EXHIBIT 10.3
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of April 30, 2002
Among
Silverleaf Resorts, Inc.,
as Borrower,
The Lending Institutions Referred to Herein
as Banks,
and
Sovereign Bank,
as Agent
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION..................................................1
1.1. Definitions...................................................................1
1.2. Rules of Interpretation......................................................26
2. THE REVOLVING CREDIT FACILITY...........................................................27
2.1. Commitment to Lend...........................................................27
2.2. Mandatory Automatic Reduction of Tranche B Total Commitment..................30
2.3. The Notes....................................................................30
2.4. Interest on Loans............................................................30
2.5. Requests for Loans...........................................................30
2.6. Funds for Loans..............................................................31
2.6.1. Funding Procedures................................................31
2.6.2. Advances by Agent.................................................31
2.7. Change in Borrowing Base; Ineligible Consumer Loans..........................32
2.8. Repayments of Loans Prior to Event of Default................................33
2.8.1. Credit for Funds Received in Borrower's Account...................33
2.8.2. Application of Payments Prior to Event of Default.................33
2.9. Repayments of Loans After Event of Default...................................35
3. REPAYMENT OF THE LOANS..................................................................35
3.1. Maturity.....................................................................35
3.2. Mandatory Repayments of Loans................................................36
3.3. Optional Repayments of Loans.................................................37
4. CERTAIN GENERAL PROVISIONS..............................................................38
4.1. Funds for Payments...........................................................38
4.1.1. Payments to Agent.................................................38
4.1.2. No Offset, etc....................................................38
4.2. Computations.................................................................38
4.3. Additional Costs, etc........................................................38
4.4. Capital Adequacy.............................................................40
4.5. Certificate..................................................................40
4.6. Indemnity....................................................................40
4.7. Interest After Default.......................................................40
4.7.1. Overdue Amounts...................................................40
4.7.2. Amounts Not Overdue...............................................41
5. SECURITY; SERVICING AGREEMENT; LOCK BOX AGREEMENT AND COLLATERAL CUSTODIAN AGREEMENT....41
5.1. Collateral...................................................................41
5.2. Lock Box Agreement...........................................................41
5.3. Collateral Custodial.........................................................41
5.4. Servicing Agreement..........................................................42
5.5. Collateral Procedures........................................................42
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5.6. Eligible Projects...................................................................42
5.7. Security Interests in All Consumer Loan Collateral and other Consumer
Loans...............................................................................43
5.8. Release of Certain Collateral.......................................................44
6. REPRESENTATIONS AND WARRANTIES.................................................................44
6.1. Corporate Authority.................................................................44
6.1.1. Incorporation; Good Standig..............................................44
6.1.2. Authorization............................................................44
6.1.3. Enforceability...........................................................44
6.2. Approvals...........................................................................45
6.3. Associations........................................................................45
6.4. Title to Properties; Leases.........................................................45
6.5. Assignability.......................................................................45
6.6. Financial Statements and Business Condition.........................................45
6.6.1. Fiscal Year..............................................................45
6.6.2. Financial Statements.....................................................45
6.7. No Material Changes, etc............................................................46
6.8. Operation of Business...............................................................46
6.9. Litigation..........................................................................46
6.10. No Materially Adverse Contracts, etc.; No Defaults..................................47
6.11. Compliance with Other Instruments. Laws, etc........................................47
6.12. Tax Status..........................................................................47
6.13. No Event of Default.................................................................48
6.14. Holding Company and Investment Company Acts.........................................48
6.15. Absence of Financing Statements etc.................................................48
6.16. Perfection of Security Interest.....................................................48
6.17. Certain Transactions................................................................48
6.18. Employee Benefit Plans..............................................................48
6.19. Use of Proceeds.....................................................................48
6.19.1. General.................................................................49
6.19.2. Regulations U and X.....................................................49
6.19.3. Ineligible Securities...................................................49
6.20. Environmental Compliance............................................................49
6.21. Subsidiaries, etc...................................................................50
6.22. Disclosure..........................................................................51
6.23. The Projects and the Additional Resort Collateral...................................51
6.24. Sale of Timeshare Interests.........................................................51
6.25. Tangible Property...................................................................51
6.26. Real Property Taxes: Special Assessments............................................52
6.27. Violations..........................................................................52
6.28. Subordination.......................................................................52
6.29. Standby Servicer....................................................................52
6.30. Inventory Control...................................................................52
6.31. Operating Contracts.................................................................52
6.32. ▇▇▇▇▇▇ and Textron Facilities.......................................................52
6.33. Bond Holder Exchange Transaction....................................................52
6.34. DZ Facility.........................................................................52
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7. AFFIRMATIVE COVENANTS OF THE BORROWER...........................................................52
7.1. Punctual Payment.....................................................................53
7.2. Maintenance of Office; Management....................................................53
7.3. Records and Accounts.................................................................53
7.4. Financial Statements, Certificates and Information...................................53
7.5. Notices..............................................................................57
7.5.1. Defaults..................................................................57
7.5.2. Environmental Events......................................................58
7.5.3. Notification of Claims Against Collateral.................................58
7.5.4. Notice of Litigation and Judgments........................................58
7.5.5. Notice of Loss............................................................58
7.6. Corporate Existence; Maintenance of Properties.......................................58
7.7. Insurance............................................................................59
7.8. Taxes................................................................................61
7.9. Inspection of Properties and Books, etc..............................................61
7.9.1. General; Audits and Fair Lending Review...................................61
7.9.2. Collateral Reports........................................................61
7.9.3. Appraisals................................................................62
7.9.4. Environmental Assessments.................................................62
7.9.5. Communication with Accountants............................................62
7.10. Compliance with Laws, Contracts, Licenses, and Permits..............................63
7.11. Underwriting Criteria...............................................................63
7.12. Agreements Constituting Collateral..................................................63
7.13. Subordination.......................................................................64
7.14. Sale of Timeshare Interests.........................................................64
7.15. Consumer Documents..................................................................64
7.16. Collection..........................................................................64
7.17. Use of Proceeds.....................................................................64
7.18. Bank Accounts.......................................................................64
7.18.1. General..................................................................64
7.18.2. Acknowledgment of Application............................................65
7.19. Servicing Agreement and Lock Box Agreement..........................................65
7.20. Standby Management Agreement; Standby Servicing Agreement...........................65
7.21. Tangible Property...................................................................65
7.22. Further Assurances..................................................................65
7.23. Business Plan.......................................................................66
7.24. Tax Refund..........................................................................66
7.25. Net Securitization Cash Flow........................................................66
7.26. Sale or Securitizations of Notes Receivable.........................................66
7.27. ▇▇▇▇▇▇ Facility, Textron Facility, DZ Bank Securitization and Bond Holder Exchange
Transaction.........................................................................66
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER......................................................66
8.1. Restrictions on Indebtedness.........................................................67
8.2. Restrictions on Liens................................................................68
8.3. Restrictions on Investments..........................................................70
8.4. Distributions........................................................................70
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8.5. Merger, Consolidation................................................................70
8.5.1. Mergers and Acquisitions..................................................70
8.5.2. Disposition of Assets.....................................................71
8.6. Sale and Leaseback...................................................................71
8.7. Compliance with Environmental Laws...................................................71
8.8. Subordinated Debt....................................................................71
8.9. Employee Benefit Plans...............................................................71
8.10. Business Activities.................................................................72
8.11. Fiscal Year; Jurisdiction of Organization...........................................72
8.12. Transactions with Affiliates........................................................72
8.13. Bank Accounts.......................................................................72
8.14. Covenant Against Alienation.........................................................73
8.15. Association Liens...................................................................73
8.16. Time Share Instruments; Required Consumer Loan Documentation; Management
Agreements..........................................................................73
8.17. Compensation of Senior Management...................................................73
8.18. Sale of Timeshare Interests.........................................................73
8.19. Modification of Loan Documents......................................................74
8.20. No New Construction.................................................................74
8.21. Modification of Other Documents.....................................................74
9. FINANCIAL COVENANTS OF THE BORROWER.............................................................74
9.1. Tangible Net Worth...................................................................74
9.2. Marketing Expenses...................................................................75
9.3. Minimum Loan Delinquency.............................................................75
9.4. Debt Service.........................................................................75
9.5. Profitable Operations................................................................75
10. CLOSING CONDITIONS.............................................................................75
10.1. Loan Documents......................................................................76
10.2. Other Debt; Intercreditor Agreement; Etc............................................76
10.2.1. ▇▇▇▇▇▇ Facility and Textron Facility Modifications.......................76
10.2.2. Intercreditor Agreement..................................................76
10.2.3. Definitive Exchange Offer................................................76
10.2.4. DZ Bank Securitization...................................................77
10.3. Certified Copies of Charter Documents...............................................77
10.4. Corporate Action....................................................................77
10.5. Incumbency Certificate..............................................................77
10.6. Validity of Liens...................................................................77
10.7. Perfection Certificates and UCC Search Results; Litigation Search...................78
10.8. Survey and Taxes....................................................................78
10.9. Title Insurance.....................................................................78
10.10. Certificates of Insurance...........................................................79
10.11. Borrower's Account Notices to Consumer Borrowers....................................79
10.12. Borrowing Base Certificate..........................................................79
10.13. Hazardous Waste Assessments.........................................................79
10.14. Opinion of Counsel..................................................................79
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10.15. [Intentionally Omitted.]............................................................79
10.16. Loan Paydown; Availability of Tranche A Total Commitment;...........................79
10.17. Business Plan.......................................................................79
10.18. Oak 'N Spruce Resort UCC Financing Statements.......................................80
10.19. Initial Lockbox Agreement...........................................................80
10.20. Standby Manager.....................................................................80
10.21. Forbearance Agreement...............................................................80
10.22. No Changes..........................................................................80
10.23. No Material Change..................................................................80
10.24. Payment of Expenses.................................................................80
10.25. Servicing Agreement.................................................................81
10.26. Estoppel Letters....................................................................81
11. CONDITIONS TO ALL BORROWINGS...................................................................81
11.1. Representations True: No Event of Default...........................................81
11.2. No Legal Impediment.................................................................81
11.3. Governmental Regulation.............................................................81
11.4. Proceedings and Documents...........................................................81
11.5. Borrowing Base Certificate..........................................................82
11.6. No Adverse Change...................................................................82
11.7. Available Cash on Hand..............................................................82
11.8. Pro-Rata Advances...................................................................82
11.9. Operating Expenses..................................................................82
12. EVENTS OF DEFAULT; ACCELERATION; ETC...........................................................82
12.1. Events of Default and Acceleration..................................................82
12.2. Termination of Commitments..........................................................87
12.3. Remedies............................................................................87
12.4. Standby Servicer and Standby Manager................................................88
12.5. Distribution of Collateral Proceeds.................................................88
12.6. Relief From Automatic Stay, Etc.....................................................92
13. SETOFF.........................................................................................92
14. THE AGENT......................................................................................93
14.1. Authorization.......................................................................93
14.2. General; Employees and Agents.......................................................94
14.3. No Liability........................................................................94
14.4. No Representations..................................................................95
14.4.1. General..................................................................95
14.4.2. Consumer Loan Collateral.................................................95
14.4.3. Closing Documentation, etc...............................................96
14.5. Payments............................................................................96
14.5.1. Payments to Agent........................................................96
14.5.2. Distribution by Agent....................................................96
14.5.3. Delinquent Banks.........................................................96
14.6. Holders of Notes....................................................................97
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14.7. Indemnity...........................................................................97
14.8. Agent as Bank.......................................................................97
14.9. Resignation; Removal................................................................97
14.10. Notification of Defaults and Events of Default Notices..............................98
15. EXPENSES AND INDEMNIFICATION...................................................................98
15.1. Expenses............................................................................98
15.2. Indemnification.....................................................................99
15.3. Survival............................................................................100
16. SURVIVAL OF COVENANTS, ETC.....................................................................100
17. ASSIGNMENT AND PARTICIPATION...................................................................100
17.1. Conditions to Assignment by Banks...................................................100
17.2. Certain Representations and Warranties Limitations Covenants........................101
17.3. Register............................................................................102
17.4. New Notes...........................................................................102
17.5. Participations......................................................................103
17.6. Disclosure..........................................................................103
17.7. Assignee or Participant Affiliated with the Borrower................................103
17.8. Miscellaneous Assignment Provisions.................................................104
17.9. Assignment by Borrower..............................................................104
18. NOTICES, ETC...................................................................................104
19. GOVERNING LAW..................................................................................105
20. HEADINGS.......................................................................................105
21. COUNTERPARTS...................................................................................105
22. ENTIRE AGREEMENT, ETC..........................................................................105
23. WAIVER OF JURY TRIAL...........................................................................106
24. CONSENTS, AMENDMENTS, WAIVERS, ETC.............................................................106
25. SEVERABILITY...................................................................................107
26. NONCONSOLIDATION WITH SILVERLEAF FINANCE I, INC................................................108
27. TRANSITIONAL ARRANGEMENTS......................................................................108
28. RELEASE........................................................................................108
29. WAIVER.........................................................................................109
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EXHIBITS
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Tranche A Note
Exhibit C Form of Tranche B Note
Exhibit D Form of Loan Request
Exhibit E Eligible Projects
Exhibit F Existing Mortgaged Property
Exhibit G Form of Assignment and Acceptance
Exhibit H Authorized Officers
Exhibit I Additional Resort Collateral
Exhibit J DZ Bank Commitment Letter
Exhibit K Bond Holder Exchange Term Sheet
Exhibit L Business Plan
Exhibit M Crown Resorts Projects
Exhibit N Ineligible Note Portfolio
SCHEDULES
Schedule 1 Banks; Commitments
Schedule 1.1(a) ▇▇▇▇▇▇ Documents
Schedule 1.1(b) Textron Documents
Schedule 1.1(c) DZ Bank Documents
Schedule 1.1(d) Bond Holder Exchange Documents
Schedule 2.1(f) Executive Management
Schedule 2.2 Automatic Reduction of Tranche B Total Commitment
Schedule 6.9 Litigation
Schedule 6.10 Defaults
Schedule 6.20 Environmental Matters
Schedule 6.21(a) Subsidiaries
Schedule 6.21(b) Joint Ventures
Schedule 6.28 Affiliate Debt
Schedule 6.30 Inventory Control Procedures
Schedule 7.7 Project Title Policies
Schedule 7.13 Affiliate Fees
Schedule 7.14 Jurisdictions of Sales of Timeshare Interests
Schedule 8.1 Indebtedness
Schedule 8.2 Liens
Schedule 8.3 Investments
Schedule 8.17 Compensation of Senior Management
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT is made as of
April 30, 2002 by and among Silverleaf Resorts, Inc., a Texas corporation (the
"BORROWER") having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and Sovereign Bank, a federally chartered savings bank, and
the other lending institutions listed on SCHEDULE 1 and Sovereign Bank, a
federally chartered savings bank, as agent for itself and such other lending
institutions.
WHEREAS, the Borrower, Sovereign Bank, Liberty Bank, and Sovereign
Bank, as agent for itself and Liberty Bank, are parties to that certain Loan and
Security Agreement dated as of September 30, 1999, as amended to date (as
amended, the "ORIGINAL AGREEMENT"), pursuant to which the Sovereign Bank and
Liberty Bank have extended credit to the Borrower on the terms set forth
therein; and
WHEREAS, the Borrower, Sovereign Bank and Liberty Bank have agreed to
enter into this Credit Agreement to amend and restate the Original Agreement in
its entirety as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this Section 1 or elsewhere in the provisions of this Credit Agreement
referred to below:
Additional Available Amount. See Section 3.2(d).
Additional Resort Collateral. Collectively, the development rights, the
real property, the fixtures and the personal property, including all management
agreements for the Eligible Projects, now or hereafter acquired by the Borrower,
and described on EXHIBIT I attached hereto. For the avoidance of any doubt,
"Additional Resort Collateral" shall not include the promissory notes and other
property of Silverleaf Finance I, Inc. that constitutes "Pledged Assets" under
the DZ Bank Documents.
Additional Resort Collateral Assignment. An agreement executed and
delivered by the Borrower to the Agent or its collateral agent, for the benefit
of the Banks, granting to the Agent or its collateral agent, for the benefit of
the Banks, a first priority security interest in that portion of the Additional
Resort Collateral constituting personal property.
2
Additional Resort Collateral Mortgages. The several mortgages and deeds
of trust, in form and substance satisfactory to the Agent, dated as of the
Closing Date, from the Borrower to the Agent or its collateral agent with
respect to the fee interests of the Borrower in that portion of the Additional
Resort Collateral consisting of real property and fixtures.
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent. Sovereign Bank, acting as agent for the Banks, or any successor
agent appointed in accordance with the terms hereof.
Agent's Office. The Agent's office located at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel. ▇▇▇▇▇▇▇ ▇▇▇▇ LLP or such other counsel as may
be approved by the Agent.
Assignment and Acceptance. See Section 17.1.
Assignments of Development Rights. The assignments of development
rights, in form and substance satisfactory to the Required Banks, dated as of
the Closing Date, made by the Borrower in favor of the Agents, pursuant to which
the Borrower assigns its development rights for each of the Eligible Projects.
Assignment of Management Agreements. The assignment of management
agreements, in form and substance satisfactory to the Required Banks, dated as
of the Closing Date, made by the Borrower in favor of the Agent, assigning all
of the Borrower's rights under the management agreements for the Eligible
Projects.
Association. With respect to each Eligible Project, the corporation or
other organization of owners of Timeshare Interests which has responsibility for
managing and administering the Eligible Project's facilities, time share program
and reservation systems.
Authorized Officer. An officer of the Borrower who has been duly
authorized by Borrower to execute and deliver to the Banks Borrowing Base
Certificates and other certificates, each, of whom is listed on EXHIBIT H
attached hereto, as such exhibit may be amended by the Borrower from time to
time.
Available Cash on Hand. As of any date of determination, the sum of all
Cash and Cash Equivalents held by the Borrower as of such date.
Available Fund-Up Amount. See Section 3.2(c).
3
Banks. Sovereign and the other lending institutions listed on SCHEDULE
1 hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 17.
Base Rate. The higher of (i) the variable annual rate of interest so
designated from time to time by Sovereign as its "prime rate," such rate being a
reference rate and not necessarily representing the lowest or best rate being
charged to any customer and (ii) two and three-fourths of one percent (2.75%)
above the Federal Funds Effective Rate; provided that, in the event that, the
higher of clauses (i) and (ii) above is less than six percent (6%), then the
"Base Rate" shall be six percent (6%). For the purposes of this definition,
"FEDERAL FUNDS EFFECTIVE RATE" shall mean for any day, the rate per annum equal
to the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
funds brokers of recognized standing selected by the Agent. Changes in the Base
Rate resulting from any changes in Sovereign's "prime rate" shall take place
immediately without notice or demand of any kind.
Bond Holder Exchange Documents. See Section 10.2.3.
Bond Holder Exchange Term Sheet. See Section 10.2.3.
Bond Holder Exchange Transaction. See Section 10.2.3.
Borrower. As defined in the preamble hereto.
Borrower's Account. See Section 7.18.1.
Borrowing Base. At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base
Certificate delivered to the Banks and the Agent pursuant to Section 7.4(f),
which is equal to the sum of seventy-five percent (75%) of the Eligible Consumer
Loan Amount.
Borrowing Base Certificate. A Borrowing Base Certificate signed by the
chief financial officer of the Borrower and in substantially the form of EXHIBIT
A hereto.
Business Day. Any day on which banking institutions in Providence,
Rhode Island and Middletown, Connecticut are open for the transaction of banking
business.
Business Plan. See Section 10.17.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
4
Cash and Cash Equivalents. Unrestricted (i) cash, (ii) marketable
direct obligations issued or unconditionally guaranteed by the United States
government and backed by the full faith and credit of the United States
government; and (iii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Rating Group or P-1
(or better) by ▇▇▇▇▇'▇ Investor Service, Inc. provided that the maturities of
such Cash and Cash Equivalents shall not exceed one year.
CERCLA. See Section 6.20(a).
Chase. See Section 10.19.
Closing Date. The first date on which the conditions set forth in
Section 10 have been satisfied and any Loans are to be made.
Code. The Internal Revenue Code of 1986.
Collateral. All of the property, rights and interests of the Borrower
and its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents, including, without
limitation, the Consumer Loan Collateral, the Existing Mortgaged Properties, the
Additional Resort Collateral, Silverleaf Finance I, Inc. Stock, the Ineligible
Note Portfolio, the Standby Servicing Agreement, the Standby Management
Agreement, and all collateral under the Textron Facility and the ▇▇▇▇▇▇
Facility.
Collateral Custodian. State Street Bank and Trust Company.
Collateral Custodian Agreement. See Section 5.3.
Commitment. With respect to each Bank, the aggregate amount of its
Tranche A Commitment and Tranche B Commitment.
Commitment Percentage. With respect to each Bank, its Tranche A
Commitment Percentage and/or its Tranche B Commitment Percentage, as the context
requires.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income. The consolidated net income of the Borrower
and its Subsidiaries, after deduction of all expenses, taxes, and other proper
charges (but excluding any extraordinary profits or losses), determined in
accordance with generally accepted accounting principles.
5
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease, or any synthetic lease referred to in clause (vi) of the
definition of the term "Indebtedness," and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.
consumer borrower. Each person (including two or more persons acting
jointly and severally) who purchases a Timeshare Interest and finances such
purchase with purchase money financing extended by the Borrower.
Consumer Loan Collateral. All of the Borrower's right, title and
interest in each consumer loan pledged by the Borrower to the Agent as
Collateral, now existing or hereafter arising, (a) for which the original
promissory note, comparable instrument or installment sales contract shall, at
the time of determination, be in the possession of the Agent (including
possession through an agent or bailee) or (b) which shall be identified by the
Borrower as being pledged to the Agent pursuant to the Security Agreement as
evidenced by a Borrowing Base Certificate or other means by which the promissory
note, comparable instrument or installment sales contract may be identified to
the grant of the security interest under the Security Agreement.
Consumer Loan Cover Sheet. A document, on a form satisfactory to the
Agent, prepared by the Borrower and executed by an Authorized Officer of the
Borrower stating the outstanding principal amount of a consumer loan and
certifying that (a) attached to such document are the Required Consumer Loan
Documents for the consumer loan, (b) the Required Consumer Loan Documents are
consistent as to consumer borrower name, property address, loan amount, interest
rate and loan term, (c) the promissory note, comparable instrument or
installment sales contract evidencing such loan bears an original signature or
signatures of the maker or other obligor consistent with the name of the
consumer borrower as submitted, (d) the promissory note, comparable instrument
or installment sales contract does not contain any irregular writing which
affects or appears to affect the validity thereof (but the promissory note,
comparable instrument or installment sales contract may contain endorsements to
the Borrower or the Agent or in blank), and (e) the loan has all of the
characteristics of an Eligible Consumer Loan. The Borrower shall be entitled to
deliver a Consumer Loan Cover Sheet relating to a single consumer loan or a
Consumer Loan Cover Sheet or Sheets relating to multiple consumer loans.
Credit Agreement. This Amended and Restated
Revolving Credit Agreement,
including the Schedules and Exhibits hereto.
Crown Resorts Projects. The projects listed on EXHIBIT M.
6
Current Notes. See Section 10.2.3.
Debtor Relief Laws. Any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
law, proceeding or device providing for the relief of debtors from time to time
in effect and generally affecting the rights of creditors.
Default. See Section 12.1.
Delinquent Bank. See Section 14.5.3.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of
America.
Drawdown Date. The date on which any Loan is made or is to be made.
DZ Bank. DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt Am
Main.
DZ Bank Commitment Letter. See Section 10.2.4.
DZ Bank Documents. The documents listed on SCHEDULE 1.1(c).
DZ Bank Securitization. That certain note purchase facility to be
provided by DZ Bank, as agent for Autobahn Funding Company LLC, to the Borrower,
on the terms outlined in the DZ Bank Commitment Letter, and evidenced by the
documents listed on SCHEDULE 1.1(c).
Earnings Before Interest and Taxes. The consolidated earnings (or loss)
from the operations of the Borrower and its Subsidiaries for any period (but
excluding any extraordinary profits or losses), after all expenses and other
proper charges but before payment or provision for any income taxes or interest
expense for such period, determined in accordance with generally accepted
accounting principles.
EBITDA. With respect to the Borrower and its Subsidiaries for any
period, (a) the sum of (i) Consolidated Net Income, (ii) Interest Expense, (iii)
depreciation and amortization and other non-cash items properly deducted in
determining Consolidated Net Income, and (iv) federal, state and local income
taxes, in each case for such Person for such period, computed and calculated in
accordance with generally accepted accounting principles, to the extent deducted
in determining Consolidated Net Income minus (b) non-cash items properly added
in determining Consolidated Net Income, in each case for the corresponding
period.
7
Eligible Assignee. Any bank, insurance company, commercial finance
company or other financial institution, or, if an Event of Default has occurred
and is continuing, any other Person approved by the Required Banks, such
approval not to be unreasonably withheld.
Eligible Consumer Loan. A loan to a consumer borrower with all of the
following characteristics:
(1) Residence of the Consumer Borrower. The borrower shall be (a) a
resident of the United States or Canada and (b) the owner of the collateral
securing such loan. Any loan made to a resident of Canada shall not cause the
outstanding principal amount of all of the Eligible Consumer Loans pledged as
Collateral and made to residents of Canada to exceed 5% of the outstanding
principal amount of all Eligible Consumer Loans pledged as Collateral.
(2) Underwriting and Other Criteria. The loan shall have been made in
accordance with the Borrower's general underwriting criteria as set forth in
Section 7.11. For loans made after the Closing Date, the consumer borrower shall
have a FICO Credit Bureau Score of at least 600; provided that up to an
aggregate of fifteen percent (15%) of the outstanding principal amount of all
Eligible Consumer Loans made after the Closing Date and pledged as Collateral
hereunder may be made to consumer borrowers with FICO Credit Bureau Scores of
less than 600 (both for each Loan and on a cumulative basis). From and after the
date hereof, the consumer loan shall not cause the weighted average of the FICO
Credit Bureau Scores of the consumer borrowers under Eligible Consumer Loans
pledged as Collateral after the Closing Date to be less than 640. The consumer
borrower shall be a member of the applicable Association.
(3) Terms of the Loan. The loan shall have the following terms:
(a) an original term not to exceed eighty-four (84) months;
provided that loans made prior to the date hereof may have an original
term that exceeds eighty-four (84) months so long as the term remaining
after the date hereof does not exceed eight-four (84) months; and
provided further, that up to twenty percent (20%) of the outstanding
principal amount of all Eligible Consumer Loans pledged as Collateral
may have an original term greater than eighty-four (84) months, but not
greater than one hundred and twenty (120) months;
(b) the principal amount of the loan shall equal not more than
ninety percent (90%) of the sales price (not including closing costs,
broker's commission, and prior to any discounts) of the Unit or Oak N'
Spruce Beneficial Interest securing such loan, with the downpayment of
the purchase being not less than ten percent (10%) of the sales price
(not including closing costs, broker's commission, and prior to any
discounts);
(c) the loan shall be payable in equal monthly installments of
principal and interest over the original term of the loan, with the
first
8
installment due and payable not more than sixty (60) days from the date
of the making of the loan;
(d) the principal amount of the loan shall bear interest at an
interest rate of not less than twelve and one-half of one percent
(12.5%) per annum or, if the loan does not cause the outstanding
principal amount of all Eligible Consumer Loans pledged as Collateral
and bearing an interest rate of less than twelve and one-half of one
percent (12.5%) per annum to exceed twenty percent (20%) of the
outstanding principal amount of all Eligible Consumer Loans pledged as
Collateral, the loan shall have an interest rate of not less than ten
percent (10%) per annum; and
(e) all principal, interest and other amounts payable in
respect of the loan shall be payable in Dollars.
(4) Collateral Securing the Loan. The collateral securing the loan
shall be a Timeshare Interest in or an Oak N' Spruce Beneficial Interest in a
Unit (a) acceptable to the Agent, (b) constructed in compliance with all
applicable laws and regulations, served by utilities necessary for their
intended use, furnished and ready for occupancy, (c) for which a valid
certificate of occupancy or equivalent has been issued by appropriate
Governmental Authorities or for which no certificate of occupancy or equivalent
is required by appropriate Governmental Authorities, and (d) duly admitted to
the provisions of the applicable Timeshare Instruments.
(5) Borrower's Prior Perfected Security Interest in the Collateral
Securing the Loan. The loan shall be secured by a valid perfected first priority
mortgage or deed of trust on the Timeshare Interest or an Oak N' Spruce
Beneficial Interest, subject (in the case of the Unit or, for an Oak N' Spruce
Beneficial Interest, in the case of the beneficial interest or related Unit)
only to (a) liens for taxes not yet due and payable and (b) other easements,
restrictions and encumbrances acceptable to the Agent, which do not represent
liens securing monies owed or claimed and which do not materially affect the
value of the collateral for such loan. Any prior mortgages or deeds of trust or
security interests on the Timeshare Interest shall have been released of record,
and the loan or any rights thereto shall not be affected by or subject to any
escrow for presales or otherwise.
(6) Agent's Prior Perfected Security Interest in the Loan. If pledged
to the Agent as Collateral, the Agent shall have a valid, perfected, first
priority security interest in the loan and all supporting obligations, liens and
related rights, free and clear of any liens or claims of any other Person.
(7) Required Consumer Loan Documents. The Borrower shall have delivered
the Required Consumer Loan Documents at the time when the loan is or was pledged
as Collateral. All of the Required Consumer Loan Documents shall be the legal,
valid and binding obligations of the consumer borrower, in full force and effect
and enforceable in accordance with their terms, with no claim of defense, setoff
or counterclaim asserted by the consumer borrower.
9
(8) Regulatory Compliance. The loan shall comply in all respects with
all requirements of all applicable state and federal law, including, without
limitation, state laws and regulations governing sales of timeshares, applicable
usury limitations, real estate settlement procedures, the Securities Act of
1933, the Securities Exchange Act of 1934, the Interstate Land Sales Full
Disclosure Act, the Federal Trade Commission Act, the Consumer Credit Protection
Act of 1968, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act, the Consumer
Leasing Act of 1976, the Equal Credit Opportunity Act, the Truth in Lending Act,
the Flood Disaster Prevention Act of 1973, the applicable Timeshare Act, and
Regulation Z of the Board of Governors of the Federal Reserve System. All
applicable rescission or cancellation periods relating to the loan shall have
expired.
(9) Payments not Overdue. Payments on the loan shall have been timely
made within the following limitations:
(a) No payments on the loan shall be more than (i) twenty-nine
(29) days late as of the first date such loan is included in the
calculation of the Eligible Consumer Loan Amount or (ii) sixty (60)
days late at any time thereafter and no other defaults shall have
occurred with respect to such loan and the documents related thereto,
or
(b) If defaults shall have occurred, (i) the consumer borrower
shall have entered into a payment plan accepted by the Borrower, (ii)
the first payment under such payment plan shall have been timely made
and no other payments under the payment plan shall be more than
twenty-nine (29) days late and no other defaults shall have occurred
with respect to such loan since the payment plan, (iii) there shall
have been no more than two (2) revised payment plans during the term of
the loan, and (iv) the payment plan for any loan shall not have been
modified more than once in the twelve (12) months prior to date such
loan is pledged to the Agent.
(10) Consumer not an Affiliate of the Borrower. The consumer borrower
or any guarantor or other surety is not, and no payment of a sum due under the
loan has been made by, an officer, director, agent, employee, principal, broker,
or creditor (or relative thereof) of the Borrower or an Affiliate of the
Borrower.
(11) No Violation of Environmental or Other Law. The Borrower has no
knowledge or notice of any of the following conditions existing in connection
with the collateral securing such loan: hazardous wastes or Hazardous Substances
prohibited by applicable law or regulation, asbestos or urea formaldehyde
insulation, or any release of any of the foregoing prohibited by any
Environmental Laws or any applicable law or regulation.
(12) No Downgrade Replacement. The loan shall not be replacing an
Eligible Consumer Loan and financing the purchase of a Timeshare Interest which
constitutes a downgrade by the consumer borrower to a less expensive Timeshare
Interest.
10
(13) No Upgrade Replacement from Another Lender. The loan shall not be
replacing a loan pledged as collateral to another lender and financing the
purchase of a Timeshare Interest which constitutes an upgrade by the consumer
borrower to a more expensive Timeshare Interest, other than such loans that had
previously been pledged to ▇▇▇▇▇▇, Credit Suisse First Boston and DZ Bank and
that do not have a modified payment plan in effect.
(14) Other Upgrade Replacements. If the loan is a newly originated
Eligible Consumer Loan which is replacing an existing Eligible Consumer Loan
pledged as Collateral under the Security Agreement and the proceeds have been
used to finance the purchase of a Timeshare Interest which is being upgraded by
the consumer borrower to a more expensive Timeshare Interest:
(a) the principal balance of the existing Eligible Consumer
Loan which is being upgraded may still be included for purposes of
calculating the Borrowing Base for a period of time expiring on the
earlier to occur of (i) the 31st day after the consumer documents
effecting the upgrade have been executed or (ii) the date on which any
payment on such Eligible Consumer Loan becomes thirty (30) or more days
past due;
(b) on or before the second business day after the expiration
of the statutory rescission period in connection with any consumer
documents executed effecting any upgrade involving an Eligible Consumer
Loan and in any event within ten (10) days of such upgrade, the
Borrower shall deliver to the Agent or its designee the original of the
new promissory note, comparable instrument or installment sale contract
executed in connection with such upgrade duly endorsed in blank by the
Borrower and the Borrower will cause all payments made with respect to
such new promissory note, comparable instrument or installment sale
contract to be forwarded to the Lock Box;
(c) any new upgraded consumer loan involving a prior Eligible
Consumer Loan shall only be included as part of the Borrowing Base if
the prior Eligible Consumer Loan has been removed from the Borrowing
Base and the new upgraded consumer loan satisfies all conditions for an
Eligible Consumer Loan; and
(d) an amount equal to the sum of (i) the principal balance of
all existing Eligible Consumer Loans being upgraded which are included
within subclause (a) of this clause (14) minus (ii) the principal
balance of all upgraded loans for which promissory notes have been
delivered to the Agent or its designee and payments thereunder are
being made to the Lock Box in accordance with subclause (b) of this
clause (14), if positive, shall be deducted from the Eligible Consumer
Loan Amount when calculating the Borrowing Base as an adjustment for
all such upgraded consumer loans.
(15) No Other Modifications. Except as otherwise expressly contemplated
by this definition of the term "Eligible Consumer Loan," the terms of the loan
have not have been modified without the prior written consent of the Required
Banks.
11
(16) Other Requirements. Such other characteristics as the Agent may
require from time to time, in its reasonable discretion, including, without
limitation, the establishment of any reserves to reflect any events,
contingencies, conditions, or risks which do or may adversely affect any
Eligible Consumer Loans pledged as the Collateral, the Agent's or any Bank's
rights therein or the value of such Collateral. In addition, the Agent reserves
the right to incorporate the general underwriting criteria set forth in Section
7.11 into the definition of "Eligible Consumer Loans" effective as of, or any
time after, the Closing Date.
Eligible Consumer Loan Amount. The sum of (a) the aggregate principal
amount outstanding from time to time of all Eligible Consumer Loans pledged to
the Agent as Collateral less (b) the amount by which the aggregate principal
amount of Eligible Consumer Loans in respect of the Oak N' Spruce Resort pledged
to the Agent exceeds twenty percent (20%) of the aggregate principal amount
outstanding of all Eligible Consumer Loans pledged to the Agent, less (c) the
amount by which the aggregate principal amount of Eligible Consumer Loans for
which a modified payment plan has been implemented (in accordance with clause
(b) of paragraph (9) of the definition of "Eligible Consumer Loan") exceeds (i)
from the Closing Date to the first anniversary of the Closing Date, fifteen
percent (15%) of the aggregate principal amount outstanding of all Eligible
Consumers Loans pledged to the Agent, (ii) from the first anniversary of the
Closing Date to the second anniversary of the Closing Date, seven and one-half
percent (7 1/2%) of the aggregate principal amount outstanding of all Eligible
Consumer Loans pledged to the Agent, (iii) from and after the second anniversary
of the Closing Date to the third anniversary of the Closing Date, six percent
(6%) of the aggregate principal amount outstanding of all Eligible Consumer
Loans pledged to the Agent, and (iv) from and after the third anniversary of the
Closing Date, five percent (5%) of the aggregate principal amount outstanding of
all Eligible Consumer Loans pledged to the Agent..
Eligible Projects. Those timeshare resorts owned by the Borrower listed
on EXHIBIT E attached hereto, as such EXHIBIT E may be amended from time to time
by the Borrower and all of the Banks in accordance with Section 5.6. For the
avoidance of any doubt, none of the Crown Resort Projects is an "Eligible
Project".
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Indemnity. The Amended and Restated Environmental
Indemnity dated as of the date hereof made by the Borrower in favor of the Agent
and the Banks and in form and substance satisfactory to the Banks and the Agent.
Environmental Laws. See Section 6.20(a).
EPA. See Section 6.20(b).
ERISA. The Employee Retirement Income Security Act of 1974.
12
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
Event of Default. See Section 12.1.
Existing Mortgaged Property. The Real Estate of the Borrower described
on EXHIBIT F attached hereto.
Existing Mortgages. The several mortgages and deeds of trust from the
Borrower to the Agent with respect to the fee interests of the Borrower in the
Existing Mortgaged Property.
Existing Mortgage Amendments. The amendment and restatements of the
Existing Mortgages, in form and substance satisfactory to the Agent.
FICO Credit Bureau Score. A credit risk score determined by the Fair
▇▇▇▇▇ Company for a consumer borrower through the analysis of individual credit
files in order to predict the likelihood of repayment based on sample
statistics.
Forbearance Agreement. The Forbearance Agreement, dated April 18, 2001,
among the Borrower, the Agent and the Lenders, as amended.
generally accepted accounting principles. (i) When used in Section 9,
whether directly or indirectly through reference to a capitalized term used
therein, means (A) prior to the Banks' receipt and approval of the financial
statements of the Borrower for the fiscal year ended on December 31, 2001, (1)
principles that are consistent with the principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors, in effect for the
period ended on September 30, 2001, and (2) to the extent consistent with such
principles, the accounting practice of the Borrower reflected in its financial
statements for the period ended on September 30, 2001, and (B) following the
Banks' receipt and approval of the financial statements of the Borrower for the
fiscal year ended on December 31, 2001, (1) principles that are consistent with
the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, in effect for the fiscal year ended on December 31,
2001, and (2) to the extent consistent with such principles, the accounting
practice of the Borrower reflected in its financial statements for the fiscal
year ended on December 31, 2001 and (ii) when used in general, other than as
provided above, means principles that are (A) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time, and (B) consistently applied with
past financial statements of the Borrower adopting the same principles, provided
that in each case referred to in this definition of "generally accepted
accounting principles" a certified public accountant would, insofar as the use
of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a
13
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.
Governmental Authorities. The United States of America, the state where
the Eligible Project is located and any political subdivision thereof, the
county of and city or town where the Eligible Project is located, and any
agency, authority, department, commission, board, bureau, or instrumentality of
any of them.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See Section 6.20(b).
▇▇▇▇▇▇. ▇▇▇▇▇▇ Financial Corporation, a Delaware corporation.
▇▇▇▇▇▇ Documents. The documents listed on SCHEDULE 1.1(a).
▇▇▇▇▇▇ Facility. Those certain credit facilities provided by ▇▇▇▇▇▇ to
the Borrower pursuant to the documents listed on SCHEDULE 1.1(a).
Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses,
(iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person,
(iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith),
(v) every obligation of such Person under any Capitalized Lease,
(vi) every obligation of such Person under any lease (a "SYNTHETIC
LEASE") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes,
(vii) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating
14
or evidencing a right to payment of money or (C) other receivables (collectively
"RECEIVABLES"), whether pursuant to a purchase facility or otherwise, other than
in connection with the disposition of the business operations of such Person
relating thereto or a disposition of defaulted receivables for collection and
not as a financing arrangement, and together with any obligation of such Person
to pay any discount, interest, fees, indemnities, penalties, recourse, expenses
or other amounts in connection therewith,
(viii) every obligation of such Person (an "EQUITY RELATED PURCHASE
OBLIGATION") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured by
the value of such shares, warrants, options or other rights,
(ix) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar agreements),
the value of which is dependent upon interest rates, currency exchange rates,
commodities or other, indices (a "DERIVATIVE CONTRACT"),
(x) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise acting
as surety for, any obligation of a type described in any of clauses (i) through
(x) (the "PRIMARY OBLIGATION") of another Person (the "PRIMARY OBLIGOR"), in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person (A) to purchase or pay (or advance or supply funds for
the purchase of) any security for the payment of such primary obligation, (B) to
purchase property, securities or services for the purpose of assuring the
payment of such primary obligation, or (C) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (v) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (w) any synthetic lease shall be the stipulated loss value, termination
value or other equivalent amount, (x) any derivative contract shall be the
maximum amount of any termination or loss
15
payment required to be paid by such Person if such derivative contract were, at
the time of determination, to be terminated by reason of any event of default or
early termination event thereunder, whether or not such event of default or
early termination event has in fact occurred and (y) any equity related purchase
obligation shall be the maximum fixed redemption or purchase price thereof
inclusive of any accrued and unpaid dividends to be comprised in such redemption
or purchase price.
Indenture. The Indenture dated as of April 1, 1998 among the Borrower,
the Subsidiaries of the Borrower, as guarantors, and Norwest Bank Minnesota,
N.A., as trustee.
Ineligible Note Portfolio. All of the right, title and interest of the
Borrower in certain loans made by it to consumer borrowers secured by a mortgage
or deed of trust on a Timeshare Interest or an Oak N' Spruce Beneficial Interest
listed on EXHIBIT N, which are not currently pledged to any other Person and
which shall be held by the Borrower, as agent for and on behalf of the Banks,
Textron and ▇▇▇▇▇▇, in accordance with the terms of the Intercreditor Agreement,
until an Event of Default shall occur.
Ineligible Securities. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
Initial Lockbox Agreement. Lockbox Agreement dated as of September 30,
1999 among the Agent, the Borrower, and Chase.
Intercreditor Agreement. See Section 10.2.2.
Interest Expense. With respect to any Person for any period, the
interest expense of such Person during such period determined in accordance with
generally accepted accounting principles, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any obligations in respect of Capitalized Leases allocable to interest expense,
(iv) all fixed and all calculable dividend payments on preferred stock, and (v)
payments of interest expense in kind.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
16
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Loan Documents. This Credit Agreement, the Notes, the Security
Documents, the Environmental Indemnity, the Intercreditor Agreement, the Standby
Servicing Agreement, the Collateral Custodial Agreement, the Servicing
Agreement, and such other agreements, documents, instruments and certificates
evidencing the obligations or effectuating the transactions contemplated herein.
Loan Request. See Section 2.5.
Loan Year. The period from the Closing Date to the first anniversary of
the Closing Date and each twelve (12) calendar month period thereafter.
Loans. Loans made or to be made by the Banks to the Borrower pursuant
to Section 2.1.
Lockbox Agreement. The Replacement Lockbox Agreement and, to the extent
still in effect in accordance with Section 5.2, the Initial Lockbox Agreement.
Management Agreement. (1) With respect to the following Eligible
Projects: ▇▇▇▇▇ Lake Resort, Piney Shores Resort, The Villages (including Lake
O' The ▇▇▇▇▇), Hill County Resort, Seaside Resort, Ozark Mountain Resort,
Holiday Hills Resort, Timber Creek Resort, Fox River Resort, Oak N' Spruce
Resort, Apple Mountain Resort and Beech Mountain Resort, that certain Management
Agreement by and between Silverleaf Club (f/k/a Master Club, f/k/a Master
Endless Escape Club) and Borrower dated May 28, 1990, as amended through Eighth
Amendment dated March 9, 1999, as such agreement may be amended from time to
time, and (2) with respect to the following resorts managed by the Borrower:
Alpine Bay (including Capricorn Complex, Dogwood Hills and The Pines), Hickory
Hills Resort, Quail Hollow Village at Beech Mountain Lakes, Treasure Lake Resort
(including Silverwoods and Wolf Run Manor), Foxwood Hills Resort (including
Kinston Manor and Villas at Foxwood Hills), Tansi Resort (including Hiawatha
Manor, Hiawatha Manor I, and Hiawatha Manor West) and Westwind Manor Resort,
each of the management agreements between the Association for the resort and the
developer of the resort in each case, assigned to the Borrower pursuant to a
▇▇▇▇ of Sale and Blanket Assignment dated May 28, 1998.
Marketing Expenses. All promotion, lead generation, sales commission
and all other marketing expenses incurred or paid by the Borrower pursuant to
any marketing agreement or otherwise.
Monthly Financial Reports. The reports delivered or to be delivered by
the Borrower to the Banks pursuant to clauses (j), (k), (l), and (m) of Section
7.4.
17
Mortgaged Property. Collectively, the Existing Mortgaged Property and
the Additional Resort Collateral consisting of real property and fixtures.
Mortgages. Collectively, the Existing Mortgages and the Additional
Resort Collateral Mortgages.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Net Cash Proceeds. With respect to any sale or other disposition of any
of the Existing Mortgaged Properties or Additional Resort Collateral, as the
case may be, the cash proceeds received by the Borrower from such sale or other
disposition, net of all reasonable costs of sale and property transfer or sales
taxes paid or payable as a result thereof by the Borrower.
Net Securitization Cash Flow. Silverleaf Finance I, Inc.'s right, title
and interest in any excess cash flow derived from the consumer loans sold by the
Borrower to Silverleaf Finance I, Inc. and then sold by Silverleaf Finance I,
Inc. to DZ Bank pursuant to the DZ Bank Documents.
New Notes. See Section 10.2.3.
Notes. Collectively, the Tranche A Notes and the Tranche B Notes.
Note Record. A Record with respect to a Note.
Notices to Maker. See clause (6) of the definition of "Required
Consumer Loan Documents".
Oak N' Spruce Resort. The Borrower's project in Lee, Massachusetts.
Oak N' Spruce Beneficial Interest. The use rights and interests of a
purchaser under a Certificate as defined in the Oak N' Spruce Resort Declaration
of Trust.
Oak N' Spruce Resort Declaration of Trust. That certain Amended and
Restated Declaration of Trust of Oak N' Spruce Resort dated January 6, 1998, and
recorded in Book 1587, Page 179, in the Berkshire Middle District Registry of
Deeds, as amended by Amendment to the Amended and Restated Declaration of Oak N
Spruce Resort Trust dated July 9, 1998 and recorded with the Berkshire Middle
District Registry of Deeds in Book 1612, Page 588, by Second Amendment to the
Amended and Restated Declaration of Trust of Oak N' Spruce Resort Trust dated
November 13, 1998 and recorded with the Berkshire Middle District Registry of
Deeds in Book 1631, Page 831 and by Third Amendment to the Amended and Restated
Declaration of Oak N' Spruce Resort Trust dated April 15, 1999 and recorded with
the Berkshire Middle District Registry of Deeds in Book 1658, Page 506.
18
Obligations. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans or any of the Notes or other instruments at any time
evidencing any thereof.
Operating Contracts. See Section 6.31.
Operating Expenses. All expenditures, computed in accordance with
generally accepted accounting principles, of whatever kind relating to the
ownership, operation, maintenance and management of the Eligible Projects that
are incurred on a regular monthly or other periodic basis, including, without
limitation, utilities, ordinary and capital repairs and maintenance, insurance
premiums, license fees, property taxes and assessments, management fees, payroll
and related taxes, computer processing charges, operational equipment or other
lease payments as approved by the Required Banks, and other similar costs.
Original Agreement. See the recitals hereto.
outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificate. The Perfection Certificate as defined in the
Security Agreement.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Project Title Policy. See Section 7.7.
RCRA. See Section 6.20(a).
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries, including, without
limitation, the real property where each of the Eligible Projects and the
Additional Resort Collateral is located and the Existing Mortgaged Property.
19
Record. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Period. Any period of four (4) consecutive fiscal quarters of
the Borrower and its Subsidiaries ending on the relevant date.
Register. See Section 17.3.
Replacement Lockbox Agreement. See Section 5.2.
Required Banks. As of any date, (a) if there are only two (2) Banks,
then both Banks (with a Bank and its Affiliates being considered one Bank for
purposes of this clause (a)) and (b) if there are more than two (2) Banks, then
both (i) the Banks holding at least seventy-five percent (75%) of the then
outstanding principal balance of the Loans on such date, and if no such
principal is outstanding, the Banks whose aggregate Commitments constitute at
least seventy-five percent (75%) of the Total Commitment and (ii) if Sovereign
or Liberty Bank then holds at least $5,000,000 in principal amount of the
outstanding Loans or Commitments, each such Bank.
Required Consumer Loan Documents. With respect to each loan included
within Consumer Loan Collateral and the Eligible Consumer Loan Amount, the
Consumer Loan Cover Sheet relating to such loan, together with the following:
(1) Promissory Note or Other Evidence of Indebtedness. The
original promissory note, comparable instrument or installment sale
contract signed by the consumer borrower and payable to the Borrower or
endorsed by the consumer borrower to the order of the Borrower, and
endorsed in blank by an Authorized Officer of the Borrower, and the
original of any and all guaranties and other credit enhancement
documents supporting or securing payment of the consumer borrower's
obligations;
(2) Mortgage or other Security Agreement. Either:
(a) the original or copy time-stamped by the
appropriate recording office of the recorded mortgage or deed
of trust securing the promissory note, comparable instrument
or installment sale contract, and an original or copy
time-stamped by the appropriate recording office of all
amendments and assignments of such mortgage or deed of trust
showing an unbroken chain of title from the originator to the
Borrower, or
(b) in the case of a loan secured by an assignment of
an Oak N' Spruce Beneficial Interest (i) an original or copy
time-stamped by the appropriate recording office of an
assignment of beneficial interest securing the promissory
note, comparable instrument or installment sale contract and
an original or copy time-stamped by the appropriate recording
office of all amendments and assignments of such assignment of
beneficial interest showing an unbroken chain of title
20
from the originator to the Borrower and (ii) evidence
satisfactory to the Agent of the perfection of the Borrower's
security interest in the Oak N' Spruce Beneficial Interest,
including, without limitation, a copy of a UCC financing
statement filed by the Borrower against the consumer borrower
in the appropriate jurisdiction and recording office;
(3) Assignment to the Agent. Either:
(a) an original or copy time-stamped by the
appropriate recording office of the recorded assignment to the
Agent of the mortgage or deed of trust referred to in clause
(2) above, or
(b) in the case of a loan secured by an assignment of
an Oak N' Spruce Beneficial Interest (i) an original or copy
time-stamped by the appropriate recording office of an
assignment to the Agent of the assignment of beneficial
interest referred to in clause (2) above and (ii) evidence
satisfactory to the Agent of the perfection of the Agent's
security interest in the assignment of beneficial interest;
(4) Evidence of Regulatory Compliance. An original credit
application and right of rescission notices, if applicable, credit
report, purchase contract containing truth in lending disclosure
statement, good faith estimate of settlement costs (if any), and HUD-1
settlement statement, receipt for timeshare documents, privacy act
notice, servicing disclosure statement and acknowledgement of
representations;
(5) Evidence of Consumer Borrower Ownership. Either:
(a) a copy of deed to the consumer borrower with
evidence of recording in the appropriate recording office, or
(b) in the case of a loan secured by an assignment of
an Oak N' Spruce Beneficial Interest, a certificate of
beneficial interest in favor of the consumer borrower with
evidence of recording in the appropriate recording office;
(6) Payment Notices. (a) A copy of the notice to consumer
borrower that payments shall be made to the Lock Box Agent and (b) an
original notice, in form and substance satisfactory to the Agent, to
the consumer borrower signed by payee of the note directing that
payments be made directly to the Agent or its designee ("NOTICES TO
MAKER");
(7) Evidence of Authority of Organization. If the consumer
borrower or any guarantor or other surety shall be an organization, all
resolutions and authorizations to evidence authority to enter into the
transaction and that the transaction has been duly authorized;
21
(8) Releases of Prior Interests. If requested by the Agent in
connection with each such loan which has at any time been subject to
any security interest, pledge or hypothecation for the benefit of any
Person, a certification or release by the former secured party in form
acceptable to the Agent that such security interest has been released;
and
(9) Other Documents. Other documents required by the Agent
from time to time.
Requirements. Any law, ordinance, code, order, rule or regulation of
any Governmental Authority relating in any way to the acquisition and ownership
of any Eligible Project, the construction of any Eligible Project, or the use,
occupancy or operation of the Eligible Project following the completion of
construction, including, without limitation, the Timeshare Act, and laws,
ordinances, rules or regulations relating to timeshares, subdivision control,
zoning, building, use and occupancy, fire prevention, health, safety,
sanitation, handicapped access, historic preservation and protection, tidelands,
wetlands, flood control, access and earth removal, and all Environmental Laws.
▇▇▇▇. See Section 6.20(a).
Section 20 Subsidiary. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement. The Amended and Restated Security Agreement dated
as of the Closing Date between the Borrower and the Agent and in form and
substance satisfactory to the Banks and the Agent.
Security Documents. The Security Agreement, the Existing Mortgage
Amendments, the Additional Resort Collateral Mortgages, the Assignments of
Development Rights, the Lock Box Agreement, the Standby Management Agreement
Assignment, the Assignment of Management Agreements, the Stock Pledge Agreement,
the estoppel letters identified in Section 10.6 and all other instruments and
documents required to be executed or delivered pursuant to any Security
Document.
Senior Lender Advance Schedule. See Section 10.17.
Servicer. See Section 5.4.
Servicing Agreement. See Section 5.4.
Silverleaf Club. Silverleaf Club, a Texas non-profit corporation, a
master association to which each Association belongs.
Silverleaf Finance I, Inc. Stock. All issued and outstanding shares of
capital stock of Silverleaf Finance I, Inc., a Delaware corporation, all
certificates, instruments or other documents evidencing or representing the same
and all
22
dividends and distributions therefrom, including dividends and distributions
paid in stock.
Sovereign. Sovereign Bank, a federally chartered savings bank, in its
individual capacity.
Standby Management Agreement Assignment. The assignment, in form and
substance satisfactory to the Required Banks, among the Borrower, the Standby
Manager, and the Agent, pursuant to which the Borrower assigns all of its rights
under the Standby Management Agreement to the Agent.
Standby Management Agreement. The agreement, in form and substance
satisfactory to the Required Banks, to be dated on or prior to the Closing Date
between the Standby Manager and the Borrower pursuant to which the Standby
Manager shall (1) monitor the operations of the Borrower and the Silverleaf Club
and the Borrower's compliance with the Business Plan, (2) assist the Borrower
with the preparation of the reports deliverable to the Banks by the Borrower
pursuant to this Agreement, and (3) assume the management of the Eligible
Projects upon the occurrence of an Event of Default in accordance with the terms
of this Agreement.
Standby Manager. The Person selected by the Borrower and acceptable to
the Required Banks, in their sole discretion, to act as standby manager in
accordance with the Standby Management Agreement. Subject to their review and
approval of the Standby Management Agreement, in their sole discretion, the
Required Banks hereby approve J&J Limited, Inc. as the initial Standby Manager.
Standby Servicer. The Person selected by the Required Banks to act as
standby servicer in accordance with the Standby Servicing Agreement. The current
Standby Servicer is Concord Servicing Corporation.
Standby Servicing Agreement. The Backup Servicing Agreement, dated as
of May 9, 2001, among the Borrower, Concord Servicing Corporation, and the
Agent, as amended by the First Amendment to Backup Servicing Agreement, in form
and substance satisfactory to the Required Banks, dated on or prior to the
Closing Date, among the Borrower, Concord Servicing Corporation, pursuant to
which agreement, as amended, the Standby Servicer shall provide servicing
functions with respect to the Consumer Loan Collateral and the Ineligible Note
Portfolio upon the occurrence of an Event of Default.
Stock Pledge Agreement. The stock pledge agreement, in form and
substance satisfactory to the Required Banks, dated the Closing Date, made by
the Borrower in favor of the Agent or its collateral agent, for the benefit of
the Banks and the Agent, pledging the Silverleaf Finance I, Inc. Stock.
Subordinated Debt. The New Notes and any other unsecured Indebtedness
of the Borrower or any of its Subsidiaries that is expressly subordinated and
made junior to the payment and performance in full of the Obligations, and
evidenced as such by a subordination agreement or by another written instrument
containing
23
subordination provisions in form and substance approved by the Required Banks in
writing.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Survey. In relation to each Mortgaged Property, an instrument survey of
such Mortgaged Property, which shall show the location of all buildings,
structures, easements and utility lines on such Mortgaged Property, shall be
sufficient to remove the survey exception from the Title Policy, shall show that
all buildings and structures are within the lot lines of such Mortgaged
Property, shall not show any encroachments by others, shall show the zoning
district or districts in which such Mortgaged Property is located, shall show
any flood hazard district as established by the Federal Emergency Management
Agency or any successor agency or equivalent of any other Governmental Authority
and shall show whether such Mortgaged Property is located in any flood plain,
flood hazard or wetland protection district established by any Governmental
Authority.
Surveyor Certificate. In relation to each Mortgaged Property for which
a Survey has been conducted, a certificate executed by the surveyor who prepared
such Survey dated as of a recent date and containing such information relating
to such Mortgaged Property as the Agent or the applicable title insurance
company may require, such certificate to be satisfactory to the Agent in form
and substance.
Tangible Net Worth. With respect to any Person, the amount calculated
in accordance with generally accepted accounting principles as (i) the
consolidated net worth of such Person and its consolidated subsidiaries, plus
(ii) to the extent not otherwise included in such consolidated net worth,
unsecured subordinated Indebtedness of such Person and its consolidated
subsidiaries the terms and conditions of which are reasonably satisfactory to
the Required Banks, minus (iii) the consolidated intangibles of such Person and
its consolidated subsidiaries, including, without limitation, goodwill,
trademarks, tradenames, copyrights, patents, patent applications, licenses and
rights in any of the foregoing and other items treated as intangibles in
accordance with generally accepted accounting principles.
Tax Refund. That certain corporate tax refund of the Borrower for the
1998 and 1999 tax years in the estimated amount of $5,000,000.
Textron. Textron Financial Corporation, a Delaware corporation.
Textron Documents. The documents listed on SCHEDULE 1.1(b).
Textron Facility. Those certain credit facilities provided by Textron
and certain other lenders to the Borrower pursuant to the documents listed on
SCHEDULE 1.1(b).
24
Timeshare Act. With respect to each Eligible Project, the statutes and
regulations related to timeshare development and sales in the jurisdiction where
such Eligible Project is located.
Timeshare Instruments. With respect to each Eligible Project, the
documents pursuant to which the Eligible Project shall be submitted to a
timeshare form of ownership and registered with appropriate Governmental
Authorities.
Timeshare Interest. (a) As defined in the Timeshare Instruments for
each Eligible Project, consisting of an undivided interest in a Unit at the
Eligible Project as tenant-in-common, together with the right to make use of any
and all easements appurtenant thereto, the non-exclusive right to use the common
areas and amenities, and the exclusive right to use and occupy any Unit and the
common furnishings therein for a use period for which such rights to use have
been properly reserved or (b) with respect to Oak N' Spruce Resort, an Oak N'
Spruce Beneficial Interest.
Title Policy. In relation to each Mortgaged Property, an ALTA standard
form title insurance policy issued by a title insurance company, acceptable to
the Agent (with such reinsurance or co-insurance as the Agent may require, any
such reinsurance to be with direct access endorsements) in such amount as may be
determined by the Agent insuring the priority of the Mortgage of such Mortgaged
Property and that the Borrower or one of its Subsidiaries holds fee simple title
to such Mortgaged Property, subject only to the encumbrances permitted by the
applicable Mortgage and which shall not contain exceptions for mechanics liens,
persons in occupancy or matters which would be shown by a survey (except as may
be permitted by the applicable Mortgage), shall not insure over any matter
except to the extent that any such affirmative insurance is acceptable to the
Agent in its sole discretion, and shall contain such endorsements and
affirmative insurance as the Agent in its discretion may require, including but
not limited to (i) comprehensive endorsement, (ii) variable rate of interest
endorsement, (iii) usury endorsement, (iv) revolving credit endorsement, (v)
tie-in endorsement, (vi) doing business endorsement and (vii) ALTA form 3.1
zoning endorsement.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Tranche A Banks. Sovereign and the other lending institutions listed on
SCHEDULE 1 hereto under the heading "Tranche A Banks" and any Person who becomes
an assignee of any rights and obligations of a Tranche A Bank pursuant to
Section 17.
Tranche A Commitment. With respect to each Tranche A Bank, the amount
set forth on SCHEDULE 1 hereto as the amount of such Tranche A Bank's commitment
to make Tranche A Loans, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
25
Tranche A Commitment Percentage. With respect to each Tranche A Bank,
the percentage set forth in SCHEDULE 1 hereto as such Tranche A Bank's
percentage of the aggregate Tranche A Commitments of all of the Tranche A Banks.
Tranche A Conversion Date. The earlier of (a) March 31, 2004 and (b)
two (2) years from the Closing Date, as the same may be extended with the
consent of all of the Tranche A Banks as set forth in Section 3.2(a).
Tranche A Loans. Loans made or to be made by the Tranche A Banks to the
Borrower pursuant to Section 2.1(a).
Tranche A Maturity Date. The earliest of (a) ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) five
(5) years from the Closing Date or (c) the weighted average maturity date of the
Eligible Consumer Loans pledged as Collateral as of the Tranche A Conversion
Date, as determined by the Agent in its reasonable discretion.
Tranche A Notes. See Section 2.3.
Tranche A Total Commitment. The sum of the Tranche A Commitments of the
Tranche A Banks, as in effect from time to time, which shall not exceed the sum
of $48,000,000 minus the Tranche B Total Commitment, as determined on the
Closing Date.
Tranche B Banks. Sovereign and the other lending institutions listed on
SCHEDULE 1 hereto under the heading "Tranche B Banks" and any Person who becomes
an assignee of any rights and obligations of a Tranche B Bank pursuant to
Section 17.
Tranche B Commitment. With respect to each Tranche B Bank, the amount
set forth on SCHEDULE 1 hereto as the amount of such Tranche B Bank's commitment
to make Tranche B Loans to the Borrower, as the same shall be reduced in
accordance with Section 2.2 hereof and may otherwise be reduced from time to
time; or if such commitment is terminated pursuant to the provisions hereof,
zero.
Tranche B Commitment Percentage. With respect to each Tranche B Bank,
the percentage set forth on SCHEDULE 1 hereto as such Tranche B Bank's
percentage of the aggregate Tranche B Commitments of all of the Tranche B Banks.
Tranche B Loans. Loans made or to be made by the Tranche B Banks to the
Borrower pursuant to Section 2.1(b).
Tranche B Maturity Date. The earlier of (a) March 30, 2007 and (b) five
(5) years from the Closing Date.
Tranche B Notes. See Section 2.3.
Tranche B Total Commitment. The sum of the Tranche B Commitments of the
Tranche B Banks, as in effect from time to time, which shall not exceed
$11,500,000 (or such lesser amount determined on the Closing Date).
26
Unit. Each of the units at one of the Eligible. Projects designated for
timeshare interval ownership in the respective Timeshare Instruments.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
Weekly Flash Reports. See Section 7.4(o).
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the Commonwealth of Massachusetts, have the meanings assigned to
them therein, with the term "instrument" being that defined under Article 9 of
the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof', "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including," the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including."
27
(k) This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are, however, cumulative
and are to be performed in accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others, the
Agent and the Borrower and are the product of discussions and negotiations among
all parties. Accordingly, this Credit Agreement and the other Loan Documents are
not intended to be construed against the Agent or any of the Banks merely on
account of the Agent's or any Bank's involvement in the preparation of such
documents.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND.
(a) Tranche A Commitment. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Tranche A Banks severally agrees to lend
to the Borrower, and the Borrower may borrow, repay, and reborrow from time to
time from the Closing Date up to but not including the Tranche A Conversion
Date, upon notice by the Borrower to the Agent given in accordance with Section
2.5, such sums as are requested by the Borrower up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Tranche A Commitment then in effect, provided
that (i) the sum of the outstanding Tranche A Loans (after giving effect to all
amounts requested) shall not at any time exceed the lesser of (A) the Tranche A
Total Commitment then in effect and (B) the Borrowing Base and (ii) the sum of
the outstanding Tranche A Loans and the outstanding Tranche B Loans (after
giving effect to all amounts requested) shall not at any time exceed ninety-five
percent (95%) of the Eligible Consumer Loan Amount. Notwithstanding anything
herein to the contrary, the Borrower acknowledges, confirms and agrees that it
shall not be entitled to receive, nor shall any Bank be required to make, any
Tranche A Loan if and to the extent that: (i) the Borrower has failed to
substantially adhere to the Business Plan, including the Senior Lender Advance
Schedule, as determined by the Required Banks in their sole and absolute
discretion; or (ii) the most recent Weekly Flash Report delivered to the Banks
in accordance with Section 7.4(n), indicates that the Borrower has in excess of
five million dollars ($5,000,000) in Available Cash on Hand. The Tranche A Loans
shall be made pro rata in accordance with each Bank's Tranche A Commitment
Percentage. Each request for a Tranche A Loan hereunder shall constitute a
representation and warranty by the Borrower that the conditions set forth in
Section 10 and Section 11, in the case of the initial Tranche A Loan to be made
on the Closing Date, and Section 11, in the case of all other Tranche A Loans,
have been satisfied on the date of such request.
(b) Tranche B Commitment. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Tranche B Banks severally agrees to lend
to the Borrower, and the Borrower may borrow, repay, and reborrow from time to
time
28
(except as otherwise provided below) from the Closing Date up to but not
including the Tranche B Maturity Date, upon notice by the Borrower to the Agent
given in accordance with Section 2.5, such sums as are requested by the Borrower
up to a maximum aggregate principal amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Bank's Tranche B Commitment
then in effect, provided that (i) the sum of the outstanding amount of the
Tranche B Loans (after giving effect to all amounts requested) shall not at any
time exceed the Tranche B Total Commitment then in effect and (ii) the sum of
the outstanding Tranche A Loans and the outstanding Tranche B Loans (after
giving effect to all amounts requested) shall not at any time exceed ninety-five
percent (95%) of the Eligible Consumer Loan Amount. Notwithstanding anything
herein to the contrary, the Borrower acknowledges, confirms and agrees that it
shall not be entitled to receive, nor shall any Bank be required to make, any
Tranche B Loan if and to the extent that: (i) the Borrower has failed to
substantially adhere to the Business Plan, including the Senior Lender Advance
Schedule, as determined by the Required Banks in their sole and absolute
discretion; or (ii) the most recent Weekly Flash Report delivered to the Banks
in accordance with Section 7.4(n), indicates that the Borrower has in excess of
five million dollars ($5,000,000) in Available Cash on Hand. Other than the
initial Tranche B Loans to be made on the Closing Date, the Borrower may not
borrow or reborrow any Tranche B Loans prior to the repayment in full of all of
the Tranche A Loans and the cancellation, or permanent reduction to zero, of the
Tranche A Total Commitment. Notwithstanding anything to the contrary set forth
herein, the Borrower may not reborrow any Tranche B Loans made by Liberty Bank
or its successors and assigns. The Tranche B Loans shall be made pro rata in
accordance with each Bank's Tranche B Commitment Percentage. Each request for a
Tranche B Loan hereunder shall constitute a representation and warranty by the
Borrower that the conditions set forth in Section 10 and Section 11, in the case
of the initial Tranche B Loan to be made on the Closing Date, and Section 11, in
the case of all other Tranche B Loans, have been satisfied on the date of such
request.
(c) Business Plan. Notwithstanding anything herein to the contrary, the
obligation of each Bank to make any Loan under this Agreement shall be subject
to and conditioned upon both ▇▇▇▇▇▇ and the lenders under the Textron Facility
each making advances to the Borrower substantially in accordance with the
Business Plan, including the Senior Lender Advance Schedule, which the Agent
agrees will be determined on a quarterly basis commencing with the quarter
beginning on April 1, 2002. The Banks shall have no obligation to make any Loan
hereunder to the extent that either the lenders under the Textron Facility or
▇▇▇▇▇▇ terminates its respective facility or fails to make advances to the
Borrower as provided in the Business Plan, including the Senior Lender Advance
Schedule, which the Agent agrees will be determined on a quarterly basis
commencing with the quarter beginning on April 1, 2002.
(d) General. The Borrower acknowledges, agrees and confirms that the
effectiveness of this Credit Agreement is subject to the satisfaction of the
conditions set forth in Section 10 and Section 11 on or before May 31, 2002.
Until such time as the Banks determine that the conditions set forth in Section
10 and Section 11 have been satisfied, all of the Borrower's rights shall be
governed by and construed in accordance with the terms and
29
conditions of the Original Agreement, as modified by the Forbearance Agreement.
If the conditions set forth in Section 10 and Section 11 are not satisfied on or
before May 31, 2002, then this Agreement, and the respective rights and
obligations of the parties hereto, shall be null and void AB INITIO and of no
further force and effect and the respective rights and obligations of the
Borrower, the Agent and the Banks shall be governed by the terms and conditions
of the Original Agreement, as modified by the Forbearance Agreement.
(e) Suspension of Loans. If any stay, order, cease and desist order,
injunction, temporary restraining order or similar judicial or nonjudicial
sanction shall be issued limiting or otherwise materially adversely affecting
any Timeshare Interest sales activities, other business operations in respect of
the Eligible Projects, or the enforcement of the remedies of the Agent and the
Banks hereunder or under the Security Documents, then, in such event, the Agent
and the Banks shall have no obligation to make any Loans hereunder: (i) in
respect of Eligible Consumer Loans from the sale of Timeshare Interests which
are the subject of any stay, order, cease and desist order, injunction,
temporary restraining order or similar judicial or nonjudicial sanction until
the stay, order, cease and desist order, injunction, temporary restraining order
or similar judicial or nonjudicial sanction has been lifted or released to the
satisfaction of the Required Banks and (ii) in respect of consumer loans from
the sale of Timeshare Interests at any Eligible Project if: (x) the stay, order,
cease and desist order, injunction, temporary restraining order or similar
judicial or nonjudicial sanction in question has not been lifted or released to
the satisfaction of the Required Banks within sixty (60) days of its issuance
and (y) there is a reduction in the total number of sales of Timeshare Interests
by the Borrower in any Loan Year of more than twenty percent (20%) from the
total number of sales of Timeshare Interests in the immediately preceding Loan
Year.
(f) Change in Control. If there shall occur a change, singly or in the
aggregate, of more than fifty percent (50%) of the executive management of the
Borrower as described in SCHEDULE 2.1(f), the Banks shall have no obligation to
make any Loans hereunder, unless within thirty (30) days prior thereto the
Borrower provides the Banks with written information setting forth the
replacement executive management personnel of the Borrower together with a
description of those Persons' experience, ability and reputation, and the
Required Banks, acting in good faith, determine that the replacement management
personnel's experience, ability and reputation is equal to or greater than that
of the Borrower as set forth on SCHEDULE 2.1(f). Notwithstanding the foregoing,
the makeup of the Borrower's Board of Directors may be altered in accordance
with the Bond Holder Exchange Documents, provided that no more than two (2) of
the five (5) positions shall be controlled by the holders of the New Notes.
(g) Failure to Adhere to Business Plan/Default or Event of Default. The
Agent and the Banks shall not be obligated to fund any Loan hereunder if: (i)
the Borrower shall fail to substantially adhere to the Business Plan (including
the Senior Lender Advance Schedule) as determined by the Required Banks in their
sole and absolute discretion or (ii) a Default or Event of Default shall have
occurred and be continuing.
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2.2. MANDATORY AUTOMATIC REDUCTION OF TRANCHE B TOTAL COMMITMENT. The
Tranche B Total Commitment shall be reduced automatically on a monthly basis as
of the first day of each calendar month based on a twenty (20) year amortization
schedule to an amount equal to or less than the amount set forth on SCHEDULE
2.2. Upon each such reduction, the Tranche B Commitments of each of the Tranche
B Banks shall be reduced pro rata in accordance with its Tranche A Commitment
Percentage and the Borrower shall make any prepayments required by Section
3.2(b) hereof. No reduction of the Tranche B Commitments may be reinstated.
2.3. THE NOTES. The Tranche A Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of EXHIBIT B hereto
(each a "TRANCHE A NOTE"). The Tranche B Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of EXHIBIT C hereto
(each a "TRANCHE B Note"). Each of the Tranche A Notes and the Tranche B Notes
shall be dated as of the Closing Date and completed with appropriate insertions.
One Tranche A Note shall be payable to the order of each Tranche A Bank in a
principal amount equal to such Bank's Tranche A Commitment or, if less, the
outstanding amount of all Tranche A Loans made by such Bank, plus interest
accrued thereon, as set forth below. One Tranche B Note shall be payable to the
order of each Tranche B Bank in a principal amount equal to such Bank's Tranche
B Commitment or, if less, the outstanding amount of all Tranche B Loans made by
such Tranche B Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Loan or at the time of receipt of any
payment of principal on such Bank's Note, an appropriate notation on such Bank's
Note Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Loans set forth on such
Bank's Note record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Bank, but the failure to record, or any error in so
recording, any such amount on such Bank's Note Record shall not limit or
otherwise affect the obligations of the Borrower hereunder or under any Note to
make payments of principal of or interest on any Note when due.
2.4. INTEREST ON LOANS. Except as otherwise provided in Section 4.7,
(a) each Tranche A Loan shall bear interest for the period commencing with the
Drawdown Date thereof and ending on the date such Loan is repaid at a rate per
annum equal to the Base Rate and (b) each Tranche B Loan shall bear interest for
the period commencing with the Drawdown Date thereof and ending on the date such
Loan is repaid at the rate of eight percent (8%) per annum. The Borrower
promises to pay interest on each Loan monthly in arrears on the first day of
each calendar month for the prior calendar month.
2.5. REQUESTS FOR LOANS. The Borrower shall give to the Agent written
notice in the form of EXHIBIT D hereto (or telephonic notice confirmed in a
writing in the form of EXHIBIT D hereto) of each Loan requested hereunder (a
"LOAN REQUEST") no less than two (2) Business Days prior to the proposed
Drawdown Date of any Loan. Each such notice shall specify (i) the principal
amount of the Tranche A Loan or Tranche B Loan requested and (ii) the proposed
Drawdown Date
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of such Loan. Each Loan Request for a Tranche A Loan shall be accompanied by a
Borrowing Base Certificate. With each Loan Request for a Tranche A Loan, the
Borrower shall deliver to the Agent the Required Consumer Loan Documents for the
Eligible Consumer Loans to be pledged by the Borrower to the Agent and upon
which such Loan Request is based so that the Borrowing Base shall exceed the
outstanding amount of all Tranche A Loans (including the Tranche A Loans
included in such Loan Request). By submitting a Loan Request, the Borrower shall
be deemed to represent and warrant that (i) with respect to a Loan Request for a
Tranche A Loan, the information in the most recent Borrowing Base Certificate
remains true and accurate as of the date of such Loan Request, (ii) the proceeds
of such Loan shall be used by the Borrower in accordance with Section 6.19.1 and
the Business Plan, and (iii) that after giving effect to the requested advance,
the outstanding principal amount of the Tranche A Loans will not exceed the
lesser of the Tranche A Total Commitment and the Borrowing Base and the
outstanding principal amount of the Tranche B Loans will not exceed the Tranche
B Total Commitment. Promptly upon receipt of any such notice, the Agent shall
notify each of the Tranche A Banks and/or Tranche B Banks, as applicable,
thereof. Each such notice shall be irrevocable and binding on the Borrower and
shall obligate the Borrower to accept the Loan(s) requested from the Banks on
the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate
amount of $100,000 or an integral multiple thereof. The Borrower shall not
submit more frequently than once a calendar week a Loan Request for a Tranche A
Loan.
2.6. FUNDS FOR LOANS.
2.6.1. FUNDING PROCEDURES. Subject to the terms and conditions
set forth herein (including receipt by each Bank of a Loan Request
within the time period specified in Section 2.5), not later than 1:00
p.m. (Providence, Rhode Island time) on the proposed Drawdown Date of
any Loans, each of the Tranche A Banks and/or Tranche B Banks, as
applicable, will make available to the Agent, at the Agent's Office, in
immediately available funds, the amount of such Bank's Tranche A
Commitment Percentage and/or Tranche B Commitment Percentage, as
applicable, of the amount of the requested Loans. Upon receipt from
each such Bank of such amount, and upon receipt of the documents
required by Sections 10 and 11 and the satisfaction of the other
conditions set forth herein, to the extent applicable, the Agent will
make available to the Borrower the aggregate amount of such Loans made
available to the Agent by the Banks. The failure or refusal of any Bank
to make available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its applicable Commitment Percentage of the
requested Loans shall not relieve any other Bank from its several
obligation hereunder to make available to the Agent the amount of such
other Bank's applicable Commitment Percentage of any requested Loans.
2.6.2. ADVANCES BY AGENT. The Agent may, unless notified to
the contrary by any Bank prior to a Drawdown Date, assume that such
Bank has made available to the Agent on such Drawdown Date the amount
of such Bank's applicable Commitment Percentage of the Loans to be made
on such
32
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Drawdown Date, such Bank shall pay to the
Agent on demand an amount equal to the product of (i) the average
computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times
(ii) the amount of such Bank's applicable Commitment Percentage of such
Loans, times (iii) a fraction, the numerator of which is the number of
days that elapse from and including such Drawdown Date (or such later
date which is two Business Days after such Bank received the Loan
Request for such Loan) to the date on which the amount of such Bank's
applicable Commitment Percentage of such Loans shall become immediately
available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any
amounts owing under this paragraph shall be prima facie evidence of the
amount due and owing to the Agent by such Bank. If the amount of such
Bank's applicable Commitment Percentage of such Loans is not made
available to the Agent by such Bank within three (3) Business Days
following such Drawdown Date, the Agent shall be entitled to recover
such amount from the Borrower on demand, with interest thereon at the
rate per annum applicable to the Loans made on such Drawdown Date.
2.7. CHANGE IN BORROWING BASE; INELIGIBLE CONSUMER LOANS. (a) The
Borrowing Base shall be determined weekly (or at such other intervals as may be
specified pursuant to Section 7.4(f)) by the Agent by reference to the Borrowing
Base Certificate delivered to the Banks and the Agent pursuant to Section 7.4(f)
and other information obtained by or provided to the Agent or any of the Banks.
The Agent shall give to the Borrower written notice of any change in the
Borrowing Base determined by the Required Banks. In the case of any change in
the general criteria for Eligible Consumer Loans, such notice shall be effective
upon its receipt by the Borrower. Prior to the time that such notice becomes
effective, the Borrowing Base shall be computed as it would have been computed
in the absence of such notice.
(b) If any consumer loan pledged as Consumer Loan Collateral shall
subsequent to the pledge under the Security Agreement no longer qualify as an
Eligible Consumer Loan, such consumer loan shall be excluded from the Borrowing
Base, and the Borrower (i) shall replace such consumer loan with an Eligible
Consumer Loan that provides the same amount of credit to the Borrowing Base,
(ii) shall reduce the amount of outstanding Tranche A Loans (if necessary) so
that the total amount of Tranche A Loans outstanding shall not exceed the
Borrowing Base, or (iii) if the Borrower is unable to replace such consumer loan
with an Eligible Consumer Loan or reduce the Tranche A Loan, and the Required
Banks give their prior written consent, may replace such consumer loan with a
consumer loan that does not satisfy the criteria for being classified as an
Eligible Consumer Loan. In the event that any Eligible Consumer Loan becomes
available thereafter, the Borrower shall promptly substitute such Eligible
Consumer Loan for the ineligible consumer loan pledged to the Agent.
33
2.8. REPAYMENTS OF LOANS PRIOR TO EVENT OF DEFAULT.
2.8.1. CREDIT FOR FUNDS RECEIVED IN BORROWER'S ACCOUNT. Prior
to the occurrence of an Event of Default as to which the account
officers of the Agent active upon the Borrower's account have actual
knowledge, (i) all funds and cash proceeds in the form of money, checks
and like items received in the Borrower's Account as contemplated by
Section 7.18 shall be credited, on the same Business Day on which the
Agent determines that good collected funds have been received, and,
prior to the receipt of good collected funds, may, in the Agent's
discretion, be credited on a provisional basis until final receipt of
good collected funds, and applied as contemplated by Section 2.8.2,
(ii) all funds and cash proceeds in the form of a wire transfer
received in the Borrower's Account as contemplated by Section 7.18
shall be credited on the same Business Day as the Agent's receipt of
such amounts (or up to such later date as the Agent determines that
good collected funds have been received), and applied as contemplated
by Section 2.8.2, and (iii) all funds and cash proceeds in the form of
an automated clearing house transfer received in the Borrower's Account
as contemplated by Section 7.18 shall be credited, on the next Business
Day following the Agent's receipt of such amounts (or up to such later
date as the Agent determines that good collected funds have been
received), and applied as contemplated by Section 2.8.2. For purposes
of the foregoing provisions of this Section 2.8.1, the Agent shall not
be deemed to have received any such funds or cash proceeds on any day
unless received by the Agent before 2:30 p.m. (Providence, Rhode Island
time) on such day. The Borrower further acknowledges and agrees that
any such provisional credits or credits in respect of wire or automatic
clearing house funds transfers shall be subject to reversal if final
collection in good funds of the related item is not received by, or
final settlement of the funds transfer is not made in favor of, the
Agent in accordance with the Agent's customary procedures and practices
for collecting provisional items or receiving settlement of funds
transfers.
2.8.2. APPLICATION OF PAYMENTS PRIOR TO EVENT OF DEFAULT.
(a) Prior to the occurrence of an Event of Default of which
the account officers of the Agent active on the Borrower's account have
knowledge, and except as otherwise provided in Section 2.8.2(b) and
(c), all funds transferred to the Borrower's Account and for which the
Borrower has received credits shall be applied to the Obligations once
each calendar week as follows:
(i) first, to pay the fees, expenses, costs, and any
past due amounts (other than principal and interest on any
Loans) due and payable by the Borrower to the Agent or any
Bank;
(ii) second, to pay interest then due and payable on
the Tranche A Loans, interest then due and payable on the
Tranche B Loans, and any other Obligations then due and
payable (other than the principal of the Loans);
34
(iii) third, to make any unpaid principal payments
due with respect to the Tranche B Loans under Section 2.2;
(iv) fourth, to reduce the principal of the Tranche A
Loans;
(v) fifth, to reduce the principal of the Tranche B
Loans pro rata based upon the respective Tranche A Commitment
Percentages of the Banks; and
(vi) sixth, to reduce any remaining principal of the
Tranche B Loans.
(b) Prior to the occurrence of an Event of Default of which
the account officers of the Agent active on the Borrower's account have
knowledge, any funds in the Borrower's Account constituting (1) the Net
Cash Proceeds of the sale or other disposition of any of the Additional
Resort Collateral or (2) insurance proceeds in respect of damaged or
destroyed Additional Resort Collateral that are not applied to repair
or replacement in accordance with Section 7.7, proceeds of title
insurance and condemnation proceeds respect to any of the Additional
Resort Collateral shall be applied to the Obligations as follows:
(i) first, to pay the fees, expenses, costs and any
past due amounts (other than principal and interest on any
Loans) due and payable by the Borrower to the Agent or any
Bank;
(ii) second, to pay interest then due and payable on
the Tranche A Loans, interest then due and payable on the
Tranche B Loans, and any other Obligations then due and
payable (other than the principal of the Loans);
(iii) third, to reduce the principal of the Tranche B
Loans pro rata based upon the respective Tranche A Commitment
Percentages of the Banks;
(iv) fourth, to reduce any remaining principal of the
Tranche B Loans; and
(v) fifth, to reduce the principal of the Tranche A
Loans.
(c) Prior to the occurrence of an Event of Default of which
the account officers of the Agent active on the Borrower's account have
knowledge, any funds in the Borrower's Account constituting (1) the Net
Cash Proceeds of the sale or other disposition of any of the Existing
Mortgaged Properties or (2) insurance proceeds in respect of damaged or
destroyed Existing Mortgaged Property that are not applied to repair or
replacement in accordance with Section 7.7, proceeds of title insurance
and condemnation proceeds respect to any of the Existing Mortgaged
Properties shall be applied to the Obligations as follows:
35
(i) first, to pay the fees, expenses, and any past
due amounts (other than principal and interest on any Loans)
due and payable by the Borrower to Sovereign;
(ii) second, to pay interest then due and payable on
the Tranche B Loans of Sovereign, interest then due and
payable on the Tranche A Loans of Sovereign, and any other
Obligations then due and payable to Sovereign (other than the
principal of the Loans);
(iii) third, to reduce the principal of the Tranche B
Loans of Sovereign;
(iv) fourth, to reduce the principal of the Tranche A
Loans of Sovereign;
(v) fifth, to pay interest then due and payable on
the Tranche B Loans of the Tranche B Banks (other than
Sovereign), interest then due and payable on the Tranche A
Loans of the Tranche A Banks (other than Sovereign), and any
other Obligations then due and payable (other than the
principal of the Loans) to the Banks (other than Sovereign);
and
(vi) sixth, to reduce the principal of the Tranche B
Loans of the Tranche B Banks (other than Sovereign) and then
to reduce the principal of the Tranche A Loans of the Tranche
A Banks (other than Sovereign).
(d) Except as otherwise provided in Section 2.8.2(a), (b), or
(c), all prepayments of the Loans pursuant to this Section 2.8.2 shall
be allocated among the Banks making such Loans, in proportion, as
nearly as practicable, to the respective unpaid principal amount of
such Loans outstanding, with adjustments to the extent practicable to
equalize any prior payments or repayments not exactly in proportion.
2.9. REPAYMENTS OF LOANS AFTER EVENT OF DEFAULT. Following the
occurrence and during the continuance of an Event of Default of which the
account officers of the Agent active on the Borrower's account have knowledge,
all funds transferred to the Borrower's Account and for which the Borrower has
received credits shall be applied to the Obligations in accordance with Section
12.5.
3. REPAYMENT OF THE LOANS.
3.1. MATURITY.
(a) Tranche A Maturity Date. The Borrower promises to pay on the
Tranche A Maturity Date, and there shall become absolutely due and payable on
the Tranche A Maturity Date, all of the Tranche A Loans outstanding on such
date, together with any and all accrued and unpaid interest thereon.
36
(b) Tranche B Maturity Date. The Borrower promises to pay on the
Tranche B Maturity Date, and there shall become absolutely due and payable on
the Tranche B Maturity Date, all of the Tranche B Loans outstanding on such
date, together with any and all accrued and unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF LOANS.
(a) Scheduled Payments of Tranche A Loans. Not later than December 31,
2004, the Borrower may request in writing to the Agent and the Tranche A Banks
that the Tranche A Conversion Date be extended. If the Agent and each of the
Tranche A Banks, in their sole discretion, consent to such request, the Tranche
A Conversion Date shall be extended for such period as determined by the Agent
and the Tranche A Banks. Effective upon the occurrence of the Tranche A
Conversion Date, the Tranche A Commitments shall terminate and the Borrower
shall pay the outstanding principal amount of the Tranche A Loans by applying
thereto the proceeds from the Consumer Loan Collateral in accordance with
Sections 2.8 and 2.9, with a final payment on the Tranche A Maturity Date in an
amount equal to the unpaid balance of the Tranche A Loans. Notwithstanding
anything herein to the contrary, the Borrower agrees that on and after the
Tranche A Conversion Date, the outstanding principal balance of the Tranche A
Loans shall be reduced in substantial accordance with the Business Plan. Absent
a Default or an Event of Default, following the Tranche A Conversion Date, all
payments of principal and interest on the Consumer Loan Collateral shall
continue to be paid to the Agent for the pro rata benefit of the Banks and the
Agent, and the Agent shall apply such payments as set forth in Section 2.8.2(a)
to satisfy the Borrower's obligations under this Section 3.2(a).
(b) Overadvances. If at any time the sum of the outstanding amount of
the Tranche A Loans exceeds the Tranche A Total Commitment then in effect, then
the Borrower shall immediately pay the amount of such excess to the Agent for
application to the Tranche A Loans. In the event that the aggregate outstanding
Tranche A Loans at any time exceed the Borrowing Base or the outstanding Tranche
A Loans and Tranche B Loans exceed 95% of the Eligible Consumer Loan Amount, the
Borrower (i) shall pay the amount of such excess to the Agent for application to
the outstanding Tranche A Loans, (ii) shall pledge sufficient Eligible Consumer
Loans to increase the Borrowing Base to equal or exceed the outstanding
principal amount of the Tranche A Loans, or (iii) if the Borrower is unable to
pay such excess or pledge additional Eligible Consumer Loans, and the Required
Banks give their prior written consent, may deliver to the Agent consumer loans
that do not satisfy the criteria for being classified as Eligible Consumer
Loans. If at any time the sum of the outstanding amount of the Tranche B Loans
exceeds the Tranche B Total Commitment then in effect, then the Borrower shall
immediately pay the amount of such excess to the Agent for application to the
Tranche B Loans.
(c) Mandatory Tranche B Fund Up Prepayment. If and to the extent that:
(i) at the end of each calendar quarter during the first two (2) years following
the Closing Date, commencing with the quarter beginning on April 1, 2002 (x) the
outstanding principal balance of all Tranche A Loans is less than seventy
percent
37
(70%) of the then Eligible Consumer Loan Amount (such difference being
hereinafter referred to as an "AVAILABLE FUND-UP Amount") and (y) provided the
Borrower has Available Cash on Hand of five million dollars ($5,000,000) or more
as indicated in the most recent Weekly Flash Report or (ii) at the end of the
calendar quarter commencing April 1, 2004, if the Tranche A Conversion Date has
not yet occurred, (x) the outstanding principal balance of all Tranche A Loans
is less than seventy-five percent (75%) of the then Eligible Consumer Loan
Amount (such difference also being referred to as an "AVAILABLE FUND-UP AMOUNT")
and (y) provided the Borrower has Available Cash on Hand of five million dollars
($5,000,000) or more as indicated in the most recent Weekly Flash Report, then
the Borrower agrees that the Agent may, on the last Business Day of each such
calendar quarter, make a Tranche A Loan in an amount equal to such Available
Fund Up Amount and apply such Tranche A Loan to the repayment of the outstanding
Tranche B Loans as follows: (i) first, to pay interest then due and payable on
the Tranche B Loans and the Tranche A Loans and (ii) second, to reduce the
principal of the Tranche B Loans pro rata based on the respective Tranche A
Commitment Percentages of the Banks until such time as the Tranche B Loans are
paid in full. Any such reduction of the Tranche B Loans shall permanently reduce
the Tranche B Commitments by a corresponding amount.
(d) Further Quarterly Payments. If, at the end of any calendar quarter
commencing the quarter beginning on April 1, 2002, the Borrower has Available
Cash on Hand exceeding five million dollars ($5,000,000), as indicated in the
most recent Weekly Flash Report (the "ADDITIONAL AVAILABLE AMOUNT"), then the
Borrower agrees to repay the Loans in an amount equal to such Additional
Available Amount and such amount will be applied as follows: (i) first, to pay
interest then due and payable on the Tranche B Loans and the Tranche A Loans,
(iii) second, to reduce the principal of the Tranche B Loans pro rata based upon
the respective Tranche A Commitment Percentages of the Banks until such time as
the Tranche B Loans are paid in full, and (iii) third, to reduce the principal
of the Tranche A Loans. Any such reduction of the Tranche B Loans shall
permanently reduce the Tranche B Commitments by a corresponding amount.
3.3. OPTIONAL REPAYMENTS OF LOANS. The Borrower shall have the right,
at its election, to repay the outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium. The Borrower shall give the Agent,
no later than 10:00 a.m., Providence, Rhode Island time, at least three (3)
Business Days prior written notice, of any proposed repayment pursuant to this
Section 3.3 of Loans, specifying the proposed date of payment of Loans and the
principal amount to be paid. Each such partial prepayment of the Loans shall be
in an integral multiple of $100,000, shall be accompanied by the payment of
accrued interest on the principal repaid to the date of payment and shall be
applied first to the outstanding Tranche B Loans and, after the outstanding
Tranche B Loans have been repaid in full, then to the outstanding Tranche A
Loans. No Tranche B Loans so repaid may be reborrowed. Each partial prepayment
shall be allocated among the applicable Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's Tranche A
Note or Tranche B Note, as applicable, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.
38
4. CERTAIN GENERAL PROVISIONS.
4.1. FUNDS FOR PAYMENTS.
4.1.1. PAYMENTS TO AGENT. All payments of principal, interest,
and any other amounts due hereunder or under any of the other Loan
Documents shall be made on the due date thereof to the Agent in
Dollars, for the respective accounts of the applicable Banks and the
Agent, at the Agent's Office or at such other place that the Agent may
from time to time designate, in each case at or about 11:00 a.m.
(Providence, Rhode Island, time or other local time at the place of
payment) and in immediately available funds.
4.1.2. NO OFFSET, ETC. All payments by the Borrower hereunder
and under any of the other Loan Documents shall be made without
recoupment, setoff or counterclaim and free and clear of and without
deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions
of any nature now or hereafter imposed or levied by any jurisdiction or
any political subdivision thereof or taxing or other authority therein
unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrower with
respect to any amount payable by it hereunder or under any of the other
Loan Documents, the Borrower will pay to the Agent, for the account of
the applicable Banks or (as the case may be) the Agent, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to
enable the applicable Banks or the Agent to receive the same net amount
which such Banks or the Agent would have received on such due date had
no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for
all taxes or other charges deducted from or paid with respect to
payments made by the Borrower hereunder or under such other Loan
Document.
4.2. COMPUTATIONS. All computations of interest on the Loans shall be
based on a 360-day year and paid for the actual number of days elapsed. Whenever
a payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day, and interest shall accrue during such
extension. The outstanding amount of the Loans as reflected on the Note Records
from time to time shall be considered correct and binding on the Borrower unless
within five (5) Business Days after receipt of any notice by the Agent or any of
the Banks of such outstanding amount, the Agent or such Bank shall notify the
Borrower to the contrary.
4.3. ADDITIONAL COSTS, ETC. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to
39
time hereafter made upon or otherwise issued to any Bank or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not having
the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, such Bank's Tranche
A Commitment or Tranche B Commitment or any of the Loans (other than
taxes based upon or measured by the income or profits of such Bank or
the Agent), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts payable
to any Bank or the Agent under this Credit Agreement or the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any of the Loans, such Bank's Tranche A Commitment or
Tranche B Commitment, or any class of loans or commitments of which any
of the Loans or such Bank's Tranche A Commitment or Tranche B
Commitment forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Tranche A Commitment or Tranche B
Commitment, or
(ii) to reduce the amount of principal, interest, or
other amount payable to such Bank or the Agent hereunder on
account of such Bank's Tranche A Commitment or Tranche B
Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or other sum payable
hereunder, the amount of which payment or foregone interest or
other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts
40
as will be sufficient to compensate such Bank or the Agent for such additional
cost, reduction, payment or foregone interest or other sum.
4.4. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower agrees to pay such Bank or (as the case may be) the
Agent for the amount of such reduction in the return on capital as and when such
reduction is determined upon presentation by such Bank or (as the case may be)
the Agent of a certificate in accordance with Section 4.5 hereof. Each Bank
shall allocate such cost increases among its customers in good faith and on an
equitable basis.
4.5. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 4.3 or 4.4 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
4.6. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of
default by the Borrower in making a borrowing after the Borrower has given (or
is deemed to have given) a Loan Request.
4.7. INTEREST AFTER DEFAULT.
4.7.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Tranche A Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand
at a rate per annum equal to four percent (4%) above the Base Rate
until such amount shall be paid in full (after as well as before
judgment). Overdue principal and (to the extent permitted by applicable
law) interest on the Tranche B Loans shall bear interest compounded
monthly and payable on demand at a rate per annum equal to four percent
(4%) above the interest
41
rate applicable to the Tranche B Loans pursuant to Section 2.4 until
such amounts shall be paid in full (after as well as before judgment).
4.7.2. AMOUNTS NOT OVERDUE. During the continuance of a
Default or an Event of Default, the principal of the Loans not overdue
shall, until such Default or Event of Default has been cured or
remedied or such Default or Event of Default has been waived by the
Required Banks pursuant to Section 24, bear interest at a rate per
annum equal to four percent (4%) above the rate of interest otherwise
applicable to such Loans pursuant to Section 2.4. Any installment or
payment due hereunder which shall be received by the Agent more than
ten (10) days after its due date shall be subject to an additional
charge of five percent (5%) per annum on the amount so overdue (but in
not event higher than the maximum allowed by applicable law).
5. SECURITY; SERVICING AGREEMENT; LOCK BOX AGREEMENT AND COLLATERAL
CUSTODIAN AGREEMENT.
5.1. COLLATERAL. Pursuant to the Security Documents, the Obligations
shall be secured by a perfected security interest in the Collateral with the
priority set forth in the applicable Security Documents (subject only to
Permitted Liens entitled to priority under applicable law).
5.2. LOCK BOX AGREEMENT. Pursuant to the Initial Lockbox Agreement,
Chase shall receive in the lock box identified therein all payments on loans
constituting Consumer Loan Collateral and other consumer loans pledged to the
Agent (other than the Ineligible Note Portfolio) in the ordinary course of
business. By June 30, 2002, the Borrower and the Agent shall have entered into a
replacement lockbox agreement, in form and substance satisfactory to the
Required Banks (the "REPLACEMENT LOCKBOX AGREEMENT"), pursuant to which
Sovereign shall replace Chase as the lock box agent. By September 30, 2002, the
Borrower shall have delivered to each of the consumer borrowers of an Eligible
Consumer Loan included in the calculation of the Eligible Consumer Loan Amount
as of such date a notice, in form and substance satisfactory to the Agent,
instructing such consumer borrower to remit payments in respect of its Eligible
Consumer Loan directly to the Lock Box with Sovereign. Following such
replacement, the Initial Lockbox Agreement shall remain in effect for a
transitional period satisfactory to the Required Banks. Chase or Sovereign, to
the extent then the effective lockbox agent, shall deposit to the Borrower's
Account all payments collected with respect to the Consumer Loan Collateral and
other consumer loans pledged to the Agent (other than the Ineligible Note
Portfolio) on each Business Day. All amounts deposited by Chase or, in its
capacity solely as the lockbox agent, Sovereign in the Borrower's Account shall
be applied by the Agent on a weekly basis as provided in Section 2.8 or Section
2.9, as the case may be.
5.3. COLLATERAL CUSTODIAL. Pursuant to the Custodial Agreement, dated
as of August 11, 2002, as amended by the First Amendment to Custodial Agreement
date on or prior to the date hereof, among the Agent, the Borrower and the
Collateral Custodian (as so amended, the "COLLATERAL CUSTODIAL AGREEMENT"), the
42
Collateral Custodian shall hold, as collateral agent for the Agent, all of the
Consumer Loan Collateral (including the Required Consumer Loan Documents).
5.4. SERVICING AGREEMENT. Pursuant to the Amended and Restated
Servicing Agreement, of even date herewith (the "SERVICING AGREEMENT") among the
Borrower, the Agent and the Borrower, as servicer (the "SERVICER"), the Servicer
shall service and administer loans constituting Consumer Loan Collateral in the
ordinary course of business. The Servicer shall administer all amounts due to
the Borrower with respect to the Consumer Loan Collateral and shall direct
payment to the Lock Box of all amounts to be collected with respect to the
Consumer Loan Collateral. All amounts directed by the Servicer to the Lock Box
shall be transferred to the Borrower's Account as set forth in Section 5.2 and
applied by the Agent as set forth in Section 2.8 or Section 2.9, as the case may
be. The Servicer shall provide to the Agent such reports and perform such other
functions as the Agent shall require. Following an Event of Default or for other
good cause, the Agent shall be entitled to establish a substitute servicing
arrangement with a servicer acceptable to the Required Banks at any time.
5.5. COLLATERAL PROCEDURES. The Borrower shall deliver to the Agent the
Required Consumer Loan Documents from time to time to such locations and in such
manner acceptable to the Agent as the Agent shall reasonably determine. The
Borrower shall take any actions required by the Agent to obtain the release of
any lien or security interest in favor of any party other than the Agent in any
Consumer Loan Collateral. The Borrower shall pay to the Agent all custodial
costs incurred, as determined by the Agent. With the prior consent of the Agent
in each instance, in its sole discretion, the Borrower shall be entitled to
effect delivery to the Agent by delivery to the Collateral Custodian or a
successor custodian approved by the Agent. All consumer loans delivered by the
Borrower to the Agent or the Collateral Custodian shall be accompanied by the
Required Consumer Loan Documents, and the Borrower shall be deemed to represent
and warrant in connection with all such loans delivered to the Agent or the
Collateral Custodian that the certifications required to be included in the
Consumer Loan Cover Sheet are true even if no such cover sheet shall be
delivered by the Borrower. The Borrower shall promptly deliver to the Agent or
the Collateral Custodian any additional documents related to any Consumer Loan
Collateral which the Borrower acquires after delivery to the Agent or the
Collateral Custodian of the Required Consumer Loan Documents.
5.6. ELIGIBLE PROJECTS.
(a) Proposed Additional Projects. The Borrower may propose additional
projects to be included as Eligible Projects. The Agent shall conduct such
review of such projects as the Agent shall deem appropriate, including, without
limitation, review of all timeshare instruments, consumer loan documents, real
estate documents, amenities agreements, management contracts, marketing
contracts, and other documentation related to such project. The Agent, with the
consent of all of the Banks, shall be entitled to approve or not approve such
proposed project as an Eligible Project.
43
(b) Acceptance of Additional Projects. Upon the approval by all of the
Banks of a proposed project as an Eligible Project, EXHIBIT E shall be deemed
amended to include such project and the Agent shall circulate a revised EXHIBIT
E containing such additional projects to the Banks. The Borrower shall take such
other action as the Banks shall require in connection with such project,
including, without limitation, the subordination of any applicable management
and marketing fees, the delivery of an opinion from local counsel in the
jurisdiction where such project is located, or any other action as the Agent
shall require. Upon the inclusion of an additional project as an Eligible
Project, all representations, warranties and covenants of the Borrower with
regard to the Eligible Projects in the Loan Documents shall be deemed amended to
refer to the additional Eligible Project.
5.7. SECURITY INTERESTS IN ALL CONSUMER LOAN COLLATERAL AND OTHER
CONSUMER LOANS. The Agent shall have a first-priority perfected security
interest in the Consumer Loan Collateral and a second-priority security interest
in any loans pledged by the Borrower to ▇▇▇▇▇▇ or Textron and included in
▇▇▇▇▇▇'▇ or Textron's borrowing bases, perfected to the extent set forth in the
Intercreditor Agreement. Notwithstanding that the Banks are obligated, subject
to the conditions of the Loan Documents, to make Tranche A Loans only in respect
of Eligible Consumer Loans pledged to the Agent from and after the Closing Date,
the Agent, for the benefit of the Banks, shall have a continuing security
interest in all of the Consumer Loan Collateral, all consumer loans constituting
part of the Ineligible Note Portfolio and any consumer loans pledged to ▇▇▇▇▇▇
or Textron and the Agent may, on behalf of the Banks, collect all payments made
under or in respect of all such Consumer Loan Collateral, including, without
limitation, Eligible Consumer Loans that are or may become ineligible, until any
of the same may be released by Agent, if at all, pursuant to Section 8.1 or the
Security Agreement. The Agent shall have a security interest in the Ineligible
Note Portfolio perfected by the filing of Uniform Commercial Code financing
statements in accordance with the terms of the Intercreditor Agreement.
Notwithstanding anything heretofore to the contrary, unless and until an Event
of Default shall occur, the Borrower, as agent for and on behalf of the Agent,
▇▇▇▇▇▇ and Textron, will retain possession of and collect all payments under or
in respect of all consumer loans in the Ineligible Note Portfolio, subject to
the terms of the Intercreditor Agreement. By executing this Agreement, the
Borrower acknowledges and agrees that it is holding the consumer loans
constituting the Ineligible Note Portfolio as bailee and agent for the Agent.
The Borrower shall hold and designate such consumer loans and the mortgages or
deeds of trust related thereto in a manner that clearly indicates that they are
being held by the Borrower as bailee on behalf of the Agent. Upon the occurrence
of an Event of Default, the Borrower shall promptly deliver to Textron, as agent
for the Banks, ▇▇▇▇▇▇ and itself, pursuant to the terms of the Intercreditor
Agreement, all original consumer loans comprising the Ineligible Note Portfolio,
and the related mortgages and deeds of trust. Upon the occurrence of an Event of
Default, Textron, in such capacity as agent, shall have the right to collect all
proceeds therefrom for application in accordance with the terms of the
Intercreditor Agreement. The Borrower further acknowledges and agrees that upon
repayment in full of the ▇▇▇▇▇▇ Facility or the Textron Facility, the Agent's
security interest in the collateral securing such facilities shall automatically
become a first priority security interest for the Obligations and the Borrower
shall take such
44
steps as the Agent may request to deliver such collateral to the Agent and to
confirm the Agent's first priority security interest therein.
5.8. RELEASE OF CERTAIN COLLATERAL. Upon the Borrower's repayment in
full of all Obligations under and in respect of the Tranche B Loans, the Agent
shall release its security interest in and mortgage on the Existing Mortgaged
Property, the Additional Resort Collateral, and the Silverleaf Finance I, Inc.
Stock; provided that (i) no Default or Event of Default shall exist and (ii)
▇▇▇▇▇▇ and Textron shall be releasing simultaneously their interest, if any, in
such Collateral.
6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as
follows:
6.1. CORPORATE AUTHORITY.
6.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and
its Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas (in the case
of the Borrower) or its state of incorporation (in the case of its
Subsidiaries), (ii) has all requisite corporate power to own its
property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation
and is duly authorized to do business in each jurisdiction where such
qualification is necessary. The Borrower's tax identification number is
▇▇-▇▇▇▇▇▇▇.
6.1.2. AUTHORIZATION. The execution, delivery and performance
of this Credit Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the
corporate authority of such Person, (ii) have been duly authorized by
all necessary corporate proceedings, (iii) do not conflict with or
result in any breach or contravention of any provision of law, statute,
rule or regulation to which the Borrower or any of its Subsidiaries is
subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower or any of its Subsidiaries and (iv) do not
conflict with any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, the Borrower or any of
its Subsidiaries.
6.1.3. ENFORCEABILITY. The execution and delivery of this
Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party will result in valid
and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of
45
specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding therefor may be brought.
6.2. APPROVALS. The execution, delivery and performance by the Borrower
or any of its Subsidiaries of this Credit Agreement and the other Loan Documents
to which the Borrower or any of its Subsidiaries is or is to become a party and
the transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority, any
shareholders, directors, bondholders, or any other Person, other than those
already obtained.
6.3. ASSOCIATIONS. Each Association is a corporation or unincorporated
association duly organized, validly existing and in good standing under the laws
of the jurisdiction where the respective Eligible Project is located. Each
Association at the following Eligible Projects is a member of the Silverleaf
Club: ▇▇▇▇▇ Lake Resort, Piney Shores Resort, The Villages (including Lake O'
The ▇▇▇▇▇), ▇▇▇▇ Country Resort, Seaside Resort, Ozark Mountain Resort, Holiday
Hills Resort, Timber Creek Resort, Fox River Resort, Oak N' Spruce Resort, and
Apple Mountain Resort. Each of the Associations and the Silverleaf Club has the
power and authority to own and operate its property, perform its obligations
under the Timeshare Instruments, and conduct its business as it is now being
conducted or as proposed to be conducted. Each Association has the authority to
levy annual assessments to cover the costs of maintaining and operating the
respective Eligible Project. Any lien for unpaid assessments in favor of any
Association or the Silverleaf Club shall at all times be subordinate to any lien
securing an Eligible Consumer Loan and to any lien in favor of the Agent or any
Bank.
6.4. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.2
hereto, the Borrower has good and marketable title to the Collateral, subject to
no rights of others, including any mortgages, leases, conditional sales
agreements, title retention agreements, liens or other encumbrances, except
Permitted Liens.
6.5. ASSIGNABILITY. Each Required Consumer Loan Document delivered
and/or assigned to the Agent (or the Collateral Custodian, as agent of the
Agent) in connection with each loan pledged as Consumer Loan Collateral contains
no prohibitions on assignment (other than prohibitions which have been waived
with all necessary consents obtained), and upon the exercise of the Agent's or
any Bank's rights as secured party, the Agent or such Bank shall be entitled to
the same benefits pursuant to each such document as the Borrower is entitled.
6.6. FINANCIAL STATEMENTS AND BUSINESS CONDITION.
6.6.1. FISCAL YEAR. The Borrower and each of its Subsidiaries
has a fiscal year which is the twelve months ending on December 31 of
each calendar year.
6.6.2. FINANCIAL STATEMENTS. The Weekly Flash Reports, the
Monthly Financial Reports for the first ten (10) months of the calendar
year 2001 and the Alternative Financial Models dated December 4, 2001
are, to
46
the best of Borrower's knowledge, accurate and fairly represent the
financial condition of the Borrower for the periods in question,
subject to the written qualifications set forth therein, including the
fact that such statements and reports are preliminary and subject to
completion of the audit thereof and that the Borrower anticipates
adjustments thereto which may significantly affect the results thereof,
including an estimated reduction in shareholder equity of $63,000,000.
To the best of Borrower's knowledge, there are no material liabilities,
direct or indirect, fixed or contingent, of the Borrower, except as
disclosed to the Banks in writing.
6.7. NO MATERIAL CHANGES, ETC. Prior to the Banks' receipt and approval
of the Borrower's financial statements for the fiscal year ended on December 31,
2001, except as otherwise disclosed by the Borrower to the Banks in writing, and
subject to the qualifications set forth in Section 6.6.2, since September 30,
2001, there has occurred no materially adverse change in the financial condition
or business of the Borrower and its Subsidiaries as shown on or reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at September
30, 2001, or the consolidated statement of income as of such date, other than
changes in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business or
financial condition of the Borrower or any of its Subsidiaries. Following the
Banks' receipt and approval of the Borrower's financial statements for the
fiscal year ended on December 31, 2001, there has occurred no materially adverse
change in the financial condition or business of the Borrower and its
Subsidiaries as shown on or reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 2001, or the consolidated
statement of income as of such date, other than changes in the ordinary course
of business that have not had any materially adverse effect either individually
or in the aggregate on the business or financial condition of the Borrower or
any of its Subsidiaries.
Since September 30, 2001, the Borrower has not made any Distribution.
6.8. OPERATION OF BUSINESS. Each of the Borrower and its Subsidiaries
possesses all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted and as presently proposed to be
conducted without known conflict with any rights of others. The Borrower's
buildings and the operation of the Borrower's business and the Eligible Projects
comply with all zoning, environmental, public health and safety, banking,
securities, lending and other similar laws and regulations and all other
Requirements.
6.9. LITIGATION. Except as set forth on SCHEDULE 6.9, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, might, either in
any case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of the Borrower or any of its
Subsidiaries or materially impair the right of the Borrower or any of its
Subsidiaries, to carry on business substantially as now
47
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower, or which question the validity of
this Credit Agreement or any of the other Loan Documents, or any action taken or
to be taken pursuant hereto or thereto.
6.10. NO MATERIALLY ADVERSE CONTRACTS, ETC.; NO DEFAULTS. Neither the
Borrower nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Borrower or any of its
Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the Borrower's
officers, to have any materially adverse effect on the business of the Borrower
or any of its Subsidiaries. Except for the Specified Events of Default (as
defined in the Forbearance Agreement) during the term of the Forbearance
Agreement, the Borrower has no knowledge of any Default or Event of Default not
disclosed to the Banks in writing. Except for the specified events of default
under the forbearance agreement between the Borrower and ▇▇▇▇▇▇ and the
forbearance agreement among the Borrower, Textron and the other lenders party
thereto, all of which shall be waived by Textron and ▇▇▇▇▇▇ on or prior to the
Closing Date, the Borrower has no knowledge of any default or event of default
under the ▇▇▇▇▇▇ Documents or the Textron Documents, except as disclosed to the
Banks in writing, and neither ▇▇▇▇▇▇ nor Textron has accelerated any loan
obligation of the Borrower on account of any such specified default or event of
default. Except for the Specified Events of Default or as disclosed in SCHEDULE
6.10, to the best of the Borrower's knowledge, the Borrower is not in default of
any material indenture, mortgage, deed of trust, agreement or other instrument
to which it is a party or by which it may be bound or affected.
6.11. COMPLIANCE WITH OTHER INSTRUMENTS. LAWS, ETC. Neither the
Borrower nor any of its Subsidiaries is in violation of (a) any provision of its
charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound in a manner that
could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Borrower
or any of its Subsidiaries or (b) any decree, order, judgment, statute, license,
rule or regulation or other Requirement.
6.12. TAX STATUS. The Borrower and its Subsidiaries (i) have made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (ii)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (iii) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
48
6.13. NO EVENT OF DEFAULT. Taking into consideration the waiver set
forth in Section 29, from and after the Closing Date, no Default or Event of
Default has occurred and is continuing under this Credit Agreement.
6.14. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
6.15. ABSENCE OF FINANCING STATEMENTS ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any of the Collateral or the Borrower's rights thereto.
6.16. PERFECTION OF SECURITY INTEREST. All filings, assignments,
pledges and deposits of documents or instruments have been made and all other
actions have been taken that are necessary or advisable, under applicable law,
to establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not subject
to any setoff, claims, withholdings or other defenses. The Borrower is the owner
of the Collateral free from any lien, security interest, encumbrance and any
other claim or demand, except for Permitted Liens.
6.17. CERTAIN TRANSACTIONS. None of the officers, directors, or
employees of the Borrower or any of its Subsidiaries is presently a party to any
transaction with the Borrower or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
6.18. EMPLOYEE BENEFIT PLANS.
Neither the Borrower nor any of its ERISA Affiliates has any Employee
Benefit Plans, Guaranteed Pension Plans or Multiemployer Plans. No liability to
the PBGC has been incurred by the Borrower or any ERISA Affiliate.
6.19. USE OF PROCEEDS.
49
6.19.1. GENERAL. The proceeds of the Loans shall be used
solely for working capital and general corporate purposes in accordance
with the Business Plan.
6.19.2. REGULATIONS U AND X. No portion of any Loan is to be
used for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221
and 224.
6.19.3. INELIGIBLE SECURITIES. No portion of the proceeds of
any Loans is to be used for the purpose of knowingly purchasing, or
providing credit support for the purchase of, during the underwriting
or placement period or within thirty (30) days thereafter, any
Ineligible Securities underwritten or privately placed by a Section 20
Subsidiary.
6.20. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all necessary
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and, based upon such diligent
investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of
the Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act,
or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter
"ENVIRONMENTAL LAWS"), which violation would have a material adverse
effect on the environment or the business, assets or financial
condition of the Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇; (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("HAZARDOUS SUBSTANCES") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that the Borrower or any of its Subsidiaries
conduct a remedial investigation, removal
50
or other response action pursuant to any Environmental Law; or (iii)
that it is or shall be a named party to any claim, action, cause of
action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence of
costs, expenses, losses or damages of any kind whatsoever in connection
with the release of Hazardous Substances;
(c) except as set forth on SCHEDULE 6.20 attached hereto: (i)
no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is
located on any portion of the Real Estate; (ii) in the course of any
activities conducted by the Borrower, its Subsidiaries or operators of
its properties, no Hazardous Substances have been generated or are
being used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would
have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or
into any real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Real Estate; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best
of the Borrower's knowledge, operating in compliance with such permits
and applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries, any Mortgaged
Property or any of the other Real Estate is subject to any applicable
environmental law requiring the performance of Hazardous Substances
site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or the
recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein
and contemplated hereby, or as a condition to the recording of any
Mortgage or to the effectiveness of any other transactions contemplated
hereby.
6.21. SUBSIDIARIES, ETC. SCHEDULE 6.21(a) contains a list of all of the
Borrower's Subsidiaries and the percentage of issued and outstanding shares of
each class of capital stock or equivalent issued by or owned by the Borrower.
None of the Borrower's Subsidiaries has any ownership or security interest in
the Collateral.
51
Except as set forth on SCHEDULE 6.21(b) hereto, (a) neither the Borrower nor any
Subsidiary of the Borrower is engaged in any joint venture or partnership with
any other Person and (b) no Subsidiary has any material assets or material
income.
6.22. DISCLOSURE. No information, exhibit or written report or the
content of any schedule furnished by or on behalf of the Borrower to the Agent
or any Bank in connection with any Loan or Eligible Project contains any
material misstatement of fact or omits the statement of a material fact
necessary to make the statement contained herein or therein not misleading. The
Borrower knows of no fact or condition which will prevent the sale of Timeshare
Interests to consumer borrowers or prevent the operation of the Eligible
Projects in accordance with the Timeshare Documents, related public offering
statements, and applicable law, or prevent the Borrower from performing its
Obligations pursuant to the Loan Documents. The Business Plan furnished to the
Banks in accordance with Section 10.17 is based on assumptions that the Borrower
believes are reasonable.
6.23. THE PROJECTS AND THE ADDITIONAL RESORT COLLATERAL. Each Eligible
Project and Additional Resort Collateral has adequate access from a publicly
dedicated street, and is constructed and operated in compliance with all
applicable laws and regulations, served by utilities necessary for its intended
use, and, with respect to the Eligible Projects only, furnished and equipped and
ready for occupancy. All amenities for each Eligible Project which have been
offered to purchasers of Timeshare Interests or referred to in any offering
materials are available to consumer borrowers. Each Timeshare Instrument for
each Eligible Project has been recorded in the real property records where such
project is located and otherwise filed in accordance with all applicable laws
and regulations.
6.24. SALE OF TIMESHARE INTERESTS. The marketing, sale, offering for
sale, rental solicitation of purchasers and financing of Timeshare Interests:
(a) will not constitute the sale, or the offering for sale, of securities
subject to the registration requirements of the Securities Act of 1933, as
amended, or any state securities law applicable to such sale or offer for sale;
(b) will not violate any Timeshare Act, or any land sales or consumer protection
law, statute or regulation of the State of Texas or any other state or
jurisdiction in which sales or solicitation activities occur or any Eligible
Project is located; and (c) will not violate any consumer credit or usury
statute of the State of Texas or any other state or jurisdiction in which sales
or solicitation activities occur or any Eligible Project is located. All
marketing and sales activities have been performed by Borrower's employees or by
independent contractors or agents of the Borrower, all of whom are properly
licensed in accordance with applicable laws. There have been no
misrepresentations made by the Borrower or any of its employees or selling
agents with respect to any matter relating to any Eligible Project or the sale
or financing of Timeshare Interests.
6.25. TANGIBLE PROPERTY. The machinery, equipment, fixtures, tools and
supplies used in connection with each Eligible Project and Additional Resort
Collateral, including, without limitation, with respect to the operations and
maintenance of the common areas, are owned or leased either by the Borrower,
Silverleaf Club or the respective Association.
52
6.26. REAL PROPERTY TAXES: SPECIAL ASSESSMENTS. Each portion of the
Real Estate constituting real property consists of a single tax lot. No portion
of said lots covers property other than the Real Estate in question and no
portion of the land in question lies in any other tax lot. There are no unpaid
or outstanding real estate or other taxes or assessments on or against any
Eligible Project, any Real Estate or any part thereof which are payable by the
Borrower (except real estate taxes not yet due and payable). The Borrower has
delivered to the Agent true and correct copies of real estate tax bills for each
Eligible Project and the Real Estate for the past fiscal tax year. No abatement
proceedings are pending with reference to any real estate taxes assessed against
the Real Estate. There are no betterment assessments or other special
assessments presently pending with respect to any part of any Eligible Project
or the Real Estate and the Borrower has received no notice of any such special
assessment being contemplated.
6.27. VIOLATIONS. The Borrower has received no notices of, and has no
knowledge of, any violations of any applicable Requirements.
6.28. SUBORDINATION. There is no indebtedness of the Borrower presently
owing to any Affiliate or shareholder of the Borrower except as described on
SCHEDULE 6.28 attached hereto.
6.29. STANDBY SERVICER. The Borrower has entered into the Standby
Servicing Agreement and such agreement is in full force and effect and has not
been modified, amended, or terminated.
6.30. INVENTORY CONTROL. Attached hereto as SCHEDULE 6.30 is a true and
complete copy of the Borrower's Inventory, Sales and Assignments procedures.
6.31. OPERATING CONTRACTS. The Borrower has entered into contracts,
agreements, and arrangements necessary for the operation of the Eligible
Projects, including, but not limited to, those with respect to utilities,
maintenance, management, services, marketing and sales (the "OPERATING
CONTRACTS").
6.32. ▇▇▇▇▇▇ AND TEXTRON FACILITIES. The modifications of the ▇▇▇▇▇▇
Facility and the Textron Facility on terms and conditions as provided in the
Business Plan have closed, and the Agent has been provided with true and correct
copies of the ▇▇▇▇▇▇ Documents and the Textron Documents, as so modified. There
is no event of default or event which, with the passage of time, notice or both,
would constitute an event of default under either the ▇▇▇▇▇▇ Facility or the
Textron Facility and the Borrower is in good standing under both of such
facilities.
6.33. BOND HOLDER EXCHANGE TRANSACTION. The Bond Holder Exchange Term
Sheet has not been amended, modified or otherwise rescinded.
6.34. DZ FACILITY. The DZ Bank Commitment Letter is in full force and
effect and has not been amended, modified or otherwise rescinded.
7. AFFIRMATIVE COVENANTS OF THE BORROWER.
53
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans provided for in this
Credit Agreement, all in accordance with the terms of this Credit Agreement and
the Notes.
7.2. MAINTENANCE OF OFFICE; MANAGEMENT. The Borrower will maintain its
chief executive office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ or at such
other place in the United States of America as the Borrower shall designate upon
written notice to the Agent, where notices, presentations and demands to or upon
the Borrower in respect of the Loan Documents may be given or made. Unless
replaced by the Standby Manager in accordance with the terms of the Loan
Documents and the Standby Management Agreement, the Borrower shall remain
engaged in the active management of the Eligible Projects and shall continue to
perform duties substantially similar to those presently performed as provided in
the management agreement relating to each Eligible Project.
7.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (ii) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (iii) at all times engage Deloitte &
Touche, L.P. or other independent certified public accountants satisfactory to
the Required Banks as the independent certified public accountants of the
Borrower and its Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor firm's) engagement
as the independent certified public accountants of the Borrower and its
Subsidiaries and the appointment in such capacity of a successor firm as shall
be satisfactory to the Required Banks.
7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Borrower
(notwithstanding the foregoing, the Borrower shall deliver its annual
financial statements for its fiscal years 2000 and 2001 within ninety
(90) days of the Closing Date), the consolidated balance sheet of the
Borrower and its Subsidiaries and the consolidating balance sheet of
the Borrower and its Subsidiaries, each as at the end of such year, and
the related consolidated statement of income and consolidated statement
of cash flow and consolidating statement of income and consolidating
statement of cash flow for such year, each setting forth in comparative
form the figures for the previous fiscal year and all such consolidated
and consolidating statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and
54
certified (such certification to be in form and substance satisfactory
to the Agent) by Deloitte & Touche, L.P. or by other independent
certified public accountants satisfactory to the Agent, together with a
written statement from such accountants to the effect that they have
read a copy of this Credit Agreement, and that, in making the
examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants
shall have obtained knowledge of any then existing Default or Event of
Default they shall disclose in such statement any such Default or Event
of Default; provided that such accountants shall not be liable to the
Banks for failure to obtain knowledge of any Default or Event of
Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
the Borrower, copies of the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries and the unaudited consolidating balance
sheet of the Borrower and its Subsidiaries, each as at the end of such
quarter, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of
income and consolidating statement of cash flow for the portion of the
Borrower's fiscal year then elapsed, all in reasonable detail and
prepared in accordance with generally accepted accounting principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such
financial statements fairly presents the financial position of the
Borrower and its Subsidiaries on the date thereof (subject to year-end
adjustments);
(c) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of the
Borrower, unaudited monthly consolidated financial statements of the
Borrower and its Subsidiaries for such month and unaudited monthly
consolidating financial statements of the Borrower and its Subsidiaries
for such month, each prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
condition of the Borrower and its Subsidiaries on the date thereof
(subject to year-end adjustments);
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the
Borrower, in form and substance satisfactory to the Required Banks, and
(i) setting forth in reasonable detail computations evidencing
compliance with the covenants contained in Section 9 and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since September 30, 2001 (with respect to
financial statements delivered prior the Required Banks' receipt and
approval of the financial statements for the fiscal year ended on
December 31, 2001) or December 31, 2001 (with respect to financial
statements delivered following the Required Banks' receipt and approval
of
55
the financial statements for the fiscal year ended on December 31,
2001), (ii) stating that no Default or Event of Default has occurred
and (iii) if a Default or Event of Default has occurred and is
continuing, specifying the nature and the period of existence thereof
and the action proposed to be taken with respect thereto;
(e) within five (5) days after the filing thereof, a copy of
the Borrower's Form 10-K and 10-Q as filed with the Securities and
Exchange Commission;
(f) (i) on the first day of each calendar week, (ii) from time
to time as requested by the Agent, (iii) simultaneously with each Loan
Request, and (iv) simultaneously with any request for release of any
Collateral, a Borrowing Base Certificate substantially in the form of
EXHIBIT A, accompanied by summary aging reports and a trial balance of
the Consumer Loan Collateral, acceptable in form to the Required Banks;
(g) within thirty (30) days after filing, a copy of the
federal income tax return for the Borrower and the Association, with
all schedules;
(h) within one hundred and twenty (120) days after the close
of each fiscal year, annual reports required by each relevant Timeshare
Act, or such other management prepared financial statements of
Silverleaf Club containing information concerning each Eligible Project
satisfactory to the Required Banks;
(i) no later than sixty (60) days prior to the start of any
fiscal year, the Borrower shall submit to the Banks an update to the
Business Plan for the upcoming fiscal year in form acceptable to the
Required Banks (each such update to the Business Plan shall be subject
to the Required Banks' approval);
(j) no later than the fifteenth (15th) day of each calendar
month, the Borrower shall furnish to the Banks, or cause the Servicer
to furnish to the Banks, three (3) copies of a report in form and
substance acceptable to the Required Banks prepared by the Borrower or
the Servicer, certified by an Authorized Officer of the Borrower, and
showing, with respect to each of the loans constituting Consumer Loan
Collateral as of the close of business on the last day of the calendar
month last ended:
(i) the account number;
(ii) name(s) of consumer borrower(s);
(iii) original principal amount of such consumer
loan;
(iv) any payment, including any prepayment, received
on account of such consumer loan during the period covered by
the statement;
56
(v) a cash receipts journal;
(vi) the opening and closing principal balance;
(vii) any consumer loans constituting Consumer Loan
Collateral cancelled during the period covered by such
statement;
(viii) any delinquency of principal and interest
payments on a 30-60-90 day basis;
(ix) any delinquency of principal, interest or
assessments in excess of ninety (90) days;
(x) the interest rate for each consumer loan and the
weighted average consumer interest rate for all Eligible
Consumer Loan pledged to the Agent and the outstanding
principal amount of Eligible Consumer Loans bearing an
interest rate of less than 12.5% and such amount expressed as
a percentage of the outstanding principal balance of all
Eligible Consumer Loans;
(xi) any extensions, refinances or other adjustments
to such consumer loan;
(xii) the outstanding principal balance of Eligible
Consumer Loans made to residents of Canada and such amount
expressed as a percentage of the outstanding principal balance
of all Eligible Consumer Loans;
(xiii) the outstanding principal balance of Eligible
Consumer Loans made to consumer borrowers with a FICO Credit
Bureau Score of less than 600 and such amount expressed as a
percentage of the outstanding principal balance of all
Eligible Consumer Loans;
(xiv) the weighted average of the FICO Credit Bureau
Scores of all consumer borrowers under Eligible Consumer
Loans;
(xv) the outstanding principal balance of Eligible
Consumer Loans described in paragraph (9)(b) of the definition
of "Eligible Consumer Loans" and such amount expressed as a
percentage of the outstanding principal balance of all
Eligible Consumer Loans;
(xvi) the outstanding principal balance of Eligible
Consumer Loans with an original term of greater than
eighty-four (84) months and such amount expressed as a
percentage of the outstanding principal balance of all
Eligible Consumer Loans; and
(xvii) such other information as the Agent or any
Bank .may request;
57
(k) no later than the fifteenth (15th) day of each calendar
month, the Borrower shall deliver to the Banks a sales and cancellation
report indicating the sales and cancellation activity with respect to
each Eligible Project for the preceding calendar month showing such
detailed information as the Agent or any Bank may request;
(l) no later than the fifteenth (15th) day of each calendar
month, the Borrower shall deliver to the Banks an inventory report in
form satisfactory to the Required Banks indicating the number of
Timeshare Interests sold and unsold at each Eligible Project,
identified by Unit and type or color of Timeshare Interest, for the
preceding calendar month;
(m) no later than the fifteenth (15th) day of each calendar
month, the Borrower shall deliver to the Banks a report in form
satisfactory to the Required Banks indicating the performance of each
Eligible Consumer Loan pledged as Collateral described in clause (b) of
paragraph (9) of the definition of "Eligible Consumer Loan" during the
preceding calendar month;
(n) no later than the fifteenth (15th) day of each calendar
month, the Borrower shall deliver to the Banks a report in form
satisfactory to the Required Banks indicating, among other things, the
conformity of the Borrower's business to the Business Plan and any
variances therefrom during the preceding calendar month;
(o) weekly "flash reports" (the "WEEKLY FLASH REPORTS")
consisting of the number of showings of the Eligible Projects to
prospective purchasers of Timeshare Interests, gross sales reports,
accountants payables reports, accounts receivables reports and cash
balances before 5:00 p.m. (eastern standard time) on each Thursday
during the term hereof for the prior week; and
(p) from time to time, with reasonable promptness, such other
financial data and information (including accountants, management
letters) and such other information concerning the Collateral, the
Eligible Projects and the business and operations of the Borrower, as
the Agent or any Bank may reasonably request.
7.5. NOTICES.
7.5.1. DEFAULTS The Borrower will promptly notify the Agent
and each of the Banks in writing of the occurrence of any Default or
Event of Default. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower or any of its Subsidiaries is a
party or obligor, whether as principal or surety, the Borrower shall
forthwith give written notice thereof to each of the Banks, describing
the notice or action and the nature of the claimed default.
58
7.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give
notice to the Banks (i) of any violation of any Environmental Law that
the Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (ii) upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including a notice
from any agency of potential environmental liability, of any federal,
state or local environmental agency or board, that has the potential to
materially affect the assets, liabilities, financial conditions or
operations of the Borrower or any of its Subsidiaries, or the Agent's
security interests pursuant to the Security Documents.
7.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The Borrower
will, immediately upon becoming aware thereof, notify the Banks in
writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which
any of the Collateral, or the Agent's rights with respect to the
Collateral, are subject.
7.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will,
and will cause each of its Subsidiaries to, give notice to the Banks in
writing within fifteen (15) days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving any material claim against the Borrower or any of its
Subsidiaries (which in a situation involving monetary claims shall have
in excess of $100,000 in dispute) and stating the nature and status of
such litigation or proceedings. The Borrower will, and will cause each
of its Subsidiaries, to give notice to the Banks, in writing, in form
and detail satisfactory to the Agent, within ten (10) days of any
judgment not covered by insurance, final or otherwise, against the
Borrower or any of its Subsidiaries in an amount in excess of $100,000.
7.5.5. NOTICE OF LOSS. If any Collateral shall be materially
damaged or destroyed, the Borrower shall immediately notify the Agent
and the Banks.
7.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(ii) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (iii) will, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now
59
conducted by them and in related businesses; provided that nothing in this
Section 7.6 shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties or those of its Subsidiaries if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its or their business and that do not in the aggregate materially adversely
affect the business of the Borrower and its Subsidiaries on a consolidated
basis.
7.7. INSURANCE.
(a) Insurance Generally. The Borrower will maintain the insurance
coverage set forth below with financially sound and reputable insurers in the
amounts and for the periods set forth below.
(i) At all times during the term of this Agreement, the
Borrower shall maintain insurance for each Eligible Project against
loss by fire, windstorm and other hazards, with minimum coverage equal
to the replacement cost of each Eligible Project.
(ii) At all times during the term of this Agreement, the
Borrower shall maintain broad form coverage public liability insurance
with minimum coverage of Five Million Dollars ($5,000,000). The amount
of such coverage shall be reviewed annually by the Required Banks and
may, in the Required Banks' sole discretion and at the Borrower's
expense, be increased or decreased during the term of this Agreement.
The Borrower shall obtain a new or revised policy within twenty (20)
days of receipt of notice from the Agent of a revision in the amount of
public liability insurance required.
(iii) If any of the improvements now or hereafter constructed
on the Real Estate are within an area designated by the Director of the
Federal Emergency Management Agency, pursuant to the Flood Disaster
Protection Act of 1973, as amended, as one having special flood
hazards, the Borrower shall maintain flood insurance at the maximum
limit of coverage available.
(iv) The Borrower shall maintain workers' compensation
insurance and such other insurance as shall be necessary or prudent for
the operation of the Borrower's business, all with minimum coverage at
least equal to that in effect on the date of this Agreement.
(v) The Borrower will maintain insurance on each of the
Mortgaged Properties in accordance with the terms of the applicable
Mortgage.
The Borrower shall pay all premiums for and take all other actions to
maintain in full force and effect the insurance required by this Section 7.7.
The Borrower shall ensure that no such policies shall be cancelled except after
thirty (30) days' prior notice by the insurance carrier to the Agent, and that
the Agent for the pro rata benefit of the Banks shall be named as an additional
insured, mortgagee and lender's loss payee on such policies. The Borrower shall
at least thirty (30) days
60
prior to the expiration date of each policy, and otherwise, from time to time
upon the Agent's request, furnish or cause to be furnished to the Agent and the
Banks, evidence of the maintenance of the insurance required by this Section
7.7, including, without limitation, such originals or copies as the Agent may
request of policies, certificates of insurance, riders and endorsements relating
to such insurance and proof of premium payments.
(b) Project Title Policies. In addition to the foregoing, in connection
with each Eligible Project (other than Oak N' Spruce Resort), the Borrower shall
provide a mortgagee title insurance policy in favor of the Agent for the pro
rata benefit of the Banks on a current ALTA Loan Policy Form issued by a title
insurance company qualified to do business in the State of Texas or the
jurisdiction of the respective Eligible Project and acceptable to the Agent
issued in the amount equal to twenty-five percent (25%) of the outstanding
principal amount of the consumer loans from such Eligible Project pledged to the
Agent under the Security Agreement and insuring that the mortgages or deed of
trusts referred to in clause (2) of the definition of "Required Consumer Loan
Documents" are not subject to any prior liens, other than certain Permitted
Liens, substantially in the form of the specimen policy for each Eligible
Project attached as SCHEDULE 7.7 attached hereto (each a "PROJECT TITLE
POLICY"). The Project Title Policies shall contain only those exceptions
approved by the Agent, in writing, and shall contain affirmative insurance for
real estate taxes, matters of survey and against mechanics liens. Any material
deviation from such specimen policy shall require the Agent's consent. If the
Agent or the Banks at any time shall determine that title to any Collateral or
the assignment to the Agent of the Borrower's rights in such Collateral shall be
defective in any respect, the Borrower shall within sixty (60) days after a
request by the Agent provide to the Agent and the Banks title insurance in favor
of the Agent for the pro rata benefit of the Banks acceptable to the Agent for
100% of the principal amount of Consumer Loan Collateral pledged hereunder.
(c) Insurance Proceeds. In the event of any fire or other casualty to
or with respect to the improvements on or at any Eligible Project or any Real
Estate comprising the Additional Resort Collateral, the Borrower covenants that
the Borrower or the applicable Association, as the case may be, will promptly
restore, repair or replace (or cause to be restored, repaired or replaced) the
damaged improvements and restore, repair or replace any other personal property
to the same condition as immediately prior to such fire or other casualty and,
with respect to the improvements and personal property on any Eligible Project
or any Real Estate comprising the Additional Resort Collateral, in accordance
with the terms of the applicable Timeshare Instruments and applicable Timeshare
Act. The insufficiency of any net insurance proceeds shall in no way relieve the
Borrower or, as applicable, the Association of its obligation to restore, repair
or replace such improvements and other personal property in accordance with the
terms hereof, of the applicable Timeshare Instruments and the applicable
Timeshare Act, and the Borrower covenants that the Borrower or, as the case may
be, the applicable Association shall promptly comply or cause compliance with
the provisions of the applicable Timeshare Instruments and the applicable
Timeshare Act relating to such restoration, repair or replacement. The Borrower
shall, unless an Event of Default
61
has occurred, apply all insurance proceeds payable to or received by it in
accordance with the applicable Timeshare Instruments. If an Event of Default has
occurred, the Agent may, in its sole discretion, apply all insurance proceeds in
accordance with the applicable Timeshare Instruments or to the repayment of the
Loans in accordance with Section 12.5.
7.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be duly paid or discharged, before the
same shall become overdue, all taxes, assessments and other governmental charges
(other than taxes, assessments and other governmental charges imposed by foreign
jurisdictions that in the aggregate are not material to the business or assets
of the Borrower on an individual basis or of the Borrower and its Subsidiaries
on a consolidated basis) imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto with the consent of the Required Banks;
and provided further that the Borrower and each Subsidiary of the Borrower will
pay all such taxes, assessments, charges, levies or claims forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor.
7.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
7.9.1. GENERAL; AUDITS AND FAIR LENDING REVIEW. The Borrower
shall permit the Banks, through the Agent or any of the Banks' other
designated representatives, to visit and inspect any of the properties
of the Borrower or any of its Subsidiaries, to examine the books of
account of the Borrower and its Subsidiaries (and to make copies
thereof and extracts therefrom), and to discuss the affairs, finances
and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such
reasonable times and intervals as the Agent or any Bank may reasonably
request and all at the Borrower's expense. The Agent, and any Bank
acting through the Agent, shall have the right to audit the Borrower's
operations and the Collateral from time to time at the Borrower's
expense; provided that, if no Event of Default has occurred, the Agent,
and any Bank acting through the Agent, shall conduct such audits no
more frequently than twice each calendar year. At the discretion of the
Agent, the Agent shall be entitled to conduct a fair lending review of
the Borrower, at the Borrower's expense, at least once a calendar year.
7.9.2. COLLATERAL REPORTS. No more frequently than two times
during each calendar year, or more frequently as determined by the
Agent if an Event of Default shall have occurred and be continuing,
upon the request of the Agent, the Borrower will obtain and deliver to
the Agent, or, if the Agent so elects, will cooperate with the Agent in
the Agent's obtaining, a
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report of an independent collateral auditor satisfactory to the Agent
(which may be affiliated with one of the Banks) with respect to the
Eligible Consumer Loans included in the Borrowing Base, which report
shall indicate whether or not the information set forth in the
Borrowing Base Certificate most recently delivered is accurate and
complete in all material respects based upon a review by such auditors
of the Eligible Consumer Loans (including verification with respect to
the amount, aging, identity and credit of the respective consumer
borrowers). All such collateral value reports shall be conducted and
made at the expense of the Borrower.
7.9.3. APPRAISALS. No more frequently than once during two (2)
calendar years, or more frequently as determined by the Agent if an
Event of Default shall have occurred and be continuing, upon the
request of the Agent, the Borrower will obtain and deliver to the Agent
appraisal reports in form and substance and from appraisers
satisfactory to the Agent, stating the then current fair market,
orderly liquidation and forced liquidation values of all or any portion
of the Collateral and the then current business value of each of the
Borrower and its Subsidiaries. All such appraisals shall be conducted
and made at the expense of the Borrower.
7.9.4. ENVIRONMENTAL ASSESSMENTS. No more frequently than once
during two (2) calendar years, or more frequently as determined by the
Agent if an Event of Default shall have occurred and be continuing, the
Agent, in its discretion, for the purpose of assessing and ensuring the
value of any Mortgaged Property or Additional Resort Collateral, obtain
one or more environmental assessments or audits of such Mortgaged
Property or Additional Resort Collateral prepared by a hydrogeologist,
an independent engineer or other qualified consultant or expert
approved by the Agent to evaluate or confirm (i) whether any Hazardous
Substances are present in the soil or water at such Mortgaged Property
or Additional Resort Collateral and (ii) whether the use and operation
of such Mortgaged Property or Additional Resort Collateral complies
with all Environmental Laws. Environmental assessments may include
without limitation detailed visual inspections of such Mortgaged
Property or Additional Resort Collateral including any and all storage
areas, storage tanks, drains, dry ▇▇▇▇▇ and leaching areas, and the
taking of soil samples, surface water samples and ground water samples,
as well as such other investigations or analyses as the Agent deems
appropriate. All such environmental assessments shall be conducted and
made at the expense of the Borrower.
7.9.5. COMMUNICATION WITH ACCOUNTANTS. The Borrower authorizes
the Agent and, if accompanied by the Agent, the Banks to communicate
directly with the Borrower's independent certified public accountants
and authorizes such accountants to disclose to the Agent and the Banks
any and all financial statements and other supporting financial
documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of the
Borrower or any of its Subsidiaries. At the request of the Agent, the
Borrower shall
63
deliver a letter addressed to such accountants instructing them to
comply with the provisions of this Section 7.9.5.
7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (i) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, (ii) the provisions of its charter documents and
by-laws, (iii) all agreements and instruments by which it or any of its
properties may be bound and (iv) all applicable decrees, orders, and judgments.
The Borrower, its employees, servants and agents have and, at all times, will
have all licenses, registrations, approvals and other authority as may be
necessary to enable them to own and operate their businesses, to perform all
services which they have agreed to perform in any state, municipality or other
jurisdiction, to sell Timeshare Interests, to finance the sale of Timeshare
Interests and to operate the Eligible Projects and the Additional Resort
Collateral. If at any time while any Loan or Note is outstanding or any Bank has
any obligation to make Loans hereunder, any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any government
shall become necessary or required in order that the Borrower may fulfill any of
its obligations hereunder, the Borrower will immediately take or cause to be
taken all reasonable steps within the power of the Borrower to obtain such
authorization, consent, approval, permit or license and furnish the Banks with
evidence thereof.
7.11. UNDERWRITING CRITERIA. All Eligible Consumer Loans pledged as
Collateral to the Agent subsequent to the date of execution of this Agreement
will be consistent with the Borrower's general underwriting criteria as approved
in writing by the Required Banks, including, without limitation, (i) the
requirement that a majority of sales shall be made to consumer borrowers with
minimum annual income as follows: $35,000 for Texas, $40,000 for Illinois, and
$45,000 for Massachusetts and (ii) the requirement that each consumer borrower
shall have a major credit card issued in his or her name. In addition to the
foregoing, effective as of the date sixty (60) days after the Closing Date, the
Borrower shall ensure that the weighted average FICO Credit Bureau Scores of all
consumer borrowers with respect to which a FICO Credit Bureau Score can be
obtained be not less than 640. The Borrower shall not materially alter its
general underwriting criteria without the prior written approval of the Required
Banks, which approval may be withheld by the Required Banks in their sole
discretion.
7.12. AGREEMENTS CONSTITUTING COLLATERAL. The Borrower shall comply
with all terms of any agreements related to any Collateral, and the Borrower
shall immediately notify the Agent and the Banks of any defaults or events of
defaults under any such agreements. Except for prepayments in the ordinary
course of business and except for revised payment plans as provided for in
clause (b) of paragraph (9) of the definition of Eligible Consumer Loan, the
Borrower shall not modify, compromise, extend, rescind or cancel any agreements
related to the Collateral without the prior written consent of the Required
Banks, which consent shall not be unreasonably withheld.
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7.13. SUBORDINATION. All indebtedness to officers or shareholders of
the Borrower now existing or hereafter arising, including subordinated
shareholder debt, if any, and Indebtedness and fees payable to affiliated
entities, other than those fees set forth on SCHEDULE 7.13, shall be
subordinated to the Obligations, pursuant to subordination agreements in form
and substance satisfactory to the Required Banks.
7.14. SALE OF TIMESHARE INTERESTS. The Borrower will sell or offer for
sale Timeshare Interests only in the State of Texas and such other jurisdictions
listed on SCHEDULE 7.14 where the Borrower has completed all registrations
consistent with applicable Requirements. All sales will be made in compliance
with all Requirements and utilizing then current disclosure materials approved
as required by all Governmental Authorities. Before it sells or offers for sale
Timeshare Interests in any other jurisdictions, the Borrower will notify the
Agent and provide the Agent with evidence satisfactory to the Agent that the
Borrower has complied with all laws of such jurisdiction governing its proposed
conduct.
7.15. CONSUMER DOCUMENTS. The Borrower agrees with Agent that the
consumer loan documents in the forms previously delivered to the Agent are the
only documents which have been or will be used in connection with the credit
sale of Timeshare Interests and that the Borrower shall not materially modify or
amend, or permit the modification or amendment of, any such consumer loan
documents or use or permit the use by others of any other or additional
documents in connection with the credit sale of Timeshare Interests, except with
the consent of the Agent, or as reasonably requested by the Agent in order to
meet any of the Requirements or to protect the Agent's security interest therein
from any claims or disputes. If any such consumer loan document shall be
modified or amended or if any additional document shall be used in connection
with the credit sale of Timeshare Interests, the Borrower shall immediately
provide to the Agent an accurate and complete copy of such consumer loan
document as so modified or amended and of any such additional document.
7.16. COLLECTION. The Borrower will undertake the diligent and timely
collection of all amounts due under each consumer loan in connection with the
credit sale of a Timeshare Interest, including the Consumer Loan Collateral, and
will bear the entire expense of such collection.
7.17. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
solely for working capital and general corporate purposes in accordance with the
Business Plan.
7.18. BANK ACCOUNTS.
7.18.1. GENERAL. On or prior to the Closing Date, the Borrower
will (i) establish a depository account (the "BORROWER'S ACCOUNT") with
the Agent under the control of the Agent for the benefit of the Banks
and the Agent, in the name of the Borrower, (ii) instruct all consumer
borrowers and other obligors, pursuant to notices of assignment and
instruction letters in
65
form and substance satisfactory to the Agent, to remit all payments on
consumer loans pledged as Collateral to the Lock Box for credit to the
Borrower's Account, and (iii) otherwise at all times ensure that
immediately upon the Borrower's, the Servicer's or any of its
Subsidiaries' receipt of any funds constituting cash proceeds of any
Collateral, all such amounts shall be deposited in the Borrower's
Account, subject to the Intercreditor Agreement.
7.18.2. ACKNOWLEDGMENT OF APPLICATION. The Borrower hereby
agrees that all amounts received by the Agent in the Borrower's Account
will be the sole and exclusive property of the Agent, for the accounts
of the Banks and the Agent, to be applied in accordance Section 2.8 or
Section 2.9, as applicable.
7.19. SERVICING AGREEMENT AND LOCK BOX AGREEMENT. The Borrower shall
(a) exercise all reasonable efforts to enforce or secure the performance of each
and every obligation, covenant, condition and agreement to be performed by the
Servicer under the Servicing Agreement and (b) in a timely manner perform, and
not suffer or permit any default in, any of Borrower's obligations under the
Servicing Agreement or the Lock Box Agreement.
7.20. STANDBY MANAGEMENT AGREEMENT; STANDBY SERVICING AGREEMENT. The
Borrower will enter into the Standby Management Agreement on or before the
Closing Date and will maintain such agreement in full force and effect. The
Standby Manager will monitor the daily operations and performance of the
Borrower. The Borrower shall instruct the Standby Manager to provide (a) the
Banks with regular reports on the Borrower's business and the operation of the
Eligible Projects and (b) the Agent or any Bank with any information reasonably
requested. The Agent may (and, at the direction of the Required Banks, shall)
request, from time to time, in its sole discretion and as it deems necessary,
that the Standby Manager perform such other duties and responsibilities related
to the operation of the Eligible Projects, the related amenities, the Timeshare
Interests, the Additional Resort Collateral, and any other Collateral. The
Borrower shall provide the Required Banks with a list in form and substance
satisfactory to the Required Banks, in their sole discretion, of the duties and
responsibilities associated with the operation of the Eligible Projects. The
Borrower will maintain the Standby Servicing Agreement in full force and effect.
7.21. TANGIBLE PROPERTY. The machinery, equipment, fixtures, tools and
supplies to be used in connection with each Eligible Project and Additional
Resort Collateral, including, without limitation, with respect to the operations
and maintenance of the common areas, will be owned or leased either by the
Borrower, the Silverleaf Club or the respective Association. The Borrower will
obtain such non-disturbance and estoppel agreements as the Agent may reasonably
require for any tangible property necessary to the ownership, operation or
maintenance of each Eligible Project and Additional Resort Collateral which is
not owned by the Borrower, the Silverleaf Club or the respective Association.
7.22. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
66
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
7.23. BUSINESS PLAN. The Borrower will operate its business in
substantial compliance with the Business Plan, including the Senior Lender
Advance Schedule.
7.24. TAX REFUND. The Borrower agrees that it shall use the proceeds of
the Tax Refund strictly to fund Operating Expenses in accordance with the
Business Plan and for no other reason, without the Required Banks' prior written
consent. The Borrower agrees to use the Tax Refund before requesting any Loans
hereunder. Upon request of the Agent, the Borrower shall promptly provide to the
Banks such evidence as the Agent may request as to the manner in which the
proceeds of the Tax Refund are being used.
7.25. NET SECURITIZATION CASH FLOW. The Borrower will cause Silverleaf
Finance I, Inc. to declare, at least quarterly, a cash dividend payable to the
Borrower in an amount equal to the Net Securitization Cash Flow for such
quarter. If no Default or Event of Default has occurred, the Borrower agrees to
use such dividends for payment of Operating Expenses as provided in the Business
Plan and for no other purpose. If a Default or Event of Default has occurred,
then all such dividends shall be paid directly to the Agent, as agent for the
Banks, and applied by the Agent in repayment of the Tranche B Loans in
accordance with the priorities set forth in Section 3.2(c).
7.26. SALE OR SECURITIZATIONS OF NOTES RECEIVABLE. The Borrower shall
use its best efforts to sell and/or securitize the consumer loans pledged to the
Agent as security for the Loans, including, without limitation, the Eligible
Consumer Loans, and the proceeds of any such sale or securitization shall be
used to pay down the Loans in accordance with the Business Plan and according to
the priorities set forth in Section 2.8.2(a). The Borrower agrees to provide the
Agent with written notice prior to any such sale or securitization and agrees to
deliver to the Agent copies of all documents executed in connection therewith.
The proceeds received from any such securitization shall be used to pay down the
Loans in accordance with the Business Plan.
7.27. ▇▇▇▇▇▇ FACILITY, TEXTRON FACILITY, DZ BANK SECURITIZATION AND
BOND HOLDER EXCHANGE TRANSACTION. The Borrower will comply with each of the
terms and conditions of the ▇▇▇▇▇▇ Facility, the Textron Facility, the DZ Bank
Documents and the Bond Holder Exchange Documents and will promptly deliver to
the Banks, upon receipt by Borrower, copies of any notices received by Borrower
in connection with any of the foregoing credit facilities.
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
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8.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any
of the Loan Documents;
(b) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(c) Indebtedness arising under the New Notes, Indebtedness
arising under the ▇▇▇▇▇▇ Facility, and Indebtedness arising under the
Textron Facility;
(d) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by the Borrower
or any Subsidiary of the Borrower or under any Capitalized Lease,
provided that the aggregate principal amount of such Indebtedness
incurred by the Borrower and its Subsidiaries shall not exceed the
aggregate amount of $1,000,000 per calendar year;
(e) Indebtedness arising under a revolving credit facility
secured by a pledge of loans made by the Borrower to consumer borrowers
(and the related mortgages or deeds of trust on Timeshare Interests
purchased by the consumer borrowers, which loans have not been pledged
to any Person by the Borrower); provided that
(i) prior to March 31, 2003, such
Indebtedness shall be incurred only with the prior
written consent of the Required Banks, not to be
unreasonably withheld, and as a condition to such
consent, the Required Banks may require that (A) all
proceeds of such financing be applied to the
repayment of the Loans pursuant to Section 2.8.2(a)
and (B) advances to be funded by Tranche A Loans
prior to advances from such other financing; and
(ii) from and after March 31, 2003, such
Indebtedness shall be incurred only if (A) no Default
or Event of Default has occurred and is continuing or
will result therefrom, (B) in the reasonable opinion
of the Required Banks, such Indebtedness is
substantially similar in structure to this Credit
Agreement, (C) in the reasonable opinion of the
Required Banks, both before and after giving effect
to such Indebtedness, the Borrower is and will
continue to be in compliance in all material respects
with the Business Plan and (D) the aggregate
outstanding principal amount of such Indebtedness
shall not exceed $20,000,000 at any time provided
that the Borrower
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shall, at the Required Banks' request, submit a
request for Tranche A Loans hereunder prior to
accepting advances from such other financing;
(f) Indebtedness in respect of the sale of "receivables"
described in clause (vii) of the definition of Indebtedness, to the
extent permitted by Section 8.5.2 hereof, and
(g) Indebtedness existing on November 1, 2001 and listed and
described on SCHEDULE 8.1 hereto.
8.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, (i) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired or the Timeshare
Interests mortgaged as security for any Consumer Loan Collateral, or upon the
income or profits therefrom; (ii) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (iii) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (iv) suffer to
exist for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (v) sell, assign, pledge or otherwise
transfer any "receivables" as defined in clause (vii) of the definition of the
term "Indebtedness," with or without recourse; or (vi) enter into or permit to
exist any arrangement or agreement, enforceable under applicable law, which
directly or indirectly prohibits the Borrower or any of its Subsidiaries from
creating or incurring any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest other than in favor of the Agent for the
benefit of the Banks and the Agent under the Loan Documents and other than
customary anti-assignment provisions in leases and licensing agreements entered
into by the Borrower or such Subsidiary in the ordinary course of its business,
provided that the Borrower or any of its Subsidiaries may create or incur or
suffer to be created or incurred or to exist:
(a) liens in favor of the Borrower on all or part of the
assets of Subsidiaries of the Borrower securing Indebtedness owing by
Subsidiaries of the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties
other than the Collateral to secure claims for labor, material or
supplies in respect of obligations not overdue;
69
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) liens on properties other than the Collateral in respect
of judgments or awards that have been in force for less than the
applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which the Borrower or such
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(e) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties other than the
Collateral, in existence less than one hundred and twenty (120) days
from the date of creation thereof in respect of obligations not
overdue;
(f) encumbrances consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the
Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of the
Borrower and its Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and its Subsidiaries on a
consolidated basis;
(g) presently outstanding liens listed on SCHEDULE 8.2 hereto
and the Project Title Policies;
(h) purchase money security interests in or purchase money
mortgages on real or personal property other than the Collateral
acquired after the date hereof to secure purchase money Indebtedness of
the type and amount permitted by Section 8.1(d), incurred in connection
with the acquisition of such property, which security interests or
mortgages cover only the real or personal property so acquired;
(i) liens and encumbrances on each Mortgaged Property as and
to the extent permitted by the Mortgage applicable thereto;
(j) liens in favor of the Agent for the benefit of the Banks
and the Agent under the Loan Documents and liens in respect of the
▇▇▇▇▇▇ Facility and the Textron Facility, to the extent provided in the
Intercreditor Agreement;
(k) transfers of receivables to the extent permitted by
Section 8.1(f) hereof; and
70
(l) security interests in consumer loans (other than the
Consumer Loan Collateral) to secure Indebtedness permitted by Section
8.1(e) hereof, provided that such security interests shall extend only
to consumer loans comprising the borrowing base of such Indebtedness.
8.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by ▇▇▇▇▇'▇ Investors Service, Inc., and not less than "A 1" if
rated by Standard and Poor's Rating Group;
(d) Investments existing on November 1, 2001 and listed on
SCHEDULE 8.3 hereto;
(e) Investments consisting of residuals under the DZ Bank
Securitization;
(f) Investments outstanding on November 1, 2001 by the
Borrower in Subsidiaries of the Borrower;
(g) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 8.5.2; and
(h) Investments consisting of loans and advances to employees
for moving, entertainment, travel and other similar expenses in the
ordinary course of business not to exceed $100,000 in the aggregate at
any time outstanding.
8.4. DISTRIBUTIONS. The Borrower will not make any Distributions.
8.5. MERGER, CONSOLIDATION.
8.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and
will not permit any of its Subsidiaries to, become a party to any
merger or consolidation, or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary
course of business
71
consistent with past practices) except the merger or consolidation of
one or more of the Subsidiaries of the Borrower with and into the
Borrower, or the merger or consolidation of two or more Subsidiaries of
the Borrower.
8.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (i) the sale of Timeshare
Interests and the disposition of obsolete assets, in each case in the
ordinary course of business consistent with past practices, (ii) the
sale of Eligible Consumer Loans constituting Consumer Loan Collateral
into the DZ Bank Securitization and other similar purchase facilities
for receivables; provided that the proceeds of such sales are
transferred to the Borrower's Account and applied as contemplated by
Section 2.8 or Section 2.9, as the case may be, and (iii) the sale of
consumer loans (not constituting Consumer Loan Collateral) into the DZ
Bank Securitization and other similar purchase facilities for
receivables; provided that if such consumer loans are Collateral, the
proceeds of such sales are transferred to the Borrower's Account and
applied as contemplated by Section 2.8 or Section 2.9, as the case may
be.
8.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property that the Borrower or any Subsidiary of the Borrower intends
to use for substantially the same purpose as the property being sold or
transferred.
8.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and
will not permit any of its Subsidiaries or the Associations to, (i) use any of
the Real Estate or any portion thereof for the handling, processing, storage or
disposal of Hazardous Substances, (ii) cause or permit to be located on any of
the Real Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (iii) generate any Hazardous Substances on any of the Real
Estate, (iv) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (v) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate any Environmental Law or
bring such Real Estate in violation of any Environmental Law.
8.8. SUBORDINATED DEBT. The Borrower will not, and will not permit any
of its Subsidiaries to, amend, supplement or otherwise modify the terms of any
of the Subordinated Debt or prepay or repurchase any of the Subordinated Debt.
8.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will:
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(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could result
in a material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to Section
302(f) or Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities.
8.10. BUSINESS ACTIVITIES. The Borrower will not, and will not permit
any of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
8.11. FISCAL YEAR; JURISDICTION OF ORGANIZATION. The Borrower will not,
and will not permit any of it Subsidiaries to, change the date of the end of its
fiscal year from that set forth in Section 6.6.1. The Borrower will not change
its jurisdiction of organization without giving the Banks thirty (30) days prior
written notice.
8.12. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such Affiliate or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any such Affiliate has a substantial interest or is an officer,
director, trustee or partner, on terms more favorable to such Person than would
have been obtainable on an arm's-length basis in the ordinary course of
business.
8.13. BANK ACCOUNTS. The Borrower will not, and will not permit any of
its Subsidiaries to, violate directly or indirectly the Lock Box Agreement or
any bank agency or lock box agreement in favor of the Agent for the benefit of
the Banks and the Agent with respect to any accounts.
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8.14. COVENANT AGAINST ALIENATION. The Borrower shall not in any way
notify any consumer borrower of an consumer loan constituting Consumer Loan
Collateral that payments should be made other than to the Servicer or the Lock
Box Agent.
8.15. ASSOCIATION LIENS. The Borrower shall not in any way create,
incur, assume or suffer to exist any security interest, mortgage, pledge, lien,
restriction or other encumbrance on any of the Associations or the Silverleaf
Club or their assets, other than in the ordinary course of business of such
Association or Silverleaf Club and other than in favor of the Agent, for the
benefit of the Agent and the Banks, ▇▇▇▇▇▇ and Textron on a pari passu basis.
8.16. TIME SHARE INSTRUMENTS; REQUIRED CONSUMER LOAN DOCUMENTATION;
MANAGEMENT AGREEMENTS. The Borrower shall not amend or modify in any material
respect adverse to the interest of the Agent or the Banks or terminate any
Timeshare Instrument or any Management Agreement. The Borrower shall not cause
or permit any amendment to or modification of the form or terms of the Required
Consumer Loan Documentation, except as otherwise permitted by this Credit
Agreement. Other than pursuant to the Security Documents, the Borrower shall not
assign any of its rights under any Timeshare Instrument or Management Agreement.
8.17. COMPENSATION OF SENIOR MANAGEMENT. No management agreement for
any Eligible Project shall be modified, assigned, extended, terminated, or
entered into nor shall the current method of operation and management of the
Eligible Projects be changed in any material manner, without the prior written
approval of the Required Banks, except as otherwise expressly provided for
herein. The compensation payable to the senior management of the Borrower, as a
group, shall not be increased by more than twenty-five percent (25%) each year,
with the increase for the fiscal year ending December 31, 2002 being measured
against the compensation payable to the senior management of the Borrower as of
December 31, 2001, which compensation is set forth on SCHEDULE 8.17. The
Borrower represents and warrants that SCHEDULE 8.17 accurately sets forth such
compensation.
8.18. SALE OF TIMESHARE INTERESTS. The marketing, sale, offering for
sale, rental solicitation of purchasers and financing of Timeshare Interests:
(a) will not constitute the sale, or the offering for sale, of securities
subject to the registration requirements of the Securities Act of 1933, as
amended, or any state securities law applicable to such sale or offer for sale;
(b) will not violate any Timeshare Act, or any land sales or consumer protection
law, statute or regulation of the State of Texas or any other state or
jurisdiction in which sales or solicitation activities occur; and (c) will not
violate any consumer credit or usury statute of the State of Texas or any other
state or jurisdiction in which sales or solicitation activities occur. All
marketing and sales activities will be performed by Borrower's employees or by
independent contractors or agents of the Borrower, all of whom are and will be
properly licensed in accordance with applicable laws. There shall be no
misrepresentations by the Borrower or any of its employees or selling agents
with
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respect to any matter relating to any Eligible Project or the sale or financing
of Timeshare Interests.
8.19. MODIFICATION OF LOAN DOCUMENTS. The Borrower shall not amend or
modify the ▇▇▇▇▇▇ Documents, the Textron Documents, the DZ Bank Documents, the
Bond Holder Exchange Documents or the documents evidencing any other
Indebtedness of Borrower, nor shall the Borrower extend, modify, increase or
terminate the ▇▇▇▇▇▇ Facility, DZ Bank Securitization, the Bond Holder Exchange
Transaction, the Textron Facility or any other credit facility or loan, without
the prior written consent of the Required Banks, which consent shall not be
unreasonably withheld. For avoidance of any doubt, it shall not be deemed
unreasonable if the Required Banks withhold their consent to any such proposed
amendment or modification if the Loan Documents are not being amended or
modified in a substantially similar manner.
8.20. NO NEW CONSTRUCTION. The Borrower shall not, without the Required
Banks' written consent, construct any improvements (excluding resort amenities)
on any Eligible Project, Real Estate or any portion of the Additional Resort
Collateral, unless such improvements are contemplated by the Business Plan.
8.21. MODIFICATION OF OTHER DOCUMENTS. The Borrower shall not amend or
modify the Standby Management Agreement, the Servicing Agreement, or the Standby
Servicing Agreement, without the prior written consent of the Required Banks,
which consent shall not be unreasonably withheld.
9. FINANCIAL COVENANTS OF THE BORROWER.
9.1. TANGIBLE NET WORTH. The Borrower will not permit Tangible Net
Worth of the Borrower at any time to be less than an amount equal to (i) the
greater of (A) $100,000,000 and (B) an amount equal to 90% of the Tangible Net
Worth of the Borrower as of September 30, 2001, plus (ii) (A) on a cumulative
basis, 100% of the positive Consolidated Net Income after January 1, 2002, plus
(B) 100% of the proceeds of (1) any sale by the Borrower of (x) equity
securities issued by the Borrower or (y) warrants or subscription rights for
equity securities issued by the Borrower or (2) any Indebtedness incurred by the
Borrower, other than the Loans and any loans under the ▇▇▇▇▇▇ Facility or the
Textron Facility and other senior indebtedness of the Borrower incurred under
Section 8.1(d) and (e) hereof, in the case of each of (1) and (2) above
occurring after January 1, 2002.
For purposes of this Section 9.1, if any change in generally accepted
accounting principles after the Closing Date results in a material change in the
calculation to be performed in this Section 9.1, solely as a result of such
change in generally accepted accounting principles, the Banks and the Borrower
shall negotiate in good faith a modification of the covenant set forth in this
Section 9.1 so that the economic effect of the calculation of such covenant
using generally accepted accounting principles as so changed is as close as
feasible to what the economic effect of the calculation of such covenant would
have been using generally accepted accounting principles in effect as of the
Closing Date.
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9.2. MARKETING EXPENSES. As of the last day of each fiscal quarter,
commencing with the fiscal quarter ending March 31, 2002, the Borrower will not
permit the ratio of the Marketing Expenses to the Borrower's net sales of
Timeshare Interests as recorded on the Borrower's financial statements for
either the fiscal quarter or, from and after the fiscal quarter ending June 30,
2002, the Reference Period then ending to equal or exceed the ratio set forth
opposite such period in the table below :
Fiscal Quarter Ending Ratio
--------------------- -----
March 31, 2002 - December 31, 2002 .550 to 1
January 1, 2003 - thereafter .525 to 1
9.3. MINIMUM LOAN DELINQUENCY. The Borrower will not permit as of the
last day of each fiscal quarter its over 30-day delinquency rate on its entire
consumer loan portfolio (including, without limitation, all consumer loans
pledged pursuant to the Security Agreement, the ▇▇▇▇▇▇ Facility and the Textron
Facility) for any Reference Period to be greater than twenty-five percent (25%).
In the event that, as of the last day of any fiscal quarter, such delinquency
rate is greater than twenty percent (20%), the Borrower hereby agrees that, at
the Agent's request and at the Borrower's expense, the Banks may conduct an
audit of the Borrower in accordance with Section 7.9.1 hereof (and such audit
shall not count against the annual audit limit set forth in Section 7.9.1).
9.4. DEBT SERVICE. The Borrower will not permit the ratio of (i) EBITDA
less capital expenditures as determined in accordance with generally accepted
accounting principles to (ii) Consolidated Total Interest Expense for:
(a) the fiscal quarter ending June 30, 2002 to be less than
1.1 to 1;
(b) the two (2) consecutive fiscal quarters ending September
30, 2002 to be less than 1.1 to 1;
(c) the three (3) consecutive fiscal quarters ending December
31, 2002 to be less than 1.1 to 1; and
(d) each period of four (4) consecutive fiscal quarters ending
on or after March 31, 2003 to be less than 1.25 to 1.
9.5. PROFITABLE OPERATIONS. The Borrower will not permit Consolidated
Net Income (a) for any fiscal year, commencing with the fiscal year ending
December 31, 2002, to be less than $1.00 and (b) for any two consecutive fiscal
quarters (treated as a single accounting period) to be less than $1.00.
10. CLOSING CONDITIONS.
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The effectiveness of this Credit Agreement and obligations of the Banks
to make the initial Loans shall be subject to the satisfaction of the following
conditions precedent on or prior to May 31, 2002, as determined by each Bank:
10.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
10.2. OTHER DEBT; INTERCREDITOR AGREEMENT; ETC.
10.2.1. ▇▇▇▇▇▇ FACILITY AND TEXTRON FACILITY MODIFICATIONS.
The Borrower shall have delivered to the Banks, evidence satisfactory
to the Banks, that the ▇▇▇▇▇▇ Facility and the Textron Facility have
each been modified in accordance with the Business Plan. Each of the
▇▇▇▇▇▇ Facility and the Textron Facility shall be in full force and
effect and shall permit the Borrower to make borrowings thereunder. The
Borrower shall have delivered to the Banks copies of the executed
documents relating to the modification of the ▇▇▇▇▇▇ Facility and the
Textron Facility, including, without limitation, the ▇▇▇▇▇▇ Documents
and the Textron Documents, each of which shall be in form and substance
satisfactory to the Banks. There shall exist no event of default or
event which, with the passage of time, notice or both, would constitute
an event of default under either the ▇▇▇▇▇▇ Facility or the Textron
Facility and the Borrower is in good standing under both of such
facilities.
10.2.2. INTERCREDITOR AGREEMENT. Textron, ▇▇▇▇▇▇ and the Agent
(as agent for the Banks) shall have duly executed and delivered an
Intercreditor Agreement (the "INTERCREDITOR AGREEMENT"), in form and
substance satisfactory to the Banks, providing for, among other things,
the pari passu sharing among the Banks and the lenders under the
Textron Facility of certain real estate collateral and the pari passu
sharing among the Banks, the lenders under the Textron Facility, and
▇▇▇▇▇▇ of other collateral pledged to or for the benefit of each such
lender, and the subordination of certain liens granted to each lender
on collateral pledged to the other lenders.
10.2.3. DEFINITIVE EXCHANGE OFFER. The Borrower shall have
completed a definitive exchange, upon terms, and pursuant to documents,
in form and substance satisfactory to the Banks (the "BOND HOLDER
EXCHANGE TRANSACTION"), with the holders of its 10 1/2% Senior
Subordinated Notes issued pursuant to the Indenture in accordance with
the term sheet, dated October 19, 2001, a copy of which is attached
hereto as EXHIBIT K (the "BOND HOLDER EXCHANGE TERM SHEET"), pursuant
to which (a) at least 80% of the holders of the now outstanding senior
subordinated notes of the Borrower (the "CURRENT NOTES") will be issued
capital stock of the Borrower and new senior subordinated notes of the
Borrower which will have a reduced interest rate and principal balance
and the term contemplated by the Business Plan (the "NEW NOTES") in
exchange for their surrender of their Current Notes, (b) the holders of
the New Notes will forgive all interest
77
accrued under the Current Notes prior to their surrender (provided
that, holders of the New Notes may be entitled to receive partial
interest payments in accordance with the terms of the exchange offer,
but in no event shall such partial interest payments exceed $1,700,000
in the aggregate), (c) all defaults thereunder shall have been waived
or cured by the Closing Date, and (d) the trustee acting on behalf of
the holders of the New Notes consents to the Borrower's execution and
delivery of the Loan Documents. The Borrower shall have delivered to
the Banks the documents executed to consummate the Bond Holder Exchange
Transaction, which documents are listed on SCHEDULE 1.1(d) (the "BOND
HOLDER EXCHANGE DOCUMENTS").
10.2.4. DZ BANK SECURITIZATION. The receipt by the Banks of
evidence satisfactory to the Banks that the DZ Bank Securitization has
closed on terms and conditions set forth in the letter agreement dated
December 12, 2001, as supplemented by that certain letter agreement
dated February 7, 2002, and as further supplemented by that certain
letter agreement dated March 19, 2002, each attached hereto as EXHIBIT
J (the "DZ BANK COMMITMENT LETTER"), except that DZ Bank shall waive
any limitations on the Borrower's ability to pledge the Additional
Resort Collateral to the Agent, and has been documented in form and
substance satisfactory to the Banks. The Borrower shall have delivered
to the Banks copies of all executed documents related to the DZ Bank
Securitization.
10.3. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from the Borrower and each Subsidiary of the Borrower, a copy,
certified by a duly authorized officer of such Person to be true and complete on
the Closing Date, of each of (i) its charter or other incorporation documents as
in effect on such date of certification and (ii) its by-laws as in effect on
such date.
10.4. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
10.5. INCUMBENCY CERTIFICATE. Each of the Banks shall have received
from the Borrower and each of its Subsidiaries an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of the Borrower or
such Subsidiary, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (i) to sign, in the name and on behalf of
each of the Borrower or such Subsidiary, each of the Loan Documents to which the
Borrower or such Subsidiary is or is to become a party; (ii) in the case of the
Borrower, to make Loan Requests; and (iii) to give notices and to take other
action on its behalf under the Loan Documents.
10.6. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first priority or
second priority security interest in the Collateral, as required by the
applicable Security Document (except for Permitted Liens entitled to priority
under applicable law and except for
78
any other liens ). All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent shall
have received evidence thereof in form and substance satisfactory to the Agent.
10.7. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS; LITIGATION
SEARCH. The Banks shall have received from each of the Borrower and its
Subsidiaries a completed and fully executed Perfection Certificate and the
results of UCC searches with respect to its Collateral, indicating no liens,
other than Permitted Liens, and otherwise in form and substance satisfactory to
the Banks.
The Agent shall have obtained, at the Borrower's cost, an independent
search to verify that there are no bankruptcy, foreclosure actions or other
material litigation or judgments pending or outstanding against the Eligible
Projects, any portion of the Collateral, the Borrower, or any Affiliates of
Borrower (each a "MATERIAL PARTY"). The term "other material litigation" as used
herein shall not include matters in which (i) a Material Party is plaintiff and
no counterclaim is pending or (ii) which the Banks determine in their sole
discretion exercised in good faith, are immaterial due to settlement, insurance
coverage, frivolity, or amount or nature of claim. The Banks shall not be
obligated to fund any Loan if the Banks determine that any such litigation is
pending.
10.8. SURVEY AND TAXES. The Agent shall have received (i) a Survey of
each Mortgaged Property and Additional Resort Collateral (subject to an
Additional Resort Collateral Mortgage) together with a Surveyor Certificate
relating thereto, each in form and substance satisfactory to the Agent, (ii)
evidence of payment of real estate taxes and municipal charges on all Real
Estate not delinquent on or before the Closing Date, and (iii) legible recorded
plats of the parcels comprising the Additional Resort Collateral and the
Existing Mortgaged Property, which recorded plats are in form and substance
satisfactory to the Agent and the title companies delivering the Title Policies
pursuant to Section 10.9 and are sufficient to remove the survey exception from
the Title Policies issued with respect thereto.
10.9. TITLE INSURANCE. The Agent shall have received a Title Policy, in
form and substance satisfactory to the Agent, covering each Existing Mortgaged
Property and Additional Resort Collateral (subject to an Additional Resort
Collateral Mortgage) and a Project Title Policy covering each Eligible Project
(or commitments to issue such policies, with all conditions to issuance of each
Title Policy or Project Title Policy, as the case may be, deleted by an
authorized agent of the applicable title insurance company) together with proof
of payment of all fees and premiums for such policies, from the applicable title
insurance company and in amounts satisfactory to the Agent with respect to the
Title Policies for each Existing Mortgaged Property and Additional Resort
Collateral (subject to an Additional Resort Collateral Mortgage) and in the
amounts required by Section 7.7 for each Eligible Project, insuring the interest
of the Agent and each of the Banks as mortgagee under the Mortgages or as
assignee of the consumer loan mortgages, as the case may be.
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10.10. CERTIFICATES OF INSURANCE. The Banks shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
Section 7.7 and (ii) certified copies of all policies evidencing such insurance
(or certificates therefore signed by the insurer or an agent authorized to bind
the insurer).
10.11. BORROWER'S ACCOUNT NOTICES TO CONSUMER BORROWERS. The Borrower
shall have established the Borrower's Account and the Lock Box. The Borrower
shall have delivered to each of the consumer borrowers of an Eligible Consumer
Loan included in the calculation of the Eligible Consumer Loan Amount as of the
Closing Date a notice, in form and substance satisfactory to the Agent,
instructing such consumer borrower to remit payments in respect of its Eligible
Consumer Loan directly to the Lock Box.
10.12. BORROWING BASE CERTIFICATE. The Banks shall have received from
the Borrower the initial Borrowing Base Certificate dated as of the Closing
Date.
10.13. HAZARDOUS WASTE ASSESSMENTS. The Agent shall have received
hazardous waste site assessments from environmental engineers and in form and
substance satisfactory to the Agent, covering all Real Estate.
10.14. OPINION OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable opinion addressed to the Banks and the Agent, dated as of
the Closing Date, in form and substance satisfactory to the Banks and the Agent,
from:
(a) Meadow, Owens, Collier, ▇▇▇▇, Cousins & Blau, L.L.P.,
counsel to the Borrower and its Subsidiaries;
(b) local counsel to the Borrower in each jurisdiction where
an Eligible Project is located; and
(c) local counsel to the Borrower in each jurisdiction where
Mortgaged Property is located (which opinions will include zoning and
environmental opinions).
10.15. [INTENTIONALLY OMITTED.]
10.16. LOAN PAYDOWN; AVAILABILITY OF TRANCHE A TOTAL COMMITMENT; All
interest due and owing to the Banks shall be paid in full prior to the Closing
Date and approximately $11,500,000 shall be paid down on the principal balance
of the loans made by the Banks pursuant to the Original Agreement. On the
Closing Date, after giving effect to the repayment by the Borrower of the Loans
under the Original Agreement from the DZ Bank Securitization, the amount of
availability under the Tranche A Total Commitment shall not be less than
$2,000,000.
10.17. BUSINESS PLAN. The Banks shall have received evidence
satisfactory to them that the five-year "Stand Alone" business plan of the
Borrower, including,
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without limitation, the "Impact on Lenders Worksheet" (the "SENIOR LENDER
ADVANCE SCHEDULE") setting forth the amounts to be advanced by the Banks, the
lenders under the Textron Facility, and ▇▇▇▇▇▇ pursuant to their respective
credit facilities, a copy of which is attached hereto as EXHIBIT L (the
"BUSINESS PLAN"), has been adopted by the Board of Directors (and, if necessary,
the shareholders) of the Borrower. The Business Plan shall have been consummated
through the Closing Date in all material respects.
10.18. OAK 'N SPRUCE RESORT UCC FINANCING STATEMENTS. The Borrower
shall have delivered to the Agent evidence satisfactory to the Agent of the
filing by the Borrower of a UCC financing statement, in form and in the
jurisdictions satisfactory to the Agent, against each of the consumer borrowers
of an Eligible Consumer Loan financing the purchase of an Oak 'N Spruce
Beneficial Interest, which Eligible Consumer Loan is included in the calculation
of the Borrowing Base as of the Closing Date.
10.19. INITIAL LOCKBOX AGREEMENT. The Borrower, ▇▇ ▇▇▇▇▇▇ Chase Bank of
New York (as successor to Chase Bank of Texas, N.A.) ("CHASE"), and the Agent
shall have entered into an Amended and Restated Lockbox Agreement of even date
herewith, in form and substance satisfactory to the Agent, pursuant to which
Chase will continue to administer the Lock Box (under and as defined in the
Initial Lockbox Agreement) following the Closing Date.
10.20. STANDBY MANAGER. The Borrower shall have entered into a Standby
Management Agreement, in form and substance satisfactory to the Banks, in their
sole discretion, with the Standby Manager.
10.21. FORBEARANCE AGREEMENT. All of the terms and conditions of the
Forbearance Agreement shall have been satisfied to the satisfaction of the Banks
and the Banks shall have determined that no Termination Event (as defined in the
Forbearance Agreement) shall have occurred and be continuing.
10.22. NO CHANGES. All information and documents heretofore delivered
by the Borrower to the Banks, including information and documents delivered in
connection with the Forbearance Agreement, shall remain true and correct in all
respects.
10.23. NO MATERIAL CHANGE. Except as disclosed by the Borrower in
writing to the Banks prior to the date hereof, no material change shall have
occurred in the assets, liabilities, or financial condition of the Borrower or
any of its Subsidiaries since September 30, 2001.
10.24. PAYMENT OF EXPENSES. The Borrower shall have reimbursed the
Agent for, or paid directly, all reasonable fees, costs, and expenses incurred
by the Banks, their counsel and their professional advisors, for which invoices
have been delivered.
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10.25. SERVICING AGREEMENT. The Servicing Agreement, in form and
substance satisfactory to the Banks, shall have been duly executed and delivered
by the respective parties thereto, shall be in full force and effect and shall
be in form and substance satisfactory to each of the Banks. Each Bank shall have
received a fully executed copy of the Servicing Agreement.
10.26. ESTOPPEL LETTERS. The Borrower shall deliver to the Banks (i) an
estoppel letter with respect to each Eligible Project duly executed and
delivered by the applicable Association, each in form and substance satisfactory
to the Banks, and (ii) an estoppel letter with respect to the Management
Agreement, in form and substance satisfactory to the Banks, duly executed and
delivered by Silverleaf Club.
11. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent, as determined by each Bank:
11.1. REPRESENTATIONS TRUE: NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan, with the same effect as if
made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
11.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan.
11.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
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11.5. BORROWING BASE CERTIFICATE. The Banks shall have received the
most recent Borrowing Base Certificate required to be delivered to the Agent in
accordance with Section 7.4(f).
11.6. NO ADVERSE CHANGE. No material adverse change shall have occurred
in the financial condition of the Borrower, in the business operations of the
Borrower, or in the condition of the Collateral or the Borrower's business from
the Closing Date.
11.7. AVAILABLE CASH ON HAND. The most recent Weekly Flash Report
delivered to the Agent indicates that the Borrower has less than five million
dollars ($5,000,000) Available Cash on Hand.
11.8. PRO-RATA ADVANCES. ▇▇▇▇▇▇ and Textron shall have funded advances
requested by the Borrower in accordance with Section 2.1(c) hereof and the
Intercreditor Agreement.
11.9. OPERATING EXPENSES. There are insufficient proceeds from the Tax
Refund to pay Operating Expenses as provided in the Business Plan.
12. EVENTS OF DEFAULT; ACCELERATION; ETC.
12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("EVENTS OF DEFAULT" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "DEFAULTS") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date
fixed for payment and such failure shall continue for three (3) days
after the Agent has provided the Borrower with written or verbal notice
thereof;
(b) the Borrower shall fail to pay any interest on the Loans
or any other sums due hereunder or under any of the other Loan
Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment and such failure shall continue for three
(3) days after the Agent has provided the Borrower with written or
verbal notice thereof;
(c) the Borrower shall fail to comply with any of its
covenants contained in Sections 7, 8 or 9 or any of the covenants
contained in any of the Security Documents;
(d) the Borrower or any of its Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of
the other Loan Documents (other than those specified elsewhere in this
Section 12.1) for fifteen (15) days after written notice of such
failure has been given to the Borrower by the Agent;
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(e) any representation or warranty of the Borrower or any of
its Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument constituting or
relating to the Collateral or delivered pursuant to or in connection
with this Credit Agreement shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay
when due, or within any applicable period of grace, any obligation for
borrowed money (including, without limitation, any obligation under the
▇▇▇▇▇▇ Facility, the Textron Facility, or the New Notes), or credit
received in respect of any Capitalized Leases in excess of $100,000, or
fail to observe or perform any material term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing
borrowed money or credit received (including, without limitation, the
New Notes and the agreements and instruments executed into by the
Borrower in connection with the ▇▇▇▇▇▇ Facility and the Textron
Facility) or in respect of any Capitalized Leases in excess of $100,000
for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof, or
any such holder or holders shall rescind or shall have a right to
rescind the purchase of any such obligations;
(g) an event of default shall occur under the DZ Bank
Facility, the ▇▇▇▇▇▇ Facility, the Textron Facility or the New Notes;
(h) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee
or other custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or of any substantial part of the assets of the
Borrower or any of its Subsidiaries or shall commence any case or other
proceeding relating to the Borrower or any of its Subsidiaries under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against the Borrower or any of its Subsidiaries and the
Borrower or any of its Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(i) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the
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Borrower or any Subsidiary of the Borrower in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
(j) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive,
any final judgment against the Borrower or any of its Subsidiaries
that, with other outstanding final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate $100,000;
(k) the holders of all or any part of the Subordinated Debt
shall accelerate the maturity of all or any part of the Subordinated
Debt or the Subordinated Debt shall be prepaid or repurchased in whole
or in part;
(l) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded or the Agent's security interests,
mortgages or liens in a substantial portion of the Collateral shall
cease to be perfected, or shall cease to have the priority contemplated
by the Security Documents, in each case other than in accordance with
the terms thereof or with the express prior written agreement, consent
or approval of the Banks, or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of the Borrower, any of
its Subsidiaries party thereto or any of their respective stockholders,
or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or
issue a judgment, order, decree or ruling to the effect that, any one
or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof,
(m) the Borrower or any ERISA Affiliate incurs any liability
to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA
in an aggregate amount exceeding $100,000, or the Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of
ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $100,000, or any of the following occurs with respect to a
Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to
make a required installment or other payment (within the meaning of
Section 302(f)(1) of ERISA), provided that the Agent determines in its
reasonable discretion that such event (A) could be expected to result
in liability of the Borrower or any of its Subsidiaries to the PBGC or
such Guaranteed Pension Plan in an aggregate amount exceeding $100,000
and (B) could constitute grounds for the termination of such Guaranteed
Pension Plan by the PBGC, for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed
Pension Plan or for the imposition of a lien in favor of such
Guaranteed Pension Plan; or (ii) the appointment by a United States
District Court of a trustee to administer such Guaranteed Pension Plan;
or (iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
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(n) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
thirty (30) days;
(o) there shall occur any material damage to, or loss, theft
or destruction of, any of the Collateral or any Eligible Project,
whether or not insured, or any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty, which in
any such case is not fully covered by insurance and which, in the
opinion of the Agent or the Required Banks, materially impairs its
security interest or increases its risk;
(p) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Borrower or any of its Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material
adverse effect on the business or financial condition of the Borrower
or such Subsidiary;
(q) the Borrower or any of its Subsidiaries shall be indicted
for a state or federal crime, or any civil or criminal action shall
otherwise have been brought or threatened against the Borrower or any
of its Subsidiaries, a punishment for which in any such case could
include the forfeiture of any assets of the Borrower or such Subsidiary
included in the Borrowing Base or any assets of the Borrower or such
Subsidiary not included in the Borrowing Base but having a fair market
value in excess of $100,000;
(r) (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 20% or more of the outstanding shares of common stock of the
Borrower (other than ▇▇▇▇▇▇ ▇. ▇▇▇▇); (ii) during any period of twelve
consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period shall cease to constitute a
majority of the board of directors of the Borrower; or (iii) there
shall occur any change in the Borrower's key management personnel
(whether by termination, death, incompetence or otherwise), which the
Required Bank deem material, and, within thirty (30) days of such
change, the Borrower does not have in place a team of key management
personnel with skills at least commensurate, in the reasonable opinion
of the Required Banks, with those of the Borrower's key management team
in place as of the date hereof.
(s) there shall occur a material adverse change in the
Collateral or in the business, operations, properties or condition
(financial or otherwise) of the Borrower, which, in the opinion of the
Agent or the Required Banks, impairs its security or increases its
risk, including, without limitation, if any financial information
furnished to the Agent or Banks shall indicate any
86
operating loss or total liabilities in excess of total assets, as
determined in accordance with generally accepted accounting principles
(in the absence of any operating loss or total liabilities in excess of
total assets, any adverse change which has less than a five percent
(5%) one time or annual adverse impact on any of the Borrower's
revenues, net profit, net worth or assets shall not be deemed
material);
(t) there shall occur an event of default under any material
agreement affecting or related to any Eligible Project;
(u) commencement of any levy, seizure, attachment or sale upon
execution against any Collateral or other proceedings of any nature
whereby the Borrower shall or may be deprived of title or right of
possession to the Collateral or any part thereof;
(v) the Borrower or the Servicer shall fail to remit to the
Agent any proceeds of any Collateral or shall fail to perform any of
the obligations under the Lock Box Agreement or the Servicing
Agreement;
(w) the Borrower, Silverleaf Club or any Association shall
fail to fund maintenance fees, taxes, reserves, or other payments
required for the proper and efficient operation of any Eligible
Project, or the Silverleaf Club or any Association shall default in the
observance or performance of its duties in connection with an Eligible
Project;
(x) there shall occur a conveyance, assignment, sale, pledge,
transfer, hypothecation or other disposition (which shall include
execution of a contract for sale) of legal or equitable ownership of
any part of the Collateral, except as expressly permitted by the Loan
Documents;
(y) any material adverse change in the financial condition of
the Borrower or in the condition of the Collateral (for purposes of
this provision, a decline in the net worth of the Borrower of $100,000
or less shall not be considered a material adverse change); or
(z) DZ Bank does not purchase loans in substantially the
amounts and during the periods specified in the Business Plan or if the
proceeds of such purchase are insufficient to make the principal
payments described in Section 3.2 hereof or if Borrower fails to apply
such proceeds to repayment of the Loans as provided in Section 3.2
hereof.
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Required Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the event of any Event of Default specified in
Sections 12.1(h), 12.1(i) or
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12.1(k), all such amounts shall become immediately due and payable automatically
and without any requirement of notice from the Agent or any Bank.
12.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 12.1(h), Section 12.1(1) or Section 12.1(k) shall
occur, any unused portion of the credit hereunder shall forthwith terminate and
each of the Banks shall be relieved of all obligations to make Loans to the
Borrower. If any other Event of Default shall have occurred and be continuing,
or if on any Drawdown Date the conditions precedent to the making of the Loans
to be made on such Drawdown Date are not satisfied, the Agent may and, upon the
request of the Required Banks, shall, by notice to the Borrower, terminate the
unused portion of the credit hereunder, and upon such notice being given such
unused portion of the credit hereunder shall terminate immediately and each of
the Banks shall be relieved of all further obligations to make Loans. If any
such notice is given to the Borrower, the Agent will forthwith furnish a copy
thereof to each of the Banks. No termination of the credit hereunder shall
relieve the Borrower of any of the Obligations or any of its existing
obligations to any of the Banks arising under other agreements or instruments.
12.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 12.1, each Bank, if
owed any amount with respect to the Loans, may, with the consent of the Required
Banks but not otherwise, proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Credit Agreement and
the other Loan Documents or any instrument pursuant to which the Obligations to
such Bank are evidenced, including as permitted by applicable law the obtaining
of the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Bank. In addition to foregoing, the Agent
may, and at the request of the Required Banks shall, pursue any of the foregoing
remedies: (i) deliver Notices to Maker (which Notices to Maker shall not be
delivered in the absence of an Event of Default) and other notices to account
debtors and servicers that payments should be made directly to the Agent, record
or file assignments or mortgages, complete blank endorsements and take such
other actions as the Agent shall deem necessary to exercise rights in the
Collateral or assign the Collateral, (ii) require the Borrower to give notice to
account debtors and servicers that payment should be made directly to the Agent,
(iii) require the Borrower to assemble Collateral and make it available to the
Agent at a place designated by the Agent which is reasonably convenient, and
(iv) in its name or in the Borrower's name, without notice to the Borrower, and
at Borrower's expense (A) verify the validity and amount of or any other matter
relating to the Consumer Loan Collateral, by mail, telephone, facsimile or
otherwise or (B) direct all consumer borrowers to make payment directly to the
Agent or a Person designated by the Agent and forward invoices directly to such
consumer borrowers. No remedy herein conferred upon any Bank or the Agent or the
holder of any Note is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder
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or now or hereafter existing at law or in equity or by statute or any other
provision of law. Notwithstanding anything to the contrary herein or any other
Loan Documents, the Agent and the Banks shall not, by virtue of entering into
this Credit Agreement or the other Loan Documents or the exercise of rights
hereunder or thereunder, be deemed to have assumed any obligations,
responsibilities or duties of the Borrower in respect of any Eligible Projects,
Timeshare Interests, Timeshare Instruments or other documents, instruments or
agreements relating to the business of the Borrower.
12.4. STANDBY SERVICER AND STANDBY MANAGER. Without demand or notice of
any nature whatsoever, upon an Event of Default, the Agent may, and at the
request of the Required Banks shall, with the approval of a majority of the
Borrower's Board of Directors, not to be unreasonably withheld or delayed
(provided that (i) if the Obligations have become immediately due and payable in
accordance with Section 12.1 hereof or (ii) the Required Banks elect to have J&J
Limited, Inc. act as Standby Manager, then no such approval shall be required),
terminate any then existing management agreement and replace any existing
manager of the Eligible Projects with the Standby Manager, or such other manager
as the Required Banks may select in their sole and absolute discretion. Upon an
Event of Default, the Agent may, and at the request of the Required Banks shall,
without demand or notice of any nature whatsoever, terminate any then existing
servicing agreement and replace any then existing servicer with the Standby
Servicer or such other servicer as the Required Banks may select in their sole
and absolute discretion. Upon an Event of Default, at the election of the
Required Banks, the Borrower agrees that with the approval of the Borrower's
Board of Directors, not to be unreasonably withheld or delayed (provided that
(i) if the Obligations have become immediately due and payable in accordance
with Section 12.1 hereof or (ii) the Required Banks elect to have J&J Limited,
Inc. act as Standby Manager, then no such approval shall be required), the
Standby Manager or such other manager as the Required Banks may select in their
sole and absolute discretion may assume control of (A) the management or the
operation of the Eligible Projects, the related amenities, the Additional Resort
Collateral and any other Collateral as the Required Banks may in their sole
discretion deem necessary and (B) the monitoring or supervising of the
marketing, sales, resales, and financings of the Timeshare Interests pledged to
the Agent, reporting to the Banks, subject to the terms of the Intercreditor
Agreement. Upon an Event of Default, at the election of the Required Banks, the
Borrower agrees that the Standby Servicer or such other servicer as the Required
Banks may select in their sole and absolute discretion may assume control over
the servicing of the Consumer Loan Collateral or any other consumer loans
pledged to the Agent, reporting to the Banks. The Agent shall also have the
right, but not the obligation, to assume management of the Eligible Projects,
subject to the terms of the Intercreditor Agreement.
12.5. DISTRIBUTION OF COLLATERAL PROCEEDS.
(a) Except as otherwise provided in Section 12.5(b) and (c)
below, in the event that the Agent receives proceeds of Collateral or
in the event that, following the occurrence or during the continuance
of any Default or Event of
89
Default, the Agent or any Bank, as the case may be, receives any monies
in connection with the enforcement of any the Security Documents, or
otherwise with respect to the realization upon any of the Collateral,
such monies shall be distributed for application as follows:
(i) First, to the payment of, or (as the case may be)
the reimbursement of the Agent and the Banks for or in respect
of all reasonable costs, expenses, disbursements and losses
which shall have been incurred or sustained by the Agent and
the Banks in connection with the collection of such monies by
the Agent and the Banks, for the exercise, protection or
enforcement by the Agent and the Banks of all or any of the
rights, remedies, powers and privileges of the Agent and the
Banks under this Credit Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent and the Banks
against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent and the Banks to
such monies;
(ii) Second, to pay interest on the Tranche A Loans
and to pay interest on the Tranche B Loans;
(iii) Third, to pay any other Obligations (other than
the principal of the Loans) then due and payable;
(iv) Fourth, to pay the principal of the Tranche A
Loans (it being understood that such repayment shall be
accompanied by a permanent reduction in the Tranche A Total
Commitment (if then in effect) in the amount of such
repayment);
(v) Fifth, to pay the principal of the Tranche B
Loans pro rata based upon the respective Tranche A Commitment
Percentages of the Banks (it being understood that such
repayment shall be accompanied by a permanent reduction in the
Tranche B Total Commitment (if then in effect) in the amount
of such repayment);
(vi) Sixth, to pay any remaining principal of the
Tranche B Loans (it being understood that such repayment shall
be accompanied by a permanent reduction in the Tranche B Total
Commitment (if then in effect) in the amount of such
repayment); and
(vii) Seventh, upon payment and satisfaction in full
or other provisions for payment in full satisfactory to the
Banks and the Agent of all of the Obligations, to the payment
of any obligations required to be paid pursuant to Section
9-608(a)(i)(c) or 9-615(a)(3) of the Uniform Commercial Code;
and
(viii) Eighth, the excess, if any, shall be returned
to the Borrower or to such other Persons as are entitled
thereto.
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(b) In the event that the Agent receives Net Cash Proceeds in
respect of any of the Additional Resort Collateral, insurance proceeds
in respect of damaged or destroyed Additional Resort Collateral, title
insurance proceeds and condemnation proceeds respect to any of the
Additional Resort Collateral or in the event that, following the
occurrence or during the continuance of any Default or Event of
Default, the Agent or any Bank, as the case may be, receives any monies
in connection with the foreclosure of any of the Additional Resort
Collateral, or otherwise with respect to the realization upon any of
the Additional Resort Collateral, such monies shall be distributed for
application as follows:
(i) First, to the payment of, or (as the case may be)
the reimbursement of the Agent and the Banks for or in respect
of all reasonable costs, expenses, disbursements and losses
which shall have been incurred or sustained by the Agent and
the Banks in connection with the collection of such monies by
the Agent and the Banks, for the exercise, protection or
enforcement by the Agent and the Banks of all or any of the
rights, remedies, powers and privileges of the Agent and the
Banks under this Credit Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent and the Banks
against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent and the Banks to
such monies;
(ii) Second, to pay interest on the Tranche A Loans
and to pay interest on the Tranche B Loans;
(iii) Third, to pay any other Obligations (other than
the principal of the Loans) then due and payable;
(iv) Fourth, to pay the principal of the Tranche B
Loans pro rata based upon the respective Tranche A Commitment
Percentages of the Banks (it being understood that such
repayment shall be accompanied by a permanent reduction in
Total Tranche B Commitment (if then in effect) in the amount
of such repayment);
(v) Fifth, to pay any remaining principal of the
Tranche B Loans (it being understood that such repayment shall
be accompanied by a permanent reduction in Total Tranche B
Commitment (if then in effect) in the amount of such
repayment);
(vi) Sixth, to pay the principal of the Tranche A
Loans (it being understood that such repayment shall be
accompanied by a permanent reduction in Total Tranche A
Commitment (if then in effect) in the amount of such
repayment);
(vii) Seventh, upon payment and satisfaction in full
or other provisions for payment in full satisfactory to the
Banks and the
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Agent of all of the Obligations, to the payment of any
obligations required to be paid pursuant to Section
9-608(a)(i)(c) or 9-615(a)(3) of the Uniform Commercial Code;
and
(viii) Eighth, the excess, if any, shall be returned
to the Borrower or to such other Persons as are entitled
thereto.
(c) In the event that the Agent receives Net Cash Proceeds in
respect of any of the Existing Mortgaged Properties, insurance proceeds
in respect of damaged or destroyed Existing Mortgaged Properties, title
insurance proceeds and condemnation proceeds respect to any of the
Existing Mortgaged Properties or in the event that, following the
occurrence or during the continuance of any Default or Event of
Default, the Agent or any Bank, as the case may be, receives any monies
in connection with the foreclosure of any of the Existing Mortgages or
otherwise with respect to the realization upon any of the Existing
Mortgaged Properties, such monies shall be distributed for application
as follows:
(i) First, to the payment of, or (as the case may be)
the reimbursement of the Agent and the Banks for or in respect
of all reasonable costs, expenses, disbursements and losses
which shall have been incurred or sustained by the Agent and
the Banks in connection with the collection of such monies by
the Agent and the Banks, for the exercise, protection or
enforcement by the Agent and the Banks of all or any of the
rights, remedies, powers and privileges of the Agent and the
Banks under this Credit Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent and the Banks
against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent and the Banks to
such monies;
(ii) Second, to pay interest on the Tranche A Loans
of Sovereign and to pay interest on the Tranche B Loans of
Sovereign;
(iii) Third, to pay any other Obligations (other than
the principal of the Loans) then due and payable to Sovereign;
(iv) Fourth, to pay the principal of the Tranche B
Loans of Sovereign (it being understood that such repayment
shall be accompanied by a permanent reduction in Sovereign's
Tranche B Commitment (if then in effect) in the amount of such
repayment);
(v) Fifth, to pay the principal of the Tranche A
Loans of Sovereign (it being understood that such repayment
shall be accompanied by a permanent reduction in Sovereign's
Tranche A Commitment (if then in effect) in the amount of such
repayment);
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(vi) Sixth, to pay the interest on the Tranche A
Loans of the Tranche A Banks (other than Sovereign) and to pay
interest on the Tranche B Loans of the Tranche B Banks (other
than Sovereign) and to pay any other Obligations (other than
the principal of the Loans) then due and payable to the Banks
(other than Sovereign);
(vii) Seventh, to pay the principal of the Tranche A
Loans of the other Tranche A Banks (it being understood that
such repayment shall be accompanied by a permanent reduction
in the Tranche A Total Commitment (if then in effect) in the
amount of such repayment);
(viii) Eighth, to pay the principal of the Tranche B
Loans of the other Tranche B Banks (it being understood that
such repayment shall be accompanied by a permanent reduction
in the Tranche B Total Commitment (if then in effect) in the
amount of such repayment);
(ix) Ninth, upon payment and satisfaction in full or
other provisions for payment in full satisfactory to the Banks
and the Agent of all of the Obligations, to the payment of any
obligations required to be paid pursuant to Section
9-608(a)(i)(c) or 9-615(a)(3) of the Uniform Commercial Code;
and
(x) Tenth, the excess, if any, shall be returned to
the Borrower or to such other Persons as are entitled thereto.
(d) Except as otherwise provided in Section 12.5(a), (b) and
(c) above, with respect to each type of Obligation owing to the Banks,
such as interest, principal, fees and expenses, all payments shall be
made to the Banks pro rata.
12.6. RELIEF FROM AUTOMATIC STAY, ETC. To the fullest extent permitted
by law, in the event the Borrower shall make any application for or seek relief
or protection under the federal bankruptcy code (the "BANKRUPTCY CODE") or other
Debtor Relief Laws, or in the event that any involuntary petition is filed
against the Borrower under the Bankruptcy Code or any other Debtor Relief Law,
and not dismissed with prejudice within 45 days, the Borrower agrees that the
automatic stay provisions of Section 362 of the Bankruptcy Code shall be
modified to permit set-off and the Borrower agrees that the Agent and each Bank
automatically and without demand or notice (each of which is hereby waived)
shall be entitled to immediate relief from any automatic stay imposed by Section
362 of the Bankruptcy Code or otherwise, on or against the exercise of the
rights and remedies otherwise available to the Agent and the Banks as provided
in the Loan Documents.
13. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any
93
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (i) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Notes held by such Bank, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness evidenced by all such Notes held by such
Bank, and (ii) if such Bank shall receive from the Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by such Bank by proceedings
against the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by such Bank
any amount in excess of its ratable portion of the payments received by all of
the Banks with respect to the Notes held by all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect of
the Notes held by it its proportionate payment as contemplated by this Credit
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
14. THE AGENT.
14.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of
each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably
incident thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been
assumed by the Agent. Each Bank hereby authorizes the Agent to hold and
exercise control over the Consumer Loan Collateral and to exercise
discretion with regard to the acceptance of Consumer Loan Collateral
and the inclusion of Consumer Loan Collateral in the Borrowing Base
from time to time.
(b) The relationship between the Agent and each of the Banks
is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Agent and each of
the Banks. Nothing contained in this Credit Agreement nor the other
Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship between the Agent and any of the Banks.
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(c) As an independent contractor empowered by the Banks to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless
a "representative" of the Banks, as that term is defined in Article 1
of the Uniform Commercial Code, for purposes of actions for the benefit
of the Banks and the Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority
or enforcement of any security interests, mortgages or deeds of trust
in collateral security intended to secure the payment or performance of
any of the Obligations, all for the benefit of the Banks and the Agent.
(d) Each of the Banks and the Borrower hereby acknowledges the
terms of the Intercreditor Agreement and further acknowledges that
certain rights and remedies hereunder (including those set forth in
Sections 3.2(c) and 12.4 hereof) are subject to the terms of the
Intercreditor Agreement. Each of the Banks hereby authorizes the Agent
to execute, deliver and perform the Intercreditor Agreement in its
capacity as Agent for the Banks. The Agent and the Banks hereby agree
that Agent shall act, or refrain from acting, as a "Lender" under the
Intercreditor Agreement at the direction of the Required Banks (except
that the Agent may act, or refrain from acting, with respect to the
Existing Mortgaged Property solely at the direction of Sovereign), and
that all amounts received by the Agent under the Intercreditor
Agreement shall be applied to the Obligations in accordance with the
terms of this Credit Agreement.
14.2. GENERAL; EMPLOYEES AND AGENTS. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Credit Agreement and the other Loan Documents.
The Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
14.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence. Subject to the preceding sentence, in the
administration of the Loans and the custody of the Collateral, the Agent shall
exercise the same standard of care as it exercises with loans where it is the
sole lender.
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14.4. NO REPRESENTATIONS.
14.4.1. GENERAL. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the
Notes, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing
with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan
Documents or in any certificate or instrument hereafter furnished to it
by or on behalf of the Borrower, or be bound to ascertain or inquire as
to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the
Notes or to inspect any of the properties, books or records of the
Borrower or any of its Subsidiaries. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to
it by the Borrower or any holder of any of the Notes shall have been
duly authorized or is true, accurate and complete. The Agent has not
made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Banks, with respect to
the credit worthiness or financial conditions of the Borrower or any of
its Subsidiaries. Each Bank acknowledges that it has, independently and
without reliance upon the Agent or any other Bank, and based upon such
information and documents as it has deemed appropriate, made its own
credit analysis and decision to enter into this Credit Agreement.
14.4.2. CONSUMER LOAN COLLATERAL.
The Agent shall be under no obligation to review or in any
manner approve any Consumer Loan Collateral delivered to the Agent from
time to time, although nothing herein shall preclude the Agent from
conducting whatever review it deems appropriate. The Agent shall have
no responsibility for taking any steps necessary to preserve rights
against other parties or any other rights pertaining to Collateral. The
Agent shall not be required to perfect or maintain the perfection of
its security interests. No loss of or damage to any Collateral shall
release the Borrower from the Indebtedness. The Agent may, but shall
not be obligated to, take such action as it deems fit, at the
Borrower's expense, to collect or enforce any loan pledged to the Agent
hereunder which shall be in default and the Agent shall not be liable
to the Borrower for any act or omission taken by it in the collection
or enforcement of such loans. The Agent shall not be liable or
responsible in any way for any loss or damage to the Collateral or any
diminution in the value thereof, except if caused by the Agent's gross
negligence or willful misconduct. The Agent shall not be liable or
responsible in any way for any act of any custodian, carrier, servicer,
lock box agent or any other Person whatsoever, and all of the same
shall be at the Borrower's sole risk. The Agent and the Banks shall not
be responsible for any excise, property or other taxes related to the
Collateral or the sale thereof and all such taxes shall be the
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responsibility of the Borrower. The grants of security interests under
the Security Documents shall not obligate or be construed to obligate
the Agent to perform any of the terms contained in the agreements
constituting Collateral or otherwise to impose any duty upon the Agent
with respect to the same.
14.4.3. CLOSING DOCUMENTATION, ETC. For purposes of
determining compliance with the conditions set forth in Section 10,
each Bank that has executed this Credit Agreement shall be deemed to
have consented to, approved or accepted, or to be satisfied with, each
document and matter either sent, or made available, by the Agent to
such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to such Bank.
14.5. PAYMENTS.
14.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the
Agent hereunder or any of the other Loan Documents for the account of
any Bank shall constitute a payment to such Bank. The Agent agrees
promptly (and in any event within two (2) Business Days) after receipt
to distribute to each Bank such Bank's pro rata share of payments
received by the Agent for the account of the Banks except as otherwise
expressly provided herein or in any of the other Loan Documents. If the
Agent does not so distribute within two (2) Business Days any such
payment received by it for the account of any Bank, the Agent shall pay
to such Bank on demand an amount equal to the product of (i) the
average computed for the period referred to in clause (iii) below, of
the weighted average interest rate paid by such Bank for federal funds
acquired by such Bank during each day included in such period, times
(ii) the amount of such payment for the account of such Bank, times
(iii) a fraction, the numerator of which is the number of days that
elapse from and including the date which is two Business Days after the
Agent received such payment to the date on which such payment is made
to such Bank, and the denominator of which is 365.
14.5.2. DISTRIBUTION BY AGENT. If in the reasonable opinion of
the Agent the distribution of any amount received by it in such
capacity hereunder, under the Notes or under any of the other Loan
Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay
over the same in such manner and to such Persons as shall be determined
by such court.
14.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
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Documents, any Bank that fails (i) to make available to the Agent its
pro rata share of any Loan required to be funded by such Bank or (ii)
to comply with the provisions of Section 13 with respect to making
dispositions and arrangements with the other Banks, where such Bank's
share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of
the Banks, in each case as, when and to the full extent required by the
provisions of this Credit Agreement, shall be deemed delinquent (a
"DELINQUENT BANK") and shall be deemed a Delinquent Bank until such
time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding
Loans. The Delinquent Bank hereby authorizes the Agent to distribute
such payments to the nondelinquent Banks in proportion to their
respective pro rata shares of all outstanding Loans. A Delinquent Bank
shall be deemed to have satisfied in full a delinquency when and if, as
a result of application of the assigned payments to all outstanding
Loans of the nondelinquent Banks, the Banks' respective pro rata shares
of all outstanding Loans have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.
14.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note as the absolute owner thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or by a subsequent
holder.
14.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by Section 15), and liabilities of
every nature and character arising out of or related to this Credit Agreement,
the Notes, or any of the other Loan Documents or the transactions contemplated
or evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
14.8. AGENT AS BANK. In its individual capacity, Sovereign shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the Notes,
as it would have were it not also the Agent.
14.9. RESIGNATION; REMOVAL. The Agent may resign at any time by giving
sixty (60) days prior written notice thereof to the Banks and the Borrower. The
Required Banks (determined without regard to Notes and Commitments held by the
Bank which is the Agent) may remove the Agent upon 30 days' prior notice to the
Agent after the occurrence of one of the following (unless cured within the 30
day period): (a) a material uncured default by the Agent in the performance of
its duties;
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(b) the failure of the Agent, as a Bank, to advance its pro-rata share of the
Loans in accordance with this Credit Agreement; or (c) the appointment of a
receiver for the Agent or the assumption of the Agent's operations by any
federal regulatory agency with jurisdiction over the Agent. Upon any such
resignation or removal, the Required Banks shall have the right to appoint a
successor Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT NOTICES. Each
Bank hereby agrees that, upon learning of the existence of a Default or an Event
of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that (a) upon receipt of any notice under this Section 14.10, or (b) if
Sovereign is the Agent, upon Sovereign's obtaining actual knowledge of the
existence of a Default or Event of Default, it shall promptly notify the other
Banks of the existence of such Default or Event of Default. The Agent hereby
agrees that it will promptly distribute to the Banks, all Loan Requests, reports
and other information delivered to it under Section 7.4, notices delivered to it
under Section 7.5, other notices and information delivered to the Agent
hereunder for distribution to the Banks, and all material notices sent or
received by the Agent with respect to the Intercreditor Agreement.
15. EXPENSES AND INDEMNIFICATION.
15.1. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel, any local counsel to the Agent and counsel to each Bank
incurred in connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein, the
closing hereunder, any amendments, modifications, approvals, consents or waivers
hereto or hereunder, or the cancellation of any Loan Document upon payment in
full in cash of all of the Obligations or pursuant to any terms of such Loan
Document providing for such
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cancellation, (iv) the fees, expenses and disbursements of the Agent or any of
its affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, including all title insurance premiums
and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses
and bank charges, including bank charges for returned checks, incurred by the
Agent in establishing, maintaining or handling the Borrower's Account, the Lock
Box, any other lock box and any other accounts for the collection of any of the
Collateral; (vi) all reasonable out-of-pocket expenses (including without
limitation reasonable attorneys' fees and costs, which attorneys may be
employees of any Bank or the Agent, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or the Agent in connection with (A) the interpretation,
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower or any of its Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's or the Agent's relationship with the Borrower or any of its Subsidiaries,
(vii) all reasonable fees, expenses and disbursements of any Bank or the Agent
incurred in connection with UCC searches, UCC filings or mortgage recordings,
(viii) the fees and expenses (including reasonable attorney's fees) of the
Collateral Custodian, and (ix) any other fees and expenses to be paid pursuant
to the terms of the Loan Documents.
15.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agent, its affiliates and the Banks (and their respective
affiliates, officers, directors, representatives, agents and attorneys) from and
against any and all claims, actions and suits whether groundless or otherwise,
and from and against any and all liabilities, losses, damages and expenses of
every nature and character (a) arising out of this Credit Agreement or any of
the other Loan Documents or the transactions contemplated hereby including,
without limitation, (i) any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the Loans, (ii) the reversal or
withdrawal of any provisional credits granted by the Agent upon the transfer of
funds from the Borrower's Account, the Lock Box or any other lock box or
concentration accounts or in connection with the provisional honoring of checks
or other items, (iii) any actual or alleged infringement of any patent,
copyright, trademark, service ▇▇▇▇ or similar right of the Borrower or any of
its Subsidiaries comprised in the Collateral, (iv) the Borrower or any of its
Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents, (v) any alleged obligation or undertaking on the Agent's
part to perform or discharge any of the terms, covenants, and conditions
contained in the Servicing Agreement, the Lock Box Agreement, or the Collateral
Custodian Agreement, or (vi) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of or noncompliance
with any Requirements or any Environmental Law, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release or threatened release
of any Hazardous Substances or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances (including, but
not limited to, claims with respect to wrongful death, personal injury or damage
to property), or (b) related in any way to
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(i) any act or omission of the Borrower or any of its Subsidiaries or any of
their respective employees, contractors, or agents or (ii) any Eligible Project,
Existing Mortgaged Property or Additional Resort Collateral and the operator of
the Borrower's business, in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding. In litigation, or the preparation therefor, the Banks and the Agent
and its affiliates shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 15.2 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law.
15.3. SURVIVAL. The covenants contained in this Section 15 shall
survive payment or satisfaction in full of all other Obligations.
16. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any of
them, and shall survive the making by the Banks of the Loans, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Credit Agreement or the Notes or any of the other Loan Documents
remains outstanding or any Bank has any obligation to make any Loans, and for
such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
17. ASSIGNMENT AND PARTICIPATION.
17.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it) and the Notes held by it; provided that (i)
the Agent shall have given its prior written consent to such assignment, which
consent shall not be unreasonably withheld, except that the consent of the Agent
shall not be required for any such assignment by Liberty Bank of less than all
of its Loans and Commitments hereunder (ii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Credit Agreement, (iii) each assignment shall be in an
amount that is a whole multiple of $5,000,000 (or such lesser amount as shall
constitute the aggregate
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holdings of such Bank) and (iv) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter defined), an
assignment and acceptance, substantially in the form of EXHIBIT G hereto (an
"ASSIGNMENT AND ACCEPTANCE"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Tranche A Bank and/or Tranche B Bank, as the case may be, hereunder, and (ii)
the assigning Bank shall, to the extent provided in such assignment, be released
from its obligations under this Credit Agreement.
17.2. CERTAIN REPRESENTATIONS AND WARRANTIES LIMITATIONS COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or
mortgage;
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrower and its Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations or any of their obligations under this Credit Agreement or
any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in Section 7.4 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Credit Agreement;
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(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank; and
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance.
17.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "REGISTER'") for
the recordation of the names and addresses of the Banks and the Tranche A
Commitment Percentage and Tranche B Commitment Percentage of, and principal
amount of the Tranche A Loans and the Tranche B Loans owing to the Banks from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice.
17.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (i) record the information contained therein in
the Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its, own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note or Notes, a new Note or Notes to
the order of such Eligible Assignee in an amount equal to the amount assumed by
such Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Note or Notes to the order of the assigning Bank in an amount equal to the
amount retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes. Within five (5)
days of issuance of any new Notes pursuant to this Section 17.4, the Borrower
shall deliver an opinion of counsel, addressed to the Banks and the Agent,
relating to the due authorization, execution and delivery of such new Notes and
the legality, validity and binding effect thereof, in form and substance
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satisfactory to the Banks. The surrendered Notes shall be cancelled and returned
to the Borrower.
17.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on Loans, only to the extent such participant
has an interest in such Loans, extend the term or increase the amount of the
Tranche A Commitment or Tranche B Commitment of such Bank as it relates to such
participant or extend any regularly scheduled payment date for principal or
interest on any Loans in which the participant has acquired an interest.
17.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation. For purposes of this Section
17.6 an assignee or participant or potential assignee or participant may include
a counterparty with whom such Bank has entered into or potentially might enter
into a derivative contract referenced to credit or other risks or events arising
under this Credit Agreement or any other Loan Document.
17.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 12.1 or Section
12.2, and the determination of the Required Banks shall for all purposes of this
Credit Agreement and the other Loan Documents be made without regard to such
assignee Bank's interest in any of the Loans. If any Bank sells a participating
interest in any of the Loans to a participant, and such participant is the
Borrower or an Affiliate of the Borrower, then such transferor Bank shall
promptly notify the Agent of the sale of such participation. A transferor Bank
shall have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Agent pursuant to Section 12.1 or
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Section 12.2 to the extent that such participation is beneficially owned by the
Borrower or any Affiliate of the Borrower, and the determination of the Required
Banks shall for all purposes of this Credit Agreement and the other Loan
Documents be made without regard to the interest of such transferor Bank in the
Loans to the extent of such participation.
17.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 15 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of the United States of America or any
state thereof, it shall, prior to the date on which any interest or fees are
payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. Anything
contained in this Section 17 to the contrary notwithstanding, any Bank may at
any time pledge all or any portion of its interest and rights under this Credit
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
17.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
18. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes shall be in writing and shall be delivered in
hand, mailed by United States registered or certified first class mail, postage
prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or
telex and confirmed by delivery via courier or postal service, addressed as
follows:
(a) if to the Borrower, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, facsimile number:
▇▇▇-▇▇▇-▇▇▇▇ or at such other address for notice as the Borrower shall
last have furnished in writing to the Person giving the notice;
(b) if to the Agent, at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇, facsimile number:
▇▇▇-▇▇▇-▇▇▇▇ or such other address for notice as the Agent shall last
have furnished in writing to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on
SCHEDULE 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
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Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
19. GOVERNING LAW.
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 18. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
20. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
21. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
22. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any
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term hereof may be changed, waived, discharged or terminated, except as provided
in Section 24.
23. WAIVER OF JURY TRIAL.
The Borrower hereby waives its right to a jury trial with respect to
any action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement and the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
24. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Credit Agreement, any
consent or approval required or permitted by this Credit Agreement to be given
by the Banks may be given, and any term of this Credit Agreement or of any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower of any terms of this Credit Agreement
or such other instrument or the continuance of any Default or Event of Default
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Borrower and the written consent of the Required Banks. Notwithstanding the
foregoing,
(a) the principal amount of or the rate of interest on the Notes
(other than interest accruing pursuant to Section 4.7.2
following the effective date of any waiver by all of the Banks
of the Default or Event of Default relating thereto) may not
be increased or decreased without the written consent of all
of the Banks;
(b) the amount of the Commitments may not be increased or reduced,
without the written consent of all of the Banks, other than
reductions specifically provided for herein and reductions
effected by permitted assignments;
(c) the principal amortization or mandatory reductions of the
Loans or Commitments may not be changed, except as
specifically provided for herein, without the written consent
of all of the Banks;
(d) the Tranche A Conversion Date may not be extended without the
written consent of each of the Tranche A Banks;
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(e) a substantial amount of the Collateral (other than the
Existing Mortgaged Properties) may not be released (other than
any release specifically provided for herein) without the
written consent of all of the Banks;
(f) the Intercreditor Agreement may not be amended without the
written consent of all of the Banks (other than any amendment
relating solely to the Existing Mortgaged Properties, which
may be approved by Sovereign in its sole discretion) and to
the extent that the Agent is agreeing to or consenting with
any action or waiver under the Intercreditor Agreement (other
than any action or waiver relating solely to the Existing
Mortgaged Properties, which may be approved by Sovereign in
its sole discretion), the Agent shall consult with all of the
Banks prior thereto and shall agree or consent (or not agree
or consent) as directed by all of the Banks;
(g) no Tranche A Loan shall be made during the continuance of an
Event of Default without the written consent of all of the
Banks;
(h) neither the Tranche A Maturity Date nor the Tranche B Maturity
Date may be postponed without the written consent of all of
the Banks;
(i) this Section 24 and the definition of Required Banks may not
be amended without the written consent of all of the Banks;
(j) none of Section 7.4, Section 9, or Section 11 may be amended
in any material respect without the written consent of all of
the Banks;
(k) the Borrower may not amend the Business Plan in any material
respect without the written consent of all of the Banks;
(l) no Event of Default may be waived by the Banks, and no
provision of any Loan Document may be amended for the purpose
of curing any Event of Default, in each case without the
written consent of all of the Banks; and
(m) Section 14 may not be amended without the written consent of
the Agent.
No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of any Bank in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. No notice to or demand upon the
Borrower shall entitle the Borrower to other or further notice or demand in
similar or other circumstances.
25. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any
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jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Credit Agreement in any jurisdiction.
26. NONCONSOLIDATION WITH SILVERLEAF FINANCE I, INC.
As of the Closing Date, the Banks (a) acknowledge the true sale nature
of the transfer of receivables from the Borrower to Silverleaf Finance I, Inc.
("SFI") in connection with the DZ Bank Securitization and (b) agree that they
will not take action to seek or support a substantive consolidation of SFI into
the Borrower in case of the bankruptcy of the Borrower or otherwise. The Banks
further agree not to take any action to challenge the true sale nature of the
transfer of receivables from the Borrower to SFI or commence or join with others
in commencing an involuntary bankruptcy of SFI.
27. TRANSITIONAL ARRANGEMENTS.
This Credit Agreement shall supersede the Original Agreement in its
entirety, except as provided in this Section 27. On the Closing Date, the rights
and obligations of the parties under the Original Agreement and the "Notes"
defined therein shall be subsumed within and be governed by this Credit
Agreement and the Notes; provided however, that any of the "Loans" (as defined
in Original Agreement) outstanding under the Original Agreement shall, for
purposes of this Credit Agreement, be Loans hereunder. Upon its receipt of the
Notes to be delivered hereunder on the Closing Date, each Bank will promptly
return to the Borrower, marked "Cancelled" or "Replaced", the notes of the
Borrower held by such Bank pursuant to the Original Agreement. All interest and
all commitment, facility and other fees and expenses owing or accruing under or
in respect of the Original Agreement shall be calculated as of the Closing Date
(prorated in the case of any fractional periods), and shall be paid on the
Closing Date in accordance with the method specified in the Original Agreement,
as if the Original Agreement were still in effect.
28. RELEASE.
In order to induce the Agent and the Banks to enter into this
Agreement, the Borrower acknowledges and agrees that: (i) the Borrower has no
claim or cause of action against the Agent or any Bank (or any of their
respective directors, officers, employees or agents); (ii) the Borrower has no
offset right, counterclaim or defense of any kind against any of its
obligations, indebtedness or liabilities to the Agent or any Bank; and (iii)
each of the Agent and the Banks has heretofore properly performed and satisfied
in a timely manner all of its obligations to the Borrower. The Borrower wishes
to eliminate any possibility that any past conditions, acts, omissions, events,
circumstances or matters would impair or otherwise adversely affect the Agent's
or any of the Banks' rights, interests, contracts, collateral security or
remedies. Therefore, the Borrower unconditionally releases, waives and forever
discharges (A) any and all liabilities, obligations, duties, promises or
indebtedness of
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any kind of the Agent or any Bank to the Borrower, except the obligations to be
performed by the Agent or any Bank on or after the date hereof as expressly
stated in this Credit Agreement and the other Loan Documents, and (B) all
claims, offsets, causes of action, suits or defenses of any kind whatsoever (if
any), whether arising at law or in equity, whether known or unknown, which the
Borrower might otherwise have against the Agent, any Bank or any of their
respective directors, officers, employees or agents, in either case (A) or (B),
on account of any past or presently existing condition, act, omission, event,
contract, liability, obligation, indebtedness, claim, cause of action, defense,
circumstance or matter of any kind.
29. WAIVER.
On the Closing Date, so long as each condition precedent set forth in
this Agreement has been satisfied, the Banks agree to waive all prior Defaults
and Events of Default under the Original Agreement, including, but not limited
to the Specified Events of Default (as defined in the Forbearance Agreement).
For the avoidance of any doubt, the Borrower, the Agent and the Banks
acknowledge and agree that the foregoing waiver shall not extend to any Default
or Event of Default that may exist or occur on or after the Closing Date under
this Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
SILVERLEAF RESORTS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: CFO
SOVEREIGN BANK, individually and as Agent
By: /s/ ▇▇▇▇ ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
LIBERTY BANK
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
List of Exhibits:
Exhibit E: Eligible Projects
Exhibit F: Existing Mortgaged Property