<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH , 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
SILVERLEAF RESORTS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
TEXAS 6552 75-2259890
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
ROBERT E. MEAD
CHIEF EXECUTIVE OFFICER
SILVERLEAF RESORTS, INC.
1221 RIVERBEND DRIVE, SUITE 120 1221 RIVERBEND DRIVE, SUITE 120
DALLAS, TEXAS 75247 DALLAS, TEXAS 75247
(214) 631-1166 (214) 631-1166
(Address, including zip code, and telephone (Address, including zip code, and telephone
number, including area code, number, including area code,
of registrant's principal executive offices) of agent for service)
</TABLE>
Copies to:
<TABLE>
<C> <C>
DAVID N. REED, ESQ.
MEADOWS, OWENS, COLLIER, REED, THOMAS W. DOBSON, ESQ.
COUSINS & BLAU, LLP LATHAM & WATKINS
901 MAIN STREET, SUITE 3700 633 W. FIFTH STREET, SUITE 4000
DALLAS, TEXAS 75202-3792 LOS ANGELES, CALIFORNIA 90071
(214) 744-3700 (213) 485-1234
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
of the Securities Act of 1933, please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED AMOUNT PROPOSED PER SHARE(2) PRICE(2) REGISTRATION FEE
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share................................ shares $ $75,000,000 $25,000
</TABLE>
================================================================================
(1) Includes shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
SILVERLEAF RESORTS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(a) AND ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND
HEADING IN FORM S-1
REGISTRATION STATEMENT PROSPECTUS CAPTION
---------------------- ------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross-Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Summary; Risk Factors; Selected
Consolidated Historical Financial,
Operating and Pro Forma Financial
Information
4. Use of Proceeds............................ Summary; Use of Proceeds; Capitalization;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................. Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel..... Experts; Legal Matters
11. Information with Respect to the
Registrant................................. Outside and Inside Front Cover Pages of
Prospectus; Summary; Risk Factors; Use of
Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Historical Financial,
Operating and Pro Forma Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships and
Related Transactions; Principal
Shareholders; Description of Capital
Stock; Certain Provisions of the
Company's Charter and Bylaws; Shares
Eligible for Future Sale; Consolidated
Financial Statements of Silverleaf
Resorts, Inc.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Management
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED MARCH 31, 1997
Shares
LOGO
SILVERLEAF RESORTS, INC.
Common Stock
($0.01) par value
------------------
All of the shares of Common Stock, $0.01 par value ("Common Stock"), of
Silverleaf Resorts, Inc., a Texas corporation (the "Company"), offered hereby
(the "Offering"), are being sold by the Company. Prior to the Offering, there
has been no public market for the Common Stock. It is anticipated that the
initial public offering price will be between $ and $ per share of
Common Stock. For information relating to the factors considered in determining
the initial public offering price, see "Underwriting". The Company has applied
to have the Common Stock approved for listing on The Nasdaq Stock Market's
National Market ("NNM"), subject to official notice of issuance, under the
symbol "SLRI".
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total(2)............................................. $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at
$ .
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds to
Company will be $ .
The Common Stock is offered by the several Underwriters when, as and if
issued by the Company, delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that the
Common Stock will be ready for delivery on or about , 1997, against
payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
Prospectus Dated , 1997
<PAGE> 4
[OUTSIDE COVER OF GATEFOLD -- GRAPHICS TO FOLLOW]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING".
2
<PAGE> 5
[INSIDE COVER OF GATEFOLD -- GRAPHICS TO FOLLOW]
3
<PAGE> 6
[INSIDE COVER OF GATEFOLD -- GRAPHICS TO FOLLOW]
4
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data included
elsewhere in this Prospectus, including the Consolidated Financial Statements
and the notes thereto. Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option, and
all share information has been adjusted to give effect to a common stock
dividend to existing shareholders which will result in a for one increase in
outstanding shares (the "Stock Split") which will be effected prior to the
Offering. Unless otherwise indicated, all timeshare industry data contained
herein is derived from information prepared by the American Resort Development
Association ("ARDA"). This Prospectus contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. In evaluating such statements, prospective investors
should specifically consider the various factors identified in this Prospectus,
including the matters set forth under the caption "Risk Factors", which could
cause actual results to differ materially from those indicated in such
forward-looking statements. Unless the context otherwise indicates, the
"Company" or "Silverleaf" means Silverleaf Resorts, Inc., doing business as
"Silverleaf Vacation Club, Inc.", and its subsidiaries.
THE COMPANY
The Company is a leading developer, marketer, and operator of timeshare
resorts in the economy segment of the timeshare industry. The Company currently
owns and operates five "home" resorts in Texas (the "Home Resorts") and two
"destination" resorts in Missouri (the "Destination Resorts"). The Home Resorts
are designed to appeal to value conscious vacationers seeking comfortable and
affordable accommodations in locations convenient to their residences. The Home
Resorts are located proximate to major metropolitan areas (currently Dallas-Ft.
Worth, Houston, San Antonio and Austin), facilitating more frequent "short stay"
getaways, which the Company believes is a growing vacation trend. The
Destination Resorts, which are located in the popular resort area of Branson,
Missouri, offer Silverleaf customers the opportunity to upgrade into a higher
quality destination resort area as their lifestyles and travel budgets permit.
Both the Home Resorts and the Destination Resorts (collectively, the "Existing
Resorts") are in rustic areas and provide a quiet, relaxing vacation
environment. The Company believes its combination of Home and Destination
Resorts offers its customers an economical alternative to commercial vacation
lodging. The average price for an annual one week vacation interval (a "Vacation
Interval") at the Existing Resorts was $6,645 in 1996 and $5,881 in 1995, which
compares favorably to an industry average price of $12,014 in 1995.
The Company offers benefits to owners of Silverleaf Vacation Intervals
("Silverleaf Owners") which are uncommon in the timeshare industry. These
benefits include (i) use of vacant lodging facilities at the Existing Resorts at
no extra cost through Silverleaf's "Endless Escape" program; (ii) year-round
access to the Existing Resorts' non-lodging amenities such as fishing, boating,
horseback riding, tennis or golf for little or no additional charge; and (iii)
the right of Silverleaf Owners to exchange their Vacation Interval for a
different time period or different Existing Resort through Silverleaf's internal
exchange program. The above benefits are subject to availability. Silverleaf
Owners also have the option of enrolling in the world's largest Vacation
Interval exchange network operated by Resort Condominiums International ("RCI").
Operations
Silverleaf's operations include (i) developing timeshare resorts; (ii)
marketing and selling Vacation Intervals to prospective first-time owners; (iii)
marketing and selling upgraded Vacation Intervals to existing Silverleaf Owners;
(iv) providing financing for the purchase of Vacation Intervals; and (v)
operating timeshare resorts. The Company has substantial in-house capabilities
which enable it to coordinate all aspects of expansion of the Existing Resorts
and the development of any new resorts, including site selection, design, and
construction pursuant to standardized plans and specifications. The Company also
performs substantially all marketing and sales functions internally and has made
a significant investment in operating technology, including sophisticated
telemarketing and computer systems and proprietary software applications. The
Company identifies potential purchasers through internally developed marketing
techniques, and sells Vacation Intervals through on-site sales offices located
at certain Home Resorts. This practice allows the Company to avoid the more
expensive marketing costs of subsidized airfare and lodging which are typically
associated with the timeshare industry. The Company
5
<PAGE> 8
believes its marketing program and operating systems enable it to market and
sell Vacation Intervals at a lower cost than its competitors in the timeshare
industry.
During 1996, the Company sold 6,054 Vacation Intervals at the Existing
Resorts to new customers, compared to 4,831 and 3,705 during 1995 and 1994,
respectively. Total revenues for the same periods increased to $48.1 million in
1996 from $36.7 million and $27.2 million in 1995 and 1994, respectively. At
December 31, 1996, the Company had an existing inventory of 6,221 Vacation
Intervals and a master plan to construct up to 70,300 additional Vacation
Intervals at the Existing Resorts, subject to demand and contingencies
applicable to real estate development. See "Risk Factors -- Development,
Construction and Property Acquisition Activities".
As part of the Vacation Interval sales process, the Company offers
potential purchasers financing of up to 90% of the purchase price over a seven
year period. The Company has historically financed its operations by borrowing
from third-party lending institutions at an advance rate of up to 70% of
customer receivables. At December 31, 1996, the Company had a portfolio of
approximately 11,712 loans to Vacation Interval purchasers totalling
approximately $66.8 million with an average yield of 14.7% per annum, which
compares favorably to the Company's weighted average cost of borrowings of 11.2%
per annum. At December 31, 1996, approximately $3.6 million in principal, or
5.9% of the Company's loans to Silverleaf Owners, were 60 to 120 days past due,
and approximately $4.3 million in principal, or 7.2% of the Company's loans to
Silverleaf Owners, were more than 120 days past due. The Company provides for
uncollectible notes by reserving an amount which management believes is
sufficient to cover anticipated losses from customer defaults. In 1996 and 1995,
the Company's provision for uncollectible notes exceeded actual loan chargeoffs
by $2.0 million and $467,000, respectively. See "Risk Factors -- Borrower
Defaults", and "-- Financing Customer Borrowings".
Each Existing Resort has a timeshare owners' association (a "Club") which
has contracted with a centralized organization (referred to as the "Master
Club") to manage the Existing Resorts on a collective basis. The Master Club has
contracted with the Company to perform the supervisory, management and
maintenance functions at the Existing Resorts on a collective basis. All costs
of operating the Existing Resorts, including management fees to the Company, are
covered by monthly dues paid by Silverleaf Owners to their respective Clubs,
together with income generated by the operation of certain amenities at the
Existing Resorts. See "Business -- Clubs/Master Club".
Timeshare Industry
The timeshare industry has experienced substantial growth since 1980.
Annual worldwide timeshare sales have increased from approximately $490 million
in 1980 to approximately $5 billion in 1995, representing a compound annual
growth rate of 16.7%. The Company believes that the growth in the worldwide
timeshare industry is due to (i) increased consumer confidence resulting from
consumer protection regulation of the timeshare industry and the entrance of
brand name national lodging companies into the industry; (ii) increased
flexibility of timeshare ownership due to the growth of exchange organizations
such as RCI; (iii) improvement in the quality and management of timeshare
resorts and related amenities; (iv) increased consumer awareness of the value
and benefits of timeshare ownership, including the cost savings relative to
other lodging alternatives; and (v) improved availability of financing for
purchasers of Vacation Intervals.
Growth Strategy
The Company believes it is the largest operator and developer in the
economy segment of the timeshare industry, and further believes this segment has
particularly attractive demographic and competitive characteristics. The Company
targets households with earnings between $25,000 and $50,000, which represented
30.2% of the U.S. population in 1995; however, only 1% of these households owned
a Vacation Interval. The Company believes it is the only significant timeshare
developer focused solely on this segment. The Company intends to grow through
the following strategies:
- Increasing Development and Sales of Vacation Intervals at Existing
Resorts. The Company intends to capitalize on its significant expansion
capacity at the Existing Resorts by increasing marketing, sales and
development activities. At December 31, 1996, the Company owned
approximately 1,100 acres of land at the Existing Resorts, including
approximately 580 acres contemplated for further development under the
6
<PAGE> 9
Company's master plan. For each Existing Resort, the Company has
broadened its marketing efforts, increased its sales force, completed (in
certain instances) the construction of new sales offices, and other
amenities, and commenced the development of newer lodging facilities.
Furthermore, the Company has continued to emphasize its Endless Escape
program designed to accommodate shorter, "getaway" vacations and has
broadened its product offerings to include biennial (alternate year)
intervals and short-term leasing packages ("Samplers") which are designed
to accommodate more cost-conscious customers.
- Increasing Sales of Upgraded Intervals at Existing Resorts. The Company
has designed specific marketing and sales programs to sell upgraded
Vacation Intervals to Silverleaf Owners. Upgrades may include (i) an
interval in a newly designed and constructed standard unit; (ii) an
interval in a larger or higher quality unit; (iii) an interval during a
more desirable time period (week); (iv) an interval at a different Home
Resort; (v) an interval at a Destination Resort; and (vi) the purchase of
an interval for an additional week by an existing Silverleaf Owner. The
Company generally develops higher quality, larger units for sale as
upgraded intervals. For example, at the Ozark Mountain Resort in Branson,
Missouri, luxury "President's View" units are offered for sale at prices
ranging from $8,000 to $17,500 per Vacation Interval. The Company is
expanding the President's View units to other Existing Resorts. See
"Business -- Description of Existing Resorts". In 1996, sales of upgraded
intervals amounted to $7.9 million, or 16.4% of the Company's total
revenues.
- Development of New Resorts and Acquisitions. The Company believes there
is significant opportunity for development of new timeshare resorts with
characteristics similar to those of the Existing Resorts. The Company
plans to develop new Home Resorts close to major metropolitan areas and
is currently evaluating various potential sites. In developing a new
resort, the Company will use its design, marketing, and sales
capabilities to complete and market such resorts in accordance with the
Company's standard criteria. In addition, the Company selectively
considers acquiring other resorts and timeshare companies where it
believes such acquisitions would be advantageous to its business. See
"Risk Factors -- Development, Construction and Property Acquisition
Activities".
- Improvement of Operating Margins. The Company believes it can increase
sales without significantly increasing general and administrative costs
by capitalizing on recent investments in its marketing and administrative
systems and personnel. The Company also believes it can improve margins
by selling upgraded Vacation Intervals to existing Silverleaf Owners
since sales of upgraded intervals have significantly lower sales and
marketing costs. In addition, as a public company, Silverleaf may be able
to achieve lower borrowing costs and a lower cost of capital.
Competitive Advantages
The Company believes the following characteristics provide Silverleaf with
competitive advantages in operating within the economy segment of the timeshare
industry:
- Lower Marketing and Sales Costs. With convenient "drive-to" locations and
on-site sales offices at certain Home Resorts, the Company can invite
potential customers to tour the Home Resorts without offering subsidized
airline tickets, lodging, and passes to theme parks, a significant
marketing expense typically incurred by competitors in the industry. The
Company has also reduced marketing, operating, and administrative costs
through centralization and automation of many functions at its Dallas,
Texas headquarters.
- Convenient "drive-to" Locations. The Company's Home Resorts are located
within a two-hour drive of the target customers' residences, which
accommodates the growing demand for shorter, more frequent, close to home
vacations. This proximity facilitates use of the Company's Endless Escape
program, which offers Silverleaf Owners up to six consecutive nights per
visit on an unlimited basis for no additional charge, subject to
availability and certain limitations. Silverleaf Owners can also
conveniently enjoy non-lodging resort amenities year-round. The Company
believes it is the only operator in the industry which offers its
customers these benefits.
7
<PAGE> 10
- Substantial Internal Growth Capacity. At December 31, 1996, the Company
had an inventory of 6,221 Vacation Intervals and a master plan to
construct new units at the Existing Resorts which will result in up to
70,300 additional Vacation Intervals on land presently owned by the
Company. The Company is therefore less reliant on acquisitions and new
development for growth.
- In-House Operations. The Company has in-house marketing, sales, financing,
development, and property management capabilities. While the Company
utilizes outside contractors to supplement internal resources, when
appropriate, the breadth of the Company's internal capabilities allows
greater control over all phases of its operations and helps maintain
operating standards and reduce overall costs.
- Standard Design, Lower Construction and Operating Costs. The Company has
developed standard architectural designs and operating procedures which the
Company believes significantly reduce construction and operating expenses at
the Existing Resorts and should likewise reduce such expenses at new
resorts. Standardization and integration also allow the Company to rapidly
develop new inventory in response to demand. New units can normally be
constructed on an "as needed" basis in under 150 days.
- Centralized Property Management. The Company operates all of the Existing
Resorts on a centralized and collective basis, with operating and
maintenance costs paid from Silverleaf Owners' monthly dues. The Company
believes that consolidation of resort operations benefits Silverleaf Owners
by providing them with a uniform level of service, accommodations and
amenities on a standardized, cost-effective basis. Integration also
facilitates the Company's internal exchange program, the Endless Escape
program, and the Existing Resorts' qualification in the RCI exchange
program.
THE EXISTING RESORTS
The following table sets forth certain information regarding each of the
Existing Resorts at December 31, 1996.
<TABLE>
<CAPTION>
VACATION
INTERVALS VACATION INTERVALS AT
UNITS AT RESORT SOLD(A) RESORTS
------------------------ ---------------- AVERAGE ---------------------
INVENTORY IN SALES INVENTORY
PRIMARY AT PLANNED THROUGH 1996 PRICE AT PLANNED
RESORT/LOCATION MARKET SERVED 12/31/96 EXPANSION(B) 12/31/96 ONLY IN 1996(A) 12/31/96 EXPANSION
--------------- -------------- --------- ------------ -------- ----- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HOME RESORTS
Holly Lake Dallas- 130 104 5,881 1,376 $ 6,097 619 5,200(d)
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 204 388 9,524 1,970 6,336 676 19,424(e)
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 3,073 821 6,272 127 800(d)
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 96 304 3,514 1,139 7,349 1,176 15,808(f)
Conroe, TX
Hill Country Austin-San 113 292(g) 4,690 644 6,853 944 14,600(d)
Canyon Lake, TX Antonio, TX
DESTINATION RESORTS
Ozark Mountain Branson, MO 118 84 3,719 95 13,887 2,263 4,368(f)
Kimberling City, MO
Holiday Hills Branson, MO 24 202 784 9 11,999 416 10,100(d)
Branson, MO
--- ----- ------ ----- ----- ------
TOTAL 749 1,390 31,185 6,054 $ 6,645 6,221 70,300
=== ===== ====== ===== ======= ===== ======
<CAPTION>
AMENITIES/
RESORT/LOCATION ACTIVITIES(C)
--------------- --------------
<S> <C>
HOME RESORTS
Holly Lake B,F,G,H,
Hawkins, TX M,S,T
The Villages B,F,H,
Flint, TX M,S,T
Lake O' The Woods F,M,S,T
Flint, TX
Piney Shores B,F,H,
Conroe, TX M,S,T
Hill Country B,M,S,T(h)
Canyon Lake, TX
DESTINATION RESORTS
Ozark Mountain B,F,H,
Kimberling City, MO M,S,T
Holiday Hills B,F,G,H,
Branson, MO M,S,T(h)
TOTAL
</TABLE>
- ---------------
(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For 1996, upgrade sales at the Existing Resorts were as
follows:
8
<PAGE> 11
<TABLE>
<CAPTION>
AVERAGE SALES
UPGRADED VACATION PRICE IN 1996 -- NET OF
RESORT INTERVALS SOLD EXCHANGED INTERVAL
------ ----------------- -----------------------
<S> <C> <C>
Holly Lake............................ 279 $4,195
The Villages.......................... 399 4,316
Lake O' The Woods..................... 125 4,303
Piney Shores.......................... 571 4,028
Hill Country.......................... 296 4,209
Ozark Mountain........................ 184 3,639
Holiday Hills......................... 60 3,760
------
1,914 $4,113
====== =======
</TABLE>
(b) Represents units included in the Company's master plan. This plan is subject
to change based upon various factors, including consumer demand, the
availability of financing, grant of governmental permits, and future
land-planning and site layout considerations. The following chart reflects
the status of certain planned units:
<TABLE>
<CAPTION>
GOVT.
GOVT. APPROVAL GOVT. APPROVAL APPROVAL
SHELL CURRENTLY IN PROCESS PROCESS PROCESS
COMPLETE CONSTRUCTION COMPLETE PENDING NOT STARTED TOTAL
-------- ------------ -------------- -------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake................ 4 -- 50 -- 50 104
The Villages.............. -- 12 114 152 110 388
Lake O' The Woods......... -- -- 16 -- -- 16
Piney Shores.............. -- 12 64 120 108 304
Hill Country.............. 3 12 70 54 153(g) 292
Ozark Mountain............ 12 6 30 -- 36 84
Holiday Hills............. 14 -- 118 -- 70 202
-- -- --- --- --- -----
33 42 462 326 527 1,390
== == === === === =====
</TABLE>
The 33 "Shell Complete" units are currently devoted to such uses as a
general store, registration office, sales office, activity center,
construction office, or pro shop.
"Governmental Approval Process Complete" means either that (i) the Company
believes that it has obtained all necessary authorizations under current
law from the applicable local governmental authority with jurisdiction,
including the approval and filing of any required preliminary or final plat
and the issuance of building permit(s), in each case to the extent
applicable, or (ii) upon payment of any required filing or other fees, the
Company believes that it will under current law obtain such necessary
authorizations without further process. See "Risk Factors -- Development,
Construction and Property Acquisition Activities".
"Governmental Approval Process Pending" means that the Company has
commenced the process which the Company believes is required under current
law in order to obtain the necessary authorizations from the applicable
local governmental authority with jurisdiction, including submitting for
approval any architectural drawings, preliminary plats or other attendant
items as may be required.
(c) Principal amenities available to Silverleaf Owners at each resort are
indicated by the following symbols: B -- boating; F -- fishing; G -- golf
course; H -- horseback riding, hiking, hayrides; M -- miniature golf; S --
swimming pool; and T -- tennis.
(d) These figures are based on 50 one-week intervals per unit. In some
instances, the Company may be able to market 52 one-week intervals per unit.
(e) These figures are based on 52 one-week intervals for 12 units currently
under construction and 50 one-week intervals for all other planned units.
(f) These figures are based on 52 one-week intervals per unit.
(g) This figure includes 132 planned units on land which the Company has the
right to acquire in June 1997 pursuant to a written agreement.
(h) Boating is available near the resort.
9
<PAGE> 12
CORPORATE BACKGROUND
The Company was incorporated in Texas in 1989 and has been owned by and
operated primarily under the direction of Robert E. Mead. Mr. Mead has more than
17 years of experience in timeshare resort acquisition, development, and
operations, and since 1995 has served as a director of ARDA, the primary trade
association for the timeshare industry. See "Management -- Directors and
Executive Officers".
Through the Company, Mr. Mead consolidated in one entity all of the
timeshare assets and operations he previously owned through various partnerships
and corporations affiliated with Mr. Mead. In May 1989, a partnership, of which
the Company was the general partner, acquired the Existing Resorts from a now
dissolved corporation which was also owned and controlled by Mr. Mead. In
December 1995 (i) through a merger of the partnership into the Company, the
Existing Resorts were transferred to the Company, (ii) the Company acquired
additional assets of the now dissolved corporation subject to certain
indebtedness owing by such corporation to Mr. Mead and his affiliates; and (iii)
the Company acquired Condominium Builders, Inc. ("CBI") and certain assets from
Mr. Mead (all of the acquisition and merger transactions in (i), (ii) and (iii)
are collectively referred to herein as the "Consolidation Transactions"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Transactions". The affiliated
corporations and partnership whose assets were acquired by the Company through
the Consolidation Transactions are sometimes collectively referred to herein as
the "Affiliated Companies" or individually as an "Affiliated Company".
The Company does business under the name "Silverleaf Vacation Club, Inc."
The Company's principal executive offices are located at 1221 Riverbend Drive,
Suite 120, Dallas, Texas 75247. The Company's telephone number is (214)
631-1166.
THE OFFERING
<TABLE>
<S> <C>
Issuer.................................... Silverleaf Resorts, Inc.
Offering.................................. shares(1)
Shares outstanding after the Offering..... shares(1)(2)
Use of proceeds........................... To repay outstanding indebtedness and for working
capital and general corporate purposes. A
substantial portion of the proceeds will be used to
repay indebtedness owed to Mr. Mead and his
affiliates.
Dividend policy........................... The Company does not expect to pay any dividends in
the foreseeable future. See "Dividend Policy".
Proposed Nasdaq National Market symbol.... "SLRI"
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting".
(2) Does not include shares of Common Stock reserved for issuance
pursuant to the Company's 1997 Stock Option Plan (as defined). See
"Management -- 1997 Stock Option Plan".
10
<PAGE> 13
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL, OPERATING AND
PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated historical financial information set forth below
has been derived from the consolidated financial statements of the Company which
have been restated giving effect to the Consolidation Transaction utilizing the
historical cost basis of the combined entities so as to present the consolidated
financial condition and operations since these entities were under common
ownership and control. The consolidated financial statements of the Company for
1995 and 1996 included herein were audited by Deloitte & Touche LLP. The
consolidated financial statements for 1994 included herein were audited by James
Smith & Company, P.C. The consolidated financial statements for 1992 and 1993
are unaudited.
The unaudited pro forma income statement data for 1996 gives effect to the
Offering and the application of the proceeds therefrom to the payment of all
amounts due to affiliates and notes payable to third parties at the beginning of
the period, subject to the assumptions stated in the related notes. The
unaudited as adjusted balance sheet data at December 31, 1996 gives effect to
the Offering and the application of the proceeds therefrom to the payment of
debt at December 31, 1996, subject to the assumptions stated in the notes. The
unaudited pro forma income statement and balance sheet data is not necessarily
indicative of what the actual results of operations or financial position of the
Company would have been, nor do they purport to represent the Company's results
of operations or financial position for future periods.
The Summary Consolidated Historical Financial, Operating and Pro Forma
Financial Information should be read in conjunction with the Consolidated
Financial Statements and notes thereto included herein, "Selected Consolidated
Historical Financial, Operating and Pro Forma Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
11
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
HISTORICAL PRO FORMA(A)
-------------------------------------------------------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1992 1993 1994 1995 1996 1996
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Vacation Interval sales......... $ 13,987 $ 19,607 $ 25,843 $ 35,885 $ 48,103 $ 48,103
Less provision for uncollectible
notes......................... (2,693) (3,249) (6,014) (9,144) (12,075) (12,075)
---------- ---------- ---------- ---------- ---------- ------------
Net Vacation Interval sales:...... 11,294 16,358 19,829 26,741 36,028 36,028
Interest income................. 542 1,029 1,633 3,968 6,297 6,297
Interest income from
affiliates.................... -- 70 252 393 377 --
Management fee income........... 2,265 3,613 2,394 2,478 2,187 2,187
Lease income.................... 428 512 1,137 1,310 1,717 1,717
Other income.................... 1,813 1,964 1,932 1,832 1,440 1,440
---------- ---------- ---------- ---------- ---------- ------------
16,342 23,546 27,177 36,722 48,046 47,669
Costs and Operating Expenses:
Cost of Vacation Interval
sales......................... 3,876 2,094 2,648 3,280 2,805 2,805
Sales and marketing............. 7,690 10,219 12,929 17,850 21,839 21,839
Operating, general and
administrative................ 2,475 6,109 5,336 8,062 8,970 9,720
Depreciation and amortization... 288 477 590 863 1,264 1,264
Interest expense to
affiliates.................... 383 664 885 1,403 880 --
Interest expense to unaffiliated
entities...................... 1,318 762 757 2,206 3,879 92
---------- ---------- ---------- ---------- ---------- ------------
Total costs and operating
expenses............... 16,030 20,325 23,145 33,664 39,637 35,720
---------- ---------- ---------- ---------- ---------- ------------
Income from continuing operations
before income taxes............. 312 3,221 4,032 3,058 8,409 11,949
Income tax expense................ 266 1,376 1,677 1,512 3,140 4,450
---------- ---------- ---------- ---------- ---------- ------------
Income from continuing
operations...................... 46 1,845 2,355 1,546 5,269 $ 7,499
========== ============
Income (loss) on discontinued
operations...................... -- (286) 568 (1,484) (295)
---------- ---------- ---------- ---------- ----------
Net income........................ $ 46 $ 1,559 $ 2,923 $ 62 $ 4,974
========== ========== ========== ========== ==========
Income per common share
from:(b)........................
Continuing operations........... $ $ $ $ $ $
============
Discontinued operations.........
---------- ---------- ---------- ---------- ----------
Net income per common share....... $ $ $ $ $
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding.....................
========== ========== ========== ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ----------
(DOLLARS IN THOUSANDS EXCEPT AVERAGE PRICE OF VACATION
INTERVALS SOLD)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(c).............................................. $ 2,301 $ 5,124 $ 6,264 $ 7,530 $ 14,433
Cash flows provided by (used in):
Operating activities................................. $ 1,672 $ 5,711 $ 2,496 $ 3,713 $ 6,375
Investing activities................................. (4,266) (6,121) (12,189) (19,604) (23,997)
Financing activities................................. 422 378 10,424 18,674 14,882
Number of Existing Resorts at period end............... 7 7 7 7 7
Number of Vacation Intervals sold (excluding
upgrades)............................................ 1,983 2,582 3,705 4,831 6,054
Number of upgraded Vacation Intervals sold............. 884 1,378 1,290 1,924 1,914
Number of Vacation Intervals in inventory.............. 7,218 5,615 5,943 6,600 6,221
Average price of Vacation Intervals sold (excluding
upgrades)............................................ $ 5,293 $ 5,554 $ 5,727 $ 5,881 $ 6,645
Average price of upgraded Vacation Intervals sold (net
of exchanged interval)............................... $ 3,949 $ 3,822 $ 3,585 $ 3,885 $ 4,113
Average price of all Vacation Intervals sold (including
upgrades)............................................ $ 7,054 $ 7,594 $ 6,975 $ 7,428 $ 7,946
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------
HISTORICAL AS ADJUSTED(D)
---------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (at end of period):
Cash and cash equivalents........................ $ 973 $ 4,953
Amounts due from affiliates...................... 6,237 1,569
Total assets..................................... 90,852 90,165
Amounts due to affiliates........................ 14,765 --
Notes payable and capital lease obligations...... 41,986 1,064
Total liabilities................................ 70,190 14,502
Shareholders' equity............................. 20,662 75,662
</TABLE>
- ---------------
(a) Assumes (i) the sale of shares of Common Stock offered hereby at
an offering price of $ per share, in the aggregate $60.0 million,
less the underwriting discounts and commissions and the payment by the
Company of the estimated offering expenses of $5.0 million; (ii) payment of
all amounts due to affiliates net of amounts due from affiliates and
elimination of the related interest; (iii) payment of all notes payable to
third parties and elimination of the related interest expense; (iv)
estimated annual additional costs to be incurred as a public company of
$750,000; and (v) adjustment of the provision for income taxes for the
effect of these pro forma adjustments.
(b) Gives retroactive effect to the pro forma Stock Split and increase in the
number of shares outstanding to million Common Shares at December 31,
1996.
(c) As shown below, EBITDA represents net income from continuing operations
before interest expense, income taxes and depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness. However, EBITDA
should not be construed as an alternative to net income as a measure of the
Company's operating results or to cash flows from operating activities
(determined in accordance with generally accepted accounting principles) as
a measure of liquidity. The following table reconciles EBITDA to net income
from continuing operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net income from continuing
operations......................... $ 46 $1,845 $2,355 $1,546 $ 5,269
Interest expense..................... 1,701 1,426 1,642 3,609 4,760
Income tax expense................... 266 1,376 1,677 1,512 3,140
Depreciation and amortization........ 288 477 590 863 1,264
------ ------ ------ ------ -------
EBITDA from continuing operations.... $2,301 $5,124 $6,264 $7,530 $14,433
====== ====== ====== ====== =======
</TABLE>
(d) As adjusted to give effect to the Offering and the application of the
proceeds therefrom as described in Note (a) as if the Offering and
application of the proceeds therefrom occurred at December 31, 1996.
13
<PAGE> 16
RISK FACTORS
Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus before
purchasing any of the shares of Common Stock offered hereby. Certain statements
in this Prospectus that are not historical fact constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Discussions containing such
forward-looking statements may be found in the material set forth in "Prospectus
Summary", "Use of Proceeds", "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Business", as well as within this Prospectus generally. In addition, when used
in this Prospectus, the words "believes", "anticipates", "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements as a result of
various factors, including the risk factors set forth below and the matters set
forth in this Prospectus generally.
SENSITIVITY OF CUSTOMERS TO GENERAL ECONOMIC CONDITIONS
The Company focuses exclusively on the economy segment of the timeshare
industry and markets primarily to households with annual incomes between $25,000
and $50,000. The Company's targeted customers are generally more vulnerable to
deteriorating economic conditions than consumers in the luxury or upscale
markets. Any economic downturn could depress spending for Vacation Intervals,
limit the availability or increase the cost of financing for the Company and its
customers, and adversely affect the collectibility of the Company's loans to
Vacation Interval buyers. Delinquencies, foreclosures and loan losses generally
increase during economic slowdowns and recessions. Similar adverse consequences
could result from significant increases in transportation costs. Any or all of
the foregoing could have a material adverse effect on the Company's results of
operations, liquidity and financial position.
CONCENTRATION
At December 31, 1996, all of the Company's resorts and substantially all of
the Company's customers and borrowers were located in Texas and Missouri. The
Company's performance and the value of its properties is affected by regional
factors, including local economic conditions (which may be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and the local regulatory climate. While the Company intends to
build new resorts in different locations, the Company's current concentration in
the Texas and Missouri markets could make the Company more susceptible to
adverse events or conditions which affect these areas in particular.
Because the Company's operations are conducted solely within the timeshare
industry, any adverse changes affecting the timeshare industry such as an
oversupply of timeshare units, a reduction in demand for timeshare units,
changes in travel and vacation patterns, changes in governmental regulations or
taxation of the timeshare industry, as well as negative publicity about the
timeshare industry, could have a material adverse effect on the Company's
results of operations, liquidity or financial position. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
BORROWER DEFAULTS
The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers make a down payment of at least 10% of the
purchase price and deliver a promissory note to the Company for the balance; the
promissory notes generally bear interest at a fixed rate, are payable over a
seven year period, and are secured by a first mortgage on the Vacation Interval.
The Company bears the risk of defaults on these promissory notes, and this risk
is heightened inasmuch as the Company generally does not verify the credit
history of its customers and will provide financing if the customer is presently
employed and meets certain household income criteria.
The Company's credit experience is such that in 1997 it plans to allocate
22% of the purchase price of each Vacation Interval to a bad debt reserve. If a
buyer of a Vacation Interval defaults, the Company generally must
14
<PAGE> 17
foreclose on the Vacation Interval and attempt to resell it; the associated
marketing, selling, and administrative costs from the original sale are not
recovered; and such costs must be incurred again to resell the Vacation
Interval. Although the Company, in many cases, may have recourse against a
Vacation Interval buyer for the unpaid price, the state of Texas and certain
other states have "anti-deficiency" laws which limit the Company's ability to
recover personal judgments against customers who have defaulted on their loans.
Accordingly, the Company has generally not pursued this remedy.
Prior to 1996, the Company sold customer promissory notes and mortgages to
third parties, generally with recourse, as a means of financing its operations.
As a result, the Company may be required to repurchase customer promissory notes
previously sold which become delinquent. The Company takes these contingent
obligations into account in establishing its allowance for uncollectible notes.
At December 31, 1996, the Company had notes receivable (including notes
unrelated to Vacation Intervals) in the approximate principal amount of $67.7
million, was contingently liable with respect to approximately $11.0 million
principal amount of customer notes sold with recourse and had an allowance for
doubtful notes of approximately $11.9 million. There can be no assurance that
such reserves are adequate. See Note 4 of Notes to Consolidated Financial
Statements.
FINANCING CUSTOMER BORROWINGS
While the Company intends to use the proceeds of the Offering to pay
existing indebtedness, it will be required to continue to borrow to sustain
operations.
Borrowing Base. The Company has entered into agreements with lenders to
borrow up to approximately $96 million collateralized by customer promissory
notes and mortgages. The Company's lenders typically lend the Company 70% of the
principal amount of performing notes, and Silverleaf Owners make payments on
their promissory notes directly to the lender's collection center, where
receipts are applied against the Company's loan balance. At December 31, 1996,
the Company had a portfolio of approximately 11,712 loans to Silverleaf Owners
in the approximate principal amount of $66.8 million, of which approximately
$7.9 million in principal amount of customer receivables were 60 days or more
past due and therefore ineligible as collateral. At such date, the Company had
borrowings from lenders in the approximate principal amount of $30.7 million
secured by the customer loans. Historically and currently, after taking into
account the amount of ineligible collateral and the 70% borrowing base, the
Company's borrowings have approached the maximum amount available under its
existing credit facilities. To the extent the Company generates additional
customer notes receivable through its sales efforts, such notes may be pledged
to lenders for additional borrowings, subject to the 70% advance rate.
Negative Cash Flow. The Company ordinarily receives only 10% of the
purchase price on the sale of a Vacation Interval but must pay in full the costs
of development, marketing, and sale of the Interval. Maximum borrowings
available under the Company's current credit agreements may not be sufficient to
cover these costs, thereby straining capital resources, liquidity, and capacity
to grow.
Interest Rate Mismatch. At December 31, 1996, the Company's portfolio of
customer loans had a weighted average fixed interest rate of 14.7%. At such
date, the Company's borrowings (which bear interest at variable rates) against
the portfolio had a weighted average cost of funds of 11.2%. The Company has
historically derived net interest income from its financing activities because
the interest rates it charges its customers who finance the purchase of their
Vacation Intervals exceed the interest rates the Company pays to its lenders.
Because the Company's indebtedness bears interest at variable rates and the
Company's customer receivables bear interest at fixed rates, increases in
interest rates will erode the spread in interest rates that the Company has
historically enjoyed and could cause the interest expense on the Company's
borrowings to exceed its interest income on its portfolio of customer loans. The
Company does not currently engage in interest rate hedging transactions.
Therefore, any increase in interest rates, particularly if sustained, could have
a material adverse effect on the Company's results of operations, liquidity and
financial position.
To the extent interest rates decrease generally on loans available to the
Company's customers, the Company faces an increased risk that customers will
pre-pay their loans and reduce the Company's income from financing activities.
See "Business -- Customer Financing".
15
<PAGE> 18
Maturity Mismatch. The Company typically provides financing to customers
over a seven year period which customer notes have an average maturity of 5.6
years. The Company's related revolving credit borrowings, however, mature
between October 1998 and August 2003, with most of such borrowings maturing in
1999. Accordingly, there is a mismatch between the Company's anticipated cash
receipts and cash disbursements. Although the Company has historically been able
to secure financing sufficient to fund its operations, it does not presently
have agreements with its lenders to extend the term of its existing funding
commitments or to replace such commitments upon their expiration. Failure to
obtain such refinancing facilities could require the Company to sell its
portfolio of customer loans, probably at a substantial discount, or to seek
other alternatives to enable it to continue in business. While the Company has
been successful in obtaining financing to date, there is no assurance it will be
able to do so in the future. See "-- Acceleration of Deferred Taxes; Alternative
Minimum Taxes".
Impact on Sales. Limitations on the availability of financing would inhibit
sales of Vacation Intervals due to (i) the lack of funds to finance the initial
negative cash flow that results from sales that are financed by the Company, and
(ii) reduced demand if the Company is unable to provide financing to purchasers
of Vacation Intervals.
LEVERAGE
The Company's future lending and development activities will likely be
financed with indebtedness obtained under the Company's existing credit
facilities or under credit facilities to be obtained by the Company in the
future. Such credit facilities are and would likely be collateralized by Company
assets and contain restrictive covenants. Among other consequences, terms of the
Company's debt instruments could impair the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, significant business opportunities that may arise, general
corporate purposes or other purposes. In addition, if the Company were to incur
additional indebtedness, this could increase its vulnerability to adverse
general economic and timeshare industry conditions and to increased competitive
pressures. Finally, creditors' claims against the Company will be paid in full
before the claims of shareholders in the event of a liquidation, bankruptcy or
winding up of the Company. See "Business -- Existing Credit Facilities".
COMPETITION
The timeshare industry is highly fragmented and includes a large number of
local and regional resort developers and operators. However, some of the world's
most recognized lodging, hospitality and entertainment companies, such as,
Marriott Ownership Resorts ("Marriott"), The Walt Disney Company ("Disney"),
Hilton Hotels Corporation ("Hilton") and Hyatt Corporation ("Hyatt"), have
recently entered the industry. Other companies in the timeshare industry,
including Signature Resorts, Inc. ("Signature"), Fairfield Communities, Inc.
("Fairfield"), Vacation Break USA, Inc. ("Vacation Break"), Vistana, Inc.
("Vistana") and Ramada Vacation Suites ("Ramada"), a subsidiary of Mego
Financial Corporation, are public companies with enhanced access to capital and
other resources.
Fairfield and Signature own timeshare resorts in or near Branson, Missouri,
which compete with the Company's Holiday Hills and Ozark Mountain Resorts, and
Signature owns a resort which is located near and competes with the Company's
Piney Shores Resort. Based on published industry data and reports, except for
Fairfield and Signature, the Company does not believe that any of the
competitors named above own timeshare resorts in Texas or Missouri and believes
that such competitors generally target consumers with higher annual incomes than
the Company. Nonetheless, competitors may possess significantly greater
financial, marketing, personnel and other resources than the Company, and there
can be no assurance that such competitors will not significantly reduce the
price of their Vacation Intervals or offer greater convenience, services or
amenities than the Company.
While the Company's principal competitors are developers of timeshare
resorts, the Company is also subject to competition from other entities engaged
in the commercial lodging business, including condominiums, hotels and motels;
others engaged in the leisure business; and, to a lesser extent, from
campgrounds, recreational vehicles, tour packages and second home sales. A
reduction in the product costs associated with any of these
16
<PAGE> 19
competitors, or an increase in the Company's costs relative to such competitors'
costs, could have a material adverse effect on the Company's results of
operations, liquidity and financial position.
Numerous businesses, individuals and other entities will compete with the
Company in seeking properties for development and acquisition of resorts. Some
of these competitors will be larger and have greater financial resources than
the Company. Such competition may result in a higher cost for properties the
Company wishes to acquire or may cause the Company to be unable to acquire
suitable properties for the development of new resorts.
DEVELOPMENT, CONSTRUCTION AND PROPERTY ACQUISITION ACTIVITIES
The Company intends to selectively develop and acquire new resorts and
continue the expansion of the Existing Resorts. Acquiring and developing new
resorts will place substantial demands on the Company's liquidity and capital
resources, as well as on its personnel and administrative capabilities. Risks
associated with the Company's development and construction activities include
the following: construction costs or delays at a property may exceed original
estimates, possibly making the expansion or development uneconomical or
unprofitable; sales of Vacation Intervals at a newly completed property may not
be sufficient to make the property profitable; and financing may be unavailable
or may not be available on favorable terms for development of, or the continued
sales of Vacation Intervals at, a property. There can be no assurance the
Company will develop and acquire new resorts or expand the Existing Resorts. The
Company does not and upon the consummation of the Offering will not have the
financing available to complete all of its planned expansion as set forth in
"Business -- Summary of the Company's Resorts".
In addition, the Company's development and construction activities, as well
as its ownership and management of real estate, are subject to comprehensive
federal, state and local laws regulating such matters as environmental and
health concerns, protection of endangered species, water supplies, zoning, land
development, land use, building design and construction, marketing and sales,
and other matters. Such laws and difficulties in obtaining, or failing to
obtain, the requisite licenses, permits, allocations, authorizations and other
entitlements pursuant to such laws could impact the development, completion, and
sale of the Company's projects. See "-- Regulation of Marketing and Sales or
Vacation Intervals and Related Laws". The enactment of "slow growth" or
"no-growth" initiatives or changes in labor or other laws in any area where the
Company's projects are located could also delay, affect the cost or feasibility
of, or preclude entirely the expansion planned at each of the Existing Resorts
or the development of other resorts.
The Company's resorts are located in rural areas, often requiring the
Company to provide public utility water and sanitation services in order to
proceed with development. Such activities are subject to permission and
regulation by governmental agencies, the denial or conditioning of which could
limit or preclude development. Operation of the utilities also subjects the
Company to risk of liability in connection with both the quality of fresh water
provided and the treatment and discharge of waste water. See
"Business -- Government Regulation".
While the Company's construction activities typically are performed by
third-party contractors whose performance cannot be assured by the Company,
construction claims may be asserted against the Company for construction defects
and such claims may give rise to liabilities. Certain state and local laws may
impose liability on property developers with respect to construction defects
discovered or repairs made by future owners of such property.
See "Business -- Business Strategy" and "-- Acquisition and Development
Process", "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a large extent upon the experience and
abilities of Mr. Mead, Sharon K. Brayfield, and David T. O'Connor, the Company's
Chief Executive Officer, President, and Executive Vice President -- Sales,
respectively. The loss of the services of any one of these key individuals could
have a material adverse effect on the Company's results of operations, liquidity
or financial position. See "Management -- Employment and Noncompetition
Agreements". The Company's success is also dependent upon its ability to attract
and maintain qualified acquisition, development, marketing, management,
administrative and sales
17
<PAGE> 20
personnel. The ability to attract such personnel will become particularly
important as the Company grows and develops additional resorts, and there can be
no assurance that the Company will be successful in attracting and/or retaining
such personnel.
REGULATION OF MARKETING AND SALES OF VACATION INTERVALS AND RELATED LAWS
The Company's marketing and sales of Vacation Intervals and other
operations are subject to extensive regulation by the federal government and the
states and jurisdictions in which the Existing Resorts are located and in which
Vacation Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-in-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Settlement Procedures Act, the Consumer Credit
Protection Act, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act and the Civil
Rights Acts of 1964 and 1968.
In addition, many states, including Texas and Missouri (the only states in
which the Company owns resorts), have adopted specific laws and regulations
regarding the sale of Vacation Interval ownership programs. The laws of most
states, including Texas, require the Company to file with a designated state
authority for its approval a detailed offering statement describing the Company
and all material aspects of the project and the sale of Vacation Intervals prior
to selling to residents of that state. The laws of these states require the
Company to file numerous documents and supporting information with the state
agency responsible for the regulation of Vacation Intervals. When the agency
determines that a project may be sold, it will issue a public report for the
project. The Company is required to deliver an offering statement or public
report to all prospective purchasers of a Vacation Interval who are Texas
residents, together with certain additional information concerning the terms of
the purchase, regardless of whether the resort is located in Texas. In Missouri,
the Company is required to make certain disclosures in its sales documents. Laws
in each state where the Company currently sells Vacation Intervals generally
grant the purchaser of a Vacation Interval the right to cancel a contract of
purchase at any time within approximately five calendar days following the date
the contract was signed by the purchaser. Most states have other laws which
regulate the Company's activities and protect purchasers, such as real estate
licensure laws; travel sales licensure laws; anti-fraud laws; consumer
protection laws; telemarketing laws; prize, gift and sweepstakes laws; and
"anti-deficiency" laws.
The Company believes it is in material compliance with federal, Texas, and
Missouri laws and regulations to which it is currently subject relating to the
sale and marketing of timeshare resorts. However, the Company is normally and
currently the subject of a number of consumer complaints generally relating to
marketing or sales practices filed with relevant authorities, and there can be
no assurance that all of these complaints can be resolved without adverse
regulatory actions or other consequences. The Company expects some level of
consumer complaints in the ordinary course of its business as the Company
targets audiences which generally are less financially sophisticated and more
susceptible to intensive sales practices than more affluent customers. There can
be no assurance that the costs of resolving consumer complaints or of qualifying
under Vacation Interval ownership regulations in all jurisdictions in which the
Company desires to conduct sales will not be significant, that the Company is in
material compliance with applicable federal, Texas, Missouri, or other laws and
regulations, or that violations of law will not have adverse implications for
the Company, including negative public relations, potential litigation, and
regulatory sanctions. The expense, negative publicity, and potential sanctions
associated with the failure to comply with applicable laws or regulations could
have a material adverse effect on the Company's results of operations,
liquidity, or financial position. See "Business -- Governmental Regulation".
Prior to the advent of the current level of government regulation, and
continuing sporadically to the present, the timeshare industry has been
afflicted with negative publicity and prosecutorial attention due, among other
things, to marketing practices which were widely viewed as deceptive or
fraudulent. Among the many timeshare companies which have been the subject of
federal, state and local enforcement actions and investigations were certain of
the Affiliated Companies and their affiliates. Some of the settlements,
injunctions and decrees resulting from litigation and enforcement actions (the
"Orders") to which certain of the Affiliated Companies consented
18
<PAGE> 21
purport to bind all successors and assigns, and accordingly bind the Company. In
addition, the Company was directly a party to one such Order issued in Missouri.
These Orders require, among other things, that all parties bound by the Orders,
including the Company, refrain from engaging in deceptive sales practices in
connection with the offer and sale of Vacation Intervals. In one case in 1988,
an Affiliated Company pled guilty to deceptive uses of the mails in connection
with promotional sales literature mailed to prospective timeshare purchasers and
agreed to pay a judicially imposed fine of $1.5 million and restitution of
$100,000. The requirements of the Orders are substantially what applicable state
and federal laws and regulation mandate, but the consequence of violating the
Order may be that sanctions (including possible financial penalties and
suspension or loss of licensure) may be imposed more summarily and may be
harsher than would be the case if the Orders did not bind the Company. In
addition, the existence of the Orders may be viewed negatively by prospective
regulators in jurisdictions where the Company does not now do business, with
attendant risks of increased costs and reduced opportunities.
In March 1997, the Company entered into an Assurance of Voluntary
Compliance with the Texas Attorney General, in which the Company agreed to make
additional disclosure to purchasers of Vacation Intervals regarding the limited
availability of its Endless Escape program during certain periods. The Company
paid $15,200 for investigatory costs and attorneys' fees of the Attorney General
in connection with this matter. Also, in March 1997, the Company entered into an
agreed order (the "Agreed Order") with the Texas Real Estate Commission
requiring the Company to comply with certain aspects of the Texas Timeshare Act,
Texas Real Estate License Act and Rules of the Texas Real Estate Commission,
with which it had allegedly been in non-compliance until mid-1995. The
allegations included (i) the Company's admitted failure to register the Missouri
Destination Resorts in Texas due to its misunderstanding of the reach of the
Texas Timeshare Act; (ii) payment of referral fees for Vacation Interval sales,
the receipt of which was improper on the part of the recipients; and (iii)
miscellaneous other actions alleged to violate the Texas Timeshare Act, which
the Company denied. While the Agreed Order acknowledges that Silverleaf
independently resolved ten consumer complaints referenced in the Agreed Order,
discontinued the practices complained of, and had registered the Destination
Resorts during 1995 and 1996, the Texas Real Estate Commission ordered
Silverleaf to cease its discontinued practices and enhance its disclosure to
purchasers of Vacation Intervals. In the Agreed Order, Silverleaf agreed to make
a voluntary donation of $30,000 to the State of Texas. The Agreed Order also
directs Silverleaf to revise its training manual for timeshare salespersons and
verification officers. The Agreed Order resolved all of the alleged violations
contained in complaints received by the Commission through December 31, 1996.
See "Business -- Governmental Regulation".
COSTS OF COMPLIANCE WITH LAWS GOVERNING ACCESSIBILITY OF FACILITIES TO DISABLED
PERSONS
A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act (the "ADA"), impose requirements related to
access and use by disabled persons of a variety of public accommodations and
facilities. The ADA requirements did not become effective until after January 1,
1991. Although the Company believes the Existing Resorts are substantially in
compliance with laws governing the accessibility of its facilities to disabled
persons, the Company may incur additional costs of complying with such laws.
Additional federal, state and local legislation may impose further burdens or
restrictions on the Company, the Clubs, or the Master Club at the Existing
Resorts with respect to access by disabled persons. The ultimate cost of
compliance with such legislation is not currently ascertainable, and, while such
costs are not expected to have a material effect on the Company's results of
operations, liquidity or capital resources, such costs could be substantial.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local laws, ordinances and regulations, as
well as common law, the owner or operator of real property generally is liable
for the costs of removal or remediation of certain hazardous or toxic substances
located on, in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of the
hazardous or toxic substances. The presence of such substances, or the failure
to properly remediate such substances, may adversely affect the owner's ability
to sell or lease a property or to borrow money
19
<PAGE> 22
using such real property as collateral. Other federal and state laws require the
removal or encapsulation of asbestos-containing material when such material is
in poor condition or in the event of construction, demolition, remodeling or
renovation. Other statutes may require the removal of underground storage tanks.
Noncompliance with these and other environmental, health or safety requirements
may result in the need to cease or alter operations at a property. Further, the
owner or operator of a site may be subject to common law claims by third parties
based on damages and costs resulting from violations of environmental
regulations or from contamination associated with the site. Phase I
environmental reports (which typically involve inspection without soil sampling
or ground water analysis) were prepared in 1994 by independent environmental
consultants for each Existing Resort and did not reveal, nor is the Company
aware of, any environmental liability that would have, a material adverse effect
on the Company's results of operations, liquidity or financial position. No
assurance, however, can be given that these reports reveal all environmental
liabilities or that no prior owner created any material environmental condition
not known to the Company.
Certain environmental laws impose liability on a previous owner of property
to the extent hazardous or toxic substances were present during the prior
ownership period. A transfer of the property may not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by it or by its predecessors.
The Company owns its own water supply facilities and waste-water treatment
plant at several of its resorts. The Texas Natural Resources Conservation
Commission ("TNRCC") is the primary state umbrella agency regulating the
utilities at the Home Resorts in Texas, and the Department of Natural Resources
and the Public Service Commission of Missouri are the primary state umbrella
agencies regulating such utilities at the Destination Resorts in Missouri. As a
result of an enforcement proceeding brought against the Company by TNRCC in
connection with a waste-water facility at the Holly Lake Resort, the Company is
in the process of expanding the existing waste-water facility. See
"Business -- Government Regulation".
The Company believes that it is in compliance in all material respects with
all federal, state and local ordinances and regulations regarding hazardous or
toxic substances. Other than in connection with the waste-water proceedings
mentioned above, the Company has not been notified by any governmental authority
or third party of any non-compliance, liability or other claim in connection
with any of its present or former properties. See "Business -- Governmental
Regulation -- Environmental Matters".
DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORKS; POSSIBLE INABILITY TO QUALIFY
RESORTS
The attractiveness of Vacation Interval ownership is enhanced by the
availability of exchange networks that allow Silverleaf Owners to exchange in a
particular year the occupancy right in their Vacation Interval for an occupancy
right in another participating network resort. According to ARDA, the ability to
exchange Vacation Intervals was cited by many buyers as an important reason for
purchasing a Vacation Interval. Several companies, including RCI, provide
broad-based Vacation Interval exchange services, and all of the Company's
Existing Resorts are currently qualified for participation in the RCI exchange
network. However, no assurance can be given that the Company will continue to be
able to qualify the Existing Resorts or future resorts for participation in the
RCI network or any other exchange network. If such exchange networks cease to
function effectively, or if the Company's resorts are not accepted as exchanges
for other desirable resorts, the Company's sales of Vacation Intervals could be
materially adversely affected. See "Business -- Participation in Vacation
Interval Exchange Networks".
RESALE MARKET FOR VACATION INTERVALS
Based on its experience at the Existing Resorts, the Company believes the
market for resale of Vacation Intervals by the owners of such intervals is very
limited and that resale prices are substantially below their original purchase
price. This may make ownership of Vacation Intervals less attractive to
prospective buyers. Also, attempts by buyers to resell their Vacation Intervals
compete with sales of Vacation Intervals by the Company. While Vacation Interval
resale clearing houses or brokers do not currently have a material impact, if
the secondary market for Vacation Intervals were to become more organized and
liquid, the availability of resale intervals at lower prices could materially
adversely affect the prices and number of sales of new Vacation Intervals by the
Company.
20
<PAGE> 23
SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS
Sales of Vacation Intervals have generally been lower in the months of
November and December. Cash flow and earnings may be impacted by the timing of
development, the completion of future resorts, and the potential impact of
weather or other conditions in the regions where the Company operates. The above
may cause significant variations in quarterly operating results. See "-- Natural
Disasters; Uninsured Loss" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
NATURAL DISASTERS; UNINSURED LOSS
There are certain types of losses (such as losses arising from floods and
acts of war) that are not generally insured because they are either uninsurable
or not economically insurable and for which neither the Company nor the Clubs,
nor the Master Club have insurance coverage. Should an uninsured loss or a loss
in excess of insured limits occur, the Company could lose its capital invested
in a resort, as well as the anticipated future revenues from such resort and
would continue to be obligated on any mortgage indebtedness or other obligations
related to the property. Any such loss could have a material adverse effect on
the Company's results of operations, liquidity or financial position. See
"Business -- Insurance, Legal Proceedings".
ACCELERATION OF DEFERRED TAXES; ALTERNATIVE MINIMUM TAXES
While the Company reports sales of Vacation Intervals as income currently
for financial reporting purposes (see Note 2 of Notes to Consolidated Financial
Statements), for regular federal income tax purposes the Company reports
substantially all Vacation Interval sales on the installment method. Under the
installment method, the Company recognizes income for tax on the sale of the
Vacation Interval when cash is received in the form of a down payment and as
payments on customer loans are received. The Company's December 31, 1996 balance
sheet reflected a liability for deferred taxes (i.e., taxes owed to taxing
authorities in the future in consequence of income previously reported in the
financial statements) of $4.8 million, primarily attributable to this method of
reporting Vacation Interval sales. This amount does not include accrued interest
on such deferred taxes which also will be payable when the taxes are due, the
amount of which is not now reasonably ascertainable. If the Company should sell
the installment notes or be required to factor them or if the notes were
foreclosed on by a lender of the Company or otherwise disposed of, the deferred
gain would be reportable for tax and the deferred taxes, including interest on
the taxes for the period the taxes were deferred, as computed under Section 453
of the Internal Revenue Code of 1986, as amended (the "Code"), would become due.
There can be no assurance that the Company would have sufficient cash resources
to pay those taxes and interest. Furthermore, if the Company's sales of Vacation
Intervals should decrease in the future, the Company's diminished operations may
not generate either sufficient tax losses to offset taxable income or funds to
pay the deferred tax liability from prior periods. See "-- Limitations on Use of
Net Operating Loss From Ownership Change".
The Company has also used the installment method for the calculation of
adjusted current earnings for federal alternative minimum tax purposes, although
the accrual method is required under the Code. This has resulted in current
income taxes payable of approximately $3.65 million as reflected on the
Company's December 31, 1996 balance sheet. The Company will submit a request to
the Internal Revenue Service for permission to change to the accrual method for
this computation. If granted, the current estimated taxes of approximately $3.65
million will become payable during 1997 through 1999. Although the Company
believes the Internal Revenue Service will give its permission, there is no
assurance that it will, and if not granted, the Company will currently owe those
taxes plus interest and potential penalties.
LIMITATIONS ON USE OF NET OPERATING LOSS FROM OWNERSHIP CHANGE
The Company estimates that it had net operating loss carryforwards of
approximately $14 million at December 31, 1996, for regular federal income tax
purposes related primarily to losses associated with the deferral of installment
sale gains. In addition to the general limitations on the carryback and
carryforward of net operating losses under Section 172 of the Code, Section 382
of the Code imposes additional limitations on the utilization of a net operating
loss by a corporation following various types of ownership changes which result
in more than a 50 percentage point change in ownership of a corporation within a
three year period. Mr. Mead
21
<PAGE> 24
owned 100% of the stock of the Company until December 29, 1995, at which time
his ownership decreased to approximately 99%. As a result of the Offering, Mr.
Mead's ownership of the Company will decrease such that he will own
approximately % to % of the Company after the Offering. Thereafter,
Mr. Mead could transfer his shares and/or the Company could issue additional
shares or grant stock options, which could result in more than a 50 percentage
point change in his ownership of the Company. If such a subsequent change occurs
within a three year period, the limitations of Section 382 would apply and may
limit or deny the future utilization of the net operating loss by the Company,
resulting in the Company paying substantial additional federal and state taxes
and interest for any periods following such change in ownership. See
"Acceleration of Deferred Taxes".
TAX RE-CLASSIFICATION OF INDEPENDENT CONTRACTORS AND RESULTING TAX LIABILITY
Although all on-site sales personnel are treated as employees of the
Company for payroll tax purposes, the Company does have independent contractor
agreements with certain sales, marketing, and architectural persons or entities.
The Company has not treated these independent contractors as employees;
accordingly, the Company does not withhold payroll taxes from the amounts paid
to such persons or entities. In the event the Internal Revenue Service or any
state or local taxing authority were to successfully classify such persons or
entities as employees of the Company, rather than as independent contractors,
and hold the Company liable for back payroll taxes, such action may have a
material adverse effect on the Company's results of operations, liquidity or
financial position.
VOTING CONTROL BY EXISTING SHAREHOLDERS
Upon consummation of the Offering, Mr. Mead will hold a majority of the
Common Stock (approximately %), which will allow him to elect all of the
Company's directors and control the management and affairs of the Company. Also,
Mr. Mead will have sufficient voting power, in general, to determine the outcome
of various matters submitted to the shareholders for approval, including
mergers, consolidations, and the sale of substantially all of the Company's
assets. See "Principal Shareholders" and "Description of Capital Stock". Such
control may result in decisions which are not in the best interest of the
Company.
BENEFITS TO OFFICERS AND OTHER PERSONS; REPAYMENT OF INDEBTEDNESS OWED TO
OFFICERS, AFFILIATES AND UNDERWRITERS
Mr. Mead will realize benefits from the Offering that will not be received
by other persons participating in the Offering. Such benefits include the
repayment by the Company of indebtedness owed to Mr. Mead and his affiliates.
Thus, Mr. Mead has interests that conflict with the interests of persons
acquiring Common Stock in the Offering. Mr. Mead and his affiliates will receive
approximately $10.1 million of the net proceeds of the Offering for the
repayment of debt owed by the Company to him and his affiliates. See "Certain
Relationships and Related Transactions -- Repayment of Affiliated Debt",
"Principal Shareholders", and "Management -- Employment and Noncompetition
Agreements".
CS First Boston Mortgage Capital Corp., an affiliate of Credit Suisse First
Boston Corporation, the lead managing underwriter for the Offering, will receive
approximately $5.5 million of the net proceeds of the Offering as repayment of
indebtedness and related interest expected to be outstanding upon consummation
of the Offering. See "Underwriting".
ANTI-TAKEOVER EFFECT OF THE COMPANY'S CHARTER AND BYLAWS
Certain provisions of the Company's articles of incorporation (the
"Charter") and bylaws (the "Bylaws"), may be deemed to have anti-takeover
effects and may delay, defer or prevent a takeover attempt that a shareholder
might consider to be in the shareholder's best interest. For example, such
provisions may (i) deter tender offers for Common Stock, which offers may be
beneficial to shareholders, or (ii) deter purchases of large
22
<PAGE> 25
blocks of Common Stock, thereby limiting the opportunity for shareholders to
receive a premium for their Common Stock over then-prevailing market prices.
These provisions include the following:
Preferred Shares. The Charter authorizes the Board of Directors to
issue Preferred Stock in one or more series and to establish the
preferences and rights (including the right to vote and the right to
convert into Common Stock) of any series of Preferred Stock issued. No
Preferred Stock will be issued or outstanding as of the consummation of the
Offering. See "Description of Capital Stock -- Preferred Stock".
Classified Board. The Board of Directors of the Company will have
three classes of directors, and directors will be elected for three year
terms, with approximately one-third of the directors elected each year. The
terms of the first, second and third classes will expire in 1998, 1999 and
2000, respectively. The affirmative vote of two-thirds of the outstanding
Common Stock is required to remove a director.
IMMEDIATE AND SUBSTANTIAL DILUTION; NO ANTICIPATED DIVIDENDS
Purchasers of Common Stock in the Offering will experience immediate
dilution in net tangible book value per share of Common Stock of $ from the
initial public offering price per share. See "Dilution". In addition, the
Company does not anticipate that it will pay any dividends on its Common Stock
in the foreseeable future. See "Dividend Policy".
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, all the shares of Common Stock
offered hereby will be eligible for public sale under the Securities Act without
restriction, except for shares acquired in the Offering by "affiliates" of the
Company, as that term is defined in Rule 144 promulgated under the Securities
Act. In addition, all shares held by affiliates will be eligible for public sale
under Rule 144, subject to the Rule's volume, manner of sale and other
restrictions. In addition, the Company has the authority to issue additional
shares of Common Stock and shares of one or more series of Preferred Stock. The
Company intends to register shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Stock Option Plan as soon as practicable
following the consummation of the Offering. The issuance of such shares could
result in the dilution of voting power of the shares of Common Stock purchased
in the Offering and could have a dilutive effect on earnings per shares. The
Company currently has no plans to designate and/or issue any shares of Preferred
Stock. Future sales of substantial amounts of Common Stock, or the potential for
such sales, could adversely affect prevailing market prices.
The Company and its officers, directors and current shareholders each have
agreed that they will not, without the prior written consent of Credit Suisse
First Boston Corporation, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock or in any
other manner transfer all or a portion of the economic consequences associated
with the ownership of such Common Stock for a period of 180 days from the date
of this Prospectus.
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no prior public market for the Company's Common Stock.
Although application has been made for listing of the Common Stock on the Nasdaq
National Market, there can be no assurance that a viable public market for the
Common Stock will develop or be sustained after the Offering or that purchasers
of the Common Stock will be able to resell their Common Stock at prices equal to
or greater than the initial public offering price. The initial public offering
price will be determined by negotiations between the Company and the
representative of the Underwriters and may not be indicative of the prices that
may prevail in the public market after the Offering is completed. See
"Underwriting". Numerous factors, including announcements of fluctuations in the
Company's or its competitors' operating results and market conditions for
hospitality and timeshare industry stocks in general, could have a significant
impact on the future price of the Common Stock. In addition, the stock market in
recent years has experienced significant price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies. These broad fluctuations may adversely affect the market price of the
Common Stock.
23
<PAGE> 26
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be $ million
($ million if the Underwriters' over-allotment option is exercised in
full), based on the initial public offering price of $ per share, after
deducting underwriting discounts and commissions and estimated expenses of the
Offering. The Company intends to use approximately $ of the net
proceeds to repay outstanding indebtedness and accrued interest, including $10.1
million to Mr. Mead and his affiliates and $5.5 million to CS First Boston
Mortgage Capital Corp., an affiliate of Credit Suisse First Boston Corporation,
the lead managing underwriter for the Offering. See "Certain Relationships and
Related Transactions -- Repayment of Affiliated Debt" and "Underwriting".
Indebtedness to be repaid out of the net proceeds from the Offering bears
interest at rates currently ranging from 6% to 11% per annum and matures at
various times over the next seven years. The balance of the net proceeds of
approximately $ million is intended to be used for working capital and other
general corporate purposes. Pending any such additional uses, the Company will
invest the excess proceeds in commercial paper, bankers' acceptances, other
short-term investment-grade securities and money-market accounts.
DIVIDEND POLICY
The Company does not intend to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain future earnings
to finance its operations and fund the growth of its business. Any payment of
future dividends will be at the discretion of the Board of Directors of the
Company and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
and other restrictions in respect of the payment of dividends, and other factors
that the Company's Board of Directors deems relevant. See "Business -- Existing
Credit Facilities".
24
<PAGE> 27
CAPITALIZATION
The following table sets forth at December 31, 1996, the consolidated
capitalization of the Company on an actual basis and as adjusted to give effect
to the Offering and the payment of all amounts due to affiliates and notes
payable to third parties with the proceeds thereof. This table should be read in
conjunction with "Use of Proceeds", the Consolidated Financial Statements and
the notes thereto, "Selected Consolidated Historical Financial, Operating and
Pro Forma Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(A)
-------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Amounts due to affiliates (net of $4,668 due from
affiliates)............................................ $ 10,097 $ --
Notes payable and capital lease obligations............... 41,986 1,064
-------- --------
Total indebtedness........................................ 52,083 1,064
Shareholders' equity:
Common Stock, $0.01 par value; 10,696 shares issued and
outstanding, and pro forma shares as adjusted for
the Offering(b)........................................ 1 1
Additional paid-in capital................................ 13,546 68,546
Retained earnings......................................... 7,115 7,115
-------- --------
Total shareholders' equity................................ 20,662 75,662
-------- --------
Total capitalization.............................. $ 72,745 $ 76,726
======== ========
</TABLE>
- ---------------
(a) Adjusted to give effect to the sale of shares of Common
Stock offered hereby at an offering price of $ per share, in the
aggregate $60.0 million, less the underwriting discounts and commissions
and the payment by the Company of the estimated offering expenses of $5.0
million, and the payment of all amounts due to affiliates and notes payable
to third parties. See "Selected Consolidated Historical Financial,
Operating and Pro Forma Financial Information".
(b) Does not include an aggregate shares of Common Stock
reserved for issuance pursuant to the Company's 1997 Stock Option Plan and
shares of Common Stock which the Underwriters may purchase
pursuant to their over-allotment option. See "Management -- 1997 Stock
Option Plan" and "Underwriting".
25
<PAGE> 28
DILUTION
The net tangible book value of the Company at December 31, 1996, was
approximately $ million, or $ per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities, divided by the total number of outstanding shares of Common
Stock. After giving effect to the sale of shares of Common Stock
offered by the Company hereby and the application of the net proceeds therefrom,
the pro forma net tangible book value of the Company at December 31, 1996, would
have been approximately $ million or $ per share of Common Stock. This
represents an immediate increase in such net tangible book value of $ per
share to the existing shareholders of the Company and an immediate dilution in
net tangible book value of $ per share to purchasers of Common Stock in the
Offering. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Public offering price per share............................. $
Net tangible book value per share before the Offering..... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after the
Offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table sets forth, as of December 31, 1996, after giving
effect to the Offering, the number of shares of Common Stock purchased, the
total consideration paid therefor and the average price paid per share by the
existing shareholders of the Company and the purchasers of Common Stock in the
Offering, respectively. The following table does not give effect to an aggregate
of shares of Common Stock reserved for issuance pursuant to the
Company's 1997 Stock Option Plan, and does not include shares of
Common Stock which the Underwriters may purchase pursuant to their
over-allotment option. See "Management -- Executive Compensation" and
"Underwriting".
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders................. % $ % $
------- ----- -------- ----- --------
New investors......................... $
------- ----- -------- ----- --------
Total....................... % $ %
======= ===== ======== =====
</TABLE>
26
<PAGE> 29
SELECTED CONSOLIDATED HISTORICAL FINANCIAL, OPERATING AND
PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated historical financial information set forth below
has been derived from the consolidated financial statements of the Company which
have been restated giving effect to the Consolidation Transaction utilizing the
historical cost basis of the combined entities so as to present the consolidated
financial condition and operations since these entities were under common
ownership and control. The consolidated financial statements of the Company for
1995 and 1996 included herein were audited by Deloitte & Touche LLP. The
consolidated financial statements for 1994 included herein were audited by James
Smith & Company, P.C. The consolidated financial statements for 1992 and 1993
are unaudited.
The unaudited pro forma income statement data for 1996 gives effect to the
Offering and the application of the proceeds therefrom to the payment of all
amounts due to affiliates and notes payable to third parties at the beginning of
the period, subject to the assumptions stated in the related notes. The
unaudited as adjusted balance sheet as of December 31, 1996 gives effect to the
Offering and the application of the proceeds therefrom to the payment of debt as
of the last day of the period presented subject to the assumptions stated in the
related notes. The unaudited pro forma income statement and balance sheet data
is not necessarily indicative of what the actual results of operations or
financial position of the Company would have been, nor do they purport to
represent the Company's results of operations or financial position for future
periods.
The Selected Consolidated Historical Financial, Operating and Pro Forma
Financial Information should be read in conjunction with the Consolidated
Financial Statements and notes thereto included herein and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
27
<PAGE> 30
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
HISTORICAL PRO FORMA(A)
-------------------------------------------------------------- ------------
1992 1993 1994 1995 1996 1996
---------- ---------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Vacation Interval sales.......... $ 13,987 $ 19,607 $ 25,843 $ 35,885 $ 48,103 $ 48,103
Less provision for uncollectible
notes.......................... (2,693) (3,249) (6,014) (9,144) (12,075) (12,075)
---------- ---------- ---------- ---------- ---------- ----------
Net Vacation Interval sales:....... 11,294 16,358 19,829 26,741 36,028 36,028
Interest income.................. 542 1,029 1,633 3,968 6,297 6,297
Interest income from
affiliates..................... -- 70 252 393 377 --
Management fee income............ 2,265 3,613 2,394 2,478 2,187 2,187
Lease income..................... 428 512 1,137 1,310 1,717 1,717
Other income..................... 1,813 1,964 1,932 1,832 1,440 1,440
---------- ---------- ---------- ---------- ---------- ----------
16,342 23,546 27,177 36,722 48,046 47,669
Costs and Operating Expenses:
Cost of Vacation Interval
sales.......................... 3,876 2,094 2,648 3,280 2,805 2,805
Sales and marketing.............. 7,690 10,219 12,929 17,850 21,839 21,839
Operating, general and
administrative................. 2,475 6,109 5,336 8,062 8,970 9,720
Depreciation and amortization.... 288 477 590 863 1,264 1,264
Interest expense to affiliates... 383 664 885 1,403 880 --
Interest expense to unaffiliated
entities....................... 1,318 762 757 2,206 3,879 92
---------- ---------- ---------- ---------- ---------- ----------
Total costs and operating
expenses................ 16,030 20,325 23,145 33,664 39,637 35,720
---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations
before income taxes.............. 312 3,221 4,032 3,058 8,409 11,949
Income tax expense................. 266 1,376 1,677 1,512 3,140 4,450
---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations....................... 46 1,845 2,355 1,546 5,269 $ 7,499
========== ==========
Income (loss) on discontinued
operations....................... -- (286) 568 (1,484) (295)
---------- ---------- ---------- ---------- ----------
Net income......................... $ 46 $ 1,559 $ 2,923 $ 62 $ 4,974
========== ========== ========== ========== ==========
Income per common share from:(b)...
Continuing operations............ $ $ $ $ $ $
==========
Discontinued operations..........
---------- ---------- ---------- ---------- ----------
Net income per common share........ $ $ $ $ $
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding......................
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE PRICE
OF VACATION INTERVALS SOLD)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(c)............................................ $ 2,301 $ 5,124 $ 6,264 $ 7,530 $ 14,433
Cash flows provided by (used in)
Operating activities............................... $ 1,672 $ 5,711 $ 2,496 $ 3,713 $ 6,375
Investing activities............................... (4,266) (6,121) (12,189) (19,604) (23,997)
Financing activities............................... 422 378 10,424 18,674 14,882
Number of Existing Resorts at period end............. 7 7 7 7 7
Number of Vacation Intervals sold (excluding
upgrades).......................................... 1,983 2,582 3,705 4,831 6,054
Number of upgraded Vacation Intervals sold........... 884 1,378 1,290 1,924 1,914
Number of Vacation Intervals in inventory............ 7,218 5,615 5,943 6,600 6,221
Average price of Vacation Intervals sold (excluding
upgrades).......................................... $ 5,293 $ 5,554 $ 5,727 $ 5,881 $ 6,645
Average price of upgraded Vacation Intervals sold
(net of exchanged interval)........................ $ 3,949 $ 3,822 $ 3,585 $ 3,885 $ 4,113
Average price of all Vacation Intervals sold
(including upgrades)............................... $ 7,054 $ 7,594 $ 6,975 $ 7,428 $ 7,946
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
AS ADJUSTED
1992 1993 1994 1995 1996 1996(D)
------- ------- ------- ------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 228 $ 197 $ 929 $ 3,712 $ 973 $ 4,953
Amounts due from affiliates........... 1,485 2,391 4,559 4,342 6,237 1,569
Total assets.......................... 16,695 23,834 37,326 62,687 90,852 90,165
Amounts due to affiliates............. 5,690 8,704 14,613 14,263 14,765 --
Notes payable and capital lease
obligations......................... 2,054 533 11,887 23,363 41,986 1,064
Total liabilities..................... 11,788 18,062 29,340 46,999 70,190 14,502
Equity................................ 4,907 7,292 10,123 15,689 20,662 75,662
</TABLE>
- ---------------
(a) Assumes (i) the sale of shares of Common Stock offered hereby at
an offering price of $ per share, in the aggregate $60.0 million,
less the underwriting discounts and commissions and the payment by the
Company of the estimated offering expenses of $5.0 million; (ii) payment of
all amounts due to affiliates net of amounts due from affiliates and
elimination of the related interest; (iii) payment of all notes payable to
third parties and elimination of the related interest expense; (iv)
estimate of additional costs to be incurred as a public company of
$750,000; (v) adjustment of the provision for income taxes for the effect
of the pro forma adjustments.
(b) Gives retroactive effect to the pro forma Stock Split and increase in the
number of shares outstanding to million Common Shares at December 31,
1996.
(c) EBITDA represents net income from continuing operations before interest
expense, income taxes and depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness. However, EBITDA should not be
construed as an alternative to net income as a measure of the Company's
operating results or to cash flows from operating activities (determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. The following table reconciles EBITDA to net income from
continuing operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net income, from continuing
operations......................... $ 46 $1,845 $2,355 $1,546 $ 5,269
Interest expense..................... 1,701 1,426 1,642 3,609 4,760
Income tax expense................... 266 1,376 1,677 1,512 3,140
Depreciation and amortization........ 288 477 590 863 1,264
------ ------ ------ ------ -------
EBITDA, from continuing operations... $2,301 $5,124 $6,264 $7,530 $14,433
====== ====== ====== ====== =======
</TABLE>
- ---------------
(d) As adjusted to give effect to the Offering and the application of the
proceeds therefrom as described in Note (a) as if the Offering and
application of the proceeds therefrom occurred at December 31, 1996.
29
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Historical Financial, Operating and Pro Forma Financial
Information" and the Consolidated Financial Statements and notes thereto
included elsewhere in this Prospectus.
OVERVIEW
Silverleaf Resorts, Inc. was formed in 1989 to acquire the Existing
Resorts. Certain additional assets and liabilities were subsequently acquired
from the Affiliated Companies in 1995 pursuant to the Consolidation
Transactions. See "Summary -- Corporate Background", "Certain Relationships and
Related Transactions", and Notes 1 and 10 of Notes to Consolidated Financial
Statements. The Consolidated Financial Statements of the Company include the
accounts of Silverleaf Resorts, Inc. and its subsidiaries, all of which are
wholly-owned. One such subsidiary, CBI, is treated as a discontinued operation.
See Note 12 of Notes to Consolidated Financial Statements. The historical
consolidated financial statements have been restated utilizing the historical
cost basis of the Affiliated Companies since these entities were under common
ownership and control.
The Company generates revenues primarily from the sale and financing of
Vacation Intervals at the Existing Resorts. Additional revenues are generated
from management fees from the Master Club, lease income from Sampler sales, and
resort and utility operations. The Company recognizes management fee income as
the lesser of 15% of revenue or 100% of net income of the Master Club. See
"Business -- Clubs/Master Club".
The Company recognizes Vacation Interval sales revenues on the accrual
basis. A sale is recognized after a binding sales contract has been executed,
the buyer has made a down payment of at least 10%, and the statutory rescission
period has expired. If a customer fails to make the first installment payment,
the Company reverses the sale and normally retains any payments received. For
further information concerning accounting for Vacation Interval sales and
accounting policies generally. See Note 2 of Notes to Consolidated Financial
Statements.
The Company accounts for uncollectible notes by recording a provision to
its Allowance for Doubtful Notes at the time revenue is recognized. Since 1993,
this provision has historically averaged approximately 23% of Vacation Interval
sales. The Company sets this provision at an amount sufficient to maintain the
Allowance at a level which management considers adequate to provide for
anticipated losses from customers' failure to fulfill their obligations under
the notes. When inventory is returned to the Company, any unpaid notes
receivable balances are charged against the previously established bad debt
reserves net of the amount at which the Vacation Interval is being restored to
inventory.
Costs associated with the acquisition and development of the Existing
Resorts and the marketing and sale of Vacation Intervals (including land,
construction costs, furniture, interest, and taxes) are capitalized and included
in inventory. Vacation Interval inventory is segregated into three ratings based
on customer demand (see "Business -- Participation in Vacation Interval Exchange
Networks"), with greater costs apportioned to higher value ratings. As Vacation
Intervals are sold, these costs are deducted from inventory on a specific
identification basis.
Vacation Intervals may be reacquired as a result of (i) foreclosure (or
deed in lieu of foreclosure); (ii) trade-in, associated with the purchase of an
upgraded Vacation Interval; or (iii) the Company's program to reacquire Vacation
Intervals owned but not actively used by Silverleaf Owners. Vacation Intervals
reacquired are recorded in inventory at the lower of their original cost or
market value. Vacation Intervals which have been reacquired are relieved from
inventory on a specific identification basis when resold. Inventory obtained
through the Consolidation Transactions has a significantly lower average cost
basis than recently constructed inventory, contributing significantly to
historical operating margins. New inventory added through the Company's
construction and acquisition programs has a higher average cost than the
Company's existing inventory. Accordingly, cost of goods sold will increase as
sales of new inventory increases.
The Company recognizes interest income as earned. To the extent interest
payments become delinquent the Company ceases recognition of the interest income
until collection is assured.
30
<PAGE> 33
RESULTS OF OPERATIONS
The following table sets forth certain operating information for the
Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
As a percentage of Total Revenues:
Vacation Interval sales................................... 95.1% 97.7% 100.1%
Less provision for uncollectible notes.................... (22.1%) (24.9%) (25.1%)
------ ------ ------
Net Vacation Interval sales............................... 73.0% 72.8% 75.0%
Interest income........................................... 6.9% 11.9% 13.9%
Management fee income..................................... 8.8% 6.7% 4.6%
Lease income.............................................. 4.2% 3.6% 3.6%
Other income.............................................. 7.1% 5.0% 2.9%
------ ------ ------
Total Revenues............................................ 100.0% 100.0% 100.0%
As a percentage of gross Vacation Interval sales:
Provision for uncollectible notes......................... 23.3% 25.5% 25.1%
Cost of Vacation Interval sales........................... 10.2% 9.1% 5.8%
Sales and marketing....................................... 50.0% 49.7% 45.4%
As a percentage of Interest Income:
Interest expense.......................................... 87.1% 82.8% 71.3%
As a percentage of Total Revenues:
Operating, general and administrative..................... 19.6% 22.0% 18.7%
Depreciation and amortization............................. 2.2% 2.4% 2.6%
Total costs and operating expenses........................ 85.2% 91.7% 82.5%
</TABLE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996, TO THE YEAR ENDED DECEMBER
31, 1995. Revenues in 1996 were $48.0 million, representing a $11.3 million or
30.8% increase over revenues of $36.7 million in 1995. The increase was
primarily due to a $9.3 million increase in net sales of Vacation Intervals and
a $2.3 million increase in interest income.
In 1996, the number of Vacation Interval weeks sold, exclusive of sales of
upgraded Vacation Intervals, increased 25.3% to 6,054 from 4,831 in 1995 and the
average price per unit increased 13.0% to $6,645 from $5,881. The increase in
Vacation Interval sales resulted from the Company's modernized electronic
telemarketing programs, increased sales force and enhanced lead generation
methods. The increase in average price per interval resulted from the Company's
increased sales of higher value rated intervals. In addition to increases in
sales of Vacation Intervals, the Company has increased revenues generated from
sales of upgraded intervals at its Existing Resorts through the continued
implementation of specifically designed marketing and sales programs focused on
selling such intervals to Silverleaf Owners. See "Business -- Strategy".
The provision for uncollectible notes as a percentage of Vacation Interval
sales remained relatively unchanged at 25.1% in 1996 versus 25.5% in 1995.
Interest income increased 53.0% to $6.7 million in 1996 from $4.4 million
in 1995. This increase resulted from a $20.2 million increase in notes
receivable, net of allowance for uncollectible notes, due to increased sales.
Management fee income decreased 11.8% to $2.2 million in 1996 from $2.5
million in 1995. This decrease was primarily the result of the Master Clubs' net
income being reduced by significant non-capital maintenance and refurbishment
costs incurred as a part of the Company's continuing facility improvement
program and increased operating costs.
In 1996, lease income increased 31.1% to $1.7 million in 1996 from $1.3
million in 1995 due to increased sales under the Company's Sampler program. To
date, the Company has generally been successful in converting such customers to
purchasers of Vacation Intervals.
Other income decreased 21.4% to $1.4 million in 1996 from $1.8 million in
1995. This decrease was primarily due to a significant reduction in servicing
fee income due to discontinuation of factoring notes receivables, and, to a
lesser extent, the temporary closing of the Holiday Hills golf course for
remodeling.
31
<PAGE> 34
Cost of sales as a percentage of gross Vacation Interval sales declined to
5.8% in 1996 from 9.1% in 1995. This decrease was due to a greater volume of
sales of Vacation Intervals with a low cost basis, and to a lesser extent, price
increases of Vacation Intervals sold. The Company obtained a significant amount
of low cost inventory in 1996 through its continuing program to reacquire
Vacation Intervals owned but not actively used by Silverleaf Owners. As the
Company has begun an extensive construction program to build new inventory, the
cost of sales average is expected to increase.
Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 45.4% in 1996 from 49.7% in 1995. This decline is due primarily to
the efficiencies resulting from the Company's telemarketing and sales force
areas and economies of scale.
Operating, general and administrative expenses as a percentage of gross
Vacation Interval sales declined to 18.6% in 1996 from 22.5% in 1995 due to
realization of economies of scale and elimination non-recurring expenses
incurred in 1995.
Interest expense as a percentage of interest income declined to 71.3% in
1996 from 82.8% in 1995. This decrease was due to lower borrowing cost during
the period.
Depreciation and amortization expense as a percentage of total revenue
increased to 2.6% in 1996 from 2.4% in 1995 primarily due to an increase in
property, plant and equipment made in 1996.
Income from continuing operations before income taxes increased 175.0% to
$8.4 million in 1996 from $3.1 million in 1995 as a result of the above
mentioned operating activities.
Income tax expense as a percentage of income from continuing operations
before income taxes declined to 37.3% in 1996 from 49.4% in 1995 due to
recognition in 1995, for tax purposes, of certain income which was not
recognized under generally accepted accounting principles. CBI operated as a
Subchapter S Corporation wholly-owned by the principal shareholder; accordingly,
the cumulative losses of CBI incurred prior to the transfer of the stock of CBI
to the Company were not available for utilization by the Company as an offset to
taxable income. Effective January 1, 1996, the Company converted CBI to a C
corporation and CBI will be included in the consolidated income tax return of
the Company.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995, TO THE YEAR ENDED DECEMBER
31, 1994. Revenues in 1995 were $36.7 million, representing a $9.5 million or
35.1% increase over revenues of $27.2 million in 1994. The increase was
primarily due to a $6.9 million increase in net sales of Vacation Intervals and
a $2.5 million increase in interest income.
In 1995, the number of Vacation Interval weeks sold, exclusive of sales of
upgraded Vacation Intervals, increased 30.4% to 4,831 from 3,705 in 1994 and the
average price per unit increased 2.7% to $5,881 from $5,727. The increase in
Vacation Interval sales resulted from the Company's bringing many lead
generation, telemarketing and sales programs in-house.
The provision for uncollectible notes as a percentage of Vacation Interval
sales increased to 25.5% in 1995 versus $15.9% in 1994 due to the impact of the
Company's aggressive inventory recovery policy.
Interest income increased 131.4% to $4.4 million in 1995 from $1.9 million
in 1994. This increase was the result of a $15.9 million increase in notes
receivable and the Company's decision to change its method of financing
operations. Prior to 1994, the Company had factored its customer notes
receivable to third parties. In 1994 the Company ceased factoring and began
retaining and borrowing against its notes. This change in the Company's method
of financing enabled it to retain the interest income on the notes.
Management fee income increased 3.5% to $2.5 million in 1995 from $2.4
million in 1994 due primarily to an increase in the number of dues paying
Silverleaf Owners resulting from increased sales during the period.
Lease income increased 15.2% to $1.3 million in 1995 from $1.1 million in
1994 due to emphasis of sales under the Company's Sampler program.
32
<PAGE> 35
Other income decreased 5.1% to $1.8 million in 1995 from $1.9 million in
1994. This decrease was primarily due to servicing income of the Company's
factored notes as the Company ceased factoring of notes receivable.
Cost of sales as a percentage of gross Vacation Interval sales declined to
9.1% in 1995 from 10.2% in 1994. This decrease was due to a greater volume of
sales of Vacation Intervals with a low cost basis, and to a lesser extent, price
increases of Vacation Intervals sold. The Company obtained a significant amount
of low cost inventory in 1995 by commencing a program to reacquire Vacation
Intervals owned but not actively used by Silverleaf Owners.
Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 49.7% in 1995 from 50.0% in 1994. The Company's lead generation and
telemarketing programs were taken in house in mid-1994. Prior to that time,
outside marketers, who were paid on a production basis, had been used.
Operating, general and administrative expenses as a percentage of gross
Vacation Interval sales increased to 22.5% in 1995 from 20.6% in 1994. This
increase included nonrecurring expenses comprised of $1 million incurred in
connection with promoting the Company's Holiday Hills development; commissions
of $212,000 paid in connection with the inventory recovery program; salary and
bonus increases of $275,000; $80,000 related to the implementation of a customer
relations function, and other various increases primarily related to increased
volume.
Interest expense as a percentage of interest income declined to 82.8% in
1995 from 87.1% in 1994. This decrease was due to lower borrowing costs and an
increase in notes receivable.
Depreciation and amortization expense as a percentage of total revenue
increased to 2.4% in 1995 from 2.2% in 1994 primarily due to the impact of added
capital investments during 1995.
Income from continuing operations before income taxes declined 24.1% to
$3.1 million in 1995 from $4.0 million in 1994 as a result of the above
mentioned operating activities.
Income tax expense as a percentage of income from continuing operations
before income taxes increased to 49.4% in 1995 from 41.6% in 1994 due to
recognition in 1995, for tax purposes, of certain income which was not
recognized under generally accepted accounting principles.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash. The Company generates cash primarily from the sale of
Vacation Intervals, the financing of the Vacation Interval sales, management
fees, Sampler sales, and resort and utility operations. During the years ended
December 31, 1994, 1995, and 1996, cash provided by operations was $2.5 million,
$3.7 million, and $6.4 million, respectively. The Company generates cash from
financing sales not only by borrowing against customer loans receivable but also
from the spread between interest paid on borrowings and interest received on the
related customer notes receivables. Because the Company uses significant amounts
of cash in the development and marketing of Vacation Intervals, but collects the
cash on the customer notes receivable over a long period of time, the borrowings
against receivables is a necessary part of normal operations. See "Risk
Factors -- Financing Customer Borrowings" and " -- Borrower Defaults".
For regular Federal income tax purposes, the Company reports substantially
all of the Vacation Interval sales it finances under the installment method.
Under the installment method, the Company does not recognize income on sales of
Vacation Intervals until the installment payments on customer receivables are
received by the Company. The deferral of income tax liability conserves cash
resources on a current basis. Interest will be imposed, however, on the amount
of tax attributable to the installment payments for the period beginning on the
date of sale and ending on the date the related tax is paid. If the Company is
otherwise not subject to tax in a particular year, no interest is imposed since
the interest is based on the amount of tax paid in that year. The consolidated
financial statements do not contain an accrual for any interest expense which
would be paid on the deferred taxes related to the installment method as the
interest expense is not estimable as of December 31, 1996. In addition, the
Company is subject to current alternative minimum tax ("AMT") as a result of the
deferred income which results from the installment sales treatment. Payment of
AMT reduces future regular tax liability in
33
<PAGE> 36
respect of installment sales, and creates a deferred tax asset. As of December
31, 1996, the Company estimates its total liability for AMT to be approximately
$3.65 million. See "Risk Factors -- Acceleration of Deferred Taxes; Alternative
Minimum Taxes" and Note 6 of Notes to Consolidated Financial Statements. The
Company's net operating losses, which also may be used to offset installment
sale income, expire beginning in 2007 through 2011. Realization of the deferred
tax assets arising from net operating losses is dependent on generating
sufficient taxable income prior to the expiration of the loss carryforwards and
other factors. See "Risk Factors -- Limitations on Use of Net Operating Loss
from Ownership Change" and Note 6 of Notes to Consolidated Financial Statements.
Financing activities have historically provided cash as a result of the
Company's financing of customer notes receivable. Net cash provided from
financing activities for the years ended December 31, 1994, 1995, and 1996 was
$10.4 million, $18.7 million, and $14.9 million, respectively.
Uses of Cash. Investing activities typically reflect a net use of cash
because of capital additions and loans to customers in connection with the
Company's Vacation Interval sales. Net cash used in investing activities for the
years ended December 31, 1994, 1995, and 1996, was $12.2 million, $19.6 million,
and $24.0 million, respectively. Cash used in investing activities increased
significantly in the year ended December 31, 1996, over 1995 and in the year
ended December 31, 1995, over 1994 due to significant increases in customer
notes receivable and a major capital improvements program begun in 1995 to
remodel the corporate headquarters and build new field sales offices.
The Company requires funds to finance the acquisitions of property for
future resort development and to further develop the Existing Resorts, as well
as to make capital improvements and support current operations. The Company has
budgeted capital expenditures of $6.8 million in 1997 for the development of
additional roads and utilities, amenities, and condominium units at the Existing
Resorts. The Company is also actively seeking sites for new resorts. The Company
plans to acquire property for two new Home Resorts and one Destination Resort in
the next twelve months. Acquisition funds required for these projects are
expected to be $3.0 million to $4.0 million per project.
Customer defaults have significant impact on cash available to the Company
from financing customer notes receivable in that notes more than 60 days past
due are not eligible as collateral. As a result, the Company in effect must
repay borrowings against such notes. See "Risk Factors -- Borrower Defaults" and
"-- Financing Customer Borrowings".
CBI, which has historically required funding from the Company, was engaged
in the development and sale of full ownership condominiums, the investment in,
holding and sale of both real and personal properties, principally in Missouri,
and holding land in Mississippi. Subsequent to acquisition of CBI, the Company
determined that CBI's condominium development and sale line of business was not
fully compatible with the Company's timeshare operations. Consequently, CBI has
ceased all development operations and adopted a plan of dissolution effective
December 31, 1996, whereby all remaining full ownership condominiums will be
sold by December 31, 1997. Accordingly, the condominium development and sales
operation of CBI is being treated as a discontinued operation for financial
reporting purposes. The income (loss), net of income taxes, from the
discontinued operations was $568,000, $(1.5) million, and $(295,000) for the
years ended December 31, 1994, 1995, and 1996, respectively. Anticipated future
costs of carrying and selling the remaining inventory of CBI have been accrued
as of December 31, 1996, in the amount of $201,000.
Credit Facilities. At December 31, 1996, the Company had available certain
revolving credit facilities for financing customer notes receivable and for
construction and development activities. See "Business -- Existing Credit
Facilities" and Note 7 of Notes to Consolidated Financial Statements. Some of
this debt will be paid with the proceeds of the Offering. See "Capitalization"
and "Use of Proceeds". The Company intends to maintain each of the facilities
and to utilize such facilities to finance its operations.
In accordance with its growth strategy, the Company intends to accelerate
the development of the Existing Resorts and to acquire new properties for
development. The Company will finance such development with proceeds of the
Offering, after retiring existing debt, together with existing credit
facilities. Additional financing may be required. Any failure to renew existing
credit facilities or obtain adequate financing under new facilities
34
<PAGE> 37
could have a material adverse effect on the Company's financial position,
results of operations or liquidity, and could significantly reduce the Company's
plans to acquire new properties and expand the Existing Resorts.
In the future, the Company may negotiate additional credit facilities,
issue corporate debt, issue equity securities, or any combination of the above.
Any debt incurred or issued by the Company may be secured or unsecured, may bear
interest at fixed or variable rates of interest, and may be subject to such
terms as management deems prudent. There is no assurance that the Company will
be able to secure additional corporate debt or equity at or beyond current
levels. See "Risk Factors -- Leverage."
The Company believes available borrowing capacity, together with cash
generated from operations, will be sufficient to meet the Company's liquidity
and capital requirements for existing operations for at least the next 12
months.
INFLATION
Inflation and changing prices have not had a material impact on the
Company's revenues, operating income and net income during any of the Company's
three most recent fiscal years. However, to the extent inflationary trends
affect short-term interest rates, a portion of the Company's debt service costs
may be affected as well as the rates the Company charges on its customer
mortgages.
35
<PAGE> 38
BUSINESS
OVERVIEW
The Company is a leading developer, marketer, and operator of timeshare
resorts in the economy segment of the timeshare industry. The Company currently
owns and operates five Home Resorts in Texas and two Destination Resorts in
Missouri. The Home Resorts are designed to appeal to value conscious vacationers
seeking comfortable and affordable accommodations in locations convenient to
their residences. The Home Resorts are located proximate to major metropolitan
areas (currently Dallas-Fort Worth, Houston, San Antonio, and Austin),
facilitating more frequent "short stay" getaways, which the Company believes is
a growing vacation trend. The Destination Resorts, which are located in the
popular resort area of Branson, Missouri, offer Silverleaf Owners the
opportunity to upgrade into a higher quality destination resort area as their
lifestyles and travel budgets permit. The Existing Resorts are in rustic areas
and provide a quiet, relaxing vacation environment. The Company believes its
combination of Home and Destination Resorts offers its customers an economical
alternative to commercial vacation lodging. The average price for an annual one
week Vacation Interval at the Existing Resorts was $6,645 in 1996 and $5,881 in
1995, which compares favorably to an industry average price of $12,014 in 1995.
The Company offers benefits to Silverleaf Owners which are uncommon in the
timeshare industry. The benefits include (i) use of vacant lodging facilities at
the Existing Resorts at no extra cost through Silverleaf's "Endless Escape"
program; (ii) year-round access to the Existing Resorts' non-lodging amenities
such as fishing, boating, horseback riding, tennis or golf for little or no
additional charge; and (iii) the right of Silverleaf Owners to exchange their
Vacation Interval for a different time period or different Existing Resort
through Silverleaf's internal exchange program. The above benefits are subject
to availability. Silverleaf Owners also have the option to enroll in the world's
largest Vacation Interval exchange network operated by RCI.
OPERATIONS
Silverleaf's operations include (i) developing timeshare resorts; (ii)
marketing and selling Vacation Intervals to prospective first-time owners; (iii)
marketing and selling upgraded Vacation Intervals to existing Silverleaf Owners;
(iv) providing financing for the purchase of Vacation Intervals; and (v)
operating timeshare resorts. The Company has substantial in-house capabilities
which enable it to coordinate all aspects of expansion of the Existing Resorts
and the development of any new resorts, including site selection, design, and
construction pursuant to standardized plans and specifications. The Company also
performs substantially all marketing and sales functions internally, and has
made a significant investment in operating technology, including sophisticated
telemarketing and computer systems and proprietary software applications. The
Company identifies potential purchasers through internally developed marketing
techniques, and sells Vacation Intervals through on-site sales offices at
certain Home Resorts. This practice allows the Company to avoid the more
expensive marketing costs of subsidized airfare and lodging which are typically
associated with the timeshare industry. The Company believes its marketing
program and operating systems enable it to market and sell Vacation Intervals at
a lower cost than its competitors in the timeshare industry.
During 1996, the Company sold 6,054 Vacation Intervals at the Existing
Resorts to new customers, compared to 4,831 and 3,705 during 1995 and 1994,
respectively. Total revenues for the same periods increased to $48.1 million in
1996 from $36.7 million and $27.2 million in 1995 and 1994, respectively. At
December 31, 1996, the Company had an existing inventory of 6,221 Vacation
Intervals, and a master plan to construct up to 70,300 additional Vacation
Intervals at the Existing Resorts, subject to demand and contingencies
applicable to real estate development. See "Risk Factors -- Development,
Construction and Property Acquisition Activities".
As part of the Vacation Interval sales process, the Company offers
potential purchasers financing of up to 90% of the purchase price over a seven
year period. The Company has historically financed its operations by borrowing
from third-party lending institutions at an advance rate of up to 70% of
customer receivables. At December 31, 1996, the Company had a portfolio of
approximately 11,712 loans to Vacation Interval purchasers totalling
approximately $66.8 million with an average yield of 14.7% per annum, which
compares favorably to the Company's weighted average cost of borrowings of 11.2%
per annum. At December 31, 1996, approximately
36
<PAGE> 39
$3.6 million in principal, or 5.9% of the Company's loans to Silverleaf Owners,
were 60 to 120 days past due, and approximately $4.3 million in principal, or
7.2% of the Company's loans to Silverleaf Owners, were more than 120 days past
due. The Company provides for uncollectible notes by reserving an amount which
management believes is sufficient to cover anticipated losses from customer
defaults. In 1996 and 1995, the Company's provision for uncollectible notes
exceeded actual loan chargeoffs by $2.0 million and $467,000, respectively. See
"Risk Factors -- Borrower Defaults", and "-- Financing Customer Borrowings".
Each Existing Resort has a Club which has contracted with the Master Club
to manage the Existing Resorts. The Master Club has contracted with the Company
to perform the supervisory, management and maintenance functions at the Existing
Resorts on a collective basis. Costs of operating the Existing Resorts,
including management fees to the Company, are covered by monthly dues paid by
Silverleaf Owners to their respective Clubs, together with income generated by
the operation of certain amenities at the Existing Resorts. See
"Business -- Clubs/Master Club".
THE TIMESHARE INDUSTRY
The Market. The resort component of the leisure industry is serviced
primarily by two alternatives for overnight accommodations: commercial lodging
establishments and timeshare resorts. Commercial lodging consists of (i) hotels
and motels in which a room is rented on a nightly, weekly or monthly basis for
the duration of the visit, and (ii) rentals of privately-owned condominium units
or homes. For many vacationers, particularly those with families, a lengthy stay
at a quality commercial lodging establishment can be very expensive, and the
space provided to the guest relative to the cost is not economical for
vacationers. In addition, room rates and availability at such establishments are
subject to change periodically. Timeshare ownership presents an economical
alternative to commercial lodging for vacationers.
Worldwide Market. The worldwide timeshare industry experienced a record
year in 1995 (the most recent year for which statistics are available) with
206,000 first-time buyers, sales of 600,000 Vacation Intervals, and sales volume
of $5 billion. First introduced in Europe in the mid-1960s, ownership of
Vacation Intervals has been one of the fastest growing segments of the
hospitality industry over the past two decades. As shown in the following
charts, the worldwide timeshare industry has expanded significantly since 1980
both in Vacation Interval sales volume and number of Vacation Interval owners.
DOLLAR VOLUME OF VACATION INTERVAL SALES
(IN BILLIONS)
<TABLE>
<S> <C> <C> <C> <C>
1980 0.49
1981 0.965
1982 1.165
1983 1.34
1984 1.735
1985 1.58
1986 1.61
1987 1.94
1988 2.39
1989 2.97
1990 3.24
1991 3.74
1992 4.25
1993 4.505
1994 4.76
1995 5.010
</TABLE>
37
<PAGE> 40
NUMBER OF VACATION INTERVAL OWNERS
(IN MILLIONS)
<TABLE>
<S> <C> <C> <C> <C>
1980 0.155
1981 0.220
1982 0.335
1983 0.470
1984 0.620
1985 0.805
1986 0.970
1987 1.125
1988 1.310
1989 1.530
1990 1.800
1991 2.070
1992 2.363
1993 2.760
1994 3.144
1995 3.350
</TABLE>
United States Market. The number of interval owners of U.S. timeshare
properties has also grown significantly as set forth in the following table:
NUMBER OF VACATION INTERVAL OWNERS
OF U.S. PROPERTIES
(IN MILLIONS)
[TRACOR BAR GRAPH]
38
<PAGE> 41
Reasons for Growth. The Company believes that, based on published industry
data, the following factors have contributed to the increased acceptance of the
timeshare concept among the general public and the substantial growth of the
timeshare industry over the past 15 years:
- increased consumer confidence resulting from consumer protection
regulation of the timeshare industry and the entrance of brand name
national lodging companies to the industry;
- increased flexibility of timeshare ownership due to the growth of
exchange organizations such as RCI;
- improved quality and management of timeshare resorts and related
amenities;
- increased consumer awareness of the value and benefits of timeshare
ownership, including the cost savings relative to other lodging
alternatives; and
- improved availability of financing for purchasers of Vacation Intervals.
Despite the growth in the timeshare industry, Vacation Interval ownership
had only achieved an approximate 1.72% market penetration of all U.S. households
at December 31, 1994. This is comprised of a .39% penetration of households with
an annual income under $35,000, a 1.73% penetration of households earning
$35,000 to $49,999 per year, and a 3.70% penetration of households with yearly
earnings of $50,000 to $99,999. In 1995, 69.6% of all existing one week
intervals were purchased for under $10,000.
The timeshare industry is highly fragmented, engaged in by a large number
of local and regional resort developers and operators. The Company believes that
one of the most significant factors contributing to the current awareness of the
timeshare industry is the entry into the market of some of the world's major
lodging, hospitality and entertainment companies, including Marriott, Disney,
Hilton, Hyatt, and Ramada. Certain other companies, such as Signature, Vistana,
and Vacation Break, have recently become public companies, which has also added
to the growth of the industry.
The Consumer. The median age of a Vacation Interval owner in the United
States in 1995 was 50 years. The median annual household income of a U.S.
Vacation Interval owner in 1995 was approximately $63,400. In 1995,
approximately 16.3% of all U.S. Vacation Interval owners had an annual household
income of less than $40,000, approximately 30.4% of such owners had an annual
household income of less than $50,000, approximately 34.7% of such owners had a
household income of $50,000 to $74,999, and approximately 34.8% of such owners
had household incomes that exceeded $75,000. The U.S. Census Bureau has
estimated that 30.2% of all U.S. households had a household income between
$25,000 and $50,000 in 1995, which represents the Company's targeted market.
The Company believes that its growth strategy is well designed to take
advantage of the strong growth conditions in the timeshare market generally and
the sheer size of the economy segment of the industry particularly.
GROWTH STRATEGY
The Company believes it is the largest operator and developer in the
economy segment of the industry, and further believes this segment has
particularly attractive demographic and competitive characteristics. The Company
targets households with earnings between $25,000 and $50,000, which represented
30.2% of the U.S. population in 1995; however, only 1% of these households owned
a Vacation Interval. Furthermore, the Company believes it is the only
significant timeshare developer focused solely on this segment. The Company
intends to grow through the following strategies:
- Increasing Development and Sales of Vacation Intervals at Existing
Resorts. The Company intends to capitalize on its significant expansion
capacity at the Existing Resorts by increasing marketing, sales and
development activities. At December 31, 1996, the Company owned
approximately 1,100 acres of land at the Existing Resorts, including
approximately 580 acres contemplated for further development under the
Company's master plan. For each Existing Resort, the Company has
broadened its marketing efforts, increased its sales force, completed (in
certain instances) the construction of new sales offices, club houses,
and other amenities, and commenced the development of newer lodging
facilities. Furthermore,
39
<PAGE> 42
the Company has continued to emphasize its Endless Escape program designed to
accommodate shorter, "getaway" vacations and has broadened its product offerings
to include biennial (alternate year) intervals and Samplers which are designed
to accommodate more cost-conscious customers.
- Increasing Sales of Upgraded Intervals at Existing Resorts. The Company
has designed specific marketing and sales programs to sell upgraded
Vacation Intervals to Silverleaf Owners. Upgrades may include (i) an
interval in a newly designed and constructed standard unit, (ii) an
interval in a larger luxury or enhanced amenity unit, (iii) an interval
during a more desirable time period (week), (iv) an interval at a
different Home Resort, (v) an interval at a Destination Resort, and (vi)
the purchase of an interval for an additional week by an existing
Silverleaf Owner. The Company generally develops higher quality, larger
standard and luxury units for sale as upgraded intervals. For example, at
the Ozark Mountain Resort in Branson, Missouri, luxury "President's View"
units are offered for sale at prices ranging from $8,000 to $17,500 per
Vacation Interval. The Company is expanding the President's View units to
other Existing Resorts. To facilitate sales, an existing Silverleaf Owner
may apply the equity in his existing Vacation Interval against the price
of an upgraded Vacation Interval. Such purchase price is typically
financed in the same manner as sales of standard Vacation Intervals. In
1996, upgrade sales amounted to $7.9 million, or approximately 16.4% of
the Company's total revenues.
- Development of New Resorts and Acquisitions. The Company believes there
is ample opportunity for development of new timeshare resorts with
characteristics similar to those of the Existing Resorts. The Company
plans to develop new Home Resorts close to major metropolitan areas and
is considering various potential sites. In developing a new resort, the
Company will use its internal design, marketing, and sales capabilities
to complete and market such resorts in accordance with the Company's
standard criteria and incorporate them into its system. The Company will
consider acquiring other resorts and timeshare companies where it
believes such acquisitions would be advantageous to its business. There
can be no assurance that the Company will develop new resorts, locate
suitable acquisition candidates or successfully consummate any such
acquisitions. See "Risk Factors -- Development, Construction and Property
Acquisition Activities".
- Improvement of Operating Margins. The Company believes it can increase
sales without significantly increasing general and administrative costs
by capitalizing on recent investments in its marketing and administrative
systems and personnel. The Company also believes it can improve margins
by selling upgraded Vacation Intervals to existing Silverleaf Owners
since sales of upgraded intervals have significantly lower sales and
marketing costs. In addition, as a public company, Silverleaf may be able
to achieve lower borrowing costs and a lower cost of capital.
COMPETITIVE ADVANTAGES
The Company believes the following characteristics provide Silverleaf with
competitive advantages in operating within the economy segment of the timeshare
industry:
- Lower Marketing and Sales Costs. With convenient "drive-to" locations and
on-site sales offices at certain Home Resorts, the Company can invite
potential customers to tour the Home Resorts without offering subsidized
airline tickets, lodging and tickets to theme parks, a significant
marketing expense typically incurred by competitors in the industry. The
Company has also reduced marketing, operating, and administrative costs
through centralization and automation of many functions at its Dallas,
Texas headquarters.
- Convenient "drive-to" Home Resort Locations. The Company's Home Resorts
are located within a two-hour drive of the target customers' residences,
which accommodates the demand for shorter, more frequent, close to home
vacations. This proximity facilitates use of the Company's Endless Escape
program which offers Silverleaf Owners up to six consecutive nights per
visit on an unlimited basis for no additional charge, subject to
availability and certain limitations. Silverleaf Owners can also
conveniently enjoy non-lodging resort amenities year-round. The Company
believes it is the only operator in the industry which offers its
customers these benefits.
40
<PAGE> 43
- Substantial Internal Growth Capacity. At December 31, 1996, the Company
had an inventory of 6,221 Vacation Intervals and a master plan to
construct new units at the Existing Resorts which will result in up to
70,300 additional Vacation Intervals on land presently owned by the
Company. The Company is therefore less reliant on acquisitions and new
development for growth.
- In-House Operations. The Company has in-house marketing, sales,
financing, development, and property management capabilities. While the
Company utilizes outside contractors to supplement internal resources,
when appropriate, the breadth of the Company's internal capabilities
allows greater control over all phases of its operations and helps
maintain operating standards and reduce overall costs.
- Standard Design, Lower Construction and Operating Costs. The Company has
developed standard architectural designs and operating procedures which
the Company believes significantly reduce construction and operating
expenses at the Existing Resorts and should likewise reduce such expenses
at new resorts. Standardization and integration also allow the Company to
rapidly develop new inventory in response to demand. New units can
normally be constructed on an "as needed" basis in under 150 days.
- Centralized Property Management. The Company operates all of the Existing
Resorts on a centralized and collective basis, with operating and
maintenance costs paid from Silverleaf Owners' monthly dues. The Company
believes that consolidation of resort operations benefits Silverleaf
Owners by providing them with a uniform level of service, accommodations
and amenities on a standardized, cost-effective basis. Integration also
facilitates the Company's internal exchange program, the Endless Escape
program, and the Existing Resorts' qualification in the RCI exchange
program.
THE EXISTING RESORTS
The following table sets forth certain information regarding each of the
Existing Resorts at December 31, 1996.
<TABLE>
<CAPTION>
VACATION
INTERVALS VACATION INTERVALS AT
UNITS AT RESORT SOLD(A) RESORTS
------------------------ ---------------- AVERAGE ---------------------
INVENTORY IN SALES INVENTORY
PRIMARY AT PLANNED THROUGH 1996 PRICE AT PLANNED
RESORT/LOCATION MARKET SERVED 12/31/96 EXPANSION(B) 12/31/96 ONLY IN 1996(A) 12/31/96 EXPANSION
--------------- -------------- --------- ------------ -------- ----- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HOME RESORTS
Holly Lake Dallas- 130 104 5,881 1,376 $ 6,097 619 5,200(d)
Hawkins, TX Ft. Worth, TX
The Villages Dallas- 204 388 9,524 1,970 6,336 676 19,424(e)
Flint, TX Ft. Worth, TX
Lake O' The Woods Dallas- 64 16 3,073 821 6,272 127 800(d)
Flint, TX Ft. Worth, TX
Piney Shores Houston, TX 96 304 3,514 1,139 7,349 1,176 15,808(f)
Conroe, TX
Hill Country Austin-San 113 292(g) 4,690 644 6,853 944 14,600(d)
Canyon Lake, TX Antonio, TX
DESTINATION RESORTS
Ozark Mountain Branson, MO 118 84 3,719 95 13,887 2,263 4,368(f)
Kimberling City, MO
Holiday Hills Branson, MO 24 202 784 9 11,999 416 10,100(d)
Branson, MO
--- ----- ------ ----- ----- ------
TOTAL 749 1,390 31,185 6,054 $ 6,645 6,221 70,300
=== ===== ====== ===== ======= ===== ======
<CAPTION>
AMENITIES/
RESORT/LOCATION ACTIVITIES(C)
--------------- --------------
<S> <C>
HOME RESORTS
Holly Lake B,F,G,H,
Hawkins, TX M,S,T
The Villages B,F,H,
Flint, TX M,S,T
Lake O' The Woods F,M,S,T
Flint, TX
Piney Shores B,F,H,
Conroe, TX M,S,T
Hill Country B,M,S,T(h)
Canyon Lake, TX
DESTINATION RESORTS
Ozark Mountain B,F,H,
Kimberling City, MO M,S,T
Holiday Hills B,F,G,H,
Branson, MO M,S,T(h)
TOTAL
</TABLE>
- ---------------
(a) These totals do not reflect sales of upgraded Vacation Intervals to
Silverleaf Owners. For 1996, upgrade sales at the Existing Resorts were as
follows:
41
<PAGE> 44
<TABLE>
<CAPTION>
AVERAGE SALES
UPGRADED VACATION PRICE IN 1996 -- NET OF
RESORT INTERVALS SOLD EXCHANGED INTERVAL
------ ----------------- -----------------------
<S> <C> <C>
Holly Lake............................ 279 $4,195
The Villages.......................... 399 4,316
Lake O' The Woods..................... 125 4,303
Piney Shores.......................... 571 4,028
Hill Country.......................... 296 4,209
Ozark Mountain........................ 184 3,639
Holiday Hills......................... 60 $3,760
------
1,914 $4,113
====== =======
</TABLE>
(b) Represents units included in the Company's master plan. This plan is subject
to change based upon various factors, including consumer demand, the
availability of financing, grant of governmental permits, and future
land-planning and site layout considerations. The following chart reflects
the status of certain planned units:
<TABLE>
<CAPTION>
GOVT. GOVT. GOVT.
APPROVAL APPROVAL APPROVAL
SHELL CURRENTLY IN PROCESS PROCESS PROCESS
COMPLETE CONSTRUCTION COMPLETE PENDING NOT STARTED TOTAL
-------- ------------ -------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Holly Lake.............................. 4 -- 50 -- 50 104
The Villages............................ -- 12 114 152 110 388
Lake O' The Woods....................... -- -- 16 -- -- 16
Piney Shores............................ -- 12 64 120 108 304
Hill Country............................ 3 12 70 54 153(g) 292
Ozark Mountain.......................... 12 6 30 -- 36 84
Holiday Hills........................... 14 -- 118 -- 70 202
-- -- --- --- --- -----
33 42 462 326 527 1,390
== == === === === =====
</TABLE>
The 33 "Shell Complete" units are currently devoted to such uses as a
general store, registration office, sales office, activity center,
construction office, or pro shop.
"Governmental Approval Process Complete" means either that (i) the Company
believes that it has obtained all necessary authorizations under current
law from the applicable local governmental authority with jurisdiction,
including the approval and filing of any required preliminary or final plat
and the issuance of building permit(s), in each case to the extent
applicable, or (ii) upon payment of any required filing or other fees, the
Company believes that it will under current law obtain such necessary
authorizations without further process. See "Risk Factors -- Development,
Construction and Property Acquisition Activities".
"Governmental Approval Process Pending" means that the Company has
commenced the process which the Company believes is required under current
law in order to obtain the necessary authorizations from the applicable
local governmental authority with jurisdiction, including submitting for
approval any architectural drawings, preliminary plats or other attendant
items as may be required.
(c) Principal amenities available to Silverleaf Owners at each resort are
indicated by the following symbols: B -- boating; F -- fishing; G -- golf
course; H -- horseback riding, hiking, hayrides; M -- miniature golf;
S -- swimming pool; and T -- tennis.
(d) These figures are based on 50 one-week intervals per unit. In some
instances, the Company may be able to market 52 one-week intervals per unit.
(e) These figures are based on 52 one-week intervals for 12 units currently
under construction and 50 one-week intervals for all other planned units.
(f) These figures are based on 52 one-week intervals per unit.
(g) This figure includes 132 planned units on land which the Company has the
right to acquire in June 1997 pursuant to a written agreement.
(h) Boating is available near the resort.
42
<PAGE> 45
FEATURES COMMON TO ALL RESORTS
The Existing Resorts are located in rustic areas offering Silverleaf Owners
a quiet, relaxing vacation environment. Furthermore, the resorts offer different
vacation activities, including golf, fishing, boating, swimming, horseback
riding, tennis and archery. Features common to all resorts include the
following:
- Endless Escape Program. The Company's Endless Escape program offers
Silverleaf Owners a substantial benefit not typically enjoyed by many
other timeshare owners. In addition to the right to use his unit one week
per year, the Endless Escape program allows a Silverleaf Owner to also
use any of the Existing Resorts for up to six consecutive nights per
visit on an unlimited basis for no additional charge. The Endless Escape
program is limited based on the availability of units which include
unused intervals and unsold inventory. The Company believes this program
is important as many vacationers prefer shorter two to three day
vacations. Silverleaf Owners who have utilized the resort less frequently
are given priority to use the program and may only use an interval with
an equal or lower rating than his Vacation Interval. See
"-- Participation in Vacation Interval Exchange Networks".
- Year-Round Use of Amenities. Silverleaf Owners have unlimited year-round
use of the amenities located at the Existing Resorts, such as boating,
fishing, miniature golf, tennis, swimming, or hiking, for little or no
additional cost. Certain amenities, however, such as golf, horseback
riding or watercraft rentals, may require a usage fee.
- Exchange Privileges. Each Silverleaf Owner has certain exchange
privileges which entitle him on an annual basis to (i) exchange his
interval for a different interval (week) at the same resort so long as
the different interval is of an equal or lower rating; and (ii) exchange
his interval for the same interval (week) at any other of the Existing
Resorts. These intra-company exchange rights require an exchange fee,
which is currently $50, and are conditioned upon availability of the
desired interval or resort. In addition, for an additional annual fee of
approximately $74, a Silverleaf Owner may join the exchange program
administered by RCI. See "-- Participation in Vacation Interval Exchange
Networks".
- Deeded Ownership. The Company typically sells a Vacation Interval which
entitles the owner to use a specific unit for a designated one week
interval each year. The Vacation Interval purchaser receives a recorded
deed which grants the purchaser a percentage interest in a specific unit
for a designated week. The Company also sells a biennial (alternate year)
Vacation Interval which allows the owner to use a unit for a one week
interval every other year with reduced dues.
- Clubs/Master Club. Each of the Existing Resorts has a Club which has an
agreement with the Master Club to manage the Existing Resorts on a
centralized and collective basis. The Master Club has contracted with the
Company to perform the supervisory, management and maintenance functions
granted by the Clubs to the Master Club. Costs of these operations are
covered by monthly dues paid by Silverleaf Owners to their respective
Clubs together with income generated by the operation of certain
amenities at the Existing Resorts.
- On-Site Security. The Existing Resorts are patrolled by security
personnel who are either employees of the Master Club or personnel of
independent security service companies which have contracted with the
Clubs.
DESCRIPTION OF EXISTING RESORTS
Holly Lake Resort. Holly Lake is a family-oriented golf resort located in
the Piney Woods of East Texas, approximately 105 miles east of Dallas. The
timeshare portion of Holly Lake is part of a 4,300 acre mixed use development of
single-family lots and timeshare units with other third-party developers. The
Company owns approximately 232 acres within Holly Lake Resort, of which
approximately 45 acres are currently planned by the Company to be used for
future development.
The Holly Lake Resort timeshare development has been planned for a total of
234 units, with 130 units completed as of December 31, 1996. Three different
types of units are offered at the resort: (i) two bedroom, two bath, wood siding
and stucco fourplexes; (ii) one bedroom, one bath, one sleeping loft, log
construction duplexes; and (iii) two bedroom, two bath, log construction
fourplexes. Each unit has a living room with sleeper sofa and
43
<PAGE> 46
full kitchen. Other amenities within each unit include whirlpool tub, color
television, and vaulted ceilings. Certain units include interior ceiling fans,
imported ceramic tile, over-sized sliding glass doors, and rattan and pine
furnishings.
Amenities at the resort include an 18-hole golf course with pro shop;
19th-hole private club and restaurant; Holly Lake Restaurant; Country Store;
indoor rodeo arena and stables; six tennis courts (four lighted); four different
lakes (one with sandy swimming beach and swimming dock, one with boat launch for
water skiing); two swimming pools with bathhouses; children's pool and pavilion;
recently completed hiking/nature trail; children's playground area; miniature
golf course; three picnic areas; activity center with big screen television;
gameroom with arcade games and pool tables; horseback trails; activity areas for
basketball, horseshoes, volleyball, shuffleboard, and archery; and camp sites
with electrical and water hookups. Silverleaf Owners can also rent canoes,
bicycles, and water trikes. Homeowners in neighboring subdivisions are entitled
to use the amenities at Holly Lake Resort pursuant to easements or use
agreements.
At December 31, 1996, the resort contained 6,500 Vacation Intervals, of
which 619 intervals remained available for sale. The Company plans to build an
additional 104 units, which would yield an additional 5,200 Vacation Intervals
available for sale. Vacation Intervals are currently priced from $6,000 to
$12,500 for one-week stays, 1,376 of which were sold in 1996. See "-- Summary of
Company Resorts" and "Risk Factors -- Development, Construction and Property
Acquisition Activities".
The Villages and Lake O' The Woods Resorts. The Villages and Lake O' The
Woods are sister resorts located on the shores of Lake Palestine, approximately
100 miles east of Dallas, Texas. The Villages, located approximately 5 miles
northwest of Lake O' The Woods, is an active sport resort popular for
water-skiing and boating. Lake O' The Woods is a quiet wooded resort where
Silverleaf Owners can enjoy the seclusion of dense pine forests less than two
hours from the Dallas-Fort Worth metroplex. The Villages is a mixed use
development of single-family lots and timeshare units, while Lake O' The Woods
has been developed solely as a timeshare resort. The two resorts contain
approximately 271 acres, of which approximately 189 acres are currently planned
by the Company to be used for future development.
The timeshare development at these resorts has been planned for 672 units,
including 592 at The Villages and 80 at the Lake O' The Woods. At December 31,
1996, 204 units were completed at The Villages and 64 units were completed at
Lake O' The Woods. An additional 12 units at The Villages are scheduled for
completion by July 1997. There are four different types of units at these
resorts: (i) three bedroom, two and one-half bath, wood siding exterior duplexes
and fourplexes (two units); (ii) two bedroom, two bath, brick and siding
exterior fourplexes; (iii) two bedroom, two bath, siding exterior fourplexes;
and (iv) one bedroom, one bath with two-bed loft sleeping area, log construction
duplexes. Amenities within each unit include full kitchen, whirlpool tub, and
color television. Certain units include interior ceiling fans, ceramic tile,
and/or a fireplace.
Both resorts are situated on Lake Palestine, a 27,000 acre public lake.
Recreational facilities and improvements at The Villages include a full service
marina with convenience store, boat launch, water-craft rentals, covered and
locked rental boat stalls; two swimming pools; lighted tennis court; miniature
golf course; nature trails; camp sites; riding stables; soccer/softball field;
children's playground; RV sites; an activity center with reading room,
wide-screen television and pool table; and competitive sports facilities which
include horseshoe pits, archery range, and shuffleboard, volleyball, and
basketball courts. Silverleaf Owners at The Villages can also rent or use
bicycles, jet skis, motor boats, paddle boats, pontoon boats, and water trikes.
Neighboring homeowners are also entitled to use these amenities pursuant to a
use agreement.
Recreational facilities at Lake O' The Woods include swimming pool,
bathhouse, lighted tennis court, a recreational beach area with picnic areas, a
fishing pier on Lake Palestine, nature trails, soccer/softball field, children's
playground, RV sites, an activity center with wide-screen television and pool
table, horseshoe pits, archery range, putting green, miniature golf course, and
shuffleboard, volleyball, and basketball courts. Guests can also ride horses or
rent bicycles.
44
<PAGE> 47
At December 31, 1996, the Villages contained 10,200 total Vacation
Intervals, of which 676 remained available for sale. In addition to the 12 units
under construction, the Company plans to build 376 additional units at the
Villages, which collectively would yield an additional 19,424 Vacation Intervals
available for sale. At December 31, 1996, Lake O' The Woods contained 3,200
total Vacation Intervals, of which 127 remained available for sale. The Company
plans to build 16 additional units at Lake O' The Woods, which would yield 800
additional Vacation Intervals available for sale. Vacation Intervals at The
Villages and Lake O' The Woods are currently priced from $5,500 to $14,500 for
one-week stays (and start at $3,500 for biennial intervals). During 1996, 1,970
Vacation Intervals were sold at The Villages and 821 Vacation Intervals were
sold at Lake O' The Woods. See "-- Summary of Company Resorts" and "Risk
Factors -- Development, Construction and Property Acquisition Activities".
Piney Shores Resort. Piney Shores is a quiet, wooded resort ideally located
for day-trips from metropolitan areas in the southeastern Gulf Coast area of
Texas. Piney Shores is located on the shores of Lake Conroe, approximately 40
miles north of Houston, Texas. The resort contains approximately 116 acres, of
which approximately 73 acres are planned by the Company for future development.
At December 31, 1996, 96 units were completed, and an additional 12 units
are scheduled to be completed by July 1997. All units consist of two bedroom,
two bath units, configured in log cabin fourplexes which will comfortably
accommodate up to six people. Amenities include a living room with sleeper sofa
and full kitchen, whirlpool tub, color television, and interior ceiling fans.
The Company recently completed 24 new "lodge-style" units which feature stone
fireplaces, white-washed pine wall coverings, "age-worn" paint finishes, and
antique furnishings.
The primary recreational amenity at the resort is Lake Conroe, a 21,000
acre public lake. Other recreational facilities and improvements available at
the resort include a swimming pool with spa, a new bathhouse complete with
showers and restrooms, lighted tennis court, miniature golf course, stables,
horseback riding trails, children's playground, picnic areas, boat launch, beach
area for swimming, 1,500-square foot activity center with big-screen television,
covered wagon rides, and facilities for horseshoes, archery, shuffleboard, and
basketball. The resort also has a vintage moored paddle-wheeled riverboat which
is available for parties and receptions.
At December 31, 1996, the resort contained 4,800 Vacation Intervals, of
which approximately 1,176 remained available for sale. In addition to the 12
units under construction, the Company intends to build 292 additional units,
which collectively would yield an additional 15,808 Vacation Intervals available
for sale. Vacation Intervals at Piney Shores are currently priced from $6,000 to
$14,500 for one-week stays (and start at $3,500 for biennial intervals). In
1996, 1,139 Vacation Intervals were sold. See "-- Summary of Company Resorts"
and "Risk Factors -- Development, Construction and Property Acquisition
Activities".
Hill Country Resort. Hill Country Resort is located near Canyon Lake in the
hill country of central Texas between Austin and San Antonio. Hill Country
Resort contains approximately 37 acres, of which approximately 13 acres are
currently planned by the Company to be used for future development. The Company
has recently entered into a contract to purchase an additional five acres on
which the Company plans to build 132 units.
At December 31, 1996, 113 units were completed, and an additional 292 units
are planned for development. Twenty units are single story, while all other
units are two-story structures in which the bedrooms and baths are located on
the second story. Each unit contains two bedrooms, two bathrooms, living room
with sleeper sofa, and full kitchen. Other amenities within each unit include
whirlpool tub, color television, and interior design details such as vaulted
ceilings. Certain units include interior ceiling fans, imported ceramic tile,
over-sized sliding glass doors, rattan and pine furnishings, and/or a fireplace.
The Company has recently completed 22 new units which feature the new "lodge
style".
Amenities at the resort include a registration center; an 1,150-square foot
activity center with electronic games, pool table, and wide-screen television;
miniature golf course; a children's playground area; barbecue and picnic areas;
enclosed swimming pool and heated spa; children's wading pool; newly-constructed
tennis court; archery range; and activity areas for shuffleboard, basketball,
horseshoes, and volleyball. Area sights and activities include water-tubing on
the nearby Guadalupe River, and visiting the River Walk or the Alamo in San
Antonio.
45
<PAGE> 48
At December 31, 1996, the resort contained 5,650 total Vacation Intervals,
of which 944 remained for sale. In addition to the 12 units under construction,
the Company plans to build 280 additional units, which collectively would yield
14,600 additional Vacation Intervals available for sale. Vacation Intervals at
the resort are currently priced from $6,000 to $14,500 for one-week stays (and
start at $3,500 for biennial alternate year intervals), 644 of which were sold
in 1996. See "-- Summary of Company Resorts" and "Risk Factors -- Development,
Construction and Property Acquisition Activities".
Ozark Mountain Resort. Ozark Mountain Resort is a family-oriented resort
located on the shores of Table Rock Lake which features bass fishing. The resort
is located approximately 15 miles from Branson, Missouri, a country music
entertainment center, 233 miles from Kansas City, and 276 miles from St. Louis.
Ozark Mountain Resort is a mixed-use development of timeshare and condominium
units. The resort contains approximately 116 acres, of which approximately 82
acres are currently planned by the Company to be used for future development.
At December 31, 1996, 118 units were completed, and the Company plans to
build 84 additional units. There are two types of units: (i) two bedroom, two
bath, one-story fourplexes; and (ii) two bedroom, two bath, three-story
sixplexes. Each standard unit includes two large bedrooms, two bathrooms, living
room with sleeper sofa, and full kitchen. Other amenities within each unit
include whirlpool tub, color television, and vaulted ceilings. Certain units
contain interior ceiling fans, imported ceramic tile, over-sized sliding glass
doors, rattan or pine furnishings, or fireplace. "President's View" units
feature a panoramic view of Table Rock Lake, a larger, more spacious floor plan
(1,210 square feet), front and back screened verandas, washer and dryer, and a
more elegant decor.
The primary recreational amenity available at the resort is Table Rock
Lake, a 43,100 acre public lake. Other recreational facilities and improvements
at the resort include a swimming beach with dock, an activities center with pool
table, covered boat dock and launch ramp, olympic-sized swimming pool,
concession area with dressing facilities, lighted tennis court, nature trails,
horseback riding trails, two picnic areas, two playgrounds, miniature golf
course, and a competitive sports area accommodating volleyball, basketball,
tetherball, horseshoes, shuffleboard, and archery. Guests can also rent or use
canoes, paddle boats, or rowboats. Owners of condominium units are also entitled
to use these amenities pursuant to use agreements with the Company.
At December 31, 1996, the resort contained 5,912 Vacation Intervals, of
which approximately 2,263 remained available for sale. In addition to the six
units under construction, the Company plans to build 78 additional units, which
collectively would yield an additional 4,368 Vacation Intervals available for
sale. Standard Vacation Intervals at the resort are currently priced from $6,000
to $12,500 for one-week stays, while one-week "President's View" intervals are
priced at $8,000 to $17,500 depending on the value rating of the interval. See
"-- Summary of Company Resorts" and "Risk Factors -- Development, Construction
and Property Acquisition Activities".
Holiday Hills Resort. Holiday Hills is a resort community located in Taney
County, Missouri, two miles east of Branson, Missouri. The resort is 224 miles
from Kansas City and 267 miles from St. Louis. The resort is heavily wooded by
cedar, pine, and hardwood trees, and is favored by Silverleaf Owners seeking
quality golf and nightly entertainment in nearby Branson. Holiday Hills is a
mixed-use development of single-family lots, condominiums and timeshare units.
The resort contains approximately 338 acres, of which approximately 177 acres
are currently planned by the Company to be used for future development.
The Company plans to build 202 new units, and 24 units were complete at
December 31, 1996. There are three types of timeshare units: (i) two bedroom,
two bath, one-story fourplexes; (ii) one bedroom, one bath, with upstairs loft,
log construction duplexes; and (iii) one bedroom, two bath, with upstairs loft,
log construction duplexes. Each unit includes a living room with sleeper sofa,
full kitchen, whirlpool tub, color television, vaulted ceilings, and interior
ceiling fans.
Taneycomo Lake, a popular lake for trout fishing, is three miles away, and
Table Rock Lake is approximately ten miles away. The resort has an 18-hole golf
course which is undergoing an approximate $2.5 million renovation and is
scheduled for completion in mid-1997. Other amenities owned by the Company
include a pro shop, a swimming pool, miniature golf course, tennis court, picnic
area, camp sites, archery range,
46
<PAGE> 49
basketball court, and an activity area which includes shuffleboard and
horseshoes. Lot and condominium unit owners are also entitled to use these
amenities pursuant to use agreements between the Company and certain homeowner
associations.
At December 31, 1996, the resort contained 1,200 Vacation Intervals, of
which 416 remained available for sale. The Company plans to build 202 additional
units, which would yield an additional 10,100 Vacation Intervals available for
sale. Intervals at the resort are currently priced from $6,000 to $12,500 for
one-week stays. See "-- Summary of Company Resorts" and "Risk
Factors -- Development, Construction and Property Acquisition Activities".
MARKETING AND SALES
Marketing is the process by which the Company attracts potential customers
to visit and tour an Existing Resort or attend a sales presentation. Sales is
the process by which the Company seeks to sell a Vacation Interval to a
potential customer once he arrives for a tour at an Existing Resort or attends a
sales presentation. The Company believes it has the marketing and sales systems
necessary to sell Vacation Intervals in the economy sector on a low-cost basis.
The Company also believes it is strategically positioned to enter new markets
and develop marketing programs for additional resorts it may develop in the
future at a lower cost than its competitors in the economy segment.
Marketing. The Company's in-house marketing staff develops prospects
through a variety of marketing programs specifically designed to attract the
Company's target customers. Databases of new prospects are principally developed
through cooperative arrangements between Database Research, Inc., a subsidiary
of the Company, and other local businesses and special event sponsors. Under
these cooperative marketing programs, basic demographic information of potential
customers is solicited on a voluntary basis from individuals who patronize these
businesses or events. After entering this demographic information into its
permanent database, the Company utilizes its systems to identify prospects who
meet the Company's marketing criteria. Using the Company's automated dialing and
bulk mailing equipment, in-house marketing specialists conduct coordinated
telemarketing and direct mail procedures which invite prospects to tour one of
the Company's resorts and receive an incentive, such as a free gift.
Sales. The Company actively sells its Vacation Intervals primarily through
on-site salespersons at certain Existing Resorts. Upon arrival at an Existing
Resort for a scheduled tour, the prospect is met by a member of the Company's
on-site salesforce who conducts the prospect on a one to two hour tour of the
resort and its related amenities. At the conclusion of the tour, the sales
representative explains the benefits and costs of becoming a Silverleaf Owner.
The presentation also includes a description of the financing alternatives
offered by the Company. Prior to the closing of any sale, a verification officer
(a salaried employee of the Company) interviews each prospect to ensure
compliance with Company sales policies and regulatory agency requirements. No
sale becomes final until a statutory waiting period (which varies from state to
state) of up to five days has passed.
Sales representatives receive commissions ranging from 5-14% of the sales
price depending on established guidelines. Sales managers also receive
commissions from 4-6%, and are subject to commission chargebacks in the event
the purchaser fails to make his first required payment. Sales directors also
receive commissions of 2%, which are also subject to chargebacks.
Prospects who are interested in a lower priced product are offered biennial
(alternate year) intervals or Samplers, which entitle the prospect to sample a
resort for a specified number of nights. The prospect may apply the cost of a
Sampler against the down-payment on a Vacation Interval if purchased at a later
date. In addition, the Company actively markets upgraded Vacation Intervals to
existing Silverleaf Owners. See "-- Strategy". Although most upgrades are sold
by the Company's in-house sales staff, the Company has contracted with a third
party to assist in offsite marketing of upgrades at the Destination Resorts.
These upgrade programs have been well received by Silverleaf Owners and
accounted for 20.8% and 16%, respectively, of the Company's gross revenues from
Vacation Interval sales for 1995 and 1996. By offering Samplers and upgraded
Vacation Intervals, the Company believes it offers an affordable product for all
prospects in its target market. Also, by offering products with a range of
prices, the Company attempts to attract younger purchasers with its
lowered-priced products and gradually upgrade such purchasers over time as their
earnings increase.
47
<PAGE> 50
Because the Company's sales representatives are a critical component of the
sales and marketing effort, the Company continually strives to attract, train
and retain a dedicated salesforce. The Company provides intensive sales
instruction and training which, coupled with the representative's valuable local
knowledge, assist the sales representatives in acquainting prospects with the
resort's benefits. Each sales representative is an employee of the Company and
receives some employment benefits. At December 31, 1996, the Company employed
more than 200 sales representatives at its Existing Resorts.
CUSTOMER FINANCING
The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers make a down payment of at least 10% of the
purchase price and deliver a promissory note to the Company for the balance; the
promissory notes generally bear interest at a fixed rate, are payable over a
seven year period, and are secured by a first mortgage on the Vacation Interval.
The Company bears the risk of defaults on these promissory notes, and this risk
is heightened inasmuch as the Company generally does not verify the credit
history of its customers and will provide financing if the customer is presently
employed and meets certain household income criteria.
The Company's credit experience is such that in 1997 it plans to allocate
22% of the purchase price of each Vacation Interval to a bad debt reserve. If a
buyer of a Vacation Interval defaults, the Company generally must foreclose on
the Vacation Interval and attempt to resell it; the associated marketing,
selling, and administrative costs from the original sale are not recovered; and
such costs must be incurred again to resell the Vacation Interval. Although the
Company, in many cases, may have recourse against a Vacation Interval buyer for
the unpaid price, the State of Texas and certain other states have
"anti-deficiency" laws which limit the Company's ability to recover personal
judgments against customers who have defaulted on their loans. Accordingly, the
Company has generally not pursued this remedy.
Prior to 1996, the Company sold customer promissory notes and mortgages to
third parties, generally with recourse, as a means of financing its operations.
As a result, the Company may be required to repurchase customer promissory notes
previously sold which become delinquent. The Company takes these contingent
obligations into account in establishing its allowance for uncollectible notes.
At December 31, 1996, the Company had notes receivable (including notes
unrelated to Vacation Intervals) in the approximate principal amount of $67.7
million, was contingently liable with respect to approximately $11.0 million
principal amount of customer notes sold with recourse and had an allowance for
doubtful notes of approximately $11.9 million. There can be no assurance that
such reserves are adequate. See Note 4 of Notes to Consolidated Financial
Statements.
The Company recognizes interest income as earned. If interest payments on
customer notes become delinquent, the Company ceases recognition of the interest
income until collection is assured. When inventory is returned to the Company,
any unpaid note receivable balances are charged against the allowance for
uncollectible notes net of the amount at which the Vacation Interval is being
restored to inventory.
While the Company intends to use the proceeds of the Offering to pay off
all its existing indebtedness, it will be required to continue to borrow to
sustain operations. The Company has entered into agreements with lenders to
borrow up to approximately $96 million collateralized by customer promissory
notes and mortgages. The Company's lenders typically lend 70% of the principal
amount of performing notes, and Silverleaf Owners make payments on their
promissory notes directly to the lender's collection center, where receipts are
applied against the Company's loan balance. At December 31, 1996, the Company
had a portfolio of approximately 11,712 loans to Silverleaf Owners in the
approximate principal amount of $66.8 million, of which approximately $7.9
million in principal amount of customer receivables were 60 days or more past
due and therefore ineligible as collateral. At such date, the Company had
borrowings from lenders in the approximate principal amount of $30.7 million
secured by the customer loans. Historically and currently, after taking into
account the amount of ineligible collateral and the 70% borrowing base, the
Company's borrowings have approached the maximum amount available under its
existing credit facilities. To the extent the Company generates additional
customer notes receivable through its sales efforts, such notes may be pledged
to lenders for additional borrowings, subject to the 70% advance rate.
48
<PAGE> 51
At December 31, 1996, the Company's portfolio of customer loans had an
average yield of 14.7%. At such date, the Company's borrowings, which bear
interest at variable rates, had a weighted average cost of 11.2%. The Company
has historically derived net interest income from its financing activities
because the interest rates it charges its customers who finance the purchase of
their Vacation Intervals exceed the interest rates the Company pays to its
lenders. Because the Company's indebtedness bears interest at variable rates and
the Company's customer receivables bear interest at fixed rates, increases in
interest rates will erode the spread in interest rates that the Company has
historically enjoyed and could cause the interest expense on the Company's
borrowings to exceed its interest income on its portfolio of customer loans. The
Company does not engage in interest rate hedging transactions. Therefore, any
increase in interest rates, particularly if sustained, could have a material
adverse effect on the Company's results of operations, liquidity and financial
position.
Limitations on availability of financing would inhibit sales of Vacation
Intervals due to (i) the lack of funds to finance the initial negative cash flow
that results from sales that are financed by the Company, and (ii) reduced
demand if the Company is unable to provide financing to purchasers of Vacation
Intervals. The Company ordinarily receives only 10% of the purchase price on the
sale of a Vacation Interval but must pay in full the costs of development,
marketing, and sale of the Interval. Maximum borrowings available under the
Company's current credit agreements may not be sufficient to cover these costs,
thereby straining capital resources, liquidity, and capacity to grow. In
addition, to the extent interest rates decrease generally on loans available to
the Company's customers, the Company faces an increased risk that customers will
pre-pay their loans and reduce the Company's income from financing activities.
The Company typically provides financing to customers over a seven year
period which customer notes have an average maturity of 5.6 years. The Company's
related revolving credit borrowings, however, mature between October 1998 and
August 2003, with most of such borrowings maturing in 1999. Accordingly, there
is a mismatch between the Company's cash receipts and the Company's cash
disbursement obligations. Although the Company has historically been able to
secure financing sufficient to fund its operations, it does not presently have
agreements with its lenders to extend the term of its existing funding
commitments or to replace such commitments upon their expiration. Failure to
obtain such refinancing facilities could require the Company to sell its
portfolio of customer loans, probably at a substantial discount, or to seek
other alternatives to enable it to continue in business. While the Company has
been successful in obtaining financing to date, there is no assurance it will be
able to do so in the future. See "Risk Factors -- Acceleration of Deferred
Taxes; Alternative Minimum Taxes".
EXISTING CREDIT FACILITIES
The Company has five revolving credit facilities with four lenders
providing for loans up to $96 million, approximately $34.7 million of which was
outstanding at December 31, 1996, maturing between October 1998 and August 2003.
These credit facilities are collateralized by customer notes receivables, and
one of these credit facilities is also collateralized by unsold Vacation
Intervals. The Company also has one term loan which is collateralized by
condominium units, certain acreage, and customer notes receivable. Collectively,
the credit agreements contain numerous covenants including requiring the Company
to (i) preserve and maintain the collateral securing the loans; (ii) pay all
taxes and other obligations relating to the collateral; and (iii) refrain from
selling or transferring the collateral or permitting any encumbrances on the
collateral. Such credit facilities also contain operating covenants requiring
the Company to (i) maintain an aggregate minimum tangible net worth ranging from
$6.0 million to $17.5 million; (ii) maintain its legal existence and be in good
standing in any jurisdiction where it conducts business; (iii) remain in the
active management of the Existing Resorts; (iv) ensure that sales and marketing
expenses incurred in connection with marketing the Vacation Intervals do not
exceed 50% of the net sales revenue realized from the sale of the Vacation
Intervals, and (v) refrain from modifying or terminating certain timeshare
documents. See Note 7 of Notes to Consolidated Financial Statements.
The Company's future lending and development activities will likely be
financed with indebtedness obtained under the Company's existing credit
facilities or under credit facilities to be obtained by the Company in the
future. Such credit facilities are and would likely be collateralized by Company
assets and contain restrictive covenants. Among other consequences, terms of the
Company's debt instruments could impair the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions,
49
<PAGE> 52
significant business opportunities that may arise, general corporate purposes or
other purposes. In addition, if the Company were to incur additional
indebtedness, this could increase its vulnerability to adverse general economic
and timeshare industry conditions and to increased competitive pressures.
Finally, creditors' claims against the Company will be paid in full before the
claims of shareholders in the event of a liquidation, bankruptcy or winding up
of the Company.
DEVELOPMENT AND ACQUISITION PROCESS
The Company believes there is substantial opportunity to develop and
acquire resorts, although such activities have not contributed to the Company's
growth in recent years. As part of its current growth strategy, the Company
intends to develop and selectively acquire new resorts with characteristics
similar to the Existing Resorts.
In evaluating a potential site for a Home Resort, the Company generally
seeks locations within 100 miles of a large metropolitan area. For both Home
Resorts and Destination Resorts, the Company seeks rustic settings with
amenities such as golf courses or water frontage. The Company also seeks
locations offering an absence of competing properties within the economy
timeshare segment, ease of development with respect to zoning and land-use
issues, and ease of compliance with governmental regulations concerning
timeshare sales and operations.
Before committing capital to a site, the Company tests the market using
certain marketing techniques developed by the Company. The Company also explores
the zoning and land-use laws applicable to the potential site and the regulatory
issues pertaining to licenses and permits for timeshare sales and operations.
The Company will also contact various governmental entities and review
applications for necessary governmental permits and approvals. If the Company is
satisfied with its market and regulatory review, it will prepare a conceptual
layout of the resort, including building site plans and resort amenities. After
the Company applies its standard lodging unit design and amenity package, the
Company prepares a budget which estimates the cost of developing the resort,
including costs of lodging facilities, infrastructure and amenities, as well as
projected sales, marketing, and general and administrative costs. Once a budget
has been prepared, the Company will enter into a contract for the site. Such
contract may provide for additional due diligence by the Company, including
obtaining an environmental report by an environmental consulting firm, a survey
of the property, and a title commitment. If recommended by an environmental
consulting firm, the Company may either conduct additional testing or abandon
the proposed site. The Company employs legal counsel to review such documents
and to also review pertinent legal issues. If the Company continues to be
satisfied with the site after the environmental and legal review, the Company
will complete the purchase of the property.
The Company has a contract with an outside architectural firm which
supervises construction of new units. All construction activities are contracted
out to third parties, subject to completion guarantees. The Company seeks
initial completion of the development of a new resort's basic infrastructure and
models within one year, with additional units to be added within 150 days based
on demand. See "Risk Factors -- Development, Construction and Property
Acquisition Activities". An integral part of the development process is the
establishment of a functional sales office at the new resort.
CLUBS/MASTER CLUB
Upon purchasing a Vacation Interval at an Existing Resort, the purchaser
automatically becomes a member of the Club for that particular resort. The
Company has the right to appoint the directors of the Clubs. The Silverleaf
Owners are obligated to pay monthly dues to their respective Club, which
obligation is secured by a lien on their Vacation Interval in favor of the Club.
Each of the Clubs has entered into a Master Club Agreement with the Master Club.
The Master Club, a non-profit corporation, has no shareholders or members, and
its directors are elected by a majority vote of the directors of the Clubs. The
Master Club Agreement authorizes the Master Club to manage the Existing Resorts
on a centralized and collective basis. As the Company develops new resorts,
their clubs are expected to be added to the Master Club Agreement. The
consolidation of resort operations through the Master Club permits: (i) a
centralized reservation system for the Existing Resorts; (ii) substantial cost
savings by purchasing goods and services for the Existing Resorts on a group
basis, which
50
<PAGE> 53
generally results in a lower cost of goods and services than if such goods and
services were purchased by each resort on an individual basis; (iii) centralized
management for the entire resort system; (iv) centralized legal, accounting and
administrative services for the entire resort system; and (v) uniform
implementation of various rules and regulations governing the Existing Resorts.
All furniture, furnishings, recreational equipment and other personal property
used in connection with the operation of the Existing Resorts are owned by the
Master Club, rather than the Company.
One officer of the Company is also an officer of the Master Club. Prior to
1997, a large portion of her salary was paid by the Master Club. At December 31,
1996, the Master Club had 340 full-time employees and is solely responsible for
their salaries. The Master Club is also responsible for the direct expenses of
operating the Existing Resorts, while the Company is responsible for the direct
expenses of new development and all marketing and sales activities. To the
extent the Master Club provides payroll, administrative and other services that
directly benefit the Company, the Company reimburses the Master Club for such
services. See "Certain Relationships and Related Transactions -- Other
Affiliated Transactions" and Note 10 of Notes to Consolidated Financial
Statements.
The Master Club collects dues, currently $49.98 per month ($24.98 for
biennial alternate year Vacation Intervals), from Silverleaf Owners, plus
certain other amounts assessed against the Silverleaf Owners from time to time,
together with all income generated by the operation of certain amenities at the
Existing Resorts. Such amounts are placed in a common account and are used by
the Master Club to pay the costs of operating the Existing Resorts and the
management fees owing to the Company pursuant to a Management Agreement between
the Company and the Master Club. This Management Agreement authorizes the
Company to manage and operate the resorts and provides for a management fee
equal to 15% of Master Club gross revenues, but the Company's right to receive
such fee on an annual basis is limited to the amount of the Master Club's net
income. Due to anticipated refurbishment of units at the Existing Resorts,
together with the operational and maintenance expenses associated with the
Company's current expansion and development plans, the Company believes its 1997
management fee will be subject to the net income limitation. For financial
reporting purposes, management fees from the Master Club are recognized based on
the lower of (i) 15% of Master Club's gross revenues, or (ii) Master Club net
income. See Note 10 of Notes to Consolidated Financial Statements. The
Management Agreement was entered into in March 1990, has a ten year term, and
will continue year-to-year thereafter unless cancelled by either party.
OTHER OPERATIONS
Operation of Amenities. The Company owns, operates, and receives the
revenues from the marina at The Villages and the golf course and pro shop at
Holiday Hills. Although the Company owns the golf course at Holly Lake Resort, a
homeowners association in the development operates the golf course. In general,
the Master Club receives revenues from the various amenities which require a
usage fee, such as watercraft rentals, horseback rides, and restaurants.
Unit Leasing. The Company also realizes revenues from sales of Samplers
which allow prospective Vacation Interval purchasers to sample a resort for a
specified number of nights. A five night Sampler package currently sells for
$795. For the years ended December 31, 1995 and 1996, the Company realized $1.31
million and $1.72 million, respectively, in revenues from Sampler revenues. See
"Management Discussion and Analysis of Financial Condition and Results of
Operation".
Utility Services. The Company owns its own water supply facilities at Piney
Shores Resort, The Villages, Hill Country Resort, Holly Lake Resort, Ozark
Mountain Resort, and Holiday Hills Resort. The Company also currently owns its
own waste-water treatment facilities at Piney Shores Resort and Ozark Mountain
Resort, and has entered into an agreement with the local public utility company
to transfer ownership of the waste-water treatment facilities at Holiday Hills.
TNRCC is the primary state umbrella agency regulating the utilities at the Home
Resorts in Texas, and the Department of Natural Resources and Public Service
Commission of Missouri are the primary state umbrella agencies regulating such
utilities at the Destination Resorts in Missouri. The Company has rate case
permits to supply and charge third parties for the water supply facilities at
The Villages and Holly Lake Resort and the waste-water facility at Holiday Hills
Resort, and has applied for rate case permits
51
<PAGE> 54
which would allow it to charge third-parties for water supply at Piney Shores
Resort and Hill Country Resort and the waste-water facility at Holiday Hills
Resort. The Company plans to build a waste-water facility at The Villages in
1997, which facility should be completed by mid-1998. As a result of an
enforcement proceeding brought by TNRCC, the Company is in the process of
expanding its waste-water facility at the Holly Lake Resort, which the Company
believes will be completed within the time schedule mandated by TNRCC.
Other Property. The Company owns an undeveloped five-acre tract of land on
the Gulf Coast in Mississippi. As of December 31, 1996, it also owned 28 lots at
Ozark Mountain Resort and Holiday Hills Resort and 282 lots at The Villages. At
December 31, 1996, the Company also owned 18 condominium units which are in the
process of being sold. See Note 12 of Notes to Consolidated Financial
Statements. Additionally, the Company owns approximately 45 acres in
Mississippi, and the Company is entitled to 85% of any profits from this land.
An affiliate of a proposed director owns a 10% net profits interest in this
land. See "Management -- Certain Relationships and Other Transactions".
Other Operations. The Company provides management services for certain
condominium homeowners' associations at the Existing Resorts.
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORKS
Internal Exchanges. Each purchaser of a Vacation Interval from the Company
has certain exchange privileges which entitle such purchaser to: (i) exchange
his interval for a different interval (week) at the same resort so long as the
different interval is of an equal or lower rating; and (ii) exchange his
interval for the same interval at any other of the Existing Resorts. These
intra-company exchange rights require an exchange fee, which is currently $50,
and are conditioned upon availability of the desired interval or resort.
RCI Exchanges. The Company believes that its Vacation Intervals are made
more attractive by the Company's participation in Vacation Interval exchange
networks operated by RCI. Approximately one-third of Silverleaf Owners
participate in RCI's exchange network. Membership in RCI allows participating
Silverleaf Owners to exchange their occupancy right in a unit in a particular
year for an occupancy right at the same time or a different time of the same or
lower color rating in another participating resort, based upon availability and
the payment of a variable exchange fee. A member may exchange his Vacation
Interval for an occupancy right in another participating resort by listing his
Vacation Interval as available with the exchange organization and by requesting
occupancy at another participating resort, indicating the particular resort or
geographic area to which the member desires to travel, the size of the unit
desired and the period during which occupancy is desired.
RCI has assigned a rating of either "red", "white", or "blue" to each
Vacation Interval for each Existing Resort, based upon a number of factors,
including the location and size of the unit, the quality of the resort and the
period during which the Vacation Interval is available, and attempts to satisfy
exchange requests by providing an occupancy right in another Vacation Interval
with a similar rating. Owners of a red Vacation Interval may exchange their
interval for a red, white, or blue interval. Owners of a white Vacation Interval
may exchange only for a white or blue interval, and owners of a blue interval
may exchange only for a blue interval. If RCI is unable to meet the member's
initial request, it suggests alternative resorts based on availability. RCI has
assigned either red or white ratings to all Vacation Intervals at the Company's
Ozark Mountain and Holiday Hills resorts.
RCI has more than 2,900 participating resort facilities and over 2.0
million members worldwide. During 1995 RCI processed over 1.5 million Vacation
Interval exchanges. The cost of the annual membership fee in RCI, which is at
the option and expense of the owner of the Vacation Interval, is currently $74
per year. Exchange rights require an additional fee of approximately $103 for
domestic exchanges and $133 for foreign exchanges.
COMPETITION
The timeshare industry is highly fragmented and includes a large number of
local and regional resort developers and operators. However, some of the world's
most recognized lodging, hospitality and entertainment companies, such as,
Marriott, Disney, Hilton and Hyatt have recently entered the industry. Other
companies in the timeshare industry, including Signature, Fairfield, Vacation
Break, Vistana, and Ramada are public companies, with the enhanced access to
capital and other resources that public ownership implies.
52
<PAGE> 55
Fairfield and Signature own timeshare resorts in or near Branson, Missouri,
which compete with the Company's Holiday Hills and Ozark Mountain Resorts, and
Signature owns a resort which is located near and competes with the Company's
Piney Shores Resort. Based on published industry data and reports, except for
Fairfield and Signature, the Company does not believe that any of the
competitors named above own timeshare resorts in Texas or Missouri and believes
that such competitors generally target consumers with higher annual incomes than
the Company. Nonetheless, competitors may possess significantly greater
financial, marketing, personnel and other resources than the Company, and there
can be no assurance that such competitors will not significantly reduce the
price of their Vacation Intervals or offer greater convenience, services or
amenities than the Company.
While the Company's principal competitors are developers of timeshare
resorts, the Company is also subject to competition from other entities engaged
in the commercial lodging business, including condominiums, hotels and motels;
others engaged in the leisure business; and, to a lesser extent, from
campgrounds, recreational vehicles, tour packages and second home sales. A
reduction in the product costs associated with any of these competitors, or an
increase in the Company's (or its customers') costs relative to such
competitors' (or their customers') costs, could have a material adverse effect
on the Company's results of operations, liquidity and financial position.
Numerous businesses, individuals and other entities will compete with the
Company in seeking properties for acquisition and development and new resorts.
Some of these competitors will be larger and have greater financial resources
than the Company. Such competition may result in a higher cost for properties
the Company wishes to acquire or may cause the Company to be unable to acquire
suitable properties for the development of new resorts.
GOVERNMENTAL REGULATION
General. The Company's marketing and sales of Vacation Intervals and other
operations are subject to extensive regulation by the federal government and the
states and jurisdictions in which the Existing Resorts are located and in which
Vacation Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-in-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Settlement Procedures Act, the Consumer Credit
Protection Act, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act and the Civil
Rights Acts of 1964 and 1968.
In addition, many states, including Texas and Missouri (the only states in
which the Company owns resorts), have adopted specific laws and regulations
regarding the sale of Vacation Interval ownership programs. The laws of most
states, including Texas, require the Company to file with a designated state
authority for its approval a detailed offering statement describing the Company
and all material aspects of the project and the sale of Vacation Intervals prior
to selling to residents of that state. The laws of these states require the
Company to file numerous documents and supporting information with the state
agency responsible for the regulation of Vacation Intervals. When the agency
determines that a project may be sold, it will issue a public report for the
project. The Company is required to deliver an offering statement or public
report to all prospective purchasers of a Vacation Interval who are Texas
residents, together with certain additional information concerning the terms of
the purchase, regardless of whether the resort is located in Texas. In Missouri
the Company is required to make certain disclosures in its sales documents. Laws
in each state where the Company currently sells Vacation Intervals generally
grant the purchaser of a Vacation Interval the right to cancel a contract of
purchase at any time within approximately five calendar days following the date
the contract was signed by the purchaser. Most states have other laws which
regulate the Company's activities and protect purchasers, such as real estate
licensure laws; travel sales licensure laws; anti-fraud laws; consumer
protection laws; telemarketing laws; prize, gift and sweepstakes laws; and
"anti-deficiency" laws.
The Company believes it is in material compliance with federal, Texas, and
Missouri laws and regulations to which it is currently subject relating to the
sale and marketing of timeshare resorts. However, the Company is
53
<PAGE> 56
normally and currently the subject of a number of consumer complaints generally
relating to marketing or sales practices filed with cognizant authorities, and
there can be no assurance that all of these complaints can be resolved without
adverse regulatory actions or other consequences. The Company expects some level
of consumer complaints in the ordinary course of its business as the Company
targets audiences which generally are less financially sophisticated and more
susceptible to intensive sales practices than more affluent customers. There can
be no assurance that the costs of resolving consumer complaints or of qualifying
under Vacation Interval ownership regulations in all jurisdictions in which the
Company desires to conduct sales will not be significant, that the Company is in
material compliance with applicable federal, Texas, Missouri, or other laws and
regulations, or that violations of law will not have adverse implications for
the Company, including negative public relations, potential litigation, and
regulatory sanctions. The expense, negative publicity, and potential sanctions
associated with the failure to comply with applicable laws or regulations could
have a material adverse effect on the Company's results of operations,
liquidity, or financial position.
Prior to the advent of the current level of government regulation, and
continuing sporadically to the present, the timeshare industry has been
afflicted with negative publicity and prosecutorial attention due, among other
things, to marketing practices which were widely viewed as deceptive or
fraudulent. Among the many timeshare companies which have been the subject of
federal, state and local enforcement actions and investigations were certain of
the Affiliated Companies and their affiliates. Some of the settlements,
injunctions and decrees resulting from litigation and enforcement actions (the
"Orders") to which certain of the Affiliated Companies consented purport to bind
all successors and assigns, and accordingly bind the Company. In addition, the
Company was directly a party to one such Order issued in Missouri. These Orders
require, among other things, that all parties bound by the Orders, including the
Company, refrain from engaging in deceptive sales practices in connection with
the offer and sale of Vacation Intervals. In one case in 1988 an Affiliated
Company pled guilty to deceptive uses of the mails in connection with
promotional sales literature mailed to prospective timeshare purchasers and
agreed to pay a judicially imposed fine of $1.5 million and restitution of
$100,000. The requirements of the Orders are substantially what applicable state
and federal laws and regulation mandate, but the consequence of violating the
Order may be that sanctions (including possible financial penalties and
suspension or loss of licensure) may be imposed more summarily and may be
harsher than would be the case if the Orders did not bind the Company. In
addition, the existence of the Orders may be viewed negatively by prospective
regulators in jurisdictions where the Company does not now do business, with
attendant risks of increased costs and reduced opportunities.
In March 1997, the Company entered into an Assurance of Voluntary
Compliance with the Texas Attorney General, in which the Company agreed to make
additional disclosure to purchasers of Vacation Intervals regarding the limited
availability of its Endless Escape program during certain periods. The Company
paid $15,200 for investigatory costs and attorneys' fees of the Attorney General
in connection with this matter. Also, in March 1997, the Company entered into an
agreed order (the "Agreed Order") with the Texas Real Estate Commission
requiring the Company to comply with certain aspects of the Texas Timeshare Act,
Texas Real Estate License Act and Rules of the Texas Real Estate Commission,
with which it had allegedly been in non-compliance until mid-1995. The
allegations included (i) the Company's admitted failure to register the Missouri
Destination Resorts in Texas due to its misunderstanding of the reach of the
Texas Timeshare Act; (ii) payment of referral fees for Vacation Interval sales,
the receipt of which was improper on the part of the recipients; and (iii)
miscellaneous other actions alleged to violate the Texas Timeshare Act, which
the Company denied. While the Agreed Order acknowledges that Silverleaf
independently resolved ten consumer complaints referenced in the Agreed Order,
discontinued the practices complained of, and had registered the Destination
Resorts during 1995 and 1996, the Texas Real Estate Commission ordered
Silverleaf to cease its discontinued practices and enhance its disclosure to
purchasers of Vacation Intervals. In the Agreed Order, Silverleaf agreed to make
a voluntary donation of $30,000 to the State of Texas. The Agreed Order also
directs Silverleaf to revise its training manual for timeshare salespersons and
verification officers. The Agreed Order resolved all of the alleged violations
contained in complaints received by the Commission through December 31, 1996.
See "Business -- Governmental Regulation".
Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous
54
<PAGE> 57
or toxic substances or petroleum product releases at such property, and may be
held liable to a governmental entity or to third parties for property damage and
tort liability and for investigation and clean-up costs incurred by such parties
in connection with the contamination. Such laws typically impose clean-up
responsibility and liability without regard to whether the owner or operator
knew of or caused the presence of the contaminants, and the liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. The cost of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate the
contamination on such property, may adversely affect the owner's ability to sell
such property or to borrow using such property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances at a
disposal or treatment facility also may be liable for the costs of removal or
remediation of a release of hazardous or toxic substances at such disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner or operator of a site may be subject
to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site or from environmental
regulatory violations. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such claims.
Certain Federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACMs and may provide for third parties to seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs. In 1994, the
Company conducted a limited asbestos survey at each of the Existing Resorts,
which surveys did not reveal material potential losses associated with ACM's at
the Existing Resorts.
In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no state
or federal requirements regarding the monitoring for, presence of, or exposure
to, radon in indoor air, the EPA and the Surgeon General recommend testing
residences for the presence of radon in indoor air, and the EPA further
recommends that concentrations of radon in indoor air be limited to less than 4
picocuries per liter of air (Pci/L) (the "Recommended Action Level"). The
presence of radon in concentrations equal to or greater than the Recommended
Action Level in one or more of the Company's properties may adversely affect the
Company's ability to sell Vacation Intervals at such properties and the market
value of such property. Recently-enacted federal legislation will eventually
require the Company to disclose to potential purchasers of Vacation Intervals at
the Company's resorts that were constructed prior to 1978 any known lead-paint
hazards and will impose treble damages for failure to so notify.
Electric transmission lines are located in the vicinity of the Company's
properties. Electric transmission lines are one of many sources of
electromagnetic fields ("EMFs") to which people may be exposed. Research into
potential health impacts associated with exposure to EMFs has produced
inconclusive results. Notwithstanding the lack of conclusive scientific
evidence, some states now regulate the strength of electric and magnetic fields
emanating from electric transmission lines, while others have required
transmission facilities to measure for levels of EMFs. In addition, the Company
understands that lawsuits have, on occasion, been filed (primarily against
electric utilities) alleging personal injuries resulting from exposure as well
as fear of adverse health effects. In addition, fear of adverse health effects
from transmission lines has been a factor considered in determining property
value in obtaining financing and in condemnation and eminent domain proceedings
brought by power companies seeking to construct transmission lines. Therefore,
there is a potential for the value of a property to be adversely affected as a
result of its proximity to a transmission line and for the Company to be exposed
to damage claims by persons exposed to EMFs.
In 1994, the Company conducted Phase I environmental assessments at each of
its Existing Resorts in order to identify potential environmental concerns.
These Phase I assessments have been carried out in accordance with accepted
industry practices and consisted of non-invasive investigations of environmental
conditions at the properties, including a preliminary investigation of the sites
and identification of publicly known conditions
55
<PAGE> 58
concerning properties in the vicinity of the sites, physical site inspections,
review of aerial photographs and relevant governmental records where readily
available, interviews with knowledgeable parties, investigation for the presence
of above ground and underground storage tanks presently or formerly at the
sites, a limited asbestos survey, and the preparation and issuance of written
reports. The Company's assessments of its properties have not revealed any
environmental liability that the Company believes would have a material adverse
effect on the Company's business, assets or results of operations, nor is the
Company aware of any such material environmental liability. Nevertheless, it is
possible that the Company's assessments do not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. The Company's Phase I assessments of the properties have not
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets or results of
operations taken as a whole; nor is the Company aware of any such material
environmental liability. Nevertheless, it is possible that the Company's Phase I
assessments do not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware. Moreover,
there can be no assurance that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of the properties will not be affected by the condition
of land or operations in the vicinity of the properties (such as the presence of
underground storage tanks) or by third parties unrelated to the Company. The
Company does not believe that compliance with applicable environmental laws or
regulations will have a material adverse effect on the Company or its financial
condition, results of operations, or liquidity.
The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. The Company has not been notified by
any governmental authority or any third party, and is not otherwise aware, of
any material noncompliance, liability or claim relating to hazardous or toxic
substances or petroleum products in connection with any of its present
properties.
Utility Regulation. The Company owns its own water supply and waste-water
treatment facilities at several of the Existing Resorts, which are regulated by
various governmental agencies. See "-- Other Operations". TNRCC is the primary
state umbrella agency regulating utilities at the Home Resorts in Texas, and the
Missouri Department of Natural Resources and Public Service Commission of
Missouri are the primary state umbrella agencies regulating utilities at the
Destination Resorts in Missouri. These agencies regulate the rates and charges
for the services (allowing a reasonable rate of return in relation to invested
capital and other factors), the size and quality of the plants, the quality of
water supplied, the efficacy of waste-water treatment, and many other aspects of
the utilities' operations. The agencies have approval rights regarding the
entity owning the utilities (including its financial strength) and the right to
approve a transfer of the applicable permits upon any change in control of the
entity holding the permits. Other federal, state, regional and local
environmental, health and other agencies also regulate various aspects of the
provision of water and waste-water treatment services.
Other Regulations. Under various state and federal laws governing housing
and places of public accommodation, the Company is required to meet certain
requirements related to access and use by disabled persons. Many of these
requirements did not take effect until after January 1, 1991. Although
management of the Company believes that its facilities are substantially in
compliance with present requirements of such laws, the Company may incur
additional costs of compliance. Additional legislation may impose further
burdens or restrictions on owners with respect to access by disabled persons.
The ultimate amount of the cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's growth strategy in certain instances or reduce profit margins on
the Company's operations. See "Risk Factors -- Cost of Compliance with Laws
Governing Availability of Facilities to Disabled Persons".
EMPLOYEES
At December 31, 1996, the Company employed approximately 595 full-time
employees. The Company believes that employee relations are good. None of the
these employees is represented by a labor union.
56
<PAGE> 59
INSURANCE; LEGAL PROCEEDINGS
The Company carries comprehensive liability, fire, hurricane and storm
insurance with respect to the Company's resorts, with policy specifications,
insured limits and deductibles customarily carried for similar properties which
the Company believes are adequate. There are, however, certain types of losses
(such as losses arising from floods and acts of war) that are not generally
insured because they are either uninsurable or not economically insurable.
Should an uninsured loss or a loss in excess of insured limits occur, the
Company could lose its capital invested in a resort, as well as the anticipated
future revenues from such resort and would continue to be obligated on any
mortgage indebtedness or other obligations related to the property. Any such
loss could have a material adverse effect on the Company. The Company
self-insures for property damage to certain vehicles and heavy equipment. See
"Risk Factors -- Natural Disasters; Uninsured Loss".
The Company is currently subject to litigation and claims respecting tort,
contract, and consumer disputes, among others. In the judgment of management,
none of such pending lawsuits or claims against the Company, either individually
or in the aggregate, is likely to have a material adverse effect on the Company
or its business. See "Risk Factors -- Regulation of Marketing and Sales of
Vacation Intervals and Related Laws".
57
<PAGE> 60
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each person
who is a director or executive officer of the Company or upon the consummation
of the Offering will become a director of the Company. Concurrently with or
shortly following the Offering, the Company will add an additional director who
will be a non-employee or independent director within the meaning of Rule 16b-3
of the Exchange Act (an "Independent Director").
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Mead.................... 50 Chairman of the Board and Chief Executive Officer
Sharon K. Brayfield............... 36 Director and President
David T. O'Connor................. 55 Executive Vice President -- Sales
Joe W. Conner..................... 40 Chief Financial Officer, Treasurer
Larry H. Fritz.................... 45 Vice President -- Marketing
Ioannis N. Gioldasis.............. 47 Vice President -- Promotions
Robert G. Levy.................... 49 Vice President -- Resort Operations
Sandra G. Cearley................. 35 Secretary
James B. Francis, Jr.............. 48 Proposed Director
Michael A. Jenkins................ 55 Proposed Director
</TABLE>
ROBERT E. MEAD founded the Company and has served as its Chairman of the
Board and Chief Executive Officer since its inception. Mr. Mead began his career
in hotel and motel management and also operated his own construction company.
Mr. Mead currently serves as a member of the Board of Directors of ARDA and has
over 17 years of experience in the timeshare industry, with special expertise in
the areas of consumer finance, hospitality management and real estate
development.
SHARON K. BRAYFIELD has served as the President of the Company since 1992
and manages all of the Company's day to day activities. Ms. Brayfield began her
career with an Affiliated Company in 1982 as the Public Relations Director of
Ozark Mountain Resort. In 1988, she was promoted to Executive Vice President of
Resort Operations and in 1991 was named Chief Operations Officer of the Company.
DAVID T. O'CONNOR has over 20 years of experience in real estate and
timeshare sales and has worked periodically with Mr. Mead over the past 14
years. Since 1991, Mr. O'Connor has served as the Company's Executive Vice
President -- Sales, directing all field sales, including the design and
preparation of all training materials, incentive programs, and follow-up sales
procedures. For the past five years, Mr. O'Connor has been an employee of
Recreational Consultants, Inc., which is an independent contractor of the
Company. See "Employment and Noncompetition Agreements".
JOE W. CONNER joined the Company in February 1997 as Chief Financial
Officer and has responsibility for all accounting, financial reporting and
taxation issues. From 1995 to 1997, Mr. Conner served as Vice President of
Finance and Chief Financial Officer of the Jacobsen Division of Textron, Inc.
From 1993 to 1995, Mr. Conner was Executive Vice President and Chief Financial
Officer for Furr's/Bishop's, Inc. Mr. Conner worked for Club Corporation of
America from 1985 to 1993, and last served as Sr. Vice President, Chief
Financial Officer and Director. Mr. Conner is a certified public accountant.
LARRY H. FRITZ has been employed by the Company (or an Affiliated Company)
periodically over the past nine years and has served in various marketing
management positions. Since 1991, Mr. Fritz has served as the Company's chief
marketing officer, with responsibility for daily marketing operations, and
currently serves as the Company's Vice President-Marketing.
IOANNIS N. GIOLDASIS has been with the Company since May of 1993 and
currently serves as Vice President -- Promotions. Mr. Gioldasis is responsible
for the design and implementation of marketing strategies and promotional
concepts for lead generation in Texas and other markets. Prior to joining the
Company, Mr. Gioldasis was a national field director for Resort Property
Consultants, Inc.
58
<PAGE> 61
ROBERT G. LEVY was promoted in February 1997 to Vice President-Operations
and administers the Company's Management Agreement with the Master Club. Since
1989, Mr. Levy has held a variety of managerial positions within the Company
including Project Manager, General Manager, Texas Regional Manager, and Director
of Operations. Prior to joining the Company, Mr. Levy spent 18 years in hotel,
motel, and resort management, and was associated with the Sheraton, Ramada Inn,
and Holiday Inn hotel chains.
SANDRA G. CEARLEY has served as Secretary of the Company since its
inception. Ms. Cearley maintains corporate minute books, oversees regulatory
filings, and coordinates legal matters with the Company's attorneys.
JAMES B. FRANCIS, JR. has consented to become a Director of the Company
upon the consummation of the Offering. During 1996, Mr. Francis' company,
Francis Enterprises, Inc., served as a consultant to the Company in connection
with governmental and public affairs. From 1980 to 1996, Mr. Francis was a
partner in the firm of Bright & Co., which managed various business investments,
including the Dallas Cowboys Football Club. During his tenure with Bright & Co.,
Mr. Francis served as a director and a member of the audit committees of Bright
Insurance Company, State Bank & Trust, and Bright Truck Leasing Corporation.
MICHAEL A. JENKINS has consented to become a Director of the Company upon
the consummation of the Offering. In 1971, Mr. Jenkins founded and became the
President of Leisure and Recreation Concepts, Inc. ("LARC"), which has planned
and designed over 850 theme parks, resorts, retail areas, and major attractions
worldwide. Mr. Jenkins has more than 35 years in the leisure industry, and has
served on the Board of Directors of International Broadcasting Corporation and
the International Association of Amusement Parks and Attractions. Prior to
forming LARC, Mr. Jenkins served as Vice President of Six Flags Over Texas,
Inc., and assisted in the development of all major Six Flags projects throughout
the United States.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. Concurrently with the consummation of the Offering,
the Board of Directors will establish an executive committee (the "Executive
Committee"), which will be granted such authority as may be determined from time
to time by a majority of the Board of Directors. The Company expects that the
Executive Committee will include at least one Independent Director. All actions
by the Executive Committee will require a majority vote of its members.
Audit Committee. Concurrently with the consummation of the Offering, the
Board of Directors will establish an audit committee (the "Audit Committee"),
which will consist of two or more Independent Directors. The Audit Committee
will be established to make recommendations concerning the engagement of
independent public accountants, review the plans and results of the audit
engagement, approve professional services provided by the independent public
accountants, review the independence of the independent public accountants and
the adequacy of the Company's internal accounting controls, and consider the
range of audit and non-audit fees.
Compensation Committee. Concurrently with the consummation of the Offering,
the Board of Directors will establish a compensation committee (the
"Compensation Committee"), which will consist of two or more Independent
Directors to determine compensation for the Company's senior executive officers
and to administer the Company's 1997 Stock Option Plan.
The Board of Directors of the Company initially will not have a nominating
committee or any other committee. The membership of the committees of the Board
of Directors will be established after the consummation of the Offering.
CLASSIFIED BOARD OF DIRECTORS
The Company's Board of Directors is divided into three classes serving
staggered terms. Upon the consummation of the Offering, the Board of Directors
will be comprised of one Class I director (presently not identified), two Class
II directors (Ms. Brayfield and Mr. Jenkins) and two Class III directors (Mr.
Mead and Mr. Francis). At each annual meeting of shareholders, a class of
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are then expiring. The terms of the initial Class I
directors, Class II directors and Class III directors will expire upon the
election and qualification of successor directors at the annual meeting of
shareholders held in calendar years 1998, 1999 and 2000, respectively. The
classification of
59
<PAGE> 62
directors makes it more difficult for a significant shareholder to change the
composition of the Board of Directors in a relatively short period of time.
DIRECTOR COMPENSATION
Upon the consummation of the Offering, the Company will grant to each
Independent Director, as directors' fees, options to purchase shares of
Common Stock at the initial public offering price. Such options shall vest in
three equal portions over a term of three years, with the first vesting period
occurring on the first anniversary of the Company's annual 1997 shareholders'
meeting. The options shall expire on the tenth anniversary of the Company's 1997
annual shareholders' meeting. Immediately following the 1998 and 1999 annual
shareholders' meetings, each Independent Director will receive a grant of
additional options to purchase shares of Common Stock at the fair market
value of the Common Stock on the date of the grant, which options shall be fully
vested upon the date of grant and shall expire on the tenth anniversary of the
date of grant. In addition to such option grants, the Independent Directors will
be reimbursed for expenses of attending each meeting of the Board of Directors.
Officers of the Company who are directors will not be paid any director fees but
will be reimbursed for expenses of attending meetings of the Board of Directors.
INDEMNIFICATION
The Charter provides for the indemnification of the Company's officers and
directors against certain liabilities to the fullest extent permitted under
applicable law. The Charter also provides that the directors and officers of the
Company be exculpated from monetary damages to the fullest extent permitted
under applicable law. Additionally, the Company has entered into written
Indemnification Agreements with its directors and officers. It is the position
of the Securities and Exchange Commission (the "Commission") that
indemnification of directors and officers for liabilities arising under the
Securities Act is against public policy and unenforceable under the Securities
Act.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the annual base
salary and other annual compensation that the Company paid in 1996 to the
Company's Chief Executive Officer and each of the other executive officers whose
cash compensation (salary and bonus) on an annualized basis exceeded $100,000
(the "Named Executive Officers"). During 1996, none of such persons received
compensation in the form of restricted stock awards, stock options, stock
appreciation rights, or long-term incentive plans.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ----------------------
PRINCIPAL POSITION YEAR SALARY BONUS(1)
------------------ ---- -------- --------
<S> <C> <C> <C>
Robert E. Mead,...................................... 1996 $400,015 $ 37,731
Chief Executive Officer
Sharon K. Brayfield,................................. 1996 17,763(2) 341,479(3)
President
David T. O'Connor,................................... 1996 451,196 65,328
Executive Vice President -- Sales(4)
Larry H. Fritz,...................................... 1996 70,000 67,913
Vice President -- Marketing
</TABLE>
- ---------------
(1) See "-- Employment and Noncompetition Agreements" for a discussion of
certain bonuses.
(2) During 1996, Ms. Brayfield also received $100,000 in salary paid by the
Master Club. Beginning in 1997, Ms. Brayfield will no longer receive a
salary from the Master Club and the Company will pay her a salary of
$133,101. See "-- Employment and Noncompetition Agreements".
(3) Approximately $77,000 of such amount is for forgiveness of a loan by the
Company to Ms. Brayfield.
(4) These amounts are paid as sales commissions to Recreational Consultants,
Inc., a corporation of which Mr. O'Connor is the principal. See
"-- Employment and Noncompetition Agreements".
60
<PAGE> 63
1997 STOCK OPTION PLAN
The Company has established a stock option plan (the "1997 Stock Option
Plan" or "Plan") to attract and retain directors, officers, and key employees of
the Company and to provide them incentives to maximize the Company's
performance. The 1997 Stock Option Plan provides for the award to directors,
officers, and key employees of nonqualified stock options and provides for the
grant to salaried key employees of options intended to qualify as "incentive
stock options" under Section 422 of the Code.
The 1997 Stock Option Plan will be administered by the Compensation
Committee which will select the individuals to whom options are to be granted
and to determine the number of shares to be subject thereto and the terms and
conditions thereof. The Compensation Committee is also authorized to adopt,
amend and rescind rules relating to the administration of the 1997 Stock Option
Plan.
Promptly after the consummation of the Offering, the Company estimates that
it will issue to officers and Independent Directors options to purchase
shares of Common Stock pursuant to the 1997 Stock Option Plan,
including options on shares to Mr. O'Connor. A maximum of
shares will be reserved for issuance under the 1997 Stock Option Plan. The
Company will file a Registration Statement to register such shares. See "Shares
Eligible for Future Sale".
Nonqualified stock options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value). Nonqualified stock options may be
granted for any term and upon such conditions determined by the Compensation
Committee.
Incentive stock options will be designed to comply with the provisions of
the Code and will be subject to restrictions contained therein, including
exercise prices equal to at least 100% of fair market value of Common Stock on
the grant date and a ten year restriction on their term; however, incentive
stock options granted to any person owning more than 10% of the voting power of
the stock of the Company shall have exercise prices equal to at least 110% of
the fair market value of the Common Stock on the grant date and shall not be
exercisable after five years from the date the option is granted.
Under the 1997 Stock Option Plan, the Board of Directors of the Company
reserves the right to exercise the powers and functions of the Compensation
Committee. Also, the Board of Directors reserves the right to amend the Plan at
any time; however, the Board of Directors may not without the approval of the
shareholders of the Company (i) increase the total number of shares reserved for
options under the Plan (other than for certain changes in the capital structure
of the Company), (ii) reduce the required exercise price of any incentive stock
options, or (iii) modify the provisions of the Plan regarding eligibility.
DISCRETIONARY PERFORMANCE AWARDS
Performance awards, including bonuses, may be granted by the Compensation
Committee on an individual or group basis. Generally, these awards will be based
upon specific agreements or performance criteria and will be paid in cash.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Effective January 1, 1997, Mr. Mead entered into a three year employment
agreement with the Company which provides for an annual base salary of $500,000,
a company vehicle, and other fringe benefits such as employee health insurance,
vacation, and sick leave as determined by the Board of Directors of the Company
from time to time. Either party may terminate the agreement upon 30 days notice
to the other.
Effective January 1, 1997, Ms. Brayfield entered into a three year
employment agreement which provides for an annual base salary of $133,101, a
company vehicle, and other fringe benefits such as employee health insurance,
vacation, and sick leave as determined by the Board of Directors of the Company
from time to time. Ms. Brayfield's agreement with the Company also provides for
an incentive bonus equal to .35% of the Company's net sales from Vacation
Intervals. Either party may terminate the agreement upon 30 days notice to the
other. Ms. Brayfield and the Company have an agreement that she may not transfer
her stock in the Company
61
<PAGE> 64
without first offering it for sale to the Company; this agreement will terminate
upon the consummation of the Offering.
Effective January 1, 1997, the Company entered into a three year
independent contractor agreement with Recreational Consultants, Inc., an entity
of which Mr. David T. O'Connor is the principal. Mr. O'Connor is Executive Vice
President-Sales for the Company. Pursuant to the agreement, Recreational
Consultants, Inc. will receive commissions equal to 1% of the Company's net
sales from Vacation Intervals, plus additional commissions based on weekly sales
volume and revenue per guest. The Company will also provide Recreational
Consultants, Inc. with a company vehicle and health insurance for Mr. O'Connor.
Either party may terminate the agreement upon 30 days notice to the other.
Each of the three agreements discussed above provides that such person or
entity will not directly or indirectly compete with the Company in any county in
which it conducts its business or markets its products for a period of two years
following the termination of the agreement. The agreements also provide that
such persons or entity will not (i) influence any employee or independent
contractor to terminate its relationship with the Company, or (ii) disclose any
confidential information of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REPAYMENT OF AFFILIATED DEBT
Approximately $10 million of the net proceeds from the Offering will be
used to repay outstanding debt to Mr. Mead and affiliated persons or entities.
Mr. Mead, Chairman of the Board and Chief Executive Officer of the Company, will
simultaneously repay his debt to the Company, as will STG, an affiliate of Mr.
Mead. Affiliated debt is explained below:
<TABLE>
<CAPTION>
COMPONENTS OF AMOUNT AT
AFFILIATED DEBT OF THE COMPANY DECEMBER 31, 1996
------------------------------ -----------------
(IN THOUSANDS)
<S> <C>
Debt of CBI to Mr. Mead (a)................................. $ 5,910
Debt of Silverleaf to Mr. Mead and affiliates (b)........... 8,077
Debt of Silverleaf to Pace, STG and Ralph Brotherton (c),
(d), (e).................................................. 778
-------
Total............................................. 14,765
Less:
Receivable from Mr. Mead (a)........................... (4,499)
Receivable from STG (f)................................ (169)
-------
Net Affiliated Party Debt of Silverleaf........... $10,097
=======
</TABLE>
- ---------------
(a) Prior to the Consolidation Transactions, Mr. Mead owned 100% of the stock
of CBI. During this period, Silverleaf made loans to Mr. Mead who
simultaneously made loans of similar amounts to CBI to finance its
operations. The Silverleaf loans to Mr. Mead bear interest at 8% per annum,
and the loans by Mr. Mead to CBI bear interest at 9% per annum. As a result
of the Consolidation Transactions, the debt of Mr. Mead to CBI and of CBI
to Mr. Mead has been consolidated on the Company's financial statements.
The above table reflects, on a consolidated basis, the remaining debt due
to Mr. Mead from the Company and the remaining receivable from Mr. Mead at
December 31, 1996.
(b) Mr. Mead owned 100% of the stock of Freedom Financial Corporation ("FFC")
prior to the Consolidation Transactions. As a part of the Consolidation
Transactions, the Company acquired certain assets held by FFC and the
Company assumed certain liabilities associated with these assets. See Note
9 of Notes to Consolidated Financial Statements. Liabilities assumed were
approximately $8.9 million consisting primarily of notes payable to Mr.
Mead and his affiliates of $7.6 million. The affiliates of Mr. Mead include
certain family partnerships and trusts. The notes payable to Mr. Mead and
his affiliates originated from loans of $1.1 million and asset sales of
$1.6 million made by Mr. Mead and his affiliates to FFC during 1987 and
1988. The $8.1 million debt at December 31, 1996 consists of principal of
$2.7 million and accrued interest
62
<PAGE> 65
of $5.4 million, computed at a weighted average rate of 11.9% through
December 1995 and at the rate of 11.87% per annum during 1996.
(c) Includes approximately $617,000 owed to Pace Finance Company ("Pace"), a
Texas corporation wholly owned by Mr. Mead. Pace loaned the Company
approximately $648,000, $541,000 and $655,000, in 1994, 1995, and 1996,
respectively. The Company secured such loans by pledging notes secured by
Vacation Intervals with an aggregate principal balance of approximately
$1.1 million, $901,000, and $1.1 million, in 1994, 1995, and 1996,
respectively. The Company made payments to Pace of approximately $395,0000,
$636,000, and $863,000, in 1994, 1995, and 1996, respectively.
(d) Includes approximately $95,000 owed to S.T.G. Investments ("STG"), a Texas
general partnership owned by trusts beneficially owned by Mr. Mead's
children.
(e) Includes approximately $67,000 owing to Ralph Brotherton, who serves as a
trustee of trusts for the children of Mr. Mead. This debt arose from the
1995 redemption of Mr. Brotherton's equity interest in Equal Investment
Company ("EIC") in exchange for a $100,000 note from EIC. Subsequently, EIC
was merged into the Company and the Company became liable for the note to
Mr. Brotherton. The note to Mr. Brotherton does not bear interest.
(f) At December 31, 1996, STG owed Silverleaf approximately $169,000 relating
to cash payments on notes receivable of Silverleaf collected and held by
STG on behalf of Silverleaf.
TRANSACTIONS WITH RELATED ENTITIES
FFC loaned the Company approximately $3.2 million and $555,000 in 1994 and
1995. To secure such loans, the Company pledged to FFC in 1994 and 1995 notes
secured by Vacation Intervals with an aggregate principal balance of
approximately $4.3 million and $740,000, respectively. The Company made
principal and interest payments to FFC of approximately $1.3 million and
$871,000, in 1994 and 1995.
During 1994, the Company transferred to FFC notes with an aggregate
principal balance of $216,094 secured by Vacation Intervals as a partial payment
of interest on a note from the Company to FFC (the "FFC Note"). The Company also
set off the amount of $121,032 in 1994 against the FFC Note, for servicing fees
to administer certain notes owned by FFC. FFC paid the Company $144,000 during
1994 in fees for providing administrative personnel, equipment, supplies and
other overhead items to FFC.
Prior to the Consolidation Transactions in December, 1995, Silverleaf
engaged in various transactions with entities affiliated with Mr. Mead. As a
result of the Consolidation Transactions, all transactions between Silverleaf
and the entities which were parties to the Consolidation Transactions were
eliminated through consolidation and restatement of the Company's financial
statements, and are therefore not specifically discussed herein. See Note 1 of
Notes to Consolidated Financial Statements.
Prior to the Consolidation Transactions, Pace purchased delinquent notes
secured by Vacation Intervals from an Affiliated Company. From time to time,
Pace sold these delinquent notes to the Company, generally at a price of $200
per note. The Company then reacquired through foreclosure the underlying
Vacation Intervals for resale. Pace's note sales to the Company equaled $47,400
in 1994 and $24,200 in 1996. In February 1997, Pace sold its remaining inventory
of notes to the Company for a consideration of $16,400. Pace also receives
revenues under agreements with approximately 218 unrelated individuals to use
various camping facilities at the Existing Resorts. Pace does not compensate the
Company for this use of its camping facilities.
STG loaned the Company approximately $558,000 and $272,000 in 1994 and
1995, respectively. As security, the Company pledged to STG notes secured by
Vacation Intervals with an aggregate principal balance of approximately $870,000
and $454,000 in 1994 and 1995, respectively. The Company made principal and
interest payments to STG of approximately $380,000, $533,000 and $247,000, in
1994, 1995, and 1996, respectively. These loans were repaid in full by the
Company in 1996.
TRANSACTIONS WITH RELATED INDIVIDUALS
In March 1997, Mr. Mead entered into a lease agreement with the Company
which grants Mr. Mead the exclusive right to use approximately 500 acres
adjoining an Existing Resort for hunting purposes. This land is
63
<PAGE> 66
located in a flood plain and is not suitable for development. In exchange for
these lease rights, Mr. Mead has agreed to pay the annual property taxes for
this land. This lease agreement has a ten-year term and may be renewed by Mr.
Mead for four additional ten-year terms.
Upon the consummation of the Offering, Mr. Mead has agreed to purchase a
condominium in Mexico and a residential property in Texas from the Company. The
Company's acquisition cost of these properties in 1995 was approximately
$403,000. Mr. Mead has proposed to pay the Company its acquisition cost plus an
additional 15% per annum (approximately $464,000).
Prior to the consummation of the Offering, the Company will enter into a
Registration Rights Agreement with Mr. Mead with respect to all of his shares of
Common Stock. See "Shares Eligible for Future Sale".
During 1995, the Company loaned $15,000 to Ms. Brayfield at 8.5% interest
per annum. Due to a previous loan balance and the accrual of interest, her
aggregate debt to the Company was $71,000 at December 31, 1995. Her largest
outstanding loan balances in 1995 and 1996 were approximately $71,000 and
$77,000, respectively. The Company forgave this loan effective December 31,
1996. See "Management -- Executive Compensation".
During 1996, the Company was a party to a consulting agreement with Francis
Enterprises, Inc. ("FEI"), a Texas corporation which is wholly owned by a
proposed director of the Company. FEI received approximately $201,000 (and the
Company expensed approximately $208,000) in 1996 under this agreement. FEI
provided advice to the Company in connection with governmental and public
affairs. This consulting agreement was cancelled in February 1997. An affiliate
of this proposed director owns a 10% net profits interest in a 45 acre tract of
land in Mississippi owned by the Company. See "Management -- Directors and
Executive Officers" and "Business -- Other Operations".
Effective January 1, 1997, the Company entered into a three year
independent contractor agreement with Recreational Consultants, Inc., an entity
of which Mr. O'Connor is the principal. See "Management -- Executive
Compensation, Employment and Noncompetition Agreements". Silverleaf paid
Recreational Consultants, Inc. approximately $321,000, $430,000, and $552,000 in
1994, 1995, and 1996, respectively.
With regard to each of the above-referenced transactions with related
individuals, the Board of Directors (or the disinterested Directors, if
appropriate) will conduct a review to determine if the terms of such
transactions are fair to the Company.
TRANSACTIONS WITH THE MASTER CLUB
Ms. Brayfield, an officer and director of the Company, is also the
principal executive officer of the Master Club. The Company manages the Existing
Resorts under a management agreement with the Master Club. The Company is
entitled to a management fee equal to 15% of the Master Club's gross revenues,
but the Company's right to receive such fee on an annual basis is limited to the
amount of the Master Club's net income. If the management fee is limited due to
the Master Club's net income in a given year, such deficiency may be recovered
from the Master Club in subsequent years, subject to the net income limitation.
Accordingly, receivables for unpaid management fee deficiencies from the Master
Club due to the net income limitation are not accrued on the books of the
Company. In 1994, 1995, and 1996, the Company reported management fees from the
Master Club of approximately $2.4 million, $2.5 million and $2.2 million,
respectively. The Master Club bears and pays all expenses of operating the
Existing Resorts, while the Company bears the expense of new development and all
marketing and sales activities. To the extent the Master Club pays for payroll
or other general and administrative expenses that relate to the Company's
development, marketing, or sales activities, the Master Club allocates and
charges such expenses to the Company. During 1994, 1995 and 1996, the Master
Club charged the Company approximately $1.5 million, $1.9 million, and $2.1
million, respectively, for expenses attributable to the Company. Also, during
1996, the Company advanced on behalf of the Master Club approximately $940,000
for expenditures related to refurbishment of the Existing Resorts. After netting
management fees earned, expenses charged back, and the advance for refurbishment
expenditures, the Company owed the Master Club approximately $429,000 at the end
of 1995, and the Master Club owed the Company approximately $1.1 million at the
end of 1996. See "Business -- Clubs/Master Club".
64
<PAGE> 67
All future transactions between the Company and its officers, directors,
affiliates or principal shareholders will be effected on terms that are no less
favorable to the Company, in the judgment of the disinterested directors, than
those which would otherwise be obtainable in arms' length transactions with
unaffiliated third parties.
PRINCIPAL SHAREHOLDERS
The information in the following table sets forth information regarding the
beneficial ownership of the Common Stock of the Company, as adjusted to reflect
the sale of shares offered hereby, with respect to (i) each person known by the
Company to beneficially own 5% or more of the outstanding shares of Common
Stock, (ii) each person who is a director, proposed director or Named Executive
Officer of the Company and (iii) all directors, proposed directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
NAME AND ADDRESS OF ---------------------- ----------------------
BENEFICIAL OWNER(A) SHARES PERCENTAGE SHARES PERCENTAGE
------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Robert E. Mead(b)............................. 10,576 99% %
Sharon K. Brayfield(b)........................ 120 1% %
Joe W. Conner................................. -- -- %
Larry H. Fritz................................ -- -- %
Ioannis N. Gioldasis.......................... -- -- %
Robert G. Levy................................ -- -- %
Sandra G. Cearley............................. -- -- %
James B. Francis, Jr.......................... -- -- %
Michael A. Jenkins............................ -- -- %
All directors, proposed directors and
executive officers as a group (9 persons)... 10,696 100%
</TABLE>
- ---------------
(a) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Common Stock owned by
such beneficial owner.
(b) The address of such person is 1221 Riverbend Drive, Suite 120, Dallas, Texas
75247.
DESCRIPTION OF CAPITAL STOCK
Upon the consummation of the Offering the authorized capital stock of the
Company will consist of (i) 100,000,000 shares of Common Stock, par value $0.01
per share, shares of which will be outstanding after the Offering, and
(ii) 10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be outstanding after the Offering. The following summary description
of the capital stock of the Company is qualified in its entirety by reference to
the Charter and Bylaws of the Company, copies of which are filed as exhibits to
the Registration Statement of which this Prospectus is a part. See "Additional
Information".
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors, and, except
as otherwise required by law or provided in any series of Preferred Stock, the
holders of shares of Common Stock exclusively possess all voting power. The
Charter does not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding series of Preferred Stock,
the holders of Common Stock are entitled to such distributions as may be
declared from time to time by the Board of Directors from funds available
therefor, and upon liquidation are entitled to receive pro rata all assets of
the Company available for distribution to such holders. All shares of Common
Stock issued in the Offering will be fully paid and nonassessable and the
holders thereof will not have preemptive rights.
PREFERRED STOCK
Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors. Prior to issuance of shares of each class,
the Board of Directors is required by the Texas Business
65
<PAGE> 68
Corporation Act ("TBCA") and the Company's Charter to fix for each such series,
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, as are permitted by Texas law. The Board of Directors
could authorize the issuance of Preferred Stock with terms and conditions which
could have the effect of discouraging a takeover or other transaction which
holders of some, or a majority, of the Company's outstanding shares might
believe to be in their best interests or in which holders of some, or a
majority, of shares might receive a premium for their shares over the market
price of such shares. No Preferred Stock will be outstanding following the
consummation of the Offering.
TRANSFER AGENT AND REGISTRAR
The Company has appointed ChaseMellon Shareholder Services, L.L.C. as its
transfer agent and registrar.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
The following paragraphs summarize certain provisions of the Company's
Charter and Bylaws that may be deemed to have anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a shareholder
may consider to be in the best interests of the Company or its shareholders,
including those attempts that may result in a premium over the then current
market price for the Common Stock. The following summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Charter and Bylaws, copies of which are exhibits to the Registration
Statement of which this Prospectus is a part, as described in "Additional
Information".
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Company's Charter provides that the number of directors of the Company
shall be established by the Bylaws but shall not be less than the minimum number
required by the TBCA, which in the case of the Company is one. The Bylaws
currently provide that the Board of Directors will consist of not fewer than
five nor more than 13 members. Any vacancy on the Board of Directors will be
filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors will be filled by a
majority of the entire board of directors. The Charter provides for a staggered
Board of Directors consisting of three classes as nearly equal in size as
practicable. One class will hold office initially for a term expiring at the
annual meeting of shareholders to be held in 1998, another class will hold
office initially for a term expiring at the annual meeting of shareholders to be
held in 1999 and another class will hold office initially for a term expiring at
the annual meeting of shareholders to be held in 2000. As the term of each class
expires, directors in that class will be elected for a term of three years and
until their successors are duly elected and qualify. The Company believes that
classification of the Board of Directors will help to assure the continuity and
stability of the Company's business strategies and policies as determined by the
Board of Directors.
The classified director provision could have the effect of making the
removal of incumbent directors more time-consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its shareholders. At least two annual meetings of
shareholders, instead of one, will generally be required to effect a change in a
majority of the Board of Directors. Thus, the classified board provision could
increase the likelihood that incumbent directors will retain their positions.
Holders of shares of Common Stock will have no right to cumulative voting for
the elections of directors. Consequently, at each annual meeting of
shareholders, the holders of a majority of outstanding shares of Common Stock
present at such meeting (so long as a quorum exists) will be able to elect all
of the successors of the class of directors whose term expires at that meeting.
REMOVAL OF DIRECTORS
The Charter provides that a director may be removed with or without cause
by the affirmative vote of at least two-thirds of the votes entitled to be cast
in the election of directors, and by the vote required to elect a director, the
shareholders may fill a vacancy on the Board of Directors resulting from
removal. This provision, when coupled with the provision in the Bylaws
authorizing the Board of Directors to fill vacant directorships, could
66
<PAGE> 69
preclude shareholders from removing incumbent directors except upon a
substantial affirmative vote and filling the vacancies created by such removal
with their own nominees.
AMENDMENT TO THE COMPANY'S CHARTER AND BYLAWS
The Company's Charter, including its provisions on classification of the
Board of Directors and removal of directors, may be amended only by the
affirmative vote of the holders of at least 66 2/3% of the capital stock
entitled to vote. The Company's Bylaws may be amended by the affirmative vote of
holders of at least 66 2/3% of the capital stock entitled to vote on the matter.
Subject to the right of shareholders as set forth in the preceding sentence, the
Board of Directors is authorized to adopt, alter or repeal the Bylaws.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (i) with respect to an annual
meeting of shareholders, nominations of persons for election to the Board of
Directors and the proposal of business to be considered by shareholders may be
made only (a) pursuant to the Company's notice of the meeting, (b) by the Board
of Directors, or (c) by a shareholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws, and
(ii) with respect to special meetings of shareholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of shareholders, or provided that the Board of Directors has determined that
directors shall be elected at such meeting, nominations of persons for election
to the Board of Directors may be made by a shareholder who is entitled to vote
at the meeting and has complied with the advance notice provisions set forth in
the Bylaws.
SHAREHOLDER MEETINGS AND ACTION BY WRITTEN CONSENT
In order for shareholders to call special meetings, the Bylaws require the
written request of holders of shares entitled to cast not less than 25% of all
votes entitled to be cast at such meeting. Such provisions do not, however,
affect the ability of shareholders to submit a proposal to the vote of all
shareholders of the Company in accordance with the Bylaws, which provide for the
additional notice requirements for shareholder nominations and proposals at the
annual meetings of shareholders as described above.
The Bylaws provide that any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting by unanimous written
consent, if such consent sets forth such action and is signed by each
shareholder entitled to vote on the matter and a written waiver of any right to
dissent is signed by each shareholders entitled to notice of the meeting but not
entitled to vote at it.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Charter limits the liability of the Company's directors and
officers to the Company and its shareholders to the fullest extent permitted
from time to time by the TBCA. The TBCA presently permits the liability of
directors and officers to a corporation or its shareholders for money damages to
be limited, except (i) to the extent that it is proved that the director or
officer actually received an improper personal benefit or profit, or (ii) if a
judgment or other final adjudication is entered in a proceeding based on a
finding that the director's or officers' action, or failure to act, was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision does not limit the ability
of the Company or its shareholders to obtain other relief, such as an injunction
or rescission.
The Company's Charter and Bylaws require the Company to indemnify its
directors, offices and certain other parties to the fullest extent permitted
from time to time by the TBCA. The TBCA presently permits a corporation to
indemnity its directors, officers and certain other parties against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service to the corporation, unless it is established that (i) the act or
omission of the indemnified party was material to the matter giving rise to the
proceeding, and (1) was committed in bad faith or (2) was the result of active
and deliberate dishonesty; or (ii) the indemnified party actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the indemnified party had reasonable cause to
believe that the act or omission was unlawful. Indemnification may be
67
<PAGE> 70
made against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director or officer in connection with the proceeding;
provided, however, that if the proceeding is one by or in the right of the
corporation, indemnification may not be made with respect to any proceeding in
which the director or officer has been adjudged to be liable to the corporation.
In addition, a director or officer may not be indemnified with respect to any
proceeding charging improper personal benefit to the director or officer in
which the director or officer was adjudged to be liable on the basis that
personal benefit was improperly received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted. The Company has applied for directors and
officers insurance which will become effective upon the effectiveness of the
Registration Statement.
DISSOLUTION OF THE COMPANY
The dissolution of the Company must be approved by the affirmative vote of
holders of not less than two-thirds of the votes entitled to be cast on the
matter.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering the Company will have outstanding
shares of Common Stock. Of these shares, the shares sold in
the Offering plus any additional shares sold upon exercise of the Underwriters'
over-allotment option will be freely tradable in the public market without
restriction or further registration under the Securities Act.
The remaining outstanding shares of Common Stock are "restricted
securities" as that term is defined under Rule 144 and may be sold only pursuant
to registration under the Securities Act or pursuant to an exemption therefrom,
such as that provided by Rule 144. In general, under Rule 144 as recently
amended, if one year has elapsed since the later of (i) the date of acquisition
of shares of Common Stock from the Company (as is the case with respect to all
shares of Common Stock owned immediately prior to the consummation of the
Offering), or (ii) the date of acquisition of shares of Common Stock from any
"affiliate" of the Company (as that term is defined under the Securities Act),
the acquiror or subsequent holder is entitled to sell within any three-month
period a number of shares of Common Stock that does not exceed the greater of 1%
of the then-outstanding shares of Common Stock or the average weekly trading
volume of shares of Common Stock on all exchanges and reported through the
automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain restrictions on
the manner of sales, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the date of
acquisition of shares of Common Stock from the Company or from any "affiliate"
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an affiliate of the company at any time during the 90 days preceding a
sale, such person would be entitled to sell such shares of Common Stock in the
public market under Rule 144(i) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements.
The Company has entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with Mr. Mead pursuant to which the Company is
obligated to register his shares under the Securities Act at specified times and
in specified amounts. Specifically, the Company, subject to certain exceptions
and limitations, will, upon request, be required (i) at any time after 180 days
following consummation of the Offering, to register up to 50% of the Common
Stock owned by Mr. Mead, and (ii) at any time after the first anniversary of the
Offering, to register all of the Common Stock owned by Mr. Mead which has not
been previously registered.
Under the Registration Rights Agreement, subject to certain exception and
limitations, if the Company proposes to register any of its securities under the
Securities Act for its own account or the account of another person pursuant to
an underwriting, Mr. Mead may require the Company to include in such
registration all or part of the shares of Common Stock held by him after
completion of the Offering.
68
<PAGE> 71
The Company is required to pay all expenses incident to the performance of
its obligations under the Registration Rights Agreement, other than any
underwriting discounts and commissions, or transfer taxes relating to shares of
Common Stock registered pursuant thereto.
Mr. Mead has agreed, if requested by an underwriter in an underwritten
offering of the Company's securities (whether for the account of the Company or
otherwise), not to effect any public sale or distribution of any shares of
Common Stock or other Company equity securities, including a sale pursuant to
Rule 144, during the ten day period prior to, and during the 90-day period
beginning on, the closing date of such underwritten offering.
After the completion of the Offering, the Company intends to file a
Registration Statement on Form S-8 under the Securities Act to register all of
the shares of Common Stock reserved for issuance under the Plan. After the date
of such filing, such shares when issued will be immediately eligible for sale in
the public market, provided that shares owned by "affiliates" of the Company (as
defined in Rule 144 under the Securities Act), will be subject to the volume
limitations, manner of sale provisions, and public information and notice
requirements of Rule 144.
Prior to the Offering, there has been no public market for the Common Stock
and the effect, if any, that future market sales of Common Stock or the
availability of such Common Stock for sale will have on the market price of the
Common Stock prevailing from time to time cannot be predicted. Nevertheless,
sales of substantial amounts of Common Stock in the public market (or the
perception that such sales could occur) might adversely affect market prices for
the Common Stock.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated April , 1997 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation is acting as representative (the "Representative"), have severally
but not jointly agreed to purchase from the Company the following respective
numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
-------
Total.............................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances, the
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to purchase
up to additional shares at the initial public offering price less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representative, to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a discount
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Representative.
69
<PAGE> 72
The Representative has informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the number of shares
being offered hereby.
The Company and its shareholders, officers and directors have agreed that
they will not offer, sell, contract to sell, announce their intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to, any additional shares of Common Stock or securities convertible
or exchangeable into or exercisable for any shares of Common Stock without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this Prospectus.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the Underwriters may be required to make in respect thereof.
Application has been made to list the shares of Common Stock on the Nasdaq
Stock Market's National Market.
Prior to the Offering, there has been no public market for the Common
Stock. The initial price to the public for the shares of Common Stock has been
negotiated among the Company and the Representative. Such initial price is based
on, among other things in addition to prevailing market conditions, the
Company's financial and operating history and condition, its prospects and the
prospects for its industry in general, the management of the Company and the
market prices for securities of companies in businesses similar to that of the
Company.
The Representative, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which creates
a syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the Common Stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representative to reclaim a
selling concession from a syndicate member when the Common Stock originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on The Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
CS First Boston Mortgage Capital Corp. ("CSFBMCC"), an affiliate of Credit
Suisse First Boston Corporation, currently has a lending relationship with the
Company and its affiliate, CBI. In October of 1996, CSFBMCC entered into two
loan agreements which provide for borrowings up to $45.4 million: a revolving
loan commitment for up to $40.0 million of borrowings secured by notes
receivable from Silverleaf Owners and a $5.4 million term loan secured by
condominium units, certain undeveloped acreage at the Ozark Mountain and Holiday
Hills Resorts, and the golf course at Holiday Hills Resort. At December 31,
1996, the Company was indebted to CSFBMCC in the amount of $5.5 million.
Interest continues to accrue on this debt at the rate of 10.25% per annum.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Common Stock are effected. Accordingly, any resale of the Common
Stock in Canada must be made in accordance with applicable securities laws which
will vary depending on the relevant jurisdiction, and which may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Common Stock.
70
<PAGE> 73
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
RIGHT OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the Company
or such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the shares for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P. ("Meadows
Owens"), Dallas, Texas. Certain matters of Missouri real estate and timeshare
law will be passed upon for the Company by Armstrong, Teasdale, Schlafy & Davis,
Kansas City, Missouri. Certain matters will be passed upon for the Underwriters
by Latham & Watkins, Los Angeles, California, in reliance, as to matters of
Texas law, on the opinion of Meadows Owens.
EXPERTS
The combined financial statements of Silverleaf Resorts, Inc. at December
31, 1994 and for the year then ended included in this Prospectus have been
audited by James Smith & Company, P.C., Dallas, Texas, independent auditors, as
stated in its report appearing herein, and are included in reliance upon the
report of such firm given upon its authority as experts in accounting and
auditing.
71
<PAGE> 74
The consolidated financial statements of the Company at December 31, 1995
and 1996 and for the years then ended included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and in each instance, reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement may be obtained from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
public reference section of the Commission at its Washington address upon
payment of the fees prescribed by the Commission or may be examined without
charge at the offices of the Commission. The Commission maintains a web site
that contains reports, proxy statements and other information filed with the
Commission; the address of this site is http://www.sec.gov. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing unaudited consolidated financial information.
72
<PAGE> 75
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... F-2
Financial Statements
Consolidated Balance Sheets at December 31, 1995 and
1996................................................... F-4
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996....................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1994, 1995 and 1996........... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... F-7
Notes to Consolidated Financial Statements for the years
ended December 31, 1994, 1995 and 1996................. F-8
</TABLE>
F-1
<PAGE> 76
The accompanying consolidated financial statements will reflect an increase in
the number of common shares authorized to shares and a stock dividend
to existing shareholders which will result in an increase in the number of
shares of common stock outstanding, which is to be effected prior to the
effective date of the Offering. The following opinion is in the form which will
be signed by Deloitte & Touche LLP upon consummation of the above events, which
are described in Note 9 of Notes to Consolidated Financial Statements, and
assuming that from March 10, 1997 to the date of such event, no other events
have occurred which would affect the accompanying consolidated financial
statements and notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Silverleaf Resorts, Inc.
We have audited the accompanying consolidated balance sheets of Silverleaf
Resorts, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1996
and the related consolidated statements of income, shareholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Silverleaf Resorts, Inc. and
subsidiaries as of December 31, 1995 and 1996 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Dallas, Texas
March 10, 1997 (April , 1997
as to the first paragraph of Note 9)
F-2
<PAGE> 77
The accompanying consolidated financial statements will reflect an increase in
the number of common shares authorized to shares and a stock dividend
to existing shareholders which will result in an increase in the number of
shares of common stock outstanding, which events are to be effected prior to the
effective date of the Offering. The following opinion is in the form which will
be signed by James Smith & Company, P.C., upon consummation of the above events,
which are described in Note 9 of Notes to Consolidated Financial Statements, and
assuming that from December 1, 1995, to the date of such event, no other events
have occurred which would affect the accompanying consolidated financial
statements and notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Silverleaf Resorts, Inc.
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows for the year ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Silverleaf
Resorts, Inc. and subsidiaries for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
Dallas, Texas
December 1, 1995 (April , 1997 as
to the first paragraph of Note 9)
F-3
<PAGE> 78
SILVERLEAF RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 3,711,571 $ 972,510
Notes receivable, net of allowance for uncollectible notes
of approximately $9,861,000 and $11,894,000,
respectively.............................................. 35,567,224 55,793,996
Amounts due from affiliates................................. 4,341,888 6,237,023
Inventory................................................... 4,453,914 10,300,475
Land, equipment and utilities, net.......................... 8,947,848 12,633,119
Land held for sale.......................................... 1,016,132 466,133
Prepaid and other assets.................................... 1,599,801 2,859,956
Net assets of discontinued operations....................... 3,048,795 1,589,212
----------- -----------
TOTAL ASSETS...................................... $62,687,173 $90,852,424
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses..................... $ 2,761,731 $ 3,155,335
Amounts due to affiliates................................. 14,262,627 14,765,135
Unearned revenues......................................... 1,089,334 1,790,269
Income taxes payable...................................... 2,654,000 3,650,000
Deferred income taxes, net................................ 2,868,000 4,843,000
Notes payable and capital lease obligations............... 23,362,867 41,986,269
----------- -----------
Total Liabilities................................. 46,998,559 70,190,008
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $0.01 per share, 1,000,000 shares
authorized 10,696 shares issued and outstanding........ 107 107
Additional paid-in capital................................ $13,547,112 $13,547,112
Retained earnings......................................... 2,141,395 7,115,197
----------- -----------
Total Shareholders' Equity........................ 15,688,614 20,662,416
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $62,687,173 $90,852,424
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 79
SILVERLEAF RESORTS, INC. AND AFFILIATES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Vacation Interval sales.......................... $25,842,774 $35,885,181 $ 48,103,161
Provision for uncollectible notes................ (6,013,783) (9,144,251) (12,075,097)
----------- ----------- ------------
Net Vacation Interval sales...................... 19,828,991 26,740,930 36,028,064
Interest income.................................. 1,632,649 3,968,332 6,296,578
Interest income from affiliates.................. 252,083 392,713 377,090
Management fee income............................ 2,394,475 2,478,181 2,186,903
Lease income..................................... 1,136,853 1,309,670 1,717,207
Other income..................................... 1,931,668 1,832,374 1,440,798
----------- ----------- ------------
Total revenues........................... 27,176,719 36,722,200 48,046,640
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales.................. 2,648,170 3,279,533 2,805,063
Sales and marketing.............................. 12,929,231 17,850,161 21,838,577
Operating, general and administrative............ 5,335,960 8,061,534 8,970,233
Depreciation and amortization.................... 589,847 863,149 1,263,816
Interest expense to affiliates................... 884,668 1,403,309 880,488
Interest expense to unaffiliated entities........ 757,060 2,206,091 3,879,253
----------- ----------- ------------
Total costs and operating expenses....... 23,144,936 33,663,777 39,637,430
----------- ----------- ------------
Income from continuing operations before income
taxes............................................ 4,031,783 3,058,423 8,409,210
Income tax expense................................. 1,677,000 1,512,000 3,140,000
----------- ----------- ------------
INCOME FROM CONTINUING OPERATIONS.................. 2,354,783 1,546,423 5,269,210
DISCONTINUED OPERATIONS:
Income (loss) from operations (less applicable
income taxes of $0 in 1994 and 1995 and a
benefit of $99,000 in 1996)................... 568,592 (1,484,414) (168,408)
Loss on disposal including provision for
operating losses during the phase out period
(less applicable income taxes of $0 in 1994
and 1995 and a benefit of $74,000 in 1996).... -- -- (127,000)
----------- ----------- ------------
Total income (loss) from discontinued operations... 568,592 (1,484,414) (295,408)
----------- ----------- ------------
NET INCOME......................................... $ 2,923,375 $ 62,009 $ 4,973,802
=========== =========== ============
INCOME PER COMMON SHARE FROM:
Continuing Operations............................ $ $ $
Discontinued Operations..........................
----------- ----------- ------------
NET INCOME PER COMMON SHARE........................ $ $ $
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING......
=========== =========== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 80
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
----------------- NET
NUMBER OF $0.10 UNREALIZED ADDITIONAL
SHARES PAR GAINS PAID-IN RETAINED
ISSUED VALUE (LOSSES) CAPITAL EARNINGS TOTAL
--------- ----- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1994................. 10,526 $105 $ -- $ 8,082,115 $ (843,989) $ 7,238,231
Unrealized loss on investments
available for sale......... -- -- (44,675) -- -- (44,675)
Net income.................... -- -- -- -- 2,923,375 2,923,375
------ ---- ------- ----------- ---------- -----------
DECEMBER 31, 1994............... 10,526 105 (44,675) 8,082,115 2,079,386 10,116,931
Contributions................. 290 3 -- 5,564,996 -- 5,564,999
Repurchase and retirement of
common stock............... (120) (1) -- (99,999) -- (100,000)
Realized loss on investments
available for sale......... -- -- 44,675 -- -- 44,675
Net income.................... -- -- -- -- 62,009 62,009
------ ---- ------- ----------- ---------- -----------
DECEMBER 31, 1995............... 10,696 107 -- 13,547,112 2,141,395 15,688,614
Net income.................... -- -- -- -- 4,973,802 4,973,802
------ ---- ------- ----------- ---------- -----------
DECEMBER 31, 1996............... 10,696 $107 $ -- $13,547,112 $7,115,197 $20,662,416
====== ==== ======= =========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 81
SILVERLEAF RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................ $ 2,923,375 $ 62,009 $ 4,973,802
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 589,847 863,149 1,263,816
Discontinued operations............................ (3,530,342) 1,476,057 3,794,138
Loss on investment in joint venture................ -- 151,035 --
(Gain) Loss on disposal of land, equipment and
utilities........................................ (4,580) 116,373 64,721
Loss on sale of marketable securities.............. -- 8,578 --
Deferred tax provision............................. 861,000 871,000 1,975,000
Increase (decrease) in cash from changes in assets
and liabilities (exclusive of amounts
contributed):
Amounts due from affiliates...................... (383,366) 452,181 (1,733,402)
Inventory........................................ 205,389 (379,868) (5,846,561)
Prepaid and other assets......................... (650,692) 42,084 (1,558,753)
Accounts payable and accrued expenses............ 473,188 160,866 393,604
Amounts due to affiliates........................ 836,029 (711,597) 114,013
Interest payable to affiliates................... 410,376 (41,392) 1,238,035
Unearned revenues................................ (49,731) 23,259 700,935
Income taxes payable............................. 816,000 619,000 996,000
----------- ----------- -----------
Net cash provided by operating activities..... 2,496,493 3,712,734 6,375,348
INVESTING ACTIVITIES:
Proceeds from sale of marketable securities........... -- 58,907 --
Issuance of notes receivable from affiliates.......... (1,783,871) (237,453) (207,668)
Proceeds from sales of land, equipment and
utilities.......................................... 593,164 --
Proceeds from sales of land held for sale............. -- 733,279 599,999
Purchase of land held for sale........................ (744,203) -- --
Purchases of land, equipment and utilities............ (1,701,402) (4,497,328) (4,162,069)
Notes receivable, net................................. (8,552,693) (15,661,786) (20,226,772)
----------- ----------- -----------
Net cash used in investing activities......... (12,189,005) (19,604,381) (23,996,510)
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities... 4,454,544 22,667,898 26,647,776
Payments on borrowings to unaffiliated entities....... (1,134,053) (4,004,385) (8,938,788)
Proceeds from borrowings from affiliates.............. 6,417,057 2,467,791 619,564
Payments on borrowings to affiliates.................. (1,800,925) (1,116,954) (1,111,896)
Discontinued operations............................... 2,487,685 (1,340,053) (2,334,555)
----------- ----------- -----------
Net cash provided by financing activities..... 10,424,308 18,674,297 14,882,101
NET INCREASE (DECREASE) IN CASH......................... 731,796 2,782,650 (2,739,061)
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR..................................... 197,125 928,921 3,711,571
----------- ----------- -----------
END OF YEAR........................................... $ 928,921 $ 3,711,571 $ 972,510
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid......................................... $ 1,545,916 $ 2,462,179 $ 3,713,796
Assets contributed.................................... -- 14,489,000 --
Liabilities assumed with contributed assets........... -- 8,924,000 --
Equipment acquired under capital leases............... 726,847 408,655 814,414
Repurchase of common stock through issuance of debt... -- 100,000 --
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 82
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1. NATURE OF BUSINESS
Silverleaf Resorts, Inc., a Texas Corporation (the "Company" or
"Silverleaf"), formerly known as Ascension Capital Corporation ("ACC"), operates
as Silverleaf Vacation Club, Inc. Silverleaf's principal activities consist of
(i) developing and operating timeshare resorts; (ii) marketing and selling one
week vacation intervals ("Vacation Intervals") to new prospective owners; (iii)
marketing and selling upgraded Vacation Intervals to existing Silverleaf Owners;
and (iv) providing financing for the purchase of Vacation Intervals. The Company
has in-house sales, marketing, financing, and property management capabilities
and coordinates all aspects of expansion of its existing resorts and the
development of any new timeshare resort, including site selection, design, and
construction. The Company operates its existing resorts under a management
agreement with a non-profit corporation, Master Club ("Master Club") which bears
the costs of operating, maintaining, and refurbishing the resorts from monthly
dues paid by the Vacation Interval owners. The Company receives a management fee
from Master Club to compensate it for the services it provides. In addition to
Vacation Interval sales revenues, interest income derived from its financing
activities and the management fee received from Master Club the Company
generates additional revenue from leasing of unsold intervals, utility
operations related to the resorts and other sources. All of the operations are
directly related to the resort real estate development industry. Sales of
Vacation Intervals are marketed to individuals primarily through direct mail and
telephone solicitation.
The consolidated financial statements of the Company as of and for the year
ended December 31, 1996, reflect the operations of the Company and its wholly
owned subsidiaries, Condominium Builders, Inc. ("CBI"), Villages Land, Inc.
("VLI"), Silverleaf Travel, Inc., and Database Research, Inc.
The Company was formed as a result of the combination of ACC, Equal
Investment Corporation ("EIC"), CBI, and Holly Ranch Water Company, Inc.
("HRWCI") on December 29, 1995 (HRWCI was liquidated in 1995). ACC and EIC were
the 99% general partner and 1% limited partner of Ascension Resorts, Ltd.
("ARL"). The historical consolidated financial statements have been restated
utilizing the historical cost basis of the combined entities so as to present
the consolidated financial condition, operations, equity and cash flows since
these entities were under common ownership and control.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
Revenue and Expense Recognition -- A substantial portion of Vacation
Interval sales are made in exchange for mortgage notes receivable, which are
secured by a deed of trust on the Vacation Interval sold. The Company recognizes
the sale of a Vacation Interval under the accrual method. Revenues are
recognized after a binding sales contract has been executed, a 10% minimum down
payment has been received, construction is substantially complete and the
statutory rescission period has expired. If all criteria are met except that
construction is not substantially complete, revenues are recognized on the
percentage-of-completion basis. If a customer fails to make the first
installment payment when due, the Company reverses the sale and the recovered
property is placed back into inventory at its original historical cost basis and
any payments made by the customer during the period which are not refunded are
recorded as other revenues. In addition to sales of Vacation Intervals to new
prospective owners the Company sales upgraded Vacation Intervals to existing
Silverleaf owners. Revenues are recognized on these upgrade Vacation Interval
sales when the criteria described above are satisfied. The revenue recognized is
the net of the incremental increase in the upgrade sales recognized price and
cost of sales is the incremental increase in the cost of the Vacation Interval
purchased.
The Company recognizes interest income as earned. To the extent interest
payments become delinquent the Company ceases recognition of the interest income
until collection is assured. When inventory is returned to the
F-8
<PAGE> 83
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company any unpaid note receivable balances are charged against the previously
established bad debt reserve net of the amount at which the Vacation Interval is
being restored to inventory.
Revenues related to one-time Sampler contracts, which entitles the
prospective owner to sample a resort for various periods, are recorded as lease
income and deferred until earned.
The Company receives fees for management services provided to Master Club.
These revenues are recognized on an accrual basis in the period the services are
provided.
Utilities, services and other income is recognized on an accrual basis in
the period service is provided.
Sales and marketing costs are expensed as incurred.
Cash and Cash Equivalents -- Cash and cash equivalents consist of all
highly liquid investments with a remaining maturity at the date of purchase of
three months or less. Cash and cash equivalents consist of cash, certificates of
deposit and money market funds.
Provision for Uncollectible Notes -- The Company records a provision for
uncollectible notes at the time revenue is recognized. Such provision is
recorded in an amount sufficient to maintain the allowance at a level considered
adequate to provide for anticipated losses resulting from customers' failure to
fulfill their obligations under the terms of their notes. The allowance for
doubtful notes takes into consideration both notes held by the Company and those
sold with recourse. Such allowance for doubtful notes is adjusted based upon
periodic analysis of the portfolio, historical credit loss experience and
current economic factors. The allowance for uncollectible notes is reduced by
actual cancellations and losses experienced, including losses related to
previously sold notes receivable which were reacquired pursuant to the recourse
obligations discussed herein. Recourse to the Company on sales of notes
receivable is governed by the agreements between the purchasers and the Company.
Inventory -- Inventory is stated at the lower of cost or market. Cost
includes amounts for land construction materials, direct labor and overhead,
taxes and capitalized interest incurred in the construction or through the
acquisition by purchase of resort dwellings held for timeshare sale. These costs
are capitalized as inventory and are allocated to Vacation Intervals based upon
their relative sales values. Upon sale of a Vacation Interval these costs are
charged to cost of sales on a specific identification basis. Vacation Intervals
reacquired through repossession, recaptured through mutual release of deed or
received as part of the upgrade program are placed back into inventory at the
lower of its original historical cost basis or market value.
Land Held for Sale -- Land held for sale represents undeveloped land and is
recorded at the lower of cost or fair value less costs to sell.
Impairment -- In March, 1995, the FASB issued Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of ("SFAS No. 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 on January 1, 1996, with no material impact to the
Company's operations or financial position.
Land, Equipment and Utilities -- Land, equipment (including equipment under
capital lease), and utilities are stated at cost, which includes amounts for
construction materials, direct labor and overhead and capitalized interest. When
assets are disposed of, the cost and related accumulated depreciation are
removed, and any resulting gain or loss is reflected in income for the period.
Maintenance and repairs are charged to operations as incurred; significant
betterments and renewals are capitalized. Depreciation is calculated using the
straight-line method over the estimated useful life of the asset, ranging from 3
to 10 years.
F-9
<PAGE> 84
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Discontinued Operations -- The Company has adopted a plan to discontinue
its development and sale of condominiums by CBI. Accordingly, these operations
have been reported as a separate component of operations and the assets and
liabilities have been combined and included in net assets of discontinued
operations on the balance sheet.
Income Taxes -- Deferred income taxes are recorded for temporary
differences between the bases of assets and liabilities as recognized by tax
laws and their carrying value as reported in the financial statements. Provision
is made or benefit recognized for deferred taxes relating to temporary
differences in the recognition of expense and income for financial reporting
purposes. To the extent a deferred tax asset does not meet the criteria of "more
likely than not" for realization, a valuation allowance is recorded.
Earnings per Share -- Earnings per share amounts are based on the weighted
average number of shares outstanding. The weighted average shares outstanding
for all periods presented give retroactive effect to the 1995 and 1997 stock
dividends (see Note 9). Fully diluted earnings per share amounts are not
presented as there are no common stock equivalents.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.
Environmental Remediation Costs -- The Company accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable. Company management is not aware of any
environmental remediation obligations which would materially affect the
operations, financial position or cash flow of the Company.
New Accounting Standards -- Statement of Financial Accounting Standards No.
125 ("SFAS 125"), "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," requires an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred
and to derecognize financial assets when control has been surrendered. The
Company will apply the new rules of SFAS 125 prospectively to transactions
beginning in 1997. Based on current activities, the Company believes the
adoption of SFAS 125 will not have a material impact on the Company's results of
operations or financial position.
SFAS No. 123 -- "Accounting for Stock-Based Compensation," which is
effective for fiscal years beginning after December 15, 1995, requires that an
employer's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
them. Management expects to measure compensation costs using APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and will therefore include
disclosures in the notes to the financial statements of pro forma net income and
pro forma earnings per share as if the fair value based accounting method in
SFAS No. 123 had been used to account for stock-based compensation cost in
future financial statement presentations. No awards or grants existed as of
December 31, 1996.
3. CONCENTRATIONS OF RISK
Credit Risk -- The Company is exposed to on-balance sheet credit risk
related to its notes receivable. The Company is exposed to off-balance sheet
credit risk related to loans sold under recourse provisions.
The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts. These buyers make a down payment of at least 10% of the
purchase price and deliver a promissory note to the Company for the balance; the
promissory notes generally bear interest at a fixed rate are payable over a
seven year period and are
F-10
<PAGE> 85
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
secured by a first mortgage on the Vacation Interval. The Company bears the risk
of defaults on these promissory notes, and this risk is heightened inasmuch as
the Company generally does not verify the credit history of its customers and
will provide financing if the customer is presently employed and meets certain
household income criteria.
If a buyer of a Vacation Interval defaults, the Company generally must
foreclose on the Vacation Interval and attempt to resell it; the associated
marketing, selling, and administrative costs from the original sale are not
recovered; and such costs must be incurred again to resell the Vacation
Interval. Although the Company in many cases may have recourse against a
Vacation Interval buyer for the unpaid price, Texas and certain other states
have "anti-deficiency" laws which limit the Company's ability to recover
personal judgments against customers who have defaulted on their loans.
Accordingly, the Company has generally not pursued this remedy. (See Note 4)
Interest Rate Risk -- The Company has historically derived net interest
income from its financing activities because the interest rates it charges its
customers who finance the purchase of their Vacation Intervals exceed the
interest rates the Company pays to its lenders. Because the Company's
indebtedness bears interest at variable rates and the Company's customer
receivables bear interest at fixed rates, increases in interest rates will erode
the spread in interest rates that the Company has historically obtained and
could cause the rate on the Company's borrowings to exceed the rate at which the
Company provides financing to its customers. The Company does not engage in
interest rate hedging transactions. Therefore, any increase in interest rates,
particularly if sustained, could have a material adverse effect on the Company's
results of operations, cash flows and financial position.
Availability of Funding Sources -- The Company funds substantially all of
the notes receivable, timeshare inventory and land inventory which it originates
or purchases with borrowings through its financing facilities and internally
generated funds. These borrowings are in turn repaid with the proceeds received
by the Company from repayments of such notes receivable. To the extent that the
Company is not successful in maintaining or replacing existing financings, it
would have to curtail its operations or sell assets, thereby having a material
adverse effect on the Company's results of operations, cash flows and financial
condition.
Geographic Concentration -- The Company's notes receivable are primarily
originated in Texas and Missouri. The risk inherent in such concentrations is
dependent upon regional and general economic stability which affects property
values and the financial stability of the borrowers. The Company's Vacation
Interval inventories are concentrated in Texas and Missouri. The risk inherent
in such concentrations is in the continued popularity of the resort
destinations, which affects the marketability of the Company's products and the
collection of notes receivable.
4. NOTES RECEIVABLE
The Company provides financing to the purchasers of Vacation Intervals
which are collateralized by their interest in such Vacation Intervals. The notes
receivable generally have initial terms of up to seven years. The average yield
on outstanding notes receivable at December 31, 1996 was approximately 14.7%.
In connection with the its Sampler program the Company routinely enters
into notes receivable with terms of 10 months. These notes receivable total
$1,089,334 at December 31, 1995, and $1,568,051 at December 31, 1996, and are
typically non-interest bearing. These notes receivable have not been discounted
as management has determined the effects would not be material to the
consolidated financial statements of the Company.
F-11
<PAGE> 86
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes receivable are scheduled to mature as follows at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $ 8,130,195
1998........................................................ 9,054,037
1999........................................................ 9,430,225
2000........................................................ 10,254,382
2001........................................................ 10,691,275
Thereafter.................................................. 20,128,168
------------
67,688,282
Less allowance for uncollectible notes...................... (11,894,286)
------------
Notes receivable, net....................................... $ 55,793,996
============
</TABLE>
The following schedule summarizes the original principal amount of notes
receivable sold with recourse to third parties and affiliates during the years
ended December 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---------- -------- --------
<S> <C> <C> <C>
Unaffiliated third parties........................ $5,406,102 $564,664 $ --
Affiliates........................................ -- -- --
---------- -------- --------
Total notes receivable sold............. $5,406,102 $564,664 $ --
========== ======== ========
</TABLE>
The following schedule summarizes outstanding principal maturities of notes
receivable sold with recourse as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Unaffiliated third parties................................ $11,735,864 $ 9,693,317
Affiliates................................................ 2,033,386 1,355,387
----------- -----------
Total outstanding notes receivable sold with
recourse...................................... $13,769,250 $11,048,704
=========== ===========
</TABLE>
Management considers both pledged and sold-with-recourse notes receivable
in the Company's allowance for uncollectible notes. The activity in the
allowance for uncollectible notes is as follows for years ended December 31,
1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Balance, beginning of year.................. $ 7,953,164 $ 9,394,490 $ 9,861,458
Provision................................... 6,013,783 9,144,251 12,075,097
Receivables charged off..................... (4,572,457) (8,677,283) (10,042,269)
----------- ----------- ------------
Balance, end of year........................ $ 9,394,490 $ 9,861,458 $ 11,894,286
=========== =========== ============
</TABLE>
Receivables charged off is inclusive of current year and previous year
sales which were charged against the provision during the respective year.
F-12
<PAGE> 87
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LAND, EQUIPMENT AND UTILITIES
The Company's land, equipment and utilities consist of the following at
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Land.................................... $ 875,472 $ 1,345,774
Vehicles and equipment.................. 1,872,087 2,066,470
Utility plant and facilities............ 2,345,494 3,397,689
Office furniture and equipment.......... 2,977,905 4,012,727
Improvements............................ 3,559,376 5,551,074
----------- -----------
11,630,334 16,373,734
Less accumulated depreciation........... (2,682,486) (3,740,615)
----------- -----------
Net land, equipment and utilities....... $ 8,947,848 $12,633,119
=========== ===========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1994, 1995 and 1996, was $589,847, $863,149 and $1,263,816 respectively.
6. INCOME TAXES
Prior to December 29, 1995, CBI operated as a Subchapter S Corporation
wholly-owned by the principal shareholder of the Company. The cumulative losses
of CBI incurred prior to the transfer of the stock of CBI to the Company have
been reported on the individual income tax return of its then sole shareholder.
Upon transfer the Company recorded deferred taxes for the difference between the
tax and book basis of the assets, which was not material. Effective January 1,
1996, the Company converted CBI to a C corporation and, accordingly, CBI will be
included in the consolidated income tax return of the Company (See Note 12).
Income tax expense (benefit) consists of the following components for the
years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal............................... $ 751,000 $ 618,000 $ 992,000
State................................. 65,000 17,000 --
---------- ---------- ----------
Total current tax expense..... 816,000 635,000 992,000
Deferred tax expense.................... 861,000 877,000 1,975,000
---------- ---------- ----------
Total income tax expense...... $1,677,000 $1,512,000 $2,967,000
========== ========== ==========
</TABLE>
F-13
<PAGE> 88
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income taxes on reported pretax income at statutory
rates to actual income tax expense for the years ended December 31, 1994, 1995,
and 1996, is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
DOLLARS RATE DOLLARS RATE DOLLARS RATE
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory rates........... $1,371,000 34% $1,040,000 34% $2,700,000 34%
State income taxes, net of Federal Tax
benefit............................... 121,000 3% 92,000 3% 238,000 3%
Other................................... 185,000 5% 380,000 12% 29,000 1%
---------- -- ---------- -- ---------- --
Total income tax expense...... $1,677,000 42% $1,512,000 49% $2,967,000 38%
========== ========== ==========
Income tax expense attributable to:
Continuing operations................. $1,677,000 $1,512,000 $3,140,000
Discontinued operations............... -- -- (173,000)
---------- ---------- ----------
Total income tax expense...... $1,677,000 $1,512,000 $2,967,000
========== ========== ==========
</TABLE>
Amounts for deferred tax assets and liabilities as of December 31, 1995 and
1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Installment sales income................................ $10,143,000 $16,056,000
Other................................................... 54,000 34,000
----------- -----------
Total deferred tax liabilities.................. 10,197,000 16,090,000
----------- -----------
Deferred tax assets:
Accrued interest payable to related party............... 1,963,000 2,287,000
Alternative minimum tax credit.......................... 2,654,000 3,650,000
Net operating loss carryforward......................... 2,712,000 5,310,000
----------- -----------
Total deferred tax assets....................... 7,329,000 11,247,000
----------- -----------
Net deferred tax liability................................ $ 2,868,000 $ 4,843,000
=========== ===========
</TABLE>
The Company reports substantially all Vacation Interval sales which it
finances on the installment method for Federal income tax purposes. Under the
installment method, the Company does not recognize income on sales of Vacation
Intervals until the installment payments on customer receivables are received by
the Company. Interest will be imposed, however, on the amount of tax
attributable to the installment payments for the period beginning on the date of
sale and ending on the date the related tax is paid. If the Company is otherwise
not subject to tax in a particular year, no interest is imposed since the
interest is based on the amount of tax paid in that year. The consolidated
financial statements do not contain an accrual for any interest expense which
would be paid on the deferred taxes related to the installment method. The
amount of interest expense is not estimatable as of December 31, 1996.
The Company is subject to Alternative Minimum Tax ("AMT") as a result of
the deferred income which results from the installment sales treatment of
Vacation Interval sales for regular tax purpose. The AMT liability creates a
deferred tax asset which can be used to offset any future tax liability from
regular Federal income tax. This deferred tax asset has an unlimited carryover
period.
The net operating losses expire beginning in 2007 through 2011. Realization
of the deferred tax assets arising from net operating losses is dependent on
generating sufficient taxable income prior to the expiration of
F-14
<PAGE> 89
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the loss carryforwards. The amount of the deferred tax asset considered
realizable could be decreased if estimates of future taxable income during the
carryforward period are reduced.
The following are the expiration dates and the approximate net operating
loss carryforwards at December 31, 1996:
<TABLE>
<CAPTION>
EXPIRATION DATES
- ----------------
<S> <C> <C>
2007............................................................. $ 261,000
2008............................................................. --
2009............................................................. 1,493,000
2010............................................................. 5,454,000
2011............................................................. 7,142,000
-----------
$14,350,000
===========
</TABLE>
7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations related to continuing
operations at December 31, 1995 and 1996, consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
$25 million revolving loan agreement ($15 million at
December 31, 1995), which contains certain financial
covenants, due January 2, 2001, principal and interest
payable from the proceeds obtained from timeshare notes
receivable which are pledged as collateral for the note,
at an interest rate as defined in the agreement (10.28%
at December 31, 1996).................................... $ 9,026,337 $20,139,365
$12 million revolving loan agreement which contains certain
financial covenants, due May 8, 2003, principal and
interest payable from the proceeds obtained from
timeshare notes receivable which are pledged as
collateral for the note, at an interest rate of Base plus
2.75% (11.00% at December 31, 1996)...................... 7,324,323 6,004,061
$4 million revolving line of credit, which contains certain
financial covenants, due January 2, 1999, secured by
certain assets of the Company, with monthly interest
payments at Base plus 2.75% (10.75% at December 31,
1996).................................................... 4,000,000 4,000,000
$40 million revolving loan agreement, which contains
certain financial covenants, due October 9, 1998,
principal and interest payable from the proceeds obtained
on timeshare notes receivable pledged as collateral for
the note, at an interest rate of LIBOR plus 4% (9.53% at
December 31, 1996)....................................... -- 277,694
$15 million ($5 million at December 31, 1995) revolving
loan agreement which contains certain financial
covenants, due November 30, 2002, principal and interest
payable from the proceeds obtained from timeshare notes
receivable which are pledged as collateral for the note,
at an interest rate of Prime plus 2%..................... 661,778 4,278,484
</TABLE>
F-15
<PAGE> 90
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
$5.4 million note payable, which contain certain financial
covenants, due October 9, 1999, secured by certain assets
of the Company, interest only payments due through April
1, 1998, with payments of principal and interest due
monthly thereafter until maturity on October 9, 1999, at
interest rate of Prime plus 2%........................... -- 5,200,920
Various notes, due from November, 1997, through October,
2002, collateralized by various assets with interest
rates ranging from 6% to 11%............................. 1,635,479 1,022,203
----------- -----------
Total notes payable.............................. 22,647,917 40,922,727
Capital lease obligations.................................. 714,950 1,063,542
----------- -----------
Total notes payable and capital lease
obligations.................................... $23,362,867 $41,986,269
=========== ===========
</TABLE>
Prime rate at December 31, 1996, was 8.25%.
As of December 31, 1995, the Company had additional notes payable to
unaffiliated entities totaling $2,334,555 which are included in net liabilities
of discontinued operations on the balance sheet. These notes payable to
unaffiliated parties were collateralized by various assets and had interest
rates which were generally based on prime plus 2% to 3%. During 1996, all of
these notes were repaid. (See note 12)
Certain of the above debt agreements include restrictions on the Company's
ability to pay dividends based on minimum levels of net income and cash flow.
The debt agreements contain additional covenants including requirements that the
Company (i) preserve and maintain the collateral securing the loans; (ii) pay
all taxes and other obligations relating to the collateral; and (iii) refrain
from selling or transferring the collateral or permitting any encumbrances on
the collateral. Such credit facilities also contain operating covenants
requiring the Company to (i) maintain an aggregate minimum tangible net worth
ranging from $6 million to $17.5 million; (ii) maintain its legal existence and
be in good standing in any jurisdiction where it conducts business; (iii) remain
in the active management of the Resorts; (iv) ensure that sales and marketing
expenses incurred in connection with marketing the Vacation Intervals do not
exceed 50% of the net sales revenue realized from the sale of the Vacation
Intervals, and (v) refrain from modifying or terminating certain timeshare
documents.
Principal maturities of notes payable and capital lease obligations are as
follows at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING CONTINUING AFFILIATES
DECEMBER 31: OPERATIONS (SEE NOTE 10) TOTAL
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
1997...................................... $10,225,282 $8,201,445 $18,426,727
1998...................................... 11,702,713 33,333 11,736,046
1999...................................... 12,868,669 -- 12,868,669
2000...................................... 2,971,033 -- 2,971,033
2001...................................... 3,304,037 -- 3,304,037
Thereafter................................ 914,535 -- 914,535
----------- ---------- -----------
Total..................................... $41,986,269 $8,234,778 $50,221,047
=========== ========== ===========
</TABLE>
Total interest expense for 1994, 1995 and 1996 was $1,641,728, $3,609,400
and $4,759,741, respectively. Interest of $0, $515,751 and $711,070 was
capitalized during 1994, 1995 and 1996, respectively.
Substantially all assets of the Company are pledged as collateral.
F-16
<PAGE> 91
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business the Company has been named a defendant
in certain lawsuits. It is the opinion of the Company's management that the
outcome of the suits now pending will not have a material, adverse effect on the
operations, cash flows or the consolidated financial position of the Company.
Prior to 1996, the Company sold certain of its notes receivable with
recourse to third parities and affiliated parties. The Company has contingent
liability for the notes receivable sold with recourse. The total amount of
contingent liability is equal to the uncollected balance of the notes as of
December 31, 1996. The Company's management considers both pledged and sold with
recourse notes receivable in the Company's allowance for doubtful notes. (see
Note 4)
The Company has entered into noncancelable operating leases covering office
and storage facilities and small equipment which will expire at various dates
through 2001. The total rental expense incurred during the years ended December
31, 1994, 1995 and 1996, was $674,501, $309,894 and $480,801, respectively. The
Company has also acquired equipment by entering into capital leases. The future
minimum annual commitments for the noncancelable lease agreements are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31 LEASES LEASES
- ----------------------- ---------- ---------
<S> <C> <C> <C>
1997...................................................... $ 551,182 $ 185,937
1998...................................................... 448,708 161,376
1999...................................................... 190,932 116,704
2000...................................................... 3,549 68,725
2001...................................................... -- 22,037
Thereafter................................................ -- --
---------- ---------
Total minimum future lease payments....................... 1,194,371 $ 554,779
=========
Less amounts representing interest........................ (130,829)
----------
Present value of future minimum lease payments............ $1,063,542
==========
</TABLE>
Equipment acquired under capital leases consists of the following as of
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Amount of equipment under capital leases.................... $1,190,224 $2,240,366
Less accumulated depreciation............................... (218,727) (599,224)
---------- ----------
$ 971,497 $1,641,142
========== ==========
</TABLE>
9. EQUITY
On March 27, 1997 the Board of Directors of the Company increased the
number of common shares authorized to 100,000,000 shares and on April , 1997
the Board of Directors declared a common stock dividend to existing shareholders
which resulted in an increase in the number of shares of common stock
outstanding. The weighted average shares outstanding for all periods presented
give retroactive effect to the split of common shares.
On December 27, 1995, the principal shareholder contributed certain assets
and the Company assumed certain liabilities associated with these assets which
had been held in a dormant entity. These assets and liabilities were recorded by
the Company at their historical cost basis at the date of the transaction. The
historical cost basis of the assets contributed was approximately $14,489,000
which included a note receivable from the Company of $10,869,000. Upon receipt
of this asset, the Company retired the corresponding obligation which had been
recorded in the Company's financial statements. Liabilities assumed had a
historical cost basis of approximately
F-17
<PAGE> 92
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$8,924,000 consisting primarily of notes payable to affiliates of $7,631,000.
These amounts are included within the financial statements of the Company. The
net excess of assets contributed over liabilities assumed is reflected as an
equity contribution to the Company.
During December 1995, the Company re-acquired a former officers equity
interest in EIC in exchange for a $100,000 promissory. As of December 31, 1996
the amount owed under this agreement was $66,667 and is included in amounts due
to affiliates.
10. RELATED PARTY TRANSACTIONS
The Company has entered into certain financing and operating transactions
with affiliate entities of the Company or its shareholders and officers. Pace
Finance Company ("Pace") and Capital Ventures I are entities owned or controlled
by the Company's principal shareholder; STG Investments is a partnership, the
partners of which include certain trusts which benefit the family of the
Company's principal shareholder.
Each timeshare owners association has entered into an agreement with Master
Club, formerly Master Endless Escape Club, a Texas nonprofit corporation which
authorizes Master Club to manage the resorts on a centralized and collective
basis. Master Club, in turn, has entered into a management agreement with the
Company. Under this agreement, the Company manages the operations of the
resorts. Pursuant to the management agreement, the Company receives a management
fee equal to the lesser of 15% of Master Club's gross revenues, or the net
income of Master Club; however, if the Company does not receive 15% of Master
Club's gross revenues, such deficiency is deferred for payment in succeeding
year(s), subject again to the net income limitation. The management agreement
expires in March, 2000, but will continue year-to-year thereafter unless
canceled by either party. During the years ending December 31, 1994, 1995 and
1996, the Company recorded management fees from Master Club of $2,394,475,
$2,478,181 and $2,186,903, respectively, in management fee income.
The direct expenses of operating the resorts are paid by Master Club. To
the extent Master Club provides payroll, administrative and other services that
directly benefit the Company, a separate allocation charge is generated and paid
by the Company to Master Club. During 1994, 1995 and 1996, the Company incurred
$1,483,510, $1,911,285 and $2,107,347, respectively, of expenses under this
agreement.
At December 31, 1995 the net amount payable to Master Club totaled $429,449
and at December 31, 1996 the net receivable from MEEC totalled $1,187,028. The
amounts are included in amounts due to/from affiliates.
The Company incurred and made payments to Recreational Consultants, Inc.,
an entity of which an officer of the Company is the principal. Amounts paid
under this agreement totaled $320,581, $429,747 and $552,377, during 1994, 1995,
and 1996, respectively.
Prior to 1995, Pace purchased from an affiliate of the Company certain
delinquent notes receivable executed by purchasers of Vacation Intervals. During
1996, the Company purchased notes from Pace for $24,200. During 1997 the Company
and subsidiaries purchased the remainder of Pace's inventory of notes receivable
at a cash price of $16,400.
F-18
<PAGE> 93
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following schedule represents amounts due from affiliates at December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Notes receivable from the principal shareholder, due
December 31, 1997, bearing interest at rates ranging from
8.0%-9.0%................................................. $4,025,038 $4,128,343
Notes receivable from the other shareholder, which bore
interest at 8%, such Note being forgiven and included in
compensation expense during 1996.......................... 64,537
Receivable from other affiliated parties.................... 168,900
Interest on shareholders notes receivables.................. 89,698 370,764
---------- ----------
4,179,273 4,668,007
Timeshare owners associations and other, net................ 162,615 435,838
Amount due from Master Club................................. 1,133,178
---------- ----------
Total amounts due from affiliates................. $4,341,888 $6,237,023
========== ==========
</TABLE>
The following schedule represents outstanding amounts due to affiliates at
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Note payable to Capital Venture I, due December 31, 1997,
bearing interest at 12.0%............................... $ 1,570,118 $ 1,570,118
Note payable to principal shareholder, due December 31,
1997, bearing interest at 9.0%.......................... 809,640 809,640
Note payable to Pace Finance Company due December 31,
1997, bearing interest at prime plus 3.5% (11.75% at
December 31, 1996)...................................... 539,168 361,515
Notes payable to principal shareholder, due December 31,
1997, bearing interest at 8.0%.......................... 5,152,642 5,152,642
Other affiliated entities (see below), bearing interest at
9.0%.................................................... 451,969 340,863
Accrued interest payable to Capital Venture I............. 2,529,493 2,671,190
Accrued interest payable to principal shareholder......... 2,488,806 3,329,331
Accrued interest payable to other affiliated entities (see
below).................................................. 291,342 243,582
Accounts payable to other affiliated entities............. 286,254
Amount due to Master Club................................. 429,449
----------- -----------
Total notes payable to affiliates............... $14,262,627 $14,765,135
=========== ===========
</TABLE>
Notes payable and interest payable to other affiliated entities represent
amounts payable to entities owned or controlled by the Company's principal
shareholder.
The Company has a consulting agreement with a proposed director of the
Company. During 1996, $208,000 was expensed by the Company under this agreement.
This agreement was canceled during 1997.
The Company has agreed to sell to the principal shareholder the Company's
interest in a condominium, two vehicles and a residential dwelling at a price in
excess of the Company's carrying value. As of December 31, 1996, the carrying
value of these assets totaled approximately $450,000.
The Company has entered into a ten year lease agreement with the principal
shareholder for personal use of flood plain land adjacent to one of the
Company's resorts in exchange for an annual payment equal to the property taxes
attributable to the land.
F-19
<PAGE> 94
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The carrying value of cash and cash equivalents, other receivables, amounts
due from or to affiliates, and accounts payable and accrued expenses
approximates fair value due to the relatively short term nature of the financial
instruments. The carrying value of the notes receivable approximates fair value
because the weighted average interest rate on the portfolio of notes receivable
approximates current interest rates to be received on similar current notes
receivable. The carrying amount reported on the balance sheet of notes
receivable and payable to affiliates and notes payable and capital lease
obligation approximates their fair value because the interest rates on these
instruments are adjustable or approximate current interest rates charged on
similar current borrowings.
12. DISCONTINUED OPERATIONS
The Company adopted a plan on December 31, 1996, to discontinue its
development and sale of condominiums by CBI. Based on the formal plan adopted by
the Company, all assets will be sold and liabilities repaid by December 31,
1997. All anticipated future costs of carrying and selling the remaining
inventory of CBI has been accrued as of December 31, 1996. The net assets of the
subsidiary as of December 31, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Inventory of unsold condominiums............................ $4,740,892 $1,939,194
Other Assets................................................ 1,137,330 49,856
Accounts payable and accrued expenses....................... (494,872) (198,486)
Notes payable............................................... (2,334,555) --
Reserve for losses on discontinued operations............... -- (201,352)
---------- ----------
Net assets of discontinued operations............. $3,048,795 $1,589,212
========== ==========
</TABLE>
Gross revenues applicable to the discontinued operations were $14,569,597,
$8,556,278, and $7,459,141 for the years ended December 31, 1994, 1995 and 1996,
respectively. The income from discontinued operations was $568,592 for the year
ended December 31, 1994, and the loss from discontinued operations was
$1,484,414 and $295,408 for the years ended December 31, 1995 and 1996, net of
income tax benefit of $173,000 in 1996. There was no tax affect applicable to
the years ended December 31, 1994 and 1995, since the discontinued operations
were contained in an S-Corporation, and taxable income and losses were passed
directly through to its shareholder.
F-20
<PAGE> 95
SILVERLEAF RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENTS
The Company has proposed an initial public offering for the sale of common
stock. In preparation for this offering the Company entered into the following
contracts and agreements.
The Company has established a stock option plan (the "1997 Stock Option
Plan" or "Plan"). The 1997 Stock Option Plan provides for the award to
directors, officers, and key employees of nonqualified stock options and
provides for the grant to salaried key employees of incentive stock options.
Nonqualified stock options will provide for the right to purchase Common Stock
at a specified price which may be less than fair market value on the date of
grant (but not less than par value). Nonqualified stock options may be granted
for any term and upon such conditions determined by the board of directors of
the Company.
Effective January 1, 1997, the Company entered into three year employment
agreements with two executive employees which provides for minimum annual base
salaries, bonuses based on the operating results of the Company and other fringe
benefits as determined by the Board of Directors of the Company from time to
time. Either party may terminate the agreement upon 30 days notice to the other.
Effective January 1, 1997, the Company entered into a three year
independent contractor agreement with Recreational Consultants, Inc., an entity
of which an officer of the Company is the principal. Pursuant to the agreement,
Recreational Consultants, Inc. will receive commissions equal to one percent
(1%) of the Company's net sales from Vacation Intervals, plus additional
commissions based on weekly sales volume and revenue per guest. Either party may
terminate the agreement upon 30 days notice to the other.
Each of the employment and contractor agreements provide that such person
or entity will not directly or indirectly compete with the Company in any county
in which it conducts its business or markets its products for a period of two
years following the termination of the agreement. The agreements also provide
that such persons or entity will not influence any employee or independent
contractor to terminate its relationship with the Company, or disclose any
confidential information of the Company.
F-21
<PAGE> 96
[INSIDE REAR COVER -- GRAPHICS TO FOLLOW]
<PAGE> 97
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
Risk Factors.......................... 14
Use of Proceeds....................... 24
Dividend Policy....................... 24
Capitalization........................ 25
Dilution.............................. 26
Summary Consolidated Historical
Financial, Operating and Pro Forma
Financial Information............... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 38
Management............................ 58
Certain Relationships and Related
Transactions........................ 62
Principal Shareholders................ 65
Description of Capital Stock.......... 65
Certain Provisions of the Company's
Charter and Bylaws.................. 66
Shares Eligible for Future Sale....... 68
Underwriting.......................... 69
Notice to Canadian Residents.......... 71
Legal Matters......................... 72
Experts............................... 72
Additional Information................ 72
Index to Combined Financial
Statements.......................... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
SILVERLEAF RESORTS, INC.
Shares
Common Stock
($0.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
- ------------------------------------------------------
<PAGE> 98
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, in connection with the sale and
distribution of the shares of Common Stock being registered hereby.
<TABLE>
<S> <C>
Commission Registration Fee................................. $25,000
NASD filing fee............................................. 8,000
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Legal fees and expenses..................................... *
Printing and engraving expenses............................. *
Transfer Agent fees......................................... *
Miscellaneous expenses...................................... *
-------
TOTAL............................................. $ *
=======
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Texas corporation. Article 2.02-1 of the Texas Business
Corporation Act empowers the Company to indemnify, subject to the standards set
forth therein, any person who is a party in any action in connection with any
action, suit or proceeding brought or threatened by reason of the fact that the
person was a director, officer, employee or agent of such company, or is or was
serving as such with respect to another entity at the request of such company.
The Texas Business Corporation Act also provides that the Company may purchase
insurance on behalf of any such director, officer, employee or agent and the
Company will maintain liability insurance for the benefit of its directors and
officers.
The Company's Charter and Bylaws provide in effect for the indemnification
by the Company of each director and officer of the Company to the fullest extent
permitted by applicable law.
The Company has also entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Articles of Incorporation and By-Laws. These agreements provide, among other
things, that the Company will indemnify its directors and officers for all
direct and indirect expenses and costs (including, without limitation, all
reasonable attorneys' fees and related disbursements, other out-of-pocket costs
and reasonable compensation for time spent by such persons for which they are
not otherwise compensated by the Company or any third person) and liabilities of
any type whatsoever (including, but not limited to, judgments, fines and
settlement fees) actually and reasonably incurred by such person in connection
with either the investigation, defense, settlement or appeal of any threatened,
pending, or completed action, suit or other proceeding, including the
corporation, arising out of such person's services as a director, employee or
other agent of the Company, any subsidiary of the Company or any other company
or enterprise to which the person provides services at the request of the
Company. The Company believes that these provisions and agreements are necessary
to attract and retain talented and experienced directors and officers. Upon the
consummation of the Offering, the Company expects to have in place certain
insurance which insures the directors and officers against certain acts and
omissions in the course of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
II-1
<PAGE> 99
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits filed with this Registration Statement on Form S-1 is
set forth in the Index to Exhibits on page E-1, and is incorporated herein by
reference.
(b) Financial Statement Schedules
None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by registrant is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-2
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Silverleaf Resorts, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas, on March 31, 1997.
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT E. MEAD
----------------------------------
Name: Robert E. Mead
Title: Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert
E. Mead and Joe W. Conner, and each of them, with full power to act without the
other, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign this Registration Statement, and any
and all amendments thereto (including pre- and post-effective amendments) or any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with exhibits and schedules thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT E. MEAD Chairman of the Board and Chief March 31, 1997
- ----------------------------------------------------- Executive Officer (Principal
Robert E. Mead Executive Officer)
/s/ SHARON K. BRAYFIELD Director and President March 31, 1997
- -----------------------------------------------------
Sharon K. Brayfield
/s/ JOE W. CONNER Chief Financial Officer and March 31, 1997
- ----------------------------------------------------- Treasurer (Principal Financial
Joe W. Conner and Accounting Officer)
</TABLE>
II-3
<PAGE> 101
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+1.1 -- Form of Underwriting Agreement between Silverleaf
Resorts, Inc. and Credit Suisse First Boston Corporation.
*2.1 -- Acquisition Agreement between Ascension Capital
Corporation and Robert E. Mead, executed December 27,
1995, effective December 29, 1995.
*2.2 -- Articles of Merger (Holly Ranch Water Co., Inc. into
Ascension Capital Corporation).
*2.3 -- Plan and Agreement of Reorganization between Ascension
Capital Corporation and Freedom Financial Corporation,
dated December 27, 1995.
*2.4 -- Plan and Agreement of Reorganization by Merger of Equal
Investment Company and Ascension Resorts, Ltd. with and
into Ascension Capital Corporation, which is renamed
"Silverleaf Vacation Club, Inc.", dated December 29,
1995.
*3.1 -- Charter of Silverleaf Resorts, Inc.
+3.2 -- Bylaws of Silverleaf Resorts, Inc.
+4.1 -- Form of Stock Certificate of Silverleaf Resorts, Inc.
+5.1 -- Form of Opinion of Meadows, Owens, Collier, Reed, Cousins
& Blau, L.L.P. regarding the validity of the Common Stock
being registered (including consent).
+10.1 -- Form of Registration Rights Agreement between Silverleaf
Resorts, Inc. and Robert E. Mead.
*10.2.1 -- Employment Agreement between Silverleaf Resorts, Inc. and
Robert E. Mead.
*10.2.2 -- Independent Contractor Agreement between Silverleaf
Resorts, Inc. and Recreational Consultants, Inc.
*10.2.3 -- Employment Agreement between Silverleaf Resorts, Inc. and
Sharon K. Brayfield.
+10.3 -- 1997 Stock Option Plan of Silverleaf Resorts, Inc.
*10.4 -- Master Club Agreement between the Master Club and the
resort clubs named therein.
*10.5 -- Management Agreement between Silverleaf Resorts, Inc. and
the Master Club.
*10.6 -- Revolving Loan and Security Agreement, dated October
1996, by CS First Boston Mortgage Capital Corp.
("CSFBMCC") and Silverleaf Vacation Club, Inc.
*10.7 -- Amendment No. 1 to Revolving Loan and Security Agreement,
dated November 8, 1996, between CSFBMCC and Silverleaf
Vacation Club, Inc.
*10.8 -- Inventory and Development Loan and Security Agreement,
dated October 9, 1996, among Condominium Builders, Inc.,
CSFBMCC, and Silverleaf Vacation Club, Inc.
*10.9 -- Loan and Security Agreement among Textron Financial
Corporation ("Textron"), Ascension Resorts, Ltd. and
Ascension Capital Corporation, dated August 15, 1995.
*10.10 -- First Amendment to Loan and Security Agreement, dated
December 28, 1995, between Textron and Silverleaf
Vacation Club, Inc.
*10.11 -- Second Amendment to Loan and Security Agreement, dated
October 31, 1996, executed by Textron and Silverleaf
Vacation Club, Inc.
*10.12 -- Restated and Amended Loan and Security Agreement, dated
December 27, 1995, between Heller Financial, Inc.
("Heller") and Ascension Resorts, Ltd.
*10.13 -- Loan and Security Agreement, dated December 27, 1995,
executed by Ascension Resorts, Ltd. and Heller.
*10.14 -- Amendment to Restated and Amended Loan and Security
Agreement, dated August 15, 1996, between Heller and
Silverleaf Vacation Club, Inc.
</TABLE>
<PAGE> 102
<TABLE>
<C> <S>
*10.15 -- Loan and Security Agreement, between Greyhound Financial Corporation and Ascension
Resorts, Ltd., dated August 12, 1994.
*10.16 -- Amendment No. 1 to Loan and Security Agreement between FINOVA Capital Corporation and
Ascension Resorts, Ltd., dated July 24, 1995.
*10.17 -- Amendment No. 2 to Loan and Security Agreement among Ascension Resorts, Ltd., Ascension
Capital Corporation, and Finova Capital Corporation, dated December 13, 1995.
*10.18 -- Form of Indemnity Agreement (between Silverleaf Resorts, Inc. and all officers,
directors, and proposed directors).
*10.19 -- Resort Affiliation and Owners Association Agreement between Resort Condominiums
International, Inc., Ascension Resorts, Ltd., and Hill Country Resort Condoshare Club,
dated July 29, 1995. (similar agreements for all other Existing Resorts).
*10.20 -- Agreement for Professional Services between Silverleaf Vacation Club, Inc. and Hudson
and Company, Inc., dated November 12, 1996.
*10.21 -- Shareholder's Agreement between Silverleaf Vacation Club, Inc. and Sharon K. Brayfield,
dated December 29, 1995.
*21.1 -- Subsidiaries of Silverleaf Resorts, Inc.
+23.1 -- Consent of Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P. (included as part of
Exhibit 5.1)
+23.2 -- Consent of James Smith & Company.
+23.3 -- Consent of Deloitte & Touche LLP.
+23.4 -- Consent of Director Nominee James B. Francis, Jr.
+23.5 -- Consent of Director Nominee Michael A. Jenkins.
*24.1 -- Power of Attorney (included as part of page II-3 of this Registration Statement).
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
+ To be filed by amendment
<PAGE> 1
EXHIBIT 2.1
================================================================================
ACQUISITION AGREEMENT
BETWEEN
ASCENSION CAPITAL CORPORATION
AND
ROBERT E. MEAD
REGARDING CONDOMINIUM BUILDERS INC.,
AND HOLLY RANCH WATER CO., INC.
================================================================================
<PAGE> 2
ACQUISITION AGREEMENT
BETWEEN ASCENSION CAPITAL CORPORATION
AND ROBERT E. MEAD
THIS ACQUISITION AGREEMENT ("Agreement") is made between ASCENSION
CAPITAL CORPORATION, a Texas corporation (the "Acquiring Corporation") and
Robert E. Mead (the "Shareholder"), for the purposes and considerations and
upon the terms and provisions herein set forth.
R E C I T A L S:
A. The Shareholder currently owns all of the issued and
outstanding stock of the Acquiring Corporation, CONDOMINIUM BUILDERS, INC., a
Texas corporation ("CBI"), and HOLLY RANCH WATER CO., INC., a Texas corporation
("HRWCI"), (the latter two sometimes being collectively referred to as the
"Acquired Corporations"), all of which are involved in various aspects of the
real estate business;
B. The shares owned by the Shareholder in CBI are
represented by Certificate #001 for 1,000 shares of the common stock of CBI
(the "CBI Shares"), and in HRWCI are represented by Certificate #4A issued to
the Shareholder for 9,000 shares of the common stock of HRWCI (the "HRWCI
Shares") (collectively the "Acquired Shares");
C. The Acquiring Corporation desires to acquire all of
the Acquired Shares, and the Shareholder desires to make the Acquired Shares
available to the Acquiring Corporation as a contribution to its capital in
exchange for the issuance of shares of voting common stock of the Acquiring
Corporation; and
D. As the financial, legal, regulatory, accounting,
disclosure, reporting and other administrative requirements of the separate
entities often overlap and duplicate themselves,
<PAGE> 3
the desired acquisition and contribution should promote greater efficiency and
economy in the management of the Acquiring Corporation and the Acquired
Corporations and their respective businesses.
NOW, THEREFORE, in consideration of the premises, mutual
covenants and conditions herein contained, as well as other good and valuable
consideration, the adequacy and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
A G R E E M E N T:
Section 1.0. ASSIGNMENT BY SHAREHOLDER. The Shareholder,
by the execution hereof, hereby assigns and transfers the Acquired Shares to
the Acquiring Corporation. The Shareholder further warrants and agrees to
defend title to the Acquired Shares to the Acquiring Corporation, its
successors and assigns, against all lawful claims.
Section 2.0. ISSUANCE BY ACQUIRING CORPORATION. The
Acquiring Corporation, by the execution hereof, hereby issues to the
Shareholder two hundred eighty six (286) shares of its common stock, to be
represented by its Certificate #5.
Section 3.0. SECTION 351 TRANSFER. The Acquired Shares
transferred and assigned to the Acquiring Corporation pursuant to the terms and
provisions of this Agreement are being assigned to the Acquiring Corporation
pursuant to section 351 of the Internal Revenue Code of 1986, as amended.
Section 4.0. COMPANY SECURITIES FULLY PAID. The Acquiring
Corporation represents and certifies that its Board of Directors has determined
that the fair market value of the Acquired Shares is equal to or in excess of
the par value of the Acquiring Corporation's stock to be issued in exchange
therefor. All shares of the Acquiring Corporation's stock issued
2
<PAGE> 4
pursuant to the terms and provisions of this Agreement shall be fully paid and
non-assessable shares of the Acquiring Corporation's stock, as identified
above, in accordance with the provisions of its Articles of Incorporation and
the laws of the State of Texas.
Section 5.0. ADDITIONAL INSTRUMENTS. The Acquiring
Corporation and the Shareholder agree to execute and deliver such additional
instruments and documents and to take such other and further actions, as may be
reasonably required to implement the terms of this Agreement.
Section 6.0. ENTIRE AGREEMENT. This Agreement constitutes
the entire understanding of the parties and supersedes all prior
understandings, whether written or oral, between the parties with respect to
the subject matter of this Agreement. No amendment, modification, or
alteration of the terms of this Agreement shall be binding unless in writing,
dated subsequent to the date of this Agreement, and duly executed by all
parties.
Section 7.0. SEVERABILITY OF PROVISIONS. If any term or
provision of this Agreement is illegal or invalid for any reason, such
illegality or invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
Section 8.0. HEADINGS. No heading or caption contained in
this Agreement shall be considered in interpreting any of its terms or
provisions.
Section 9.0. APPLICABLE LAW. This Agreement shall be
governed exclusively by the laws of the State of Texas, and the obligations of
the parties to this Agreement are performable in Dallas, Dallas County, Texas.
Section 10.0. EXECUTION IN COUNTERPARTS. This Agreement
and any amendment may be executed in any number of counterparts, with the same
effect as if all parties had signed the same document.
3
<PAGE> 5
Section 11.0. ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and all other costs and expenses
of litigation from the other party, which amounts may be set by the court in
the trial of such action or may be enforced in a separate action brought for
that purpose, and which amounts shall be in addition to any other relief which
may be awarded.
Section 12.0. EXECUTION AND EFFECTIVE DATE. This Agreement
is executed the 27th day of December, 1995, but shall be effective as of the
29th day of December, 1995, at 4:00 p.m.
ACQUIRING CORPORATION:
ASCENSION CAPITAL CORPORATION
By: /s/ ROBERT E. MEAD
------------------------------------------
Robert E. Mead, Chief Executive Officer
SHAREHOLDER:
/s/ ROBERT E. MEAD
----------------------------------------------
Robert E. Mead, Individually
4
<PAGE> 1
EXHIBIT 2.2
ARTICLES OF MERGER
Pursuant to the provisions of Article 5.16 of the Texas Business
Corporation Act, ASCENSION CAPITAL CORPORATION ("Parent Corporation") has
adopted the following Articles of Merger for the purpose of merging HOLLY RANCH
WATER CO., INC. ("Subsidiary Corporation") in the Parent Corporation.
ARTICLE ONE
Both corporations are organized under the laws of the State of Texas.
ARTICLE TWO
The number of outstanding shares of each class for the Subsidiary
Corporation and the number of such shares of each class owned by the Parent
Corporation are as follows:
<TABLE>
<S> <C> <C>
Number of Shares Designation Number of Shares
Outstanding of Class Owned by Parent
----------- -------- ---------------
9,000 Common 9,000
</TABLE>
ARTICLE THREE
A copy of the merger resolutions adopted by the Board of Directors of
the Parent Corporation approving the merger of the Subsidiary Corporation into
the Parent Corporation is attached to and incorporated by reference into these
Articles as Exhibit "A". The resolutions were approved on December 29, 1995.
<PAGE> 2
ARTICLE FOUR
Pursuant to the provisions of Article 10.03 of the Texas Business
Corporation Act, these Articles of Merger shall be effective as of December
29, 1995, at 4:00 p.m.
Executed this 29th day of December, 1995, to be effective as stated in
Article Four hereof.
ASCENSION CAPITAL CORPORATION
By: /s/ ROBERT E. MEAD
---------------------------------------
Robert E. Mead, Chief Executive Officer
2
<PAGE> 1
EXHIBIT 2.3
================================================================================
PLAN AND AGREEMENT OF REORGANIZATION
between
ASCENSION CAPITAL CORPORATION
and
FREEDOM FINANCIAL CORPORATION
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
R E C I T A L S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
EXCHANGE OF ASSETS FOR SHARES OF STOCK. . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Transfer of Seller's Properties to Purchaser . . . 1
Section 1.2. Transfer of Purchaser's Stock to Seller . . . . . . 2
Section 1.3. Closing Date . . . . . . . . . . . . . . . . . . . 2
ARTICLE II.
LIABILITIES AND OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. Subject to Seller's Liabilities . . . . . . . . . . 2
(a) Liabilities . . . . . . . . . . . . . . . . . . . . 3
(b) Interim Liabilities . . . . . . . . . . . . . . . . 3
Section 2.2. Excluded Liabilities and Obligations . . . . . . . 3
ARTICLE III.
CONSUMMATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1. Instruments of Transfer . . . . . . . . . . . . . . 3
Section 3.2. Sales and Transfer Taxes . . . . . . . . . . . . . 3
Section 3.3. Further Assurances . . . . . . . . . . . . . . . . 3
Section 3.4. Liquidation and Dissolution of Seller . . . . . . . 4
Section 3.5. Reorganization Expenses . . . . . . . . . . . . . . 4
ARTICLE IV.
COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SELLER . . . . . . . . . . . . 4
Section 4.1. Legal Status . . . . . . . . . . . . . . . . . . . 4
Section 4.2. Authority of Seller . . . . . . . . . . . . . . . . 5
Section 4.3. Title of Seller . . . . . . . . . . . . . . . . . . 5
Section 4.4. Operations Since Balance Sheet Date . . . . . . . . 5
Section 4.5. Representations and Warranties at Closing Date . . 5
ARTICLE V.
COVENANTS, REPRESENTATIONS, AND WARRANTIES OF PURCHASER . . . . . . . . . . . 5
Section 5.1. Legal Status . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 5.2. Purchaser's Common Stock to Be Transferred . . . . 6
Section 5.3. Authority of Seller . . . . . . . . . . . . . . . . 6
Section 5.4. Representations and Warranties at Closing Date . . 6
ARTICLE VI.
CONDITIONS PRECEDENT TO TRANSFER OF SHARES BY PURCHASER . . . . . . . . . . . 6
Section 6.1. Conditions Precedent to Closing . . . . . . . . . . 6
Section 6.2. Truth of Representations and Warranties . . . . . . 6
Section 6.3. Approval by Seller's Shareholders . . . . . . . . . 7
ARTICLE VII.
CONDITION PRECEDENT TO TRANSFER OF ASSETS BY SELLER . . . . . . . . . . . . . 7
Section 7.1. Conditions Precedent to Closing . . . . . . . . . . 7
Section 7.2. No Substantial Adverse Change . . . . . . . . . . . 7
Section 7.3. Approval of Seller's Shareholders . . . . . . . . . 7
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 7
ARTICLE IX.
AMENDMENTS AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 9.1. Abandonment or Amendment . . . . . . . . . . . . . 8
Section 9.2. Waiver . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE X.
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10.1. Notice Provision . . . . . . . . . . . . . . . . . 8
(a) To the Purchaser . . . . . . . . . . . . . . . . . 9
(b) To the Seller . . . . . . . . . . . . . . . . . . . 9
Section 10.2. Entire Plan . . . . . . . . . . . . . . . . . . . . 9
Section 10.3. Severability of Provisions . . . . . . . . . . . . 9
Section 10.4. Headings . . . . . . . . . . . . . . . . . . . . . 9
Section 10.5. Applicable Law . . . . . . . . . . . . . . . . . . 9
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.6. Execution in Counterparts . . . . . . . . . . . . 10
Section 10.7. Attorneys' Fees . . . . . . . . . . . . . . . . . 10
Section 10.8. Amendment . . . . . . . . . . . . . . . . . . . . 10
Section 10.9. Binding Effect . . . . . . . . . . . . . . . . . 10
Section 10.10. Gender and Number . . . . . . . . . . . . . . . . 10
Section 10.11. Strict Construction . . . . . . . . . . . . . . . 10
Section 10.12. Effective Date . . . . . . . . . . . . . . . . . 11
</TABLE>
iii
<PAGE> 5
PLAN AND AGREEMENT OF REORGANIZATION
between
ASCENSION CAPITAL CORPORATION
and
FREEDOM FINANCIAL CORPORATION
THIS PLAN AND AGREEMENT OF REORGANIZATION (the "Plan") is entered into
between ASCENSION CAPITAL CORPORATION, a Texas corporation (the "Purchaser")
and FREEDOM FINANCIAL CORPORATION (the "Seller").
R E C I T A L S:
A. This Plan provides for a reorganization within the meaning of
Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended. The
Purchaser will acquire all of the properties of the Seller in exchange for
shares of voting stock of the Purchaser and subject to certain liabilities of
Seller.
B. To consummate the Plan, the Purchaser and the Seller, in
consideration of the mutual covenants and on the basis of the representations
and warranties set forth herein, agree as follows:
ARTICLE I.
EXCHANGE OF ASSETS FOR SHARES OF STOCK.
Section 1.1. Transfer of Seller's Properties to Purchaser.
Subject to the terms and conditions precedent set forth in this Plan, the
Seller agrees to convey, transfer, and deliver to the Purchaser, and the
Purchaser agrees to acquire and accept from the Seller, all the assets,
<PAGE> 6
property, and business of any kind, real and personal, tangible and intangible,
that is owned by the Seller on the Closing Date specified in Section 1.3,
except as otherwise expressly provided herein. The property transferred
pursuant to this Section 1.1 includes without limitation all assets and
properties of the Seller shown on the Balance Sheet of Seller as of December
22, 1995 (the "Balance Sheet" and the "Balance Sheet Date"), and all of its
books and records relating to its business; but it does not include the
Seller's charter to exist as a corporation, its stock record books, its
corporate minute books, its corporate seal, and other corporate records having
exclusively to do with its corporate organization and capitalization.
Section 1.2. Transfer of Purchaser's Stock to Seller. In
exchange for the properties transferred by the Seller, the Purchaser agrees to
issue and deliver to Seller two hundred ninety (290) shares of its common
stock, and will take the properties subject to the liabilities of Seller
specified in Section 2.1.
Section 1.3. Closing Date. Subject to the conditions precedent
and other obligations of the parties set forth in this Plan, the reorganization
shall be consummated on or before December 28, 1995, as the parties fix by
mutual consent (the "Closing Date").
ARTICLE II.
LIABILITIES AND OBLIGATIONS OF SELLER.
Section 2.1. Subject to Seller's Liabilities. Subject to the
limitations listed in Section 2.2, the Purchaser agrees:
2
<PAGE> 7
(a) Liabilities: To take the properties transferred
by Seller subject to all of the liabilities and obligations of Seller,
including those disclosed on the Balance Sheet as of the Balance Sheet
Date, in the amounts recorded on its books as of the Closing Date; and
(b) Interim Liabilities: All liabilities and
obligations of the Seller reflected on its books of account on the
Closing Date that have been incurred between the Balance Sheet Date
and the Closing Date in the usual and ordinary course of business of
the Seller, to the extent that the transactions are not inconsistent
with the representations, warranties, and covenants of the Seller
contained in this Plan.
Section 2.2. Excluded Liabilities and Obligations. The
Purchaser shall not assume, pay, perform, or discharge any liabilities or
obligations of the Seller with respect to any transactions occurring after the
Closing Date.
ARTICLE III.
CONSUMMATION OF TRANSACTION.
Section 3.1. Instruments of Transfer. The transfer of the
assets and properties of the Seller as provided in this Plan shall be effected
by special warranty deeds, bills of sale, endorsements, assignments, drafts,
checks, and other instruments of transfer and conveyance in that form necessary
to effectively transfer all of the Seller's business, properties, and assets as
specified by this Plan.
Section 3.2. Sales and Transfer Taxes. All applicable sales,
transfer, use and other taxes that may be payable as a result of the transfer
of the property pursuant to this Plan shall be paid by Purchaser.
Section 3.3. Further Assurances. The Seller agrees that it will
upon the reasonable request of the Purchaser execute any instruments and
perform all further acts and assurances as
3
<PAGE> 8
are necessary to confirm the Purchaser's title to or to enable it to deal with
any of the business, assets, and property to be transferred under this Plan.
Section 3.4. Liquidation and Dissolution of Seller. The Seller
agrees that in compliance with the applicable laws of the State of Texas it
shall call, not later than December 28, 1995, a meeting of its sole
shareholder. The special meeting shall be called for the purpose of approving
the liquidation and dissolution of the Seller. Promptly on or after the
Closing Date, the Seller agrees to proceed with due diligence to wind up its
affairs, liquidate, and distribute its remaining assets, including the shares
of common stock of Buyer received pursuant to the exchange, and voluntarily
dissolve.
Section 3.5. Reorganization Expenses. Subject to the provisions
of this Section 3.5, the Seller may retain at the Closing sufficient sums to
pay its reasonable expenses incurred in connection with transfer of its assets
and dissolution pursuant to this Plan. The Fund shall be reduced by any
amounts paid by Seller prior to the Closing Date in connection with such
expenses.
ARTICLE IV.
COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SELLER.
Section 4.1. Legal Status. The Seller is a corporation duly
organized, validly existing, in good standing under the laws of the State of
Texas, with corporate power to carry on its business as it is now being
conducted.
4
<PAGE> 9
Section 4.2. Authority of Seller. The execution of this Plan by
the Seller, and the transfers contemplated by it, have been duly authorized by
the Seller's Board of Directors.
Section 4.3. Title of Seller. Seller represents and warrants it
has good and marketable title to all the property and assets included on the
Balance Sheet, subject to any liens and encumbrances disclosed herein or on the
Balance Sheet.
Section 4.4. Operations Since Balance Sheet Date. Except as
disclosed in writing to Purchaser, Seller has not, and prior to the Closing
Date will not suffer any change in its financial condition, nor any damage,
destruction, or loss, that materially and adversely affects its properties, nor
shall Seller sell, exchange, otherwise dispose of or encumber any of its
properties or any interest in property.
Section 4.5. Representations and Warranties at Closing Date.
Except as expressly provided elsewhere in this Plan, the representations and
warranties of the Seller set forth in this Plan shall be true on and as of the
Closing Date as though such representations and warranties were made on the
Closing Date.
ARTICLE V.
COVENANTS, REPRESENTATIONS, AND WARRANTIES OF PURCHASER.
Section 5.1. Legal Status. The Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Texas, with corporate power to carry on its business as it is now being
conducted, and to own or lease and operate its property and assets now owned,
leased, or operated by it. The Purchaser is qualified to do business in
5
<PAGE> 10
each jurisdiction in which the character and location of its properties make
such qualification necessary.
Section 5.2. Purchaser's Common Stock to Be Transferred. The
shares of the Purchaser's Common Stock to be delivered pursuant to this Plan
will at the time of delivery have been validly authorized and issued by the
Purchaser and will be fully paid and nonassessable.
Section 5.3. Authority of Seller. The Board of Directors of the
Purchaser has approved the transactions contemplated by this Plan and has
authorized the execution and delivery of this Plan by Purchaser.
Section 5.4. Representations and Warranties at Closing Date.
Except as expressly provided elsewhere in this Plan, the representations and
warranties of the Seller set forth in this Plan shall be true on and as of the
Closing Date as though such representations and warranties were made on the
Closing Date.
ARTICLE VI.
CONDITIONS PRECEDENT TO TRANSFER OF SHARES BY PURCHASER.
Section 6.1. Conditions Precedent to Closing. The obligations
of the Purchaser to consummate the Plan shall be subject to the condition
precedent that on or before the Closing Date all of the events specified in
this Article VI have occurred.
Section 6.2. Truth of Representations and Warranties. The
representations and warranties by the Seller in this Plan shall be correct as
of the Closing Date, with the same force as though such representations and
warranties had been made on the Closing date.
6
<PAGE> 11
Section 6.3. Approval by Seller's Shareholders. The principal
terms of this Plan and the assets-for-shares exchange covered by it shall be
approved as required by the Texas Business Corporation Act by the outstanding
shares of each class of Seller.
ARTICLE VII.
CONDITION PRECEDENT TO TRANSFER OF ASSETS BY SELLER.
Section 7.1. Conditions Precedent to Closing. The obligations
of the Seller to consummate the Plan shall be subject to the conditions
precedent that on or before the Closing Date all of the events specified in
this Article VII have occurred.
Section 7.2. No Substantial Adverse Change. The Purchaser shall
have suffered no substantial adverse change in its financial condition or
operations.
Section 7.3. Approval of Seller's Shareholders. All corporate
proceedings required by the sale and transfer by Seller of its properties, and
its liquidation and dissolution, shall have been approved and consented to by
the sole shareholder of Seller in the manner required by applicable law.
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the parties each to the
other pursuant to this Plan shall survive the Closing Date and the delivery of
stock specified in this Plan, except to the extent provided in this Plan or
specifically waived in writing by either of the parties.
7
<PAGE> 12
ARTICLE IX.
AMENDMENTS AND WAIVER.
Section 9.1. Abandonment or Amendment. The Purchaser and the
Seller may at any time prior to the Closing Date abandon the transaction
contemplated in this Plan by mutual consent of their respective Board of
Directors. The Purchaser and the Seller may amend or modify this Plan in a
manner mutually agreed upon by a written instrument executed by both the Seller
and Purchaser.
Section 9.2. Waiver. Either party to this Plan may in writing:
[1] Extent the time for the performance of any of the
obligations of the other party;
[2] Waive any inaccuracies and representations
contained in this Plan or any document delivered pursuant to the Plan
made by the other party;
[3] Waive compliance with any of the covenants or
performance of any obligations contained in this Plan by the other
party; and
[4] Waive the fulfillment of any condition precedent to
the performance by the other party.
ARTICLE X.
MISCELLANEOUS PROVISIONS.
Section 10.1. Notice Provision. Any notice, payment, demand or
communication required or permitted to be given by the provisions of this Plan
shall be deemed to have been effectively given and received on the date
personally delivered to the respective party to whom it is directed, or when
deposited by registered or certified mail, with postage and charges prepaid and
addressed as follows:
8
<PAGE> 13
(a) To the Purchaser. If to the Purchaser, they shall be
addressed to:
Ascension Capital Corporation (or, Silverleaf Vacation Club,
Inc., after its name change)
1221 Riverbend, Suite 120
Dallas, Texas 75247
(b) To the Seller. If to the Seller, they shall be addressed to:
Freedom Financial Corporation
1221 Riverbend, Suite 120
Dallas, Texas 75247
Any party may change its address by delivering a written change of address to
all of the other parties in the manner set forth in this Section.
Section 10.2. Entire Plan. This Plan constitutes the entire
understanding of the parties and supersedes all prior understandings, whether
written or oral, between the parties with respect to the subject matter of this
Plan.
Section 10.3. Severability of Provisions. If any term or
provision of this Plan is illegal or invalid for any reason, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Plan.
Section 10.4. Headings. No heading or caption contained in this
Plan shall be considered in interpreting any of its terms or provisions.
Section 10.5. Applicable Law. This Plan shall be governed
exclusively by the laws of the State of Texas, and the obligations of the
parties to this Plan are performable in Dallas, Dallas County, Texas.
9
<PAGE> 14
Section 10.6. Execution in Counterparts. This Plan and any
amendment may be executed in any number of counterparts, with the same effect
as if all parties had signed the same document.
Section 10.7. Attorneys' Fees. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Plan, the prevailing party shall be entitled
to recover reasonable attorneys' fees and all other costs and expenses of
litigation from the other party, which amounts may be set by the court in the
trial of such action or may be enforced in a separate action brought for that
purpose, and which amounts shall be in addition to any other relief which may
be awarded.
Section 10.8. Amendment. No amendment, modification or
alteration of the terms of this Plan shall be binding unless in writing, dated
subsequent to the date of this Plan, and executed by the parties.
Section 10.9. Binding Effect. Each and all of the covenants,
terms and provisions of this Plan shall be binding upon and inure to the
benefit of the successors, transferees, heirs and assigns of the respective
parties.
Section 10.10. Gender and Number. Wherever the context shall so
require, all words herein in the male gender shall be deemed to include the
female or neuter gender, all singular words shall include the plural and all
plural words shall include the singular.
Section 10.11. Strict Construction. This Plan shall not be
strictly construed against any party hereto.
10
<PAGE> 15
Section 10.12. Effective Date. This Plan is executed effective as
of the 27th day of December, 1995.
PURCHASER:
ASCENSION CAPITAL CORPORATION
By: /s/ ROBERT E. MEAD
-----------------------------------------
Robert E. Mead, Chief Executive Officer
SELLER:
FREEDOM FINANCIAL CORPORATION
By: /s/ ROBERT E. MEAD
-----------------------------------------
Robert E. Mead, President
11
<PAGE> 1
EXHIBIT 2.4
================================================================================
PLAN AND AGREEMENT OF REORGANIZATION
by merger of
EQUAL INVESTMENT COMPANY
and
ASCENSION RESORTS, LTD.
with and into
ASCENSION CAPITAL CORPORATION,
which is renamed
"SILVERLEAF VACATION CLUB, INC."
================================================================================
<PAGE> 2
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
<S> <C>
Section 1.1. Plan Adopted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Simultaneous Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Name of Survivor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Continuance of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Surrender of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Retention of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(h) Cancellation of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF CONSTITUENT ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. Nonsurvivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Authority to Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Survivor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Status of Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Authority to Execute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
SUBMISSION TO SHAREHOLDERS AND FILING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
MANNER AND BASIS OF CONVERTING SHARES
AND CANCELLATION OF OTHER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1. Manner of Converting Shares of Equal . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.2. Basis of Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.3. Manner of Converting Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V
DIRECTORS AND OFFICERS OF SURVIVOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI
ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6.1. Name Change of Survivor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.2. Survivor's Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VII
BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 8.1. Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Election of Any Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 8.2. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8.3. Liability on Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IX
INTERPRETATION AND ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.1. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.2. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.3. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.4. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.5. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.6. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10.7. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10.8. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10.9. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10.10. Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10.11. Date of Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
ii
<PAGE> 4
PLAN AND AGREEMENT OF REORGANIZATION
BY MERGER OF
EQUAL INVESTMENT COMPANY
AND
ASCENSION RESORTS, LTD.
WITH AND INTO
ASCENSION CAPITAL CORPORATION,
WHICH IS RENAMED
"SILVERLEAF VACATION CLUB, INC."
EQUAL INVESTMENT COMPANY, a Texas corporation ("Equal"), and ASCENSION
RESORTS, LTD., a Texas limited partnership ("ARL") (collectively referred to as
the "Nonsurvivors"), and ASCENSION CAPITAL CORPORATION, a Texas corporation
("ACC") (also referred to as the "Survivor"), agree as follows:
ARTICLE I
PLAN OF REORGANIZATION
Section 1.1. PLAN ADOPTED. A plan of reorganization of
Nonsurvivors and Survivor pursuant to the provisions of Articles 5.01 through
5.13 of the Texas Business Corporation Act, Section 2.11 of the Texas Revised
Limited Partnership Act and Sections 368(a)(1)(A) and 731 of the Internal
Revenue Code of 1986, as amended, (the "Plan"), is adopted as follows:
(a) SIMULTANEOUS MERGER: Nonsurvivors shall be
simultaneously merged with and into Survivor, to exist and be governed
by the laws of the State of Texas.
<PAGE> 5
(b) NAME OF SURVIVOR: The name of the Survivor shall be
ASCENSION CAPITAL CORPORATION, the Articles of Incorporation of which
are hereinafter amended to change its name to "SILVERLEAF VACATION
CLUB, INC."
(c) TRANSFER OF ASSETS: When this Plan shall become
effective, the separate existence of each of the Nonsurvivors shall
cease, and the Survivor shall succeed to all the rights, title and
interests to all property of each Nonsurvivor, without reversion or
impairment, without any further act, and without any transfer or
assignment having occurred, but subject to all existing liens or other
encumbrances thereon. The Survivor shall also be subject to and
become the primary obligor for all the liabilities and obligations of
the Nonsurvivors.
(d) CONTINUANCE OF BUSINESS: Survivor will carry on
business with the assets of Nonsurvivors, as well as with the assets
of Survivor.
(e) SURRENDER OF SHARES: The shareholder of Equal will
surrender all of her shares in the manner hereinafter set forth.
(f) ISSUANCE OF SHARES: In exchange for the shares of
Equal surrendered by its shareholder, the Survivor will issue and
transfer to such shareholder on the basis hereinafter set forth shares
of its common stock.
(g) RETENTION OF SHARES: The shareholder of Survivor
will retain his shares as shares of Survivor.
(h) CANCELLATION OF PARTNERSHIP INTERESTS: Each general
and limited partnership interest in ARL shall be cancelled.
Section 1.2. EFFECTIVE DATE. The effective date of the
merger, hereinafter referred to as the "Effective Date," shall be December 29,
1995, at 5:00 p.m.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF CONSTITUENT ENTITIES
Section 2.1. NONSURVIVORS. As a material inducement to
the Survivor to execute this Agreement and perform its obligations hereunder,
each of the Nonsurvivors represents and warrants to Survivor as follows:
2
<PAGE> 6
(a) STATUS: Each Nonsurvivor is a corporation or limited
partnership, as set forth herein, which is duly organized, validly
existing, and in good standing under the laws of the state of Texas,
with power and authority to own property and carry on its business as
it is now being conducted.
(b) AUTHORITY TO EXECUTE: The execution, delivery and
performance of this Plan has been duly authorized by all requisite
actions.
Section 2.2. SURVIVOR. As a material inducement to
Nonsurvivors to execute this Agreement and perform their obligations hereunder,
Survivor represents and warrants to Nonsurvivors as follows:
(a) STATUS OF CORPORATION: Survivor is a corporation
duly organized, validly existing, and in good standing under the laws
of the state of Texas, with corporate power and authority to own
property and carry on its business as it is now being conducted.
(b) AUTHORITY TO EXECUTE: The execution, delivery and
performance of this Agreement has been duly authorized by all
requisite corporate actions.
ARTICLE III
SUBMISSION TO SHAREHOLDERS AND FILING
This Plan shall be submitted separately to the respective shareholders
and partners of the constituent corporations and the limited partnership in the
manner provided by the laws of the State of Texas.
ARTICLE IV
MANNER AND BASIS OF CONVERTING SHARES
AND CANCELLATION OF OTHER INTERESTS
Section 4.1. MANNER OF CONVERTING SHARES OF EQUAL. On the
Effective Date, the holder of shares of Equal shall surrender her shares to the
Secretary of Survivor promptly
3
<PAGE> 7
after this Agreement shall become effective, in exchange for shares of Survivor
to which she is entitled.
Section 4.2. BASIS OF CONVERSION. The shareholder of
Equal shall be entitled to receive one hundred twenty (120) shares of common
stock of the Survivor, each of $0.10 par value, being one and 12/100th percent
(1.12%) of the total outstanding common stock of Survivor.
Section 4.3. MANNER OF CONVERTING PARTNERSHIP INTERESTS.
At the Effective Time of the merger, all general and limited partnership
interests in ARL shall be cancelled and cease to exist, and all of its assets
and liabilities shall be transferred to Survivor as its sole partner by virtue
of the merger of ARL and Equal into Survivor as set forth herein.
ARTICLE V
DIRECTORS AND OFFICERS OF SURVIVOR
The present Board of Directors of Survivor shall continue to
serve as the Board of Directors of Survivor until the next annual meeting or
until such time as their successors have been elected and qualified. All
persons who at the Effective Date shall be executive or administrative officers
of Survivor shall remain as officers of Survivor until the Board of Directors
of Survivor shall otherwise determine. The Board of Directors of Survivor may
elect or appoint such additional officers as it may determine.
ARTICLE VI
ARTICLES OF INCORPORATION
Section 6.1. NAME CHANGE OF SURVIVOR. Article One of
Survivor's Articles of Incorporation, as previously amended, is hereby further
amended to read as follows:
4
<PAGE> 8
"ARTICLE ONE
The name of the Corporation is SILVERLEAF VACATION CLUB, INC."
Section 6.2. SURVIVOR'S ARTICLES. Except as amended in
Section 6.1, the Articles of Incorporation of Survivor, as existing on the
Effective Date, shall continue in full force until altered, amended, or
repealed as provided therein or as provided by law.
ARTICLE VII
BYLAWS
The Bylaws of Survivor, as existing on the Effective Date,
shall continue in full force until altered, amended, or repealed as provided
therein or as provided by law.
ARTICLE VIII
TERMINATION
Section 8.1. CIRCUMSTANCES. This Agreement may be
terminated and the merger herein provided for may be abandoned at any time
prior to the Effective Date:
(a) MUTUAL CONSENT: By mutual consent of the Board of
Directors of the constituent corporations and the partners of the
limited partnership;
(b) ELECTION OF ANY CORPORATION: At the election of the
Boards of Directors of any constituent corporation, but only as to
their participation in the Agreement, if:
(i) The number of shareholders of any constituent
corporation dissenting from the merger shall be so large as to
make the merger, in the opinion of either such Board of
Directors, inadvisable or undesirable; and
(ii) Any legislation shall be enacted which, in the
opinion of either such Board of Directors, renders the merger
inadvisable or undesirable.
5
<PAGE> 9
Section 8.2. NOTICE OF TERMINATION. In the event an
election is made to terminate this Agreement and abandon the merger provided
for herein, the President or any Vice-President of the constituent corporation
whose Board of Directors has made such election shall give written notice
thereof to the other constituent corporations and the limited partnership.
Section 8.3. LIABILITY ON TERMINATION. Upon the giving of
such notice as provided in Section 8.2 above, this Agreement shall terminate
and the proposed merger be abandoned and, except for payment of their own costs
and expenses incident to this Agreement, there shall be no liability on the
part of either constituent corporation or the limited partnership as a result
of such termination and abandonment.
ARTICLE IX
INTERPRETATION AND ENFORCEMENT
Each Nonsurvivor hereby agrees that from time to time, as and
when requested by the Survivor or by its successors or assigns, it will execute
and deliver or cause to be executed and delivered, all such deeds and other
instruments, and will take or cause to be taken such further or other actions
as the Survivor may deem necessary or desirable in order to vest or perfect in,
or conform of record or otherwise to, the Survivor title to and possession of
all the property, rights, privileges, powers, and franchises referred to in
Article I hereof, and otherwise carry out the intent and purposes of this
Agreement.
6
<PAGE> 10
ARTICLE X
MISCELLANEOUS
Section 10.1. ENTIRE AGREEMENT. This Agreement constitutes
the entire understanding of the parties and supersedes all prior
understandings, whether written or oral, between the parties with respect to
the subject matter of this Agreement.
Section 10.2. SEVERABILITY OF PROVISIONS. If any term or
provision of this Agreement is illegal or invalid for any reason, such
illegality or invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
Section 10.3. HEADINGS. No heading or caption contained in
this Agreement shall be considered in interpreting any of its terms or
provisions.
Section 10.4. APPLICABLE LAW. This Agreement shall be
governed exclusively by the laws of the State of Texas, and the obligations of
the parties to this Agreement are performable in Dallas, Dallas County, Texas.
Section 10.5. EXECUTION IN COUNTERPARTS. This Agreement
and any amendment may be executed in any number of counterparts, with the same
effect as if all parties had signed the same document.
Section 10.6. ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and all other costs and expenses
of litigation from the other party, which amounts may be set by the court in
the trial of such action or may be enforced in a separate action brought for
that purpose, and which amounts shall be in addition to any other relief which
may be awarded.
7
<PAGE> 11
Section 10.7. AMENDMENT. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing,
dated subsequent to the date of this Agreement, and executed by the parties.
Section 10.8. BINDING EFFECT. Each and all of the
covenants, terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the successors, transferees, heirs and assigns of the
respective parties.
Section 10.9. GENDER AND NUMBER. Wherever the context
shall so require, all words herein in the male gender shall be deemed to
include the female or neuter gender, all singular words shall include the
plural and all plural words shall include the singular.
Section 10.10. STRICT CONSTRUCTION. This Agreement shall not
be strictly construed against any party hereto.
Section 10.11. DATE OF EXECUTION. This Agreement is executed
the 29th day of December, 1995, to be effective as stated in Section 1.2
hereof.
NONSURVIVORS:
EQUAL INVESTMENT COMPANY, a Texas corporation
By: /s/ SHARON K. BRAYFIELD
------------------------------------------
Sharon K. Brayfield, Vice-President
ASCENSION RESORTS, LTD., a Texas limited partnership
By: ASCENSION CAPITAL CORPORATION, its sole
general partner, a Texas corporation
By: /s/ ROBERT E. MEAD
---------------------------------
Robert E. Mead,
Chief Executive Officer
8
<PAGE> 12
By: EQUAL INVESTMENT COMPANY, its sole
limited partner, a Texas corporation
By: /s/ SHARON K. BRAYFIELD
------------------------------------
Sharon K. Brayfield, Vice-President
SURVIVOR:
ASCENSION CAPITAL CORPORATION, a Texas corporation
By: /s/ ROBERT E. MEAD
---------------------------------------------
Robert E. Mead, Chief Executive Officer
9
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SILVERLEAF VACATION CLUB, INC.
Silverleaf Vacation Club, Inc., a Texas corporation (the
"Corporation"), pursuant to the provisions of Article 4.07 of the Texas
Business Corporation Act (the "Act"), hereby adopts these Amended and Restated
Articles of Incorporation of the Corporation which accurately copy the Articles
of Incorporation of the Corporation and all amendments thereto that are in
effect to date and as further amended hereby as hereinafter set forth and which
contain no other change in any provision thereof.
ARTICLE I
The name of the Corporation is Silverleaf Vacation Club, Inc.
ARTICLE II
The Articles of Incorporation of the Corporation are amended by these
Amended and Restated Articles of Incorporation as follows: (a) current ARTICLE
ONE is amended in its entirety to read as set forth in ARTICLE ONE of ARTICLE
VII below so as to restate the name of the Corporation; (b) current ARTICLE FOUR
is amended in its entirety to read as set forth in ARTICLE FOUR of ARTICLE VII
below so as to restate to Corporation's authorized shares; (c) current ARTICLE
SIX is amended in its entirety to read as set forth in ARTICLE SIX of ARTICLE
VII below so as to restate to Corporation's registered agent; (d) current
ARTICLE SEVEN is amended in its entirety to read as set forth in ARTICLE SEVEN
of ARTICLE VII below; and (e) current ARTICLE EIGHT is amended in its entirety
to read as set forth in ARTICLE EIGHT of ARTICLE VII below.
ARTICLE III
Each such amendment made by these Amended and Restated Articles of
Incorporation has been effected in conformity with the provisions of the Act
and these Amended and Restated Articles of Incorporation and each amendment
effected hereby was duly adopted by the shareholders of the Corporation as of
the 27th day of March, 1997.
ARTICLE IV
The number of shares of the Corporation outstanding at the time of
such adoption was 10,696 shares of Common Stock and the number of shares
entitled to vote on the Amended and Restated Articles of Incorporation was
10,696 shares. All of the shareholders have signed a written consent to the
adoption of such Amended and Restated Articles of Incorporation pursuant to
Article 9.10 of the Act and any written notice required by Article 9.10 has
been given.
ARTICLE V
Upon these Amended and Restated Articles of Incorporation becoming
effective, each certificate which therefore represented shares of Common Stock
of the par value of $0.10 a share of the Corporation shall automatically
represent the same number of shares of Common Stock of the par value of $0.01 a
share of the Corporation, and there shall be no exchange, reclassification or
cancellation of issued shares.
ARTICLE VI
These Amended and Restated Articles of Incorporation change the amount
of the stated capital of the Corporation. The amount of stated capital is
reduced by $962.64, from $1,069.60 to $106.96.
<PAGE> 2
ARTICLE VII
The Articles of Incorporation of the Corporation and all amendments
thereto are hereby superseded by the following Amended and Restated Articles of
Incorporation, which accurately copy the entire text thereof and as amended as
set forth above:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SILVERLEAF RESORTS, INC.
ARTICLE ONE
The name of the corporation ("Corporation") is Silverleaf Resorts,
Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is to transact any
or all lawful business for which corporations may be incorporated under the
Act.
ARTICLE FOUR
A. The aggregate number of shares that the Corporation shall have
authority to issue is One Hundred Ten Million (110,000,000) shares. Such
shares shall be issued in two (2) classes of stock to be designated "Common
Stock" and "Preferred Stock." The number of shares of Common Stock authorized
is One Hundred Million (100,000,000) shares having a par value of $0.01 per
share. The number of shares of Preferred Stock authorized is Ten Million
(10,000,000) shares having a par value of $0.01 per share.
B. The designations and the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the shares of each class of capital stock
of the Corporation are as follows:
(1) PREFERRED STOCK. The Preferred Stock may be authorized for
issuance from time to time by the Board of Directors in one or more separately
designated series. The designation of each such series, the number of shares
to be included in each such series, and the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and terms and
conditions of redemption shall be as set forth in resolutions adopted by the
Board of Directors and included in a statement filed as required by law from
time to time prior to the issuance of any shares of such series. Subject to
the express limitations, if any, of any series
2
<PAGE> 3
of Preferred Stock of which shares are outstanding at the time, the Board of
Directors is authorized, by the adoption of resolutions, to increase or
decrease (but not below the number of shares of Preferred Stock of such series
then outstanding) the number of shares of Preferred Stock of such series and to
alter the designation of or, classify or reclassify, any unissued shares of
Preferred Stock of any series from time to time, by setting or changing the
preferences, conversion or other rights, voting powers restrictions,
limitations as to dividends or other distributions qualifications or terms and
conditions of redemption of such series.
(2) COMMON STOCK. Subject to all rights of Preferred Stock, as
expressly provided herein, by law or by the Board of Directors pursuant to this
Article Four, the Common Stock of the Corporation shall have all rights and
privileges afforded to capital stock by applicable law in the absence of any
express grant of rights or privileges in the Corporation's charter, including,
but not limited to, the following rights and privileges:
(a) The holders of shares of Common Stock shall have the
right to vote for the election of directors and on all other matters requiring
stockholder action, each share of Common Stock being entitled to one vote;
(b) Dividends may be declared and paid or set apart for
payment upon shares of Common Stock out of any assets or funds of the
Corporation legally available for the payment of dividends.
(c) Upon the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the net assets of the Corporation
shall be distributed pro rata to the holders of shares of Common Stock in
accordance with their respective rights and interests.
ARTICLE FIVE
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done, or property actually received.
ARTICLE SIX
The street address of the registered office of the Corporation is 1221
Riverbend Drive, Suite 120, Dallas, Texas 75247 and the name of the registered
agent at such address is Sandra Cearley.
ARTICLE SEVEN
The business and affairs of the Corporation shall be managed by a
Board of Directors which may exercise all of the powers of the Corporation
except those conferred on or reserved to the stockholders by law. The number
of directors of the Corporation is currently two (2), which number may be
increased or decreased pursuant to the Bylaws of the Corporation but in no
event shall be less than the
3
<PAGE> 4
minimum number required by the Act. Each director shall hold office for the
term determined as specified below and until his or her successor shall have
been elected and qualified. The names and addresses of the persons serving as
the current directors are:
<TABLE>
<S> <C>
Robert E. Mead, 1221 Riverbend Drive, Suite 120
Class III Director Dallas, Texas 75247
Sharon K. Brayfield, 1221 Riverbend Drive, Suite 120
Class II Director Dallas, Texas 75247
</TABLE>
The following provisions shall apply to the directors of the
Corporation:
A. The directors of the Corporation (other than any directors who may be
elected solely by holders of any series of Preferred Stock) shall be divided
into three classes, designated "Class I," "Class II," and "Class III,"
respectively. The number of directors in each class shall be as nearly equal as
possible. Each director shall serve for a term ending on the date of the third
Annual Meeting of Stockholders following the Annual Meeting at which such
director was elected, provided, however, that each initial director in Class I,
as determined by the directors, shall serve for a term ending on the date of the
Annual meeting held in 1998; each initial director in Class II, as determined by
the directors, shall serve for a term ending on the date of the Annual Meeting
held in 1999; and each initial director in Class III, as determined by the
directors, shall serve for a term ending on the date of the Annual Meeting held
in 2000.
B. In the event of any increase or decrease in the authorized number of
directors: (i) each director then serving shall nevertheless continue as
director of the class of which such director is a member until the expiration
of such director's term or such director's prior death, retirement, resignation
or removal; and (ii) except to the extent that an increase or decrease in the
authorized number of directors occurs in connection with the rights of holders
of Preferred Stock to elect additional directors, the newly created or
eliminated directorships resulting from any increase or decrease shall be
apportioned by the Board of Directors among the three classes so as to keep the
number of directors in each class as nearly equal as possible.
C. Anything in this Article Seven to the contrary notwithstanding, each
director shall serve until such director's successor is elected and qualified,
or until such director's earlier death, retirement, resignation or removal.
D. A director may be removed from office with or without cause only by
the affirmative vote of the holders of at least two-thirds of the votes
entitled to be cast in the election of directors.
ARTICLE EIGHT
The following provisions are hereby adopted for the purposes of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
A. The Board of Directors shall have power from time to time and in its
sole discretion: (a) to determine in accordance with sound accounting practice
what constitutes annual or other net profit, earnings, surplus or net assets in
excess of capital; (b) to fix and vary from time to time the amount to be
reserved as working capital, or determine that retained earnings or surplus
shall remain in the hands of the Corporation; (c) to set apart out of any funds
of the Corporation such
4
<PAGE> 5
reserve or reserves in such amount or amounts and for such proper purposes as
it shall determine and to abolish or redesignate any such reserve or any part
thereof; (d) to borrow or raise money upon any terms for any Corporate
purposes; (e) to distribute and pay distributions or dividends in stock, cash
or other securities or property, out of surplus or any other funds or amounts
legally available therefore, at such times and to the stockholders of record on
such dates as it may from time to time, determine; and (f) to determine whether
and to what extent and at what times and places and under what conditions and
regulations the books, accounts and documents of the Corporation or any of them
shall be open to the inspections of stockholders, except as otherwise provided
by statute or by the Bylaws of the Corporation, and, except as so provided no
stockholder shall have the right to inspect any book, account or document of
the Corporation unless authorized so to do by resolution of the Board of
Directors.
B. The liability of the directors and officers of the Corporation to the
Corporation or its stockholders for money damages shall be limited to the
fullest extent permitted under Texas law, including the Act now or hereafter in
force, and the directors and officers of the Corporation shall have no
liability whatsoever to the Corporation or its stockholders for money damages
except to the extent which such liability cannot be limited or restricted under
Texas law now or hereafter in force. Neither the amendment nor repeal of the
foregoing sentence of this Section B of Article Eight nor the adoption nor
amendment of any other provision of the Articles or Bylaws of the Corporation
inconsistent with the foregoing sentence shall apply to or affect in any manner
the applicability of the foregoing sentence with respect to any act or omission
of any director or officer occurring prior to any such amendment, repeal or
adoption.
C. The Corporation shall indemnify, in the manner and to the fullest
extent permitted by law, any person who is or was a party to or is threatened
to be made a party to, any threatened pending or completed action, suit or
proceeding, whether or not by or in the right of the Corporation and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of the Corporation or
that such person, while an officer or director of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner or
trustee of another corporation, partnership, trust, employee benefit plan or
other enterprise. To the fullest extent permitted by law, the indemnification
provided herein shall include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement and any such expenses may be paid by the
Corporation in advance of the final disposition of any such action, suit or
proceeding. Upon authorization by the Board of Directors, the Corporation may
indemnify employees and/or agents of the Corporation to the same extent
provided herein for directors and officers. Any repeal or modification of any
of the foregoing sentences of this Section C of Article Eight shall be
prospective in operation and effect only, and shall not adversely affect any
right to indemnification or advancement of expenses hereunder existing at the
time of any such repeal or modification.
D. No holders of shares of stock of the Corporation of any class shall
have preemptive rights or preferential right to purchase, subscribe for or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized or any securities convertible into or
5
<PAGE> 6
exchangeable for shares of stock of the Corporation of any class now or
hereafter authorized or any warrants, options or other instrument evidencing
rights to purchase, subscribe for or otherwise acquire shares of stock of the
Corporation of any class now or hereafter authorized, other than such
preferential rights, if any, as the Board of Directors in its sole discretion
may determine, and at such price as the Board of Directors in its sole
discretion may fix.
E. The Board of Directors shall have the power, in its sole discretion
and without limitation, to authorize the issuance at any time and from time to
time shares of stock of the Corporation with or without par value, of any class
now or hereafter authorized and of securities convertible into or exchangeable
for shares of the stock of the Corporation, with or without par value, of any
class now or hereafter authorized, for such consideration (irrespective of the
value or amount of such consideration) and in such manner and by such means as
said Board of Directors may deem advisable.
F. The Board of Directors shall have the power, in its sole discretion
and without limitation to classify or reclassify any unissued shares of stock,
whether now or hereafter authorized, by setting, altering or eliminating in any
one or more respects, from time to time before the issuance of such shares, any
feature of such shares, including but not limited to the designation,
preferences, conversion or other rights, voting powers, qualifications, and
terms and conditions of redemption of, and limitations as to dividends and any
restrictions on, such shares.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Corporation's Amended and Restated Articles, or construed
as or deemed by inference or otherwise in any manner to exclude or limit any
powers conferred upon the Board of Directors under the Laws of the State of
Texas now or hereafter in force.
IN WITNESS WHEREOF, and in accordance with Article 4.07D of the Act,
the undersigned has executed these Amended and Restated Articles of
Incorporation as of the 27th day of March, 1997.
By: /s/ ROBERT E. MEAD
---------------------------------
Robert E. Mead, Chief Executive
Officer
6
<PAGE> 7
STATE OF TEXAS )
)
COUNTY OF DALLAS )
The foregoing instrument was sworn to and acknowledged before me by
Robert E. Mead, Chief Executive Officer of Silverleaf Resorts, Inc. on the
27th day of March, 1997.
/s/ SANDRA CEARLEY
-------------------------------------
Notary Public, State of Texas
My Commission Expires: Printed or Stamped Name:
-------------------------------------
7
<PAGE> 1
EXHIBIT 10.2.1
EMPLOYMENT AGREEMENT
WITH SILVERLEAF RESORTS, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made between SILVERLEAF
RESORTS, INC., a Texas corporation ("Silverleaf"), and ROBERT E. MEAD (the
"Employee").
R E C I T A L S:
A. Employee is a key executive officer and employee of Silverleaf;
and
B. Silverleaf and Employee desire to continue the employment of
Employee and to agree on the terms of Employee's continued
employment.
NOW, THEREFORE, in consideration of the premises and terms hereinafter
set forth, the parties agree as follows:
A G R E E M E N T:
SECTION 1. EMPLOYMENT. Employee's employment with Silverleaf as
Chief Executive Officer is hereby continued, effective as of the Effective Date
and for an initial period of three (3) years from the Effective Date (the
"Term"), unless sooner terminated pursuant to the termination provisions of
this Agreement. Employee may not engage in other employment while he or she is
in the employ of Silverleaf pursuant to this Agreement.
SECTION 2. DUTIES. Employee agrees to devote such time, attention
and energies as are necessary to fulfill his or her duties as specified by the
Board of Directors of Silverleaf from time to time. Employee further agrees
that he or she will promote the best interests and welfare of Silverleaf and
shall perform any and all duties to the best of his or her abilities. The
Employee shall:
(a) NON-COMPETITION: Not render to others, during his or her
employment with Silverleaf, service of any kind for compensation or
promote, participate or engage in any other business activity which
would conflict or interfere with the performance of his or her duties or
loyalty under this Agreement, including, but not limited to,
participating in the promotion or sale of products or services for a
competitor of Silverleaf or otherwise engage in business with such
competitor;
(b) REGULATORY LAWS: Abide by all applicable statutes, rules
and regulations of each State in which services may be rendered; and
(c) SILVERLEAF RULES: Abide by all rules and regulations
issued by Silverleaf, which are pertinent to Employee's duties and
obligations.
<PAGE> 2
SECTION 3. COMPENSATION. As compensation for the services rendered
pursuant to this Agreement:
(a) BASE COMPENSATION: Silverleaf shall pay Employee base
compensation computed at the annual rate of Five Hundred Thousand and
No/100 Dollars ($500,000.00), payable in semi-monthly payments on the
1st and 15th days of each month.
(b) INCENTIVE COMPENSATION: Employee shall be entitled to
participate in any bonus, incentive, stock option or other compensation
plans of Silverleaf only to the extent the Board of Directors of
Silverleaf may deem appropriate from time to time.
(c) COMPANY VEHICLE: Silverleaf shall furnish Employee a
company owned vehicle for use by Employee in performing his or her
duties, and Silverleaf shall pay all expenses associated therewith.
(d) FRINGE BENEFITS: Silverleaf shall provide Employee health
insurance under its group plan as it may exist from time to time. The
cost of any coverage of any of the Employee's family members under
Silverleaf's group plan shall be paid by the Employee. The Employee
shall also be entitled to such vacation time, sick leave and other
fringe benefits as may be specified by the Board of Directors of
Silverleaf from time to time for its executive personnel.
(e) TERMINATION: Employee shall be entitled to no termination
pay. At the Termination of this Agreement, the payment to Employee of
compensation earned to date shall be in full satisfaction of all claims
against Silverleaf under this Agreement, and payment is contingent upon
return of all Silverleaf's property as outlined below.
SECTION 4. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE: Employee acknowledges that
during his or her employment with Silverleaf, he or she may have access
to and become acquainted with Silverleaf Confidential Information, as
defined below. Except as Employee's duties during his or her employment
with Silverleaf may require or Silverleaf may otherwise consent in
writing, Employee agrees that he or she shall not at any time disclose
or use, directly or indirectly, either during or subsequent to his or
her employment with Silverleaf, any Silverleaf Confidential Information.
(b) CONFIDENTIAL INFORMATION: For purposes of the foregoing
provisions, "Silverleaf Confidential Information" shall mean (1) any and
all confidential and proprietary business information and trade secrets
concerning the business and affairs of Silverleaf and its affiliates,
including but not limited to all marketing, sales and lead generation
techniques, know-how and studies, customer and lead lists, current and
anticipated customer requirements, price lists, business plans, training
programs, computer software and programs, and computer software and
data-base technologies,
2
<PAGE> 3
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information), (2) any and all
information concerning the business and affairs of Silverleaf and its
affiliates (including but not limited to their historical financial
statements, financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and backgrounds of
key personnel, personnel training and techniques and materials, however
documented), and (3) any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for Silverleaf and its
affiliates containing or based, in whole or in part, on any information
included in the foregoing.
SECTION 5. NON-INTERFERENCE. Employee further agrees that during his
or her employment and at all times thereafter, Employee shall not, either on
his or her own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or shareholder or
otherwise on behalf of any other person, firm or corporation: (1) carry on or
be engaged or interested directly or indirectly in, or solicit, the manufacture
or sale of goods or provision of services to any person, firm or corporation
which, at any time during his or her employment has been or is a customer or in
the habit of dealing with Silverleaf or its affiliates in their business, (2)
endeavor, directly or indirectly, to canvas or solicit in competition with
Silverleaf or its affiliates or to interfere with the supply of orders for
goods or services from or by any person, firm or corporation which during this
or her employment has been or is a supplier of goods or services to Silverleaf
or its affiliates, or (3) directly or indirectly solicit or attempt to solicit
away from Silverleaf or its affiliates any of its officers, employees or
independent contractors or offer employment or business to any person who, on
or during the 6 months immediately preceding the date of such solicitation or
offer, is or was an officer, employee or independent contractor of Silverleaf
or its affiliates.
SECTION 6. NONCOMPETITION.
(a) COVENANT: Employee covenants and agrees that he or she
shall not, for a period of two (2) years from and after the effective
date of any Termination, working alone or in conjunction with one or
more other persons or entities, for compensation or not, permit his or
her name to be used by or engage in or carry on, directly or indirectly,
either for himself or herself or as a member of a partnership or other
entity or as a stockholder, investor, officer or director of a
corporation or as an employee, agent, associate or contractor of any
person, partnership, corporation or other entity, any business in
competition with the business of Silverleaf or its affiliates, as
carried on by Silverleaf or its affiliates immediately prior to the
effective date of any Termination, but only for as long as such business
is carried on by (1) Silverleaf or its affiliates or (2) any person,
corporation, partnership, trust or other organization or entity deriving
title from Silverleaf or its affiliates to the assets and goodwill of
the business being carried on by Silverleaf or its affiliates
immediately prior to the effective date of any Termination, in any
county of any state of the United States in which Silverleaf or its
affiliates conducts such business or markets the products of such
business immediately prior to the effective date of any Termination.
3
<PAGE> 4
(b) TOLLING. If Employee violates any covenant contained in
this Section, then the term of such violated covenant shall be tolled
for the period commencing on the commencement of such violation and
ending upon the earlier of (1) such time as such violation shall be
cured by Employee to the reasonable satisfaction of Silverleaf, (2)
final adjudication (including appeals) of any action filed for
injunctive relief or damages arising out of such violation, and (3) the
expiration of 24 months after Termination during which no violation of
the covenant has occurred.
(c) REFORMATION. If, in any judicial proceeding, the court
shall refuse to enforce any covenant contained in this Section because
the time limit is too long, it is expressly understood and agreed
between Silverleaf and Employee that for purposes of such proceeding
such time limitation shall be deemed reduced to the extent necessary to
permit enforcement of such covenant. If, in any judicial proceeding,
the court shall refuse to enforce any covenant contained in this Section
because it is more extensive (whether as to geographic area, scope of
business or otherwise) than necessary to protect the business and
goodwill of Silverleaf and/or its affiliates, it is expressly understood
and agreed between Silverleaf and Employee that for purposes of such
proceeding the geographic area, scope of business or other aspect shall
be deemed reduced to the extent necessary to permit enforcement of such
covenant.
SECTION 7. INJUNCTIVE RELIEF. Employee acknowledges that a breach of
Sections 4, 5 or 6 hereof would cause irreparable damage to Silverleaf and/or
its affiliates, and in the event of Employee's breach of the provisions of
Sections 4, 5 or 6 hereof, Silverleaf shall be entitled to a temporary
restraining order and an injunction restraining Employee from breaching such
Sections without the necessity of posting bond or proving irreparable harm,
such being conclusively admitted by Employee. Nothing shall be construed as
prohibiting Silverleaf from pursuing any other available remedies for such
breach, including the recovery of damages from Employee. Employee acknowledges
that the restrictions set forth in Sections 4, 5 and 6 hereof are reasonable in
scope and duration, given the nature of the business of Silverleaf and its
affiliates. Employee agrees that issuance of an injunction restraining
Employee from breaching such Sections in accordance with their terms will not
pose an unreasonable restriction on Employee's ability to obtain employment or
other work following the effective date of any Termination.
SECTION 8. EMPLOYEE INVESTMENTS. Anything to the contrary herein
notwithstanding, Employee: (1) shall not be prohibited from investing his or
her assets in such form or such manner as will not, in the aggregate, detract
from the performance by Employee of his or her duties hereunder and will not
violate the provisions of Sections 4, 5 or 6 hereof; and (2) shall not be
prohibited from purchasing stock in any publicly traded company solely as a
stockholder so long as Employee does own (together or separately or through his
or her affiliates) more than two percent (2%) of the stock in any company,
other than Silverleaf, which is engaged in the timeshare business.
SECTION 9. EMPLOYEE'S REPRESENTATIONS. Employee represents and
warrants that he or she is free to enter into and perform each of the terms and
conditions hereof, and that his or
4
<PAGE> 5
her execution and performance of this Agreement does not and will not violate
or breach any other Agreement between Employee and any other person or entity.
SECTION 10. TERMINATION. This Agreement shall terminate upon the
expiration of its Term, or prior thereto: (1) upon written notice by either
party, at any time and for any or no reason whatsoever, at least thirty (30)
days prior to the effective date of the termination; or (2) as of the end of
the month of Employee's death or incapacity due to Employee's physical or
mental illness as determined in Silverleaf's sole discretion (the
"Termination").
SECTION 11. RETURN OF MATERIALS AND VEHICLES. Employee understands
and agrees that any training manuals, sales and promotional material, vehicles
or other equipment provided to him or her by Silverleaf in connection with this
Agreement shall remain the sole property of Silverleaf, and shall be used by
the Employee exclusively for Silverleaf's benefit. Upon termination of this
Agreement, any such material, vehicles or other equipment shall be immediately
returned to Silverleaf.
SECTION 12. NON-BINDING ALTERNATE DISPUTE RESOLUTION. Except for
actions brought by Silverleaf pursuant to Section 7 hereof:
(a) AGREEMENT TO UTILIZE: The parties shall attempt to settle
any claim or controversy arising from this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation prior to the commencement of any legal action. If such
attempts fail, then the dispute shall be mediated by a mutually-accepted
mediator to be chosen by the parties within forty-five (45) days after
written notice demanding mediation is sent by one party to the other
party. Neither party may unreasonably withhold consent to the selection
of a mediator, and the parties shall share the costs of the mediation
equally. By mutual written agreement, however, the parties may postpone
mediation until they have completed some specified but limited discovery
regarding the dispute. The parties may also agree to replace mediation
with any other form of alternate dispute resolution ("ADR") available in
Texas, such as a mini-trial or arbitration.
(b) FAILURE TO RESOLVE: Any dispute which the Parties cannot
resolve through negotiation, mediation or any other form of ADR, within
six (6) months of the date of the initial demand for mediation, may then
be submitted to the appropriate court for resolution. The use of
negotiation, mediation, or any other form of ADR procedures will not be
construed under the doctrines of laches, waiver or estoppel to affect
adversely the rights of either party.
SECTION 13. WAIVER. Silverleaf's failure at any time to require
performance by Employee of any of the provisions hereof shall not be deemed to
be a waiver of any kind nor in any way affect the rights of Silverleaf
thereafter to enforce the provisions hereof. In the event that either party to
this Agreement waives any provision of this Agreement or any rights concerning
any breach or default of the other party hereto, such waiver shall not
constitute a continuing waiver of any such provision or breach or default of
the other party hereto.
5
<PAGE> 6
SECTION 14. SUCCESSORS, ASSIGNS, BENEFIT.
(a) SILVERLEAF SUCCESSORS: The provisions of this Agreement
shall inure to the benefit of and be binding upon Silverleaf, its
successors, assigns and other affiliated entities, including, but not
limited to, any corporation which may acquire all or substantially all
of Silverleaf's assets or with or into which Silverleaf may be
consolidated, merged or reorganized. Upon any such merger,
consolidation or reorganization, the term "Silverleaf" as used herein
shall be deemed to refer to any such successor corporation.
(b) NO ASSIGNMENT BY EMPLOYEE: The parties hereto agree that
Employee's services hereunder are personal and unique, and that
Silverleaf is executing this Agreement in reliance thereon. This
Agreement shall not be assignable by Employee.
SECTION 15. SEVERABILITY. If one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but shall be deemed
stricken and severed from this Agreement and the remaining terms of this
Agreement shall continue in full force and effect.
SECTION 16. GOVERNING LAW AND VENUE. This Agreement shall be deemed
to have been made and entered into in the State of Texas and its validity,
construction, breach, performance and operation shall be governed by the laws
of that state. The obligations hereunder of Silverleaf shall be performable in
Dallas County, Texas, and venue for any suit involving this Agreement shall lie
exclusively in Dallas County, Texas.
SECTION 17. ENTIRE UNDERSTANDING. This Agreement sets forth the
entire understanding between the parties with respect to the employment of
Employee, and no other representations, warranties or agreements whatsoever
have been made by Silverleaf to Employee. Further, this Agreement may not be
modified or amended except by another instrument in writing executed by both of
the parties.
SECTION 18. NOTICES. All notices and communications under this
Agreement shall be sent to the parties at the following addresses or such other
addresses that the parties may subsequently designate in writing.
(a) SILVERLEAF:
Silverleaf Resorts, Inc.
Attention: Sharon K. Brayfield
1221 Riverbend, Suite 120
Dallas, Texas 75247
6
<PAGE> 7
(b) EMPLOYEE:
Robert E. Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
SECTION 19. SECTION HEADINGS. Section and paragraph headings are
inserted herein only for convenience and shall not be used to interpret any of
the provisions hereof.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same original.
SECTION 21. EFFECTIVE DATE. This Agreement is executed on the date
set forth below, but shall be effective as of January 1, 1997 (the "Effective
Date").
Executed this 25th day of February, 1997.
"SILVERLEAF"
SILVERLEAF RESORTS, INC.
By: /s/ SHARON K. BRAYFIELD
------------------------------
Authorized Officer
"EMPLOYEE"
/s/ ROBERT E. MEAD
-------------------------------------
ROBERT E. MEAD
7
<PAGE> 1
EXHIBIT 10.2.2
INDEPENDENT CONTRACTOR AGREEMENT
WITH SILVERLEAF RESORTS, INC.
THIS INDEPENDENT CONTRACTOR AGREEMENT (the "Agreement") is made
between SILVERLEAF RESORTS, INC., a Texas corporation ("Silverleaf"), and
RECREATIONAL CONSULTANTS, INC., a Texas corporation ("Recreational").
R E C I T A L S:
A. Recreational is providing marketing and management services to
Silverleaf in regard to the sale of interests in Silverleaf's
timeshare resorts; and
B. Silverleaf and Recreational desire to continue their
contractual relationship and to agree on the terms of their
continued contract.
NOW, THEREFORE, in consideration of the premises and terms hereinafter
set forth, the parties agree as follows:
A G R E E M E N T:
SECTION 1. SERVICES. Recreational shall perform all sales
management functions for Silverleaf's timeshare sales as further defined by
Silverleaf, effective as of the Effective Date and for an initial period of
three (3) years from the Effective Date (the "Term"), unless sooner terminated
pursuant to the termination provisions of this Agreement.
SECTION 2. GENERAL DUTIES. Recreational agrees to devote such
personnel, time, attention and energies as are necessary to fulfill its duties
as specified by the Board of Directors of Silverleaf from time to time.
Recreational further agrees that it will promote the best interests and welfare
of Silverleaf and shall perform any and all duties to the best of its
abilities. Recreational shall:
(a) NON-COMPETITION: Not render to others, during the
term of this Agreement, service of any kind for compensation or
promote, participate or engage in any other business activity, which
would conflict or interfere with the performance of its duties or
loyalty under this Agreement, including, but not limited to,
participating in the promotion or sale of products or services for a
competitor of Silverleaf or otherwise engage in business with such
competitor;
(b) REGULATORY LAWS: Abide by all applicable statutes,
rules and regulations of each State in which services may be rendered;
and
(c) SILVERLEAF RULES: Abide by all rules and regulations
issued by Silverleaf, which are pertinent to Recreational's duties and
obligations.
<PAGE> 2
SECTION 3. EXECUTIVE PERSONNEL. Recreational's President, David
T. O'Connor, or such other person as may be approved by Silverleaf's Board of
Directors, shall also serve as Executive Vice-President of Sales of Silverleaf,
subject to removal or re-election by the Board of Directors of Silverleaf. Any
compensation payable to David T. O'Connor for these services shall be the sole
responsibility of Recreational.
SECTION 4. NONCOMPETITIVE BUSINESS. Recreational shall be free
to devote such time, attention and energy to other non-competitive business in
which Recreational may be engaged so long as Recreational provides the required
services to Silverleaf to the satisfaction of Silverleaf in its sole
discretion.
SECTION 5. COMPENSATION. As compensation for the services
rendered pursuant to this Agreement:
(a) BASE COMPENSATION: Recreational shall be paid weekly
commissions equal to one percent (1%) of Silverleaf's net sales from
timeshare and vacation contracts from Silverleaf's resorts for which
Recreational is directly responsible for management of the sales
personnel. For this purpose, net sales mean only sales on which
Silverleaf has received a full down payment and which have not been
cancelled as of the due date of the payment of this base compensation.
The payment of this base compensation shall be made as follows and
shall be subject to the following chargebacks:
[1] The base compensation payable on net sales
for each week shall be paid on the second Friday thereafter;
and
[2] If the first monthly installment due under
the contract for a net sale is not made and the contract is
subsequently cancelled, the base compensation paid to
Recreational on the contract shall be charged back to
Recreational. For this purpose, Silverleaf shall maintain a
$2,000 reserve out of Recreational's base compensation,
against which the chargebacks shall be deducted. The reserve
shall be established and replenished on a regular basis by
Silverleaf deducting, to the extent required, ten percent
(10%) of the base compensation otherwise due Recreational.
(b) INCENTIVE COMPENSATION FOR UPGRADE SALES:
Recreational shall be paid additional weekly incentive compensation,
payable on the second Friday after each week, based on the weekly
volume of upgrade net sales, according to the following initial scale:
<TABLE>
<CAPTION>
Weekly Volume Incentive Compensation
------------- ----------------------
<S> <C>
$125,000 $1,000.00
$150,000 $1,250.00
$175,000 $1,500.00
</TABLE>
The weekly volumes and the incentive compensation shall be subject to
adjustment from time to time in the sole discretion of Silverleaf.
2
<PAGE> 3
(c) INCENTIVE COMPENSATION FOR APG: Recreational shall
also be paid monthly incentive compensation based on the monthly
average price per guest ("APG") computed on only vacation ownership
and bi-annual ownership contracts and sampler sales, and the
commissions paid thereon for the month, according to the following
scale:
<TABLE>
<CAPTION>
APG Incentive Compensation
--- ----------------------
<S> <C>
$800-$849 5% of Commissions Paid
$850-$900 10% of Commissions Paid
$901-$949 15% of Commissions Paid
$950 or more 20% of Commissions Paid
</TABLE>
The APG amounts and this incentive compensation shall also be subject
to adjustment from time to time by Silverleaf in its sole discretion.
(d) EXPENSES: Silverleaf shall furnish Recreational a
company owned vehicle for use by Recreational in performing its
duties, and Silverleaf shall pay all expenses associated therewith.
All other expenses incurred by Recreational in the performance of the
Services hereunder shall be paid by Recreational, except to the extent
otherwise agreed in writing by Silverleaf.
(e) TERMINATION: Recreational shall be entitled to no
termination pay. At the Termination of this Agreement, the payment to
Recreational of compensation earned to date shall be in full
satisfaction of all claims against Silverleaf under this Agreement,
and payment is contingent upon return of all Silverleaf's property as
outlined below.
SECTION 6. NATURE OF RELATIONSHIP. Recreational is retained as
an independent contractor, and Silverleaf and Recreational agree in regard to
such status as follows:
(a) EMPLOYEES: Recreational shall be responsible for
hiring, paying and supervising any employees employed by Recreational
in the performance of its duties under this Agreement and the
withholding of all required federal or state taxes from their
compensation, and Recreational shall indemnify and hold Silverleaf
harmless from any claims made by such employees against Silverleaf or
made by any taxing authority against Silverleaf for any such taxes.
(b) NO FRINGE BENEFITS: No employee of Recreational
shall be entitled to any fringe benefits or to participate in any
other kind of benefits furnished to Silverleaf's employees, except to
the extent otherwise agreed in writing by Silverleaf. Provided,
however, so long as David T. O'Connor serves as Executive Vice-
President of Sales, Silverleaf shall provide him health insurance
under its group plan, with any cost of coverage of his family to be
paid by him or Recreational.
3
<PAGE> 4
SECTION 7. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE: Recreational acknowledges
that during the term of this Agreement, it may have access to and
become acquainted with Silverleaf Confidential Information, as defined
below. Except as Recreational's duties may require or Silverleaf may
otherwise consent in writing, Recreational agrees that it and its
employees shall not at any time disclose or use, directly or
indirectly, either during or subsequent to the term of this Agreement
with Silverleaf, any Silverleaf Confidential Information.
(b) CONFIDENTIAL INFORMATION: For purposes of the
foregoing provisions, "Silverleaf Confidential Information" shall mean
(1) any and all confidential and proprietary business information and
trade secrets concerning the business and affairs of Silverleaf and
its affiliates, including but not limited to all marketing, sales and
lead generation techniques, know-how and studies, customer and lead
lists, current and anticipated customer requirements, price lists,
business plans, training programs, computer software and programs, and
computer software and data-base technologies, systems, structures and
architectures (and related processes, formulae, compositions,
improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information), (2) any and all information
concerning the business and affairs of Silverleaf and its affiliates
(including but not limited to their historical financial statements,
financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key
personnel, personnel training and techniques and materials, however
documented), and (3) any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for Silverleaf
and its affiliates containing or based, in whole or in part, on any
information included in the foregoing.
SECTION 8. NON-INTERFERENCE. Recreational further agrees that
during the term of this Agreement or subsequent thereto, Recreational shall
not, either on its own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or shareholder or
otherwise on behalf of any other person, firm or corporation: (1) carry on or
be engaged or interested directly or indirectly in, or solicit, the manufacture
or sale of goods or provision of services to any person, firm or corporation
which, at any time during the term of this Agreement has been or is a customer
or in the habit of dealing with Silverleaf or its affiliates in their business,
(2) endeavor, directly or indirectly, to canvas or solicit in competition with
Silverleaf or its affiliates or to interfere with the supply of orders for
goods or services from or by any person, firm or corporation which during the
term of this Agreement has been or is a supplier of goods or services to
Silverleaf or its affiliates, or (3) directly or indirectly solicit or attempt
to solicit away from Silverleaf or its affiliates any of its officers,
employees or independent contractors or offer employment to any person who, on
or during the 6 months immediately preceding the date of such solicitation or
offer, is or was an officer, employee or independent contractor of Silverleaf
or its affiliates.
4
<PAGE> 5
SECTION 9. NONCOMPETITION.
(a) COVENANT: Recreational covenants and agrees that it
shall not, for a period of two (2) years from and after the effective
date of any Termination, working alone or in conjunction with one or
more other persons or entities, for compensation or not, permit its
name to be used by or engage in or carry on, directly or indirectly,
either for itself or as a member of a partnership or other entity or
as a stockholder, investor, officer or director of a corporation or as
an employee, agent, associate or contractor of any person,
partnership, corporation or other entity, any business in competition
with the business of Silverleaf or its affiliates, as carried on by
Silverleaf or its affiliates immediately prior to the effective date
of any Termination, but only for as long as such business is carried
on by (1) Silverleaf or its affiliates or (2) any person, corporation,
partnership, trust or other organization or entity deriving title from
Silverleaf or its affiliates to the assets and goodwill of the
business being carried on by Silverleaf or its affiliates immediately
prior to the effective date of any Termination, in any county of any
state of the United States in which Silverleaf or its affiliates
conducts such business or markets the products of such business
immediately prior to the effective date of any Termination.
(b) TOLLING. If Recreational violates any covenant
contained in this Section, then the term of such violated covenant
shall be tolled for the period commencing on the commencement of such
violation and ending upon the earlier of (1) such time as such
violation shall be cured by Recreational to the reasonable
satisfaction of Silverleaf, (2) final adjudication (including appeals)
of any action filed for injunctive relief or damages arising out of
such violation, and (3) the expiration of 24 months after Termination
during which no violation of the covenant has occurred.
(c) REFORMATION. If, in any judicial proceeding, the
court shall refuse to enforce any covenant contained in this Section
because the time limit is too long, it is expressly understood and
agreed between Silverleaf and Recreational that for purposes of such
proceeding such time limitation shall be deemed reduced to the extent
necessary to permit enforcement of such covenant. If, in any judicial
proceeding, the court shall refuse to enforce any covenant contained
in this Section because it is more extensive (whether as to geographic
area, scope of business or otherwise) than necessary to protect the
business and goodwill of Silverleaf and/or its affiliates, it is
expressly understood and agreed between Silverleaf and Recreational
that for purposes of such proceeding the geographic area, scope of
business or other aspect shall be deemed reduced to the extent
necessary to permit enforcement of such covenant.
SECTION 10. INJUNCTIVE RELIEF. Recreational acknowledges that a
breach of Sections 7, 8 or 9 hereof would cause irreparable damage to
Silverleaf and/or its affiliates, and in the event of Recreational's breach of
the provisions of Sections 7, 8 or 9 hereof, Silverleaf shall be entitled to a
temporary restraining order and an injunction restraining Recreational from
breaching such Sections without the necessity of posting bond or proving
irreparable harm, such being conclusively admitted by Recreational. Nothing
shall be construed as prohibiting Silverleaf from pursuing any other available
remedies for such breach, including the recovery
5
<PAGE> 6
of damages from Recreational. Recreational acknowledges that the restrictions
set forth in Sections 7, 8 and 9 hereof are reasonable in scope and duration,
given the nature of the business of Silverleaf and its affiliates.
Recreational agrees that issuance of an injunction restraining Recreational
from breaching such Sections in accordance with their terms will not pose an
unreasonable restriction.
SECTION 11. INVESTMENTS. Anything to the contrary herein
notwithstanding, Recreational: (1) shall not be prohibited from investing its
assets in such form or such manner as will not, in the aggregate, detract from
the performance by Recreational of its duties hereunder and will not violate
the provisions of Sections 7, 8 or 9 hereof; and (2) shall not be prohibited
from purchasing stock in any publicly traded company solely as a stockholder so
long as Recreational does own (together or separately or through its
affiliates) more than two percent (2%) of the stock in any company, other than
Silverleaf, which is engaged in the timeshare business.
SECTION 12. RECREATIONAL'S REPRESENTATIONS. Recreational
represents and warrants that it is free to enter into and perform each of the
terms and conditions hereof, and that its execution and performance of this
Agreement does not and will not violate or breach any other Agreement between
Recreational and any other person or entity.
SECTION 13. TERMINATION. This Agreement may be terminated by
either party at any time and for any or no reason whatsoever by written notice
at least thirty (30) days prior to the effective date of the termination.
SECTION 14. RETURN OF MATERIALS AND VEHICLES. Recreational
understands and agrees that any training manuals, sales and promotional
material, vehicles or other equipment provided to it or its employees by
Silverleaf in connection with this Agreement shall remain the sole property of
Silverleaf, and shall be used by Recreational and its employees exclusively for
Silverleaf's benefit. Upon termination of this Agreement, any such material,
vehicles or other equipment shall be immediately returned to Silverleaf.
SECTION 15. NON-BINDING ALTERNATE DISPUTE RESOLUTION. Except for
actions brought by Silverleaf pursuant to Section 10 hereof:
(a) AGREEMENT TO UTILIZE: The parties shall attempt to
settle any claim or controversy arising from this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation prior to the commencement of any legal action. If such
attempts fail, then the dispute shall be mediated by a
mutually-accepted mediator to be chosen by the parties within
forty-five (45) days after written notice demanding mediation is sent
by one party to the other party. Neither party may unreasonably
withhold consent to the selection of a mediator, and the parties shall
share the costs of the mediation equally. By mutual written
agreement, however, the parties may postpone mediation until they have
completed some specified but limited discovery regarding the dispute.
The parties may also agree to replace mediation with any other form of
alternate dispute resolution ("ADR") available in Texas, such as a
mini-trial or arbitration.
6
<PAGE> 7
(b) FAILURE TO RESOLVE: Any dispute which the parties
cannot resolve through negotiation, mediation or any other form of
ADR, within six (6) months of the date of the initial demand for
mediation, may then be submitted to the appropriate court for
resolution. The use of negotiation, mediation, or any other form of
ADR procedures will not be construed under the doctrines of laches,
waiver or estoppel to affect adversely the rights of either party.
SECTION 16. WAIVER. Silverleaf's failure at any time to require
performance by Recreational of any of the provisions hereof shall not be deemed
to be a waiver of any kind nor in any way affect the rights of Silverleaf
thereafter to enforce the provisions hereof. In the event that either party to
this Agreement waives any provision of this Agreement or any rights concerning
any breach or default of the other party hereto, such waiver shall not
constitute a continuing waiver of any such provision or breach or default of
the other party hereto.
SECTION 17. SUCCESSORS, ASSIGNS, BENEFIT.
(a) SILVERLEAF SUCCESSORS: The provisions of this
Agreement shall inure to the benefit of and be binding upon
Silverleaf, its successors, assigns and other affiliated entities,
including, but not limited to, any corporation which may acquire all
or substantially all of Silverleaf's assets or with or into which
Silverleaf may be consolidated, merged or reorganized. Upon any such
merger, consolidation or reorganization, the term "Silverleaf" as used
herein shall be deemed to refer to any such successor corporation.
(b) NO ASSIGNMENT BY RECREATIONAL: The parties hereto
agree that Recreational's services hereunder are unique, and that
Silverleaf is executing this Agreement in reliance thereon. This
Agreement shall not be assignable by Recreational.
SECTION 18. SEVERABILITY. If one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
shall be deemed stricken and severed from this Agreement and the remaining
terms of this Agreement shall continue in full force and effect.
SECTION 19. GOVERNING LAW AND VENUE. This Agreement shall be
deemed to have been made and entered into in the State of Texas and its
validity, construction, breach, performance and operation shall be governed by
the laws of that state. The obligations hereunder of Silverleaf shall be
performable in Dallas County, Texas, and venue for any suit involving this
Agreement shall lie exclusively in Dallas County, Texas.
SECTION 20. ENTIRE UNDERSTANDING. This Agreement sets forth the
entire understanding between the parties, and no other representations,
warranties or agreements whatsoever have been made by Silverleaf to
Recreational. Further, this Agreement may not be modified or amended except by
another instrument in writing executed by both of the parties.
7
<PAGE> 8
SECTION 21. NOTICES. All notices and communications under this
Agreement shall be sent to the parties at the following addresses or such other
addresses that the parties may subsequently designate in writing.
(a) SILVERLEAF:
Silverleaf Resorts, Inc.
Attention: Robert E. Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
(b) RECREATIONAL:
Recreational Consultants, Inc.
Attention: David T. O'Connor
-------------------------------------------------
-------------------------------------------------
SECTION 22. SECTION HEADINGS. Section and paragraph headings are
inserted herein only for convenience and shall not be used to interpret any of
the provisions hereof.
SECTION 23. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same original.
SECTION 24. EFFECTIVE DATE. This Agreement is executed on the
date set forth below, but shall be effective as of January 1, 1997 (the
"Effective Date").
Executed this 28th day of February, 1997.
"SILVERLEAF"
SILVERLEAF VACATION CLUB, INC.
By: /s/ ROBERT MEAD
----------------------------------
Authorized Officer
"Recreational"
RECREATIONAL CONSULTANTS, INC.
By: /s/ DAVID T. O'CONNOR
----------------------------------
David T. O'Connor, President
8
<PAGE> 9
AGREEMENT REGARDING COVENANTS
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the undersigned hereby agrees to be individually
bound by the provisions of Sections 7, 8, 9, 10 and 11 of the foregoing
Agreement in the same manner as though he was named therein in the place of
Recreational.
/s/ DAVID T. O'CONNOR
-----------------------------------
DAVID T. O'CONNOR
9
<PAGE> 1
EXHIBIT 10.2.3
EMPLOYMENT AGREEMENT
WITH SILVERLEAF RESORTS, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made between SILVERLEAF
RESORTS, INC., a Texas corporation ("Silverleaf"), and SHARON K. BRAYFIELD (the
"Employee").
R E C I T A L S:
A. Employee is a key executive officer and employee of Silverleaf;
and
B. Silverleaf and Employee desire to continue the employment of
Employee and to agree on the terms of Employee's continued
employment.
NOW, THEREFORE, in consideration of the premises and terms hereinafter
set forth, the parties agree as follows:
A G R E E M E N T:
SECTION 1. EMPLOYMENT. Employee's employment with Silverleaf as
President is hereby continued, effective as of the Effective Date and for an
initial period of three (3) years from the Effective Date (the "Term"), unless
sooner terminated pursuant to the termination provisions of this Agreement.
Employee may not engage in other employment while he or she is in the employ of
Silverleaf pursuant to this Agreement.
SECTION 2. DUTIES. Employee agrees to devote such time, attention
and energies as are necessary to fulfill his or her duties as specified by the
Board of Directors of Silverleaf from time to time. Employee further agrees
that he or she will promote the best interests and welfare of Silverleaf and
shall perform any and all duties to the best of his or her abilities. The
Employee shall:
(a) NON-COMPETITION: Not render to others, during his or her
employment with Silverleaf, service of any kind for compensation or
promote, participate or engage in any other business activity which
would conflict or interfere with the performance of his or her duties or
loyalty under this Agreement, including, but not limited to,
participating in the promotion or sale of products or services for a
competitor of Silverleaf or otherwise engage in business with such
competitor;
(b) REGULATORY LAWS: Abide by all applicable statutes, rules
and regulations of each State in which services may be rendered; and
(c) SILVERLEAF RULES: Abide by all rules and regulations
issued by Silverleaf, which are pertinent to Employee's duties and
obligations.
<PAGE> 2
SECTION 3. COMPENSATION. As compensation for the services rendered
pursuant to this Agreement:
(a) BASE COMPENSATION: Employee shall be paid base
compensation computed at the annual rate of One Hundred Thirty Three
Thousand One Hundred One and 13/100 Dollars ($133,101.13), which shall
be payable in equal semi-monthly payments on the 1st and 15th days of
each month or as otherwise agreed by Silverleaf and Employee.
(b) ADDITIONAL INCENTIVE COMPENSATION: Employee shall be paid
additional weekly incentive compensation equal to thirty five one
hundredths percent (0.35%) of Silverleaf's net sales from timeshare and
vacation contracts. For this purpose, net sales mean only sales on
which Silverleaf has received a full down payment and which have not
been cancelled as of the due date of the payment of this incentive
compensation. The payment of this incentive compensation shall be made
as follows and shall be subject to the following chargebacks:
[1] The incentive compensation payable on net sales for
each week shall be paid on the second Friday thereafter; and
[2] If the first monthly installment due under the
contract for a net sale is not made and the contract is
subsequently cancelled, the incentive compensation paid to
Employee on the contract shall be charged back to Employee. For
this purpose, Silverleaf shall maintain a $2,000 reserve out of
Employee's incentive compensation, against which the chargebacks
shall be deducted. The reserve shall be established and
replenished on a regular basis by Silverleaf deducting, to the
extent required, ten percent (10%) of the incentive compensation
otherwise due Employee.
(c) OTHER INCENTIVE COMPENSATION: Employee shall be entitled
to participate in any other bonus, incentive, stock option or other
compensation plans of Silverleaf only to the extent the Board of
Directors of Silverleaf may deem appropriate from time to time.
(d) COMPANY VEHICLE: Silverleaf shall furnish Employee a
company owned vehicle for use by Employee in performing his or her
duties, and Silverleaf shall pay all expenses associated therewith.
(e) FRINGE BENEFITS: Silverleaf shall provide Employee health
insurance under its group plan as it may exist from time to time. The
cost of any coverage of any of the Employee's family members under
Silverleaf's group plan shall be paid by the Employee. The Employee
shall also be entitled to such vacation time, sick leave and other
fringe benefits as may be specified by the Board of Directors of
Silverleaf from time to time for its executive personnel.
<PAGE> 3
(f) TERMINATION: Employee shall be entitled to no termination
pay. At the Termination of this Agreement, the payment to Employee of
compensation earned to date shall be in full satisfaction of all claims
against Silverleaf under this Agreement, and payment is contingent upon
return of all Silverleaf's property as outlined below.
SECTION 4. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE: Employee acknowledges that
during his or her employment with Silverleaf, he or she may have access
to and become acquainted with Silverleaf Confidential Information, as
defined below. Except as Employee's duties during his or her employment
with Silverleaf may require or Silverleaf may otherwise consent in
writing, Employee agrees that he or she shall not at any time disclose
or use, directly or indirectly, either during or subsequent to his or
her employment with Silverleaf, any Silverleaf Confidential Information.
(b) CONFIDENTIAL INFORMATION: For purposes of the foregoing
provisions, "Silverleaf Confidential Information" shall mean (1) any and
all confidential and proprietary business information and trade secrets
concerning the business and affairs of Silverleaf and its affiliates,
including but not limited to all marketing, sales and lead generation
techniques, know-how and studies, customer and lead lists, current and
anticipated customer requirements, price lists, business plans, training
programs, computer software and programs, and computer software and
data-base technologies, systems, structures and architectures (and
related processes, formulae, compositions, improvements, devices, know-
how, inventions, discoveries, concepts, ideas, designs, methods and
information), (2) any and all information concerning the business and
affairs of Silverleaf and its affiliates (including but not limited to
their historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and
plans, the names and backgrounds of key personnel, personnel training
and techniques and materials, however documented), and (3) any and all
notes, analysis, compilations, studies, summaries, and other material
prepared by or for Silverleaf and its affiliates containing or based, in
whole or in part, on any information included in the foregoing.
SECTION 5. NON-INTERFERENCE. Employee further agrees that during
his or her employment and at all times thereafter, Employee shall not, either
on his or her own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or shareholder or
otherwise on behalf of any other person, firm or corporation: (1) carry on or
be engaged or interested directly or indirectly in, or solicit, the manufacture
or sale of goods or provision of services to any person, firm or corporation
which, at any time during his or her employment has been or is a customer or in
the habit of dealing with Silverleaf or its affiliates in their business, (2)
endeavor, directly or indirectly, to canvas or solicit in competition with
Silverleaf or its affiliates or to interfere with the supply of orders for
goods or services from or by any person, firm or corporation which during this
or her employment has been or is a supplier of goods or services to Silverleaf
or its affiliates, or (3) directly or indirectly solicit or attempt to solicit
away from Silverleaf or its affiliates any of its officers, employees or
independent contractors or offer employment to any person who, on or during the
3
<PAGE> 4
6 months immediately preceding the date of such solicitation or offer, is or
was an officer, employee or independent contractor of Silverleaf or its
affiliates.
SECTION 6. NONCOMPETITION.
(a) COVENANT: Employee covenants and agrees that he or she
shall not, for a period of two (2) years from and after the effective
date of any Termination, working alone or in conjunction with one or
more other persons or entities, for compensation or not, permit his or
her name to be used by or engage in or carry on, directly or indirectly,
either for himself or herself or as a member of a partnership or other
entity or as a stockholder, investor, officer or director of a
corporation or as an employee, agent, associate or contractor of any
person, partnership, corporation or other entity, any business in
competition with the business of Silverleaf or its affiliates, as
carried on by Silverleaf or its affiliates immediately prior to the
effective date of any Termination, but only for as long as such
business is carried on by (1) Silverleaf or its affiliates or (2) any
person, corporation, partnership, trust or other organization or entity
deriving title from Silverleaf or its affiliates to the assets and
goodwill of the business being carried on by Silverleaf or its
affiliates immediately prior to the effective date of any Termination,
in any county of any state of the United States in which Silverleaf or
its affiliates conducts such business or markets the products of such
business immediately prior to the effective date of any Termination.
(b) TOLLING. If Employee violates any covenant contained in
this Section, then the term of such violated covenant shall be tolled
for the period commencing on the commencement of such violation and
ending upon the earlier of (1) such time as such violation shall be
cured by Employee to the reasonable satisfaction of Silverleaf, (2)
final adjudication (including appeals) of any action filed for
injunctive relief or damages arising out of such violation, and (3) the
expiration of 24 months after Termination during which no violation of
the covenant has occurred.
(c) REFORMATION. If, in any judicial proceeding, the court
shall refuse to enforce any covenant contained in this Section because
the time limit is too long, it is expressly understood and agreed
between Silverleaf and Employee that for purposes of such proceeding
such time limitation shall be deemed reduced to the extent necessary to
permit enforcement of such covenant. If, in any judicial proceeding,
the court shall refuse to enforce any covenant contained in this Section
because it is more extensive (whether as to geographic area, scope of
business or otherwise) than necessary to protect the business and
goodwill of Silverleaf and/or its affiliates, it is expressly understood
and agreed between Silverleaf and Employee that for purposes of such
proceeding the geographic area, scope of business or other aspect shall
be deemed reduced to the extent necessary to permit enforcement of such
covenant.
SECTION 7. INJUNCTIVE RELIEF. Employee acknowledges that a breach of
Sections 4, 5 or 6 hereof would cause irreparable damage to Silverleaf and/or
its affiliates, and in the event of Employee's breach of the provisions of
Sections 4, 5 or 6 hereof, Silverleaf shall be entitled to a temporary
restraining order and an injunction restraining Employee from breaching such
4
<PAGE> 5
Sections without the necessity of posting bond or proving irreparable harm,
such being conclusively admitted by Employee. Nothing shall be construed as
prohibiting Silverleaf from pursuing any other available remedies for such
breach, including the recovery of damages from Employee. Employee acknowledges
that the restrictions set forth in Sections 4, 5 and 6 hereof are reasonable in
scope and duration, given the nature of the business of Silverleaf and its
affiliates. Employee agrees that issuance of an injunction restraining
Employee from breaching such Sections in accordance with their terms will not
pose an unreasonable restriction on Employee's ability to obtain employment or
other work following the effective date of any Termination.
SECTION 8. EMPLOYEE INVESTMENTS. Anything to the contrary herein
notwithstanding, Employee: (1) shall not be prohibited from investing his or
her assets in such form or such manner as will not, in the aggregate, detract
from the performance by Employee of his or her duties hereunder and will not
violate the provisions of Sections 4, 5 or 6 hereof; and (2) shall not be
prohibited from purchasing stock in any publicly traded company solely as a
stockholder so long as Employee does own (together or separately or through his
or her affiliates) more than two percent (2%) of the stock in any company,
other than Silverleaf, which is engaged in the timeshare business.
SECTION 9. EMPLOYEE'S REPRESENTATIONS. Employee represents and
warrants that he or she is free to enter into and perform each of the terms and
conditions hereof, and that his or her execution and performance of this
Agreement does not and will not violate or breach any other Agreement between
Employee and any other person or entity.
SECTION 10. TERMINATION. This Agreement shall terminate upon the
expiration of its Term, or prior thereto: (1) upon written notice by either
party, at any time and for any or no reason whatsoever, at least thirty (30)
days prior to the effective date of the termination; or (2) as of the end of
the month of Employee's death or incapacity due to Employee's physical or
mental illness as determined in Silverleaf's sole discretion (the
"Termination").
SECTION 11. RETURN OF MATERIALS AND VEHICLES. Employee understands
and agrees that any training manuals, sales and promotional material, vehicles
or other equipment provided to him or her by Silverleaf in connection with this
Agreement shall remain the sole property of Silverleaf, and shall be used by
the Employee exclusively for Silverleaf's benefit. Upon termination of this
Agreement, any such material, vehicles or other equipment shall be immediately
returned to Silverleaf.
SECTION 12. NON-BINDING ALTERNATE DISPUTE RESOLUTION. Except for
actions brought by Silverleaf pursuant to Section 7 hereof:
(a) AGREEMENT TO UTILIZE: The parties shall attempt to
settle any claim or controversy arising from this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation prior to the commencement of any legal action. If such
attempts fail, then the dispute shall be mediated by a mutually-accepted
mediator to be chosen by the parties within forty-five (45) days after
written notice demanding mediation is sent by one party to the other
party. Neither party may unreasonably
5
<PAGE> 6
withhold consent to the selection of a mediator, and the parties shall
share the costs of the mediation equally. By mutual written agreement,
however, the parties may postpone mediation until they have completed
some specified but limited discovery regarding the dispute. The parties
may also agree to replace mediation with any other form of alternate
dispute resolution ("ADR") available in Texas, such as a mini-trial or
arbitration.
(b) FAILURE TO RESOLVE: Any dispute which the Parties cannot
resolve through negotiation, mediation or any other form of ADR, within
six (6) months of the date of the initial demand for mediation, may then
be submitted to the appropriate court for resolution. The use of
negotiation, mediation, or any other form of ADR procedures will not be
construed under the doctrines of laches, waiver or estoppel to affect
adversely the rights of either party.
SECTION 13. WAIVER. Silverleaf's failure at any time to require
performance by Employee of any of the provisions hereof shall not be deemed to
be a waiver of any kind nor in any way affect the rights of Silverleaf
thereafter to enforce the provisions hereof. In the event that either party to
this Agreement waives any provision of this Agreement or any rights concerning
any breach or default of the other party hereto, such waiver shall not
constitute a continuing waiver of any such provision or breach or default of
the other party hereto.
SECTION 14. SUCCESSORS, ASSIGNS, BENEFIT.
(a) SILVERLEAF SUCCESSORS: The provisions of this Agreement
shall inure to the benefit of and be binding upon Silverleaf, its
successors, assigns and other affiliated entities, including, but not
limited to, any corporation which may acquire all or substantially all
of Silverleaf's assets or with or into which Silverleaf may be
consolidated, merged or reorganized. Upon any such merger,
consolidation or reorganization, the term "Silverleaf" as used herein
shall be deemed to refer to any such successor corporation.
(b) NO ASSIGNMENT BY EMPLOYEE: The parties hereto agree that
Employee's services hereunder are personal and unique, and that
Silverleaf is executing this Agreement in reliance thereon. This
Agreement shall not be assignable by Employee.
SECTION 15. SEVERABILITY. If one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but shall be deemed
stricken and severed from this Agreement and the remaining terms of this
Agreement shall continue in full force and effect.
SECTION 16. GOVERNING LAW AND VENUE. This Agreement shall be deemed
to have been made and entered into in the State of Texas and its validity,
construction, breach, performance and operation shall be governed by the laws
of that state. The obligations hereunder of Silverleaf shall be performable in
Dallas County, Texas, and venue for any suit involving this Agreement shall lie
exclusively in Dallas County, Texas.
6
<PAGE> 7
SECTION 17. ENTIRE UNDERSTANDING. This Agreement sets forth the
entire understanding between the parties with respect to the employment of
Employee, and no other representations, warranties or agreements whatsoever
have been made by Silverleaf to Employee. Further, this Agreement may not be
modified or amended except by another instrument in writing executed by both of
the parties.
SECTION 18. NOTICES. All notices and communications under this
Agreement shall be sent to the parties at the following addresses or such other
addresses that the parties may subsequently designate in writing.
(a) SILVERLEAF:
Silverleaf Resorts, Inc.
Attention: Robert E. Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
(b) EMPLOYEE:
Sharon K. Brayfield
2135 Texas Ash
-----------------------------------------
Irving, Texas 75063
-----------------------------------------
SECTION 19. SECTION HEADINGS. Section and paragraph headings are
inserted herein only for convenience and shall not be used to interpret any of
the provisions hereof.
SECTION 20. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same original.
SECTION 21. EFFECTIVE DATE. This Agreement is executed on the date
set forth below, but shall be effective as of January 1, 1997 (the "Effective
Date").
Executed this 25th day of February, 1997.
"SILVERLEAF"
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT E. MEAD
------------------------------
Authorized Officer
"EMPLOYEE"
/s/ SHARON K. BRAYFIELD
-------------------------------------
SHARON K. BRAYFIELD
7
<PAGE> 1
EXHIBIT 10.4
MASTER CLUB AGREEMENT
THIS MASTER CLUB AGREEMENT (this "Agreement") is entered into as of
the 28th day of March 1990, by and between Master Endless Escape Club, a Texas
non-profit corporation (the "Master Club"), and Ozark Mountain Resort Club, a
Missouri non-profit corporation, Holiday Hills Resort Club, a Missouri
non-profit corporation, The Holly Lake Club, a Texas non-profit unincorporated
association, The Villages Condoshare Association, a Texas non-profit
unincorporated association, The Villages Club, an unincorporated association,
Piney Shores Club, a Texas non-profit unincorporated association, and Hill
Country Resort Condoshare Club, a Texas non-profit unincorporated association
(collectively the "Clubs" and individually a "Club").
R E C I T A L S:
- - - - - - - -
WHEREAS, Ascension Resorts, Ltd., a Texas limited partnership
("Ascension"), owns and operates six (6) resorts, four (4) of which are located
in Texas and are known as Holly Lake Ranch, The Villages, Piney Shores Resort
and Hill Country Resort and two (2) of which are located in Missouri and are
known as Ozark Mountain Resort and Holiday Hills Resort (collectively the
"Resorts" and individually a "Resort"); and
WHEREAS, Ascension has created and established a program referred to
as the Endless Escape Program (the "Program") pursuant to which each member of
the Clubs is entitled, at no additional charge, (i) to vacation at each
member's respective Resort more frequently and, under certain circumstances,
during use periods not already owned by that member, and (ii) to vacation at
the other Resorts owned by Ascension and participating in the Program; and
WHEREAS, Ascension created the Master Club for the purpose of
implementing and administering the Program and more efficiently managing the
various Resorts owned by Ascension which participate in the Program; and
WHEREAS, each respective Club acknowledges and agrees that the Program
and this Agreement are to its benefit and advantage; and
WHEREAS, the Clubs and the Master Club desire to enter into this
Agreement in order to set forth the responsibilities and duties of the Master
Club;
NOW, THEREFORE, in order to carry out the desire of the Clubs and the
Master Club, and for and in consideration of Ten and No/100 Dollars ($10.00),
the covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Clubs and the Master Club hereby covenant and agree as follows:
1. The Master Club shall have the following responsibilities and
duties for the benefit of all Clubs:
(a) create and maintain a centralized reservation system
for all Resorts;
(b) achieve cost savings by purchasing goods and services
for all Resorts as a group rather than having each Resort
purchase its goods and services on an individual basis;
(c) arrange for centralized management of the entire
resort system;
(d) provide accounting, legal and other administrative
services for the entire resort system;
(e) implement and administer the Program in accordance
with the rules and regulations of the Program; and
<PAGE> 2
(f) pay all costs and expenses incurred at each Resort
individually as well as any system-wide costs and expenses.
2. In order to enable the Master Club to perform the responsibilities and
duties described hereinabove, each Club agrees to pay to the Master
Club the following amounts as a fee to the Master Club for the services
rendered by the Master Club for the benefit of each Club: (i) all dues,
assessments, late charges and other amounts levied against and
collected from its respective members pursuant to the Declaration of
Restrictions, Covenants and Conditions and the By-Laws of such
respective Club, plus (ii) all other income generated by its respective
Resort. The Master Club will use its fee collected from the Clubs to
pay (i) the individual common expenses of each Resort, and (ii) the
system-wide costs and expenses of administering and maintaining the
Program and operating and managing the Resorts including, but not
limited to, expenses for accounting, legal services, administration,
payroll, and management of the entire resort system.
3. This Agreement shall be in full force and effect in perpetuity.
Notwithstanding the foregoing, however, this Agreement shall be
terminated upon the cessation of legal existence of the Master Club or,
alternatively, of all of the Clubs, and the surviving party or parties,
if any, shall in such event have no further obligations hereunder.
4. This Agreement inures to the benefit of, and is binding upon, the
Master Club and each of the Clubs and their respective successors,
legal representatives and assigns.
5. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument, and all such
counterparts shall be deemed one and the same instrument.
MASTER CLUB:
-----------
MASTER ENDLESS ESCAPE CLUB,
a Texas non-profit corporation
By: /s/SHARON BRAYFIELD
----------------------------------
Its: President
CLUBS:
-----
OZARK MOUNTAIN RESORT CLUB, a
Missouri non-profit corporation
By: /s/SHARON BRAYFIELD
----------------------------------
SHARON BRAYFIELD, Director
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Director
By: /s/ORVILLE GARRISON
----------------------------------
ORVILLE GARRISON, Director
By: /s/VICKI CURRY
----------------------------------
VICKI CURRY, Director
By: /s/MAX JONES
----------------------------------
MAX JONES, Director
-2-
<PAGE> 3
HOLIDAY HILLS RESORT CLUB, a
Missouri non-profit corporation
By: /s/SHARON BRAYFIELD
----------------------------------
SHARON BRAYFIELD,Director
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Director
By: /s/VICKI CURRY
----------------------------------
VICKI CURRY, Director
By: /s/DELBERT WILKENS
----------------------------------
DELBERT WILKENS, Director
By: /s/GUY WILKERSON
----------------------------------
GUY WILKERSON, Director
THE HOLLY LAKE CLUB, a Texas non-
profit unincorporated association
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Governor
By: /s/WILLIAM HUFF
----------------------------------
WILLIAM HUFF, Governor
By: /s/BOB LEVY
----------------------------------
BOB LEVY, Governor
By: /s/JACK ODOM
----------------------------------
JACK ODOM, Governor
By: /s/JANETTE PERRY
----------------------------------
JANETTE PERRY, Governor
-3-
<PAGE> 4
THE VILLAGES CONDOSHARE
ASSOCIATION, a Texas non-profit
unincorporated association
By: /s/GLORIA ANDERSON
----------------------------------
GLORIA ANDERSON, Director
By: /s/JANA BLEVINS
----------------------------------
JANA BLEVINS, Director
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Director
By: /s/RAYMOND LEWIS
----------------------------------
RAYMOND LEWIS, Director
By: /s/JACK ODOM
----------------------------------
JACK ODOM, Director
THE VILLAGES CLUB, an
unincorporated association
By: /s/JANA BLEVINS
----------------------------------
JANA BLEVINS, Governor
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Governor
By: /s/GRACE CASEY
----------------------------------
GRACE CASEY, Governor
By: /s/JACK ODOM
----------------------------------
JACK ODOM, Governor
By: /s/SALLY TURNER
----------------------------------
SALLY TURNER, Governor
PINEY SHORES CLUB, a Texas non-
profit unincorporated association
By: /s/GEORGE BISHOP
----------------------------------
GEORGE BISHOP, Governor
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON,Governor
By: /s/PAULA FRANKLIN
----------------------------------
PAULA FRANKLIN, Governor
By: /s/MARIE A. McCAGHREN
----------------------------------
MARIE McCAGHREN, Governor
By: /s/JACK ODOM
----------------------------------
JACK ODOM, Governor
-4-
<PAGE> 5
HILL COUNTRY RESORT CONDOSHARE
CLUB, a Texas non-profit
unincorporated association
By: /s/OBIE BINNICKER
----------------------------------
OBIE BINNICKER, Governor
By: /s/RALPH BROTHERTON
----------------------------------
RALPH BROTHERTON, Governor
By: /s/MARGARET COWAN
----------------------------------
MARGARET COWAN, Governor
By: /s/MIKE FENLON
----------------------------------
MIKE FENLON, Governor
By: /s/JACK ODOM
----------------------------------
JACK ODOM, Governor
-5-
<PAGE> 1
EXHIBIT 10.5
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is entered into as of the
28th day of March, 1990, but effective for all purposes as of April 1, 1990, by
and between MASTER ENDLESS ESCAPE CLUB, a Texas non-profit corporation ("Master
Club"), and ASCENSION RESORTS, LTD., a Texas limited partnership ("Manager").
R E C I T A L S
---------------
WHEREAS, Manager is the current owner and developer of six (6)
timeshare/condoshare development resorts, four (4) of which are located in
Texas and are known as Holly Lake Ranch, The Villages, Piney Shores Resort and
Hill Country Resort and two (2) of which are located in Missouri and are known
as Ozark Mountain Resort and Holiday Hills Resort (collectively the "Resorts");
and
WHEREAS, pursuant to that certain Master Club Agreement (so called
herein) dated March 28, 1990, executed by and between Master Club and Ozark
Mountain Resort Club, a Missouri non-profit corporation, Holiday Hills Resort
Club, a Missouri non-profit corporation, The Holly Lake Club, a Texas
non-profit unincorporated association, The Villages Condoshare Association, a
Texas non-profit unincorporated association, The Villages Club, an
unincorporated association, Piney Shores Club, a Texas non-profit
unincorporated association, and Hill Country Resort Condoshare Club, a Texas
non-profit unincorporated association (collectively the "Clubs"), the Master
Club was authorized and appointed by each of the Clubs to arrange for
centralized management of the Resorts and to implement the Program (hereinafter
defined) for the benefit of the Clubs; and
WHEREAS, Manager has created and established a program referred to as
the Endless Escape Program (the "Program") pursuant to which each member of the
Clubs is entitled, at no additional charge, (i) to vacation at each member's
respective Resort more frequently and under certain circumstances, during use
periods not already owned by that member, and (ii) to vacation at the other
Resorts; and
WHEREAS, the Master Club desires to retain the services of Manager to
perform certain supervisory and maintenance functions with regard to the
Resorts;
NOW, THEREFORE, in consideration of the foregoing, and the further
terms, covenants and conditions hereinafter set forth, and for other
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby covenant and agree as follows:
1. Appointment of Manager. The Master Club does hereby appoint
Manager as its attorney-in-fact and exclusive managing agent for the Resorts.
2. Operation, Maintenance and Financial Administration of the
Resorts. Manager shall make itself available as may be reasonably necessary to
properly fulfill its management duties described as follows:
(a) Manager shall properly and efficiently operate and
maintain the Resorts, pursuant to the terms of the budget established
or ratified by the Board of Directors of the Master Club (the
"Directors") from time to time.
(b) Manager shall, in accordance with such budget, keep
the Resorts clean and in a state of good repair at all times, and
shall order and supervise the completion of non-budgeted alterations,
decorations, improvements and repairs as may be required from time to
time and authorized by the Directors.
(c) On behalf of or for the benefit of the Master Club,
Manager shall be authorized to purchase, lease or otherwise provide
for all furniture and furnishings, maintenance supplies, tools and
equipment, restroom and toilet supplies,
<PAGE> 2
electrical supplies and light bulbs, paint, stationery, office
supplies and any other items or property incident to the performance
of the obligations herein assumed by Manager, and applicable to the
Resorts, and Manager shall be authorized to charge the Master Club for
any such expenses incurred in connection therewith; all such furniture
and furnishings, maintenance supplies, tools and equipment, restroom
and toilet supplies, electrical supplies and light bulbs, paint,
stationery, office supplies and other items or property shall be the
property of the Master Club and shall be used only in connection with
the Resorts.
(d) On behalf of or for the benefit of the Master Club,
Manager shall be authorized to employ, pay, furnish, train, supervise
and discharge such personnel, either on behalf of or for the benefit
of itself or the Master Club, as may in its sole discretion be
necessary to the performance of its duties hereunder, including, but
not limited to, maintenance employees, domestic employees and such
other employees necessary to the efficient management, operation and
maintenance of the Resorts, and Manager shall be authorized to charge
the Master Club for any such expenses incurred in connection
therewith. Manager shall enter into contracts for such services as it
shall deem advisable or necessary, within such budgetary limits as may
be prescribed by the Directors from time to time; provided, however,
that the Master Club shall approve, and be liable and responsible for,
any such contracts which, by their terms, may be in existence
subsequent to the termination of this Agreement.
(e) On behalf of or for the benefit of the Master Club,
Manager shall create and maintain a centralized reservation system for
the Resorts participating in the Program and Manager shall further
administer the Program in accordance with the rules and regulations of
the Program for the benefit of all Resorts.
(f) On behalf of or for the benefit of the Master Club,
Manager shall be authorized to employ, pay and discharge such
professionals and consultants as may in its sole discretion be
necessary to the performance of its duties hereunder, including, but
not limited to, accountants, attorneys or such other professionals or
consultants necessary to the efficient management, operation and
maintenance of the Resorts, and Manager shall be authorized to charge
the Master Club for any such expenses incurred in connection
therewith. Manager shall enter into contracts for such services as it
shall deem advisable or necessary, within such budgetary limits as may
be prescribed by the Directors from time to time; provided, however,
that the Master Club shall approve, and be liable and responsible for,
any such contracts which, by their terms, may be in existence
subsequent to the termination of this Agreement.
(g) On behalf of or for the benefit of the Master Club,
Manager shall compensate in a timely manner all those employed on
behalf of the Master Club and shall promptly pay for all supplies,
merchandise, materials, labor, insurance, or other items ordered,
furnished or used by it or for it in the performance of the duties
assumed hereunder, and Manager shall be authorized to charge the
Master Club any such expenses incurred in connection therewith.
(h) On behalf of and for the benefit of the Master Club,
Manager shall enter into such contracts for water, sewer, electricity,
gas, trash collection, telephone, vermin extermination, guard service
and other necessary services as may be set forth in the budget or
deemed necessary or desirable by the Directors.
-2-
<PAGE> 3
(i) Manager is further authorized to take any and all
further action as may in its sole discretion be necessary or desirable
for the proper maintenance and operation of the Resorts.
3. Insurance, Taxes and Administrative Details.
(a) Manager shall obtain Worker's Compensation Insurance
in accordance with the laws of the State of Texas or Missouri, as
applicable, and Employer's Liability Insurance applicable to and
covering all persons engaged in performance of the work required by
the obligations assumed by Manager hereunder, the cost of which shall
be included in the budget described in subparagraph 2 (a) hereinabove
and paid by the Master Club. Manager will furnish Master Club
certificates evidencing such insurance. In the event that Manager, in
fulfillment of its obligations hereunder, subcontracts for services,
Manager shall include in such subcontract a provision that the
subcontractor shall carry Worker's Compensation Insurance in
accordance with the laws of the State of Texas or Missouri, as
applicable, and Employer's Liability Insurance applicable to and
covering all persons engaged in the performance of said work, and
Manager shall satisfy itself that such insurance is in force at all
times under this Agreement.
(b) Manager shall procure and maintain such public
liability, property damage, fire, employees liability and other
insurance covering such other risks as Manager may in its sole
discretion deem necessary and appropriate, the cost of which shall be
included in the budget described in subparagraph 2(a) hereinabove and
paid by the Master Club.
4. Administration of Assessments and Income.
(a) On behalf of the Master Club, Manager shall send a
monthly bill to each member of the Clubs, which bill shall set forth
each member's liability for dues, assessments, late charges and other
amounts levied against the members of its respective Club pursuant to
the Declaration of Restrictions, Covenants and Conditions and the
By-Laws of its respective Club. Manager shall receive payment from all
members for such assessments and shall maintain accurate records with
respect thereto. Manager shall have no liability for failing to
collect delinquent assessments or other charges.
(b) On behalf of or for the benefit of the Master Club,
Manager shall collect all income generated from its operation,
management and administration of the Resorts.
(c) Manager shall disburse all funds received from the
members of the Clubs and income generated from the Resorts in
accordance with the budget described in subparagraph 2(a) hereinabove
or pursuant to any special directions of the Directors for the benefit
and on behalf of the Master Club.
5. Financial Records.
(a) Manager shall at all times keep and maintain full,
true and accurate books of account to fully reflect all of the monies
received and paid out under this Agreement, which books and records
shall be open to inspection by authorized representatives of the Master
Club.
(b) Manager shall maintain records showing all of its
receipts and expenditures relating to the Master Club and shall
promptly submit to the Directors a cash receipt and disbursements
statement for the preceding year and a statement indicating the balance
or deficit in the Manager's account for the Master Club on or before
the last day of the second month following the fiscal year end of
Manager during the term hereof.
-3-
<PAGE> 4
(c) If requested by the Directors, Manager shall prepare
and submit to the Directors, on or before the 30th day preceding the
end of the calendar year, a recommended budget for the next year,
showing anticipated receipts and expenditures for such year.
6. Advances by Manager. In the event that the Master Club does
not have sufficient funds to cover such the expenses of operation, maintenance
and administration as are described in paragraphs 2 and 3 hereinabove, Manager
may elect to advance such funds on behalf of the Master Club and treat the same
as an account receivable without prejudice to any other remedy which may be
available to Manager; provided, however, that until receipt of such additional
funds, Manager shall not be responsible for payment of any such expenses, and
Manager shall have no obligations to advance funds to Master Club for any
purpose whatsoever.
7. Compensation to Manager. As compensation for Manager's
services hereunder, Manager is entitled to retain for its own account at the
end of each calendar month during the term of this Agreement an amount equal to
the lesser of (a) fifteen percent (15%) of the Gross Revenues (as defined
hereinbelow) for the preceding month or (b) the amount by which the Gross
Revenues for the preceding month exceed the total of all accrued expenses of
any kind whatsoever ("Expenses") incurred by the Master Club during the
preceding month in performing its duties and obligations under the Master Club
Agreement; provided, however, that, if in any month the compensation paid to
Manager pursuant to this Agreement does not equal fifteen percent (15%) of the
Gross Revenues for the preceding month then an amount equal to the difference
between (x) 15% of the Gross Revenues for such month and (y) the amount of
compensation actually paid to Manager in such month (the "Shortfall") shall be
owed Manager and, in any subsequent month in which the Gross Revenues for such
month are more than sufficient to pay all Expenses as well as compensation to
Manager in the amount of 15% of the Gross Revenues for such month, then
Manager shall be entitled to retain for its own account so much of the excess
Gross Revenues as is necessary to satisfy the Shortfall. As used herein, the
term Gross Revenues shall mean the amount of all dues, assessments, late
charges and any other amounts accrued by Manager from the members of the Club
pursuant to paragraph 4(a) hereinabove, plus, (ii) the amount of income
generated by the Resorts and accrued by Manager pursuant to paragraph 4(b)
hereinabove. Such accruals shall be determined by Manager in its reasonable
discretion using its normal accounting practices.
8. Indemnification. The Master Club shall indemnify, defend and
save Manager, its directors, shareholders, officers, employees and agents,
harmless of and from any and all loss, cost or expense, including reasonable
attorneys' fees, arising out of or directly or indirectly connected with
Manager's operation and maintenance of the Resorts.
9. Term. This Agreement shall become effective on the date hereof
and shall continue in force for a period of ten (10) years, and thereafter from
year to year unless cancelled by Manager or the Master Club by giving notice in
writing of at least sixty (60) days prior to the anniversary date hereof. Upon
termination, the parties hereto shall account to one another with respect to
all matters outstanding as of the date of termination and the Master Club shall
furnish Manager security, satisfactory to Manager, against any outstanding
obligations or liabilities which Manager may have incurred under this
Agreement.
10. Default. Should Manager fail to perform any of the obligations
it has assumed hereunder, and Manager has not cured such failure within ninety
(90) days after the Master Club has provided Manager with written notice
thereof or, if such failure on the part of Manager is not susceptible of being
cured within said ninety (90) day period, should Manager fail to commence
curing
-4-
<PAGE> 5
such failure within said ninety (90) day period or, having commenced to cure
the failure within said ninety (90) day period, should Manager fail to
prosecute or complete the curing of such failure with due diligence and
dispatch, this Agreement shall be terminated and neither Manager nor the Master
Club shall have any continuing obligation one unto the other.
11. Use Agreements. Manager hereby agrees that so long as this
Agreement is in full force and effect, it will not cancel or terminate those
certain agreements (the "Use Agreements") entered into by and between Manager
and each respective Club, which use Agreements provide for the sharing of
certain amenities and recreational facilities owned by Manager located near or
in the vicinity of the respective Resorts.
12. Miscellaneous. This Agreement shall be construed under the
laws of the State of Texas, and may be amended only, by an instrument in
writing signed by Manager and the Master Club.
EXECUTED as of the date first above written.
Manager: Master Club:
- -------- ------------
ASCENSION RESORTS, LTD., a MASTER ENDLESS ESCAPE CLUB,
Texas limited partnership a Texas non-profit corporation
By: ASCENSION CAPITAL CORPORATION,
a Texas corporation, By: /s/ SHARON BRAYFIELD
General Partner ------------------------------
Its: President
By: /s/ ROBERT E. MEAD
------------------------------
Its: President
-5-
<PAGE> 1
EXHIBIT 10.6
REVOLVING LOAN AND SECURITY AGREEMENT
-------------------------------------
REVOLVING LOAN AND SECURITY AGREEMENT ("Agreement") entered into as of
October____, 1996, by CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware
corporation ("Lender"), and SILVERLEAF VACATION CLUB, INC., a Texas
corporation, ("Borrower").
RECITALS:
---------
A. Borrower has requested that Lender: (i) make a revolving loan
secured by receivables the loan to be in the amount of $40,000,000, and (ii)
make Borrower a separate $5,400,000 inventory and development loan in
accordance with the terms of a separate Loan and Security Agreement of even
date herewith.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto do hereby
agree as follows:
1. DEFINITIONS
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other
Documents, the following terms shall have the following meanings (such
meanings to be applicable equally both to the singular and plural
terms defined).
1.1 "Advance": an advance of the proceeds of the Loan by Lender on
behalf of Borrower in accordance with the terms and provisions
of this Agreement.
1.2 "Affiliate": with respect to any individual or entity, any
other individual or entity that directly or indirectly,
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such individual or
entity.
1.3 "Agents": the Servicing Agent, Custodian Agent and the Lockbox
Agent.
1.4 "Applicable Usury Law": the usury law chosen by the parties
pursuant to the terms of paragraph 8.11 or such other usury
law which is applicable if such usury law is not.
1.5 "Articles of Organization": the charter, articles, operating
agreement, partnership agreement, by-laws and any other
written documents evidencing the formation, organization and
continuing existence of an entity.
1.6 "Assignments": a written assignment or assignments, executed
by Borrower, as required by Lender, and creating in favor of
Lender, as security for the Performance of the Obligations, a
perfected, direct, first and (subject only to the Permitted
Encumbrances) exclusive assignment of: all leases, sales
contracts,
<PAGE> 2
rents, sales and other proceeds pertaining to or arising from
the Receivables Collateral Servicing Agreement and the
Receivables Collateral; as such assignments may be from time
to time renewed, amended, restated or replaced.
1.7 "Associations": The Time-Share Associations.
1.8 "Borrower": Silverleaf Vacation Club, Inc., a Texas
corporation, and subject to the restrictions on merger,
consolidation and assignment contained in the Documents, its
successors and assigns.
1.9 "Borrowing Base": with respect to an Eligible Instrument,
shall be seventy percent (70%) of the unpaid principal balance
of such Eligible Instrument.
1.10 "Borrowing Term": the period commencing on the date of this
Agreement and ending on the close of Lender's normal business
hours on the date (or if not a Business Day, the first
Business Day thereafter) which is twenty-four (24) months from
the date of this Agreement. The Borrowing Term shall be
extended for a period of twelve (12) months provided the
Maturity Date has been extended at least twelve (12) months.
1.11 "Business Day": any day other than a Saturday, Sunday or a day
on which banks in New York, New York are required to close.
1.12 "Closing Date": the date on which this Agreement is executed
and delivered by the parties hereto.
1.13 "Collateral": the Receivables Collateral and any and all other
assets now or hereafter serving as security for the
Performance of the Obligations, and all products and proceeds
thereof.
1.14 "Structuring Advisory Fees": a fee for investment banking
advisory services in connection with the Loan and potential
securitization, payable by Borrower to Lender in the amount of
$400,000 which paid out of the initial Advance, but not later
than sixty (60) days after the date of this Agreement, all as
more specifically set forth in a separate agreement between
Borrower and Lender.
1.15 "Custodian" or "Custodian Agent": Comerica Bank-Texas or its
successors as Custodian, under the Custodian Agreement.
1.16 "Custodian Agreement": The document between Borrower, Lender
and Custodian where the Custodian will take possession of the
Designated Instruments on behalf of Lender as it may be from
time to time renewed, amended, restated or replaced.
1.17 "Default Rate": as defined in the Note.
1.18 "Designated Instrument": an Instrument which has been
designated by Borrower in writing to be part of the Designated
Receivables Collateral.
2
<PAGE> 3
1.19 "Designated Receivables Collateral": all Designated
Instruments which have not been replaced pursuant to paragraph
3.2, their proceeds, and that other part of the Receivables
Collateral related to the Designated Instruments.
1.20 "Documents": the Note, the Subordination Agreement(s), the
Security Documents, the Lockbox Agreement, the Servicing
Agreement, the Custodian Agreement, the Environmental
Certificate, this Agreement, and all other documents executed
in connection with the Loan, as they may be from time to time
renewed, amended, restated or replaced.
1.21 "Eligible Instrument": a Designated Instrument which conforms
to the standards set forth in Exhibit B. An Instrument that
has qualified as an Eligible Instrument shall cease to be an
Eligible Instrument upon the date of the first occurrence of
any of the following: (a) any installment due with respect to
that Instrument becomes more than 60 days past due; or (b)
that Instrument otherwise fails to continue to conform to the
standards set forth in Exhibit B.
1.22 "Environmental Certificate": an environmental certificate
executed by Borrower, and such other persons or parties as
required by Lender in the form of Exhibit C, as it may be from
time to time renewed, amended, restated or replaced.
1.23 "Event of Default": the meaning set forth in paragraph 7.1.
1.24 "Fee Simple Time-Share Instrument": an Instrument which has
arisen out of the sale of a Fee Simple Time-Share Interest.
1.25 "Fee Simple Time-Share Interest": an undivided 1/50 or 1/52
fee simple interest in a particular Unit, together with the
right to the exclusive occupancy and use of the Unit for seven
(7) consecutive days each calendar year together with an
appurtenant undivided fractional interest in the common
elements of the Time Share Project and the non-exclusive right
to use such common elements during the same seven (7) day
period including rights as members of Master Club.
1.26 "Incipient Default": an event which after notice and/or lapse
of time would constitute an Event of Default.
1.27 "Instrument": a promissory note which has arisen out of the
sale of a Time-Share Interest by a Time- Share Developer to a
Purchaser.
1.28 "Insurance Policies": the insurance policies that Borrower are
required to maintain and deliver pursuant to paragraph 6.8.
1.29 "Lender": CS First Boston Mortgage Capital Corp. or its
successors and assigns.
1.30 "Loan": the Revolving Receivables Loan made pursuant to this
Agreement and the other Documents.
3
<PAGE> 4
1.31 "Lockbox Agent": Texas Commerce Bank, or its successor as
lockbox agent under the Lockbox Agreement.
1.32 "Lockbox Agreement": an agreement to be made between Lender,
Borrower and Lockbox Agent, which provides for the Lockbox
Agent to collect through a lockbox payments made on
Instruments constituting part of the Receivables Collateral,
and to remit them to Lender subject to the provisions of
paragraph 5.5(b), as it may be from time to time renewed,
amended, restated or replaced.
1.33 "Management Agreement(s)": that certain Management Agreement
entered into as of March 28, 1990, by and between Master Club
and Borrower as amended by First Amendment to Management
Agreement entered into as of January 1, 1993; and Master Club
Agreement entered into as of March 28, 1990, by and between
Master Club and Ozark Mountain Resort Club, a Missouri
non-profit corporation, Holiday Hills Resort Club, a Missouri
non-profit corporation, The Holly Lake Resort Club, a Texas
non-profit unincorporated association, The Villages Resort
Club, a Texas non-profit unincorporated association, The
Villages Club, an unincorporated association, Piney Shores
Resort Club, a Texas non-profit unincorporated association,
and Hill Country Resort Club, a Texas non-profit
unincorporated association as amended by First Amendment to
Master Club Agreement entered into as of March 28, 1990.
1.34 "Master Deed(s)": the Master Deeds whereby the Resorts were
conveyed from Freedom Financial Corporation to Borrower
(a) Warranty Deed dated May 31, 1989, and recorded in
Volume 2915, Page 215 of the Real Property Records of
Smith County, Texas, and an Assignment of Development
and Contract Rights, dated May 31, 1989, and recorded
in Volume 2915, Page 274 of the Real Property Records
of Smith County, Texas;
(b) Warranty deed Dated May 31, 1989, and recorded in
Book 194, Page 854 of the Deed Records of Stone
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 135, Page
360 of the Deed Records of Stone County, Missouri;
(c) Warranty Deed dated May 31, 1989, and recorded in
Volume 1162, Page 519 of the Real Property Records of
Wood County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Volume 1162, Page
526 of the Real Property Records of Wood County,
Texas;
(d) Warranty Deed dated May 31, 1989, and recorded under
Clerk's File No. 8922886 of the Real Property Records
of Montgomery County, Texas, and an Assignment of
Development Rights, Warranties, Service Contracts,
and Trade Name dated May 31, 1989, and recorded under
Clerk's File No. 8922887 of the Real Property Records
of Montgomery County, Texas.
4
<PAGE> 5
(e) Warranty Deed dated May 31, 1989, and recorded in
Book 300, Page 650 of the Recorder of Deeds of Taney
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 301, Page
331 on the Recorder of Deeds of Taney County,
Missouri;
(f) Warranty Deed dated May 31, 1989 and recorded in
Volume 679, Page 29 of the Real Property Records of
Comal County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts and Trade Name
dated May 31, 1989, and recorded in Volume 679, Page
36 of the Real Property Records of Comal County,
Texas.
1.35 "Maturity Date": two (2) years after the date which is the
first day of the month after the Closing Date (or if not a
Business Day, the first Business Day thereafter which may be
extended for an additional period of one year upon a request
to Lender accompanied by a payment of One Percent (1%) of the
difference between the Maximum Loan Amount and the then
principal balance of the Loan.
1.36 "Maximum Loan Amount": Forty Million United States Dollars
($40,000,000).
1.37 "Master Club": Master Club, a non-profit Texas corporation to
which all Time-Share Associations belong.
1.38 "Master Club Rights": the right to use the Resorts pursuant to
the conditions of the Endless Escape Disclosure Statement
given to all Purchasers upon purchasing a Fee Simple
Time-Share Interest.
1.39 "Non-Designated Receivables Collateral": that part of the
Receivables Collateral which is not Designated Receivables
Collateral.
1.40 "Note": the Promissory Note dated of even date herewith from
Borrower in favor of Lender in the original principal amount
of $40,000,000, as it may from time to time be renewed,
amended, restated, or replaced. The aforesaid $40,000,000 Note
is in the form of Exhibit D.
1.41 "Obligations": all obligations, agreement, duties, covenants
and conditions that Borrower is now or hereafter required to
Perform under the Documents.
1.42 "Other Lenders": FINOVA Capital Corporation, Marine Midland
Bank, N.A., Oxford Financial Corporation, Textron Financial
Corporation and Heller Financial, Inc.
1.43 "Performance" or "Perform": full, timely and faithful
performance.
1.44 "Permitted Encumbrances": the rights, restrictions,
reservations, encumbrances, easements and liens of record
which Lender has agreed to accept as set forth in Exhibit E.
5
<PAGE> 6
1.45 "Purchaser": a purchaser of a Time-Share Interest from a
Time-Share Developer.
1.46 "Purchaser Mortgage": the purchase money given to secure a Fee
Simple Time-Share Instrument.
1.47 "Real Property": the property described in Exhibit K.
1.48 "Receivables Assignment": a written assignment of specific
Designated Instruments and/or related Purchaser Mortgages and
their proceeds, delivered by Borrower to Lender in the form of
Exhibit A.
1.49 "Receivables Collateral": (a) the Instruments which are now or
hereafter assigned, endorsed or delivered to Lender pursuant
to this Agreement or against which an Advance has been made;
(b) all rights under all documents evidencing, securing or
otherwise pertaining to such Instruments, including, without
limitation, Purchaser Mortgages and purchase agreements; (c)
all files, books and records of Borrower pertaining to the
foregoing; and (d) the proceeds from the foregoing.
1.50 "Resolutions": a resolution of a corporation (including the
corporation as a general partner) certified as true and
correct by an authorized officer of such corporation, a
certificate signed by the manager of a limited liability
company and/or such other members whose approval is required,
or a partnership certificate signed by all of the general
partners of such partnership and such other partners whose
approval is required.
1.51 "Resorts": the projects legally described by the Master Deeds
and developed by Borrower; which include the Time-Share
Projects; Holly Lake; Piney Shores Resort; Lake O' the Woods;
The Villages; Hill Country Resort; Ozark Mountain Resort; and
Holiday Hills Resort.
1.52 "Inventory and Development Loan": the $5,400,000 loan
evidenced by the $5,400,000 Promissory Note from Borrower in
favor of Lender.
1.53 "Revolving Receivables Loan": the $40,000,000 loan evidenced by
the Promissory Note from Borrower in favor of Lender in the
form of composite Exhibit D.
1.54 "Security Documents": the Receivables Assignments, this
Agreement, and any and all other documents now or hereafter
executed by Borrower and securing Performance of the
Obligations, as they may be from time to time renewed,
amended, restated or replaced.
1.55 "Security Interest": a perfected, direct, first and (subject
only to the Permitted Encumbrances) exclusive security
interest in and charge upon the property intended to be
covered by it.
1.56 "Servicing Agent": Borrower serving in the capacity of
Servicing Agent pursuant to the Servicing Agreement.
6
<PAGE> 7
1.57 "Servicing Agent - Back Up": The back up Servicing Agent
acceptable to Lender to be hired by Borrower to track
Borrower's collections of the Receivables Collateral and to
substitute for Servicing Agent upon an Event of Default.
1.58 "Servicing Agreement": an agreement to be made among Lender
and Borrower for itself and acting as Servicing Agent, which
provides for Servicing Agent to perform for the benefit of
Lender accounting, reporting and other servicing functions
with respect to the Instruments constituting part of the
Receivables Collateral, as it may be from time to time
renewed, amended, restated or replaced.
1.59 "Subordination Agreement(s)": subordination agreement(s) made
and delivered to Lender pursuant to paragraph 6.11, as it may
be from time to time renewed, amended, restated or replaced.
1.60 "Term": the duration of this Agreement, commencing on the date
as of which this Agreement is entered into and ending when all
of the Obligations shall have been Performed.
1.61 "Third Party Consents": those consents which Lender requires
Borrower, and its Affiliates to obtain or which one or more of
them is contractually or legally obligated to obtain, from
others in connection with the transaction contemplated by the
Documents.
1.62 "Time-Share Associations" or sometimes "Associations": Ozark
Mountain Resort Club, a Missouri non-profit corporation,
Holiday Hills Resort Club, a Missouri non-profit corporation,
Hill Country Resort Club, a Texas non-profit unincorporated
organization, Piney Shores Resort Club, a Texas non-profit
unincorporated association, Holly Lake Resort Club, a Texas
non-profit unincorporated association, The Villages Resort
Club, a Texas non-profit unincorporated association.
1.63 "Time-Share Declaration": the declaration recorded/or to be
recorded in the real estate records where each Time-Share
Project is located for the purpose of adding ownership of Fee
Simple Time-Share Interests to the Time-Share Program, as it
may be in effect from time to time.
1.64 "Time-Share Developer": Borrower, in its capacity selling
Time-Share Interests.
1.65 "Time-Share Interests": the Fee Simple Time-Share Interests.
1.66 "Time-Share Program": the program in which Purchasers have
purchased in Fee Simple Time-Share Interests; owners of
Time-Share Interests have the right to use and enjoy their
respective Time-Share Interests on a recurring basis; and
owners of Time-Share Interests share the expenses associated
with the operation and management of such program.
7
<PAGE> 8
1.67 "Time-Share Program Consumer Documents": the purchase
contract, Instrument, Purchaser Mortgage, credit application,
credit disclosures, rescission right notices, final,
subdivision public reports/ prospectuses/ public offering
statements, Time-Share Project exchange affiliation agreement,
Endless Escape Disclosure Document and other documents and
advertising materials used or to be used by a Time-Share
Developer in connection with the sale of Time-Share Interests.
1.68 "Time-Share Program Governing Documents": the Articles of
Organization of the Time-Share Associations, the rules and
regulations of the Time-Share Associations, the Time-Share
Program management contract between the Time-Share
Associations and a management company, any subsidy agreement
by which a Time-Share Developer is obligated to subsidize
shortfalls in the budget of the Time-Share Program in lieu of
paying assessments, and any exchange affiliation agreement, as
they may be from time to time in effect.
1.69 "Time-Share Projects": the part of the Resorts described in
Exhibit F and such other part of the Resorts as Lender may
from time to time hereafter approve in writing.
1.70 "Title Insurer (Purchaser Mortgage)": a title company which is
acceptable to Lender and issues a Title Policy (Purchaser
Mortgage).
1.71 "Title Opinion" (Purchaser Mortgage): an opinion that Lender's
interest in the Purchaser Mortgage securing the Fee Simple
Time Share Investment as a perfected, direct, first and
exclusive lien on the Time-Share Interest encumbered thereby,
subject only to the Permitted Encumbrances, issued by a law
firm and in form and substance acceptable to Lender.
1.72 "Title Policy (Purchaser Mortgage)": a policy of title
insurance in an amount equal to the principal balance of five
percent (5%) of the Instruments against which an Advance has
been made, submitted for such Advance insuring Lender's
interest in the Purchaser Mortgage securing such Instrument as
a perfected, direct, first and exclusive lien on the
Time-Share Interest encumbered thereby, subject only to the
Permitted Encumbrances, issued by a Title Insurer (Purchaser
Mortgage) and in form and substance acceptable to Lender.
1.73 "Unit": a dwelling unit in a Time-Share Project.
2. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Lender hereby agrees, if Borrower has Performed all of the
Obligations then due, to make Advances to Borrower in amounts equal to (a) the
then Borrowing Base of the Eligible Instruments less (b) the then unpaid
principal balance of the Loan; provided, at no time shall the unpaid principal
balance of the Loan exceed the Maximum Loan Amount. Lender shall have no
obligation to make any Advance after the Borrowing Term has expired.
8
<PAGE> 9
2.2 The Loan is a revolving line of credit; however, all of the
Advances shall be viewed as a single loan. Borrower shall not be entitled to
obtain Advances after the expiration of the Borrowing Term unless Lender agrees
in writing with Borrower to make Advances thereafter on terms and conditions
satisfactory to Lender and such action if taken shall not be deemed a waiver
with respect to subsequent advances. This Agreement and Borrower's liability
for Performance of the Obligations shall continue, however, until the
Obligations have been completely satisfied or waived in writing by Lender.
2.3 Borrower will use the proceeds of all Advances only to fund
sales, marketing and working capital needs.
3. RECEIVABLES COLLATERAL SECURITY
3.1 To secure the Performance of all of the Obligations, Borrower
hereby grants to Lender a Security Interest in and assigns to Lender the
Collateral. Such Security Interest shall be absolute, continuing and applicable
to all initial and subsequent Advances and to all of the Obligations. All of the
Collateral shall secure repayment of the Loan and the Performance of the other
Obligations. Borrower will unconditionally deliver to Custodian as agent for
Lender pursuant to the Custodian Agreement, with full recourse, all Instruments
which are part of the Receivables Collateral. Lender is hereby appointed
Borrower's attorney-in-fact to take any and all actions in the name of Borrower
or on behalf of Borrower which are deemed necessary or appropriate by Lender
with respect to the collection and remittance of payments (including the
endorsement of payment items) received on account of the Receivables
Collateral.
3.2 If an Instrument which is part of the Designated Receivables
Collateral is not an Eligible Instrument upon assignment to Lender or
thereafter ceases to be an Eligible Instrument, then within thirty (30) days
after the earlier of (a) Borrower having obtained knowledge the Instrument is
not an Eligible Instrument or (b) the Instrument ceasing to qualify as an
Eligible Instrument, Borrower will either (x) pay to Lender an amount equal to
the Borrowing Base of the ineligible Instrument, together with interest, costs
and expenses attributable to it, or (y) replace such ineligible Instrument with
an Eligible Instrument or Eligible Instruments having a Borrowing Base not less
than the Borrowing Base (calculated immediately before its ineligibility) of
the ineligible Instrument being replaced. Simultaneously with such payment or
the delivery of the replacement Instrument to Lender, Borrower will deliver to
Lender all of the items (except for a "Request for Advance and Certification")
required to be delivered by Borrower to Lender pursuant to paragraph 4.1,
together with a "Borrower's Certificate" in form and substance identical to
Exhibit G. If neither an Event of Default nor Incipient Default has occurred
and is continuing, then within a reasonable time after the substitution of an
Eligible Instrument for an ineligible Instrument, Lender will reassign to
Borrower, without recourse or warranty of any kind, the ineligible Instrument.
Borrower will prepare the reassignment instrument, which shall be in form and
substance identical to Exhibit H and shall deliver it to Lender for execution.
Notwithstanding the foregoing to the contrary, Borrower shall not be required
to replace the Instrument described in 3.2(a) or (b) above if the aggregate
principal amount of the Loan outstanding does not exceed the Borrowing Base of
all Eligible Instruments.
3.3 Borrower will deliver or cause to be delivered to Lender, and
will maintain or cause to be maintained throughout the Term in full force and
effect in accordance with their terms, the
9
<PAGE> 10
Borrower Security Documents, the Subordination Agreement(s), and all other
security agreements required pursuant to the Documents.
4. ADVANCES
4.1 Lender's obligation to make the initial Advance shall be
subject to and conditioned upon the terms and conditions set forth in the
following subparagraphs and elsewhere in this Agreement being satisfied and
remaining satisfied during the Term.
(a) Borrower shall have delivered to Lender the
following Documents, duly executed and delivered by all parties
thereto, and in form and substance satisfactory to Lender:
(i) the Note;
(ii) a Receivables Assignment of the specific
Instruments, which must be Eligible
Instruments, against which the Advance is
requested;
(iii) the Subordination Agreement(s)
(iv) the Environmental Certificate;
(v) UCC financing statements for filing and/or
recording, as appropriate, where necessary to
perfect the Security Interest in the
Collateral subject to the UCC;
(vi) a favorable opinion which is from independent
counsel for Borrower, satisfactory to Lender
and is in form and substance satisfactory to
Lender,
(vii) the Lockbox Agreement;
(viii) the Servicing Agreement;
(ix) the Custodian Agreement;
(x) this Agreement;
(xi) the Title Opinion, including a guaranty to
update the Title Opinion after recording of
the Documents that are to be recorded; and
(xii) such other documents as Lender may reasonably
require.
(b) Borrower shall have delivered to Lender the following
items at least ten (10) Business Days prior to the date of the
Advance, or in the case of the items called
10
<PAGE> 11
for in item (xii) at least five (5) Business Days prior to the date of
the Advance, all of which shall be in form and substance satisfactory
to Lender:
(i) the Articles of Organization of Borrower and
for all purposes herein the Articles of
Organization of and its General Partner, and,
if applicable, their respective managers,
members and partners, to the extent any such
entity is not a natural person;
(ii) the Resolutions of Borrower, and, if
applicable, their respective managers,
members and general partners, to the extent
any such entity is not a natural person;
(iii) evidence that all taxes and assessments on
the Time-Share Projects have been paid;
(iv) a title commitment or preliminary title
report for the issuance of the Title Policy
(Purchaser Mortgage), together with copies of
all documents referred to therein and a
pro-forma copy of such title policy;
(v) the approved subdivision plat;
(vi) a copy of the registrations/consents to sell,
the final subdivision public reports/public
offering statements and/or prospectuses and
approvals thereof required to be issued by or
used in the state where the Time-Share
Projects is located and other jurisdictions
where Time-Share Interests have been offered
for sale or sold;
(vii) if the Time-Share Project has not been
registered under the Interstate Land Sales
Full Disclosure Act ("Act") and Lender
requests such an opinion, a copy of an
advisory opinion issued by the federal Office
of Interstate Land Sales Registration that
the Project does not fall within the purview
of the Act. Lender may in its sole
discretion, accept the opinion of Borrower's
counsel on the applicability of such act.
(viii) a copy of the form of the Time-Share Program
Consumer Documents and the Time-Share Program
Governing Documents which have been or are
being used by the Time-Share Developers,
including, without limitation, the exchange
affiliation agreement with RCI and the
Management Agreements;
(ix) the Insurance Policies;
(x) a structural inspection of the Time-Share
Projects;
11
<PAGE> 12
(xi) without implying Lender's consent to any such
lien, agreements from the holders of liens on
the Time-Share Project and any amenities
available to Purchasers as described in the
Time-Share Documents that they will not
disturb the rights of owners of Time-Share
Interests to use and enjoy such Time-Share
Interests so long as they are not in default
of their obligations under their Instruments
and the Time-Share Program Governing
Documents;
(xii) the specific Instruments against which the
Advance is requested, items property endorsed
and the other items described in Exhibit I,
which for purposes of efficiently handling
requests for Advances, contains some of the
items also set forth in Sections 4.1 through
4.4 herein; and
(xiii) such other items as Lender requests which are
reasonably necessary to evaluate the request
for the Advance and the satisfaction of the
conditions precedent to the Advance.
(c) Lender shall have received the following in form and
substance satisfactory to Lender:
(i) lien, litigation and judgment searches for
Borrower, and Master Club conducted in such
jurisdictions as Lender deems appropriate.
(d) No material adverse change shall have occurred-in the
Time-Share Project or in Borrower's or Master Club's business or
financial condition since the date of the latest financial and
operating statements given to Lender by or on behalf of Borrower and
Master Club. A suspension of sales or a liability incurred outside the
ordinary course of business in the amount of $100,000 or more shall be
deemed material and adverse.
(e) There shall have been no change in the warranties and
representations made in the Documents by Borrower, for the Performance
of any of the Obligations.
(f) Neither an Event of Default nor Incipient Default
shall have occurred and be continuing.
(g) The interest rate applicable to the Advance (before
giving effect to any savings clause) will not exceed the maximum rate
permitted by the Applicable Usury Law.
(h) Borrower shall have paid to Lender (or its designee),
or authorized such payment be made out of the Advance, the Structuring
Advisory Fee, the Lenders Attorney's Fee, the Custodian Fee, the
Lockbox Agent Fee, and all other fees required to be paid at the time
of the Advance.
12
<PAGE> 13
4.2 Advances shall be requested in writing (in the form of Exhibit
J) by the Chief Executive Officer or principal financial officer of Borrower
and shall be made (i) no more frequently than three times each month nor more
frequently than one (1) time in any week; or (ii) in amounts less than
$500,000.
4.3 Advances may be disbursed by checks, wire transfers or drafts
payable to Borrower; or if requested by Borrower and approved in writing by
Lender, to others, either severally or jointly with Borrower, for the credit or
benefit of Borrower. Lender may, at its option, withhold from any Advance any
sum due it (including costs and expenses) under the terms of the Documents.
4.4 Although Lender shall have no obligation to make an Advance
unless and until all of the conditions precedent to the Advance have been
satisfied, Lender may, at its discretion, make Advances prior to that time
without waiving or releasing any of the Obligations.
4.5 After the initial Advance, the obligation of Lender to make a
subsequent Advance shall be subject to the satisfaction of the conditions
precedent set forth on Exhibit I.
5. NOTE, MAINTENANCE OF BORROWING BASE: PAYMENTS:
SERVICING AND COLLECTION
5.1 The Loan shall be evidenced by the Note and shall be repaid in
immediately available funds according to the terms of the Note.
5.2 Subject to Borrower's rights under paragraph 3.2 to provide
replacement Eligible Instruments, if for any reason the aggregate principal
amount of the Loan outstanding at any time shall exceed the then Borrowing Base
of all Eligible Instruments, Borrower, without notice or demand, will
immediately make to Lender a principal payment in an amount equal to such
excess plus accrued and unpaid interest on such principal payment.
5.3 (a) Lockbox Agent shall collect payment on the
Instruments constituting part of the Receivables Collateral and, remit
collected payments to Lender on the last Business Day of each and
every month after the date of first Advance, according to the terms of
the Lockbox Agreement, or sooner if requested by Lender. Payments
shall not be deemed received by Lender until Lender actually receives
such payments from Lockbox Agent.
(b) Servicing Agent shall furnish to Lender at Borrower's
sole cost and expense, no later than the 1Oth day of each month
commencing with the first full calendar month following the date of
this Agreement, separate reports for the Designated and Non-Designated
Receivables Collateral, substantially in a format satisfactory to
Lender, which: (i) shows as of the end of the prior month with respect
to each Instrument which constitutes part of the Receivables
Collateral (A) all payments received allocated between principal,
interest, late charges and taxes, (B) the opening and closing
balances, (C) present value, (D) average consumer interest rate, and
(E) extensions, refinances, prepayments, and other similar
adjustments; (F) the average remaining term; (G) the average
downpayment collected; and (H) the percentage of payments made by U.S.
obligors and the percentage of payments made by Canadian obligors; and
(ii) indicates
13
<PAGE> 14
delinquencies of 30, 60 and 90 days and in excess of 90 days. On the
basis of such reports, Lender will compute the amount, if any, which
was due and payable by Borrower on the last Business Day of the
preceding month and will notify Borrower of any amount due. If such
reports are not timely received, Lender may estimate the amount which
was due and payable. Borrower will pay upon demand the amount
determined by Lender to be due and payable. If payment is made on the
basis of Lender's estimate and thereafter reports required by this
paragraph are received by Lender, the estimated payment amount shall be
adjusted by an additional payment or a refund to the correct amount, as
the reports may indicate; such additional amount should be paid by
Borrower upon demand and such refund to be made by Lender within 5
Business Days after receipt of written request therefor by Borrower. At
the end of each calendar quarter, Borrower will deliver or cause the
Servicing Agent to deliver to Lender a current list of the names,
addresses and phone numbers of the obligors on each of the Instruments
constituting part of the Receivables Collateral. Borrower will also
deliver or cause Servicing Agent to deliver to Lender, promptly after
receipt of a written request for them, such other reports with respect
to Instruments constituting part of the Receivables Collateral as
Lender may from time to time require.
(c) Lender, subject to any restriction contained in the
Lockbox Agreement, Custodian Agreement or the Servicing Agreement, as
the case may be, may at any time and from time to time subject to
provisions of subsection (d) immediately below, substitute or require
Borrower to substitute a successor or successors to any Agent acting
under the Lockbox Agreement, Custodian Agreement or the Servicing
Agreement.
(d) Borrower agrees to hire the Servicing Agent - Back Up
at a cost not to exceed $20,000 per year. Upon the occurrence of an
Event of Default, Lender may replace the Servicing Agent, with the
Servicing Agent - Back Up who shall then receive compensation at a
market rate for a Prime Servicing Agent.
5.4 Subject to Lender's rights under Article VII, all proceeds
from the Receivables Collateral (except payments which are identified by
Purchasers as tax and insurance impounds/payments or maintenance and other
assessment payments and are required to be so treated by Borrower) and the
other security shall be applied as follows: first to the payment of all late
charges, costs, fees and expenses required by the Documents to be paid by
Borrower; second to accrued and unpaid interest due on the Note; third to the
unpaid principal balance of the Note; and then to the other Obligations in such
order and manner as Lender may determine.
5.5 Whether or not the proceeds from the Receivables Collateral
shall be sufficient for that purpose, Borrower will pay when due all payments
required to be made pursuant to any of the Documents, Borrower's Obligation to
make such payments being absolute and unconditional.
6. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Borrower is, and will remain at all times, duly
organized, validly existing and in good standing under the laws of
Texas and in each jurisdiction where the Time-Share Projects are
located and in which it is selling Time-Share Interests or where the
location or nature of its properties or its business makes such
qualification necessary.
14
<PAGE> 15
Borrower has full authority to Perform the Obligations and to carry on
its business and own its property.
(b) Borrower has full power and authority to grant the
Security Interest in the Receivables Collateral and to execute and
deliver the Documents and to Perform the Obligations. All action
necessary and required by the Articles of Organization of Borrower and
all applicable laws for the obtaining of the Loan and for the
execution and delivery of the Documents executed and delivered in
connection with the Loan has been duly and effectively taken. The
Documents are and shall be legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable Usury Law or
constitute a default or result in the imposition of a lien under the
terms or provisions of any agreement to which Borrower is a party. No
consent of any governmental agency or any other person not a party to
this Agreement is or will be required as a condition to the execution,
delivery or enforceability of the Documents.
6.2 There is no action, litigation or other proceeding pending or,
to the knowledge of Borrower, threatened before any arbitration tribunal,
court, governmental agency or administrative body involving Borrower (including
Master Club), its property, the Time-Share Projects or Resorts which might
materially adversely affect the Collateral, the Time-Share Project, the
business or financial condition of Borrower or the ability of Borrower to
perform the Obligations.
6.3 (a) Only Borrower has sold or offered Time-Share Interests
for sale; Time-Share Interests have been offered for sale only in the
state in which the Time-Share Projects are located, and all sales have
been made at the Time-Share Projects. Before Borrower offers
Time-Share Interests for sale in any jurisdiction or sells Time-Share
Interests other than at the Time-Share Projects, Borrower will
promptly notify Lender and provide Lender with evidence that it has
complied with all laws of the jurisdiction governing its proposed
conduct.
(b) Borrower has complied, and Borrower will comply, with
all applicable laws and regulations, including, without limitation,
all laws and regulations of the state in which the Time-Share Projects
are located and all other governmental jurisdictions in which the
Time-Share Projects are located or in which Time-Share Interests have
been or are being sold or offered for sale if required by such
jurisdiction.
(c) Borrower has not sold or offered any Time-Share
Interests for sale as an investment. Neither the sale nor the offering
of any Time-Share Interest would constitute the sale or the offering
of a security for sale under any applicable law.
(d) Neither the time-share use nor other transient use
and occupancy of Units will violate or constitute a non-conforming use
under any private covenant or restriction or any zoning, use or
similar law, ordinance or regulation affecting the use or occupancy of
any Time-Share Project.
6.4 (a) Each Instrument which is assigned to Lender pursuant
to this Agreement and against which an Advance is requested or which
is assigned in satisfaction of Borrower's obligations under paragraph
3.2 shall be an Eligible Instrument at the time of
15
<PAGE> 16
assignment. Borrower and Master Club have performed all their
obligations to Purchasers, and there are no executory obligations to
Purchasers to be Performed by Borrower or Master Club other than
obligations which by their nature or by agreement are to be executed
in the future. Borrower further warrants and guarantees the
enforceability of the Receivables Collateral.
(b) Without the prior written consent of Lender, Borrower
will not cancel or materially modify, or consent to or acquiesce in
any material modification (including, without limitation, any change
in the interest rate or the amount, frequency or number of payments)
to, or solicit the prepayment of, any Instrument which constitutes
part of the Receivables Collateral; waive the timely performance of
the obligations of the Purchaser under any such Instrument or its
security; or release the security for any such Instrument. Borrower
will not pay or advance directly or indirectly for the account of any
Purchaser any sum requested to be deposited or owing by the Purchaser
under any Instrument which constitutes part of the Receivables
Collateral.
(c) Borrower at all times will fulfill and will cause its
Affiliates, agents and independent contractors at all times to fulfill
all obligations to Purchasers, except where failure to do so would not
materially or adversely affect the Collateral, the Time-Share
Projects, the business or financial condition of Borrower, or the
ability of Borrower to Perform the Obligations. Borrower will perform
and will cause its Affiliates to perform all of their respective
obligations under the Time-Share Program Governing Documents.
(d) True and complete copies of the Time-Share Program
Consumer Documents and Time-Share Program Governing Documents which
have been and are being used in connection with the Time-Share Project
and the sale or offering for sale of Time-Share Interests have been
delivered to Lender. Borrower, without the prior written consent of
Lender, will not cancel or materially modify or permit or acquiesce in
the cancellation or material modification of any such document except
as required by law; and will not permit or suffer any of its
Affiliates to do so.
(e) Each owner of a Time-Share Interest is a member of
the appropriate Time-Share Association, and all the Time-Share
Associations have authority to levy annual assessments to cover the
costs of maintaining and operating the respective Time-Share Projects.
To Borrower's knowledge, Master Club and each Association is solvent;
currently levied assessments are adequate to cover such costs and to
establish and maintain a reasonable reserve for capital improvements
and such reserves are established pursuant to applicable law and are
not deficient to perform the purposes for which they are intended; and
there are no events which could give rise to a material increase in
such costs. Borrower will use its best efforts to: (i) cause each
Association to (A) discharge its obligations under the Time-Share
Program Governing Documents and (B) maintain the reserve described
above.
(f) Except as otherwise permitted and disclosed by the
Time-Share Program Governing Documents: (i) the owners of the
Time-Share Interest in the Time-Share Project have a right to use all
the common areas in the Time-Share Project and Borrower owns in fee
simple other amenities which have been promised or represented as
being available to Purchasers, free and clear of liens and security
interests (or subordinated to
16
<PAGE> 17
the interests of Purchasers) except for the Permitted Encumbrances;
(ii) Master Club owns all furnishings within the Units free and clear
of all liens and security interests; and (iii) all access roads and
utilities and off-site improvements necessary to the use of the
Time-Share Project have been dedicated to and/or accepted by the
responsible governmental authority or utility company or are held in
fee simple by Borrower with all Purchasers enjoying a recorded right
to use such access roads, utilities and the above-described amenities
Borrower will maintain or cause to be maintained in good condition and
repair all amenities and common areas which have been promised or
represented as being available to Purchasers and all roads and
off-site improvements which are not the responsibility of the
Associations to maintain and repair and have not been dedicated to or
accepted by the responsible governmental authority or utility company;
provided, however, that if any such property is not owned by Borrower
or any of its Affiliates, Borrower will use its best efforts to cause
the owner or other responsible third party to maintain and repair such
property. Borrower will maintain a reasonable reserve to assure
compliance with the terms of the foregoing sentence.
6.5 Borrower will undertake the diligent and timely collection of
amounts delinquent under each Instrument which constitutes part of the
Receivables Collateral and will bear the entire expense of such collection.
Lender shall have no obligation to undertake any action to collect under any
Instrument.
6.6 Lender may notify Purchasers of the existence of Lender's
interest as assignee in the Receivables Collateral and request from Purchasers
any information relating to the Receivables Collateral. Borrower will deliver
such notice under its letterhead if requested.
6.7 Borrower without the prior written consent of Lender, will
not: (a) sell, convey, pledge, hypothecate, encumber or otherwise transfer any
of the Collateral; (b) permit or suffer to exist any liens, security interests
or other encumbrances on any of the Collateral, except for the Permitted
Encumbrances and liens and security interests expressly granted to Lender; (c)
sell, lease, transfer or dispose of all or substantially all of its assets to
another entity; or (d) permit or suffer to exist any transfer of the ownership
interests or control of Borrower; except that Robert Mead, the controlling
shareholder of the General Partner of Borrower, may sell a portion of his
shares of Borrower provided he maintains a number of shares equal to at least
51% of the issued and outstanding shares of Borrower except that control may
change if it occurs through an initial public offering or private placement
sale of Borrower's common stock; (e) Robert Mead terminates his employment with
Borrower, is deceased or incapacitated; or (f) change in any material,
deleterious way, the program by which the Time-Share Interests are marketed. A
default under Section 6.7(d) or (e) shall allow Lender as its exclusive remedy,
to refrain from making any additional Advances. In the event Lender makes such
Advances after the default under Section 6.7(d) or (e), it shall have the right
at any time to discontinue further Advances.
6.8 Borrower will pay the cost of and will maintain and deliver to
Lender evidence of insurance policies required by Lender making Lender an
additional insured and written by insurers and in amounts and on forms
satisfactory to Lender.
17
<PAGE> 18
6.9 (a) The Documents and all certificates, financial statements
and written materials furnished to Lender by or on behalf of Borrower
in connection with the Loan do not contain any untrue statement of a
material fact or omit to state a fact which materially adversely
affects or in the future may materially adversely affect the
Collateral, the Time-Share Project, the business or financial
condition of Borrower, or the ability of Borrower to Perform the
Obligations.
(b) Lender's examination, inspection, or receipt of
information pertaining to the Collateral or the Time-Share Project and
its proposed operation shall not in any way be deemed to reduce the
full scope and protection of the warranties, representations and
Obligations contained in this Agreement.
6.10 (a) On or before the 10th day of each month, Borrower will
cause to be furnished to Lender the reports required pursuant to
paragraph 5.4(b).
(b) Borrower will furnish or cause to be furnished to
Lender within 120 days after each fiscal year of the subject, a copy
of the current annual financial statements of Borrower and, subject to
the best efforts of Borrower, Master Club and the Associations; and
shall furnish or cause to be furnished to Lender within 45 days after
each interim quarterly fiscal period of Borrower, a copy of the
current financial statements for the period commencing with the first
day of the fiscal year and concluding with such quarter end. Such
financial statements shall contain a balance sheet as of the end of
the relevant fiscal period and statements of income and of cash flow
for such fiscal period (together, in each case, with the comparable
figures for the corresponding period of the previous fiscal year), all
in reasonable detail. All financial statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied. All financial statements required pursuant to this paragraph
shall be certified by the chief financial officer of the subject of
such statements. Annual statements shall be audited and certified by a
recognized firm of certified public accountants reasonably
satisfactory to Lender. Together with such financial statements,
Borrower will deliver to Lender: (a) a certificate signed by the chief
financial officer of Borrower stating that there exists neither an
Event of Default nor an Incipient Default or, if any such Event of
Default or Incipient Default exists, specifying the nature and period
of its existence and what action Borrower proposes to take with
respect to it; and (b) certificates signed by the chief financial
officer of Borrower which shall state specifically that Borrower, and
to the best of his knowledge, Master Club, is in full compliance with
paragraphs 6.16-6.17, inclusive, and set forth in reasonable detail
the calculations upon which such certification is based.
(c) Borrower will deliver to Lender from time to time, as
available, and promptly upon amendment or effective date: current
price lists, sales literature, registrations/consents to sell, and
final subdivisions public reports/public offering
statements/prospectuses. Borrower will deliver to Lender any material
modifications which it or, to its knowledge, any other person having
the power to do so proposes be made to the Time-Share Program Consumer
Documents or the Time-Share Program Governing Documents last delivered
to Lender, and will deliver all such modifications to Lender promptly
after they are made or adopted.
18
<PAGE> 19
(d) Borrower will at its expense permit Lender and its
representatives at all reasonable times to inspect the Time-Share
Projects and to inspect, audit and copy its records and records of
Master Club in Borrower's possession.
(e) Borrower will submit to Lender annually, within 10
days after each is available, proposed annual maintenance and
operating budgets of Master Club, certified to be adequate Borrower
and a statement of the annual assessment to be levied upon the members
of such Associations; and will use its best efforts to cause to be
made available to Lender for inspection, auditing and copying, upon
Lender's request, the books and records of each Associations.
(f) Borrower will deliver to Lender such further
information as Lender may from time to time reasonably request.
6.11 Borrower will cause any and all indebtedness owing by it, to
its shareholders, directors and officers, or their relatives and Affiliates of
Borrower or the foregoing and all liens, security interests, and other charges
in the assets of Borrower to be fully subordinated in writing in all aspects to
the Obligations and Lender's claims now held or hereafter acquired to the
assets of Borrower, including, without limitation, the Collateral; provided,
however, that if neither an Event of Default nor Incipient Default is
outstanding, Borrower may make regularly scheduled payments on any such
indebtedness and other normal and customary payments for services rendered.
Lender may require any such creditor to execute a written subordination
agreement satisfactory in form and substance to Lender, which shall include,
without limitation, provisions precluding exercise of remedies by the creditor
against the assets of Borrower, until all Obligations have been satisfied in
full.
6.12 Borrower is not in default of any payment on account-of
indebtedness for borrowed money or of any repurchase obligations in connection
with a receivables purchase financing, or in violation of or in default under
any material term in any agreement, order, decree or judgment of any court,
arbitration or governmental authority to which it is a party or by which it is
bound.
6.13 Borrower has filed all tax returns and paid all taxes,
assessments, levies and penalties, if any, required to be filed by it or paid
by it to any governmental or quasi-governmental authority or subdivision,
including real estate taxes and assessments relating to the Time-Share Projects
or the Collateral. Borrower will use its best efforts to provide to Lender not
more than 30 days after such taxes and assessments become due evidence that all
taxes and assessments on the Units and Time-Share Projects common areas and
related amenities have been paid in full.
6.14 (a) Borrower has paid to Lender a deposit of $35,000, and
Borrower will pay or cause to be paid to Lender an additional $365,000
Structuring Advisory Fee at the time of the initial Advance. Borrower
acknowledges that the deposit and the Structuring Advisory Fee has
been earned and are non-refundable. Borrower will pay on demand any
and all costs and expenses incurred by Lender in connection with the
initiation, documentation and closing of the Loan, the making of
Advances, the protection of the Collateral, or the enforcement of the
obligations against Borrower, including, without limitation, all
attorneys' and other professionals'
19
<PAGE> 20
fees and costs, consumer credit reports, revenue, documentary stamp
and intangible taxes and any other taxes imposed on the Documents.
(b) Borrower shall, at the time of the initial Advance of
the Loan, pay or cause to be paid all of Lender's attorneys fees in
the amount of $25,000 and costs for services rendered in connection
with this Loan and will pay such fees and costs as are set forth in
the Inventory and Development Loan.
(c) Borrower will pay Custodian a one time Custodial Fee
in the amount of $5.00, with potential increases to a maximum of
$9.00, for each new Eligible Instrument held by Custodian as
designated agent of Lender exclusive of Eligible Instruments assigned
as replacements for Instruments that cease to be Eligible Instruments
and recurring fees that are set forth in the Custodian Agreement.
6.15 Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, AND DEFEND
Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, agents and servants of
the foregoing, for, from and against any and all losses, costs, expenses
(including, without limitation, any attorneys' fees and costs), demands,
claims, suits, proceedings (whether civil or criminal), orders, judgments,
penalties, fines and other sanctions arising from or brought in connection with
(a) the Time-Share Projects, the Collateral, Lender's status by virtue of the
Assignments, creation of Security Interests, the terms of the Documents or the
transactions related thereto, or any act or omission of Borrower or any Agent,
or their respective employees, contractors or agents, whether actual or
alleged, and (b) any and all brokers' commissions or finders' fees or other
costs of similar type by any party in connection with the Loan. On written
request by a person or other entity covered by the above agreement of
indemnity, Borrower will undertake, at its own cost and expense, on behalf of
such indemnitee, using counsel satisfactory to the indemnitee, the defense of
any legal action or proceeding to which such person or entity shall be a party.
At Lender's option, Lender may at Borrower's expense prosecute or defend any
action involving the priority, validity or enforceability of the Security
Interests in the Collateral.
6.16 Borrower will not make, and will not permit or suffer any
Affiliate to make, any distribution (inclusive of dividends, stock repurchases
and redemptions, the repayment of loans from, and the making of loans to or
investments in the distributees) to any-of their respective Affiliates unless
at the time of the distribution and after giving effect thereto, there exists
neither an Event of Default nor an Incipient Default.
6.17 Borrower will maintain an aggregate minimum tangible net worth
of not less than $17,500,000.
6.18 Borrower will execute or cause to be executed all documents
and do or cause to be done all acts necessary for Lender to perfect and to
continue the perfection of the Security Interest of Lender in the Collateral or
otherwise to effect the intent and purposes of the Documents.
6.19 The representations, warranties and covenants contained in
this Article VI are in addition to, and not in derogation of, the
representations, warranties and covenants contained
20
<PAGE> 21
elsewhere in the Documents and shall be deemed to be made and reaffirmed prior
to the making of each Advance.
6.21 Borrower covenants and warrants that none of the Other Lenders
have a security interest in (i) the proceeds derived from the Management
Agreements, or (ii) from any furniture or furnishings, (iii) the assets of
Master Club, or (iv) claims against the FDIC or other parties.
7. DEFAULT
7.1 The occurrence of any of the following events or conditions
shall constitute an Event of Default under the Documents:
(a) failure of Lender to receive from Borrower within 5
days of the date written notice has been sent to Borrower after the
due date (i) any amount payable under the Note or (ii) any other
payment due under the Documents, except for the Note payment due at
the Maturity Date for which no grace period is allowed;
(b) any representation or warranty of a person other than
Lender contained in the Documents or in any certificate furnished to
Lender under the Documents by or on behalf of Borrower proves to be,
in any material respect, false or misleading as of the date deemed
made;
(c) a default in the Performance of the Obligations set
forth in paragraphs 3.2, 6.7, 6.8, 6.11, 6.16, 6.17, 6.18, 6.19, or
9.2;
(d) a default in the Performance of the Obligations or a
violation of any term, covenant or provision of the Documents (other
than a default or violation referred to elsewhere in this paragraph
7.1) which continues unremedied (i) for a period of 5 Days after
notice of such default or violation to Borrower in the case of a
default under or violation of paragraph 6.7(b) or any other default
or violation which can be cured by the payment of money alone or (ii)
in the case of any other default or violation, for a period of twenty
(20) Business Days after notice to Borrower of such default or
violation, plus only if such default or violation cannot be cured by
Borrower proceeding diligently and Borrower has been diligent in
attempting to effect cure, such additional period not to exceed twenty
(20) Business Days as may be required by Borrower proceeding
diligently to effect cure;
(e) an "Event of Default", as defined elsewhere in any of
the Documents or any of the Other Loan Documents;
(f) any final, non-appealable judgment or decree for
money damages or for a fine or penalty against Borrower which is not
paid and discharged or stayed within 30 days thereafter and when
aggregated with all other judgments or decree(s) that have remained
unpaid and undischarged or stayed for such period is in excess of
$100,000;
(g) any person holding a lien or security interest in the
Collateral or a lien (other than a lien created by Purchaser solely
with respect to its Time-Share Interest and without implying Lender's
consent to the creation or existence of any such lien or security
21
<PAGE> 22
interest) on any part of the Time-Share Projects or its related
amenities institutes foreclosure, receivership or other proceedings
for the enforcement of any remedy available to it on account of such
lien or security interest;
(h) Borrower shall (i) generally not be paying its debts
as they become due, (ii) file or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency or the appointment of a custodian under the laws of any
jurisdiction, (iii) make an assignment for the benefit of its
creditors, (iv) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers for itself or any
substantial part of its property, (v) be adjudicated insolvent, (vi)
dissolve; commence to wind-up its affairs or (vii) take any action for
purposes of the foregoing; or a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency or the appointment of a custodian under the laws of any
jurisdiction is filed against it or a custodian is appointed for
Borrower, the Collateral or any material party of its properties and
such proceeding is not dismissed and appointment vacated within 60
days thereafter;
(i) a material adverse change in any of the Time-Share
Projects or in the business or financial condition of Borrower or in
the Collateral, which change is not otherwise enumerated in this
paragraph 7.1 as an Event of Default as the result of which Lender in
good faith deems the prospect of Performance of the Obligations
impaired or its Collateral imperiled. A change shall not be deemed
material and adverse until it results in cumulative damages of at
least $100,000 or is not subject to quantification, in Lender's
reasonable opinion;
(j) failure of Lender to receive from Borrower, within 20
days of the date Borrower knows or should have known of such change,
notice of any material change in any representations or warranties in
the Documents or otherwise made in connection with the Loan; or
(k) an order or decree has been entered by any court or
regulatory agency, local, state or federal, of competent jurisdiction
enjoining the intended use of the Time-Share Projects as time-share
resorts and such order or decree is not vacated within sixty (60) days
after Borrower has obtained knowledge thereof.
(l) If a default or Event of Default occurs under any
document or instrument evidencing, securing or executed in connection
with the Inventory and Development Loan and any such default or Event
of Default is not cured within the applicable grace period (if any)
provided therein.
(m) any default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money or a receivables
purchase financing involving an obligation in excess of $100,000 to
make a payment of principal or interest or to repurchase receivables
or any other material default permitting the acceleration of the
repayment of the borrowed money or the repurchase of receivables,
which accelerated repayment or repurchase obligations are in excess of
$100,000 in the aggregate;
22
<PAGE> 23
provided that Lender's sole remedy for this paragraph 7.1(l) default
shall be to withhold any subsequent Advances requested by Borrower.
7.2 At any time after an Event of Default has occurred and while
it is continuing, Lender may but without obligation, in addition to the rights
and powers granted elsewhere in the Documents and not in limitation thereof, do
any one or more of the following:
(a) cease to make further Advances;
(b) declare the Note, and all other sums owing by
Borrower to Lender in connection with the Documents, immediately due
and payable without notice, presentment, demand or protest, which are
hereby waived by Borrower;
(c) receive and retain the Borrower's Receivables
Collateral Proceeds;
(d) with respect to the Receivables Collateral, (i)
institute collection, foreclosure and other enforcement actions
against Purchasers and other persons obligated on the Receivables
Collateral, (ii) enter into modification agreements and make extension
agreements with respect to payments and other performances, (iii)
release persons liable for performance, (iv) settle and compromise
disputes with respect to payments and performances claimed due, all
without notice to Borrower, without being called to account for such
actions by Borrower and without relieving Borrower from Performance of
the Obligations, and (v) receive, collect, open and read all mail of
Borrower for the purpose of obtaining all items pertaining to the
Receivables Collateral; and
(e) proceed to protect and enforce its rights and
remedies under the Documents and the Other Loan Documents, to
foreclose or otherwise realize upon the collateral and/or to exercise
any other rights and remedies available to it at law, in equity or by
statute.
7.3 Notwithstanding anything in the Documents to the contrary,
while an Event of Default exists, any cash received and retained by Lender in
connection with the Collateral may be applied to payment of the Obligations in
the manner provided in paragraph 7.5.
7.4 (a) Lender shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code of the States of New
York, Texas and Missouri and all other rights and remedies accorded to
a Secured Party at equity or law. Any notice of sale or other
disposition of the Collateral given not less than 10 Business Days
prior to such proposed action in connection with the exercise of
Lenders remedies shall constitute reasonable and fair notice of such
action. Lender may postpone or adjourn any such sale from time to time
by announcement at the time and place of sale stated on the notice of
sale or by announcement of any adjourned sale, without being required
to give a further notice of sale. Any such sale may be for cash or,
unless prohibited by applicable law, upon such credit or installment
as Lender may determine. Borrower shall be credited with the net
proceeds of such sale only when such proceeds are actually received by
Lender in good current funds. Despite the consummation of any such
sale, Borrower shall remain liable for any deficiency on the
Obligations which remains
23
<PAGE> 24
outstanding following such sale. All net proceeds recovered pursuant
to a sale shall be applied in accordance with the provisions of
paragraph 7.5.
(b) Lender may, in the name of Borrower, or in its own
name, make and execute all conveyances, assignments and transfers of
the Collateral sold in connection with the exercise of Lender's
remedies; and for this purpose Lender is hereby appointed
attorney-in-fact for Borrower.
(c) Upon request of Lender when an Event of Default
exists, Borrower shall assemble the Collateral not already in Lender's
possession and make it available to Lender at a time and place
designated by Lender.
7.5 The proceeds realized from any sale of all or any part of the
Collateral made in connection with the exercise-of Lender's remedies shall be
applied in the following order of priorities; first, to the payment of all
costs and expenses of such sale, including, without reasonable compensation to
Lender and its agents, attorneys fees, and all other expenses, liabilities and
advances incurred or made by Lender, its agents and attorneys in connection
with such sale, and any other unreimbursed expenses for which Lender may be
reimbursed pursuant to the Documents; second, to the payment of the
Obligations, in such order and manner as Lender shall determine, with no
amounts applied to payment of principal until all interest has been paid; and
third, to the payment to Borrower, its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
7.6 Lender may, at its option, and without any obligation to do so,
pay, perform and discharge any and all liabilities agreed to be paid or
performed in the Documents by Borrower, any Guarantor or any surety for the
Performance of the Obligations if the person obligated fails to do so. For such
purposes Lender may use the proceeds of the Collateral. All amounts expended by
Lender in so doing or in exercising its remedies under the Documents following
an Event of Default shall become part of the Obligations, shall be immediately
due and payable by Borrower to Lender upon demand, and shall bear interest at
the Default Rate from the dates of such expenditures until paid.
7.7 No remedy in any Document conferred on or reserved to Lender
is intended to be exclusive of any other remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given under any Document or now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power shall be construed to be a
waiver of or acquiescence to any default or a waiver of any right or power; and
every such right and power may be exercised from time to time and as often as
may be deemed expedient
7.8 Borrower, for itself and for all who may claim through or under
it, hereby expressly waives and releases all right to have the Collateral or
any part thereof, marshalled on any foreclosure sale or other enforcement of
Lender's rights and remedies.
7.9 For the purpose of exercising its rights and remedies under
Paragraph 7.2(d) and 7.6, Lender may do so in the name of Borrower or its name
and is hereby appointed as Borrower's attorney-in-fact to take any and all
actions in the name of Borrower and/or on behalf
24
<PAGE> 25
of Borrower-as Lender may deem necessary or appropriate in the accomplishment
of such purposes.
8. CONSTRUCTION AND GENERAL TERMS
8.1 All moneys payable under the Documents shall be paid to Lender
at its address set forth on the signature page of this Agreement in lawful
monies of the United States of America, unless otherwise designated in the
Documents or by Lender by notice.
8.2 The Documents exclusively and completely state the rights and
obligations of Lender and Borrower with respect to the Loan. No modification,
variation, termination, discharge, abandonment or waiver of any of the terms or
conditions of the Documents shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by such action. The
Documents supersede any and all prior representations, warranties and/or
inducements, written or oral, heretofore made by Lender concerning this
transaction, including any commitment for financing.
8.3 The powers and agency granted to Lender by Borrower in the
Documents are coupled with an interest and are irrevocable and are granted as
cumulative to Lender's other remedies for collection and enforcement of the
Obligations.
8.4 Any Document may be executed simultaneously in any number of
identical copies each of which shall constitute an original for all purposes.
8.5 Except as otherwise expressly provided in the Document, any
notice required or permitted to be given under any Document by Lender or
Borrower to the other shall be in writing and shall be (a) personally
delivered, (b) transmitted postage prepaid by certified or registered mail, (c)
sent by overnight express carrier, or (d) sent by telecopy, to Lender or such
Borrower at its address and/or telecopy number as set forth on the signature
page of this Agreement, or at such other address and/or telecopy number as
either party may designate for such purpose in a notice given to the other
party. Such notice shall be deemed received upon the earliest of the following
to occur: (a) upon personal delivery; (b) on the third Business Day following
the day sent, if sent by registered or certified mail; (c) on the next Business
Day following the day sent, if sent by overnight express courier; and (d) on the
day sent or if such day is not a Business Day on the next Business Day after the
day sent, if sent by telecopy.
8.6 All the covenants of Borrower and all the rights and remedies
of the Lender contained in the Documents shall bind Borrower and its successors
and assigns, and shall inure to the benefit of Lender, its successors and
assigns, whether so expressed or not. Borrower may not assign its rights in the
Documents in whole or in part. Except as may be expressly provided in a
Document, no person or other entity shall be deemed a third party beneficiary
of any provision of the Documents.
8.7 If any one or more of the provisions contained in any Document
shall be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained in the
Document shall not in any way be affected or impaired thereby.
25
<PAGE> 26
8.8 Time is of the essence in the Performance of the Obligations.
8.9 No modification, variation, termination, discharge,
abandonment or waiver granted or consented to by Lender including a waiver of
the time of the essence standard, shall be deemed to be an abandonment of such
rights.
8.10 All headings are inserted for convenience only and shall not
affect any construction or interpretation of the Documents. Unless otherwise
indicated, all references in a Document to clauses and other subdivisions refer
to the corresponding paragraphs, clauses and other subdivisions of the
Document; the words "herein", "hereof", "hereto", "hereunder" and words of
similar import refer to the Document as a whole and not to any particular
paragraph, clause or other subdivision; the use of any gender shall be deemed
to include other genders, unless inappropriate; and reference to a numbered or
lettered subdivision of an Article, or paragraph shall include relevant matter
within the Article or paragraph which is applicable to but not within such
numbered or lettered subdivision. All Schedules and Exhibits referred to in
this Agreement are incorporated in this Agreement by reference.
8.11 CHOICE OF LAW: JURISDICTION: VENUE AND WAIVER OF JURY TRIAL.
BORROWER AND LENDER AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
LOAN AGREEMENT SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND ELECTION,
ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF NEW YORK.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. BORROWER HEREBY IRREVOCABLY
APPOINTS AND DESIGNATES CT CORPORATION SYSTEM, WHOSE ADDRESS IS BORROWER, C/O
CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DULY
AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH
PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON
BORROWER PROVIDED THAT A COPY OF SUCH PROCESS BE DELIVERED TO BORROWER PURSUANT
TO THE PROVISIONS OF SECTION 8.5 ABOVE. IN THE EVENT SERVICE IS UNDELIVERABLE
BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, NEW YORK, OR
LENDER WISHES TO HAVE A DIFFERENT AGENT, BORROWER SHALL, WITHIN TEN (10) DAYS
AFTER LENDER'S REQUEST, APPOINT A SUBSTITUTE AGENT (IN NEW YORK, NEW YORK) ON
ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH
SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION,
HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO
BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON THE LOAN DOCUMENTS
IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
LOAN AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND BY
LENDER, AND BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON
BEHALF OF LENDER HAS MADE ANY
26
<PAGE> 27
REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN
ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT BORROWER AND LENDER HAVE ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH OF THEM WILL CONTINUE TO RELY
ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER
ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS LOAN
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE A MATERIAL INDUCEMENT FOR
LENDERS'S MAKING THE LOAN TO BORROWER AND BORROWER ACCEPTING THE LOAN FROM
LENDER.
[BORROWER'S INITIALS: ]
------
[LENDER'S INITIALS: /s/ [ILLEGIBLE]]
----------------
8.12 It is the intent of the parties hereto to comply with the
Applicable Usury Law. Accordingly, notwithstanding any provision to the
contrary in the Documents, in no event shall this Agreement or the Documents
require the payment or permit the collection of interest in excess of the
maximum contract rate permitted by the Applicable Usury Law.
8.12 LENDER DOES NOT HEREBY ASSUME AND SHALL HAVE NO
RESPONSIBILITY, OBLIGATION OR LIABILITY TO PURCHASERS, LENDER'S RELATIONSHIP
BEING THAT ONLY OF A CREDITOR WHO HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED
TO IT, AN ASSIGNMENT FROM BORROWER OF THE INSTRUMENTS. EXCEPT AS REQUIRED BY
LAW, BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO
LENDER WITH RESPECT TO THE TIME-SHARE PROJECTS, THE SALE OF TIME-SHARE
INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF LENDER.
8.13 Unless otherwise specifically stipulated elsewhere in the
Documents, if a matter is left in the Documents to the decision, determination,
requirement, request, judgment, approval, consent, satisfaction, acceptance,
agreement, option or discretion of Lender, its employees, Lender's counsel or
any agent for or contractor of Lender, such action shall be deemed to be
exercisable by Lender or such other person in its sole and absolute discretion
and according to standards established in its sole and absolute discretion.
Without limiting the generality of the foregoing, "option" and "discretion"
shall be implied by use of the words "if" or "may".
8.14 All representations, warranties, covenants and agreements made
by Borrower herein, in the other Documents or in any other agreement, document,
instrument or certificate delivered by or on behalf of Borrower under or
pursuant to the Documents shall be considered to have been relied upon by
Lender and shall survive the delivery to Lender of such Documents and the
extension of the Loan (and each part thereof), regardless of any investigation
made by or on behalf of Lender.
27
<PAGE> 28
9. ADDITIONAL PROVISIONS
9.1 Management of Real Property. Borrower will at all times cause
the Real Property to be managed by a professional property manager in
accordance with a written management agreement which may include Borrower as
the Manager. Borrower will not modify or extend the term of any management
agreement or enter into a new management agreement in substitution for an
existing management agreement without the prior written consent of Lender if
there is an Event of Default or Incipient Default at the time of such
modification or extension.
9.2 Notice. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m. (New
York City time) on a business day; provided that a hard copy of such notice is
also sent pursuant to (c) or (d) below; (c) if by overnight courier, on the
first business day after delivery to the courier; or (d) if by U.S. Mail,
certified or registered mail, return receipt requested on the fourth (4th) day
after deposit in the mail postage prepaid.
Notices to Borrower: Silverleaf Vacation Club, Inc.
Attn: Robert Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
Telecopy: (214) 905-0514
With a copy to: Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
Attn: George Bedell, Esq.
3700 Nations Bank Plaza
901 Main Street
Dallas, Texas 75202
Telecopy: (214) 747-3732
Notices to Lender: CS First Boston Mortgage Capital Corp.
Attn: Principal Transaction Group
55 East 52nd Street
New York, New York 10055-0186
Telecopy: (212)-318-1468
With a copy to: Fieldstone Lester & Shear
Attn: Robert E. Dady, Esq.
200 S. Biscayne Blvd.
Suite 2100
Miami, Florida 33131-2804
Telecopy: (305) 982-1550
[EXECUTIONS APPEAR ON PAGE 30]
28
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
BORROWER:
SILVERLEAF VACATION CLUB, INC.
a Texas corporation
By: /s/ ROBERT MEAD
------------------------------------
ROBERT MEAD,
Chief Executive Officer
LENDER:
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
By: /s/ DAVID ARZI
------------------------------------
Name: DAVID ARZI
------------------------------------
Its: Vice President
------------------------------------
29
<PAGE> 30
LIST OF EXHIBITS
Exhibit A Assignment of Mortgage(s) (Fee Simple Time-Share Instruments)
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D Promissory Notes
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Projects
Exhibit G Borrower's Certificate
Exhibit H Re-Assignment of Mortgage(s) (Fee Simple Time-Share Instruments)
Exhibit I Additional Condition to Advances
Exhibit J Request for Advance and Certification
Exhibit K Real Property Description
Exhibit L Personal Property Description
The above-listed exhibits are omitted from this filing. Registrant
agrees to furnish supplementally a copy of any omitted exhibit to the
Commission upon request.
<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO. 1 TO
REVOLVING LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 1 to the Revolving Loan and Security Agreement
("Amendment") dated as of November 8, 1996, by CS FIRST BOSTON MORTGAGE CAPITAL
CORP., a Delaware corporation ("Lender"), and SILVERLEAF VACATION CLUB, INC., a
Texas corporation, ("Borrower"), for good and valuable consideration, the
receipt of which is hereby acknowledged, hereby confirm and agree as follows:
1. INTRODUCTION
1.1 Lender and Borrower entered into a Revolving Loan and Security
Agreement dated as of October 9, 1996 (the "Loan Agreement") relating to a
revolving receivables line of credit ("Loan").
1.2 Borrower and Lender wish to amend the Loan Agreement to clarify
certain of the conditions relating to title insurance for Advances, all under
the terms and conditions set forth herein.
2. AGREEMENT
2.1 Except as otherwise defined herein or unless the context
otherwise requires, capitalized terms used in this Amendment shall have the
meaning given to them in the Loan Agreement.
2.2 The Loan Agreement is amended as follows:
(a) Paragraph 1.72 shall be deleted in its entirety and the
following is inserted in its place:
"Title Policy (Purchaser Mortgage)": a policy of title
insurance covering a Lender selected twenty-five percent (25%)
of the Fee Simple Time-Share Instruments submitted for each
Advance, in an amount equal to the Borrowing Base of the
Instruments selected by such policy, insuring Lender that the
Purchaser Mortgages securing such instruments created in favor
of Lender a perfected, direct, first and exclusive lien on the
Time-Share Interests encumbered thereby, subject only to the
Permitted Encumbrances, issued by a Title Insurer (Purchaser
Mortgage) and in form and substance acceptable to Lender.
(b) Paragraph 4.1(xi) shall be deleted in its entirety and
replaced by the word "Deleted."
<PAGE> 2
2.3 This Amendment may be executed in counterparts and any number
of copies which have been separately executed by all parties shall constitute
one original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
BORROWER:
SILVERLEAF VACATION CLUB, INC. a Texas
corporation
By: /s/ ROBERT MEAD
---------------------------------------
ROBERT MEAD,
Chief Executive Officer
LENDER:
CS FIRST BOSTON MORTGAGE CAPITAL
CORP.
By: /s/ DAVID ARZI
---------------------------------------
Name: DAVID ARZI
-------------------------------------
Its: Vice President
--------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.8
INVENTORY AND
DEVELOPMENT LOAN AND SECURITY AGREEMENT
This ("Agreement") dated as of October 9, 1996, is made by and between
SILVERLEAF VACATION CLUB, INC., a Texas corporation, and CONDOMINIUM BUILDERS,
INC., a Texas corporation (collectively, "BORROWER") whose address is 1221
Riverbend, Suite 120, Dallas, Texas 75247, and CS FIRST BOSTON MORTGAGE CAPITAL
CORP., a Delaware corporation, whose address is 55 East 52nd Street, New York,
New York 10055-0186 ("LENDER").
RECITALS:
Borrower has asked Lender to make Borrower an inventory and
development loan to finance its existing unsold inventory at certain resorts,
undeveloped acreage and golf course and additional land at another one of its
resorts; and
Borrower's obligations under the loan will be evidenced and secured by
the Loan Documents as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
SECTION I
DEFINITION OF TERMS
1.1 TERMS DEFINED. The following terms used in this Agreement
shall have the following meanings:
ACREAGE. Undeveloped tracts, lots and parcels of land in and around the
Ozark Mountain Resort, Stone County, Missouri and Holiday Hills Resort, Taney
County, Missouri.
ADVANCE. Proceeds of the Loan advanced by Lender to Borrower in
accordance with this Agreement.
AFFILIATE. (a) Any person or entity which has a financial interest in
Borrower; (b) any person or entity under common ownership with Borrower; (c)
any person or entity in which Borrower has a financial interest (any of (a),
(b) or (c) are referred to as a "Related Party"); (d) any person or entity
which has a financial interest in any Related Party; (e) any trust for the
benefit of Borrower or any Related Party; or (f) any person or entity in which
any Related Party has a financial interest.
BUSINESS DAY. Any day which is not a Saturday or Sunday or a legal
holiday under the laws of the State of New York or the United States.
CLOSING DATE. The date this Agreement is executed and delivered.
CODE. The Uniform Commercial Code as adopted and in force in the State
of New York as the same may be amended from time to time.
<PAGE> 2
COLLATERAL. Has the meaning assigned in Section 3.
COSTS. Shall have the meaning set forth in Section 10.3.
DECLARATION OR CONDOMINIUM DECLARATION. The Declaration recorded in
the real estate records where each Project is located for the purpose of adding
ownership of Units to the Condominium Program, as it may be in effect from time
to time.
DEED OF TRUST. That certain Deed of Trust and Security Agreement dated
of even date herewith from Borrower, as grantor, to the Trustee named therein,
in trust, for the benefit of Lender, in the form of Exhibit E attached hereto
and made a part hereof, as same may from time to time be renewed, amended,
restated or replaced.
DEFAULT RATE. A per annum rate of interest equal to the Interest Rate
plus four percent (4%).
DEVELOPMENT NOTE. The promissory note evidencing the Loan in the
original principal amount of $5,400,000 executed and delivered by Borrower to
Lender concurrently herewith in the form of Exhibit D attached hereto and made
a part hereof, as same may from time to time be renewed, amended, restated, or
replaced.
DISCLOSURE STATEMENT. A statement given to Purchasers describing the
Condominium Program.
ELIGIBLE UNSOLD UNITS. Each Unit satisfying all of the following
criteria:
(a) An existing unsold Unit in an applicable Condominium Project
that has been completed and developed in accordance with all
applicable building codes and furnished in a manner
substantially similar to the model unit, and for which a
certificate of occupancy has been obtained;
(b) All amenities and facilities (including, without limitation,
all utilities) for the applicable Condominium Project have
been completed, and all prospective Purchasers of such unsold
Unit would have uninterrupted use of all such amenities and
facilities;
(d) The unsold Unit is encumbered by the Deed of Trust and is not
subject to any lien not previously consented to by Lender.
ENVIRONMENTAL CERTIFICATE. An environmental certificate executed by
Borrower, and such other persons or parties as required by Lender, in form and
substance satisfactory to Lender, as it may be from time to time renewed,
amended, restated or replaced.
EVENT OF DEFAULT. Has the meaning set forth in Section 8 of this
Agreement.
FINANCED UNIT. Any Eligible Unsold Unit as to which an Advance has
been made and which is encumbered by the Deed of Trust and secures the Loan.
2
<PAGE> 3
GOLF COURSE. The golf course, including clubhouse and other customary
facilities and land to be developed at Holiday Hills Resort in Taney County,
Missouri.
HAZARDOUS MATERIALS. Any hazardous, dangerous or toxic substance or
material within the meaning of any federal, state or local law, regulation or
ordinance.
INDEBTEDNESS. Collectively, all payment obligations of Borrower to
Lender: (i) under the Note and other Loan Documents; and (ii) in connection with
the Revolving Receivables Loan from Lender to Borrower; together with any and
all other indebtedness of Borrower to Lender whether now existing or hereafter
arising.
INTEREST ONLY PERIOD. The eighteen (18) months after the Closing Date.
INTEREST RATE. A floating rate per annum equal to the Corporate Base
Rate plus two percent (2%) (the aggregate rate referred to as the "Interest
Rate"). "Corporate Base Rate" shall mean the interest rate last published by
The Wall Street Journal as the "Prime Rate" or if The Wall Street Journal
ceases to so publish, as so announced by Chase Manhattan Bank, N.A. Interest
shall be calculated based on a 360 day year and charged for the actual number
of days elapsed.
LOAN. The Five Million Four Hundred Thousand and OO/1OO Dollars
($5,400,000.00) development loan described in this Agreement.
LOAN DOCUMENTS. Collectively, this Agreement, the Note, the Deed of
Trust and any and all other agreements, documents, instruments and certificates
delivered or contemplated to be delivered in connection with this Agreement, as
such may be amended, renewed, extended, restated or supplemented from time to
time.
LOT. A parcel of land designated on a subdivision plat within the
Property.
MANDATORY PREPAYMENT. Any prepayment required by Section 2.5(b) of this
Agreement.
MASTER DEED(S). The Master Deeds whereby the Resorts were conveyed
from Freedom Financial Corporation, a Texas corporation, to Borrower:
(a) Warranty Deed dated May 31, 1989, and recorded in Book 194,
Page 854 of the Deed Records of Stone County, Missouri, and an
Assignment of Development Rights, Warranties, Service
Contracts, and Trade Name dated May 31, 1989, and recorded in
Book 135, Page 360 of the Deed Records of Stone County,
Missouri;
(b) Warranty Deed dated May 31, 1989, and recorded in Book 300,
Page 650 of the Recorder of Deeds of Taney County, Missouri,
and an Assignment of Development Rights, Warranties, Service
Contracts, and Trade Name dated May 31, 1989, and recorded in
Book 301, Page 331 of the Recorder of Deeds of Taney County,
Missouri;
3
<PAGE> 4
MATURITY DATE. October 9, 1999 or any earlier date on which the Loan
shall be required to be paid in full, whether by acceleration or otherwise.
PERMITTED EXCEPTIONS. The exceptions to title listed on Exhibit A.
PERSON. Natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
PROPERTY. Collectively, the Acreage, Golf Course and Resorts including
Units.
PURCHASE DOCUMENTS. Any purchase agreement and related sale and escrow
documents executed and delivered by a Purchaser to Borrower with respect to the
purchase of a Unit.
PURCHASER. Any Person who purchases one or more Units.
RESORTS. The vacation resorts legally described by the Master Deeds
and developed by Borrower which include the condominium units in Waters Bluff
subdivision at Ozark Mountain Resorts, Stone County, Missouri and condominium
units in Holiday Hills Resort, Taney County, Missouri.
REVOLVING RECEIVABLES LOAN. The $40,000,000 loan from Lender to
Borrower.
STONE COUNTY ACREAGE. The undeveloped property at the Ozark Mountain
Resort, Stone County, Missouri.
STRUCTURING ADVISORY FEE. A fee paid in consideration of advisory
services provided by Lender to Borrower with respect to the advice on the
method of financing in the amount of $54,000
TANEY COUNTY ACREAGE. The undeveloped property at the Holiday Hills
Resort, Taney County, Missouri.
CONDOMINIUM DOCUMENTS. Any and all document evidencing or relating to
the sale of Units by Borrower.
CONDOMINIUM PROGRAM. The program in which Purchasers have purchased
Units; owners of Units have the right to use and enjoy their respective Units;
fee simple and owners of Units share the expenses associated with the operation
and management of such program.
CONDOMINIUM PROJECT. The part of the Resorts which Lender currently
has approved, and may from time to time hereafter approve in writing, as being
subject to the sale of Units.
TITLE INSURER. Commonwealth Land Title Insurance Company, its
successors and assigns.
4
<PAGE> 5
TITLE INSURANCE POLICY. An American Land Title Association Loan
Policy, as last revised, issued to Lender by the Title Insurer in an amount not
less than $5,400,000, insuring that the Deed of Trust is a first lien upon the
"Property" (as said term is defined in the Deed of Trust) subject only to the
Permitted Exceptions. Said policy shall contain a Variable Rate Endorsement and
be in form and substance otherwise acceptable to Lender.
UNIT. One individual air space dwelling unit, together with all
furniture, fixtures and furnishings therein, and together with any and all
interest in common elements appurtenant thereto, as provided in the
Declaration.
SECTION 2
THE LOAN
2.1 LOAN. At the Closing, the Loan shall be advanced by Lender to
Borrower in a single payment subject to the provisions contained in this
Agreement and the other Loan Documents. In no event shall the Loan at any time
exceed $5,400,000. In no event shall the outstanding principal balance of the
Loan, at any time during the term of the Loan be less than $1,000.
2.2 TERM. The Loan shall be for a term of thirty-six (36) months
plus the number of days from the Closing Date to the end of the month in which
the Closing Date occurs.
2.3 INTEREST RATE. The average monthly balance of all outstanding
Advances together with all other outstanding obligations of Borrower shall bear
interest at the Interest Rate. After the occurrence of an Event of Default and
after the Maturity Date, the Loan will bear interest at the Default Rate.
2.4 PAYMENTS.
(a) MONTHLY PAYMENTS. Commencing on the first day of November,
1996, and for the Interest Only Period, Borrower shall pay interest
computed at the Interest Rate in arrears on the first day of each
month. Thereafter, Borrower shall make equal monthly payments of
principal and interest so as to fully amortize the Loan by the
Maturity Date. Interest shall be calculated based on a 360 day year
and charged for the actual number of days elapsed.
(b) FINAL PAYMENT. The entire outstanding principal amount of
the Loan, together with all accrued but unpaid interest, fees, and
charges, shall be payable on the Maturity Date.
2.5 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrower may prepay the Loan in
whole without premium upon five (5) days' prior written notice to
Lender or pursuant to the release provisions set forth in Section 2.6
hereof.
5
<PAGE> 6
(b) MANDATORY PREPAYMENTS. If Borrower receives any payment
with respect to the condemnation or lease of the property encumbered
by the Deed of Trust (other than rental payments and expense
reimbursements) including, without limitation, lease termination,
cancellation or similar fees, Borrower shall immediately prepay the
principal balance of the Loan in an amount equal to such payment. No
prepayment premium will be due with respect to any such prepayments.
Any mandatory prepayment shall be accompanied by an amount equal to
the interest accrued thereon to the date of receipt of such prepayment
in collected funds.
2.6 RELEASES OF COLLATERAL. Provided that no Event of Default
shall have occurred and be continuing, Lender agrees to release the Collateral
including Units and their appurtenant interests in the common elements from the
lien of the Deed of Trust, in accordance with and subject to all of the
following terms, provisions and conditions:
(a) Borrower shall request releases in writing not less than
five (5) business days prior to the date the release is needed. Each
request for release shall be submitted no more frequently than two (2)
times per month.
(b) Lender shall have received, with respect to each Unit,
Golf Course or Acreage to be sold or otherwise released: (i) a partial
release document prepared by Borrower at Borrower's expense in form
and content satisfactory to Lender; (ii) a schedule containing a list
of that Property previously released by Lender and that Property
remaining to be released; and (iii) all other data reasonably
necessary to support the Borrower's being entitled to the release,
including, without limitation, such other documents, certificates,
opinions and assurances as Lender may request, together with the legal
fees and disbursements of Lender's counsel incurred in connection with
the issuance of each such release.
(c) At the time of release, Borrower shall pay to Lender, in
cash or immediately available funds, a release price of an amount
equal to (i) seventy percent (70%) of the List Price as set forth on
Exhibit B attached hereto, and (ii) for the release of each of the
acreage, tracts, parcels, lots listed on Exhibits C-1 and C-2 attached
hereto, seventy percent (70%) of the value listed next to each
category of Property.
(d) Releases of Units, acreage or the Golf Course shall not
affect or impair the lien or security interest of the Deed of Trust
(or Lender's liens and security interests created by the other Loan
Documents) as to other Property (as defined in the Deed of Trust) not
theretofore released, and said liens and security interest shall
continue in full force and effect as to the unreleased Property and
such other Property.
SECTION 3
COLLATERAL
3.1 GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Indebtedness, Borrower does hereby unconditionally and
irrevocably assign, pledge and grant to Lender a first priority continuing
security interest and lien in and to the right, title and interest
6
<PAGE> 7
of Borrower in the following property of Borrower, whether now owned or
existing or hereafter acquired regardless of where located (collectively, the
"COLLATERAL"):
(a) All unsold Units encumbered by the Deed of Trust which are
part of a CONDOMINIUM program offered at a Resort, together with all
security deposits, accounts, receivables, profits and proceeds contact
right, general intangibles, chattel paper, documents, instruments and
all books and records relating to the foregoing, from time to time
arising form the sale of such UNITS;
(b) Stone County Acreage and Taney County Acreage and Golf
Course.
(c) All other "Property", as said term is defined in the Deed
of Trust;
(d) All collateral now or hereafter securing the Revolving
Receivables Loan; and
(e) All proceeds, profits, extensions, additions,
improvements, betterments, renewals, substitutions and replacements of
the foregoing.
SECTION 4
CONDITIONS PRECEDENT TO ADVANCES
The obligation of Lender to make the Loan is subject to satisfaction
of all of the conditions set forth below.
4.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. Lender shall have
received, as conditions precedent to the making of the initial Advance
hereunder, in form and substance satisfactory to Lender, all documents,
instruments and information identified on SCHEDULE 4.1 and all other agreements,
notes, certificates, orders, authorizations, financing statements, and other
documents which Lender may at any time reasonably request.
4.2 CONDITIONS PRECEDENT TO ADDITIONAL ADVANCES. As conditions
precedent to the making of each additional Advance hereunder, Borrower shall
have satisfied all of the conditions precedent for the making of the Initial
Loan, and all other conditions precedent for making Advances set forth in this
Agreement and in any other Loan Document.
4.3 SECURITY INTERESTS. Lender shall have received satisfactory
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral.
4.4 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on and as of the date of funding
of the Loan and any additional Advance except for any representation or warranty
limited by its terms to a specific date and taking into account any
7
<PAGE> 8
amendments to the Schedules or Exhibits as a result of any disclosures made by
Borrower to Lender after the Closing Date and approved by Lender.
4.5 NO DEFAULT. No Event of Default shall have occurred and no
condition shall exist which, but for notice or the passage of time, or both,
may result in an Event of Default in the Loan or the Revolving Receivables
Loan.
4.6 PERFORMANCE OF AGREEMENTS. Borrower shall have performed in
all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it.
4.7 FEES AND EXPENSES. Borrower shall have paid all fees and
expenses required to be paid by Borrower pursuant to this Agreement.
SECTION 5
GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows, which
representations and warranties shall remain true throughout the term of this
Agreement:
5.1 ORGANIZATION, STANDING, QUALIFICATION. BORROWER EXISTENCE.
Borrower is, and will remain at all times, a corporation duly formed, validly
existing and in good standing under the laws of the State of Texas, with its
principal place of business at 1221 Riverbend, Suite 120, Dallas, Texas 75247.
Borrower is in good standing under the laws of the State of Missouri and is
authorized to transact business in the State of Missouri.
5.2 AUTHORIZATION AND ENFORCEABILITY.
(a) EXECUTION AND DELIVERY. The execution, delivery and
performance by Borrower of the Loan Documents has been duly authorized
by all necessary corporate action of Borrower, and does not and will
not (i) violate any provision of the Borrower's Articles of
Incorporation or Bylaws 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 or
with respect to any asset of Borrower other than liens and security
interests 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 OTHER APPROVALS. No approval, authorization, order,
license, permit, franchise or consent of, or registration,
declaration, qualification or filing with, any governmental authority
is required in connection with the execution, delivery and performance
by Borrower of any of the Loan Documents, except for such filings as
are contemplated by the Loan Documents.
8
<PAGE> 9
(c) VALIDITY OF DOCUMENTS. The Loan Documents have been duly
authorized and, when duly executed and delivered by Borrower, will
constitute legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar
laws now or hereafter in effect which relate to or affect the
enforceability of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
5.3 TITLE TO PROPERTIES: PRIOR LIENS. Borrower has good and
marketable title to the Property. Borrower is not in default under any of the
documents evidencing or securing any indebtedness which is secured, wholly or
in part, by any Property, 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. There are no liens
or encumbrances against any of the Property other than the Permitted
Exceptions.
5.4 LITIGATION AND PROCEEDINGS. There are no actions, suits,
proceedings, orders or injunctions pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower, at law or in equity, or
before or by any governmental authority, which could have a material adverse
effect on Borrower or relate to the Loan or to any of the Property. Borrower
has received no notice from any court or governmental authority alleging that
Borrower has violated any applicable condominium act, any of the rules or
regulations thereunder, or any other applicable laws.
5.5 LICENSES AND PERMITS. Borrower possesses all requisite
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders as are
necessary to carry on its business as now being conducted.
5.6 ENVIRONMENTAL MATTERS. No part of the Property contains any
Hazardous Materials. Neither Borrower nor any of the Resorts have received
notice from any governmental agency, entity or other person with regard to
Hazardous Materials on or affecting any Property; neither Borrower nor any
Resort, or any portion thereof, are in violation of any applicable federal,
state, or local environmental or health laws relating to or affecting the
Property or Borrower. No Unit contains asbestos.
5.7 FULL DISCLOSURE. No information, exhibit or written report
furnished by or on behalf of Borrower to Lender in connection with the Loan
contains any material misstatement of fact or omits any material fact necessary
to make the statement contained herein or therein not misleading. Borrower
knows of no legal or contractual restriction which will prevent it from
offering or selling Units to Purchasers in any state where it is selling Units.
5.8 MARGIN REGULATIONS. The proceeds from the Loan to be evidenced
by the Note will be used to finance Borrower's existing unsold Units at certain
Resorts and to provide funds for the development of the Golf Course and
undeveloped property at such Resorts. 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,
9
<PAGE> 10
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter 11.
5.9 NO DEFAULTS. No default exists, and there is no violation in
any material respect of any term of any agreement, partnership agreement,
charter instrument, bylaw or other instrument to which Borrower is a party or
by which either may be bound.
5.10 COMPLIANCE WITH LAW. Borrower
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject; and
(b) has not failed to make or cause to be made any
registrations or declarations with any government or agency or
department thereof, necessary to the ownership of any of the Resorts
or to the conduct of its business including, without limitation, the
operation of the Resorts and the sale, or offering for sale, of Units
therein; which violation or failure to obtain or register materially
adversely affects the business, prospects, profits, properties or
condition (financial or otherwise) of Borrower. Borrower has, to the
extent required by its activities and businesses, fully complied with
(i) all of the applicable provisions of (A) the Consumer Credit
Protection Act, as amended; (B) the Federal Trade Commission Act, as
amended; (C) the Federal Interstate Land Sales Full Disclosure Act, as
amended; (D) any applicable condominium act; (E) all other applicable
federal statutes; and (F) all rules and regulations promulgated under
any of the foregoing; and (ii) all of the applicable provisions of any
law of any state in which Borrower is selling Units (and the rules and
regulations promulgated thereunder) relating to the sale, offering for
sale or financing of Units.
5.11 EMPLOYEE BENEFIT PLANS. Borrower is in compliance in all
material respects with all applicable provisions of ERISA, the IRC and all
other applicable laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. No material liability has been incurred
by Borrower which remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.
5.12 REPRESENTATIONS AS TO THE RESORTS AND GOLF COURSE.
(a) ACCESS. Each of the Resorts and the Golf Course has direct
access to a publicly dedicated road over a recorded easement and all
roadways, if any, inside the Resorts are accessible to Purchasers of
Units.
(b) UTILITIES. Electric, gas, sewer, water facilities and
other necessary utilities are lawfully available in sufficient
capacity to service each of the Resorts and Golf Course and any
easements necessary to the furnishing of such utility service have
been obtained and duly recorded.
(c) AMENITIES. All amenities described in the sales prospectus
and the Disclosure Statement for each of the Condominium Projects are
completed, or a bond insuring their completion has been posted. Each
Purchaser of a Unit will have access to and the use of all of the
amenities and public utilities of the respective Condominium
10
<PAGE> 11
Project as and to the extent provided in the Declaration and the
Disclosure Statement. A purchaser of a Lot will have access to all
utilities and availability of the Golf Course.
(d) CONSTRUCTION. All costs arising from the construction of
any improvements and the purchase of any equipment, inventory, or
furnishings located in or on each of the Resorts have been paid or
will be paid in the ordinary course of business but no later than 30
days after invoices for the work or equipment have been received by
Borrower.
(e) SALE OF UNITS. The sale, offering of sale, and financing
of Units or Lots in the Resorts (i) 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; and (ii) do not violate any applicable law, statute or
regulation including, without limitation, any applicable timesharing
law, statute, or regulation.
5.13 REPRESENTATIONS AS TO STONE COUNTY ACREAGE AND TANEY COUNTY
ACREAGE
(a) ACCESS. All of the Acreage has direct access to a publicly
dedicated road over a recorded easement.
(b) UTILITIES. Electric, gas, sewer, water facilities and
other necessary utilities are lawfully in sufficient capacity to
service of the Stone County Acreage and Taney County Acreage and any
easements necessary to the furnishing of such utility service have
been obtained and duly recorded.
(c) CONSTRUCTION. All costs arising from the construction of
any improvements to the Stone County Acreage and Taney County Acreage
have been paid.
5.14 COLLATERAL.
(a) TITLE. Borrower has good and marketable title to the
Collateral, free and clear of any lien, security interest, charge or
encumbrance except for the security interest created by the Deed of
Trust, this Agreement, or otherwise created in favor of 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.
(b) POWER. Borrower has the lawful right, power and authority
to grant a security interest in the Collateral. The Deed of Trust,
this Agreement and all filings and other actions necessary or
desirable to perfect and protect such security interest, create a
valid and perfected first priority security interest in the Collateral
securing the payment and performance of the Indebtedness.
(c) TAXES AND LIENS. Borrower has paid all taxes, levies and
other charges upon the Collateral. Borrower shall defend Lender
against and save it harmless from all claims of any Persons other than
Lender with respect to the Collateral, and this indemnity shall
include all attorneys' fees and legal expenses.
11
<PAGE> 12
(d) DEED OF TRUST. The Deed of Trust constitutes a valid and
enforceable first and prior lien and security interest on the
properties and interests covered thereby.
SECTION 6
AFFIRMATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid, Borrower
hereby agrees with Lender as follows:
6.1 PAYMENT AND PERFORMANCE OF INDEBTEDNESS. Borrower shall pay
and promptly perform all of the obligations hereunder and under the Loan
Documents.
6.2 INSURANCE. Borrower shall duly and promptly comply with all of
the insurance provisions set forth in the Deed of Trust.
6.3 CONDEMNATION. Borrower shall duly and promptly comply with all
of the condemnation provisions set forth in the Deed of Trust.
6.4 REPORTING REQUIREMENTS. So long as the Indebtedness remains
unpaid, Borrower shall duly and promptly furnish to Lender all reports,
financial statements, compliance certificates, and other related information
required by any document or instrument evidencing, securing, or executed in
connection with the Revolving Receivables Loan, or as may otherwise be
requested by Lender from time to time.
6.5 CLAIMS. The Collateral is and shall remain free of all liens
and encumbrances whatsoever (including, without limitation, claims for labor,
services, materials and supplies) except for the Permitted Exceptions. In the
event any lien attaches to any Collateral, Borrower shall, within ten (10) days
after such attachment, 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 where the subject Collateral is located, issued by a corporate surety
acceptable to Lender, in an amount acceptable to Lender and in form acceptable
to Lender.
6.6 TITLE. Borrower shall promptly notify Lender of any claim,
action or proceeding affecting title to the Collateral, or any part thereof, or
any of the security interests granted hereunder and, at the request of Lender,
appear in and defend, at Borrower's expense, any such claim, action or
proceeding.
6.7 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, which are subordinated by the
terms thereof or by separate instrument to the payment of principal of, and
interest on, the Note except in accordance with the terms of such
subordination, (ii) permit the amendment, rescission or other modification of
any such subordination provisions of any of Borrower's subordinated obligations
in such a manner as to affect adversely Lender's lien or the prior position of
the Note, or (iii) permit the prepayment or redemption, except for mandatory
prepayments, of all or any part of any subordinated obligations of Borrower
except in accordance with the terms any intercreditor agreement.
12
<PAGE> 13
6.8 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 the Indebtedness and to ensure the performance of the terms
and provisions of the Loan Documents. 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 its representations, warranties and covenants.
6.9 AFFIRMATIVE COVENANTS IN OTHER DOCUMENTS. Borrower shall duly
and promptly comply with and perform, or cause to be complied with and
performed, all of the affirmative covenants set forth (a) in the Deed of Trust
or in any other Loan Document, (b) in any document or instrument evidencing,
securing, or executed in connection with the Revolving Receivables Loan, or (c)
in any other document or instrument evidencing, securing, or executed in
connection with any other Indebtedness.
SECTION 7
NEGATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lender is
committed to lend hereunder, unless Lender otherwise consents in writing,
Borrower hereby covenants and agrees with Lender as follows:
7.1 NEGATIVE COVENANTS IN OTHER DOCUMENTS. Borrower shall not
violate or permit to be violated any of the negative covenants set forth (a) in
the Deed of Trust or in any other Loan Document, (b) in any document or
instrument evidencing, securing, or executed in connection with the Revolving
Receivables Loan, or (c) in any other document or instrument evidencing,
securing, or executed in connection with any other Indebtedness.
7.2 USE OF LENDER NAME. Borrower shall not, and shall not permit
any Affiliate to, without the prior written consent of Lender use the name of
Lender or the name of any affiliates of Lender in connection with any of their
respective businesses or activities, except in connection with internal
business matters, administration of the Loan and as required in dealings with
governmental agencies.
SECTION 8
EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
8.1 PAYMENTS. Failure of Lender to receive from Borrower, within
five (5) days of the date written notice has been sent to Borrower after the
due date: (a) any amount payable under the Note, or (b) any other payment due
under the Loan Documents, except for the Note payment due at the Maturity Date
for which no grace period is allowed.
13
<PAGE> 14
8.2 COVENANT DEFAULTS. Borrower shall fail to perform or observe
any covenant, agreement, obligation, representation or warranty contained in
this Agreement or in any of the Loan Documents (other than any covenant or
agreement obligating Borrower to pay the Indebtedness), and such failure shall
continue for thirty (30) days after Lender delivers written notice thereof to
Borrower, provided, however, if the failure is incapable of cure within such
thirty (30) day period and Borrower shall be diligently pursuing a cure, such
thirty (30) day cure period shall be extended by an additional period not to
exceed sixty (60) days.
8.3 WARRANTIES OR REPRESENTATIONS. 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, shall be false, misleading or incorrect in any
material respect as of the date made.
8.4 INVOLUNTARY PROCEEDINGS. If a case is commenced or a petition
is filed and not dismissed within sixty (60) days against Borrower under any
applicable liquidation, conservatorship, bankruptcy, moratorium, insolvency,
reorganization or similar law providing for the relief of debtors and generally
affecting the rights of creditors; 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 sixty (60) days; or if any material
asset of Borrower is sequestered by court order and such order remains in
effect for more than sixty (60) days.
8.5 PROCEEDINGS. Borrower voluntarily seeks, consents to or
acquiesces in the benefit of any provision of any applicable liquidation,
conservatorship, bankruptcy, moratorium, insolvency, reorganization or similar
law providing for the relief of debtors and generally affecting the rights of
creditors, whether now or hereafter in effect; consents to the filing of any
petition against it under such law; makes an assignment for the benefit of its
creditors; admits in writing its inability to pay its debts generally as they
become due; or consents to the appointment of a receiver, trustee, liquidator
or conservator for it or any part of its assets.
8.6 ATTACHMENT, JUDGMENT, TAX LIENS. The issuance, filing or levy
against 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.
8.7 INSOLVENCY. Borrower shall become insolvent or otherwise
generally be unable to pay its debts when due.
8.8 MATERIAL ADVERSE CHANGE. Any material adverse change in the
financial condition of Borrower (which is not otherwise specifically described
in this Section 8 as an Event of Default) which Lender in good faith believes
impairs or may impair Borrower's ability to duly and promptly perform all of
its obligations under this Agreement and the other Loan Documents. A change
shall not be deemed material and adverse until it results in cumulative damages
of at least $100,000 or is not subject to quantification in Lender's reasonable
opinion.
8.9 DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default by
Borrower in the payment of Indebtedness for borrowed money in excess of
$100,000 in the aggregate after the expiration of any applicable grace or cure
period; any other default under such Indebtedness which accelerates or permits
the acceleration (after the giving of notice or passage of time, or
14
<PAGE> 15
both) of the maturity of such Indebtedness; or any default which permits the
holders of such Indebtedness to control Borrower.
8.10 SUSPENSION OF SALES. The issuance of any stay order, cease and
desist order or similar judicial or nonjudicial sanction that materially
adversely limits or otherwise affects any Unit sales activities, and, with
respect to any such sanction only, such sanction is not dismissed, terminated
or rescinded within thirty (30) days after issuance.
8.11 DEFAULT UNDER DEED OF TRUST. If a default or Event of Default
occurs under the Deed of Trust or any other Loan Document and such default or
event of default is not cured within the applicable grace period (if any),
provided therein.
8.12 DEFAULT UNDER OTHER LOANS. If a default or Event of Default
occurs under (a) any document or instrument evidencing, securing or executed in
connection with the Revolving Receivables Loan, or (b) any document or
instrument evidencing, securing, or executed in connection with any other
Indebtedness, and any such default or event of default (as described in (a) or
(b) above) is not cured within the applicable grace period (if any) provided
therein.
SECTION 9
REMEDIES
9.1 REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, Lender may take any one or more of the following actions, all without
notice to Borrower:
(a) ACCELERATION. Declare the unpaid balance of the
Indebtedness, or any part thereof, immediately due and payable,
whereupon the same shall be due and payable.
(b) TERMINATION OF OBLIGATION TO ADVANCE. Terminate any
commitment of Lender to lend under this Agreement in its entirety, or
any portion of any such commitment, to the extent Lender shall deem
appropriate.
(c) EXERCISE OF OTHER RIGHTS. Exercise any and all other
rights or remedies afforded by any 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.
9.2 APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon the
occurrence of an Event of Default, Lender may apply against the Indebtedness
any and all Collateral in its possession, any and all balances, credits,
deposits, accounts, reserves, indebtedness or other moneys due or owing to
Borrower held by Lender hereunder or under any other financing agreement or
otherwise, whether accrued or not.
15
<PAGE> 16
9.3 WAIVERS. 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,
Borrower and each and every surety, endorser, guarantor and other party liable
for the payment or performance of all or any portion of the Indebtedness,
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 the time of payment of the
Indebtedness, or by any release or change in any security for the payment or
performance of the Indebtedness, regardless of the number of such renewals,
extensions, releases or changes.
9.4 CUMULATIVE RIGHTS. All rights and remedies available to Lender
under the Loan Documents shall be cumulative and in addition to all other
rights and remedies granted to Lender at law or in equity, whether or not the
Indebtedness 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.
9.5 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 Indebtedness and shall bear interest at the Default Rate,
from the date of such expenditure until the date repaid.
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 Lender's liens and security interests in and to preserve the
Collateral. Borrower agrees to cooperate fully with all of Lender's efforts to
preserve the Collateral and Lender's liens and security interests therein and
will take such actions to preserve the Collateral and Lender's liens and
security interests therein.
10.2 PERFORMANCE BY LENDER. If Borrower fails to perform any
agreement contained herein, Lender may, but shall not be obligated to, cause
the performance of, such agreement, and the expenses of Lender incurred in
connection therewith shall be payable by Borrower pursuant to Section 10.3
below.
10.3 FEES AND EXPENSES. Borrower agrees to promptly pay all
reasonable Costs (defined below) incurred by Lender in connection with the
documentation, modification, workout, collection or enforcement of the Loan or
any of the Loan Documents (as applicable) and all such Costs shall be included
as additional indebtedness bearing interest at the Default Rate set forth in
the Note until paid. For the purposes hereof "COSTS" shall mean all
expenditures and expenses which may be paid or incurred by or on behalf of
Lender including payments to remove or protect against liens, attorneys' fees
(including fees of Lender's inside counsel), receivers' fees, engineers' fees,
accountants' fees, independent consultants' fees (including environmental
16
<PAGE> 17
consultants), all costs and expenses incurred in connection with any of the
foregoing, Lender's out-of-pocket costs and expenses related to any audit or
inspection of any of the Resorts or the Collateral, outlays for documentary and
expert evidence, stenographers' charges, stamp taxes, publication costs, and
costs (which may be estimates as to items to be expended after entry of an order
or judgment) for procuring all such abstracts of title, title and UCC searches,
and examination, title insurance policies, and similar data and assurances with
respect to title as Lender may deem reasonably necessary either to prosecute
any action or to evidence to bidders at any foreclosure sale a true condition
of the title to, or the value of, the Collateral. Lenders costs, including fees
of its attorney, shall be limited to $15,000 for preparation of the Loan
Documents and closing of the Loan.
10.4 LENDER'S RIGHT OF SET-OFF. Upon the occurrence of an Event of
Default, or if Lender shall be served with garnishment process in which
Borrower shall be named as defendant, whether or not any Event of Default shall
have occurred, Lender may, but shall not be required to, set-off any
indebtedness owing by Lender to Borrower against any of the Indebtedness
without first resorting to the security hereunder and without prejudice to any
other rights or remedies of Lender or its security interest herein.
10.5 ASSIGNMENT OF LENDER'S INTEREST. Lender shall have the right
to assign all or any portion of its rights in this Agreement to any subsequent
holder or holders of the Indebtedness.
10.6 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, (i) from time to time to institute and prosecute in the
name of Borrower or otherwise, but for the benefit of Lender, 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; and (ii) 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 are coupled with an interest and are and shall
be irrevocable by Borrower in any manner, or for any reason, unless and until
all obligations of Borrower to Lender have been satisfied.
10.7 INDEMNIFICATION OF LENDER. Borrower hereby agrees to indemnify
Lender and hold Lender harmless from and against any and all liabilities,
indebtedness, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against Lender, in any way relating to
or arising out of (i) this Agreement and the Loan Documents and/or (ii) any of
the transactions contemplated therein or thereby (including, without
limitation, those in any way relating to or arising out of the violation by
Borrower of any federal or state laws including the Interstate Land Sales Act
or the Condominium Act). Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Lender believes is covered by this indemnity,
and subject to the condition that no Event of Default under this Agreement
shall then exist, Lender shall give Borrower notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to Lender. Notwithstanding any defense by
17
<PAGE> 18
Borrower of any such suit claim or demand, Lender shall have the right to
participate in any material decision affecting the conduct or settlement of any
dispute or proceeding for which indemnification may be claimed. It is the
express intention of the parties hereto that the indemnity provided for herein
is intended to and shall protect and indemnify Lender from the consequences of
Lender's own negligence (but not gross negligence or willful misconduct),
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.
SECTION 11
MISCELLANEOUS
11.1 NOTICE. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m. (New
York time) on a business day; provided that a hard copy of such notice is also
sent pursuant to (c) or (d) below; (c) if by overnight courier, on the first
business day after delivery to the courier; or (d) if by U.S. Mail, certified
or registered mail, return receipt requested on the fourth (4th) day after
deposit in the mail postage prepaid.
Notices to Borrower: Silverleaf Vacation Club, Inc.
Attn: Robert Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
Telecopy: (214) 904-0514
With a copy to: Meadows, Owens, Collier, Reed,
Cousins & Blau., L.L.P.
Attn: George Bedell, Esq.
3700 Nations Bank Plaza
901 Main Street
Dallas, Texas 75202
Telecopy: (214) 747-3732
Notices to Lender: CS First Boston Mortgage Capital Corp.
Attn: Principal Transaction Group
55 East 52nd Street
New York, New York 10055-0186
Telecopy: (212) 318-1468
With a copy to: Fieldstone Lester & Shear
Attn: Robert E. Dady, Esq.
200 S. Biscayne Blvd.
Suite 2100
Miami, Florida 33131-2804
Telecopy: (305) 982-1550
18
<PAGE> 19
11.2 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 the extension of the Indebtedness (and each part thereof),
regardless of any investigation made by or on behalf of Lender.
11.3 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 NEW YORK AND
APPLICABLE LAWS OF THE UNITED STATES.
11.4 LIMITATION ON INTEREST. In no event whatsoever shall the
amount of interest paid or agreed to be paid to Lender pursuant to this
Agreement, the Note or any of the Loan Documents exceed the highest lawful rate
of interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which
a court of competent jurisdiction may deem applicable hereto ("EXCESS
INTEREST"), then ipso facto, the obligation to be fulfilled shall be reduced to
the highest lawful rate of interest permissible under such law and if, for any
reason whatsoever, Lender shall receive, as interest, an amount which would be
deemed unlawful under such applicable law, such interest shall be applied to
the Loan (whether or not due and payable), and not to the payment of interest,
or refunded to Borrower if such Loan(s) have been paid in full. Neither Borrower
nor any guarantor or endorser shall have any action against Lender for any
damages whatsoever arising out of the payment or collection of any such Excess
Interest.
11.5 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 and 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.
11.6 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 and Lender.
11.7 NO DUTY. All attorneys, accountants, appraisers, consultants,
custodians and other professional persons retained by Lender shall have the
right to act exclusively in the interests of Lender and shall have no duty of
disclosure, duty of loyalty, duty of care or other duty or obligation of any
type or nature whatsoever to Borrower or any of its partners, or to any other
person or entity.
11.8 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.
19
<PAGE> 20
11.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
other Loan Documents and agreements referred to herein embody the entire
agreement between the parties hereto, supersedes all prior agreements and
understandings between the parties whether written or oral relating to the
subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no oral
agreements among Lender, Borrower, the General Partner, or between any two or
more of them. This Agreement may be modified or changed only in a writing
executed by both Lender and Borrower and/or the other affected parties.
11.10 VENUE. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR
FROM THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED, AT LENDER'S
SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY
OF NEW YORK, STATE OF NEW YORK. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY
AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION
SYSTEM, WHOSE ADDRESS IS BORROWER, C/O CT CORPORATION SYSTEM, 1633 BROADWAY,
NEW YORK, NEW YORK 10019, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL
PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL
CONSTITUTE PERSONAL SERVICE OF PROCESS UPON SUCH PARTIES PROVIDED THAT A COPY
OF SUCH PROCESS BE DELIVERED TO BORROWER PURSUANT TO THE PROVISIONS OF SECTION
11.1 OF THIS AGREEMENT. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH
AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, OR LENDER CHOOSES A DIFFERENT
AGENT, BORROWER SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN NEW YORK) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY
LENDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED,
LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE
AGENT UPON FIVE (5) DAYS NOTICE TO BORROWER. BORROWER HEREBY WAIVES ANY RIGHT
IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY LENDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.
11.11 JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF
LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER OF TRIAL BY
JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON
THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE
20
<PAGE> 21
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL.
11.12 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.
11.13 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.
11.14 BROKER'S FEES. There are no brokers, finders' or other similar
fees or commitments due with respect to the transactions described in the
Agreement. Borrower shall defend Lender and save and hold it harmless from all
claims of any Persons for any such fees which indemnity shall include
reasonable attorneys' fees and legal expenses.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed and delivered by their duly authorized officers effective as of the
date first above written.
BORROWER: BORROWER:
CONDOMINIUM BUILDERS, INC., SILVERLEAF VACATION CLUB, INC.,
a Texas corporation a Texas corporation
/s/ ROBERT MEAD /s/ ROBERT MEAD
- --------------------------------- ---------------------------------
By: ROBERT MEAD, By: ROBERT MEAD,
PRESIDENT Chief Executive Officer
LENDER:
CS FIRST BOSTON MORTGAGE CAPITAL
CORP., a Delaware corporation
By: /s/ DAVID ARZI
------------------------------
Name: DAVID ARZI
----------------------------
Its: Vice President
----------------------------
21
<PAGE> 22
SCHEDULE 4.1
CLOSING DELIVERIES
Pursuant to Section 4.1 of the Agreement, Lender shall not be
obligated to fund the initial Advance unless Lender shall have received, in
form and substance satisfactory to Lender, all documents, instruments and
information as follows:
1. OPINIONS OF COUNSEL. An opinion of Borrower's counsel stating:
(a) that the Loan is not usurious under applicable laws; (b) that the Loan
Documents are validly executed, duly authorized and binding and enforceable in
accordance with their terms; (c) that the execution and delivery of the Loan
Documents and the performance of the transactions contemplated thereby do not
violate or contravene any law, court order, judgment or contract to which
Borrower is a party; and (d) such further opinions as Lender shall require. The
opinion of Borrower's counsel shall be from an independent counsel acceptable
to Lender.
2. TITLE. The Title Insurer shall have issued to Lender the Title
Insurance Policy or a binding commitment satisfactory to Lender's counsel
without any exceptions from coverage other than the Permitted Exceptions.
3. AUTHORIZATIONS. Such certified authorizations or resolutions
required to authorize Borrower to enter into and execute this Agreement, the
Note and the other Loan Documents in connection therewith and to borrow the
Loan from Lender.
4. EVIDENCE OF INSURANCE. Evidence of policies of insurance as
required by the Deed of Trust
5. APPLICABLE LAWS. Evidence that Borrower is in compliance with
all applicable laws in connection with its sales of Intervals.
6. LOAN DOCUMENTS. All documents to be executed in connection
with the Loan, including, without limitation, the Note, Deed of Trust, the Loan
and Security Agreement, UCC-1 Financing Statements and such other documents as
Lender may require.
7. OTHER LOAN DOCUMENTS. Copies of all loan documents between
Borrower and any lender holding a deed of trust or mortgage lien on any of the
Property or any portion thereof.
8. ENVIRONMENTAL INDEMNITY. An Environmental Indemnity Agreement,
executed by Borrower in favor of Lender.
9. OTHER ITEMS. Such other agreements, documents, instruments and
certificates as Lender may request to evidence the Indebtedness and to evidence
and perfect the liens and security interests contemplated by the Loan
Documents.
1
<PAGE> 23
10. UCC SEARCHES. Such searches of the applicable public records as
it deems necessary under applicable law to verify that it has a first and prior
perfected lien and security interest covering all of the Collateral.
11. TAXES. Evidence that all real property taxes owed by or for
which Borrower is responsible for collection have been paid.
12. CREDIT REFERENCES. Such satisfactory credit references and
results of credit investigations as Lender may require for Borrower and any
Affiliate.
13. STRUCTURY ADVISORY FEE. Lender shall have received the
Structury Advisory Fee.
ANY WAIVER OF ANY OF THE AFORESAID CONDITIONS PRECEDENT MUST BE IN
WRITING, SPECIFY THE CONDITION AND BE SIGNED BY AN AUTHORIZED OFFICER OF THE
LENDER. ANY WAIVER, IF ANY, SHALL ONLY WAIVE THE SPECIFIED CONDITION AND NO
OTHER, AND SHALL NOT BE DEEMED OR CONSTRUED TO BE A SUBSEQUENT WAIVER. NEITHER
THE CLOSING OF THE LOAN NOR THE DISBURSEMENT OF ANY LOAN PROCEEDS SHALL BE
DEEMED A WAIVER OF ANY OF THE AFORESAID CONDITIONS PRECEDENT.
2
<PAGE> 1
EXHIBIT 10.9
LOAN AND SECURITY AGREEMENT
$5,000,000.00 Credit Facility
provided by Textron Financial Corporation to
Ascension Resorts, Ltd., a Texas Limited Partnership
doing business as
Silverleaf Resorts, Ltd.
As of August 15, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 - DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 - THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Revolving Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3 - COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Security Interest in All Pledged Notes Receivable... . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Protection of Collateral; Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4 - CONDITIONS PRECEDENT TO THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Closing Date Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 Proceeding Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5 - FUNDING PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6 - GENERAL REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Organization, Standing, Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Authorization, Enforceability, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Financial Statements and Business Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Title to Properties: Prior Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Subsidiaries, Affiliates and Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.7 Litigation, Proceedings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8 Licenses, Permits, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.10 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.11 Use of Proceeds/Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.12 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.14 Restrictions of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.15 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.16 Deferred Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.17 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.18 Resort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.19 Timeshare Regimen Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.20 Operating Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.21 Architectural and Environmental Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.22 Tax Identification/Social Security Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7 - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8 - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.1 Nature of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9 - REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.1 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.2 Notice of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.3 Application of Collateral; Termination of Agreements . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 Rights of Lender Regarding Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.5 Delegation of Duties and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.6 Lender Not in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.8 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.9 Expenditures by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.10 Diminution in Value of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10 - CERTAIN RIGHTS OF LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 Protection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 No Liability of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.4 Right to Defend Action Affecting Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.6 Lender's Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.8 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.9 Assignment of Lender's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.10 Notice to Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.11 Collection of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.12 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.13 Relief from Automatic Stay, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 11 - TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.4 Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.5 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.7 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.8 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.9 Lender Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.10 Return of Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.11 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.12 Total Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.14 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.15 Consent to Advertising and Publicity of Timeshare Documents . . . . . . . . . . . . . . . . . . . . 64
12.16 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.18 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
EXHIBIT "A" -- FORM OF REQUEST & BORROWING BASE CERTIFICATE
EXHIBIT "B" -- INTENTIONALLY OMITTED
EXHIBIT "C" -- LOAN DOCUMENTS
EXHIBIT "D" -- OPERATING CONTRACTS
SCHEDULE 1.1(n) -- DECLARATIONS
SCHEDULE 1.1(xx) -- RESORTS
SCHEDULE 1.1(eee) -- TIMESHARE OWNERS' ASSOCIATIONS
SCHEDULE 5 -- APPLICABLE RECORDING OFFICES
SCHEDULE 6.9 -- ENVIRONMENTAL MATTERS
SCHEDULE 6.19 -- TIMESHARE REGIMENT REPORT
iii
<PAGE> 5
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated as of August 15,1995 among Ascension
Resorts, Ltd, a Texas limited partnership ("Borrower"), ASCENSION CAPITAL
CORPORATION, a Texas corporation (the "Guarantor"), jointly and severally, and
TEXTRON FINANCIAL CORPORATION, a Delaware corporation ("Lender").
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) ADVANCE. A portion of the proceeds of the Loan
advanced from time to time by the Lender to the Borrower in accordance
with the terms of this Agreement.
(b) AFFILIATE. Any party controlled by, controlling, or
under common control with, the Borrower or the Guarantor.
(c) AGREEMENT. This Loan and Security Agreement among
Borrower, the Guarantor and Lender (including the exhibits and
schedules to it), as it may be amended from time to time.
(d) ASSIGNMENT OF NOTES RECEIVABLE AND MORTGAGES. A
recordable assignment made by Borrower in favor of Lender evidencing
the assignment to Lender of all of the Pledged Notes Receivable and
Mortgages.
(e) BORROWING BASE. With respect to Eligible Notes
Receivable pledged to Lender in connection with each Advance, an
amount equal to seventy percent (70%) of the remaining principal
balance of each such Note.
(f) BUSINESS DAY. Each day which is not a Saturday or
Sunday or a legal holiday under the laws of the State of Connecticut,
the State of Missouri, the State of Rhode Island, the State of Texas,
or the United States.
(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.
<PAGE> 6
(i) COLLATERAL. Collectively, all now owned or hereafter
acquired right, title and interest of the Borrower, in all of the
following:
(i) Pledged Notes Receivable and all
proceeds of or from them;
(ii) Mortgages and all proceeds of or
from them;
(iii) Documents, instruments, accounts,
chattel paper, and general intangibles relating to the Pledged
Notes Receivable and the Mortgages;
(iv) Extensions, additions, improvements,
betterments, renewals, substitutions and replacements of, for
or to any of the Collateral, wherever located, together with
the products, proceeds issues, rents and profits thereof, and
any replacements, additions or accessions thereto or
substitutions thereof; and
(v) All books, records, reports,
computer tapes, disks and software relating to the Collateral.
(j) COMMITMENT. The Loan Commitment issued by Lender to
Borrower dated May 11, 1995 and accepted on May 26, 1995.
(k) COMMITMENT FEE. The commitment fee in the amount of
$50,000.00 described in the Commitment, which is to be paid in
accordance with the terms of the Commitment Letter.
(l) 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.
(m) 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.
(n) DECLARATION OR DECLARATIONS. With respect to each
Resort, the applicable Declaration or Declarations described on
Schedule 1.1(o) attached hereto.
(o) 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.
(p) DEFAULT RATE. Defined in the Note.
2
<PAGE> 7
(q) DIVISION OR COMMISSION. The Texas Real Estate
Commission.
(r) ELIGIBLE NOTES RECEIVABLE. Those Pledged Notes
Receivable which satisfy each of the following criteria:
(i) the Borrower shall be the sole payee;
(ii) it arises from a bona fide sale by Borrower
of one or more Intervals;
(iii) the Interval sale from which it arises shall
not have been cancelled by the Purchaser, and any statutory or
other applicable cancellation or rescission period shall have
expired and otherwise in compliance with this Agreement;
(iv) it is secured by a Mortgage on the purchased
Interval;
(v) principal and interest payments on it are
payable to the Borrower in legal tender of the United States;
(vi) payments of principal and interest on it are
payable in equal monthly installments;
(vii) it shall have an original term of no more
than 84 months;
(viii) a cash down payment has been received from
the Purchaser or the maker in an amount equal to at least ten
percent (10%) of the actual purchase price of each Interval,
and Purchaser shall have received no cash or other rebates of
any kind;
(ix) The Purchaser or other obligor shall have
made at least one (1) monthly payment pursuant to the Note;
(x) no monthly installment is more than thirty
(30) days contractually past due at the time of an Advance in
respect of such Eligible Note Receivable, or more than sixty
(60) days contractually past due at any time;
(xi) the rate of interest payable on the unpaid
balance is at least the rate required so that when the Advance
is made in respect of such Eligible Note Receivable the
average interest rate on all Eligible Notes Receivable in
respect of which Advances are outstanding shall not be less
than fourteen percent (14%) per annum at any time;
3
<PAGE> 8
(xii) the Purchaser of the related Interval has
immediate access, for the timeshare "unit week" related to
such purchase, to the Interval described in the Mortgage
securing such Eligible Note Receivable, which Interval has
been completed, developed, and furnished in accordance with
the specifications provided in the Purchaser's purchase
contract, public offering statement and other Timeshare
Documents; and the Purchaser has, subject to the terms of the
Declaration, purchase contract, public offering statement and
other Timeshare Documents, complete and unrestricted access to
the related Interval and the Resort;
(xiii) neither the Purchaser of the related Interval
or any other maker of the Note is an Affiliate of, or related
to, or employed by the Borrower or the Guarantor;
(xiv) the Purchaser or other maker has no claim
against Borrower and no defense, set-off or counterclaim with
respect to the Note Receivable;
(xv) the maximum remaining principal balance of
any such Note Receivable shall not exceed $25,000 and the
total maximum remaining principal balance of the Notes
Receivable executed by any one Purchaser or other maker shall
not exceed $25,000 in the aggregate (or such greater amount as
may be approved in writing in advance by Lender);
(xvi) it is executed by a U.S. or Canadian
resident; provided, however, that no more than ten percent
(10%) of the outstanding principal balance of all Eligible
Notes Receivable shall at any time be comprised of Notes
Receivable executed by Canadian residents, and, to the extent
such outstanding principal balance of such Notes exceeds ten
percent (10%), they shall not be considered Eligible Notes
Receivable;
(xvii) the original of such Note Receivable has been
endorsed to Lender and delivered to Lender as provided in this
Agreement, and the terms thereof and all instruments related
thereto shall comply in all respects with all applicable
federal and state laws and the regulations promulgated
thereunder; and
(xviii) the Unit in which the timeshare Interval
being financed or evidenced by such Note Receivable is
located, shall not be subject to any Lien which is not
previously consented to in writing by Lender.
(s) ENCUMBERED INTERVALS. The Intervals subject to the
Mortgages.
4
<PAGE> 9
(t) 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 Texas and Missouri state and
local environmental laws, rules and regulations, 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.
(u) EXCHANGE COMPANY. Resort Condominiums International,
Inc. ("RCI").
(v) EVENT OF DEFAULT. Defined in Section 8.1 of this
Agreement.
(w) FINAL MATURITY DATE. August 31, 2000.
(x) 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 prior to the Closing
Date and provided for in Section 4.1(d) of this Agreement; and the
financial statements and reports of the Guarantor delivered to Lender
prior to the Closing Date; and the monthly and annual financial
statements and reports required to be provided to Lender pursuant to
Section 7.1(h) (i), (ii) and (iii).
(y) 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.
5
<PAGE> 10
(z) GUARANTOR. Ascension Capital Corporation, a Texas
corporation.
(aa) GUARANTY. A Guaranty and Subordination Agreement
executed and delivered to Lender concurrently with this Agreement by
the Guarantor.
(bb) 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.
(cc) INTEREST RATE. The variable rate, adjusted as of the
first day of each calendar month, equal to the sum of the Prime Rate
as of the first day of each calendar month, plus two and
three-quarters percent (2 3/4%) per annum.
(dd) INTERVAL. With respect to each Resort the undivided
fractional fee simple interval ownership interest as a
tenant-in-common (sometimes referred to in the Timeshare Documents as
a Condoshare Interest or Condoshare Week) in a Unit sold to a
Purchaser by delivery of a warranty deed, for a time-share period per
calendar year of one week (as is 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 each is defined in the Declaration), all
as more particularly described in the Declaration or other Timeshare
Documents.
(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) LOAN. The $5,000,000.00 revolving term credit
facility described in this Agreement.
(gg) 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;
(ii) THE NOTE;
(iii) THE GUARANTY;
6
<PAGE> 11
(iv) THE ASSIGNMENT OF NOTES RECEIVABLE AND
MORTGAGES;
(v) THE LOCKBOX AGREEMENT;
(vi) FINANCING STATEMENTS; UCC financing
statements covering the Collateral, to be filed with the
Missouri Secretary of State and the Texas Secretary of State.
(vii) 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.
(hh) 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.
(ii) LOCKBOX AGENT. Texas Commerce Bank, National
Association, a national banking association having a place of business
at 2200 Ross Avenue, Dallas, Texas 75201, or such other financial
institution as may be approved by Lender in writing from time to time.
(jj) LOCKBOX AGREEMENT. A Lockbox and Servicing Agreement
between Borrower, Lender, Servicing Agent and Lockbox Agent pursuant
to which Lockbox Agent is to provide lockbox, reporting and related
services and is to provide for the receipt of payments on the Notes
Receivable and disbursement of such payments to Lender.
(kk) MANDATORY PREPAYMENT. Any prepayment required by
Section 2.4(b) of this Agreement.
(ll) MORTGAGE. A properly recorded, first priority
mortgage executed and delivered by each Purchaser to Borrower,
securing a Pledged Note Receivable and encumbering all of the right,
title and interest of each Purchaser in the related Encumbered
Interval and Common Elements, and related or appurtenant easement,
access and use rights and benefits.
(mm) NOTE. The Secured Promissory Note evidencing the Loan
dated the Closing Date executed and delivered by Borrower to Lender
concurrently with this Agreement.
7
<PAGE> 12
(nn) NOTE RECEIVABLE. A promissory note executed in favor
of Borrower in connection with a Purchaser's acquisition of an
Interval.
(oo) OBLIGATIONS. All amounts due or becoming due to
Lender in respect of the Loan or 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, and by the Guarantor, jointly and severally, of all
obligations, indebtedness and liabilities pursuant to this Agreement
or any of the Loan Documents or otherwise
(pp) OPERATING CONTRACT OR OPERATING CONTRACTS. As defined
in Section 6.20.
(qq) PAYMENT AUTHORIZATION AGREEMENT. Pre-authorized
electronic debit agreement by Purchaser for payment of a Note
Receivable.
(rr) PERSON. An individual, partnership, corporation,
limited liability company, trust, unincorporated organization, other
entity, or a government or agency or political subdivision thereof.
(ss) PLEDGED NOTES RECEIVABLE. Any Note Receivable which
at any time has been pledged to Lender by Borrower pursuant to this
Agreement or any of the Loan Documents.
(tt) PROPERTY OR PROPERTIES. Any interest in any kind of
property or asset, whether real, personal or mixed, tangible or
intangible.
(uu) 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.
(vv) PURCHASE PRICE. The total purchase price of a
timeshare Interval, as set forth in the Timeshare Documents and Note
Receivable relating to the purchase of such Interval.
(ww) PURCHASER. Any Person who purchases one or more
Intervals.
8
<PAGE> 13
(xx) RESORT OR RESORTS. As applicable, each or all of the
interval ownership and time-share projects commonly known as Holly
Lake Condoshare, Piney Shores Resort Condoshare, Lake O'the Woods, The
Villages Condoshare, Hill Country Resort Condoshare, Ozark Mountain
Resort Condoshare, and Holiday Hills Resort Condoshare, consisting of,
among other things, Units and Intervals, now existing or hereafter
added, in one or more buildings or phases and all related Common
Elements and appurtenances, described on Schedule 1.1(xx), together
with all related or appurtenant properties, amenities, facilities,
equipment, appliances, fixtures, easements, licenses, rights and
interests as established by and more fully described in the
Declaration and the other Timeshare Documents, and as the same may be
amended from time to time.
(yy) SECURITY. Shall have the same meaning as in Section
2(l) of the Securities Act of 1933, as amended.
(zz) SERVICING AGENT. Lender's exclusive agent, which shall
be such Person or Persons designated by Lender in Lender's sole
discretion, for the purposes of billing and collecting amounts due on
account of the Pledged Notes Receivable, providing reports pursuant to
the Lockbox Agreement and performing other servicing functions not
performed by the Lockbox Agent. Borrower shall be the Servicing Agent
for so long as no Event of Default shall have occurred, provided,
however, that upon the occurrence of an Event of Default, Borrower
shall continue to serve as Servicing Agent until a new Servicing Agent
is designated by Lender.
(aaa) SURVEY. A plat or survey of the Resort prepared by a
licensed surveyor acceptable to Lender and in a form acceptable to
Lender.
(bbb) TERM. A period of five (5) 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.
(ccc) TIMESHARE ACT. The Texas Timeshare Act, or any
successor thereto or replacement thereof, as the same may be amended
from time to time and any rules and regulations promulgated
thereunder, and any timeshare act that may be enacted in the State of
Missouri.
(ddd) TIMESHARE DOCUMENTS. All of the documents relating to
each of the Resorts and the creation, marketing and sale of Intervals
including:
(1) The registration statement
(currently required in Texas but not in Missouri)
approving the establishment and operation of the
Resorts and the sales of Intervals.
9
<PAGE> 14
(2) The Resort Declaration and all
amendments establishing and describing the timeshare
estate status of the Units and Intervals, and all
amenities, services, and the Common Areas and
elements related or appurtenant thereto and any other
declarations of covenants, conditions and
restrictions encumbering the Resorts.
(3) The Rules and Regulations of the
Resorts.
(4) Other registrations, approvals and
permits for creation and sale of Intervals and
operation of the Resorts, including, without
limitation, samples of all advertising and
promotional materials.
(5) The Association's certificate of
good standing, and certified articles of
incorporation, bylaws and all amendments or, if the
Association is an unincorporated association, the
bylaws and all amendments.
(6) All agreements entered into, by or
on behalf of the Association, including agreements
with Borrower or any Affiliate related to management,
operations and maintenance of the Resorts and,
agreements with Purchasers.
(7) The form of all documents used to
market and sell Intervals or that govern the rights
of Purchasers, including without limitation, purchase
contracts, advertising materials, Notes Receivable,
truth-in-lending statements, Purchaser's
Acknowledgments, grant deeds, Deeds of Trust, the
Exchange Agreement with the Exchange Company,
reservation agreements, subsidy agreements,
management agreements, warranties, space leases,
equipment leases or other personal property financing
arrangements, if any, and a certified Personal
Property inventory.
(eee) TIMESHARE OWNERS' ASSOCIATION. With respect to each
Resort, the Master Endless Escape Club, a Texas non-profit
corporation, and the applicable not-for-profit corporations described
on Schedule 1.1(eee).
(fff) 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.
(ggg) VOLUNTARY PREPAYMENT. Any voluntary prepayment of the
loan permitted to be made by the Borrower under the terms of this
Agreement.
10
<PAGE> 15
SECTION 2 - THE LOAN
2.1 REVOLVING LOAN. Upon the terms and subject to the conditions
set forth in this Agreement, Lender shall advance to Borrower, and Borrower may
borrow, repay and reborrow, principal under the Loan in an amount not to exceed
at any time the lesser of the amount of the Borrowing Base, or $5,000,000.00.
No Advances of the Loan will be made after August 31, 1996.
2.2 INTEREST RATE. The aggregate principal amount of all Advances
of the Loan which are outstanding from time to time will bear interest at a
rate equal to the Interest Rate. The outstanding principal balance of the Loan
shall bear interest as of Lender's wiring of funds through its receipt of
repayment of the Loan (if received by Lender later than 12 noon, E.S.T., 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.
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 or in respect
of the Loan. The Borrower shall make the following payments on the Loan:
(a) MONTHLY PAYMENT. The Borrower shall direct or
otherwise cause all makers of all Pledged Notes Receivable to pay all
monies due thereunder to the lockbox established pursuant to the
Lockbox Agreement, or as otherwise required by Lender. One hundred
percent (100%) of the cleared funds collected from the Pledged Notes
Receivable each week will be paid to Lender by the Lockbox Agent
pursuant to the Lockbox Agreement, and will be applied by Lender in
the following order: (i) to the payment of costs or expenses incurred
by Lender pursuant to this Agreement in creating, maintaining,
protecting or enforcing its Liens in and to the Collateral and in
collecting any amounts 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 the Loan. If the amount of the
funds received by Lender from the Lockbox Agent with respect to any
month is insufficient to pay in full the amounts provided for in
clauses (i), (ii), and (iii) of the preceding sentence for such month,
without notice or demand, Borrower shall pay the difference to Lender
on or before the fifth (5th) day of the following month. In the event
Borrower receives any payments on any of the pledged Notes Receivable
directly from or on behalf of the maker or makers thereof, Borrower
shall receive all such payments in trust for the sole and exclusive
benefit of Lender; and Borrower shall deliver to the Lockbox Agent all
such payments (in the form so received by Borrower) as and when
received by Borrower, unless Lender shall have notified Borrower to
deliver directly to Lender all payments in respect of the Pledged
Notes Receivable which may be received by Borrower, in which event
11
<PAGE> 16
all such payments (in the form received) shall be endorsed by Borrower
to Lender and delivered to Lender promptly upon Borrower's receipt
thereof.
(b) 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. Subject to the terms of this
Agreement, and to the payment of the applicable premium set forth in
Section 2.4(c) below, Borrower may prepay the Loan, in whole but not
in part, at any time after the end of the first Loan Year, after
thirty (30) days' prior written notice to Lender. Any such prepayment
must include all outstanding principal, accrued but unpaid interest,
and all other Obligations, including the applicable prepayment premium
provided in Section 2.4(c) below. The Loan may not be prepaid before
the end of the first Loan Year.
(b) MANDATORY PREPAYMENT. If at any time and for any
reason, the outstanding unpaid principal balance of the Loan shall
exceed the aggregate amount of the Borrowing Base, then, within five
(5) Business Days following Borrower's receipt of telecopied notice
from Lender of the occurrence of such excess over Borrowing Base 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 of the Borrowing Base, or (ii) increase the aggregate
principal amount of Eligible Note Receivables pledged to Lender so
that the amount of Borrowing Base equals or exceeds the aggregate
outstanding principal amount of the Loan. The pledge and delivery to
Lender of additional Eligible Notes Receivable shall comply with the
document delivery and recordation requirements set forth in Section
4.2(b) of this Agreement and shall be accompanied by a written
certification of the Borrower to the effect that such additional
Pledged Notes Receivable are Eligible Notes Receivable, and that,
giving effect to the pledge to Lender of such Eligible Note
Receivable, the outstanding unpaid principal balance of the Loan is
equal to or less than the aggregate amount of the Borrowing Base. 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.
12
<PAGE> 17
(c) PREMIUMS. Any prepayment of the Loan pursuant to
Section 2.4(a) above must be accompanied by a prepayment premium
calculated, as of immediately prior to such prepayment, as follows:
<TABLE>
<CAPTION>
DATE OF PREPAYMENT PREMIUM
------------------ -------
<S> <C>
Loan Year Two Three percent (3%) of the then
outstanding balance of the Loan.
Loan Year Three Two percent (2%) of the then
outstanding balance of the Loan.
Loan Year Four One percent (1%) of the then
outstanding balance of the Loan.
After Loan Year Four Zero (0).
</TABLE>
No prepayment premium shall be payable in connection with any prepayment of the
principal balance of the Loan which arises from the prepayment of one or more
Eligible Notes Receivable by its maker or makers.
SECTION 3-COLLATERAL
3.1 GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Obligations, for value received, Borrower unconditionally
and irrevocably assigns, pledges and grants to Lender a continuing first
priority security interest in and to the Collateral.
3.2 SECURITY INTEREST IN PLEDGED NOTES RECEIVABLE. Notwithstanding
that the Lender may be obligated, subject to the conditions of the Loan
Documents, to make Advances only in respect of Eligible Notes Receivable,
Lender shall have a continuing security interest in all of the Pledged Notes
Receivable, and may collect all payments made under or in respect of all
Pledged Notes Receivable, including Eligible Notes Receivable that may become
ineligible, until any of the same may be released by Lender, if at all,
pursuant to Section 12.10 below.
3.3 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.
13
<PAGE> 18
3.4 INTENTIONALLY DELETED
3.5 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.
3.6 PROTECTION OF COLLATERAL; REIMBURSEMENT. The portion of the
Collateral consisting of (i) the original Pledged Notes Receivable, (ii) the
original Mortgages, (iii) the original purchase contract (including addendum)
related to such Pledged Notes Receivable and Mortgages, and (iv) originals or
true copies of the related truth-in-lending disclosure, loan application,
warranty deed, and if required by Lender, the related Purchaser's
acknowledgement, receipt, owner's policy of title insurance and the Exchange
Company application and disclosures, shall be delivered at Borrower's expense
to the Lender at its East Hartford, Connecticut office, and held in Lender's
possession and control until the Obligations are fully satisfied; and Borrower
shall pay to Lender, at the time of each Advance, a custodial fee of $10.00 for
each Pledged Note Receivable (and related Collateral) delivered into Lender's
physical possession. The portion of the Collateral delivered to Lender as
described above shall be segregated by Lender and stored in a fire-resistant
filing cabinet; and Borrower and the Guarantor agree that such storage is and
shall be deemed to constitute reasonable care by Lender with respect to such
Collateral. All insurance expenses and all expenses of protecting the
Collateral, including without limitation, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, and any and all excise,
property, intangibles, sales and use taxes imposed by any state, federal or
local authority on any of the Collateral or in respect of the sale thereof
shall be borne and paid by the Borrower; and if the Borrower fails to promptly
pay any portion thereof when due, Lender may, at its option, but shall not be
required to, pay the same and charge the Borrower's account therefor, and the
Borrower agrees promptly to reimburse Lender therefor with interest accruing
thereon daily at the Default Rate. All sums so paid or incurred by Lender for
any of the foregoing and any and all other sums for which the Borrower may
become liable hereunder and all costs and expenses (including attorneys' and
paralegals' fees, legal expenses and court costs) which the Lender may incur in
enforcing or protecting its Lien on, or rights and interest in, the Collateral
or any of its rights or remedies under this Agreement or any other Loan
Document or in respect to any of the transactions to be had hereunder or
thereunder, until paid by the Borrower to Lender with interest at the Default
Rate, shall be included among the Obligations, and, as such, shall be secured
by all of the Collateral. Provided that Lender retains the original Pledged
Notes Receivable and Mortgages, and originals or copies of the related
Timeshare Documents delivered to it and listed above, in a fire-resistant
filing cabinet as provided above, Lender shall not be liable or responsible in
any way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default
of any warehouseman, carrier, forwarding agency, the Lockbox Agent, Servicing
Agent or any other Person whomsoever.
14
<PAGE> 19
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 and by Guarantor shall have been fully
complied with and performed to the satisfaction of Lender.
(b) NO PROHIBITED ACTS. Neither Borrower nor any of the
Guarantors shall 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 if such provision had been binding and
effective at all times during the period from May 11, 1995 to and
including the Closing Date.
(c) 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(c)(i) through (xviii) 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
15
<PAGE> 20
INFORMATION IN CONNECTION WITH ITS DETERMINATION TO MAKE A LOAN TO
ASCENSION RESORTS, LTD. IN CONNECTION WITH THE SUBJECT COLLATERAL."
(i) A certificate, to be dated as of the Closing
Date and signed by the president, vice president, or secretary
of the General Partner of the Borrower and the Guarantor,
certifying that the conditions specified in Sections 4.1(a)
and (b) above are true;
(ii) Copies of the limited partnership agreement
of Borrower and articles of incorporation of Guarantor,
together with any amendments thereto certified to be true and
complete by Borrower and Guarantor, respectively and the
Secretary of State of the State of Texas, current certificates
of limited partnership for Borrower, a current certificate of
good standing for Guarantor, and copies of the by-laws of
Guarantor certified to be true, correct and complete by the
secretary or assistant secretary of Guarantor;
(iii) the Survey;
(iv) a certificate of the General Partner of the
Borrower certifying the adoption by the Borrower, and a
certificate of the secretary or assistant secretary of
Guarantor certifying the adoption by the board of directors
thereof, respectively, of a resolution authorizing Borrower
and Guarantor, respectively, to enter into and execute this
Agreement, the Note, and the other Loan Documents, to borrow
the Loan Amount from Lender, and to grant to Lender first
priority security interest in and to the Collateral;
(v) a certificate of the secretary or assistant
secretary of Guarantor and General Partner certifying the
incumbency, and verifying the authenticity of the signatures,
of the specified officers of Guarantor and General Partner
authorized to sign the Agreement, the Note and the other Loan
Document; and
(vi) an engineering report or reports covering the
Resorts, including without limitation all real property and
personal property subject to the Declaration and all Adjacent
Property, confirming:
(1) that soil conditions are sufficient
to support all existing and any contemplated
improvements to the real property;
(2) the absence of Hazardous Materials
on the personal property and real property comprising
the Resort;
16
<PAGE> 21
(3) that the engineering 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 such other
information as Lender may reasonably require,
including, without limitation, 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 the Resorts or in such
proximity thereto as to create a material risk of
contamination of the Resorts;
(vii) Evidence that Borrower is maintaining all
policies of insurance required by and in accordance with
Section 7.1(d), including copies of the most current paid
insurance premium invoices;
(viii) Evidence that Borrower and the Timeshare
Documents are in compliance with all applicable laws in
connection with its sales of Intervals, including without
limitation, the Timeshare Acts;
(ix) A current preliminary title report for the
Resorts, with copies of all title exceptions;
(x) Copies of all applicable governmental
permits, approvals, consents, licenses, and certificates for
the establishment of the Resorts as timeshare projects in
accordance with Timeshare Act, and for the occupancy and
intended use and operation of the Resorts, 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 the Resorts, and any business licenses necessary for
operation of the Resorts;
(xi) Certified true, correct and complete copies
of all of the Timeshare Documents;
(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 the Resorts and copies of the most current paid tax bills
for the Resorts evidencing that the Resorts have been
segregated from all other property on the applicable municipal
taxrolls;
17
<PAGE> 22
(xiii) An audit by Lender, satisfactory to Lender,
of Borrower, Guarantors, subsidiaries of Borrower, the
Resorts, the Notes Receivable and the other Collateral;
(xiv) Independent credit references from the
following creditors for Borrower and Guarantor, which credit
references shall be furnished by mail directly to Lender from
the creditors: Marine Midland Bank and FINOVA. Lender may also
request additional credit references on Borrower or Guarantor
as Lender deems necessary in its sole discretion;
(xv) Copies or other evidence of all loans to
Borrower from any officers, shareholders, Guarantor or
Affiliates of Borrower.
(xvi) Commitment to issue Mortgagee Title Policies
(as defined below) from Title Insurer.
(xvii) The Financial Statements.
(d) 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 Composite Exhibit "C",
and each of which when required, shall be in recordable form:
(i) CLOSING OPINIONS FOR BORROWER AND GUARANTOR.
(ii) NOTE.
(iii) GUARANTY.
(iv) ASSIGNMENT OF DEEDS OF TRUST.
(v) SUBORDINATION AGREEMENT. A Subordination
Agreement executed by Borrower, Guarantor, each officer and
shareholder of Borrower, and each Affiliate of Borrower and
Guarantor, together with copies of any subordinated notes.
(vi) ENVIRONMENTAL INDEMNITY. An Environmental
Indemnity Agreement, executed by Borrower in favor of Lender.
(vii) LOCKBOX AGREEMENT. The Lockbox Agreement,
executed by Lockbox Agent, Borrower and Lender, together with
signature cards, Designation of Account and Secretary's
Certificate.
18
<PAGE> 23
(viii) DRAW REQUEST.
(ix) FINANCING STATEMENTS. Original UCC financing
statements covering the Collateral, filed with the Texas
Secretary of State and the Missouri Secretary of State.
(x) 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.
(e) PHYSICAL INSPECTION. Lender shall be satisfied with
its physical inspection of the Resorts.
(f) UCC SEARCH. Lender shall have obtained, at Borrower's
cost, such searches of the applicable public records as it deems
necessary under Texas, Missouri 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 Advance if Lender determines that it does not have a first and
prior perfected lien and security interest covering any portion of the
Collateral.
(g) 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, Guarantor, or any Affiliates of Borrower or
Guarantor (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 ADVANCES. 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 initial Advance together with any moneys paid by Borrower
is sufficient to satisfy all fees and expenses
19
<PAGE> 24
required to be paid pursuant to this Agreement, and (b) the use of the Advance
is not materially different from the uses set forth in Section 6.11.
4.4 PROCEEDING SATISFACTORY. Borrower shall execute all of the
Loan Documents approved by Lender on the Closing Date, and Guarantor shall
execute the Guaranty attached in Exhibit "C", 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.
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 and shall certify the amount of
the then-current Borrowing Base, specify the principal amount
of the Advance requested and designate the account to which
the proceeds of such Advance are to be transferred;
(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 such 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;
(v) be signed by a principal financial officer of
the Borrower;
20
<PAGE> 25
(vi) certify that the Borrower has no knowledge of
any asserted or threatened defense, offset, counterclaim,
discount or allowance in respect of each Note Receivable to be
pledged in connection with such requested Advance, or in
respect of any of the Pledged Notes Receivable;
(vii) contain an aging report of the Pledged Notes
Receivable; identifying, among other things, which among them
are Eligible Notes Receivable; and
(viii) contain a delinquency report which shall be
in form and substance satisfactory to the Lender and shall
show which of such Notes Receivable is delinquent and the
duration of such delinquent and the duration of such
delinquency, and which of such Pledged Notes Receivable is not
an Eligible Notes Receivable;
(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 Eligible
Notes Receivable and related Mortgages which are to be the
subject of such requested Advance, indicating the unpaid
principal balance owing on each of the Pledged Notes
Receivable deemed to be an Eligible Note Receivable, 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) (A) the
original of each Pledged Note Receivable (duly endorsed with
the words "Pay to the order of Textron Financial Corporation
with recourse"), (B) the original of each Mortgage securing
such Pledged Notes Receivable, (C) the original of each
purchase contract (including addenda) relating to the Pledged
Notes Receivable and Mortgages, and (D) originals or true
copies of the related truth-in-lending disclosures, loan
application, warranty deed, Payment Authorization Agreement
and, if required by Lender, the related Purchaser's
acknowledgement, receipt, owner's policy of title insurance
and exchange company application, disclosures and materials;
(iii) delivered to Lender a duly executed
Assignment of Notes Receivable and Mortgages assigning to
Lender all of the Borrower's right, title and interest in and
to each such Pledged Note Receivable and the related Mortgage;
and
(iv) delivered to Lender, with respect to each
Encumbered Interval, a commitment for a mortgagee's title
insurance policy showing that the
21
<PAGE> 26
Mortgage in respect of such Interval has been assigned to
Lender and insuring in favor of Lender the first priority Lien
of such Mortgage in the original principal amount of the
Pledged Note Receivable secured thereby, with a satisfactory
title insurance policy to be issued on the date of Advance.
The Mortgages and the assignments thereof to Lender shall each
have been duly recorded in the applicable land records which are
described in Schedule 5. 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 requested Advance, delivery of the Collateral and issuance of
the title insurance policy, and recording of the assignments 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
requested 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 dollar amount of the requested
Advance based on the Eligible Notes Receivable pledged to
Lender, and the Notes Receivable being pledged
contemporaneously with each requested Advance in the form
attached hereto as Exhibit "C";
(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;
22
<PAGE> 27
(vi) such requested Advance shall be in a
principal amount of not less than $50,000, unless Lender, in
its sole discretion, agrees to make an Advance in an amount
less than $50,000;
(vii) Lender shall have determined that the
requested Advance, when added to the aggregate outstanding
principal amount of all previous Advances, if any, does not
exceed the total amount of the Borrowing Base, based on the
Eligible Notes Receivable that have been duly pledged in favor
of Lender;
(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 limited partnership, acting herein by its
general partner, a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and (b) has 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
and Guarantor of the Loan Documents has been dully authorized by all
necessary partnership and corporate action by Borrower and Guarantor
and does not and will not (i) violate any provision of the limited
partnership agreement of Borrower, certificate or articles of
incorporation of Guarantor, bylaws of Guarantor, or any agreement,
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award
23
<PAGE> 28
presently in effect to which Borrower and/or Guarantor is a party or
is subject; (ii) result in, or require the creation or imposition of,
any Lien upon or with respect to any asset of Borrower or Guarantor
other than Liens in favor of Lender; or (iii) result in a breach of,
or constitute a default by Borrower or Guarantor under, any indenture,
loan or credit agreement or any other agreement, document, instrument
or certificate to which Borrower or Guarantor 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.
(e) The execution and delivery of the Loan Documents, the
delivery and endorsement to Lender of the Pledged Notes Receivable,
the filing of the UCC-1's with the Texas Secretary of State and the
Assignment of Notes Receivable and 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) None of the Pledged Notes Receivable is forged or has
affixed thereto any unauthorized signatures or has been entered into
by any Person without the required legal capacity; and during the term
of the Agreement, none will be forged, or will have affixed thereto,
any unauthorized signatures.
(g) There have been no modifications or amendments to the
Pledged Notes Receivable or Mortgages.
(h) The makers of the Eligible Notes Receivable have no
defenses, offsets, counterclaims or claims relating to the Eligible
Notes Receivable or the Mortgages.
24
<PAGE> 29
(i) The Pledged Notes Receivable and the Mortgages were
executed and delivered by Purchasers in favor of Borrower in
connection with the purchase of the related Encumbered Intervals.
(j) The Mortgages constitute and will constitute valid
and enforceable first and prior liens and security interests on the
Encumbered Intervals.
(k) The Pledged Notes Receivable and the Mortgages are
and shall remain in full force and effect, are and will be valid and
binding obligations of the respective makers in favor of Lender, as
holder; and the Borrower further warrants and guarantees the value,
quantity, sound condition, grade and quality of the Encumbered
Intervals and rights, properties, easements and interests appurtenant
or related thereto.
(l) The grant of the security interests described herein
has not affected and will not affect the validity or enforceability of
the obligations of the respective makers of the Pledged Notes
Receivable under such Notes Receivable or the respective Mortgages.
(m) The Lender is not and shall not be required to take,
and the Borrower has taken any and all required steps to protect
Lender's security interests in the Collateral (other than maintaining
possession of the portion of the Collateral constituting instruments);
and Lender is not and 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 (or the
Guarantor) from any of the Obligations.
6.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION. The Financial
Statements fairly present the respective financial conditions and results of
operations of Borrower and Guarantor 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 or Guarantor 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 or Guarantor from the financial conditions shown in their respective
Financial Statements, nor have Borrower or Guarantor incurred any material
liabilities, direct or indirect, fixed or contingent, which are not shown in
their respective Financial Statements. Borrower, or the Guarantor,
respectively, is able to pay all of its or their respective debts as they
become due and Borrower or Guarantor, as the case may be, shall maintain such
solvent financial condition, giving effect to the Obligations, as long as the
Borrower, or Guarantor, are obligated to Lender under the Agreement, or with
respect to the Guarantor, the Guaranty, or in any other manner whatsoever.
Borrower's or Guarantor's Obligations under this Agreement and
25
<PAGE> 30
under the Loan Documents will not render Borrower or the Guarantor unable to
pay its or their debts as they become due. The present fair market value of
Borrower's or Guarantor's assets is greater than the amount required to pay its
or their respective 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
benefitting 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 and the existing
mortgage in favor of Freedom Financial Corporation in the original principal
amount of $5,454,157.00 (having an outstanding balance of $4,718,554.00 as of
December 31, 1994), there are no liens or encumbrances against the Collateral,
or against any Resort.
6.6 SUBSIDIARIES, AFFILIATES AND CAPITAL STRUCTURE. Except for the
Guarantor and except for the mortgage in favor of Freedom Financial Corporation
referred to above, Borrower has no subsidiaries or Affiliates which have any
involvement or interest in any Resort in any way. Guarantor (98% owner and sole
general partner) and Equal Investment Company (2% owner and sole limited
partner) are the only owners and holders of 100% of all of the outstanding
partnership interests in the Borrower. The Guarantor is involved in the
business operations of and derives substantial financial benefit from the
Borrower. For so long as Borrower is obligated to Lender under any of the Loan
Documents, Guarantor shall remain the sole general partner of the Borrower.
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 Guarantor, 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
26
<PAGE> 31
Borrower or Guarantor 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 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
27
<PAGE> 32
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 the State of Texas,
the State of Missouri, 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 Guarantor 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 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; (1) 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
28
<PAGE> 33
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. Lender and Borrower 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 other than
the Broker's Fee, 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 "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
29
<PAGE> 34
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.
(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
30
<PAGE> 35
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 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.
6.20 OPERATING CONTRACTS. The contracts, agreements and
arrangements listed in EXHIBIT "D" comprise those agreements or arrangements
relating 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, including but not limited to those listed in
Exhibit D, are referred to herein as the "Operating Contracts"). All of the
Operating Contracts listed in Exhibit D 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.
31
<PAGE> 36
6.22 TAX IDENTIFICATION/SOCIAL SECURITY NUMBERS. The Borrower's and
Guarantor's respective federal taxpayer's identification numbers, or social
security numbers, are as follows:
Ascension Resorts, Ltd. 75-2280789
Ascension Capital Corporation 75-2259890
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
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. Unless Borrower shall have
first obtained Lender's prior written approval, which shall not be
unreasonably withheld, Borrower will not consolidate with or merge
into any other Person or permit any other Person to consolidate with
or merge into it.
(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
32
<PAGE> 37
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, 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.
To the extent any other timeshare receivable 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.
33
<PAGE> 38
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 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
34
<PAGE> 39
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, service materials and supplies) arises for sums which have
become due and payable. Except for 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
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. Without limiting the foregoing, Lender shall have
the right to make such credit investigations as Lender may deem
appropriate in connection with its review of Notes Receivable, and
Borrower shall make available to Lender all credit information in
Borrower's possession or under its control or to which it may have
35
<PAGE> 40
access, with respect to Purchasers or other obligors under Notes
Receivable as Lender may request.
(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) MONTHLY FINANCIAL REPORTS. As soon as
available and in any event within ten (10) days after the end
of each calendar month, a report showing (i) the trial balance
of the Pledged Notes Receivable, (ii) an aging report on the
Pledged Notes Receivable, (iii) a report detailing the
collections on each of the Pledged Notes Receivable, (iv) an
Borrowing Base Report and (v) monthly reports from the Lockbox
Agent required pursuant to the Lockbox Agreement;
(ii) QUARTERLY FINANCIAL REPORTS. As soon as
available and in any event within forty-five (45) days after
the end of each fiscal quarter, copies of income statements
and balance sheets for the operations of each Resort and for
Borrower, certified by the General Partner of Borrower.
(iii) ANNUAL FINANCIAL REPORTS. As soon as
available and in any event within ninety (90) days after the
end of each of calendar year or other fiscal year as may be
applicable with respect to the Borrower (a "Fiscal Year"), a
statement of income and expense of Borrower for the annual
period ended as of the end of such Fiscal Year, and a balance
sheet of Borrower as of the end of such Fiscal Year, all in
such detail and scope as may be reasonably required by Lender
and prepared in accordance with GAAP and on a basis consistent
with prior accounting periods. Each annual financial statement
of Borrower shall be prepared by an independent certified
public accountant and certified by Borrower and Guarantor to
be true, correct and complete, and shall otherwise be in form
acceptable to Lender. In the event that Lender, acting in good
faith, is not satisfied with any such Financial Statement, and
if Borrower fails to provide Lender with new Financial
Statements acceptable to Lender within fifteen (15) days after
Lender delivers written notice of such dissatisfaction to
Borrower, then, at Lender's request, Borrower shall furnish to
Lender copies of audited income statements and balance sheets
certified by an independent certified public accountant
acceptable to Lender and prepared in accordance with GAAP and
on a basis consistent with prior accounting periods. Such
audited annual statements shall also be in form and content
satisfactory to Lender. If the figures for net and total
operating income (as such terms are defined in accordance with
GAAP) in the audited annual statements do not vary by more
than five percent (5%) from the figures in the unaudited
annual statements, Lender
36
<PAGE> 41
shall bear the cost of the certified public accountant's
audit. If, however, such figures vary by more than five
percent (5%), Borrower shall bear the cost of such certified
public accountant's audit;
(iv) GUARANTOR'S FINANCIAL STATEMENT. Within
ninety (90) days of the end of each calendar year, the
corporate Guarantor shall deliver to Lender such Guarantor's
statement of income and expense and balance sheet. The
Guarantor's Financial Statement shall be in such detail and
scope as may reasonably be required by Lender and prepared in
accordance with GAAP on a basis consistent with prior
accounting periods. The Guarantor's Financial Statement shall
be dated as of the end of the immediately preceding calendar
year or fiscal year as applicable to such Guarantor, and shall
be certified as being true, correct and complete by such
Guarantor;
(v) OFFICER'S CERTIFICATE. Each set of annual
Financial Statements or reports delivered to the Lender
pursuant to Sections 7.1(h)(i) and (ii) of this Agreement will
be accompanied by a certificate of the President or the
Treasurer of the Borrower (and, as applicable the corporate
Guarantor) setting forth that the signers have reviewed the
relevant terms of the Agreement (and all other agreements and
exhibits between the parties) and have made, or caused to be
made, under their supervision, a review of the transactions
and conditions of the Borrower from the beginning of the
period covered by the Financial Statements or reports being
delivered therewith to the date of the certificate and that
such review has not disclosed the existence during such period
of any condition or event which constitutes a Default or Event
of Default or, if any such condition or event existed or
exists or will exist, specifying the nature and period of
existence thereof and what action the Borrower has taken or
proposes to take with respect thereto;
(vi) SALES REPORTS. Concurrently with the
financial statements required pursuant to Section 7.1(h)(i)
and (ii), Borrower shall deliver to Lender, annually, an
annual sales report, detailing the sales of all Intervals at
the Resorts for the period covered thereby, certified by
Borrower and Guarantor to be true, correct and complete and
otherwise in a form approved by Lender;
(vii) AUDIT REPORTS. Promptly upon receipt thereof,
one (1) copy of each other report submitted to the Borrower by
independent public accountants or other Persons in connection
with any annual, interim or special audit made by them of the
books of the Borrower;
(viii) NOTICE OF DEFAULT OR EVENT OF DEFAULT.
Immediately upon becoming aware of the existence of any
condition or event which constitutes
37
<PAGE> 42
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;
(ix) 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;
(x) 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 Guarantor, 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; and
(xi) OTHER INFORMATION. Borrower will promptly
deliver to Lender any other information related to the Loan,
the Collateral, the Resort, Borrower or Guarantor as Lender
may in good faith request including, without limitation,
annually, federal call reports relating to Lockbox Agent. In
addition, concurrently with the financial statements described
in Section 7.1(h) above, Borrower and Guarantor shall cause to
be furnished to Lender the financial statements as described
and provided in the Guaranty from time to time.
(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 therefor, complete,
timely and accurate records of all sales of Intervals and all payments
in respect of Pledged Notes Receivable.
(j) MANAGEMENT. The Borrower and the Guarantor shall
cause Borrower to remain engaged in the active management of the
Resort and, unless Borrower notifies Lender in writing at least 30
days in advance of its new location, to retain its executive offices
at 1221 Riverbend Drive, Suite 120, Dallas, Texas 75221, and to
continue to perform duties substantially similar to those presently
performed, as
38
<PAGE> 43
provided in the "Management Agreement" relating to the Resorts which
is included among the Operating Contracts. In the event of the
resignation, termination, retirement or death of Robert E. Mead, Chief
Executive Officer of the General Partner of Borrower, the Borrower and
Guarantor shall, within six (6) months after the date of any such
event, cause to be engaged in his place, a Person or Persons who have
substantially equivalent experience, background and demonstrated
ability to perform, on terms satisfactory to Lender, the duties
performed by Mr. Mead at the time of the Closing Date and who is in
all other respects reasonably satisfactory to the Lender.
(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 listed in Exhibit D shall be modified, extended,
terminated or entered into, without the prior written approval of
Lender, if any such modification, extension, termination or new
agreement could have an adverse impact on the operating of the Resort
or the Collateral.
(m) GUARANTOR. Robert E. Mead shall remain owner and
holder of 100% of the authorized, issued and outstanding shares of
stock of the Guarantor (unless Lender approves in each instance any
such change in ownership in advance in writing, provided, however,
that Lender shall not unreasonably withhold its approval) and
Guarantor shall continue as sole general partner of the Borrower. The
Borrower shall not enter into proxies, voting trusts, shareholders
agreements or similar arrangements for the purpose of vesting voting
rights, authority or discretion in any other Person.
(n) 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.
(o) 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
39
<PAGE> 44
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.
(p) CLAIMS. Borrower shall promptly notify Lender of any
claim, action or proceeding affecting the Resort or Collateral, or any
part thereof, 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.
(q) 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
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
40
<PAGE> 45
(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
State of Missouri, 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 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.l.
(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,
41
<PAGE> 46
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 provided, however, that Borrower's obligation to pay
Lender's counsel fees in connection with the negotiation,
preparation, documentation and closing of this Agreement shall
not exceed $20,000.00;
(iii) Lender's out-of-pocket expenses;
(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
42
<PAGE> 47
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 the Lockbox and Lockbox Account by the
Lockbox Agent and Servicing and any escrow by the Title Company
or any other escrow agent;
(vii) the custodial fees payable to Lender with
respect to the original Pledged Notes Receivable and related
Collateral;
(viii) all costs and expenses incurred by Lender
under the Note, and all late charges under the Note; and
(ix) 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 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
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
Commitment or the Collateral; (ii) the transactions contemplated under
any of the Loan Documents or any of the Timeshare Document, 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
43
<PAGE> 48
of the Loan Documents (including without limitation any certification
of the Borrower delivered to the 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 any 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 (id) 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 or the
Guarantor 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 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 fall payment, performance
and discharge of the Obligations and the termination of this
Agreement, and shall continue thereafter in full force and effect.
44
<PAGE> 49
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, or any Notes Receivable or other
accounts receivable (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 Encumbered Intervals 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 Encumbered Intervals, the Common Elements relating to
the Encumbered Intervals or any Resort facilities or amenities, or
change the legal or actual possession or use thereof, (iii) permit the
dilution, transfer, pledge, hypothecation or encumbrance of any
interest in Borrower without obtaining the prior written consent of
Lender (which consent shall not be unreasonably withheld), (iv) permit
the assignment, transfer, delegation, change, modification or
diminution of the duties or responsibilities of Borrower, the
Guarantor or, to the extent within the control 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 (v) 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 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 Encumbered Intervals, the Common Elements
relating to the
45
<PAGE> 50
Encumbered Intervals 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 Encumbered Intervals, the Common
Elements relating to the Encumbered Intervals or any Resort facilities
or amenities by Borrower to its stockholders or Affiliates or vice
versa, (C) any corporate merger or consolidation, disposition or other
reorganization, and (D) any change in the ownership of stock of the
Borrower that would result in a change in control of the Borrower. 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 THE LENDER'S NAME. Borrower will not, and will
not permit any Affiliate to, without the prior written consent of the
Lender, use the name of the Lender or the name of any affiliate of the
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") including without limitation, the
Subordinated Indebtedness (as defined in the Guaranty Agreement) to
any of its shareholders or their affiliates or which are subordinated
by the terms thereof or by separate instrument to the payment of
principal of, and interest on, the
46
<PAGE> 51
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 Lender's 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 Lender in the
Collateral, nor shall Borrower cause or permit any amendment to or
modification of the form or terms of any of the Pledged Notes
Receivable, Mortgages or, except as specifically provided hereinabove,
the other 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.
47
<PAGE> 52
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 10 day period,
but, because of the nature of such failure, cure cannot be completed
within 10 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 or Guarantor 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 Lender 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 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 or Guarantor under any Debtor
Relief Law; a receiver, liquidator or trustee of Borrower or Guarantor
or of any material asset of Borrower or Guarantor 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 or Guarantor is
sequestered by court order and such order remains in effect for more
than forty-five (45) days.
48
<PAGE> 53
(f) PROCEEDINGS. If either Borrower or Guarantor
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 or the Guarantor,
of one or more attachments, injunctions, executions, tax liens or
judgments for the payment of money cumulatively in excess of $50,000,
which is not discharged in full or stayed within thirty (30) days
after issuance or filing.
(h) FAILURE TO DEPOSIT PROCEEDS. If Borrower shall fail
to deliver payments made under the Pledged Notes Receivable directly
to Lender as required pursuant to Section 2.3 above, or if Borrower
shall take any other act which Lender shall deem to be a conversion of
the Collateral or fraudulent with respect to Lender.
(i) 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).
(j) 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.
(k) OTHER DEFAULTS. If a material default shall occur in
any of the covenants or Obligations set forth in any of the Loan
Documents.
(l) MATERIAL ADVERSE CHANGE. Any material adverse change
in the financial condition of the Borrower or the Guarantor or 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.
(m) DEATH OR DISABILITY OF ROBERT MEAD OR DEFAULT OF
GUARANTOR. (i) Death or disability of Robert Mead, unless within
ninety (90) days thereafter Borrower provides Lender with written
information setting forth the replacement management personnel of
Borrower together with a description of those Persons'
49
<PAGE> 54
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 prior to such death or disability; or (ii) Any default under
the Guaranty Agreement or the revocation or attempted revocation or
repudiation thereof, in whole or part, by the Guarantor; or (iii)
except with Lender's prior written consent, which consent shall not be
unreasonably withheld, any change in the ownership structure of the
corporate Guarantor, or in the Guarantor's administrative,
operational, management or marketing responsibilities with respect to
the Borrower or the Resort.
(n) DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default
by the Borrower (i) in the payment of any indebtedness to Lender; (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 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).
(o) 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.
(p) SUSPENSION OF SALES. The issuance of any stay order,
cease and desist order, injunction, temporary restraining order or
similar judicial or nonjudicial sanction limiting or otherwise
materially adversely affecting any Interval sales activities, other
business operations in respect of the Resorts, or the enforcement of
Lender's remedies.
(q) 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 Loan, or any part
thereof, immediately due and payable, whereupon the same shall be due
and payable.
50
<PAGE> 55
(b) TERMINATION OF OBLIGATION TO ADVANCE. Terminate any
commitment of 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 and the Guarantor hereby acknowledge and agree 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.
(e) RETENTION OF COLLATERAL. At its discretion, retain
such portion of the Collateral as shall aggregate in value to an
amount equal to the Loan, 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
right and remedies of a secured party under the Code and other legal
and equitable rights to which it may be entitled, including, without
limitation, and without notice to the Borrower, the right to continue
to collect all payments made on the Pledged Notes Receivable, and to
apply such payments to the Obligations, and to sue in its own name the
maker of any defaulted pledged Notes Receivable. 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
51
<PAGE> 56
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 sale, Lender shall
retain an amount equal to all 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 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 its own interest, 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
52
<PAGE> 57
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, 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, and may also, at any time,
appropriate and apply on any Obligations any and all Collateral in its (or the
Lockbox Agent's) possession, any and all balances, credits, deposits, account,
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 Lender, but they shall, in all events, continue until
all of the Obligations are satisfied.
9.4 RIGHTS OF LENDER REGARDING COLLATERAL. In addition to all
other rights possessed by Lender, Lender, at its option, may 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.
53
<PAGE> 58
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 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 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, but specifically excluding any
diminution or loss in value which is actually and proximately
54
<PAGE> 59
caused by Lender's failure to retain the Pledged Notes Receivable in a
fire-resistant filing cabinet as provided in Section 3.6 above.
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
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 its 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. 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
55
<PAGE> 60
Agreement, any action or actions on the part of Lender taken hereunder, nor the
acquisition of the Pledged Notes Receivable and the Mortgages by Lender 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 the Pledged Notes Receivable, the Mortgages 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 Pledged Notes Receivable, the Mortgages
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 Purchasers or Lender, as the case may be, on the other, or (v) the Pledged
Notes Receivable, the Mortgages or 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, 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
Pledged Notes Receivables or Mortgages, 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.
56
<PAGE> 61
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 of the rights of Lender 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 right 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, any Purchasers, 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 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.
10.10 NOTICE TO PURCHASER. The Borrower authorizes any of the
Lender, the Lockbox Agent or Servicing Agent (but none of the Lender, the
Lockbox Agent nor Servicing Agent shall be obligated) to communicate at any
time and from time to time with any Purchaser or any other Person primarily or
secondarily liable under a Pledged Note Receivable with regard to the Lien of
the Lender thereon and any other matter relating thereto, and by no later than
the Closing Date, Borrower shall deliver to Lender a notification to the
Purchasers executed in blank by the Borrower and in form acceptable to Lender,
pursuant to which the Purchasers (or other obligors) may be directed to remit
all payments in respect of the Collateral as Lender may require.
10.11 COLLECTION OF THE NOTES. Borrower hereby directs and authorizes
each party liable for the payment of the Pledged Notes Receivable, and by no
later than the Closing
57
<PAGE> 62
Date shall direct in writing each such party, to pay each installment thereon
to Lockbox Agent pursuant to the Lockbox Agreement, unless and until directed
otherwise by written notice from Lender or, at Lender's direction, from
Borrower, after which such parties are and shall be directed to make all
further payments on the Pledged Notes Receivable in accordance with the
directions of Lender. Following the occurrence of an Event of Default, Lender
shall have the right to require that all payments becoming due under the
Pledged Notes Receivable be paid directly to Lender, and Lender is hereby
authorized to receive, collect, hold and apply the same in accordance with the
provisions of this Agreement. In the event that following the occurrence of an
Event of Default, Lender or Lockbox Agent does not receive any installment of
principal or interest due and payable under any of the Pledged Notes Receivable
on or prior to the date upon which such installment becomes due, Lender may, at
its election (but without any obligation to do so), give or cause Lockbox Agent
to give notice of such default to the defaulting party or parties, and Lender
shall have the right (but not the obligation), subject to the terms of such
Notes, to accelerate payment of the unpaid balance of any of the Pledged Notes
Receivable in default and to foreclose each of the Mortgages securing the
payment thereof, and to enforce any other remedies available to the holder of
such Pledged Notes Receivable with respect to such default. Borrower hereby
further authorizes, directs and empowers Lender (and Lockbox Agent or any other
Person as may be designated by Lender in writing) to collect and receive all
checks and drafts evidencing such payments and to endorse such checks or drafts
in the name of Borrower and upon such endorsements, to collect and receive the
money therefor. The right to endorse checks and drafts granted pursuant to the
preceding sentence is irrevocable by Borrower, and the banks or banks paying
such checks or drafts upon such endorsements, as well as the signers of the
same, shall be as fully protected as though the checks or drafts have been
endorsed by Borrower.
10.12 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 as provided in Section 10.11 above,
(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 10.12 are coupled with an interest and are and shall be irrevocable by
Borrower in any manner, or for any reason, unless and until a
58
<PAGE> 63
release of the same is executed by Lender and duly recorded in the appropriate
public records of Dallas County, Texas.
10.13 RELIEF FROM AUTOMATIC STAY, ETC. To the fullest extent
permitted by law, in the event the Borrower or Guarantor 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 or Guarantor 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
Lender as provided in the Loan Documents. In addition, in the event relief is
sought by or against Guarantor under the Bankruptcy Code, such Guarantor agrees
to not seek, directly or indirectly, in any ensuing bankruptcy proceeding, any
extension of the exclusivity period otherwise available to a debtor under the
Bankruptcy Code, including, without limitation, the exclusivity period provided
for under Section 1121(b) of the Bankruptcy Code. Guarantor agrees not to
contest the validity or enforceability of this Section.
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
either the Borrower or the Guarantor makes a payment to the 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
59
<PAGE> 64
(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: Ascension Resorts, Ltd.
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
WITH A COPY TO: Textron Financial Corporation
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attention: Vice President - Law
AND TO: Textron Financial Corporation
333 East River Drive, Suite 305
East Hartford, Connecticut 06108
Attn: Vice President
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: Richard Mitterling, Vice President. The
applicable Sections of this Agreement are Section 2.4(a) Voluntary Prepayments,
Section 5(a) Request for Advances, and Section 12.10 Return of Notes
Receivable. In addition, all documents, instruments and other items to be
delivered to 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.
60
<PAGE> 65
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 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 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 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 the Lender and the Borrower, expressly declaring the usury
61
<PAGE> 66
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, the
Commitment 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 rights or derive
any benefits under or with respect to this Agreement, the Commitment 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 parties hereto.
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 and Lender.
12.9 LENDER NO 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.
62
<PAGE> 67
12.10 RETURN OF NOTES RECEIVABLE.
(a) In the event Borrower complies with its Obligations
under Section 2.4(b) of this Agreement with respect to Pledged Notes
Receivable that cease to be Eligible Notes Receivable, and Borrower
thereafter desires to enforce such ineligible Note Receivable against
the Purchaser thereof, then provided that no Event of Default has
occurred which has not been cured to Lender's satisfaction (as
evidenced by a written acceptance of such cure executed by Lender),
and no event has occurred which with notice, the passage of time or
both, would constitute an Event of Default, then within thirty (30)
days after its receipt of a written request from Borrower, Lender
shall endorse the ineligible Note Receivable "Pay to the order of
Ascension Resorts, Ltd., without recourse," and deliver such
ineligible Note Receivable to Borrower.
(b) In the event that all Obligations hereunder are fully
satisfied, then within a reasonable thereafter, Lender shall endorse
the Pledged Notes Receivable "Pay to the order of Ascension Resorts,
Ltd. without recourse", and deliver such Pledged Notes Receivable,
together with any other nonrecourse Collateral reassignment documents
requested and prepared by Borrower, at Borrower's sole cost and
expense. In addition, if requested by Borrower in its written request,
Lender shall execute and deliver to Borrower UCC-3 termination
statements covering the ineligible Note Receivable being returned to
Borrower, provided that such termination statements are limited to the
specific ineligible Notes Receivable being released, are prepared by
Borrower at Borrower's sole cost and expense.
12.11 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.
12.12 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.
12.13 LITIGATION. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE BORROWER, THE GUARANTOR AND LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO A
63
<PAGE> 68
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, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OR 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, GUARANTOR
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 AND GUARANTOR HEREBY
CERTIFY 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 AND THE GUARANTOR ACKNOWLEDGE 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, the Guarantor,
and Lender in this Section 12.13 shall survive the final payment or performance
of all of the Obligations of the Borrower and the resulting termination of this
Agreement.
12.14 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.
12.15 CONSENT TO ADVERTISING AND PUBLICITY OF TIMESHARE DOCUMENTS.
The Borrower hereby consents that the 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.
12.16 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.
64
<PAGE> 69
12.17 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.
12.18 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.
IN WITNESS WHEREOF, Borrower, Lender and the Guarantor have caused
this Agreement to be duly executed and delivered effective as of the date first
above written.
BORROWER:
ASCENSION RESORTS, LTD., a Texas
limited partnership
By: Ascension Capital Corporation,
a Texas corporation, its sole
general partner
By /s/ ROBERT E. MEAD
---------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
LENDER:
TEXTRON FINANCIAL CORPORATION
A Delaware corporation
By /s/ RICHARD H. MITTERLING
------------------------------------
Name: Richard H. Mitterling
Title: Vice President
GUARANTOR:
ASCENSION CAPITAL CORPORATION,
a Texas corporation
By /s/ ROBERT E. MEAD
------------------------------------
Name: Robert E. Mead
Title: Chief Executive Officer
65
<PAGE> 70
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me this 15th day of August,
1995 by Robert E. Mead, Chief Executive Officer of Ascension Capital
Corporation, a Texas corporation, sole General Partner of ASCENSION RESORTS,
LTD., a Texas limited partnership, on behalf of the partnership.
[SEAL] /s/ SANDRA CEARLEY
SANDRA CEARLEY -----------------------------------
NOTARY PUBLIC Notary Public
STATE OF TEXAS My Commission Expires
COMM. EXP. 08/14/98
STATE OF CONNECTICUT )
) ss: East Hartford
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 11th day of
September, 1995 by Richard H. Mitterling, Vice President of TEXTRON FINANCIAL
CORPORATION, a Delaware Corporation, on behalf of the corporation.
/s/ JAMES R. KINYON
-----------------------------------
Commissioner of the Superior Court
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me this 15th day of
August, 1995 by Robert E. Mead, Chief Executive Officer of ASCENSION CAPITAL
CORPORATION, a Texas corporation, on behalf of the corporation.
[SEAL] /s/ SANDRA CEARLEY
SANDRA CEARLEY -----------------------------------
NOTARY PUBLIC Notary Public
STATE OF TEXAS My Commission Expires
COMM. EXP. 08/14/98
66
<PAGE> 1
EXHIBIT 10.10
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of December
28, 1995 (the "Amendment"), is by and between TEXTRON FINANCIAL CORPORATION, a
Delaware corporation (the "LENDER"), and SILVERLEAF VACATION CLUB, INC., a Texas
corporation (the "BORROWER"), formerly known as ASCENSION CAPITAL CORPORATION
(the "GUARANTOR"), successor to ASCENSION RESORTS, LTD., a Texas limited
partnership (the "ORIGINAL BORROWER"), by merger of EQUAL INVESTMENT COMPANY, a
Texas corporation, ASCENSION RESORTS, LTD. and ASCENSION CAPITAL CORPORATION.
W I T N E S S E T H:
WHEREAS, Lender, Original Borrower and Guarantor are parties to that
certain Loan and Security Agreement dated as of August 15, 1995 (the "LOAN AND
SECURITY AGREEMENT"), pursuant to which the Original Borrower executed its
Secured Promissory Note in favor of the Lender in the amount of $5,000,000.00,
as amended to date (the "NOTE");
WHEREAS, on December 28, 1995 Ascension Resorts, Ltd. was merged into
Ascension Capital Corporation, a Texas corporation ("ASCENSION"), and Ascension
was thereafter renamed Silverleaf Vacation Club, Inc. ("SILVERLEAF"); and
WHEREAS, Borrower has requested Lender to approve the merger of
Ascension Resorts, Ltd. into Ascension Capital Corporation and to agree to an
amendment of the Loan and Security Agreement to reflect the above-mentioned
merger and name change; and
WHEREAS, Lender, Borrower and Guarantor desire to amend the Loan and
Security Agreement in order to so provide;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to such terms in the Loan and Security
Agreement.
2. The Loan and Security Agreement is hereby amended by changing all
references to the Borrower therein from Ascension Resorts, Ltd., a Texas limited
partnership, to Silverleaf Vacation Club, Inc., a Texas corporation.
<PAGE> 2
3. The Loan and Security Agreement is hereby amended by changing all
references to the Guarantor therein from Ascension Capital Corporation, a Texas
corporation, to Silverleaf Vacation Club, Inc., a Texas corporation.
4. In order to satisfy the requirements of Section 6.6 of the Loan and
Security Agreement, Lender hereby approves the merger of Ascension Resorts,
Ltd. into Ascension Capital Corporation.
5. Borrower agrees to execute and deliver to Lender any and all
additional documentation as Lender may now or hereafter require in order to
effectuate the terms and conditions of this Amendment.
6. Except as herein expressly amended, the Loan and Security Agreement
is hereby ratified and affirmed in all respects.
7. This First Amendment to General Loan and Security Agreement shall
be effective as of December 28, 1995.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to General Loan and Security Agreement to be executed on its behalf as of the
day and year first written above.
Witnessed By:
TEXTRON FINANCIAL CORPORATION
/s/ ALICE A. MARINO
- ------------------------ By /s/ RICHARD H. MITTERLING
--------------------------------
Richard H. Mitterling
/s/ [ILLEGIBLE] Its: Vice President
- ------------------------
SILVERLEAF VACATION CLUB, INC.
/s/ GEORGE R. BEDELL
- ------------------------
By /s/ ROBERT E. MEAD
--------------------------------
/s/ SANDRA CEARLEY Its: Chief Executive Officer
- ------------------------
2
<PAGE> 3
STATE OF CONNECTICUT )
) ss: East Hartford
COUNTY OF HARTFORD )
At East Hartford in said County and State on this 12th day of January,
1996, personally appeared Richard H. Mitterling, duly authorized Vice President
of Textron Financial Corporation, and he acknowledged the foregoing instrument
by him signed and sealed to be his free act and deed and the free act and deed
of Textron Financial Corporation.
Before me: /s/ JENNIFER L. SAUER
------------------------------------
Notary Public in and for said State
My Commission Expires: 8/31/99
Commissioner of the Superior Court
JENNIFER L. SAUER
NOTARY PUBLIC
MY COMMISSION EXPIRES AUG. 31, 1999
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
At Dallas in said County and State on this 16th day of January, 1996,
personally appeared Robert E. Mead, duly authorized officer of SILVERLEAF
VACATION CLUB, INC., and he/she acknowledged the foregoing instrument by
him/her signed and sealed to be his/her free act and deed and the free act and
deed of Silverleaf Vacation Club, Inc., a Texas corporation, on behalf of the
corporation.
Before me: /s/ SANDRA CEARLEY
------------------------------------
Notary Public in and for said State
My Commission Expires:
--------------
SANDRA CEARLEY
NOTARY PUBLIC
[SEAL] STATE OF TEXAS
COMM. EXP. 08/14/99
3
<PAGE> 1
EXHIBIT 10.11
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of
October 31, 1996 (the "Second Amendment"), is by and between TEXTRON FINANCIAL
CORPORATION, a Delaware corporation (the "LENDER"), and SILVERLEAF VACATION
CLUB, INC., a Texas corporation (the "BORROWER"), formerly known as ASCENSION
CAPITAL CORPORATION, successor to ASCENSION RESORTS, LTD., a Texas limited
partnership (the "ORIGINAL BORROWER"), by merger of EQUAL INVESTMENT COMPANY, a
Texas corporation, ASCENSION RESORTS, LTD. and ASCENSION CAPITAL CORPORATION
(the "GUARANTOR").
W I T N E S S E T H :
WHEREAS, Lender, Original Borrower and Guarantor are parties to that
certain Loan and Security Agreement dated as of August 15, 1995 (the "LOAN AND
SECURITY AGREEMENT"), pursuant to which the Original Borrower executed its
Secured Promissory Note in favor of the Lender in the amount of $5,000,000.00,
as amended to date (the "NOTE");
WHEREAS, on December 28, 1995 Ascension Resorts, Ltd. was merged into
Ascension Capital Corporation, a Texas corporation ("ASCENSION"), and Ascension
was thereafter renamed Silverleaf Vacation Club, Inc. ("SILVERLEAF"); and
WHEREAS, on December 28, 1995, Lender, Borrower and Guarantor amended
the Loan and Security Agreement pursuant to a First Amendment to Loan and
Security Agreement dated as of December 28, 1995 (the "FIRST AMENDMENT TO LOAN
AND SECURITY AGREEMENT") to, among other things, evidence Lender's approval of
the merger of Ascension Resorts, Ltd. into Ascension Capital Corporation and to
reflect the above-mentioned merger and name change; and
WHEREAS, pursuant to a commitment letter dated as of October 29, 1996,
the parties thereto agreed, among other things, to modify the terms of the Loan
and Security Agreement to, among other things, increase the amount of the Loan,
to decrease the interest rate, and to extend the maturity date of the Loan; and
WHEREAS, Lender and Borrower have agreed to enter into this Second
Amendment to Loan and Security Agreement dated as of October 31, 1996 (the
"SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT") to amend the Loan and
Security Agreement as provided in the October 29, 1996 commitment letter; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
<PAGE> 2
1. Loan Amount. The maximum loan amount is increased from
$5,000,000.00 to $15,000,000.00 and all references to "$5,000,000.00" on the
cover page, in Section 1.1(ff), and in Section 2.1 in the Loan and Security
Agreement are hereby changed to "$15,000,000.00".
2. Closing Date. "Closing Date" as defined in Section 1.1(g)
shall for purposes of Section 4.1 only mean November 30, 1996.
3. Commitment. To reflect the issuance of a second commitment
letter, Section 1.1(j) is hereby amended to read as follows:
(j) Commitment. Collectively, (i) the Loan
Commitment issued by Lender to Borrower dated May 11, 1995 and
accepted on May 26, 1995 (the "Original Commitment"); and (ii)
the Loan Commitment issued by Lender to Borrower dated October
29, 1996 and accepted on December 27, 1996 (the "1996
Commitment").
4. Commitment Fee. To reflect the commitment fee provided for by
the 1996 Commitment, Section 1.1(k) is hereby amended to read as follows:
(k) Commitment Fee. With respect to the Original
Commitment, the commitment fee in the amount of $50,000.00
described in the Original Commitment, which was paid in
accordance with the terms of the Original Commitment. With
respect to the 1996 Commitment, the commitment fee in the
amount of $100,000.00 described in the 1996 Commitment, which
is to be paid in accordance with the terms of the 1996
Commitment and this Agreement.
5. Final Maturity Date. The Final Maturity Date is hereby
extended from August 31, 2000 to November 30, 2002 and the reference to "August
31, 2000" set forth in Section 1.1(w) is hereby changed to "November 30, 2002".
6. Interest Rate. The variable Interest Rate described in Section
1.1(cc) is changed from the Prime Rate plus two and three-quarters percent (2
3/4%) per annum to the Prime Rate plus two percent (2.00%) per annum and the
reference to "two and three-quarters percent (2 3/4%) per annum" set forth in
Section 1.1(cc) is hereby changed to "two percent (2.00%) per annum".
7. Loan Year. Section 1.1(hh) is amended to read as follows:
Effective commencing November 30, 1996, the period from
November 30, 1996 through the last day of the next full
twelve
2
<PAGE> 3
(12) calendar month period (Loan Year One) and each
twelve (12) calendar month period thereafter.
8. Note. The definition of "Note" in Section 1.1(mm) is changed
to reflect the Amended and Restated Secured Promissory Note and Section 1.1(mm)
is hereby amended to read as follows:
The Secured Promissory Note evidencing the Loan dated
the Closing Date executed and delivered by Borrower
to Lender concurrently with the Agreement, as amended
and restated by the Amended and Restated Secured
Promissory Note dated as of October 31, 1996, a copy
of which is attached hereto as Exhibit B-1.
9. Revolving Credit Period. The revolving credit period is
extended from August 31, 1996 to November 30, 1998 and the reference to "August
31, 1996" in Section 2.1 of the Loan and Security Agreement is hereby changed to
"November 30, 1998".
10. Voluntary Prepayments. The right of the Borrower to make
voluntary prepayments is changed and Section 2.4(a) of the Loan and Security
Agreement is hereby amended to read as follows:
(a)(i) From the date hereof through and including
November 30, 1998, subject to the terms of this
Agreement, Borrower may not voluntarily prepay the
Loan, in whole or in part, except as set forth in
this Section 2.4(a)(i). A voluntary prepayment under
this Subsection 2.4(a)(i) shall be permitted solely
in connection with the sale or pledge in bulk in
minimum increments of $5,000,000.00 or more of notes
receivable relating to the Resorts and, in the event
of a bulk pledge, further provided that any such bulk
pledge is not made to a Warehouse Lender other than a
Warehouse Lender that is providing temporary
financing in connection with the securitization of
all such notes receivable. For purposes hereof, a
"Warehouse Lender" means a lender who agrees to
refinance notes receivable for a period of one (1)
year or less. Borrower may make such prepayment only
after thirty (30) days' prior written notice to
Lender. Any such prepayment must include all accrued
but unpaid interest, and accrued but unpaid
contributions, taxes, insurance, loan charges
(including Minimum Loan Usage Fees), custodial fees,
attorneys' and paralegals' fees and expenses and
other fees or expenses incurred by Lender or advanced
to or on behalf of
3
<PAGE> 4
Borrower by Lender pursuant to any of the Loan
Documents accrued but unpaid.
(a)(ii) No prepayment premium shall be required in
connection with any voluntary prepayment made in
accordance with Section 2.4(a)(i).
(a)(iii) Commencing on and after December 1, 1998,
subject to the terms of this Agreement, and to the
payment of the prepayment premium set forth in
Section 2.4(c) below, Borrower may prepay the Loan,
in whole but not in part, after (30) days' prior
written notice to Lender. Any such prepayment must
include all outstanding principal, accrued but unpaid
interest, and all other Obligations, including the
applicable prepayment premium provided in Section
2.4(c) below and the Minimum Loan Usage Fees.
11. Mandatory Prepayments. Section 2.4(b) is hereby amended to read
as follows:
If at any time and for any reason, the outstanding
unpaid principal balance of the Loan shall exceed the
aggregate amount of the Borrowing Base, then, within
five (5) Business Days following Borrower's receipt
of telecopied notice from Lender of the occurrence of
such excess over Borrowing Base or, absent such
telecopied notice, within fifteen (15) days after
the end of the calendar month in which such excess
occurred, (i) Borrower shall 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 of the Borrowing Base, or
(ii) if the Lender has determined that notes
receivable have been delivered to Lender and were
included in the Borrowing Base, which notes
receivable did not or no longer satisfy the
requirements for inclusion in the Borrowing Base as
Eligible Notes Receivable ("Ineligible Notes
Receivable"), Borrower shall substitute Eligible
Notes Receivable for the Ineligible Notes Receivable
and thereby increase the aggregate principal amount
of Eligible Note Receivables pledged to Lender so
that the amount of Borrowing Base equals or exceeds
the aggregate outstanding principal amount of the
Loan. The pledge and delivery to Lender of additional
Eligible Notes Receivable shall comply with the
document delivery and recordation requirements set
forth in Section 4.2(b) of this Agreement and shall
be accompanied by a written certification of the
Borrower to the effect that such additional Pledged
Notes
4
<PAGE> 5
Receivable are Eligible Notes Receivable, and that,
giving effect to the pledge to Lender of such
Eligible Note Receivable, the outstanding unpaid
principal balance of the Loan is equal to or less
than the aggregate amount of the Borrowing Base. 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.
12. Prepayment Premiums. Section 2.4(c) is hereby amended to read
as follows:
(c) Premiums. Any prepayment of the Loan
pursuant to Section 2.4(a) above must be accompanied
by a prepayment premium calculated, as of immediately
prior to such prepayment as follows:
Date of Prepayment Premium
------------------ -------
Loan Years One No prepayment premium.
and Two Prepayment, without
prepayment premium, permitted
only in accordance with
Section 2.4(a)(i).
Loan Year Three One half percent (0.5%) of
the then outstanding balance
of the Loan.
No prepayment premium shall be payable in connection
with any prepayment of the principal balance of the
Loan which arises from the prepayment of one or more
Eligible Notes Receivable by its maker or makers.
13. Minimum Loan Usage Fee. A new Section 2.5 is hereby added to
the Agreement as follows:
2.5 Minimum Loan Usage Fee. In addition to the
interest payable pursuant to this Agreement, Borrower
shall pay to Lender, with respect to the six month
period commencing on May 1, 1997 and ending on
November 30, 1997 and with respect to each six month
period thereafter through and including November 30,
1998, on the fifth day after every such six month
period, IN ARREARS, a fee (the "Minimum Loan Usage
Fee") equal to the product of: (a) the excess, if any
of (i) $7,500,000.00, over (ii) the average daily
5
<PAGE> 6
outstanding principal balance of the Note for such
six month period; times (b) two percent (2.00%).
14. Loan Documents/Collateral. Section 5(b)(iv) is hereby amended
to read as follows:
(iv) delivered to Lender, with respect to
each Encumbered Interval, a commitment for a
mortgagee's title insurance policy showing that the
Mortgage in respect of such Interval has been
assigned to Lender and 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
Pledged Note Receivable, with a satisfactory title
insurance policy to be issued on the date of Advance.
15. Partial Waiver of Requirement for Title Insurance Policies Upon
Satisfactory Maintenance of Inventory Control Procedures. A new subparagraph
(f) is hereby added to Section 5 of the Agreement as follows:
(f) Partial Waiver of Requirement for Title Insurance Policies Upon
Satisfactory Maintenance of Inventory Control Procedures. Anything in
Section 5(b)(iv) hereof to the contrary notwithstanding, on and after
December 1, 1996, the delivery of a commitment for a mortgagee title
insurance policy and a mortgagee title insurance policy shall be
required only with respect to twenty-five percent (25%) of the
Eligible Notes Receivable delivered to Lender in respect of each
advance, subject to the following requirements and limitations:
(i) Borrower shall be in full compliance with the Inventory
Control Procedures (as defined herein); and
(ii) Lender shall have the right in its sole discretion to
determine those Eligible Notes Receivables in respect of which
commitments for mortgagee title insurance policies and also the
mortgagee title insurance policies themselves shall be
required.
In the event that Borrower fails to satisfy the requirements of
Subparagraph 5(f)(i), then, immediately upon such failure, the partial
waiver provided under this subparagraph shall no longer be effective.
16. Organization, Standing, Qualification. Section 6.1 is hereby
amended to read as follows:
Borrower (a) is a duly organized and validly existing Texas
corporation in good standing under the laws of the State of
Texas, and (b) has all requisite power, corporate or
otherwise, to conduct
6
<PAGE> 7
its business and to execute and deliver, and to perform its
obligations under, the Loan Documents.
17. Tax Identification/Social Security Numbers. Section 6.22 is
hereby amended to read as follows:
The Borrower's federal taxpayer's identification number is
75-2259890.
18. Inventory Control Procedures. A new Section 6.23 is hereby
added to the Agreement as follows:
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 Exhibit E.
19. Maintenance of Inventory Control. A new Section 7.1(x) is
hereby added to the Agreement as follows:
(x) 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.
20. Notice Address to Borrower. The notice address for the Borrower
is changed to reflect the change in name of the Borrower and the notice address
for the Borrower set forth in Section 12.1 is hereby changed to:
Silverleaf Vacation Club, Inc.
1221 Riverbend Drive, Suite 120
Dallas, TX 75221
Attn: Mr. Robert E. Mead, CEO
21. Exhibit A. The Form of Request and Borrowing Base Certificate
is changed to reflect the changes to the Loan and the name of the Borrower and
Exhibit A attached to the Loan and Security Agreement is hereby deleted and
replaced by Exhibit A hereto.
7
<PAGE> 8
22. Exhibit C. The references to the terms Assignment of Deeds of
Trust, Subordination Agreement, Environmental Indemnity, and Lockbox Agreement
shall mean those documents as heretofore or hereafter amended.
23. Definitions. All capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Loan and Security Agreement.
24. Further Documentation. Borrower agrees to execute and deliver
to Lender any and all additional documentation as Lender may now or hereafter
require in order to effectuate the terms and conditions of this Second
Amendment.
25. Ratification and Affirmation. Except as herein expressly
amended, the Loan and Security Agreement is hereby ratified and affirmed in all
respects. Without limiting the foregoing, Borrower hereby again as of the date
hereof ratifies and affirms the warranties, covenants, agreements, and
representations which the Original Borrower and the Borrower made in the Loan
and Security Agreement on August 15, 1995.
26. Effective Date. This Second Amendment shall be effective
commencing as of the later of: (1) November 30, 1996, or (2) the satisfaction
of the terms of the 1996 Commitment and Section 4.1 of the Loan and Security
Agreement, as amended (which satisfaction shall be evidenced by notice from
Lender or Lender's counsel to the Borrower or the Borrower's counsel,
respectively).
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed on their behalf as of the day and year first written
above.
Witnessed By:
TEXTRON FINANCIAL CORPORATION
By: /s/ JENNIFER L. SAUER
---------------------------------
By /s/ NICHOLAS L. MECCA
---------------------------------
/s/ JAMES R. KINYON NICHOLAS L. MECCA
--------------------------------- Its Vice President
SILVERLEAF VACATION CLUB, INC.
/s/ BRIGETTE SCOTT
--------------------------------- By /s/ ROBERT E. MEAD
----------------------------------
ROBERT E. MEAD
/s/ KRISTI JONES Its Chief Executive Officer
---------------------------------
8
<PAGE> 9
STATE OF CONNECTICUT )
) ss: East Hartford
COUNTY OF HARTFORD )
At East Hartford in said County and State on this 26th day of
December, 1996, personally appeared Nicholas L. Mecca, duly authorized Vice
President of Textron Financial Corporation, and he acknowledged the foregoing
instrument by him signed and sealed to be his free act and deed and the free
act and deed of Textron Financial Corporation.
Before me: /s/ JAMES R. KINYON
---------------------------------------
Commissioner of the Superior Court
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
At Dallas in said County and State on this 19th day of December, 1996,
personally appeared Robert E. Mead, C.E.O., duly authorized officer of
SILVERLEAF VACATION CLUB, INC., and he/she acknowledged the foregoing
instrument by him/her signed and sealed to be his/her free act and deed and the
free act and deed of Silverleaf Vacation Club, Inc., a Texas corporation, on
behalf of the corporation.
Before me: /s/ SANDRA CEARLEY
Notary Public in and for said State
My Commission Expires: 8/14/98
-------
[SEAL] SANDRA CEARLEY
NOTARY PUBLIC
STATE OF TEXAS
COMM. EXP. 08/14/98
9
<PAGE> 1
EXHIBIT 10.12
RESTATED AND AMENDED
LOAN AND SECURITY AGREEMENT
RESTATED AND AMENDED LOAN AND SECURITY AGREEMENT ("Agreement")
entered into as of December 27, 1995 by HELLER FINANCIAL, INC., a Delaware
corporation ("Lender"), and ASCENSION RESORTS, LTD., a Texas limited
partnership, d/b/a SILVERLEAF RESORTS, LTD. ("Borrower").
RECITALS:
A. Lender and Borrower entered into that certain Loan and
Security Agreement dated as of October 11, 1994 (the "Original Agreement").
B. Pursuant to the terms and conditions of the Original
Agreement, Lender made Borrower a $5,000,000 revolving receivables loan the
"Original Loan") secured by "Receivables Collateral" (as defined in the
Original Agreement).
C. On April 19, 1995 at Borrower's request the Original Loan was
modified and increased by an additional $5,000,000 (the "First Loan Increase")
to $10,000,000.
D. Borrower has requested that Lender: (i) further modify, extend
and increase the Original Loan by an additional $5,000,000 (the "Second Loan
Increase") to $15,000,000, and (ii) make Borrower a separate $4,000,000
revolving inventory loan in accordance with the terms of a separate Loan and
Security Agreement of even date herewith. Lender is willing to comply with
Borrower's requests provided that the Original Agreement is restated and
amended as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto do hereby
agree that the Original Agreement shall be restated and amended as follows:
1. DEFINITIONS
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other
Documents, the following terms shall have the following meanings (such
meanings to be applicable equally both to the singular and plural
terms defined).
1.1 "Advance": an advance of the proceeds of the Loan by Lender on
behalf of Borrower in accordance with the terms and provisions
of this Agreement.
1.2 "Affiliate": with respect to any individual or entity, any
other individual or entity that directly or indirectly,
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such individual or
entity.
1.3 "Agents": the Servicing Agent, Custodian Agent and the Lockbox
Agent.
<PAGE> 2
1.4 "Applicable Usury Law": the usury law chosen by the parties
pursuant to the terms of paragraph 8.11 or such other usury
law which is applicable if such usury law is not
1.5 "Articles of Organization": the charter, articles, operating
agreement, partnership agreement, by-laws and any other
written documents evidencing the formation, organization and
continuing existence of an entity.
1.6 "Assignments": a written assignment or assignments, executed
by Borrower, as required by Lender, and creating in favor of
Lender, as security for the Performance of the Obligations, a
perfected, direct, first and (subject only to the Permitted
Encumbrances) exclusive assignment of: all leases, sales
contracts, rents, sales and other proceeds pertaining to or
arising from the Receivables Collateral Servicing Agreement;
and the Receivables Collateral; as such assignments may be
from time to time renewed, amended, restated or replaced.
1.7 "Associations": The Time-Share Associations.
1.8 "Borrower": Ascension Resorts, Ltd., a Texas limited
partnership, d/b/a Silverleaf Resorts, Ltd., and subject to
the restrictions on merger, consolidation and assignment
contained in the Documents, its successors and assigns.
1.9 "Borrowing Base": with respect to an Eligible Instrument,
shall be seventy percent (70%) of the unpaid principal balance
of such Eligible Instrument.
1.10 "Borrowing Term": the period commencing on the date of this
Agreement and ending on the close of Lender's normal business
hours on the date (or if not a Business Day, the first
Business Day thereafter) which is twelve (12) months from the
date of this Agreement.
1.11 "Business Day": any day other than a Saturday, Sunday or a day
on which banks in Chicago, Illinois are required to close.
1.12 "Closing Date": the date on which this Agreement is executed
and delivered by the parties hereto.
1.13 "Collateral": the Receivables Collateral and any and all other
assets now or hereafter serving as security for the
Performance of the Obligations, and all products and proceeds
thereof
1.14 "Commitment Fees": a commitment fee for the Original Loan
payable by Borrower to Lender in the amount of $50,000 which
has been paid pursuant to the Original Agreement, and an
additional commitment fee in the amount of $50,000 payable by
Borrower to Lender in connection with the Second Loan
Increase.
1.15 "Custodian" or "Custodian Agent": Comerica Bank-Texas, a Texas
banking corporation or its successors as Custodian, under the
Custodian Agreement.
2
<PAGE> 3
1.16 "Custodian Agreement": The document between Borrower, Lender
and Custodian where the Custodian will take possession of the
Designated Instruments on behalf of Lender as it may be from
time to time renewed, amended, restated or replaced.
1.17 "Default Rate": as defined in the Note.
1.18 "Designated instrument": an Instrument which has been
designated by Borrower in writing to be part of the Designated
Receivables Collateral.
1.19 "Designated Receivables Collateral": all Designated
Instruments which have not been replaced pursuant to paragraph
3.2, their proceeds, and that other part of the Receivables
Collateral related to the Designated Instruments.
1.20 "Documents": the Note, the Subordination Agreement(s), the
Security Documents, the Lockbox Agreement, the Servicing
Agreement, the Custodian Agreement, the Environmental
Certificate, this Agreement, and all other documents executed
in connection with the Loan, as they may be from time to time
renewed, amended, restated or replaced.
1.21 "Eligible Instrument": a Designated Instrument which conforms
to the standards set forth in Exhibit B. An Instrument that
has qualified as an Eligible Instrument shall cease to be an
Eligible Instrument upon the date of the first occurrence of
any of the following: (a) any installment due with respect to
that Instrument becomes more than 60 days past due; or (b)
that Instrument otherwise fails to continue to conform to the
standards set forth in Exhibit B.
1.22 "Environmental Certificate": an environmental certificate
executed by Borrower, and such other persons or parties as
required by Lender in the form of Exhibit C, as it may be from
time to time renewed, amended, restated or replaced.
1.23 "Event of Default": the meaning set forth in paragraph 7.1.
1.24 "Fee Simple Time-Share Instrument": an Instrument which has
arisen out of the sale of a Fee Simple Time-Share Interest.
1.25 "Fee Simple Time-Share Interest": an undivided 1/50 fee simple
interest in a particular Unit, together with the right to the
exclusive occupancy and use of the Unit for seven (7)
consecutive days each calendar year, together with an
appurtenant undivided fractional interest in the common
elements of the Time-Share Project and the non-exclusive right
to use such common elements during the same seven (7) day
period including rights as members of MEEC.
1.26 "FFC": Freedom Financial Corporation, a Texas corporation.
1.27 "Incipient Default": an event which after notice and/or lapse
of time would constitute an Event of Default.
3
<PAGE> 4
1.28 "Instrument": a promissory note which has arisen out of the
sale of a Time-Share Interest by a Time-Share Developer to a
Purchaser.
1.29 "Insurance Policies": the insurance policies that Borrower are
required to maintain and deliver pursuant to paragraph 6.8.
1.30 "Lender": Heller Financial, Inc. or its successors and
assigns.
1.31 "Loan": the Revolving Receivables Loan made pursuant to this
Agreement and the other Documents.
1.32 "Lockbox Agent": Texas Commerce Bank, or its successor as
lockbox agent under the Lockbox Agreement.
1.33 "Lockbox Agreement": an agreement to be made between Lender,
Borrower and Lockbox Agent, which provides for the Lockbox
Agent to collect through a lockbox payments made on
Instruments constituting part of the Receivables Collateral,
and to remit them to Lender subject to the provisions of
paragraph 5.5(b), as it may be from time to time renewed,
amended, restated or replaced.
1.34 "Management Agreement(s)": that certain Management Agreement
entered into as of March 28, 1990, by and between MEEC and
Borrower as amended by First Amendment to Management Agreement
entered into as of January 1, 1993; and Master Club Agreement
entered into as of March 28,1990, by and between MEEC and
Ozark Mountain Resort Club, a Missouri non-profit corporation,
Holiday Hills Resort Club, a Missouri non-profit corporation,
The Holly Lake Club, a Texas nonprofit unincorporated
association, The Villages Condoshare Association, a Texas
non-profit unincorporated association, The Villages Club, an
unincorporated association, Piney Shores Club, a Texas
non-profit unincorporated association, and Hill Country Resort
Condoshare Club, a Texas non-profit unincorporated association
as amended by First Amendment to Master Club Agreement entered
into as of March 28, 1990.
1.35 "Master Deed(s)": the Master Deeds whereby the Resorts were
conveyed from Freedom Financial Corporation, a Texas
corporation, to Borrower
(a) Warranty Deed dated May 31, 1989, and recorded in
Volume 2915, Page 215 of the Real Property Records of
Smith County, Texas, and an Assignment of Development
and Contract Rights, dated May 31,1989, and recorded
in Volume 2915, Page 274 of the Real Property Records
of Smith County, Texas;
(b) Warranty Deed dated May 31, 1989, and recorded in
Book 194, Page 854 of the Deed Records of Stone
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 135, Page
360 of the Deed Records of Stone County, Missouri;
4
<PAGE> 5
(c) Warranty Deed dated May 31, 1989, and recorded in
Volume 1162, Page 519 of the Real Property Records of
Wood County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Volume 1162, Page
526 of the Real Property Records of Wood County,
Texas;
(d) Warranty Deed dated May 31, 1989, and recorded under
Clerk's File No. 8922886 of the Real Property Records
of Montgomery County, Texas, and an Assignment of
Development Rights, Warranties, Service Contracts,
and Trade Name dated May 31, 1989, and recorded under
Clerk's File No. 8922887 of the Real Property Records
of Montgomery County, Texas.
(e) Warranty Deed dated May 31, 1989, and recorded in
Book 300, Page 650 of the Recorder of Deeds of Taney
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 301, Page
331 of the Recorder of Deeds of Taney County,
Missouri;
(f) Warranty Deed dated May 31,1989 and recorded in
Volume 679, Page 29 of the Real Property Records of
Comal County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts and Trade Name
dated May 31, 1989, and recorded in Volume 679, Page
36 of the Real Property Records of Comal County,
Texas.
1.36 "Maturity Date": five (5) years after the date which is the
first day of the month after the Closing Date (or if not a
Business Day, the first Business Day thereafter).
1.37 "Maximum Loan Amount": Fifteen Million United States Dollars
($15,000,000).
1.38 "MEEC": Maker Endless Escape Club, a non-profit Texas
corporation to which all Time-Share Associations belong.
1.39 "MEEC Rights": the right to use the Resorts pursuant to the
conditions of the Endless Escape Disclosure Statement given to
all Purchasers upon purchasing a Fee Simple Time-Share
Interest.
1.40 "Non-Designated Receivables Collateral": that part of the
Receivables Collateral which is not Designated Receivables
Collateral.
1.41 "Note": collectively (i) the Restated and Amended Promissory
Note dated of even date herewith from Borrower in favor of
Lender in the original principal amount of $5,000,000, as it
may from time to time be renewed, amended, restated, or
replaced; and (ii) the Consolidated and Amended Promissory
Note dated of even date herewith from Borrower in favor of
Lender in the original principal amount of $10,000,000, as it
may from time to time be renewed, amended, restated, or
replaced. The aforesaid $5,000,000 and $10,000,000 Notes are in
the form of Exhibit D.
5
<PAGE> 6
1.42 "Obligations": all obligations, agreements, duties, covenants
and conditions that Borrower is now or hereafter required to
Perform under the Documents.
1.43 "Opening Prepayment Date": the date (or if not a Business Day,
the first Business Day thereafter) one (1) year after the
Closing Date.
1.44 "Other Lenders": FINOVA Capital Corporation, f/k/a Greyhound
Financial Corporation, Marine Midland Bank, N.A., Oxford
Financial Corporation, Textron Financial Corporation.
1.45 "Performance" or "Perform": full, timely and faithful
performance.
1.46 "Permitted Encumbrances": the rights, restrictions,
reservations, encumbrances, easements and liens of record
which Lender has agreed to accept as set forth in Exhibit E.
1.47 "Prepayment Premium": an amount to be paid only after one (1)
year after the Closing Date as a percentage of the outstanding
principal balance of the Revolving Receivables Loan in the
event of a prepayment of the Revolving Receivables Loan
determined in accordance with Schedule 1.
1.48 "Purchaser": a purchaser of a Time-Share interest from a
Time-Share Developer.
1.49 "Purchaser Mortgage": the purchase money given to secure a Fee
Simple Time-Share Instrument.
1.50 "Real Property": the property described in Exhibit K.
1.51 "Receivables Assignment": a written assignment of specific
Designated Instruments and/or related Purchaser Mortgages and
their proceeds, delivered by Borrower to Lender in the form of
Exhibit A.
1.52 "Receivables Collateral": (a) the Instruments which are now
or hereafter assigned, endorsed or delivered to Lender
pursuant to this Agreement or against which an Advance has
been made; (b) all rights under all documents evidencing,
securing or otherwise pertaining to such Instruments,
including, without limitation, Purchaser Mortgages and
purchase agreements; (c) all files, books and records of
Borrower pertaining to the foregoing; and (d) the proceeds
from the foregoing.
1.53 "Resolutions": a resolution of a corporation (including the
corporation as a general partner) certified as true and
correct by an authorized officer of such corporation, a
certificate signed by the manager of a limited liability
company and/or such other members whose approval is required,
or a partnership certificate signed by all of the general
partners of such partnership and such other partners whose
approval is required.
1.54 "Resorts": the projects legally described by the Master Deeds
and developed by Ascension Resorts, Ltd. d/b/a Silverleaf
Resorts, Ltd., a Texas limited partnership,
6
<PAGE> 7
which include the Time-Share Projects; The Holly Lake
Condoshare; Piney Shores Resort; Lake O' the Woods; The
Villages Condoshare; Hill Country Resort; Ozark Mountain
Resort; and Holiday Hills Resort Condoshare.
1.55 "Revolving Inventory Loan": the $4,000,000 loan evidenced by
the $4,000,000 Revolving Promissory Note from Borrower in
favor of Lender.
1.56 "Revolving Receivables Loan": the $15,000,000 loan evidenced
by the $5,000,000 Restated and Amended Promissory Note and
$10,000,000 Consolidated and Amended Promissory Note from
Borrower in favor of Lender in the form of composite Exhibit
D.
1.57 "Security Documents": the Receivables Assignments, this
Agreement, and any and all other documents now or hereafter
executed by Borrower and securing Performance of the
Obligations, as they may be from time to time renewed,
amended, restated or replaced.
1.58 "Security Interest": a perfected, direct, first and (subject
only to the Permitted Encumbrances) exclusive security
interest in and charge upon the property intended to be
covered by it.
1.59 "Servicing Agent": Borrower serving in the capacity of
Servicing Agent pursuant to the Servicing Agreement.
1.60 "Servicing Agreement": an agreement to be made among Lender
and Borrower for itself and acting as Servicing Agent, which
provides for Servicing Agent to perform for the benefit of
Lender accounting, reporting and other servicing functions
with respect to the Instruments constituting part of the
Receivables Collateral, as it may be from time to time
renewed, amended, restated or replaced.
1.61 "Subordination Agreement(s)": subordination agreement(s) made
and delivered to Lender pursuant to paragraph 6.11, as it may
be from time to time renewed, amended, restated or replaced.
1.62 "Term": the duration of this Agreement, commencing on the date
as of which this Agreement is entered into and ending when all
of the Obligations shall have been Performed.
1.63 "Third Party Consents": those consents which Lender requires
Borrower, and its Affiliates to obtain or which one or more of
them is contractually or legally obligated to obtain, from
others in connection with the transaction contemplated by the
Documents.
1.64 "Time-Share Associations" or sometimes "Associations": Ozark
Mountain Resort Club, a Missouri non-profit corporation,
Holiday Hills Resort Club, a Missouri non-profit corporation,
Hill Country Resort Condoshare Club, a Texas non-profit
unincorporated organization, Piney Shores Club, a Texas
non-profit unincorporated
7
<PAGE> 8
association, Holly Lake Club, a Texas non-profit
unincorporated association, The Villages Condoshare
Association, at Texas non-profit unincorporated association
1.65 "Time-Share Declaration": the declaration recorded/or to be
recorded in the real estate records where each Time-Share
Project is located for the purpose of adding ownership of Fee
Simple Time-Share Interests to the Time-Share Program, as it
may be in effect from time to time.
1.66 "Time-Share Developer": Borrower, in its capacity, selling
Time-Share Interests.
1.67 "Time-Share Interests": the Fee Simple Time-Share Interests.
1.68 "Time-Share Program": the program in which Purchasers have
purchased in Fee Simple Time-Share Interests; owners of
Time-Share Interests have the right to use and enjoy their
respective Time-Share Interests on a recurring basis; and
owners of Time-Share Interests share the expenses associated
with the operation and management of such program.
1.69 "Time-Share Program Consumer Documents": the purchase
contract, Instrument, Purchaser Mortgage, credit application,
credit disclosures, rescission right notices, final,
subdivision public reports/ prospectuses/ public offering
statements, Time-Share Project exchange affiliation agreement,
Endless Escape Disclosure Document and other documents and
advertising materials used or to be used by a Time-Share
Developer in connection with the sale of Time-Share Interests.
1.70 "Time-Share Program Governing Documents": the Articles of
Organization of the Time-Share Associations, the rules and
regulations of the Time-Share Associations, the Time-Share
Program management contract between the Time-Share
Associations and a management company, any subsidy agreement
by which a Time-Share Developer is obligated to subsidize
shortfalls in the budget of the Time-Share Program in lieu of
paying assessments, and any exchange affiliation agreement, as
they may be from time to time in effect.
1.71 "Time-Share Projects": the part of the Resorts described in
Exhibit F and such other part of the Resorts as Lender may
from time to time hereafter approve in writing.
1.72 "Title Insurer (Purchaser Mortgage)": a title company which is
acceptable to Lender and issues a Title Policy (Purchaser
Mortgage).
1.73 "Title Policy (Purchaser Mortgage)": a policy of title
insurance in an amount not less than Borrowing Base of a Fee
Simple Time-Share Instrument, insuring Lenders interest in the
Purchaser Mortgage securing such Instrument as a perfected,
direct, first and exclusive lien on the Time-Share Interest
encumbered thereby, subject only to the Permitted
Encumbrances, issued by a Title Insurer (Purchaser Mortgage)
and in form and substance acceptable to Lender.
1.74 "Unit": a dwelling unit in a Time-Share Project.
8
<PAGE> 9
2. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Lender hereby agrees, if Borrower has Performed all of the
Obligations then due, to make Advances to Borrower in amounts equal to (a) the
then Borrowing Base of the Eligible Instruments less (b) the then unpaid
principal balance of the Loan; provided, at no time shall the unpaid
principal balance of the Loan exceed the Maximum Loan Amount. Lender shall have
no obligation to make any Advance after the Borrowing Term has expired.
2.2 The Loan is a revolving line of credit; however, all of the
Advances shall be viewed as a single loan. Borrower shall not be entitled to
obtain Advances after the expiration of the Borrowing Term unless Lender agrees
in writing with Borrower to make Advances thereafter on terms and conditions
satisfactory to Lender and such action if taken shall not be deemed a waiver
with respect to subsequent advances. This Agreement and Borrower's liability for
Performance of the Obligations shall continue, however, until the Obligations
have been completely satisfied or waived in writing by Lender.
2.3 Borrower will use the proceeds of all Advances only to fund
sales, marketing and working capital needs.
3. RECEIVABLES COLLATERAL SECURITY
3.1 To secure the Performance of all of the Obligations, Borrower
hereby grants to Lender a Security Interest in and assigns to Lender the
Collateral. Such Security Interest shall be absolute, continuing and applicable
to all initial and subsequent Advances and to all of the Obligations. All of
the Collateral shall secure repayment of the Loan and the Performance of the
other Obligations. Borrower will unconditionally deliver to Custodian as agent
for Lender pursuant to the Custodian Agreement, with full recourse, all
Instruments which are part of the Receivables Collateral. Lender is hereby
appointed Borrower's attorney-in-fact to take any and all actions in the name of
Borrower or on behalf of Borrower which are deemed necessary or appropriate by
Lender with respect to the collection and remittance of payments (including the
endorsement of payment items) received on account of the Receivables
Collateral.
3.2 If an Instrument which is part of the Designated Receivables
Collateral is not an Eligible Instrument upon assignment to Lender or
thereafter ceases to be an Eligible Instrument, then within thirty (30) days
after the earlier of (a) Borrower having obtained knowledge the Instrument is
not an Eligible Instrument or (b) the Instrument ceasing to qualify as an
Eligible Instrument, Borrower will either (x) pay to Lender an amount equal to
the Borrowing Base of the ineligible Instrument, together with interest, costs
and expenses attributable to it, or (y) replace such ineligible Instrument with
an Eligible Instrument or Eligible Instruments having a Borrowing Base not less
than the Borrowing Base (calculated immediately before its ineligibility) of
the ineligible Instrument being replaced. Simultaneously with such payment or
the delivery of the replacement Instrument to Lender, Borrower will deliver to
Lender all of the items (except for a "Request for Advance and Certification")
required to be delivered by Borrower to Lender pursuant to paragraph 4.1,
together with a "Borrower's Certificate" in form and substance identical to
Exhibit G. If neither an Event of Default nor Incipient Default has occurred
and is continuing, then within a reasonable time after the substitution of an
Eligible Instrument for an ineligible Instrument, Lender will reassign to
Borrower, without recourse or warranty of any kind, the ineligible
9
<PAGE> 10
Instrument. Borrower will prepare the reassignment instrument, which shall be
in form and substance identical to Exhibit H and shall deliver it to Lender for
execution.
3.3 Borrower will deliver or cause to be deliver to Lender, and
will maintain or cause to be maintained throughout the Term in full force and
effect in accordance with their terms, the Borrower Security Documents, the
Subordination Agreement(s), and all other security agreements required pursuant
to the Documents.
4. ADVANCES
4.1 Lender's obligation to make the initial Advance shall be
subject to and conditioned upon the terms and conditions set forth in the
following subparagraphs and elsewhere in this Agreement being satisfied and
remaining satisfied during the Term.
(a) Borrower shall have delivered to Lender the
following Documents, duly executed and delivered by all
parties thereto, and in form and substance satisfactory to
Lender:
(i) the Note;
(ii) a Receivables Assignment of the
specific Instruments, which must be
Eligible Instruments, against which
the Advance is requested;
(iii) the Subordination Agreement(s)
(iv) the Environmental Certificate;
(v) UCC financing statements for filing
and/or recording, as appropriate,
where necessary to perfect the
Security Interest in the Collateral
subject to the UCC;
(vi) a favorable opinion which is from
independent counsel for Borrower,
satisfactory to Lender and is in
form and substance satisfactory to
Lender,
(vii) the Lockbox Agreement;
(viii) the Servicing Agreement;
(ix) the Custodian Agreement
(x) this Agreement; and
(xi) such other documents as Lender may
reasonably require.
(b) Borrower shall have delivered to Lender the
following items at least ten (10) Business Days prior to the
date of the Advance, or in the case of the items called for in
10
<PAGE> 11
item (xii) at least five (5) Business Days prior to the date
of the Advance, all of which shall be in form and substance
satisfactory to Lender:
(i) the Articles of Organization of Borrower and
for all purposes herein the Articles of
Organization of and its General Partner, and,
if applicable, their respective managers,
members and partners, to the extent any such
entity is not a natural person;
(ii) the Resolutions of Borrower, and, if
applicable, their respective managers,
members and general partners, to the extent
any such entity is not a natural person;
(iii) evidence that all taxes and assessments on
the Time-Share Projects have been paid;
(iv) a title commitment or preliminary title
report for the issuance of the Title Policy
(Purchaser Mortgage), together with copies of
all documents referred to therein and a
pro-forma copy of such title policy;
(v) the approved subdivision plat;
(vi) a copy of the registrations/consents to sell,
the final subdivision public reports/public
offering statements and/or prospectuses and
approvals thereof required to be issued by or
used in the state where the Time-Share
Projects is located and other jurisdictions
where Time-Share Interests have been offered
for sale or sold;
(vii) if the Time-Share Project has not been
registered under the Interstate Land Sales
Full Disclosure Act ("Act") and Lender
requests such an opinion, a copy of an
advisory opinion issued by the federal Office
of Interstate Land Sales Registration that
the Project does not fall within the purview
of the Act. Lender may in its sole
discretion, accept the opinion of Borrower's
counsel on the applicability of such act.
(viii) a copy of the form of the Time-Share Program
Consumer Documents and the Time-Share Program
Governing Documents which have been or are
being used by the Time-Share Developers,
including, without limitation, the exchange
affiliation agreement with RCI and the
Management Agreements;
(ix) the Insurance Policies;
(x) a structural inspection of the Time-Share
Projects;
11
<PAGE> 12
(xi) without implying Lenders consent to any such
lien, agreements from the holders of liens on
the Time-Share Project and any amenities
available to Purchasers as described in the
Time-Share Documents that they will not
disturb the rights of owners of Time-Share
Interests to use and enjoy such Time-Share
Interests so long as they are not in default
of their obligations under their instruments
and the Time-Share Program Governing
Documents;
(xii) the specific Instruments against which the
Advance is requested, items properly endorsed
and the other items described in Exhibit 1,
which for purposes of efficiently handling
requests for Advances, contains some of the
items also set forth in Sections 4.1 through
4.4 herein; and
(xiii) such other items as Lender requests which are
reasonably necessary to evaluate the request
for the Advance and the satisfaction of the
conditions precedent to the Advance.
(c) Lender shall have received the following in form and
substance satisfactory to Lender
(i) Dunn and Bradstreet reports for Borrower; and
(ii) lien, litigation and judgment searches for
Borrower, and MEEC conducted in such
jurisdictions as Lender deems appropriate.
(d) No material adverse change shall have occurred-in the
Time-Share Project or in Borrowers or MEEC's business or financial
condition since the date of the latest financial and operating
statements given to Lender by or on behalf of Borrower and MEEC.
(e) There shall have been no change in the warranties and
representations made in the Documents by Borrower, for the Performance
of any of the Obligations.
(f) Neither an Event of Default nor Incipient Default
shall have occurred and be continuing.
(g) The interest rate applicable to the Advance (before
giving effect to any savings clause will not exceed the maximum rate
permitted by the Applicable Usury Law.
(h) Borrower shall have paid to Lender (or its designee)
the Commitment Fee, the Lenders Attorney's Fee, the Custodian Fee, the
Lockbox Agent Fee, and all other fees required to be paid at the time
of the Advance.
4.2 Advances shall be requested in writing (in the form of Exhibit
J) by the Chief Executive Officer or principal financial officer of the General
Partner of Borrower and shall not be made more frequently than twice monthly or
in amounts less than $250,000.
12
<PAGE> 13
4.3 Advances may be disbursed by checks, wire transfers or drafts
payable to Borrower, or if requested by Borrower and approved in writing by
Lender, to others, either severally or jointly with Borrower, for the credit or
benefit of Borrower. Lender may, at its option, withhold from any Advance any
sum due it (including costs and expenses) under the terms of the Documents.
4.4 Although Lender shall have no obligation to make an Advance
unless and until all of the conditions precedent to the Advance have been
satisfied, Lender may, at its discretion, make Advances prior to that time
without waiving or releasing any of the Obligations.
4.5 After the initial Advance, the obligation of Lender to make a
subsequent Advance shall be subject to the satisfaction of the conditions
precedent set forth on Exhibit I.
4.6 It is acknowledged by Borrower that on the date hereof, all
documentation required by Lender to Advance for Eligible Instruments from
Missouri Time-Share Projects has not been received, and satisfaction and
approval of same shall be in Lender's sole discretion.
5. NOTE; MAINTENANCE OF BORROWING BASE; PAYMENTS; SERVICING AND COLLECTION
5.1 The Loan shall be evidenced by the Note and shall be repaid in
immediately available funds according to the terms of the Note.
5.2 Subject to Borrower's rights under paragraph 3.2 to provide
replacement Eligible Instruments,if for any reason the aggregate principal
amount of the Loan outstanding at any time shall exceed the then Borrowing Base
of all Eligible Instruments, Borrower, without notice or demand, will
immediately make to Lender a principal payment in an amount equal to such
excess plus accrued and unpaid interest on such principal payment.
5.3 Borrower shall not be entitled to prepay, in whole or in part,
the Loan until the Opening Prepayment Date. Thereafter, if neither an Event of
Default nor an Incipient Default has occurred and is continuing, Borrower shall
have the option to prepay the Loan in full, but not in part, upon 30 days prior
written notice and the simultaneous payment of the Prepayment Premium on any
date an installment is due on the Note. If (a) there shall occur an Event of
Default and (b) such occurrence results in acceleration or prepayment of the
Loan, a Prepayment Premium will be required in the amount which shall be
determined as of and due on the earlier of the date of acceleration or
prepayment. The prohibition on prepayment and the requirement to pay a
Prepayment Premium shall not apply to prepayment resulting from the application
of payments required from obligors on the Receivables Collateral (unless
solicited by Borrower in contravention of its Obligations), from performance by
Borrower of its Obligations under paragraph 3.2 or 5.2 (unless due to a
misrepresentation or breach of warranty concerning the Designated Receivables
Collateral).
5.4 (a) Lockbox Agent shall collect payments on the
Instruments constituting part of the Receivables Collateral and, remit
collected payments to Lender on the last Business Day of each and
every month after the date of first Advance, according to the terms of
the Lockbox Agreement, or sooner if requested by Lender. Payments
shall not be deemed received by Lender until Lender actually receives
such payments from Lockbox Agent.
13
<PAGE> 14
(b) Servicing Agent shall furnish to Lender at Borrower's
sole cost and expense, no later than the 10th day of each month
commencing with the first full calendar month following the date of
this Agreement, separate reports for the Designated and Non-Designated
Receivables Collateral, substantially in a format satisfactory to
Lender, which: (i) shows as of the end of the prior month with respect
to each Instrument which constitutes part of the Receivables
Collateral (A) all payments received allocated between principal,
interest, late charges and taxes, (B) the opening and closing
balances, (C) present value, (D) average consumer interest rate, and
(E) extensions, refinances, prepayments, and other similar
adjustments; (F) the average remaining term; (G) the average
downpayment collected; and (H) the percentage of payments made by U.S.
obligors and the percentage of payments made by Canadian obligors; and
(ii) indicates delinquencies of 30, 60 and 90 days and in excess of 90
days. On the basis of such reports, Lender will compute the amount, if
any, which was due and payable by Borrower on the last Business Day of
the preceding month and will notify Borrower of any amount due. If
such reports are not timely received, Lender may estimate the amount
which was due and payable. Borrower will pay upon demand the amount
determined by Lender to be due and payable. If payment is made on the
basis of Lender's estimate and thereafter reports required by this
paragraph are received by Lender, the estimated payment amount shall
be adjusted by an additional payment or a refund to the correct
amount, as the reports may indicate; such additional amount should be
paid by Borrower upon demand and such refund to be made by Lender
within 5 Business Days after receipt of written request therefor by
Borrower. At the end of each calendar quarter, Borrower will deliver
or cause the Servicing Agent to deliver to Lender a current list of
the names, addresses and phone numbers of the obligors on each of the
Instruments constituting part of the Receivables Collateral. Borrower
will also deliver or cause Servicing Agent to deliver to Lender,
promptly after receipt of a written request for them, such other
reports with respect to Instruments constituting part of the
Receivables Collateral as Lender may from time to time require.
(c) Lender, subject to any restriction contained in the
Lockbox Agreement, Custodian Agreement or the Servicing Agreement, as
the case may be, may at any time and from time to time substitute or
require Borrower to substitute a successor or successors to any Agent
acting under the Lockbox Agreement, Custodian Agreement or the
Servicing Agreement.
5.5 Subject to Lender's rights under Article VII, all proceeds from
the Receivables Collateral (except payments which are identified by Purchasers
as tax and insurance impounds/payments or maintenance and other assessment
payments and are required to be so treated by Borrower) and the other security
shall be applied as follows: first to the payment of all late charges, costs,
fees and expenses required by the Documents to be paid by Borrower; second to
accrued and unpaid interest due on the Note; third to the unpaid principal
balance of the Note; and then to the other Obligations in such order and manner
as Lender may determine.
5.6 Whether or not the proceeds from the Receivables Collateral
shall be sufficient for that purpose, Borrower will pay when due all payments
required to be made pursuant to any of the Documents, Borrower's Obligation to
make such payments being absolute and unconditional.
14
<PAGE> 15
6. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Borrower is, and will remain at all times, duly
organized, validly existing and in good standing under the laws of
Texas and in each jurisdiction where the Time-Share Projects are
located and in which it is selling Time-Share Interests or where the
location or nature of its properties or its business makes such
qualification necessary. Borrower has full authority to Perform the
Obligations and to carry on its business and own its property.
(b) Borrower has full power and authority to grant the
Security Interest in the Receivables Collateral and to execute and
deliver the Documents and to Perform the Obligations. All action
necessary and required by the Articles of Organization of Borrower and
all applicable laws for the obtaining of the Loan and for the
execution and delivery of the Documents executed and delivered in
connection with the Loan has been duly and effectively taken. The
Documents are and shall be legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable Usury Law or
constitute a default or result in the imposition of a lien under the
terms or provisions of any agreement to which Borrower is a party. No
consent of any governmental agency or any other person not a party to
this Agreement is or will be required as a condition to the execution,
delivery or enforceability of the Documents.
6.2 There is no action, litigation or other proceeding pending or,
to the knowledge of Borrower, threatened before any arbitration tribunal,
court, governmental agency or administrative body involving Borrower (including
MEEC), its property, the Time-Share Projects or Resorts which might materially
adversely affect the Collateral, the Time-Share Project, the business or
financial condition of Borrower, or the ability of Borrower to Perform the
Obligations.
6.3 (a) Only Borrower has sold or offered Time-Share
Interests for sale; Time-Share Interests have been offered for
sale only in the state in which the Time-Share Projects are
located, and all sales have been made at the Time-Share
Projects. Before Borrower offers Time-Share Interests for sale
in any jurisdiction or sells Time-Share Interests other than
at the Time-Share Projects, Borrower will promptly notify
Lender and provide Lender with evidence that it has complied
with all laws of the jurisdiction governing its proposed
conduct.
(b) Borrower has complied, and Borrower will
comply, with all applicable laws and regulations, including,
without limitation, all laws and regulations of the state in
which the Time-Share Projects are located and all other
governmental jurisdictions in which the Time-Share Projects
are located or in which Time-Share Interests have been or are
being sold or offered for sale.
(c) Borrower has not sold or offered any
Time-Share Interests for sale as an investment. Neither the
sale nor the offering of any Time-Share Interest would
constitute the sale or the offering of a security for sale
under any applicable law.
(d) Neither the time-share use nor other
transient use and occupancy of Units will violate or
constitute a non-conforming use under any private covenant or
restriction or any zoning, use or similar law, ordinance or
regulation affecting the use or occupancy of any Time-Share
Project.
15
<PAGE> 16
6.4 (a) Each Instrument which is assigned to Lender
pursuant to this Agreement and against which an Advance is
requested or which is assigned in satisfaction of Borrower's
obligations under paragraph 3.2 shall be an Eligible
Instrument at the time of assignment. Borrower and MEEC have
performed all their obligations to Purchasers, and there are no
executory obligations to Purchasers to be Performed by
Borrower or MEEC other than obligations which by their nature
or by agreement are to be executed in the future. Borrower
further warrants and guarantees the enforceability of the
Receivables Collateral.
(b) Without the prior written consent of Lender,
Borrower will not cancel or materially modify, or consent to
or acquiesce in any material modification (including, without
limitation, any change in the interest rate or the amount,
frequency or number of payments) to, or solicit the prepayment
of, any Instrument which constitutes part of the Receivables
Collateral; waive the timely performance of the obligations of
the Purchaser under any such Instrument or its security; or
release the security for any such Instrument. Unless an Event
of Default exists, however, Borrower shall have a license to
take in the ordinary course of its business any or all of the
actions with respect to the Non-Designated Receivables
Collateral which otherwise would be prohibited pursuant to the
terms of the preceding sentence. Borrower will not pay or
advance directly or indirectly for the account of any
Purchaser any sum requested to be deposited or owing by the
Purchaser under any Instrument which constitutes part of the
Receivables Collateral.
(c) Borrower at all times will fulfill and will
cause its Affiliates, agents and independent contractors at
all times to fulfill all obligations to Purchasers, except
where failure to do so would not materially or adversely
affect the Collateral, the Time-Share Projects, the business
or financial condition of Borrower, or the ability of Borrower
to Perform the Obligations. Borrower will perform and will
cause its Affiliates to perform all of their respective
obligations under the Time-Share Program Governing Documents.
(d) True and complete copies of the Time-Share
Program Consumer Documents and Time-Share Program Governing
Documents which have been and are being used in connection
with the Time-Share Project and the sale or offering for sale
of Time-Share Interests have been delivered to Lender.
Borrower, without the prior written consent of Lender, will
not cancel or materially modify or permit or acquiesce in the
cancellation or material modification of any such document
except as required by law; and will not permit or suffer any
of its Affiliates to do so.
(e) Each owner of a Time-Share Interest is a
member of the appropriate Time-Share Association, and all the
Time-Share Associations have authority to levy annual
assessments to cover the costs of maintaining and operating
the respective Time-Share Projects. To Borrower's knowledge,
MEEC and each Association is solvent; currently levied
assessments are adequate to cover such costs and to establish
and maintain a reasonable reserve for capital improvements and
such reserves are established pursuant to applicable law and
are not deficient to perform the purposes for which they are
intended; and there are no events which could give rise to a
material increase in such costs. Borrower will use its best
efforts to: (i) cause each Association to (A) discharge its
obligations under the Time-Share Program Governing Documents
and (B) maintain the reserve described above.
16
<PAGE> 17
(f) Except as otherwise permitted and disclosed
by the Time-Share Program Governing Documents: (i) the owners
of the Time-Share Interest in the Time-Share Project own all
the common areas in the Time-Share Project and Borrower owns
in fee simple other amenities which have been promised or
represented as being available to Purchasers, free and clear
of liens and security interests (or subordinated to the
interests of Purchasers) except for the Permitted
Encumbrances; (ii) MEEC owns all furnishings within the Units
free and clear of all liens and security interests; and (iii)
all access roads and utilities and off-site improvements
necessary to the use of the Time-Share Project have been
dedicated to and/or accepted by the responsible governmental
authority or utility company or are held in fee simple by
Borrower with all Purchasers enjoying a recorded right to use
such access roads, utilities and the above-described
amenities. Borrower will maintain or cause to be maintained in
good condition and repair all amenities and common areas which
have been promised or represented as being available to
Purchasers and all roads and off-site improvements which are
not the responsibility of the Associations to maintain and
repair and have not been dedicated to or accepted by the
responsible governmental authority or utility company;
provided, however, that if any such property is not owned by
Borrower or any of its Affiliates, Borrower will use its best
efforts to cause the owner or other responsible third party to
maintain and repair such property. Borrower will maintain a
reasonable reserve to assure compliance with the terms of the
foregoing sentence.
6.5 Borrower will undertake the diligent and timely collection of
amounts delinquent under each Instrument which constitutes part of the
Receivables Collateral and will bear the entire expense of such collection.
Lender shall have no obligation to undertake any action to collect under any
Instrument.
6.6 Lender may notify Purchasers of the existence of Lender's
interest as assignee in the Receivables Collateral and request from Purchasers
any information relating to the Receivables Collateral. Borrower will deliver
such notice under its letterhead if requested.
6.7 Borrower, without the prior written consent of Lender, will
not: (a) sell, convey, pledge, hypothecate, encumber or otherwise transfer any
of the Collateral; (b) permit or suffer to exist any liens, security interests
or other encumbrances on any of the Collateral, except for the Permitted
Encumbrances and liens and security interests expressly granted to Lender; (c)
sell, lease, transfer or dispose of all or substantially all of its assets to
another entity; or (d) permit or suffer to exist any transfer of the ownership
interests or control of Borrower; except that Robert Mead, the controlling
shareholder of the General Partner of Borrower, may sell a portion of his
shares in Ascension Capital Corporation the General Partner of Borrower,
provided he maintains a number of shares equal to at least 51% of the issued
and outstanding shares of such General Partner; (e) change in any material way
of the present management of Borrower or MEEC, including reducing in any
material way the every day involvement of Robert Mead as the Chief Executive
Officer of Borrower; or (f) change in any material, deleterious way, the program
by which the Time-Share Interests are marketed.
6.8 Borrower will pay the cost of and will maintain and deliver to
Lender evidence of insurance policies required by Lender making Lender an
additional insured and written by insurers and in amounts and on forms
satisfactory to Lender.
17
<PAGE> 18
6.9 (a) The Documents and all certificates, financial
statements and written materials furnished to Lender by or on behalf
of Borrower in connection with the Loan do not contain any untrue
statement of a material fact or omit to state a fact which materially
adversely affects or in the future may materially adversely affect the
Collateral, the Time-Share Project, the business or financial
condition of Borrower, or the ability of Borrower to Perform the
Obligations.
(b) Lender's examination, inspection, or receipt of
information pertaining to the Collateral or the Time-Share Project and
its proposed operation shall not in any way be deemed to reduce the
full scope and protection of the warranties, representations and
Obligations contained in this Agreement.
6.10 (a) On or before the 10th day of each month, Borrower
will cause to be furnished to Lender the reports required pursuant to
paragraph 5.4(b).
(b) Borrower will furnish or cause to be furnished to
Lender within 120 days after each fiscal year of the subject, a copy of
the current annual financial statements of Borrower and, subject to
the best efforts of Borrower, MEEC and the Associations; and shall
furnish or cause to be furnished to Lender within 45 days after each
interim quarterly fiscal period of Borrower, a copy of the current
financial statements for the period commencing with the first day of
the fiscal year and concluding with such quarter end. Such financial
statements shall contain a balance sheet as of the end of the relevant
fiscal period and statements of income and of cash flow for such
fiscal period (together, in each case, with the comparable figures for
the corresponding period of the previous fiscal year), all in
reasonable detail. All financial statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied. All financial statements required pursuant to this paragraph
shall be certified by the chief financial officer of the subject of
such statements. Annual statements shall be audited and certified by a
recognized firm of certified public accountants reasonably
satisfactory to Lender. Together with such financial statements,
Borrower will deliver to Lender: (a) a certificate signed by the chief
financial officer of Borrower stating that there exists neither an
Event of Default nor an Incipient Default or, if any such Event of
Default or Incipient Default exists, specifying the nature and period
of its existence and what action Borrower proposes to take with
respect to it; and (b) certificates signed by the chief financial
officer of Borrower which shall state specifically that Borrower, and
to the best of his knowledge, MEEC, is in full compliance with
paragraphs 6.16-6.17, inclusive, and set forth in reasonable detail
the calculations upon which such certification is based.
(c) Borrower will deliver to Lender from time to time, as
available, and promptly upon amendment or effective date: current
price lists, sales literature, registrations/consents to sell, and
final subdivisions public reports/public offering
statements/prospectuses. Borrower will deliver to Lender any material
modifications which it or, to its knowledge, any other person having
the power to do so proposes be made to the Time-Share Program Consumer
Documents or the Time-Share Program Governing Documents last delivered
to Lender; and will deliver all such modifications to Lender promptly
after they are made or adopted.
18
<PAGE> 19
(d) Borrower will at its expense permit Lender and its
representatives at all reasonable times to inspect the Time-Share
Projects and to inspect, audit and copy its records and records of
MEEC in Borrower's possession.
(e) Borrower will submit to Lender annually, within 10
days after each is available, proposed annual maintenance and
operating budgets of MEEC, certified to be adequate by the managing
agent for such Associations and a statement of the annual assessment
to be levied upon the members of such Associations; and will use its
best efforts to cause to be made available to Lender for inspection,
auditing and copying, upon Lender's request, the books and records of
each Associations.
(f) Borrower will deliver to Lender such further
information as Lender may from time to time reasonably request.
6.11 Borrower will cause any and all indebtedness owing by it, to
its shareholders, directors and officers, or the relatives and Affiliates of
Borrower or the foregoing and all liens, security interests, and other charges
in the assets of Borrower to be fully subordinated in writing in all aspects to
the Obligations and Lender's claims now held or hereafter acquired to the
assets of Borrower, including, without limitation, the Collateral; provided,
however, that if neither an Event of Default nor Incipient Default is
outstanding, Borrower may make regularly scheduled payments on any such
indebtedness and other normal and customary payments for services rendered.
Lender may require any such creditor to execute a written subordination
agreement satisfactory in form and substance to Lender, which shall include,
without limitation, provisions precluding exercise of remedies by the creditor
against the assets of Borrower, until all Obligations have been satisfied in
full.
6.12 Borrower is not in default of any payment on account-of
indebtedness for borrowed money or of any repurchase obligations in connection
with a receivables purchase financing, or in violation of or in default under
any material term in any agreement, order, decree or judgment of any court,
arbitration or governmental authority to which it is a party or by which it is
bound.
6.13 Borrower has filed all tax returns and paid all taxes,
assessments, levies and penalties, if any, required to be filed by it or paid
by it to any governmental or quasi-governmental authority or subdivision,
including real estate taxes and assessments relating to the Time-Share Projects
or the Collateral. Borrower will use its best efforts to provide to Lender not
more than 30 days after such taxes and assessments become due evidence that all
taxes and assessments on the Units and Time-Share Projects common areas and
related amenities have been paid in full.
6.14 (a) Borrower has paid to Lender the $50,000 Commitment
Fee for the Original Loan, and Borrower will pay or cause to be paid
to Lender an additional $50,000 Commitment Fee for the Second Loan
Increase at the time of the initial Advance of the Second Loan
Increase. Borrower acknowledges that the Commitment Fees have been
examined and are non-refundable. Borrower will pay on demand any and
all costs and expenses incurred by Lender in connection with the
initiation, documentation and closing of the Loan, the making of
Advances, the protection of the Collateral, or the enforcement of the
obligations against Borrower, including, without limitation, all
attorneys' and other
19
<PAGE> 20
Professionals' fees and costs, consumer credit reports, revenue,
documentary stamp and intangible taxes and any other taxes imposed on
the Documents.
(b) Borrower has paid Lender's attorneys a fee of $25,000,
(including all out of pocket costs incurred by the attorneys) in
connection with the Original Loan, and Borrower will, at the time of
the initial Advance of the Second Loan Increase, pay or cause to be
paid all of Lender's attorneys fees and costs for services rendered in
connection with the Revolving Inventory Loan and the increase,
extension and modification of the Revolving Receivables Loan.
(c) Borrower will pay Custodian a one time Custodial Fee
in the amount of $5.00, with potential increases to a maximum of
$9.00, for each new Eligible Instrument held by Custodian as
designated agent of Lender exclusive of Eligible Instruments assigned
as replacements for Instruments that cease to be Eligible Instruments
and recurring fees that are set forth in the Custodian Agreement.
6.15 Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, AND DEFEND
Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, agents and servants of
the foregoing, for, from and against any and all losses, costs, expenses
(including, without limitation, any attorneys' fees and costs), demands,
claims, suits, proceedings (whether civil or criminal), orders, judgments,
penalties, fines and other sanctions arising from or brought in connection with
(a) the Time-Share Projects, the Collateral, Lender's status by virtue of the
Assignments, creation of Security Interests, the terms of the Documents or the
transactions related thereto, or any act or omission of Borrower or any Agent,
or their respective employees, contractors or agents, whether actual or
alleged, and (b) any and all brokers' commissions or finders' fees or other
costs of similar type by any party in connection with the Loan. On written
request by a person or other entity covered by the above agreement of
indemnity, Borrower will undertake, at its own cost and expense, on behalf of
such indemnitee, using counsel satisfactory to the indemnitee, the defense of
any legal action or proceeding to which such person or entity shall be a party.
At Lender's option, Lender may at Borrower's expense prosecute or defend any
action involving the priority, validity or enforceability of the Security
Interests in the Collateral.
6.16 Borrower will not make, and will not permit or suffer any
Affiliate to make, any distribution (inclusive of dividends, stock repurchases
and redemptions, the repayment of loans from, and the making of loans to or
investments in the distributees) to any-of their respective Partners or
Affiliates unless (a) at the time of the distribution and after giving effect
thereto, there exists neither an Event of Default nor an Incipient Default; (b)
and after giving effect to the distribution, the aggregate of all distributions
by Borrower and any subsidiary does not exceed the lesser of (i) their
respective net income generated by the Resorts and the Time-Share Projects, or
(ii) 100% of their respective cash flow, in each case measured from June 30,
1994; provided, however, that notwithstanding the amount available for
distribution pursuant to the foregoing subclause (b), if neither an Event of
Default nor Incipient Default exists, such entity shall be entitled to
distribute to its Partners each fiscal year a sum of money equal to the tax
liability of its Partners attributable to their respective Partnership
interests in such entity. As used above, "net income" shall be determined in
accordance with generally accepted accounting principles applied on a
consistent basis, and "cash flow" shall mean for any period the net income or
loss of the subject determined in accordance with generally accepted accounting
principles
20
<PAGE> 21
consistently applied (excluding the effect of any extraordinary gains or losses
from sales of property not in the ordinary course of business), plus (a)
depreciation, (b) amortization and (c) other non-cash expenses during such
period to the extent deducted from revenues in calculating net income and less
capital expenditures to the extent paid in such period.
6.17 Borrower will maintain an aggregate minimum tangible net worth
of not less than $6,000,000.
6.18 Upon any Default in the terms, covenants and conditions of
this Agreement or any of the other Documents, and following the acceleration of
maturity of the Note indebtedness, a tender of payment of the amount necessary
to satisfy all Obligations, made at any time prior to foreclosure sale by
Borrower or by anyone on behalf of Borrower or (following a foreclosure sale)
during any period of redemption that might exist under applicable law, shall
constitute an evasion of the Prepayment Premium and shall be deemed to be a
voluntary prepayment thereunder; and such payment, to the extent not prohibited
by applicable law, will therefore include a premium equal to the (a) three
percent (3%) of the outstanding principal balance of the Note if the payment is
made in the 2nd year of the Term; (b) two percent (2%) of the outstanding loan
balance if the payment is made in the third year of the Term; (c) one percent
(1%) of the outstanding loan balance if the payment is made in the fourth year
of the Term; and (d) zero percent (0%) of the outstanding loan balance if
prepayment is made in the fifth year or any year thereafter.
6.19 Borrower will execute or cause to be executed all documents
and do or cause to be done all acts necessary for Lender to perfect and to
continue the perfection of the Security Interest of Lender in the Collateral or
otherwise to effect the intent and purposes of the Documents.
6.20 The representations, warranties and covenants contained in
this Article VI are in addition to, and not in derogation of, the
representations, warranties and covenants contained elsewhere in the Documents
and shall be deemed to be made and reaffirmed prior to the making of each
Advance.
6.21 Borrower covenants and warrants that none of the Other Lenders
have a security interest in (i) the proceeds derived from the Management
Agreements, or (ii) from any furniture or furnishings, (iii) the assets of FFC
or MEEC, or (iv) claims against the FDIC or other parties.
7. DEFAULT
7.1 The occurrence of any of the following events or conditions
shall constitute an Event of Default under the Documents:
(a) failure of Lender to receive from Borrower within 5
days of the date written notice has been sent to Borrower after the
due date (i) any amount payable under the Note or (ii) any other
payment due under the Documents, except for the Note payment due at
the Maturity Date for which no grace period is allowed;
(b) any representation or warranty of a person other than
Lender contained in the Documents or in any certificate furnished to
Lender under the Documents by or on
21
<PAGE> 22
behalf of Borrower proves to be, in any material respect, false or
misleading as of the date deemed made;
(c) a default in the Performance of the Obligations set
forth in paragraphs 3.2, 6.7, 6.8, 6.11, 6.16, 6.17, 6.18, 6.19, or
9.2;
(d) a default in the Performance of the Obligations or a
violation of any term, covenant or provision of the Documents (other
than a default or violation referred to elsewhere in this paragraph
7.1) which continues unremedied (i) for a period of 5 Days after
notice of such default or violation to Borrower in the case of a
default under or violation of paragraph 6.7(b) or any other default
or violation which can be cured by the payment of money alone or (ii)
in the case of any other default or violation, for a period of twenty
(20) Business Days after notice to Borrower of such default or
violation, plus only if such default or violation cannot be cured by
Borrower proceeding diligently and Borrower has been diligent in
attempting to effect cure, such additional period not to exceed
twenty (20) Business Days as may be required by Borrower proceeding
diligently to effect cure;
(e) an "Event of Default", as defined elsewhere in any of
the Documents or any of the Other Loan Documents;
(f) any final, non-appealable judgment or decree for
money damages or for a fine or penalty against Borrower which is not
paid and discharged or stayed within 30 days thereafter and when
aggregated with all other judgments or decree(s) that have remained
unpaid and undischarged or stayed for such period is in excess of
$100,000;
(g) any person holding a lien or security interest in the
Collateral or a lien (other than a lien created by Purchaser solely
with respect to its Time-Share Interest and without implying Lender's
consent to the creation or existence of any such lien or security
interest) on any part of the Time-Share Projects or its related
amenities institutes foreclosure, receivership or other proceedings
for the enforcement of any remedy available to it on account of such
lien or security interest;
(h) Borrower shall (i) generally not be paying its debts
as they become due, (ii) file or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency or the appointment of a custodian under the laws of any
jurisdiction, (iii) make an assignment or the benefit of its
creditors, (iv) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers for itself or any
substantial part of its property, (v) be adjudicated insolvent, (vi)
dissolve; commence to wind-up its affairs or (vii) take any action for
purposes of the foregoing; or a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or
insolvency or the appointment of a custodian under the laws of any
jurisdiction is filed against it or a custodian is appointed for
Borrower, the Collateral or any material party of its properties and
such proceeding is not dismissed and appointment vacated within 60
days thereafter;
(i) a material adverse change in any of the Time-Share
Projects or in the business or financial condition of Borrower or in
the Collateral, which change is not
22
<PAGE> 23
otherwise enumerated in this paragraph 7.1 as an Event of Default as
the result of which Lender in good faith deems the prospect of
Performance of the Obligations impaired or its Collateral imperiled;
(j) failure of Lender to receive from Borrower, within 20
days of the date Borrower knows or should have known of such change,
notice of any material change in any representations or warranties in
the Documents or otherwise made in connection with the Loan; or
(k) an order or decree has been entered by any court or
regulatory agency, local, state or federal, of competent jurisdiction
enjoining the intended use of the Time-Share Projects as time-share
resorts and such order or decree is not vacated within sixty (60)
days after Borrower has obtained knowledge thereof.
(l) If a default or Event of Default occurs under any
document or instrument evidencing, securing or executed in connection
with the Revolving Inventory Loan and any such default or Event of
Default is not cured within the applicable grace period (if any)
provided therein.
(m) any default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money or a receivables
purchase financing involving an obligation in excess of $100,000 to
make a payment of principal or interest or to repurchase receivables
or any other material default permitting the acceleration of the
repayment of the borrowed money or the repurchase of receivables,
which accelerated repayment or repurchase obligations are in excess of
$100,000 in the aggregate; provided that Lender's sole remedy for this
paragraph 7.1(l) default shall be to withhold any subsequent Advances
requested by Borrower.
7.2 At any time after an Event of Default has occurred and while
it is continuing, Lender may but without obligation, in addition to the rights
and powers granted elsewhere in the Documents and not in limitation thereof, do
any one or more of the following:
(a) cease to make further Advances;
(b) declare the Note, together with prepayment premiums
and all other sums owing by Borrower to Lender in connection with the
Documents, immediately due and payable without notice, presentment,
demand or protest, which are hereby waived by Borrower,
(c) receive and retain the Borrower's Receivables
Collateral Proceeds;
(d) with respect to the Receivables Collateral, (i)
institute collection, foreclosure and other enforcement actions
against Purchasers and other persons obligated on the Receivables
Collateral, (ii) enter into modification agreements and make extension
agreements with respect to payments and other performances, (iii)
release persons liable for performance, (iv) settle and compromise
disputes with respect to payments and performances claimed due, all
without notice to Borrower, without being called to account for such
actions by Borrower and without relieving Borrower from Performance of
the
23
<PAGE> 24
Obligations, and (v) receive, collect, open and read all mail of
Borrower for the purpose of obtaining all items pertaining to the
Receivables Collateral; and
(e) proceed to protect and enforce its rights and
remedies under the Documents and the Other Loan Documents, to
foreclose or otherwise realize upon the collateral and/or to exercise
any other rights and remedies available to it at law, in equity or by
statute.
7.3 Notwithstanding anything in the Documents to the contrary,
while an Event of Default exists, any cash received and retained by Lender in
connection with the Collateral may be applied to payment of the Obligations in
the manner provided in paragraph 7.5.
7.4 (a) Lender shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code of the States of
Illinois, Texas and Missouri and all other rights and remedies
accorded to a Secured Party at equity or law. Any notice of sale or
other disposition of the Collateral given not less than 10 Business
Days prior to such proposed action in connection with the exercise of
Lender's remedies shall constitute reasonable and fair notice of such
action. Lender may postpone or adjourn any such sale from time to time
by announcement at the time and place of sale stated on the notice of
sale or by announcement of any adjourned sale, without being required
to give a further notice of sale. Any such sale may be for cash or,
unless prohibited by applicable law, upon such credit or installment
as Lender may determine. Borrower shall be credited with the net
proceeds of such sale only when such proceeds are actually received by
Lender in good current funds. Despite the consummation of any such
sale, Borrower shall remain liable for any deficiency on the
Obligations which remains outstanding following such sale. All net
proceeds recovered pursuant to a sale shall be applied in accordance
with the provisions of paragraph 7.5.
(b) Lender may, in the name of Borrower, or in its own
name, make and execute all conveyances, assignments and transfers of
the Collateral sold in connection with the exercise of Lender's
remedies; and for this purpose Lender is hereby appointed
attorney-in-fact for Borrower.
(c) Upon request of Lender when an Event of Default
exists, Borrower shall assemble the Collateral not already in Lenders
possession and make it available to Lender at a time and place
designated by Lender.
7.5 The proceeds realized from any sale of all or any part of the
Collateral made in connection with the exercise-of Lender's remedies shall be
applied in the following order of priorities; first, to the payment of all
costs and expenses of such sale, including, without reasonable compensation to
Lender and its agents, attorneys fees, and all other expenses, liabilities and
advances incurred or made by Lender, its agents and attorneys, in connection
with such sale, and any other unreimbursed expenses for which Lender may be
reimbursed pursuant to the Documents; second, to the payment of the
Obligations, in such order and manner as Lender shall determine, with no
amounts applied to payment of principal until all interest has been paid; and
third, to the payment to Borrower, its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
24
<PAGE> 25
7.6 Lender may, at its option, and without any obligation to do
so, pay, perform and discharge any and all liabilities agreed to be paid or
performed in the Documents by Borrower, any Guarantor or any surety for the
Performance of the Obligations if the person obligated fails to do so. For
such purposes Lender may use the proceeds of the Collateral. All amounts
expended by Lender in so doing or in exercising its remedies under the
Documents following an Event of Default shall become part of the Obligations,
shall be immediately due and payable by Borrower to Lender upon demand, and
shall bear interest at the Default Rate from the dates of such expenditures
until paid.
7.7 No remedy in any Document conferred on or reserved to Lender
is intended to be exclusive of any other remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given under any Document or now or hereafter existing at law, or in equity. No
delay or omission to exercise any right or power shall be construed to be a
waiver of or acquiescence to any default or a waiver of any right or power; and
every such right and power may be exercised from time to time and as often as
may be deemed expedient.
7.8 Borrower, for itself and for all who may claim through or
under it, hereby expressly waives and releases all right to have the Collateral
or any part thereof, marshalled on any foreclosure sale or other enforcement of
Lenders rights and remedies.
7.9 For the purpose of exercising its rights and remedies under
Paragraph 7.2(d) and 7.6, Lender may do so in the name of Borrower or its name
and is hereby appointed as Borrower's attorney-in-fact to take any and all
actions in the name of Borrower and/or on behalf of Borrower-as Lender may deem
necessary or appropriate in the accomplishment of such purposes.
8. CONSTRUCTION AND GENERAL TERMS
8.1 All moneys payable under the Documents shall be paid to Lender
at its address set forth on the signature page of this Agreement in lawful
monies of the United States of America, unless otherwise designated in the
Documents or by Lender by notice.
8.2 The Documents exclusively and completely state the rights and
obligations of Lender and Borrower with respect to the Loan. No modification,
variation, termination, discharge, abandonment or waiver of any of the terms or
conditions of the Documents shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by such action. The
Documents supersede any and all prior representations, warranties and/or
inducements, written or oral, heretofore made by Lender concerning this
transaction, including any commitment for financing.
8.3 The powers and agency granted to Lender by Borrower in the
Documents are coupled with an interest and are irrevocable and are granted as
cumulative to Lender's other remedies for collection and enforcement of the
Obligations.
8.4 Any Document may be executed simultaneously in any number of
identical copies each of which shall constitute an original for all purposes.
25
<PAGE> 26
8.5 Except as otherwise expressly provided in the Document, any
notice required or permitted to be given under any Document by Lender or
Borrower to the other shall be in writing and shall be (a) personally
delivered, (b) transmitted postage prepaid by certified or registered mail, (c)
sent by overnight express carrier, or (d) sent by telecopy, to Lender or such
Borrower at its address and/or telecopy number as set forth on the signature
page of this Agreement, or at such other address and/or telecopy number as
either party may designate for such purpose in a notice given to the other
party. Such notice shall be deemed received upon the earliest of the following
to occur: (a) upon personal delivery; (b) on the third Business Day following
the day sent, if sent by registered or certified mail; (c) on the next Business
Day following the day sent, if sent by overnight express courier; and (d) on
the day sent or if such day is not a Business Day on the next Business Day
after the day sent, if sent by telecopy.
8.6 All the covenants of Borrower and all the rights and remedies
of the Lender contained in the Documents shall bind Borrower, and, subject to
the restrictions on merger, consolidation and assignment contained in the
Documents, its successors and assigns, and shall inure to the benefit of
Lender, its successors and assigns, whether so expressed or not. Borrower may
not assign its rights in the Documents in whole or in part. Except as may be
expressly provided in a Document, no person or other entity shall be deemed a
third party beneficiary of any provision of the Documents.
8.7 If any one or more of the provisions contained in any Document
shall be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained in the
Document shall not in any way be affected or impaired thereby.
8.8 Time is of the essence in the Performance of the Obligations.
8.9 No modification, variation, termination, discharge,
abandonment or waiver granted or consented to by Lender including a waiver of
the time of the essence standard, shall be deemed to be an abandonment of such
rights.
8.10 All headings are inserted for convenience only and shall not
affect any construction or interpretation of the Documents. Unless otherwise
indicated, all references in a Document to clauses and other subdivisions refer
to the corresponding paragraphs, clauses and other subdivisions of the
Document; the words "herein", "hereof", "hereto", "hereunder" and words of
similar import refer to the Document as a whole and not to any particular
paragraph, clause or other subdivision; the use of any gender shall be deemed
to include other genders, unless inappropriate; and reference to a numbered or
lettered subdivision of an Article, or paragraph shall include relevant matter
within the Article or paragraph which is applicable to but not within such
numbered or lettered subdivision. All Schedules and Exhibits referred to in
this Agreement are incorporated in this Agreement by reference.
8.11 CHOICE OF LAW; JURISDICTION; VENUE AND WAIVER OF JURY TRIAL.
BORROWER AND LENDER AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
LOAN AGREEMENT SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND ELECTION,
ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE
26
<PAGE> 27
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY
AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES C T CORPORATION
SYSTEM, WHOSE ADDRESS IS BORROWER, C/O C T CORPORATION SYSTEM, 208 S. LASALLE
STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF
LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL
CONSTITUTE PERSONAL SERVICE OF PROCESS UPON BORROWER PROVIDED THAT A COPY OF
SUCH PROCESS BE DELIVERED TO BORROWER PURSUANT TO THE PROVISIONS OF SECTION 8.5
ABOVE. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES
TO DO BUSINESS IN CHICAGO, ILLINOIS, BORROWER SHALL, WITHIN TEN (10) DAYS AFTER
LENDER'S REQUEST, APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS
BEHALF AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH
SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION,
HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO
BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON THE LOAN DOCUMENTS
IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
LOAN AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND BY
LENDER, AND BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON
BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER OF
TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT BORROWER AND LENDER HAVE
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED IN THE SIGNING OF THIS LOAN AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL.
ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE A MATERIAL INDUCEMENT FOR
LENDERS'S MAKING THE LOAN TO BORROWER AND BORROWER ACCEPTING THE LOAN FROM
LENDER.
[BORROWER'S INITIALS: /s/ REM ]
-------------
[LENDER'S INITIALS: ]
-------------
8.12 It is the intent of the parties hereto to comply with the
Applicable Usury Law. Accordingly, notwithstanding any provision to the
contrary in the Documents, in no event shall this Agreement or the Documents
require the payment or permit the collection of interest in excess of the
maximum contract rate permitted by the Applicable Usury Law.
8.12 LENDER DOES NOT HEREBY ASSUME AND SHALL HAVE NO
RESPONSIBILITY, OBLIGATION OR LIABILITY TO PURCHASERS, LENDER'S RELATIONSHIP
27
<PAGE> 28
BEING THAT ONLY OF A CREDITOR WHO HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED
TO IT, AN ASSIGNMENT FROM BORROWER OF THE INSTRUMENTS. EXCEPT AS REQUIRED BY
LAW, BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO
LENDER WITH RESPECT TO THE TIME-SHARE PROJECTS, THE SALE OF TIME-SHARE
INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF LENDER.
8.13 Unless otherwise specifically stipulated elsewhere in the
Documents, if a matter is left in the Documents to the decision, determination,
requirement, request, judgment, approval, consent, satisfaction, acceptance,
agreement, option or discretion of Lender, its employees, Lender's counsel or
any agent for or contractor of Lender, such action shall be deemed to be
exercisable by Lender or such other person in its sole and absolute discretion
and according to standards established in its sole and absolute discretion.
Without limiting the generality of the foregoing, "option" and "discretion"
shall be implied by use of the words "if" or "may".
8.14 All representations, warranties, covenants and agreements made
by Borrower herein, in the other Documents or in any other agreement, document,
instrument or certificate delivered by or on behalf of Borrower under or
pursuant to the Documents shall be considered to have been relied upon by
Lender and shall survive the delivery to Lender of such Documents and the
extension of the Loan (and each part thereof), regardless of any investigation
made by or on behalf of Lender.
9. ADDITIONAL PROVISIONS
9.1 Payment of Ward Fees. Each party represents and warrants that
neither it nor any of its Affiliates has worked with another broker other than
Ward Financial Corporation ("Ward") in connection with the Loan and Borrower
will pay Ward pursuant to a separate agreement and shall indemnify Lender from
any claims and costs for brokerage commissions or other such fees.
9.2 Management of Real Property. Borrower will at all times cause
the Real Property to be managed by a professional property manager in
accordance with a written management agreement which may include Borrower as
the Manager. Borrower will not modify or extend the term of any management
agreement or enter into a new management agreement in substitution for an
existing management agreement without the prior written consent of Lender if
there is an Event of Default or Incipient Default at the time of such
modification or extension.
9.3 Notice. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m.
(Chicago
28
<PAGE> 29
time) on a business day; provided that a hard copy of such notice is also sent
pursuant to (c) or (d) below; (c) if by overnight courier, on the first
business day after delivery to the courier; or (d) if by U.S. Mail, certified
or registered mail, return receipt requested on the fourth (4th) day after
deposit in the mail postage prepaid.
Notices to Borrower: Ascension Resorts, Ltd.
Attn: Robert Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
Telecopy: (214) 905-0514
With a copy to: Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
Attn: George Bedell, Esq.
3700 Nations Bank Plaza
901 Main Street
Dallas, Texas 75202
Telecopy: (214) 747-3732
Notices to Lender: Heller Financial, Inc.
Real Estate Financial Services
Attn: Portfolio Manager, Secured Receivables
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7119
With a copy to: Heller Financial, Inc.
Real Estate Financial Services
Attn: Group General Counsel
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7872
[EXECUTIONS APPEAR ON PAGE 30]
29
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
BORROWER:
ASCENSION RESORTS, LTD.,
a Texas limited partnership
BY: ASCENSION CAPITAL CORPORATION,
a Texas corporation, its General Partner
By: /s/ ROBERT MEAD
-----------------------------------
ROBERT MEAD,
Chief Executive Officer
LENDER:
HELLER FINANCIAL, INC.
By: /s/ DAWN GRATON
-------------------------------
Name: Dawn Graton
-------------------------------
Its: Assistant Vice President
-------------------------------
30
<PAGE> 31
LIST OF EXHIBITS
Schedule 1 Prepayment Schedule
Exhibit A Assignment of Mortgage(s) (Fee Simple Time-Share Instruments)
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D Promissory Notes
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Projects
Exhibit G Borrower's Certificate
Exhibit H Re-Assignment of Mortgage(s) (Fee Simple Time-Share
Instruments)
Exhibit I Additional Condition to Advances
Exhibit J Request for Advance and Certification
Exhibit K Real Property Description
Exhibit L Personal Property Description
The above-listed exhibits are omitted from this filing. Registrant
agrees to furnish supplementally a copy of any exhibit to the Commission upon
request.
<PAGE> 32
SCHEDULE 1 TO
RESTATED AND AMENDED
LOAN AND SECURITY AGREEMENT
The Prepayment Premium at any time after the first year of the Loan
shall be equal to a percentage of the then unpaid principal amount being
prepaid, which percentage shall be determined as follows:
Year After Opening Percentage of
Prepayment Date Prepayment
2nd 3
3rd 2
4th 1
thereafter 0
Year 1 shall be the period of time commencing on the Closing Date and
expiring twelve months thereafter. Year 2 begins upon the expiration of Year 1
(i.e. the first anniversary of the Opening Prepayment Date). Each succeeding
year thereafter commencing with Year 2 shall be for a period of twelve months,
with Year 4 terminating 48 months from the Closing Date.
Notwithstanding anything herein to the contrary, Borrowers right to
prepay this Loan is limited to the terms and conditions set forth in the
Restated and Amended Loan and Security Agreement.
32
<PAGE> 1
EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
This ("Agreement") dated December 27, 1995, is made by and between
ASCENSION RESORTS, LTD. d/b/a/ SILVERLEAF RESORTS, LTD., a Texas limited
partnership, ("BORROWER") whose address is 1221 Riverbend, Suite 120, Dallas,
Texas 75247, and Heller Financial, Inc., a Delaware corporation whose address
is 500 West Monroe Street, 15th Floor, Chicago, Illinois 60661 ("LENDER").
RECITALS:
Borrower desires Lender to make Borrower a revolving inventory
loan to finance its existing unsold timeshare interval inventory at certain
resorts, and to provide funds for new timeshare intervals at such resorts; and
Borrower's obligations under the revolving loan will be
evidenced and secured by the loan documents as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower and Lender
agree as follows:
SECTION 1
DEFINITION OF TERMS
1.1 TERMS DEFINED. The following terms used in this Agreement
shall have the following meanings:
ADVANCE. Proceeds of the Loan advanced from time to time by Lender to
Borrower in accordance with this Agreement.
AFFILIATE. (a) Any person or entity which has a financial interest in
Borrower or General Partner; (b) any person or entity under common ownership
with Borrower or General Partner; (c) any person or entity in which Borrower or
General Partner has a financial interest (any of (a), (b) or (c) are referred
to as a "Related Party"); (d) any person or entity which has a financial
interest in any Related Party; (e) any trust for the benefit of Borrower or
General Partner or any Related Party; or (f) any person or entity in which any
Related Party has a financial interest.
AVAILABILITY PERIOD. The period commencing on the Closing Date and
ending June 27, 1997.
BUSINESS DAY. Any day which is not a Saturday or Sunday or a legal
holiday under the laws of the State of Illinois or the United States.
CLOSING DATE. The date this Agreement is executed and delivered.
CODE. The Uniform Commercial Code as adopted and in force in the State
of Illinois as the same may be amended from time to time.
COLLATERAL. Has the meaning assigned in Section 3.
<PAGE> 2
COMMITMENT FEE. A commitment fee for the Loan payable by
Borrower to Lender in the amount of $60,000.
COSTS. Shall have the meaning set forth in Section 10.3.
DECLARATION OR TIMESHARE DECLARATION. The Declaration recorded or to
be recorded in the real estate records where each Timeshare Project is located
for the purpose of adding ownership of Timeshare Intervals to the Timeshare
Program, as it may be in effect from time to time.
DEED OF TRUST. That certain Deed of Trust and Security Agreement dated
of even date herewith from Borrower, as grantor, to the Trustee named therein,
in trust, for the benefit of Lender, as it may from time to time be extended,
renewed, restated or replaced, in the form of EXHIBIT E attached hereto and
made a part hereof, as same may from time to time be renewed, amended, restated
or replaced.
DEFAULT RATE. A per annum rate of interest equal to the Interest Rate
plus four percent (4%).
ELIGIBLE UNSOLD TIMESHARE INTERVAL. Each Interval satisfying all of
the following criteria:
(a) An existing unsold Interval in an applicable Resort
with respect to a Unit that has been completed and developed in
accordance with all applicable building codes and furnished in a
manner substantially similar to the model unit, and for which a
certificate of occupancy has been obtained;
(b) All amenities and facilities (including, without
limitation, all utilities) for the applicable Resort have been
completed, and all prospective Purchasers of such unsold
Intervals would have uninterrupted use of all such amenities
and facilities;
(c) All furnishings in the unsold Units and all furnishings to the
common areas of each of the Resorts are owned by Master
Endless Escape Club, a non-profit Texas corporation, free of
charges, liens and security interests; and
(d) The unsold Interval is encumbered by the Deed of
Trust and is not subject to any lien not previously consented
to by Lender;
ENVIRONMENTAL CERTIFICATE. An environmental certificate executed by
Borrower, and such other persons or parties as required by Lender, in form and
substance satisfactory to Lender, as it may be from time to time renewed,
amended, restated or replaced.
EVENT OF DEFAULT. Has the meaning set forth in Section 8 of this
Agreement.
FINANCED INTERVAL. Any Eligible Unsold Timeshare Interval as to which
an Advance has been made and which is encumbered by the Deed of Trust and
secures the Loan.
GENERAL PARTNER. Ascension Capital Corporation, a Texas corporation.
2
<PAGE> 3
HAZARDOUS MATERIALS. Any hazardous, dangerous or toxic substance or
material within the meaning of any federal, state or local law, regulation or
ordinance.
INDEBTEDNESS. Collectively, all payment obligations of Borrower to
Lender: (i) under the Note and other Loan Documents; and (ii) in connection with
the Revolving Receivables Loan from Lender to Borrower; together with any and
all other indebtedness of Borrower to Lender whether now existing or hereafter
arising.
INTEREST RATE. A floating rate per annum equal to the Corporate Base
Rate plus two and three-fourths percent (2.75%) (the aggregate rate referred to
as the "Interest Rate"). "Corporate Base Rate" shall mean the interest rate
announced from time to time by The First National Bank of Chicago as its
Corporate Base Rate in effect at its main office in Chicago, Illinois. Interest
shall be calculated based on a 360 day year and charged for the actual number
of days elapsed.
INTERVAL OR TIMESHARE INTERVAL. An undivided fee simple ownership
interest as tenants in common with all other Purchasers with respect to any
Unit with a right to use such Unit for one week annually, together with all
appurtenant rights and interests as more particularly described in the
Timeshare Documents.
LOAN. The Four Million and 00/100 Dollar ($4,000,000.00) revolving
Timeshare Interval inventory loan described in this Agreement.
LOAN DOCUMENTS. Collectively, this Agreement, the Note, the Deed of
Trust and any and all other agreements, documents, instruments and certificates
delivered or contemplated to be delivered in connection with this Agreement, as
such may be amended, renewed, extended, restated or supplemented from time to
time.
MANDATORY PREPAYMENT. Any prepayment required by Section 2.5(b) of
this Agreement.
MASTER DEED(S). The Master Deeds whereby the Resorts were conveyed from
Freedom Financial Corporation, a Texas corporation, to Borrower
(a) Warranty Deed dated May 31, 1989, and recorded in
Volume 2915, Page 215 of the Real Property Records of
Smith County, Texas, and an Assignment of Development
and Contract Rights, dated May 31, 1989, and recorded
in Volume 2915, Page 274 of the Real Property Records
of Smith County, Texas;
(b) Warranty Deed dated May 31, 1989, and recorded in
Book 194, Page 854 of the Deed Records of Stone
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 135, Page
360 of the Deed Records of Stone County, Missouri;
(c) Warranty Deed dated May 31, 1989, and recorded in
Volume 1162, Page 519 of the Real Property Records of
Wood County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Volume 1162, Page
526 of the Real Property Records of Wood County,
Texas;
3
<PAGE> 4
(d) Warranty Deed dated May 31, 1989, and recorded under
Clerk's File No. 8922886 of the Real Property Records
of Montgomery County, Texas, and an Assignment of
Development Rights, Warranties, Service Contracts,
and Trade Name dated May 31, 1989, and recorded under
Clerk's File No. 8922887 of the Real Property Records
of Montgomery County, Texas;
(e) Warranty Deed dated May 31, 1989, and recorded in
Book 300, Page 650 of the Recorder of Deeds of Taney
County, Missouri, and an Assignment of Development
Rights, Warranties, Service Contracts, and Trade Name
dated May 31, 1989, and recorded in Book 301, Page
331 of the Recorder of Deeds of Taney County,
Missouri;
(f) Warranty Deed dated May 31, 1989 and recorded in
Volume 679, Page 29 of the Real Property Records of
Comal County, Texas, and an Assignment of Development
Rights, Warranties, Service Contracts and Trade Name
dated May 31, 1989, and recorded in Volume 679, Page
36 of the Real Property Records of Comal County,
Texas.
MATURITY DATE. January 2, 1999, or any earlier date on which the Loan
shall be required to be paid in full, whether by acceleration or otherwise.
NOTE. The revolving promissory note evidencing the Loan in the
original principal amount of $4,000,000 executed and delivered by Borrower to
Lender concurrently herewith in the form of EXHIBIT D attached hereto and made
a part hereof, as same may from time to time be renewed, amended, restated, or
replaced.
PERMITTED EXCEPTIONS. The exceptions to title listed on EXHIBIT A.
PERSON. Natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
PUBLIC REPORTS. Any public reports now or hereafter filed with and
approved by any jurisdiction having control over the sale of Intervals for a
Resort.
PURCHASE DOCUMENTS. Any purchase agreement and related sale and escrow
documents executed and delivered by a Purchaser to Borrower with respect to the
purchase of an Interval.
PURCHASER. Any Person who purchases one or more Intervals.
RESORTS. The timeshare vacation resorts legally described by the
Master Deeds and developed by Ascension Resorts, Ltd. d/b/a Silverleaf Resorts,
Ltd., a Texas limited partnership, which include the Time-Share Projects: The
Holly Lake Condoshare; Piney Shores Resort: Lake O' the Woods; The Villages
Condoshare; Hill Country Resort; Ozark Mountain Resort; and Holiday Hills
Resort Condoshare.
4
<PAGE> 5
REVOLVING RECEIVABLES LOAN. The $15,000,000 loan from Lender to
Borrower.
TIMESHARE DOCUMENTS. Any and all documents evidencing or relating to
the sale of Intervals by Borrower.
TIMESHARE INTEREST. An Interval.
TIMESHARE PROGRAM. The program in which Purchasers have purchased
Timeshare Interests; owners of Timeshare Interests have the right to use and
enjoy their respective Timeshare Interests on a recurring basis; and owners of
Timeshare Interests share the expenses associated with the operation and
management of such program.
TIMESHARE PROJECT. The part of the Resorts which Lender currently has
approved, and may from time to time hereafter approve in writing, as being
subject to a Timeshare Program.
TITLE INSURER. Commonwealth Land Title Insurance Company, its
successors and assigns.
TITLE INSURANCE POLICY. An American Land Title Association Loan Policy,
as last revised, issued to Lender by the Title Insurer in an amount not less
than $4,000,000, insuring that the Deed of Trust is a first lien upon the
"Property" (as said term is defined in the Deed of Trust) subject only to the
Permitted Exceptions. Said policy shall contain a Variable Rate Endorsement and
be in form and substance otherwise acceptable to Lender.
UNIT. One individual air space dwelling unit, together with all
furniture, fixtures and furnishings therein, and together with any and all
interest in common elements appurtenant thereto, as provided in the
Declaration.
SECTION 2
THE LOAN
2.1 LOAN. During the Availability Period the proceeds of the Loan
shall be advanced and readvanced from time to time by Lender to Borrower as a
single continuous revolving loan that allows Borrower to borrow, repay,
reborrow and repay without penalty or premium, subject to the provisions
contained in this Agreement and the other Loan Documents. Each Advance: (a)
shall be in integral multiples of $1,000; and (b) shall be made no more
frequently than quarterly. Requests for Advances shall be made at least ten
(10) business days prior to the date of disbursement and shall be in the form
of EXHIBIT C. In no event shall Lender make Advances in excess of $1,000 per
each Eligible Unsold Timeshare Interval and then only on a one-time basis per
each such Interval; provided, however that if an Interval previously released
(in accordance with Section 2.6 hereof) is returned to inventory, Lender may,
subject to the terms and conditions of this Agreement, make additional advances
against such returned Interval. Lender shall have no obligation to make
Advances hereunder to the extent any requested Advance would cause the
outstanding principal balance of the Loan, at any time, to exceed $4,000,000.
In no event shall the outstanding principal balance of the Loan, at any time
during the Availability Period, be less than $1,000.
5
<PAGE> 6
2.2 TERM. The Loan shall be for a term of thirty-six (36) months
plus the number of days from the Closing Date to the end of the month in which
the Closing Date occurs.
2.3 INTEREST RATE. The average monthly balance of all outstanding
Advances together with all other outstanding obligations of Borrower shall bear
interest at the Interest Rate. After the occurrence of an Event of Default and
after the Maturity Date, the Loan will bear interest at the Default Rate.
2.4 PAYMENTS.
(a) MONTHLY PAYMENTS. Commencing on the first day of
December 1995, Borrower shall pay interest computed at the
Interest Rate in arrears on the first day of each month. Interest shall
be calculated based on a 360 day year and charged for the actual
number of days elapsed.
(b) FINAL PAYMENT. The entire outstanding principal
amount of the Loan, together with all accrued but unpaid interest,
fees, and charges, shall be payable on the Maturity Date.
2.5 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrower may prepay the Loan
in whole or in part without premium upon five (5) days' prior written
notice to Lender only pursuant to the release provisions set forth in
Section 2.6 hereof.
(b) MANDATORY PREPAYMENTS. If Borrower receives any
payment with respect to the condemnation or lease of the property
encumbered by the Deed of Trust (other than rental payments and
expense reimbursements) including, without limitation, lease
termination, cancellation or similar fees, Borrower shall immediately
prepay the principal balance of the Loan in an amount equal to such
payment. No prepayment premium will be due with respect to any such
prepayments. Any mandatory prepayment shall be accompanied by an
amount equal to the interest accrued thereon to the date of receipt
of such prepayment in collected funds.
2.6 RELEASES OF TIMESHARE INTERESTS. Provided that no Event of
Default shall have occurred and be continuing, Lender agrees to release
individual Intervals and their appurtenant interests in the common elements
from the lien of the Deed of Trust, in accordance with and subject to all of
the following terms, provisions and conditions:
(a) Borrower shall request releases in writing not less
than five (5) business days prior to the date the release is needed.
Each request for release shall be for a minimum of ten (10) Intervals
at a time and shall be submitted no more frequently than two (2) times
per month.
(b) Prior to or contemporaneously with each release,
there shall be a sale of each such Interval to a bona fide third
party for value who is not an Affiliate in an armslength transaction
pursuant to a contract of sale.
6
<PAGE> 7
(c) Lender shall have received, with respect to each
Interval to be sold: (i) a partial release document prepared by
Borrower at Borrower's expense in form and content satisfactory to
Lender, (ii) a schedule containing a list of those Intervals previously
released by Lender and those Intervals remaining to be released; and
(iii) all other data reasonably necessary to support the Borrower's
being entitled to the release, including, without limitation, such
other documents, certificates, opinions and assurances as Lender may
request, together with the legal fees and disbursements of Lender's
counsel incurred in connection with the issuance of each such release.
(d) At the time of release, Borrower shall pay to Lender,
in cash or immediately available funds, a release price of $1,250 for
each Interval to be released. Said payment shall be applied in
reduction of the unpaid principal balance of the Note. The payment of
the aforesaid release price in accordance with these terms and
provisions shall not preclude the payment of additional monies
(at the option of the Borrower) in connection with any release.
(e) Releases of Intervals shall not affect or impair the
lien or security interest of the Deed of Trust (or Lender's liens and
security interests created by the other Loan Documents) as to other
Property (as defined in the Deed of Trust) not theretofore released,
and said liens and security interest shall continue in full force and
effect as to the unreleased Intervals and such other Property.
SECTION 3
COLLATERAL
3.1 GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Indebtedness, Borrower does hereby unconditionally and
irrevocably assign, pledge and grant to Lender a first priority continuing
security interest and lien in and to the right, title and interest of Borrower
in the following property of Borrower, whether now owned or existing or
hereafter acquired regardless of where located (collectively, the
"COLLATERAL"):
(a) All unsold Timeshare Intervals encumbered by the Deed
of Trust which are part of a Timeshare Program offered at a Resort,
together with all security deposits, accounts, receivables, profits and
proceeds contract rights, general intangibles, chattel paper,
documents, instruments and all books and records relating to the
foregoing, from time to time arising from the sale of such Intervals;
(b) All cash and other monies and property of Borrower in
the possession or under the control of Lender;
(c) All other "Property", as said term is defined in the
Deed of Trust;
(d) All collateral now or hereafter securing the Revolving
Receivables Loan; and
(e) All proceeds, profits, extensions, additions,
improvements, betterments, renewals, substitutions and replacements
of the foregoing.
7
<PAGE> 8
SECTION 4
CONDITIONS PRECEDENT TO ADVANCES
The obligation of Lender to make Advances is subject to satisfaction
of all of the conditions set forth below.
4.1 REQUEST FOR ADVANCE. Lender shall have received, prior to each
Advance, a completed and executed "Request for Advance" in the form attached
hereto as EXHIBIT C.
4.2 CONDITIONS PRECEDENT TO INITIAL ADVANCE. Lender shall have
received, as conditions precedent to the making of the initial Advance
hereunder, in form and substance satisfactory to Lender, all documents,
instruments and information identified on SCHEDULE 4.2 and all other
agreements, notes, certificates, orders, authorizations, financing statements,
and other documents which Lender may at any time reasonably request.
4.3 CONDITIONS PRECEDENT TO ADDITIONAL ADVANCES. As conditions
precedent to the making of each additional Advance hereunder, Borrower shall
have satisfied all of the conditions precedent for the making of the Initial
Advance, and all other conditions precedent for making Advances set forth in
this Agreement and in any other Loan Document.
4.4 SECURITY INTERESTS. Lender shall have received satisfactory
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral.
4.5 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on and as of the date of funding
of the Advance except for any representation or warranty limited by its terms
to a specific date and taking into account any amendments to the Schedules or
Exhibits as a result of any disclosures made by Borrower to Lender after the
Closing Date and approved by Lender.
4.6 NO DEFAULT. No Event of Default shall have occurred and no
condition shall exist which, but for notice or the passage of time, or both,
may result in an Event of Default.
4.7 PERFORMANCE OF AGREEMENTS. Borrower shall have performed in
all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it.
4.8 FEES AND EXPENSES. Borrower shall have paid all fees and
expenses required to be paid by Borrower pursuant to this Agreement.
SECTION 5
GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows, which
representations and warranties shall remain true throughout the term of this
Agreement:
8
<PAGE> 9
5.1 ORGANIZATION, STANDING, QUALIFICATION. BORROWER
EXISTENCE. Borrower is, and will remain at all times, a limited partnership
duly formed, validly existing and in good standing under the laws of the State
of Texas, with its principal place of business at 1221 Riverbend, Suite 120,
Dallas, Texas 75247. Borrower is in good standing under the laws of the State
of Missouri and is authorized to transact business in the State of Missouri.
Borrower's General Partner is a corporation duly formed, validly existing and in
good standing under the laws of the State of Texas.
5.2 AUTHORIZATION AND ENFORCEABILITY.
(a) EXECUTION AND DELIVERY. The execution,
delivery and performance by Borrower of the Loan Documents has
been duly authorized by all necessary partnership action of
Borrower and corporate action of Borrower's General Partner,
and does not and will not (i) violate any provision of the
Borrower's partnership agreement or the articles of
incorporation or bylaws of its General Partner 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 or with
respect to any asset of Borrower other than liens and security
interests 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 OTHER APPROVALS. No approval,
authorization, order, license, permit, franchise or consent
of, or registration, declaration, qualification or filing
with, any governmental authority is required in connection
with the execution, delivery and performance by Borrower of
any of the Loan Documents, except for such filings as are
contemplated by the Loan Documents.
(c) VALIDITY OF DOCUMENTS. The Loan Documents
have been duly authorized and, when duly executed and
delivered by Borrower, will constitute legal, valid and
binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws
now or hereafter in effect which relate to or affect the
enforceability of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
5.3 TITLE TO PROPERTIES: PRIOR LIENS. Borrower has good
and marketable title to each of the Eligible Unsold Timeshare Intervals.
Borrower is not in default under any of the documents evidencing or securing
any indebtedness which is secured, wholly or in part, by any Resort, 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. There are no liens or encumbrances against any
of the Resorts other than the Permitted Exceptions.
5.4 LITIGATION AND PROCEEDINGS. There are no actions,
suits, proceedings, orders or injunctions pending or, to the best of Borrower's
knowledge, threatened against or affecting
9
<PAGE> 10
Borrower, at law or in equity, or before or by any governmental authority,
which could have a material adverse effect on Borrower or relate to the Loan or
to any of the Resorts. Borrower has received no notice from any court or
governmental authority alleging that Borrower has violated any applicable
timeshare act, any of the rules or regulations thereunder, or any other
applicable laws.
5.5 LICENSES AND PERMITS. Borrower possesses all requisite
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders as are
necessary to carry on its business as now being conducted.
5.6 ENVIRONMENTAL MATTERS. No Resort contains any Hazardous
Materials. Neither Borrower nor any of the Resorts have received notice from
any governmental agency, entity or other person with regard to Hazardous
Materials on or affecting any Resort; neither Borrower nor any Resort, or any
portion thereof, are in violation of any applicable federal, state, or local
environmental or health laws relating to or affecting such Resort or Borrower.
No Unit contains asbestos.
5.7 FULL DISCLOSURE. No information, exhibit or written report
furnished by or on behalf of Borrower to Lender in connection with the Loan
contains any material misstatement of fact or omits any material fact necessary
to make the statement contained herein or therein not misleading. Borrower
knows of no legal or contractual restriction which will prevent it from
offering or selling Intervals to Purchasers in any state where it is selling
Intervals.
5.8 MARGIN REGULATIONS. The proceeds from the Loan to be evidenced
by the Note will be used to finance Borrower's existing unsold Timeshare
Interval inventory at certain Resorts and to provide funds for new Timeshare
Intervals at such Resorts. 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.
5.9 NO DEFAULTS. No default exists, and there is no violation in
any material respect of any term of any agreement, partnership agreement,
charter instrument, bylaw or other instrument to which Borrower or its General
Partner is a party or by which either may be bound.
5.10 COMPLIANCE WITH LAW. Borrower
(a) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject; and
(b) has not failed to make or cause to be made any
registrations or declarations with any government or agency or
department thereof, necessary to the ownership of any of the Resorts
or to the conduct of its 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 business, prospects, profits,
properties or condition (financial or otherwise) of Borrower. Borrower
has, to the extent required by its activities and businesses, fully
complied with
10
<PAGE> 11
(i) all of the applicable provisions of (A) the Consumer Credit
Protection Act, as amended;(B)the Federal Trade Commission Act, as
amended; (C) the Federal Interstate Land Sales Full Disclosure Act, as
amended; (D) any applicable timeshare act; (E) all other applicable
federal statutes; and (F) all rules and regulations promulgated under
any of the foregoing; and (ii) all of the applicable provisions of any
law of any state in which Borrower is selling Intervals (and the rules
and regulations promulgated thereunder) relating to the sale, offering
for sale or financing of Intervals.
5.11 EMPLOYEE BENEFIT PLANS. Borrower is in compliance in all
material respects with all applicable provisions of ERISA, the IRC and all
other applicable laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. No material liability has been incurred
by Borrower which remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.
5.12 REPRESENTATIONS AS TO THE RESORTS.
(a) ACCESS. Each of the Resorts has direct access
to a publicly dedicated road over a recorded easement and all
roadways, if any, inside the Resorts are common areas under the
Declaration.
(b) UTILITIES. Electric, gas, sewer, water facilities and
other necessary utilities are lawfully available in sufficient capacity
to service each of the Resorts and any easements necessary to the
furnishing of such utility service have been obtained and duly
recorded.
(c) AMENITIES. All amenities described in the
sales prospectus and the Public Reports for each of the Resorts are
completed, or a bond insuring their completion has been posted. Each
Purchaser of an Interval will have access to and the use of all of the
amenities and public utilities of the respective Resort as and to the
extent provided in the Declaration and the Public Reports.
(d) CONSTRUCTION. All costs arising from the construction
of any improvements and the purchase of any equipment, inventory, or
furnishings located in or on each of the Resorts have been paid.
(e) SALE OF INTERVALS. The sale, offering of sale, and
financing of Intervals in the Resorts (i) 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; and (ii) do not violate any applicable law, statute or
regulation including, without limitation, any applicable timesharing
law, statute, or regulation.
5.13 COLLATERAL.
(a) TITLE. Borrower has good and marketable title to the
Collateral, free and clear of any lien, security interest, charge or
encumbrance except for the security interest created by the Deed of
Trust, this Agreement, or otherwise created in favor of Lender. No
financing statement or other instrument similar in effect covering all
or any part of the
11
<PAGE> 12
Collateral is on file in any recording office, except such as may
have been filed in favor of Lender.
(b) POWER. Borrower has the lawful right, power
and authority to grant a security interest in the Collateral. The Deed
of Trust, this Agreement and all filings and other actions necessary
or desirable to perfect and protect such security interest, create a
valid and perfected first priority security interest in the Collateral
securing the payment and performance of the Indebtedness.
(c) TAXES AND LIENS. Borrower has paid all taxes,
levies and other charges upon the Collateral. Borrower shall
defend Lender against and save it harmless from all claims of any
Persons other than Lender with respect to the Collateral, and this
indemnity shall include all attorneys' fees and legal expenses.
(d) DEED OF TRUST. The Deed of Trust constitutes
a valid and enforceable first and prior lien and security interest on
the properties and interests covered thereby.
SECTION 6
AFFIRMATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid, Borrower
hereby agrees with Lender as follows:
6.1 PAYMENT AND PERFORMANCE OF INDEBTEDNESS. Borrower shall pay
and promptly perform all of the obligations hereunder and under the Loan
Documents.
6.2 INSURANCE. Borrower shall duly and promptly comply with all of
the insurance provisions set forth in the Deed of Trust.
6.3 CONDEMNATION. Borrower shall duly and promptly comply with all
of the condemnation provisions set forth in the Deed of Trust.
6.4 REPORTING REQUIREMENTS. So long as the Indebtedness remains
unpaid, Borrower shall duly and promptly furnish to Lender all reports,
financial statements, compliance certificates, and other related information
required by any document or instrument evidencing, securing, or executed in
connection with the Revolving Receivables Loan, or as may otherwise be
requested by Lender from time to time.
6.5 CLAIMS. The Collateral is and shall remain free of all liens
and encumbrances whatsoever (including, without limitation, claims for labor,
services, materials and supplies) except for the Permitted Exceptions. In the
event any lien attaches to any Collateral, Borrower shall, within ten (10) days
after such attachment, either (a) cause such lien to be released of record or
(b) provide Lender with a bond in accordance with the applicable laws of the
state where the subject Collateral is located, issued by a corporate surety
acceptable to Lender, in an amount acceptable to Lender and in form acceptable
to Lender.
12
<PAGE> 13
6.6 TITLE. Borrower shall promptly notify Lender of any claim,
action or proceeding affecting title to the Collateral, or any part thereof, or
any of the security interests granted hereunder, and, at the request of Lender,
appear in and defend, at Borrower's expense, any such claim, action or
proceeding.
6.7 SUBORDINATED OBLIGATIONS. Borrower will not, directly or
indirectly, (a) permit any payment to be made in respect of any indebtedness,
liabilities or obligations, direct or contingent, which are subordinated by the
terms thereof or by separate instrument to the payment of principal of, and
interest on, the Note except in accordance with the terms of such
subordination, (b) permit the amendment, rescission or other modification of
any such subordination provisions of any of Borrower's subordinated obligations
in such a manner as to affect adversely Lender's lien or the prior position of
the Note, or (c) permit the prepayment or redemption, except for mandatory
prepayments, of all or any part of any subordinated obligations of Borrower
except in accordance with the terms any intercreditor agreement.
6.8 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 the Indebtedness and to ensure the performance
of the terms and provisions of the Loan Documents. 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 its representations, warranties and covenants.
6.9 AFFIRMATIVE COVENANTS IN OTHER DOCUMENTS. Borrower shall duly
and promptly comply with and perform, or cause to be complied with and
performed, all of the affirmative covenants set forth (a) in the Deed of Trust
or in any other Loan Document, (b) in any document or instrument evidencing,
securing, or executed in connection with the Revolving Receivables Loan, or
(c) in any other document or instrument evidencing, securing, or executed in
connection with any other Indebtedness.
SECTION 7
NEGATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lender is
committed to lend hereunder, unless Lender otherwise consents in writing,
Borrower hereby covenants and agrees with Lender as follows:
7.1 NEGATIVE COVENANTS IN OTHER DOCUMENTS. Borrower shall not
violate or permit to be violated any of the negative covenants set forth (a) in
the Deed of Trust or in any other Loan Document, (b) in any document or
instrument evidencing, securing, or executed in connection with the Revolving
Receivables Loan, or (c) in any other document or instrument evidencing,
securing, or executed in connection with any other Indebtedness.
7.2 USE OF LENDER NAME. Borrower shall not, and shall not permit
any Affiliate to, without the prior written consent of Lender, use the name of
Lender or the name of any affiliates of Lender in connection with any of their
respective businesses or activities, except in connection
13
<PAGE> 14
with internal business matters, administration of the Loan and as
required in dealings with governmental agencies.
SECTION 8
EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
8.1 PAYMENTS. Failure of Lender to receive from Borrower, within
five (5) days of the date written notice has been sent to Borrower after the
due date: (a) any amount payable under the Note, or (b) any other payment due
under the Loan Documents, except for the Note payment due at the Maturity Date
for which no grace period is allowed.
8.2 COVENANT DEFAULTS. Borrower shall fail to perform or observe
any covenant, agreement, obligation, representation or warranty contained in
this Agreement or in any of the Loan Documents (other than any covenant or
agreement obligating Borrower to pay the Indebtedness), and such failure shall
continue for thirty (30) days after Lender delivers written notice thereof to
Borrower, provided, however, if the failure is incapable of cure within such
thirty (30) day period and Borrower shall be diligently pursuing a cure, such
thirty (30) day cure period shall be extended by an additional period not to
exceed sixty (60) days.
8.3 WARRANTIES OR REPRESENTATIONS. 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, shall be false, misleading or incorrect in any
material respect as of the date made.
8.4 INVOLUNTARY PROCEEDINGS. If a case is commenced or a petition
is filed and not dismissed within sixty (60) days against Borrower under any
applicable liquidation, conservatorship, bankruptcy, moratorium, insolvency,
reorganization or similar law providing for the relief of debtors and generally
affecting the rights of creditors; 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 sixty (60) days; or if any material
asset of Borrower is sequestered by court order and such order remains in
effect for more than sixty (60) days.
8.5 PROCEEDINGS. Borrower voluntarily seeks, consents to or
acquiesces in the benefit of any provision of any applicable liquidation,
conservatorship, bankruptcy, moratorium, insolvency, reorganization or similar
law providing for the relief of debtors and generally affecting the rights of
creditors, whether now or hereafter in effect; consents to the filing of any
petition against it under such law; makes an assignment for the benefit of its
creditors; admits in writing its inability to pay its debts generally as they
become due; or consents to the appointment of a receiver, trustee, liquidator
or conservator for it or any part of its assets.
8.6 ATTACHMENT, JUDGMENT, TAX LIENS. The issuance, filing or levy
against 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.
14
<PAGE> 15
8.7 INSOLVENCY. Borrower shall become insolvent or otherwise
generally be unable to pay its debts when due.
8.8 MATERIAL ADVERSE CHANGE. Any material adverse change in the
financial condition of Borrower (which is not otherwise specifically described
in this Section 8 as an Event of Default) which Lender in good faith believes
impairs or may impair Borrowers ability to duly and promptly perform all of its
obligations under this Agreement and the other Loan Documents.
8.9 DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default by
Borrower in the payment of Indebtedness for borrowed money after the expiration
of any applicable grace or cure period; any other default under such
Indebtedness which accelerates or permits the acceleration (after the giving of
notice or passage of time, or both) of the maturity of such Indebtedness; or
any default which permits the holders of such Indebtedness to control Borrower.
8.10 SUSPENSION OF SALES. The issuance of any stay order, cease and
desist order or similar judicial or nonjudicial sanction that materially
adversely limits or OTHERWISE affects any Interval sales activities, and, with
respect to any such sanction only, such sanction is not dismissed, terminated
or rescinded within thirty (30) days after issuance.
8.11 DEFAULT UNDER DEED OF TRUST. If a default or Event of Default
occurs under the Deed of Trust or any other Loan Document and such default or
event of default is not cured within the applicable grace period (if any),
provided therein.
8.12 DEFAULT UNDER OTHER LOANS. If a default or Event of Default
occurs under (a) any document or instrument evidencing, securing or executed in
connection with the Revolving Receivables Loan, or (b) any document or
instrument evidencing, securing, or executed in connection with any other
Indebtedness, and any such default or event of default (as described in (a) or
(b) above) is not cured within the applicable grace period (if any) provided
therein.
SECTION 9
REMEDIES
9.1 REMEDIES UPON DEFAULT . Upon the occurrence of an Event of
Default, Lender may take any one or more of the following actions, all without
notice to Borrower:
(a) ACCELERATION. Declare the unpaid balance of the
Indebtedness, or any part thereof, immediately due and payable,
whereupon the same shall be due and payable.
(b) TERMINATION OF OBLIGATION TO ADVANCE. Terminate any
commitment of Lender to lend under this Agreement in its entirety, or
any portion of any such commitment, to the extent Lender shall deem
appropriate.
(c) EXERCISE OF OTHER RIGHTS. Exercise any and all other
rights or remedies afforded by any 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
15
<PAGE> 16
contained in the Loan Documents or in aid of the exercise of any right
or remedy granted to Lender in the Loan Documents.
9.2 APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon the
occurrence of an Event of Default, Lender may apply against the Indebtedness
any and all Collateral in its possession, any and all balances, credits,
deposits, accounts, reserves, indebtedness or other moneys due or owing to
Borrower held by Lender hereunder or under any other financing agreement or
otherwise, whether accrued or not.
9.3 WAIVERS. 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,
Borrower and each and every surety, endorser, guarantor and other party liable
for the payment or performance of all or any portion of the Indebtedness,
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 the time of payment of the
Indebtedness, or by any release or change in any security for the payment or
performance of the Indebtedness, regardless of the number of such renewals,
extensions, releases or changes.
9.4 CUMULATIVE RIGHTS. All rights and remedies available to Lender
under the Loan Documents shall be cumulative and in addition to all other
rights and remedies granted to Lender at law or in equity, whether or not the
Indebtedness 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.
9.5 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 Indebtedness and shall bear interest at the Default Rate,
from the date of such expenditure until the date repaid.
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 Lender's liens and security interests in and to preserve the Collateral.
Borrower agrees to cooperate fully with all of Lender's efforts to preserve the
Collateral and Lender's liens and security interests therein and will take such
actions to preserve the Collateral and Lender's liens and security interests
therein.
10.2 PERFORMANCE BY LENDER. If Borrower fails to perform any
agreement contained herein, Lender may, but shall not be obligated to, cause
the performance of, such agreement, and the expenses of Lender incurred in
connection therewith shall be payable by Borrower pursuant to Section 10.3
below.
16
<PAGE> 17
10.3 FEES AND EXPENSES. Borrower agrees to promptly pay all
reasonable Costs (defined below) incurred by Lender in connection with the
documentation, modification, workout, collection or enforcement of the Loan or
any of the Loan Documents (as applicable) and all such Costs shall be included
as additional Indebtedness bearing interest at the Default Rate set forth in
the Note until paid. For the purposes hereof "COSTS" shall mean all
expenditures and expenses which may be paid or incurred by or on behalf of
Lender including payments to remove or protect against liens, attorneys' fees
(including fees of Lender's inside counsel), receivers' fees, engineers' fees,
accountants' fees, independent consultants' fees (including environmental
consultants), all costs and expenses incurred in connection with any of the
foregoing, Lender's out-of-pocket costs and expenses related to any audit or
inspection of any of the Resorts or the Collateral, outlays for documentary and
expert evidence, stenographers' charges, stamp taxes, publication costs, and
costs (which may be estimates as to items to be expended after entry of an
order or judgment) for procuring all such abstracts of title, title and UCC
searches, and examination, title insurance policies, and similar data and
assurances with respect to title as Lender may deem reasonably necessary either
to prosecute any action or to evidence to bidders at any foreclosure sale a
true condition of the title to, or the value of, the Collateral.
10.4 LENDER'S RIGHT OF SET-OFF. Upon the occurrence of an Event of
Default, or if Lender shall be served with garnishment process in which
Borrower shall be named as defendant, whether or not any Event of Default shall
have occurred, Lender may, but shall not be required to, set-off any
indebtedness owing by Lender to Borrower against any of the Indebtedness
without first resorting to the security hereunder and without prejudice to any
other rights or remedies of Lender or its security interest herein.
10.5 ASSIGNMENT OF LENDER'S INTEREST. Lender shall have the right
to assign all or any portion of its rights in this Agreement to any subsequent
holder or holders of the Indebtedness.
10.6 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, (a) from time to time to institute and prosecute in the
name of Borrower or otherwise, but for the benefit of Lender,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; and (b) 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 are coupled with an interest and are and shall
be irrevocable by Borrower in any manner, or for any reason, unless and until
all obligations of Borrower to Lender have been satisfied.
10.7 INDEMNIFICATION OF LENDER. Borrower hereby agrees to indemnify
Lender and hold Lender harmless from and against any and all liabilities,
indebtedness, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against Lender, in any way relating to
or arising out of (a) this Agreement and the Loan Documents and/or (b) any of
the transactions contemplated therein or thereby (including, without
limitation, those in any way
17
<PAGE> 18
relating to or arising out of the violation by Borrower of any federal or state
laws including the Interstate Land Sales Act or the Timeshare Act). Upon
receiving knowledge of any suit, claim or demand asserted by a third party that
Lender believes is covered by this indemnity, and subject to the condition that
no Event of Default under this Agreement shall then exist, Lender shall give
Borrower notice of the matter and an opportunity to defend it, at Borrower's
sole cost and expense, with legal counsel satisfactory to Lender.
Notwithstanding any defense by Borrower of any such suit, claim or demand,
Lender shall have the right to participate in any material decision affecting
the conduct or settlement of any dispute or proceeding for which indemnification
may be claimed. It is the express intention of the parties hereto that the
indemnity provided for herein is intended to and shall protect and indemnify
Lender from the consequences of Lender's own negligence (but not gross
negligence or willful misconduct), 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.
SECTION 11
MISCELLANEOUS
11.1 NOTICE. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m.
(Chicago time) on a business day; provided that a hard copy of such notice is
also sent pursuant to (c) or (d) below; (c) if by overnight courier, on the
first business day after delivery to the courier, or (d) if by U.S. Mail,
certified or registered mail, return receipt requested on the fourth (4th) day
after deposit in the mail postage prepaid.
Notices to Borrower Ascension Resorts, Ltd.
Attn: Robert Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
Telecopy: (214) 905-0514
With a copy to: Meadows, Owens, Collier, Reed,
Cousins & Blau., L.L.P.
Attn: George Bedell, Esq.
3700 Nations Bank Plaza
901 Main Street
Dallas, Texas 75202
Telecopy: (214) 747-3732
Notices to Lender: Heller Financial, Inc.
Real Estate Financial Services
Attn: Portfolio Manager, Secured Receivables
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7119
18
<PAGE> 19
With a copy to: Heller Financial, Inc.
Real Estate Financial Services
Attn: Group General Counsel
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7872
11.2 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 the extension of the Indebtedness (and each part thereof),
regardless of any investigation made by or on behalf of Lender.
11.3 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 ILLINOIS AND
APPLICABLE LAWS OF THE UNITED STATES.
11.4 LIMITATION ON INTEREST. In no event whatsoever shall the
amount of interest paid or agreed to be paid to Lender pursuant to this
Agreement, the Note or any of the Loan Documents exceed the highest lawful rate
of interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which
a court of competent jurisdiction may deem applicable hereto ("EXCESS
INTEREST"), then ipso facto, the obligation to be fulfilled shall be reduced to
the highest lawful rate of interest permissible under such law and if, for any
reason whatsoever, Lender shall receive, as interest, an amount which would be
deemed unlawful under such applicable law, such interest shall be applied to
the Loan (whether or not due and payable), and not to the payment of interest,
or refunded to Borrower if such Loan(s) have been paid in full. Neither
Borrower nor any guarantor or endorser shall have any action against Lender for
any damages whatsoever arising out of the payment or collection of any such
Excess Interest.
11.5 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 and 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.
11.6 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 and Lender.
11.7 NO DUTY. All attorneys, accountants, appraisers, consultants,
custodians and other professional persons retained by Lender shall have the
right to act exclusively in the interests of Lender and shall have no duty of
disclosure, duty of loyalty, duty of care or other duty or
19
<PAGE> 20
obligation of any type or nature whatsoever to Borrower or any of its partners,
or to Borrower's General Partner or any of its shareholders, or to any other
person or entity.
11.8 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.
11.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
other Loan Documents and agreements referred to herein embody the entire
agreement between the parties hereto, supersedes all prior agreements and
understandings between the parties whether written or oral relating to the
subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no oral
agreements among Lender, Borrower, the General Partner, or between any two or
more of them. This Agreement may be modified or changed only in a writing
executed by both Lender and Borrower and/or the other affected parties.
11.10 VENUE. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR
FROM THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED, AT LENDER'S
SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY
OF COOK, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY
AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION
SYSTEM, WHOSE ADDRESS IS BORROWER, C/O CT CORPORATION SYSTEM, 208 S. LASALLE
STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF
LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL
CONSTITUTE PERSONAL SERVICE OF PROCESS UPON SUCH PARTY. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN CHICAGO,
ILLINOIS, BORROWER SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST, APPOINT
A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH PERIOD
NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO BORROWER. BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY LENDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.
11.11 JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF
LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER OF TRIAL BY
JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
BORROWER AND LENDER ACKNOWLEDGE
20
<PAGE> 21
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS WAIVER IN ENTERING
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND
LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
11.12 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.
11.13 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.
11.14 BROKER'S FEES. There are no brokers, finders' or other
similar fees or commitments due with respect to the transactions described in
the Agreement. Borrower shall defend Lender and save and hold it harmless from
all claims of any Persons for any such fees which indemnity shall include
reasonable attorneys' fees and legal expenses.
IN WITNESS WHEREOF, Borrower and Lender have caused this
Agreement to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
ASCENSION RESORTS, LTD.,
a Texas limited partnership
BY: ASCENSION CAPITAL CORPORATION,
a Texas corporation, its General Partner
By: /s/ROBERT MEAD
-----------------------------
ROBERT MEAD,
Chief Executive Officer
LENDER:
HELLER FINANCIAL, INC.
By: /s/ DAWN GRATON
-----------------------------
Name: Dawn Graton
-----------------------------
Its: Assistant Vice President
-----------------------------
21
<PAGE> 22
SCHEDULE 4.2
CLOSING DELIVERIES
Pursuant to Section 4.2 of the Agreement, Lender shall not be
obligated to fund the initial Advance unless Lender shall have received, in
form and substance satisfactory to Lender, all documents, instruments and
information as follows:
1. OPINIONS OF COUNSEL. An opinion of Borrower's counsel stating:
(a) that the Loan is not usurious under applicable laws; (b) that the Loan
Documents are validly executed, duly authorized and binding and enforceable in
accordance with their terms; (c) that the execution and delivery of the Loan
Documents and the performance of the transactions contemplated thereby do not
violate or contravene any law, court order, judgment or contract to which
Borrower or General Partner is a party; and (d) such further opinions as Lender
shall require. The opinion of Borrower's counsel shall be from an independent
counsel acceptable to Lender.
2. TITLE. The Title Insurer shall have issued to Lender the Title
Insurance Policy without any exceptions from coverage other than the Permitted
Exceptions.
3. AUTHORIZATIONS. Such certified authorizations or resolutions
required to authorize Borrower to enter into and execute this Agreement, the
Note and the other Loan Documents in connection therewith and to borrow the
Loan from Lender,
4. EVIDENCE OF INSURANCE. Evidence of policies of insurance as
required by the Deed of Trust.
5. APPLICABLE LAWS. Evidence that Borrower is in compliance with
all applicable laws in connection with its sales of Intervals.
6. LOAN DOCUMENTS. All documents to be executed in connection
with the Loan, including, without limitation, the Note, Deed of Trust, the Loan
and Security Agreement, UCC-1 Financing Statements and such other documents as
Lender may require.
7. OTHER LOAN DOCUMENTS. Copies of all loan documents between
Borrower and any lender holding a deed of trust or mortgage lien on any of the
Resorts or any portion thereof.
8. ENVIRONMENTAL INDEMNITY. An Environmental Indemnity Agreement,
executed by Borrower in favor of Lender.
9. OTHER ITEMS. Such other agreements, documents, instruments and
certificates as Lender may request to evidence the Indebtedness and to evidence
and perfect the liens and security interests contemplated by the Loan
Documents.
10. UCC SEARCHES. Such searches of the applicable public records
as it deems necessary under applicable law to verify that it has a first and
prior perfected lien and security interest covering all of the Collateral.
22
<PAGE> 23
11. TAXES. Evidence that all real property taxes owed by or for
which Borrower is responsible for collection have been paid.
12. CREDIT REFERENCES. Such satisfactory credit references and
results of credit investigations as Lender may require for Borrower, the
General Partner and any Affiliate.
13. COMMITMENT FEE. Lender shall have received the Commitment Fee.
ANY WAIVER OF ANY OF THE AFORESAID CONDITIONS PRECEDENT MUST BE IN
WRITING, SPECIFY THE CONDITION AND BE SIGNED BY AN AUTHORIZED OFFICER OF THE
LENDER. ANY WAIVER, IF ANY, SHALL ONLY WAIVE THE SPECIFIED CONDITION AND NO
OTHER, AND SHALL NOT BE DEEMED OR CONSTRUED TO BE A SUBSEQUENT WAIVER. NEITHER
THE CLOSING OF THE LOAN NOR THE DISBURSEMENT OF ANY LOAN PROCEEDS SHALL BE
DEEMED A WAIVER OF ANY OF THE AFORESAID CONDITIONS PRECEDENT.
23
<PAGE> 1
EXHIBIT 10.14
AMENDMENT TO RESTATED AND AMENDED
LOAN AND SECURITY AGREEMENT
This First Amendment to Restated and Amended Loan and Security
Agreement ("AMENDMENT AGREEMENT") entered into as of August 15, 1996 by HELLER
FINANCIAL, INC., a Delaware corporation ("LENDER") and SILVERLEAF VACATION CLUB,
INC., a Texas corporation ("BORROWER").
RECITALS:
A. Lender and Borrower entered into that certain Loan and
Security Agreement dated as of October 11, 1994 (the "Original Agreement").
B. Pursuant to the terms and conditions of the Original
Agreement, Lender made Borrower a $5,000,000 revolving receivables loan (the
"Original Loan") secured by "Receivables Collateral" (as defined in the
Original Agreement).
C. On April 19, 1995 at Borrower's request, the Original Loan was
modified and increased by an additional $5,000,000 (the "First Loan Increase")
to $10,000,000.
D. On December 27, 1995 Lender and Borrower modified the Original
Loan Agreement ("Restated and Amended Loan") and increased the Original Loan to
$15,000,000 and made Borrower a separate $4,000,000 revolving inventory loan.
E. Borrower has requested that Lender (i) further modify, extend
and increase the Restated and Amended Loan by an additional $10,000,000 to
$25,000,000 (the "New Loan").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto do hereby
agree that the Restated and Amended Loan and Security Agreement of December
27, 1995 ("Restated Agreement") shall be amended in part as set forth below. All
terms and conditions of the Restated Agreement not specifically amended by this
Amendment Agreement shall remain in full force and effect and the new document
as herein amended shall be known as the Second Restated and Amended Loan and
Security Agreement.
1. Amendments to the Restated Agreement shall be made as follows:
SECTION 1.8 shall be amended in its entirety to read as follows:
"1.8 "Borrower": Silverleaf Vacation Club, Inc., a Texas
corporation, formerly known as Ascension Resorts, Ltd., a
Texas limited partnership, d/b/a Silverleaf Resorts, Ltd. and
subject to the restrictions on merger, consolidation and
assignment contained in the Documents, its successors and
assigns."
SECTION 1.10 shall be amended by replacing "... twelve (12) months..."
with "twenty-four (24) months from the date of this Amendment Agreement or any
amendment thereto".
<PAGE> 2
SECTION 1.14 shall be amended by adding the following language:
"Commitment Fee for the New Loan shall be $100,000 payable by Borrower to
Lender."
SECTION 1.36 shall be amended by replacing "five (5) ..." with "seven
(7) ..."; and adding to the end "...or the date of any amendment to this
Amendment Agreement."
SECTION 1.37 shall be amended by replacing "Fifteen Million United
States Dollars ($15,000,000)" with "Twenty-Five Million United States Dollars
($25,000,000)".
SECTION 1.39A shall be added to the Restated Agreement as follows;
"1.39A "New Loan": shall mean the increase in the Loan to
$25,000,000".
SECTION 1.41 shall be amended in its entirety to read as follows:
"1.41 "Note"; the promissory note evidencing the Loan in the
amount of $25,000,000 executed and delivered by Borrower to
Lender concurrently herewith and attached as Exhibit D."
SECTION 1.43 shall be amended to change the date from "one (1) year"
to "two (2) years".
SECTION 1.47 shall be amended to replace "one (1) year" to "two (2)
years" in the first line.
SECTION 1.56 shall be amended in its entirety to read as follows:
"1.56 "Revolving Receivables Loan": the $25,000,000 loan
evidenced by the Note from Borrower in favor of Lender in the
form of Exhibit D."
SECTION 5.3 shall be amended by designating the first paragraph as
"(a)" and by adding a new subparagraph "(b)" as follows:
"(b) Notwithstanding the provisions of Section 5.3(a) to the
contrary, Borrower may make partial pre-payments of the Loan
during the Borrowing Term in minimum tranches of $5,000,000
subject to the provisions of Section 5.7 in the event Borrower
does not maintain the Note balance as stated in Section 5.7."
SECTION 5.7 shall be added to the Restated Agreement in its entirety
as follows:
"5.7 During each twelve (12) month period during the
Borrowing Term, commencing with the date of this Amendment
Agreement during which Borrower does not maintain an average
outstanding balance of principal on the Note of at least
$15,000,000, Borrower will pay to Lender, on or before ten
(10) days after notice given after the end of each twelve (12)
month period, an amount equal to
2
<PAGE> 3
two percent (2%) of the difference between $15,000,000 and the
average balance of the Loan during the last concluded twelve
(12) month period."
SECTION 6.14(a) shall be amended to add the following to the first
sentence: "... and Borrower shall pay an additional $100,000 Commitment Fee to
Lender for the New Loan at the time of the next Advance after the date of this
Amendment Agreement but no later than August 15, 1996. Borrower authorizes
Lender to advance such sum to itself from the first Advance."
SECTION 6.14(b) shall be amended to add the following to the end of
the paragraph: "... and such attorneys fees and costs rendered in connection
with the New Loan."
SECTION 6.22 shall be a new section added to the Restated Agreement in
its entirety as follows:
"6.22 Borrower may increase the Borrowing Term for an
additional twelve (12) months upon delivering to Lender (i) a
written request for such extension delivered no more than
ninety (90) days and no less than thirty (30) days from the
expiration of the Borrowing Term, and (ii) an extension fee in
the amount of $125,000 in good funds, provided that there
exists no Event of Default and Lender has the approval of its
Credit Committee, acting in its sole discretion."
2. Schedule 1 will be amended in its entirety as set forth on
SCHEDULE 1 to this Amendment Agreement.
3. The Note evidencing the Loan in the principal amount of
$25,000,000 as attached to this Amendment Agreement as EXHIBIT "A" shall be
executed by Borrower and delivered by Lender.
4. The Environmental Certificate with Representations, Covenants
and Warranties ("Environmental Warranty") effective December 22, 1995 shall be
amended to state that the maximum principal amount of the Loan shall be
$25,000,000 and the Environmental Warranty is hereby restated, confirmed with
all force and effect as of the date of this Amendment Agreement.
5. Borrower represents and warrants unto the Lender that: (i) the
Note, Second Restated Amended Loan and Security Agreement and all other Loan
Documents are valid and binding obligations of Borrower, enforceable in
accordance with their respective terms; (ii) no payment of interest which has
been made to Lender nor contracted to be made to Lender has resulted in the
computation or earning of interest in excess of the maximum lawful rate; and
(iii) no oral representations, statements or inducements have been made by
Lender with respect to the Loan or this Amendment Agreement.
6. The Note, Loan Agreement and other Loan Documents (including
any and all modifications or amendments thereto) are hereby ratified, confirmed
and approved in all respects by Borrower.
3
<PAGE> 4
7. Except as amended by this Amendment Agreement (and as
heretofore amended, if such is the case), all of the terms and conditions of
the Restated and Amended Loan and Security Agreement shall be unmodified and
shall remain in full force and effect.
8. This Amendment Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois.
9. The invalidity, illegality, or unenforceability of any
provision of this Amendment Agreement shall not affect or impair the validity,
legality or enforceability of the remainder of this Amendment Agreement, and to
this end, the provisions of this Agreement are declared to be severable.
10. This Amendment Agreement shall be binding upon, and shall
inure to the benefit of, the respective successors and assigns of the Borrower
and Lender.
LENDER:
HELLER FINANCIAL, INC.,
a Delaware corporation
By: /s/ DAWN GRATON
------------------------------
Its: Assistant Vice President
-----------------------------
BORROWER:
SILVERLEAF VACATION CLUB, INC.,
a Texas corporation
By: /s/ ROBERT E. MEAD
------------------------------
Its: Chief Executive officer
-----------------------------
4
<PAGE> 5
SCHEDULE 1 TO
AMENDMENT TO RESTATED AND AMENDED
LOAN AND SECURITY AGREEMENT
The Prepayment Premium at any time after the second year from the date
of the Note shall be equal to a percentage of the then unpaid principal amount
being prepaid, which percentage shall be determined as follows:
Year After Date Percentage of
of Note Prepayment
------- ----------
Third 3
Fourth 2
Fifth 1
thereafter 0
The Third Year shall be the period of time commencing on the date
which is two years after the date of the Note and expiring twelve months (12)
months thereafter. The Fourth Year begins upon the expiration of the Third
Year. Each succeeding year thereafter shall be for a period of twelve months,
with the Fifth Year terminating 60 months from the date of the Note.
Notwithstanding anything herein to the contrary, Borrower's right to
prepay this Loan in the initial 24 months after the date of the Note is subject
to the terms and conditions set forth in Sections 5.3 and 5.7 of the first
Amendment to Restated and Amended Loan and Security Agreement.
5
<PAGE> 6
LOAN NO. EXHIBIT "A"
--------
CONSOLIDATED PROMISSORY NOTE
$25,000,000.00 August 1996
------,
RECITALS:
A. On October 11, 1994, HELLER FINANCIAL, INC. , a Delaware
corporation ("Holder"), made a $5,000,000 loan (the "Loan") to ASCENSION
RESORTS, LTD., a Texas limited partnership, d/b/a SILVERLEAF RESORTS, LTD., now
known as SILVERLEAF VACATION CLUB, INC., a Texas corporation ("Maker"), which
Loan is evidenced by that certain Promissory Note (the "Original Note") dated
October 11, 1994 from Maker in favor of Holder, in the original principal
amount of $5,000,000, maturing on November 1, 1999 (the "Original Maturity
Date").
B. On April 19, 1995, at Maker's request, the Original Loan was
modified and increased to $10,000,000 by an additional $5,000,000 loan (the
"First Loan Increase") from Holder pursuant to that certain Loan and
Modification Agreement dated April 19, 1995 between Maker and Holder.
C. On Maker's request, Holder (i) extended the Maturity Date of
the First Loan Increase, and (ii) increased the Original Loan to $15,000,000 by
loaning Maker an additional $5,000,000 (the "Second Loan Increase").
D. Maker has requested that Holder consolidate the First Loan
Increase and the Second Loan Increase and obtain an additional increase of
$10,000,000 ("Additional Loan") for a consolidated loan of $25,000,000 on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises, the First Loan
Increase, the Second Loan Increase and the Additional Loan are hereby
consolidated and amended as hereinafter provided.
1. PROMISE TO PAY.
FOR VALUE RECEIVED, SILVERLEAF VACATION CLUB, INC., a Texas
corporation ("Maker"), promises to pay to the order of HELLER FINANCIAL, INC.,
a Delaware corporation, and its successors and assigns ("Holder") the sum of
TWENTY-FIVE MILLION and 00/100 Dollars ($25,000,000.00), together with all
other amounts added thereto (the "Loan") pursuant to this Note or otherwise
payable to Holder pursuant to that certain Restated and Amended Loan and
Security Agreement dated December 27, 1995 as restated and amended by that
certain Amendment to Restated and Amended Loan and Security Agreement dated
August_, 1996, between Maker and Holder, as the same may be further amended,
modified or supplemented from time to time (the "Loan Agreement") or any
Document, as defined therein, (or so much thereof as may from time to time be
outstanding), together with interest thereon as hereinafter set forth, payable
in lawful money of the United States of America. Payments shall be made in
money of the United States of America. Payments shall be made in immediately
available funds to Holder at 500 West Monroe Street, 15th Floor, Chicago,
Illinois 60661 (or such other address as Holder may hereafter designate in
writing to Maker).
<PAGE> 7
This Note is executed and subject to the terms and conditions of the
Loan Agreement and any other Documents evidencing or securing the Loan and
executed in connection therewith and any modification, renewal and extension
thereof and evidences Advances of the Loan. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
2. PRINCIPAL AND INTEREST.
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a rate equal to a floating rate per annum equal to four and
three-quarters percent (4.75%) plus the Base Rate (the aggregate rate referred
to as the "INTEREST RATE"). "BASE RATE" shall mean the rate published each
business day in the Wall Street Journal for deposits maturing three (3) months
after issuance under the caption "Money Rates, London Interbank Offered Rates
(Libor)". The Interest Rate for each calendar month shall be fixed based upon
the Base Rate published prior to and in effect on the first (1st) business day
of such month. Interest shall be calculated based on a 360 day year and charged
for the actual number of days elapsed.
3. PAYMENT.
Commencing on the first day of August 1996, Maker shall pay interest
computed at the Interest Rate monthly in arrears on the first day of each
month. Interest shall be calculated based on a 360 day year and charged for the
actual number of days elapsed.
The Additional Loan shall be due and payable on or before August 1,
2003, or any earlier date on which the Loan shall be required to be paid in
full, whether by acceleration or otherwise (the "MATURITY DATE").
4. PREPAYMENT.
Maker may prepay the Loan in full at any time after the second year
from the date of this Note, provided Maker gives Holder at least thirty (30)
days prior written notice and pays to Holder a prepayment premium in an amount
equal to the corresponding percentage of principal prepaid:
Loan Year Percentage
--------- ----------
Third Three percent (3%)
Fourth Two percent (2%)
Fifth One percent (1%)
At any time after the Fifth Loan Year, Maker may prepay the Loan in
full at any time without premium. "LOAN YEAR" shall mean the period from the
date hereof through the last day of the same month in the following year and
thereafter each successive twelve (12) month period.
Notwithstanding the above provisions to the contrary, Borrower may
make partial prepayments of the Loan during the Borrowing Term (the
twenty-four(24) month period after the date of this Note) in minimum tranches
of $5,000,000, subject to the provisions of the immediately
2
<PAGE> 8
succeeding paragraph in the event Borrower does not maintain the Note balance
as stated in the paragraph immediately below.
During each twelve (12) month period of the Borrowing Term commencing
on the date of this Note during which Borrower does not maintain an average
outstanding balance of principal on this Note of at least $15,000,000, Borrower
will pay to Lender, on or before ten (10) days after notice given after the end
of each twelve (12) month period, an amount equal to two percent (2%) of the
difference between $15,000,000 and the average balance of the Loan during the
last concluded twelve (12) month period.
In the event Holder declares the Loan immediately due and payable at a
time when a prepayment premium would be due, such prepayment premium shall be
paid upon any tender of payment at any time or upon foreclosure of the
Collateral.
5. DEFAULT.
5.1 Events of Default. Any of the following shall constitute an
"EVENT OF DEFAULT" under this Note: (a) failure to pay any amounts owed
pursuant to this Note within five (5) days of the date written notice has been
sent to Maker after the due date; or (b) the occurrence of any default under
any of the other Documents, after giving effect to any applicable grace or cure
period.
5.2 Remedies. So long as an Event of Default remains outstanding:
(a) interest shall accrue at a rate equal to the Interest Rate plus four
percent (4%) per annum; (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under this Note and
the other Documents. Holder's rights, remedies and powers, as provided in this
Note and the other Documents, are cumulative and concurrent, and may be pursued
singly, successively or together against Maker, any guarantor of the Loan, the
security described in the Documents, and any other security given at any time
to secure the payment hereof, all at the sole discretion of Holder.
Additionally, Holder may resort to every other right or remedy available at law
or in equity without first exhausting the rights and remedies contained herein,
all in Holder's sole discretion. Failure of Holder, for any period of time or
on more than one occasion, to exercise its option to accelerate the Maturity
Date shall not constitute a waiver of the right to exercise the same at any
time during the continued existence of any Event of Default or any subsequent
Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note; (iii) to protect the liens of the Security Documents or
any of the Documents; (iv) to represent Holder in any other proceedings
whatsoever in connection with the Security Documents or any of the Documents
including post judgment proceedings to enforce any judgment related to the
Security Documents; or (v) in connection with seeking an out-of-court workout
or settlement of any of the foregoing, then Maker shall pay to Holder all
costs, attorneys' fees and expenses in connection therewith, in addition to all
other amounts due hereunder.
3
<PAGE> 9
6. LATE CHARGE.
If payments of principal and/or interest, or any other amounts under
the other Documents are not timely made or remain overdue for a period of five
(5) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("LATE CHARGE") equal to four percent (4%) of each delinquent payment.
7. GOVERNING LAW; SEVERABILITY.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. WAIVER.
Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their heirs, successors and assigns, legal representatives, hereby
waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor, notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and agrees that their
respective liability shall be unconditional and without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
Holder. Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their heirs, legal representatives, successors and assigns, hereby
consents to every extension of time, renewal, waiver or modification that may
be granted by Holder with respect to the payment or other provisions of this
Note, and to the release of any makers, endorsers, guarantors or sureties, and
of any collateral given to secure the payment hereof, or any part hereof, with
or without substitution, and agrees that additional makers, endorsers,
guarantors or sureties may become parties hereto without notice to Maker or to
any endorser, guarantor or surety and without affecting the liability of any of
them.
9. SECURITY, APPLICATION OF PAYMENTS.
This Note is secured by the liens, encumbrances and obligations
created hereby and by the other Documents and the terms and provisions of the
other Documents are hereby incorporated herein. Payments will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Documents, second to interest due on the
Loan and third to the outstanding principal balance of the Loan.
10. MISCELLANEOUS.
10.1 Amendments. This Note may not be terminated or amended orally,
but only by a termination or amendment in writing signed by Holder.
10.2 Lawful Rate of Interest. In no event whatsoever shall the
amount of interest paid or agreed to be paid to Holder pursuant to this Note or
any of the Documents exceed the highest lawful rate of interest permissible
under applicable law. If, from any circumstances whatsoever,
4
<PAGE> 10
fulfillment of any provision of this Note and the other Documents shall involve
exceeding the lawful rate of interest which a court of competent jurisdiction
may deem applicable hereto ("EXCESS INTEREST"), then ipso facto, the obligation
to be fulfilled shall be reduced to the highest lawful rate of interest
permissible under such law and if, for any reason whatsoever, Holder shall
receive, as interest, an amount which would be deemed unlawful under such
applicable law, such interest shall be applied to the Loan (whether or not due
and payable), and not to the payment of interest, or refunded to Maker if such
Loan has been paid in full. Neither Maker nor any guarantor or endorser shall
have any action against Holder for any damages whatsoever arising out of the
payment or collection of any such Excess Interest.
10.3 Captions. The captions of the Paragraphs of this Note are for
convenience of reference only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof.
10.4 Notices. Notices shall be given under this Note in conformity
with the terms and conditions of the Loan Agreement.
10.5 Joint and Several. The obligations of Maker under this Note
shall be joint and several obligations of Maker and of each Maker, if more than
one, and of each Maker's heirs, personal representatives, successors and
assigns.
10.6 Time of Essence. Time is of the essence of this Note and the
performance of each of the covenants and agreements contained herein.
11. SALE OF LOAN.
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of
its right, title and interest in and to the Loan, this Note, the Mortgage and
the other Loan Documents, any guaranties given in connection with the Loan and
any collateral given to secure the Loan.
12. VENUE.
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
NOTE SHALL BE LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN
COURTS HAVING A SITUS WITHIN THE COUNTY OF COOK STATE OF ILLINOIS. MAKER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND
DESIGNATES C T CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION
SYSTEM, 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED
AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED
THAT A COPY OF SUCH PROCESS BE DELIVERED TO BORROWER PURSUANT TO THE PROVISIONS
OF SECTION 8.5 OF THE LOAN AND SECURITY AGREEMENT OF EVEN DATE HEREWITH. IN THE
EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO
BUSINESS IN CHICAGO, ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER
5
<PAGE> 11
HOLDER'S REQUEST, APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS
BEHALF AND WITHIN SUCH PERIOD NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH
SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION,
HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO
MAKER. MAKER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY HOLDER ON THE LOAN DOCUMENTS IN
ACCORDANCE WITH THIS PARAGRAPH.
13. JURY TRIAL WAIVER.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND
HOLDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has caused the
same to be executed by its duly authorized representatives as of the date set
first forth above.
MAKER:
SILVERLEAF VACATION CLUB, INC.
a Texas corporation
By:
---------------------------
Robert Mead, President
6
<PAGE> 1
EXHIBIT 10.15
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
August 12, 1994, by GREYHOUND FINANCIAL CORPORATION, a Delaware corporation
("Lender"), and ASCENSION RESORTS, LTD., a Texas limited partnership, d/b/a
Silverleaf Resorts, Ltd. ("Borrower").
I. DEFINITIONS
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other
Documents, the following terms shall have the following meanings (such
meanings to be applicable equally both to the singular and plural
terms defined).
1.1 "Advance": an advance of the proceeds of the Loan by Lender on
behalf of Borrower in accordance with the terms and provisions
of this Agreement.
1.2 "Agents": the Oversight Agent, the Lockbox Agent and the
Servicing Agent.
1.3 "Applicable Usury Law": the usury law chosen by the parties
pursuant to the terms of paragraph 8.10 or such other usury
law which is applicable if such usury law is not.
1.4 "Articles of Organization": the charter, articles, agreements
and other written documents evidencing the formation,
organization and continuing existence of an entity.
1.5 "Assignment": a written assignment of specific Instruments
and/or Purchaser Mortgages and their proceeds, delivered by
Borrower to Lender in the form of EXHIBIT A.
1.6 "Borrowing Base": with respect to an Eligible Instrument, an
amount equal to the lesser of:
(a) seventy percent (70%) of the unpaid principal balance
of such Eligible Instrument; or
(b) seventy-five percent (75%) of the present value of
the unmatured installments of principal and interest
under such Eligible Instrument, discounted at the
greater of the applicable interest rate under the
terms of the Note or 12%.
1.7 "Borrowing Term": the period commencing on the date of this
Agreement and ending on the close of Lender's normal
-1-
<PAGE> 2
business hours on the date (or if not a Business Day, the
first Business Day thereafter) which is the earlier of (a) the
date twelve (12) months from the date of the first Advance or
(b) August 12, 1995.
1.8 "Business Day": any day other than a Saturday, Sunday or a
day on which banks in Phoenix, Arizona are required to close.
1.9 "Commitment Fee": a commitment fee for the Loan payable by
Borrower to Lender in the amount of Sixty Thousand Dollars
($60,000).
1.10 "Collateral": the Receivables Collateral, Insurance Policies
and any and all other assets now or hereafter serving as
security for the Performance of the Obligations, and all
products and proceeds thereof.
1.11 "Default Rate": as defined in the Note.
1.12 "Documents": the Note, the Guarantee, the Subordination
Agreement, the Assignment, the Lockbox Agreement, the
Oversight Agreement, the Environmental Certificate, this
Agreement and all other documents executed in connection with
the Loan, together with any and all renewals, amendments,
restatements or replacements of such documents.
1.13 "Eligible Instrument": an Instrument which conforms to the
standards set forth in EXHIBIT B, (which at all times during
the Borrowing Term shall be limited to Instruments arising
from the sale of Time-Share Interests in Projects for which
agreed-to Permitted Encumbrances have been agreed to by Lender
in writing and stipulated on EXHIBIT E hereto or any
supplement thereto). Without limiting the generality of the
foregoing, Borrower acknowledges and agrees that until such
time as it has delivered to Lender, and Lender has approved,
proforma title policies on each of the Projects identified on
EXHIBIT F hereto and located in the State of Missouri, that
Borrower shall not be entitled to Advances of the Loan with
respect to Instruments arising from the sale of Time-Share
Interests in such Missouri Projects. An Instrument that has
qualified as an Eligible Instrument shall cease to be an
Eligible Instrument upon the date of the first occurrence of
any of the following: (a) any installment due with respect to
that Instrument becomes more than fifty-nine (59) days past
due or (b) that Instrument otherwise fails to continue to
conform to the standards set forth in EXHIBIT B.
-2-
<PAGE> 3
1.14 "Environmental Certificate": an environmental certificate
executed by Borrower and such other persons or parties as
required by Lender in the form of EXHIBIT C.
1.15 "Event of Default": the meaning set forth in paragraph 7.1.
1.16 "Guarantee": a primary, joint and several guarantee made by a
Guarantor of the Obligations.
1.17 "Guarantor": each person or entity now or hereafter
guaranteeing the Obligations, including, without limitation,
Robert E. Mead.
1.18 "Incipient Default": an event which after notice and/or lapse
of time would constitute an Event of Default.
1.19 "Instrument": a promissory note which has arisen out of the
sale of a Time-Share Interest by Borrower to a Purchaser and
is secured by a Purchaser Mortgage.
1.20 "Insurance Policies": such insurance policies required by, and
written by insurers and in amounts and form satisfactory to,
Lender.
1.21 "Loan": the loan made pursuant to this Agreement and the other
Documents.
1.22 "Lockbox Agent": Texas Commerce Bank, or its successor as
lockbox agent under the Lockbox Agreement.
1.23 "Lockbox Agreement": an agreement in form and substance
satisfactory to Lender in its sole and absolute discretion to
be made between Lender, Borrower and Lockbox Agent, which
provides for the Lockbox Agent to collect through a lockbox
payments made on Instruments constituting part of the
Receivables Collateral and to remit them to Lender.
1.24 "Master Club": the Master Endless Escape Club, a Texas non-
profit corporation, which collects all assessments and pays
all expenses for the owners' associations of all of the
Projects, pursuant to a Master Club Agreement and a First
Amendment to Master Club Agreement, both dated March 28, 1990
("Master Club Agreement").
1.25 "Maturity Date": the date (or if not a Business Day, the first
Business Day thereafter) seven (7) years after the date of the
last Advance.
1.26 "Maximum Loan Amount": Six Million Dollars ($6,000,000) minus
the outstanding principal balance of the 1992 Loan.
-3-
<PAGE> 4
1.27 "Non-Disturbance Agreements": agreements executed by the
holder(s) of all liens on the Projects or related amenities
insuring the continued uninterrupted use of the subject
Project(s), common areas and amenities by the owners of Time-
share Interests, all in form and substance acceptable to
Lender.
1.28 "Note": the "Promissory Note" issued by Borrower in the form
of EXHIBIT D to evidence the Loan.
1.29 "Obligations": all obligations, agreements, duties, covenants
and conditions that Borrower is now or hereafter required to
Perform under the Documents.
1.30 "Opening Prepayment Date": the date (or if not a Business Day,
the first Business Day thereafter) one (1) year after the date
of the last Advance.
1.31 "Oversight Agent": GFC Portfolio Services, Inc., an Arizona
corporation, or its successor as Oversight Agent under the
Oversight Agreement.
1.32 "Oversight Agreement": an agreement in form and substance
satisfactory to Lender in its sole and absolute discretion, to
be made among Lender, Borrower and Oversight Agent, which
provides for Oversight Agent to perform for the benefit of
Lender certain oversight and reporting functions in connection
with Borrower's servicing of the Instruments constituting the
Receivables Collateral.
1.33 "Performance" or "Perform": full, timely and faithful
performance.
1.34 "Permitted Encumbrances": the rights, restrictions,
reservations, encumbrances, easements and liens of record
against each Project which Lender has agreed to accept, which
with respect to each Project located in Texas are as set forth
on EXHIBIT E, and which with respect to any other Project not
specifically addressed in the original EXHIBIT E to this
Agreement, shall be delineated on a supplement to EXHIBIT E
after being approved in writing by Lender.
1.35 "Prepayment Premium": an amount equal to (a) six percent
(6.0%) of the outstanding principal balance of the Loan in the
event of a prepayment of the Loan occurring prior to the
Opening Prepayment Date or (b) a percentage, determined in
accordance with SCHEDULE 1, of the outstanding principal
balance of the Loan in the event of a prepayment of the Loan
occurring subsequent to the Opening Prepayment Date.
-4-
<PAGE> 5
1.36 "Project": any one of the time-share resorts or parts of such
resorts described in EXHIBIT F and any other time-share resort
or part thereof as Lender may in its discretion from time to
time hereafter approve in writing.
1.37 "Projects": collectively, all of the resorts (or parts
thereof) defined above as a "Project."
1.38 "Purchaser": a purchaser of a Time-Share Interest from
Borrower.
1.39 "Purchaser Mortgage": the purchase money mortgage or deed of
trust given to secure an Instrument.
1.40 "Receivables Collateral": (a) the Instruments which are now or
hereafter assigned, endorsed or delivered to Lender pursuant
to this Agreement or against which an Advance has been made;
(b) all rights under all documents evidencing, securing or
otherwise pertaining to such Instruments, including, without
limitation, Purchaser Mortgages and purchase agreements; (c)
the Insurance Policies and related rights pertaining to the
foregoing; (d) all rights under any escrow agreements and
accounts pertaining to the foregoing; (e) all files, books and
records of Borrower pertaining to the foregoing; and (f) the
proceeds from the foregoing.
1.41 "Resolutions": the corporate resolution of a corporation
certified as true and correct by an authorized officer of such
corporation or a partnership certificate signed by all of the
general partners of such partnership.
1.42 "Security Interest": a perfected, direct and exclusive first
priority security interest in and charge upon the property
intended to be covered by it.
1.43 "Servicing Agent": the Borrower or, subject to paragraph
5.4(b), a servicing agent acceptable to Lender or its
successor as Servicing Agent under the Servicing Agreement.
1.44 "Servicing Agreement": an agreement in form and substance
satisfactory to Lender in its sole and absolute discretion, to
be made among Lender, Borrower and Servicing Agent which
provides for Servicing Agent to perform for the benefit of
Lender accounting, reporting and other servicing functions
with respect to the Instruments constituting part of the
Receivables Collateral.
1.45 "Subordination Agreement(s)": the subordination agreement(s)
made and delivered to Lender pursuant to paragraph 6.11.
-5-
<PAGE> 6
1.46 "Term": the duration of this Agreement, commencing on the date
as of which this Agreement is entered into and ending when all
of the Obligations shall have been Performed.
1.47 "Time-Share Interest": the estate described in EXHIBIT F in a
Project or the right to the exclusive use of a Unit and to the
non-exclusive use of the related Project's common areas for a
one week period of each year.
1.48 "Title Policy (Purchaser Mortgage)": a policy of title
insurance in an amount not less than Borrowing Base of an
Instrument secured by a Purchaser Mortgage, insuring Lender's
interest in such Purchaser Mortgage as a valid first priority
lien subject only to the Permitted Encumbrances, issued by a
title company and in form and substance acceptable to Lender.
1.49 "Unit": a dwelling unit in a Project.
1.50 "1992 Loan": the loan in the original principal amount of
$1,000,000 made by Lender's predecessor, Greyhound Real Estate
Finance Company, an Arizona corporation to Borrower pursuant
to a Loan And Security Agreement dated January 7, 1992.
II. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Lender hereby agrees, if Borrower has Performed all of the
obligations then due, to make Advances to Borrower in amounts
equal to (a) the then Borrowing Base of all Eligible
Instruments then held by Lender together with those delivered
to and accepted by Lender with a Request for Advance, less (b)
the then unpaid principal balance of the Loan; provided, at no
time shall the unpaid principal balance of the Loan exceed the
Maximum Loan Amount. Lender shall have no obligation to make
any Advance after the Borrowing Term has expired.
2.2 The Loan is a revolving line of credit; however, all of the
Advances shall be viewed as a single loan. Borrower shall not
be entitled to obtain Advances after the expiration of the
Borrowing Term unless Lender, in its sole and absolute
discretion, agrees in writing with Borrower to make Advances
thereafter on terms and conditions satisfactory to Lender.
This Agreement and Borrower's liability for Performance of the
Obligations shall continue, however, until the end of the
Term.
2.3 Borrower will use the proceeds of the Loan only for Borrower's
business purposes, which shall consist of use for working
capital.
-6-
<PAGE> 7
III. SECURITY
3.1 To secure the Performance of all of the Obligations, Borrower
hereby grants to Lender a Security Interest in and assigns to
Lender the Receivables Collateral. Such Security Interest
shall be absolute, continuing and applicable to all existing
and future Advances and to all of the Obligations. All of the
Receivables Collateral shall secure repayment of the Loan and
the Performance of the other Obligations. Borrower will
unconditionally deliver to Lender, with full recourse, all
Instruments which are part of the Receivables Collateral.
Lender is hereby appointed Borrower's attorney-in-fact to take
any and all actions in Borrower's name and/or on Borrower's
behalf deemed necessary or appropriate by Lender with respect
to the collection and remittance of payments (including the
endorsement of payment items) received on account of the
Receivables Collateral.
3.2 If a previously Eligible Instrument which is part of the
Receivables Collateral ceases to be an Eligible Instrument,
then within thirty (30) days thereafter, Borrower will either
(i) pay to Lender an amount equal to the Borrowing Base of the
ineligible Instrument, together with interest, costs and
expenses attributable to it, or (ii) replace such ineligible
Instrument with an Eligible Instrument or Eligible Instruments
having a Borrowing Base not less than the Borrowing Base
(calculated immediately before its ineligibility) of the
ineligible Instrument(s) being replaced. Simultaneously with
such payment or the delivery of the replacement Instrument to
Lender, Borrower will deliver to Lender all of the items
(except for a "Request for Advance and Certification")
required to be delivered by Borrower to Lender pursuant to
paragraph 4.1, together with a "Borrower's Certificate" in
form and substance identical to EXHIBIT G. If no Event of
Default or Incipient Default has occurred and is continuing,
then upon the substitution of an Eligible Instrument for an
ineligible Instrument, Lender will reassign to Borrower,
without recourse or warranty of any kind, the ineligible
Instrument. Borrower will prepare the reassignment instrument,
which shall be in form and substance identical to EXHIBIT G-1,
and shall deliver it to Lender for execution.
3.3 Borrower will deliver or cause to be delivered to Lender and
will maintain or cause to be maintained throughout the Term in
full force and effect the Guarantee, the Subordination
Agreement(s), and all other security agreements required
pursuant to the Documents.
-7-
<PAGE> 8
IV. ADVANCES
4.1 Lender's obligation to make the initial Advance and
subsequent Advances shall be subject to and conditioned upon
the terms and conditions set forth in the following
subparagraphs and elsewhere in this Agreement being satisfied
and remaining satisfied during the Term.
(a) Borrower shall have delivered to Lender the following
Documents, duly executed, delivered and in form and
substance satisfactory to Lender:
(i) the Note;
(ii) an Assignment of the specific Instruments for
which the Advance is requested;
(iii) the specific Instruments for which the
Advance is requested, properly endorsed;
(iv) the Guarantee;
(v) the Subordination Agreement(s);
(vi) the Environmental Certificate;
(vii) UCC financing statements for filing and/or
recording, as appropriate, where necessary to
perfect the Security Interest in the security
required pursuant to the Documents;
(viii) a favorable opinion from independent counsel
for Borrower in form and substance
substantially identical to EXHIBIT H;
(ix) a favorable opinion from independent counsel
for Guarantor in form and substance
substantially identical to EXHIBIT I;
(x) a favorable opinion from independent counsel
for Borrower and Freedom Financial Corp.
("FFC") regarding the existence of claims
against FFC, in form and substance
satisfactory to Lender;
(xi) the Lockbox Agreement;
(xii) the Oversight Agreement;
-8-
<PAGE> 9
(xiii) the Non-Disturbance Agreements or other
assurance of lien releases; and
(xiv) this Agreement.
(b) Borrower shall have delivered to Lender at least ten
(10) Business Days prior to the date of the Advance,
or in the case of the items called for in item (x) at
least five (5) Business Days prior to the date of the
Advance:
(i) the Articles of Organization of Borrower and
its partners, if any, to the extent any such
entity is not a natural person;
(ii) the Resolutions of Borrower and its
respective partners, if any, to the extent
any such entity is not a natural person;
(iii) unless waived in writing by Lender, prior
only to the initial Advance for each Project,
an environmental assessment of each Project;
(iv) except as to the Projects identified on the
original EXHIBIT F to this Agreement, as to
which such requirement is waived by Lender, a
1988 ALTA/ACSM survey and condominium map of
each Project prepared by a licensed land
surveyor acceptable to Lender, showing the
dimensions of each Unit and such other
details as Lender may reasonably require;
(v) a copy of the registrations/consents to sell,
the final subdivision public reports/public
offering statements and/or prospectuses and
approvals thereof required to be issued by or
used in the state where each Project is
located and other jurisdictions where Time-
Share Interests have been offered for sale or
sold;
(vi) if any Project has not been registered under
such act and Lender requests such an opinion,
a copy of an advisory opinion issued by the
federal Office of Interstate Land Sales
Registration that the subject Project does
not fall within the purview of the Interstate
Land Sales Full
-9-
<PAGE> 10
Disclosure Act, or a legal opinion from
Borrower's counsel acceptable to Lender;
(vii) a copy of the form of the purchase contract,
deed, Instrument, Purchaser Mortgage, credit
applications and disclosures, and other
documents and exhibits which have been or are
being used by Borrower in connection with
each Project or the sale of Time-Share
Interests, together with the Project
governing documents, the Project management
agreement, the Project exchange affiliation
agreement(s) and advertising materials;
(viii) the Insurance Policies;
(ix) intentionally omitted;
(x) the items described in EXHIBIT J; and
(xi) such other items as Lender requests which are
reasonably necessary to evaluate the request
for the Advance and the satisfaction of the
conditions precedent to the Advance.
(c) No material adverse change shall have occurred in any
Project or in Borrower's or Guarantor's business or
financial condition since the date of the latest
financial and operating statements given to Lender by
or on behalf of Borrower or Guarantor.
(d) There shall have been no change in the warranties and
representations made in the Documents by Borrower,
Guarantor and/or any other surety for the Performance
of any of the Obligations.
(e) Neither an Event of Default nor Incipient Default
shall have occurred and be continuing.
(f) The interest rate applicable to the Advance (before
giving effect to any savings clause) will not exceed
the maximum rate permitted by the Applicable Usury
Law.
(g) Borrower shall have paid to Lender the Commitment Fee
and all other fees required to be paid at the time of
the Advance.
(h) Borrower shall not be entitled to any Advance unless
on or before September 15, 1994 all
-10-
<PAGE> 11
Documents have been executed by the persons required
to do so and delivered to Lender and the first
Advance has been requested.
4.2 Advances shall be requested in writing by Borrower and shall
not be made more frequently than two (2) per month or in
amounts less than One Hundred Thousand Dollars ($100,000).
Borrower shall pay to Lender an administrative fee for each
advance in excess of one (1) per month in an amount equal to
the greater of $500 or 0.25% of the amount of the subject
advance.
4.3 Advances may be disbursed by checks, wire transfers or drafts
payable to Borrower.
4.4 Although Lender shall have no obligation to make an Advance
unless and until all of the conditions precedent to the
Advance have been satisfied, Lender may, at its sole
discretion, make Advances prior to that time without waiving
or releasing any of the Obligations.
V. NOTE, MAINTENANCE OF BORROWING BASE; PAYMENTS; SERVICING AND
COLLECTION
5.1 The Loan shall be evidenced by the Note and shall be repaid in
immediately available funds according to the terms of the
Note.
5.2 Subject to Borrower's rights under paragraph 3.2 to provide
replacement Eligible Instruments, if for any reason the
aggregate principal amount of the Loan outstanding at any time
shall exceed the then Borrowing Base of all Eligible
Instruments, Borrower, without notice or demand, will
immediately make to Lender a principal payment in an amount
equal to such excess plus accrued and unpaid interest on such
principal payment.
5.3 Borrower will not be entitled to prepay, in whole or in part,
the Loan until the Opening Prepayment Date. Thereafter, if
neither an Event of Default nor an Incipient Default has
occurred and is continuing, then Borrower shall have the
option to prepay the Loan in full, but not in part, upon 60
days prior written notice and the simultaneous payment of the
Prepayment Premium on any date an installment is due on the
Note. If (a) there shall occur an Event of Default and such
occurrence results in acceleration of the Loan, or if (b)
there shall occur a casualty to or condemnation of all or any
portion of any Project and such occurrence results in
prepayment of the Loan, a Prepayment Premium will be required
in the amount which shall be determined as of and due on the
earlier of the date of acceleration or prepayment. The
prohibition
-11-
<PAGE> 12
on prepayment and the requirement to pay a Prepayment Premium
shall not apply to prepayment resulting from the application
of payments required from obligors on the Receivables
Collateral (unless solicited by Borrower in contravention of
its Obligations) or from performance by Borrower of its
Obligations under paragraph 3.2 or 5.2 (unless due to a
misrepresentation or breach of warranty concerning the
Receivables Collateral qualifying as Eligible Instruments).
5.4 (a) Lockbox Agent shall collect payments on the
Instruments constituting part of the Receivables
Collateral and remit collected payments to Lender on
the last Business Day of each and every week after
the date of first Advance, according to the terms of
the Lockbox Agreement. Payments shall not be deemed
received by Lender until Lender actually receives
such payments from Lockbox Agent. Servicing Agent
shall furnish to Lender at Borrower's sole cost and
expense, no later than the tenth (10th) day of each
month commencing with the first full calendar month
following the date of this Agreement, a report,
substantially in the format of EXHIBIT K, which: (i)
shows as of the end of the prior month with respect
to each Instrument which constitutes part of the
Receivables Collateral (A) all payments received,
allocated between principal, interest, late charges
and taxes, (B) the opening and closing balances, (C)
present value, (D) average consumer interest rate,
and (E) extensions, refinances, prepayments, and
other similar adjustments; and (ii) indicates
delinquencies of thirty (30), sixty (60) and ninety
(90) days and in excess of ninety (90) days. On the
basis of such reports, Lender will compute the
amount, if any, which was due and payable by Borrower
on the last Business Day of the preceding month and
will notify Borrower of any amount due. If such
reports are not timely received, Lender may estimate
the amount which was due and payable. Borrower will
pay upon demand the amount determined by Lender to be
due and payable. If payment is made on the basis of
Lender's estimate and thereafter reports required by
this paragraph are received by Lender, the estimated
payment amount shall be adjusted by an additional
payment or a refund to the correct amount, as the
reports may indicate; such additional amount to be
paid by Borrower upon demand and such refund to be
made by Lender within five (5) Business Days after
receipt of written request therefor by Borrower. At
the end of each calendar quarter, Borrower will
deliver or cause the Servicing Agent to deliver to
Lender a
-12-
<PAGE> 13
current list of the names, addresses and phone
numbers of the obligors on each of the Instruments
constituting part of the Receivables Collateral.
Borrower will also deliver or cause Servicing Agent
to deliver to Lender, promptly after receipt of a
written request for them, such other reports with
respect to Instruments constituting part of the
Receivables Collateral as Lender may from time to
time require.
(b) At any time following the occurrence of an Event of
Default (and regardless of whether such Event of
Default is cured), at Lender's election, an
independent Servicing Agent may be engaged under a
Servicing Agreement and Borrower shall cooperate in
such appointment. Lender, subject to any restriction
contained in the Lockbox Agreement or the Servicing
Agreement, as the case may be, may at any time and
from time to time in its discretion substitute or
require Borrower to substitute a successor or
successors to any Agent acting under the Lockbox
Agreement or (at any time after appointment of a
Servicing Agent other than Borrower pursuant to the
terms of this Agreement) the Servicing Agreement.
5.5 Subject to Lender's rights under Article VII, all proceeds
from the Receivables Collateral (except payments which are
identified by Purchasers as tax and insurance impounds or
maintenance and other assessment payments and are required to
be so treated by Borrower) and the other security shall be
applied as follows: first to the payment of all late charges,
costs, fees and expenses required by the Documents to be paid
by Borrower; second to accrued and unpaid interest due on the
Note; third to the unpaid principal balance of the Note; and
then to the other Obligations in such order and manner as
Lender may determine. Unless and until all the Obligations
have been Performed, Borrower shall have no right to any
portion of the proceeds of the Receivables Collateral;
provided, however, that any payments which are received by
Lender which are identified by Purchasers as assessment
payments will be delivered to Borrower within thirty (30) days
of Lender's receipt thereof.
5.6 Whether or not the proceeds from the Receivables Collateral
shall be sufficient for that purpose, Borrower will pay when
due all payments required to be made pursuant to any of the
Documents, Borrower's Obligation to make such payments being
absolute and unconditional.
-13-
<PAGE> 14
VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Borrower is, and will remain at all times, duly
organized, validly existing and in good standing
under the laws of Texas and in each jurisdiction in
which it is selling Time-Share Interests or where the
location or nature of its properties or its business
makes such qualification necessary. Borrower has full
authority to Perform the Obligations and to carry on
its business and own its property.
(b) Borrower has full power and authority to grant the
Security Interest in the Receivables Collateral and
to execute and deliver the Documents and to Perform
the Obligations. All action necessary and required by
the Articles of Organization and all applicable laws
for the obtaining of the Loan and for the execution
and delivery of the Documents executed and delivered
in connection with the Loan has been duly and
effectively taken. The Documents are and shall be
legal, valid, binding and enforceable against
Borrower; and do not violate the Applicable Usury Law
or constitute a default or result in the imposition
of a lien under the terms or provisions of any
agreement to which Borrower is a party. No consent of
any governmental agency or any other person not a
party to this Agreement is or will be required as a
condition to the execution, delivery or
enforceability of the Documents.
6.2 There is no action, litigation or other proceeding pending or,
to Borrower's knowledge, threatened before any arbitration
tribunal, court, governmental agency or administrative body
involving Borrower, its property or any Project which might
materially adversely affect the Performance of the
Obligations, the Project, the business or financial condition
of Borrower, or the ability of Borrower to Perform the
Obligations.
6.3 (a) Borrower has sold or has offered for sale Time-Share
Interests only in the states in which the Projects
are located and all sales have been made at the
Projects. Before it sells or offers for sale
Time-Share Interests in jurisdictions other than the
states in which the Projects are located and the
state(s) listed in the preceding sentence, Borrower
will promptly notify Lender and provide Lender with
evidence that it has complied with all laws of such
jurisdiction governing its proposed conduct.
-14-
<PAGE> 15
(b) Borrower has complied, and will comply, with all laws
and regulations of the state in which the Projects
are located and all other governmental jurisdictions
in which the Projects are located or in which
Time-Share Interests have been sold or offered for
sale.
(c) The time-share use and occupancy of Units will not
violate or constitute a non-conforming use under any
private covenant or restriction or any zoning, use or
similar law, ordinance or regulation affecting the
use or occupancy of the Projects.
6.4 (a) Each Instrument assigned to Lender pursuant to this
Agreement shall be an Eligible Instrument. Borrower
has Performed all its obligations to Purchasers, and
there are no executory obligations to Purchasers to
be Performed by Borrower. Borrower further warrants
and guarantees the enforceability of the Receivables
Collateral.
(b) Without the prior written consent of Lender, Borrower
will not cancel or materially modify, or consent to
or acquiesce in any material modification to, or
solicit the prepayment of, any Instrument which
constitutes part of the Receivables Collateral; or
waive the timely performance of the obligations of
the Purchaser under any such Instrument or its
security; or release the security for any such
Instrument. Borrower will not pay or advance directly
or indirectly for the account of any Purchaser any
sum owing by the Purchaser under any Instrument which
constitutes part of the Receivables Collateral.
(c) Borrower at all times will fulfill and will cause its
affiliates, agents and independent contractors at all
times to fulfill all obligations to Purchasers.
(d) True and complete copies of the Project governing
documents, the purchase contract form, the deed form,
the Instrument form, the Purchaser Mortgage form,
advertising materials and other documents and
exhibits thereto which have been and are being used
by Borrower in connection with the Projects and the
sale or offering for sale of Time-Share Interests
have been delivered to Lender. Borrower, without the
prior written consent of Lender, will not cancel or
materially modify any such documents except as
required by law. Borrower will perform all of
-15-
<PAGE> 16
its obligations under the Project governing documents.
(e) Each Purchaser is a member of a Project owners'
association or associations having authority to levy
annual assessments to cover the costs of maintaining
and operating the Projects. To Borrower's knowledge,
the Master Club and each owners' association is
solvent; currently levied assessments are adequate to
cover such costs and to establish and maintain a
reasonable reserve for capital improvements; and
there are no events which could give rise to a
material increase in such costs. Borrower will use
its best efforts to cause the Master Club to (A)
discharge its obligations under the Master Club
Agreement and all of the Project's governing
documents and (B) maintain the reserve for capital
improvements described above.
(f) Except as otherwise permitted and disclosed by the
Project governing documents, the Project owners'
association(s) have a non-exclusive recreation and use
easement over all the common areas in the Projects and
other amenities which have been promised or
represented as being available to Purchasers, which
common areas and amenities are free and clear of liens
and security interests. Such interests are represented
by the documents described on EXHIBIT M hereto (the
"Recreation And Use Documents"). Borrower will
maintain or cause to be maintained in good condition
and repair all amenities and common areas which have
been promised or represented as being available to
Purchasers and all roads and off-site improvements
which are not the responsibility of the Project
owners' association(s) to maintain and repair and have
not been dedicated to or accepted by the responsible
governmental authority or utility company. Without
limiting the generality of the foregoing, Borrower
shall not sell or further encumber its fee simple
interest in any common areas and amenities which are
the subject of the Recreation and Use Documents which
are presently improved and available for use by owners
of Time-share Interests; Borrower shall not terminate
or cause to be terminated any of the Recreation and
Use Documents with respect to any common areas or
amenities and which are presently improved and
available for use by owners of Time-Share Interests;
and Borrower shall fully perform its contractual
obligations under the Recreation and Use Documents for
each Project regarding maintenance and upkeep of the
subject common areas and amenities. Finally, Borrower
hereby represents and warrants to Lender that the
amenities available
-16-
<PAGE> 17
to Purchasers at each Project, as represented in the
Project and related marketing documents used by
Borrower, are in fact located on the easement parcels
identified in the respective Recreation and Use
Documents for each Project.
(g) In its capacity as the contract manager for each of
the Projects (and related common areas and
amenities), and as the party which shall at all times
control each Project owner's association, Borrower
covenants and agrees that it shall at no time cause
assessments to be levied against the owners of
Time-Share Interests in such Projects which, with
respect to each Project, constitute in the aggregate,
amounts which are more than the amount reasonably
necessary to maintain that portion of each Project
(including any amenities and common areas) from time
to time representing Time-Share Interests sold to
consumers.
6.5 Borrower will undertake the diligent and timely collection of
amounts delinquent under each Instrument which constitutes
part of the Receivables Collateral and will bear the entire
expense of such collection. Lender shall have no obligation to
undertake any action to collect under any Instrument.
6.6 Lender may notify Purchasers of the existence of Lender's
interest as assignee in the Receivables Collateral and request
from Purchasers any information relating to the Receivables
Collateral. Borrower will deliver such notice under its
letterhead if requested.
6.7 Borrower, without the prior written consent of Lender, will
not: (a) sell, convey, pledge, hypothecate, encumber or
otherwise transfer any security for the Performance of the
Obligations; (b) permit or suffer to exist any liens, security
interests or other encumbrances on any security for the
Performance of the Obligations, except for the Permitted
Encumbrances and liens and security interests expressly
granted to Lender; (c) sell, lease, transfer or dispose of all
or substantially all of its assets to another entity; or (d)
permit or suffer to exist any transfer of the ownership
interests or control of Borrower and, if Borrower is a
partnership, any general partner of Borrower.
6.8 Borrower will ensure that the Master Club and/or the
underlying Project owners associations maintains and pays the
cost of the Insurance Policies and will deliver copies of the
Insurance Policies to Lender. Subject to existing laws for the
protection of time-share owners,
-17-
<PAGE> 18
Lender shall have the right to approve the use of any
insurance proceeds, and shall have the right to require that
such proceeds be applied to the outstanding balance of the
Loan.
6.9 (a) The Documents and all certificates, financial
statements and written materials furnished to Lender
by or on behalf of Borrower in connection with the
Loan do not contain any untrue statement of a
material fact or omit to state a fact which
materially adversely affects or in the future may
materially adversely affect the Receivables
Collateral or any other security for the Performance
of the Obligations or the business or financial
condition of Borrower or the Project.
(b) Lender's examination, inspection, or receipt of
information pertaining to the Receivables Collateral
or the Projects and their proposed operation shall
not in any way be deemed to reduce the full scope and
protection of the warranties, representations and
Obligations contained in this Agreement.
6.10 (a) On or before the tenth (10th) day of each month,
Borrower will cause to be furnished to Lender (i) the
reports required pursuant to paragraph 5.4(a) and
(ii) if requested by Lender, a sales report for the
prior month showing the number of sales of Time-Share
Interests, their aggregate dollar amount and related
down payments.
(b) Borrower will furnish or cause to be furnished to
Lender within ninety (90) days after each fiscal year
of the subject, a copy of the current annual
financial statements of Borrower, each Guarantor and,
subject to the best efforts of Borrower, the Master
Club; and shall furnish or cause to be furnished to
Lender within forty-five (45) days after each interim
quarterly fiscal period of Borrower during the
Borrowing Term a copy of the current financial
statements of Borrower for the period commencing with
the first day of the fiscal year and concluding with
such quarter end, together with a status report
covering the subject quarter from Carol Sullivan &
Associates, including financial, management,
marketing and collateral aspects of Borrower's
business operations. Such financial statements for
Borrower shall contain a balance sheet as of the end
of the relevant fiscal period and statements of
income and of cash flow for such fiscal period and
for Guarantor, a balance
-18-
<PAGE> 19
sheet as of the end of the relevant fiscal period
(together, in each case, with the comparable figures
for the corresponding period of the previous fiscal
year), all in reasonable detail. All financial
statements shall be prepared in accordance with
generally accepted accounting principles,
consistently applied. All financial statements
required pursuant to this paragraph shall be
certified by the chief financial officer or general
partner, as the case may be, of the subject of such
statements. Annual statements shall be reviewed and
certified by a recognized firm of certified public
accountants reasonably satisfactory to Lender.
Together with such financial statements, Borrower
will deliver to Lender a certificate signed by the
chief financial officer or managing general partner,
as the case may be, of Borrower stating that there
exists no Event of Default or Incipient Default or,
if any such Event of Default or Incipient Default
exists, specifying the nature and period of its
existence and what action Borrower proposes to take
with respect to it.
(c) Borrower will deliver to Lender from time to time, as
available, and promptly upon amendment or effective
date, current price lists, sales literature,
registrations/consents to sell, final subdivisions
public reports/public offering statements/
prospectuses, purchase documents, and any other items
requested by Lender which relate to the Time-Share
Interests.
(d) Borrower will at its expense permit Lender and its
representatives at all reasonable times to inspect
the Projects and to inspect, audit and copy
Borrower's records; and shall make available such
further information as Lender may from time to time
reasonably request.
(e) Borrower will submit to Lender annually, within ten
(10) days after each is available, proposed annual
maintenance and operating budgets of the Master Club,
certified to be adequate by the managing agent for
the Master Club and the underlying Project owners
associations, and a statement of the annual
assessment to be levied upon the Purchasers for each
Project owners' association; and will use its best
efforts to cause to be made available to Lender for
inspection, auditing and copying, upon Lender's
request, the books of account, logs and records of
the Master Club.
-19-
<PAGE> 20
6.11 Borrower will cause any and all indebtedness owing by
it to its shareholders, directors, officers or
partners, as the case may be, Guarantor(s), or the
relatives and affiliates of Borrower or the foregoing
to be subordinated in all aspects to the Obligations;
provided, however, that if no Event of Default or
Incipient Default is outstanding, such subordination
shall not prohibit (a) regularly scheduled payments
on the subordinated indebtedness, or (b) reasonable
salaries or fees at normal and customary rates for
services actually rendered.
6.12 Borrower is not in default of any payment on account
of indebtedness for borrowed money or of any
repurchase obligations in connection with a
receivables purchase financing, or in violation of or
in default under any material term in any agreement,
order, decree or judgment of any court, arbitration
or governmental authority to which it is a party or
by which it is bound.
6.13 Borrower has filed all tax returns and paid all
taxes, assessments, levies and penalties, if any,
required to be filed by it or paid by it to any
governmental or quasi-governmental authority or
subdivision, including real estate taxes and
assessments relating to the Project. Borrower will
provide to Lender not more than thirty (30) days
after such taxes and assessments become due evidence
that all taxes and assessments on the Units and
Project common areas and related amenities have been
paid in full.
6.14 Borrower will pay to Lender the Commitment Fee and,
in addition to that fee, Twenty Thousand Dollars
($20,000) ("Documentation Fee") for the preparation
of the Documents executed at or prior to the closing
of the first Advance. Borrower has paid to Lender
Twenty Thousand Dollars ($20,000) of the Commitment
Fee. Borrower will pay to Lender the Forty Thousand
Dollar ($40,000) balance of the Commitment Fee and
the Twenty Thousand Dollar ($20,000) Documentation
Fee at the time the initial Advance is made, but in
no event later than September 15, 1994. Borrower
acknowledges that the Commitment Fee and the
Documentation Fee have been earned and are
nonrefundable. Borrower will pay on demand any and
all costs and expenses incurred by Lender in
connection with the initiation, documentation and
closing of the Loan, the making of Advances, the
protection of the security for the Performance of the
Obligations, or the enforcement of the Obligations
against Borrower or Guarantor(s), including, without
limitation, all attorneys' and other professionals'
fees, consumer credit reports, and revenue,
documentary stamp and intangible
-20-
<PAGE> 21
taxes. Notwithstanding anything in this paragraph to
the contrary, Borrower will have no obligation to pay
or reimburse Lender for Lender's attorneys' fees
which are incurred in connection with the original
preparation, negotiation and execution of the
Documents delivered prior to or in connection with
the first Advance ("Original Documents") or the
closing of the first Advance, except for such
attorneys' fees which are in excess of the
Documentation Fee and are caused by the negligence or
lack of diligence or cooperation by Borrower in the
negotiation of the Original Documents and the closing
of the first Advance, changes requested by Borrower
to that commitment letter from Lender to Borrower
dated June , 1994, or circumstances which could not
reasonably have been foreseen by Lender.
6.15 Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, AND
DEFEND Lender, its successors, assigns and
shareholders (including corporate shareholders), and
the directors, officers, employees, agents and
servants of the foregoing, for, from and against any
and all losses, costs, expenses (including, without
limitation, and attorneys' fees), demands, claims,
suits, proceedings (whether civil or criminal),
orders, judgments, penalties, fines and other
sanctions arising from or brought in connection with
(a) the Projects, the Collateral, Lender's status by
virtue of the Assignments, creation of Security
Interests, the terms of the Documents or the
transactions related thereto, or any act or omission
of Borrower or any Agent, or their respective
employees, contractors or agents, whether actual or
alleged, and (b) any and all brokers' commissions or
finders' fees or other costs of similar type by any
party in connection with the Loan; excluding,
however, any such matters that arise solely by reason
of Lender's gross negligence or willful misconduct.
On written request by a person or other entity
covered by the above agreement of indemnity, Borrower
will undertake, at its own cost and expense, on
behalf of such indemnitee, using counsel satisfactory
to the indemnitee, the defense of any legal action
or proceeding to which such person or entity shall be
a party. At Lender's option, Lender may at Borrower's
expense prosecute or defend any action involving the
priority, validity or enforceability of the Security
Interests in the Receivables Collateral and any
other security required pursuant to the Documents.
6.16 Borrower shall be required to have a minimum tangible
net worth (as reflected on the financial statements
delivered pursuant to paragraph 6.10) of Seven
Million Dollars ($7,000,000) at all times during the
term of the Loan.
-21-
<PAGE> 22
6.17 Sales and marketing expenses incurred in connection
with the marketing of Time-Share Interests in the
Projects will not exceed fifty percent (50%) of the
net sales revenue realized from the sale of such
Time-Shares Interests. Such determination will be
made at the end of each calendar quarter based upon
expenses and net sales revenues being annualized over
the preceding twelve month period. Sales and
marketing expenses shall include the aggregate of all
costs and expenses for commissions and sales relating
to the sale of time-share interests, including but
not limited to all costs and expenses for
advertising, mailing, consumer premiums, referral and
lead generation.
6.18 Annual distributions by Borrower to its partners
shall be permitted only when there is no Event of
Default or Incipient Default, and when permitted,
shall be limited to the lesser of (1) Borrower's net
income, or (2) one hundred percent (100%) of cash
flow. As used above, "net income" shall be determined
in accordance with generally accepted accounting
practices applied on a consistent basis, and "cash
flow" shall mean net cash generated by Borrower's
operations and financings for a given period of time
determined by subtracting cash outflows from cash
inflows, all in accordance with GAAP.
6.19 The outstanding balance of the Receivables Collateral
which are sixty (60) days or more delinquent shall at
no time exceed five percent (5%) of the total balance
of all Receivables Collateral held by Lender for
three (3) consecutive months.
6.20 Borrower shall pay to Lender a Ten Dollar ($10) fee
for each Eligible Receivable held by Lender,
exclusive of substitutions and cancellations. Such
fee shall be payable with respect to each Eligible
Receivable at the time of the Advance made with
respect to such Eligible Receivable.
6.21 Borrower covenants and agrees that within thirty (30)
days following the date of this Agreement it shall
have, with respect to each of the Projects,
reproduced the booklet provided to Purchasers
containing the Declaration and Bylaws for the
respective Project owner's association, so as to
correct all errors and omissions in such booklets
identified in EXHIBIT L.
6.22 Borrower represents and warrants that none of the
Units are located in a flood prone area. Borrower
covenants and agrees that it shall, within ninety
(90) days following the date of this Agreement:
-22-
<PAGE> 23
(a) With respect to the Piney Shores Project,
provide to Lender documentation evidencing
that dumped roofing materials identified in
the March 9, 1994 Professional Service
Industries, Inc. Environmental Site
Assessment, have been removed from the
subject Project and disposed of properly; and
(b) With respect to the Piney Shores, the
Villages and Holly Lake Projects, provide to
Lender documentation (to the extent Borrower
now possesses or obtains such documentation
within the prescribed ninety (90) day period)
regarding the presence of polychlorinated
byphenyls in the medium of on-site
transformers located at such Projects.
6.23 Borrower will execute or cause to be executed all
documents and do or cause to be done all acts
necessary for Lender to perfect and to continue the
perfection of the Security Interest of Lender in the
Receivables Collateral or the other security required
pursuant to the Documents or otherwise to effect the
intent and purposes of the Documents.
6.24 The representations, warranties and covenants
contained in this Article VI are in addition to, and
not in derogation of, the representations, warranties
and covenants contained elsewhere in the Documents
and shall be deemed to be made and reaffirmed prior
to the making of each Advance.
VII. DEFAULT
7.1 The occurrence of any of the following events or
conditions shall constitute an Event of Default by
Borrower under the Documents:
(a) failure of Lender to receive from Borrower
within five (5) Business Days following
written notice from Lender that such amount
is due, (i) any amount payable under the Note
or (ii) any other payment due under the
Documents, except for the Note payment due at
the Maturity Date for which no grace period
is allowed;
(b) any representation or warranty of Borrower
contained in the Documents or in any
certificate furnished under the Documents
proves to be, in any material respect, false
or misleading as of the date deemed made;
-23-
<PAGE> 24
(c) a default in the Performance of the
Obligations set forth in paragraph 3.2,
6.7(a), 6.7(c), 6.7(d), 6.8 or 6.11;
(d) a default in the Performance of the
Obligations or a violation of any term,
covenant or provision of the Documents (other
than a default or violation referred to
elsewhere in this paragraph 7.1) which
continues unremedied (i) for a period of five
(5) Business Days after notice of such
default or violation to Borrower in the case
of a default under or violation of paragraph
6.7(b) or any other default or violation
which can be cured by the payment of money
alone or (ii) for a period of twenty (20)
Business Days after notice to Borrower in the
case of any other default or violation;
(e) an "Event of Default", as defined elsewhere
in any of the Documents;
(f) any default by Borrower under any other
agreement evidencing, guaranteeing, or
securing borrowed money or a receivables
purchase financing involving an obligation in
excess of Fifty Thousand Dollars ($50,000) to
make a payment of principal or interest or to
repurchase receivables or any other material
default permitting the acceleration of the
repayment of the borrowed money or the
repurchase of receivables, which accelerated
repayment or repurchase obligations are in
excess of Fifty Thousand Dollars ($50,000) in
the aggregate;
(g) any final, non-appealable judgment or decree
for money damages or for a fine or penalty
against Borrower which is not paid and
discharged or stayed within thirty (30) days
thereafter and when aggregated with all other
judgment(s) or decree(s) that have remained
unpaid and undischarged or stayed for such
period is in excess of Fifty Thousand Dollars
($50,000);
(h) any party holding a lien or security interest
in the Receivables Collateral or any other
security for the Performance of the
Obligations or a lien (other than a lien
created by Purchaser solely with respect to
its Time-Share Interest) on any part of any
Project or its related amenities commences
foreclosure or similar sale thereof;
(i) Borrower shall (i) generally not be paying
its debts as they become due, (ii) file or
consent by answer or otherwise to the filing
against it of a
-24-
<PAGE> 25
petition for relief or reorganization,
arrangement or liquidation or any other
petition in bankruptcy or insolvency under
the laws of any jurisdiction, (iii) make an
assignment for the benefit of its creditors,
(iv) consent to the appointment of a
custodian, receiver, trustee or other officer
with similar powers for itself or any
substantial part of its property, (v) be
adjudicated insolvent, (vi) dissolve or
commence to wind-up its affairs or (vii) take
any action for purposes of the foregoing;
(j) a material adverse change in any of the
Projects or in the business or financial
condition of Borrower or in the Receivables
Collateral or any other security for the
Performance of the Obligations, which change
is not enumerated in this paragraph 7.1 as
the result of which Lender in good faith
deems the prospect of Performance of the
Obligations impaired or its security for the
Performance of the Obligations imperiled;
(k) any of the events enumerated in paragraph
7.1(b), (f), (g), (i) or (j) occurs with
respect to any Guarantor or surety for the
Performance of the Obligations;
(l) failure of Lender to receive from Borrower,
within twenty (20) days of the date Borrower
knows or should have known of such change,
notice of any material change in any
representations or warranties in the
Documents or otherwise made in connection
with the Loan;
(m) an order or decree has been entered by any
court of competent jurisdiction enjoining the
intended use of any of the Projects as a
time-share resort and judgment is not
vacated within ninety (90) days after
Borrower has obtained knowledge or notice
thereof; or
(n) the cessation of the legal existence of the
Master Club.
7.2 At any time after an Event of Default has occurred
and while it is continuing, Lender may but without
obligation, in addition to the rights and powers
granted elsewhere in the Documents and not in
limitation thereof, do any one or more of the
following:
(a) cease to make further Advances;
-25-
<PAGE> 26
(b) declare the Note, together with prepayment
premiums and all other sums owing by Borrower
to Lender in connection with the Documents,
immediately due and payable without notice,
presentment, demand or protest, which are
hereby waived by Borrower;
(c) with respect to the Receivables Collateral,
(i) institute collection, foreclosure and
other enforcement actions against Purchasers
and other persons obligated on the
Receivables Collateral, (ii) enter into
modification agreements and make extension
agreements with respect to payments and other
performances, (iii) release persons liable
for performance, (iv) settle and compromise
disputes with respect to payments and
performances claimed due, all without notice
to Borrower, without being called to account
for such actions by Borrower and without
relieving Borrower from Performance of the
Obligations, and (v) receive, collect, open
and read all mail of Borrower for the purpose
of obtaining all items pertaining to the
Receivables Collateral; and
(d) proceed to protect and enforce its rights and
remedies under the Documents, to foreclose or
otherwise realize upon its security for the
Performance of the Obligations, and/or to
exercise any other rights and remedies
available to it at law, in equity or by
statute.
7.3 Notwithstanding anything in the Documents to the
contrary, while an Event of Default exists, any cash
received and retained by Lender in connection with
the Receivables Collateral may be applied to payment
of the Obligations in the manner provided in
paragraph 7.5.
7.4 (a) Lender shall have all of the rights and
remedies of a secured party under the Uniform
Commercial Code of the State of Arizona and
all other rights and remedies accorded to a
Secured Party at equity or law. Any notice of
sale or other disposition of the Receivables
Collateral given not less than ten (10)
Business Days prior to such proposed action
in connection with the exercise of Lender's
remedies shall constitute reasonable and fair
notice of such action. Lender may postpone or
adjourn any such sale from time to time by
announcement at the time and place of sale
stated on the notice of sale or by
announcement of any adjourned sale, without
being required to give a further notice of
sale. Any such sale may be for cash or,
unless prohibited by applicable law, upon
such credit or installment
-26-
<PAGE> 27
as Lender may determine. Borrower shall be
credited with the net proceeds of such sale
only when such proceeds are actually received
by Lender in good current funds. Despite the
consummation of any such sale, Borrower shall
remain liable for any deficiency on the
Obligations which remains outstanding
following such sale. All net proceeds
recovered pursuant to a sale shall be applied
in accordance with the provisions of
paragraph 7.5.
(b) Lender may, in the name of Borrower or in its
own name, make and execute all conveyances,
assignments and transfers of the Receivables
Collateral sold in connection with the
exercise of Lender's remedies; and Lender is
hereby appointed Borrower's attorney-in-fact
for this purpose.
(c) Upon request of Lender when an Event of
Default exists, Borrower shall assemble the
Receivables Collateral not already in
Lender's possession and make it available to
Lender at a time and place designated by
Lender.
7.5 The proceeds realized from any sale of all or any
part of the Receivables Collateral made in connection
with the exercise of Lender's remedies shall be
applied in the following order of priorities; first,
to the payment of all costs and expenses of such
sale, including without limitation, reasonable
compensation to Lender and its agents, attorneys
fees, and all other expenses, liabilities and
advances incurred or made by Lender, its agents and
attorneys, in connection with such sale, and any
other unreimbursed expenses for which Lender may be
reimbursed pursuant to the Documents; second, to the
payment of the other Obligations, in such order and
manner as Lender shall in its discretion determine,
with no amounts applied to payment of principal until
all interest has been paid; and third, to the payment
to Borrower, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
7.6 Lender may, at its option, and without any obligation
to do so, pay, perform and discharge any and all
liabilities agreed to be paid or performed in the
Documents by Borrower, any Guarantor or any surety
for the Performance of the Obligations if the person
obligated fails to do so. For such purposes Lender
may use the proceeds of the Receivables Collateral.
All amounts expended by Lender in so doing or in
exercising its remedies under the Documents following
an Event of Default shall become part of
-27-
<PAGE> 28
the Obligations, shall be immediately due and payable
by Borrower to Lender upon demand, and shall bear
interest at the Default Rate from the dates of such
expenditures until paid.
7.7 No remedy in any Document conferred on or reserved to
Lender is intended to be exclusive of any other
remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to every
other remedy given under any Document or now or
hereafter existing at law or in equity. No delay or
omission to exercise any right or power shall be
construed to be a waiver of or acquiescence to any
default or a waiver of any right or power; and every
such right and power may be exercised from time to
time and as often as may be deemed expedient.
7.8 Borrower, for itself and for all who may claim
through or under it, hereby expressly waives and
releases all right to have the Receivables Collateral
or any other security for the Performance of the
Obligations, or any part of such security, marshalled
on any foreclosure sale or other enforcement of
Lender's rights and remedies.
7.9 For the purpose of exercising its rights and remedies
under Paragraph 7.2(c) and 7.6, Lender may do so in
Borrower's name or its name and is hereby appointed
as Borrower's attorney-in-fact to take any and all
actions in Borrower's name and/or on Borrower's
behalf as Lender may deem necessary or appropriate in
its sole and absolute discretion in the
accomplishment of such purposes.
VIII. CONSTRUCTION AND GENERAL TERMS
8.1 All moneys payable under the Documents shall be paid
to Lender at its address set forth on the signature
page of this Agreement in lawful monies of the United
States of America, unless otherwise designated in the
Documents or by Lender by notice.
8.2 The Documents exclusively and completely state the
rights and obligations of Lender and Borrower with
respect to the Loan. No modification, variation,
termination, discharge, abandonment or waiver of any
of the terms or conditions of the Documents shall be
valid unless in writing and signed by duly authorized
representatives of the party sought to be bound by
such action. The Documents supersede any and all
prior representations, warranties and/or inducements,
written or oral, heretofore made by Lender concerning
this transaction, including any commitment for
financing.
-28-
<PAGE> 29
8.3 The powers and agency granted to Lender by Borrower
in the Documents are coupled with an interest and are
irrevocable and are granted as cumulative to Lender's
other remedies for collection and enforcement of the
obligations.
8.4 Any Document may be executed simultaneously in any
number of identical copies each of which shall
constitute an original for all purposes.
8.5 Except as otherwise expressly provided in the
Document, any notice required or permitted to be
given under any Document by Lender or Borrower to the
other shall be in writing and shall be (a) personally
delivered, (b) transmitted postage prepaid by
certified or registered mail, (c) sent by overnight
express carrier, or (d) sent by telecopy, to Lender
or Borrower at its address and/or telecopy number as
set forth on the signature page of this Agreement, or
at such other address and/or telecopy number as
either party may designate for such purpose in a
notice given to the other party. Such notice shall be
deemed received upon the earliest of the following to
occur: (a) upon personal delivery; (b) on the third
Business Day following the day sent, if sent by
registered or certified mail; (c) on the next
Business Day following the day sent, if sent by
overnight express courier; and (d) on the day sent or
if such day is not a Business Day on the next
Business Day after the day sent, if sent by telecopy.
8.6 All the covenants of Borrower and all the rights and
remedies of the Lender contained in the Documents
shall bind Borrower, and, subject to the restrictions
on merger, consolidation and assignment contained in
the Documents, its successors and assigns, and shall
inure to the benefit of Lender, its successors and
assigns, whether so expressed or not. Borrower may
not assign its rights in the Documents in whole or in
part. Except as may be expressly provided in a
Document, no person or other entity shall be deemed a
third party beneficiary of any provision of the
Documents.
8.7 If any one or more of the provisions contained in any
Document shall be held invalid, illegal or
unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions
contained in the Document shall not in any way be
affected or impaired thereby.
8.8 Time is of the essence in the Performance of the
Obligations.
-29-
<PAGE> 30
8.9 All headings are inserted for convenience only and
shall not affect any construction or interpretation
of the Documents. Unless otherwise indicated, all
references in a Document to clauses and other
subdivisions refer to the corresponding paragraphs,
clauses and other subdivisions of the Document; the
words "herein", "hereof", "hereto", hereunder" and
words of similar import refer to the Document as a
whole and not to any particular paragraph, clause or
other subdivision; the use of any gender shall be
deemed to include other genders, unless
inappropriate; and reference to a numbered or
lettered subdivision of an Article, or paragraph
shall include relevant matter within the Article or
paragraph which is applicable to but not within such
numbered or lettered subdivision. All Schedules and
Exhibits referred to in this Agreement are
incorporated in this Agreement by reference.
8.10 THE DOCUMENTS SHALL BE CONSTRUED AND GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ARIZONA, AND TO THE EXTENT THEY PREEMPT THE LAWS OF
SUCH STATE, THE LAWS OF THE UNITED STATES; PROVIDED
THAT IF ANY OBLIGATION, AGREEMENT OR WAIVER ON THE
PART OF BORROWER OR ANY OTHER PERSON OBLIGATED
PRIMARILY OR SECONDARILY ON THE DOCUMENTS OR RIGHT OF
REMEDY OF LENDER WOULD BE INVALID OR UNENFORCEABLE
UNDER SUCH LAWS BUT WOULD BE VALID OR ENFORCEABLE
UNDER THE LAWS OF THE STATES OF TEXAS OR MISSOURI,
THEN THE INTERNAL LAWS OF THE STATES OF TEXAS OR
MISSOURI SHALL APPLY WITH RESPECT TO SUCH MATTER.
BORROWER HEREBY AGREES THAT, EXCEPT AS EXPRESSLY
PROVIDED IN ANOTHER DOCUMENT, ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING
DIRECTLY OUT OF THE DOCUMENTS SHALL BE LITIGATED IN
THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY
DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF ARIZONA, OR, IF LENDER INITIATES SUCH
ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH
ACTION TO THE EXTENT SUCH COURT HAS JURISDICTION.
BORROWER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL
BY JURY IN ANY SUCH PROCEEDING. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER'S MAKING THE LOAN TO
BORROWER.
[Borrower (initial /s/ )]
8.11 It is the intent of the parties hereto to comply with
the Applicable Usury Law. Accordingly,
notwithstanding any provision to the contrary in the
Documents, in no event shall this Agreement or the
Documents require the payment or permit the
collection of interest in excess of the maximum
contract rate permitted by the Applicable Usury Law.
-30-
<PAGE> 31
8.12 LENDER DOES NOT HEREBY ASSUME AND SHALL HAVE NO
RESPONSIBILITY, OBLIGATION OR LIABILITY TO
PURCHASERS, LENDER'S RELATIONSHIP BEING THAT ONLY OF
A CREDITOR WHO HAS TAKEN, AS SECURITY FOR
INDEBTEDNESS OWED TO IT, A COLLATERAL ASSIGNMENT FROM
BORROWER OF THE INSTRUMENTS. EXCEPT AS REQUIRED BY
LAW, BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF
OR MAKE REFERENCE TO LENDER WITH RESPECT TO THE
PROJECT, THE SALE OF TIME-SHARE INTERESTS OR
OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF
LENDER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
BORROWER: ASCENSION RESORTS, LTD., a Texas limited
partnership, d/b/a Silverleaf Resorts, Ltd.
By: ASCENSION CAPITAL CORPORATION, a
Texas corporation
Its: General Partner
BY: /s/ ROBERT E. MEAD
----------------------------------
Robert E. Mead
Its: Chief Executive Officer
Address: 1221 Riverbend Dr., Ste.120
Dallas, TX 75247
Telecopy No.: 214-905-0514
LENDER: GREYHOUND FINANCIAL CORPORATION, a
Delaware corporation
By: /s/ D.A. LUTTENEGGER
--------------------------------------
Type/Print Name: D.A. LUTTENEGGER
--------------------------
Title: Vice President Credit
------------------------------------
Address: Dial Corporate Center 1850
North Central Avenue Phoenix,
Arizona 85077-1141
(Attention: Vice President,
Law)
Telecopy No.: (602) 207-5116
-31-
<PAGE> 32
LIST OF EXHIBITS
Schedule 1 Prepayment Schedule
Exhibit A Assignment of Mortgages
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D Promissory Note
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Resort and
Time-Share Interest
Exhibit G Borrower's Certificate
Exhibit G-1 Re-Assignment of Mortgages
Exhibit H Borrower's Opinion of Counsel
Exhibit I Guarantor's Opinion of Counsel
Exhibit J Additional Condition to Advances
Exhibit J-1 Request for Advance and Certification
Exhibit K Borrower's Monthly Reports (Format)
Exhibit L Agreed-to Changes To Consumer
Booklets
Exhibit M Recreation And Use Documents
The above-listed exhibits are omitted from this filing. Registrant
agrees to furnish supplementally a copy of any omitted exhibit to the
Commission upon request.
-32-
<PAGE> 1
EXHIBIT 10.16
AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT ("Amendment")
dated as of July 24, 1995, Ascension Resorts, Ltd., a Texas limited
partnership, d/b/a Silverleaf Resorts, Ltd. ("Borrower") and FINOVA Capital
Corporation, a Delaware corporation, formerly known as Greyhound Financial
Corporation, a Delaware corporation ("Lender"), for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby confirm and agree as follows:
ARTICLE 1 - INTRODUCTION
1.1 Borrower and Lender previously entered into a Loan and
Security Agreement dated as of August 12, 1994 (the "Loan Agreement"),
relating to a revolving line of credit loan in the amount of up to $6,000,000
("Loan").
1.2 Borrower and Lender wish to amend the Loan Agreement, among
other ways, to increase the maximum amount of the Loan to $12,000,000, extend
the Borrowing Term, revise the rate of interest of the Loan, and permit up to
$4,000,000 of the Loan to be used to finance lot receivables from the Holiday
Hills Lot Project in Branson, Missouri, all as more fully provided below.
ARTICLE 2 - AGREEMENT
2.1 Except as otherwise defined herein or unless the context
otherwise requires, capitalized terms used in this Amendment shall have the
meaning given to them in the Loan Agreement.
2.2 The Loan Agreement is amended as follows:
(a) The definition of Borrowing Base in paragraph 1.6 is
deleted in its entirety and the following is substituted in its place:
"Borrowing Base": with respect to an Eligible Instrument, an amount
equal to the lesser of:
(a) seventy percent (70%) of the unpaid principal balance
of such Eligible Instrument; or
(b) seventy-five percent (75%) of the present value of
the unmatured installments of principal and interest under
such Eligible Instrument, discounted at the greater of the
applicable interest rate under the terms of the Note or 13%.
1
<PAGE> 2
(b) The definition of Borrowing Term in paragraph 1.7 is
deleted in its entirety and the following is substituted in its place:
"Borrowing Term": the period commencing on the date of this Agreement
and ending on the close of Lender's normal business hours on the date
(or if not a Business Day, the first Business Day thereafter) which is
the earlier of (a) the date 12 months from the date of the first
Advance made after July 24, 1995, or (b) August 31, 1996.
(c) The definition of Eligible Instrument in paragraph
1.13 is deleted in its entirety and the following is substituted in its place:
"Eligible Instrument": an Instrument which conforms to the standards
set forth in EXHIBIT B (which at all times during the Borrowing Term
shall be limited to Instruments arising from the sale of Time-Share
Interests or Lots in Projects for which Permitted Encumbrances have
been agreed to by Lender in writing and stipulated on EXHIBIT E hereto
or any supplement thereto). An Instrument that has qualified as an
Eligible Instrument shall cease to be an Eligible Instrument upon the
date of the first occurrence of any of the following: (a) any
installment due with respect to that Instrument becomes more than
fifty-nine (59) days past due, or (b) that Instrument otherwise fails
to continue to conform to the standards set forth in EXHIBIT B.
(d) The definition of Instrument in paragraph 1.19 is
deleted in its entirety and the following is substituted in its place:
"Instrument": a promissory note which has arisen out of the
sale of a Time-Share Interest or Lot by Borrower to a Purchaser and is
secured by a Purchaser Mortgage.
(e) The following definition is inserted after paragraph
1.23:
1.23A "Lot": a fee simple interest in any
residential lot created by a recorded subdivision
plat of the Project identified on EXHIBIT F as the
Holiday Hills Lot Project.
(f) The definition of Maximum Loan Amount in paragraph
1.26 is deleted in its entirety and the following is substituted in its place:
"Maximum Loan Amount": Twelve Million United States Dollars
($12,000,000.00) minus the outstanding principal balance of the 1992
Loan.
2
<PAGE> 3
(g) The definition of Project in paragraph 1.36 is
deleted in its entirety and the following is substituted in its place:
"Project": any one of the time-share resorts, lot subdivision
project(s) or parts of such resorts or project(s) described in EXHIBIT
F and any other time-share resort, lot subdivision project or part
thereof as Lender may in its discretion from time to time hereafter
approve in writing.
(h) The definition of Purchaser in paragraph 1.38 is
deleted in its entirety and the following is substituted in its place:
"Purchaser": a purchaser of a Time-Share Interest or Lot from
Borrower.
(i) The first sentence of Paragraph 2.1 is deleted in its
entirety and the following is substituted in its place:
Lender hereby agrees, if Borrower has Performed all of the obligations
then due, to make Advances to Borrower in amounts equal to (a) the
then Borrowing Base of all Eligible Instruments then held by Lender
together with those delivered to and accepted by Lender with a Request
for Advance, less (b) the then unpaid principal balance of the Loan;
provided, (1) at no time shall the unpaid principal balance of the
Loan exceed the Maximum Loan Amount, (2) the maximum Advance for any
Eligible Instrument arising from the sale of a Lot shall be $35,000,
and (3) at no time shall the Borrowing Base for Eligible Instruments
arising from the sale of Lots exceed, in the aggregate, $4,000,000.
(j) The following is added to the Loan Agreement as a new
paragraph 2.4:
"2.4 With respect to any portion of an Advance that constitutes an
Availability Advance against an Eligible Instrument, Borrower shall
pay to Lender at the time of such Advance a fee equal to 1.5% of the
amount of such Availability Advance. The term "Availability Advance"
means each Advance made against an Eligible Instrument after the first
Advance made against such Instrument; provided that in the case of an
Eligible Instrument substituted for an ineligible Instrument pursuant
to paragraph 3.2, an Availability Advance shall be deemed made at the
time of the first Advance made against such substituted Instrument."
(k) The first sentence of Paragraph 3.2 is deleted in its
entirety and the following is substituted in its place:
3
<PAGE> 4
If a previously Eligible Instrument which is part of the Receivables
Collateral ceases to be an Eligible Instrument, and at that time, the
aggregate principal amount of the Loan outstanding exceeds the then
Borrowing Base of all Eligible Instruments, then within five (5)
Business Days thereafter, Borrower will either (i) pay to Lender an
amount equal to the Borrowing Base of the ineligible Instrument,
together with interest, costs and expenses attributable to it, or (ii)
replace such ineligible Instrument with an Eligible Instrument or
Eligible Instruments having a Borrowing Base not less than the
Borrowing Base (calculated immediately before its ineligibility) of
the ineligible Instrument(s) being replaced. If on any occasion,
Borrower fails to comply with the requirements of the first sentence
of this paragraph within the five (5) Business Days required therein
(a "Borrowing Base Reinstatement Event of Default"), but on such
occasion Borrower cures such Event of Default before Lender has
exercised its remedies under paragraph 7.2 below, then, at all times
following the next occurring Borrowing Base Reinstatement Event of
Default (following expiration of the five (5) Business Day cure period
described above), in addition to the remedies of Lender provided for
in this Agreement and the other Documents, and notwithstanding that
Borrower may have cured such second Borrowing Base Reinstatement Event
of Default, Borrower shall comply with the following requirement: If
at any time throughout the remaining Term of the Loan, a previously
Eligible Instrument which is part of the Receivables Collateral ceases
to be an Eligible Instrument (and even if at that time the Borrowing
Base of all Eligible Instruments exceeds the aggregate principal
amount of the Loan outstanding), then within thirty (30) days
thereafter, Borrower will either (i) pay to Lender an amount equal to
the Borrowing Base of the ineligible Instrument, together with
interest, costs and expenses attributable to it, or (ii) replace such
ineligible Instrument with an Eligible Instrument or Eligible
Instruments having a Borrowing Base not less than the Borrowing Base
(calculated immediately before its ineligibility) of the ineligible
Instrument(s) being replaced.
(l) All references to "Time-Share Interests" in paragraphs
6.1(a), 6.3(a), 6.3(b), 6.4(d), 6.4(f), 6.4(g), and 8.12 are deleted and
"Time-Share Interests or Lots" is substituted in their place. All references to
"Time-Share Interests" in paragraphs 6.10(a), 6.10(c), and 6.17 are deleted and
"Time-Share Interests and Lots" are substituted in their place.
(m) The following sentence is inserted at the end of
paragraph 6.10(b):
If Borrower delivers to Lender a copy of current audited annual
financial statements of Borrower prepared by an
4
<PAGE> 5
independent certified public accounting firm satisfactory to Lender,
and such financial statements are acceptable to Lender in Lender's
sole and absolute discretion, then Borrower will thereafter no longer
be required to furnish to Lender the status reports from Carol
Sullivan & Associates required by this paragraph 6.10(b).
(n) Paragraph 6.16 is deleted in its entirety and the
following is substituted in its place:
Borrower shall maintain a minimum tangible net worth (as reflected on
the financial statements delivered pursuant to paragraph 6.10) of not
less than Twelve Million Dollars ($12,000,000) at all times during the
Term of the Loan.
(o) The covenant in paragraph 6.18 shall hereafter be
deemed to apply to the aggregate of distributions by Borrower to its partners
and any loans by Borrower to any of its Affiliates.
(p) The address for Lender on the signature page (and all
other references to the Lender's address in the Loan Agreement and the
Documents) is deleted in its entirety and the following is substituted in its
place:
FINOVA Capital Corporation
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
(Attention, Vice-President, Law)
Telecopy No.: (602) 874-6445
(q) SCHEDULE 1 is deleted in its entirety and SCHEDULE 1
hereto is substituted in its place, and incorporated in the Loan Agreement.
(r) EXHIBIT B is deleted in its entirety and EXHIBIT B
hereto is substituted in its place, and incorporated in the Loan Agreement.
(s) EXHIBIT E hereto is hereby added as a supplement to
EXHIBIT E to the Loan Agreement and incorporated therein.
(t) The following is inserted in the list of Projects in
Section A of EXHIBIT F:
A lot subdivision project to be named later (the first phase
of which is named The Fairways) located three miles east of Branson,
Missouri, in Taney County, Missouri (the "Holiday Hills Lot Project").
5
<PAGE> 6
(u) All references to "Time-Share Interests" in EXHIBIT
J are deleted and "Time-Share Interests or Lots" is substituted in their place.
(v) Paragraph (g) of EXHIBIT J is deleted in its entirety
and the following is substituted in its place:
(g) a credit report from a recognized consumer credit reporting
agency on each Purchaser obligated under an Instrument covered by (b)
above for all Instruments with a principal amount of $15,000 or more
and arising from the sale of Lots, and if requested by Lender in
accordance with its normal underwriting procedures, all other
Instruments covered by item (b) above.
(w) The following is inserted at the end of EXHIBIT J:
(k) a standard FNMA or other loan application acceptable to Lender
for each Purchaser obligated under an Instrument covered by item (b)
above for all Instruments with a principal amount of $15,000 or more
arising from the sale of Lots, and evidence satisfactory to Lender
that such Purchaser's debt-to-income ratio (including the obligations
under such Instrument) shall not exceed 55%.
2.3 Borrower will pay to Lender a non-refundable loan fee ("Loan
Fee") equal to $60,000. The Loan Fee shall be payable upon the initial Advance
under the Loan following the date of this Amendment, but not later than July
31, 1995. Borrower acknowledges that Lender has earned the Loan Fee and that
the Loan Fee is non-refundable.
2.4 Subject to the remaining provisions of this paragraph,
Borrower will on demand pay or, at Lender's election, reimburse Lender for all
Lender's attorneys' fees and other out-of-pocket expenses in connection with
the documentation and closing of this Amendment and the due diligence conducted
in May and June of 1995 in connection with Lender's approval of the Missouri
Projects for purposes of funding Advances on Eligible Instruments arising from
the sale of Time-Share Interests therein. Borrower will pay or reimburse
Lender or Lender's attorneys for all reasonable out-of-pocket expenses of
Lender's attorneys incurred in connection with the foregoing. Notwithstanding
the foregoing, to the extent Lender's attorneys' fees in connection with the
foregoing exceed $8,500.00 Borrower will pay or reimburse Lender for such
excess only if the excess fees are (a) caused by the negligence or lack of
diligence or cooperation by Borrower in the documentation and closing of this
Amendment, (b) caused by circumstances which could not reasonably have been
foreseen by Lender, or (c) incurred in connection with the review of materials
relating to the Holiday Hills Lots Project which are submitted to Lender
following the date of this Amendment in satisfaction of the conditions set
forth in
6
<PAGE> 7
paragraph 2.8 hereof. In reliance upon the representation and warranty made by
Lender in the following sentence, Borrower will indemnify, hold harmless and
defend Lender, and its officers, directors, employees, agents, affiliates,
successors and assigns for, from and against loss, expense, demand and
liability arising out of any claim for a broker's fee with respect to the
transaction contemplated by this Amendment. Lender represents and warrants to
Borrower that it has not dealt with any broker.
2.5 Borrower confirms and restates to Lender as of the date
hereof all its representations and warranties set forth in the Loan Agreement,
as amended hereby, and the other documents executed by Borrower evidencing,
securing or otherwise pertaining to the Loan ("Documents"). Borrower
represents and warrants to Lender that since August 12, 1994, except for such
changes shown in the documents delivered to Lender and any changes to
advertising materials in conformance with applicable law, there have been no
material changes to the documents used in connection with the sale of
Time-Share Interests or the governance of the Project. Borrower reaffirms all
liens and security interests granted by it to Lender and agrees that such liens
and security interests shall continue to secure the Loan. Borrower further
acknowledges that Lender has performed and is not in default of its obligations
under the Documents and that there are no offsets, defenses or counterclaims
with respect to any of Borrower's obligations under the Documents.
2.6 Borrower will execute and deliver such further instruments and
do such things as in the sole and absolute judgment of Lender are necessary or
desirable to effect the intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by the terms of this
Amendment and any other documents executed in connection herewith, including,
without limitation, amendments to security loan documents and financing
statements.
2.7 This Amendment shall not be binding upon Lender unless and
until the following conditions have been satisfied, which in no event shall be
later than July 31, 1995:
(a) Borrower has delivered to Lender the following
documents and other items, all of which shall be properly completed and
executed and shall otherwise be satisfactory in form and substance to Lender
in its sole and absolute discretion:
(i) a resolution or certificate from Borrower and
its general partner authorizing (A) the execution and delivery of this
Amendment and the other documents called for in this Amendment or
requested by Lender pursuant to this paragraph ("Modification
Documents") and (B) the transaction contemplated hereby;
7
<PAGE> 8
(ii) an "Amendment No. 1 to Promissory Note" in
form and substance acceptable to Lender executed by Borrower;
(iii) a "Consent of Guarantors and Amendment to
Guaranty" in form and substance acceptable to Lender executed by
Guarantor;
(iv) an "Acknowledgement of Subordinating Parties"
in form and substance acceptable to Lender executed by the
Subordinating Parties;
(v) an "Amendment and Reaffirmation of
Environmental Certificate" in form and substance acceptable to Lender
executed by Borrower;
(vi) opinions from counsel to Borrower and
Guarantor in form and substance the equivalent of Exhibits "A-1" and
"A-2" attached hereto;
(vii) such amendments to recorded and filed
Documents as Lender may deem necessary, including without limitation,
additional UCC-1 financing statements and amendments to UCC-1
financing statements;
(viii) a personal financial statement of Guarantor
dated within 90 days of the date of this Amendment and acceptable to
Lender;
(ix) updated lien, litigation, and judgment
searches acceptable to Lender, and updated Dun & Bradstreet and credit
information acceptable to Lender;
(x) updated information in form and substance
acceptable to Lender regarding the environmental condition of the
Projects; and
(xi) such other items as Lender may reasonably
require.
(b) Lender has received all material changes made since
August 12, 1994, to the documents used in connection with the sale of
Time-Share Interests and/or the governance of the Projects, and copies of all
public reports/offering statements/prospectuses required by law to be utilized
in those jurisdictions where it is currently selling Time-Share Interests or
Lots or offering them for sale.
(c) Lender has received evidence that Borrower has been
registered and maintained all necessary licenses and permits as required by
applicable law in all jurisdictions where either Borrower has sold or offered
Time-Share Interests or Lots for sale since August 12, 1994.
8
<PAGE> 9
(d) Lender has received evidence that Borrower is in
compliance with all environmental, health and safety laws and that it does not
have any material contingent liability in connection with such matters.
Waiver by Lender of any of the foregoing as a condition to the effectiveness of
this Amendment shall not relieve Borrower of the obligation to satisfy such
condition as promptly as possible thereafter.
2.8 Lender's obligation to make any Advance secured by Receivables
Collateral arising from the sale of Lots in the Holiday Hills Lot Project shall
be subject to and conditioned upon the following additional terms and
conditions:
(a) Lender shall have completed a site inspection of the
Holiday Hills Lot Project by Lender, satisfactory to Lender.
(b) Borrower shall have delivered to Lender at least
fifteen (15) Business Days prior to the date of the first Advance secured by
Receivables Collateral arising from the sale of Lots in the Holiday Hills Lot
Project:
(i) Evidence of assurances of completion of the
nine-hole golf course improvement at the Holiday Hills Lot Project
satisfactory to Lender;
(ii) if the Holiday Hills Lot Project has not been
registered under such act and Lender requests such an opinion, a copy
of an advisory opinion issued by the federal Office of Interstate Land
Sales Registration that the subject Project does not fall within the
purview of the Interstate Land Sales Full Disclosure Act, or a legal
opinion from Borrower's counsel acceptable to Lender;
(iii) a copy of the form of the purchase contract,
deed, Instrument, Purchaser Mortgage, credit applications and
disclosures, and other documents and exhibits which have been or are
being used by Borrower in connection with the Holiday Hills Lot
Project, together with the Project governing documents, the Project
management agreement, the Project exchange affiliation agreement(s) (if
any) and advertising materials;
(iv) a pro forma lender's title policy for Lots in
the Holiday Hills Lot Project in a form acceptable to Lender;
(v) an environmental assessment of the Holiday
Hills Lot Project satisfactory to Lender;
9
<PAGE> 10
(vi) a favorable opinion from independent counsel
for Borrower in form and substance substantially identical to Exhibit
A-3 hereto; and
(vii) such other items as Lender may reasonably
require related to the Holiday Hills Lot Project, including, without
limitation, a UCC financing statement covering all Receivables
Collateral arising from the sale of Lots therein that is assigned to
Lender, and an amendment to the Loan Agreement identifying the
Permitted Encumbrances with respect thereto.
2.9 Notwithstanding anything herein or in the Documents to the
contrary, Borrower shall, on or before the 60th day following the date hereof,
have completed the installation of (and provided to Lender documentary
evidence of such installation acceptable to Lender) "secondary containment" for
all above-ground storage tanks located on the real property comprising the
Holiday Hills Resort. Borrower's failure to comply with the foregoing
requirements shall constitute an Event of Default under the Documents.
2.10 Lender's continuing obligation to make Advances of the Loan
shall be conditioned upon Borrower's delivery of current financial statements
of Robert E. Mead to Lender within ninety (90) days following the date of this
Agreement.
2.11 This Amendment may not be amended or otherwise modified except
in a writing duly executed by the parties hereto.
2.12 If any one or more of the provisions of this Amendment is held
to be invalid, illegal or unenforceable in any respect or for any reason (all
of which invalidating laws are waived to the fullest extent possible), the
validity, legality and enforceability of any remaining portions of such
provision(s) in every other respect and of the remaining provision(s) of this
Amendment shall not be in any respect impaired. In lieu of each such
unenforceable provision, there shall be added automatically as a part of this
Amendment a provision that is legal, valid and enforceable and is as similar in
terms to such unenforceable provisions as may be possible.
2.13 This Amendment constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and this
Amendment and the Documents, as amended hereby, supersedes all prior written or
oral understandings and agreements between the parties in connection with its
subject matter.
(a) All Schedules and Exhibits referred to herein are
herein incorporated by this reference.
10
<PAGE> 11
2.14 This Amendment may be executed in one or more counterparts,
and any number of which having been signed by all the parties hereto shall be
taken as one original.
2.15 Borrower and Lender hereby ratify and confirm the Loan
Agreement, as amended hereby, in all respects; and, except as expressly amended
hereby, the Loan Agreement shall remain in full force and effect.
IN WITNESS WHEREOF this instrument is executed as of the date set
forth above.
"BORROWER"
ASCENSION RESORTS, LTD., a Texas
limited partnership, d/b/a Silverleaf
Resorts, Ltd.
By: ASCENSION CAPITAL CORPORATION, a
Texas corporation
Its: General Partner
BY: /s/ ROBERT E. MEAD
------------------------------------------
Robert E. Mead
Its: Chief Executive Officer
"LENDER"
FINOVA Capital Corporation,
a Delaware corporation,
formerly known as
Greyhound Financial Corporation
By: /s/ JACK FIELDS, III
----------------------------------------------
Print Name: JACK FIELDS, III
---------------------------------------
Title: Group Vice President
---------------------------------------------
11
<PAGE> 12
<TABLE>
<CAPTION>
List of Exhibits
- ----------------
<S> <C>
Exhibits A-1 and A-2 Form of Legal Opinion Required Pursuant to Paragraph
2.7(a)(vi)
Exhibit A-3 Form of Legal Opinion Required Pursuant to Paragraph
2.8(b)(vi)
Exhibit B Replacement Exhibit B to Loan Agreement (defining
"Eligible Instruments")
Exhibit E Supplement to Exhibit E to Loan Agreement (adding
Permitted Encumbrances for Missouri Time-Share
Projects and Holiday Hills Lot Project)
</TABLE>
The above-listed exhibits are omitted from this filing. Registrant
agrees to furnish supplementally a copy of any omitted exhibit to the
Commission upon request.
12
<PAGE> 1
EXHIBIT 10.17
AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT ("Amendment")
dated as of December 13, 1995, Ascension Resorts, Ltd., a Texas limited
partnership, d/b/a Silverleaf Resorts, Ltd. ("Borrower"), Ascension Capital
Corporation, a Texas corporation ("Assuming Borrower"), and FINOVA Capital
Corporation, a Delaware corporation, formerly known as Greyhound Financial
Corporation, a Delaware corporation ("Lender"), for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby confirm and agree as follows:
ARTICLE 1 - INTRODUCTION
1.1 Borrower and Lender previously entered into a Loan and
Security Agreement dated as of August 12, 1994, as amended by an Amendment No.1
to Loan and Security Agreement ("First Amendment") dated July 24, 1995
(collectively, the "Loan Agreement"), relating to a revolving line of credit
loan in the amount of up to $12,000,000 ("Loan"). All capitalized terms used
but not specifically defined herein shall have the meanings described in the
Loan Agreement.
1.2 Borrower will be merged into its general partner, Assuming
Borrower, and Assuming Borrower will be renamed "Silverleaf Vacation Club,
Inc." pursuant to a merger to be effective on or before December 31, 1995, and
the actual effective date of the merger shall be referred to herein as the
"Merger Date." As a result of the merger, Assuming Borrower will assume
Borrower's existing and ongoing obligations under the Documents, and take title
to all property securing the Loan subject to the liens and security interests
created in favor of Lender pursuant to the Documents.
1.3 Borrower, Assuming Borrower and Lender wish to amend the Loan
Agreement, among other ways, to provide for Lender's consent to the merger, and
provide for certain conditions subsequent to such consent, all as more fully
provided below.
ARTICLE 2 - AGREEMENT
2.1 Subject to the conditions subsequent described in paragraph
2.3 below, in order to satisfy the requirements of Section 6.7(d) of the Loan
Agreement, Lender hereby approves the merger of Borrower into Assuming
Borrower. Lender and Borrower further agree, subject to paragraph 2.3 below,
that on and after the Merger Date, all references to the Borrower in the Loan
Agreement and other Documents shall mean Silverleaf Vacation Club, Inc., a
Texas corporation.
1
<PAGE> 2
2.2 Effective as of the Merger Date, Assuming Borrower hereby
absolutely and unconditionally assumes all of the Borrower's
Obligations under the Loan Documents, and without limiting the
generality of such assumption, covenants, promises and agrees:
(i) to pay the Note at the time(s) and in the
manner as provided therein;
(ii) to perform each and all of the covenants,
agreements and obligations to be performed by Borrower under
the Documents; and
(iii) to be bound by each and all of the terms and
provisions of, and to perform each and all of the Obligations
of Borrower under, the Documents.
Assuming Borrower acknowledges and agrees that this assumption is part of the
consideration for Lender's consent to the merger of Borrower into Assuming
Borrower.
2.3 Lender's obligation to make Advances of the Loan on and after
the Merger Date, and Lender's consent to the merger of Borrower into Assuming
Borrower is conditioned upon satisfaction of the following no later than
fifteen (15) days after the Merger Date:
(a) Lender's receipt of:
(i) a certified copy of the Articles of Merger,
Certificate of Merger, and any other documents required to
effectuate the merger of Borrower into Assuming Borrower,
including without limitation, all limited partner approvals
required for such merger; and
(ii) a resolution or certificate from Borrower and
Assuming Borrower authorizing (A) the execution and delivery
of this Amendment and the other documents called for in this
Amendment or requested by Lender pursuant to this paragraph
("Modification Documents") and (B) the transactions
contemplated hereby.
(b) Lender's receipt of a written opinion by counsel to
Borrower and Assuming Borrower acceptable to Lender in the form of
Exhibit A hereto; and
(c) Assuming Borrower's delivery, as Borrower under the
Loan, of such amendments to recorded and filed Documents as Lender may
deem necessary, including without limitation, additional UCC-1
financing statements and amendments to UCC-1 financing statements, and
such further instruments as are necessary or desirable to effect the
intent of this Amendment and to secure to Lender the benefits of all
rights and
2
<PAGE> 3
remedies conferred upon Lender by the terms of this Amendment and any
other documents executed in connection herewith.
2.4 Subject to the remaining provisions of this paragraph,
Borrower and Assuming Borrower will on demand pay or, at Lender's election,
reimburse Lender for all Lender's attorneys' fees and other out-of-pocket
expenses in connection with the documentation and closing of this Amendment.
2.5 Borrower confirms and restates to Lender as of the date hereof
all its representations and warranties set forth in the Loan Agreement, as
amended hereby, and the other documents executed by Borrower evidencing,
securing or otherwise pertaining to the Loan ("Documents"). Borrower reaffirms
all liens and security interests granted by it to Lender, and Borrower and
Assuming Borrower agree that such liens and security interests shall continue
to secure the Loan. Borrower and Assuming Borrower further acknowledge that
Lender has performed and is not in default of its Obligations under the
Documents and that there are no offsets, defenses or counterclaims with respect
to any of Borrower's Obligations under the Documents. In addition, Assuming
Borrower hereby represents and warrants that its sole business activity and
function to date has been to act as the general partner of Borrower, and that
upon consummation of the merger described herein, the limited partner(s) of
Borrower shall receive shares of Assuming Borrower in exchange for their
limited partnership interests in Borrower, and that such limited partners shall
not be merged into Assuming Borrower.
2.6 This Amendment may not be amended or otherwise modified except
in a writing duly executed by the parties hereto.
2.7 This Amendment constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and this
Amendment and the Documents, as amended hereby, supersede all prior written or
oral understandings and agreements between the parties in connection with its
subject matter; provided, however, that if the Merger Date has not occurred by
January 15, 1996, this Amendment shall be of no force or effect and the
relationship of the parties hereto shall continue to be governed by the Loan
Agreement without giving effect hereto.
2.8 All Schedules and Exhibits referred to herein are herein
incorporated by this reference.
2.9 This Amendment may be executed in one or more counterparts,
and any number of which having been signed by all the parties hereto shall be
taken as one original.
2.10 Borrower, Assuming Borrower and Lender hereby ratify and
confirm the Loan Agreement, as amended hereby, in all respects; and, except as
expressly amended hereby, the Loan Agreement shall remain in full force and
effect.
3
<PAGE> 4
IN WITNESS WHEREOF this instrument is executed as of the date set
forth above.
"BORROWER"
ASCENSION RESORTS, LTD., a Texas
limited partnership, d/b/a Silverleaf
Resorts, Ltd.
By: ASCENSION CAPITAL CORPORATION, a
Texas corporation
Its: General Partner
BY: /s/ ROBERT E. MEAD
-----------------------------
Robert E. Mead
Its: Chief Executive Officer
"ASSUMING BORROWER"
ASCENSION CAPITAL CORPORATION, a
Texas corporation
BY: /s/ ROBERT E. MEAD
---------------------------------
Robert E. Mead
Its: Chief Executive Officer
"LENDER"
FINOVA Capital Corporation,
a Delaware corporation,
formerly known as
Greyhound Financial Corporation
By: /s/ JACK FIELDS, III
---------------------------------
Print Name: JACK FIELDS,III
--------------------------
Title: GROUP VICE PRESIDENT
-------------------------------
4
<PAGE> 5
CONSENT OF GUARANTOR
The undersigned Robert E. Mead ("Guarantor"), hereby consents to the
execution of the foregoing Amendment, and the Merger described therein, and
acknowledges that it is his desire to fully guarantee the payment and
performance in full of the loan made or to be made pursuant to the terms of the
Loan Agreement and the other Documents, as amended by the Amendment in
accordance with the terms and conditions of the Guarantee, Indemnity and
Subordination Agreement (Full) dated as of August 12, 1994 ("Guarantee"),
executed by Guarantor in favor of Lender.
Guarantor hereby: (a) reaffirms and restates as of the date hereof all
of Guarantor's covenants, representations and warranties set forth in the
Guarantee; (b) represents and warrants that no event has occurred and no
condition currently exists that would constitute a default under the Guarantee
by Guarantor or under the Loan Agreement or any other Document by Borrower or
any other surety; and (c) acknowledges that Lender has performed and is not in
default of its obligations under the Documents and that there are no offsets,
defenses or counterclaims with respect to any obligation of Borrower under the
Documents or of Guarantor under the Guarantee.
This instrument is executed for the benefit of Lender, its successors
and assigns. Guarantor acknowledges that it has received good and valuable
consideration for the execution of this instrument and Guarantor's
representations, warranties and covenants contained in this instrument.
IN WITNESS WHEREOF, Guarantor has executed this instrument to be
effective as of the 13th day of December, 1995.
GUARANTOR
/s/ ROBERT E. MEAD
-----------------------------
Robert E. Mead
5
<PAGE> 6
CONSENT OF SUBORDINATING PARTIES
The undersigned FREEDOM FINANCIAL CORP., a Texas corporation, and
CONDOMINIUM BUILDERS, INC., a Texas corporation ("Subordinating Parties")
hereby consent to the foregoing Amendment and hereby reaffirm, as of the date
hereof, the terms and conditions set forth in the Subordination And Standstill
Agreement dated August 12, 1994 executed by Subordinating Parties in favor of
Lender, and jointly and severally acknowledge and agree that any and all
obligations of Borrower and Assuming Borrower to any of them, and all security
therefor, shall at all times remain subordinate to Borrower's and Assuming
Borrower's Obligations to Lender under the Loan Documents, as modified by the
foregoing Amendment.
IN WITNESS WHEREOF, Subordinating Parties have executed this Consent
to be effective as of the 13th day of December, 1995.
SUBORDINATING PARTIES: FREEDOM FINANCIAL CORP., a Texas
corporation
By /s/ ROBERT E. MEAD
----------------------------
Its President
------------------------
CONDOMINIUM BUILDERS, INC., a Texas
corporation
By /s/ ROBERT E. MEAD
----------------------------
Its President
------------------------
6
<PAGE> 1
EXHIBIT 10.18
(Form of Officers and Directors Indemnification Agreement)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this __ day of
_____________, 199__, by and between ____________________ a _____________
corporation (the "Company"), and _____________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers
and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors
of the Company and to indemnify its officers and directors so as to provide
them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred
by Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner that Indemnitee reasonably believed to be
in or not
<PAGE> 2
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that Indemnitee's conduct
was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and amounts paid in settlement actually
and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company unless and only to the extent that the
District Court of the State of Texas or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the District Court of the State of Texas or such other court shall
deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section I or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. AGREEMENT TO SERVE. In consideration of the protection afforded by
this Agreement, if Indemnitee is a director of the Company he agrees to serve
at least for the balance of the current term as a director and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. If Indemnitee is an officer of the Company not serving
under an employment contract, he agrees to serve in such capacity at least for
the balance of the current fiscal year of the Company and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. Following the applicable period set forth above, Indemnitee
agrees to continue to serve in such capacity at the will of the Company (or
under separate agreement, if such agreement exists) so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the by-laws of the Company or any subsidiary of the Company or until such
time as he tenders his resignation in writing. Nothing contained in this
Agreement is intended to create in Indemnitee any right to continued
employment.
-2-
<PAGE> 3
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1(a) or (b) hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified by the Company
as authorized hereby. The advances to be made hereunder shall be paid by the
Company to the Indemnitee within twenty (20) days following delivery of a
written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Silverleaf Resorts, Inc.,
1221 Riverbend Drive, Suite 120, Dallas, Texas 75247 (Attn: Chief Executive
Officer) (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received on the third business day after
the date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or By-laws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written
request for payment thereof has first been received by the Company, Indemnitee
may, but need not, at any time thereafter bring an action against the Company
to recover the unpaid amount of the claim and, subject to Section 13 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses
(including attorneys' fees) of bringing such action. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct that
make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Company and Indemnitee shall be entitled to receive interim payments
of expenses pursuant to Subsection 3(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of
the Company (including its Board of Directors or any committee or subgroup of
the Board of Directors, independent legal counsel, or its stockholders) to have
made a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors or any committee or subgroup of the Board of
-3-
<PAGE> 4
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice
of a claim pursuant to Subsection 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume
the defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred
by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles
of Incorporation, the Company's By-laws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule that expands the right of a Texas corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
that narrows the right of a Texas corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's
-4-
<PAGE> 5
Articles of Incorporation, its By-laws, any agreement, any vote of
stockholders or disinterested Directors, the Texas Business Corporation Act, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he may have ceased to
serve in an indemnified capacity at the time of any action, suit or other
covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any
civil or criminal action, suit or proceeding, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken, and may be required in the future
to undertake, with the SEC to submit the question of indemnification to a court
in certain circumstances for a determination of the Company's right under
public policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company
shall have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if
the premium costs for such insurance are disproportionate to the amount of
coverage provided, if the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or if Indemnitee is
covered by similar insurance maintained by a parent or subsidiary of the
Company.
-5-
<PAGE> 6
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach
of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 8. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Agreement that shall not have been invalidated,
and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement for the following:
(a) Claims Initiated by Indemnitee. The Company shall not be
obligated to indemnify or advance expenses to Indemnitee with respect to
proceedings or claims initiated or brought voluntarily by Indemnitee and not by
way of defense, except with respect to proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law or otherwise as required under the Texas Business Corporation Act, but
such indemnification or advancement of expenses may be provided by the Company
in specific cases if the Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. The Company shall not be obligated to
indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any
proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a
court of competent jurisdiction determines that each of the material assertions
made by Indemnitee in such proceeding was not made in good faith or was
frivolous;
(c) Insured Claims. The Company shall not be obligated to indemnify
Indemnitee for expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) that have been paid directly to Indemnitee by an insurance
carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) Claims under Section 16(b). The Company shall not be obligated to
indemnify Indemnitee for expenses or the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any similar successor
statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger that, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that if Indemnitee is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director,
-6-
<PAGE> 7
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, Indemnitee shall stand in the same position under
the provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
that imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee as a basis
for such action was not made in good faith or was frivolous. In the event of an
action instituted by or in the name of the Company under this Agreement or to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action was made in bad faith or was frivolous.
14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipt is acknowledged by the party addressee, on the
date of such receipt, or (ii) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and the Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Texas
for all purposes in
-7-
<PAGE> 8
connection with any action or proceeding that arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
brought only in the state courts of the State of Texas.
16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Texas, as applied to
contracts between residents entered into and to be performed entirely within
Texas.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties or their duly authorized representatives
hereto have executed this agreement as of the date first above written.
SILVERLEAF RESORTS, INC.
By:
-----------------------------------
Name:
---------------------------------
(Printed)
Title:
Address: 1221 Riverbend Drive
Suite 120
Dallas, Texas 75247
AGREED TO AND ACCEPTED:
INDEMNITEE:
- ----------------------------------
(Signature)
- ----------------------------------
(address)
- ----------------------------------
-9-
<PAGE> 1
EXHIBIT 10.19
[RCI LOGO]
RESORT AFFILIATION AND OWNERS ASSOCIATION AGREEMENT
This RESORT AFFILIATION AND OWNERS ASSOCIATION AGREEMENT ("Agreement")
is made and entered into at Indianapolis, Indiana, by and between RESORT
CONDOMINIUMS INTERNATIONAL, INC., an Indiana corporation having offices and its
principal place of business at One RCI Plaza, 3502 Woodview Trace,
Indianapolis, Indiana, U.S.A. ("RCI"), and ASCENSION RESORTS, LTD., a Texas
limited partnership, having its principal place of business at 1221 Riverbend,
Suite 120, Dallas, Texas 75247, ("Affiliate"), and HILL COUNTRY RESORT
CONDOSHARE CLUB, an owners association comprised of the owners of Timeshare
Interests at the Resort, having its principal place of business at 1221
Riverbend, Suite 120, Dallas, Texas 75247, ("Association").
RECITALS
A. RCI makes available the RCI Exchange Program to individuals who purchase or
acquire Timeshare Interests in RCI Affiliated Resorts.
B. Affiliate has developed Timeshare Interests at the resort project(s)
described as follows: Name, location and street address of each Resort project
affiliated hereby:
(use additional sheets if necessary)
HILL COUNTRY RESORT
Highway 306 Parkview
Canyon Lake, Texas 78133
C. Affiliate and Association have submitted to RCI an Application for
Affiliation, a copy of which is incorporated by reference herein in its
entirety, and desire the Resort to become an RCI Affiliated Resort, and for
Affiliate and Association to offer to Purchasers the opportunity to become RCI
Members and to be eligible to participate in the RCI Exchange Program.
D. RCI desires the Resort to become an RCI Affiliated Resort and for Affiliate
to perform services and duties associated with the RCI Exchange Program in
accordance with the provisions of this Agreement until Affiliate transfers its
management responsibilities to Association and thereafter, for Association to
perform or provide for such services and duties.
NOW THEREFORE, in consideration of the mutual covenants and obligations
contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1 - DEFINITIONS
For the purposes of this Agreement, the terms listed below shall,
unless the context otherwise requires, bear the following meanings:
1.1 APPLICATION FOR AFFILIATION: The Affiliate's and Association's
Application for Resort Affiliation, including any attachments thereto, which is
required to be submitted by Affiliate or Association to RCI in connection with
this Agreement.
1.2 CONFIRMED EXCHANGE: RCI's written or oral notification to the Resort
and RCI Member or Exchange Guest that an exchange has been confirmed and that
accommodations at the Resort or another resort have been reserved for use by
the RCI Member or Exchange Guest.
1.3 ENROLLMENT APPLICATION: The form of application from time to time
prescribed by RCI for the enrollment of Purchasers in the RCI Exchange Program.
1.4 EXCHANGE GUEST(S): Person(s) who have received a Confirmed Exchange
to the Resort from RCI.
1.5 MARKS: Those trademarks set forth below, or other trademarks as may be
included and licensed by RCI to Affiliate and/or Association from time to time:
RCI
RESORT CONDOMINIUMS INTERNATIONAL
ENDLESS VACATION
SPACEBANK
<PAGE> 2
1.6 PRESALE: That status where the Resort or a Unit at the Resort is under
construction, renovation or refurbishment and is considered by RCI to be not
ready for occupancy by an Exchange Guest(s).
1.7 PROSPECTIVE PURCHASER: Prospective purchasers of a Timeshare Interest
or other interest at the Resort or any other RCI Affiliated Resort.
1.8 PURCHASERS: Persons who purchase Timeshare Interests in the Resort,
including persons who are already RCI Members at time of purchase.
1.9 RCI AFFILIATED RESORTS: Resorts subject to resort affiliation
agreements with RCI, including those resorts described in Recital B.
1.10 RCI EXCHANGE PROGRAM: RCI's program of facilitating the exchange of
Timeshare Interests.
1.11 RCI PROCEDURES MANUAL: Any manual(s) of policies and/or procedures for
affiliates and Associations as published and amended by RCI from time to time.
1.12 RCI SUBSCRIBING MEMBERS OR RCI MEMBERS: Purchasers whose Enrollment
Applications are accepted by RCI and who comply with the Terms and Conditions
of RCI Membership.
1.13 RCI SUBSCRIPTION FEE: The annual fee from time to time payable by RCI
Members in respect of RCI's directory, magazine(s) or other publications and
such other benefits incident to the subscription.
1.14 RCI TERMS AND CONDITIONS: Those terms and conditions of RCI membership
contained in RCI's Endless Vacation Special Resort Edition magazine as amended
from time to time by RCI in its discretion.
1.15 RESELLERS: Any brokers, marketers, marketing companies or management
companies engaged by Affiliate or Association.
1.16 RESORT: The resort project(s) or other lodging or vacation
accommodation(s): (1) described in Recital B and (2) all subsequent buildings
or phases of the resort project(s) or other lodging or vacation
accommodation(s) which meet RCI standards.
1.17 TIMESHARE INTERESTS: Possessory, occupancy or usage rights in
timeshare resorts or other lodging or vacation accommodation(s), whole-owner
condominiums or similar vacation ownership plans.
1.18 UNIT: A unit of accommodation of moveable or immovable property
designed for separate occupancy in connection with the use of a Timeshare
Interest.
ARTICLE 2 - RCI'S DUTIES AND OBLIGATIONS
2.1 PROVIDE EXCHANGE PROGRAM. RCI shall make the RCI Exchange Program
available to RCI Subscribing Members and perform its functions with respect to
the RCI Exchange Program in accordance with its obligations under this
Agreement, the RCI Terms and Conditions of Membership and the RCI Procedures
Manual.
2.2 PROCESS ENROLLMENT APPLICATIONS. RCI shall process, promptly and
fairly, Enrollment Applications and will notify Affiliate or Association if RCI
rejects an Enrollment Application.
2.3 FEES. If an Enrollment Application is rejected by RCI or is cancelled
by the Purchaser as a result of the Purchaser's cancellation or recision of a
contract to purchase a Timeshare Interest, RCI will refund fees previously
remitted to RCI which correspond to such rejected or cancelled Enrollment
Application in accordance with the procedures set forth in the RCI Procedures
Manual.
ARTICLE 3 - AFFILIATE'S AND ASSOCIATION'S OBLIGATIONS
3.1 ENROLLMENT APPLICATION AND FEES. During the term of this Agreement and
any renewal terms, Affiliate and Association shall on a weekly basis and no
later than thirty (30) days after a Purchaser's date of purchase:
3.1.1 submit to RCI a fully completed Enrollment Application for each
Purchaser;
3.1.2 pay to RCI in a form acceptable to RCI and without setoff or
deduction, a sum equal to the number of Purchasers since the
last payment was made multiplied by the applicable fee(s)
required for each Purchaser; and
3.1.3 submit a sales report in a form prescribed by RCI.
3.2 PROMOTION OF EXCHANGE PROGRAM. Affiliate and Association shall in a
manner that complies with the terms of this Agreement and the RCI Procedures
Manual, promote RCI and the RCI Exchange Program to Purchasers and Prospective
Purchasers. Such efforts shall include but not be limited to:
3.2.1 distributing or arranging for the distribution of the Endless
Vacation Special Resort Edition magazine to all Purchasers at
the Resort;
3.2.2 making the Endless Vacation Special Resort Edition magazine
available to all Prospective Purchasers in the Resort; and
3.2.3 encouraging continued membership in the RCI Exchange Program.
3.3 MINIMUM PERFORMANCE REQUIREMENT. Affiliate and Association acknowledge
that if Affiliate's or Association's annual Enrollment Applications do not
exceed FIFTY (50), or, in the case of an Association, if the Association's
enrolled membership is not more than ONE HUNDRED (100), it is not economically
viable for RCI to maintain the Affiliation, and this Agreement is likewise
terminable at the sole option and discretion of RCI upon sixty (60) days notice
to Affiliate and Association.
2
<PAGE> 3
3.4 PHOTOGRAPH. Affiliate or Association agrees to provide to RCI at least
two (2) photographs or representative images of the Resort for non-exclusive
use by RCI, at its sole discretion, for the promotion of the RCI Exchange
Program. Affiliate or Association represents and warrants to RCI that: (a)
Affiliate or Association owns, has acquired or licensed the copyright rights in
and to such photographs, and (b) Affiliate or Association has obtained, and has
on file at its office, releases or consents from or for every person, entity or
thing as may be required by law or otherwise for the reproduction of each such
photograph as contemplated herein. Further, Affiliate and/or Association hereby
releases, discharges and agrees to indemnify and hold RCI harmless from and
against any and all liability, demand, claim, cost, expense, loss or damage
(including attorneys' fees) caused by or arising from the reproduction and
distribution of such photographs. This indemnification and hold harmless
provision shall survive the termination of this Agreement for all applicable
statutes of limitation.
3.5 RESERVE UNITS. Affiliate agrees to make available to the RCI Exchange
Program NOT APPLICABLE reserve unit(s) at the Resort each week of the year
until Affiliate ceases sales of the Timeshare Interests to be sold at the
Resort. Each such reserve unit shall be a unit configuration acceptable to RCI.
In the event that RCI sends to the Resort written notice that it does not
intend to use a reserve unit, Affiliate may use that reserve unit as it sees
fit. In the event that RCI sends to the Resort written notice that it does
intend to use the reserve unit, or RCI sends no notice to the Resort, RCI may
use that reserve unit as it sees fit.
3.6 MANAGEMENT DUTIES. Until Affiliate transfers its management
responsibilities to Association, Affiliate agrees, and thereafter Association
agrees:
3.6.1 on RCI's request, to promote new services and benefits provided
by RCI to RCI Members;
3.6.2 to perform services and other duties associated with the
operation of the RCI Exchange Program in accordance with the
RCI Procedures Manual and other materials furnished to it by RCI
from time to time;
3.6.3 to maintain high qualitative and managerial standards
throughout the Resort (including maintenance of an efficient and
effective reservations system) and in particular to
maintain high standards of hospitality, service, cleanliness,
maintenance and appearance and a comprehensive maintenance
program;
3.6.4 to operate its business in a commercially reasonable fashion
that will enable it to meet its obligations;
3.6.5 to honor all Confirmed Exchanges at the Resort;
3.6.6 to provide all RCI Members and Exchange Guests with the
services and facilities referred to in the Application for
Affiliation and this Agreement;
3.6.7 to provide all RCI Members and Exchange Guests with the same
rights and privileges at the same rates afforded generally to
Purchasers at the Resort;
3.6.8 to act in a reasonable and co-operative manner to satisfy any
complaints;
3.6.9 to the extent permissible by law, to submit to RCI upon RCI's
request, not to exceed once annually, a report containing the
name, current billing address and current ownership information
for each Purchaser at the Resort. This report shall be current
as of one month prior to the date such report is submitted to
RCI;
3.6.10 not to require Exchange Guests staying at the Resort to attend
a sales presentation;
3.6.11 to collect any bed tax, transient occupancy tax or other local
rate tax or charge on use or occupancy of the Resort's
accommodations from owners of the Timeshare Interests at the
Resort, unless the imposition of such tax is precluded by
law, in which case to collect the applicable taxes from Exchange
Guests;
3.6.12 to provide RCI with Certificates of Insurance reflecting: (1)
those property and casualty coverages in effect as described in
Section 5.3.3 and (2) naming RCI as an additional insured under
such general liability policy as required by Section 5.3.3; and
3.6.13 to inform RCI before the appointment or replacement of any
management and/or maintenance company relating to the Resort
(whose appointment shall not, for the avoidance of doubt, affect
the Affiliate's obligations of management and maintenance of the
Resort).
3.7 CHANGE IN INFORMATION. Affiliate and Association agree to immediately
notify RCI of any change in any information set forth in the Application for
Affiliation or of any other fact or circumstances affecting the operation of
the RCI Exchange Program with respect to the Resort.
3.8 NON-INTERFERENCE. During the term of this Agreement and following its
termination, neither Affiliate nor Association shall in any manner:
3.8.1 encourage any Purchaser or any other timeshare owner or RCI
Member, to modify, amend, rescind, contravene or cancel their
RCI membership;
3.8.2 encourage any owners association, club, developer or RCI
Affiliated Resort to modify, amend, rescind, contravene or
cancel its affiliation agreement with RCI; or
3
<PAGE> 4
3.8.3 interfere or facilitate interference in any respect with the
contractual relationship between RCI (including any RCI
subsidiary, parent, associated or affiliated company or other
entity in which RCI or its principal holds a controlling
ownership interest) and any party contracting with RCI.
3.9 NON-DISCLOSURE. During the term of this Agreement and after its
termination, Affiliate and Association agree that neither shall use for its
own benefit (other than as permitted under this Agreement) or disclose to any
third party, directly or indirectly, any information with respect to: (a) the
terms of this Agreement or this Agreement's prior drafts or documents used in
this Agreement's negotiations, (b) any proposals produced by RCI and
distributed to Affiliate or Association, (c) any RCI proprietary information
(including but not limited to any trade secrets, any confidential business
information not readily available to the general public, or any confidential
information regarding the operation of the RCI Exchange Program) to which it
may be privy, (d) RCI membership numbers or exchange activity of any RCI Member
of Exchange Guest, or (e) the names, addresses or telephone numbers of
Purchasers at the Resort or other RCI Members. However, disclosure of the terms
of this Agreement may be permitted in the following limited circumstances: (i)
where such disclosure is required by law, provided that Affiliate or
Association give RCI at least twenty (20) days written notice prior to such
disclosure, and (ii) where requested by Affiliate's or Association's
fiduciaries or proposed lenders, only if: (1) Affiliate or Association secure,
on behalf of RCI, the agreement in writing of the receiving party not to
further disclose the confidential information, and (2) RCI gives written
approval of such disclosure. Notwithstanding the above, Affiliate and
Association agree that direct or indirect disclosure of any of the above
information to any other exchange company, timeshare or vacation ownership
developer or timeshare owners association is expressly prohibited by this
Section under any circumstances.
3.10 DENIAL OF ACCESS.
3.10.1 If Affiliate or Association fails to honor a Confirmed Exchange
into the Resort or if an Exchange Guest is otherwise denied
access to a unit at the Resort for which that Exchange Guest has
a Confirmed Exchange, then Affiliate or Association, whichever
has failed to honor such Confirmed Exchange or denied such
access, shall immediately and at its own expense secure
alternative accommodations of similar size and quality for the
same time period for the Exchange Guest and shall reimburse RCI
for any costs incurred by RCI in connection with such failure to
honor the Confirmed Exchange or such denial of access.
3.10.2 Neither Affiliate, Association nor RCI shall have any
obligation to secure alternate accommodations for an Exchange
Guest arriving at the Resort during an interval other than that
for which the Exchange Guest has been confirmed by RCI.
3.11 PROTECTION OF RCI'S INTERESTS. Affiliate and Association agree that
during the term of this Agreement and for a period of one (1) year after this
Agreement is terminated for any reason, it will not, without RCI's prior
written consent, hire, employ, engage or pay for services any person who was
employed by RCI during the term of this Agreement; or directly or indirectly
induce any such person to terminate or alter his/her relationship with RCI.
ARTICLE 4 -- RELATIONSHIP OF THE PARTIES
4.1 REPRESENTATION OF RELATIONSHIP. Affiliate and Association shall fully
and accurately describe the RCI Exchange Program and Association's relationship
with RCI to Prospective Purchasers and Purchasers. To this end, Affiliate and
Association:
4.1.1 shall not misrepresent in any way the RCI Exchange Program to
Purchasers or Prospective Purchasers nor make any representation
which could lead to any confusion on the part of any
Purchaser or Prospective Purchaser as to the RCI Exchange
Program or the services and benefits offered in connection
therewith;
4.1.2 shall deliver, in writing and in easily readable print, and
prior to the execution of any contract for purchase, the
following or substantially similar language to Prospective
Purchasers or Purchasers:
RCI conducts an exchange program made available to purchasers at
this resort. No joint venture, partnership or contract of
agency exists between RCI and the owner of this resort; however
the owner of this resort is a party to an agreement with RCI
through which the owner submits applications on behalf of
purchasers to become members of RCI's Exchange Program. RCI's
responsibility for representations concerning the RCI Exchange
Program is limited to those representations made in materials
supplied by RCI. While it is anticipated that the owner of this
resort and RCI will maintain an ongoing relationship, there is
no assurance that the agreement between the owner of this resort
and RCI will continue. Similarly, RCI makes no representations
as to the continued viability of this resort. Your decision to
purchase should be based primarily upon the benefits to be
gained from ownership and use of your timeshare interests in the
resort and not upon the RCI Exchange Program.
4.1.3 shall not amend, summarize, change or modify any material
supplied by RCI without RCI's prior written consent, or delete,
alter or obscure any proprietary notice or legend contained
thereon;
4
<PAGE> 5
4.1.4 shall not use the name, photograph(s) or image(s) of any other
RCI Affiliated Resort or any other resort or hotel in any material to be
used in a sales presentation. Further, those name(s), photograph(s) and
image(s) may not be used in any other manner without obtaining the prior
written consent of: (a) RCI, (b) the owner of such other RCI Affiliated
resort or other resort, hotel, or other lodging or vacation
accommodation (c) the owner of the copyright in the photograph(s) or
image(s), and (d) any other person whose permission is legally required
to use such name(s), photograph(s) or image(s);
4.1.5 shall not offer the RCI Exchange Program as an investment, in
conjunction with the sale of a security, through an emphasis on any
profit or appreciation, or in connection with any rental pool; and
4.1.6 shall not promote the RCI Exchange Program or other services
available from RCI as the main or principal reason for purchase of any
Timeshare Interest nor represent Affiliate's or Association's
affiliation to the RCI Exchange Program as a warranty or indication of
the Affiliate's, Association's or Resort's status or condition.
4.2 PRESALE. During Presale, Affiliate agrees to represent fully and fairly to
Purchasers at the Resort RCI's requirements regarding use of Presale units for
exchange. Affiliate shall send written notice to RCI when construction of the
Resort has been completed, after which RCI will inspect the Resort to determine
whether the Presale status of the Resort may be lifted. If RCI accepts a
SPACEBANK deposit of a specified unit and week by a Purchaser of a unit having
a Presale status at the Resort, and the Purchaser's unit is not completed and
approved by RCI for occupancy at least fourteen (14) days prior to the start
date of the specific week deposited and the week deposited is after the date
that Affiliate agreed the unit would be ready for occupancy, Affiliate agrees
to make available to the RCI Exchange Program during the specified week, or
such other comparable week to which RCI may agree, another comparable,
completed unit at the Resort.
4.3 APPOINTMENT OF RESELLERS. Affiliate and/or Association will insure that
Resellers do not make any representations related to RCI or the RCI Exchange
Program in connection with the sale of Timeshare Interests in the Resort unless
and until the Affiliate or Association request and receive RCI's approval to
sublicense to the particular Reseller(s) the right to use the RCI Marks and RCI
materials for the sole purpose of promoting the RCI Exchange Program and
obtaining RCI Enrollment Application Forms on the Affiliate's or Association's
behalf. RCI will grant such approval only upon fulfillment of the following
conditions:
4.3.1 Affiliate or Association gives RCI at least thirty (30) days prior
written notice of its intent to engage the Reseller for the above
purposes;
4.3.2 Affiliate or Association provides RCI with its 30 days notice a
copy of its proposed agreement with the Reseller, which agreement shall
contain the same trademark provisions as contained in this Agreement,
including but not limited to those in Section 4.3.5 and Article 6
herein;
4.3.3 Affiliate or Association provides RCI with its 30 day notice a
Reseller's Acknowledgment in the form required by RCI from time to
time;
4.3.4 Affiliate and Association acknowledge and agree that RCI may, at
any time during the thirty (30) day notice period referred to above: (a)
request additional information regarding the Reseller from Affiliate or
Association; and (b) refuse at its sole discretion to grant Affiliate's
or Association's request for approval to sublicense to Reseller the
right to use the RCI Marks and RCI materials for the sole purpose of
promoting the RCI Exchange Program and obtaining RCI Enrollment
Application Forms on the Affiliate's or Association's behalf. If notice
of refusal from RCI is not given during such 30 day period, Affiliate or
Association may grant the Reseller a sublicense as described herein;
4.3.5 Affiliate and Association acknowledge and agree that immediately
on termination of this Agreement, the Reseller shall cease using RCI
Marks and RCI materials, cease promoting the RCI Exchange Program, and
further cease obtaining RCI Enrollment Application Forms. Affiliate or
Association shall notify all Resellers in writing of such termination
and Affiliate or Association shall collect all RCI materials, all
materials bearing one or more of the RCI Marks, and all RCI Enrollment
Application Forms held by or on behalf of all Resellers. Affiliate and
Association agree that it will promptly notify RCI in writing of the
Reseller's cessation of the previously authorized activities and will
certify to RCI that it has collected all such materials from the
Reseller. Affiliate and Association shall be liable to RCI for all acts
or omissions of the Reseller arising out of any such failure to timely
cease such activities and any damages which RCI may suffer as a result
of Reseller's activities following termination will be covered under
the Affiliate's or Association's obligation to indemnify RCI as set
fourth in this Agreement; and
4.3.6 Affiliate and Association acknowledge and agree that, RCI, in
addition to any other rights it may enjoy under this Agreement, hereby
reserves the right to require termination of the Reseller in the event
Reseller engages in any act or omission which would constitute a breach
of this Agreement if committed by Affiliate or Association.
4.4 RESPONSIBILITIES OF AFFILIATE AND ASSOCIATION. Affiliate and Association
acknowledge and agree that, the appointment of Resellers notwithstanding, they
are and remain at all times directly and primarily responsible for (a) the
submission to RCI of RCI Enrollment Applications and fees; (b) the content and
correctness of RCI Enrollment Applications; (c) all acts or omissions of
Resellers; and (d) ensuring that any and all Resellers fully comply with the
terms of this Agreement.
5
<PAGE> 6
ARTICLE 5 - ACKNOWLEDGMENTS,
REPRESENTATIONS AND WARRANTIES
5.1 ACKNOWLEDGMENTS. Affiliate and Association each acknowledge and agree
that:
5.1.1 RCI has the right to accept or reject any Enrollment Application
submitted to it;
5.1.2 it will offer the RCI Exchange Program only to Purchasers
purchasing Timeshare Interests in the Resort(s) identified in
Recital B;
5.1.3 it will not offer the RCI Exchange Program to Purchasers of
Timeshare Interests at any other resort without entering into a
separate Agreement with RCI for such resort or adding such resort
to this Agreement by Addendum;
5.1.4 RCI memberships are available to natural persons, and if a
Timeshare Interest is purchased by a corporation, partnership, or
other business entity, RCI membership must be in the name of the
natural person authorized by such entity to utilize the purchased
Timeshare Interest;
5.1.5 through the RCI Exchange Program, RCI has the right to confirm any
individuals into Units at the Resort which have been deposited
with RCI provided, however, such Exchange Guests comply with the
rules and regulations of the Resorts;
5.1.6 the RCI Terms and Conditions, including but not limited to the
services and benefits provided by RCI to RCI Members, exchange
privileges, the practices, procedures and priorities for
effecting exchanges and the fees payable by RCI Members govern the
relationship between RCI and RCI Members, and may be changed by
RCI from time to time in its discretion;
5.1.7 the use of RCI Guest Certificates is personal to RCI Members and
no commercial use of RCI Guest Certificates may be made by
Purchasers, Affiliate, Association, or any of their officers,
directors, employees, sales representatives, brokers or agents;
5.1.8 RCI has the right to inspect the Resort and the sales records of
Affiliate and Association with respect to the Resort upon
reasonable notice and during regular business hours for the sole
purpose of monitoring Affiliate's and Association's compliance
with this Agreement;
5.1.9 neither Affiliate nor Association may assign or sublicense any or
all of its rights under this Agreement to any person without RCI's
prior written approval and any such attempted assignment or
sublicense shall be null and void;
5.1.10 RCI may assign its rights and duties under this Agreement or any
Enrollment Application or agreement with an RCI Member in which
case this Agreement shall remain in full force and effect; and
5.1.11 except for sales in the ordinary course of business to Purchasers
for use other than a commercial use, it will not transfer any
interest in the Resort unless the transferee agrees to be bound
by the terms and conditions of this Agreement in the same manner
as the Affiliate or Association hereunder.
5.2 ACKNOWLEDGMENT OF RELATIONSHIP. Affiliate and Association each hereby
acknowledge that:
5.2.1 it has no power to bind RCI in any manner;
5.2.2 Affiliate, Association, and Resort are independent and outside the
control of RCI and that nothing in this Agreement creates a
relationship of agency, employment, partnership or joint venture
between RCI and the Affiliate or Association;
5.2.3 the product(s) of Affiliate and Association (including but not
limited to Timeshare Interests) are separate and distinct from
the services offered through the RCI Exchange Program; and
5.2.4 it is not relying on RCI or the RCI Exchange Program for the sale
of its product(s).
5.3 REPRESENTATIONS AND WARRANTIES. Affiliate and Association, each represent
and warrant to RCI only as to themselves and not as to each other that:
5.3.1 the statements made by it in the Application for Affiliation are
not misleading and are true and correct in all material respects
and that all the facilities referred to in the Application for
Affiliation will be available to Exchange Guests in the manner
described in the Application for Affiliation;
5.3.2 it owns or has the legal right to convey Timeshare Interests to
Purchasers;
5.3.3 it maintains with a reputable insurer property and casualty
insurance to cover loss or damage to the Resort, as well as
general liability insurance naming RCI as an additional insured
in an amount sufficient to cover its risk;
5.3.4 it has thoroughly examined the RCI Exchange Program as set forth
in the RCI Procedures Manual and other materials furnished to it
by RCI and that it is familiar with the operation of the RCI
Exchange Program;
5.3.5 except as previously disclosed in writing to RCI, there is no
litigation, proceeding, claim, complaint, investigation or similar
action pending or threatened against it which would materially and
adversely affect the performance of its obligations or the
continued operation of the Resort;
5.3.6 by entering into this Agreement, it will not be in breach of the
provisions of any other agreement, lease, charter, by-law or any
other instrument or obligation;
5.3.7 it is in compliance with all applicable laws, rules and
regulations; and
5.3.8 the execution of this Agreement has been duly authorized by all
necessary actions, the persons executing this Agreement are
authorized to do so and this Agreement constitutes its legal and
binding obligation.
The representations and warranties contained herein are of a continuing nature,
and unless otherwise disclosed to RCI in writing, shall be considered
reaffirmed by Affiliate and Association with each submission of Enrollment
Applications.
6
<PAGE> 7
ARTICLE 6 - TRADEMARKS
6.1 LICENSE. Upon the terms and conditions of this Agreement, and the
policies and procedures established by RCI from time to time governing the use
of the Marks, RCI grants to Affiliate and to Association, individually, a
non-exclusive license to use the Marks only on and in connection with their
services in promoting the RCI Exchange Program, submitting Enrollment
Applications of Purchasers at the Resort to RCI, and coordinating activities and
performing services associated with the operation of the RCI Exchange Program
at the Resort. Neither Affiliate nor Association shall use or permit use of the
Marks, in whole or in part, on or in connection with any other business,
including but not limited to travel related services, financing services,
reservation services, resort management services or resort rental enterprises.
Except as expressly provided herein at Section 4.3, neither Affiliate nor
Association shall permit or authorize any other person or entity of any kind to
use the Marks in any manner.
6.2 ACKNOWLEDGMENT. Affiliate and Association acknowledge that: (a) RCI is
the owner in the United States and various other countries of the Marks, and
(b) RCI has the right to exclude others from using the Marks or any variant or
combination of the Marks determined to be confusingly similar to the Marks.
Neither Affiliate nor Association shall register or attempt to register the
Marks or any other trademark or tradename confusingly similar to one or more of
the Marks in its own name or that of any person or entity. Further, neither
Affiliate nor Association shall contest to the validity of the Marks or any
registration of the Marks by RCI.
6.3 QUALITY AND CONTROL. RCI has the right to control all uses of the
Marks. Affiliate and Association agree to maintain such quality standards for
its services, in connection with which the Marks are used, equal to the quality
of services of RCI. Affiliate and Association may use the Marks on their
promotional materials, advertising and owner communications only as prescribed
by RCI policies and procedures in the RCI Procedures Manual and other materials
furnished to Affiliate or Association from time to time. Affiliate and
Association agree to comply with all requests of RCI with respect to the
appearance and use of the Marks, including any requests to change the form or
style of the Marks. Affiliate and Association shall at all times consistently
use the Marks so as to ensure that RCI's rights are adequately preserved.
Affiliate and Association agree to promptly submit to RCI one copy of all
printed or visual material bearing one or more of the Marks for prior written
approval. RCI reserves the right to withdraw approval should it be determined,
in RCI's sole discretion, that such materials misrepresent or do not accurately
reflect RCI or the RCI Exchange Program. Neither Affiliate nor Association
shall do anything itself, or aid or assist any other party to do anything which
would infringe, violate, damage, dilute, harm or contest the rights of RCI in
and to the Marks. In addition, Affiliate and Association confirm that all use
of the Marks by them or any of their approved sublicensees shall inure to RCI's
benefit. Affiliate and Association shall at any time execute any documents
reasonably required by RCI to confirm RCI's ownership of all such rights in and
to the Marks.
ARTICLE 7 - TERMINATION & REMEDIES
7.1 GENERAL RIGHT OF TERMINATION. Any party may terminate participation in
this Agreement:
7.1.1 in the event of a breach of any of the terms, conditions,
covenants, representations or warranties contained in this
Agreement, following written notice to the other party(ies)
stating the grounds for such termination, unless the breaching
party cures the asserted breach to the reasonable satisfaction
of the party giving such notice within thirty (30) days of the
date of notice;
7.1.2 immediately by giving the parties written notice if the other
party(ies) commit a breach of any of the provisions of this
Agreement which breach is incapable of cure; or
7.1.3 by giving the other parties hereto at least 180 days written
notice prior to the expiration of the initial term or any
renewal term of its intent to terminate this Agreement at the
end of such term.
7.2 RCI'S RIGHT OF TERMINATION. Without prejudice to any other rights of
termination RCI may have under this Agreement, RCI may terminate its
participation in this Agreement with respect to any or all of the Resorts
listed in Recital B:
7.2.1 immediately upon written notice to the Affiliate and the
Association in the event the Affiliate or Association: (a)
becomes insolvent as defined in the Uniform Commercial Code or
makes an assignment for the benefit of its creditors; (b)
initiates a proceeding, whether voluntarily or involuntarily,
under any chapter or part of the Federal Bankruptcy Code; (c) is
a party to a proceeding for the reorganization or for the
adjustment of any of its debts under any act or law, for the
relief of debtors now or hereafter existing; (d) has a receiver
or trustee appointed for it or for a substantial part of any of
its assets; or (e) is a party to any proceeding seeking its
dissolution or its full or partial liquidation;
7.2.2 immediately upon written notice to the Affiliate and the
Association if any Reseller commits any act or omission which
would constitute a breach of this Agreement if committed by
Affiliate or Association which, if capable of remedy, has not
been remedied within thirty (30) days of notice from RCI;
7.2.3 immediately upon written notice to the Affiliate and the
Association if Affiliate or Association transfers a controlling
interest in the Resort without RCI's prior written consent;
7.2.4 immediately upon written notice to the Affiliate and the
Association if Affiliate or Association attempts to assign or
sublicense all or any portion of its rights and duties under
this Agreement without RCI's prior written approval;
7
<PAGE> 8
7.2.5 immediately upon written notice to the Affiliate and the
Association if Affiliate or Association is in fundamental or
material breach of a term of this Agreement or engages in
fraudulent, deceptive or dishonest conduct in connection with
this Agreement (whether or not capable of remedy);
7.2.6 upon written notice to Affiliate or Association of not less than
six (6) months in the event Affiliate or Association enters into
any agreement or arrangement other than with RCI that provides
for internal or external exchange services to Purchasers. In any
event, Affiliate or Association agrees to provide RCI with
ninety (90) days written notice prior to entering into such
agreement or arrangement;
7.2.7 immediately upon written notice to Affiliate or Association if
any representation or warranty contained herein is not true at
the time it is made or considered reaffirmed;
7.2.8 immediately upon written notice to Affiliate or Association if
any representation or warranty contained herein ceases to be
true during the term of this Agreement and any renewals thereto;
and
7.2.9 as provided for elsewhere in this Agreement.
7.3 AFFILIATE'S AND ASSOCIATION'S ACKNOWLEDGMENTS.
7.3.1 RCI'S exercise of its right to terminate pursuant to this
Agreement shall in no way limit or impair its right to seek
other legal or equitable remedies in connection with a breach by
Affiliate or Association.
7.3.2 Termination of this Agreement for whatever reason shall not in
any way affect the right of RCI to receive fees that have
accrued and remain unpaid.
7.4 GENERAL ACKNOWLEDGMENT. All of the foregoing notwithstanding,
termination of one party's participation in this Agreement shall not impair or
terminate the relationship between the remaining parties.
7.5 OBLIGATIONS UPON TERMINATION. Upon termination of this Agreement:
7.5.1 RCI, Affiliate and Association shall honor all Confirmed
Exchanges and exchange privileges of RCI Members exchanging into
the Resort that are confirmed or accrued prior to termination;
7.5.2 RCI, Affiliate and Association shall honor all Confirmed
Exchanges and exchange privileges of RCI Members who are
Purchasers at the Resort that are confirmed or accrued prior to
termination of this Agreement;
7.5.3 RCI at its sole discretion, may allow RCI Members who are
Purchasers at the Resort to participate in the RCI Exchange
Program following termination of this Agreement provided that
the Resort maintains high fiscal, qualitative and managerial
standards. Affiliate and Association agree to honor all
present and future Confirmed Exchanges or exchange privileges of
Purchasers, or other RCI Members and their guests utilizing an
RCI Guest Certificate exchanging into the Resort through use of
such Purchaser's Timeshare Interest;
7.5.4 Affiliate and Association shall immediately discontinue
promoting, selling, marketing or offering the RCI Exchange
Program in any form to Purchasers or Prospective Purchasers;
7.5.5 Affiliate and Association shall immediately cease using and
thereafter abstain from using all RCI videos and other materials
bearing any of the RCI Marks, and return the same to RCI within
fifteen (15) days after termination of this Agreement;
7.5.6 Affiliate and Association shall immediately cease using and
thereafter abstain from using the Marks and any name or mark
similar thereto; and
7.5.7 Affiliate and Association shall immediately ensure that the
agreement with any RCI approved Reseller is correspondingly
immediately terminated with respect to any activities related to
RCI and/or use of the Marks, as detailed in Article 4 herein.
7.6 SUSPENSION. Upon breach by Affiliate or Association, RCI may, without
prejudice to its right to terminate this Agreement, suspend operation of the
RCI Exchange Program at the Resort or impose such conditions or limitations
thereon as RCI deems necessary or appropriate from time to time.
7.7 EQUITABLE RELIEF. Affiliate and Association acknowledge that damages
cannot adequately compensate RCI for a breach of any of the provisions of this
Agreement, and, therefore, the parties agree that RCI shall be entitled to a
remedy of specific performance or injunctive relief, as appropriate, in the
event of a breach or threatened breach of any such provisions by Affiliate or
Association, in addition to any other appropriate legal or equitable remedies.
7.8 WAIVER. Upon the termination of this Agreement, Affiliate and
Association hereby expressly waive any claim for a refund of any applicable
fees remitted during the term of this Agreement.
7.9 LIMITATIONS. Failure to cease using any one or more of the Marks by
Affiliate or Association or its Resellers following termination of this
Agreement shall entitle RCI to liquidated damages from the offending
responsible party in the amount of One Thousand Dollars (US$1,000) per day,
which Affiliate and Association agree is reasonable. This liquidated damages
remedy shall be in addition to any other remedies, legal or equitable,
available to RCI.
8
<PAGE> 9
ARTICLE 8 - GENERAL
8.1 TERM. This Agreement shall become effective on the date it is executed
by RCI in Indianapolis, Indiana, U.S.A. and shall be for an initial term of
five (5) years. Thereafter, this Agreement will automatically renew for
additional five (5) year terms, until such time as notice of intent to
terminate is given by any party hereto pursuant to Section 7.1; provided,
however, that Affiliate and Association are in compliance with this Agreement
at the expiration of the initial term and subsequent renewal terms.
8.2 NOTICES. All notices and other communications made pursuant to this
Agreement shall be in writing and shall be deemed to have been given if mailed
by registered or certified mail, return receipt requested, or transmitted by
facsimile with printed confirmation of receipt together with mailing of an
original, to the appropriate party(ies) at the following address (or such other
address as shall be specified by notice given pursuant to this Section 8.2):
(a) if to AFFILIATE: (b) if to ASSOCIATION:
ASCENSION RESORTS, LTD. HILL COUNTRY RESORT CONDOSHARE CLUB
1221 Riverbend, Suite 120 1221 Riverbend, Suite 120
Dallas, Texas 75247 Dallas, Texas 75247
(c) if to RCI:
RESORT CONDOMINIUMS INTERNATIONAL, INC.
One RCI Plaza
3502 Woodview Trace
P.O. Box 80229
Indianapolis, Indiana 46280-0229
U.S.A.
Attention: Legal Services
Notwithstanding the above, RCI may send the notices referred to in Section 3.5
to the Resort at the address set forth in Recital B (or such other address as
shall be specified by notice given pursuant to this Section 8.2) by regular
United States mail.
8.3 LEGAL AND BINDING OBLIGATION. Affiliate and Association and the
individuals executing this Agreement on behalf of Affiliate and Association,
respectively, represent, and warrant to RCI that this Agreement has been duly
and validly executed and delivered by Affiliate and Association, respectively,
and constitutes a legal, valid, binding and enforceable agreement of Affiliate
and Association, respectively.
8.4 OBLIGATIONS BINDING ON REAL ESTATE. Affiliate and Association agree
that their obligations under this Agreement shall run with real estate
comprising the Resort and shall be binding upon any transferee of (or successor
to) an interest in the Resort which operates such interest for commercial
purposes.
8.5 INDEMNIFICATION. Affiliate and Association each agree to indemnify and
hold RCI harmless from and against any and all claims, demands, obligations,
deficiencies, judgments, damages, suits, losses, penalties, expenses, costs
(including reasonable attorneys' fees) and liabilities of any kind, type or
nature whatsoever directly or indirectly resulting from, arising out of or in
connection with:
8.5.1 any inaccuracy in a representation or warranty or any breach of
any of its obligations in this Agreement;
8.5.2 a failure to observe policies and procedures established by RCI;
8.5.3 the wrongful denial of access to a Unit to any Exchange Guest;
8.5.4 any death or personal injury or damage to or loss of property
sustained by Exchange Guests while at the Resort;
8.5.5 any acts or omissions by any of their respective directors,
officers, partners, employees, representatives, agents, brokers,
salesmen, independent contractors, or associates which would
constitute a breach of this Agreement if committed by Affiliate
or Association;
8.5.6 any acts or omissions of Reseller or Reseller's directors,
officers, partners, employees, representatives, agents, salesmen
or associates which would constitute a breach of this Agreement
if committed by Affiliate or Association; and
8.5.7 alleged or actual infringement of any trademark, copyright,
trade secret, patent, publicity rights, privacy rights, moral
rights or false advertising or unfair competition (but excluding
any such actions on RCI Marks).
This indemnification and hold harmless provision shall survive the termination
of this Agreement for all applicable statutes of limitation.
9
<PAGE> 10
8.6 SEVERABILITY. If any provision of this Agreement is declared by any
judicial or other competent authority to be void, voidable, illegal or
otherwise unenforceable or indications of the same are received by either of
the parties from any relevant competent authority, the parties shall amend that
provision in such reasonable manner as achieves the intention of the parties
without illegality or, at the discretion of RCI, such provision may be severed
from this Agreement and the remaining provisions of this Agreement shall remain
in full force and effect; provided, however, that if, in RCI's judgment, the
effect of such declaration is to defeat the original intention of the parties,
RCI shall be entitled to terminate this Agreement by 30 days' notice to the
Affiliate and/or Association.
8.7 GENERAL. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement. The Recitals are hereby incorporated in this
Agreement. All references in this Agreement to particular Recitals and Sections
are references to Recitals and Sections of this Agreement. If there is any
difference or conflict between the English text of this Agreement and any
translation, the English text shall prevail. Failure of any party to insist on
strict compliance with the provisions of this Agreement shall not constitute
waiver of that party's right to demand later compliance with the same or other
provisions of this Agreement. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. This Agreement and
Affiliate's and Association's Application for Affiliation and all attachments
thereto constitute the entire understanding and agreement between the parties
concerning the subject matter of this Agreement. This Agreement may be modified
only by a writing executed by the parties with the same formality with which
this Agreement has been executed. All understandings between the parties are
merged into this Agreement, and there are no representations, warranties,
covenants, obligations, understandings or agreements, oral or otherwise, in
relation thereto between the parties other than those incorporated herein. This
Agreement is for the exclusive benefit of Affiliate, Association and RCI;
nothing herein shall be construed to create a third-party beneficiary of any
Purchaser, RCI Member or other individual or entity. Affiliate and Association
acknowledge that this Agreement has been executed, made and entered into in
Indianapolis, Indiana, U.S.A., and consents to the personal jurisdiction of the
courts of the State of Indiana. This Agreement shall in all respects be
interpreted and construed in accordance with and governed by the laws of the
State of Indiana, U.S.A., and any action at law or in equity under this
Agreement shall be submitted exclusively to the jurisdiction of the courts of
Marion County, Indiana, U.S.A., unless RCI determines in its sole discretion
that, because of the injunctive or other equitable relief sought by it, the
action should be brought in a jurisdiction in which Affiliate, Association, or
the resort are located. This Agreement and all of its provisions shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.
ASCENSION RESORTS, LTD. ("Affiliate") HILL COUNTRY RESORT CONDOSHARE CLUB
("Association")
BY: ASCENSION CAPITAL CORPORATION
ITS: GENERAL PARTNER
By: /s/ SHARON K. BRAYFIELD By: /s/ ROBERT LEVY
--------------------------------- --------------------------------
Sharon K. Brayfield, President Robert Levy, Governor
AGREED TO AND ACCEPTED THIS 29TH DAY OF JULY, 1995.
RESORT CONDOMINIUMS INTERNATIONAL, INC.
By: /s/ JOHN B. REINHARDT
---------------------------------
John B. Reinhardt, Vice President
10
<PAGE> 1
EXHIBIT 10.20
AGREEMENT FOR PROFESSIONAL SERVICES
I. This Agreement is entered into on 12 November, 1996 by Hudson and Company,
Inc. hereinafter known as the Subcontractor and Silverleaf Vacation Club, Inc.
hereinafter known as the Contractor. This Agreement supersedes all other
Agreements which are hereby terminated.
II. The Subcontractor agrees to provide to the Contractor the following scope
of services:
1. All Architectural drawings, specifications and related documents
necessary for all Projects required by the Contractor.
2. All Construction Management services necessary for the execution of
the Architectural documents including, but not necessarily limited to, bid
negotiations for fixed and cost plus construction, vendor and subcontractor
negotiation and selection, construction coordination, construction observation
and reporting, quality control, processing applications for payment and other
document administration related to the Work.
3. Coordination of and consulting with Contractor's Construction
Division account no. 717 as it relates to projects at all resort locations
including, but not necessarily limited to, consulting with construction account
no. 717 manager regarding feasibility, scope, scheduling, cost analysis,
subcontractor and vendor selections and project observation and reporting
primarily at PSR, TVR, HLR and LOW project locations.
4. Coordination of and consulting with Contractor's Engineering
Division account no. 718 on all projects including, but not necessarily limited
to, interface in regard to all civil engineering drawings and specifications
and other related documents necessary for all project locations and input and
monitoring of software program utilized to track all projects at all locations.
5. Coordination of and consulting with Contractor's account no. 716 as
it relates to projects at all resort locations including, but not necessarily
limited to, monitoring preparation, review and limited approval of purchase
orders, change orders, narratives and construction observation and reporting
primarily at HHR, OMR and HCR project locations.
<PAGE> 2
6. All Interior Design services including, but not necessarily limited
to, drawings, specifications, product and vendor research and selection,
purchasing negotiations, and coordination of all new unit interior
installations at all resort locations, coordination, scheduling, costing and
execution of unit rehab and upgrade at all resort locations, merchandising
coordination at all resort locations, and design and execution of all sales
center credibility walls, signage, interior renovations and additions as
requested.
7. Provide Office Management as required by Contractor's needs
including, but not necessarily limited to, review of all construction
proposals, purchase orders, change orders, narratives, in regard to their
procedural and arithmetic accuracy as produced by the Subcontractor and other
departments or divisions of the Contractor, status tracking and end
administration, review and processing of all construction applications for
payment for projects at all locations.
8. All services shall be rendered to the Contractor on a first
priority basis, i.e., provided that the time frames requested by the Contractor
are reasonable, the Subcontractor shall place execution of services ahead of
any and all other client obligations the Subcontractor may have.
III. The Contractor agrees to compensate the Subcontractor for its services
based on the definitions, terms and conditions contained in the attached Exhibit
"A".
IV. The Subcontractor agrees that the use of all drawings, specifications, and
related documents produced for and on behalf of the Contractor shall be made
available to the Contractor upon demand insofar as the Contractor is not in
default of its compensation obligation to the Subcontractor.
V. This Agreement may be terminated by either party at will, with compensation
to the Subcontractor paid in full through the date of termination.
Hudson and Company, Inc. Silverleaf Vacation Club, Inc.
/s/ ALLEN L. HUDSON
- ----------------------------- -------------------------------
By: Allen L. Hudson, President By: Robert E. Mead, CEO
Date: 13 Nov 1996 Date: _________, 1996
<PAGE> 3
EXHIBIT "A"
MONTHLY INVOICES FOR PAYMENT
SILVERLEAF VACATION CLUB, INC. (SVCI) SHALL PAY HUDSON & CO., INCORPORATED
(H&C) THE FOLLOWING AMOUNTS WITHIN FIVE DAYS FROM RECEIVING THE MONTHLY INVOICE
THEREFORE FROM H & C.
1. $2,916.67 PER MONTH, FOR THE SERVICES OF THE OFFICE MANAGER;
2. $12,500.00 PER MONTH, FOR THE SERVICES OF ALLEN HUDSON;
3. ALL PAYROLL COST OF H & C DIRECTLY ATTRIBUTABLE TO SERVICES PROVIDED TO
SVCI, INCLUDING EMPLOYER'S CONTRIBUTION FOR FICA AT THE RATE OF 7.65%,
EMPLOYER'S CONTRIBUTION FOR FUTA AT THE RATE OF 0.80%, AND EMPLOYER'S
CONTRIBUTION FOR SUTA AT THE RATE OF 1.17%.
4. ALL COSTS OF H & C DIRECTLY ATTRIBUTABLE TO SERVICES PERFORMED FOR SVCI,
INCLUDING BUT NOT LIMITED TO PHONE CALLS, FAX TRANSMISSIONS, COMPUTER
DISKETTES, BLUELINE REPRODUCTIONS, OUTSIDE DISCIPLINES (MECHANICAL
ENGINEERING, STRUCTURAL ENGINEERING, ARCHITECTURAL SEALS), AND PRINTING
COSTS; AND
5. A PERCENTAGE OF H & C'S GROSS PAYROLL (INCLUDING EMPLOYER CONTRIBUTIONS
SET FORTH IN 3 ABOVE) AND THE SAME PERCENTAGE OF ALL H & C'S COSTS NOT
DIRECTLY ATTRIBUTABLE TO SERVICES PROVIDED TO SVCI ("INDIRECT COSTS"),
INCLUDING BUT NOT LIMITED TO H & C'S RENT FOR OFFICE SPACE, UTILITIES,
ALL LEASED EQUIPMENT, SUPPLIES AND LIKE COSTS. THE PERCENTAGE SHALL BE
CALCULATED BY DIVIDING H & C'S PAYROLL COST DIRECTLY ATTRIBUTABLE TO
SERVICES PROVIDED TO SVCI BY H & C'S GROSS PAYROLL, AND ADDING 2.5%. FOR
EXAMPLE, IF H & C'S GROSS PAYROLL IS $20,000 FOR A MONTH, AND H & C'S
PAYROLL COSTS DIRECTLY ATTRIBUTABLE TO SERVICES PROVIDED TO SVCI IS
$10,000 FOR THE MONTH, THAT THE PERCENTAGE OF H & C'S GROSS PAYROLL AND
INDIRECT COSTS TO BE PAID TO H & C IS 52.5% ($10,000 DIVIDED BY $20,000,
PLUS 2.5%). THIS AMOUNT WILL BE PAID TO H & C IN ADDITION TO 100% OF THE
PAYROLL
<PAGE> 4
COSTS DIRECTLY ATTRIBUTABLE TO SERVICES PROVIDED TO SVCI. IN NO EVENT,
HOWEVER, SHALL THE AMOUNT TO BE RECEIVED BY H & C FOR THE PAYROLL COSTS
DIRECTLY ATTRIBUTABLE TO SERVICES PROVIDED TO SVCI PLUS THE PERCENTAGE OF H &
C'S GROSS PAYROLL TO BE PAID BY SVCI EXCEED 100% OF H & C'S GROSS PAYROLL.
6. H & C SHALL PROVIDE SVCI COPIES OF ALL EMPLOYEE PAYROLL LOGS AND RECORDS, JOB
LOGS FOR THE OFFICE MANAGER AND ALLEN HUDSON, DOCUMENTS AND INVOICES
NECESSARY TO SUPPORT ALL ASPECTS OF ITS INVOICE TO SVCI. THE INVOICE SHALL BE
ITEMIZED TO SHOW ALL AMOUNTS REFERRED TO ABOVE, INCLUDING THE CALCULATION OF
THE PERCENTAGE AFOREMENTIONED.
7. H & C REQUESTS THAT A $20,000.00 DEPOSIT BE MADE BY SVCI TO H & C, TO BE
RETAINED BY H & C IN ORDER FOR H & C NOT TO HAVE THE BURDEN OF CARRYING THE
TOTAL EXPENSE OF SERVICES DELIVERED TO SVCI FOR A PERIOD OF TIME POSSIBLY IN
EXCESS OF 45 DAYS (30 DAYS OF DIRECT AND INDIRECT COST FOR SERVICES RENDERED
PLUS APPROXIMATELY 10 TO 15 DAYS TO ASSEMBLE ALL NECESSARY DOCUMENTATION
AND CALCULATIONS NECESSARY FOR COMPILATION OF THE INVOICE AND 5 DAYS FOR
PAYMENT OF INVOICE BY SVCI). THIS WILL EASE H & C'S CASH FLOW PROBLEMS
WHICH OCCUR TOWARDS THE END OF THE 45 DAY PERIOD WHICH ELAPSES BEFORE H & C
CAN RECEIVE PAYMENT PURSUANT TO THE INVOICES TO BE SENT OUT.
9. SVCI AGREES TO PROCESS AND PAY EACH H & C WITHIN FIVE (5) DAYS OF SUBMITTAL
BY H & C TO SVCI.
<PAGE> 1
EXHIBIT 10.21
==============================================================================
SHAREHOLDER'S AGREEMENT
BETWEEN
SILVERLEAF VACATION CLUB, INC.
AND
SHARON K. BRAYFIELD
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
GENERAL PROVISIONS............................................................. 1
Section 1.1. Statement of Intent...................................... 1
Section 1.2. Interests Subject to Agreement........................... 1
Section 1.3. General Definitions for Agreement........................ 1
(a) Agreement............................................... 1
(b) Disability.............................................. 1
(c) Offer................................................... 2
(d) Offered Shares.......................................... 2
(e) Shares.................................................. 2
(f) Shareholder............................................. 2
(g) Purchase Price.......................................... 2
(h) Transfer................................................ 2
ARTICLE II
DETERMINATION OF PURCHASE PRICE................................................ 2
Section 2.1. Agreement as to Purchase Price.......................... 2
Section 2.2. Determination of Purchase Price......................... 3
(a) Computation of Corporation's Net Book Value............. 3
(b) Purchase Price for Shares............................... 3
ARTICLE III
RESTRICTIONS ON LIFETIME TRANSFER OF SHARES.................................... 3
Section 3.1. Restrictions on Lifetime Transfers...................... 3
Section 3.2. Lifetime Offer of First Refusal......................... 4
Section 3.3. Corporation's Option to Purchase Shares................. 4
(a) Offeror Shareholder's Required Notice................... 4
(b) Option Period........................................... 4
(c) Exercise of Option...................................... 4
Section 3.4. Payment of Right of First Refusal Price by Corporation.. 5
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Closing Date of Purchase/Sale........................... 5
(b) Terms of Right of First Refusal Price................... 5
(c) Prepayment Privilege.................................... 5
Section 3.5. Expiration of Lifetime Transfer Restrictions............ 5
(a) Legal Opinion........................................... 5
(b) Reimbursement for Expenses.............................. 6
(c) Assumption of Agreement................................. 6
(d) Failure to Transfer..................................... 6
ARTICLE IV
OPTION TO PURCHASE UPON TERMINATION OF EMPLOYMENT.............................. 6
Section 4.1. Purchase Option of Corporation.......................... 6
(a) Purchase Price.......................................... 6
(b) Option.................................................. 6
(c) Exercise of Option...................................... 6
Section 4.2. Payment of Purchase Price by Corporation................ 7
(a) Closing Date of Purchase/Sale........................... 7
(b) Payment for Interest.................................... 7
Section 5.5. Notice Provision........................................ 8
(a) To the Corporation...................................... 9
(b) To the Shareholder...................................... 9
Section 5.6. Entire Agreement........................................ 9
Section 5.7. Amendment of Agreement.................................. 9
Section 5.8. Termination of Agreement................................ 9
Section 5.9. Interpretation of Agreement............................. 9
Section 5.10. Specific Performance of Agreement....................... 10
Section 5.11. Execution of Agreement in Counterparts.................. 10
Section 5.12. Binding Effect of Agreement............................. 10
Section 5.13. Gender and Number....................................... 11
Section 5.14. Execution of Additional Instruments..................... 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
Section 5.15. Strict Construction..................................... 11
Section 5.16. Effective Date.......................................... 11
</TABLE>
EXHIBIT "A"
STOCK OWNERSHIP
EXHIBIT "B"
PROMISSORY NOTE
iii
<PAGE> 5
SHAREHOLDER'S AGREEMENT
BETWEEN
SILVERLEAF VACATION CLUB, INC.
AND
SHARON K. BRAYFIELD
THIS SHAREHOLDER'S AGREEMENT (the "Agreement") is executed between
SILVERLEAF VACATION CLUB, INC., a Texas corporation (the "Corporation"), and
SHARON K. BRAYFIELD ("Shareholder") to provide for the orderly disposition of
shares of stock in the Corporation.
ARTICLE I
GENERAL PROVISIONS
Section 1. 1. Statement of Intent. The Shareholder owns the
shares of stock of the Corporation reflected on the attached Exhibit "A" and is
an employee of the Corporation. The Corporation and the Shareholder have
agreed in this Agreement to various restrictions, options and purchase
obligations concerning the Shares of stock of the Corporation.
Section 1.2. Interests Subject to Agreement. All interests in
the Shares now owned by the Shareholder are subject to the terms and provisions
of this Agreement. In the event the Corporation issues additional Shares in
the future to the Shareholder, the Shares shall be issued subject to the
restrictions, conditions and options contained in this Agreement.
Section 1.3. General Definitions for Agreement. The
following terms shall have the indicated meanings for purposes of this
Agreement:
(a) Agreement: References to "Agreement" shall mean this
Shareholder's Agreement, including any amendments made hereto.
(b) Disability: References in this Agreement to
"Disability" shall mean the physical or mental incapacity of the
Shareholder which prevents the
<PAGE> 6
Shareholder from performing the usual duties of her employment with
the Corporation for a consecutive period of THREE (3) months.
(c) Offer: References in this Agreement to "Offer" shall
mean the offer which an Offeror Shareholder is required to make as
provided by this Agreement. All Offers must be in writing, disclose
the full name and address of the proposed transferee, disclose the
transferee's qualifications to be a Shareholder of the Corporation,
and the full terms, conditions and purchase price of the proposed
Transfer.
(d) Offered Shares: References in this Agreement to
"Offered Shares" shall mean the Shares of the Shareholder subject to
the Offer that the Shareholder is required to make as provided in this
Agreement.
(e) Shares: References in this Agreement to "Shares"
shall mean the issued and outstanding shares of stock of the
Corporation owned by the Shareholder from time to time.
(f) Shareholder: References in this Agreement to the
"Shareholder" shall mean the Shareholder, her heirs, successors,
representatives, executors, transferees and assigns.
(g) Purchase Price: References in this Agreement to the
"Purchase Price" shall mean the amount of consideration which the
Shareholder shall receive under this Agreement on the sale of her
Shares under this Agreement.
(h) Transfer: References in this Agreement to "Transfer"
shall mean the sale, transfer, assignment, pledge, encumbrance,
alienation or any other disposition or hypothecation of any Share(s),
whether voluntary or involuntary.
ARTICLE II
DETERMINATION OF PURCHASE PRICE
Section 2.1. Agreement as to Purchase Price. The Shareholder
agrees that the determination of the Purchase Price of the Shareholder's Shares
shall be made under the provisions of Section 2.2 as to all sales and purchases
of Shares that are made under the terms of this Agreement, except as otherwise
specifically provided for in this Agreement.
2
<PAGE> 7
Section 2.2. Determination of Purchase Price. The Purchase
Price of each Share shall be determined in accordance with the following
provisions:
(a) Computation of Corporation's Net Book Value: The
representatives of the Corporation shall first determine the net book
value of the Corporation, computed in accordance with the accounting
procedures and practices historically employed for these purposes.
The Corporation and the Shareholder hereby agree that the computation
of the net book value of the Corporation shall be made by utilizing
the net book value of corporate assets reduced by all accrued expenses
and liabilities of the Corporation as reflected by the Corporation's
balance sheet prepared as of the last day of the month immediately
preceding the applicable Offer Date. The Corporation and the
Shareholder, however, hereby further agree that deferred taxes shall
be accrued as a liability based on the maximum corporate tax rates and
that such computations shall not include any value for good will,
control premiums, nor valuation discounts based upon minority
interests or marketability factors. The Corporation shall not be
required to retain the services of independent certified public
accountants for these purposes, nor shall the applicable financial
statement(s) be required to be certified.
(b) Purchase Price for Shares: The Purchase Price for the
Shareholder's Shares shall be determined by dividing the number of her
Shares by the total number of all Shares of the Corporation that are
issued and outstanding as of the applicable Offer Date, multiplied by
the net book value of the Corporation as determined above.
ARTICLE III
RESTRICTIONS ON LIFETIME TRANSFER OF SHARES
Section 3.1. Restrictions on Lifetime Transfers. No Shares
shall be Transferred without the prior written consent of the Board of
Directors of the Corporation, without first complying with the conditions
and provisions of this Agreement. The Shareholder shall not
3
<PAGE> 8
execute any agreement Transferring the Shares or any part thereof or otherwise
act to create new rights as to the Shares or any part thereof, except in
compliance with this Agreement, and any attempt to do so shall be void and of
no force nor effect.
Section 3.2. Lifetime Offer of First Refusal. If the
Shareholder (the "Offeror Shareholder") desires to Transfer all or any portion
of her Shares, the Offeror Shareholder must first make a written offer (the
"Offer") to sell all of such Shares to the Corporation. The Offer shall give
the Corporation the right to purchase the Shares at a price (the "Right of
First Refusal Price") equal to the lesser of (i) the Purchase Price as
determined under Article II, above, or (ii) the amount of consideration which
the Offeror Shareholder is entitled to receive under the terms of the proposed
Transfer.
Section 3.3. Corporation's Option to Purchase Shares. The
Corporation shall have the option to purchase all or any portion of the
Shares which the Offeror Shareholder desires to sell pursuant to the
following provisions:
(a) Offeror Shareholder's Required Notice: The Offeror
Shareholder shall deliver a written notice to the Board of Directors
specifying therein the name of the proposed Transferee, the number of
Shares, the total consideration to be received for such Shares, and
all other terms, provisions and conditions of the proposed Transfer.
(b) Option Period: The Corporation may exercise its
option to purchase any part of the Offered Shares at any time within
THIRTY (30) days after the latter of: [1] receipt of the Offer to
sell, and [2] the date of the determination of the Right of First
Refusal Price of the Shares.
(c) Exercise of Option: The Corporation shall give
written notice within such option period to the Offeror Shareholder of
the number of Shares which it agrees to purchase. The failure of the
Corporation to notify the Offeror Shareholder within this option
period shall constitute a rejection of the Offer.
Section 3.4. Payment of Right of First Refusal Price by
Corporation. In the event the Corporation exercises its option to purchase all
or any portion of the Offered Shares, the Right of First Refusal Price shall be
paid pursuant to the following provisions:
(a) Closing Date of Purchase/Sale: The Corporation shall
give the Offeror Shareholder written notice of the time and place of
the closing. The closing shall be within THIRTY (30) days after the
date of the Corporation's notice of its election to exercise its
option.
(b) Terms of Right of First Refusal Price: The
Corporation shall pay no
4
<PAGE> 9
less than TEN PERCENT (10%) of the total Right of First Refusal Price
at closing, payable in cash or by check. The Corporation shall have
the right and option to pay all or any greater amount in cash. The
balance of the Right of First Refusal Price shall be payable by the
execution and delivery of a promissory note at closing, the terms and
provisions of which are the same as the form which is attached as
Exhibit "B" to this Agreement.
(c) Prepayment Privilege: The Corporation shall have the
sole and absolute right to prepay all or any part of the Right of
First Refusal Price at any time, without penalty.
Section 3.5. Expiration of Lifetime Transfer Restrictions. The
Offeror Shareholder shall have the right to Transfer all or any part of such
Offered Shares that the Corporation elects not to purchase, provided that the
Transfer is made under the same terms, conditions and price as originally
proposed and set forth in the Offer. The Offeror Shareholder's right to
Transfer under this Section shall exist for a period of THIRTY (30) days after
the expiration of the option period specified by Section 3.3, above. The
Offeror Shareholder's right shall, however, be subject to the following
conditions:
(a) Legal Opinion: At the discretion of the Corporation,
the Corporation may require the Offeror Shareholder, at her expense,
to provide the Corporation with a legal opinion satisfactory to
counsel for the Corporation that the Transfer does not violate the
registration requirements of the federal or applicable state
securities laws.
(b) Reimbursement for Expenses: The Offeror Shareholder
shall reimburse the Corporation for expenses incurred with respect to
the Transfer, including but not limited to, all legal fees incurred by
the Corporation.
(c) Assumption of Agreement: The transferee of such
Shares ["the Third Party Transferee"] shall be subject to all of the
terms, provisions and conditions of this Agreement, including, but not
limited to, all of the restrictions, conditions and options contained
herein. The Third Party Transferee shall execute and deliver to the
Corporation an original counterpart of this Agreement.
(d) Failure to Transfer: If any of the Offered Shares are
not
5
<PAGE> 10
Transferred within the THIRTY (30) day period described in this
Section, or if the Offeror Shareholder desires to change the
transferee, terms or price as set forth in the Offer, the Offeror
Shareholder, if she desires to transfer the Shares, must re-offer the
Shares to the Corporation in accordance with the provisions of this
Article.
ARTICLE IV
OPTION TO PURCHASE UPON TERMINATION OF EMPLOYMENT
Section 4. 1. Purchase Option of Corporation. The Corporation
shall have the option to purchase all or any portion of the Shares of the
Shareholder when her employment with the Corporation is terminated by reason of
her Disability, retirement, resignation, termination (whether voluntarily or
involuntarily), or death pursuant to the following provisions:
(a) Purchase Price: The Purchase Price for the Shares
shall be determined under Article II, above, as of the last day of the
month preceding the Shareholder's termination.
(b) Option: The Corporation may exercise its option to
purchase any part of the Shares at any time within FIVE (5) years
after the date of employment termination.
(c) Exercise of Option: The Corporation shall be given
written notice within such option period to the Shareholder [or her
legal representatives] of the number of Shares which it agrees to
purchase.
Section 4.2. Payment of Purchase Price by Corporation. In the
event the Corporation exercises its option to purchase all or any portion of
the Shares pursuant to this Article, the Purchase Price of the Shares shall be
paid pursuant to the following provisions:
(a) Closing Date of Purchase/Sale: The Corporation shall
give the Shareholder or persons in possession of the Shares written
notice of the time and place of the closing.
(b) Payment for Interest: The Corporation shall make a
down payment
6
<PAGE> 11
in cash at Closing equal to at least TEN PERCENT (10%) of the
Purchase Price. The Corporation shall have the right and
option to pay all or any greater amount in cash. The balance
of the Purchase Price shall be payable by the execution and
delivery of a promissory note in an initial principal amount
equal to the balance of the Purchase Price, and being in the
form attached as Exhibit "B" to this Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.1. Deemed Offer on Involuntary Transfer of Shares.
The Shareholder, her representatives, and any person seeking to foreclose upon
or otherwise acquire any of the Shares through involuntary procedures shall be
required to send written notice by certified mail, return receipt requested, to
the Corporation prior to any involuntary Transfer and/or foreclosure upon any
Shares, including, but not limited to, any Shares which have been pledged or
otherwise encumbered with the consent of the Corporation. The required notice
shall disclose in full the nature and details of the involuntary transfer or
foreclosure. Upon receipt of the written notice, the Shareholder shall be
deemed to have made a written offer to sell such Shares under Article III of
this Agreement, and the Corporation shall have the option to purchase such
Shares under the terms of Article III of this Agreement, free and clear of any
claim of the person seeking to foreclose upon or otherwise acquire such Shares,
except as to any interest such person may have in the amount to be paid for the
Shares.
7
<PAGE> 12
Section 5.2. Filing of Agreement. An executed copy of this
Agreement shall be filed with the Corporation. The Corporation shall
furnish free of charge to the Shareholder a copy of this Agreement
upon written request.
Section 5.3. Endorsement of Stock Certificates. Each Share
certificate for the Shares shall be endorsed with the following statement:
"No transfer of this stock of the Corporation shall be effective without
compliance with, or written waiver by the Corporation of, the terms, provisions
and conditions of the Shareholder's Agreement between the Corporation and the
Shareholder on file at the Company's principal place of business."
The Shareholder shall return to the Secretary of the
Corporation any certificate for Shares which she now holds for the addition of
this required statement.
Section 5.4. Compliance with Law. In the event the Corporation
would otherwise be prohibited pursuant to the provisions of the Texas Business
Corporation Act from purchasing any Shares, the Corporation and the Shareholder
hereby agree to take such actions deemed reasonable to permit the Corporation
to purchase such Shares, including, without limitation, revaluation of assets
or reallocation of the stated capital of the Corporation.
Section 5.5. Notice Provision. Any notice, payment, demand or
communication required or permitted to be given by any provision of this
Agreement shall be deemed to have been effectively given and received on the
date personally delivered to the respective party to whom it is directed, or
when deposited by registered or certified mail, with postage and charges
prepaid and addressed as follows:
(a) To the Corporation: If to the Corporation, they shall
be addressed to the Corporation at the address of its principal place
of business in Dallas, Texas.
8
<PAGE> 13
(b) To the Shareholder: If to the Shareholder,
they shall be addressed to the Shareholder at the address on
file with the Corporation.
Any party may change its notice address by delivering a written change of
address to the other party.
Section 5.6. Entire Agreement. This Agreement constitutes the
entire understanding of the parties and supersedes all prior agreements,
whether written or oral, between the parties with respect to the subject matter
of this Agreement.
Section 5.7. Amendment of Agreement. No amendment,
modification or alteration of the terms of this Agreement shall be binding
unless in writing, dated subsequent to the date of this Agreement, and executed
by the Corporation and the Shareholder.
Section 5.8. Termination of Agreement. This Agreement shall
terminate upon the written consent of the Corporation and the Shareholder.
Section 5.9. Interpretation of Agreement. This Agreement
shall be construed under and in accordance with the laws of the State of Texas,
and all obligations that the parties created hereunder are performable in
Dallas County, Texas. In the event that judicial proceedings are instituted to
enforce any of the provisions of this Agreement, it shall be brought in a court
of competent jurisdiction in Dallas County, Texas. If any term or provision of
this Agreement is illegal or invalid for any reason, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement. No headings or caption contained in this Agreement shall be
considered in interpreting any of its terms or provisions.
Section 5.10. Specific Performance of Agreement. The parties
hereby agree that it is impossible to measure in money the damages which will
accrue to a party by reason of a
9
<PAGE> 14
failure to perform any of the obligations under this Agreement. Therefore, if
any party or the personal representatives of the Shareholder shall institute
any action or proceeding to enforce the provisions of this Agreement, any
person, including the Corporation, against whom such action or proceeding is
brought hereby waives the claim or defense that such party or such personal
representative has or have an adequate remedy at law, and such person shall not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.
If any action at law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees and all other costs and expenses of litigation from the other
party, which amounts may be set by the court in the trial of such action or may
be enforced in a separate action brought for that purpose, and which amounts
shall be in addition to any other relief which may be awarded.
Section 5.11. Execution of Agreement in Counterparts. This
Agreement and any amendment may be executed in any number of counterparts,
either by the parties or their duly authorized attorneys-in-fact, with the same
effect as if all parties had signed the same document.
Section 5.12. Binding Effect of Agreement. Subject to the
limitations on transferability and assignment contained in this Agreement, each
and all of the covenants, terms and provisions shall be binding upon and inure
to the benefit of the successors, transferees, heirs and assigns of the
respective parties.
Section 5.13. Gender and Number. Wherever the context shall
so require, all words herein in the male gender shall be deemed to include the
female or neuter gender, all
10
<PAGE> 15
singular words shall include the plural and all plural words shall include the
singular.
Section 5.14. Execution of Additional Instruments. The
Corporation and the Shareholder shall execute and deliver to any parties so
requesting such additional instruments and documents as may be reasonably
required to implement the terms and provisions of this Agreement.
Section 5.15. Strict Construction. This Agreement shall not
be strictly construed against any party hereto.
Section 5.16. Effective Date. This Agreement shall be
effective as of December 29, 1995.
DATES: CORPORATION:
SILVERLEAF VACATION CLUB, INC.,
a Texas corporation
December 29, 1995 By: /s/ ROBERT E. MEAD
---------------------------------------
Robert E. Mead, Chief Executive Officer
SHAREHOLDER:
December 29, 1995 By: /s/ SHARON K. BRAYFIELD
---------------------------------------
Sharon K. Brayfield
11
<PAGE> 16
EXHIBIT "A"
STOCK OWNERSHIP
Shareholders Number of Shares
Sharon K. Brayfield 120
----------------
<PAGE> 17
EXHIBIT "B"
__________________
PROMISSORY NOTE
Date: ______________ , 19 __
Maker: ______________________
Payee: ______________________
Place for Payment: ______________________
Principal Amount: _______________________
Annual Interest Rate on Unpaid
Principal from Date of Funding: The greater of Ten Percent (10%) or the
applicable Federal rate as determined and
adjusted from time to time for purposes of
Section 7872(f)(2)(B) of the Internal Revenue
Code of 1986, as amended.
Terms of Payment: The principal balance of this Note shall be payable
in five (5) equal annual installments, commencing one (1)
year after date. Accrued but unpaid interest shall be
payable together with each principal payment.
Annual Interest Rate on
Matured, Unpaid Amounts: Fifteen Percent (15%)
Maker promises to pay to the order of Payee at the place for
payment and according to the terms of payment the principal amount plus
interest at the rates stated above. All unpaid amounts shall be due by the
final scheduled payment date.
On default in the payment of this note and Maker's failure to
cure such default within ten (10) days after receipt of written notice of such
default from Payee, it shall become immediately due at the election of Payee.
Maker and each surety, endorser and guarantor waive all demands for payment,
presentations for payment, notices of intention to accelerate maturity, protest
and notices of protest, except for such notice of default.
B-1
<PAGE> 18
If this note is given to any attorney for collection, or if suit
is brought for collection, or if it is collected through probate, bankruptcy or
other judicial proceedings, then Maker shall pay Payee reasonable attorneys'
fees in addition to other amounts due. Reasonable attorneys' fees shall be 10%
of all amounts due unless either party pleads otherwise.
Interest on the debt evidenced by this note shall not exceed the
maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law; any interest in excess of that
maximum amount shall be credited on the principal of the debt or, if that has
been paid, refunded. On any acceleration or required or permitted prepayment,
any such excess shall be cancelled automatically as of the acceleration or
prepayment or, if already paid, credited on the principal of the debt, or if
the principal of the debt has been paid, refunded. This provision overrides
other provisions in this and all other instruments concerning the debt.
Each Maker is responsible for all obligations represented by this note.
When the context requires, singular nouns and pronouns include the
plural.
MAKER:
________________________________
B-2
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF SILVERLEAF RESORTS, INC.
Due to the provisions of Item 601(b)(21)(ii) of Regulation S-K, the
Registrant has no subsidiaries which must be specifically described under Item
601(b)(21)(i).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 973
<SECURITIES> 0
<RECEIVABLES> 6,237
<ALLOWANCES> 0
<INVENTORY> 10,767
<CURRENT-ASSETS> 20,837
<PP&E> 16,374
<DEPRECIATION> 3,741
<TOTAL-ASSETS> 90,852
<CURRENT-LIABILITIES> (23,361)
<BONDS> 0
0
0
<COMMON> (1)
<OTHER-SE> (20,661)
<TOTAL-LIABILITY-AND-EQUITY> (90,852)
<SALES> (36,028)
<TOTAL-REVENUES> (60,122)
<CGS> 2,805
<TOTAL-COSTS> 34,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,075
<INTEREST-EXPENSE> 4,760
<INCOME-PRETAX> (8,409)
<INCOME-TAX> 3,140
<INCOME-CONTINUING> (5,269)
<DISCONTINUED> 295
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,974)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
