<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 001-13003
SILVERLEAF RESORTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2259890
(State of incorporation) (I.R.S. Employer
Identification No.)
1221 RIVER BEND DRIVE, SUITE 120
DALLAS, TEXAS 75247
(Address of principal executive offices, including zip code)
214-631-1166
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding of the issuer's Common Stock, par
value $0.01 per share, as of November 12, 1999: 12,889,417
<PAGE> 2
SILVERLEAF RESORTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1. Condensed Consolidated Statements of Income for the three months
and nine months ended September 30, 1999 and 1998...................... 1
Condensed Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998.................................................. 2
Condensed Consolidated Statement of Shareholders' Equity for the
nine months ended September 30, 1999................................... 3
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998............................... 4
Notes to the Condensed Consolidated Financial Statements............... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 15
Item 6. Exhibits and Reports on Form 8-K....................................... 15
SIGNATURES......................................................................... 15
</TABLE>
<PAGE> 3
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Vacation Interval sales $ 50,706 $ 38,427 $ 138,480 $ 102,364
Sampler sales 1,475 682 4,217 1,685
------------ ------------ ------------ ------------
Total sales 52,181 39,109 142,697 104,049
Interest income 7,554 4,262 19,981 11,244
Interest income from affiliates 12 16 36 47
Management fee income 678 725 2,218 1,819
Other income 1,337 1,107 2,997 2,250
------------ ------------ ------------ ------------
Total revenues 61,762 45,219 167,929 119,409
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 7,826 5,605 21,183 16,154
Sales and marketing 26,864 19,260 72,177 47,692
Provision for uncollectible notes 5,071 4,489 13,848 12,346
Operating, general and administrative 6,345 3,485 17,399 10,123
Other expense 876 740 2,185 2,213
Depreciation and amortization 1,439 1,029 3,978 2,280
Interest expense 4,517 1,756 11,545 5,088
------------ ------------ ------------ ------------
Total costs and operating expenses 52,938 36,364 142,315 95,896
Income before provision for income taxes 8,824 8,855 25,614 23,513
Provision for income taxes (3,397) (3,435) (9,861) (9,019)
------------ ------------ ------------ ------------
NET INCOME $ 5,427 $ 5,420 $ 15,753 $ 14,494
============ ============ ============ ============
NET INCOME PER COMMON SHARE:
BASIC $ 0.42 $ 0.42 $ 1.22 $ 1.16
============ ============ ============ ============
DILUTED $ 0.42 $ 0.42 $ 1.22 $ 1.14
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 12,889,417 13,054,380 12,889,417 12,543,544
============ ============ ============ ============
DILUTED 12,889,417 13,054,380 12,889,417 12,664,871
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
1
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SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
ASSETS ------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 8,026 $ 11,355
Restricted cash 903 873
Notes receivable, net of allowance for uncollectible notes of
$29,018 and $23,947, respectively 258,499 173,959
Amounts due from affiliates 8,581 4,115
Inventories 97,236 71,694
Land, equipment, buildings, and utilities, net 48,501 34,025
Prepaid and other assets 16,492 16,899
------------- -------------
TOTAL ASSETS $ 438,238 $ 312,920
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 15,424 $ 8,144
Unearned revenues 7,412 4,082
Income taxes payable 1,634 4,136
Deferred income taxes, net 26,462 21,524
Notes payable and capital lease obligations 154,627 58,108
Senior subordinated notes 75,000 75,000
------------- -------------
Total Liabilities 280,559 170,994
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share, 100,000,000
shares authorized, 13,311,517 shares issued and
12,889,417 shares outstanding at September 30, 1999
and December 31, 1998 133 133
Additional paid-in capital 109,339 109,339
Retained earnings 53,206 37,453
Treasury stock, at cost (422,100 shares at September 30, 1999
and December 31, 1998) (4,999) (4,999)
------------- -------------
Total Shareholders' Equity 157,679 141,926
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 438,238 $ 312,920
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number of $0.01 Additional Treasury Stock
Shares Par Paid-in Retained --------------------------
Issued Value Capital Earnings Shares Cost Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 13,311,517 $ 133 $ 109,339 $ 37,453 (422,100) $ (4,999) $ 141,926
Net income -- -- -- 15,753 -- -- 15,753
---------- ---------- ---------- ---------- ---------- ---------- ----------
September 30, 1999 13,311,517 $ 133 $ 109,339 $ 53,206 (422,100) $ (4,999) $ 157,679
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 15,753 $ 14,494
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 3,978 2,280
Deferred income taxes 4,938 6,037
Increase (decrease) in cash from changes in
assets and liabilities:
Restricted cash (30) --
Amounts due from affiliates (4,466) (1,601)
Inventories (25,542) (23,957)
Prepaid and other assets 177 (10,631)
Accounts payable and accrued expenses 7,280 5,837
Unearned revenues 3,330 1,688
Income taxes payable (2,502) 1,994
------------ ------------
Net cash provided by (used in) operating activities 2,916 (3,859)
------------ ------------
INVESTING ACTIVITIES:
Purchases of land, equipment, buildings, and utilities (15,576) (10,676)
Sales of land, equipment, buildings, and utilities 6,466 --
Notes receivable, net (84,540) (63,225)
------------ ------------
Net cash used in investing activities (93,650) (73,901)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities 145,672 118,682
Payments on borrowings to unaffiliated entities (58,267) (78,808)
Net proceeds from issuance of common stock -- 44,782
Purchase of treasury stock -- (4,350)
------------ ------------
Net cash provided by financing activities 87,405 80,306
------------ ------------
Net (decrease) increase in cash (3,329) 2,546
CASH AND CASH EQUIVALENTS:
Beginning of period 11,355 4,970
------------ ------------
End of period $ 8,026 $ 7,516
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 8,277 $ 2,216
Income taxes paid $ 7,426 $ 988
Equipment acquired under capital lease or note $ 9,114 $ 2,065
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 7
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BACKGROUND
These condensed consolidated financial statements of Silverleaf Resorts, Inc.
and subsidiaries ("the Company") presented herein do not include certain
information and disclosures required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes included in the
Company's Form 10-K for the year ended December 31, 1998 (File No. 001-13003) as
filed with the Securities and Exchange Commission. The accounting policies used
in preparing these condensed consolidated financial statements are the same as
those described in such Form 10-K. Certain previously reported amounts, however,
have been reclassified to conform to the 1999 presentation.
SFAS No. 133 -- In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 is effective
for fiscal years beginning after June 15, 2000 and will be adopted for the
period beginning January 1, 2001. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of the derivatives are recorded each period in current earnings or
other comprehensive income depending on whether a derivative is designated as
part of a hedge transaction, and if it is, the type of hedge transaction. The
impact of SFAS No. 133 on the Company's results of operations, financial
position, or cash flows will be dependent on the level and types of derivative
instruments the Company will have entered into at the time the standard is
implemented.
NOTE 2 - EARNINGS PER SHARE
The following table illustrates the reconciliation between basic and diluted
weighted average shares outstanding for the three and nine months ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding - basic 12,889,417 13,054,380 12,889,417 12,543,544
Issuance of shares from stock options exercisable -- -- -- 728,887
Repurchase of shares from stock options proceeds -- -- -- (607,560)
------------- ------------- ------------- -------------
Weighted average shares outstanding - diluted 12,889,417 13,054,380 12,889,417 12,664,871
============= ============= ============= =============
</TABLE>
For the three and nine months ended September 30, 1999, and for the three months
ended September 30, 1998, the weighted average shares outstanding assuming
dilution was anti-dilutive.
5
<PAGE> 8
NOTE 3 - DEBT
Loans, notes payable, capital lease obligations, and senior subordinated notes
as of September 30, 1999 and December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
$60 million revolving loan agreement, which contains certain financial
covenants, due December 2000, principal and interest payable from the proceeds
obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of LIBOR plus 2.55% .................... 36,602 11,210
$70 million revolving loan agreement, which contains certain financial
covenants, due August 2004, principal and interest payable from the proceeds
obtained from customer notes receivable which are pledged
as collateral for the note, at an interest rate of LIBOR plus 2.65% .................... 44,802 29,856
$75 million revolving loan agreement which contains certain financial
covenants, due April 2005, principal and interest payable from the proceeds
obtained from customer notes receivable which are pledged
as collateral for the note, at an interest rate of LIBOR plus 3% ....................... 60,073 13,638
Various notes, due from December 1999 through October 2005,
collateralized by various assets with interest rates ranging from
4.2% to 12.4% .......................................................................... 3,300 223
------------ ------------
Total notes payable .............................................................. 144,777 54,927
Capital lease obligations ................................................................ 9,850 3,181
------------ ------------
Total notes payable and capital lease obligations ................................ 154,627 58,108
10 1/2% senior subordinated notes, due 2008, interest payable semi-
annually on April 1 and October 1, guaranteed by all of the Company's
present and future domestic restricted subsidiaries .................................... 75,000 75,000
------------ ------------
$ 229,627 $ 133,108
============ ============
</TABLE>
At September 30, 1999, prime rate was 8.25% and the LIBOR rates were from 5.34%
to 6.02%. At December 31, 1998, prime rate was 7.75% and LIBOR rates were from
5.15% to 5.28%.
Effective September 1, 1999, the Company reached a definitive agreement with a
lender to increase its $40 million revolving loan agreement, due October 2005,
to a $70 million five-year revolving loan agreement, due August 2004. The credit
facility is based on an 85% advance rate against receivables compared to the
previous advance rate of 70%. The interest rate on the amended credit facility
is LIBOR plus 2.65% compared to the previous interest rate of LIBOR plus 2.5%.
Effective September 30, 1999, the Company entered into a $30 million revolving
loan agreement with a lender. The $30 million revolving loan agreement, which
contains certain financial covenants, is due September 30, 2006, and bears
interest at either the lender's alternate base rate, as defined, or the adjusted
Eurodollar rate plus 2.75%, as defined, determined at the time of each advance.
Principal and interest are paid from the proceeds obtained from customer notes
receivable pledged as collateral for the note. There were no amounts outstanding
under this revolving loan agreement as of September 30, 1999.
NOTE 4 - SUBSIDIARY GUARANTEES
All subsidiaries of the Company have guaranteed the $75.0 million of senior
subordinated notes. The separate financial statements and other disclosures
concerning each guaranteeing subsidiary (each, a "Guarantor Subsidiary") are not
presented herein because the Company's management has determined that such
information is not material to investors. The guarantee of each Guarantor
Subsidiary is full and unconditional and joint and several. Each Guarantor
Subsidiary is a wholly-owned subsidiary of the Company, and together comprise
all direct
6
<PAGE> 9
and indirect subsidiaries of the Company.
Combined summarized operating results of the Guarantor Subsidiaries for the nine
months ended September 30, 1999 and 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 46 $ 81
Expenses (65) (188)
---------- ----------
Net loss $ (19) $ (107)
========== ==========
</TABLE>
September 30,
1999
--------------
Other assets $ 10
--------------
Total assets $ 10
==============
Investment by parent (includes equity
and amounts due to parent) $ 10
--------------
Total liabilities and equity $ 10
==============
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain matters discussed throughout this Form 10-Q filing are forward looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
include, but are not limited to, those discussed in the Company's Form 10-K for
the year ended December 31, 1998 (File No. 001-13003).
The Company currently owns and/or operates 22 resorts in various stages of
development. These resorts offer a wide array of country club-like amenities,
such as golf, swimming, horseback riding, boating, and many organized activities
for children and adults. The Company represents an owner base of over 90,000.
The condensed consolidated financial statements of the Company include the
accounts of Silverleaf Resorts, Inc. and its subsidiaries, all of which are
wholly-owned.
RESULTS OF OPERATIONS
The following table sets forth certain operating information for the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
As a percentage of total revenues:
Vacation Interval sales 82.1% 85.0% 82.5% 85.7%
Sampler sales 2.4% 1.5% 2.5% 1.4%
---------- ---------- ---------- ----------
Total sales 84.5% 86.5% 85.0% 87.1%
Interest income 12.2% 9.5% 11.9% 9.5%
Management fee income 1.1% 1.6% 1.3% 1.5%
Other income 2.2% 2.4% 1.8% 1.9%
---------- ---------- ---------- ----------
Total revenues 100.0% 100.0% 100.0% 100.0%
As a percentage of Vacation Interval sales:
Cost of Vacation Interval sales 15.4% 14.6% 15.3% 15.8%
Provision for uncollectible notes 10.0% 11.7% 10.0% 12.1%
As a percentage of total sales:
Sales and marketing 51.5% 49.2% 50.6% 45.8%
As a percentage of total revenues:
Operating, general and administrative 10.3% 7.7% 10.4% 8.5%
Other expense 1.4% 1.6% 1.3% 1.9%
Depreciation and amortization 2.3% 2.3% 2.4% 1.9%
As a percentage of interest income:
Interest expense 59.7% 41.0% 57.7% 45.1%
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues
Revenues for the quarter ended September 30, 1999 were $61.8 million,
representing a $16.5 million or 36.6% increase over revenues of $45.2 million
for the quarter ended September 30, 1998. The increase was primarily due to a
$12.3 million increase in sales of Vacation Intervals and a $3.3 million
increase in interest income. The strong increase in Vacation Interval sales
primarily resulted from the marketing success of several sales offices that
opened subsequent to September 30, 1998, in Georgia, South Carolina, and
Tennessee.
8
<PAGE> 11
In the third quarter of 1999, the number of Vacation Intervals sold, exclusive
of upgraded Vacation Intervals, increased 9.4% to 3,948 from 3,608 in the same
period of 1998; the average price per interval increased 13.2% to $9,357 from
$8,265. Total interval sales for the third quarter of 1999 included 1,514
biennial intervals (counted as 757 Vacation Intervals) compared to 1,030 (515
Vacation Intervals) in the third quarter of 1998. The Company also increased
sales of upgraded intervals through the continued implementation of marketing
and sales programs focused on selling upgraded intervals to the Company's
existing Vacation Interval owners. In the third quarter of 1999, the 3,152
upgraded Vacation Intervals were sold at an average price of $4,367 compared to
1,891 upgraded Vacation Intervals sold at an average price of $4,551 during the
comparable 1998 period.
Sampler sales increased $793,000 to $1.5 million for the quarter ended September
30, 1999, compared to $682,000 for the same period in 1998. The increase
resulted from increased sales of overnight samplers offered at new resorts,
offset by an increase in biennial interval sales, which are an alternative to
the sampler program. The increase also resulted from increased sales of the
Company's Endless Escape Program to owners of Vacation Intervals at seven
resorts that have been managed by the Company since May 1998.
Interest income increased 76.9% to $7.6 million for the quarter ended September
30, 1999, from $4.3 million for the same period of 1998. This increase primarily
resulted from a $103.2 million increase in notes receivable, net of allowance
for uncollectible notes, since September 30, 1998, due to increased sales.
Management fee income decreased $47,000 for the 1999 third quarter, as compared
to the 1998 third quarter. This decrease was primarily the result of an increase
in the resorts' management clubs' operating expenses.
Other income consists of water and utilities income, condominium rental income,
marina income, golf course and pro shop income, and other miscellaneous items.
Other income increased $230,000 to $1.3 million for the third quarter of 1999
compared to $1.1 million for the same period of 1998. The increase primarily
relates to the Apple Mountain golf course and pro shop, which opened in the
fourth quarter of 1998, and the Holiday Hills restaurant, which opened in the
second quarter of 1999.
Cost of Sales
Cost of sales as a percentage of Vacation Interval sales increased to 15.4% in
the third quarter of 1999, from 14.6% for the same period of 1998. This increase
was primarily the result of the sales mix in the third quarter of 1999 including
a larger percentage of newer, higher cost inventory compared to the third
quarter of 1998.
Sales and Marketing
Sales and marketing costs as a percentage of total sales increased to 51.5% for
the quarter ended September 30, 1999, from 49.2% for the same period of 1998.
Several factors contributed to the increase in sales and marketing costs as a
percentage of sales. This increase, in part, was due to the implementation of
new marketing programs, including a vacation product whereby related revenues
received are deferred until the guest actually stays at the resort.
Additionally, the Company is incurring substantial marketing and start up costs
associated with two new sales offices and one expanded sales office in recently
opened markets where sales have not yet reached mature levels. Finally,
implementation costs associated with four new automated dialers contributed to
the increase.
Provision for Uncollectible Notes
The provision for uncollectible notes as a percentage of Vacation Interval sales
decreased to 10.0% for the third quarter of 1999 from 11.7% for the same period
of 1998. This is the result of continued improvements in the Company's
collection efforts, including increased staffing, improved collections software,
the implementation of a program through which delinquent loans are assumed by
existing owners with a consistent payment history, and an increase in
receivables relating to upgrade sales, which typically represent better
performing accounts, resulting in fewer delinquencies.
Operating, General and Administrative
Operating, general and administrative expenses as a percentage of total revenues
increased to 10.3% for the quarter ended September 30, 1999, as compared to 7.7%
for the quarter ended September 30, 1998. The increase is
9
<PAGE> 12
primarily attributable to higher than expected travel, legal, and professional
fees, primarily related to expansion into new markets, increases in payroll
taxes, employee benefits, and workers' compensation related to Company growth,
and an increase in title and recording fees due to increased borrowings against
pledged notes receivable.
Other Expense
Other expense consists of water and utilities expenses, golf course and pro shop
expenses, marina expenses, and other miscellaneous expenses. Other expense as a
percentage of total revenues remained relatively flat at 1.4% for the quarter
ended September 30, 1999, as compared to 1.6% for the quarter ended September
30, 1998. The $136,000 increase in other expense primarily relates to the Apple
Mountain golf course and pro shop, which opened in the fourth quarter of 1998,
and the Holiday Hills restaurant, which opened in the second quarter of 1999.
Depreciation and Amortization
Depreciation and amortization expense as a percentage of total revenues was
unchanged at 2.3% for the quarter ended September 30, 1999, compared to the
quarter ended September 30, 1998. Overall, depreciation and amortization expense
increased $410,000 for the third quarter of 1999, as compared to 1998, primarily
due to investments in new automated dialers, investments in telephone systems,
and investments in two central marketing facilities, which opened in September
1998 and September 1999, respectively.
Interest Expense
Interest expense as a percentage of interest income increased to 59.7% for the
third quarter of 1999, from 41.0% for the same period of 1998. This increase is
primarily the result of interest expense related to increased borrowings against
pledged notes receivable.
Income before Provision for Income Taxes
Income before provision for income taxes decreased to $8.8 million for the
quarter ended September 30, 1999, as compared to $8.9 million for the quarter
ended September 30, 1998, as a result of the above mentioned operating results.
Provision for Income Taxes
Income tax expense as a percentage of income before provision for income taxes
remained relatively flat at 38.5% in the third quarter of 1999 as compared to
38.8% in the third quarter of 1998.
Net Income
Net income remained flat at $5.4 million for the quarter ended September 30,
1999, as compared to the quarter ended September 30, 1998, as a result of the
above mentioned operating results.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues
Revenues for the nine months ended September 30, 1999 were $167.9 million,
representing a $48.5 million or 40.6% increase over revenues of $119.4 million
for the nine months ended September 30, 1998. The increase was primarily due to
a $36.1 million increase in sales of Vacation Intervals and an $8.7 million
increase in interest income. The strong increase in Vacation Interval sales
primarily resulted from the marketing success of several sales offices that
opened subsequent to September 30, 1998, in Georgia, South Carolina, and
Tennessee.
In the first nine months of 1999, the number of Vacation Intervals sold,
exclusive of upgraded Vacation Intervals, increased 22.9% to 11,858 from 9,651
in the same period of 1998; the average price per interval increased 5.8% to
$8,680 from $8,207. Total interval sales for the nine months ended September 30,
1999, included 4,386 biennial intervals (counted as 2,193 Vacation Intervals)
compared to 2,582 (1,291 Vacation Intervals) in the nine months ended September
30, 1998. The company also increased sales of upgraded intervals through the
continued
10
<PAGE> 13
implementation of marketing and sales programs focused on selling upgraded
intervals to the Company's existing Vacation Interval owners. In the first nine
months of 1999, the 8,162 upgraded Vacation Intervals were sold at an average
price of $4,356 compared to 5,247 upgraded Vacation Intervals sold at an average
price of $4,414 during the comparable 1998 period.
Sampler sales increased $2.5 million to $4.2 million for the nine months ended
September 30, 1999, compared to $1.7 million for the same period in 1998. The
increase resulted from increased sales of overnight samplers offered at new
resorts, offset by an increase in biennial interval sales, which are an
alternative to the sampler program. The increase also resulted from sales of the
Company's Endless Escape Program to owners of Vacation Intervals at seven
resorts that have been managed by the Company since May 1998.
Interest income increased 77.3% to $20.0 million for the nine months ended
September 30, 1999, from $11.3 million for the same period of 1998. This
increase primarily resulted from a $103.2 million increase in notes receivable,
net of allowance for uncollectible notes, since September 30, 1998, due to
increased sales.
Management fee income increased $399,000 for the first nine months of 1999, as
compared to the same period of 1998. This increase was primarily the result of
greater net income from the resorts' management clubs due to higher dues income
resulting from an increased membership base, partially offset by an increase in
the management clubs' operating expenses.
Other income consists of water and utilities income, condominium rental income,
marina income, golf course and pro shop income, and other miscellaneous items.
Other income increased $747,000 to $3.0 million for the nine months ended
September 30, 1999, compared to $2.3 million for the same period of 1998. The
increase primarily relates to the Apple Mountain golf course and pro shop, which
opened in the fourth quarter of 1998, and the Holiday Hills restaurant, which
opened in the second quarter of 1999.
Cost of Sales
Cost of sales as a percentage of Vacation Interval sales decreased to 15.3% for
the nine months ended September 30, 1999, from 15.8% for the same period of
1998. This decrease is primarily the result of a greater percentage of sales of
Destination Resorts units and Presidents units in the first nine months of 1999
compared to the same period of 1998. These units typically represent a lower
cost of sales percentage in comparison to overall inventory. Sales price
increases during the nine months ended September 30, 1999, also contributed to
the decrease in cost of sales as a percentage of Vacation Interval sales
compared to the same period of 1998.
Sales and Marketing
Sales and marketing costs as a percentage of total sales increased to 50.6% for
the nine months ended September 30, 1999, from 45.8% for the same period of
1998. Several factors contributed to the increase in sales and marketing costs
as a percentage of sales. This increase, in part, was due to the continued
implementation of new marketing programs, including a vacation product whereby
related revenues received are deferred until the guest actually stays at the
resort. Additionally, the Company continues to incur substantial marketing and
start up costs associated with two new sales offices and one expanded sales
office in recently opened markets where sales have not yet reached mature
levels. Finally, implementation costs associated with four new automated dialers
contributed to the increase.
Provision for Uncollectible Notes
The provision for uncollectible notes as a percentage of Vacation Interval sales
decreased to 10.0% for the nine months ended September 30, 1999, from 12.1% for
the nine months ended September 30, 1998. This is the result of continued
improvements in the Company's collection efforts, including increased staffing,
improved collections software, the implementation of a program through which
delinquent loans are assumed by existing owners with a consistent payment
history, and an increase in receivables relating to upgrade sales, which
typically represent better performing accounts, resulting in fewer
delinquencies.
Operating, General and Administrative
Operating, general and administrative expenses as a percentage of total revenues
increased to 10.4% for the nine
11
<PAGE> 14
months ended September 30, 1999, as compared to 8.5% for the nine months ended
September 30, 1998. The increase is primarily attributable to higher salaries,
increased headcount, legal and printing fees associated with year-end reporting,
increased title and recording fees due to increased borrowings against pledged
notes receivable, and increased travel, legal, and professional fees, primarily
related to expansion into new markets.
Other Expense
Other expense consists of water and utilities expenses, golf course and pro shop
expenses, marina expenses, and other miscellaneous expenses. Other expense as a
percentage of total revenues decreased to 1.3% for the nine months ended
September 30, 1999, as compared to 1.9% for the nine months ended September 30,
1998. Overall, other expenses remained flat at $2.2 million for the nine months
ended September 30, 1999 and 1998.
Depreciation and Amortization
Depreciation and amortization expense as a percentage of total revenues
increased to 2.4% for the nine months ended September 30, 1999, compared to 1.9%
for the nine months ended September 30, 1998. Overall, depreciation and
amortization expense increased $1.7 million for the first nine months of 1999,
as compared to 1998, primarily due to investments in new automated dialers,
investments in telephone systems, and investments in two central marketing
facilities, which opened in September 1998 and September 1999, respectively.
Interest Expense
Interest expense as a percentage of interest income increased to 57.7% for the
first nine months of 1999, from 45.1% for the same period of 1998. This increase
is primarily the result of interest expense related to increased borrowings
against pledged notes receivable.
Income before Provision for Income Taxes
Income before provision for income taxes increased 8.9% to $25.6 million for the
nine months ended September 30, 1999, from $23.5 million for the nine months
ended September 30, 1998, as a result of the above mentioned operating results.
Provision for Income Taxes
Income tax expense as a percentage of income before provision for income taxes
remained relatively flat at 38.5% in the first nine months of 1999 as compared
to 38.4% in the same period of 1998.
Net Income
Net income increased $1.3 million, or 8.7%, to $15.8 million for the nine months
ended September 30, 1999, from $14.5 million for the nine months ended September
30, 1998, as a result of the above mentioned operating results.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CASH. The Company generates cash primarily from down payments on the
sale of Vacation Intervals, sampler sales, collections of principal and interest
on customer notes receivable from Vacation Interval owners, management fees, and
resort and utility operations. During the nine months ended September 30, 1999,
cash provided by operations was $2.9 million, compared to cash used in operating
activities of $3.9 million for the same period of 1998. The increase in cash
provided by operating activities was primarily a result of the timing of
operational payments. The Company typically receives a 10% down payment on sales
of Vacation Intervals and finances the remainder by receipt of a seven to ten
year customer promissory note. The Company generates cash from financing of
customer notes receivable (i) by borrowing at an advance rate of 70% to 85% of
eligible customer notes receivable and (ii) from the spread between interest
received on customer notes receivable and interest paid on related borrowings.
Because the Company uses significant amounts of cash in the development and
marketing of Vacation Intervals, but collects cash on customer notes receivable
over a seven to ten year period, borrowing against receivables has historically
been a necessary part of normal operations.
12
<PAGE> 15
For the nine months ended September 30, 1999 and 1998, cash provided by
financing activities was $87.4 million and $80.3 million, respectively. The
increase in net cash provided by financing activities was primarily due to
increased borrowings against pledged notes receivable during the nine months
ended September 30, 1999, compared to the same period of 1998. This increase was
offset by the issuance of $75.0 million senior subordinated notes and $44.8
million of Company common stock during the second quarter of 1998. As of
September 30, 1999, the Company's credit facilities provide for loans of up to
$235.0 million. At September 30, 1999, approximately $141.5 million of principal
and interest related to advances under the credit facilities was outstanding.
For the nine months ended September 30, 1999, the weighted average cost of funds
for all borrowings, including the senior subordinated debt, was approximately
9.1%.
Effective September 1, 1999, the Company reached a definitive agreement with a
lender to increase its $40 million revolving loan agreement, due October 2005,
to a $70 million five-year revolving loan agreement, due August 2004. The credit
facility is based on an 85% advance rate against receivables compared to the
previous advance rate of 70%. The interest rate on the amended credit facility
is LIBOR plus 2.65% compared to the previous interest rate of LIBOR plus 2.5%.
Effective September 30, 1999, the Company consummated a $30 million revolving
loan agreement with a lender. The $30 million revolving loan agreement, which
contains certain financial covenants, is due September 30, 2006, and bears
interest at either the lender's alternate base rate, as defined, or the adjusted
Eurodollar rate plus 2.75%, as defined, determined at the time of each advance.
Principal and interest are paid from the proceeds obtained from customer notes
receivable pledged as collateral for the note.
The Company believes that with respect to its current operations and capital
commitments, its borrowing capacity under existing third-party lending
agreements, together with cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the third quarter of 2000. The Company will continue to review the
possibility of extending its borrowing capacity with existing lenders or issuing
additional debt, equity, or mortgage-backed securities to finance future
acquisitions, refinance debt, finance mortgage receivables, and provide for
other working capital purposes.
For regular federal income tax purposes, the Company reports substantially all
of the Vacation Interval sales it finances under the installment method. Under
this method, income on sales of Vacation Intervals is not recognized until cash
is received, either in the form of a down payment or as installment payments on
customer notes receivable. 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. 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 the future regular tax liability attributable to Vacation Interval
sales, and creates a deferred tax asset. In 1998, the Internal Revenue Service
approved a change in the method of accounting for installment sales effective
January 1, 1997. As a result, the Company's alternative minimum taxable income
for 1997 through 2000 was or will be increased each year by an estimated amount
of approximately $9.0 million per year for the pre-1997 adjustment, which will
result in the Company paying substantial additional federal and state taxes in
those years. The Company's net operating loss carryforwards, which also may be
used to offset installment sales income, expire beginning in 2007 through 2018.
Realization of the deferred tax asset arising from net operating losses is
dependent on generating sufficient taxable income prior to the expiration of the
loss carryforwards and other factors.
USES OF CASH. Investing activities typically reflect a net use of cash as a
result of loans to customers in connection with the Company's Vacation Interval
sales, capital additions, and property acquisitions. Net cash used in investing
activities for the nine months ended September 30, 1999 and 1998, was $93.7
million and $73.9 million, respectively. The increase was primarily due to the
increased level of customer notes receivable resulting from higher sales volume,
which was partially offset by equipment sales.
YEAR 2000 COMPLIANCE
Many of the world's computer systems record years in a two-digit format. Such
computer systems will be unable to properly interpret dates beyond the year
1999, which could potentially lead to disruptions in the Company's
13
<PAGE> 16
operations. The Company has conducted a review of its information technology
("IT") systems currently utilized and has identified and assessed non-IT systems
in order to determine potential year 2000 deficiencies. This study included
reviewing all applicable reports, files, inquiry screens, maintenance screens,
batch programs, software, hardware, and other interactive applications. Non-IT
systems are generally more difficult to assess because they often contain
embedded technology that may be subject to year 2000 problems. In completing its
assessment, the Company identified several primary computer systems that were
not year 2000 compliant, including the Marketing system, the Sales and Credit
system, the Accounts Receivable system, the Inventory system, the Finance
Administration system, the Sales Commissions system, and the Predictive dialer
software. Virtually all year 2000 modifications and upgrades to these systems
were successfully tested and fully implemented by July 15, 1999.
In addition to the major computer systems described above, the Company primarily
utilizes standardized and upgraded Microsoft Office products that are year 2000
compliant. All personal computer ("PC") applications that are not in Microsoft
Office are either written in Visual Basic and programmed to handle year 2000
issues, or are other year 2000 certified packages. All operating systems
utilized by the Company, which include Novell Intranetware, OS/400, Windows 95,
and Windows NT, are year 2000 compliant. The Company's AS400 hardware and
related Network servers are year 2000 compliant as well. The Company has
evaluated all data communications equipment, including PCs. The Company had to
replace a minimal number of PCs and no significant deficiencies of data
communications equipment have been found.
The Company identified all non-IT systems that may be year 2000 sensitive,
primarily including access gates, alarms, irrigation systems, thermostats, and
utility meters and switches at its resorts. Although these systems vary by
resort, most of these systems were already year 2000 compliant or are not
reliant on a time-chip that would be affected by year 2000. The Company
believes, however, that any year 2000 modifications needed were completed as of
the end of the second quarter of 1999.
The Company has made inquiries of its major vendors, consisting primarily of
financial institutions, regarding their year 2000 compliance status and its
potential impact to the Company's business. Based on these discussions, the
Company does not anticipate year 2000 difficulties associated with its major
vendors. The Company, however, would change vendors if year 2000 problems at its
existing vendors create interruptions to its business.
Company management believes that the total cost of the aforementioned year 2000
computer system and equipment enhancements will be less than $430,000, including
an estimate of internal payroll committed to the projects, of which
approximately $425,000 has already been incurred. The Company is utilizing both
internal and external resources to achieve year 2000 compliance. The Company has
upgraded or replaced all systems it has found that were not compliant. Although
the systems have been tested or certified, all programs and equipment will
continue to be monitored for compatibility and functionality.
The failure to correct a material year 2000 internal problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of year 2000 readiness of third party vendors, the Company is unable
to determine at this time whether the consequences of year 2000 failures of
third party vendors will have a material impact on the Company's results of
operations, liquidity, or financial condition. The Company believes, however,
that its year 2000 compliance plan provides for adequate staffing, resources,
and time to mitigate and proactively respond to any unforeseen year 2000
problems in a timely and preemptive manner. The cost of year 2000 compliance and
the estimated date of completion of necessary modifications, however, are based
on the Company's best estimates, which were derived from various assumptions of
future events. There can be no assurance that these estimates will be achieved
and actual results could differ materially from those anticipated.
In the event of a complete failure of the Company's information technology
systems, the Company would be able to continue the affected functions either
manually or through the use of non-year 2000 compliant systems. The primary
costs associated with such a necessity would be (1) increased time delays
associated with posting of information and (2) increased personnel to manually
process the information. The Company does not believe the increased costs
associated with such personnel would be significant. The Company currently does
not have any other contingency plans in place. The Company will continue to
evaluate the need for such plans.
14
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently subject to litigation arising in the normal course of
its business. From time to time, such litigation includes claims regarding
employment, tort, contract, truth-in-lending, the marketing and sale of Vacation
Intervals, and other consumer protection matters. Litigation has been initiated
from time to time by persons seeking individual recoveries for themselves, as
well as, in some instances, persons seeking recoveries on behalf of an alleged
class. In the judgement of the Company, none of these lawsuits or claims against
the Company, either individually or in the aggregate, is likely to have a
material adverse effect on the Company, its business, results of operations, or
financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amended and Restated Receivables Loan and Security Agreement dated
September 1, 1999, between the Company and Heller Financial, Inc.
10.2 Amended and Restated Inventory Loan and Security Agreement dated
September 1, 1999, between the Company and Heller Financial, Inc.
10.3 Loan and Security Agreement dated September 30, 1999, between the
Company and BankBoston, N.A., as Agent, and BankBoston, N.A. and
various financial institutions, as Lenders.
10.4 Purchase and Sale Agreement dated July 30, 1999, between the Company
and American National Bank and Trust Company of Chicago, as Trustee.
27.0 Financial Data Schedule.
- -------
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 12, 1999 By: /s/ ROBERT E. MEAD
-------------------------------
Robert E. Mead
Chairman of the Board and
Chief Executive Officer
Dated: November 12, 1999 By: /s/ HARRY J. WHITE, JR.
-------------------------------
Harry J. White, Jr.
Chief Financial Officer
15
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Amended and Restated Receivables Loan and Security
Agreement dated September 1, 1999, between the Company
and Heller Financial, Inc.
10.2 Amended and Restated Inventory Loan and Security
Agreement dated September 1, 1999, between the Company
and Heller Financial, Inc.
10.3 Loan and Security Agreement dated September 30, 1999,
between the Company and BankBoston, N.A., as Agent, and
BankBoston, N.A. and various financial institutions, as
Lenders.
10.4 Purchase and Sale Agreement dated July 30, 1999,
between the Company and American National Bank and
Trust Company of Chicago, as Trustee.
27.0 Financial Data Schedule.
</TABLE>
_____________
(b) Reports on Form 8-K
None.
<PAGE> 1
EXHIBIT 10.1
AMENDED
AND
RESTATED RECEIVABLES LOAN
AND
SECURITY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. - THE LOAN.............................................................................................2
1.1 Loan............................................................................................2
1.2 Term............................................................................................2
1.3 Interest Rate...................................................................................2
1.4 Payments........................................................................................3
1.5 Prepayments.....................................................................................3
1.6 Commitment Fee..................................................................................4
1.7 Unused Line Fee.................................................................................4
Section 2. - COLLATERAL...........................................................................................4
2.1 Grant of Security Interest......................................................................4
2.2 Security Agreement..............................................................................5
Section 3. - CONDITIONS PRECEDENT TO ADVANCES.....................................................................5
3.1 Closing Deliveries..............................................................................5
3.2 Deliveries Prior to Each Advance................................................................5
3.3 Security Interests..............................................................................5
3.4 Representations and Warranties..................................................................5
3.5 No Default......................................................................................5
3.6 Performance of Agreements.......................................................................6
3.7 Governmental Approvals..........................................................................6
Section 4. - GENERAL REPRESENTATIONS AND WARRANTIES...............................................................6
4.1 Existence.......................................................................................6
4.2 Authorization and Enforceability................................................................6
4.3 Financial Statements and Business Condition.....................................................6
4.4 Taxes...........................................................................................6
4.5 Litigation and Proceedings......................................................................7
4.6 Licenses and Permits............................................................................7
4.7 Full Disclosure.................................................................................7
4.8 Employee Benefit Plans..........................................................................7
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.9 Representations as to the Resort................................................................7
4.10 Timeshare Interval Exchange Network.............................................................8
4.11 Associations....................................................................................8
4.12 Collateral......................................................................................8
Section 5. - AFFIRMATIVE COVENANTS................................................................................9
5.1 Payment and Performance of Indebtedness.........................................................9
5.2 Maintenance of Insurance........................................................................9
5.3 Condemnation...................................................................................10
5.4 Inspections and Audits.........................................................................10
5.5 Reporting Requirements.........................................................................11
5.6 Records........................................................................................13
5.7 Management.....................................................................................13
5.8 Net Worth; Liquidity and Leverage..............................................................13
5.9 Maintenance....................................................................................13
5.10 Proceeds.......................................................................................13
5.11 Release and Bonding of Liens...................................................................13
5.12 Claims.........................................................................................13
5.13 Use of Lender Name.............................................................................14
5.14 Other Documents................................................................................14
5.15 Subordinated Obligations.......................................................................14
5.16 Loan Servicing.................................................................................14
5.17 Custodian......................................................................................15
5.18 Compliance with Laws...........................................................................15
5.19 Year 2000 Compliance...........................................................................15
5.20 Cross Default, Cross Collateralization.........................................................15
5.21 Environmental Reports..........................................................................16
5.22 Oak N' Spruce Trust............................................................................16
5.23 Waiver of Non-Recourse Liability...............................................................17
5.24 Registration of Interval Exchange Club.........................................................17
5.25 Suspension of Sales............................................................................17
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 6. - NEGATIVE COVENANTS..................................................................................17
6.1 Consolidation and Merger.......................................................................17
6.2 Restrictions on Transfers......................................................................18
6.3 Timeshare Regimen..............................................................................18
6.4 Collateral.....................................................................................18
6.5 No Sales Outside of Certain States.............................................................19
6.6 Contracts......................................................................................19
6.7 Restricted Transfer and Encumbrance of Units and Intervals.....................................19
Section 7. - EVENTS OF DEFAULT...................................................................................19
7.1 Payments.......................................................................................19
7.2 Failure to Permit Inspections..................................................................19
7.3 Covenant Defaults..............................................................................19
7.4 Warranties or Representations..................................................................19
7.5 Bankruptcy.....................................................................................19
7.6 Attachment, Judgment, Tax Liens................................................................20
7.7 Default by Borrower in Other Agreements........................................................20
7.8 Default under Construction Loan or Inventory Loan..............................................20
7.9 Environmental Reports..........................................................................20
Section 8. - REMEDIES............................................................................................20
8.1 Remedies Upon Default..........................................................................20
8.2 Application of Collateral; Termination of Agreements...........................................21
8.3 Waivers........................................................................................21
8.4 Cumulative Rights..............................................................................21
Section 9. - CERTAIN RIGHTS OF AGENT AND LENDERS.................................................................22
9.1 Protection of Collateral.......................................................................22
9.2 Performance by Agent...........................................................................22
9.3 Fees and Expenses..............................................................................22
9.4 Notice to Purchaser............................................................................22
9.5 Collection of Notes............................................................................22
9.6 Power of Attorney..............................................................................22
9.7 Indemnification of Agent and Lenders...........................................................23
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
9.8 Assignments and Participations in Loans and Notes..............................................23
9.9 Agent..........................................................................................25
9.10 Amendments, Consents and Waivers for Certain Actions...........................................29
9.11 Set Off and Sharing of Payments................................................................29
9.12 Disbursement of Advances.......................................................................30
9.13 Disbursements of Advances; Payment.............................................................30
9.14 Indemnities....................................................................................32
9.15 Amendments and Waivers.........................................................................33
Section 10. - MISCELLANEOUS......................................................................................33
10.1 Notice.........................................................................................33
10.2 Survival.......................................................................................34
10.3 Governing Law..................................................................................34
10.4 Invalid Provisions.............................................................................34
10.5 Counterparts; Effectiveness....................................................................35
10.6 Lender Not Fiduciary...........................................................................35
10.7 Entire Agreement...............................................................................35
10.8 Consent to Advertising and Publicity...........................................................35
10.9 Headings.......................................................................................35
10.10 Broker's Fees..................................................................................35
10.11 Venue..........................................................................................35
10.12 Jury Trial Waiver..............................................................................36
</TABLE>
SCHEDULES
<TABLE>
<S> <C> <C>
APPENDIX - Defined Terms
SCHEDULE 3.2 - Deliveries For All Advances
SCHEDULE 4.5 - List of Litigation Matters
SCHEDULE 4.9 - Silverleaf Resorts, Inc., Ownership and Management of Resorts
SCHEDULE 5.21 - Resorts for Which Environmental Reports and/or Reliance Letters are Required
</TABLE>
-iv-
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT A - Form of Reassignment of Mortgage
EXHIBIT B - Form of Legal Opinion
EXHIBIT C - Requests for Advance
EXHIBIT D - Assignments of Contracts, Notes Receivable
and Mortgages/Deeds of Trust and Assignment
of Assignments of Beneficial Interest
EXHIBIT E - Form of Allonge
EXHIBIT F - Permitted Exceptions
EXHIBIT G - Legal Description for the Resort
EXHIBIT H - Approved Resorts
EXHIBIT I - Form of Assignment and Acceptance Agreement
EXHIBIT J - Unapproved Resorts
EXHIBIT M - Timeshare Associations
EXHIBIT 5.15 - Subordination Agreement
EXHIBIT 9.13 - Form of Notice of Lender of Request for
Advance
</TABLE>
-v-
<PAGE> 7
VOF Loan No. 94-117-001
AMENDED AND RESTATED RECEIVABLES LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED RECEIVABLES LOAN AND SECURITY AGREEMENT (this
"Agreement") dated September 1, 1999, is made by and between Silverleaf Resorts,
Inc., a Texas corporation f/k/a Silverleaf Vacation Club, Inc., f/k/a Ascension
Capital Corporation, successor by merger to Ascension Resorts, Ltd., a Texas
limited partnership d/b/a Silverleaf Resorts, Ltd. ("Borrower"), whose address
is 1221 Riverbend, Suite 120, Dallas, Texas 75247, and Heller Financial, Inc., a
Delaware corporation ("Agent" and "Lender"), as a Lender and as Agent for all
Lenders and such financial institutions as are or hereafter become parties to
this Agreement as Lenders, whose address is 500 West Monroe Street, Chicago,
Illinois 60661. All capitalized terms are defined in the Appendix attached
hereto.
RECITALS
A. WHEREAS, Borrower and Lender entered into that certain Loan and
Security Agreement dated as of October 11, 1994 pursuant to which Lender made
Borrower a Five Million Dollar ($5,000,000) revolving receivables loan ("Loan").
B. The Loan was modified and increased by an additional Five Million
Dollars ($5,000,000) to Ten Million Dollars ($10,000,000) pursuant to the Loan
Modification Agreement between Borrower and Lender dated April 19, 1995.
C. The Loan was amended to reflect the merger of the Borrower into its
general partner pursuant to the Amendment to Loan and Security Agreement between
Borrower and Lender dated December 6, 1995.
D. The Loan was modified and increased by an additional Five Million
Dollars ($5,000,000) to Fifteen Million Dollars ($15,000,000) pursuant to the
Amended and Restated Loan and Security Agreement between Borrower and Lender
dated December 27, 1995.
E. The Loan was amended to revise the procedure for making Advances and
for funding option pursuant to the Amendment to Amended and Restated Loan and
Security Agreement between Borrower and Lender dated February 28, 1996
("February 1996 Amendment").
F. The Loan was modified and increased by an additional Ten Million
Dollars ($10,000,000) to Twenty-five Million Dollars ($25,000,000) pursuant to
the Amendment to Amended and Restated Loan and Security Agreement ("Second
Restated Agreement") between Borrower and Lender dated August 15, 1996.
G. The Loan was amended to add provisions regarding biennial timeshare
interests pursuant to a letter agreement between Maker and Holder dated March
31, 1997.
1
<PAGE> 8
H. The Loan was modified and increased by an additional Fifteen Million
Dollars ($15,000,000) to Forty Million Dollars ($40,000,000) pursuant to the
Second Amendment to Amended and Restated Loan and Security Agreement dated
October 31, 1997 ("Second Amendment").
I. The parties desire to amend and modify the Loan further by this
Amended and Restated Loan and Security Agreement to, among other things,
increase the Loan to Seventy Million Dollars ($70,000,000) less Advances
outstanding under the Ten Million Dollar ($10,000,000) Inventory Loan of even
date herewith and to provide for other Lenders to participate in the Loan and to
join in and consent to the terms and conditions of this Agreement and for Lender
to act as Agent on behalf of such other Lenders and on behalf of Lender who
shall also be deemed a Lender hereunder.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants herein contained, Borrower and Lender agree
as follows:
SECTION 1. - THE LOAN
1.1 LOAN.
(a) AVAILABILITY. During the Revolving Period, each Lender agrees
severally and not jointly to make each Lender's Pro Rata Share of Advances
through Agent to Borrower not in excess of the aggregate amount of Availability
provided that Borrower satisfies all conditions set forth in Section 3 hereof.
Advances shall only be made with respect to Approved Resorts. Advances shall be
(a) in minimum amounts of $100,000 each, and (b) made no more frequently than
four (4) times each month nor more than one (1) time each week; provided,
however, that, subject to Availability, any request for an Advance of less than
$100,000 or for any Advance in excess of the number of Advances permitted in any
week or month shall be honored by Lenders if accompanied by payment to Agent on
behalf of Lenders of a fee (the "Service Charge") of $3,000 for each such
Advance. Except in connection with a prepayment mandated under Section 1.5(b)(i)
below, any amounts repaid during the Revolving Period may be reborrowed during
the Revolving Period.
(b) EXCESS AVAILABILITY. Lenders, severally and not jointly, shall
make Advances of Excess Availability to Borrower not more often than once per
month and within fifteen (15) days of Borrower's delivery to Agent of written
request therefor accompanied by Monthly Reports evidencing such Excess
Availability to Agent's satisfaction.
1.2 TERM. The Loan shall be due and payable on or before August 31, 2004
or the first business day thereafter.
1.3 INTEREST RATE. The outstanding principal balance of the Loan together
with all other Indebtedness shall bear interest at the Interest Rate; provided,
however, that after the occurrence of an Event of Default the Loan will bear
interest at the Default Rate.
2
<PAGE> 9
1.4 PAYMENTS.
(a) MONTHLY PAYMENTS. All funds collected by the Lockbox Agent from
the Financed Notes Receivable shall be paid to Agent on behalf of Lenders at
least weekly pursuant to the Lockbox Agreement, and applied in the following
order: first to the payment of costs and expenses incurred by Agent in
collecting any amounts due in connection with the Loan; second, to the payment
of accrued but unpaid interest on the Loan; and thereafter to the reduction of
the principal balance of the Loan. If the funds received by Agent from the
Lockbox Agent with respect to any month are insufficient to pay interest in
full, Borrower shall pay the difference to Agent within five (5) days of written
notice from Agent. Payments received by Borrower directly from any Purchaser
shall be delivered to the Lockbox Agent within two (2) Business Days.
(b) FINAL PAYMENT. The Indebtedness shall be payable in full on the
Maturity Date.
1.5 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Prepayments of the Loan may be made in
whole, or in part, upon five (5) days prior written notice to Agent at any time.
All partial prepayments shall be based pro rata on unmodified and modified
Financed Notes Receivable. Such prepaid amounts shall be subject to the Unused
Line Fee set forth below.
(b) MANDATORY PREPAYMENTS.
(i) EXCESS OUTSTANDINGS. If at any time the outstanding
principal balance of the Loan exceeds the Maximum Exposure, Borrower shall,
within five (5) Business Days after notice, either (A) prepay the Loan in an
amount necessary to reduce the principal balance of the Loan, or (B) deliver to
Agent such additional or replacement Eligible Notes Receivable, in either event
such that the remaining outstanding principal balance of the Loan is equal to or
less than the Maximum Exposure.
(ii) INELIGIBLE FINANCED NOTE RECEIVABLE; VIOLATION OF OAK N'
SPRUCE LIMITATION. If at any time after the expiration of the Revolving Period a
Financed Note Receivable ceases to be an Eligible Note Receivable or if at any
time the aggregate amount of Advances outstanding under this Loan and the
Inventory Loan secured by assignments of Assignments of Beneficial Interests at
Oak N' Spruce Resort exceeds $5,000,000 (the "Oak N' Spruce Limitation"),
Borrower shall, within five (5) Business Days after notice, either (A) prepay
the Loan in an amount equal to the balance due under such ineligible Financed
Note Receivable, or (B) deliver to Agent one (1) or more Eligible Notes
Receivable having an outstanding aggregate principal balance equal to or in
excess of the outstanding principal balance of such ineligible Financed Note
Receivable or (C) with respect to the Oak N'Spruce Limitation, repay that
portion of the Loan or the Inventory Loan as determined by Lender in its sole
discretion secured by Assignments of Assignment of Beneficial Interests in
excess of $5,000,000. Thereafter, at Borrower's request Agent shall return such
ineligible Note Receivable to Borrower and, within five (5) days of Agent's
receipt from Borrower of a completed assignment relating to such Note Receivable
and the Mortgage securing the same, in form acceptable to Agent
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substantially in the form attached hereto as EXHIBIT A, Agent shall execute such
instrument and return it to Borrower.
1.6 COMMITMENT FEE. The Commitment Fee of $233,000 has been fully earned
by Agent. Borrower shall pay to Agent the Commitment Fee at the time of
execution of this Agreement.
1.7 UNUSED LINE FEE. Borrower agrees to pay Agent during the Revolving
Period an Unused Line Fee in an amount equal to one percent (1%) of the excess
of $25,000,000 over the average daily balance of outstanding Advances under this
Loan and the Inventory Loan for each six-month calendar period commencing on
September 1st, and March 1st of each calendar year. The Unused Line Fee shall be
payable in arrears on or before the 5th Business Day of each six-month period.
SECTION 2. - COLLATERAL
2.1 GRANT OF SECURITY INTEREST. To secure the payment and performance of
the Indebtedness, Borrower does hereby unconditionally and irrevocably assign,
pledge and grant to Agent for the benefit of Lenders 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) The Financed Notes Receivable;
(b) The Mortgages;
(c) The original Certificates of Beneficial Interest;
(d) The Assignments of Beneficial Interest;
(e) The Purchase Documents;
(f) All rights of Borrower, its Affiliates, successors or assigns, as
relates to any Interval which is the subject of a Financed Note Receivable;
(g) All deposits, accounts, accounts receivable, general intangibles
and other receivables arising under or in connection with the Pledged Documents,
together with all payments, privileges and benefits arising out of the
enforcement thereof, and all funds held in any deposit accounts related to any
of the Financed Notes Receivable;
(h) All policies of title insurance related to the Mortgages;
(i) All documents, instruments, pledged assets and chattel paper
relating to the Pledged Documents and the other properties and rights described
as Collateral herein;
(j) All cash and other monies and property of Borrower in the
possession or under the control of Agent;
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(k) All books, records, ledger cards, files, correspondence, computer
tapes, disks and software relating to the Pledged Documents or any other
Collateral described herein; and
(l) All proceeds, extensions, amendments, additions, improvements,
betterments, renewals, substitutions and replacements of the foregoing.
2.2 SECURITY AGREEMENT. This Agreement shall be deemed a security
agreement as defined in the Code, and the remedies for any violation of the
covenants, terms and conditions of the agreements herein contained shall be
cumulative and be as prescribed (a) herein, or (b) by general law, or (c) as to
such part of the Collateral which is also reflected in any filed financing
statement, by the specific provisions of the Code now or hereafter enacted, all
at Lender's sole election.
SECTION 3. - CONDITIONS PRECEDENT TO ADVANCES
The obligation of Lenders to make Advances is subject to satisfaction of
all of the conditions set forth below.
3.1 CLOSING DELIVERIES. Agent on behalf of and for the benefit of all
Lenders shall have received, in form and substance satisfactory to Agent, all
documents, instruments and information identified on the Closing Checklist
heretofore delivered by Agent to Borrower including, without limitation, an
executed legal opinion, issued by counsel acceptable to Agent, in form and
content acceptable to Agent substantially in the form attached hereto as EXHIBIT
B.
3.2 DELIVERIES PRIOR TO EACH ADVANCE. Prior to each Advance, Agent on
behalf of and for the benefit of all Lenders shall have received all documents,
instruments and information identified on SCHEDULE 3.2. Requests for Advance
with respect to the Approved Resorts shall be made at least 5 Business Days
prior to the requested date of disbursement and Requests for Advance for
Unapproved Resorts shall be made at least 5 Business Days prior to the requested
date of disbursement which shall not be earlier than 5 Business Days after an
Unapproved Resort becomes an Approved Resort and Requests for Advance shall be
in the form of EXHIBIT C hereto.
3.3 SECURITY INTERESTS. Agent shall have received satisfactory evidence
that all security interests and liens granted to Agent for the benefit of all
Lenders pursuant to this Agreement or the other Loan Documents have been duly
perfected and constitute first priority liens on the Collateral.
3.4 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained herein and in the 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 Agent after the date hereof and approved by
Agent.
3.5 NO DEFAULT. No Event of Default shall have occurred.
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3.6 PERFORMANCE OF AGREEMENTS. Borrower shall have performed in all
material respects all agreements, paid all fees, costs and expenses and
satisfied all conditions which any Loan Document provides shall be paid or
performed by it as of such date.
3.7 GOVERNMENTAL APPROVALS. Borrower shall have obtained all approvals,
licenses, permits and consents for (a) Borrower's operation of that portion of
each Resort then open and (b) the sale of Intervals which are the subject of any
requested Advance.
SECTION 4. - GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and each Lender as
follows, which representations and warranties shall remain true throughout the
term of the Loan:
4.1 EXISTENCE. Borrower is 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 Texas and is authorized to transact
business in the State of Texas and in all other jurisdictions when the conduct
of Borrower's business requires it to be so qualified or licensed.
4.2 AUTHORIZATION AND ENFORCEABILITY.
(a) EXECUTION. The Loan Documents have been duly authorized, executed
and delivered and constitute the duly authorized, valid and legally binding
obligations of Borrower, enforceable against Borrower and the other parties
signatory thereto (other than Lender) in accordance with their respective terms.
(b) OTHER AGREEMENTS. The execution, delivery and compliance with the
terms and provisions of the Loan Documents will not (i) to the best of
Borrower's knowledge, violate any provisions of law or any applicable
regulation, order or other decree of any court or governmental entity, or (ii)
conflict or be inconsistent with, or result in any default under, any contract,
agreement or commitment to which Borrower is bound.
4.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION. Borrower's financial
statements fairly present the respective financial conditions and (if
applicable) results of operations of Borrower as of the date or dates thereof
and for the periods covered thereby. All such financial statements, other than
those prepared on behalf of a natural person, if any, were prepared in
accordance with GAAP. Except for any such changes heretofore expressly disclosed
in writing to Agent, there has been no material adverse change in the respective
financial conditions of Borrower from the financial conditions shown in the
financial statements. Borrower is able to pay all of its debts as they become
due, and Borrower shall maintain such solvent financial condition, giving effect
to all obligations, absolute and contingent, of Borrower. Borrower's obligations
under this Agreement and under the Loan Documents will not render Borrower
unable to pay its debts as they become due. The present fair market value of
Borrower's assets is greater than the amount required to pay its total
liabilities.
4.4 TAXES. All ad valorem taxes, income taxes and other state or federal
taxes and assessments against the Resorts, the Timeshare Associations,
Silverleaf Berkshires and the
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Collateral have been paid and Borrower knows of no basis for any additional
taxes or assessments against the Resort or the Collateral. Borrower has filed or
caused to be filed all required tax returns and has paid all taxes shown to be
due and payable on such returns, including interest and penalties, and all other
taxes which are payable by the Timeshare Associations, Silverleaf Club or
Silverleaf Berkshires, to the extent the same have become due and payable.
Borrower shall collect and pay any applicable sales or rental tax respecting the
sale or rental of any Intervals. All taxes due and payable by each Timeshare
Association have been and will be on the date of each Advance paid.
4.5 LITIGATION AND PROCEEDINGS. Except as disclosed in SCHEDULE 4.5
attached hereto, there are no actions, suits, proceedings, orders or injunctions
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower, the Resorts, Silverleaf Club, f/k/a Master Endless Escape Club, a
Texas not-for-profit corporation, the Timeshare Associations or any Affiliate,
at law or in equity, or before or by any governmental authority in any case
individually in which the claim exceeds or is reasonably expected to exceed
$50,000 or which in the aggregate the claims exceed or are reasonably expected
to exceed $250,000. Borrower has not received any notice from any court or
governmental authority alleging that Borrower or any Affiliate, any Resort or
Timeshare Association has violated the Timeshare Act, any of the rules or
regulations thereunder, or any other applicable laws.
4.6 LICENSES AND PERMITS. Borrower possesses all requisite franchises,
certificates of occupancy, certificates of convenience and necessity, business
and operating rights, licenses, permits, consents, authorizations, exemptions
and orders as are necessary to carry on its business as now being conducted in
all jurisdictions where Borrower conducts business.
4.7 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.
4.8 EMPLOYEE BENEFIT PLANS. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act, the Internal Revenue Code and all other applicable laws and the
regulations and interpretations thereof with respect to all employee benefit
plans adopted by Borrower for the benefit of its employees. No material
liability has been incurred by Borrower which remains unsatisfied for any
funding obligation, taxes or penalties with respect to any such employee benefit
plan.
4.9 REPRESENTATIONS AS TO THE RESORT. Prior to any Advance, the following
representations and warranties shall be true and correct with respect to each
Resort for which Collateral is pledged to secure the repayment of such Advance:
(a) TITLE; PRIOR LIENS. Borrower is the fee simple owner of those
Resorts as shown on SCHEDULE 4.9 and is the fee simple owner of Intervals only
at those Resorts as shown on SCHEDULE 4.9. Borrower currently owns no interest
in the Resorts or Intervals at the Resorts as shown on SCHEDULE 4.9. Borrower
has good and marketable title to the Intervals or the Resort
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as the case may be as indicated on SCHEDULE 4.9 (excluding sold Intervals).
Borrower is not in default under any of the documents evidencing or securing any
indebtedness which is secured, wholly or in part, by the Resorts or the
Intervals, 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 the Resorts other than the Permitted Exceptions.
(b) ACCESS. Each Resort and Interval therein has direct access to a
publicly dedicated road over a recorded easement or otherwise and all roadways,
if any, inside each Resort are or will be after the first Advance common areas
under the Declaration.
(c) UTILITIES. Electric, gas, sewer, water facilities and other
necessary utilities are lawfully available in sufficient capacity to service
each Resort and any easements necessary to the furnishing of such utility
service have been obtained and duly recorded.
(d) AMENITIES. All amenities described in the sales prospectus and
the Public Reports for each Resort are completed, or a bond insuring their
completion has been posted. Each Purchaser of an Interval has undisturbed access
to and the use of all of the amenities, roads and public utilities of the Resort
as and to the extent provided in the Declaration and the Public Reports.
(e) CONSTRUCTION. All costs arising from the construction of any
improvements and the purchase of any equipment, inventory, or furnishings
located in or on any Resort or Interval have been paid current.
4.10 TIMESHARE INTERVAL EXCHANGE NETWORK. Borrower and each Resort is a
member and participant, pursuant to a validly executed and enforceable agreement
in writing, in either Interval International or Resort Condominiums
International. Borrower has paid all fees and other amounts due and owing under
such agreement and is not otherwise in default thereunder.
4.11 ASSOCIATIONS. Each owner of an Interval is a member of the related
Timeshare Association, and all the Timeshare Associations have authority to levy
annual assessments to cover the costs of maintaining and operating the
respective Resorts. To Borrower's knowledge, Silverleaf Club and each Timeshare
Association is solvent; currently levied assessments are adequate to cover such
costs and capital improvements and reserves are established pursuant to
applicable law where required and are not deficient to perform the purposes for
which they are intended; and there are no reasonably anticipated 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 applicable Declarations and (B) maintain the reserve described above.
4.12 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
(i) the security interest created by this Agreement or otherwise created in
favor of Agent for the benefit of all Lenders,
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and (ii) the Permitted Exceptions. 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 Agent for the
benefit of the Lenders. Borrower shall defend Lenders against and save them
harmless from all claims of any Persons other than Lenders with respect to the
Collateral, and this indemnity shall include all attorneys' fees and legal
expenses.
(b) BINDING OBLIGATIONS. On the date of the assignment and delivery
to Agent for the benefit of Lenders, each Financed Note Receivable constitutes
an Eligible Note Receivable and Borrower is not aware of any facts or
information which would cause such Financed Note Receivable to be ineligible
hereunder.
(c) COMMUNITY PROPERTY. The Pledged Documents were executed by
Purchasers in connection with the purchase of Intervals and, as to individuals,
bind the marital community of married individual partners, to the extent
community property statutes are applicable.
SECTION 5. - AFFIRMATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lenders are
committed to make Advances hereunder, Borrower covenants as follows:
5.1 PAYMENT AND PERFORMANCE OF INDEBTEDNESS. Borrower shall pay and
promptly perform all of the obligations hereunder and under the Loan Documents.
5.2 MAINTENANCE OF INSURANCE.
(a) POLICIES. The Resorts or Intervals, as the case may be, shall at
all times and for so long as any Indebtedness remains outstanding be kept
insured with such general liability coverage and such other coverages acceptable
to Agent, by carrier(s), in amounts and in form at all times satisfactory to
Agent, which carrier(s), amounts and form shall not be changed without the prior
written consent of Agent. All required insurance may be maintained by the
Timeshare Association as required by the Declaration, provided that in the event
such Timeshare Association fails to maintain any insurance required under this
Section 5.2(a), then Borrower shall be required to obtain and maintain such
insurance.
(b) PROOFS OF CLAIM. In case of loss or damage or other casualty,
Borrower shall give immediate written notice thereof to the insurance carrier(s)
and to Agent. Subject to the prior rights of the Timeshare Association under the
Declaration, Agent is authorized and empowered, and Borrower hereby irrevocably
appoints Agent as its attorney-in-fact (such appointment is coupled with an
interest), at Agent's option, to make or file proofs of loss or damage and to
settle and adjust any claim under insurance policies which insure against such
risks, or to direct Borrower, in writing, to agree with the insurance carrier(s)
on the amount to be paid in regard to such loss.
(c) LOSS OR CASUALTY. Provided no Event of Default then exists and
Borrower certifies as to same, the net insurance proceeds shall be made
available for the restoration or repair of the Resort if (i) in Agent's
reasonable judgment: (A) restoration or repair and the
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continued operation of the Resort is economically feasible; (B) the value of
Agent's security is not reduced; and (C) the casualty loss does not exceed the
net insurance proceeds available for restoration, or Borrower or the Timeshare
Association provides a deposit in the amount of any such excess or other
evidence satisfactory to Agent that funds are otherwise available to pay any
excess costs of restoration; and (ii) the loss does not occur in the six (6)
month period preceding the Maturity Date and Agent's independent consultant
certifies that the restoration of the Property can be completed at least ninety
(90) days prior to the Maturity Date. Borrower shall pay, or cause to be paid,
all amounts, in addition to the net insurance proceeds, necessary to pay in full
the cost of the restoration or repair. Notwithstanding anything to the contrary
contained herein, for so long as any part of the Resort is subject to the
Declaration, any and all insurance proceeds received by Agent arising from any
damage or destruction to the Resort shall be delivered and paid out by Agent to
the insurance trustee under the Declaration, to be distributed and used in
accordance with the provisions of the Declaration.
Notwithstanding the foregoing, it shall be a condition precedent to
any disbursement of insurance proceeds held by Agent hereunder that Agent shall
have approved (x) all plans and specifications for any proposed repair or
restoration; (y) the construction schedule; and (z) the architect's and general
contractor's contracts for restoration exceeding $100,000. Agent may establish
other conditions it deems reasonably necessary to assure the work is fully
completed in a good and workmanlike manner free of all liens or claims by reason
thereof, and in compliance with all applicable laws, rules and regulations. At
Agent's option, the net insurance proceeds shall be disbursed pursuant to a
construction escrow acceptable to Agent. If an Event of Default then exists, or
any of the conditions set forth in this subsection have not been met or
satisfied, the net insurance proceeds shall be applied to the Indebtedness in
such order and manner as Agent may elect, whether or not due and payable, with
any excess paid to Borrower.
5.3 CONDEMNATION. The proceeds of any award, payment or claim for damages,
direct or consequential, in connection with any condemnation or other taking of
any Unit or Interval which is the subject of a Financed Note Receivable or part
thereof, or for conveyances in lieu of condemnation, are hereby assigned to and
shall be paid to Agent. Agent is authorized (but is under no obligation) to
collect any such proceeds. Agent may, in its sole discretion, elect to apply the
net proceeds of any such condemnation award (after deduction of Lender's
reasonable costs and expenses, if any, in collecting the same) in reduction of
the Indebtedness in such order and manner as Agent may elect, whether due or
not. Notwithstanding anything to the contrary contained herein, for so long as
any part of the Resort is subject to the Declaration, any and all awards and
payment received by Agent arising from any condemnation or conveyances in lieu
thereof relating to the Resort shall be delivered and paid out by Agent to the
insurance trustee under the Declaration, to be distributed and used in
accordance with the provisions of the Declaration.
5.4 INSPECTIONS AND AUDITS. Borrower shall, at such reasonable times
during normal business hours and as often as may be reasonably requested, permit
any agents or representatives of Agent to inspect the Resorts and any of
Borrower's assets (including financial and accounting books and records), to
examine and make copies of and abstracts from the records and books of account
of Borrower, Silverleaf Berkshires, or the Timeshare Associations or servicer
under the Servicing Agreement and to discuss its affairs, finances and accounts
with any of its officers,
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employees or independent public accountants. Borrower acknowledges that Agent
intends to conduct such audits and inspections on at least an annual basis.
Borrower shall make available to Agent all credit information in Borrower's
possession or under Borrower's control with respect to Purchasers as Agent may
request. All audits, inspections of the Resorts and credit investigations shall
be at Borrower's expense; provided, however, that except with respect to any
audits, inspections of the Resorts or credit investigations after an Event of
Default hereunder, Borrower shall not be required to pay in excess of Three
Thousand Five Hundred Dollars ($3,500.00) per Resort in any calendar year for
audits, nor in excess of One Thousand Dollars ($1,000.00) per Resort in any
calendar year for inspections or credit investigations. After the occurrence of
an Event of Default, Borrower shall be required to pay all fees, cost and
expenses incurred by Agent for any and all Resort inspections, audits and any
other diligence relating to Borrower's finances or books and records.
5.5 REPORTING REQUIREMENTS. So long as the Indebtedness remains unpaid,
Borrower shall furnish the following to Agent:
(a) Within forty-five (45) days after the end of each fiscal
quarterly period, unaudited financial statements of Borrower, Silverleaf
Berkshires, Silverleaf Club and the Timeshare Associations certified by the
chief financial officer of the subject thereof.
(b) Borrower will furnish or cause to be furnished to Agent within
120 days after each fiscal year of the subject, a copy of the current annual
financial statements of Borrower and current annual financial statements of
Silverleaf Club, Silverleaf Berkshires, and the Timeshare Associations. 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 of Borrower 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 Agent:
(a) a certificate signed by the chief financial officer of Borrower stating that
there exists no Event of Default or, if any such Event of Default, 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 its
knowledge, Silverleaf Club, is in full compliance with the tangible net worth
requirements, and set forth in reasonable detail the calculations upon which
such certification is based.
(c) Within ten (10) days after the end of each month, a monthly
report showing (i) all sales and cancellations of sales of Intervals during such
month, (ii) the weighted average interest rate for all Notes Receivable, (iii)
the percentage of Notes Receivable executed by non U.S. residents, (iv) the
percentage of Biennial Intervals related to the Financed Notes Receivable, (v)
the percentage of modified Financed Notes Receivable as permitted under
paragraph 6.4, (vi) the percentage of Financed Notes Receivable related to
Certificates of Beneficial Interest and the aggregate outstanding principal
balance of such Financed Notes Receivable (and the Amount of
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Advances under the Inventory Loan secured by Certificates of Beneficial
Interest); and (vii) the percentage of modified Financed Notes Receivable the
term of which exceeds 84 months, in form and content satisfactory to Agent; and
within thirty (30) days after the end of each fiscal year of Borrower, an annual
sales and inventory report for each Resort detailing (i) the sales of all
Intervals during such fiscal year and the available inventory of Units and
Intervals, (ii) the weighted average interest rate for all Notes Receivable,
(iii) the percentage of Notes Receivable executed by non U.S. and Canadian
residents, (iv) the percentage of Biennial Intervals related to the Financed
Notes Receivable, (v) the percentage of modified Financed Notes Receivable as
permitted under paragraph 6.4, (vi) the percentage of Financed Notes Receivable
related to Certificates of Beneficial Interest and the aggregate outstanding
principal balance of such Financed Notes Receivable (and the Amount of Advances
under the Inventory Loan secured by Certificates of Beneficial Interest), and
(vii) the percentage of Financed Notes Receivable the term of which exceeds 84
months, certified by Borrower to be true, correct and complete and otherwise in
the form reasonably approved by Agent.
(d) Borrower will deliver to Agent from time to time, as requested
and 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
Agent any material modifications which it or, to its knowledge, any other person
having the power to do so proposes be made to the Timeshare Program Consumer
Documents or the Timeshare Program Governing Documents last delivered to Agent,
and will deliver all such modifications to Agent promptly after they are made or
adopted.
(e) Borrower will at its expense permit Agent and its representatives
at all reasonable times to inspect the Resorts and to inspect, audit and copy
its records and records of Silverleaf Club, the Timeshare Associations, and
Silverleaf Berkshires in Borrower's possession, custody or control.
(f) Borrower will submit to Agent annually, within ten days after
each is available, proposed annual maintenance and operating budgets of
Silverleaf Club and each Timeshare Association for which separate budgets are
available, certified to be adequate by the managing agent for Silverleaf Club
and each Timeshare Association as the case may be, and a statement of the annual
assessment to be levied upon the members of each of the Timeshare Associations;
and will cause to be made available to Agent for inspection, auditing and
copying, upon Agent's request, the books and records of Silverleaf Club and each
Timeshare Association.
(g) OTHER REPORTS. Such other reports, statements, notices or written
communications relating to the Borrower or the Resort as Agent may require, in
its reasonable discretion.
(h) SEC REPORTS. Promptly upon their becoming available one (1) copy
of each financial statement, report, notice or proxy statement sent by Borrower
to security holders generally, and of each regular or periodic report and any
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by Borrower with,
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or received by Borrower in connection therewith from, any securities exchange or
the Securities and Exchange Commission or any successor agency.
5.6 RECORDS. Borrower shall keep adequate records and books of account
reflecting all financial transactions of Borrower, including sales of Intervals,
in which complete entries will be made in accordance with GAAP.
5.7 MANAGEMENT. Silverleaf Resorts, Inc., a Texas corporation (the
"Manager") is currently the Manager for all the Resorts. The Manager and the
management contracts for the Resorts are in full force and Borrower is not aware
of any defaults thereunder and the Manager and the Management Agreements shall
at all times be satisfactory to Agent. For so long as Borrower controls or
manages the Timeshare Associations for the Resorts, Borrower shall not change
the Resorts Manager or amend, modify or waive any provision of or terminate any
management contract for the Resorts without the prior written consent of Agent,
which consent shall not be unreasonably withheld. Borrower shall promptly,
within three (3) business days, notify Agent if Robert Mead ceases to be the
Chief Executive Officer of Borrower.
5.8 NET WORTH; LIQUIDITY AND LEVERAGE. At all times Indebtedness is
outstanding or Lenders are obligated to make Advances, Borrower agrees to: (i)
maintain an aggregate minimum tangible net worth, determined in accordance with
GAAP, of One Hundred and Ten Million Dollars ($110,000,000); (ii) maintain
Leverage as the ratio of total liabilities to tangible net worth of 2.5:1 as
determined in accordance with GAAP; (iii) maintain Liquidity in an amount of
cash plus the outstanding balances of unpledged Purchaser (as defined herein)
promissory notes in an amount not less than 5% of total assets of Borrower as
determined in accordance with GAAP; and (iv) maintain Minimum Interest Coverage
as a ratio of earnings before interest, taxes, depreciation and amortization
divided by Borrower's total interest expense determined in accordance with GAAP
of not less than 2.0:1.
5.9 MAINTENANCE. Borrower shall or cause Manager to maintain each Resort
in good repair, working order and condition and shall make or cause to be made
all necessary replacements to the Resort.
5.10 PROCEEDS. Immediately upon Borrower's receipt of proceeds from the
sale of any of the Collateral, Borrower shall deliver such proceeds to Agent for
the benefit of Lenders in their original form and, pending delivery to Agent,
Borrower will hold such proceeds as agent for Agent and for the benefit of and
in trust for Lenders.
5.11 RELEASE AND BONDING OF LIENS. 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 Agent with a bond
in accordance with the applicable laws of the state in which the Resort is
located, issued by a corporate surety acceptable to Lender, in an amount
acceptable to Agent and in form acceptable to Agent, or (c) provide Agent with
such other security as Agent may reasonably require.
5.12 CLAIMS. Borrower shall (a) promptly notify Agent of (i) any material
claim, action or proceeding affecting a Resort, Borrower, Silverleaf Club,
Silverleaf Berkshires, any Timeshare
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Association or the Collateral, or any part thereof, or any of the security
interests granted hereunder, and (ii) any material action, suit, proceeding,
order or injunction of which Borrower becomes aware after the date hereof
pending or threatened against or affecting Borrower or any Affiliate, Silverleaf
Club, Silverleaf Berkshires or any Timeshare Association or any Resort; (b) at
the request of Agent, appear in and defend, at Borrower's expense, any such
claim, action or proceeding; and (c) comply in all respects, and shall cause all
Affiliates to comply in all respects, with the terms of any orders imposed on
such Person by any governmental authority. For purposes of this paragraph, the
term "material" shall mean any individual claim which exceeds or is reasonably
expected to exceed $50,000 and all claims which in the aggregate exceed or are
reasonably expected to exceed $250,000.
5.13 USE OF LENDER NAME. Borrower will not, and will not permit any
Affiliate to, without the prior written consent of Agent, use the name of any
Lender or the name of any affiliates of any 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.
5.14 OTHER DOCUMENTS. Borrower will maintain accurate and complete files
relating to the Notes Receivable and other Collateral to the satisfaction of
Agent, and such files will contain copies of each Note Receivable together with
the purchase agreements, truth-in-lending statements, all relevant credit
memoranda and all collection information and correspondence relating to such
Notes Receivable.
5.15 SUBORDINATED OBLIGATIONS. Borrower will not, directly or indirectly,
permit any payment to be made in respect of any indebtedness, liabilities or
obligations, direct or contingent, to any Affiliates (excluding trade payables
incurred in the ordinary course of business), which payments shall be and are
hereby made subordinate to the payment of principal of, and interest on, the
Note, or (b) permit the amendment, rescission or other modification of any of
Borrower's subordinated obligations in such a manner as to affect adversely the
lien priority of the Collateral. Borrower hereby represents to Agent for the
benefit of Lenders that no such subordinate obligation exists as of the date
hereof and as of the date of any Advance. Borrower shall not create any
subordinate obligations during the Term of this Agreement without Agent's prior
written consent, which shall be at its sole discretion, and upon such consent,
Borrower shall promptly obtain execution of a Subordination Agreement in the
form attached as EXHIBIT 5.15.
5.16 LOAN SERVICING. The servicing company and Servicing Agreement shall be
satisfactory to Agent in its sole discretion. Borrower may not amend or
terminate the Servicing Agreement without Agent's prior approval, and Borrower
agrees not to interfere with the servicing agent's performance of its duties
under the Servicing Agreement or to take any action that would be inconsistent
in any way with the terms of the Servicing Agreement. The Servicing Agreement
shall be cancelable by Agent upon the occurrence of any default under the Loan
Documents. If the Servicer is Borrower or an Affiliate, no servicing fees shall
be paid if a Default under any Loan Document has occurred and is continuing. All
servicing fees, and the costs and expenses of the servicing agent, shall be paid
by Borrower.
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5.17 CUSTODIAN. Agent shall have the right at any time to utilize Custodian
to maintain custody of the Collateral. Borrower agrees not to interfere with
Custodian's performance of its duties under the Custodial Agreement or to take
any action that would be inconsistent in any way with the terms of the Custodial
Agreement. All custodial fees, and the costs and expenses of the Custodian,
shall be paid by Borrower.
5.18 COMPLIANCE WITH LAWS. The Borrower, Silverleaf Club, Silverleaf
Berkshires, each Resort, Timeshare Association and each of the Units in which
Intervals are being sold, shall at all times comply with, conform to and obey
each and every judgment, law, statute, rule, code and governmental regulation
applicable to it and Borrower's business operations and each indenture, order,
instrument, agreement or document to which it is a party or by which it is
bound. The Declaration, Declaration of Trust, all Pledged Documents and all
other documents, agreements, or instruments creating the timeshare regime at
each Resort or related to the sale of Intervals at each Resort shall at all
times be in compliance with all applicable state and federal laws, statutes,
codes, regulations and ordinances. Borrower agrees and hereby does indemnify and
hold Agent and each Lender harmless from and against any and all liability,
loss, claim, damages, suits, causes of action or harm of any nature whatsoever
including reasonable attorneys' fees, suffered or incurred by Agent and each
Lender because of or arising out of any breach of this provision.
5.19 YEAR 2000 COMPLIANCE.
(a) Borrower has made an assessment of the microchip and
computer-based systems and the software used in its business and based upon such
assessment certifies that it will be "Year 2000 Compliant" by January 1, 2000.
For purposes of this paragraph, "Year 2000 Compliant" means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business operations or financial condition of, Borrower are able to
interpret, store, transmit, receive and manipulate data on and involving all
calendar dates correctly and without causing any abnormal ending scenarios in
relation to dates in and after the Year 2000. From time to time, at the request
of Agent, Borrower shall provide to Agent such updated information as is
requested regarding the status of its efforts to become Year 2000 Compliant.
(b) Borrower reasonably believes any suppliers and vendors that are
material to the operations of Borrower or its subsidiaries and affiliates will
be year 2000 compliant for their own computer applications except to the extent
that a failure to do so could not reasonably be expected to have a material
adverse effect upon the financial condition of Borrower or its performance of
its obligations hereunder.
(c) Borrower will promptly notify Agent in the event Borrower
determines that any computer application which is material to the operations of
Borrower, its Affiliates, or any of its material vendors or suppliers will not
be fully Year 2000 compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a material adverse effect upon
the financial condition of Borrower or its performance of its obligations
hereunder.
5.20 CROSS DEFAULT, CROSS COLLATERALIZATION. This Loan is given in
connection with one or more loans which Agent, either individually as a Lender
or as Agent on behalf of itself and other Lenders, has made or will make to
Borrower. Upon the occurrence of an Event of Default
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under this Agreement or any of the other Loan Documents relating hereto or the
occurrence of an Event of Default under the Inventory Loan Agreement regarding
the Inventory Loan or the Construction Loan Agreement, then in any such event,
the Agent may declare all of the principal, interest and other sums which may be
outstanding under this Loan and under the Inventory and Construction Loans
(collectively the "Indebtedness") to be immediately due and payable and the
Agent may exercise any and all rights and remedies provided in the Loan
Documents or any Loan Document in connection with this Loan, the Inventory Loan
or the Construction Loan.
Any and all Collateral, as defined in each Loan Agreement, and granted as
security for any Loan under any of the Loan Agreements shall secure to Agent the
payment of the total Indebtedness in the performance of the covenants and
agreements set forth in this Loan Agreement, the Inventory Loan Agreement or the
Construction Loan Agreement (collectively the "Obligations"), all of which are
secured to Agent without apportionment or allocation of any part or portion of
said Collateral.
Upon such an Event of Default Agent shall be entitled to enforce the
payment of the Indebtedness and performance of all Obligations and to exercise
all of its rights, remedies and powers provided hereunder or under any other
Loan Agreement in one or more proceedings, whether contemporaneous, consecutive
or both to be determined by Agent in its sole and absolute discretion. The
enforcement of any such rights or remedies by Agent shall not constitute an
election of remedies and shall not prejudice in any way, limit or preclude the
enforcement of any other right or remedy under any of the Loan Documents through
one or more additional proceedings. No judgment obtained by Agent in any one or
more enforcement proceeding shall merge the debt secured hereby into such
judgment and any portion of the Indebtedness which shall remain unpaid shall be
a continuing obligation of Borrower not merged with such judgment. Agent may
bring any action or proceeding including without limitation foreclosure through
judicial proceedings, power of sale or otherwise in any state or federal court
and such proceeding may relate to all or any part of the total Collateral
without regard to the fact that any one or more prior or contemporaneous
proceedings have been commenced elsewhere with respect to the same or any other
part of the total Collateral.
The proceeds of any such enforcement or foreclosure shall be applied to the
payment of the Indebtedness in such order as Agent may determine in its sole
discretion.
5.21 ENVIRONMENTAL REPORTS. Borrower shall on or before October 15, 1999
deliver updated environmental reports and reliance letters to Agent with respect
to the Resorts listed on SCHEDULE 5.21.
5.22 OAK N' SPRUCE TRUST. Borrower represents and warrants that it is the
legal and beneficial owner of not less than 60% of the beneficial interests in
the Oak N' Spruce Resort Trust (the "Trust") pursuant to the Amended and
Restated Declaration of Trust of Oak N' Spruce Resort Trust, the Amendment
thereto and the Second Amendment thereto and all Timeshare supplements thereto
(the "Declaration of Trust"). For so long as any Indebtedness is outstanding or
any performance obligations of Borrower hereunder are unfulfilled, Borrower as a
Beneficiary of the Trust shall not (a) own less than 60% of the beneficial
interests in the Trust; (b) sell, pledge, transfer, encumber, or hypothecate any
portion of the Resort Property or permit the
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Trustee to do so; provided however, with Agent's prior consent which shall not
be unreasonably withheld, Borrower may sell those portions of the Resort not
used for amenities so long as any such sale is for fair-market value; (c) remove
the Trustee or permit the Trustee to voluntarily resign or appoint a successor
Trustee without notifying Agent; provided however, after the occurrence of an
Event of Default, no such action shall be taken without Agent's prior written
consent; (d) terminate, revoke or materially amend or modify the Declaration of
Trust or the Trust. Borrower shall notify Agent upon any modification of the
Declaration of Trust or the Trust and provide copies of such modifications to
Agent at least semi-annually; or (f) revoke any Certificate of Beneficial
Interest related to a Financed Note Receivable without Agent's prior written
approval.
5.23 WAIVER OF NON-RECOURSE LIABILITY. Borrower hereby expressly waives its
limitation of non-recourse liability set forth at paragraph 7.5 B. of the
Declaration of Trust and hereby expressly agrees that Borrower shall be
personally liable for all indebtedness and obligations hereunder.
5.24 REGISTRATION OF INTERVAL EXCHANGE CLUB. Borrower agrees that on or
before March 1, 2000, Borrower shall properly register and obtain approvals for
the internal exchange club (the "Club") in Illinois, Missouri, Massachusetts and
any other state where such Club rights are being offered to Purchaser and such
registration is required.
5.25 SUSPENSION OF SALES. Upon the issuance of any stay order, cease and
desist order or similar judicial or nonjudicial sanction (collectively a
"Suspension of Sales") that materially adversely limits or otherwise affects any
Interval sales activities, and, such Suspension of Sales is not lifted or
dismissed within fifteen (15) days of issuance or imposition, Lenders shall be
entitled to cease Advances secured by Financed Notes Receivable and other
Collateral only with respect to the state in which such Suspension of Sales has
been imposed. If such Suspension of Sales has not been lifted or dismissed
within sixty (60) days, Lenders shall thereafter be entitled to cease all
Advances hereunder if at any time during the pendency of such Suspension of
Sales, total sales by Borrower have declined by twenty percent (20%) or more
during any sixty (60) day period compared to the same sixty (60) day time period
in the prior year and Lenders shall have no obligation to make further Advances
until such Suspension of Sales is lifted or dismissed.
SECTION 6. - NEGATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lenders are
committed to lend hereunder, unless Lenders otherwise consent in writing,
Borrower hereby covenants and agrees with Agent and Lenders as follows:
6.1 CONSOLIDATION AND MERGER. Borrower will not consolidate with or merge
into any other Person or permit any other Person to consolidate with or merge
into it unless (i) either the Borrower shall be the continuing corporation or
the successor corporation, and (ii) the Borrower or such successor corporation,
as the case may be, shall not, immediately after such merger or consolidation be
in default in the performance of any such covenant or condition hereunder. Any
such merger or consolidation shall only be permitted upon sixty (60) days' prior
notice to and approval by Agent and provided Borrower executes and delivers to
Agent all
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documents and instruments necessary to enable Agent to continue its rights
hereunder and under the other Loan Documents and the perfection and priority of
its interests in the Collateral. Borrower shall pay all Agent's fees and
expenses including attorneys' fees related to such approval and the
documentation in connection therewith.
6.2 RESTRICTIONS ON TRANSFERS. Borrower shall not, without obtaining the
prior written consent of Agent, which may be granted or withheld in Agent's sole
discretion, transfer, sell, pledge, convey, assign or encumber all or any
portion of the Collateral or those portions of any Resort used for amenities as
described in any Declaration, the Declaration of Trust or other Timeshare
Documents (or contract to do any of the foregoing, including options to purchase
and so called "installment sales contracts") except sales of Intervals to
Purchasers in arms-length transactions and except for transfers of portions of a
Resort not used for amenities as described in any Declaration for fair-market
value and only with Agent's prior consent which shall not be unreasonably
withheld.
6.3 TIMESHARE REGIMEN. Without Agent's prior written consent, Borrower
shall not amend, modify or terminate the public offering statement, Declaration,
Declaration of Trust or the covenants, conditions, easements or restrictions
against the Resorts in any material respect (or any portion thereof), except
that if any amendment or modification is required either (a) to cause additional
Units and Intervals to be annexed into the timeshare regimen of the Resort, or
(b) by law, Borrower shall implement the same and give prompt written notice
thereof to Agent.
6.4 COLLATERAL. Borrower shall not take any action (nor permit or consent
to the taking of any action) which might reasonably be anticipated to impair the
value of the Collateral or any of the rights of Agent or Lenders in the
Collateral. Borrower shall not (i) modify or amend any of the Pledged Documents
without Agent's prior written consent except that Borrower shall be permitted to
modify up to 15% of the Notes Receivable which are to be pledged to Agent by
reducing the interest rate charged and/or extending the term of the Notes
Receivable beyond 84 months so long as (a) no Financed Notes Receivable shall
have been modified more than two times; (b) all Financed Notes Receivable have a
weighted average interest rate of 13.75%; (c) no term exceeds 120 months; (d) no
more than 10% of all Financed Notes Receivable have a term exceeding 84 months;
(e) at such time as 10% of the Financed Notes Receivable constitute Notes
Receivable which have been modified as permitted hereunder any additional
modified Notes Receivable to be pledged to Agent shall be subject to the further
requirement that the Purchasers under such modified Notes Receivable to be
pledged to Agent shall have made three timely and consecutive monthly payments;
(f) no additional modified Notes Receivable shall be pledged to Agent after the
expiration of the Revolving Period except in replacement of a modified Financed
Note Receivable which has become ineligible; (g) no unmodified Financed Note
Receivable which becomes ineligible may be replaced with a modified Note
Receivable, (h) any partial prepayments of the Loan shall be a pro rata
prepayment with respect to modified and unmodified Financed Notes Receivable,
and (i) there shall be no limit on assumptions of Notes Receivable provided the
purchaser has made a 10% down payment or (ii) grant extensions of time for the
payment of, compromise for less than the full face value, release in whole or in
part any Purchaser 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
or document representing the Collateral.
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6.5 NO SALES OUTSIDE OF CERTAIN STATES. Borrower shall not market, attempt
to sell or sell any Intervals without complying with all laws related to such
marketing and sales activities and shall promptly deliver to Agent upon receipt
copies of all licenses, approvals, consents, registrations and other documents
obtained from or filed with any regulatory entity for such activities.
6.6 CONTRACTS. Borrower shall not terminate nor materially amend or modify
any management contract for the Resorts nor pledge, hypothecate, transfer or
assign to any other party any management, marketing, servicing, maintenance,
exchange, club affiliation or other similar contract for the Resorts.
6.7 RESTRICTED TRANSFER AND ENCUMBRANCE OF UNITS AND INTERVALS. All
easements, declarations of covenants, conditions and restrictions and private
and public dedications affecting unsold Units and Intervals pledged to Agent
shall be submitted to Agent for its approval and such approval must be obtained
prior to the execution or granting of any thereof by Borrower.
SECTION 7. - EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
7.1 PAYMENTS. Borrower shall fail to make any payment of the Indebtedness
within five (5) days of the date written notice has been sent to Borrower by
Agent after the due date of (a) any amount payable under the Note, or (b) any
other payment due under the Loan Documents except with respect to the payment
due on the Maturity Date of the Note for which no grace period is allowed.
7.2 FAILURE TO PERMIT INSPECTIONS. Borrower shall fail to strictly comply
with the provisions of Section 5.4 of this Agreement.
7.3 COVENANT DEFAULTS. Borrower shall fail to perform or observe any
covenant, agreement or obligation 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
Agent 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.
7.4 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.
7.5 BANKRUPTCY. A petition under any Chapter of Title 11 of the United
States Code or any similar law or regulation is filed by or against Borrower
(and in the case of an involuntary petition in bankruptcy, such petition is not
discharged within sixty (60) days of its filing), or a custodian, receiver or
trustee for any Resort is appointed, or Borrower makes an assignment for the
benefit of creditors, or is adjudged insolvent by any state or federal court of
competent
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jurisdiction, or admits its insolvency or inability to pay its debts as they
become due or an attachment or execution is levied against any of the Resort.
7.6 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.
7.7 DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default by Borrower in
the payment of indebtedness to any other party for borrowed money in excess of
$100,000 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
elect a majority of the Board of Directors of Borrower.
7.8 DEFAULT UNDER CONSTRUCTION LOAN OR INVENTORY LOAN. An Event of Default
under the Construction Loan or Inventory Loan or under the Construction Loan
Documents or the Inventory Loan Documents.
7.9 ENVIRONMENTAL REPORTS. Failure of Borrower to comply with Section 5.21
or if any environmental report reveals environmental problems, the cost of
remediation of which can reasonably be expected to exceed $50,000.
SECTION 8. - REMEDIES
8.1 REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default,
Agent on behalf of and for the benefit of all Lenders 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
Lenders to lend under this Agreement in its entirety, or any portion of any such
commitment, to the extent Lenders shall deem appropriate.
(c) JUDGMENT. Reduce Lender's claim to judgment, foreclose or
otherwise enforce Lenders' security interest in all or any part of the
Collateral by any available judicial procedure.
(d) SALE OF COLLATERAL. Exercise all the rights and remedies of a
secured party on default under the Code (whether or not the Code applies to the
affected Collateral) including (i) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request of Agent forthwith,
assemble all or part of the Collateral as directed by Agent and make it
available to Agent at a place to be designated by Agent which is reasonably
convenient to both parties; (ii) enter upon any premises of Borrower and take
possession of the Collateral; and (iii) sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any of the
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Agent's offices or elsewhere, at such time or times, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as Agent
may deem commercially reasonable. Borrower agrees that, to the extent notice of
sale shall be required by law, ten (10) days notice of the time and place of any
sale shall constitute reasonable notification. At any sale of the Collateral, if
permitted by law, Agent or any Lender may bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) for the purchase of the
Collateral or any portion thereof for the account of such party. Borrower shall
remain liable for any deficiency. Neither Agent nor any Lender shall be required
to proceed against any Collateral but may proceed against Borrower directly. To
the extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.
(e) 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.
(f) 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 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.
8.2 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 Agent hereunder or under any other financing agreement, Loan Agreement or
otherwise, whether accrued or not.
8.3 WAIVERS. No waiver by Agent or any 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 Agent or any 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 waives 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. Borrower also hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien
created by any of the Loan Documents or to any action brought to enforce the
Note or any other obligation secured by the Loan Documents.
8.4 CUMULATIVE RIGHTS. All rights and remedies available to Agent and
Lenders under the Loan Documents shall be cumulative and in addition to all
other rights and remedies granted to Agent and Lenders at law or in equity,
whether or not the Indebtedness is due and
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payable and whether or not Agent and Lenders shall have instituted any suit for
collection or other action in connection with the Loan Documents.
SECTION 9. - CERTAIN RIGHTS OF AGENT AND LENDERS
9.1 PROTECTION OF COLLATERAL. Agent may at any time and from time to time
take such actions as Agent deems necessary or appropriate to protect Agent's
liens and security interests in and to preserve the Collateral. Borrower agrees
to cooperate fully with all of Agent's efforts to preserve the Collateral and
Lender's liens and security interests therein.
9.2 PERFORMANCE BY AGENT. If Borrower fails to perform any agreement
contained herein, Agent may, but shall not be obligated to, cause the
performance of such agreement, and the expenses of Agent incurred in connection
therewith shall be payable by Borrower pursuant to Section 9.3 below.
9.3 FEES AND EXPENSES. Borrower agrees to promptly pay all reasonable
Costs and all such Costs shall be included as additional Indebtedness bearing
interest at the Default Rate until paid.
9.4 NOTICE TO PURCHASER. Borrower authorizes both Agent and the Custodian
(but neither Agent nor the Custodian shall be obligated) to communicate at any
time and from time to time, whether prior to or after a sale of an Interval,
with any Purchaser or any other Person primarily or secondarily liable under a
Financed Note Receivable with regard to the lien of Agent thereon and any other
matter relating thereto. Agent may perform, at Borrower's expense, any and all
credit investigations as Agent may deem necessary to determine whether any such
Purchaser meets the requirements to be an Eligible Notes Receivable.
9.5 COLLECTION OF NOTES. Borrower shall direct and authorize each party
liable for the payment of the Financed Notes Receivable to pay each installment
thereon to Lockbox Agent pursuant to the Lockbox Agreement, until otherwise
directed by Agent. Following the occurrence of an Event of Default, Agent shall
have the right to (a) require that all payments due under the Financed Notes
Receivable be paid directly to Agent, and to receive, collect, hold and apply
the same in accordance with the provisions of this Agreement, and (b) take such
remedial action available to it for the enforcement of any defaulted Financed
Note Receivable including the foreclosure of any Mortgage securing the payment
thereof. Borrower hereby further irrevocably authorizes, directs and empowers
Agent 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.
Upon payment and satisfaction in full of all Indebtedness, Agent will, at
Borrower's request and sole expense, give written notice as necessary to
redirect payment of the Financed Notes Receivable as requested by Borrower.
9.6 POWER OF ATTORNEY. Borrower does hereby irrevocably constitute and
appoint Agent 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
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or drafts payable to Borrower in the name of Borrower and in favor of Agent as
provided in Section 9.6 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; and (c) upon
the occurrence and during the continuance of any Event of Default hereunder, (i)
to institute and prosecute in the name of Borrower or otherwise, but for the
benefit of Agent, any and all proceedings at law, in equity, or otherwise, that
Agent 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 Agent 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 Agent and all Lenders have been
satisfied.
9.7 INDEMNIFICATION OF AGENT AND LENDERS. Borrower shall indemnify Agent
and each Lender and hold Agent and each 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 Agent, 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
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, the
Truth-in-Lending Act, the Americans with Disabilities Act or the Timeshare Act
and any other federal, state or local ordinance, law, statute or code). Upon
receiving knowledge of any suit, claim or demand asserted by a third party that
Agent believes is covered by this indemnity, and subject to the condition that
no Event of Default under this Agreement shall then exist, Agent 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 Agent. Notwithstanding
any defense by Borrower of any such suit, claim or demand, Agent 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.
9.8 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES. Each Lender
(including Agent) may from time to time assign, subject to the terms of an
Assignment and Acceptance Agreement, its rights and delegate its obligations
under this Agreement to another Person, provided that (a) such Lender (excluding
Agent) shall first obtain the written consent of Agent, which consent shall not
be unreasonably withheld; (b) the Pro Rata Share of the Loan Commitment being
assigned shall in no event be less than the lesser of (i) $10,000,000 or (ii)
the entire amount of the Pro Rata Share of the Loan of the assigning Lender; and
(c) upon the consummation of each such assignment the assigning Lender shall pay
Agent an administrative fee of $3,500. The administrative fee referred to in
clause (c) of the preceding sentence shall not apply to an assignment from a
Lender to an affiliate of such Lender. In the case of an assignment authorized
under this subsection, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were an
initial Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Pro Rata Share of the Loan or assigned
portion thereof. Borrower hereby acknowledges and agrees that any
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assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender".
Each Lender (including Agent) may sell participations in all or any
part of its Pro Rata Share of the Loan to another Person, provided that (a) such
Lender (excluding Agent) shall first obtain the prior written consent of Agent,
which consent shall not be unreasonably withheld; and (b) any such participation
shall be in a minimum amount of $5,000,000, and provided, further, that all
amounts payable by Borrower hereunder shall be determined as if that Lender had
not sold such participation and the holder of any such participation shall not
be entitled to require such Lender to take or omit to take any action hereunder
except action directly effecting (i) any reduction in the Loan, interest rate or
fees payable with respect to any Loan in which such holder participates; (ii)
any increase of the aggregate principal amount of the Loans; (iii) any extension
of the Maturity Date, any extension of the date on which any payment is to be
paid or any extension of any date fixed for any payment of interest or fees
payable with respect to any Loan in which such holder participates; (iv) any
change of the percentage of Lenders which shall be required for Lenders or any
of them to take any action hereunder; (v) any release of Collateral (except if
the sale, disposition or release of such Collateral is permitted hereunder or
any other Loan Document); (vi) any amendment or waiver of this subsection or the
definitions of the terms used in this subsection insofar as the definitions
affect the substance of this subsection; (vii) any consent to the assignment,
delegation or other transfer by Borrower of any of its rights and obligations
under any Loan Document; (viii) any change in the form in which interest is
required to be paid; and (ix) any increase in any advance rate. Borrower hereby
acknowledges and agrees that any participation will give rise to a direct
obligation of Borrower to the participant, and the participant shall for
purposes hereunder be considered to be a "Lender".
Except as otherwise provided in this subsection no Lender shall, as
between Borrower and that Lender or as between Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of a participation in, all
or any part of the Loans, the Notes or other Obligations owed to such Lender.
Each Lender may furnish any information concerning Borrower in the possession of
that Lender from time to time to assignees and participants (including
prospective assignees and participants).
Borrower agrees that it will use its best efforts to assist and
cooperate with Agent and any Lender in any manner reasonably requested by Agent
or such Lender to effect the sale of a participation or an assignment described
above, including without limitation assistance in the preparation of appropriate
disclosure documents or placement memoranda.
Agent shall provide Borrower with written notice of the name and
address of any new Lender after the date hereof.
Notwithstanding anything contained in this Agreement to the contrary,
so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no
Person shall become a "Lender" hereunder unless such Person shall also be
capable of making LIBOR Loans.
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9.9 AGENT.
(a) APPOINTMENT. Each Lender hereby designates and appoints Heller
Financial, Inc. as its Agent under this Agreement and the other Loan Documents,
and each Lender hereby irrevocably authorizes Agent to take such action or to
refrain from taking such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably
incidental thereto. Agent is authorized and empowered to amend, modify, or waive
any provisions of this Agreement or the other Loan Documents on behalf of
Lenders subject to the requirement that certain of Lenders' consent be obtained
in certain instances as provided in subsections 9.11 and 9.12 regarding
amendments. Agent agrees to act as such on the express conditions contained in
this subsection 9.13. The provisions of this subsection 9.11 are solely for the
benefit of Agent and Lenders and Borrower shall not have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement, Agent shall act solely as agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower. Agent may perform any of
its duties hereunder, or under the Loan Documents, by or through its agents or
employees.
(b) NATURE OF DUTIES. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Loan Documents, express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the financial condition
and affairs of Borrower in connection with the extension of credit hereunder and
shall make its own appraisal of the creditworthiness of Borrower, and Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto
(other than as expressly required herein). If Agent seeks the consent or
approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender. Agent shall
promptly notify each Lender any time that the Requisite Lenders have instructed
Agent to act or refrain from acting pursuant hereto.
(c) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be liable with respect
to its own gross negligence or willful misconduct. Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith and if
any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not
made, shall be to recover from other Lenders any payment in excess of the amount
to which they are determined to be entitled (and such other Lenders hereby agree
to return to such Lender any such erroneous payments received by them). In
performing its functions and duties hereunder, Agent shall exercise the same
care which it would in dealing with loans for its own account, but Agent shall
not be responsible to any Lender for any recitals, statements, representations
or warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for
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the financial condition of Borrower. Agent shall not be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents or the
financial condition of Borrower, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and if such instructions are promptly requested, Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from Requisite Lenders
or all of the Lenders, as applicable. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement, the Notes, or any of the
other Loan Documents in accordance with the instructions of Requisite Lenders.
(d) RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, telecopy or telegram) believed by
it in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or thereunder,
upon advice of counsel selected by it. Agent shall be entitled to rely upon the
advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.
(e) INDEMNIFICATION. Lenders will reimburse and indemnify Agent for
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses), advances or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in
any way relating to or arising out of this Agreement or any of the Loan
Documents or any action taken or omitted by Agent under this Agreement or any of
the Loan Documents, in proportion to each Lender's Pro Rata Share, but only to
the extent that any of the foregoing is not reimbursed by Borrower; provided,
however, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements resulting from Agent's gross negligence or
willful misconduct. If any indemnity furnished to Agent for any purpose shall,
in the opinion of Agent, be insufficient or become impaired, Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The obligations of Lenders
under this subsection shall survive the payment in full of the Loan and all
other obligations and the termination of this Agreement.
(f) HELLER INDIVIDUALLY. With respect to its obligations under the
Loan, the Loans made by it, and the Notes issued to it, Heller shall have and
may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall,
unless the context clearly otherwise indicates, include Heller in its individual
capacity as a Lender or one of the Requisite Lenders. Heller may lend money to,
acquire equity or other
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ownership interests in, and generally engage in any kind of banking, trust or
other business with Borrower as if it were not acting as Agent pursuant hereto.
(g) SUCCESSOR AGENT.
(1) RESIGNATION. Agent may resign from the performance of all
its agency functions and duties hereunder at any time by giving at least thirty
(30) Business Days' prior written notice to Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of
resignation pursuant to clause (1) above, Requisite Lenders shall, upon receipt
of Borrower's prior consent which shall not be unreasonably withheld, appoint a
successor Agent. If a successor Agent shall not have been so appointed within
the thirty (30) Business Day period, referred to in clause (1) above, the
retiring Agent, upon notice to Borrower, shall then appoint a successor Agent
who shall serve as Agent until such time, if any, as Requisite Lenders, upon
receipt of Borrower's prior written consent which shall not be unreasonably
withheld, appoint a successor Agent as provided above.
(3) SUCCESSOR AGENT. Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Agent's resignation as Agent under the Loan Documents, the provisions of this
subsection shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.
(h) COLLATERAL MATTERS.
(1) RELEASE OF COLLATERAL. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to or
held by Agent upon any Collateral (i) upon termination of the Loan Commitment
and payment and satisfaction of all Obligations by Borrower (other than
contingent indemnification obligations to the extent no claims giving rise
thereto have been asserted); (ii) constituting property being sold or disposed
of if Borrower certifies to Agent that the sale or disposition is made in
compliance with the provisions of this Agreement (and Agent may rely in good
faith conclusively on any such certificate, without further inquiry); (iii)
constituting property leased to Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement or is about to expire
and which has not been, and is not intended by Borrower to be, renewed or
extended; or (iv) in accordance with the terms of this Agreement and in the
ordinary course of administering the Loan.
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(2) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES. Without in
any manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders with respect to the release of Collateral in
accordance with this Agreement and in the ordinary course of administering the
Loan, each Lender agrees to confirm in writing, upon request by Agent or
Borrower, the authority of Agent to release any Collateral covered by the Loan
Documents as conferred upon Agent by the terms of this Agreement. From and after
an Event of Default or under any other circumstances, upon receipt by Agent of
confirmation from the requisite percentage of Lenders, of its authority to
release or compromise any particular item or types of Collateral covered by the
Loan Documents, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release or compromise
of the Liens granted to Agent, for the benefit of Agent and Lenders, upon such
Collateral, provided that (i) Agent shall not be required to execute any such
document on terms which, in Agent's opinion, would expose Agent to liability or
create any obligation or entail any consequence other than the release or
compromise of such Liens without recourse or warranty, and (ii) such release or
compromise shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of Borrower, in respect of), all interests
retained by any Borrower, including (without limitation) the proceeds of any
sale, all of which shall continue to constitute part of the property covered by
the Loan Documents.
(3) ABSENCE OF DUTY. Agent shall have no obligation whatsoever
to any Lender or any other Person to assure that the property covered by the
Loan Documents exists or is owned by Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent herein or in any of the Loan Documents, it being understood
and agreed that in respect of the property covered by the Loan Documents or any
act, omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent's own interest in property covered
by the Loan Documents as one of the Lenders and that Agent shall have no duty or
liability whatsoever to any of the other Lenders, provided that Agent shall
exercise the same care which it would in dealing with loans for its own account.
(i) AGENCY FOR PERFECTION. Agent and each Lender hereby appoint each
other Lender as agent for the purpose of perfecting Agent's security interest in
assets which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver
such Collateral to Agent or in accordance with Agent's instructions. Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Loan Document or to realize upon any collateral security for the
Loans unless instructed to do so by Agent, it being understood and agreed that
such rights and remedies may be exercised only by Agent.
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(j) DISSEMINATION OF INFORMATION. Agent will use its best efforts to
provide Lenders with any information received by Agent from Borrower or any
other party which is required to be provided to a Lender hereunder, provided
that Agent shall not be liable to Lenders for any failure to do so, except to
the extent that such failure is attributable to Agent's gross negligence or
willful misconduct.
9.10 AMENDMENTS, CONSENTS AND WAIVERS FOR CERTAIN ACTIONS.
(a) Except as otherwise provided in this subsection, in subsection
9.15 or in any Assignment and Acceptance Agreement and except as to matters set
forth in other subsections hereof or in any other Loan Document as requiring
only Agent's consent, the consent of Requisite Lenders and Borrower will be
required to amend, modify, terminate, or waive any provision of this Agreement
or any of the other Loan Documents.
(b) In the event Agent requests the consent of a Lender and does not
receive a written consent or denial thereof within ten (10) Business Days after
such Lender's receipt of such request, then such Lender will be deemed to have
denied the giving of such consent.
(c) If, in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement as contemplated
by clauses (a) through (i) of the first proviso of subsection 9.15 regarding
amendments, the consent of Requisite Lenders is obtained but the consent of one
or more other Lenders whose consent is required is not obtained, then Borrower
shall have the right, so long as all non-consenting Lenders are treated as
described in clauses (A) or (B) below, to either (A) replace each such
non-consenting Lender with one or more Replacement Lenders pursuant to this
subsection so long as each such Replacement Lender consents to the proposed
amendment, modification, termination or waiver Borrower may obtain, at
Borrower's expense, a replacement Lender ("Replacement Lender") for such
non-consenting Lender, which Replacement Lender shall be reasonably satisfactory
to Agent. In the event Borrower obtains a Replacement Lender that will refinance
all outstanding Indebtedness owed to such non-consenting Lender and assume its
Commitments hereunder within ninety (90) days following notice of Borrower's
intention to do so, the non-consenting Lender shall sell and assign all of its
rights and delegate all of its obligations under this Agreement to such
Replacement Lender in accordance with the provisions of subsection 9.8 regarding
assignments and participations, provided that Borrower has reimbursed such
non-consenting Lender for any administrative fees; or (B) terminate such
non-consenting Lender's Pro Rata Share of the Loan Commitment and prepay in full
its Indebtedness to such non-consenting Lender as follows: Borrower may prepay
in full all outstanding Indebtedness owed to such non-consenting Lender and
terminate such non-consenting Lender's Pro Rata Share of the Loan Commitment, in
which case the Loan Commitment will be reduced by the amount of such Pro Rata
Share. Borrower shall, within ninety (90) days following notice of its intention
to do so, prepay in full all outstanding Indebtedness owed to such
non-consenting Lender and terminate such non-consenting Lender's obligations
under the Loan Commitment.
9.11 SET OFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, during the continuance of any Event of Default, each Lender is hereby
authorized by Borrower at any time
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or from time to time, with reasonably prompt subsequent notice to Borrower (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender at any of
its offices for the account of Borrower or any of its Subsidiaries (regardless
of whether such balances are then due to Borrower or its Subsidiaries), and (B)
other property at any time held or owing by such Lender to or for the credit or
for the account of Borrower or any of its Subsidiaries, against and on account
of any of the Obligations; except that no Lender shall exercise any such right
without the prior written consent of Agent. Any Lender exercising a right to set
off shall, to the extent the amount of any such set off exceeds its Pro Rata
Share of the amount set off, purchase for cash (and the other Lenders shall
sell) interests in each such other Lender's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with each other
Lender in accordance with their respective Pro Rata Shares. Borrower agrees, to
the fullest extent permitted by law, that any Lender may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and upon doing so shall deliver such excess to the Agent for the
benefit of all Lenders in accordance with their Pro Rata Shares.
9.12 DISBURSEMENT OF ADVANCES. Each Lender will remit to Agent its Pro Rata
Share of any Loan Advance before Agent disburses same to Borrower. Agent shall
advise each Lender by telecopy on the form attached as EXHIBIT 9.13 of the
amount of such Lender's Pro Rata Share of the Loan Advance requested by Borrower
no later than 1:00 p.m. Chicago time not less than two business days prior to
the Funding Date applicable thereto, and each such Lender shall pay Agent such
Lender's Pro Rata Share of such requested Loan, in same day funds, by wire
transfer to Agent's account before 12:00 p.m. (Chicago time) on such Funding
Date. If any Lender fails to pay the amount of its Pro Rata Share as required
above, Agent shall promptly notify Borrower of such default. Nothing in this
subsection or elsewhere in this Agreement or the other Loan Documents, including
without limitation the provisions of subsection 9.15, shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that
Agent or Borrower may have against any Lender as a result of any default by such
Lender hereunder.
9.13 DISBURSEMENTS OF ADVANCES; PAYMENT.
(a) LOAN ADVANCES, PAYMENTS AND SETTLEMENTS; INTEREST AND FEE
PAYMENTS.
(1) The Loan balance may fluctuate from day to day through
Agent's disbursement of funds to, and receipt of funds from, Borrower. In order
to minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth herein Loan Advances and
payments will be settled among Agent and Lenders according to the procedures
described in this subsection. Notwithstanding these procedures, each Lender's
obligation to fund its portion of any Advances made by Agent to Borrower will
commence on the date such Advances are made by Agent. Such payments will be made
by such Lender without set-off, counterclaim or reduction of any kind.
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(2) On the second (2nd) Business Day of each month, or more
frequently (including daily), if Agent so elects (each such day being a
"Settlement Date"), Agent will advise each Lender by telephone or telecopy of
the amount of each such Lender's Pro Rata Share of the Loan balance as of the
close of business of the (2nd) second Business Day immediately preceding the
Settlement Date. In the event that payments are necessary to adjust the amount
of such Lender's required Pro Rata Share of the Loan balance to such Lender's
actual Pro Rata Share of the Loan balance as of any Settlement Date, the party
from which such payment is due will pay the other, in same day funds, by wire
transfer to the other's account not later than 3:00 p.m. Chicago time on the
Business Day following the Settlement Date.
(3) For purposes of this subsection 9.13(a)(3), the following
terms and conditions will have the meanings indicated:
(a) "Daily Loan Balance" means an amount calculated as of
the end of each calendar day by subtracting (i) the cumulative principal amount
paid by Agent to a Lender on the Loan from the Closing Date through and
including such calendar day, from (ii) the cumulative principal amount on a Loan
advanced by such Lender to Agent on that Loan from the Closing Date through and
including such calendar day.
(b) "Daily Interest Rate" means an amount calculated by
dividing the interest rate payable to a Lender on a Loan as of each calendar day
by three hundred sixty (360).
(c) "Daily Interest Amount" means an amount calculated by
multiplying the Daily Loan Balance of a Loan by the associated Daily Interest
Rate on that Loan.
(d) "Interest Ratio" means a number calculated by dividing
the total amount of the interest on a Loan received by Agent with respect to the
immediately preceding month by the total amount of interest on that Loan due
from Borrower during the immediately preceding month.
On the first (1st) Business Day of each month ("Interest Settlement Date"),
Agent will advise each Lender by telephone, telex, or telecopy of the amount of
such Lender's Pro Rata Share of interest and fees on each of the Loans as of the
end of the last day of the immediately preceding month. Provided that such
Lender has made all payments required to be made by it under this Agreement,
Agent will pay to such Lender, by wire transfer to such Lender's account (as
specified by such Lender on the signature page of this Agreement or the
applicable Assignment and Acceptance Agreement, as amended by such Lender from
time to time after the date hereof pursuant to the notice provisions contained
herein or in the applicable Assignment and Acceptance Agreement) not later than
3:00 p.m. Chicago time on the next Business Day following each date on which
Agent has received such payment from the Lockbox Agent or the Borrower, such
Lender's Pro Rata Share of interest and fees on each of the Loans provided
Borrower has made such payment to Lender. Such Lender's Pro Rata Share of
interest on each Loan will be calculated for that Loan by adding together the
Daily Interest Amounts for each
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calendar day of the prior month for that Loan and multiplying the total thereof
by the Interest Ratio for that Loan. Such Lender's Pro Rata Share of the Unused
Loan Fee shall be paid the next Business Day after receipt from Borrower.
(b) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(1) If a Lender has not in fact made its Pro Rata Share
available to the Agent on a Funding Date, Agent shall not be obligated to submit
to such Lender any payment made by Borrower to Agent with respect to the Loan or
any fees or other payments with respect thereto.
(2) Nothing contained in this subsection will be deemed to
relieve a Lender of its obligation to fulfill its commitments or to prejudice
any rights Agent or Borrower may have against such Lender as a result of any
default by such Lender under this Agreement.
(c) RETURN OF PAYMENTS
(1) If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind together with interest thereon, for each
day from and including the date such amount is made available by Agent to such
Lender to but excluding the date of repayment to Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by Agent in accordance with
banking industry rules on interbank compensation.
(2) If Agent determines at any time that any amount received by
Agent under this Agreement must be returned to Borrower or paid to any other
person pursuant to any requirement of law, court order or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
9.14 INDEMNITIES. Borrower agrees to indemnify, pay and hold Agent, each
Lender and their respective officers, directors, employees, agents and attorneys
(the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits and claims of
any kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the indemnitee as a result of its being a party to this Agreement or the
transactions consummated pursuant to this Agreement; provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect to liabilities
arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction. This subsection and other
indemnification provisions contained within the Loan Documents shall survive the
termination of this Agreement.
32
<PAGE> 39
9.15 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this
Agreement, the Notes or any of the other Loan Documents, shall in any event be
effective unless the same shall be in writing and signed by Requisite Lenders
(or Agent, if expressly set forth herein, in any Note or in any other Loan
Document) and the Borrower; provided, that except to the extent permitted by the
applicable Assignment and Acceptance Agreement, no amendment, modification,
termination or waiver shall, unless in writing and signed by all Lenders, do any
of the following: (a) increase any Lender's Pro Rata Share of the Loan
Commitment; (b) reduce the principal of, rate of interest on or fees payable
with respect to any Loan; (c) extend the Maturity Date, extend the date on which
any payment is to be paid or extend any date fixed for any payment of interest
or fees; (d) change the percentage of Lenders which shall be required for
Lenders or any of them to take any action hereunder; (e) release Collateral
(except if the sale, disposition or release of such Collateral is otherwise
permitted hereunder or any other Loan Document); (f) amend or waive this
subsection or the definitions of the terms used in this subsection insofar as
the definitions affect the substance of this subsection; (g) consent to the
assignment, delegation or other transfer by Borrower of any of its rights and
obligations under any Loan Document; (h) change the form in which interest is
required to be paid; and (i) increase the Advance rates; and provided, further,
that no amendment, modification, termination or waiver affecting the rights or
duties of Agent under any Loan Document shall in any event be effective, unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on Borrower shall entitle Borrower to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection shall be binding upon each holder of the Notes at the time
outstanding, each future holder of the Notes, and, if signed by Borrower, on
such Borrower Party.
SECTION 10. - MISCELLANEOUS
10.1 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, otherwise on the next 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.
33
<PAGE> 40
<TABLE>
<S> <C>
Notices to Borrower: Silverleaf Resorts, Inc.
c/o Robert Mead
1221 Riverbend, Suite 120
Dallas, Texas 75247
Telephone: 214/631-1166
Telecopy: 214/905-0514
Notices to Lender and Agent: HELLER FINANCIAL, INC.
Attn: Portfolio Manager, Vacation Ownership
Finance
500 West Monroe Street
Chicago, Illinois 60661
Loan No. 94-117
Telephone: (312) 441-7188
Telecopy: (312) 441-7924
With a copy to: HELLER FINANCIAL, INC.
Vacation Ownership
Legal Representative
500 West Monroe Street
Chicago, Illinois 60661
Loan No. 94-117
Telecopy: (312) 441-7872
</TABLE>
10.2 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 Agent and shall survive the delivery to Agent of such Loan Documents and the
extension of the Indebtedness (and each part thereof), regardless of any
investigation made by or on behalf of Agent.
10.3 GOVERNING LAW. This Agreement shall be governed by and shall be
construed and enforced in accordance with the internal laws of the State of
Illinois, (without regard to conflicts of law principles) and applicable laws of
the United States.
10.4 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.
34
<PAGE> 41
10.5 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 Agent's receipt of one or more
counterparts hereof signed by Borrower and Agent.
10.6 LENDER NOT FIDUCIARY. The relationship between Borrower and Agent and
Lenders is solely that of debtor and creditor, and have 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
Agent to be other than that of debtor and creditor.
10.7 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
Agent, Lenders, Borrower or between any two or more of them. This Agreement may
be modified or changed only in a writing executed by both Agent and Borrower
and/or the other affected parties.
10.8 CONSENT TO ADVERTISING AND PUBLICITY. Borrower hereby consents that
Agent may issue and disseminate to the public information describing the credit
accommodation entered into pursuant to this Agreement.
10.9 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.
10.10 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 Agent and Lenders 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.
10.11 VENUE. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL
BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES MARK R. TAYLOR,
WHOSE ADDRESS IS 190 S. LaSALLE STREET, CHICAGO, ILLINOIS, 60603, AS ITS
DULY-AUTHORIZED AGENT FOR SERVICE OF PROCESS AND AGREES THAT SERVICE OF PROCESS
UPON SUCH AGENT SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON BORROWER
PROVIDED THAT A COPY OF SUCH PROCESS BE DELIVERED TO BORROWER PURSUANT TO
35
<PAGE> 42
SECTION 10.1 ABOVE. 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 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.
10.12 JURY TRIAL WAIVER. BORROWER, AGENT, AND LENDERS HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. BORROWER, AGENT AND
LENDERS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER, AGENT AND LENDERS WARRANT
AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER
WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS.
The parties hereto have executed this Agreement or has caused the same to
be executed by their duly authorized representatives as of the date first above
written.
BORROWER:
SILVERLEAF RESORTS, INC., a Texas
Corporation
By: /s/ Robert Mead
-------------------------------
Name: Robert Mead
-------------------------------
Its: Chief Executive Officer
-------------------------------
36
<PAGE> 43
AGENT AND LENDER:
HELLER FINANCIAL, INC.
By: /s/ Kathryn Ploutt
-------------------------------
Name: Kathryn Ploutt
-------------------------------
Its: Vice President
-------------------------------
LENDER:
Union Bank of California, N.A.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Exhibits and Attachments
Appendix - Defined Terms
Schedule 3.2 - Deliveries For All Advances
Schedule 4.5 - List Of Litigation Matters
Schedule 4.9 - Silverleaf Resorts, Inc., Ownership And Management Of
Resorts
Schedule 5.21 - Resorts For Which Environmental Reports And/Or
Reliance Letters Are Required
37
<PAGE> 44
EXHIBITS
--------
Exhibit A Form Of Reassignment Of Mortgage
Exhibit B Form Of Legal Opinion
Exhibit C Requests For Advance
Exhibit D Assignments Of Contracts, Notes Receivable And Mortgages/Deeds
Of Trust And Assignment Of Assignments Of Beneficial Interest
Exhibit E Form Of Allonge
Exhibit F Permitted Exceptions
Exhibit G Legal Description For The Resort
Exhibit H Approved Resorts
Exhibit I Form Of Assignment And Acceptance Agreement
Exhibit J Unapproved Resorts
Exhibit M Timeshare Associations
Exhibit 5.15 Subordination Agreement
Exhibit 9.13 Form Of Notice Of Lender Of Request For Advance
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
INVENTORY LOAN AND SECURITY AGREEMENT
by and between
SILVERLEAF RESORTS, INC.,
("Borrower")
and
HELLER FINANCIAL, INC.,
("Lender")
as of September 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 THE LOAN................................................................................................1
1.1 Loan............................................................................................1
1.2 Term............................................................................................2
1.3 Interest Rate...................................................................................2
1.4 Payments........................................................................................2
1.5 Prepayments.....................................................................................2
1.6 Releases of Timeshare Interests.................................................................2
SECTION 2 COLLATERAL..............................................................................................3
2.1 Grant of Security Interest......................................................................3
SECTION 3 CONDITIONS PRECEDENT TO ADVANCES........................................................................4
3.1 Request for Advance.............................................................................4
3.2 Conditions Precedent to Initial Advance.........................................................4
3.3 Conditions Precedent to Additional Advances.....................................................4
3.4 Security Interests..............................................................................4
3.5 Representations and Warranties..................................................................4
3.6 No Default......................................................................................4
3.7 Performance of Agreements.......................................................................5
3.8 Fees and Expenses...............................................................................5
SECTION 4 GENERAL REPRESENTATIONS AND WARRANTIES..................................................................5
4.1 Organization, Standing, Qualification, Borrower Existence.......................................5
4.2 Authorization and Enforceability................................................................5
4.3 Title to Properties: Prior Liens................................................................6
4.4 Litigation and Proceedings......................................................................6
4.5 Licenses and Permits............................................................................6
4.6 Environmental Matters...........................................................................6
4.7 Full Disclosure.................................................................................6
4.8 Margin Regulations..............................................................................6
4.9 No Defaults.....................................................................................6
4.10 Compliance with Law.............................................................................7
4.11 Employer Benefit Plans..........................................................................7
4.12 Representations as to the Resorts...............................................................7
4.13 Collateral......................................................................................8
SECTION 5 AFFIRMATIVE COVENANTS...................................................................................8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
5.1 Payment and Performance of Indebtedness.........................................................8
5.2 Insurance.......................................................................................9
5.3 Condemnation....................................................................................9
5.4 Reporting Requirements..........................................................................9
5.5 Claims..........................................................................................9
5.6 Title...........................................................................................9
5.7 Subordinated Obligations........................................................................9
5.8 Further Assurances..............................................................................9
5.9 Affirmative Covenants in Other Documents.......................................................10
5.10 Suspension of Sales............................................................................10
SECTION 6 NEGATIVE COVENANTS.....................................................................................10
6.1 Negative Covenants in Other Documents..........................................................10
6.2 Use of Lender Name.............................................................................10
6.3 Material Adverse Change........................................................................10
SECTION 7 EVENTS OF DEFAULT......................................................................................11
7.1 Payments.......................................................................................11
7.2 Covenant Defaults..............................................................................11
7.3 Warranties or Representations..................................................................11
7.4 Involuntary Proceedings........................................................................11
7.5 Proceedings....................................................................................11
7.6 Attachment, Judgment, Tax liens................................................................11
7.7 Insolvency.....................................................................................12
7.8 Default by Borrower in Other Agreements........................................................12
7.9 Default under Deed of Trust....................................................................12
7.10 Default Under Other Loans......................................................................12
7.11 Cross Default, Cross Collateralization.........................................................12
SECTION 8 REMEDIES...............................................................................................13
8.1 Remedies Upon Default..........................................................................13
8.2 Application of Collateral: Termination of Agreements...........................................13
8.3 Waivers........................................................................................13
8.4 Cumulative Rights..............................................................................14
8.5 Expenditures by Lender.........................................................................14
SECTION 9 CERTAIN RIGHTS OF LENDER...............................................................................14
9.1 Protection of Collateral.......................................................................14
9.2 Performance by Lender..........................................................................14
9.3 Fees and Expenses..............................................................................14
9.4 Lender's Right of Set-Off......................................................................15
9.5 Assignment of Lender's Interest................................................................15
9.6 Power of Attorney..............................................................................15
9.7 Indemnification of Lender......................................................................15
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10 MISCELLANEOUS.........................................................................................16
10.1 Notice.........................................................................................16
10.2 Survival.......................................................................................17
10.3 GOVERNING LAW..................................................................................17
10.4 Limitation on Interest.........................................................................17
10.5 Invalid Provisions.............................................................................17
10.6 Counterparts; Effectiveness....................................................................17
10.7 No Duty........................................................................................17
10.8 Lender Not Fiduciary...........................................................................18
10.9 Entire Agreement...............................................................................18
10.10 Venue..........................................................................................18
10.11 Jury Trial Waiver..............................................................................18
10.12 Directly or Indirectly.........................................................................19
10.13 Headings.......................................................................................19
10.14 Broker's Fees..................................................................................19
</TABLE>
SCHEDULES
APPENDIX 1 - Definition of Terms
SCHEDULE 3.2 - Closing Deliveries
SCHEDULE 4.4 - List of Litigation Matters
-iii-
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT A - Permitted Exceptions
EXHIBIT B - Legal Description for the Resorts
EXHIBIT C - Request for Advance
EXHIBIT D - Form of Assignment of Beneficial Interest/Form of Deed of Trust
Or Mortgage
EXHIBIT E - Approved Resorts, Appraisals and Pending Receipt of Opinion
Letters for All States Except Texas
EXHIBIT F - Silverleaf Resorts, Inc.
Ownership and Management of Resorts
EXHIBIT 5.7 - Borrower's Debts, Liabilities and Obligations to Any Affiliates
Of Borrower
</TABLE>
-iv-
<PAGE> 6
AMENDED AND RESTATED INVENTORY LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED INVENTORY LOAN AND SECURITY AGREEMENT
("Agreement") dated September 1, 1999, is made by and between SILVERLEAF
RESORTS, INC., a Texas corporation f/k/a SILVERLEAF VACATION CLUB, INC., f/k/a
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, Chicago, Illinois 60661 ("LENDER").
RECITALS:
WHEREAS, on December 27, 1995 Borrower and Lender entered into this
certain Loan and Security Agreement (the "Original Inventory Loan") as amended
on February 28, 1996 and December 27, 1996; and
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
The parties desire to amend and restate the terms of the Original
Inventory Loan as set forth herein.
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
THE LOAN
1.1 LOAN. During the Availability Period the proceeds of the Loan
subject to Availability 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 minimum amounts of $200,000 plus the applicable Advance
Fee which Borrower acknowledges shall be advanced by Lender for its own account
at the time of each Advance; and (b) shall be made no more frequently than
monthly. 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 $1,600 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
1
<PAGE> 7
outstanding principal balance of the Loan, at any time, to exceed $10,000,000 in
the aggregate nor $5,000,000 for Eligible Unsold Timeshare Intervals at any one
Resort. In addition, at no time shall Lender be required to advance outstanding
loans in excess of $50,000,000 in the aggregate under this Loan and the
Receivables Loan (the Receivables Loan also includes a $20,000,000 commitment by
UnionBank of California) nor shall the aggregate amount of Advances outstanding
at any time hereunder and under the Receivables Loan secured by Assignments of
Beneficial Interests in the Oak N' Spruce Resort Trust exceed $5,000,000 (the
"Oak N' Spruce Limitation").
1.2 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.
1.3 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.
1.4 PAYMENTS.
(a) MONTHLY PAYMENTS. Commencing on October 1, 1999, 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.
1.5 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.
1.6 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, or Assignment of Beneficial Interests in accordance with
and subject to all of the following terms, provisions and conditions:
2
<PAGE> 8
(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 one (1) time per
week.
(b) 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 entitlement
to the release, including, without limitation, such other documents,
certificates, opinions and assurances as Lender may request, together
with the legal fees and disbursement 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 $1,600 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.
(d) Releases of Intervals shall not affect or impair the lien or
security interest of the Deed of Trust or the Mortgage and Assignment
of Beneficial Interests (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 2
COLLATERAL
2.1 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
or Assignment of Beneficial Interests 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;
3
<PAGE> 9
(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.
SECTION 3
CONDITIONS PRECEDENT TO ADVANCES
The obligation of Lender to make Advances is subject to satisfaction of
all of the conditions set forth below.
3.1 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.
3.2 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 3.2 and all other agreements,
notes, certificates, orders, authorizations, financing statements, and other
documents which Lender may at any time reasonably request.
3.3 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.
3.4 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.
3.5 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.
3.6 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.
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3.7 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.
3.8 FEES AND EXPENSES. Borrower shall have paid all fees and expenses
required to be paid by Borrower pursuant to this Agreement.
SECTION 4
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:
4.1 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.
4.2 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.
(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
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principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
4.3 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.
4.4 LITIGATION AND PROCEEDINGS. Except as disclosed on SCHEDULE 4.4
hereto, there are no actions, suits, proceedings, orders or injunctions pending
or, to the best of Borrower's knowledge, threatened against or affecting
Borrower any Resort or the Intervals, at law or in equity, or before or by any
governmental authority, in any case individually in which the claim exceeds or
would reasonably be expected to exceed $50,000 or all cases for which claims in
the aggregate exceed or could reasonably be expected to exceed $250,000.
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.
4.5 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 and to sell the Interests.
4.6 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.
4.7 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.
4.8 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 this 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.
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4.9 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.
4.10 COMPLIANCE WITH LAW.
(a) Neither Borrower nor any Resort or Timeshare Association is in
violation of any laws, ordinances, governmental rules or regulations
to which it is subject; and
(b) Borrower 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 Intervals
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 (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.
4.11 EMPLOYER 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.
4.12 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.
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(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.
4.13 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 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, the
Certificates of Beneficial Interest, the Mortgage and Assignment of
Beneficial Interest, 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; ASSIGNMENT OF BENEFICIAL INTEREST. The Deed of
Trust constitutes a valid and enforceable first and prior lien and
security interest on the properties and interests covered thereby and
the Mortgage and Assignment of Beneficial Interest a valid and
enforceable first and prior lien and security interest in the
property, interests and rights covered thereby.
SECTION 5
AFFIRMATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid, Borrower
hereby agrees with Lender as follows:
5.1 PAYMENT AND PERFORMANCE OF INDEBTEDNESS. Borrower shall pay and
promptly perform all of the obligations hereunder and under the Loan Documents.
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5.2 INSURANCE. Borrower shall duly and promptly comply with all of the
insurance provisions set forth in the Deed of Trust.
5.3 CONDEMNATION. Borrower shall duly and promptly comply with all of
the condemnation provisions set forth in the Deed of Trust.
5.4 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 Receivables Loan, or as may otherwise be requested by Lender from time to
time.
5.5 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.
5.6 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.
5.7 SUBORDINATED OBLIGATIONS. Borrower represents and warrants as of
the date hereof that Borrower is not indebted to any affiliated entity of
Borrower and during the term hereof will not become indebted to any affiliated
entity of Borrower without Lender's prior written consent. In the event of any
such consent and upon the creation of such indebtedness, such indebtedness shall
be subordinate to the debt of this Loan and Borrower shall obtain the execution
of all parties and deliver to Lender a Subordination Agreement in the form of
EXHIBIT 5.7 hereto. 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.
5.8 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
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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.
5.9 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, the
Assignment of Beneficial Interest or in any other Loan Document, (b) in any
document or instrument evidencing, securing, or executed in connection with the
Receivables Loan, or (c) in any other document or instrument evidencing,
securing, or executed in connection with any other Indebtedness.
5.10 SUSPENSION OF SALES. Upon the issuance of any stay order, cease
and desist order or similar judicial or nonjudicial sanction (collectively a
"Suspension of Sales") that materially adversely limits or otherwise affects any
Interval sales activities, and, such Suspension of Sales is not lifted or
dismissed within fifteen (15) days of issuance or imposition, Lender shall be
entitled to cease Advances secured by Intervals only with respect to the state
in which such Suspension of Sales has been imposed. If such Suspension of Sales
has not been lifted or dismissed within sixty (60) days, Lender shall thereafter
be entitled to cease all Advances hereunder if at any time during the pendency
of such Suspension of Sales, total sales by Borrower have declined by twenty
percent (20%) or more during any sixty (60) day period compared to the same
sixty (60) day time period in the prior year and Lender shall have no obligation
to make further Advances hereunder until such Suspension of Sales is lifted or
dismissed..
SECTION 6
NEGATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lender's
committed to lend hereunder, unless Lender otherwise consents in writing,
Borrower hereby covenants and agrees with Lender as follows:
6.1 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, the Assignment of Beneficial Interest or in any other Loan Document,
(b) in any document or instrument evidencing, securing, or executed in
connection with the Receivables Loan, or (c) in any other document or instrument
evidencing, securing, or executed in connection with any other Indebtedness.
6.2 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.
6.3 MATERIAL ADVERSE CHANGE. In the event of a Material Adverse Change,
Lender shall be entitled to immediately suspend any further Advances to Borrower
until such Material
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Adverse Change is cured. Borrower shall immediately notify Lender upon the
occurrence of a Material Adverse Change.
SECTION 7
EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
7.1 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.
7.2 COVENANT DEFAULTS. Borrower shall fall 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.
7.3 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.
7.4 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.
7.5 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.
7.6 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
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money cumulatively in excess of $100,000 which is not discharged in full or
stayed within thirty (30) days after issuance or filing.
7.7 INSOLVENCY. Borrower shall become insolvent or otherwise generally
be unable to pay its debts when due.
7.8 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.
7.9 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.
7.10 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 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.
7.11 CROSS DEFAULT, CROSS COLLATERALIZATION. This Loan is given in
connection with one or more loans which Lender, either individually or as Agent
on behalf of itself and other Lenders, has made or will make to Borrower. Upon
the occurrence of an Event of Default under this Agreement or any of the other
Loan Documents relating hereto or the occurrence of an Event of Default under
the Amended and Restated Receivables Loan Agreement (Receivables Loan
Agreement") regarding the Receivables Loan or the Construction Loan, then in any
such event, the Lender may declare all of the principal, interest and other sums
which may be outstanding under this Loan and under the Receivables and
Construction Loans (collectively the "Indebtedness") to be immediately due and
payable and the Lender may exercise any and all rights and remedies provided in
the Loan Documents or any Loan Document in connection with this Agreement, the
Receivables Loan or the Construction Loan.
Any and all Collateral, as defined in each Loan Agreement, and granted
as security for any Loan shall secure to Lender the payment of the total
Indebtedness in the performance of the covenants and agreements set forth in
this Loan Agreement, the Receivables Loan Agreement or the Construction Loan
Agreement (collectively the "Obligations"), all of which are secured to Lender
without apportionment or allocation of any part or portion of said Collateral.
Upon such an Event of Default Lender shall be entitled to enforce the
payment of the Indebtedness and performance of all Obligations and to exercise
all of its rights, remedies and powers provided hereunder or under any other
Loan Agreement in one or more proceedings, whether contemporaneous, consecutive
or both to be determined by Lender in its sole and absolute discretion. The
enforcement of any such rights or remedies by Lender shall not constitute an
election of remedies and shall not prejudice in any way, limit or preclude the
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enforcement of any other right or remedy under any of the Loan Documents through
one or more additional proceedings. No judgment obtained by Lender in any one or
more enforcement proceeding shall merge the debt secured hereby into such
judgment and any portion of the Indebtedness which shall remain unpaid shall be
a continuing obligation of Borrower not merged with such judgment. Lender may
bring any action or proceeding including without limitation foreclosure through
judicial proceedings, power of sale or otherwise in any state or federal court
and such proceeding may relate to all or any part of the total Collateral
without regard to the fact that any one or more prior or contemporaneous
proceedings have been commenced elsewhere with respect to the same or any other
part of the total Collateral.
The proceeds of any such enforcement or foreclosure shall be applied to
the payment of the Indebtedness in such order as Lender may determine in its
sole discretion.
The documents and instruments evidencing and securing this Loan shall
also secure the Receivables Loan of even date herewith between Agent and
Borrower and any Construction Loan which may be entered into hereafter between
Borrower and Agent as Lender pursuant to that certain Standby Commitment dated
September 1, 1999 and vise-versa.
SECTION 8
REMEDIES
8.1 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.
8.2 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.
8.3 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
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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.
8.4 CUMULATIVE RIGHTS. All rights and remedies available to Lender
under the Loan Document 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.
8.5 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 9
CERTAIN RIGHTS OF LENDER
9.1 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 Lenders liens and security interests therein and will take such
actions to preserve the Collateral and Lender's liens and security interests
therein.
9.2 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.
9.3 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 Lenders
inside counsel), receivers' fees, engineers' fees, accountants' fees,
independent consultants' fees (including environmental consultants), all
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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 (subject to the annual limits thereon set forth in
the Receivables Loan Agreement), 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 bidder's at any foreclosure sale a true condition of the tide to, or
the value of, the Collateral.
9.4 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.
9.5 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.
9.6 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.
9.7 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 what so ever 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 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
Borrowers sole cost and expense, with legal counsel satisfactory to Lender.
Notwithstanding any defense by Borrower of
15
<PAGE> 21
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 Lenders 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 10
MISCELLANEOUS
10.1 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: Silverleaf Resorts, 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: Heller Financial, Inc. R
Attn: Portfolio Manager, Vacation Ownership
Finance
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
With a copy to: Heller Financial, Inc.
Vacation Ownership
Attn: Legal Representation
16
<PAGE> 22
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7872
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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 Lenders receipt of one or more
counterparts hereof signed by Borrower and Lender.
10.7 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
17
<PAGE> 23
obligation of any type or nature whatsoever to Borrower or any of its partners,
or any of its shareholders, or to any other person or entity.
10.8 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.
10.9 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 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.
10.10 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 MARK R. TAYLOR, WHOSE
ADDRESS IS 190 S. LASALLE STREET, CHICAGO, ILLINOIS 60603, AS ITS DULY
AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH
PROCESS UPON SUCH PARTY PROVIDED THAT A COPY OF SUCH PROCESS IS DELIVERED TO
BORROWER PURSUANT TO SECTION 10.1 ABOVE 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. LENDER SHALL SEND A COPY OF SUCH SERVICE TO
BORROWER IN ACCORDANCE WITH PARAGRAPH 10.1 ABOVE BUT THE FAILURE OF LENDER TO DO
SO SHALL NOT INVALIDATE SERVICE OF PROCESS AS PROVIDED HEREIN. 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.
10.11 JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
18
<PAGE> 24
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 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.
10.12 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.
10.13 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.
10.14 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.
19
<PAGE> 25
APPENDIX 1
DEFINITION OF TERMS
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.
ADVANCE FEE. A fee payable by Borrower to Lender at the time of each
Advance in the amount of 1% of such Advance.
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.
ASSIGNMENTS OF BENEFICIAL INTERESTS. The Assignment of Borrower's
Beneficial Interests in the Oak N' Spruce Resort Trust to Lender in the form
attached as EXHIBIT D.
AVAILABILITY. The amount of the Loan ($10,000,000) less Advances by
Lender outstanding hereunder and under the Receivables Loan in excess of
$40,000,000 provided that no more than $5,000,000 in advances outstanding
hereunder and under the Receivables Loan in the aggregate shall be secured by
Assignments of Beneficial Interests in the Oak N' Spruce Resort Trust.
AVAILABILITY PERIOD. The period commencing on the Closing Date and
ending August 31, 2002.
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.
CERTIFICATES OF BENEFICIAL INTERESTS. The Certificates of Beneficial
Interest in the Oak N' Spruce Resort Trust evidencing the use rights of
Purchasers.
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> 26
CONSTRUCTION LOAN. That certain Construction Loan which may be entered
into hereafter between Borrower and Lender pursuant to that certain Standby
Commitment dated __________, 1999.
COSTS. Shall have the meaning set forth in Section 9.3.
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.
DECLARATION OF TRUST. The Amended and Restated Declaration of Trust of
Oak N' Spruce Resort Trust and all amendments and supplements thereto.
DEED OF TRUST. Those certain Deeds of Trust and Security Agreement or
Mortgages and Security Agreement dated of even date herewith or granted
hereafter from time to time from Borrower, as grantor, to Lender or the Trustee
named therein, in trust, for the benefit of Lender, as it may from time to time
be extended, renewed, restated or replaced, substantially 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 encumbering Eligible Unsold Timeshare
Intervals.
DEFAULT RATE. A per annum rate of interest equal to the Interest Rate
plus four percent (4%).
ELIGIBLE UNSOLD TIMESHARE INTERVAL. Each Interval at the Resorts listed
on EXHIBIT E 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 or similar permit for 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 Silverleaf Club,
a non-profit Texas corporation, free of charges, liens and
security interests; and
(d) The unsold Interval is encumbered by the applicable Deed of Trust
or Assignment of Beneficial Interest and is not subject to any
lien not previously consented to by Lender;
<PAGE> 27
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.
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; (ii) in connection with the
Amended and Restated Receivables Loan and Security Agreement from Lender to
Borrower, and (iii) any Construction Loan Agreement entered into between Lender
to Borrower pursuant to that certain Standby Commitment dated September 1, 1999
together with any and all other indebtedness of Borrower to Lender whether now
existing or hereafter arising.
INTEREST RATE. The outstanding principal balance of the Loan shall bear
interest at a floating rate per annum equal to the Base Rate plus three and one
half percent (3.5%) (the "Interest Rate"). Base Rate shall mean the rate
published each business day in the Wall Street Journal for deposits maturing
ninety (90) days after issuance under the caption "Money Rates, London Interbank
Offered Rates" (LIBOR); provided, however, that after the occurrence of an Event
of Default the Loan will bear interest at the Default Rate. The Interests Rate
for each calendar month shall be fixed based upon the Interest Rate published
prior to and in effect on the first business day of such month. 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 or the use rights and other rights and interest of a purchase under a
Certificate of Beneficial Interest in the Oak N' Spruce Resort Trust.
LOAN. This Ten Million and 00/100 Dollar ($10,000,000.00) revolving
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 to
Borrower including but not limited to:
<PAGE> 28
(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.
(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.
(g) Special Warranty Deed dated August 1, 1997 and recorded under
Clerk's File No. 97-12710 of the Real Property Records of LaSalle
County, Illinois.
(h) Special Warranty Deed dated August 1, 1997 and recorded in Book
784, Page 1189 of the Real Property Records of Jefferson County,
Missouri.
(i) Assignment of Beneficial Interest dated December 24, 1997 but
effective December 31, 1997 and recorded with the Berkshire
Middle District
<PAGE> 29
Registry of Deeds in Berkshire County, Massachusetts in Book
1586, Page 644.
(j) Limited Warranty Deed dated September 24, 1998 and recorded in
Book 414, Page 348; Limited Warranty Deed dated October 13, 1998
and recorded in Book 416, Page 714; Limited Warranty Deed dated
November 24, 1998 and recorded in Book 420, Page 587; and Limited
Warranty Deed dated December 9, 1998 and recorded Book 421, Page
563, all of the Real Property Records of Habersham County,
Georgia.
(k) Special Warranty deed dated February 11, 1998 and recorded under
Clerk's File No. ###-##-####, and Special Warranty deed dated
November 24, 1997 and recorded under Clerk's File No.
###-##-####, both of the Real Property Records of Galveston
County, Texas.
MATERIAL ADVERSE CHANGE. Shall mean an adverse change in Borrower's
revenue, total assets or net worth of more than five percent (5%) from those
represented to Lender as of the Closing Date.
MATURITY DATE. August 31, 2002 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 $10,000,000 executed and delivered by Borrower to Lender
concurrently herewith 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 on EXHIBIT F
hereto.
RECEIVABLES LOAN. The $70,000,000 loan from Lender to Borrower.
TIMESHARE DOCUMENTS. Any and all documents evidencing or relating to
the sale of Intervals by Borrower.
<PAGE> 30
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. Any title insurance company previously approved in
writing by Lender.
TITLE INSURANCE POLICY. A title insurance mortgage policy issued by a
Title Insurer in the amount of each Advance covering the Financed Intervals
(except for the Certificates of Beneficial Interest in the Oak N' Spruce Resort
Trust) and subject only to the Permitted Exceptions 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.
<PAGE> 31
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:
SILVERLEAF RESORTS, INC.,
a Texas corporation
By: /s/ Robert Mead
-----------------------------------------
ROBERT MEAD,
Chief Executive Officer
LENDER:
HELLER FINANCIAL, INC.
By: /s/ Kathryn Ploutt
-----------------------------------------
Name: Kathryn Ploutt
---------------------------------------
Its: Vice President
---------------------------------------
Exhibits and Attachments:
Appendix 1 - Definition of Terms
Schedule 3.2 - Closing Deliveries
Schedule 4.4 - List of Litigation Matters
Exhibit A - Permitted Exceptions
Exhibit B - Legal Description For The Resorts
Exhibit C - Request For Advance
Exhibit D - Form Of Assignment Of Beneficial Interest/Form Of Deed
Of Trust Or Mortgage
Exhibit E - Approved Resorts, Appraisals And Pending Receipt Of
Opinion Letters For All States Except Texas
Exhibit F - Silverleaf Resorts, Inc.
Ownership And Management Of Resorts
Exhibit 5.7 - Borrower's Debts, Liabilities And Obligations To Any
Affiliates Of Borrower
<PAGE> 1
EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated September 30, 1999, between
BANKBOSTON, N.A., a national banking association with its head office at 100
Federal Street, Boston, Massachusetts 02110, as agent (the "Agent"), BANKBOSTON,
N.A. and various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), and SILVERLEAF RESORTS, INC., a Texas corporation
with a principal place of business in Dallas, Texas (the "Borrower").
This Loan and Security Agreement, the $15,000,000 BankBoston Note, the
$15,000,000 Liberty Note, the Servicing Agreement, the Lock-Box Agreement, the
Subordination Agreements, the Financing Statements, all as defined herein, and
all other documents and instruments executed in connection with this Agreement,
are collectively referred to as the "Loan Documents".
The Lenders as of the date of this Agreement are BankBoston, N.A. and
other institutions listed on Schedule 1 attached hereto.
PRELIMINARY STATEMENT
This Loan and Security Agreement sets forth the terms on which the
Lenders will loan to the Borrower from time to time up to $30,000,000 (the
"Loans") for the purpose of financing timeshare receivables at the Borrower's
time share projects described herein.
AGREEMENT
IT IS THEREFORE AGREED AS FOLLOWS:
1. DEFINED TERMS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the meanings indicated in this Section
1. The singular shall include the plural and the masculine gender shall include
the feminine and neuter and vice-versa as the context requires. Accounting terms
used herein shall be given their customary meaning in accordance with generally
accepted accounting principles, unless such terms are otherwise defined herein.
Terms defined in the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts (the "UCC") shall be used herein as defined therein, unless such
terms are otherwise defined herein.
1.1 "Assignee Lender" shall have the meaning provided in
Section 12.7.1. herein.
1.2 "Association" shall mean with respect to each Eligible
Project, the corporation or other organization of owners of Timeshare Interests
which has responsibility for managing and administering the Eligible Project's
facilities, time share program and reservation systems.
1.3 "Authorized Officer" shall mean an officer of the Borrower
who has been duly authorized by Borrower to execute and deliver to the Agent
Borrowing Base Certificates and other certificates, each of whom is listed on
Schedule 1.3 attached hereto, as such schedule may be amended by the Borrower
from time to time.
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1.4 "Availability Fee" shall have the meaning provided in
Section 2.12 herein.
1.5 "Borrower's Account" shall have the meaning provided in
Section 2.2 herein.
1.6 "Borrowing Base Certificate" shall mean a certificate
substantially in the form of Exhibit 1.6 attached hereto or in such form as
shall be acceptable to the Agent and certifying (a) the Receivables Loan
Borrowing Base, (b) that all loans constituting Consumer Loan Collateral are not
in default; and (c) that the Borrower knows of no defenses assertable against
any loans constituting Consumer Loan Collateral.
1.7 "Borrowing Period" shall have the meaning provided in
Section 2.8 herein.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.9 "Collateral" shall mean the Personal Collateral and any
other collateral pledged by the Borrower hereunder from time to time.
1.10 "Commitment Fee" shall have the meaning provided in
Section 2.11 herein.
1.11 "Consolidated Interest Expense" shall mean, with
reference to any period, all interest charges (excluding amortization of debt
discount and expense and imputed interest on capitalized lease obligations) for
such period, determined on a consolidated basis for the Borrower and its
Subsidiaries, if any, in accordance with generally accepted accounting
principles consistently applied.
1.12 "Consolidated Net Income" for any period shall mean the
net income of the Borrower and its Subsidiaries, if any, for such period as
computed on a consolidated basis in accordance with generally accepted
accounting principles consistently applied, and, without limiting the foregoing,
after deduction from gross income of all expenses and reserves, including
reserves for taxes on or measured by income, but excluding any extraordinary
profits or losses and also excluding any taxes on such extraordinary profit or
loss.
1.13 "Consumer Loan Collateral" shall have the meaning
provided in Section 4.1.1 herein.
1.14 "Consumer Loan Cover Sheet" shall mean a document
prepared by the Borrower and executed by an Authorized Officer of the Borrower
indicating the outstanding principal amount of such consumer loan and certifying
that (a) attached to such cover sheet are the Required Consumer Loan Documents,
(b) all submitted documents are consistent as to borrower name, property
address, loan amount, interest rate and loan term, (c) the note evidencing such
loan bears an original signature or signatures which appear to be those of the
maker or makers, (d) except for endorsements to the Borrower or the Agent or in
blank, none of the documents contain any irregular writings which appear to
affect the validity thereof, and (e) the loan has all of the characteristics of
an Eligible Consumer Loan. The Borrower shall be entitled to deliver a Consumer
Loan Cover Sheet or Sheets relating to multiple consumer loans.
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1.15 "Delinquent Lender" shall have the meaning provided in
Section 11.12 herein.
1.16 "EBITDA" shall mean, with reference to any period,
Consolidated Net Income for such period plus all amounts deducted in arriving at
such Consolidated Net Income in respect of (i) Consolidated Interest Expense for
such period, plus (ii) federal, state and local income taxes for such period,
plus (iii) all charges for depreciation of fixed assets and amortization or
organizational and financing costs for such period, determined in each case on a
consolidated basis for the Borrower and its Subsidiaries, if any, in accordance
with generally accepted accounting principles consistently applied.
1.17 "Eligible Consumer Loan Amount" shall mean the aggregate
principal amount outstanding from time to time of all Eligible Consumer Loans
pledged as Collateral.
1.18 "Eligible Consumer Loan" shall mean a loan to a consumer
borrower with all of the following characteristics:
1.18.1 The loan shall be made to a resident of the United
States (or a resident of Canada; provided that the outstanding principal amount
of all of the Eligible Consumer Loans pledged as Collateral made to residents of
Canada shall not at any one time exceed 5% of the outstanding principal amount
of all Eligible Consumer Loans pledged as Collateral) who is the occupant or
owner of the collateral securing such loan and who was competent to contract at
the time they executed the documents in connection with such loans, shall be
payable in U.S. dollars, and shall be in accordance with the Borrower's general
underwriting criteria;
1.18.2 The loan shall have the following terms:
1.18.2.1 An original term not to exceed 96 months;
provided that at any one time up to 10% of the outstanding principal amount of
the Eligible Consumer Loans pledged as Collateral may have an original term in
excess of 96 months but not more than 120 months.
1.18.2.2 A downpayment of not less than 10% of the
sales price (not including closing costs, broker's commission, and prior to any
discounts), which sales price shall be payable in equal monthly installments of
principal and interest, with the first installment due and payable not more than
45 days after the date of the promissory note.
1.18.2.3 An interest rate no less than 12.5% per
annum; provided that at any one time up to 20% of the outstanding principal
amount of Eligible Consumer Loans pledged as Collateral shall have an interest
rate of no less than 10% per annum.
1.18.3 All applicable recision or cancellation periods
relating to such consumer loan shall have expired;
1.18.4 The collateral securing such loan shall be
interests in Units (a) acceptable to the Agent, (b) constructed in compliance
with all applicable laws and regulations, served by utilities necessary for
their intended use, furnished and ready for occupancy, (c) for
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which a valid certificate of occupancy or equivalent has been issued by
appropriate Governmental Authorities or for which no certificate of occupancy or
equivalent is required by appropriate Governmental Authorities, and (d) duly
admitted to the provisions of the applicable Timeshare Instruments;
1.18.5 The loan shall be secured by a valid perfected
first priority mortgage or deed of trust on a Timeshare Interest (or in the case
of an Oak N' Spruce Beneficial Interest, a valid perfected first priority
security interest), subject only to (a) liens for taxes not yet due and payable,
and (b) Permitted Encumbrances and other easements, restrictions and
encumbrances acceptable to the Agent which do not represent liens securing
monies owed or claimed and which do not materially affect the value of the
collateral for such loan;
1.18.6 If pledged to the Agent as Consumer Loan
Collateral, the pledge by the Borrower to the Agent of such loan and related
rights is effective to grant to the Agent a first priority security interest in
such loan and related rights free and clear of any liens or claims of any other
person;
1.18.7 All agreements in connection with such loan are
the legal, valid and binding obligations of the consumer borrower, in full force
and effect and enforceable in accordance with their terms, with no claim of
defense, setoff or counterclaim asserted by the consumer borrower;
1.18.8 The loan complies in all respects with all
requirements of all applicable state and federal law, including, without
limitation, state laws and regulations governing sales of time shares,
applicable usury limitations, real estate settlement procedures, the Securities
Act of 1933, the Securities Exchange Act of 1934, the Interstate Land Sales Full
Disclosure Act, the Federal Trade Commission Act, the Consumer Credit Protection
Act of 1968, the Telephone Consumer Protection Act, the Telemarketing and
Consumer Fraud and Abuse Prevention Act, the Fair Housing Act, the Consumer
Leasing Act of 1976, the Equal Credit Opportunity Act, the Truth in Lending Act,
the Flood Disaster Prevention Act of 1973, the applicable Timeshare Act, and
Regulation Z of the Board of Governors of the Federal Reserve System;
1.18.9 (a) No payments shall be more than 29 days late
and no other defaults shall have occurred with respect to such loan and the
documents related thereto or (b) (i) defaults shall have occurred, (ii) the
consumer borrower has entered into a payment plan accepted by the payee of the
note, (iii) the first payment under such payment plan shall have been timely
made and no other payments under the payment plan shall be more than 29 days
late and no other defaults shall have occurred with respect to such loan since
the payment plan, and (iv) there shall have been no more than two revised
payment plans during the term of the loan or (c) (i) a default shall have
occurred, (ii) a replacement consumer borrower shall have agreed to assume the
obligations under the loan, (iii) the replacement borrower shall have paid at
least 10% of the sales price of the Timeshare Interest, (iv) the first payment
by such replacement borrower shall have been timely made and no other payments
shall be more than 29 days late and no other defaults shall have occurred with
respect to such loan after the assumption of such loan by the replacement
borrower, and (v) there shall have been no more than two replacement borrowers
during the term of the Loan.
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1.18.10 The loan represents the balance of the sales
price of a Timeshare Interest and the purchaser of such Timeshare Interest is
not, and no payment of a sum due under the loan has been made by, an officer,
director, agent, employee, principal, broker, creditor (or relative thereof) of
any other entity or person related to or an affiliate of the Borrower.
1.18.11 The Borrower has no knowledge or notice of any of
the following conditions existing or in connection with the collateral securing
such loan: hazardous wastes or hazardous substances prohibited by applicable law
or regulation, asbestos or urea formaldehyde insulation, or any release of any
of the foregoing prohibited by any Environmental Regulations or any applicable
law or regulation;
1.18.12 Any prior mortgages or deeds of trust or security
interests on the collateral securing such loan shall be released of record and
the loan or any rights thereto shall not be affected by or subject to any escrow
for presales or otherwise;
1.18.13 The consumer borrower is a member of the
applicable Association;
1.18.14 In connection with each such loan pledged as
Consumer Loan Collateral, the Borrower shall have delivered the Required
Consumer Loan Documents;
1.18.15 In connection with any consumer loan for which
the most recent six consecutive monthly payments have not been timely made, no
consumer borrower obligated as payor shall have (i) a bankruptcy filing or
equivalent within two years prior to the pledge of such consumer loan, (ii)
unpaid judgments and/or liens; and
1.18.16 Such other characteristics as the Agent may
require from time to time.
1.19 "Eligible Projects" shall mean those timeshare resorts
owned by the Borrower listed on Schedule 1.19 attached hereto, as such schedule
may be amended from time to time by the Borrower and the Agent.
1.20 "Employee Benefit Plan" shall mean any employee benefit
plan within the meaning of Section 3(d) of ERISA maintained or contributed to by
any of the Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
1.21 "Environmental Regulations" shall have the meaning
provided in Section 5.17 herein.
1.22 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974.
1.23 "ERISA Affiliate" shall mean any person which is treated
as a single employer with the Borrower under Section 414(c) of the Code.
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1.24 "ERISA Reportable Event" shall mean a reportable event
with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of
ERISA and the regulations promulgated thereunder as to which the requirement of
notice has not been waived.
1.25 "Event of Default" shall have the meaning provided in
Section 9 herein.
1.26 "$15,000,000 BankBoston Note" shall have the meaning
provided in Section 2.1 herein.
1.27 "$15,000,000 Liberty Note" shall have the meaning provided
in Section 2.1 herein.
1.28 "Financial Statements" shall have the meaning provided in
Section 6.1.8 herein.
1.29 "Financing Statements" shall have the meaning provided in
Section 4.5 herein.
1.30 "Governmental Authority" shall mean the United States of
America, the State where the Eligible Project is located, any political
subdivision thereof, the County of and the City or Town where the Eligible
Project is located, and any agency, authority, department, commission, board,
bureau, or instrumentality of any of them.
1.31 "Guaranteed Pension Plan" shall mean any employee pension
benefit plan within the meaning of Section 3(2) of ERISA maintained or
contributed to by any of the Borrower or any ERISA Affiliate, the benefits of
which are guaranteed on termination in full or in part by the PBGC pursuant to
Title IV of ERISA, other than a Multiemployer Plan.
1.32 "Indebtedness" shall have the meaning provided in Section
4.1 herein.
1.33 "Individual Commitment" shall mean the amount of the Loans
each Lender shall commit to lend to the Borrower pursuant to this Agreement, as
provided in Schedule 1, as amended from time to time.
1.34 "Interest Coverage Ratio" shall have the meaning provided
in Section 6.17 herein.
1.35 "Lender's Percentage" shall mean the ratio of each
Lender's Individual Commitment to the Total Commitment from time to time.
1.36 "Lock Box Agent" shall have the meaning provided in
Section 4.3.2 herein.
1.37 "Lock Box Agreement" shall have the meaning provided in
Section 4.3.2 herein, as such agreement may be amended from time to time.
1.38 "Management Agreement" shall mean (1), with respect to the
following Eligible Projects: Holly Lake Resort, Piney Shores Resort, The
Villages (including Lake O' The
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Woods), Hill County Resort, Seaside Resort, Ozark Mountain Resort, Holiday Hills
Resort, Timber Creek Resort, Fox River Resort, Oak N' Spruce Resort, Apple
Mountain Resort and Beech Mountain Resort, that certain Management Agreement by
and between Silverleaf Club (f/k/a Master Club, f/k/a Master Endless Escape
Club) and Borrower dated May 28, 1990, as amended through Eighth Amendment dated
March 9, 1999, as such agreement may be amended from time to time, and (2), with
respect to the following resorts managed by the Borrower: Alpine Bay (including
Capricorn Complex, Dogwood Hills and The Pines), Hickory Hills Resort, Quail
Hollow Village at Beech Mountain Lakes, Treasure Lake Resort (including
Silverwoods and Wolf Run Manor), Foxwood Hills Resort (including Kinston Manor
and Villas at Foxwood Hills), Tansi Resort (including Hiawatha Manor, Hiawatha
Manor I, and Hiawatha Manor West) and Westwind Manor Resort, each of the
management agreements between the Association for the resort and the developer
of the resort in each case, assigned to Borrower pursuant to a Bill of Sale and
Blanket Assignment dated May 28, 1998.
1.39 "Marketing Ratio" shall have the meaning provided in
Section 6.18 herein.
1.40 "Maturity Date" shall mean September 30, 2006.
1.41 "Multiemployer Plan" shall mean any Multiemployer Plan
within the meaning of Section 3(37) of ERISA maintained or contributed to by any
of the Borrower or any ERISA Affiliate.
1.42 "Notes" shall mean the $15,000,000 BankBoston Note, the
$15,000,000 Liberty Note, and any replacement note issued in exchange for the
$15,000,000 BankBoston Note or the $15,000,000 Liberty Note from time to time.
1.43 "Notice to Maker" shall have the meaning provided in
Section 1.54.6 herein.
1.44 "Oak N' Spruce Resort" shall mean the Borrower's project
in Lee, Massachusetts.
1.45 "Oak N' Spruce Beneficial Interest" shall mean use rights
and interests of a purchaser under a Certificate as defined in the Oak N' Spruce
Resort Declaration of Trust.
1.46 "Oak N' Spruce Resort Declaration of Trust" shall mean
that certain Amended and Restated Declaration of Trust of Oak N' Spruce Resort
dated January 6, 1998, and recorded inn Book 1587, Page 179, in the Berkshire
Middle District Registry of Deeds, as amended by Amendment to the Amended and
Restated Declaration of Oak N' Spruce Resort Trust dated July 9, 1998 and
recorded with the Berkshire Middle District Registry of Deeds in Book 1612, Page
588, by Second Amendment to the Amended and Restated Declaration of Trust of Oak
N' Spruce Resort Trust dated November 13, 1998 and recorded with the Berkshire
Middle District Registry of Deeds in Book 1631, Page 831 and by Third Amendment
to the Amended and Restated Declaration of Oak N' Spruce Resort Trust dated
April 15, 1999 and recorded with the Berkshire Middle District Registry of Deeds
in Book 1658, Page 506.
1.47 "PBGC" shall mean the Pension Benefit Guaranty Corporation
created by Section 4002 of ERISA or any successor entity or entities having
similar responsibilities.
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1.48 "Permitted Encumbrances" shall mean with respect to each
Eligible Project those easements, restrictions and encumbrances identified on
Schedule 1.48 attached hereto.
1.49 "Personal Collateral" shall have the meaning provided in
Section 4.1 herein.
1.50 "Receivables Loan Advance" shall mean an advance on the
Loans.
1.51 "Receivables Loan Amount" shall mean the aggregate amount
of Receivables Loan Advances outstanding from time to time.
1.52 "Receivables Loan Borrowing Base" shall mean at any time
85% of the Eligible Consumer Loan Amount.
1.53 "Related Rights" shall have the meaning provided in
Section 4.1.2 herein.
1.54 "Repurchase Obligation" shall have the meaning provided in
Section 2.7 herein.
1.55 "Requirements" shall mean any law, ordinance, code, order,
rule or regulation of any Governmental Authority relating in any way to the
acquisition and ownership of any Eligible Project, the construction of any
Eligible Project, or the use, occupancy and operation of the Eligible Project
following the completion of construction, including the Timeshare Act, and laws,
ordinances, rules or regulations relating to time-shares, subdivision control,
zoning, building, use and occupancy, fire prevention, health, safety,
sanitation, handicapped access, historic preservation and protection, tidelands,
wetlands, flood control, access and earth removal, and all Environmental
Regulations.
1.56 "Required Consumer Loan Documents" shall mean with respect
to each loan included within Consumer Loan Collateral, the following:
1.56.1 Original promissory note payable to the Borrower
or endorsed to the order of the Borrower, and endorsed in blank by an Authorized
Officer of the Borrower;
1.56.2 (a) The original or copy time-stamped by the
appropriate recording office of the recorded mortgage or deed of trust securing
the note referred to in Section 1.56.1, and original or copy time-stamped by
appropriate recording office of all amendments and assignments of such mortgage
or deed of trust showing an unbroken chain of title from the originator to the
Borrower or (b), in the case of a loan secured by an assignment of an Oak N'
Spruce Beneficial Interest, (i) original or copy time stamped by the appropriate
recording office of an assignment of beneficial interest securing the note
referred to in Section 1.56.1, and original or copy time stamped by the
appropriate recording office of all amendments and assignments of such
assignment of beneficial interest showing an unbroken chain of title from the
originator to the Borrower, and (ii) evidence satisfactory to the Agent of the
perfection of the Borrower's security interest in the Oak N' Spruce Beneficial
Interest.
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1.56.3 (a) Original or copy time stamped by the
appropriate recording office of the recorded assignment to the Agent of the
mortgage or deed of trust referred to in Section 1.56.2 or (b), in the case of a
loan secured by an assignment of an Oak N' Spruce Beneficial Interest, (i)
original or copy time stamped by the appropriate recording office of an
assignment to the Agent of the assignment of beneficial interest referred to in
Section 1.56.2(b) and (ii) evidence satisfactory to the Agent of the perfection
of the Agent's security interest in the assignment of beneficial interest.
1.56.4 Original credit application and right of recision
notices, if applicable, credit report, purchase contract containing truth in
lending disclosure statement, good faith estimate of settlement costs (if any),
and HUD-1 settlement statement.
1.56.5 (a) Copy of deed to consumer borrower with
evidence of recording in the appropriate recording office or (b), in the case of
a loan secured by an assignment of an Oak N' Spruce Beneficial Interest, a
certificate of beneficial interest in favor of the consumer borrower with
evidence of recording in the appropriate recording office.
1.56.6 Copy of notice to consumer borrower that payments
shall be made to the Servicer;
1.56.7 Original notice to consumer borrower signed by
payee of note that payments shall be made to the Agent or its designee ("Notice
to Maker");
1.56.8 Receipt for timeshare documents, servicing
disclosure statement and acknowledgement of representations.
1.56.9 All guaranties, if any, for the payment of such
consumer loan, and if the borrower shall be a corporate, partnership or limited
liability company entity, all resolutions and authorizations to evidence
authority to enter into the transaction.
1.56.10 If requested by the Agent in connection with each
such loan which has at any time been subject to any security interest, pledge or
hypothecation for the benefit of any person, a certification or release by the
former secured party in form acceptable to the Agent that such security interest
has been released;
1.56.11 Consumer Loan Cover Sheet; and
1.56.12 Other documents required by the Agent from time
to time.
1.57 "Required Lenders" shall mean at any time (a) Lenders
holding at least 66 2/3% of the then outstanding principal amount of the Notes,
and (b) at any time when there are two or more Lenders, at least two Lenders.
1.58 "Servicer" shall have the meaning provided in Section
4.3.1 herein.
1.59 "Servicing Agreement" shall have the meaning provided in
Section 4.3.1 herein, as such agreement may be amended from time to time.
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1.60 "Silverleaf Club" shall mean Silverleaf Club, a Texas
non-profit corporation, a master association to which each Association belongs.
1.61 "Subordinated Debt" shall mean all indebtedness from the
Borrower identified on Schedule 1.61 attached hereto, in each case subordinated
to the Loans in a manner satisfactory to the Agent.
1.62 "Subordinated Shareholder Debt" shall mean all
indebtedness identified on Schedule 1.62 attached hereto and any indebtedness
from the Borrower to any shareholder or member of the Borrower from time to
time.
1.63 "Subordination Agreements" shall have the meaning provided
in Section 6.19 herein.
1.64 "Subsidiary" shall mean any corporation or other entity of
which more than fifty percent (50%) of the outstanding voting stock or
comparable equity interests (including interests as a limited partner in a
limited partnership) is at the time directly or indirectly owned by the
Borrower, by one or more of its Subsidiaries, or by the Borrower and one or more
of its Subsidiaries.
1.65 "Tangible Capital Funds" shall mean at any time the sum of
(a) Tangible Net worth plus (b) the principal amount outstanding of Subordinated
Debt.
1.66 "Tangible Net Worth" shall mean net worth as reflected on
the Borrower's Financial Statements, excluding goodwill and all intangibles.
1.67 "Timeshare Act" shall mean with respect to each Eligible
Project, the statutes and regulations related to timeshare development and sales
of the jurisdiction where such Eligible Project is located, as they may be
amended from time to time.
1.68 "Timeshare Interest" shall be (a) as defined in the
Timeshare Instruments for each Eligible Project, consisting of an undivided
interest in a Unit at the Eligible Project as tenant-in-common, together with
the right to make use of any and all easements appurtenant thereto, the
non-exclusive right to use the common areas and amenities, and the exclusive
right to use and occupy any Unit and the common furnishings therein for a use
period for which such rights to use have been properly reserved or (b) with
respect to Oak N' Spruce Resort, an Oak N' Spruce Beneficial Interest.
1.69 "Timeshare Instruments" shall mean with respect to each
Eligible Project the documents pursuant to which the Project shall be submitted
to a timeshare form of ownership and registered with appropriate Governmental
Authorities.
1.70 "Title Policy" shall have the meaning provided in Section
6.4.7 herein.
1.71 "Total Commitment" shall mean the aggregate of each
Lender's Individual Commitments, which shall equal $30,000,000.
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1.72 "Unit" shall mean each of the units at one of the Eligible
Projects designated for timeshare interval ownership in the respective Timeshare
Instruments.
1.73 "Year 2000 Compliant" shall have the meaning provided in
Section 12.18 herein.
2. TERMS OF THE LOANS.
2.1 The Notes. Simultaneously with the execution of this
Agreement, the Borrower is executing a Revolving Line of Credit Promissory Note
payable to BankBoston, N.A. in the original principal amount of up to
$15,000,000 (the "$15,000,000 BankBoston Note"). Simultaneously with the
execution of this Agreement, the Borrower is executing a Revolving Line of
Credit Promissory Note payable to Liberty Bank in the original principal amount
of up to $15,000,000 (the "$15,000,000 Liberty Note").
2.2 Borrower's Account. The Borrower shall establish a
collection account with the Agent, Account No. 05700556 (the "Borrower's
Account"). The Borrower shall ensure that all payments and proceeds from the
Consumer Loan Collateral from time to time shall be paid into the Borrower's
Account. All payments into the Borrower's Account shall be applied first to the
payment of any fees, expenses, or past due amounts owing by the Borrower to the
Agent or the Lenders in connection with the Loans, second to interest accrued on
the unpaid principal balance of the Loans through the last day of the calendar
month last ended, third to the principal balance of the Loans, and fourth to all
other Indebtedness then outstanding. For any Loans for which the Borrower has
selected the Adjusted Eurodollar Rate (as defined in the Note), any principal
payments shall be retained in the Collection Account, and shall be applied to
reduce the Loans only at the end of an Interest Period (as defined in the
Notes).
2.3 Advances. The Borrower shall request advances from time to
time in a manner acceptable to the Borrower and the Agent (with a copy to each
Lender), and the Agent shall credit advances by depositing such sums in
Borrower's Account at the Agent. The Borrower shall make each request for an
advance at least 48 hours prior to the date of the requested advance. The
Borrower shall not request an advance more than once each week. Prior to 1 p.m.
Eastern Standard Time on the business day on which an advance is to be made,
each Lender shall deliver to the Agent an amount equal to the total advance
times such Lender's Percentage. The Agent shall have no obligation to credit any
advance to the Borrower's Account until the Agent has received each Lender's
proportionate share of such advance. Immediately upon notice from the Agent of
an advance, each Lender shall reimburse the Agent in an amount equal to the
total advances times such Lender's Percentage. Advances on the Loans shall be
limited in an amount to no more than the Receivables Loan Borrowing Base as
reported in a Borrowing Base Certificate delivered to the Agent and each Lender
simultaneously with each request for an advance. By requesting an advance, the
Borrower shall be deemed to represent and warrant that the information in the
most recent Borrowing Base Certificate remains true and accurate as of the time
of such request, and that after giving effect to the requested advance, the
outstanding principal amount of the Loans shall not exceed the Receivables Loan
Borrowing Base. In the event that the outstanding principal amount of the Loans
shall at any time exceed the Receivables Loan Borrowing Base as determined by
the Agent, the Borrower shall immediately and without
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notice or demand (a) pay to the Agent on behalf of the Lenders the amount of
such excess or (b) pledge sufficient Eligible Consumer Loans to increase the
Receivables Loan Borrowing Base to equal or exceed the outstanding principal
amount of the Loans.
2.4 Nonreceipt of Funds by the Agent from Lenders. Unless the
Agent shall have received notice from any Lender prior to the date on which such
Lender is to provide funds to the Agent for an advance to the Borrower that such
Lender shall have demanded the amounts due under its Notes, the Agent may assume
that all Lenders shall make such funds available to the Agent on the date of
such advance, and the Agent in reliance upon such assumption in its sole
discretion may, but shall not be obligated to, make available to the Borrower on
such date a corresponding amount. If and to the extent that the Agent shall make
an advance to the Borrower and any Lender shall not immediately reimburse the
Agent, such Lender shall repay to the Agent forthwith on demand such Lender's
Percentage of such advance together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at the overnight Federal Funds rate for three business
days, and thereafter at the Agent's base rate as announced from time to time. If
any Lender shall not pay such Lender's Percentage of any advance forthwith upon
the Agent's demand therefor, the Agent shall promptly notify the Borrower, and
the Borrower shall immediately repay to the Agent such amount with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at the rate of
interest provided in the Notes. If the Agent shall have received notice from any
Lender that such Lender (a) shall have demanded the amounts due under its Notes
or (b) shall not make any further advances hereunder, the Agent shall thereafter
make no further advances hereunder until such time as the Agent shall have
received assurances acceptable to it that all Lenders shall make available to
the Agent their pro-rate share of each advance.
2.5 Nonreceipt of Funds by the Agent from Borrower. Unless the
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Agent or Lenders hereunder that the Borrower will not
make such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent in its sole discretion
may, but shall not be obligated to, in reliance upon such assumption, cause to
be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have made such
payment in full to the Agent, each Lender shall repay to the Agent forthwith on
demand such amount distributed to such Lender together with interest thereon,
for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent, at the overnight Federal Funds
rate for three business days, and thereafter at the Agent's base rate as
announced from time to time.
2.6 Borrowing Base Certificates. The Borrower shall submit to
the Agent and each Lender a Borrowing Base Certificate (a) from time to time as
requested by the Agent; (b) simultaneously with each request for an advance on
the Loans, (c) simultaneously with any request for a release of Collateral, and
(d) monthly (on the first day of the month) while any amounts are outstanding on
the Loans. Any Borrowing Base Certificate delivered on the first day of a month
shall be accompanied by a trial balance of the Consumer Loan Collateral
acceptable to the Agent.
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2.7 Repurchase Obligation. If any consumer loan pledged as
Consumer Loan Collateral shall subsequent to the pledge hereunder no longer
qualify as an Eligible Consumer Loan, such consumer loan shall be excluded from
the Receivables Loan Borrowing Base, and the Borrower shall either (a) replace
such consumer loan with an Eligible Consumer Loan or (b) reduce the amount
outstanding on the Loans (if necessary) so that the total amount outstanding
shall not exceed the Receivables Loan Borrowing Base. Upon the request of the
Borrower and in the absence of any Event of Default or event which with the
giving of notice or passage of time would constitute an Event of Default, the
Bank shall release to the Borrower any such consumer loan which shall not
constitute an Eligible Consumer Loan and which shall be excluded from the
Receivables Loan Borrowing Base. Upon the request of the Agent at any time that
the Receivables Loan Amount shall exceed the Borrowing Base, the Borrower shall
(a) reduce the amount outstanding on the Loans or pledge additional Eligible
Consumer Loans so that the total amount outstanding shall not exceed the
Receivables Loan Borrowing Base, or (b) be obligated to repurchase (a
"Repurchase Obligation") for a price equal to the principal balance thereof any
consumer loan pledged as Consumer Loan Collateral which shall subsequent to the
pledge hereunder no longer qualify as an Eligible Consumer Loan.
2.8 Borrowing Term. The initial borrowing period for
Receivables Loan Advances for the Loans shall commence on the date hereof and
shall continue through September 30, 2001 (the "Borrowing Period"). Not later
than July 31, 2001, the Borrower shall be entitled to request in writing to the
Agent and the Lenders that the Borrowing Period be extended for one additional
year. Upon such request, the Agent with the consent of all of the Lenders may in
their sole discretion extend the Borrowing Period. Unless the Agent notifies the
Borrower that the Agent and the Lenders shall extend the Borrowing Period, the
Loans shall commence amortizing as provided in Section 2.9.
2.9 Term Out. Absent a default or Event of Default hereunder,
at the expiration of the Borrowing Period, the Lenders shall make no further
advances on the Loans, all payments of principal and interest on the Consumer
Loan Collateral shall continue to be paid to the Agent for the pro-rata benefit
of the Lenders, and the Agent shall apply all such payments as provided in
Section 2.2. All amounts outstanding under the Notes shall be due and payable at
the earlier of (a) the Maturity Date or (b) the average remaining maturity of
the Eligible Consumer Loans pledged as Collateral, as determined by the Agent at
the expiration of the Borrowing Period.
2.10 Prepayments. Except as provided in the Notes, the Borrower
shall be entitled to prepay amounts outstanding on the Loans from time to time,
without penalty.
2.11 Commitment Fees. The Borrower shall pay to the Agent for
the pro-rata benefit of the Lenders on behalf of the Lenders a commitment fee
(the "Commitment Fee") in the amount of $300,000 at the closing of the Loans.
The Commitment Fee is non-refundable and is deemed to be earned in full by the
Agent and the Lenders as of the date hereof, even if the full amount of the
Loans shall not be advanced.
2.12 Availability Fee. If at any time after April 1, 2000
through the end of the Borrowing Period, the Receivables Loan Amount shall be
less than $10,000,000, then the Borrower shall pay to the Agent for the pro-rata
benefit of the Lenders an availability fee (the "Availability Fee") in the
amount of (a) (i) $10,000,000, less (ii) the Receivables Loan Amount,
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but in any event no less than zero, times (b) one percent (1.0%) per annum. The
Agent shall calculate the Availability Fee semi-annually as of the end of each
six month period based on the average Receivables Loan Amount for the six months
then ended, and the Borrower shall pay the Availability Fee upon delivery of
such calculation by the Agent.
3. RECEIVABLES LOAN.
3.1 Requests for Receivables Loan Advance. Prior to or with
each request for a Receivables Loan Advance, the Borrower shall deliver to the
Agent the Required Consumer Loan Documents for each of the Eligible Consumer
Loans which the Borrower proposes to assign to the Agent and upon which the
Borrower is basing the requested Receivables Loan Advance.
3.2 Eligible Projects. All Eligible Consumer Loans shall be
secured by Timeshare Interests at an Eligible Project.
3.2.1 Proposed Additional Projects. The Borrower may
propose additional projects to be included as Eligible Projects. The Agent shall
conduct such review of such projects as the Agent shall deem appropriate,
including, without limitation, review of all timeshare instruments, consumer
loan documents, real estate documents, amenities agreements, management
contracts, marketing contracts, and other documentation related to such project.
The Agent, with the consent of the Required Lenders, shall be entitled to
approve or not approve such proposed project as an Eligible Project.
3.2.2 Acceptance of Additional Projects. Upon the
acceptance by the Agent of a proposed project as an Eligible Project, Schedule
1.19 shall be deemed amended to include such project. The Borrower shall take
such other action as the Agent shall require in connection with such project,
including, without limitation, the subordination of any applicable management
and marketing fees, the filing of any required financing statements, or any
other action as the Agent shall require. Upon the inclusion of an additional
project as an Eligible Project, all representations, warranties and covenants of
the Borrower with regard to the Eligible Projects shall be deemed amended to
refer to the additional Eligible Project.
4. SECURITY INTERESTS; COLLATERAL
4.1 Grants of Security Interest. In order to secure payment of
the Notes and the payment and performance of the obligations of the Borrower
under this Agreement and all other Loan Documents and all liability to the Agent
and the Lenders, now existing or which may hereafter be incurred or arise by
future advances or otherwise, direct or indirect, absolute or contingent
(collectively, the "Indebtedness"), simultaneously with the execution of this
Agreement, the Borrower is granting to the Agent for the pro-rata benefit of
Lenders security interests in the following (collectively, the "Personal
Collateral"):
4.1.1 Consumer Loans. From time to time the Borrower shall
deliver to the Agent the Required Consumer Loan Documents for consumer loans by
the Borrower, and the Borrower hereby pledges to the Agent and grants to the
Agent for the benefit of the Lenders a security interest in all of the
Borrower's right, title and interest in each such consumer loan, now existing or
hereafter arising, (a) for which the original promissory note, comparable
instrument or
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installment sales contract shall from time to time be in the possession of the
Agent or its agents or (b) which shall be identified by the Borrower as being
pledged hereunder by Borrowing Base Certificate or otherwise (collectively,
"Consumer Loan Collateral"). The failure of a loan to satisfy the criteria of an
Eligible Consumer Loan, or the failure of the Borrower to deliver all Required
Consumer Loan Documents shall not in any manner limit the Agent's security
interest in any pledged Consumer Loan Collateral.
4.1.2 Related Rights. The Borrower hereby grants to the
Agent for the pro-rata benefit of the Lenders a security interest in the
following rights now existing or hereafter arising related to Consumer Loan
Collateral (collectively, the "Related Rights"):
4.1.2.1 Rights Under Related Documents. All of the
Borrower's right, title and interest in and under any documents related to each
such consumer loan, including, without limitation, all promissory notes or other
agreements for payment (and specifically including the right to collect all
payments due pursuant to such notes or agreements), loan agreements, mortgages,
or other security documents, guaranties, insurance policies (and specifically
including the right to assert and collect any claims thereunder), title
insurance policies, subordinations, custodial agreements, agency agreements,
servicing agreements, interval ownership agreements, corporate documents,
opinions, instruments, drafts, acceptances, and chattel paper;
4.1.2.2 Rights in Collateral Securing Consumer Loans.
All of the Borrower's right, title and interest in any collateral pledged the
Borrower or in which the Borrower has any lien, mortgage or security interest in
connection with each such consumer loan.
4.1.2.3 Take-Out Commitments. To the extent that such
rights are assignable, all of the Borrower's rights (but not obligations) under
any agreements related to each such consumer loan under which any party agrees
to purchase such loan or any underwriting agreements related to such loan and
all rights to deliver such loan to investors and purchasers pursuant thereto and
all proceeds resulting therefrom;
4.1.2.4 Servicing Rights. All of the Borrower's
rights to administer, service and collect each such consumer loan and all rights
to payment therefor;
4.1.2.5 Escrow Funds. All of the Borrower's rights in
funds paid in connection with such loan escrowed pursuant to any escrow
agreements.
4.1.2.6 Records and Cabinets. All of the Borrower's
related documentation and other supporting evidence related to each such
consumer loan or other Collateral, including, without limitation, computer
programs, disks, tapes and related electronic data processing media,
applications, account cards, payment records, correspondence, insurance
certificates, books of account, ledgers, and cabinets in which the same are
reflected or maintained; and
4.1.2.7 Other Related Rights and Receivables. All of
the Borrower's right, title and interest in any other rights related to each
such consumer loan,
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including, without limitation, accounts, accounts receivable, contract rights,
pre-authorized account debit agreements, rights in reservation systems, and
general intangibles.
4.1.3 Proceeds, Etc. With respect to each of the
Consumer Loan Collateral and Related Rights, all accessions thereto,
substitutions and replacements therefor, additions, renewals and replacements
thereof, all proceeds and products from the sale, exchange, collection,
foreclosure, liquidation or other disposition of any of the foregoing and from
any such proceeds or products, and any proceeds of insurance related thereto.
4.2 Collateral Procedures.
4.2.1 Delivery of Consumer Loan Collateral. The
Borrower shall deliver to the Agent Required Consumer Loan Documents from time
to time to such locations and in such manner acceptable to the Agent as the
Borrower and the Agent shall determine. The Borrower shall take any actions
required by the Agent to obtain the release of any lien or security interest in
favor of any party other than the Agent in any Consumer Loan Collateral. The
Borrower shall pay to the Agent all custodial costs incurred, as determined by
the Agent. With the prior consent of the Agent in each instance, in its sole
discretion, the Borrower shall be entitled to effect delivery to the Agent by
delivery to a custodian approved by the Agent acting on the Agent's behalf at
the Borrower's expense. All consumer loans delivered by the Borrower to the
Agent shall be accompanied by the Required Consumer Loan Documents, and the
Borrower shall be deemed to represent and warrant in connection with all such
loans delivered to the Agent that the certifications required to be included in
the Consumer Loan Cover Sheet are true even if no such cover sheet shall be
delivered by the Borrower. The Borrower shall promptly deliver to the Agent any
additional documents related to any Consumer Loan Collateral which the Borrower
acquires after delivery to the Agent of the Required Consumer Loan Documents.
4.2.2 The Agent's Obligations. The Agent shall be
under no obligation to review or in any manner approve any Consumer Loan
Collateral delivered to the Agent from time to time, although nothing herein
shall preclude the Agent from conducting whatever review it deems appropriate.
The Agent may in its discretion require Consumer Loan Collateral to be delivered
three business days prior to any advance for which such Consumer Loan Collateral
shall be part of the Receivables Loan Borrowing Base. The Agent shall have no
responsibility for taking any steps necessary to preserve rights against other
parties or any other rights pertaining to Collateral. The Agent shall not be
required to perfect or maintain the perfection of its security interests. No
loss of or damage to any Collateral shall release the Borrower from the
Indebtedness. The Agent may, but shall not be obligated to, take such action as
it deems fit and at the Borrower's expense to collect or enforce any loan
pledged to the Agent hereunder which shall be in default and the Agent shall not
be liable to the Borrower for any act or omission taken by it in the collection
or enforcement of such loans. The Agent shall not be liable or responsible in
any way for any loss or damage to the Collateral or any diminution in the value
thereof, except if caused by the Agent's gross negligence or willful misconduct.
The Agent shall not be liable or responsible in any way for any act of any
custodian, carrier, servicer, lock box agent or any other person whatsoever, and
all of the same shall be at the Borrower's sole risk. The Agent and the Lenders
shall not be responsible for any excise, property or other taxes related to the
Collateral or the sale thereof and all such taxes shall be the responsibility of
the Borrower. The grants of security interest herein shall not obligate or be
construed to obligate the Agent to perform any of
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the terms contained in the agreements constituting Consumer Loan Collateral or
otherwise to impose any duty upon the Agent with respect to the same. The
provisions of this Section 4.2.2 shall not in any manner limit the rights of the
Lenders as provided in Section 11 herein.
4.2.3 Release of Collateral. At the Borrower's
request and in the absence of a default or Event of Default, the Agent shall
release Consumer Loan Collateral in the Agent's possession from time to time in
the manner instructed by the Borrower, but only if after such release the
outstanding principal balance of the Loans shall not exceed the Receivables Loan
Borrowing Base, as shown on a Borrowing Base Certificate delivered
simultaneously with a request for release.
4.3 Servicing Agreement and Lock-Box Agreement.
4.3.1 Servicing Agreement. Pursuant to a servicing
agreement (the "Servicing Agreement") among the Borrower and the Agent and the
Borrower as servicer or a replacement servicing agent acceptable to the Agent
(the "Servicer"), the Servicer shall service and administer loans constituting
Consumer Loan Collateral in the ordinary course of business. The Servicer shall
administer all amounts due to the Borrower with respect to the Consumer Loan
Collateral and shall direct payment to Borrower's Account of all amounts
collected with respect to the Consumer Loan Collateral in accordance with a
schedule established by the Agent. All amounts directed by the Servicer to
Borrower's Account shall be applied by the Agent to interest, principal and
other amounts due under the Loans, in the Agent's sole discretion. It is the
intention of the Borrower and the Agent to create an absolute assignment of all
such payments. The Servicer shall provide to the Agent such reports and perform
such other functions as the Agent shall require. Upon a default or Event of
Default, the Agent shall be entitled (but not obligated) to assume the
administration and servicing of all loans constituting Collateral at any time
(after giving required notices to consumer borrowers). For good cause, the Agent
shall be entitled to establish a substitute servicing arrangement with a
servicer acceptable to the Required Lenders at any time.
4.3.2 Lock Box Agreement. Pursuant to a lock box
agreement (the "Lock Box Agreement") among the Borrower, the Agent and Chase
Bank of Texas, N.A. or a replacement lock box agent acceptable to the Agent
("the "Lock Box Agent"), the Lock Box Agent shall collect payments on loans
constituting Collateral in the ordinary course of business. The Lock Box Agent
shall pay to Borrower's Account all payments collected with respect to the
Consumer Loan Collateral in accordance with a schedule established by the Agent.
All amounts paid by the Lock Box Agent to Borrower's Account shall be applied by
the Agent as provided in Section 2.2. It is the intention of the Borrower and
the Agent to create an absolute assignment of all such payments. Upon a default
or Event of Default, the Agent shall be entitled (but not obligated) to assume
the administration of the lock box and collect payments on loans constituting
Collateral at any time. For good cause, the Agent shall be entitled to establish
a substitute lock box arrangement with a substitute lock box agent acceptable to
the Agent at any time.
4.3.3 Indemnification. The Borrower hereby
indemnifies and holds the Agent and the Lenders harmless from and against all
liability, loss, damage or expense (including reasonable attorney's fees) in any
way related to the Servicing Agreement or the Lock Box Agreement, including,
without limitation, any alleged obligation or undertaking on the Agent's
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part to perform or discharge any of the terms, covenants and conditions
contained in the Servicing Agreement or the Lock Box Agreement.
4.3.4 Borrower's Covenants. Borrower shall (a)
exercise all reasonable efforts to force or secure the performance of each and
every obligation, covenant, condition and agreement to be performed by the
Servicer under the Servicing Agreement and the Lock Box Agent under the Lock Box
Agreement; and (b) in a timely manner perform, and not suffer or permit any
default in, any of Borrower's obligations under the Servicing Agreement or the
Lock Box Agreement.
4.4 Further Security. The Borrower hereby grants to the
Agent and the Lenders a first lien security interest in any and all property
which is or may hereafter be in the Agent's or any Lenders' possession in any
capacity, including, without limitation, all moneys owed, or to be owed, by the
Agent or any Lender to the Borrower. Without limiting any other right of the
Agent or any Lender, and without requiring the Agent or any Lender to first
proceed against any other security interest, whenever the Agent or the Lenders
have the right to declare the Notes to be immediately due and payable (whether
or not they have so declared), the Agent and each Lender, at its option, may set
off against the Indebtedness any and all moneys then owed by the Agent or any
Lender to the Borrower in any capacity, whether or not due; and the Agent or any
Lender shall be deemed to have exercised such right of set off immediately at
the time of such election even though any charge therefor is made or entered on
the Agent's or the Lender's records subsequent thereto.
4.5 Filing and Recording. The Borrower shall, at its cost
and expense, cause all instruments and documents evidencing the security
interests given pursuant to this Agreement, including, without limitation, UCC-1
financing statements (the "Financing Statements") to be duly recorded and/or
filed in all places necessary, in the opinion of the Agent, to perfect and
protect the lien or security interest of the Agent. At the Agent's request at
any time, the Borrower shall, at its expense, cause all assignments of deeds of
trust included in the Required Consumer Loan Documents to be recorded,
re-recorded or filed in all places necessary in the opinion of the Agent to
perfect the interests of the Agent. The Borrower hereby irrevocably designates
the Agent, its agents, representatives and designees as agents and
attorneys-in-fact for the Borrower to sign on behalf of the Borrower and file
any assignment of mortgage or financing statement or extension of financing
statement in respect of any mortgage, deed of trust or security interest created
pursuant to this Agreement which may at any time be required or which, in the
opinion of the Agent, may at any time be desirable. In the event that any
re-recording or refiling thereof (or the filing of any statement) is required to
protect or preserve such lien or security interest hereunder, the Borrower shall
at its cost and expense, cause the same to be re-recorded or refiled at the time
and in the manner requested by the Agent. The Borrower shall pay on demand all
reasonable costs and expenses of the Agent in connection with any such filing
and recording.
5. REPRESENTATIONS AND WARRANTIES
In connection with the execution of this Agreement and the Loan
Documents and to induce the Agent and the Lenders to make the Loans, the
Borrower represents and warrants (and, so long as any Indebtedness shall remain
outstanding shall be deemed to represent and warrant continuously) to the Agent
and the Lenders as follows:
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5.1 Authority; No Violation of Agreements. The Borrower is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas and under the laws of every state in which the
conduct of its business requires it to so qualify or be licensed. The Borrower
has filed all documents and registrations, including tradename registrations,
required by the laws of the State of Texas and any other states in which the
conduct of its business requires it to so qualify or be licensed. The Borrower
has the power and authority to (a) own and operate its property and conduct its
business and (b) execute and deliver the Loan Documents and perform the
transactions contemplated thereby. The execution and delivery of the Loan
Documents and the performance of the transactions contemplated thereby by the
Borrower (i) have been duly authorized by all necessary corporate action and
(ii) do not and will not constitute a breach or violation of (a) any mortgage,
deed of trust, lease, loan or credit agreement, trust agreement, by-laws,
shareholders agreement or other instrument or contract to which the Borrower is
a party or by which it may be bound or affected or (b) any law, administrative
regulation or court decree or any obligation by which the Borrower is bound. The
consent or approval of any Governmental Authority is not required for the
Borrower to execute and deliver the Loan Documents and perform the transactions
contemplated thereby. The Borrower is not in default under any indenture,
mortgage, deed of trust, agreement or other instrument to which it is a party or
by which it may be bound or affected. No consent, approval, order or
authorization of, or registration with, any governmental authority, trustee, or
any other person is required in connection with the valid execution and delivery
of this Agreement or any other Loan Documents by the Borrower, or any other
party thereto, or the performance by the Borrower or any other party thereto of
the transactions contemplated hereby or thereby.
5.2 Associations. Each Association is a corporation or
unincorporated association duly organized, validly existing and in good standing
under the laws of the jurisdiction where the respective Eligible Project is
located. Each Association at the following Eligible Projects: Holly Lake Resort,
Piney Shores Resort, The Villages (including Lake O' The Woods), Hill Country
Resort, Seaside Resort, Ozark Mountain Resort, Holiday Hills Resort, Timber
Creek Resort, Fox River Resort, Oak N' Spruce Resort, Apple Mountain Resort and
Beech Mountain Resort, is a Member of Silverleaf Club. Each of the Associations
and Silverleaf Club has the power and authority to own and operate its property,
perform its obligations under the Timeshare Documents, and conduct its business
as it is now being conducted or as proposed to be conducted. Each Association
has the authority to levy annual assessments to cover the costs of maintaining
and operating the respective Eligible Project. Any lien for unpaid assessments
in favor of any Association or Silverleaf Club shall at all times be subordinate
to any lien securing an Eligible Consumer Loan and to any lien in favor of the
Agent or any Lender.
5.3 Shareholders; Subsidiaries. Schedule 5.3 attached hereto
and incorporated herein contains a list of all of the Borrower's Subsidiaries
and the percentage of issued and outstanding shares of each class of capital
stock or equivalent issued by or owned by the Borrower. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of its state of
incorporation and in every state in which the conduct of its business requires
it to so qualify or be licensed, except where the failure to be so qualified and
in good standing does not have a material adverse affect on the Borrower's
financial condition or on the Borrower's ability to exercise its rights in any
Consumer Loan Collateral. No such Subsidiary has any ownership or security
interest in the Collateral.
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5.4 Validity of Loan Documents. This Agreement and all other
Loan Documents contemplated hereby are valid, binding and enforceable in
accordance with their terms.
5.5 Absence of Actions. There is no pending or threatened
action or proceeding against or affecting the Borrower before any court,
governmental agency, arbitrator, or otherwise which may, in one case or in the
aggregate, materially adversely affect the validity or enforceability of this
Agreement, or the priority of the lien thereof, or the financial condition,
operations, properties, or business of the Borrower or, which would prevent or
impair the Borrower from complying with or performing any of the provisions of
this Agreement or the other Loan Documents. The Borrower is not in default with
respect to any statute, rule, judgment, decision, order, writ, injunction,
decree, or demand of any court or any governmental authority.
5.6 Good Title to Borrower's Property. The Borrower has good
and marketable title to the Collateral free and clear of all liens, mortgages,
pledges, security interests, encumbrances and charges of any kind except for
Permitted Encumbrances, and the Borrower shall defend the Collateral against all
claims and demands of all persons at any time claiming the same or any interest
therein adverse to any Agent or any Lender. This Agreement, the Financing
Statements and the delivery to the Agent from time to time of Required Consumer
Loan Documents create valid, perfected first priority security interests in the
Collateral and in all collateral securing the loans pledged as Consumer Loan
Collateral. The Borrower has not pledged or granted a security interest in any
part of the Collateral to any other lender, and no part of the Collateral is
identified on any uniform commercial code financing statement filed in favor of
any other lender.
5.7 Assignability. Each Required Consumer Loan Document
delivered and/or assigned to the Agent in connection with each loan pledged as
Consumer Loan Collateral contains no prohibitions on assignment (other than
prohibitions which have been waived with all necessary consents obtained), and
upon the exercise of the Agent's or the Lender's rights as secured party, the
Agent or the Lenders shall be entitled to the same benefits pursuant to each
such document as the Borrower is entitled.
5.8 Taxes. The Borrower has filed or caused to be filed all
federal, state, and local tax returns required to be filed and has paid or
caused to be paid all taxes, assessments, and governmental charges and levies
thereon, including any interest and penalties, to the extent the same have been
due. The Borrower has set up reserves which are believed by the Borrower to be
adequate for the payment of such taxes for the years that have not been audited
by the respective tax authorities. Nothing contained in this subsection shall
prevent the Borrower from contesting in good faith any tax assessment assessed
against the Borrower so long as adequate reserves for payment of the same have
been made and verified to the Agent.
5.9 Financial Condition. The balance sheets, statements of
income and retained earnings, federal tax returns, and other financial
statements and financial data of the Borrower furnished to the Agent to induce
the Agent and the Lenders to enter into this Agreement are complete and correct
and fairly present the financial condition of Borrower, as of the dates thereof
and the results of the operations of Borrower, for the periods covered by such
statements,
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all in accordance with generally accepted accounting principles consistently
applied. There are no liabilities of Borrower, fixed or contingent, which are
material but are not reflected in the financial statements and notes thereto
supplied to the Agent. The Borrower has paid no dividends and has made no
distributions (of cash or property) to its shareholders or partners or members
since the date of such financial statements, which distributions are not
reflected in the financial statements. There has been no material adverse change
in the business, operations or condition, financial or otherwise, of the
Borrower since the date of the most recent financial statements delivered to the
Agent.
5.10 No Untrue or Omitted Statements. No part of the Loan
Documents or any certificate or statement furnished by or on behalf of the
Borrower to the Agent or the Lenders contains or shall contain any material
misstatement of fact or omits to state a material fact or any fact necessary in
order to make the statements contained herein or therein not misleading. To the
best knowledge of the Borrower there is no fact (other than facts relating to
general economic conditions) which materially adversely affects the business,
operations, affairs, conditions, properties or assets of the Borrower which has
not been set forth in a document, certificate or statement furnished to the
Agent prior to or on the date of delivery hereof.
5.11 Location of Borrower's Offices and Records. The chief
place of business of the Borrower and the office where the Borrower keeps its
records concerning any of the Collateral is located at 1221 Riverbend, Suite
120, Dallas, Texas.
5.12 Operation of Business. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, necessary to conduct the Borrower's business substantially as
now conducted and as presently proposed to be conducted, and is not in violation
of any valid rights of others with respect to any of the foregoing. The
Borrower's buildings and the operation of the Borrower's business and each
Eligible Project comply with all zoning, environmental, public health and
safety, banking, securities, lending and other similar laws and regulations.
5.13 The Projects. Each Eligible Project has and will have
adequate access from a publicly dedicated street, and is and will be constructed
and operated in compliance with all applicable laws and regulations, served by
utilities necessary for its intended use, and prior to any occupancy furnished
and equipped and ready for occupancy. All amenities for each Eligible Project
which have been offered to purchasers of Timeshare Interests or referred to in
any offering materials are or prior to any occupancy will be available to
consumer borrowers. Each Timeshare Instrument for each Eligible Project has been
recorded in the real property records where such project is located and
otherwise filed in accordance with all applicable laws and regulations.
5.14 Sale of Timeshare Interests. The marketing, sale,
offering for sale, rental solicitation of purchasers and financing of Timeshare
Interests: (a) will not constitute the sale, or the offering for sale, of
securities subject to the registration requirements of the Securities Act of
1933, as amended, or any state securities law applicable to such sale or offer
for sale; (b) will not violate any Timeshare Act, or any land sales or consumer
protection law, statute or regulation of state or any other state or
jurisdiction in which sales or solicitation activities occur; and (c) will not
violate any consumer credit or usury statute of the State of Texas or any other
state or
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jurisdiction in which sales or solicitation activities occur. All marketing and
sales activities will be performed by Borrower's employees or by independent
contractors or agents of the Borrower, all of whom are and will be properly
licensed in accordance with applicable laws. There shall be no
misinterpretations by the Borrower or any of its employees or selling agents
with respect to any matter relating to any Eligible Project or the sale or
financing of Timeshare Interests.
5.15 Tangible Property. The machinery, equipment, fixtures,
tools and supplies used or to be used in connection with each Eligible Project,
including without limitation, with respect to the operations and maintenance of
the common areas, are or will be owned or leased either by the Borrower,
Silverleaf Club or the respective Association. The Borrower will obtain such
non-disturbance and estoppel agreements as the Agent may reasonably require for
any tangible property necessary to the ownership, operation or maintenance of
each Eligible Project which is not owned by the Borrower, Silverleaf Club or the
respective Association.
5.16 Subordination. There is no indebtedness of the Borrower
presently owing to any affiliate or shareholder of the Borrower except as
described on Schedule 1.62 attached hereto. All indebtedness at any time owing
by the Borrower to any affiliate or shareholder of the Borrower shall be
unsecured and shall be absolutely subordinated to the Indebtedness, which
subordination shall be evidence by a Subordination Agreement acceptable to the
Lenders.
5.17 Financing Statement Filing Locations. Schedule 5.17
attached hereto and incorporated herein lists the locations where the Financing
Statements have been or will be filed. Those locations are the only locations
necessary for filing the Financing Statements in order to perfect the security
interests in the Collateral described therein capable of being perfected by the
filing of financing statements.
5.18 Environmental Compliance. The Borrower and each Eligible
Project are in full compliance with any and all environmental, hazardous waste,
or hazardous substance rules or regulations arising out of any federal, state,
or local law (collectively, "Environmental Regulations"). There has been no use
of any Eligible Project, and there are no materials present at the Eligible
Project, that would give rise to liability under any Environmental Regulations.
The Borrower's business and use of each Eligible Project, as presently conducted
and as conducted in the future, and the Eligible Project, will not give rise to
any liability under any Environmental Regulations, and Borrower shall keep its
business and each Eligible Project in full compliance therewith. The Borrower
shall indemnify and hold harmless the Agent and the Lenders from any and all
costs, expenses, and liability relating to the Borrower or any Eligible Project
arising out of any Environmental Regulations.
5.19 Employee Benefit Plans. Each Employee Benefit Plan has
been maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions. The
Borrower has heretofore delivered to the Agent its most recently completed
annual report on Form 5500, with all required attachments, and actuarial
statements required to be submitted under Section 103(d) of ERISA, with respect
to each Guaranteed Pension Plan. Each contribution required to be made to a
Guaranteed Pension Plan, whether required to be made to avoid the incurrence of
an accumulated funding deficiency, the notice or
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lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan. No
liability to the PBGC (other than required insurance premiums, all of which have
been paid) has been incurred by the Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any ERISA Reportable
Event, or any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred within
twelve months of the date of this representation), and on the actuarial methods
and assumptions employed for that valuation, the aggregate benefit liabilities
of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA
did not exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefits liabilities.
5.20 Use of Proceeds/Margin Stock. None of the proceeds of the
Loans will be used to purchase or carry any "margin stock"(as defined by
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 Loans will be
extended to others for the purpose of purchasing or carrying margin stock. None
of the transactions contemplated in this Agreement (including, without
limitation, the use of the proceeds from the Loans) 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. The Borrower is not an investment company as defined by the Investment
Company Act of 1940, as amended, and is not required to register under said Act.
5.21 Real Property Taxes; Special Assessments. There are no
unpaid or outstanding real estate or other taxes or assessments on or against
any Eligible Project or any part thereof which are payable by the Borrower
(except only real estate taxes not yet due and payable). The Borrower has
delivered to the Agent true and correct copies of real estate tax bills for each
Eligible Project for the past fiscal tax year. No abatement proceedings are
pending with reference to any real estate taxes assessed against the Real
Property. There are no betterment assessments or other special assessments
presently pending with respect to any part of any Eligible Project, and the
Borrower has received no notice of any such special assessment being
contemplated.
5.22 Violations. The Borrower has received no notices of, and
has no knowledge of, any violations of any applicable Requirements.
5.23 Broker. No broker, agent, finder or intermediary has
acted on the Borrower's behalf in connection with the negotiation of this
Agreement or the consummation of the transactions contemplated hereby.
5.24 Survival. The Borrower understands and agrees that the
Agent and the Lenders are relying upon the above representations and warranties
in extending the Loans to the Borrower. The foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as the Indebtedness shall be paid in full, or until this
Agreement shall be terminated, whichever is the last to occur.
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6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, except with the prior written
consent of the Agent, so long as the Notes or any Indebtedness shall remain
outstanding, in whole or in part, or the Agent or the Lenders shall have any
commitment under this Loan Agreement, the Borrower shall comply with each of the
following covenants:
6.1 Financial Statements and Other Information. The Borrower
shall furnish to the Agent:
6.1.1 Audited Annual Statement of Borrower. Within
120 days after the close of each fiscal year, audited consolidated and
consolidating financial statements relating to the Borrower, including a balance
sheet, statement of income and retained earnings as of the end of that fiscal
year setting forth corresponding figures for the previous fiscal year in
comparative form, all such statements to be prepared in accordance with
generally accepted accounting principles consistently applied by an independent
certified public accountant acceptable to the Agent, and accompanied by copies
of all management letters from such accountant to the Borrower or their
directors or members.
6.1.2 10-K. Within 120 days after the close of each
fiscal year, a copy of the Borrower's Form 10-K as filed with the Securities and
Exchange Commission.
6.1.3 Quarterly Statement of Borrower. Within 45 days
after the close of each fiscal quarter, unaudited financial statements in the
form described in Section 6.1.1.
6.1.4 10-Q. Within 45 days after the close of each
fiscal quarter, a copy of the Borrower's Form 10-Q as filed with the Securities
and Exchange Commission.
6.1.5 Tax Returns. Within 30 days after filing, a
copy of the federal income tax return for the Borrower and the Association, with
all schedules.
6.1.6 Annual Statement of Associations. Within 120
days after the close of each fiscal year, annual reports required by each
relevant Timeshare Act, or such other management prepared financial statements
of Silverleaf Club containing information concerning each Eligible Project
satisfactory to the Agent.
6.1.7 Budgets. No later than 60 days prior to the
start of any fiscal year, the Borrower shall submit to the Agent detailed
operating budgets (broken down by month) for the Borrower for the upcoming
fiscal year in form acceptable to the Agent. Each such budget shall be subject
to the Agent's approval. The financial statements and reports referred to in
Sections 6.1.1, 6.1.2, 6.1.3, 6.1.4, 6.1.5, 6.1.6, and 6.1.7 are collectively
referred to herein as "Financial Statements".
6.1.8 Monthly Consumer Loan Reports. No later than
the tenth (10th) day of each month, the Borrower shall furnish to the Agent or
cause the Servicer to furnish to Agent, three copies of a report in form and
content acceptable to the Agent prepared by the Borrower or the Servicer,
certified by an Authorized Officer, and showing, with respect to each
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of the loans constituting Consumer Loan Collateral as of the close of business
on the last day of the calendar month last ended:
6.1.8.1 The account number;
6.1.8.2 Name(s) of consumer borrowers;
6.1.8.3 Original principal amount of such
consumer loan;
6.1.8.4 Any payment, including any prepayment,
received on account of such consumer loan during the period covered by the
statement;
6.1.8.5 A cash receipts journal;
6.1.8.6 The opening and closing principal
balance;
6.1.8.7 Any consumer loans constituting
Consumer Loan Collateral cancelled during the period covered by such statement;
6.1.8.8 Any delinquency of principal and
interest payments on a 30-60-90 day basis;
6.1.8.9 Any delinquency of principal, interest
or assessments in excess of 90 days;
6.1.8.10 The average consumer interest rate
for such consumer loan;
6.1.8.11 Any extensions, refinances or other
adjustments to such consumer loan; and
6.1.8.12 Such other information as the Agent
or Lenders may request.
6.1.9 Monthly Sales Reports. No later than the tenth
day of each month, the Borrower shall deliver to the Agent a sales and
cancellation report indicating the sales and cancellation activity with respect
to each Eligible Project for the preceding calendar month showing such detailed
information as the Agent may request.
6.1.10 Monthly Inventory Report. No later than the
tenth day of each month, the Borrower shall deliver to the Agent an inventory
report in form satisfactory to the Agent indicating the number of Timeshare
Interests sold and unsold at each Eligible Project, identified by Unit and type
or color of Timeshare Interest.
6.1.11 Amended Consumer Loans. Not later than the
tenth day of each month, the Borrower shall deliver to the Agent a report in
form satisfactory to the Agent indicating the performance of each Eligible
Consumer Loan pledged as collateral described in Section 1.18.9(b) and
1.18.9(c).
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6.1.12 Additional Information. With reasonable
promptness, such other information relating to the Collateral, each Eligible
Project, and the business, operations and financial condition of the Borrower as
the Agent and the Lenders may reasonably request from time to time. The Agent
and the Lenders, pursuant to an authorized request and after prior notification
to the Borrower, are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Borrower which may be furnished to it or come to its
attention pursuant to this Agreement or otherwise, to any regulatory body or
agency having jurisdiction over the Agent or the Lenders or to any person which
has, or shall have any right or obligation to succeed to all or any part of the
Agent's or the Lender's interest in this Agreement.
6.2 Statements as to Defaults and Computations. With each of
the statements referred to in Sections 6.1.1 and 6.1.3 hereof, an Authorized
Officer of the Borrower shall certify to the Agent (a) the Interest Coverage
Ratio, Tangible Capital Funds, and the Marketing Ratio, and (b) (1) that as of
the date of the statements, no event has occurred and is continuing to occur and
no condition exists which constitutes or, after notice or lapse of time or both,
would constitute a default or event of default under any of the Loan Documents
or (2), if any such event has occurred and is continuing or such condition
exists, such statement shall specify the nature and period of existence thereof
and the action proposed to be taken with respect thereto. The Borrower shall
immediately give notice to the Agent upon the occurrence of an Event of Default.
6.3 Taxes and Claims. The Borrower shall duly pay and
discharge (a) all taxes, assessments and governmental charges upon or against it
or its properties or assets prior to the date on which penalties attach thereto,
unless and to the extent that such taxes are being diligently contested in good
faith by appropriate proceedings, and appropriate reserves therefor have been
established with the consent of the Agent, and (b) all lawful claims, whether
for labor, materials, supplies, services or anything else which could, if
unpaid, become a lien or charge upon the Collateral, unless and to the extent
that the same are being diligently contested in good faith and by appropriate
proceedings and appropriate reserves therefor have been established with the
consent of the Agent.
6.4 Insurance. During the following times the Borrower shall
maintain the following insurance coverage:
6.4.1 Fire and Extended Coverage. At all times during
the term of this Agreement, the Borrower shall maintain insurance of each
Eligible Project against loss by fire, windstorm and other hazards, with minimum
coverage equal to the replacement cost of each Eligible Project.
6.4.2 Public Liability Insurance; Etc. At all times
during the term of this Agreement, the Borrower shall maintain broad form
coverage public liability insurance with minimum coverage of Five Million
Dollars. The amount of such coverage shall be reviewed annually by the Agent and
may, in the Agent's sole discretion and at the Borrower's expense, be increased
or decreased during the term of this Agreement. The Borrower shall obtain a new
or
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revised policy within 20 days of receipt of notice from the Agent of a revision
in the amount of public liability insurance required.
6.4.3 Flood Insurance. If any of the improvements now
or hereafter construed on the real property at any Eligible Project are within
an area designated by the Director of the Federal Emergency Management Agency,
pursuant to the Flood Disaster Protection Act of 1973, as amended, as one having
special flood hazards, the Borrower shall maintain flood insurance to the
maximum limit of coverage available.
6.4.4 Workers' Compensation Insurance. The Borrower
shall maintain workers' compensation insurance and such other insurance as shall
be necessary or prudent for the operation of the Borrower's business, all with
minimum coverage at least equal to that in effect on the date of this Agreement.
6.4.5 Evidence of Insurance. The Borrower shall pay
all premiums for and take all other actions to maintain in full force the effect
the insurance required by this Section 6.4. The Borrower shall ensure that no
such policies shall be cancelled except after 30 days' prior notice by the
insurance carrier to the Agent, and that the Agent for the pro-rata benefit of
the Lenders shall be named as additional insured, mortgagee and loss payee on
such policies. The Borrower shall, from time to time upon the Agent's request,
promptly furnish or cause to be furnished to the Agent and the Lenders, evidence
of the maintenance of the insurance required by this Section 6.4, including,
without limitation, such originals or copies as the Agent may request of
policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments.
6.4.6 Consumer Borrower's Title Insurance. In
connection with twenty percent of the principal amount of the loans pledged
under this Agreement in connection with each Eligible Project (other than Oak N'
Spruce Resort),the Borrower shall provide a mortgagee title insurance policy in
favor of the Agent for the pro-rata benefit of the Lenders on a current ALTA
Loan Policy Form issued by a title insurance company qualified to do business in
Texas or the jurisdiction of the respective Eligible Project and acceptable to
the Agent issued in the full amount of the loans covered by such policy and
insuring that the mortgage or deed of trust referred to in Section 1.56.2 is not
subject to any prior lien or encumbrance, other than Permitted Encumbrances,
substantially in the form of the specimen policy for each Eligible Project
attached as Schedule 6.4.6 attached hereto (each a "Title Policy" and
collectively, the "Title Policies"). The title Policies shall contain only those
exceptions approved by the Agent, in writing, and shall contain affirmative
insurance for real estate taxes, matters of survey and against mechanics liens.
Any material deviation from such specimen policy shall require the Agent's
consent. If the Agent or the Lenders at any time shall determine that title to
any Consumer Loan Collateral or the assignment to the Agent of the Borrower's
rights in such Consumer Loan Collateral shall be defective in any respect, the
Borrower shall within 60 days after a request by the Agent provide to the Agent
and the Lenders title insurance in favor of the Agent for the pro-rata benefit
of the Lenders acceptable to the Agent for 100% of the principal amount of
Consumer Loan Collateral pledged hereunder.
6.5 Books and Reserves. The Borrower shall (a) maintain at all
times true and complete books, records and accounts in which true and correct
entries shall be made of all
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business transactions in accordance with generally accepted accounting
principles; and (b), by means of appropriate entries, reflect in its accounts
and in all Financial Statements, prior liabilities and reserves for all taxes
from which the Borrower is not otherwise exempt and proper reserves for
depreciation, renewals and replacements, obsolescence and amortization of its
properties and bad debts, all in accordance with generally accepted accounting
principles consistently applied.
6.6 Inspection of Books and Records. The Borrower shall permit
the Agent, each of the Lenders, or their authorized attorneys, accountants, and
representatives to examine the books, accounts, records, ledgers and assets of
every kind and description of the Borrower at all reasonable times upon oral or
written request of the Agent or the Lenders, such examination to include the
making of copies and abstracts of such materials at the Borrower's expense.
Until a default or Event of Default shall occur, the Agent shall make no more
than one such examination per year, in addition to audits as provided in Section
8.2 herein. The Agent shall offer to each of the Lenders the opportunity to
participate in any such examination.
6.7 Preserve Collateral. The Borrower shall: (a) keep the
Collateral in good repair, working order and condition; (b) operate its business
in compliance with all applicable laws, statutes, ordinances, rules and
regulations; (c) not waste or destroy the Collateral; (d) defend the Collateral
against the claims and demands of all other parties; (e) permit the Agent or the
Lenders or their representatives or designee to inspect the Collateral at all
times upon prior notice to the Borrower; and (f) prevent the Collateral or any
part thereof from being or becoming an accession to other goods not covered by a
security interest in favor of the Agent created by the Loan Documents or from
being or becoming a fixture.
6.8 Notice of Loss. If any Collateral shall be materially
damaged or destroyed, the Borrower shall immediately notify the Agent and the
Lenders.
6.9 Notification of Litigation. The Borrower shall promptly
inform the Agent and the Lenders of the commencement of any material (which in a
situation involving monetary claims shall have in excess of $50,000 in dispute)
action, suit, proceeding or investigation against it or the making of any
counterclaim against it in any action, suit or proceeding.
6.10 Preserve Existence. The Borrower shall preserve and
maintain its name, existence and good standing in the jurisdiction of its
organization and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required.
6.11 Permits. Borrower, its employees, servants and agents
have and will have all licenses, registrations, approvals and other authority as
may be necessary to enable them to own and operate their business, to perform
all services which they have agreed to perform in any state, municipality or
other jurisdiction, to sell Timeshare Interests, to finance the sale of
Timeshare Interests and operate the Projects.
6.12 Underwriting Criteria. All Eligible Consumer Loans
pledged to the Agent pursuant to this Loan Agreement will be consistent with
the Borrower's general underwriting criteria as of the date of this Agreement.
The Borrower shall not materially alter its general underwriting criteria
without prior approval of the Agent.
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6.13 Agreements Constituting Collateral. The Borrower shall
comply with all terms of any agreements related to any Consumer Loan Collateral,
and the Borrower shall immediately notify the Agent and the Lenders of any
defaults or events of defaults under any such agreements. Except for prepayments
in the ordinary course of business and except for revised payment plans as
provided for in Section 1.18.9 (b), the Borrower shall not modify, compromise,
extend, rescind or cancel any agreements related to Consumer Loan Collateral
without the prior consent of the Agent, which shall not be unreasonably
withheld.
6.14 Additional Costs, Etc. If any present or future
applicable law, which expression, as used herein, includes statutes, rules and
regulations thereunder and interpretations thereof by any competent court or by
any governmental or other regulatory body or official charged with the
administration or the interpretation thereof and policies, requests, directives,
instructions, guidelines and notices at any time or from time to time thereafter
made upon or otherwise issued to the Agent or any Lender by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) subject the Agent or the Lenders to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to
this Agreement, the other Loan Documents or the Loans (other than taxes
based upon or measured by the income or profits of the Agent or the
Lenders); or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to the Agent or the Lenders of
the principal of or the interest on the Loans or any other amounts
payable to the Agent or the Lenders under this Agreement or the other
Loan Documents; or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or loans by, or
commitments of an office of the Agent or the Lenders; or
(d) impose on the Agent or the Lenders any other conditions or
requirements with respect to this Agreement, the other Loan Documents,
or the Loans; and the result of any of the foregoing is:
(i) to increase the cost to the Agent or the Lenders of making,
funding, issuing, renewing, extending or maintaining the Loans; or
(ii) to reduce the amount of principal, interest or other amount
payable to the Agent or the Lenders hereunder on account of the Loans; or
(iii) to require the Agent or the Lenders to make any payment or to
forego any interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by the Agent or the Lenders from the
Borrower hereunder, then, and in each such case, the Borrower shall, upon demand
made by the Agent or the Lenders at any time and from time to time and as
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often as the occasion therefor may arise, pay to the Agent for the pro-rata
benefit of the Lenders such additional amounts as will be sufficient to
compensate the Agent and the Lenders for such additional cost, reduction,
payment or foregone interest or other sum.
6.15 Capital Adequacy. If any present or future law affects
the amount of capital required or expected to be maintained by the Agent or the
Lenders or any corporation controlling the Agent or the Lenders and the Agent or
any Lender shall determine that the amount of capital required to be maintained
by it is increased by or based upon the existence of the Loans made or deemed to
be made pursuant hereto, then the Agent or the Lenders may notify the Borrower
of such fact, and the Borrower shall pay to the Agent or the Lenders from time
to time on demand, as an additional fee payable hereunder, such amount as the
Agent or the Lenders shall determine in good faith and certify in a notice to
the Borrower to be an amount that will adequately compensate the Agent and the
Lenders in light of these circumstances for the Agent's or the Lender's
increased costs of maintaining such capital. The Agent and the Lenders shall
allocate such cost increases among their customers in good faith and on an
equitable basis.
6.16 Tangible Capital Funds. At all times, the Borrower shall
maintain Tangible Capital Funds equal to or greater than (a) $200,000,000 plus
(b) (i) 75% times (ii) the sum of Net Income for each fiscal quarter commencing
with the fiscal quarter next ending after the date of this Agreement through the
fiscal quarter most recently ended.
6.17 Interest Coverage. As of the end of each fiscal quarter
for the four fiscal quarters then ended, the Borrower shall maintain a ratio
(the "Interest Coverage Ratio") of (1) EBITDA divided by (2) Consolidated
Interest Expense of no less than 2.0 to 1.
6.18 Marketing Expense. As of the end of each fiscal quarter
for the four fiscal quarters then ended, the Borrower shall maintain for each
Eligible Project and for the Borrower a ratio (the "Marketing Ratio") of (1)
promotion, lead generation, sales, commission and all marketing expenses
pursuant to the Marketing Agreement or any other marketing contract, divided by
(2) the aggregate of the purchase prices for each Unit during such period, of no
more than .55.
6.19 Subordination. All indebtedness to officers or
shareholders of the Borrower now existing or hereafter arising, including
Subordinated Shareholder Debt and fees payable to affiliated entities, if any,
shall be subordinated to the Indebtedness pursuant to subordination agreements
acceptable to the Agent (the "Subordination Agreements"). The Indebtedness
constitutes "Designated Senior Debt" as defined in the Indenture dated as of
April 1, 1998 among the Borrower, Borrower's Subsidiaries and Norwest Bank
Minnesota, National Association.
6.20 Sales of Timeshare Interests. The Borrower will sell or
offer for sale Timeshare Interests only in Texas and such other jurisdictions
listed on Schedule 6.20 where the Borrower has completed all registrations
consistent with applicable requirements. All sales will be made in compliance
with all Requirements and utilizing then current disclosure materials approved
as required by all Governmental Authorities. Before it sells or offers for sale
Timeshare Interests in any other jurisdictions, the Borrower will notify the
Agent and provide the Agent with evidence satisfactory to the Agent that the
Borrower has complied with all laws of such jurisdiction governing its proposed
conduct.
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6.21 Consumer Documents. The Borrower represents to and agrees
with Agent that the consumer loan documents in the forms previously delivered to
the Agent are the only documents which have been or will be used in connection
with the credit sale of Timeshare Interests and that the Borrower shall not
materially modify or amend, or permit the modification or amendment of, any such
consumer loan documents or use or permit the use by others of any other or
additional documents in connection with the credit sale of Timeshare Interests,
except with the consent of the Agent, or as reasonably requested by the Agent in
order to meet any of the Requirements or to protect the Agent's security
interest therein. If any such consumer loan document shall be modified or
amended or if any additional document shall be used in connection with the
credit sale of Timeshare Interests, the Borrower shall immediately provide to
the Agent an accurate and complete copy of such consumer loan document as so
modified or amended and of any such additional document.
6.22 Collection. The Borrower will undertake the diligent and
timely collection of all amounts due under each consumer loan in connection with
the credit sale of a Timeshare Interests, including the Consumer Loan
Collateral, and will bear the entire expense of such collection.
7. NEGATIVE COVENANTS. From the date hereof until the Indebtedness
shall have been paid in full, without the prior written consent of the Agent
(which shall not be unreasonably withheld):
7.1 Liens. The Borrower shall not in any way create, incur,
assume, or suffer to exist any security interest, mortgage, pledge, lien,
restriction or other encumbrance upon the Collateral or the Timeshare Interests
mortgaged as security for any Consumer Loan Collateral, other than those created
by or referred to in this Agreement.
7.2 Covenant Against Alienation. The Borrower shall not in any
way (a) sell, convey, lease or transfer any of (i) the Collateral or (ii) any
material assets other than at fair market value or otherwise in the ordinary
course of its business; (b) notify any consumer borrower for any Consumer Loan
Collateral that payments should be made other than to the Lock Box Agent; (c)
change its name; (d) enter into any transaction of merger, consolidation or
reorganization; or (e) take or permit any action to dissolve of liquidate.
7.3 Transfers of Cash and Investments. The Borrower shall not
sell, lease, donate, lend, exchange or otherwise dispose of any of its
intangible assets, including cash and investments, except in exchange for goods,
property or services at fair market value.
7.4 Association Liens. The Borrower shall not in any way
create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, restriction or other encumbrance on any of the Associations or
Silverleaf Club or their assets, other than in the ordinary course of business
of such Association or Silverleaf Club.
7.5 Time Share Instruments. The Borrower shall not materially
amend, modify or terminate any Timeshare Instruments or assign any of its rights
thereunder.
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7.6 Management. The Borrower shall not (a) make any change in
the following management personnel: Robert E Mead, Chairman; Sharon K.
Brayfield, President, David T. O'Connor, Executive Vice President Sales; Thomas
C. Franks, Vice President - Investor Relations; Harry J. White, Jr., Chief
Financial Officer; Larry H. Fritz, Vice President - Marketing, or successors in
their current positions, without notice to the Agent or (b) make any change in
the Management Agreement for any Eligible Project.
7.7 Subordinated Debt. The Borrower shall not amend any
provision regarding subordination in the Indenture dated as of April 1, 1998
among the Borrower, Borrower's Subsidiaries and Norwest Bank Minnesota, National
Association.
8. CONDITIONS PRECEDENT TO ADVANCE.
8.1 Advances. The Agent and the Lenders shall have no
obligation to make any advance under the Loans unless:
8.1.1 Representations and Warranties True. All of the
representations, warranties, covenants, terms and conditions contained in this
Agreement and the other Loan Documents are true and correct as of the date of
making such advance, with the same effect as if such representations and
warranties were made on and as of the date of such advance.
8.1.2 No Default. No default or event of default under any
Loan Documents or any other agreements between the Agent or the Lenders and the
Borrower or affecting or related to any Eligible Project shall exist on the date
of such advance, and no condition, omission, or act shall have occurred or come
into existence which, upon the giving of notice or the passage of time, would
ripen into a default or Event of Default.
8.1.3 No Adverse Change. No material adverse change shall
have occurred in the financial condition of the Borrower, in the business
operations of the Borrower, or in the condition of the Collateral or the
Borrower's business from the date of the most recent financial statements
delivered to the Agent.
8.1.4 Acceptance of Advances. Each acceptance by the
Borrower of an advance under the Loan shall constitute a representation by the
Borrower that the foregoing conditions in Sections 8.1.1, 8.1.2, and 8.1.3 have
been satisfied.
8.2 Audits. The Agent shall have the right to audit the
Borrower's operations and the Collateral from time to time at the Borrower's
expense and the Agent shall be entitled to condition advances on the Loans on
the satisfactory results of such audits. Until a default or Event of Default
shall occur, the Agent shall conduct such audits no more frequently than twice
each year.
8.3 Fair Lending Review. At the direction of the Agent, the
Agent's counsel shall be entitled to conduct a fair lending review of the
Collateral at the Borrower's expense at least once each year.
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9. EVENTS OF DEFAULT.
Each of the following events shall constitute an "Event of Default"
hereunder:
9.1 Payment Default. The Borrower shall default in making any
payment of principal, interest or other charges when the same shall become due
under the Notes or the Loan Documents; provided that with respect to regularly
scheduled payments of principal and interest on the Notes (and not with respect
to any payments after demand by the Agent or the Lenders or any payments due on
the Maturity Date) (a) upon nonpayment caused by matters out of Borrower's
control, such as the failure to act by a third party or the failure to complete
a wire transfer of funds, the Borrower shall make such payment within two
business days after telephone notice from the Agent of such nonpayment, (b)
interest shall continue to accrue on all outstanding amounts until such payment
shall be received by the Agent and (c) if, upon receiving notice of such
nonpayment from Agent, Borrower shall fail to provide evidence satisfactory to
Agent in Agent's sole discretion that such nonpayment is caused by matters out
of Borrower's control, the Agent and the Lenders shall be entitled to proceed
immediately to exercise their rights and remedies upon nonpayment without
waiting for two business days.
9.2 Other Default. The Borrower shall default in the
performance of any covenant, agreement, term or condition of this Agreement or
any other Loan Document, other than as set forth in Section 9.1 above, or in any
other subsection of this Section 9 other than this subsection 9.2, within any
applicable grace period provided therefor or, if no grace period is provided,
and provided (a) the Borrower has not intentionally concealed or negligently
failed to report such default to the Agent, and (b) such default is capable of
cure by the Borrower, such default shall continue for ten (10) days after the
Agent shall give written notice of such default to the Borrower.
9.3 Default in Other Obligations. The Borrower shall default
in making any payments for borrowed money or in respect of any extension of
credit or accommodations under any loan, in each case in connection with
indebtedness in excess of $100,000.
9.4 Insolvency; Suspension of Business. Commencement of
proceedings under any bankruptcy or insolvency law by or against the Borrower or
the admission by the Borrower of Borrower's inability to pay its debts as they
mature or become due; or the general failure by the Borrower to pay its debts as
they mature or become due; or the making of a general assignment for the benefit
of creditors by the Borrower; or the suspension of business of the Borrower; or
the appointment of a trustee, trust mortgagee, custodian or receiver of all or
any portion of the property of the Borrower.
9.5 Representations. Any representation or warranty, statement
or information under any instrument or agreement constituting or relating to any
Collateral or made by the Borrower herein, in the Loan Documents or in any other
certificate, statement, information or document delivered to the Agent by, on
behalf of or at the request of the Borrower or relating to the Loans shall fail
to be true and correct in any material respect when made or furnished.
9.6 Adverse Change. Any material adverse change in the
business, operations, properties or condition (financial or otherwise) of the
Borrower or the Collateral, which, in the
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opinion of the Agent or the Required Lenders, impairs its security or increases
its risk, including, without limitation, if any financial information furnished
to the Agent shall indicate any operating loss or total liabilities in excess of
total assets, as determined in accordance with generally accepted accounting
principles. In the absence of any operating loss or total liabilities in excess
of total assets, any adverse change which has less than a 5% one time or annual
adverse impact on any of the Borrower's revenues, net profit, net worth or
assets shall not be deemed material.
9.7 Levy. Commencement of any levy, seizure, attachment or
sale upon execution against any Collateral or other proceedings of any nature
whereby the Borrower shall or may be deprived of title or right of possession to
the Collateral or any part thereof.
9.8 Dissolution; Termination. The dissolution or termination
of existence of the Borrower.
9.9 Failure of Servicer, Lock Box Agent. The Borrower, the
Lock Box Agent, or the Servicer shall fail to remit to the Agent any proceeds of
any pledged Consumer Loan Collateral or shall fail to perform any of the
obligations under the Lock Box Agreement or the Servicing Agreement.
9.10 Failure of Association. Any failure by the Borrower,
Silverleaf Club or any Association to fund maintenance fees, taxes, reserve, or
other payments required for the proper and efficient operation of any Eligible
Project or any default by Silverleaf Club or any Association in the observance
or performance of Silverleaf Club's or such Association's duties in connection
with an Eligible Project.
9.11 Uninsured Loss. Any material loss, theft, or damage to
the Collateral or any Eligible Project which is not fully covered by insurance
and which, in the opinion of the Agent, impairs its security or increases its
risk.
9.12 Conveyance of Collateral. The conveyance, assignment,
sale, pledge, transfer, hypothecation or other disposition (which shall include
execution of a contract for sale) of legal or equitable ownership of any part of
the Collateral.
10. REMEDIES UPON DEFAULT.
10.1 Remedies Upon Default. If an Event of Default shall
occur, the Agent and the Lenders shall not have any obligation to permit any
further borrowing hereunder and may declare the Indebtedness, including the
Notes, immediately due and payable, without presentment, protest, demand or
notice of any kind, all of which are hereby expressly waived by the Borrower;
and shall have all rights and remedies of a secured party under the UCC and any
other applicable law then in effect; and may pursue any and all remedies
provided for hereunder and in any one or more of the Loan Documents or at law or
in equity, including, without limitation, the following:
10.1.1 Exercise Rights as Secured Party. Exercise all
rights of a secured party pursuant to the UCC, or otherwise, with respect to the
Collateral.
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10.1.2 Notices to Maker. Deliver Notices to Maker (which
Notices to Maker shall not be delivered in the absence of an Event of Default)
and other notices to account debtors and servicers that payments should be made
directly to the Agent, record or file assignments of mortgages, complete blank
endorsements and take such other actions as the Agent shall deem necessary to
exercise rights in the Collateral or assign the Collateral.
10.1.3 Pay to Agent. Require the Borrower and the Servicer and
the Lock Box Agent to pay over to the Agent all sums collected with respect to
the Collateral, to be applied in the Agent's sole discretion to such costs and
expenses as the Agent shall determine.
10.1.4 Notices. Require the Borrower to give notice to account
debtors and servicers that payment should be made directly to the Agent.
10.1.5 Assemble Collateral. Require the Borrower to assemble
Collateral and make it available to the Agent at a place designated by the Agent
which is reasonably convenient.
10.1.6 Deficiency; Notice. If in the event of the sale or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Agent is legally entitled, the Borrower shall be
liable for the deficiency and the reasonable fees of any agents and attorneys
employed by the Agent to collect such deficiency. The Borrower agrees that if
any notification of intended disposition of any of the Collateral is required by
law, such notification shall be deemed reasonably and properly given if
deposited in the mails, first class postage prepaid, addressed as provided in
Section 12.9 of this Agreement and at least ten (10) days before such intended
disposition.
10.1.7 Set Off. Set off and apply against any Indebtedness any
indebtedness owing from the Agent or the Lenders to the Borrower at any time and
from time to time either before or after maturity and without demand upon or
notice to anyone.
10.1.8 Actions with Respect to Timeshare Loans. The Agent may
take any of the following actions, in its name or the name of the Borrower, as
the Agent may determine, without notice to the Borrower and at the Borrower's
expense:
10.1.8.1 Verify the validity and amount of or any
other matter relating to the Consumer Loan Collateral, by mail, telephone,
telegraph or otherwise.
10.1.8.2 Direct all consumer borrowers to make payment
directly to the Agent or a person designated by the Agent and forward invoices
directly to such borrowers;
10.1.8.3 Take control in any manner of any cash or
non-cash items of payment or proceeds of the Consumer Loan Collateral;
10.1.8.4 Enforce payment of and collect any of the
Consumer Loan Collateral, by legal proceedings or otherwise, and for such
purpose, the Agent may:
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(i) Demand payment of any such loans or
direct any borrower to make payment directly to the Agent;
(ii) Receive and collect all monies due or to
become due with respect to such loans;
(iii) Settle, adjust, compromise, extend,
renew, discharge or release any of such loans;
(iv) Sell or assign any of such loans on such
terms, for such amount and at such times as the Agent deems advisable;
(v) Prepare, file and sign the Borrower's
name on any proof of claim or similar document in any proceeding filed under
federal or state bankruptcy, insolvency, reorganization or other similar law as
to any of such loans;
(vi) Endorse the name of the Borrower upon
any documents, instruments or similar documents or agreements relating to such
loans or upon any checks or other media of payment that may come into the
Agent's possession; or
(viii) Take all other actions necessary or
desirable to protect the Agent's interest in such loans.
No remedy conferred upon or reserved to the Agent or the Lenders in the
Loan Documents is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or in any other Loan Document or
now or hereafter existing at law or in equity or by statute and the exercise of
any remedy or remedies shall not be an election of the remedies. The remedies
and rights of the Agent and the Lenders may be exercised concurrently, alone or
in any combination. The inclusion of Events of Default in this Agreement and the
occurrence or non-occurrence of an Event of Default shall in no manner restrict
the Agent's or the Lender's ability to demand amounts due pursuant to any demand
obligation. The proceeds from any Collateral shall be applied to repay the Loans
and all obligations pursuant to this Agreement and then to any other
Indebtedness.
10.2 Cooperation of Borrower. The Borrower shall cooperate
with the Agent and the Lenders in effectuating the purposes hereof
notwithstanding any unanticipated inability of the Borrower to pay the Notes or
otherwise perform the obligations of this Agreement or any other Loan Document.
10.3 Payment of Costs. The Borrower shall pay all of the costs
and expenses incurred by the Agent and the Lenders (including reasonable
attorney's fees) in (1) enforcing the Loan Documents, (2) resorting to the
Collateral, (3) the care, processing and preservation of the Collateral, and (4)
collecting the outstanding balance of principal, interest and delinquent charges
under the Notes. All such costs and expenses shall be deemed additional
principal due under the Notes and may be deducted from the proceeds of
disposition of the Collateral, or any other security interests held by the Agent
or the Lenders. The Agent and the Lenders may apply any or
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all of the proceeds of disposition of the Collateral to the payment or reduction
of the Notes in such amounts as the Agent and the Lenders may, in their sole
discretion, determine even if that portion of the Notes shall be contingent and
unmatured; and in the case of any deficiency the Borrower shall remain liable
therefor.
10.4 Preservation; Notice. The Agent shall have no obligation
to take, and Borrower shall have the responsibility for taking, any and all
steps to preserve rights against any and all prior parties to any instrument of
chattel paper whether in the Borrower's possession or in the Agent's possession.
The Borrower waives protest of any instrument constituting Collateral at any
time held by the Agent on which the Borrower is in any way liable and waives
notice of any other action taken by the Agent. The Borrower shall have the
responsibility for notifying the Agent in writing that it wishes to take
advantage of any redemption, conversion or other similar right with respect to
any Collateral held by the Agent.
10.5 Right to Possession. After an Event of Default, the Agent
shall have the right at all times to the immediate possession of all Collateral
and its products and proceeds, and in its sole discretion may operate and use
the Collateral, complete work in process, or sell the Collateral without being
liable to the Borrower on account of any losses, damage, or depreciation that
may occur as a result thereof. Unless otherwise provided by law, the Agent may
at all times, at the expense of the Borrower, enter upon any premises on which
Collateral may be situated and remove any Collateral to such other places as the
Agent determines. Unless otherwise provided by law, the Agent and the Lenders
may at any time transfer any Collateral into their own name or that of their
nominee and receive the income thereon and hold the same, as security for
liabilities or apply it to principal or interest due on the Indebtedness.
11. THE AGENT.
11.1 Appointment. Each Lender hereby irrevocably appoints
BankBoston, N.A. as its agent under and for the purposes of this Agreement, the
Notes and each other Loan Document, and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
Loan Documents as are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto. The grant of particular powers
and authority to the Agent in some circumstances and to the Agent and Lenders in
others in this Agreement and in other Loan Documents shall not be deemed to
limit the power and authority of the Agent or any Lender in any instance.
11.2 Collateral. Each Lender hereby authorizes the Agent to
hold and exercise control of the Collateral and to exercise discretion with
regard to the acceptance of Collateral and inclusion of Collateral in the
Receivables Loan Borrowing Base from time to time. As an independent contractor
empowered by the Lenders to exercise certain rights and perform certain duties
and responsibilities hereunder and under the other Loan Documents, the Agent
shall be a "representative" of the Lenders, as that term is defined in Article 1
of the UCC, for purposes of actions for the benefit of the Lenders and the Agent
with respect to all collateral security and guaranties contemplated by the Loan
Documents. Each Lender hereby authorizes the Agent to be designated as "secured
party", "mortgagee" or the like on all financing statements, mortgages and other
documents and instruments, whether recorded or otherwise, relating to the
attachment, perfection, priority or enforcement of any security interests,
mortgages or deeds of trust intended
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to secure the payment or performance of any of the Indebtedness, all for the
pro-rata benefit of the Lenders and the Agent. Notwithstanding the delegation to
the Agent of control over the Collateral, each Lender shall be entitled to
review Collateral and the Agent's files with respect to Collateral from time to
time upon reasonable prior notice to the Agent, and the Agent shall cooperate
with each Lender in each such review.
11.3 Independent Contractor. The relationship between the
Agent and each of the Lenders is that of an independent contractor. The duties
of the Agent shall be mechanical and administrative in nature and the Agent
shall have no duties or responsibilities except those expressly set forth
herein. As to any matters not expressly provided for by the Loan and Security
Agreement or other Loan Documents, the Agent shall not be required to exercise
any discretion or take any action. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the Lenders.
Nothing contained in this Agreement nor the other Loan Documents shall be
construed to create a trust or other fiduciary relationship between the Agent
and any of the Lenders. The Agent may exercise its powers and execute its duties
by or through employees or agents and shall be entitled to take, and to rely on,
advice of counsel concerning all matters pertaining to its rights and duties
under the Loan and Security Agreement and the other Loan Documents. The Agent
may utilize the services of such persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such persons
shall be paid by the Borrowers.
11.4 Consent of Lenders. The Agent shall take such actions as
it shall deem necessary from time to time without instructions or consent of the
Lenders.
11.4.1 Actions Requiring Consent. Notwithstanding any
grant of authority to the Agent hereunder, the following actions by the Agent
shall require the consent of the Required Lenders:
11.4.1.1 A waiver of any of the covenants set
forth in Section 7 herein;
11.4.1.2 A declaration of an Event of Default
hereunder;
11.4.1.3 A demand for payment of all Indebtedness;
or
11.4.1.4 The commencement of any actions to
exercise rights to sell Collateral (except for any rights to set-off, which each
Lender shall be entitled to exercise independently).
11.4.2 Instructions of Lenders. Except for actions
described in Section 12.12 herein, the Agent shall be required to act or to
refrain from acting upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or applicable law.
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11.5 Liability of Agent. In the administration of the Loans
and the custody of the Collateral, the Agent shall exercise the same standard of
care as it exercises in connection with loans where it is the sole lender.
Except as provided in the previous sentence of this Section, neither the Agent
nor any of its directors, officers, agents, or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Loan Document in the absence of its or their own
gross negligence or willful misconduct. Without limiting the foregoing, the
Agent: (1) may treat the payee of any Note as the holder thereof until the Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to the Agent; (2) may consult with legal counsel
(including counsel for the Borrower), independent public accountants, and other
experts selected by the Agent and shall not be liable for any action taken or
omitted to be taken in good faith by the Agent in accordance with the advice of
such counsel, accountants, or experts; (3) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any statements,
warranties, or representations made in or in connection with this Agreement; (4)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants, or conditions of this Agreement on
the part of the Borrower, or to inspect the property (including the books and
records) of the Borrower, and any such inquiry or inspection shall not obligate
the Agent to make any further inquiry or inspection; (5) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, perfection, sufficiency, or value of this Agreement
or any other instrument or document furnished pursuant thereto; (6) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate, or other instrument or writing (which may be by telegram,
telex, or facsimile transmission) believed by the Agent in good faith to be
genuine and signed or sent by the proper party or parties and (7) shall be
liable only for Lender's actual and consequential damages, and shall not be
liable for any punitive, special or other damages. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
and holds harmless the Agent, pro rata according to such Lender's Percentage,
from and against any and all liabilities, obligations, losses, damages, claims,
costs or expenses of any kind or nature whatsoever which may at any time be
imposed on, incurred by, or asserted against, the Agent in any way relating to
or arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees and expenses, and as to which the Agent is
not reimbursed by the Borrower; provided that (1) no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from the Agent's
failure to exercise the same standard of care as it exercises in connection with
loans where it is the sole lender, gross negligence or willful misconduct, and
(2) any liability of a Lender to the Agent shall be only for actual or
consequential damages, and shall exclude punitive, special or other damages. The
Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless the Agent is
indemnified hereunder to its satisfaction. If any indemnity in favor of the
Agent shall be or become, in the Agent's determination, inadequate, the Agent
may call for additional indemnification from Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given. Without
limitation of the foregoing, each Lender shall reimburse the Agent (to the
extent not reimbursed by Borrower) promptly upon demand for its ratable share of
any out-of-pocket expenses (including reasonable counsel fees) incurred by the
Agent in
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connection with the preparation, administration, or enforcement of, or legal
advice in respect of rights or responsibilities under this Agreement or any Loan
Documents.
11.6 Successor.
11.6.1 The Agent may resign as such at any time upon at
least 30 days' prior notice to Borrower and all Lenders. If the Agent at any
time shall resign, the Required Lenders may appoint another Lender as a
successor Agent which shall thereupon become the Agent hereunder. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be one of the Lenders or a commercial
banking institution organized under the laws of the U.S. (or any State thereof)
or a U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $5,000,000,000.
11.6.2 Upon 30 days prior notice to the Agent, the
Required Lenders shall be entitled to appoint a replacement Agent, which shall
be one of the Lenders or a commercial banking institution organized under the
laws of the United States (or any state thereof) or a United States branch or
agency of a commercial banking institution, and having a combined capital and
surplus of at least $5,000,000,000.
11.6.3 Any Lender shall be entitled to remove the Agent
as agent and appoint a replacement Agent, which shall be one of the Lenders or a
commercial banking institution organized under the laws of the United States (or
any state thereof) or a United States branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least
$5,000,000,000, upon 30 days' prior notice to the Agent after the occurrence of
one of the following (unless cured within the 30 day period):
11.6.3.1 A material uncured default by the Agent
in the performance of its duties;
11.6.3.2 The failure of the Agent, as Lender, to
advance its pro-rate share of the Loans; or
11.6.3.3 the appointment of a receiver for the
Agent or the assumption of the Agent's operations by any federal regulatory
agency with jurisdiction over the Agent.
11.6.4 Upon the acceptance of any appointment as the
Agent hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent and Borrower shall deliver to such Successor
Agent such documents of transfer and assignment as such successor Agent may
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation or replacement hereunder as the Agent,
the provisions of this Section shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Agreement.
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11.7 Loans by BankBoston and Lenders. BankBoston, N.A. shall
have the same rights and powers with respect to (x) the Loans made by it, and
(y) the Notes held by it as any other Lender and may exercise the same as if it
were not the Agent. BankBoston, N.A. may accept deposits from, lend money to,
and generally engage in any kind of business with Borrower or any subsidiary or
affiliate of the Borrower as if BankBoston, N.A, were not the Agent hereunder.
Each Lender other than BankBoston, N.A. shall not be entitled to accept deposits
from, lend money to, or generally engage in any banking business with Borrower
or any Subsidiary or affiliate of Borrower independently of the Loans unless
such banking or lending services shall not be offered by BankBoston, N.A. to its
commercial clients.
11.8 Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of Borrower, this Agreement, the other Loan
Documents (the terms and provisions of which being satisfactory to such Lender)
and such other documents, information and investigation as such Lender has
deemed appropriate, made its own credit decision to make the Loans. Each Lender
also acknowledges that it will, independently of the Agent and each other
Lender, and based on such other documents, information and investigations as it
shall deem appropriate at any time, continue to make its own credit decisions as
to exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
11.9 Copies, etc. The Agent has forwarded each Lender copies
of material provided by the Borrower prior to the date hereof. The Agent shall
give prompt notice to each Lender of each notice or request required or
permitted to be given to the Agent by Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower), and
the Agent shall deliver to each Lender within 10 days of receipt copies of audit
reports, Financial Statements reports delivered pursuant to Sections 6.1.8,
6.1.9, 6.1.10, and 6.1.11, and other documents (excluding the Collateral)
provided by the Borrower. The Agent will distribute to each Lender from time to
time as requested by each Lender each document or instrument received for its
account and copies of all other communications received by the Agent from the
Borrower for distribution to Lenders by the Agent in accordance with the terms
of this Agreement. Except for notices, reports, and other documents and
information expressly required to be furnished to Lenders by the Agent
hereunder, the Agent shall have no duty or responsibility to provide any Lender
with any credit or other information concerning the affairs, financial condition
or business of the Borrower which may come into the possession of the Agent or
any of its affiliates.
11.10 Payments. A payment by the Borrower to the Agent
hereunder or under any of the other Loan Documents for the account of any Lender
shall constitute a payment to such Lender. The Agent shall distribute to each
Lender on a schedule to be determined by the Agent and the Lenders from time to
time such Lender's pro rata share of payments received by the Agent for the
account of the Lenders, after payment of all fees and expenses of the Agent
(including, without limitation, any fees in connection with the Borrower's
Account or relating to custody of the Collateral)and except as otherwise
expressly provided herein or in any of the other Loan Documents. If in the
opinion of the Agent the distribution of any amount received by it in such
capacity hereunder, under the Notes or under any of the other Loan Documents
might involve the Agent in liability, the Agent may refrain from making
distribution until the Agent's right to make
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distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such persons as shall be determined by such court.
11.11 Sharing of Payments. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Notes held by it in excess of its
Lender's Percentage of payment on account of all of the Notes, such Lender shall
distribute the excess payment ratably to each of the other Lenders, provided,
however, that if all or any portion of such excess payment is thereafter
recovered by the Borrower from the Lender making such a distribution, such
distribution to each other Lender shall be rescinded and each such other Lender
shall repay to the distributing Lender its ratable share of the distribution.
11.12 Delinquent Lenders. Notwithstanding anything to the
contrary contained in this Agreement or any of the other Loan Documents, any
Lender that fails (i) to make available to the Agent its pro rata share of any
Loan or (ii) to comply with the provisions of Section 11.11 with respect to
making dispositions and arrangements with the other Lenders where such Lender's
share of any payment received, whether by setoff or otherwise, is in excess of
its pro rata share of such payments due and payable to all of the Lenders, in
each case as, when and to the full extent required by the provisions of this
Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be
deemed a Delinquent Lender until such time as such delinquency is satisfied. A
Delinquent Lender shall be deemed to have assigned any and all payments due to
it from the Borrower, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Lenders for application to, and
reduction of their respective pro rata shares of all outstanding Loans. Each
Delinquent Lender hereby authorizes the Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of all
outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full
a delinquency when and if, as a result of application of the assignment payments
to all outstanding Loans of the nondelinquent Lenders, the Lender's respective
pro rata shares of all outstanding Loans to have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
11.13 Notification of Defaults and Events of Default. Each
Lender hereby agrees that, upon learning of the existence of a default or Event
of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 11.13 it shall promptly
notify the other Lenders of the existence of such default or Event of Default.
11.14 Sharing of Expenses. If and to the extent that the
Borrower shall not have paid to the Agent any of the Agent's reasonable costs
and expenses (including reasonable attorneys' fees and costs) in connection with
the Loan, each Lender shall pay to the Agent its pro-rata share of such costs
and expenses.
11.15 Responses to Requests for Consent. Each Lender shall
respond promptly to any request by the Agent for any consent hereunder, and any
request for consent for which the Agent shall not receive a response within ten
business days shall be deemed consented to.
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12. MISCELLANEOUS.
12.1 Power of Attorney. The Borrower hereby appoints and
irrevocably designates the Agent, its agents, representatives and designees as
agents and attorneys-in-fact for the Borrower, granting unto said attorneys full
power to do all things and acts necessary to implement and fully execute any
power or rights granted to the Agent under this Agreement, including the right
to give written notice, at any time, to such office and officials at the United
States Post Office to effect such change of address so that all mail addressed
to such Borrower may be delivered directly to the Agent, and the right to
execute trust receipts, conditional sale contracts or other title retention or
security instruments. Absent a default or Event of Default, the Agent shall not
give any notice to effect a change of address.
12.2 Indemnity. The Borrower hereby indemnifies and holds the
Agent and the Lenders and all participants, their successors, assigns,
shareholders, officers, directors and agents harmless from and against all
liability, loss, damage and expense (including reasonable attorney's fees) which
the Agent or the Lenders may or shall incur related in any way to (a) this
Agreement or any of the Loan Documents (including, without limitation, any claim
for a commission or fee in connection with any Loan Documents), or any actions
taken in good faith hereunder or thereunder, or (b) any act or omission of the
Borrower or any of its respective employees, contractors or agents, (c) any
violation of or noncompliance by the Borrower with any Requirements, (d) the
breach by the Borrower of any covenant, warranty, term or provision of this
Agreement or any Loan Document, (e) any misrepresentation by the Borrower in
respect of any aspect of the transactions contemplated by this Agreement or (f)
each Eligible Project and the operator of the Borrower's business. Borrower's
obligations under this Section shall survive termination of this Agreement and
repayment of the Loans.
12.3 Expenses. The Borrower shall pay all costs and expenses
incurred by the Agent and the Lenders in connection with the preparation,
execution, delivery, filing and administration of the Loans and any Loan
Documents including, but not limited to, reasonable fees of Agent's counsel and
any local counsel retained by them, with respect to the Loans and with respect
to advising the Agent and the Lenders as to their rights and responsibilities
under the Loan Documents, all reasonable costs and expenses in connection with
protecting, storing, warehousing, insuring, handling, maintaining and shipping
the Collateral, in connection with enforcement of the Loan Documents, title
insurance premiums, survey and site assessment costs, appraisal fees, brokerage
fees or commissions, mortgage and financing statements recording and filing fees
and any other expenses whether incurred before or after the closing of the
Loans. The Borrower shall hold the Agent and the Lenders harmless from any
liabilities with respect to or resulting from any delay in paying or omission to
pay such fees and expenses.
If the Borrower shall fail to maintain the insurance required by
Section 6.4, or pay the taxes, assessments, charges or claims referred to in
Section 6.3 hereof, or fail to perform any of its obligations hereunder, the
Agent, at its option, may maintain such insurance or pay such taxes,
assessments, charges or claims or perform any or all such obligations and the
Borrower shall pay on demand any premiums, taxes, assessments, charges or claims
so paid by the Agent or expenses incurred by the Agent or such amounts shall be
deemed additional indebtedness due under the Notes, in the Agent's sole
discretion.
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<PAGE> 44
The Agent shall be entitled, at the Borrower's sole cost and expense,
to obtain appraisals of the Collateral, from time to time. Prior to a default or
Event of Default, the Agent shall not perform such appraisals at the Borrower's
expense more frequently than twice during the original term of the Loans.
All references to attorneys in the Loan Documents shall include,
without limitation, the Agent's in-house counsel. The Borrower shall not incur
any expenses for the Agent's in-house counsel in connection with the initial
preparation of Loan Documents and closing of the Loans.
12.4 Further Assurances. The Borrower shall, at the Borrower's
cost and expense, upon request of the Agent or the Lenders, duly execute and
deliver, or cause to be duly executed and delivered, to the Agent or the Lenders
such further instruments and do and cause to be done such further acts as may be
reasonably necessary or proper in the opinion of the Agent or the Lenders to
carry out more effectually the provisions and purposes of the Loan Documents.
12.5 Severability. If any provision of any Loan Document is
deemed by any court having jurisdiction thereon invalid or unenforceable, the
balance of that Loan Document shall remain in effect; if any provision of that
Loan Document is deemed by any such court to be unenforceable because such
provision is too broad in scope such provisions thereafter shall be read to be
consistent with such Court's decision to make it enforceable; and if any
provision is deemed inapplicable by any such Court to any person or circumstance
it shall nevertheless be construed to apply to all other persons and
circumstance.
12.6 Governing Law; Effect. This Agreement and the other Loan
Documents shall be governed by and construed in accordance with the substantive
law of the Commonwealth of Massachusetts, without giving effect to the conflicts
or choice of law provisions of Massachusetts or any other jurisdiction, and
shall have the effect of a sealed instrument. In any interpretation of the
provisions of this Agreement or any Loan Document, any principle of construction
which interprets agreements against the draftsmen shall be disregarded.
12.7 Sale and Transfer of Loans and Note; Participations in
Loans and Note. Each Lender may assign, or sell participations in, its Loans to
one or more other persons in accordance with this Section 12.7.
12.7.1 Assignments. Any Lender, (a) with the written
consent of (i) the Agent and (ii), in the absence of an Event of Default, the
Borrower (which consents shall not be unreasonably withheld) may at any time
assign and delegate to one or more commercial banks or other financial
institutions, and (b) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any of its
affiliates or to any other Lender (each person described in either of the
foregoing clauses as being the person to whom such assignment and delegation is
to be made, being hereinafter referred to as an "Assignee Lender"), all or any
fraction of such Lender's Individual Commitment and outstanding Loans (which
assignment and delegation shall be of a constant, and not a varying, percentage
of all the assigning Lender's Loans) in a minimum aggregate amount of
$5,000,000; provided, that any such Assignee Lender will comply, if applicable,
with the provisions of this Agreement and all other Loan Documents. The
Borrower, each other Lender and the Agent shall be entitled to continue
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<PAGE> 45
to deal solely and directly with the assigning Lender in connection with the
interests so assigned and delegated to a Assignee Lender until (c) written
notice of such assignment and delegation, together with payment instructions,
addresses and related information with respect to the Assignee Lender, shall
have been given to the Borrower and the Agent by the assigning Lender and the
Assignee Lender, and (d) the Assignee Lender shall have executed and delivered
to the Borrower and the Agent such documents as the Agent shall reasonably
request to confirm the Assignee Lender's agreement to comply with the terms of
the Loan Documents.
From and after the date that the Agent accepts such Lender as Assignee
Lender, (x) the Assignee Lender thereafter shall be deemed automatically to have
become a party hereto and to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee Lender, shall have the rights
and obligations of a Lender hereunder and under the other Loan Documents, and
(y) the assignor Lender, to the extent that rights and obligations hereunder
have been assigned and delegated by it in connection with such assignment, shall
be released from its obligations hereunder and under the other Loan Documents.
Within five business days after its receipt of notice from the Agent of a new
Assignee Lender, the Borrower shall, upon delivery to the Borrower of the
predecessor Note marked "exchanged", execute and delivered to the Agent (for
delivery to the relevant Assignee Lender) a new Note evidencing such Assignee
Lender's assigned Loans and, if the assignor Lender has retained an Individual
Commitment hereunder, a replacement Note in the principal amount of the Loans
retained by the assignor Lender hereunder (such Note to be in exchange for, but
not in payment of, that Note then held by such assignor Lender). Each such Note
shall be dated the date of the predecessor Note. Any attempted assignment and
delegation not made in accordance with this Section 12.7 shall be null and void.
12.7.2 Participations. Any Lender may at any time sell to
one or more commercial banks or other persons participating interests in any of
the Loans, or other interests of such Lender hereunder; provided, that (a) no
participation contemplated in this Section 12.7 shall relieve such Lender from
its Individual Commitment or its other obligations hereunder or under any other
Loan Documents, (b) such Lender shall remain solely responsible for the
performance of its obligations hereunder, and (c) the Borrower and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Loan and Security Agreement and
each of the other Loan Documents.
12.7.3 Federal Reserve Bank. Notwithstanding the
foregoing provisions of this Section 12.7, any Lender may at any time pledge or
assign all or any portion of such Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank; provided, however, that no such
pledge or assignment shall release such Lender from such Lender's obligations
hereunder or under any other Loan Document.
12.8 Assignment of Loan Agreement by Borrower. Neither this
Loan Agreement nor the proceeds of the Loans shall be assignable by the Borrower
without the prior written consent of all Lenders, and any attempted assignment
without the Lenders' prior written consent shall, after closing, create a
default in the Loans.
12.9 Notices. Any demand upon or notice to the Borrower
hereunder shall be effective when delivered by hand or when properly deposited
in the mails postage prepaid, or sent by telex, answerback received, or
electronic facsimile transmission, receipt acknowledged, or
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<PAGE> 46
delivered to a telegraph company or overnight courier, in each case addressed to
the Borrower at the address shown below or as it appears on the books and
records of the Agent. Demands or notices addressed to any other address at which
the Agent customarily communicates with the Borrower also shall be effective.
Any notice by the Borrower to the Agent shall be given as aforesaid, addressed
to the Agent at the address shown below or such other address as the Agent may
advise the Borrower in writing.
The Agent or BankBoston, N.A.:
BankBoston, N.A.
15 Westminster Street
Providence, RI 0290399
Attention: Thomas Morris
Telecopier: 401-278-7952
Copy to: Steven Taylor Smith, Esquire
Cain, Hibbard, Myers & Cook
66 West Street
Pittsfield, MA 01201
Telecopier: 413-443-7964
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Liberty Bank: 315 Main Street
Box 2700
Middletown, CT 06457
Attn: Mark Rauniker
Telecopier:860-343-7439
With a copy to:
Anthony J. Krol, Esquire
Klett, Lieber, Rooney & Schorling
12th Floor - Two Logan Square
Philadelphia, PA 19103-2576
Telecopier: 215-567-2737
Borrower: Silverleaf Resorts, Inc.
1221 Riverbend, Suite 120
Dallas, Texas 75247
Attn: Robert Mead
Telecopier: 214-905-0514
Copy to: George R. Bedell, Esquire
Meadows, Owens, Collier, Reed,
Cousins & Blau, LLP
3700 Nationsbank Plaza
901 Main Street
Dallas, TX 75202-3792
Telecopier: 214-747-3732
12.10 Successors. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their successors and assigns and all
other subsequent holders of the Notes.
12.11 Entire Agreement. The Agreement and the other documents
referred to herein contain a complete statement of the undertakings between the
parties with respect to its subject matter, and supersedes all prior agreements
and undertakings. There are no representations not set forth in this Loan and
Security Agreement (including the Exhibits and Schedules attached hereto) or the
other Loan Documents which have been relied upon by the parties.
12.12 Modification. No modification, rescission, waiver,
release or amendment of any provision of the Loan Documents, shall be effective
unless made in writing and signed by a duly authorized officer of the Agent and
the Required Lenders and the same shall then be effective only for the period
and on the conditions and for the specific purposes specified in such writing,
it being expressly understood by the parties hereto that no such amendment,
modification or waiver which would:
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12.12.1 modify any requirement hereunder that any
particular action be taken by all the Lenders or by the Required Lenders shall
be effective unless consented to by each Lender;
12.12.2 modify this Section 12.12, change the definition
of "Required Lenders", reduce any fees, or release any substantial amount of
collateral security, except as otherwise specifically provided in any Loan
Document, shall be made without the consent of each Lender;
12.12.3 increase the amount of the Total Commitment or
any Individual Commitment, or extend the Maturity Date of, or extend the due
date for or reduce the amount of any scheduled repayment or prepayment of
principal of or interest on the Loans (or reduce the principal amount of or rate
of interest on the Loans) shall be made without the consent of the holder of
that Note evidencing such Loan; or
12.12.4 affect adversely the interests, rights or
obligations of the Agent shall be made without the consent of the Agent and each
Lender.
12.13 Captions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purpose of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
12.14 Counterparts. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
12.15 Waiver of Rights of the Agent. Neither the failure of the
Agent to exercise, nor the delay of the Agent in exercising any right, power, or
privilege under this Agreement or any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise or any right, power or
privilege preclude any other or further exercise of any other right, power or
privilege.
12.16 Agreement not Intended as Partnership or Agency. The
parties expressly disclaim any intention to create a partnership or joint
venture pertaining to the subject matter of this Agreement. The parties intend
that their relationship shall be solely that of borrower and lender, whether
that relationship is relevant for purposes of the parties' dealings between
themselves or with third persons. Neither the Borrower nor the Agent shall be
deemed an agent of the other for any purpose.
12.17 Survival. This Loan Agreement shall survive the closing
of the Loans and each and every one of the obligations and undertakings of the
Borrower set forth in this Agreement shall be continuing obligations and
undertakings and shall not cease or terminate until the entire outstanding
principal amount of the Loans, together with all interest and fees due thereon
and any other amounts which may be due pursuant to this Loan Agreement, shall
have been paid in full, and until the obligations and undertakings of the
Borrower shall have been fully completed and discharged.
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12.18 Year 2000 Compliance. The Borrower has (i) reviewed the
areas within its business and operations which could be adversely affected by
failure to become "Year 2000 Compliant": (that is that computer application,
imbedded microchips and other systems used by the Borrower will be able to
properly recognize and perform date sensitive functions involving certain dates
prior to and any date after December 31, 1999); (ii) developed a detailed plan
and timetable to become Year 2000 Compliant in a timely manner; and (iii)
committed adequate resources to support their Year 2000 plan. Based on such
review and plan the Borrower reasonably believes that it will become Year 2000
Compliant on a timely basis except to the extent that a failure to do so will
not have a material adverse effect on the Borrower or its operations.
12.19 Method of Payment. All payments and prepayments of
principal and all payments of interest, fees and other amounts payable hereunder
shall be made by the Borrower to the Agent at its head office OR SUCH OTHER
PLACE AS THE AGENT MAY FROM TIME TO TIME SPECIFY IN WRITING in immediately
available LAWFUL CURRENCY OF THE UNITED STATES OF AMERICA, on or before 11:00
a.m. (Boston, Massachusetts time) on the due date thereof, WITHOUT COUNTERCLAIM
OR SETOFF AND FREE AND CLEAR OF, AND WITHOUT ANY DEDUCTION OR WITHHOLDING FOR,
ANY TAXES OR OTHER PAYMENTS.
12.20 Limitation On Damages. The Borrower agrees that, in any
action, suit or proceeding, in respect of or arising out of this Agreement, the
Loan Documents or the transactions contemplated hereunder, whether sounding in
contract or in tort, each waives to the fullest extent permitted by law, any
claim they may have against the Agent or the Lenders for consequential, punitive
or special damages.
12.21 WAIVER OF JURY TRIAL. THE BORROWER AND THE AGENT AND THE
LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT
TO, IN CONNECTION WITH, OR ARISING OUT OF: (A) THIS LOAN AND SECURITY AGREEMENT,
THE NOTES, THE OTHER LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT OR DOCUMENT
DELIVERED IN CONNECTION WITH THE LOANS; (B) THE VALIDITY, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF; OR (C) ANY OTHER CLAIM OR DISPUTE HOWEVER
ARISING AMONG THE BORROWER, THE LENDERS AND THE AGENT. NONE OF THE BORROWER OR
THE LENDERS OR THE AGENT NOR ANY ASSIGNEE OR SUCCESSOR SHALL (1) SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR
ARISING OUT OF THE FOREGOING OR (2) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BORROWER, THE LENDERS AND THE
AGENT, AND THESE PROVISIONS SHALL BE
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SUBJECT TO NO EXCEPTIONS. NEITHER THE AGENT, THE LENDERS, NOR THE BORROWER HAS
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
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Signed and sealed on the date first above written.
WITNESS: SILVERLEAF RESORTS, INC.
By: /s/ Robert E. Mead
- ----------------------------- ---------------------------------
Its: Chief Executive Officer
BANKBOSTON, N.A., as Agent
By:
- ----------------------------- ---------------------------------
Thomas J. Morris, Director
BANKBOSTON, N.A., as Lender
By:
- ----------------------------- ---------------------------------
Thomas J. Morris, Director
LIBERTY BANK, as Lender
By:
- ----------------------------- ---------------------------------
Its:
Schedules and Exhibits:
Schedule 1 Name of Lender and Commitment
Schedule 1.3 Authorized Officers
Exhibit 1.6 Form of Borrowing Base Certificate
Schedule 1.19 Eligible Projects
Schedule 1.48 Permitted Encumbrances
Schedule 1.61 Subordinated Debt
Schedule 1.62 Subordinated Shareholder Debt
Schedule 5.3 Subsidiaries
Schedule 5.17 Financing Statements--Filing Locations
Schedule 6.4.6 Specimen Title Insurance Policy of Each Eligible Project
Schedule 6.20 Locations Where Borrower Sells Timeshare Interests
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<PAGE> 1
EXHIBIT 10.4
PURCHASE AND SALE AGREEMENT
1. THE PARTIES:
BUYER: Silverleaf Resorts, Inc., a Texas corporation
1221 Riverbend Dr., Suite 120, Dallas, Texas 75247 ("Buyer")
SELLER: American National Bank & Trust Company of Chicago, as Trustee
under a Trust Agreement dated February 9, 1994, known as Trust
No. 117945-00
2901 Butterfield Road, Oak Brook, Illinois 60523 ("Seller")
Buyer and Seller are hereinafter collectively referred to as the "Parties" and
may sometimes be referred to individually as "Party."
2. THE REAL ESTATE: Seller agrees to sell to Buyer and Buyer agrees to buy from
Seller, in an "AS-IS, WHERE-IS" condition with no representation or warranties
from the Seller whatsoever (except as otherwise provided in this Contract),
approximately one hundred ninety-one (191) acres of vacant land located in
LaSalle County, Illinois, legally described on the attached Exhibit "A"
(hereinafter referred to as "Real Estate").
3. PURCHASE PRICE: Buyer agrees to pay Seller a purchase price of Four Thousand
Two Hundred and No/100 Dollars ($4,200.00) per gross acre surveyed. The purchase
price shall be paid as follows: The Buyer shall deposit earnest money of
Twenty-Five Thousand and No/100 Dollars ($25,000.00) with Chicago Title
Insurance Company (hereinafter referred to as "Escrowee") in a strict joint
order no. 1 escrow, for the mutual benefit of the Parties, to be applied to the
purchase price at closing. The balance of the purchase price shall be paid as
follows: (a) $135,440.00 shall be paid to Seller at closing by certified or
cashier's check or by wire transfer; and (b) the balance of the purchase price
or $641,760.00, plus or minus prorations, shall be represented by purchase money
financing provided by Seller to Buyer. The terms of the purchase money financing
are as follows: (a) the principal amount of the purchase money financing shall
bear interest at the rate of eight percent (8%) per annum and interest shall be
paid monthly in advance commencing on the date of the closing; (b) the Buyer
shall make five (5) annual principal reduction payments, each equal to 1/5 of
the original principal balance of the purchase money loan and with the first
payment due on the first anniversary date of the purchase money note ("Note")
with the remaining four (4) principal reduction payments due on the second,
third, fourth and fifth anniversary dates of the Note so that all principal and
accrued interest is paid in full on the fifth anniversary date of the Note; (c)
the Note will be guaranteed in full by Buyer; (d) the purchase money loan
documents shall be comprised of the Note, a purchase money mortgage, an
assignment of rents, and a personal guaranty from Buyer, a collateral assignment
of beneficial interest and UCC financing statements. All of the purchase money
loan documents shall be prepared by Seller's counsel and shall be satisfactory
to Seller and Seller's counsel. The purchase money mortgage will provide for
insurance and tax escrows to be paid monthly by Buyer and shall contain
so-called "Due on Sale" and "Due on Encumbrance" clauses. It is understood and
agreed that no construction will be permitted on the Real Estate until the
purchase money loan has been repaid in full. This Contract and the issuance of
the purchase money financing are contingent upon the Seller approving the
financial condition and status of Buyer and Buyer shall provide to Seller within
ten (10) days after the execution of this Contract by Buyer a financial
statement of Buyer and such other financial information as Seller may reasonably
request. Seller agrees to approve or disapprove Buyer's financial status within
ten (10)
<PAGE> 2
days after receipt of Buyer's financial statement and any other financial
information requested by Seller. At closing, Buyer shall provide to Seller a
1990 ALTA loan policy naming Seller as the insured party thereunder the
insurance in the amount of the purchase money loan and insuring that the
purchase money loan is a first priority lien against title to the Real Estate.
The loan policy shall contain an extended coverage endorsement, a comprehensive
endorsement, an access endorsement, a survey endorsement, a separate tax parcel
endorsement, and the loan policy and all endorsements shall be paid for by Buyer
in cash at closing.
Five (5) days prior to the closing, Buyer shall provide to Seller UCC,
tax, judgment and lien searches for Buyer from the Illinois Secretary of State's
Office and the LaSalle County Recorder's Office showing no liens or judgments
against Buyer. At closing, Buyer shall provide to Seller : (a) a certificate of
good standing for Buyer from the Secretary of State's Office of the State of
Texas and a certificate from the Illinois Secretary of State's Office specifying
that Buyer is qualified to do business in the State of Illinois, each item dated
not more than thirty (30) days prior to the date of closing, (b) a certified
copy of the corporate resolution of Buyer authorizing the individuals who have
executed the purchase money loan documents to bind the corporation to the terms
and provisions of those documents, and (c) an opinion of counsel from an
attorney licensed to practice law in the State of Illinois stating that the
terms and provisions of the purchase money loan documents are the binding, valid
and legal obligations of Buyer and the interest rate contained therein does not
violate the usury laws of the State of Illinois together with an opinion of
counsel from counsel licensed to practice law in the State of Texas stating that
the interest rate charged under the purchase money loan financing is not
violative of any usury laws in the State of Texas (each opinion must be
reasonably satisfactory to Seller's counsel).
At closing, the earnest money deposit shall be paid over to Seller and
the principal amount so paid shall be credited to the purchase price of the Real
Estate with all interest earned on the principal portion of the earnest money
deposit to be paid to the Buyer. If the sale does not occur as a result of a
default by either Buyer or Seller, the earnest money deposit shall be paid to
the appropriate party as specified in paragraph 13 of this Contract.
4. CLOSING AND POSSESSION: Closing shall be on September 30, 1999 at the office
of Chicago Title Insurance Company, 1725 S. Naperville Road, Wheaton, Illinois.
Possession shall be tendered on the day of closing. THE CLOSING AND POSSESSION
DATE IS LEGALLY SIGNIFICANT TO BUYER AND SELLER. THE PARTIES UNDERSTAND THAT
WHEN THIS CONTRACT IS SIGNED BY BOTH BUYER AND SELLER, THE CLOSING AND
POSSESSION DATE MAY ONLY BE CHANGED BY MUTUAL AGREEMENT OF THE PARTIES.
5. REAL ESTATE BROKER'S COMMISSION: Each Party hereby represents and warrants to
the other that other than (i) any commission due and payable to Inland Real
Estate Sales, Inc., if any, which will be paid by Seller, and (ii) a real estate
commission in the amount of two and one-half percent (2-1/2%) of the purchase
price, which commission shall be paid by Seller to Larry Windsor of Century 21
Realtors, upon completion of the sale of the Real Estate to Buyer, no other
brokers or real estate salespeople have been involved in this transaction and
that there are no other real estate commissions due or to become due as a result
of this transaction and any Party so incurring or causing any additional claims
for a real estate commission shall indemnify, defend,
-2-
<PAGE> 3
save and hold the other Party harmless from any loss, damage, cost and expense
arising from such claims.
6. PLAT OF SURVEY: Within five (5) days of the Parties execution of this
Contract, Seller shall provide to Buyer its existing plat of survey of the Real
Estate by Vegrzyn, Sarver and Associates, Inc. dated September 15, 1981. Within
thirty (30) days of the Parties execution of this Contract, Seller shall furnish
an update of its plat of survey (the existing plat of survey and the update are
hereinafter collectively referred to as "Plat of Survey") certified to Buyer and
Chicago Title Insurance Company and made by an Illinois registered land
surveyor, showing gross acreage, having all corners staked with measurements of
all lot lines, and showing all easements, building line set backs, fences and
any improvements on the Real Estate and distances thereof to all lot lines.
7. NOTICES: All notices, communications or demands by either Party to the other
shall be in writing and shall be served by any of: (a) personal delivery; (b) a
nationally recognized overnight courier service; (c) certified mail, return
receipt requested; or (d) by facsimile with a confirmation copy sent by regular
mail on the same day as the facsimile transmission. A notice shall be deemed to
have been duly given (i) if and when personally delivered; (ii) upon actual
receipt if sent by a nationally recognized overnight courier service; (iii) upon
the second business day after being deposited in the United States Mail; or (iv)
the day of facsimile transmission provided such transmission is completed on or
before 5:00 p.m. on a business day, otherwise such delivery will be deemed
received at 9:00 a.m. on the following business day, with all notices, demands
or other communications addressed to the Parties as follows:
If to Seller: InLand Capital Fund, L.P.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attn: Patricia A. Challenger
Phone: (630) 218-4956
Fax: (630) 218-4955
With copy to: H. Dan Bauer, Esq.
The Inland Group, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attn: Patricia A. Challenger
Phone: (630) 218-8000
Fax: (630) 218-4900
If to Buyer: Silverleaf Resorts, Inc.
1221 Riverbend Dr., Suite 120
Dallas, Texas 75247
Attn: Robert E. Mead
Phone: (214) 631-1166
Fax: (214) 905-0514
With copy to: George R. Bedell, Esq.
901 Main Street, Suite 3700
Dallas, Texas 75202
Phone: (214) 744-3700
Fax: (214) 747-3732
-3-
<PAGE> 4
or at such other address as a Party may designate by a notice in conformity with
the provisions of this paragraph.
8. THE DEED AND TITLE POLICY: At closing, Seller shall deliver a recordable
trustee's quit claim deed conveying title to the Real Estate to a new land trust
established at American National Bank and Trust Company of Chicago, of which the
Buyer shall be the sole Beneficiary with title to the Real Estate subject to
only the following exceptions described herein, if any: (a) general real estate
taxes accrued, but not yet payable at the time of closing; (b) special
assessments confirmed after this Contract date; (c) zoning laws and ordinances;
(d) fire, safety and health codes and ordinances and all building setback lines
and use or occupancy laws, ordinances and regulations; (e) drainage ditches,
feeders, laterals and drain tile, pipe or other conduit; (f) matters appearing
on Seller's existing plat of survey supplied to Buyer as described in paragraph
6 of this Contract; and (g) all items listed on Exhibit "B" attached hereto.
Buyer further agrees that Buyer shall not assign the beneficial interest of the
new land trust at American National Bank and Trust Company of Chicago and that
at the time of closing, the Seller shall have the sole collateral assignment of
such beneficial interest in such new land trust. At closing, Seller shall also
provide to Buyer an ALTA title insurance policy naming the new land trust as the
insured party thereunder and providing insurance in the amount of the purchase
price payable hereunder that the new land trust has acquired good and marketable
title to the Real Estate subject only to the exceptions described hereinabove.
The title policy shall contain an extended coverage endorsement, a comprehensive
endorsement, an access endorsement, a survey endorsement, a separate tax parcel
endorsement, and the title policy and all endorsements shall be paid for by
Seller in cash at closing.
9. TITLE: Within fifteen (15) days after the execution of this Contract by both
Parties, Seller shall furnish or cause to be furnished to Buyer or Buyer's
attorney, at Seller's expense, a commitment for title insurance issued by
Chicago Title Insurance Company ("Title Company") on the current form of
American Land Title Association Owner's Policy (or equivalent policy) in the
amount of the purchase price covering the date hereof, subject only to the
following: (a) exceptions as set forth in paragraph 8 of this Contract; and (b)
acts done or suffered by or judgments against Buyer, or those claiming by,
through or under Buyer. It is understood and agreed that any loans obtained by
Seller which are secured by mortgages or trust deeds encumbering title to the
Real Estate shall be paid in full at or prior to the closing and title after
closing shall not be subject to such liens or encumbrances. In the event that
the title commitment contains any unpermitted title exceptions, Seller shall
have thirty (30) days after receipt of the title commitment to cure or have the
Title Company commit to insure Buyer against loss or damage that may be caused
by (to the reasonable satisfaction of Buyer) such unpermitted title exceptions.
It is understood and agreed that Seller shall not be required to expend more
than $10,000.00 to cure any unpermitted title exception or to have same insured
over by the Title Company. Seller shall notify Buyer in writing within the
thirty (30) day cure period in the event that Seller is unable to cure or have
insured over any unpermitted title exception. Upon written notification from
Seller that Seller is unable to cure or have insured over any unpermitted title
exception, Buyer shall have five (5) business days thereafter to elect to either
terminate this Contract and receive a return of its earnest money subject to the
terms and provisions of this Contract or to maintain this Contract in full force
and effect and take
-4-
<PAGE> 5
title subject to any uncured title exceptions with the right to receive a credit
against the purchase price equal to that portion of $10,000.00 that has not been
expended by Seller to cure unpermitted title exceptions. If Buyer does not elect
to accept the Real Estate as provided above, this Contract shall terminate and
be of no further force and effect, and the earnest money shall be refunded to
Buyer provided Seller has no claim against Buyer pursuant to the indemnity
contained in paragraph 17. Whenever it is provided in this Contract for earnest
money to be returned to Buyer, as a prerequisite to the return of such earnest
money, Buyer shall deliver to Seller, Buyer's quit claim deed to the Real Estate
fully executed, properly acknowledged and in recordable form. Within fifteen
(15) days after the execution of this Contract by both parties, Seller will also
furnish to Buyer's attorney drafts of the purchase money loan documents that
will be executed at the time of closing of this transaction.
10. AFFIDAVIT OF TITLE AND REAL ESTATE TRANSFER DECLARATION: Seller shall
furnish Buyer at closing an Affidavit of Title covering the date of closing,
subject only to those permitted exceptions set forth in paragraph 8, and
unpermitted exceptions, if any, as to which the title insurer commits to extend
insurance in a manner specified in paragraph 9. At closing, Seller shall furnish
to Buyer a completed Illinois Real Estate Transfer Declaration and Seller shall
pay any State of Illinois or LaSalle County transfer stamps or taxes applicable
to the transaction, if any.
11. TAX AND FARM RENT PRORATIONS: General real estate taxes will be prorated
ratably as of the time of closing. If the amount of the current general taxes is
not then ascertainable, the adjustment thereof shall be on the basis of the most
recent ascertainable taxes with a reproration upon receipt of the actual bill(s)
for the year in which closing occurs. The Real Estate is subject to the Land
Lease attached hereto as Exhibit "C." At closing, Seller shall provide to Buyer
a credit for any farm rent applicable to any period after the closing which rent
has been previously received by Seller. For any rents due to Seller through the
date of closing, Seller and Buyer will each execute a letter to the tenant under
the lease directing the tenant to divide its next rent payment as described in
the letter. Seller shall also assign all of its right, title and interest in and
to any existing farm lease and any rent due thereunder to Buyer at closing.
12. INTERNAL REVENUE CODE REQUIREMENTS: Parties agree to furnish, execute and
deliver all documentation and information necessary to comply with the reporting
requirements of Sections 6045(e) and 1445 of the Internal Revenue Code.
13. PERFORMANCE AND DEFAULT: Time is of the essence in this Contract. If the
closing of this transaction fails as a result of Buyer's default, then it is
agreed that Seller will suffer damages that would be difficult to ascertain.
Accordingly, in the event of such a Buyer default, the earnest money shall be
forfeited by Buyer to Seller as liquidated damages, as Seller's sole and
exclusive remedy for such default as Buyer and Seller's best estimate of the
damages to be incurred by Seller, and this Contract will thereupon terminate. If
the closing of this transaction fails as a result of Seller's default, then
Buyer shall have the option of either (a) seeking specific performance of this
Contract or (b) having the earnest money refunded to Buyer (provided Seller has
no claim against Buyer pursuant to the indemnity contained in paragraph 17) and
Seller shall pay to Buyer twice the amount of all reasonable and documented
costs and expenses actually incurred by Buyer as a result of this transaction up
to a maximum of $25,000.00, and this Contract will thereupon terminate. Buyer's
remedy will be either (a) or (b) above and such remedy will be Buyer's sole and
exclusive remedy. The Buyer's indemnification of Seller as contained in
paragraph 17 hereinafter
-5-
<PAGE> 6
shall remain in full force and effect and in no way limited by any liquidated
damages provision or any termination or expiration of this Contract.
14. CONDEMNATION: If, prior to closing, all or a material part of the Real
Estate is subjected to a bona fide threat of condemnation by a body having the
power of eminent domain, or is taken by eminent domain or condemnation (or sale
in lieu thereof), Buyer, by written notice to Seller, given within fifteen (15)
days after Buyer's receiving actual notice of such threat of condemnation, may
elect to terminate this Contract (the date of closing shall be extended, if
necessary, to grant Buyer the aforesaid fifteen (15) day period). If Buyer does
not elect to so terminate, this Contract shall remain in full force and effect
and the purchase contemplated herein, less any interest in the Real Estate taken
by eminent domain or condemnation, shall be completed with no adjustments, and
at the closing, Seller shall assign, transfer, and set over to Buyer all of
Seller's right, title and interest in and to any awards that have been or that
may thereafter be made for such taking. The phrase "a material part of the Real
Estate" shall mean ten percent (10%) or more of the land comprising of the Real
Estate.
15. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974: The Buyer and the Seller will
comply with the Real Estate Settlement Procedures Act of 1974, as amended, and
will furnish all information required for compliance therewith.
16. ESCROW CLOSING: This sale shall be closed through an escrow with Chicago
Title Insurance Company in accordance with the provisions of the usual form of
New York-styled Deed and Money Escrow Agreement with provisions inserted in the
Escrow Agreement as may be required to conform with this Contract. Upon the
creation of such an escrow, anything herein to the contrary notwithstanding, the
payment of the purchase price and delivery of deed and other documents required
to be delivered by this Contract, shall be made through the escrow. The cost of
the escrow shall be divided equally between the Parties. The Buyer shall pay the
cost of any money lender's escrow and the loan policy and all endorsements
thereto.
17. INSPECTION-FEASIBILITY PERIOD: For the period beginning upon acceptance of
this Contract by Seller and ending on a date sixty (60) days thereafter
("Inspection-Feasibility Period"), Buyer and its agents, at reasonable times and
upon reasonable notice to Seller, may enter upon the Real Estate to perform
physical inspections of the Real Estate including environmental and soil tests
and otherwise investigate and determine if the Real Estate is suitable for
Buyer's intended use, all at Buyer's sole cost and expense. Buyer shall promptly
pay for all costs of any inspections or tests and hereby indemnifies and holds
Seller harmless from any mechanic's or materialmen's liens against the Real
Estate resulting from non-payment of such inspections or tests and this
provision shall survive any termination of this Contract. The Buyer will also
review all existing exceptions as set forth in paragraph 8 during the
Inspection-Feasibility Period. All inspections and tests to be done on the Real
Estate will only be performed upon prior written notification to Seller and
Buyer shall restore the Real Estate to its condition prior to any such
inspections or tests and shall insure that there are no unsafe or dangerous
conditions existing on the Real Estate during or after such inspections or
tests. In the event that Buyer determines that the results of any inspections,
tests, investigations or review are unsatisfactory or that the Real Estate is
not suitable for Buyer's intended use, notwithstanding that this Contract is
fully binding upon the Parties at the time of execution, Buyer may terminate
this Contract by written notice ("Inspection Cancellation Notice") to Seller
delivered at anytime during the Inspection-Feasibility Period. Buyer shall save,
-6-
<PAGE> 7
indemnify, defend and hold Seller harmless from the acts of Buyer and its
representatives, agents and /or contractors arising from such tests and/or
inspections, and prior to entry upon the Real Estate or the performing of any
inspections or tests, Buyer shall provide Seller with evidence of general
liability, property damage and worker's compensation insurance in form, content
and amount satisfactory, and written by companies acceptable, to Seller in
connection therewith and Buyer agrees to name Seller, its partners and agents as
additional insured on all such policies. Buyer will repair, in a good and
workmanlike manner, any damage done to the Real Estate as a result of any tests
or inspections performed thereon. Buyer's indemnity as provided above will
survive the closing of this transaction or any termination of this Contract and
will not be deemed merged with the Deed. In addition, Buyer will be solely
responsible for the cost and expense of all crop damage incurred as a result of
any of Buyer's tests or inspections. In the event of termination by Buyer
pursuant to this paragraph, Seller shall direct that the earnest money be
returned to Buyer provided Seller has no claim against Buyer pursuant to the
above indemnity. Thereafter, this Contract will be of no further force or effect
and neither Party shall have any further liability to the other provided Seller
has no claim against Buyer pursuant to the above indemnity. If no Inspection
Cancellation Notice is received by Seller within the Inspection-Feasibility
Period, this Contract shall remain in full force and effect. In no event shall
Buyer, without the prior written consent of Seller, record any document against
the Real Estate including, but not limited to, this Contract or a memorandum
thereof, encumber the Real Estate in any way, or bind the Real Estate to any
zoning, platting or annexation at any time prior to closing. Buyer shall keep
the terms and conditions of this Contract confidential and shall not disclose
such to any third party, unless required by law to do otherwise.
Buyer agrees that unless otherwise provided herein, (a) the sale is
concluded without warranties, representations or guarantees of any kind or
nature made by Seller; (b) the Real Estate is purchased by Buyer on an "AS-IS,
WHERE-IS" basis; and (c) Buyer's decision to purchase the Real Estate is based
only on the investigation, study and analysis of all aspects of the Real Estate
as made by Buyer/and or Buyer's agents, employees, representatives and/or
independent contractors (collectively, "Buyer's Investigation"). It is expressly
understood by Buyer and Seller that all statements and representations, if any,
made by Seller and Seller's agents and independent contractors are intended by
Buyer and Seller to be made only as an accommodation to Buyer and Buyer's
Investigation and not in lieu of Buyer's Investigation. Seller makes no
representations or warranties, expressed or implied, with respect to the
environmental condition of the Real Estate, any surrounding property and any
property in the vicinity of the Real Estate (including without limitation all
facilities, improvements, structures and equipment thereon and soil and
groundwater thereunder) or compliance with any federal, state or local
environmental, health or safety statute, laws or regulations, and Seller makes
no indemnifications expressed or implied whatsoever including, but not limited
to, any indemnifications for any costs or liabilities arising out of or related
to the presence, discharge, treatment, recycling, storage, use, transportation,
generation, disposal, migration or release of a hazardous or toxic waste,
substance or constituent as defined in any applicable federal, state or local
law, ordinance or regulation, or any other substance (including, without
limitation, any asbestos, asbestos containing materials, polychlorinated
biphenyls, oil, petroleum or any fraction thereof, or crude oil or any fraction
thereof) (collectively, "Hazardous Materials") on, in, under or from the Real
Estate, any surrounding property or any property in the vicinity of the Real
Estate (including without limitation all facilities, improvements, structures
and equipment thereon and soil and groundwater thereunder). Notwithstanding any
other rights provided herein, during the Inspection-Feasibility Period Buyer
shall have the right at its own
-7-
<PAGE> 8
expense to conduct an environmental assessment of the Real Estate, provided
that: (i) the proposed scope of the assessment is reasonably acceptable to the
Seller (it is agreed that a level one environmental assessment and a reasonable
number of soil borings to determine soil classification, moisture content and
the depth of these items reasonably required for Buyer's intended use of the
Real Estate is acceptable to Seller provided Buyer fills in all soil boring
holes and fully complies with the terms and conditions of this paragraph 17,
including, but not limited to, repairing any damage caused by its tests and
provided that Buyer shall not be entitled to do any soil borings on the gas
pipeline easement crossing the Real Estate); (ii) Buyer shall keep any
information generated during this assessment as confidential unless required by
law to do otherwise and shall not disclose such to any third party (except
Buyer's members, joint venture partners, Buyer's lender and consultants) without
the prior approval of Seller, which shall be within Seller's sole discretion;
and (iii) if this transaction fails to close as required herein and if Seller so
requests, copies of all data, notes, documents and reports generated during this
environmental assessment shall be promptly provided to Seller. Any information,
reports, statements, documents, or records (hereinafter, "Disclosures"), if any,
provided or made to Buyer or its consultants by Seller, its agents, employees or
contractors concerning the environmental condition of the Real Estate,
including, without limitation, any environmental reports shall not be
representations or warranties.
18. TAX DEFERRED EXCHANGE: This Contract may be assigned by Seller to Exchange
Escrowee as a qualified exchange intermediary in order for Seller to effect an
Internal Revenue Code Section 1031 tax deferred exchange. In the event Seller
makes such an assignment, Purchaser agrees to promptly execute a customary
consent or acknowledgement of such assignment in connection therewith, as the
qualified intermediary may reasonably request. Seller shall bear all costs with
respect to its assignment/exchange transaction. There shall be no liability by
Purchaser to Seller with respect to any Internal Revenue Service disapproval or
disallowance of Seller's assignment/exchange transaction. Seller's exchange will
not require Purchaser to take title to any real estate other than the Real
Estate.
19. ATTORNEY'S FEES: In the event that either of the Parties institutes
litigation to enforce the terms and provisions of the Contract, the prevailing
Party in such litigation shall be entitled to recover all costs and fees,
including, without limitation, all attorney's and paralegal fees through all
appellate proceedings, that such prevailing Party incurs as a result of such
litigation.
20. GOVERNING LAW: This Contract and all amendments thereof shall be governed by
and construed in accordance with the laws of the State of Illinois.
21. ASSIGNABILITY: Buyer may assign its interest in the Contract without the
prior written consent of the Seller, but Buyer shall remain liable for its
obligations under this Contract despite such assignment. Seller shall be allowed
to freely transfer and assign its interest in this Contract without any prior
consent.
22. BINDING EFFECT OF CONTRACT: All the various undertakings to each of the
Parties to this Contract shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns.
23. INVALIDITY OR ILLEGALITY OF ANY PROVISION OF THIS CONTRACT: If any term,
condition or provision of this Contract shall be declared invalid or
unenforceable, the
-8-
<PAGE> 9
remainder of this Contract, other than such term, condition or provision, shall
not be affected thereby and shall remain in full force and effect and shall be
valid and enforceable to the fullest extent permitted by law.
24. CO-PARTNER JOINT VENTURER: None of the terms, provisions or conditions of
this Contract shall be construed as creating or constituting Seller as a partner
or joint venturer with Buyer, nor constituting Buyer as the agent of Seller or
Seller the agent of Buyer, nor shall any of the provisions of this Contract be
construed in any manner so as to make Seller liable for the debts, obligations,
liabilities or representations of Buyer.
25. RETURN OF EARNEST MONEY: It is agreed that notwithstanding any provision in
this Contract to the contrary concerning the return of Buyer's earnest money in
the event that Buyer would be entitled to a return of its earnest money but for
the fact that Seller has bona fide claim against Buyer pursuant to Buyer's
indemnity, defense and hold harmless obligations contained in paragraph 17 of
this Contract, the earnest money will not be returned until such claim is
resolved; provided, however, if the claim is for a known, liquidated amount, the
earnest money less such amount and less any cost and expenses (including,
without limitation, all attorney's fees) reasonably and necessarily incurred and
anticipated to be incurred by Seller as a result of such claim shall be returned
to Buyer. Until the claim is resolved, the amounts specified in the foregoing
sentences shall remain in the escrow as security for payment of the claim and
the above-described, cost and expenses. It is understood that the retention of
the earnest money or any portion thereof shall not relieve Buyer from defending
and holding harmless Seller and the Real Estate against all such claims.
It is further agreed that in the event that Buyer's insurance company notifies
Seller in writing that the insurance company: (i) acknowledges coverage of the
claim, (ii) agrees to defend Seller and the Real Estate against the claim, (iii)
has sufficient insurance coverage under the policy to cover all amounts claimed
together with all costs and expenses necessary to defend the claim, (iv) has
retained counsel to represent Seller and the Real Estate against the claim, the
amount of the earnest money plus any interest earned thereon and less any
deductible under the insurance policy shall be returned to Buyer with the
deductible being retained in the escrow as partial security for payment of the
claim.
26. MISCELLANEOUS PROVISIONS:
(a) The provisions of this Contract may be waived, altered, amended or
repealed, in whole or in part, only on the written consent of both Parties to
the Contract.
(b) This Contract may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(c) This Contract shall be deemed to have been drafted jointly by the
Parties and any uncertainty or ambiguity shall not be construed for or against
either Party as an attribution of drafting either Party.
(d) Buyer shall not record this Contract against title to the Real Estate
and any such recording will result in an automatic termination of this Contract
and Buyer's rights hereunder.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the authorized representatives of Buyer and Seller
have executed this Contract.
<TABLE>
<CAPTION>
BUYER: SELLER:
<S> <C>
SILVERLEAF RESORTS, INC., INLAND CAPITAL FUND, L. P.,
a Texas corporation a Delaware limited partnership,
By: INLAND REAL ESTATE
INVESTMENT CORPORATION,
By: /s/ Robert E. Mead a Delaware corporation,
------------------------------------- its general partner
Name: Robert E. Mead
-----------------------------------
Its: Chief Executive Officer
------------------------------------
Date: 7/23/99 By: /s/ Patricia A. Challenger
----------------------------------- ------------------------------------
Patricia A. Challenger
Senior Vice President
Date: 7/30/99
----------------------------------
SELLER:
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO, not personally, but as
Trustee under a Trust Agreement dated
February 9, 1994 and known as Trust No.
117945--00
By: [signature illegible]
------------------------------------
Its: Trust Officer
-----------------------------------
Date:
----------------------------------
</TABLE>
The instrument is executed by the undersigned Land Trustee, not personally but
solely as Trustee in the exercise of the power and authority conferred upon and
vested in it as such Trustee, it is expressly understood and agreed that all of
the warranties, indemnities, representations, covenants, undertakings and
agreements herein made on the part of the Trustee are undertaken by it solely in
its capacity as Trustee and not personally. NO personal liability or personal
responsibility is assumed by or shall at any time be asserted or enforceable
against the Trustee on account of any warranty, indemnity, representation,
covenant, undertaking or agreement of the Trustee in this instrument.
-10-
<PAGE> 11
Exhibits:
Exhibit "A": Legal Description
Exhibit "B": Title Matters
Exhibit "C": Land Lease
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,929,000
<SECURITIES> 0
<RECEIVABLES> 287,517,000
<ALLOWANCES> 29,018,000
<INVENTORY> 97,236,000
<CURRENT-ASSETS> 131,238,000
<PP&E> 60,160,000
<DEPRECIATION> 11,659,000
<TOTAL-ASSETS> 438,238,000
<CURRENT-LIABILITIES> 28,480,000
<BONDS> 75,000,000
0
0
<COMMON> 133,000
<OTHER-SE> 157,679,000
<TOTAL-LIABILITY-AND-EQUITY> 438,238,000
<SALES> 142,697,000
<TOTAL-REVENUES> 167,929,000
<CGS> 21,183,000
<TOTAL-COSTS> 116,922,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,848,000
<INTEREST-EXPENSE> 11,545,000
<INCOME-PRETAX> 25,614,000
<INCOME-TAX> 9,861,000
<INCOME-CONTINUING> 15,753,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,753,000
<EPS-BASIC> 1.22
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</TABLE>
