1
EXHIBIT 10.44
LOAN AND SECURITY AGREEMENT
between
SILVERLEAF RESORTS, INC.
(as Borrower)
and
TEXTRON FINANCIAL CORPORATION
(as Lender)
As of December 16, 1999
2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of December 16, 1999, entered into by
SILVERLEAF RESORTS, INC., a Texas corporation, (as "Borrower"), and TEXTRON
FINANCIAL CORPORATION, a Delaware corporation as ("Lender").
WITNESSETH:
WHEREAS, Borrower is engaged in the business of acquiring, constructing,
developing, owning, managing, selling and otherwise dealing with Intervals at
the Resorts (as each such term is hereafter defined);
WHEREAS, Borrower, in order to provide liquidity in connection with its
ownership, purchase and warehousing of Intervals, has entered into this
Agreement whereby Lender, will, subject to the terms and conditions set forth
herein, agree to make a loan to Borrower in the maximum amount of $10,000,000;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the parties to this Agreement,
intending to be legally bound, agree as follows:
SECTION 1 -- DEFINITION OF TERMS
1.1 Capitalized terms used in this Agreement are defined in this Section
1.1. The definitions include the singular and plural forms of the terms defined.
(a) ADDITIONAL CREDIT FACILITY. The term "Additional Credit Facility"
shall mean that certain $75,000,000 credit facility provided by the Lender
and certain other parties to Borrower pursuant to that certain Loan,
Security and Agency Agreement dated as of December 3, 1999.
(b) ADDITIONAL ELIGIBLE RESORTS or ADDITIONAL ELIGIBLE RESORT. The
terms "Additional Eligible Resorts" and "Additional Eligible Resort" shall
have the meanings ascribed to such terms in Section 3.4 hereof.
(c) ADVANCE. A portion of the proceeds of the Loan advanced by the
Lender to the Borrower in accordance with the terms of this Agreement.
(d) AFFILIATE. Any party controlled by, controlling, or under common
control with, the Borrower.
1
3
(e) AGREEMENT. This Loan and Security Agreement (including the
Exhibits and Schedules to it), as it may be amended from time to time, by
and between Borrower and the Lender.
(f) BUSINESS DAY. Each day which is not a Saturday, a Sunday or a
legal holiday under the laws of the State of Rhode Island, the State of
Connecticut or the State of Texas.
(g) CLOSING DATE. The date of this Agreement.
(h) CODE. The Uniform Commercial Code in force in the State of Rhode
Island as amended from time to time.
(i) COLLATERAL. Collectively, all now owned or hereafter acquired
right, title and interest of the Borrower, in all of the following:
(i) The Inventory;
(ii) All documents, instruments, accounts, and general
intangibles relating to the Inventory;
(iii) Any extensions, additions, improvements, betterments,
renewals, substitutions and replacements of, for or to any of the
Collateral, wherever located, now or hereafter owned by Borrower,
together with the products, proceeds, issues, rents and profits
thereof, and any replacements, additions or accessions thereto or
substitutions thereof;
(iv) All books, records, reports, computer tapes, disks and
software relating to the Collateral; and
(v) All collateral securing the Existing Credit Facility, as
hereafter defined, and the Additional Credit Facility.
(j) COMMITMENT FEE. The commitment fee in the amount of $100,000,
which is to be paid in accordance with the terms of Section 2.6(a) hereof.
(k) COMMON ELEMENTS. All common elements, including but not limited to
any limited common elements, as each such common element is defined or
provided for in the Declaration or other Timeshare Documents.
2
4
(l) 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.
(m) DECLARATION OR DECLARATIONS. With respect to each Resort, the
applicable Declaration or Declarations described on Schedule 1.1(o)
attached hereto.
(n) DEFAULT. An event or condition the occurrence of which immediately
is or, with a lapse of time or the giving or notice or both, becomes an
Event of Default.
(o) DEFAULT RATE. The term "Default Rate" shall have the meaning
ascribed to such term in the Note.
(p) DIVISION OR COMMISSION. The governmental authority of each state
in which a Resort is located, having jurisdiction over the establishment
and operation of the Resort in question and the sale of Intervals at such
Resort.
(q) ENVIRONMENTAL LAWS. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time
("CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended
from time to time ("RCRA"), the Superfund Amendments and Reauthorization
Act of 1986, as amended, the federal Clean Air Act, the federal Clean Water
Act, the federal Safe Drinking Water Act, the federal Toxic Substances
Control Act, the federal Hazardous Materials Transportation Act, the
federal Emergency Planning and Community Right to Know Act of 1986, the
federal Endangered Species Act, the federal Occupational Safety and Health
Act of 1970, the federal Water Pollution Control Act, all state and local
environmental laws, rules and regulations of each state in which a Resort
is located, as all of the foregoing legislation may be amended from time to
time, and any regulations promulgated pursuant to the foregoing; together
with any similar local, state or federal laws, rules, ordinances or
regulations either in existence as of the date hereof, or enacted or
promulgated after the date of this Agreement, that concern the management,
control, storage, discharge, treatment, containment, removal and/or
transport of Hazardous Materials or other substances that are or may become
a threat to public health or the environment; together with any common law
theory involving Hazardous Materials or substances which are (or alleged to
be) hazardous to human health or the environment, based on nuisance,
trespass, negligence, strict liability or other tortious conduct, or any
other federal, state or local statute, regulation, rule, policy, or
determination pertaining to health, hygiene, the environment or
environmental conditions.
3
5
(r) ENVIRONMENTAL INDEMNIFICATION AGREEMENT. The term "Environmental
Indemnification Agreement" shall mean the Environmental Indemnification
Agreement, in the form attached as Exhibit A, to be made by the Borrower to
the Lender pursuant to this Agreement, as the same may be amended from time
to time.
(s) EURODOLLAR BUSINESS DAY. Eurodollar Business Day shall mean any
day on which commercial banks are open for international business
(including dealings in dollar deposits) in London, England.
(t) EVENT OF DEFAULT. Defined in Section 8.1 of this Agreement.
(u) EXISTING CREDIT FACILITY. The term "Existing Credit Facility"
shall mean that certain $75,000,000 credit facility provided by Lender to
Borrower pursuant to that certain Loan and Security Agreement dated of as
of August 15, 1995, as amended by a First Amendment to Loan and Security
Agreement dated as of December 28, 1995, as further amended by a Second
Amendment to Loan and Security Agreement dated as of October 31, 1996, as
further amended by a Third Amendment to Loan and Security Agreement dated
as of March 31, 1999 and as further amended by a Fourth Amendment to Loan
and Security Agreement dated as of December 16, 1999.
(v) EXTENSION COMMITMENT FEE. The additional commitment fee payable in
accordance with Section 2.6(b) hereof.
(w) EXTENSION TERM. The term "Extension Term" shall have the meaning
inscribed to such term in Section 2.7(b) hereof.
(x) FINAL MATURITY DATE. November 30, 2001, subject to extension in
accordance with Section 2.7(b) hereof.
(y) FINANCIAL STATEMENTS. The tax returns and balance sheets and
statements of income and expense of the Borrower, and the related notes and
schedules delivered by Borrower to Lender prior to the Closing Date and
provided for in Section 4.5(c) of this Agreement; and the monthly,
quarterly and annual financial statements and reports required to be
provided to Lender pursuant to Section 7.1(h).
(z) GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board which are applicable
in the circumstances as of the date in question.
4
6
(aa) HAZARDOUS MATERIALS. "Hazardous substances," "hazardous waste" or
"hazardous constituents," "toxic substances", or "solid waste", as defined
in the Environmental Laws, and any other contaminant or any material, waste
or substance which is petroleum or petroleum based, asbestos,
polychlorinated biphenyls, flammable explosives, or radioactive materials.
(bb) INTEREST RATE. The variable rate, adjusted as of each LIBOR
Determination Date, equal to the sum of LIBOR, determined as of each LIBOR
Determination Date, plus three and one-quarter percent (3.25%) per annum.
(cc) INTERVAL. With respect to each Resort the undivided fractional
fee interval ownership interest as a tenant-in-common ((sometime referred
to in the Timeshare Documents as a condoshare interest or condoshare week)
in a Unit to be sold to a Purchaser by delivery of a deed for a time-share
period per calendar year (or, in the case of a biennial use period, per
alternate calendar year) of one week (as defined in the Declaration),
together with all appurtenant rights and interests, including, without
limitation, appurtenant rights in and to Common Elements, and easement,
license, access and use rights in and to all Resort facilities and
amenities (as described in the Declaration), all as more particularly
described in the Declaration or other Timeshare Documents. Notwithstanding
the foregoing, the term "Interval" shall also include, with respect to the
Oak `N Spruce Resort only, the beneficial interest in the entity which owns
each of the Units at the Oak `N Spruce Resort, as evidenced by the delivery
to the Purchaser of any such beneficial interest of a certificate of
beneficial interest for a timeshare period per calendar year (or, in the
case of biennial use period, per alternate calendar year) of one week (as
defined in the Oak N' Spruce Resort Declaration), together with all
pertinent rights and interests, including, without limitation, a pertinent
right in and to Common Elements, and easements, license, access and use
rights in and to all Oak `N Spruce Resort facilities and amenities, all as
more particularly described in the Declaration or other Timeshare Documents
for the Oak `N Spruce Resort.
(dd) INVENTORY. The term "Inventory" shall mean the Intervals from
Eligible Resorts, fee title to which is held by the Borrower and on which
Lender is granted a first mortgage lien to secure the Loan.
(ee) LIEN. Any interest in property securing an obligation owed to, or
claim by, a Person other than the owner of such property, whether such
interest arises in equity or is based on the common law, statute, or
contract.
(ff) LIBOR shall mean, with respect to any LIBOR Rate Period, the rate
per annum (rounded upwards, if necessary, to the nearest one-sixteenth
(1/16th) of one percent (1%)) reported at 11:00 a.m. London time on the
first day of each LIBOR Rate Period (or if such date is not a Eurodollar
Business Day, the immediately preceding Eurodollar Business
5
7
Day) (such date, the "LIBOR DETERMINATION DATE"), on Dow Jones Telerate
Service Page 3750 (British Bankers Association Settlement Rate) as the
non-reserve adjusted London Interbank Offered Rate for U.S. dollar deposits
having a ninety (90) day term (or on such other page as may replace said
Page 3750 on that service or such other service or services as may be
nominated by the British Bankers Association for the purpose of displaying
such rate, all as determined by Lender in its sole but good faith
discretion). In the event that (i) more than one such LIBOR is provided,
the average of such rates shall apply, or (ii) no such LIBOR is published,
then LIBOR shall be determined from such comparable financial reporting
company as Lender in its sole but good faith discretion shall determine.
LIBOR for any LIBOR Rate Period shall be adjusted from time to time by
increasing the rate thereof to compensate Lender for any aggregate reserve
requirements (including, without limitation, all basic, supplemental,
marginal and other reserve requirements and taking into account any
transitional adjustments or other scheduled changes in reserve requirements
during any LIBOR Rate Period) which are required to be maintained by Lender
with respect to "Eurocurrency Liabilities" (as presently defined in
Regulation D of the Board of Governors of the Federal Reserve System) of
the same term under Regulation D, or any other regulations of a
Governmental Authority having jurisdiction over Lender of similar effect.
(gg) LIBOR RATE PERIOD shall mean each successive ninety (90) day
period during the Term. The initial LIBOR Rate Period shall commence on the
date of this Agreement (or if such day is not a Eurodollar Business Day,
the immediately preceding Eurodollar Business Day) and shall terminate on a
date which is thirty days thereafter (or if such day is not a Eurodollar
Business Day, the immediately preceding Eurodollar Business Day). Each
LIBOR Rate Period after the initial LIBOR Rate Period shall commence on the
first Eurodollar Business Day immediately following the expiration of the
immediately preceding LIBOR Rate Period and shall terminate ninety days
thereafter (or if such day is not a Eurodollar Business Day, the
immediately preceding Eurodollar Business Day).
(hh) LOAN The term "Loan" shall mean the $10,000,000.00 revolving term
inventory loan described in this Agreement, subject to the limitations set
forth in Section 2.1 hereof.
(ii) LOAN DOCUMENTS. Collectively, this Agreement and the following
documents and instruments listed below as such agreements, documents,
instruments or certificates may be amended, renewed, extended, restated or
supplemented from time to time.
(i) THIS AGREEMENT;
6
8
(ii) THE NOTE;
(iii) THE ENVIRONMENTAL INDEMNIFICATION AGREEMENT;
(iv) THE MORTGAGES;
(v) FINANCING STATEMENTS; UCC financing statements covering the
Collateral, to be filed with the Texas Secretary of State and the
Secretary of State and/or such other office where UCC financing
statements are filed in each state in which the Collateral is located.
(vi) OTHER ITEMS; Such other agreements, documents, instruments,
certificates and materials as Lender may request to evidence the
Obligations; to evidence and perfect the rights and Liens and security
interests of the Lender contemplated by the Loan Documents, and to
effectuate the transactions contemplated herein, as such agreements,
documents, instruments or certificates may be hereafter amended,
renewed, extended, restated or supplemented from time to time.
(jj) LOAN YEAR. The period from the Closing Date through the last day
of the next full twelve (12) calendar month period and each twelve (12)
calendar month period thereafter.
(kk) LOAN TO RETAIL VALUE RATIO. The term "Loan to Retail Value Ratio"
shall mean the ratio of the outstanding principal balance of the Loan, from
time to time, to the Retail Value of the Inventory. The "Loan to Retail
Value Ratio" shall be 15%.
(ll) MANDATORY PREPAYMENT. Any prepayment required by Section 2.4(b)
of this Agreement.
(mm) MORTGAGE OR MORTGAGES. A properly recorded, first priority
mortgage, deed of trust, deed to secure debt, assignment of beneficial
interest or other security instrument, as applicable, in the form attached
hereto as Exhibit A (with such changes as may be necessary to comply with
the law of the state in which the Inventory in question is located)
executed and delivered by Borrower to Lender encumbering all of the right,
title and interest of the Borrower in the Inventory and Common Elements,
and related or appurtenant easement, access and use rights and benefits.
(nn) NEGATIVE PLEDGE AGREEMENT The Negative Pledge Agreement, in the
form attached as Exhibit A, made by the Borrower and each applicable
Affiliate to the Lender pursuant to this Agreement, as the same may be
amended from time to time.
7
9
(oo) NOTE. The Secured Promissory Note, in the form attached as
Exhibit A, dated the Closing Date and executed and delivered by Borrower to
Lender evidencing the Loan made or to be made by Lender to Borrower.
(pp) OBLIGATIONS. All amounts due or becoming due to Lender in respect
of the Loan under any of the Loan Documents, including principal, interest,
prepayment premiums, contributions, taxes, insurance, loan charges,
custodial fees, attorneys' and paralegals' fees and expenses and other fees
or expenses incurred by Lender or advanced to or on behalf of Borrower by
Lender pursuant to any of the Loan Documents, and the prompt and complete
payment and performance by the Borrower of all obligations, indebtedness
and liabilities pursuant to this Agreement or any of the Loan Documents or
otherwise
(qq) OPERATING CONTRACT OR OPERATING CONTRACTS. As defined in Section
6.20.
(rr) PERSON. An individual, partnership, corporation, limited
liability company, trust, unincorporated organization, other entity, or a
government or agency or political subdivision thereof.
(ss) PROPERTY OR PROPERTIES. Any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
(tt) PRIME RATE. The highest prime rate of interest from time to time
announced or published by Chase Manhattan Bank, N.A. ("Bank"). In the event
that the prime rate established by Bank shall no longer be available, due
to either the non-existence of the Bank or the Bank's failure to publish a
prime rate, then the Prime Rate shall be the highest prime rate published
by a comparable major money center bank selected by Lender.
(uu) PURCHASE PRICE. The total purchase price of an Interval, as
approved by Lender from time to time, relating to the sale by the Borrower
to a Purchaser of an Interval comprising a part of the Inventory.
(vv) PURCHASER. Any Person who purchases one or more Intervals.
(ww) RELEASE PAYMENT. The term "Release Payment" shall have the
meaning ascribed to such term in Section 2.3(b) hereof.
(xx) INTERVAL RELEASE THRESHOLD. The term "Interval Release Threshold"
shall mean 110% of the Required Retail Value of the Inventory. By way of
example, if the
8
10
Required Retail Value of the Inventory is $66,666,666.66, the Inventory
Release Threshold will be $73,333,333.33.
(yy) RETAIL VALUE. The term "Retail Value" shall mean the fair market
value of the Inventory and each Interval constituting part of the
Inventory, as determined by Lender in its sole discretion.
(zz) REQUIRED RETAIL VALUE. The term "Required Retail Value" shall
mean the aggregate Retail Value of the Inventory, such that the ratio of
the outstanding balance of the Loan, from time to time, to the aggregate
Retail Value of the Inventory does not exceed the Loan to Retail Value
Ratio. By way of example, if the outstanding principal balance of the Loan
is $10,000,000, the Required Retail Value of the Inventory will be
$66,666,666.66.
(aaa) RESORT OR RESORTS (ALSO "ELIGIBLE RESORT" OR "ELIGIBLE
RESORTS"). Individually and collectively, as applicable, each or all of the
interval ownership and time-share projects consisting of: (i) (A) Holly
Lake Ranch, Hawkins, Texas; (B) Piney Shores Resort, Conroe, Texas; (C)
Lake O' The Woods, Flint, Texas; (D) Hill Country Resort, Canyon Lake,
Texas; (E) Ozark Mountain Resort, Kimberling City, Missouri; (F) Holiday
Hills Resort, Branson, Missouri; (G) Fox River Resort, LaSalle County,
Illinois; (H) Timber Creek Resort, Jefferson County, Missouri, (I) Oak N'
Spruce Resort, South Lee, Massachusetts and (J) Apple Mountain Resort,
Habersham County, Georgia (also sometime individually and collectively
referred to herein as the "EXISTING RESORTS") and (ii) subject to Lender's
prior written approval and satisfaction by the Borrower of the conditions
precedent set forth in Sections 3.4 and 4.5 hereof, the Additional Eligible
Resorts. The term "Resort" or "Resorts" includes, among other things, the
undivided annual or (biennial) timeshare ownership interests (Intervals) in
the respective Resorts, and the appurtenant exclusive rights to use Units
in one or more buildings or phases and all appurtenant or related
properties, amenities, facilities, equipment, appliances, fixtures,
easements, licenses, rights and interests, including without limitation,
the Common Elements, as established by and more fully defined and described
in the respective Declarations, and the other Timeshare Documents.
(bbb) SURVEY. A plat or survey of the Resort prepared by a licensed
surveyor acceptable to Lender and in a form acceptable to Lender.
(ccc) TERM. A period of two (2) calendar years from the Closing Date,
plus the number of days from the Closing Date to the end of the month in
which the Closing Date occurs, subject to extension as provided in Section
2.7(b) hereof.
(ddd) TIMESHARE ACT. Any statute, act, regulation, ordinance, rule or
law applicable to the establishment and operation of the Resorts and the
sales of the Intervals.
9
11
(eee) TIMESHARE DOCUMENTS. Any registration statement required under
any Timeshare Act approving the establishment and operation of the Resorts
and the sales of Intervals.
(fff) TIMESHARE OWNERS' ASSOCIATION. With respect to each Resort, the
Silverleaf Club, a Texas non-profit corporation, and the applicable
not-for-profit corporations described on Schedule 1.1(mmm).
(ggg) UCC FINANCING STATEMENTS. The UCC-1 Financing Statements, naming
the Borrower as debtor and the Lender as secured party, heretofore or
hereafter filed in connection with the Loan and all amendments thereto.
(hhh) UNIT. With respect to each Resort, one living unit in a building
incorporated into the Resort pursuant to the Declaration, together with all
related or appurtenant Common Elements and related or appurtenant interests
in services, easements and other rights or benefits, as described and
provided for in the Declaration, including but not limited to the right to
use the Resort amenities and facilities in accordance with the Timeshare
Documents.
SECTION 2 -- THE LOAN
2.1 REVOLVING LOAN AND LENDING LIMITS. Upon the terms and subject to the
conditions set forth in this Agreement, including but not limited to Section 2.8
hereof, the Lender shall make Advances to the Borrower, and the Borrower may
borrow, repay and reborrow during the Revolving Loan Period, as such term is
hereafter defined, principal under the Loan in an amount not to exceed at any
time the lesser of: (i) the Loan to Retail Value Ratio of the Required Retail
Value of the Inventory or (ii) $10,000,000.00.
2.2 INTEREST RATE. The aggregate principal amount of all Advances, which
are outstanding from time to time, will bear interest at a rate equal to the
Interest Rate. Each Advance shall bear interest at the Interest Rate as of
Lender's wiring of funds through Lender's receipt of repayment of the Loan (if
received by Lender later than 12 noon, Eastern Standard Time, then interest
accrual shall be through the next Business Day following such receipt).
Immediately upon the occurrence of an Event of Default and after the Final
Maturity Date (if the Loan is not paid in full on the Final Maturity Date), at
Lender's election in its sole discretion, the Loan will bear interest at the
Default Rate.
10
12
2.3 PAYMENTS. The Borrower agrees punctually to pay or cause to be paid to
the Lender, all principal and interest due under the Note in respect of the Loan
made by the Lender hereunder. The Borrower shall make the following payments on
the Loan:
(a) MONTHLY PAYMENTS. The Borrower shall pay to the Lender, on the
first day of each month during the Term, commencing on February 1, 2000,
interest on the outstanding principal balance of the Loan, from time to time, at
the Interest Rate. Lender shall apply each such payment in the following order:
(i) to the payment of all costs or expenses incurred by the Lender pursuant to
this Agreement in creating, maintaining, protecting or enforcing the Liens in
and to the Collateral and in collecting any amount due to Lender in connection
with the Loan; (ii) to any interest accrued at the Default Rate; (iii) to the
payment of accrued and unpaid interest at the Interest Rate; and (iv) to the
reduction of the principal balance of such Lender's outstanding Loans. If the
amount of the funds received by Lender with respect to any month is insufficient
to pay in all amounts due from Borrower to Lender under this Agreement, Borrower
shall pay the difference to Lender on or before the fifth (5th) day after notice
from Lender to Borrower advising Borrower of such insufficiency.
(b) INTERVAL RELEASE PRICE PAYMENTS. Prior to the release by Lender of
any Interval from the Collateral in accordance with Section 2.10 hereof, the
Borrower shall pay to the Lender an amount equal to the greater of: (i)
$1,600.00 for each such Interval, or (ii) an amount necessary to fully repay the
Loan upon sale of 75% of the Inventory (the "RELEASE PRICE"), which payment
shall be applied by Lender in accordance with Section 2.3(a); provided, however,
that during the Initial Term, as such term is defined in Section 2.7(a), if the
Retail Value of the Inventory, as determined by the Lender, is equal to or
greater than the Interval Release Threshold, the Borrower shall not be required
to pay a Release Payment with respect to the release of any Interval for so long
as the Retail Value of the Inventory equals or exceeds the Interval Release
Threshold.
(c) FINAL PAYMENT. The entire outstanding principal amount of the Loan
together with all other Obligations shall be paid in full by not later than the
Final Maturity Date.
2.4 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrower may not voluntarily prepay the
Loan, in whole or in part, except that: (i) provided that no Event of Default
shall have occurred and be continuing and (ii) Borrower pays the Release Price
in accordance with Section 2.3(b) hereof, then at any time during the Term of
the Loan, the Loan may be prepaid in part in connection with any prepayment
which arises from release of any Interval from the Collateral, subject to
Section 2.10 hereof.
(b) MANDATORY PREPAYMENTS. If at any time and for any reason, the
outstanding unpaid principal balance of the Loan shall exceed the amount which
satisfies
11
13
the Loan to Retail Value Ratio, then, within five (5) Business Days following
Borrower's receipt of telecopied notice from Lender of the occurrence of such
excess or, absent such telecopied notice, within fifteen (15) days after the end
of the calendar month in which such excess occurred, Borrower shall either: (i)
prepay the principal balance of the Loan in an amount equal to the difference
between the aggregate principal amount of the Loan and the amount necessary to
comply with the Loan to Retail Value Ratio of the Inventory or (ii) Borrower
shall grant to Lender a first mortgage Lien on additional Intervals from
Eligible Resorts so that the Retail Value of the Inventory, including such
additional Intervals, equals or exceeds the Required Retail Value of the
Inventory and the Loan to Retail Value Ratio is satisfied. In granting to Lender
a first mortgage lien on such additional Intervals, Borrower shall comply with
the document delivery and recordation requirements set forth in Section 4.2(b)
of this Agreement and Borrower shall deliver to Lender its written certification
that the Retail Value of the Inventory, including such additional Intervals, is
equal to or greater than the Required Retail Value and satisfies the Loan to
Retail Value Ratio. If Borrower elects to prepay the excess principal balance of
the Loan pursuant to this Section 2.4(b)(i) above, no prepayment premium shall
be payable in connection with such prepayment.
(c) PREMIUMS. Notwithstanding anything herein contained to the
contrary, any prepayment under this Section 2.4 must include all accrued but
unpaid interest, and accrued but unpaid contributions, taxes, insurance, loan
charges custodial fees, attorneys' and paralegals' fees and expenses, amounts
due pursuant to Section 2.5 hereof as a result of a Funding Loss and other fees
or expenses incurred by Lender or advanced to or on behalf of Borrower by Lender
pursuant to any of the Loan Documents accrued but unpaid.
2.5 PAYMENT OF FUNDING LOSSES AND OTHER AMOUNTS RELATING TO LIBOR CONTRACT,
ETC.
(a) Funding Losses: Breaking of LIBOR contract, Change in Law, Etc.
Borrower hereby agrees to pay to Lender any amount necessary to compensate
Lender for any losses or costs (including, without limitation, the costs of
breaking any "LIBOR" contract, if applicable, or funding losses determined
on the basis of Lender's reinvestment rate and the interest rate thereon)
(collectively, "FUNDING LOSSES") sustained by Lender: (i) if the Loan, or
any portion hereof, is prepaid for any reason whatsoever on any date other
than the Final Maturity Date (including, without limitation, from
condemnation or insurance proceeds); (ii) upon the conversion of the
interest rate on the Loan to an interest rate based on the Prime Rate in
accordance with Section 2.5(b) hereof; (iii) as a consequence of the
reduction of any amounts received or receivable from Borrower, in either
case, due to the introduction of, or any change in, law or applicable
regulation or treaty (including the administration or interpretation
thereof), whether or not having the force of law, or due to the compliance
by Lender with any directive, whether or not having the force of law, or
12
14
request from any central bank or domestic or foreign governmental
authority, agency or instrumentality having jurisdiction; (iv) as a
consequence of the breaking of any LIBOR contract and/or (v) any other set
of circumstances not attributable to Lender's acts. Payment of Funding
Losses hereunder shall be in addition to any obligation to pay any other
amounts due and owing under this Agreement or any other Loan Documents.
(b) Conversion to Interest Rate Based on Prime Rate. If Lender
determines (which determination shall be conclusive and binding upon
Borrower, absent manifest error) (i) that dollar deposits in an amount
approximately equal to the then outstanding principal balance of the Loan
are not generally available at such time in the London Interbank Market for
deposits in Eurodollars, (ii) that the rate at which such deposits are
being offered will not adequately and fairly reflect the cost to Lender of
maintaining the Interest Rate based on LIBOR, or of funding the same in
such market for such Interest Accrual Period, due to circumstances
affecting the London Interbank Market generally, (iii) that reasonable
means do not exist for ascertaining LIBOR, (iv) that the Interest Rate
based on LIBOR would be in excess of the maximum interest rate which
Borrower may by law pay, then, in any such event, or (v) any LIBOR contract
is broken as a result of the sale in bulk of Inventory relating to the
Resorts by Borrower, Lender shall so notify Borrower and, as of the date of
such notification with respect to an event described in clauses (ii), (iv)
or (v) above, or as of the expiration of the applicable LIBOR Rate Period
with respect to an event described in clause (i) or (iii) above, interest
shall accrue at a rate equal to the Prime Rate plus a sufficient spread so
that the resulting per annum interest rate is approximately equal to what
the rate would have been based on LIBOR plus three and one-quarter percent
(3.25%) per annum, which new rate shall apply until such time as the
situations described above are no longer in effect, or as otherwise
provided herein; provided, however, if the situation described in clause
(ii) above occurs, (x) Borrower shall have the option, to be exercised by
written notice to Lender, to pay to Lender (in the manner reasonably
required by Lender) for such increased cost of maintaining the Interest
Rate based on LIBOR, and (y) if the same only affects a portion of the
Loan, then only such portion shall have interest accrue at a rate equal to
the Prime Rate plus a sufficient spread so that the resulting per annum
interest rate is approximately equal to what the rate would have been based
on LIBOR plus three and one-quarter percent (3.25%) per annum, and interest
shall continue to accrue on the remaining portion at the Interest Rate
based on LIBOR.
(c) Back-Up Interest Rate Based on Prime Rate. If the introduction of,
or any change in, any law, regulation or treaty, or in the interpretation
thereof by any governmental authority charged with the administration or
interpretation thereof, shall make it unlawful for Lender to maintain the
Interest Rate based on LIBOR with respect to the Loan, or any portion
thereof, or to fund the Loan, or any portion thereof, in Eurodollars in the
London Interbank Market, then, (i) the Loan (or such portion of the Loan)
shall, with respect to
13
15
Lender, thereafter bear interest shall accrue at a rate equal to the Prime
Rate plus a sufficient spread so that the resulting per annum interest rate
is approximately equal to what the rate would have been based on LIBOR plus
three and one-quarter percent (3.25%) per annum (unless the Default Rate
shall be applicable), and (ii) Borrower shall pay to Lender the amount of
Funding Losses (if any) incurred in connection with such conversion. The
accrual of interest shall accrue at a rate equal to the Prime Rate plus a
sufficient spread so that the resulting per annum interest rate is
approximately equal to what the rate would have been based on LIBOR plus
three and one-quarter percent (3.25%) per annum, which new rate shall
continue until such date, if any, as the situation described in this
Section 2.5(c) is no longer in effect.
(d) Capital Adequacy Events, Etc. If Lender shall have determined that
the applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee
on Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption
of any other law, rule, regulation or guideline (including, but not limited
to, any United States law, rule, regulation or guideline) regarding capital
adequacy, or any change becoming effective in any of the foregoing or in
the enforcement or interpretation or administration of any of the foregoing
by any court or any domestic or foreign governmental authority, central
bank or comparable agency charged with the enforcement or interpretation or
administration thereof, or compliance by Lender, with any request or
directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of Lender or
Lender's holding company, as the case may be, to a level below that which
Lender or its holding company, as the case may be, could have achieved but
for such applicability, adoption, change or compliance (taking into
consideration Lender's or its holding company, as the case may be, policies
with respect to capital adequacy) (the foregoing being hereinafter referred
to as "CAPITAL ADEQUACY EVENTS"), then, upon demand by Lender, Borrower
shall pay to Lender on behalf of any such Lender, from time to time, such
additional amount or amounts as will compensate Lender for any such
reduction suffered.
(e) Payment of Amounts Due under Section 2.5. Any amount payable by
Borrower under Section 2.5(a) or 2.5(d) hereof shall be paid to Lender
within five (5) days of receipt by Borrower of a certificate signed by an
officer of Lender setting forth the amount due and the basis for the
determination of such amount, which statement shall be conclusive and
binding upon Borrower, absent manifest error. Failure on the part of Lender
to demand payment from Borrower for any such amount attributable to any
particular period shall not constitute a waiver of Lender's right to demand
payment of such amount for any subsequent or prior period. Lender shall use
reasonable efforts to deliver to Borrower
14
16
prompt notice of any event described in Sections 2.5(a) or 2.5(d) hereof
and of the amount to be paid under this Section 2.5(e) as a result thereof;
provided, however, any failure by Lender to so notify Borrower shall not
affect Borrower's obligation to make the payments to be made under this
Section 2.5(e) as a result thereof. All amounts which may become due and
payable by Borrower in accordance with the provisions of this Section
2.5(e) shall constitute additional interest hereunder and shall be secured
by this Agreement and the other Loan Documents."
2.6 COMMITMENT FEE.
(a) Borrower acknowledges and agrees that the Commitment Fee of
$100,000 shall be due and payable exclusively to Lender for its services
hereunder and shall be paid to Lender upon execution of this Agreement.
Borrower agrees that Lender has earned the entire Commitment Fee,
notwithstanding whether a closing occurs under this Agreement or whether
the Loan or any portion thereof is funded.
(b) In the event that the Borrower shall exercise its option to extend
the Term of the Loan as provided in Section 2.7 (b) below, Borrower shall
pay to Lender, on or before October 31, 2001, an additional commitment fee
in an amount equal to one percent (1.0%) of the outstanding balance of the
Loan, computed as of October 31, 2001 (the "Extension Commitment Fee").
LOAN TERM.
(a) Initial Term: The Initial Term of the Loan shall commence on the
date hereof and shall terminate on November 30, 2001, subject to extension
in accordance with Section 2.7 (b) hereof.
(b) Extension Term: Borrower shall have the right to extend the Term
of the Loan for an additional period of twenty-four (24) months commencing
on December 1, 2001 and terminating on November 30, 2003; provided that:
(i) no Event of Default, or Default which would notice, the
passage of time or both would constitute an Event of Default, shall have
occurred;
(ii) the Borrower notifies the Lender in writing at least six
months prior to the expiration of the Initial Term of its election to
exercise its option to extend the Term of the Loan;
(iii) Borrower pays to the Lender the Extension Commitment Fee in
accordance with Section 2.6(b).
15
17
2.8 MAXIMUM OBLIGATION OF LENDER UNDER THE LOAN, THE EXISTING CREDIT
FACILITY AND THE ADDITIONAL CREDIT FACILITY. Borrower acknowledges, agrees and
confirms that notwithstanding anything to the contrary herein, in any other Loan
Document or in any document evidencing or securing the Existing Credit Facility
or the Additional Credit Facility, Lender shall not be obligated to fund the
Advance hereunder, which when taken together with the loans or advances made by
Lender to the Borrower under this Agreement, the Existing Credit Facility and
the Additional Credit Facility, would cause the aggregate amount of such loans
and advances by Lender to Borrower to exceed a maximum aggregate amount of
$50,000,000.
2.9 SUSPENSION OF ADVANCES.
(a) Suspension of Sales. 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 Interval sales activities, other business operations in respect of the
Resorts, or the enforcement of the remedies of the Lender hereunder, then, in
such event, the Lender shall have no obligation to make any Advances hereunder:
(i) in respect of Intervals which are the subject of any stay, order, cease and
desist order, injunction, temporary restraining order or similar judicial or
nonjudicial sanction has been issued 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
Lender and (ii) in respect of Intervals at any Resort 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 Lender within sixty (60) days of its issuance and (y)
there is a reduction in the total number of sales of Intervals by the Borrower
in any Loan Year of more than twenty percent (20%) from the total number of
sales of Intervals in the immediately preceding Loan Year.
(b) 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 E hereto, then, in such event, the Lender
shall have no obligation to make any Advances hereunder, unless within thirty
(30) days prior thereto Borrower provides Lender with written information
setting forth the replacement executive management personnel of Borrower
together with a description of those Persons' experience, ability and
reputation, and Lender, acting in good faith, determines 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 E.
2.10 RELEASE OF INTERVALS FROM INVENTORY. Upon written request of the
Borrower, and provided that no Event of Default shall have occurred and be
continuing hereunder, Lender shall release from the Collateral, one or more
Intervals subject to the following conditions: (i) payment by Borrower to Lender
at the time of such release of the Release Price for each such Interval, (ii)
the
16
18
remaining Collateral satisfies the Required Retail Value and (iii) if the
outstanding principal balance of the Loan shall, as a result of any such
release, be less than $3,000,000, then Borrower shall also pay to Lender, with
respect to the six (6) month period commencing on the date hereof and ending on
June 1, 2000, and with respect to each six (6) month period thereafter during
the Revolving Loan Period, on the fifth day of every such six (6) month period,
in arrears, a fee equal to the product of: (a) the excess, if any, of (i)
$3,000,000.00 over (ii) the average daily outstanding principal balance of the
Loan for such six (6) month period; times (b) 2% per annum.
2.11 LIMITATIONS ON ADVANCES WITH RESPECT TO OAK N' SPRUCE RESORT.
Notwithstanding anything herein to the contrary, the Lender shall be under no
obligation to make Advances in respect of Intervals from Oak N' Spruce Resort if
any such Advance, together with any prior Advances made under this Loan
Agreement, the Additional Credit Facility and/or the Existing Credit Facility,
would exceed, in the aggregate, $32,000,000.00.
SECTION 3 -- COLLATERAL GRANT OF SECURITY INTEREST
3.1 GRANT OF SECURITY INTEREST. To secure the payment and performance of
the Obligations, for value received, Borrower unconditionally and irrevocably
assigns, mortgages, pledges and grants to Lender a continuing first priority
security interest in and to the Collateral. To further secure the Obligations
hereunder, at the time of each Advance, Borrower shall execute and deliver to
the Lender, such deeds of trust, mortgages, deeds to secure debt or assignments
of beneficial interest, as the case may be, in the applicable form attached here
as Exhibit A, as Lender deems necessary in its sole discretion, in order to
grant to the Lender a first priority mortgage lien on the Inventory.
3.2 FINANCING STATEMENTS. Borrower agrees, at its own expense, to execute
the financing statements provided for by the Code together with any and all
other instruments or documents and take such other action as may be required to
perfect and to continue the perfection of Lender's security interests in the
Collateral and, unless prohibited by law, Borrower hereby authorizes Lender to
execute and file any such financing statements on the Borrower's behalf.
3.3 INSURANCE. Insurance coverage with respect to the Resort is provided by
the Timeshare Owners' Association. Borrower shall furnish Lender, upon request,
with satisfactory evidence that the Units, Buildings and Resorts are adequately
insured.
3.4 SUBSTITUTION OF INVENTORY. Lender agrees that Borrower may, from time
to time during the Term hereof, replace any Interval or Intervals by granting to
Lender a first mortgage Lien on a new Interval or Intervals owned by the
Borrower at an Eligible Resort. In granting to Lender a first mortgage Lien on
any such new Interval or Intervals, Borrower shall comply with the document
delivery and recordation requirements set forth in Section 4.2(b) of this
Agreement
17
19
and Borrower shall deliver to Lender its written certification that the Retail
Value of the Inventory after any such substitution, is equal to or greater than
the Required Retail Value and satisfies the Loan to Value Ratio. In connection
with any such replacement of Inventory under this Section 3.4 or Section 2.4(b)
hereof, Borrower may propose to Lender that one or more additional time-share
plans and projects owned and operated by Borrower be included among the Eligible
Resorts . Any such proposal will be in writing, and will be accompanied or
supported by the due diligence and supporting Borrower, Affiliate, project,
financial and related information identified in Section 4.5 hereto, and such
other information as Lender may require. Borrower will reasonably cooperate with
Lender's underwriting and due diligence, and Borrower will be responsible for
payment upon billing for Lender's out-of-pocket expenses in connection
therewith. Subject to Lender's satisfactory underwriting and due diligence
review, including satisfaction of the conditions in Sections 4 and 5 hereof as
they relate to such additional time-share resorts, Lender may, but shall not be
required to, approve one or more such additional time-share resorts, including
future phases or condominiums in an Existing Eligible Resort, as an Eligible
Resort. Subject in each instance to Lender's acceptable underwriting and due
diligence review, and Lender's prior written approval, any project as may be
approved by Lender after the Closing Date, if any, is hereinafter referred to
singly as an "ADDITIONAL ELIGIBLE RESORT" and collectively as the "ADDITIONAL
ELIGIBLE RESORTS."
SECTION 4 -- CONDITIONS PRECEDENT TO THE CLOSING
4.1 CONDITIONS PRECEDENT. The obligation of Lender to enter into this
Agreement and to fund the initial Advance shall be subject to the satisfaction
of each of the following conditions precedent, in addition to all of the
conditions precedent set forth elsewhere in the Loan Documents:
(a) REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. The
representations and warranties contained in the Loan Documents are and
shall be true and correct in all respects, and all covenants and agreements
have been complied with and correct in all respects, and all covenants and
agreements to have been complied with and performed by Borrower shall have
been fully complied with and performed to the satisfaction of Lender.
(b) NO PROHIBITED ACTS. Borrower shall not have taken any action or
permitted any condition to exist which would have been prohibited by any
provision of this Agreement or the Loan Documents.
(c) NO CHANGES. That all information and documents heretofore
delivered by Borrower to Lender with respect to the Existing Resorts,
including information and documents delivered in connection with the
Existing Credit Facility and/or the Additional Resort Facility, remain true
and correct in all respects.
18
20
(d) APPROVAL OF DOCUMENTS PRIOR TO CLOSING DATE. Borrower has
delivered to Lender (with copies to Lender's counsel), at least fifteen
(15) Business Days prior to the Closing Date, and Lender has reviewed and
approved, at least five (5) Business Days prior to the Closing Date, the
form and content of all of the items specified in Subsection 4.1(d)(i)
through (vi) below (the "Submissions"). Lender shall have the right to
review and approve any changes to the form of any of the Submissions. If
Lender disapproves of any changes to any of the Submissions, Lender shall
have the right to require Borrower either to cure or correct the defect
objected to by Lender or to elect not to fund the Loan or any Advance.
Under no circumstances shall Lender's failure to approve or disapprove a
change to any of the Submissions be deemed to be an approval of such
Submissions. All of the Submissions were and shall be prepared at
Borrower's sole cost and expense, unless expressly stated to be an
obligation and expense of Lender. Lender shall have the right of prior
approval of any Person responsible for preparing a Submission ("Preparer")
and may disapprove any Preparer in its sole discretion, for any reason,
including without limitation, that Lender believes that the experience,
skill, reputation or other aspect of the Preparer is unsatisfactory in any
respect. All Submissions required pursuant to this Agreement shall be
addressed to Lender and include the following language: "THE UNDERSIGNED
ACKNOWLEDGES THAT TEXTRON FINANCIAL CORPORATION IS RELYING ON THE WITHIN
INFORMATION IN CONNECTION WITH ITS DETERMINATION TO MAKE A LOAN TO
SILVERLEAF RESORTS, INC. IN CONNECTION WITH THE SUBJECT COLLATERAL."
(i) A certificate in the form attached as Exhibit A, to be dated
as of the Closing Date and signed by the president, vice president, or
secretary of the Borrower, certifying that the conditions specified in
Sections 4.1(a), (b) and (c) above are true;
(ii) Copies of any amendments to the articles of incorporation of
Borrower not previously delivered to the Lender, certified to be true
and complete by Borrower and the Secretary of State of the State of
Texas and a current certificate of good standing for Borrower, and
copies of any amendments to the by-laws of Borrower not previously
delivered to the Lender, certified to be true, correct and complete by
the secretary or assistant secretary of Borrower;
(iii) a certificate of the Secretary of the Borrower certifying
the adoption by the Board of Directors of the Borrower of a resolution
authorizing Borrower to enter into and execute this Agreement, the
Note, and the other Loan Documents, to borrow the Loan from Lender,
and to grant to Lender a first priority security interest in and to
the Collateral;
19
21
(iv) a certificate of the secretary or assistant secretary of
Borrower certifying the incumbency, and verifying the authenticity of
the signatures, of the specified officers of Borrower authorized to
sign the Agreement, the Note and the other Loan Document; and
(v) Copies or other evidence of all loans to Borrower from any
officers, shareholders, or Affiliates of Borrower not previously
delivered to the Lender.
(vi) Commitment to issue Mortgagee Title Policies (as defined
below) from the Title Company.
(e) EXECUTION AND DELIVERY OF LOAN DOCUMENTS. Borrower shall have
delivered to Lender, on or before the Closing Date, the following Loan
Documents, each of which shall be in the form of the respective Loan
Documents attached hereto as Exhibit "A", and each of which when required,
shall be in recordable form:
(i) CLOSING OPINIONS FOR BORROWER.
(ii) NOTE.
(iii) ENVIRONMENTAL INDEMNITY. An Environmental Indemnity
Agreement, executed by Borrower in favor of Lender.
(iv) OTHER ITEMS. Such other agreements, documents, instruments,
certificates and materials as Lender may request to evidence the
Obligations; to evidence and perfect the rights and Liens and security
interests of Lender contemplated by the Loan Documents, and to
effectuate the transactions contemplated herein.
(f) PHYSICAL INSPECTION. Lender shall be satisfied with its physical
inspection of the Resorts.
(g) UCC SEARCH. Lender shall have obtained, at Borrower's cost, such
searches of the applicable public records as it deems necessary under
Texas, and other applicable law to verify that it has a first and prior
perfected Lien and security interest covering all of the Collateral. Lender
shall not be obligated to fund any Loan if Lender determines that it does
not have a first and prior perfected lien and security interest covering
any portion of the Collateral.
20
22
(h) LITIGATION SEARCH. Lender shall have obtained, at 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 Resorts, any portion of the Collateral, 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
Lender determines, in its sole discretion exercised in good faith, are
immaterial due to settlement, insurance coverage, frivolity, or amount or
nature of claim. Lender shall not be obligated to fund any Advance if it
determines that any such litigation is pending.
4.2 CLOSING DATE ADVANCE. In the event that Borrower desires Lender to make
an Advance on the Closing Date, then, in addition to all of the conditions
precedent set forth in this Section 4, Borrower shall have complied with all of
the requirements of Section 5 below at least five (5) Business Days prior to the
Closing Date.
4.3 EXPENSES. Borrower shall have paid all fees and expenses required to be
paid pursuant to this Agreement. Lender shall have no obligation to fund the
Loan or make the initial Advance or any subsequent Advance unless (a) the amount
of the Loan together with any moneys paid by Borrower is sufficient to satisfy
all fees and expenses required to be paid pursuant to this Agreement, and (b)
the proceeds of the Advance will not be used for any of the uses set forth in
Section 6.11.
4.4 PROCEEDINGS SATISFACTORY. Borrower shall execute all of the Loan
Documents approved by Lender on the Closing Date, and all actions taken in
connection with the execution or delivery of the Loan Documents, and all
documents and papers relating thereto, shall be satisfactory to Lender and its
counsel. Lender and its counsel shall have received copies of such documents and
papers as Lender or such counsel may reasonably request in connection therewith,
all in form and substance satisfactory to Lender and its counsel.
4.5 CONDITIONS PRECEDENT TO FUNDING OF ADVANCES WITH RESPECT TO ADDITIONAL
ELIGIBLE RESORTS. As provided in the Section 3.4 hereof, Borrower may propose to
Lender that Lender approve one or more additional timeshare plans for inclusion
hereunder as an Additional Eligible Resort in respect of which Intervals may be
accepted as part of the Inventory and Advances may be made. The obligation of
Lender to fund any Advance with respect to any Interval from an Additional
Resort shall be subject to the satisfaction of each of the following conditions
precedent, in addition to all of the conditions precedent set forth elsewhere in
the Loan Documents:
(a) Representations, Warranties, Covenants and Agreements. The
representations and warranties contained in the Loan Documents are and shall be
true and correct in all respects, and all
21
23
covenants and agreements have been complied with and correct in all respects,
and all covenants and agreements to have been complied with and performed by
Borrower shall have been fully complied with and performed to the satisfaction
of Lender.
(b) No Prohibited Acts. Borrower shall not have taken any action or
permitted any condition to exist which would have been prohibited by any
provision of the Loan Documents.
(c) Approval of Documents Prior to Advance. Borrower has delivered or
caused to be delivered to Lender (with copies to Lender's counsel, at least
fifteen (15) Business Days prior to the date of each such Advance), and Lender
has reviewed and approved, at least five (5) Business Days prior to such date,
the form and content of all of the items specified in each of the Submissions
required pursuant to this Section 4.5. Lender shall have the right to review and
approve any changes to the form of any of the Submissions. If Lender disapproves
of any changes to any of the Submissions, Lender shall have the right to require
Borrower either to cure or correct the defect objected to by Lender or to elect
not to fund the Loan or any Advance with respect to any such Interval. Under no
circumstances shall Lender's failure to approve or disapprove a change to any of
the Submissions be deemed to be an approval of such Submissions. All of the
Submissions were and shall be prepared at Borrower's sole cost and expense,
unless expressly stated to be an obligation and expense of Lender. Lender shall
have the right of prior approval of any Preparer and may disapprove any Preparer
in its sole discretion, for any reason, including without limitation, that
Lender believes that the experience, skill, reputation or other aspect of the
Preparer is unsatisfactory in any respect. All Submissions required pursuant to
this Agreement shall be addressed to Lender and include the following language:
"THE UNDERSIGNED ACKNOWLEDGES THAT TEXTRON FINANCIAL CORPORATION IS RELYING ON
THE WITHIN INFORMATION IN CONNECTION WITH ITS DETERMINATION TO MAKE A LOAN TO
SILVERLEAF RESORTS, INC. IN CONNECTION WITH THE SUBJECT COLLATERAL."
(i) a certificate in the form attached as Exhibit A, to be dated as
of the date of each such Advance and signed by the president,
vice president, or secretary of the Borrower, certifying that
the conditions specified in Sections 4.5(a) and (b) above are
true;
(ii) copies of the articles of incorporation of Borrower, together
with any amendments thereto certified to be true and complete by
Borrower and the Secretary of State of the State of Texas, a
current certificate of good standing for Borrower issued by the
Secretary of State of the State of Texas, a current certificate
of authority to conduct business issued by the secretary of
state in each state in which the Borrower conducts business, and
copies of the by-laws of Borrower certified to be true, correct
and complete by the secretary or assistant secretary of
Borrower;
(iii) except for the Resorts listed on Schedule 4.5(c)(iii) (the
"CROWN RESORTS"), a Survey for each Additional Eligible Resort
for which a mortgage lien is being granted to the Lender on
Intervals in connection with the Advance in question; and
22
24
with respect to each Crown Resort, a legible, full size copy of the
recorded plat for each such Resort;
(iv) a certificate of the secretary or assistant secretary of Borrower
certifying the adoption by the board of directors thereof,
respectively, of a resolution authorizing the addition of the
Resort in question as an Additional Eligible Resort and to
authorize Borrower to enter into, execute and deliver any Documents
in connection therewith;
(v) a certificate of the secretary or assistant secretary of Borrower
certifying the incumbency, and verifying the authenticity of the
signatures, of the specified officers of Borrower authorized to
sign all documents required in connection with such Additional
Eligible Resort as required pursuant to this Section 4.5;
(vi) an inspection report or reports covering each Additional Eligible
Resort for which a mortgage lien is being granted to the Lender on
Intervals in connection with the Advance in question, including
without limitation all real property and personal property subject
to the Declaration and all adjacent property, confirming:
(1) the absence of Hazardous Materials on the personal property
and real property comprising each such Additional Eligible
Resort;
(2) that the inspection firm has obtained, reviewed and
included within its report a CERCLIS printout from the
Environmental Protection Agency (the "EPA"), statements
from the EPA and other applicable state and local
authorities and a Phase I Environmental Audit, all of which
information shall confirm that there are no known or
suspected Hazardous Materials located at, used or stored
on, or transported to or from each such Additional Eligible
Resort or in such proximity thereto as to create a material
risk of contamination of each such Additional Eligible
Resort;
(vii) evidence that Borrower is maintaining all policies of insurance
required by and in accordance with Section 7.1(d) hereof, including
copies of the most current paid insurance premium invoices;
(viii) evidence that Borrower and the Timeshare Documents for each
Additional Eligible Resort for which a mortgage lien is being
granted to the Lender on Intervals in connection with the Advance
in question are in compliance with all applicable laws in
connection with its sales of Intervals, including without
limitation, the Timeshare Acts;
23
25
(ix) a current preliminary title report or certificate of title for each
Additional Eligible Resort for which a mortgage lien is being
granted to the Lender on Intervals in connection with the Advance in
question, with copies of all title exceptions;
(x) copies of all applicable governmental permits, approvals, consents,
licenses, and certificates for the establishment of each Additional
Eligible Resort for which a mortgage lien is being granted to the
Lender on Intervals in connection with the Advance in question as
timeshare projects in accordance with the applicable Timeshare Act,
and for the occupancy and intended use and operation of each such
Additional Eligible Resort, including the Units, including a letter
certification from Borrower regarding zoning classification and
compliance, letters or other satisfactory evidence from utility
companies, governmental entities or other persons confirming that
water, sewer (sanitary and storm), electricity, solid waste
disposal, telephone, police, fire and rescue services are being
provided to each Resort, and any business licenses necessary for
operation of each such Additional Eligible Resort;
(xi) certified true, correct and complete copies of all of the Timeshare
Documents for each Additional Eligible Resort for which a mortgage
lien is being granted to Lender on Intervals in connection with the
Advance in question;
(xii) evidence satisfactory to Lender that all taxes and assessments owed
by or for which Borrower is responsible for collection have been
paid, including but not limited to sales taxes, room occupancy
taxes, payroll taxes, personal property taxes, excise taxes,
intangibles taxes, real property taxes, and income taxes, and any
assessments related to each Additional Eligible Resort for which a
mortgage lien is being granted to Lender on Intervals in connection
with the Advance in question and copies of the most current paid tax
bills for each such Additional Eligible Resort evidencing that each
such Additional Eligible Resort have been segregated from all other
property on the applicable municipal taxrolls;
(xiii) written confirmation from an architect covering each Additional
Eligible Resort, other than a Crown Resort, for which a mortgage
lien is being granted to Lender on Intervals in connection with the
Advance in question as to the physical condition of the improvements
at each such Additional Eligible Resort, including that soil
conditions are sufficient to support all existing and any
contemplated improvements to the real property; which written
confirmation shall be in form and substance reasonably acceptable to
the Lender. Each architect rendering such written confirmation shall
be licensed as an architect in the state of Texas;
(xiv) such credit references on Borrower as Lender deems necessary in its
sole discretion;
24
26
(xv) copies or other evidence of all loans to Borrower from any
officers, shareholders, or Affiliates of Borrower, if any.
(xvi) a commitment to issue Mortgagee Title Policies from the Title
Company for each Interval constituting part of the Inventory.
Notwithstanding anything heretofore to the contrary, Lender agrees
that Borrower shall not be required to provide such a commitment or
a Mortgagee Title Insurance Policy with respect to any Crown Resort
(other than the Quail Hollow Resort), or, until such time as deeded
Intervals are permitted under local law governing the Oak N' Spruce
Resort, the Oak `N Spruce Resort in order to qualify any such
Resort as an Additional Eligible Resort, provided, however, that
under no circumstance shall the portion of Loan secured by
Intervals from the Crown Resorts (other than Quail Hollow Resort)
or Oak N' Spruce Resort exceed $1,000,000.00 in the aggregate.
Notwithstanding anything heretofore to the contrary, if any claim,
lien, encumbrance, charge or other matter arises with respect to
any Interval or Intervals which constitutes part of the Collateral
pursuant to this Agreement and for which Borrower has not provided
a Mortgagee Title Policy, then, in such event:
(a) The Interval in question shall cease to constitute Inventory
and the Borrower immediately shall either replace the Mortgage
with respect to the Interval in question with a Mortgage on an
Interval acceptable to Lender in its sole discretion or make a
Mandatory Prepayment as provided in Section 2.4(b) hereof; and
(b) The Resort at which the Interval in question is located shall
cease to be an Additional Eligible Resort, unless and until the
Borrower shall cure any such claim, lien, encumbrance, charge
or other matter to the satisfaction of the Lender. Furthermore,
any and all further requests for Advances in respect of
Intervals from the Resort in question must thereafter be
accompanied by satisfactory Mortgagee Title Policies.
(xvii) the Financial Statements.
(xviii) to the extent not previously delivered pursuant to the Additional
Credit Facility, the Existing Credit Facility or hereunder,
Borrower will execute, or cause to be executed with respect to each
Additional Eligible Resort, a Negative Pledge, Borrower's Affidavit
with Respect to the Additional Eligible Resorts and an
Environmental Indemnification Agreement, each in the form attached
hereto as Exhibit A;
25
27
(xix) with respect to any improvements, including any Units, constructed at
a Resort within the twenty-four month period prior to the approval of
any Additional Eligible Resort, Borrower shall also deliver to
Lender, for its approval, such documents and instruments as Lender
may reasonably request in connection with such newly constructed
improvements, including, without limitation, copies of building
permits, plans and specifications construction and architectural
contracts, title insurance insuring over, among other things,
mechanics liens, certificates of occupancy and satisfactory evidence
of the completion of such improvements;
(xx) such other documents, instruments, agreements, tests, reports and
inspections as the Lender may require with respect to the Borrower or
any applicable Affiliate, the Loan or any Resort, including any
Additional Eligible Resort.
(xxi) Upon request of the Lender, Borrower shall deliver to the Lender
evidence, satisfactory to the Lender, that there is no material
litigation, written complaint, suit, action, written claim or written
charge pending against the Borrower or any Affiliate with any court
or with any governmental authority with respect to the Resort, the
Timeshare Documents, any Interval, or any marketing, offer or sale of
any Interval.
(d) Physical Inspection. Lender shall be satisfied with its physical
inspection of the Additional Eligible Resorts.
(e) UCC Search. Lender shall have obtained, at Borrower's cost, such
searches of the applicable public records as it deems necessary under all
applicable law to verify that it has a first and prior perfected Lien and
security interest covering all of the Collateral. Lender shall not be obligated
to fund any Advance if Lender determines that it does not have a first and prior
perfected lien and security interest covering any portion of the Collateral.
(f) Litigation Search. Lender shall have obtained, at 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
Additional Eligible Resorts, any portion of the Collateral, Borrower, or any
Affiliate, (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 Lender determines, in its sole
discretion exercised in good faith, are immaterial due to settlement, insurance
coverage, frivolity, or amount or nature of claim. Lender shall not be obligated
to fund any Advance if it determines that any such litigation is pending.
(g) Opinions of Borrower's Counsel. Borrower shall deliver to Lender, for
the benefit of Lender, at Borrower's sole cost and expense, such opinions of
counsel, including counsel admitted in each state in which each Additional
Eligible Resort is located, as to such matters with
26
28
respect to the Borrower and each Additional Eligible Resort as Lender may
request, and in form and substance acceptable to Lender in its sole discretion.
(h) Funding Procedure. Borrower shall have complied to Lender's
satisfaction with each of the conditions precedent to funding of any Advance set
forth in Section 5 hereof.
(i) Management of Resort. Borrower shall provide evidence satisfactory to
Lender that Borrower, or an Affiliate, is the manager or operator of each
Resort, pursuant to a written management or operating agreement, in form and
substance satisfactory to Lender, which with respect to all Resorts (other than
the Crown Resorts) shall have a term which shall expire no earlier April 1,
2009. With respect to each Crown Resort only, each such Resort may qualify as an
Additional Eligible Resort (subject to satisfaction by Borrower of the
conditions set forth in this Section 4.5), so long the Borrower, or an
Affiliate, is the manager or operator of each such Resort, pursuant to a written
management or operating agreement, in form and substance satisfactory to Lender.
Borrower agrees to provide an estoppel letter, in form and substance acceptable
to Lender, from the applicable Timeshare Owner's Association.
(j) Other Items. Such other agreements, documents, instruments,
certificates and materials as Lender may request to determine the acceptability
of any such Additional Eligible Resort, to evidence the Obligations; to evidence
and perfect the rights and Liens and security interests of Lender contemplated
by the Loan Documents, and to effectuate the transactions contemplated herein,
including, without limitation, true copies of all Resort Documents for each such
Additional Eligible Resort, all Timeshare Documents and operating and management
contracts and agreements, evidence of with the applicable Timeshare Act and
other applicable laws, evidence of all required governmental licenses and
permits; title searches; title commitments or policies, including. Complete and
legible copies of each title exception, engineering, environmental and soil
reports, evidence of compliance with all applicable zoning and building codes;
each of which shall be satisfactory to Lender in its sole and absolute
discretion.
SECTION 5 -- FUNDING PROCEDURE
The obligation of Lender to make any Advance, shall be subject to the
satisfaction of all of the following conditions precedent:
(a) REQUESTS FOR ADVANCES. Each request for an Advance shall:
(i) be in writing is form attached hereto as Exhibit B and shall
certify the amount of the then-current Loan to Retail Value Ratio,
specify the principal amount of the Advance requested and designate
the account to which the proceeds of such Advance are to be
transferred;
27
29
(ii) state that the representations and warranties of the
Borrower contained in the Agreement and any closing or funding related
certifications are true and correct as of the date of the request and,
after giving effect to the making of such requested Advance, will be
true and correct as of the date on which the requested Advance is to
be made;
(iii) state that no Default or Event of Default exists as of the
date of the request and, after giving effect to the making of the
requested Advance, no Default or Event of Default would exist as of
the date on which the requested Advance is to be made;
(iv) be delivered to the office of Lender at least ten (10)
Business Days prior to the date of the requested Advance; and
(v) be signed by a principal financial officer of the Borrower.
(b) LOAN DOCUMENTS/COLLATERAL. Not less than ten (10) Business Days
prior to the date of any Advance, the Borrower shall have:
(i) delivered to Lender a list of all Intervals which are to be
the subject of such requested Advance, together with such additional
information as Lender may require;
(ii) delivered to Lender (or, if Lender shall so instruct, a
designee appointed by Lender in writing), to the extent available, (a)
the original or certified copies of any deed or beneficial interest
certificate, or other documents evidencing conveyance of the Interval
in question to the Borrower, (b) a copy of any title policy received
by the Borrower in connection with its acquisition of the Interval in
question, and (c) original or true copies of any purchase contract
(including addenda) or other agreements entered into by the Borrower
with any person with respect to the sale by the Borrower to any
Purchaser of the Interval in question;
(iii) delivered to Lender a duly executed Mortgage or Mortgages
granting to Lender a first mortgage lien on the Inventory; and
(iv) original UCC financing statements covering the Collateral,
filed with the Secretary of State of Texas and the Secretary of State
of each state in which the Collateral is located.
28
30
(v) subject to Section 4.5(c) (xvi) hereof, delivered to Lender,
with respect to each Interval constituting a part of the Inventory, a
commitment for a mortgagee's title insurance policy showing that the
Mortgage in respect of such Interval insuring in favor of Lender the
first priority Lien of such Mortgage in the amount of the Advance to
be made in respect of such Interval, with a satisfactory title
insurance policy to be issued on the date of the requested Advance.
The Mortgages to Lender shall each have been duly recorded in the
applicable land records which are described in Schedule A hereof. The
mortgagee's title insurance policies shall be in form and substance
satisfactory to Lender and shall be issued by a title insurance company
satisfactory to Lender (the "Title Company"), and name Lender as the
insured party therein. The funding of the Advance, delivery of the
Collateral and issuance of the title insurance policy, and recording of the
mortgages or any releases may, in Lender's discretion, be effected by way
of an escrow arrangement with the Title Company or other fiduciary, the
form and substance of which shall be satisfactory to Lender.
(c) OTHER CONDITIONS. In addition to the other conditions set forth in
this Agreement, the making of the initial or any subsequent Advance shall
be subject to the satisfaction of the following conditions:
(i) no Default or Event of Default shall exist immediately prior
to the making of such requested Advance or, after giving effect
thereto, immediately after the making of such requested Advance;
(ii) each agreement required to have been executed and delivered
in connection with any prior Advance shall be consistent with the
terms of this Agreement and shall be in full force and effect;
(iii) the date on which such requested Advance is to be made
shall be a Business Day;
(iv) Borrower shall have delivered to Lender a certification
showing the Retail Value of each Interval and Lender shall be
satisfied with the Retail Value of each Interval in its sole
discretion, the dollar amount of the requested Advance based on the
Retail Value of the Intervals on which the Lender is being granted a
Mortgage;
(v) Not more than one Advance shall have previously been made in
the same calendar month in which such requested Advance is to be made,
unless Lender, in its sole discretion, agrees to make an additional
Advance during such calendar month;
29
31
(vi) Such requested Advance shall be in a principal amount of not
less than $50,000.00, unless Lender, in its sole discretion, agrees to
make an Advance in an amount less than $50,000.00;
(vii) Lender shall have determined that the requested Advance
does not exceed the total amount of the Loan to Retail Value Ratio,
based on the Retail Value of the Inventory on which Lender has been
granted a first mortgage lien;
(viii) If Lender shall so require, Lender shall have received an
executed Closing Protection Letter issued by the Title Company, which
shall be reasonably acceptable to Lender.
(d) EXPENSES. The Borrower shall have paid all fees and expenses
required to be paid by pursuant to this Agreement in connection with such
requested Advance or any conditions related thereto.
(e) PROCEEDINGS SATISFACTORY. All actions taken in connection with
such requested Advance and all documents and papers relating thereto shall
be satisfactory to Lender and its counsel. Lender and its counsel shall
have received copies of such documents and papers as the Lender or such
counsel may reasonably request in connection with such requested Advance,
all in form and substance reasonably satisfactory to the Lender and its
counsel.
SECTION 6 -- GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
6.1 ORGANIZATION, STANDING, QUALIFICATION. Borrower (a) is a duly organized
and validly existing Texas corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and (b) as all requisite
power, corporate or otherwise, to conduct its business and to execute and
deliver, and to perform its obligations under, the Loan Documents.
6.2 AUTHORIZATION, ENFORCEABILITY, ETC.
(a) The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary corporate action by
Borrower and does not and will not (i) violate any provision of the
certificate or articles of incorporation of Borrower, bylaws of Borrower,
or any agreement, law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect to which Borrower is a
party or is subject; (ii) result in, or require the creation or imposition
of, any Lien upon
30
32
or with respect to any asset of Borrower other than Liens in favor of
Lender; or (iii) result in a breach of, or constitute a default by Borrower
under, any indenture, loan or credit agreement or any other agreement,
document, instrument or certificate to which Borrower is a party or by
which it or any of its assets are bound or affected.
(b) No approval, authorization, order, license, permit, franchise or
consent of, or registration, declaration, qualification or filing with, any
governmental authority or other Person, including without limitation, the
Division or the Timeshare Owners' Association is required in connection
with the execution, delivery and performance by Borrower of any of the Loan
Documents.
(c) The Loan Documents constitute legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their
respective terms.
(d) Borrower has good and marketable title to the Collateral, free and
clear of any lien, security interest, charge or encumbrance except for the
security interests created by this Agreement or any Loan Document or
otherwise created in favor of Lender or those specifically consented to in
writing by the Lender. No financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of Lender
hereunder.
(e) The execution and delivery of the Loan Documents, the filing of
the UCC-1's with the office of the secretary of state of the state in which
the applicable Resort is located and the Mortgages in the official records
of the county in which the applicable Resort is located, create in favor of
Lender a valid and perfected continuing first priority security interest in
the Collateral. The Collateral shall secure the full payment and
performance of the Obligations.
(f) The Mortgages constitute and will constitute valid and enforceable
first and prior liens and security interests on the Inventory.
(g) The Loan documents are in full force and effect, are and will be
valid and binding obligations of the respective makers in favor of Lender,
and the Borrower further warrants and guarantees the value, quantity, sound
condition, grade and quality of the Inventory and rights, properties,
easements and interests appurtenant or related thereto.
(h) Lender shall not be required to take, and the Borrower has taken
any and all required steps to protect Lender's security interest in the
Collateral (other than maintaining possession of the portion of the
Collateral constituting instruments); and Lender is not or shall not be
required to collect or realize upon the Collateral or any distribution of
interest or principal, nor shall loss of, or damage to, the Collateral
release the Borrower from any of the Obligations.
31
33
6.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION. The Financial Statements
fairly present the respective financial conditions and results of operations of
Borrower as of the date or dates thereof and for the periods covered thereby.
There were no material liabilities, direct or indirect, fixed or contingent, of
Borrower as of the dates of such Financial Statements which were not reflected
therein or in the notes thereto, which have not otherwise been disclosed to
Lender in writing. Except for any such changes heretofore expressly disclosed in
writing to Lender, there has been no material adverse change in the respective
financial conditions of Borrower from the financial conditions shown in their
respective Financial Statements, nor has Borrower incurred any material
liabilities, direct or indirect, fixed or contingent, which are not shown in its
Financial Statements. Borrower is able to pay all of its debts as they become
due and Borrower shall maintain such solvent financial condition, giving effect
to the Obligations, as long as the Borrower is obligated to Lender under the
Agreement or in any other manner whatsoever. Borrower's Obligations under this
Agreement and under the Loan Documents will not render Borrower unable to pay
its debts as they become due. The present fair market value of Borrower's assets
is greater than the amount required to pay its total liabilities.
6.4 TAXES. In accordance with the requirements set forth in the
Declaration, the Borrower represents and warrants that the Borrower or Timeshare
Owners' Association, as required, has paid or will have paid in full, prior to
delinquency, all ad valorem taxes and other taxes and assessments against the
Resort and the Collateral; and the Borrower knows of no basis for any additional
taxes or assessments against the Resort or the Collateral. The Borrower or the
Timeshare Owners' Association, as the case may be, has filed all tax returns
required to have been filed by it and has paid or will pay prior to delinquency,
all taxes shown to be due and payable on such returns, including interest and
penalties, and all other taxes which are payable by it to the extent the same
have become due and payable.
6.5 TITLE TO PROPERTIES: PRIOR LIENS. Borrower has good and marketable
title to all of the Collateral, and to all unsold Units and Intervals at each
Resort, and all rights, properties and benefits appurtenant to or benefiting
them. Borrower is not in default under any of the documents evidencing or
securing any indebtedness which is secured, wholly or in part, by any portion of
any Resort or any portion or all the Collateral and no event has occurred which
with the giving of notice, the passage of time or both, would constitute a
default under any of the documents evidencing or securing any such indebtedness.
Other than the Liens granted in favor of Lender, the Liens granted to secure the
Additional Credit Facility and the Existing Credit Facility and the Liens
described in Schedule 6.5 hereto, there are no liens or encumbrances against the
Collateral, or against any Resort.
32
34
6.6 SUBSIDIARIES, AFFILIATES AND CAPITAL STRUCTURE. Borrower has no
subsidiaries or Affiliates which have any involvement or interest in any Resort
in any way. None of the Affiliates of Borrower are parties to any proxies,
voting trusts, shareholders agreements or similar arrangements pursuant to which
voting authority, rights or discretion with respect to the Borrower is vested in
any other Person.
6.7 LITIGATION, PROCEEDINGS, ETC. There are no actions, suits, proceedings,
orders or injunctions pending or threatened against or affecting Borrower, the
Resort or the Timeshare Owners' Association at law or in equity, or before or by
any governmental authority or other tribunal, which (a) could have a material
adverse effect on Borrower or (b) relate to the Loan or which could have a
material effect on the Collateral or the Resort. Borrower has received no notice
from any court, governmental authority or other tribunal alleging that Borrower
or the Resort have violated the Timeshare Act, any of the rules or regulations
thereunder, the Declaration or any other applicable laws, agreements or
arrangements that could have any material effect on the Loan, the Collateral or
the Resorts.
6.8 LICENSES, PERMITS, ETC. The Borrower, the Resorts, the Timeshare
Owners' Associations or Borrower's Affiliates involved in the operations of the
Resorts, and, to the best of Borrower's knowledge after diligent inquiry, other
Persons involved in the operations of the Resorts, possess all requisite
franchises, certificates of convenience and necessity, operating rights,
approvals, licenses, permits, consents, authorizations, exemptions and orders as
are necessary to carry on its or their business as now being conducted, without
any known conflict with the rights of others and, with respect to the Borrower,
the Resorts and the Timeshare Owners' Associations, in each case subject to no
mortgage, pledge, Lien, lease, encumbrance, charge, security interest, title
retention agreement or option other than as provided for by this Agreement.
6.9 ENVIRONMENTAL MATTERS. Except as otherwise noted on Schedule 6.9, (a)
no Resort contains any Hazardous Materials, (b) no Hazardous Materials are used
or stored at or transported to or from the Resorts, (c) neither Borrower nor the
Resorts nor any manager thereof or to Borrower's knowledge, the Timeshare
Owners' Associations, have received notice from any governmental agency, entity
or other Person with regard to Hazardous Materials on, under or affecting any
Resort, and (d) neither Borrower nor the Resorts, nor any portion thereof, nor
to Borrower's knowledge after diligent inquiry, the Timeshare Owners'
Associations, are in violation of any Environmental Laws.
6.10 FULL DISCLOSURE. No information, exhibit or written report or the
content of any schedule furnished by or on behalf of Borrower to Lender in
connection with the Loan or the Resorts 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. Borrower knows of no fact or
condition which will prevent the sale of Intervals to Purchasers or prevent the
operation of
33
35
the Resorts in accordance with the Declarations and related public offering
statements, and in accordance with applicable law, or prevent Borrower's
performing its Obligations pursuant to the Loan Documents.
6.11 USE OF PROCEEDS/MARGIN STOCK. None of the proceeds of the Loan will be
used to purchase or carry any "margin stock" (as defined under Regulation U of
the Board of Governors of the Federal Reserve System, as in effect from time to
time), and no portion of the proceeds of the Loan will be extended to others for
the purpose of purchasing or carrying margin stock. None of the transactions
contemplated in the Agreement (including, without limitation, the use of the
proceeds from the Loan) will violate or result in the violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11.
6.12 NO DEFAULTS. No Default or Event of Default exists, and there is no
violation in any material respect of any term of any agreement, charter
instrument, bylaw or other instrument to which the Borrower is a party or by
which it may be bound.
6.13 COMPLIANCE WITH LAW. The Borrower
(a) is not in violation, nor are any of its Resorts, or the business
operations in respect of any of the Resorts, or to the Borrower's knowledge
after diligent inquiry, the Timeshare Owners' Association, in violation, of
the Timeshare Act, or any laws, ordinances, governmental rules or
regulations of any state in which a Resort is located, any political
subdivision of said states or any other jurisdiction to which the Borrower
or the Resorts, or the business operations conducted in respect of the
Resorts, or the Timeshare Owners' Association, are subject; and
(b) has not failed, nor have the Resorts or, to Borrower's knowledge,
the Timeshare Owners' Associations failed, to obtain any consents or
joinders, or any approvals, licenses, permits, franchises or other
governmental authorizations, or to make or cause to be made any filings,
submissions, registrations or declarations with any government or agency or
department thereof, necessary to the establishment, ownership or operation
of the Resorts or any of Borrower's Properties, or to the conduct of
Borrower's business, including, without limitation, the operation of the
Resorts and the sale, or offering for sale, of Intervals therein; which
violation or failure to obtain or register materially adversely affects the
Borrower, the Resorts or the business, prospects, profits, properties or
condition (financial or otherwise) of the Borrower or the Resorts. The
Borrower has, to the extent required by its activities and businesses, and
the operations of the Resorts, fully complied with (1) all of the
applicable provisions of (a) the Consumer Credit Protection Act; (b)
Regulation Z of the Federal
34
36
Reserve Board; (c) the Equal Credit Opportunity Act; (d) Regulation B of
the Federal Reserve Board; (e) the Federal Trade Commission's 3-day
cooling-off Rule for Door-to-Door Sales; (f) Section 5 of the Federal Trade
Commission Act; (g) the Interstate Land Sales Full Disclosure Act ("ILSA");
(h) federal postal laws; (i) applicable state and federal securities laws;
(j) applicable usury laws; (k) applicable trade practices, home and
telephone solicitation, sweepstakes, anti-lottery and consumer credit and
protection laws; (l) applicable real estate sales licensing, disclosure,
reporting and escrow laws; (m) the Americans With Disabilities Act and
related accessibility guidelines ("ADA"); (n) the Real Estate Settlement
Procedures Act ("RESPA"); (o) all amendments to and rules and regulations
promulgated under the foregoing acts or laws; and (p) other applicable
federal statutes and the rules and regulations promulgated thereunder; and
(2) all of the applicable provisions of the Timeshare Acts, any law or laws
of any state (and the rules and regulations promulgated thereunder)
relating to ownership, establishment or operation of the Resort, or the
sale, offering for sale, or financing of Intervals.
6.14 RESTRICTIONS OF BORROWER. Neither the Borrower nor any Resort, nor to
the Borrower's knowledge, any Timeshare Owners' Association, is a party to any
contract or agreement, or subject to any Lien, charge or corporate restriction,
which materially and adversely affects its or their business. The Borrower will
not be, on or after the Closing Date, a party to any contract or agreement which
restricts its right or ability to incur indebtedness, or prohibits the
Borrower's execution of, or compliance with the terms of this Agreement or the
other Loan Documents. The Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
the Collateral, whether now owned or hereafter acquired, to be subject to a Lien
except in favor of Lender as provided hereunder.
6.15 BROKER'S FEES. Borrower and Lender represent to each other that
neither of them has made any commitment or taken any action which will result in
a claim for any brokers', finders' or other similar fees or commitments with
respect to the transactions described in the Agreement. The Borrower agrees to
indemnify Lender and save and hold Lender harmless from all claims of any Person
for any broker's or finder's fee or commission, and this indemnity shall include
reasonable attorneys' fees and legal expenses.
6.16 DEFERRED COMPENSATION PLANS. The Borrower has no pension, profit
sharing or other compensatory or similar plan (herein called a "Plan") providing
for a program of deferred compensation for any employee or officer. No fact or
situation, including but not limited to, any "Reportable Event," as that term is
defined in Section 4043 of the Employee Retirement Income Security Act of 1974
as the same may be amended from time to time ("Pension Reform Act"), exists or
will exist in connection with any Plan of the Borrower which might constitute
grounds for termination of any Plan by the Pension Benefit Guaranty Corporation
or cause the appointment by the appropriate United States District Court of a
Trustee to administer any such Plan. No
35
37
"Prohibited Transaction" within the meaning of Section 406 of the Pension Reform
Act exists or will exist upon the execution and delivery of the Agreement or the
performance by the parties hereto of their respective duties and obligations
hereunder. The Borrower will (1) at all times make prompt payment of
contributions required to meet the minimum funding standards set forth in
Sections 302 through 305 of the Pension Reform Act with respect to each of its
Plans; (2) promptly, after the filing thereof, furnish to the Lender copies of
each annual report required to be filed pursuant to Section 103 of the Pension
Reform Act in connection with each Plan for each Plan Year, including any
certified financial statements or actuarial statements required pursuant to said
Section 103; (3) notify the Lender immediately of any fact, including, but not
limited to, any Reportable Event arising in connection with any Plan which might
constitute grounds for termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a Trustee to administer the Plan; and (4) notify the Lender of any
"Prohibited Transaction" as that term is defined in Section 406 of the Pension
Reform Act. The Borrower will not (a) engage in any Prohibited Transaction or
(b) terminate any such Plan in a manner which could result in the imposition of
a Lien on the Property of the Borrower pursuant to Section 4068 of the Pension
Reform Act.
6.17 LABOR RELATIONS. The employees of the Borrower are not a party to any
collective bargaining agreement with the Borrower, and, to the best knowledge of
the Borrower and its officers, there are no material grievances, disputes or
controversies with any union or any other organization of the Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
6.18 RESORT.
(a) TIMESHARE PLAN. Each Resort has been established and dedicated,
and is and will remain, a time-share plan and project in full compliance
with all applicable laws and regulations, including without limitation, the
Timeshare Act.
(b) ACCESS. Each Resort has direct access to a publicly dedicated road
and all roadways inside each Resort are subject to an access and use
easement or other dedication or provision that benefits and will continue
to benefit all Purchasers.
(c) UTILITIES. Electric, sanitary and stormwater sewer, telephone,
water facilities and other necessary utilities are available in sufficient
capacity to service each Resort and any easements necessary to the
furnishing of such utility services have been obtained and duly recorded,
and inure to the benefit of each Resort and each Timeshare Owners'
Association.
36
38
(d) AMENITIES. Each Purchaser of an Interval has and will have access
to and the full use and enjoyment of all of the Common Elements and public
utilities of the Resort in which such interval is located, all in
accordance with the Declaration and Timeshare Documents.
(e) CONSTRUCTION. All costs arising from the construction or
acquisition of any Units and any other improvements and the purchase of any
fixtures or equipment, inventory, furnishings or other personalty located
in, at, or on the Resorts have been paid or will be paid when due.
(f) SALE OF INTERVALS. The marketing, sale, offering of sale, rental,
solicitation of Purchasers or, if applicable, lessees, and financing of
Intervals in the Resort (1) do not constitute the sale, or the offering of
sale, of Securities subject to the registration requirements of the
Securities Act of 1933, as amended, or any state securities law; (2) do not
violate the Timeshare Act or any land sales or consumer protection law,
statute or regulation of state or any other state or jurisdiction in which
a Purchaser resides or in which sales or solicitation activities occur; and
(3) do not violate any consumer credit or usury statute of state or any
other state or jurisdiction in which a Purchaser resides or in which sales
or solicitation activities occur. All marketing and sales activities are
performed by employees of Borrower, all of whom are and shall be properly
licensed in accordance with applicable laws.
(g) TANGIBLE PROPERTY. Except for specific items which may be owned by
independent contractors, the machinery, equipment, fixtures, tools and
supplies used in connection with the Resort, including without limitation,
with respect to the operations and maintenance of the Common Elements, are
owned either by the Borrower or the applicable Timeshare Owners'
Association.
(h) OPERATING CONTRACTS. The Borrower has entered into the contracts,
agreements, and arrangements necessary, in Lender's reasonable judgement,
for the operation of the Resorts, including but not limited to those with
respect to utilities, maintenance, management, services, marketing and
sales (hereinbelow defined as "Operating Contracts").
6.19 TIMESHARE REGIMEN REPORTS. The Borrower has furnished to the Lender
true and correct copies of the Timeshare Documents listed on SCHEDULE 6.19,
which consist of all those placed on file by the Borrower with the Divisions or
any federal, state or local regulatory or recording agencies, offices or
departments. All such filings and/or recordations, and all joinders and consents
necessary in order to establish the plan in respect of the Resorts, including
without limitation, the Units, Intervals, and all appurtenant Common Elements,
and all related use and access rights, have been done or obtained and all laws,
regulations and statutes, and all agreements or arrangements, in connection
therewith have been complied with.
37
39
6.20 OPERATING CONTRACTS. The contracts, agreements and arrangements
necessary, in Lender's reasonable judgement, to the operation of the Resorts,
including without limitation, with respect to utilities, maintenance,
management, services, marketing and sales under which the fees to be paid equal
or exceed $50,000.00 (collectively, all such agreements and arrangements
referred to herein as the "Operating Contracts") are unmodified and in full
force and effect and shall remain free and clear of any Lien.
6.21 ARCHITECTURAL AND ENVIRONMENTAL CONTROL. All Units, Common Elements
and other improvements at, upon or appurtenant to the Resort are and will be in
compliance with the design, use, architectural and environmental control
provisions, if any, set forth in the Declaration.
6.22 TAX IDENTIFICATION/SOCIAL SECURITY NUMBERS. The Borrower's federal
taxpayer's identification number is: 75-2259890.
6.23 INVENTORY CONTROL PROCEDURES. Borrower has provided to Lender a true
and complete copy of the Borrower's Inventory, Sales and Assignments procedures
(the "Inventory Control Procedures"), a copy of which is attached hereto as
Schedule 6.23.
SECTION 7 -- COVENANTS
7.1 AFFIRMATIVE COVENANTS. So long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) PAYMENT AND PERFORMANCE OF OBLIGATIONS. Borrower shall pay all of
the Loan and related expenses when and as the same become due and payable,
and Borrower shall strictly observe and perform all of the Obligations,
including without limitation, all covenants, agreements, terms, conditions
and limitations contained in the Loan Documents, and will do all things
necessary which are not prohibited by law to prevent the occurrence of any
Event of Default hereunder; and the Borrower will maintain an office or
agency in the State of Texas where notices, presentations and demands in
respect of the Loan Documents may be made upon the Borrower. Such office or
agency and the books and records of the Borrower shall be maintained at
1221 Riverbend Drive, Suite 120, Dallas, Texas 75221 until such time as the
Borrower shall so notify the Lender, in writing, of any change of location
of such office or agency.
(b) MAINTENANCE OF EXISTENCE, QUALIFICATION AND ASSETS. Borrower shall
at all times (i) maintain its legal existence, (ii) maintain its
qualification to transact business and good standing in any state and in
any jurisdiction where it conducts business in
38
40
connection with the Resort, and (iii) comply or cause compliance with all
governmental laws, rules, regulations and ordinances applicable to the
Resort, the Borrower or its business, including, without limitation, the
Timeshare Act.
(c) CONSOLIDATION AND MERGER. Borrower will not consolidate with or
merge into any other Person or permit any other Person to consolidate with
or merge into it, unless: (i) Borrower is the continuing or surviving
corporation in any such consolidation or merger and (ii) prior to and
immediately after such consolidation or merger, Borrower shall not be in
default hereunder.
(d) MAINTENANCE OF INSURANCE. The Borrower, or if required pursuant to
the Declaration, the Timeshare Owners' Association, shall maintain (or the
Borrower shall cause to be maintained) at all times during the term of this
Agreement, policies of insurance with premiums being paid when due, and
shall deliver to Lender originals of insurance policies issued by insurance
companies, in amounts, in form and in substance, and with expiration dates,
all acceptable to Lender and containing a waiver of subrogation rights by
the insuring company, a non-contributory standard mortgage benefit clause,
or their equivalents, and a mortgagee loss payable endorsement in favor of
and satisfactory to Lender on behalf of Lender, and breach of warranty
coverage, providing the following types of insurance on and with respect to
the Borrower (or, as appropriate, the respective Associations) and the
Resort:
(i) Fire and extended coverage insurance (including lightning,
hurricane, tornado, wind and water damage, vandalism and malicious
mischief coverage) covering the improvements at the Resort and any
personal property located in or on the Resort, in an amount not less
than the full replacement value of such improvements and personal
property, and said policy of insurance shall provide for a deductible
acceptable to Lender, breach of warranty coverage, replacement cost
endorsements satisfactory to Lender, and shall not permit
co-insurance;
(ii) Public liability and property damage insurance covering the
Resort in amounts and on terms satisfactory to Lender; and
(iii) Such other insurance on the Resort or any replacements or
substitutions therefor including, without limitation, flood insurance
(if the Property is or becomes located in an area which is considered
a flood risk by the U.S. Emergency Management Agency or pursuant to
the National Flood Insurance program), in such amounts and upon terms
as may from time to time be reasonably required by Lender.
39
41
To the extent any other lender has any rights to approve the form of
insurance policies with respect to the Resort, the amounts of coverage
thereunder, the insurers under such policies, or the designation of an
attorney-in-fact for purposes of dealing with damage to any part of the
Resort or insurance claims or matters related thereto, or any successor to
such attorney-in-fact, or any changes with respect to any of the foregoing,
Borrower shall take all steps as may be necessary (and, after turnover, if
any, of control of the Resort to the Timeshare Owners' Association,
Borrower shall use its best efforts) to ensure that Lender, shall at all
times have a co-equal right, with such other lender (including, without
limitation, Borrower or any third-party lender), to approve all such
matters and any proposed changes in respect thereof; and Borrower shall not
cause or permit any changes with respect to any insurance policies,
insurers, coverage, attorney-in-fact, or insurance trustee, if any, without
Lender's prior written approval.
In the event of any insured loss or claim in respect of the Resort,
Borrower shall apply (or cause to be applied), and Borrower covenants that
the Timeshare Owners' Association shall apply (or cause to be applied), all
proceeds of such insurance policies in a manner consistent with the
Timeshare Documents and the Timeshare Act.
All insurance policies required pursuant to this Agreement (or the
Timeshare Documents or Timeshare Act) shall provide that the coverage
afforded thereby shall not expire or be amended, canceled, modified or
terminated without at least thirty (30) days prior written notice to
Lender. At least thirty (30) days prior to the expiration date of each
policy maintained pursuant to this Section 7.1(d), a renewal or replacement
thereof satisfactory to Lender shall be delivered to Lender. Borrower shall
deliver or cause to be delivered to Lender receipts evidencing the payment
for all such insurance policies and renewals or replacements.
In the event of any fire or other casualty to or with respect to the
improvements on or at the Resort, Borrower covenants that Borrower or the
Timeshare Owners' Association, as the case may be, will promptly restore or
repair (or cause to be restored, repaired or replaced) the damaged
improvements and 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 the Resort, in
accordance with the terms of the Timeshare Documents or Timeshare Act. The
insufficiency of any net insurance proceeds shall in no way relieve the
Borrower or, as applicable, Borrower and Timeshare Owners' Association, of
its obligation to restore, repair or replace such improvements and other
personal property in accordance with the terms hereof, of the Declaration
or other Timeshare Documents or of the Timeshare Act, and Borrower
covenants that Borrower or, as the case may be, the Timeshare Owners'
Association, shall promptly comply and cause compliance with the provisions
of the Declaration and other
40
42
Timeshare Documents, or of the Timeshare Act relating to such restoration,
repair or replacement. In Lender's sole discretion, all insurance proceeds
payable to or received by Lender pursuant to the Declaration or the
applicable policies may be applied to the payment of the Obligations,
whether or not due and in whatever order Lender elects.
(e) MAINTENANCE OF SECURITY. Borrower shall execute and deliver (or
cause to be executed and delivered) to Lender all security agreements,
financing statements, assignments and such other agreements, documents,
instruments and certificates, and supplements and amendments thereto, and
take such other actions, as Lender deems necessary or appropriate in order
to maintain as valid, enforceable and perfected first priority liens and
security interests, all Liens and security interests in the Collateral
granted to Lender to secure the Obligations. The Borrower shall not grant
extensions of time for the payment of, compromise for less than the full
face value or release in whole or in part, any Purchaser or other Person
liable for the payment of, or allow any credit whatsoever except for the
amount of cash to be paid upon, any Collateral or any instrument, chattel
paper or document representing the Collateral.
(f) PAYMENT OF TAXES AND CLAIMS. Borrower will pay, and, as applicable
pursuant to the Declaration, Borrower covenants that the Timeshare Owners'
Association will pay, when due, all taxes imposed upon the Resort, the
Collateral, the Borrower, the Timeshare Owners' Association, or any of its
or their property, or with respect to any of its or their franchises,
businesses, income or profits, or with respect to the Loan or any of the
Loan Documents; and Borrower and the Timeshare Owners' Association, as the
case may be, shall pay all other charges and assessments against Borrower,
the Collateral and the Resort before any claim (including, without
limitation, claims for labor, services, materials and supplies) arises for
sums which have become due and payable. Except for the Liens in connection
with the Existing Credit Facility and the Additional Credit Facility and
the Liens in favor of Lender granted pursuant to the Loan Documents, and
except as otherwise specifically provided for herein, Borrower covenants
that no statutory or other Liens whatsoever (including, without limitation,
mechanics', materialmens', judgment or tax liens) shall attach to any of
the Collateral or the Resort except for such Liens as are expressly
provided for pursuant to the Declaration, which shall, in any event, be
subordinate to the Lien of Lender. In the event any such Lien attaches to
any of the Collateral or the Resort Borrower shall, within thirty (30) days
after any such Lien attaches, either (i) cause such Lien to be released of
record or (ii) provide Lender with a bond in accordance with the applicable
laws of the State, issued by a corporate surety acceptable to Lender, in an
amount and form acceptable to Lender.
(g) INSPECTIONS. Borrower shall, at any time and from time to time and
at the expense of Borrower, permit Lender or its agents or representatives
to inspect the Resort, the Collateral and if necessary, in Lender's
opinion, to ascertain or assure Borrower's
41
43
compliance with the terms of this Agreement, any of the Borrower's other
assets or Property, and to examine and make copies of and abstracts from
its and, to the extent it has access thereto or possession thereof, the
Timeshare Owners' Association's, books, accounts, records, original
correspondence, computer tapes, disks, software, and other papers as it may
desire; and to discuss its affairs, finances and accounts with any of its
officers, employees, Affiliates, contractors or independent public
accountants (and by this provision Borrower authorizes said accountants to
discuss with Lender, its agents or representatives, the affairs, finances
and accounts of Borrower). Lender agrees to use reasonable efforts not to
unreasonably interfere with Borrower's business operations in connection
with any such inspections.
(h) REPORTING REQUIREMENTS. So long as any portion of the Obligations
remain unsatisfied, Borrower shall furnish (or cause to be furnished, as
the case may be) to Lender the following:
(i) SALES REPORTS. Borrower shall deliver to Lender monthly,
quarterly and annually, a sales report, detailing the sales of all
Intervals at the Resorts for the period covered thereby, certified by
Borrower to be true, correct and complete and otherwise in a form
approved by Lender;
(ii) FINANCIAL REPORTS. Borrower shall deliver to Lender each of
the monthly, quarterly and annual financial reports, together with
audit reports and officer's certificates, as required under Section
7.1(h) of the loan agreements evidencing and securing the Additional
Credit Facility and the Existing Credit Facility. This requirement
shall survive the payment in full by the Borrower of any obligations
due or owing under either the Additional Credit Facility or the
Existing Credit Facility or the assignment by Lender of its rights
under the Additional Credit Facility or the Existing Credit Facility.
(iii) NOTICE OF DEFAULT OR EVENT OF DEFAULT. Immediately upon
becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Borrower is taking or proposes to take with respect thereto;
(iv) NOTICE OF CLAIMED DEFAULT. Immediately upon becoming aware
that the holder of any material obligation or of any evidence of
material indebtedness of the Borrower has given notice or taken any
other action with respect to a claimed default or event of default
thereunder, a written notice specifying the notice given or action
taken by such holder and the nature of the claimed default or event of
default and what action the Borrower is taking or proposes to take
with respect thereto;
42
44
(v) MAINTENANCE OF INVENTORY CONTROL. Borrower shall maintain and
at all times fully comply with the Inventory Control Procedures from
the date hereof until the Loan is repaid in full. Borrower shall
permit Lender, its officers, employees, auditors, and other agents or
designees to review the books and records of Borrower and make such
other examinations and inspections as Lender in its sole discretion
deems necessary to determine that Borrower is in full compliance with
such Inventory Control Procedures.
(vi) MATERIAL ADVERSE DEVELOPMENTS. Immediately upon becoming
aware of any claim, action, proceeding, development or other
information which may materially and adversely affect the Borrower,
the Collateral, the Resort, or the business, prospects, profits or
condition (financial or otherwise) of the Borrower or the ability of
the Borrower to perform its Obligations under the Agreement, Borrower
shall provide Lender with telephonic or telegraphic notice, followed
by telefaxed and mailed written confirmation, specifying the nature of
such development or information and such anticipated effect.
(i) RECORDS. Borrower shall keep adequate records and books of account
reflecting all financial transactions of Borrower and with respect to the
Resort in which complete entries will be made in accordance with GAAP. In
addition, Borrower shall keep, and shall promptly deliver to Lender upon
Lender's request therefore, complete, timely and accurate records of all
sales of Intervals.
(j) MANAGEMENT. Borrower shall: (i) remain engaged in the active
management of the Resorts, (ii) unless Borrower notifies Lender in writing
at least thirty (30) days in advance of its new location, it will retain
its executive offices at 1221 Riverbend Drive, Suite 120, Dallas, Texas
75221, and (iii) will continue to perform duties substantially similar to
those presently performed as provided in the Management Agreement relating
to each Resort.
(k) FICA. Borrower shall furnish to Lender within thirty (30) days
after the expiration of each calendar quarter proof reasonably satisfactory
to Lender that Borrower's obligations to make deposits for F.I.C.A., social
security and withholding taxes have been satisfied.
(l) OPERATING CONTRACTS. Subject to the rights of the Timeshare
Owners' Association as set forth in the Timeshare Documents, no Operating
Contract shall be modified, extended, terminated or entered into, without
the prior written approval of
43
45
Lender, if any such modification, extension, termination or new agreement
could have an adverse impact on the operation of the Resort or the
Collateral.
(m) NOTICES. Borrower shall notify Lender within five (5) Business
Days of the occurrence of any event (i) as a result of which any
representation or warranty of Borrower contained in any Loan Documents
would be incorrect or materially misleading if made at that time, or (ii)
as a result of which Borrower is not in full compliance with all of its
covenants and agreements contained in this Agreement or any Loan Document,
or (iii) which constitutes or, with the passage of time, notice or a
determination by Lender would constitute, an Event of Default.
(n) MAINTENANCE. Borrower shall maintain, or shall cause to be
maintained, or to the extent provided for pursuant to the Declaration,
shall use its best efforts to cause the Timeshare Owners' Association to
maintain, the Resort in good repair, working order and condition and shall
make all necessary replacements and improvements to the Resort so that the
value and operating efficiency of the Resort will be maintained at all
times and so that the Resort remains in compliance in all respects with the
Timeshare Act, the Timeshare Documents and other applicable law.
(o) CLAIMS. Borrower shall promptly notify Lender of any claim, action
or proceeding affecting the Resort or Collateral, or any part thereof, or
Lender, or any of the security interests or rights granted in favor of
Lender hereunder or under any of the Loan Documents. At the request of
Lender, Borrower shall appear in and defend in favor of Lender, at
Borrower's sole expense, with regard to any such claim, action or
proceeding.
(p) REGISTRATION AND REGULATIONS.
(i) LOCAL LEGAL COMPLIANCE. The Borrower will comply, and will
cause the Resort to comply, with all applicable servitudes,
restrictive covenants, applicable planning, zoning or land use
ordinances and building codes, all applicable health and Environmental
Laws and regulations, and all other applicable laws, rules,
regulations, agreements or arrangements.
(ii) REGISTRATION COMPLIANCE. The Borrower will maintain, or
cause to be maintained, all necessary registrations, current filings,
consents, franchises, approvals, and exemption certificates, and the
Borrower will make or pay, or cause to be made or paid, all
registrations, declarations or fees with the Division and any other
government or any agency or department thereof, whether in the state
or another jurisdiction, required in connection with the Resort and
the occupancy, use and operation thereof, the incorporation of Units
into the time-share plan established
44
46
pursuant to the Declaration and the other Timeshare Documents, and the
sale, advertising, marketing, and offering for sale of Intervals. All
such registrations, filings and reports will be truthfully completed;
and true and complete copies of such registrations, applications,
consents, licenses, permits, franchises, approvals, exemption
certificates, filings and reports will be delivered to the Lender.
Borrower shall advise Lender of any changes with respect to its
marketing or sales programs in any jurisdiction, including
jurisdictions other than the state, and at Lender's request from time
to time, Borrower shall deliver to Lender: (A) written statements by
the applicable state authorities, in form acceptable to Lender,
stating that no registration is necessary for the sale of Intervals in
the particular state, (B) an opinion of counsel in form acceptable to
Lender and rendered by counsel acceptable to Lender, stating that no
such registration is necessary, or (C) such other evidence of
compliance with applicable laws as Lender may require; and
(iii) OTHER COMPLIANCE. The Borrower has, in all material
respects, complied with and will comply with all laws and regulations
of the United States, the State of Texas, the each state in which an
applicable Resort is located, any political subdivision of either such
state and any other governmental, quasi-governmental or administrative
jurisdiction in which Intervals have been sold or offered for sale, or
in which sales, offers of sale or solicitations with respect to the
Resort have been or will be conducted, including to the extent
applicable, but not limited to: (1) the Timeshare Act; (2) the
Consumer Credit Protection Act; (3) Regulation Z of the Federal
Reserve Board; (4) the Equal Credit Opportunity Act; (5) Regulation B
of the Federal Reserve Board; (6) the Federal Trade Commission's 3-day
cooling-off Rule for Door-to-Door Sales; (7) Section 5 of the Federal
Trade Commission Act; (8) ILSA; (9) federal postal laws; (10)
applicable state and federal securities laws; (11) applicable usury
laws; (12) applicable trade practices, home and telephone
solicitation, sweepstakes, anti-lottery and consumer credit and
protection laws; (13) applicable real estate sales licensing,
disclosure, reporting and escrow laws; (14) the ADA; (15) RESPA; (16)
all amendments to and rules and regulations promulgated under the
foregoing acts or laws; and (17) other applicable federal statutes and
the rules and regulations promulgated thereunder; and (18) any state
law or law of any state (and the rules and regulations promulgated
thereunder) relating to ownership, establishment or operation of the
Resort, or the sale, offering for sale, or financing of Intervals.
(r) OTHER DOCUMENTS. The Borrower will maintain to the satisfaction of
the Lender, and make available to Lender, accurate and complete files
relating to the Resort, the Pledged Notes Receivable and other Collateral,
and such files will contain true copies of each Pledged Note Receivable, as
amended from time to time, copies of all relevant credit
45
47
memoranda relating to such Notes Receivable and all collection information
and correspondence relating thereto.
(s) FURTHER ASSURANCES. Borrower will execute and deliver, or cause to
be executed and delivered, such other and further agreements, documents,
instruments, certificates and assurances as, in the judgment of Lender
exercised in good faith may be necessary or appropriate to more effectively
evidence or secure, and to ensure the performance of, the Obligations. In
addition, Borrower shall deliver to Lender from time to time upon each
request by Lender such documents, instruments or other matters or items as
Lender may require to evidence Borrower's compliance with the covenants set
forth in this Section 7.1.
(t) UTILITIES. The Borrower will cause, or to the extent provided for
pursuant to the Declaration, covenants to use its best efforts to ensure
that the Timeshare Owners' Association, or the manager of the Resort, as
applicable, will cause, electric, sanitary and stormwater sewer, water
facilities, drainage facilities, solid waste disposal, telephone and other
necessary utilities to be available to the Resort in sufficient capacity to
service the Resort.
(u) AMENITIES. The Borrower will cause, or to the extent provided for
pursuant to the Declarations, will use its best efforts to ensure that the
Timeshare Owners' Association, or the manager of the Resort, as applicable,
will cause, the Resort to be maintained in good condition and repair, and
in accordance with the provisions of the applicable Timeshare Documents,
and the Borrower will cause each Purchaser of an Interval at the Resort to
have continuing access to, and the use of, to the extent of such
Purchaser's time-share periods, all of the Common Elements and related or
appurtenant services, rights and benefits, all as provided in the
Declaration and the Timeshare Documents.
(v) EXPENSES AND CLOSING FEES. Whether or not the transactions
contemplated hereunder are completed, the Borrower shall pay all expenses
of the Lender relating to negotiating, preparing, documenting, closing and
enforcing this Agreement, including, but not limited to:
(i) the cost of preparing, reproducing and binding this
Agreement, the other Loan Documents and all Exhibits and Schedules
thereto;
(ii) the fees and disbursements of Lender's counsel;
(iii) Lender's out-of-pocket expenses;
46
48
(iv) all fees and expenses (including fees and expenses of the
Lender's counsel) relating to any amendments, waivers, consents or
subsequent closings pursuant to the provisions hereof;
(v) all costs, outlays, legal fees and expenses of every kind and
character had or incurred in (1) the interpretation or enforcement of
any of the provisions of, or the creation, preservation or exercise of
rights and remedies under, any of the Loan Documents including the
costs of appeal (2) the preparation for, negotiations regarding,
consultations concerning, or the defense or prosecution of legal
proceedings involving any claim or claims made or threatened against
the Lender arising out of this transaction or the protection of the
Collateral securing the Loan or Advances made hereunder, expressly
including, without limitation, the defense by Lender of any legal
proceedings instituted or threatened by any Person to seek to recover
or set aside any payment or setoff theretofore received or applied by
the Lender with respect to the Obligations, and any and all appeals
thereof; and (3) the advancement of any expenses provided for under
any of the Loan Documents;
(vi) all expenses relating to the maintenance and administration
of any other escrow agent;
(vii) all costs and expenses incurred by Lender under the Note,
and all late charges under the Note; and
(viii) all real and personal property taxes and assessments,
documentary stamp and intangible taxes, sales taxes, recording fees,
title insurance premiums and other title charges, document copying,
transmittal and binding costs, appraisal fees, lien and judgment
search costs, fees of architects, engineers, environmental
consultants, surveyors and any special consultants, construction
inspection fees, brokers fees, escrow fees, wire transfer fees, and
all travel and out-of-pocket expenses of Lender to conduct inspections
or audits; Without limitation of the foregoing, Borrower shall pay the
costs of UCC and other searches, UCC and other Loan Document recording
fees and applicable taxes, and premiums on each Mortgagee Policy of
Title Insurance delivered to Lender pursuant to this Agreement.
(w) INDEMNIFICATION OF LENDER. In addition to (and not in lieu of) any
other provisions of any Loan Document providing for indemnification in
favor of the Lender, the Borrower shall defend, indemnify and hold harmless
Lender, its subsidiaries, affiliates, officers, directors, agents,
employees, representatives, consultants, contractors, servants, and
attorneys, as well as the respective heirs, personal representatives,
successors or assigns of any or all of them (hereafter collectively the
"Indemnified Lender Parties"), from and
47
49
against, and promptly pay on demand or reimburse each of them with respect
to, any and all liabilities, claims, demands, losses, damages, costs and
expenses (including without limitation, reasonable attorneys' and
paralegals' fees and costs), actions or causes of action of any and every
kind or nature whatsoever asserted against or incurred by any of them by
reason of or arising out of or in any way related or attributable to (i)
this Agreement, the Loan Documents, the Loan or the Collateral; (ii) the
transactions contemplated under any of the Loan Documents or any of the
Timeshare Documents, including without limitation, those in any way
relating to or arising out of the violation of any federal or state laws,
including the Timeshare Act; (iii) any breach of any covenant or agreement
or the incorrectness or inaccuracy of any representation and warranty of
the Borrower contained in this Agreement or any of the Loan Documents
(including without limitation any certification of the Borrower delivered
to a Lender; (iv) any and all taxes, including real estate, personal
property, sales, mortgage, excise, intangible or transfer taxes, and any
and all fees or charges, including, without limitation under the Timeshare
Act, which may at any time arise or become due prior to the payment,
performance and discharge in full of the Obligations; (v) the breach of any
representation or warranty as set forth herein regarding any Environmental
Laws; (vi) the failure of Borrower to perform any obligation or covenant
herein required to be performed pursuant to any Environmental Laws; (vii)
the use, generation, storage, release, threatened release, discharge,
disposal or presence on, under or about the Resort of any Hazardous
Materials; (viii) the removal or remediation of any Hazardous Materials
from the Resort required to be performed pursuant to any Environmental Laws
or as a result of recommendations of any environmental consultant or as
required by Lender; (ix) claims asserted by any Person (including without
limitation any governmental or quasi-governmental agency, commission,
department, instrumentality or body, court, arbitrator or administrative
board (collectively, a "Governmental Agency"), in connection with or any in
any way arising out of the presence, use, storage, disposal, generation,
transportation, release, or treatment of any Hazardous Materials on, in,
under or affecting the Resort; (x) the violation or claimed violation of
any Environmental Laws in regard to the Resort; or (xi) the preparation of
an environmental audit or report on the Resort, whether conducted by
Lender, Borrower or a third-party, or the implementation of environmental
audit recommendations. Such indemnification shall not give Borrower any
right to participate in the selection of counsel for Lender or the conduct
or settlement of any dispute or proceeding for which indemnification may be
claimed. Lender agrees to give Borrower written notice of the assertion of
any claim or the commencement of any action or lawsuit described in this
Section. It is the express intention of the parties hereto that the
indemnity provided for in this Section, as well as the disclaimers of
liability referred to in this Agreement, are intended to and shall protect
and indemnify Lender from the consequences of Lender's own negligence,
whether or not that negligence is the sole or concurring cause of any
liability, obligation. loss, damage, penalty, action, judgment, suit,
claim, cost, expense or disbursement provided, however, that Borrower shall
not be
48
50
required to protect and indemnify Lender from the consequences of Lender's
gross negligence, where that gross negligence is the sole cause of the
liability, obligation, loss, damage, penalty, action, judgment, suit,
claim, cost, expense or disbursement for which indemnification or
protection would otherwise be required. The provisions of this Section
shall survive the full payment, performance and discharge of the
Obligations and the termination of this Agreement, and shall continue
thereafter in full force and effect.
7.2 NEGATIVE COVENANTS. So long as any portion of the Obligations remain
unsatisfied, Borrower hereby covenants and agrees with Lender as follows:
(a) LIMITATION ON OTHER DEBT/FURTHER ENCUMBRANCES. Without the prior
written consent of Lender which may be granted, withheld or conditioned in
Lender's sole discretion, Borrower will not obtain financing or grant liens
with respect to the Collateral. Provided that such financing is in the
ordinary course of Borrower's business, Borrower may, however, obtain arms
length financing in a manner consistent with Lender's rights under this
Agreement with respect to any Units or Intervals, the Resorts or any
Properties used in connection with the Resorts (whether now existing or
created hereafter) other than those included among the Collateral.
(b) RESTRICTIONS ON TRANSFERS. Except as hereinafter specifically
provided, Borrower shall not, whether voluntarily or involuntarily, by
operation of law or otherwise, (i) without obtaining the prior written
consent of Lender (which consent may be given, withheld or conditioned by
Lender in Lender's sole discretion), transfer, sell, pledge, convey,
hypothecate, factor or assign all or any portion of the Collateral, the
Encumbered Intervals, the Common Elements relating to the Inventory or any
Resort facilities or amenities, or contract to do any of the foregoing,
including, without limitation, pursuant to options to purchase, and
so-called "installment sales contracts", "land contracts", or "contracts
for deed", (ii) without obtaining the prior written consent of Lender
(which consent may be given, withheld or conditioned by Lender in Lender's
sole discretion), lease or license all or any portion of the Collateral,
the Inventory, the Common Elements relating to the Inventory or any Resort
facilities or amenities, or change the legal or actual possession or use
thereof, (iii) permit the assignment, transfer, delegation, change,
modification or diminution of the duties or responsibilities of Borrower,
of any manager of the Resort approved by Lender as manager of the Resort
(except for an assignment of such duties to a professional management
company or companies reasonably acceptable to Lender in advance) without
obtaining the prior written consent of Lender (which consent shall not be
unreasonably withheld), or (iv) without obtaining the prior written consent
of Lender (which consent may be given, withheld or conditioned by Lender in
Lender's sole discretion), cause or permit the assignment, pledge or other
encumbrance of any of the Operating Contracts or all or any portion of
Borrower's right, title or interest in the
49
51
Declaration. Without limiting the generality of the preceding sentence, and
subject to the terms of this Agreement, the prior written consent of Lender
(as specified above) shall be required for (A) any transfer of the
Inventory, the Common Elements relating to the Inventory or any Resort
facilities or amenities or any part thereof made to a subsidiary or
Affiliate or otherwise, (B) any transfer of all or any part of the
Inventory, the Common Elements relating to the Inventory or any Resort
facilities or amenities by Borrower to its stockholders or Affiliates or
vice versa, and (C) any corporate merger or consolidation, disposition or
other reorganization, except as permitted in Section 7.1(c) hereof. In the
event that Lender is willing to consent to a transfer which would otherwise
be prohibited by this Section 7.2(b) Lender may condition its consent on
such terms as it desires, including, without limitation, an increase in the
Interest Rate and the requirement that Borrower pay a transfer fee,
together with any expenses incurred by Lender in connection with the
granting of such consent (including, without limitation, attorneys' fees
and expenses). If Borrower violates the terms of this Section 7.2(b), in
addition to any other rights or remedies which Lender may have herein, in
any other Loan Document, or at law or in equity, Lender may by written
notice to Borrower increase, effective immediately as of the date of such
violation, the Interest Rate to the Default Rate.
(c) USE OF A LENDER'S NAME. Borrower will not, and will not permit any
Affiliate to, without the prior written consent of Lender, use the name of
Lender or the name of any affiliate of Lender in connection with any of
their respective businesses or activities, except in connection with
internal business matters and as required in dealings with governmental
agencies.
(d) TRANSACTIONS WITH AFFILIATES. Without the prior written consent of
Lender, which shall not unreasonably be withheld, Borrower will not enter
into any transaction with any Affiliate in connection with the Resorts,
including, without limitation, relating to the purchase, sale or exchange
any assets or properties or the rendering of any service, except in the
ordinary course of, and pursuant to the reasonable requirements of, the
operations of the Resorts and upon fair and reasonable terms.
(e) RESTRICTIVE COVENANTS. Borrower will not without Lender's prior
written consent seek, consent to, or otherwise acquiesce in, any change in
any private restrictive covenant, planning or zoning law or other public or
private restriction, which would limit or alter the use of the Resort.
(f) SUBORDINATED OBLIGATIONS. Borrower will not, directly or
indirectly, (i) permit any payment to be made in respect of any
indebtedness, liabilities or obligations, direct or contingent, (the
"Subordinated Debt") to any of its shareholders or their affiliates or
which are subordinated by the terms thereof or by separate instrument to
the payment of
50
52
principal of, and interest on, the Note, except that the Borrower may make
and the Subordinated Lender may receive, accept and retain such payments so
long as no Default or Event of Default under, and as defined, in the Loan
Agreement shall have occurred and be continuing and such payments are in
respect of regularly scheduled payments of principal and/or interest under
the Subordinated Debt (the terms of which regularly scheduled payments
shall have previously been approved, in writing by the Lender in its sole
discretion) provided that in no case may the Borrower make, or the
Subordinated Lender accept, a prepayment of any principal and/or interest
in respect of the Subordinated Debt, (ii) permit the amendment, rescission
or other modification of any such subordination provisions of any of the
Borrower's subordinated obligations in such a manner as to affect adversely
the Lien in and to the Collateral or Lender's senior priority position and
entitlement as to payment and rights with respect to the Note and the
Obligations, or (iii) permit the prepayment or redemption, except for
mandatory prepayments, of all or any part of Borrower's obligations to its
shareholders, or of any subordinated obligations of the Borrower except in
accordance with the terms of such subordination.
(g) TIMESHARE REGIME. Without Lender's prior written consent, Borrower
shall not amend, modify or terminate the Declarations or other Timeshare
Documents, or any other restrictive covenants, agreements or easements
regarding the Resorts (except for routine non-substantive modifications
which have no impact on the Collateral); nor shall Borrower assign its
rights as "developer" under the Declarations without Lender's prior written
consent, or file or permit to be filed any additional covenants,
conditions, easements or restrictions against or affecting the Resorts (or
any portion thereof) without Lender's prior written consent, which consent
shall not be unreasonably withheld.
(h) NAME CHANGE. Borrower will not change its name.
(i) COLLATERAL. Borrower shall not take any action (nor permit or
consent to the taking of any action) which might impair the value of the
Collateral or any of the rights of the Lenders in the Collateral, nor shall
Borrower cause or permit any amendment to or modification of the Timeshare
Documents.
(j) MARKETING/SALES. Borrower shall not market, attempt to sell or
sell or permit or justify any sales or attempted sales of any Intervals
except in compliance with the Timeshare Act and applicable laws in state
and other jurisdictions where marketing, sales or solicitation activities
occur.
51
53
SECTION 8 -- EVENTS OF DEFAULT
8.1 NATURE OF EVENTS. An "Event of Default" shall exist if any of the
following shall occur:
(a) PAYMENTS. If Borrower shall fail to make, as and when due, any
payment or mandatory prepayment of principal, interest, fees or other
amounts with respect to the Loan and such failure shall continue for five
(5) days after notice of such failure is provided by Lender.
(b) COVENANT DEFAULTS. If Borrower shall fail to perform or observe
any covenant, agreement or warranty contained in this Agreement or in any
of the Loan Documents, (other than with respect to the failure to make
timely payments in respect of the Loan as provided in Section 8.1(a) or
violation of any negative covenants in Section 7.2) and, such failure shall
continue for fifteen (15) days after notice of such failure is provided by
Lender, provided however, that if Borrower commences to cure such failure
within such 15 day period, but, because of the nature of such failure, cure
cannot be completed within 15 days notwithstanding diligent effort to do
so, then, provided Borrower diligently seeks to complete such cure, an
Event of Default shall not result unless such failure continues for a total
of thirty (30) days.
(c) WARRANTIES OR REPRESENTATIONS. If any representation or other
statement made by or on behalf of Borrower in this Agreement, in any of the
Loan Documents or in any instrument furnished in compliance with or in
reference to the Loan Documents, is false, misleading or incorrect in any
material respect as of the date made or reaffirmed.
(d) ENFORCEABILITY OF LIENS. If any lien or security interest granted
by Borrower to the Lenders in connection with the Loan is or becomes
invalid or unenforceable or is not, or ceases to be, a perfected first
priority lien or security interest in favor of the Lender encumbering the
asset to which it is intended to encumber, and Borrower fails to cause such
lien or security interest to become a valid, enforceable, first and prior
lien or security interest in a manner satisfactory to Lender within ten
(10) days after Lender delivers written notice thereof to Borrower.
(e) INVOLUNTARY PROCEEDINGS. If a case is commenced or a petition is
filed against Borrower under any Debtor Relief Law; a receiver, liquidator
or trustee of Borrower or of any material asset of Borrower is appointed by
court order and such order remains in effect for more than forty-five (45)
days; or if any material asset of Borrower is sequestered by court order
and such order remains in effect for more than forty-five (45) days.
52
54
(f) PROCEEDINGS. If Borrower voluntarily seek, consent to or acquiesce
in the benefit of any provision of any Debtor Relief Law, whether now or
hereafter in effect; consent to the filing of any petition against it under
such law; make an assignment for the benefit of its creditors; admit in
writing its inability to pay its debts generally as they become due; or
consents or suffers to the appointment of a receiver, trustee, liquidator
or conservator for it, him or her or any part of its, his or her assets.
(g) ATTACHMENT, JUDGMENT, TAX LIENS. The issuance, filing, levy or
seizure against the Collateral, or, with respect to the Resort or the
Obligations, against the Borrower of one or more attachments, injunctions,
executions, tax liens or judgments for the payment of money cumulatively in
excess of $100,000, which is not discharged in full or stayed within thirty
(30) days after issuance or filing.
(h) TIMESHARE DOCUMENTS. If the Declaration, any of the other
documents creating or governing the Resort, its timeshare regime, or the
Timeshare Owners' Association, or the restrictive covenants with respect to
the Resort, shall be terminated, amended or modified without Lender's prior
written consent (except for routine non-substantive modifications which
have no impact on the Collateral).
(i) REMOVAL OF COLLATERAL. If Borrower conceals, removes, transfers,
conveys, assigns or permits to be concealed, removed, transferred, conveyed
or assigned, any of the Collateral in violation of the terms of the Loan
Documents or with the intent to hinder, delay or defraud its creditors or
any of them including, without limitation, Lender.
(j) OTHER DEFAULTS. If a material default shall occur in any of the
covenants or Obligations set forth in any of the Loan Documents.
(k) MATERIAL ADVERSE CHANGE. Any material adverse change in the
financial condition of the Borrower in the condition of the Collateral. For
purposes of this provision, a decline in the net worth of the Borrower of
$100,000.00 or less shall not be considered a material adverse change.
(l) DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default by the
Borrower (i) in the payment of any indebtedness to Lender, including any
indebtedness under the Existing Credit Facility or the Additional Credit
Facility, (ii) in the payment or performance of other indebtedness for
borrowed money or obligations secured by any part of the Resort; or (iii)
in the payment or performance of other material indebtedness or obligations
(material indebtedness or obligations being defined for purposes of this
provision as any indebtedness or obligation in excess of $50,000) where
such default accelerates or permits the
53
55
acceleration (after the giving of notice or passage of time or both) of the
maturity of such indebtedness, or permits the holders of such indebtedness
to elect a majority of the board of directors of Borrower (whether or not
such default[s] have been waived by such holder).
(m) LOSS OF LICENSE. The loss, revocation or failure to renew or file
for renewal of any registration, approval, license, permit or franchise now
held or hereafter acquired by the Borrower or with respect to any Resort,
or the failure to pay any fee, which is necessary for the continued
operation of any Resort or the Borrower's business in the same manner as it
is being conducted at the time of such loss, revocation, failure to renew
or failure to pay.
(n) VIOLATION OF NEGATIVE COVENANTS. Borrower violates any negative
covenants set forth in Section 7.2.
SECTION 9 -- REMEDIES
9.1 REMEDIES UPON DEFAULT. Should an Event of Default occur, Lender may
take any one or more of the actions described in this Section 9, all without
notice to Borrower:
(a) ACCELERATION. Without demand or notice of any nature whatsoever,
declare the unpaid balance of the Loans, or any part thereof, immediately
due and payable, whereupon the same shall be due and payable.
(b) TERMINATION OF OBLIGATION TO MAKE ADVANCE. Terminate any
obligation of the Lender to lend under this Agreement in its entirety, or
any portion of any such commitment, to the extent Lender shall deem
appropriate, all without notice to Borrower.
(c) JUDGMENT. Reduce Lender's claim to judgment, foreclose or
otherwise enforce Lender's security interest in all or any part of the
Collateral by any available judicial or other procedure under law.
(d) SALE OF COLLATERAL. After notification, if any, provided for in
Section 9.2 below, sell or otherwise dispose of, at the office of Lender,
or elsewhere, as chosen by Lender, all or any part of the Collateral, and
any such sale or other disposition may be as a unit or in parcels, by
public or private proceedings, and by way of one or more contracts (it
being agreed that the sale of any part of the Collateral shall not exhaust
Lender's power of sale, but sales may be made from time to time until all
of the Collateral has been sold or until the Obligations have been paid in
full and fully performed), and at any such sale it shall not be necessary
to exhibit the Collateral. Borrower hereby acknowledges and agrees that a
private sale or sales of the Collateral, after notification as provided for
in Section 9.2, shall constitute a commercially reasonable disposition of
the Collateral sold at any such sale or sales, and otherwise, commercially
reasonable action on the part of the Lender.
54
56
(e) RETENTION OF COLLATERAL. At its discretion, retain such portion of
the Collateral as shall aggregate in value to an amount equal to the
aggregate amount of the Loans, in satisfaction of the Obligations, whenever
the circumstances are such that Lender is entitled and elects to do so
under applicable law.
(f) RECEIVER. Apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and
Borrower hereby consents to any such appointment.
(g) PURCHASE OF COLLATERAL. Buy the Collateral at any public or
private sale.
(h) EXERCISE OF OTHER RIGHTS. Lender shall have all the rights and
remedies of a secured party under the Code and other legal and equitable
rights to which it may be entitled. Lender may also exercise any and all
other rights or remedies afforded by any other applicable laws or by the
Loan Documents as Lender shall deem appropriate, at law, in equity or
otherwise, including, but not limited to, the right to bring suit or other
proceeding, either for specific performance of any covenant or condition
contained in the Loan Documents or in aid of the exercise of any right or
remedy granted to Lender in the Loan Documents. Lender shall also have the
right to require the Borrower to assemble any of the Collateral not in
Lender's possession, at Borrower's expense, and make it available to Lender
at a place to be determined by Lender which is reasonably convenient to
both parties, and Lender shall have the right to take immediate possession
of all of the Collateral, and may enter the Resort or any of the premises
of Borrower or wherever the Collateral shall be located, with or without
process of law wherever the Collateral may be, and, to the extent such
premises are not the property of Lender, to keep and store the same on said
premises until sold (and if said premises be the property of Borrower,
Borrower agrees not to charge Lender for use and occupancy, rent, or
storage of the Collateral, for a period of at least ninety (90) days after
sale or disposition of the Collateral).
9.2 NOTICE OF SALE. Reasonable notification of time and place of any public
sale of the Collateral or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made shall
be sent to Borrower and to any other person entitled under the Code to notice;
provided, however, that if the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender may sell or
otherwise dispose of the Collateral without notification, advertisement or other
notice of any kind. It is agreed that notice sent not less than five (5)
calendar days prior to the taking of the action to which such notice relates is
reasonable notification and notice for the purposes of this Section 9.2. Lender
shall have the right to bid at any public or private sale on its own behalf. Out
of money arising from any such
55
57
sale, Lender shall retain an amount equal to all of its costs and charges,
including attorneys' fees for advice, counsel or other legal services or for
pursuing, reclaiming, seeking to reclaim, taking, keeping, removing, storing and
advertising such Collateral for sale, selling same and any and all other charges
and expenses in connection therewith and in satisfying any prior Liens thereon.
Any balance shall be applied upon the Obligations, and in the event of
deficiency, the Borrower shall remain liable to the Lender. In the event of any
surplus, such surplus shall be paid to the Borrower or to such other Persons as
may be legally entitled to such surplus. If, by reason of any suit or proceeding
of any kind, nature or description against the Borrower, or by the Borrower or
any other party against Lender, which in Lender's sole discretion makes it
advisable for Lender to seek counsel for the protection and preservation of its
security interest, or to defend the interest of the Lender, such expenses and
counsel fees shall be allowed to Lender and the same shall be made a further
charge and Lien upon the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the methods by which a sale of Collateral comprised of
Securities may be effected after an Event of Default, Borrower agrees that upon
the occurrence or existence of an Event of Default, Lender may, from time to
time, attempt to sell all or any part of such Collateral by means of a private
placement restricting the bidding and prospective purchasers to whose who will
represent and agree that they are purchasing for investment only and not for, or
with a view to, distribution. In so doing, Lender may solicit offers to buy such
Collateral, or any part of it for cash, from a limited number of investors
deemed by Lender, in its reasonable judgment, to be responsible parties who
might be interested in purchasing the Collateral, and if Lender solicits such
offers from not less than two (2) such investors, then the acceptance by Lender
of the highest offer obtained therefrom shall be deemed to be a commercially
reasonable method of disposition of such Collateral.
9.3 APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon the
occurrence of any Event of Default: (i) Lender may, with or without proceeding
with such sale or foreclosure or demanding payment or performance of the
Obligations, without notice, terminate Lender's further performance under this
Agreement or any other agreement or agreements between Lender and the Borrower,
without further liability or obligation by Lender; (ii) Lender, at any time,
appropriate and apply on any Obligations any and all Collateral in its
possession and (iii) Lender may apply any and all balances, credits, deposits,
accounts, reserves, indebtedness or other moneys due or owing to the Borrower
held by Lender hereunder or under any other financing agreement or otherwise,
whether accrued or not. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice or otherwise, shall absolve,
release or otherwise affect the liability of the Borrower in respect of
transactions prior to such termination, or affect any of the Liens, security
interests, rights, powers and remedies of the Lender, but they shall, in all
events, continue until all of the Obligations are satisfied.
56
58
9.4 RIGHTS OF LENDER REGARDING COLLATERAL. In addition to all other rights
possessed by the Lender, Lender, at its option, may on its behalf from time to
time after there shall have occurred an Event of Default, and so long as such
Event of Default remains uncured, at its sole discretion, take the following
actions:
(a) Transfer all or any part of the Collateral into the name of Lender
or its nominee;
(b) Take control of any proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises or
indulgences with respect to the Obligations, any portion thereof, any
extension or renewal thereof, or any security therefor, to any obligor
hereunder or thereunder; and
(d) Exchange certificates or instruments representing or evidencing
the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
9.5 DELEGATION OF DUTIES AND RIGHTS. Lender may execute any of its duties
and/or exercise any of its rights or remedies under the Loan Documents by or
through its officers, directors, employees, attorneys, agents or other
representatives.
9.6 LENDER NOT IN CONTROL. None of the covenants or other provisions
contained in this Agreement or in any Loan Document shall give Lender the right
or power to exercise control over the affairs and/or management of Borrower.
9.7 WAIVERS. The acceptance by Lender at any time and from time to time of
partial payments of the Loan or performance of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by Lender
of any Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default. No delay or omission by Lender in exercising any
right or remedy under the Loan Documents shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, nor shall any single
or partial exercise of any such right or remedy preclude other or further
exercise thereof, or the exercise of any other right or remedy under the Loan
Documents or otherwise. Further, except as otherwise expressly provided in this
Agreement or by applicable law, Borrower and each and every surety, endorser,
guarantor and other party liable for the payment or performance of all or any
portion of the Obligations, severally waive notice of the occurrence of any
Event of Default, presentment and demand for payment, protest, and notice of
protest, notice of intention to accelerate, acceleration and nonpayment, and
agree that their liability shall not be affected by any renewal or extension in
57
59
the time of payment of the Loan, or by any release or change in any security for
the payment or performance of the Loan, regardless of the number of such
renewals, extensions, releases or changes.
9.8 CUMULATIVE RIGHTS. All rights and remedies available to the Lender
under the Loan Documents shall be cumulative of and in addition to all other
rights and remedies granted to Lender under any of the Loan Document, at law or
in equity, whether or not the Loan is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
the Loan Documents.
9.9 EXPENDITURES BY LENDER. Any sums expended by or on behalf of Lender
pursuant to the exercise of any right or remedy provided herein shall become
part of the Obligations and shall bear interest at the Default Rate, from the
date of such expenditure until the date repaid.
9.10 DIMINUTION IN VALUE OF COLLATERAL. Lender shall not have any liability
or responsibility whatsoever for any diminution or loss in value of any of the
Collateral, specifically including that which may arise from Lender's negligence
or inadvertence, whether such negligence or inadvertence is the sole or
concurring cause of any damage.
9.11 LENDER'S KNOWLEDGE. The Lender shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default unless the Lender has actual
knowledge of the Event of Default or has received a notice the Borrower
referring to this Agreement and describing such Event of Default.
SECTION 10 -- CERTAIN RIGHTS OF LENDER
10.1 PROTECTION OF COLLATERAL. Lender may at any time and from time to time
take such actions as Lender deems necessary or appropriate to protect the
Lender's Liens and security interests in and to preserve the Collateral, and to
establish, maintain and protect the enforceability of Lender's rights with
respect thereto, all at the expense of Borrower. Borrower agrees to cooperate
fully with all of Lender's efforts to preserve the Collateral and Lender's
Liens, security interests and rights and will take such actions to preserve the
Collateral and Lender's Liens, security interests and rights as Lender may
direct, including, without limitation, by promptly paying upon Lender's demand
therefor, all documentary stamp taxes or other taxes that may be or may become
due in respect of any of the Collateral. All of Lender's expenses of preserving
the Collateral and Lender's liens and security interests and rights therein
shall be added to the Loan.
10.2 PERFORMANCE BY LENDER. If Borrower fails to perform any agreement
contained herein, Lender may itself perform, or cause the performance of, such
agreement, and the expenses of Lender incurred in connection therewith shall be
payable by Borrower under Section 10.5 below.
58
60
In no event, however, shall Lender have any obligation or duties whatsoever to
perform any covenant or agreement of Borrower contained herein or in any of the
Loan Documents, Timeshare Documents or Operating Contracts, and any such
performance by Lender shall be wholly discretionary with Lender. The performance
by Lender, of any agreement or covenant of Borrower on any occasion shall not
give rise to any duty on the part of Lender to perform any such agreements or
covenants on any other occasion or at any time. In addition, Borrower
acknowledges that Lender shall not at any time or under any circumstances
whatsoever have any duty to Borrower or to any third party to exercise any of
Lender's rights or remedies hereunder.
10.3 NO LIABILITY OF LENDER. Neither the acceptance of this Agreement by
Lender, nor the exercise of any rights hereunder by Lender, shall be construed
in any way as an assumption by Lender of any obligations, responsibilities or
duties of Borrower arising in connection with any Resort or under the Timeshare
Documents or Timeshare Acts, or under any of the Operating Contracts, or in
connection with any other business of Borrower, or the Collateral, or otherwise
bind Lender to the performance of any obligations with respect to any Resort or
the Collateral; it being expressly understood that Lender shall not be obligated
to perform, observe or discharge any obligation, responsibility, duty, or
liability of Borrower with respect to any Resort or any of the Collateral, or
under any of the Timeshare Documents, the Timeshare Acts or under any of the
Operating Contracts, including, but not limited to, appearing in or defending
any action, expending any money or incurring any expense in connection
therewith. Without limitation of the foregoing, neither this Agreement, any
action or actions on the part of Lender taken hereunder, prior to or following
the occurrence of an Event of Default shall constitute an assumption by Lender
of any obligations of Borrower with respect to any Resort or any documents or
instruments executed in connection therewith, and Borrower shall continue to be
liable for all of its obligations thereunder or with respect thereto. Borrower
agrees to indemnify, protect, defend and hold Lender harmless from and against
any and all claims, demands, causes of action, losses, damages, liabilities,
suits, costs and expenses, including, without limitation, attorneys' fees and
court costs, asserted against or incurred by Lender by reason of, arising out
of, or connected in any way with (i) any failure or alleged failure of Borrower
to perform any of its covenants or obligations with respect to each Resort or to
the Purchasers of any of the Intervals, (ii) a breach of any certification,
representation, warranty or covenant of Borrower set forth in any of the Loan
Documents, (iii) the ownership of the Inventory and the rights, titles and
interests assigned hereby, or intended so to be, (iv) the debtor-creditor
relationships between Borrower on the one hand, and the Lender, on the other, or
(v) the operation of the Resorts or sale of Intervals. The obligations of
Borrower to indemnify, protect, defend and hold Lender harmless as provided in
this Agreement are absolute, unconditional, present and continuing, and shall
not be dependent upon or affected by the genuineness, validity, regularity or
enforceability of any claim, demand or suit from which Lender is indemnified.
The indemnity provisions in this Section 10.3 shall survive the satisfaction of
the Obligations and termination of this Agreement, and remain binding and
enforceable against the Borrower, or its successors or assigns. Borrower hereby
waives all notices with respect to any losses, damages, liabilities, suits,
59
61
costs and expenses, and all other demands whatsoever hereby indemnified, and
agrees that its obligations under this Agreement shall not be affected by any
circumstances, whether or not referred to above, which might otherwise
constitute legal or equitable discharges of its obligations hereunder.
10.4 RIGHT TO DEFEND ACTION AFFECTING SECURITY. Lender may, at Borrower's
expense, appear in and defend any action or proceeding at law or in equity which
Lender in good faith believes may affect the security interests granted under
this Agreement, including without limitation, with respect to the value of the
Collateral or Lender's rights under any of the Loan Documents.
10.5 EXPENSES. All expenses payable by Borrower, under any provision of
this Agreement shall be an Obligation of the Borrower and shall be paid by
Borrower to Lender, upon demand, and shall bear interest at the Default Rate
from the date of expense until repaid by Borrower.
10.6 LENDER'S RIGHT OF SET-OFF. Lender shall have the right to set-off
against any Collateral any Obligations then due and unpaid by Borrower.
10.7 NO WAIVER. No failure or delay on the part of Lender in exercising any
right, remedy or power under this Agreement or in giving or insisting upon
strict performance by Borrower hereunder or in giving notice hereunder shall
operate as a waiver of the same or any other power or right, and no single or
partial exercise of any such power or right shall preclude any other or further
exercise thereof or the exercise of any other such power or right. Lender,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Borrower of any and all of the terms and provisions of
this Agreement to be performed by Borrower. The collection and application of
proceeds, the entering and taking possession of the Collateral, and the exercise
by Lender of its rights contained in the Loan Documents and this Agreement shall
not cure or waive any default, or affect any notice of default, or invalidate
any acts done pursuant to such notice. No waiver by Lender of any breach or
default of or by any party hereunder shall be deemed to alter or affect Lender's
rights hereunder with respect to any prior or subsequent default.
10.8 RIGHT OF LENDER TO EXTEND TIME OF PAYMENT, SUBSTITUTE, RELEASE
SECURITY, ETC. Without affecting the liability of any Person or entity including
without limitation, for the payment of any of the Obligations or without
affecting or impairing Lender's Lien on the Collateral, or the remainder
thereof, as security for the full amount of the Loan unpaid and the Obligations,
Lender may from time to time, without notice: (a) release any Person liable for
the payment of the Loan, (b) extend the time or otherwise alter the terms of
payment of the Loan, (c) accept additional security for the Obligations of any
kind, including deeds of trust or mortgages and security agreements, (d) alter,
substitute or release any property securing the Obligations, (e) realize upon
60
62
any collateral for the payment of all or any portion of the Loan in such order
and manner as it may deem fit, or (f) join in any subordination or other
agreement affecting this Agreement or the lien or charge thereof.
10.9 ASSIGNMENT OF LENDER'S INTEREST. Lender shall have the right to assign
the Loan and all or any portion of its rights in or pursuant to this Agreement
or any of the Loan Documents to any subsequent holder or holders of the Note or
the Obligations evidenced thereby.
10.10 POWER OF ATTORNEY. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender, (b) to demand and receive from time
to time any and all property, rights, titles, interests and liens hereby sold,
assigned and transferred, or intended so to be, and to give receipts for same,
(c) from time to time to institute and prosecute in Lender's own name any and
all proceedings at law, in equity, or otherwise, that Lender may deem proper in
order to collect, assert or enforce any claim, right or title, of any kind, in
and to the property, rights, titles, interests and liens hereby sold, assigned
or transferred, or intended so to be, and to defend and compromise any and all
actions, suits or proceedings in respect of any of the said property, rights,
titles, interests and liens, (d) upon an Event of Default to change the
Borrower's post office mailing address, and (e) generally to do all and any such
acts and things in relation to the Collateral as Lender shall in good faith deem
advisable. Borrower hereby declares that the appointment made and the powers
granted pursuant to this Section 10.10 are coupled with an interest and are and
shall be irrevocable by Borrower in any manner, or for any reason, unless and
until a release of the same is executed by Lender and duly recorded in the
appropriate public records of Dallas County, Texas.
10.11 RELIEF FROM AUTOMATIC STAY, ETC. To the fullest extent permitted by
law, in the event the Borrower shall make application for or seek relief or
protection under the federal bankruptcy code ("Bankruptcy Code") or other Debtor
Relief Laws, or in the event that any involuntary petition is filed against the
Borrower under such Code or other Debtor Relief Laws, and not dismissed with
prejudice within 45 days, the automatic stay provisions of Section 362 of the
Bankruptcy Code are hereby modified as to Lender to the extent necessary to
implement the provisions hereof permitting set-off and the filing of financing
statements or other instruments or documents; and Lender shall automatically and
without demand or notice (each of which is hereby waived) 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 Lender as provided in the Loan Documents.
61
63
SECTION 11 -- TERM OF AGREEMENT
This Agreement shall continue in full force and effect and the security
interests granted hereby and the duties, covenants and liabilities of the
Borrower hereunder and all the terms, conditions and provisions hereof relating
thereto shall continue to be fully operative until all of the Obligations have
been satisfied in full. The Borrower expressly agrees that if the Borrower makes
a payment to Lender, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or otherwise required to
be repaid to a trustee, receiver or any other party under any Debtor Relief
Laws, state or federal law, common law or equitable cause, then to the extent of
such repayment, the Obligations or any part thereof intended to be satisfied and
the Liens provided for hereunder securing the same shall be revived and
continued in full force and effect as if said payment had not been made.
SECTION 12 -- MISCELLANEOUS
12.1 NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender or Borrower. Each such notice,
request or other communication shall be effective (a) if given by mail, when
such notice is deposited in the United States Mail with first class postage
prepaid, addressed as aforesaid, provided that such mailing is by registered or
certified mail, return receipt requested, (b) if given by overnight delivery,
when deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne with all fees and charges prepaid, addressed as
provided below, or (c) if given by any other means, when delivered at the
address specified in this Section 12.1.
IF TO BORROWER: Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, TX 75221
Attn: Mr. Robert Mead, CEO
WITH A COPY TO: Meadows, Owens, Collier, Reed, Cousins and Blau
3700 Nations Bank Plaza
901 Main St.
Dallas, TX 75202
Attn: George R. Bedell, Esq.
IF TO LENDER: Textron Financial Corporation
40 Westminster Street
Providence, Rhode Island 02903
Attention: Collections
62
64
WITH A COPY TO: Textron Financial Corporation
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attention: Division Counsel (RRD)
AND TO: Textron Financial Corporation
333 East River Drive, Suite 305
East Hartford, Connecticut 06108
Attn: Division Manager
Notwithstanding the foregoing, copies of the requests or notices from
Borrower to Lender which are specified in the Sections of this Agreement listed
below shall not be delivered to Providence, Rhode Island as provided above, but
rather shall be delivered in accordance with this Section 12.1 to Textron
Financial Corporation, 333 East River Drive, Suite 305, East Hartford,
Connecticut 06108, Attention: Nicholas L. Mecca, Vice President. The applicable
Sections of this Agreement are Section 2.4(a) Voluntary Prepayments and Section
5(a) Request for Advances. In addition, all documents, instruments and other
items to be delivered to the Lender from time to time pursuant to this Agreement
shall be delivered to Lender's office at 333 East River Drive, Suite 305, East
Hartford, Connecticut 06108.
12.2 SURVIVAL. All representations, warranties, covenants and agreements
made by Borrower herein, in the other Loan Documents or in any other agreement,
document, instrument or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents (and
each part thereof), regardless of any investigation made by or on behalf of
Lender.
12.3 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS
MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF
ITS CHOICE OF LAWS PRINCIPLES.
12.4 LIMITATION ON INTEREST. Lender and Borrower intend to comply at all
times with applicable usury laws. All agreements between the Lender and
Borrower, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the interest
contracted for, charged, received, paid or agreed to be paid to Lender exceed
the highest lawful rate permissible under applicable usury laws. If, from any
circumstance whatsoever fulfillment of any provision hereof, of the Note or of
any other Loan Documents shall involve transcending the limit
63
65
of such validity prescribed by any law which a Court of Competent jurisdiction
may deem applicable hereto, then ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and if from any circumstance
Lender shall ever receive anything of value deemed interest by applicable law
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal of the Loan and not
to the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal of the Loan, such excess shall be refunded to Borrower. All
interest paid or agreed to be paid to the Lender shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal so that the interest on the
Loan for such full period shall not exceed the highest lawful rate. Borrower
agrees that in determining whether or not any interest payment under the Loan
Documents exceeds the highest lawful rate, any non-principal payment (except
payments specifically described in the Loan Documents as "interest") including
without limitation, prepayment fees and late charges, shall to the maximum
extent not prohibited by law, be an expense, fee, premium or penalty rather than
interest. Lender hereby expressly disclaims any intent to contract for, charge
or receive interest in an amount which exceeds the highest lawful rate. The
provisions of the Note, this Agreement, and all other Loan Documents are hereby
modified to the extent necessary to conform with the limitations and provisions
of this Section, and this Section shall govern over all other provisions in any
document or agreement now or hereafter existing. This Section shall never be
superseded or waived unless there is a written document executed by Lender and
the Borrower, expressly declaring the usury limitation of this Agreement to be
null and void, and no other method or language shall be effective to supersede
or waive this paragraph.
12.5 INVALID PROVISIONS. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part of this Agreement and/or
the Loan Documents (as the case may be) a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
12.6 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns; provided that Borrower may not transfer or
assign any of its rights or obligations under this Agreement, or the other Loan
Documents without the prior written consent of Lender. This Agreement and the
transactions provided for or contemplated hereunder or under any of the Loan
Documents are intended solely for the benefit of the parties hereto. No third
party shall have any
64
66
rights or derive any benefits under or with respect to this Agreement, or the
other Loan Documents except as provided in advance in a writing signed on behalf
of Lender.
12.7 AMENDMENT. This Agreement may not be amended or modified, and no term
or provision hereof may be waived, except by written instrument signed by the
Borrower and the Lender.
12.8 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one or more
counterparts hereof signed by Borrower.
12.9 LENDER NOT FIDUCIARY. The relationship between Borrower, and Lender is
solely that of debtor and creditor, and Lender has no fiduciary or other special
relationship with Borrower, and no term or provision of any of the Loan
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.
12.10 ACCOUNTING PRINCIPLES. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined or made in accordance
with GAAP consistently applied at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
12.11 TOTAL AGREEMENT. This Agreement and the other Loan Documents,
including the Exhibits and Schedules to them, is the entire agreement between
the parties relating to the subject matter hereof, incorporates or rescinds all
prior agreements and understandings between the parties hereto relating to the
subject matter hereof, cannot be changed or terminated orally or by course of
conduct, and shall be deemed effective as of the date it is accepted by the
Lender at the offices set forth above.
12.12 LITIGATION. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, THE BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY ANY RIGHT, POWER, REMEDY OR
DEFENSE ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, WHETHER SOUNDING IN TORT OR
CONTRACT OR OTHERWISE, OR WITH RESPECT TO ANY COURSE OF CONDUCT,
65
67
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A JUDGE AND NOT BEFORE A JURY. EACH OF THE BORROWER AND LENDER FURTHER WAIVES
ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT
BEEN WAIVED. FURTHER, THE BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF LENDER, NOR LENDER'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE BORROWER ACKNOWLEDGES THAT THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
The waiver and stipulations of the Borrower and Lender in this Section
12.12 shall survive the final payment or performance of all of the Obligations
of the Borrower and the resulting termination of this Agreement.
12.13 INCORPORATION OF EXHIBITS. This Agreement, together with all Exhibits
and Schedules hereto, constitute one document and agreement which is referred to
herein by the use of the defined term "Agreement." Such Exhibits and Schedules
are incorporated herein as to fully set out in this Agreement. The definitions
contained in any part of this Agreement shall apply to all parts of this
Agreement.
12.14 CONSENT TO ADVERTISING AND PUBLICITY OF TIMESHARE DOCUMENTS. The
Borrower hereby consents that Lender may issue and disseminate to the public
information describing the credit accommodation entered into pursuant to this
Agreement, including the names and addresses of Borrower and any subsidiaries
and Affiliates, the amount and a general description of the Borrower's business.
12.15 DIRECTLY OR INDIRECTLY. Where any provision in the Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provisions shall be applicable whether such action is taken
directly or indirectly by such Person.
12.16 HEADINGS. Section headings have been inserted in the Agreement as a
matter of convenience of reference only; such section headings are not a part of
the Agreement and shall not be used in the interpretation of this Agreement.
66
68
12.17 GENDER AND NUMBER. Words of any gender in this Agreement shall
include each other gender and the singular shall mean the plural and vice versa
where appropriate.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
67
69
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed and delivered effective as of the date first above written.
BORROWER:
SILVERLEAF RESORTS, INC., a Texas
corporation
/s/ GEORGE R. BEDELL By: /s/ ROBERT E. MEAD
- --------------------------------- --------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
LENDER:
TEXTRON FINANCIAL CORPORATION,
a Delaware corporation
/s/ [ILLEGIBLE] By: /s/ JOHN T. D'ANNEBALE
- --------------------------------- --------------------------------
Name: John T. D'Annebale
Title: AVP
68
70
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me this 8th day of
December, 1999 by Robert E. Mead, Chief Executive Officer of Silverleaf Resorts,
Inc., a Texas corporation, on behalf of the Corporation.
/s/ SANDRA CEARLEY
------------------------------------
Notary Public
My Commission Expires: 12-28-2002
[SEAL]
STATE OF CONNECTICUT )
) ss:
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 16th day of
December, 1999 by John T. D'Annebale, AVP of TEXTRON FINANCIAL CORPORATION, a
Delaware corporation, on behalf of the corporation.
/s/ CHRISTINE M. CORDEIRA
--------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires: April 30, 2002
69