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 quarter ended March 31, 1995
[ ] 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: 1-8096
FAIRFIELD COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0390438
(State of Incorporation) (I.R.S. Employer Identification No.)
2800 Cantrell Road, Little Rock, Arkansas 72202
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (501) 664-6000
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
------- ------
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
------ -----
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of May 1, 1995 totaled 9,964,915.<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
March 31, December 31,
1995 1994
---- ----
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 14,482 $ 13,641
Loans receivable, net 132,196 137,124
Real estate inventories 32,748 31,802
Restricted cash and escrow accounts 8,392 10,894
Property and equipment, net 6,399 5,956
Deferred tax assets, net 3,649 2,919
Net assets held for sale 2,691 8,378
Other assets 15,900 14,012
-------- --------
$216,457 $224,726
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements $103,292 $111,943
Deferred revenue 19,910 18,956
Accounts payable 6,465 6,305
Accrued interest 5,145 5,404
Other liabilities 13,828 15,183
-------- --------
148,640 157,791
-------- --------
Stockholders' equity:
Common stock 124 124
Paid-in capital 46,853 46,123
Retained earnings 20,840 20,688
Less treasury stock, at cost - -
-------- --------
67,817 66,935
-------- --------
$216,457 $224,726
======== ========
</TABLE>
Note: The consolidated balance sheet at December 31, 1994 has been derived
from the audited consolidated financial statements at that date.
See notes to consolidated financial statements.
2 <PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 31, 1995 and 1994
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
1995 1994
---- ----
<S> <C> <C>
REVENUES
Vacation ownership, net $12,464 $ 6,398
Lots, net 1,069 927
Resort management 3,402 2,740
Interest 4,764 5,324
Other 3,424 4,232
------- -------
25,123 19,621
------- -------
EXPENSES
Cost of sales:
Vacation ownership 3,842 2,033
Lots 360 275
Provision for loan losses 945 580
Selling 8,997 4,147
Resort management 3,064 2,385
General and administrative 2,984 2,535
Interest 2,275 2,719
Other 2,411 3,407
------- -------
24,878 18,081
------- -------
Earnings before provision for income taxes 245 1,540
Provision for income taxes 93 462
------- -------
Net earnings $ 152 $ 1,078
======== =======
NET EARNINGS PER SHARE
Primary $.01 $.10
==== ====
Fully diluted $.01 $.09
==== ====
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary 11,033,498 11,095,519
========== ==========
Fully diluted 11,641,254 11,710,273
========== ==========
</TABLE>
See notes to consolidated financial statements.
3 <PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1995 and 1994
(In thousands)
(Unaudited)
<TABLE>
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 152 $ 1,078
Adjustments to reconcile net earnings to net
cash (used in) provided by operations:
Depreciation and amortization 389 335
Provision for loan losses 945 580
Earnings from unconsolidated affiliates (618) (354)
Changes in operating assets and liabilities:
Real estate inventories (946) 1,460
Other liabilities (1,355) (737)
Other, net 278 (2,290)
-------- --------
Net cash (used in) provided by operating activities (1,155) 72
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment, net (711) (198)
Principal collections on loans 17,209 16,875
Loans originated (13,134) (5,403)
Purchase of U.S. Treasury Note (1,524) -
Net cash received from unconsolidated affiliates 618 354
Net investment activities of net assets held
for sale and discontinued operations 5,687 (7,910)
-------- -------
Net cash provided by investing activities 8,145 3,718
-------- -------
FINANCING ACTIVITIES
Proceeds from financing arrangements 39,481 27,088
Repayments of financing arrangements (48,132) (30,682)
Decrease (increase) in restricted cash and
escrow accounts 2,502 (1,934)
-------- -------
Net cash used in financing activities (6,149) (5,528)
-------- -------
Net increase (decrease) in cash and cash equivalents 841 (1,738)
Cash and cash equivalents, beginning of period 13,641 4,475
-------- --------
Cash and cash equivalents, end of period $ 14,482 $ 2,737
======== ========
</TABLE>
See notes to consolidated financial statements.
4 <PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
The accompanying unaudited consolidated financial statements of
Fairfield Communities, Inc. ("Fairfield") and its wholly owned subsidiaries
(collectively, the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the statements for the unaudited
interim periods include all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the financial
position and the results of operations of the Company for such periods.
Results of operations for the period ended March 31, 1995 are not
necessarily indicative of the results of operations that may be expected
for a full year or any interim period. Certain previously reported amounts
have been reclassified to conform to the presentation used for the current
period. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Annual Report on Form 10-K
of the Company for the year ended December 31, 1994. The accompanying
consolidated financial statements, and related notes thereto, include the
accounts of Fairfield and its wholly owned subsidiaries, with all
significant intercompany accounts and transactions eliminated.
NOTE 1 - VACATION OWNERSHIP SALES
------ ------------------------
Vacation ownership sales for the three months ended March 31, 1995
and 1994 are summarized as follows (In thousands):
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Vacation ownership sales $12,835 $5,755
Less: Deferred revenue on
current year sales, net (1,626) (729)
Add: Deferred revenue on
prior year sales 1,255 1,372
------- ------
$12,464 $6,398
======= ======
</TABLE>
NOTE 2 - LOANS RECEIVABLE
------ ----------------
Loans receivable consisted of the following (In thousands):
<TABLE>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Contracts $130,279 $136,709
Mortgages 13,345 12,044
-------- --------
143,624 148,753
Less: Allowance for loan losses (11,206) (11,322)
Unamortized valuation discount (222) (307)
-------- --------
$132,196 $137,124
======== ========
</TABLE>
5
NOTE 3 - REAL ESTATE INVENTORIES
------ -----------------------
Real estate inventories are summarized as follows (In thousands):
<TABLE>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Land:
Under development $ 8,777 $ 4,140
Undeveloped 11,943 17,633
------- -------
20,720 21,773
------- -------
Residential housing:
Vacation ownership 10,179 8,418
Homes 1,849 1,611
------- -------
12,028 10,029
------- -------
$32,748 $31,802
======= =======
</TABLE>
In 1995, the Company began development at its newest destination
sites and, therefore, the related acquisition costs were reclassed from
undeveloped land to land under development.
NOTE 4 - FINANCING ARRANGEMENTS
------ ----------------------
Financing arrangements are summarized as follows (In thousands):
<TABLE>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Notes payable:
7.6% Notes $ 68,232 $ 73,560
Other 14,394 14,708
Revolving credit agreements 20,666 23,675
-------- --------
$103,292 $111,943
======== ========
</TABLE>
At March 31, 1995, the 7.6% Notes were secured by a pool of contracts
receivable totaling $83.4 million. Principal amounts collected from the
contracts receivable pool were reinvested into additional contracts
receivable limited monthly to (i) the availability of eligible contracts
and (ii) the amounts accumulated in certain restricted cash accounts. The
reinvestment period expired March 20, 1995 and the excess funds held in the
restricted cash accounts totaling $5.3 million were, for financial
statement purposes, offset against the outstanding balance of the 7.6%
Notes. Principal amounts collected subsequent to the reinvestment period
will be used to reduce the outstanding balance of the 7.6% Notes.
On March 28, 1995, Fairfield Capital Corporation, ("FCC"), a wholly
owned subsidiary of Fairfield Acceptance Corporation ("FAC"), entered into
a Credit Agreement (the "FCC Agreement") which provides for loans of up to
$21.4 million for the purchase of contracts receivable from FAC pursuant to
the Receivables Purchase Agreement (the "Purchase Agreement"), among
Fairfield as originator, FAC, as seller and FCC, as purchaser. The initial
purchase of contracts receivable and the respective funding under the FCC
Agreement occurred on April 10, 1995, resulting in borrowings under the FCC
Agreement totaling $21.4 million, of which $20.3 million was used to reduce
borrowings under FAC's revolving credit agreement and $1.1 million was used
to establish restricted cash accounts required by the FCC Agreement and to
pay transaction fees. Borrowings under the FCC Agreement mature on
December 9, 1999 and bear interest at varying rates, based on 30 day
commercial paper rates, subject to an interest rate cap of 8.5%. As of the
date of funding, the weighted average interest rate on the borrowings was
6.875%, including facility fees totaling .675%.
6
NOTE 5 - FAIRFIELD ACCEPTANCE CORPORATION ("FAC")
------ ----------------------------------------
Condensed consolidated financial information for FAC is summarized as
follows (In thousands):
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash $ 1,523 $ 895
Loans receivable, net 103,619 108,093
Restricted cash 3,289 8,120
Due from parent 13,702 12,115
Other assets 2,769 3,008
-------- --------
$124,902 $132,231
======== ========
LIABILITIES AND EQUITY
Financing arrangements (see Note 4) $ 88,898 $ 97,235
Accrued interest and other liabilities 698 681
Equity 35,306 34,315
-------- --------
$124,902 $132,231
======== ========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1995 and 1994
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Revenues $3,838 $3,189
Expenses 2,233 2,006
------ ------
Earnings before provision for income taxes 1,605 1,183
Provision for income taxes 614 453
------ ------
Net earnings $ 991 $ 730
====== ======
</TABLE>
NOTE 6 - NET ASSETS HELD FOR SALE
------ ------------------------
A summary of net assets held for sale is as follows (In thousands):
<TABLE>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Golf courses $ 1,270 $ 2,471
Collateral for FCI Notes:
Real estate inventories 4,005 4,160
Investment in unconsolidated affiliate 4,951 4,951
Excluded Association Assets:
Real estate inventories 2,652 6,772
Loans receivable, net 4,619 4,830
-------- -------
17,497 23,184
FCI Notes (14,806) (14,806)
------- -------
$ 2,691 $ 8,378
======== ========
</TABLE>
Subsequent to March 31, 1995, the Company disposed of approximately
$2.1 million of Excluded Association Assets at approximate book value.
7
NOTE 7 - SUPPLEMENTAL INFORMATION
------ ------------------------
Other revenues for the three months ended March 31, 1995 and 1994
include cash distributions totaling $.6 million and $.4 million,
respectively, related to the Company's 35% partnership interest in Harbour
Ridge, Ltd., a limited partnership engaged in the development of a tract of
land in St. Lucie, Florida. Cash distributions from this partnership
interest are anticipated to continue through the third quarter of 1996.
Also included in other revenues and other expenses for the three months
ended March 31, 1995 are home and bulk land sales totaling $1.8 million and
related cost of sales totaling $1.6 million. For the three months ended
March 31, 1994, home and bulk land sales and related cost of sales totaled
$3.2 million and $2.9 million, respectively.
Included in other assets at March 31, 1995 and December 31, 1994 are
(i) $4.9 million and $5.1 million, respectively, related to the assets of
the Company's life insurance subsidiary and (ii) unamortized capitalized
financing costs totaling $2.0 million for each period presented. Also
included in other assets at March 31, 1995 is a $1.5 million U.S. Treasury
Note, maturing March 1997.
Interest paid totaled $2.6 million and $6.6 million for the three
months ended March 31, 1995 and 1994, respectively. Of the 1994 amount,
$3.2 million was related to the net assets of First Federal which were sold
in September 1994.
During the three months ended March 31, 1995 and 1994, benefits
realized from the utilization of pre-confirmation net operating loss
carryforwards and recognition of pre-confirmation deductible temporary
differences of $.7 million and $.4 million, respectively, were recorded as
reductions of the Company's valuation allowance for deferred tax assets and
as additions to paid-in capital.
NOTE 8 - CONTINGENCIES
------ -------------
In June 1992, the Pagosa Lakes Property Owners Association ("PLPOA")
filed an adversary proceeding in the Bankruptcy Court for the Eastern
District of Arkansas, Western Division (the "Bankruptcy Court") asserting
equitable ownership or lien interests in certain recreational amenities,
including golf courses. In March 1994, the Bankruptcy Court issued its
decision upholding Fairfield's ownership of the Pagosa recreational
amenities, subject to a restrictive covenant allowing Pagosa property
owners and their guests to use the recreational amenities. The PLPOA has
filed an appeal of the Bankruptcy Court's decision with the United States
District Court, Eastern District of Arkansas, Western Division ("District
Court"). The issues on appeal have been briefed and the parties are
awaiting a decision. Fairfield's ability to dispose of the recreational
amenities at Pagosa is restricted until the claim is finally resolved.
In August 1992, the PLPOA filed an appeal of the Bankruptcy Court's
final order confirming Fairfield's plan of reorganization. This appeal is
pending before the District Court. The basis for the appeal is the PLPOA's
position that Fairfield should have been required to resolicit the plan of
reorganization due to its amendment in accordance with the Bankruptcy
Court's conditional confirmation order to eliminate any recovery for
Fairfield's previous stockholders. The Bankruptcy Court rejected this
argument, finding that the property owner group lacked standing to raise
this issue, and in management's opinion, the appeal is without merit and
moot, since the plan of reorganization has been substantially implemented.
The issues on appeal have been briefed, but no decision has been rendered.
On or about July 21, 1993 and September 9, 1993, two lawsuits (the
"Recreation Fee Litigation") were filed by 29 individuals and a company
against Fairfield in the District Court of Archuleta County, Colorado. The
Recreation Fee Litigation, which seeks certification as class actions,
alleges that Fairfield and its predecessors in interest wrongfully imposed
an annual recreation fee on owners of lots,
8
condominiums, townhouses, VOIs
and single family residences in Fairfield's Pagosa, Colorado development.
The amount of the recreation fee, which was adopted in August, 1983, is
$180 per lot, condominium, townhouse and single family residence subject to
the fee and $360 per unit for VOIs. The Recreation Fee Litigation in
general seeks (a) a declaratory judgment that the recreation fee is
invalid; (b) the refund, with interest, of the recreation fees which were
allegedly improperly collected by Fairfield; (c) damages arising from
Fairfield's allegedly improper attempts to collect the recreation fee (i)
in an amount of not less than $1,000 per lot in one case and (ii) in an
unstated amount in the other case; (d) punitive damages; and (e) recovery
of costs and expenses, including attorneys' fees. The court has not yet
ruled on whether or not the Recreation Fee Litigation will be allowed to
proceed as class actions. Because of the preliminary nature of the
litigation and uncertainty concerning the time period covered by the suits'
allegations, Fairfield is unable to determine with any certainty the dollar
amount sought by plaintiffs, but believes it to be material.
On November 3, 1993, Fairfield filed an adversary proceeding in the
Bankruptcy Court, alleging that the Recreation Fee Litigation violates the
discharge granted to Fairfield in its Chapter 11 bankruptcy reorganization
and the injunction issued by the Bankruptcy Court against prosecution of
any claims discharged in the bankruptcy proceedings. By orders and
opinions dated September 29, 1994, the Bankruptcy Court decided motions
filed by the plaintiffs in the Recreation Fee Litigation, in response to
Fairfield's adversary proceeding. The Bankruptcy Court retained
jurisdiction over one of the lawsuits (the Storm lawsuit), and determined
that any purchaser of a lot from Fairfield and its predecessors prior to
August 14, 1992 would be limited to a pre-confirmation cause of action.
The Bankruptcy Court determined that it did not have jurisdiction over the
second lawsuit (the Daleske lawsuit), involving eight individuals and one
company, due to prior proceedings in the case in Colorado federal district
court, which ruled that the plaintiffs in this lawsuit had post-
confirmation causes of action, although all nine plaintiffs are believed to
have purchased their lots prior to August 14, 1992. Fairfield has appealed
the Bankruptcy Court's decision in the Daleske lawsuit, and the plaintiffs
in the Storm lawsuit have appealed the Bankruptcy Court's decision in that
case, to the District Court, which has indicated that it will schedule oral
argument on these appeals in the near future. The Colorado State Court
stayed further proceedings in the Recreation Fee Litigation pending the
outcome of the appeals to the District Court. Two additional related
lawsuits have also been filed in the Archuleta County District Court,
raising similar issues and demands as the Storm and Daleske cases. The
Fiedler case, filed on or about October 17, 1994, was filed individually,
while the second of these new cases, the Lobdell case, was filed on or
about November 22, 1994, as a proported class action. On February 27,
1995, Fairfield filed an adversary proceeding in the Bankruptcy Court
against the Fiedler and the Lobdell plaintiffs, seeking relief similar to
that requested in the Storm and Daleske adversary proceeding. No hearing
has been held on the Fiedler and Lobdell adversary proceeding. The
Colorado District Court has stayed proceedings in the Lobdell case and
stayed most proceedings in the Fiedler case, except with respect to a
motion for summary judgment, in connection with one lot, based upon facts
unique to the Fiedler case.
Fairfield intends to defend vigorously the Recreation Fee Litigation,
and the two recently filed related cases, including any attempt to certify
a class in any of these cases. Fairfield has previously implemented
recreation fee charges at certain other of its resort sites which are not
subject to the pending action.
On December 10, 1993, Charlotte T. Curry, who, with her husband,
purchased a lot from Fairfield under an installment sale contract
subsequently sold to First Federal, filed suit against First Federal,
currently pending in Superior Court in Mecklenburg County, North Carolina,
alleging breach of contract, breach of fiduciary duty and unfair trade
practices. On April 8, 1994, the complaint was
9
amended, (a) adding Fairfield as a party,
(b) adding an additional count against both Fairfield
and First Federal alleging violation of the North Carolina's Racketeer
Influenced and Corrupt Organizations ("RICO") Statute and (c) adding a
count against Fairfield alleging fraud. The litigation, which seeks class
action certification, contests the method by which Fairfield calculated
refunds for lot purchasers whose installment sale contracts were canceled
due to failure to complete payment of the deferred sales price for the lot.
Most installment lot sale contracts require Fairfield to refund to a
defaulting purchaser the amount paid in principal, after deducting the
greater of (a) 15% of the purchase price of the lot or (b) Fairfield's
actual damages. The plaintiff disputes Fairfield's method of calculating
damages, which has historically included certain sales, marketing and other
expenses. In the case of Ms. Curry's lot, the amount of refund claimed as
having been improperly retained is approximately $3,600. The Curry lawsuit
seeks damages, punitive damages, treble damages under North Carolina law
for unfair trade practices and RICO, prejudgment interest and attorney's
fees and costs. By order dated July 6, 1994, the court dismissed Ms.
Curry's claims for (a) breach of contract, due to the statute of
limitations, (b) breach of fiduciary duty, due to the lack of a fiduciary
duty and the statute of limitations, (c) fraud, due to the statute of
limitations, and (d) RICO, due to failure to state a claim. The court, by
order dated August 16, 1994, dismissed Ms. Curry's only remaining claim
against Fairfield, for unfair trade practices, subject to possible appeal
rights. The court has not yet addressed whether Ms. Curry is an
appropriate class representative and has not certified the case as a class
action.
Under the Stock Purchase Agreement for the sale of First Federal,
Fairfield agreed to indemnify SCBC against any liability in the Curry
litigation. While Fairfield is no longer a defendant in the litigation, it
intends to coordinate the defense of First Federal (now, by merger,
Security Bank and Trust Company) with the counsel who have been
representing First Federal, to defend the Curry litigation vigorously.
Fairfield also has cancelled defaulted lot installment sales contracts
owned by it and its subsidiaries (other than First Federal), using the same
method of calculating refunds as is at issue in the Curry litigation.
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
Vacation Ownership
------------------
Gross vacation ownership interval ("VOI") revenues totaled $12.8
million and $5.8 million for the three months ended March 31, 1995 and
1994, respectively. This increase is the result of (i) increased sales
volumes ($3.1 million) at several of the Company's existing developments
and (ii) additional sales volumes ($3.9 million) at the Company's newest
destination sites at Orlando, Florida and Nashville, Tennessee, both of
which began sales efforts in December 1994.
Net VOI revenues increased to $12.5 million for the three months
ended March 31, 1995 from $6.4 million for the three months ended March 31,
1994. The increase in net VOI revenues was partially offset by net
deferred revenue of $.4 million during the three months ended March 31,
1995, related to the percentage of completion method of accounting, as
compared to the net recognition of $.6 million of previously deferred
revenue during the three months ended March 31, 1994. Under this method,
the portion of revenues attributable to costs incurred as compared to total
estimated construction costs and selling expenses, is recognized in the
period of sale. The remaining revenue is deferred and recognized as the
remaining costs are incurred.
Cost of sales, as a percentage of revenues, improved to 30.8% for the
three months ended March 31, 1995 from 31.8% from the comparable period in
1994. This fluctuation is primarily attributable to the mix of the
products sold and the varying acquisition and development costs at certain
sites.
Selling
-------
Selling expenses, including commissions, for both VOI and lot sales,
as a percentage of related revenues, were 66.3% and 56.2%, for the three
months ended March 31, 1995 and 1994, respectively. The increase in
selling expenses, as a percentage of related revenues, is attributable to
the inefficiencies experienced at the Company's newest destination sites at
Orlando, Florida and Nashville, Tennessee. Exclusive of these new
projects, selling expenses, as a percentage of related revenues, were 55.6%
for the three months ended March 31, 1995. Future efficiencies are
expected to be realized as the Company continues to adjust its marketing
and sales efforts at these new locations to better match its marketing
programs with the respective sales efforts.
Interest
---------
Interest income totaled $4.8 million for the three months ended March
31, 1995 as compared to $5.3 million for the three months ended March 31,
1994. This decrease is primarily attributable to a lower average balance
of outstanding contracts receivable (1995 - $131.0 million; 1994 - $151.3
million), resulting primarily from principal collections exceeding
originations.
Interest expense, net of capitalized interest, totaled $2.3 million
and $2.7 million for the three months ended March 31, 1995 and 1994,
respectively. This decrease is primarily attributable to the reduction in
the average outstanding balance of interest-bearing debt.
General and Administrative
--------------------------
General and administrative expenses increased from $2.5 million
during the three months ended March 31, 1994 to $3.0 million during the
three months ended March 31, 1995. This increase resulted
11 <PAGE>
from the additional expenses incurred related to the increased VOI sales
volumes as previously discussed. As of a percentage of total revenues,
general and administrative expenses decreased from 12.9% for the three
months ended March 31, 1994 to 11.9% for the three months ended March 31,
1995.
Other
-----
Other revenues for the three months ended March 31, 1995 and 1994
include cash distributions totaling $.6 million and $.4 million,
respectively, related to the Company's 35% partnership interest in Harbour
Ridge, Ltd., a limited partnership engaged in the development of a tract of
land in St. Lucie, Florida. Cash distributions from this partnership
interest are anticipated to continue through the third quarter of 1996.
Also included in other revenues and other expenses for the three months
ended March 31, 1995 are home and bulk land sales totaling $1.8 million and
related cost of sales totaling $1.6 million. For the three months ended
March 31, 1994, home and bulk land sales and related cost of sales totaled
$3.2 million and $2.9 million, respectively.
PROVISION FOR INCOME TAXES
During the three months ended March 31, 1995 and 1994, benefits
realized from the utilization of pre-confirmation net operating loss
carryforwards and recognition of pre-confirmation deductible temporary
differences of $.7 million and $.4 million, respectively, were recorded as
reductions of the Company's valuation allowance for deferred tax assets and
as additions to paid-in capital.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of the Company increased $.8 million from
December 31, 1994 to March 31, 1995. During the three months ended March
31, 1995, the Company generated $17.2 million of cash from principal
collections on loans receivable which was partially offset by $13.1 million
of loan originations. The disposal of net assets held for sale resulted in
increases in cash and cash equivalents totaling $5.7 million. Using
available cash and certain restricted cash accounts, the Company reduced
the outstanding balances of its financing arrangements by $8.7 million (see
Note 4 of the Notes to Consolidated Financial Statements).
As of March 31, 1995, the Company had borrowing availability from
three credit facilities as discussed below. At March 31, 1995, Fairfield
and certain of its subsidiaries had no borrowings, and $1.2 million in
letters of credit, outstanding under the Amended and Restated Revolving
Credit Agreement (the "FCI Agreement") with The First National Bank of
Boston ("FNBB"). The FCI Agreement provides for revolving loans of up to
$25 million, including up to $7 million for letters of credit. The
revolving loans mature on January 1, 1998, if not extended in accordance
with the terms of the FCI Agreement. At March 31, 1995, Fairfield had
borrowing availability under the FCI Agreement of $19.3 million, net of
outstanding letters of credit.
At March 31, 1995, FAC had borrowings outstanding of $20.7 million
under the Third Amended and Restated Revolving Credit Agreement (the "FAC
Agreement") with FNBB. The FAC Agreement provides for revolving loans of
up to $35 million, including up to $1 million for letters of credit. The
revolving loans mature on January 1, 1998, if not extended in accordance
with the terms of the FAC Agreement. At March 31, 1995, FAC had no
additional borrowing availability under the FAC Agreement.
12
On March 28, 1995, Fairfield Capital Corporation, ("FCC"), a wholly
owned subsidiary of Fairfield Acceptance Corporation ("FAC"), entered into
a Credit Agreement (the "FCC Agreement") which provides for loans of up to
$21.4 million for the purchase of contracts receivable from FAC pursuant to
the Receivables Purchase Agreement (the "Purchase Agreement"), among
Fairfield as originator, FAC, as seller and FCC, as purchaser. The initial
purchase of contracts receivable and the respective funding under the FCC
Agreement occurred on April 10, 1995, resulting in borrowings under the FCC
Agreement totaling $21.4 million, of which $20.3 million was used to reduce
borrowings under the FAC Agreement and $1.1 million was used to establish
restricted cash accounts required by the FCC Agreement and to pay
transaction fees. Borrowings under the FCC Agreement mature on December 9,
1999.
As of March 31, 1995, the Company had $14.5 million in cash and cash
equivalents which will be used in part to (i) fund the Company's short-term
capital requirements to develop its new projects in Nashville, Tennessee
and Orlando, Florida, (ii) fund the acquisition of future developments and
(iii) provide operating cash. The Company intends to invest available
excess cash primarily in highly liquid investments which are those deemed
to have a maturity when purchased of three months or less.
The Company expects to finance its long-term cash needs from (i)
contract payments generated from its contracts receivable portfolio, (ii)
borrowings under its credit facilities, (iii) operating cash flows and (iv)
proceeds from asset sales.
FINANCIAL CONDITION
-------------------
Total consolidated assets of the Company decreased $8.3 million from
December 31, 1994 to March 31, 1995. The decrease in assets is primarily
attributable to (i) a $5.7 million decrease in net assets held for sale
resulting from the disposal of such assets and (ii) a $4.9 million decrease
in loans receivable resulting primarily from principal collections
exceeding origination of receivables. These decreases were partially
offset by a $2.6 million increase in other assets, resulting primarily from
the purchase of a $1.5 million U.S. Treasury Note, maturing March 1997. As
previously discussed, the Company used available cash and certain
restricted cash accounts to reduce the outstanding balances of its
financing arrangements by $8.7 million.
Other variations in the Company's assets and liabilities generally
reflect the revenue and expense activities the Company experienced during
the three months ended March 31, 1995.
13
Part II - Other Information
------ -----------------
Item 1 - Legal Proceedings
------ -----------------
Incorporated by reference. See Note 8 of "Notes to
Consolidated Financial Statements".
Item 2 - Changes in Securities
------ ---------------------
None
Item 3 - Defaults Upon Senior Securities
------ -------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
None
Item 5 - Other Information
------ -----------------
None
Item 6 - Exhibits and Reports on Form 8-K
------ --------------------------------
(a) Exhibits
---------
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
-------------------
On March 28, 1995, a Current Report on Form 8-K was filed in
which the Registrant disclosed the number of shares of its
Common Stock outstanding as of February 28, 1995.
14
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.
FAIRFIELD COMMUNITIES, INC.
Date: May 4, 1995 /s/ Robert W. Howeth
--------------------- --------------------------------------
Robert W. Howeth, Senior Vice President,
Chief Financial Officer and Treasurer
Date: May 4, 1995 /s/ William G. Sell
-------------------- --------------------------------------
William G. Sell, Vice President/Controller
(Chief Accounting Officer)
15 <PAGE>
FAIRFIELD COMMUNITIES, INC.
EXHIBIT INDEX
Exhibit
Number
-------
4.1 Supplemented and Restated Indenture between the Registrant,
Fairfield River Ridge, Inc., Fairfield St. Croix, Inc. and IBJ
Schroder Bank & Trust Company, as Trustee, and Houlihan Lokey
Howard & Zukin, as Ombudsman, related to the Senior
Subordinated Secured Notes, dated September 1, 1992 (previously
filed with the Registrant's Current Report on Form 8-K dated
September 1, 1992 and incorporated herein by reference)
4.2 First Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, dated September 1, 1992
(previously filed with the Registrant's Current Report on Form
8-K dated September 1, 1992 and incorporated herein by
reference)
4.3 Second Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, effective September 1, 1992
(previously filed with the Registrant's Annual Report on Form
10-K dated December 31, 1992 and incorporated herein by
reference)
4.4 Third Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, effective March 18, 1993
(previously filed with the Registrant's Quarterly Report on
Form 10-Q dated March 31, 1993 and incorporated herein by
reference)
4.5 Certificate of Designation, Preferences, and Rights of Series A
Junior Participating Preferred Stock, dated September 1, 1992
(previously filed with the Registrant's Current Report on Form
8-K dated September 1, 1992 and incorporated herein by
reference)
10.1 Credit Agreement dated as of March 28, 1995 among the
Registrant, Fairfield Capital Corporation ("FCC"), Fairfield
Acceptance Corporation ("FAC"), Triple-A One Funding
Corporation and Capital Markets Assurance Corporation as
Administrative Agent and Collateral Agent (attached)
10.2 Receivables Purchase Agreement dated as of March 28, 1995 among
the Registrant, FAC and FCC (attached)
11 Computation of earnings per share (attached)
27 Financial Data Schedule (attached)
99 Ombudsman Report for the period ending March 31, 1995 related
to the Registrant's Senior Subordinated Secured Notes.
Fairfield Communities, Inc. (the "Company") has issued its 10%
Senior Subordinated Secured Notes (the "FCI Notes") pursuant to
the Supplemented and Restated Indenture, dated as of September
1, 1992, as amended (the "Restated Indenture"), among the
Company, as issuer, Fairfield St. Croix, Inc. and Fairfield
River Ridge, Inc., as guarantors, IBJ Schroder Bank & Trust
16
Company, as trustee (the "Trustee"), and Houlihan Lokey Howard
& Zukin, as ombudsman (the "Ombudsman"). The Ombudsman, which
was designated by the committee representing the holders of the
notes for which the FCI Notes were exchanged in the Company's
reorganization proceedings, as part of its duties under the
Restated Indenture, is to report periodically concerning the
collateral securing the FCI Notes and other matters (the
"Ombudsman's Reports"). The Ombudsman's Reports are not
prepared at the direction of, or in concert with, the Company
and are delivered by the Ombudsman to the Trustee for
distribution to each holder of record of the FCI Notes.
However, because the Ombudsman's Reports are being distributed
to the record holders of the FCI Notes and the contents of the
Ombudsman's Reports may be of interest to other persons,
including potential purchasers of the FCI Notes, the Company is
filing herewith, as Exhibit 99, a copy of the Ombudsman's
Report dated May 3, 1995, for the period ending
March 31, 1995. The Company is not obligated to file such
reports and may discontinue filing such reports in the future
without notice to any person. (attached)
17 <PAGE>
CREDIT AGREEMENT
Dated as of March 28, 1995
among
FAIRFIELD CAPITAL CORPORATION
FAIRFIELD ACCEPTANCE CORPORATION
FAIRFIELD COMMUNITIES, INC.
TRIPLE-A ONE FUNDING CORPORATION
and
CAPITAL MARKETS ASSURANCE CORPORATION
as Administrative Agent and Collateral Agent<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of March 28, 1995 (the
"Credit Agreement"), among FAIRFIELD CAPITAL CORPORATION, a
----------------
Delaware corporation (the "Borrower"), TRIPLE-A ONE FUNDING
--------
CORPORATION, a Delaware corporation ("Triple-A"), FAIRFIELD
--------
ACCEPTANCE CORPORATION, a Delaware corporation ("FAC"), in its
---
capacity as servicer hereunder (in such capacity, the
"Servicer"), FAIRFIELD COMMUNITIES, INC., a Delaware
--------
corporation ("FCI"), and CAPITAL MARKETS ASSURANCE
---
CORPORATION, a New York stock insurance company ("CapMAC"), as
------
Collateral Agent and as Administrative Agent (in such
respective capacities, the "Collateral Agent" and the
----------------
"Administrative Agent").
--------------------
W I T N E S S E T H:
WHEREAS, pursuant to the Receivables Purchase
Agreement, the Borrower has purchased and otherwise acquired,
and may from time to time in the future purchase and otherwise
acquire Contracts, related collateral therefor and other
related property from FAC; and
WHEREAS, the Borrower has requested that Triple-A
make the Triple-A Loans to the Borrower, the proceeds of which
shall be used to purchase such Contracts, related collateral
and other related property from the Seller in accordance with
the terms of the Receivables Purchase Agreement; and
WHEREAS, Triple-A will fund such loans by (i) the
issuance of Transaction Commercial Paper Notes or (ii) if
Triple-A is unable for any reason to issue Commercial Paper
Notes, by borrowing under the Liquidity Agreement, dated as of
the date hereof, among Triple-A, the Liquidity Banks and the
Liquidity Agent; and
WHEREAS, as a condition precedent to the foregoing
Triple-A Loans, the Borrower has agreed to grant a security
interest in favor of the Collateral Agent, for the benefit of
each of the Collateral Agent, the Administrative Agent,
Triple-A and the Surety, in all of its right, title and
interest in, to and under the Collateral as described herein;
and
WHEREAS, the Surety, the Liquidity Agent, the
Borrower and Triple-A will enter into the Insurance Agreement <PAGE>
pursuant to which the Surety will issue the Surety Bonds to
guarantee repayment of the Triple-A Loans; and
WHEREAS, subject to the terms and conditions set
forth herein, Triple-A is willing to make the Triple-A Loans
to the Borrower, FAC has agreed to act as Servicer of the
Pledged Contracts and FCI has agreed to guarantee the
servicing obligations of FAC hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions. As used in this
-------------------
Credit Agreement, the Triple-A Note or any certificate or
other document made or delivered pursuant hereto or thereto,
the capitalized terms used herein and therein shall, unless
otherwise defined herein or therein, have the meanings
assigned to them in the Definitions List attached hereto as
Appendix A, the terms of which are incorporated herein by
reference (the "Definitions List").
----------------
SECTION 1.02. Accounting Terms. As used herein, in
----------------
the Triple-A Note and in any certificate or other document
made or delivered pursuant hereto and thereto, accounting
terms not otherwise defined herein and accounting terms partly
defined herein to the extent not defined, shall have the
respective meanings given to them under GAAP.
SECTION 1.03. Other Terms. (a) All other
-----------
undefined terms contained in this Credit Agreement shall,
unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or
defined therein.
(b) The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Credit Agreement
shall refer to this Credit Agreement as a whole and not to any
particular provision of this Credit Agreement, and Section,
subsection, Schedule and Exhibit references are to this Credit
Agreement unless otherwise specified.
(c) Capitalized terms used herein and in the
Triple-A Note shall be equally applicable to both the singular
and plural forms of such terms.
SECTION 1.04. Computation of Time Periods. In this
---------------------------
Credit Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from"
shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding."
ARTICLE II
THE TRIPLE-A LOANS
-----------------
SECTION 2.01. The Triple-A Loans. (a) Subject to
------------------
the terms and conditions hereof, Triple-A (x) agrees to make
loans ("Triple-A Loans") on the Closing Date, and (y) may, in
--------------
the exercise of its sole discretion, make Triple-A Loans from
time to time thereafter on any Subsequent Contract Grant Date,
in each case during the period from the Closing Date to the
Termination Date, in an aggregate outstanding principal amount
not to exceed at any time the lesser of (i) the Facility Limit
and (ii) the sum of (A) the net proceeds from the sale of
Transaction Commercial Paper Notes on any Borrowing Date plus
(B) the proceeds of Advances on such Borrowing Date.
Notwithstanding anything in the foregoing to the contrary,
under no circumstances shall Triple-A make any Triple-A Loan
if, after giving effect thereto, either an O/C Shortfall or a
Borrowing Base Shortfall would exist. The Borrowing Base in
effect on any date shall be determined by reference to the
most recent Settlement Report delivered by the Servicer to
Triple-A in accordance with Section 6.01(b) hereof, as
---------------
adjusted (i) on the most recent Subsequent Contract Grant Date
(if any), to reflect additional Eligible Contracts sold to the
Borrower by FAC and Granted to the Collateral Agent since the
delivery of such Settlement Report (if any), (ii) on any
Settlement Date, to reflect Collections received and applied
pursuant to the terms hereof on or prior to the next preceding
Determination Date, and (iii) on any Settlement Date, to
eliminate from the Eligible Contract Pool Principal Balance
the outstanding Principal Balance of any Pledged Contracts
which are either Defaulted Contracts or Defective Contracts as
of the next preceding Determination Date. All of the Triple-A
Loans shall mature, and become due and payable, on the
Maturity Date.
SECTION 2.02. Note. All of the Triple-A Loans
----
shall be evidenced by a promissory note in the form attached
hereto as Exhibit M (the "Triple-A Note") appropriately
--------- -------------
completed, duly executed and delivered on behalf of the
Borrower and payable to the order of Triple-A. The Borrowing
Date and principal amount of each Triple-A Loan, the interest
rate and Interest Period applicable thereto and each repayment
or prepayment of principal thereof shall be recorded in
Triple-A's internal records and, prior to any transfer of the
Triple-A Note, on the grid schedule annexed thereto, and the
Borrower hereby authorizes Triple-A to make such recordation;
provided, however, that the failure of Triple-A to set forth
-------- -------
any or all of such information on such schedule or any error
in such schedule shall not in any manner affect the obligation
of the Borrower to repay the Triple-A Loans in accordance with
the terms hereof and of the Triple-A Note. Such updated grid
schedules, or other proper records maintained by Triple-A (or
by the Administrative Agent on behalf of Triple-A) in lieu
thereof, shall be presumptively correct evidence of the
Triple-A Loans made by Triple-A to the Borrower. The
aggregate outstanding principal amount of the Triple-A Loans
at any time shall be the aggregate principal amount owing on
the Triple-A Note at such time.
SECTION 2.03. Making the Triple-A Loans.
-------------------------
(a) Notice of Borrowing. Whenever the Borrower
-------------------
wishes to make a Borrowing hereunder of Triple-A Loans
(whether in respect of the Closing Date or any Subsequent
Contract Grant Date), it shall deliver to Triple-A a notice
("Notice of Borrowing") in substantially the form of Exhibit N
------------------- ---------
hereto no later than 11:00 A.M. (New York City time) on the
Business Day immediately prior to the proposed Borrowing Date;
provided that, if the Borrower requests that the Borrowing be
--------
funded with the proceeds of Eurodollar Rate Advances, such
notice shall be given not later than 11:00 A.M. (New York City
time) at least three (3) Business Days prior to the proposed
Borrowing Date. Each Notice of Borrowing shall be by
telephone or facsimile transmission (in the case of any such
notice by telephone, confirmed immediately in writing) and
shall specify therein the proposed (1) Borrowing Date of such
Borrowing, which shall be the Closing Date or a Subsequent
Contract Grant Date, (2) aggregate amount of such Borrowing
requested (which amount shall be equal to $100,000 or an
integral multiple thereof) and (3) proposed Interest Period
relating thereto and the proposed principal amount of each
Triple-A Loan to be allocated to each Interest Period. Each
Notice of Borrowing shall be irrevocable and binding on the
Borrower.
(b) Selection of Interest Periods. Promptly upon
-----------------------------
receiving each Notice of Borrowing, the Administrative Agent
shall, following its review of the Borrower's proposal, select
(in the exercise of its sole discretion) the Interest Periods
for the Triple-A Loan thereby requested. At least one
Business Day prior to the last day of each Interest Period for
any Triple-A Loan, the Borrower shall request new Interest
Periods for all Triple-A Loans the Interest Periods of which
are then ending and which are not to be prepaid as provided in
Section 2.07 below; provided that, in the case of any Interest
------------ --------
Period for a Triple-A Loan for which interest is requested to
be determined by reference to the Eurodollar Rate, such
request shall be given not later than 11:00 A.M. (New York
City time) at least three (3) Business Days prior to the last
day of the relevant Interest Period. The Administrative Agent
shall, on the date of any Borrowing hereunder and, so long as
such Triple-A Loan is outstanding, on the first day of each
successive Interest Period for such Triple-A Loan, notify the
Collateral Agent and the Borrower of the duration of the
relevant Interest Period and the interest rate which will be
applicable to the Triple-A Loans during such Interest Period
as described in Section 2.06 below. Any Interest Period that
------------
commences before the Termination Date and would otherwise end
on a date occurring after the Termination Date shall end on
the Termination Date and the duration of any Interest Period
that commences on or after the Termination Date shall be of
such duration as shall be selected by the Administrative
Agent. In addition, if a CP Disruption shall have occurred
and be continuing, Triple-A, or the Administrative Agent on
its behalf, may, upon notice to the Borrower, terminate any
Interest Period then in effect if Triple-A has funded the
Triple-A Loan allocated to such Interest Period by issuing
Transaction Commercial Paper Notes. All outstanding Triple-A
Loans shall be assigned an Interest Period at all times which
Interest Periods will be limited as set forth in the
definition thereof.
(c) Funding. Triple-A shall (in the case of the
-------
requested Borrowing on the Closing Date) and may (in the case
of a requested Borrowing on any Subsequent Contract Grant
Date), on the proposed Borrowing Date of each Borrowing,
subject to the applicable conditions set forth in Article IV,
----------
make available to the Borrower a wire transfer of such funds
to the Borrower in accordance with the Borrower's written wire
transfer instructions.
SECTION 2.04. Reduction of Facility Limit. The
---------------------------
Borrower shall have the right, at any time upon at least three
(3) Business Days' notice to Triple-A, to terminate in whole
or reduce in part the unused portion of the Facility Limit in
a minimum amount of $1,000,000 and increments of $1,000,000 in
excess thereof; provided, that in no event shall the Facility
--------
Limit be reduced to less than the Triple-A Loans then
outstanding. Any such termination shall be without premium or
penalty of any kind, except for any indemnification which may
be owed in connection with such termination pursuant to
Section 2.08.
------------
SECTION 2.05. Repayments; Manner of Payment and
---------------------------------
Prepayment. Each of the Triple-A Loans shall be payable in
----------
full on the Maturity Date. Each payment or prepayment of
principal of and interest on the Triple-A Note and each
payment of fees, premiums, indemnities and all other amounts
payable by the Borrower hereunder shall be made by the
Borrower in immediately available funds to Triple-A not later
than 11:30 A.M. (New York City time) on the date on which
payable. Payments received by Triple-A after such time shall
be deemed to have been received on the next Business Day. All
payments by the Borrower under this Credit Agreement and the
Triple-A Note shall be made without setoff, deduction or
counterclaim and the Borrower agrees to pay on demand any
present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Triple-A
Note or from the execution, delivery or registration of, or
otherwise with respect to, this Credit Agreement or the
Triple-A Note. Whenever any payment to be made hereunder or
under the Triple-A Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be
extended to the next applicable Business Day and interest
shall be payable at the applicable rate during such extension;
provided, that if such extension would cause payment of
--------
interest on or principal of any Eurodollar Loan to be made in
the next following month, such payment shall be made on the
next preceding Business Day.
SECTION 2.06. Interest on Triple-A Loans; Default
-----------------------------------
Interest.
--------
(a) The Borrower shall pay to Triple-A, as interest
on the Triple-A Loans outstanding, the following amounts on
the following dates:
(i) on any Interest Payment Date for Triple-A
Loans being funded or maintained through the
issuance of Transaction Commercial Paper Notes,
interest on such Triple-A Loans in an amount equal
to the imputed interest on such maturing Transaction
Commercial Paper Notes plus the CP Dealer Fee on any
such maturing Transaction Commercial Paper Notes;
(ii) on any Interest Payment Date for Triple-A
Loans funded or maintained through the making of
Base Rate Advances under the Liquidity Agreement,
accrued and unpaid interest on such Triple-A Loans
at a per annum rate equal to the Base Rate, computed
on the basis of the actual number of days elapsed
over a year of 360 days; and
(iii) on any Interest Payment Date for Triple-A
Loans funded or maintained through the making of
Eurodollar Rate Advances under the Liquidity Agreement,
accrued and unpaid interest on such Triple-A Loans at a
per annum rate equal to the Eurodollar Rate plus one-half
of one percent (.50%), computed on the basis of the
actual number of days elapsed over a year of 360 days.
(b) Following the occurrence and during the con-
tinuance of an Event of Default, and from and after the due
date of any Triple-A Loan until such Triple-A Loan is paid in
full, the Borrower shall pay interest to Triple-A, payable on
demand, on the outstanding principal amount of each Triple-A
Loan for each day until paid in full at a per annum rate equal
to two percent (2%) plus the otherwise applicable rate for
such Triple-A Loan for such day.
SECTION 2.07. Voluntary and Mandatory Prepayment of
-------------------------------------
Triple-A Loans. (a) The Borrower shall have the right on any
--------------
Business Day and from time to time to prepay any Triple-A
Loans, in whole or in part, upon at least three Business Days'
written notice to the Administrative Agent, which notice shall
specify the proposed prepayment date and the amount of such
prepayment, provided that (i) any partial prepayment shall be
--------
equal to an integral multiple of $1,000,000; (ii) in
connection with any prepayment of Triple-A Loans taking place
within one year after the Closing Date, having an aggregate
principal balance of greater than 25% of the aggregate
principal of balance of all Triple-A Loans then outstanding
(other than in the case of any such prepayment made on a
Clean-Up Release Date in accordance with the terms of Section
-------
7.11(d)), the Borrower shall be required to pay a premium to
-------
the Administrative Agent equal in amount to one percent (1.0%)
of the principal amount of the Triple-A Loans so prepaid, and
(iii) the Borrower shall, in connection with any such
prepayment, indemnify Triple-A and hold Triple-A harmless from
any funding loss pursuant to the terms of Section 2.08. If
------------
any such notice is given, the amount specified in such notice
shall be presumed correct absent manifest error and shall be
due and payable on the date specified therein. Each notice of
prepayment shall be irrevocable and binding on the Borrower.
(b) On each Settlement Date prior to the
Termination Date during which a Borrowing Base Shortfall is in
existence, the Borrower shall be obligated to prepay the
Triple-A Loans by an amount equal to the lesser of (x) the
aggregate amount of the funds remaining on deposit in the
Collection Account on such day (other than any funds retained
in the Collection Account in respect of Carrying Costs then
accrued and unpaid), after giving effect to the required
applications of such funds pursuant to clauses (i), (ii) and
----------- --
(iii) of Section 7.06(b), and (y) the Borrowing Base Shortfall
--- ---------------
then in effect.
(c) On each Business Day from and after the
Termination Date, the Borrower shall be obligated to repay the
Triple-A Loans by an amount equal to the lesser of (i) the
aggregate amount of funds remaining on deposit in the
Collection Account on such day (other than any funds retained
in the Collection Account in respect of Carrying Costs then
accrued and unpaid) after giving effect to the required
applications of such funds pursuant to clauses (i) through (v)
of Section 7.06(d), and (ii) the then outstanding principal
---------------
balance of the Triple-A Loans.
(d) In the event of any prepayment or repayment of a
Triple-A Loan or any portion thereof on any date other than
the last day of the Interest Period applicable thereto, the
Borrower shall indemnify Triple-A and hold Triple-A harmless
from any funding loss (in an amount equal to the amount of
interest Triple-A would have received but for such prepayment
through the last day of the relevant Interest Period less the
interest earned on investing such funds) and expense which
Triple-A may sustain or incur as consequence of such
prepayment in accordance with Section 2.08.
------------
SECTION 2.08. Compensation. The Borrower shall
------------
compensate Triple-A, upon its written request, for all losses,
expenses and liabilities, including, without limitation, any
indemnification payments owed by Triple-A pursuant to the
Liquidity Agreement, on account of any liquidation or
reemployment of deposits or other funds acquired by such party
to make, fund or maintain a Triple-A Loan hereunder, (i) if
for any reason the funding of any Triple-A Loan does not occur
on a date specified therefor in the Notice of Borrowing; (ii)
if for any reason any payment, prepayment or conversion of
principal of any Triple-A Loan occurs on a date which is not
the last day of the Interest Period for such Triple-A Loan or
(iii) as a consequence of any required prepayment of any
Triple-A Loan or required conversion of any Eurodollar Rate
Advance prior to the last day of the Interest Period for the
relevant Triple-A Loan. Any request for compensation under
this Section 2.08 shall be accompanied by a copy of a state
------------
ment from Triple-A or the Administrative Agent on its behalf
setting forth in reasonable detail the basis for requesting
compensation and the determination of the amount thereof in
such statement shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.09. Increased Costs, Capital Adequacy.
---------------------------------
(a) If, after the date hereof due to either (i) the
introduction of or any change in or to the interpretation of
any law or regulation by the governmental authority that
promulgated or administers compliance with such law or
regulation (other than laws or regulations with respect to
income taxes or any change by way of imposition or increase of
reserve requirements included in the Eurodollar Reserve
Percentage) or (ii) the compliance with any guideline or
request from any central bank or other fiscal, monetary or
governmental authority or similar agency (whether or not
having the force of law), and taking into account the
obligations of the Liquidity Banks under the Liquidity
Agreement and the obligations of CapMAC under the Surety Bond
and otherwise in connection with Triple-A's asset-supported
financing business, any reserve or deposit or similar
requirement shall be imposed, modified or deemed applicable
or, any basis of taxation shall be changed or any other
condition shall be imposed, and there shall be any increase in
the cost to Triple-A (either directly or indirectly through
any increase in the costs to the Liquidity Banks or CapMAC) of
making, funding, or maintaining Triple-A Loans or in the cost
to Triple-A of agreeing to make, fund, or maintain Triple-A
Loans (including the reduction of any sum received or amount
of principal or interest receivable under the Pledged
Contracts), then the Borrower shall from time to time, upon
demand by Triple-A by the submission of the certificate
described below, pay to Triple-A additional amounts sufficient
to compensate Triple-A for such increased cost. A certificate
setting forth in reasonable detail the amount of such
increased cost submitted to the Borrower by Triple-A or the
Administrative Agent on its behalf shall be conclusive and
binding for all purposes, absent manifest error.
(b) If any of Triple-A, CapMAC or any Liquidity
Bank determines that compliance with any law or regulation or
any guideline or request or any written interpretation from
any central bank or other fiscal, monetary or governmental
authority or similar agency (whether or not having the force
of law) which is introduced, implemented or received by
Triple-A, CapMAC or such Liquidity Bank after the date hereof,
affects or would affect capital adequacy or the amount of
capital required or expected to be maintained by Triple-A,
CapMAC or such Liquidity Bank or any corporation controlling
Triple-A, CapMAC or such Liquidity Bank and that the amount of
such capital is increased by or based upon the Triple-A Loans
or the existence of this Credit Agreement, the Surety Bonds,
or the Insurance Agreement or upon the Advances or such
Liquidity Bank's commitment to lend under the Liquidity
Agreement and other commitments of that type, or has or would
have the effect of reducing the rate of return on capital,
then, upon demand by Triple-A or the Administrative Agent on
its behalf by the submission of the certificate described
below, the Borrower shall pay to Triple-A, from time to time
as specified by Triple-A, additional amounts sufficient to
compensate Triple-A or such corporation in the light of such
circumstances, to the extent that Triple-A reasonably
determines such increase in capital to be allocable to the
Triple-A Loans or the existence of this Credit Agreement, the
Surety Bonds, or the Insurance Agreement or such Liquidity
Bank's commitment to lend under the Liquidity Agreement and
other commitments of that type, or to the extent that Triple-A
owes compensation to CapMAC or to a Liquidity Bank in respect
of or on account of such events. A certificate setting forth
in reasonable detail such amounts submitted to the Borrower by
Triple-A or the Administrative Agent on its behalf shall be
conclusive and binding for all purposes, absent manifest
error.
SECTION 2.10. Taxes. (a) All payments made by the
-----
Borrower under this Credit Agreement and the Triple-A Note
shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future taxes,
levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any governmental authority having
taxing authority, excluding net income taxes and franchise
taxes (imposed in lieu of income taxes) imposed on Triple-A or
CapMAC as a result of any present or former connection between
the jurisdiction of the government or taxing authority
imposing such tax or any political subdivision or taxing
authority thereof or therein and Triple-A or CapMAC (excluding
a connection arising solely from Triple-A having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Credit Agreement, the Triple-A Note
or any other Facility Document to which Triple-A or CapMAC is
a party) (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required to be
-----
withheld from any amounts payable to or under the Triple-A
Note, (i) the sum payable shall be increased as may be
necessary so that, after making all required deductions
(including deductions applicable to additional sums payable
under this Section 2.10), Triple-A receives an amount equal to
------------
the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, and
(iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other
excise or property taxes, charges, or similar levies that
arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to,
this Credit Agreement (hereinafter "Other Taxes").
-----------
(c) The Borrower will indemnify Triple-A and CapMAC
for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.10) paid
------------
by Triple-A and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto.
Whenever any Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to Triple-A, a
certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to
pay any Taxes when due to the appropriate taxing authority or
fails to remit to Triple-A the required receipts or other
required documentary evidence, the Borrower shall indemnify
each of Triple-A and CapMAC for any incremental Taxes,
interest or penalties that Triple-A and/or CapMAC is legally
required to pay as a result of any such failure. The
agreements in this subsection shall survive the termination of
this Credit Agreement and the payment of the Triple-A Note.
SECTION 2.11. Fees. In further consideration of
----
the Triple-A Loans to be made hereunder, the Borrower agrees
to pay to the Administrative Agent and Triple-A all fees
specified in the Fee Letter of even date herewith, which fees
will be due and payable at the times and in the manner set
forth in such Fee Letter.
ARTICLE III
CONDITIONS OF LENDING
---------------------
SECTION 3.01. Conditions Precedent to Initial
-------------------------------
Borrowing. The agreement of Triple-A to make a Triple-A Loan
---------
on the Closing Date hereunder is subject to satisfaction of
the following conditions precedent:
(a) Each of the Administrative Agent, the
Collateral Agent and Triple-A shall have received, on or
before the Closing Date, all of the documents, agreements and
instruments described on the List of Closing Documents
attached as Exhibit O hereto, each in form and substance
---------
satisfactory to the Administrative Agent, and in each case
where applicable (x) duly executed by each of the parties
thereto, (y) to the extent required in Exhibit O, duly filed
---------
with the appropriate filing officer or other governmental
authority of the listed jurisdiction, as evidenced by an
appropriate acknowledgement evidencing that such filing is of
record, and (z) dated and/or certified (as applicable) as of a
date reasonably acceptable to the Administrative Agent.
(b) All fees and expenses due and owing as of the
Closing Date under the Fee Letter shall have been paid;
(c) The Collateral Agent shall have received
confirmation from the Spread Account Bank, in form and
substance satisfactory to the Collateral Agent, that the
initial balance of the Spread Account required to be funded
pursuant to Section 7.07(b) (after giving effect to the
---------------
transactions which are contemplated to take place on the
Closing Date pursuant to the terms hereof and the other
Facility Documents) has been funded;
(d) The Collateral Agent shall have received
confirmation from the Collection Account Bank, in form and
substance satisfactory to the Collateral Agent, that the
deposit in the Collection Account of all funds received with
respect to the Pledged Contracts from and after the Cut-Off
Date to the Closing Date has been made;
(e) The Collateral Agent shall have received an
Officer's Certificate of each of FAC and FCI stating that each
Pledged Contract sold by it has been properly identified as an
asset of the Borrower in its Records, and of the Servicer
stating that each related Contract File is complete in all
material respects;
(f) Not later than 12:00 noon, New York City time,
on the day which is two Business Days prior to the Closing
Date, the Borrower or the Servicer shall have (i) transmitted
to the Collateral Agent data with respect to the Contracts to
be Granted to the Collateral Agent to enable it to perform its
duties hereunder and (ii) delivered or caused to be delivered
(A) the Contract Schedule to the Collateral Agent and (B) the
Contract Files and the original execution copies of the
Pledged Contracts to the Custodian; and
(g) Each of the Collateral Agent, the
Administrative Agent, Triple-A and the Surety shall have
received such other approvals, documents or opinions as it may
reasonably request.
SECTION 3.02. Conditions Precedent to Each Borrow
-----------------------------------
ing. The making of a Triple-A Loan on the Closing Date and on
---
any Subsequent Contract Grant Date shall be subject (i) to
Triple-A's receipt of (A) a Settlement Report dated as of the
applicable Cut-Off Date, (B) a notice from the Custodian in
substantially the form of Exhibit C to the Receivables
Purchase Agreement, confirming that the Custodian has received
the Contract Files required to be delivered to it pursuant to
Section 4.04(a), (C) a timely Notice of Borrowing,
---------------
appropriately filled-out by the Borrower, (D) a Borrowing Base
Certificate, appropriately filled-out by the Servicer as of
the Borrowing Date (after giving effect to such Borrowing and
to the application of the proceeds therefrom) and (E) such
other approvals or documents as the Administrative Agent may
reasonably request, and (ii) to the condition precedent that
on the Borrowing Date of such Borrowing, before and after
giving effect to such Borrowing and to the application of the
proceeds therefrom, the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing
and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by
the Borrower that on the Borrowing Date of such Borrowing,
before and after giving effect thereto and to the application
of the proceeds therefrom, such statements are true):
(i) the representations and warranties contained in
Article IV and all representations and warranties of the
----------
Seller in the Receivables Purchase Agreement are true and
accurate as of such Borrowing Date in all material
respects with the same force and effect as though such
representations and warranties had been made as of such
time;
(ii) no event has occurred and is continuing,
or would result from such Borrowing, which
constitutes an Event of Default or Unmatured Event
of Default, and there is no Termination Date
currently in effect;
(iii) there exists no Borrowing Base
Shortfall; and
(iv) (A) the proceeds of such Triple-A Loan shall
be used (1) to fund a Purchase under the Receivables
Purchase Agreement to occur simultaneously with such
Borrowing, or (2) to otherwise fund costs and expenses to
be paid under the terms of the Facility Documents in
connection with the transactions contemplated to take
place on the Closing Date, and (B) all conditions to such
Purchase under the Receivables Purchase Agreement on such
date have been satisfied.
SECTION 3.03. Conditions Precedent to Each
----------------------------
Subsequent Borrowing. The making of a Triple-A Loan on any
--------------------
Subsequent Contract Grant Date hereunder shall be subject to
(i) the prior mutual agreement of each of Triple-A and the
Borrower, in each case acting in the exercise of its
respective sole discretion, on the relevant terms and
conditions of such Borrowing; including, without limitation,
any necessary amendments to the definitions of "Borrowing
Base" or "Eligible Contracts" hereunder, in order to reflect
appropriately the nature of the Contracts and related
Collateral to be Granted in connection with such Borrowing,
and (ii) the prior written approval of CapMAC and the
Liquidity Agent, in each case acting in the exercise of its
respective sole discretion. Notwithstanding anything herein
or elsewhere to the contrary, Triple-A shall have no
commitment to make any Triple-A Loan hereunder (other than,
subject to the terms and conditions hereof, the initial
Borrowing hereunder).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
-----------------------------
SECTION 4.01. Representations and Warranties of the
-------------------------------------
Borrower. The Borrower represents and warrants to each of
--------
Triple-A, the Collateral Agent, the Administrative Agent and
the Surety that:
(a) Due Incorporation and Good Standing. The
-----------------------------------
Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware, and
has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are
presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under each of
the Facility Documents to which it is a party. The Borrower
is duly qualified to do business and is in good standing as a
foreign corporation, and has obtained all necessary licenses
and approvals in each jurisdiction in which failure to qualify
or to obtain such licenses and approvals would render any
Pledged Contract unenforceable by the Borrower or would have a
material adverse effect on (i) the value or collectibility of
any Pledged Contract or related Collateral, (ii) the
collectibility of the Triple-A Loans, (iii) the business,
properties, operations, prospects, profits or condition
(financial or otherwise) of the Borrower, Triple-A, the
Administrative Agent or the Collateral Agent, or (iv) the
ability of the Borrower to perform its obligations hereunder
and under the other Facility Documents to which it is a party.
(b) Due Authorization and No Conflict. The
---------------------------------
execution, delivery and performance by the Borrower of each of
the Facility Documents to which it is a party, and the
consummation of each of the transactions contemplated hereby
and thereby, including the acquisition of the Pledged
Contracts under the Receivables Purchase Agreement, and the
making of the Borrowings and the Grants contemplated
hereunder, have in all cases been duly authorized by the
Borrower by all necessary corporate action, do not contravene
(i) the Borrower's charter or by-laws, (ii) any law, rule or
regulation applicable to the Borrower, (iii) any contractual
restriction contained in any indenture, loan or credit
agreement, lease, mortgage, deed of trust, security agreement,
bond, note, or other agreement or instrument binding on or
affecting the Borrower or its property or (iv) any order,
writ, judgment, award, injunction or decree binding on or
affecting the Borrower or its property (except where such
contravention would not have a material adverse effect on (A)
the value or collectibility of any Pledged Contract or related
Collateral, (B) the collectibility of the Triple-A Loans, (C)
the business, properties, operations, prospects, profits or
condition (financial or otherwise) of the Borrower, Triple-A,
the Administrative Agent or the Collateral Agent, or (D) the
ability of the Borrower to perform its obligations hereunder
and under the other Facility Documents to which it is a
party), and do not result in or require the creation of any
Lien upon or with respect to any of its properties; and no
transaction contemplated hereby requires compliance with any
bulk sales act or similar law. Each of the other Facility
Documents to which the Borrower is a party have been duly
executed and delivered on behalf of the Borrower.
(c) Governmental and Other Consents. All
-------------------------------
approvals, authorizations, consents, orders or other actions
of, and all registration, qualification, designation,
declaration, notice to or filing with, any Person or of any
governmental body or official required in connection with the
execution and delivery of any of the Facility Documents to
which the Borrower is a party, the consummation of the
transactions contemplated hereby or thereby, the performance
of and the compliance with the terms hereof or thereof, have
been obtained, except where the failure so to do would not
have a material adverse effect on the value of the Collateral
or the interests of Triple-A or the Surety herein or therein,
and each such required approval, authorization, consent,
order, registration, qualification, designation, declaration,
notice or filing is listed on Exhibit P hereto (or in the case
---------
of any Borrowing on a Subsequent Contract Grant Date
hereunder, as set forth in any addendum to such Exhibit P
---------
hereto prepared by the Borrower and accepted by the
Administrative Agent).
(d) Enforceability of Facility Documents. Each of
------------------------------------
the Facility Documents to which the Borrower is a party have
been duly and validly executed and delivered by the Borrower
and constitute the legal, valid and binding obligation of the
Borrower, enforceable in accordance with their respective
terms, except as enforceability may be subject to or limited
by Debtor Relief Laws or by general principles of equity
(whether considered in a suit at law or in equity).
(e) No Litigation. There are no proceedings or
-------------
investigations pending or, to the best knowledge of the
Borrower, threatened against the Borrower before any court,
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of
this Credit Agreement or any of the other Facility Documents,
(ii) seeking to prevent the consummation of any of the
transactions contemplated by this Credit Agreement or any of
the other Facility Documents, (iii) seeking any determination
or ruling that would adversely affect the performance by the
Borrower of its obligations under this Credit Agreement or any
of the other Facility Documents, (iv) seeking any
determination or ruling that would adversely affect the
validity or enforceability of this Credit Agreement or any of
the other Facility Documents, or (v) seeking any determination
or ruling that would, if adversely determined, be reasonably
likely to materially adversely affect the (A) the value or
collectibility of any Pledged Contract or related Collateral,
(B) the collectibility of the Triple-A Loans, (C) the
business, properties, operations, prospects, profits or
condition (financial or otherwise) of the Borrower, Triple-A,
the Administrative Agent or the Collateral Agent, or (D) the
ability of the Borrower to perform its obligations hereunder
and under the other Facility Documents to which it is a party.
(f) Use of Proceeds. All proceeds of any Triple-A
---------------
Loan shall be used by the Borrower exclusively to fund a
Purchase from the Seller under the Receivables Purchase
Agreement, or to otherwise fund costs and expenses permitted
to be paid under the terms of the Facility Documents in
connection with the transactions contemplated to take place on
the Closing Date.
(g) Perfection of Security Interest in Collateral.
---------------------------------------------
Payment of the Obligations and the prompt observance and
performance by the Borrower of all of the terms and provisions
of this Credit Agreement are secured by the Collateral as more
fully set forth in Article VII hereof. Upon the making of the
-----------
initial Triple-A Loans, the Collateral Agent will have a
legal, valid, perfected and enforceable Lien upon and first
priority security interest in the Collateral, as security for
the repayment of the Obligations, which Lien upon and security
interest in the Collateral is free and clear of all Liens.
(h) Accuracy of Information. All certificates,
-----------------------
reports, financial statements and similar writings furnished
by or on behalf of the Borrower to Triple-A, the Collateral
Agent, or the Administrative Agent at any time pursuant to any
requirement of, or in response to any request of any such
party under, this Credit Agreement or any other Facility
Document or any transaction contemplated hereby or thereby,
have been, and all such certificates, reports, financial
statements and similar writings hereafter furnished by the
Borrower to such parties will be, true and accurate in every
respect material to the transactions contemplated hereby on
the date as of which any such certificate, report, financial
statement or similar writing was or will be delivered, and
shall not omit to state any material facts or any facts
necessary to make the statements contained therein not
materially misleading.
(i) Governmental Regulations. The Borrower is not
------------------------
(1) an "investment company" or a company controlled by an
"investment company" registered or required to be registered
under or the Investment Company Act of 1940, as amended, (2) a
"public utility company" or a "holding company," a "subsidiary
company" or an "affiliate" of any public utility company
within the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or
2(a)(11) of the Public Utility Holding Company Act of 1935, as
amended, or (3) otherwise subject to any other federal or
state statute or regulation limiting its ability to incur or
pay indebtedness.
(j) Margin Regulations. The Borrower is not
------------------
engaged, principally or as one of its important activities, in
the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the
quoted terms is defined or used in Regulation G, T, U or X).
No part of the proceeds of any of the Triple-A Loans has been
used for so purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with,
the provisions of Regulation G, T, U or X.
(k) Location of Chief Executive Office and Records.
----------------------------------------------
The principal place of business and chief executive office of
the Borrower, and the office where the Borrower maintains all
of its Records, is located at 2800 Cantrell Road, Little Rock,
Arkansas 72202, and the Borrower does not operate its business
or maintain the Records at any other location (provided that,
--------
at any time after the Closing Date, upon 30 days' prior
written notice to the Collateral Agent, the Borrower may
relocate its principal place of business and chief executive
office, and/or the office where the Borrower maintains all of
its Records, to such other locations within the United States
where all action required by Section 7.04 shall have been
------------
taken and completed).
(l) Lock-Box Accounts. Except in the case of any
-----------------
Lock-Box Account pursuant to which Collections subject to a
PAC are deposited, the Borrower has filed or has caused FAC or
FCI to file a standing delivery order with the United States
Postal Service authorizing each Lock-Box Bank to receive mail
delivered to the related Post Office Box. The account numbers
of all Lock-Box Accounts, together with the names, addresses,
ABA numbers and names of contact persons of all the Lock-Box
Banks maintaining such Lock-Box Accounts and the related Post
Office Boxes, are specified in Exhibit Q. From and after the
---------
Closing Date, none of FCI, the Seller or the Borrower shall
have any right, title and/or interest in or to any of the
Lock-Box Accounts or the Post-Office Boxes and will maintain
no lock-box accounts in its own name for the collection of
Payments. The Borrower has no other lock-box accounts for the
collection of Payments except for the Lock-Box Accounts.
(m) No Trade Names. The Borrower has no trade
--------------
names, fictitious names, assumed names or "doing business as"
names.
(n) Separate Identity. The Borrower is operated as
-----------------
an entity separate from each of FAC, FCI and their respective
other Affiliates and (i) has its own board of directors,
(ii) has at least one director who is reasonably acceptable to
Triple-A and who is not a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate,
associate, customer or supplier of any of FAC, FCI or any of
their respective Affiliates (other than the Borrower) or a
relative of any thereof, nor a trustee in bankruptcy for any
thereof, (iii) maintains its assets in a manner which
facilitates their identification and segregation from those of
its Affiliates, and has a separate telephone number from that
of each of FAC, FCI and any of their respective Affiliates,
(iv) has all office furniture, fixtures and equipment
necessary to operate its business and such furniture, fixtures
and equipment are either owned by the Borrower or leased
pursuant to written leases, (v) conducts all intercompany
transactions with each of FAC, FCI and their respective
Affiliates (other than the Borrower) on terms which the
Borrower reasonably believes to be on an arm's-length basis,
(vi) has not guaranteed any obligation of any of FCI, FAC or
any of their respective Affiliates, nor has it had any of its
obligations guaranteed by any such entities and has not held
itself out as responsible for debts of any such entity or for
the decisions or actions with respect to the business and
affairs of any such entity, (vii) has not permitted the
commingling or pooling of its funds or other assets with the
assets of any of FCI, FAC or any of their respective
Affiliates (other than in respect of items of payment which
are not material in the aggregate and which have been
mistakenly forwarded by an Obligor directly to any of FCI, FAC
or any of their respective Affiliates, or deposited into a
lock-box account maintained for the benefit of FNBB under its
various credit arrangements with FCI and/or FAC), (viii) has
separate deposit and other bank accounts to which none of FCI,
FAC or any of their respective Affiliates has any access and
does not at any time pool any of its funds with those of FCI,
FAC or any of their respective Affiliates, (ix) maintains
financial records which are separate from those of FCI, FAC or
any of their respective Affiliates, (x) compensates all
employees, consultants and agents, or reimburses each of FCI
or FAC, as the case may be, from the Borrower's own funds, for
services provided to the Borrower by such employees,
consultants and agents other than the services covered under
the terms of the Administrative Services, Lease and Operating
Agreement, (xi) has agreed with each of FCI and FAC pursuant
to the terms of the Administrative Services, Lease and
Operating Agreement to allocate among themselves shared cor-
porate operating services and expenses which are not reflected
in the Servicing Fee (including, without limitation, the
services of shared employees, consultants and agents, and
reasonable legal and auditing expenses) on the basis of actual
use or the value of services rendered, and otherwise on a
basis reasonably related to actual use or the value of
services rendered, (xii) pays for its own account any
incidental administrative costs and expenses not covered under
the terms of the Administrative Services, Lease and Operating
Agreement, (xiii) conducts all of its business (whether in
writing or orally) solely in its own name, (xiv) is not,
directly or indirectly, named as a direct or contingent
beneficiary or loss payee on any insurance policy covering the
property of any of FCI, FAC, or any of their respective
Affiliates and has entered into no agreement to be named as
such a beneficiary or payee, (xv) acknowledges that Triple-A,
the Administrative Agent, the Collateral Agent, the Surety and
the Liquidity Banks are entering into the transactions
contemplated by this Credit Agreement and the other Facility
Documents in reliance on the Borrower's identity as a separate
legal entity from each of FCI, FAC and each of their
respective Affiliates, and (xvi) practices and adheres to
corporate formalities such as complying with its By-laws and
corporate resolutions and the holding of regularly scheduled
board of directors meetings.
(o) Subsidiaries. The Borrower has no Subsidiaries
------------
and does not own or hold, directly or indirectly, any capital
stock or equity security of, or any equity interest in, any
Person.
(p) Facility Documents. The Receivables Purchase
-------------------
Agreement is the only agreement pursuant to which the Borrower
purchases Contracts, other Transferred Assets or any other
assets of a similar nature. The Borrower has furnished to
Triple-A true, correct and complete copies of each Facility
Document to which the Borrower is a party, each of which is in
full force and effect. Neither the Borrower nor any Affiliate
thereof is in default of any of its obligations thereunder in
any material respect. Upon each Purchase pursuant to the
Receivables Purchase Agreement, the Borrower shall be the
lawful owner of, and have good title to, each Pledged Contract
and all of the Collateral relating thereto, free and clear of
any Liens. All such Pledged Contracts and Collateral are
purchased without recourse to the Seller except as described
in the Receivables Purchase Agreement. The Purchases by the
Borrower under the Receivables Purchase Agreement constitute
valid and true sales and transfers for consideration (and not
merely a pledge of assets for security purposes), enforceable
against creditors of each of FCI and FAC and no Pledged
Contracts or related Collateral shall constitute property of
the Seller.
(q) Business. Since its incorporation, the
--------
Borrower has conducted no business other than the execution,
delivery and performance of the Facility Documents
contemplated hereby, the purchase of Eligible Contracts
thereunder, and such other activities as are incidental to the
foregoing. The Borrower has incurred no Debt except that
expressly incurred hereunder and under the other Facility
Documents.
(r) Ownership of the Borrower. One hundred percent
-------------------------
(100%) of the outstanding capital stock of the Borrower is
directly owned (both beneficially and of record) by FAC. Such
stock is validly issued, fully paid and nonassessable and
there are no options, warrants or other rights to acquire
capital stock from the Borrower.
(s) Taxes. The Borrower has filed or caused to be
-----
filed all Federal, state and local tax returns which are
required to be filed by it, and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on
any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good
faith by appropriate proceedings and with respect to which the
Borrower has set aside adequate reserves on its books in
accordance with GAAP and which proceedings have not given rise
to any Lien.
(t) Solvency. The Borrower, both prior to and
--------
after giving effect to the initial Purchase on the Closing
Date, and after giving effect to each subsequent Purchase, if
any (i) is not "insolvent" (as such term is defined in
101(32)(A) of the Bankruptcy Code); (ii) is able to pay its
debts as they become due; and (iii) does not have unreasonably
small capital for the business in which it is engaged or for
any business or transaction in which it is about to engage.
(u) Reporting and Accounting Treatment. For
----------------------------------
reporting and accounting purposes, and in its books of account
and records, the Borrower will treat the Purchase of each
Pledged Contract pursuant to the Receivables Purchase
Agreement as a purchase of, or absolute assignment of, the
Seller's full right, title and ownership interest in each such
Pledged Contract, and the Borrower has not in any other manner
accounted for or treated the transactions.
(v) Closing Balance. The Eligible Contract Pool
---------------
Principal Balance as of the Closing Date is not less than
$25,190,300.81.
The representations and warranties of the Borrower
set forth in this Section 4.01 shall be deemed to be remade,
------------
without further act by any Person, on and as of the Closing
Date and each Subsequent Contract Grant Date. The
representations and warranties set forth in this Section 4.01
------------
shall survive the Grant of the Pledged Contracts by the
Borrower to the Collateral Agent.
SECTION 4.02. Representations and Warranties
-----------------------------
Regarding Each Pledged Contract in the Contract Pool. The
----------------------------------------------------
Borrower represents and warrants to each of Triple-A, the
Collateral Agent the Administrative Agent and the Surety, as
to each Pledged Contract, that:
(a) Eligibility. Such Contract is an Eligible
-----------
Contract.
(b) Contract Schedule. The information set forth
-----------------
in the Contract Schedule is true and correct with respect to
such Contract.
(c) No Waivers. The terms of such Contract have
----------
not been waived, altered, modified, or extended in any
respect, without the prior written consent of the Collateral
Agent, other than (i) extensions which are Permitted
Deferrals,
(ii) entered into in accordance with Customary Practices and
Credit Standards and Collections Policies, which do not reduce
the amount or extend the maturity of required Payments, (iii)
reductions in the amount of required principal Payments under
such Contract which do not alter the aggregate amount of
Collections anticipated to be received in the Collection
Account in respect of such Contract (as a result of any
release of prepaid premiums for Credit Life Insurance), and
(iv) modifications in the applicability of a PAC (which
modification will, among other things, result in a change in
the relevant Contract Rate).
(d) Binding Obligation. Such Contract is the
------------------
legal, valid and binding obligation of the Obligor thereunder
and is enforceable against the Obligor in accordance with its
terms, except as such enforceability may be limited by Debtor
Relief Laws, or by general principles of equity (whether
considered in a suit at law or in equity).
(e) No Defenses. Such Contract is not subject to
-----------
any right of rescission, setoff, counterclaim or defense,
including the defense of usury, the operations of any of the
terms of such Contract or the exercise of any right thereunder
will not render such Contract unenforceable in whole or in a
manner materially affecting the value or collectibility of
such Contract, or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and
no such right of rescission, setoff, counterclaim or defense
has been asserted with respect thereto.
(f) Origination. Such Contract was originated by
-----------
FCI (or a subsidiary thereof) in the regular course of its
business and was purchased by FAC, and then the Borrower, in
the regular course of their respective businesses.
(g) Lawful Assignment. Such Contract was not
-----------------
originated in and is not subject to the laws of any
jurisdiction the laws of which would make the transfer of the
Contract under the Receivables Purchase Agreement or the Grant
of such Contract under this Credit Agreement unlawful.
(h) Compliance with Law. The requirements of any
-------------------
federal, state or local law, including, without limitation,
usury, truth in lending and equal credit opportunity laws,
applicable to such Contract have been complied with. The VOI
Regime related to such Contract is in compliance with any and
all applicable zoning and building laws and regulations and
any other laws and regulations relating to the use and
occupancy of such VOI Regime. None of the Borrower, FAC or
FCI has received notice of any material violation of any legal
requirements applicable to such VOI Regime. The VOI Regime
related to such Contract complies with all applicable state
statutes including, without limitation, condominium statutes,
HUD filings relating to interstate land sales (if applicable),
and the requirements of any governmental authority or local
authority having jurisdiction and constitutes a valid and
conforming condominium under the laws of the State where the
related Development is located, except where such
noncompliance would not have a material adverse effect on (i)
the value or collectibility of any Pledged Contract or related
Collateral, (ii) the collectibility of the Triple-A Loans,
(iii) the business, properties, operations, prospects, profits
or condition (financial or otherwise) of the Borrower, Triple-
A, the Administrative Agent or the Collateral Agent, or (iv)
the ability of the Borrower to perform its obligations
hereunder and under the other Facility Documents to which it
is a party.
(i) Contract in Force. Such Contract is in full
-----------------
force and effect and has not been satisfied in whole or in
part, or rescinded.
(j) No Subordination. Such Contract has not been
----------------
subordinated in whole or in part.
(k) Capacity of Parties. All parties to such
-------------------
Contract had capacity to execute the Contract.
(l) Good Title. The Borrower has good and
----------
marketable title to such Contract free and clear of any Lien
(other than the lien in favor of the Collateral Agent Granted
pursuant to this Credit Agreement). The Borrower has not
sold, assigned or pledged such Contract to any other Person.
As to the related VOI or Lot, either, (i) a generally accepted
form of title insurance policy, insuring the fee estate
ownership of the Lot or the real property subject to the VOI
Regime by the Persons owning the respective interests therein,
and their successors and assigns was effective at the time the
originator acquired the Lot or at the time of registration of
the VOI Regime, is valid and remains in full force and effect,
and was issued by a title insurer qualified to do business in
the applicable jurisdiction; or (ii) at the time the
originator acquired the Lot or at the time of registration of
the VOI Regime, such fee estate ownership had been verified by
an attorney's opinion of title, the form and substance of
which is of a type acceptable for purposes of registration of
sales of VOI or Lots, and which may be relied upon by Persons
subsequently owning the respective interests therein, and
their successors and assigns. The Borrower has not sold,
assigned or pledged its interest in the related VOI or Lot to
any Person other than the Collateral Agent.
(m) No Defaults. As of the relevant Cut-Off Date,
-----------
there is no default, breach, violation or event permitting
acceleration existing under the Contract and no event which,
with the giving of notice or the expiration of any grace or
cure period or both, would constitute such a default, breach,
violation or event permitting acceleration under such Contract
(except Permitted Deferrals). None of the Borrower, FAC or
FCI has waived any such default, breach, violation or event
permitting acceleration without obtaining the prior written
consent of the Collateral Agent.
(n) Equal Installments. Such Contract has a fixed
------------------
or floating rate of interest and provides for payments which
fully amortize the loan over its term. Interest accrues on
such Contract on an actuarial (i.e., pre-computed) basis.
(o) One Original. All original executed copies of
------------
such Contract are in the custody of the Custodian.
(p) Minimum Downpayment. Such Contract had a
-------------------
minimum Equity Percentage of 10% at origination (including in
such total any cash down payments and Payments made on any
other Contract which has been "traded in" in connection with
the origination of such Contract).
(q) Contract Form/Governing Law. Such Contract was
---------------------------
executed in substantially the form of one of the forms of
Contract attached hereto as Exhibit G, except for changes
---------
required by applicable law and certain other modifications
which do not, individually or in the aggregate, affect the
enforceability or collectibility of such Contract. In
addition, such Contract was originated in and is governed by
the laws of the State in which the related Development is
located, and each such State is a jurisdiction as to the law
of which the Borrower shall have on the Closing Date delivered
to the Agent an Opinion of Counsel regarding the
enforceability of the form or forms of Contract used in such
jurisdiction and such other matters as they shall reasonably
request, and such Contract is substantially in the form of one
of the forms of Contract attached as an exhibit to such
opinion.
(r) No Event of Default. No Event of Default or
-------------------
Unmatured Event of Default will occur as a result of the Grant
of such Contract by the Borrower to the Collateral Agent on
the applicable date of Grant.
(s) Receivables Purchase Agreement. Such Contract
------------------------------
was purchased by the Borrower pursuant to the Receivables
Purchase Agreement.
(t) Interest in Real Property. The VOI or Lot
-------------------------
underlying such Contract is an interest in real property
consisting of either (a) a fixed week or undivided interest in
fee simple in a lodging unit or group of lodging units at a
Development, (b) an undivided leasehold interest in any
lodging unit located at the Harbortown Marina Resort Hotel in
Ventura County, California or the Pagosa Mountain Meadows VOI
Regime at the Pagosa Development in Archuleta County,
Colorado, or (c) if a Lot, a fee simple interest in real
property; and in each case such VOI or Lot has been deeded to
the Nominee pursuant to the terms of one of the Title Clearing
Agreements, or has been deeded to the relevant Obligor in
accordance with the requirements of the applicable Contract or
applicable law.
(u) Environmental Compliance. Each VOI Regime
------------------------
related to a Pledged Contract is now, and at all times during
FCI's (or any Affiliate of FCI's) ownership thereof has been
free of contamination from any substance, material or waste
identified as toxic or hazardous according to any federal,
state or local law, rule, regulation or order governing,
imposing standards of conduct with respect to, or regulating
in any way the discharge, generation, removal, transportation,
storage or handling of toxic or hazardous substances,
materials or waste (hereinafter referred to as "Environmental
-------------
Laws"), including, without limitation, any PCB, radioactive
-----
substance, methane, asbestos, volatile hydrocarbons, petroleum
products or wastes, industrial solvents or any other material
or substance which now or hereafter may cause or constitute a
health, safety or other environmental hazard to any person or
property (any such substance together with any substance,
material or waste identified as toxic or hazardous under any
Environmental Law now in effect or hereinafter enacted shall
be referred to herein as "Contaminants"). Neither FCI nor any
------------
Affiliate of FCI has caused or suffered to occur any
discharge, spill, uncontrolled loss or seepage of any
Contaminant onto any property comprising or adjoining any of
the VOI Regimes, and neither FCI nor any Affiliate of FCI nor
any Obligor or occupant of all or part of any of the VOI
Regimes is now or has been involved in operations at any VOI
Regime which could lead to liability for FCI, the Borrower,
any other Affiliate of FCI or any other owner of any VOI
Regime or the imposition of a lien on such VOI Regime under
any Environmental Law.
Except as set forth on Schedule 4.02(u), all
----------------
property owned, managed or controlled by FCI (or any Affiliate
of FCI) and located within a Development is now, and has at
all times during FCI's (or any Affiliate of FCI's) ownership,
management or control thereof been free of contamination from
any Contaminant. Except as set forth on Schedule 4.02(u),
----------------
neither FCI nor any Affiliate of FCI has caused or suffered to
occur any discharge, spill, uncontrolled loss or seepage of
any Contaminant onto any property comprising or adjoining any
of the Developments, and neither FCI nor any Affiliate of FCI
nor any Obligor or occupant of all or part of any of any
Development is now or has been involved in operations at any
Development which could lead to liability for FCI, the
Borrower, any other Affiliate of FCI or any other owner of any
Development or the imposition of a lien on such Development
under any Environmental Law. None of the matters set forth on
Schedule 4.02(u) will have a material adverse effect on the
----------------
value of the Collateral or the interests of the Triple-A, the
Surety or the Collateral Agent therein or an adverse effect on
Triple-A, the Surety or the Collateral Agent.
(v) Tax Liens. All taxes (including, without
---------
limitation, mortgage and transfer taxes) applicable to such
Contract and the related VOI or Lot have been paid. There are
no delinquent tax liens in respect of the VOI or Lot
underlying such Contract.
(w) Credit Life Insurance. If such Contract also
---------------------
financed a policy of Credit Life Insurance: (i) the Collateral
Agent has been assigned a valid and perfected Security
interest in and to the rights of the beneficiary thereunder;
(ii) FCI had the power and authority to assign its interest as
the beneficiary of such policy, and it has so assigned its
interest to the Borrower pursuant to the Receivables Purchase
Agreement, (iii) the Borrower has the power and authority to
pledge its interest as the beneficiary of such policy, and it
has so pledged its interest to the Collateral Agent pursuant
to this Agreement; and (iv) the Collateral Agent has the sole
power and authority to cancel such policy in the event of
nonpayment of such Contract and the sole right to receive any
unearned premium in the event of cancellation of such policy.
(x) Contract Files. The related Contract File
--------------
contains at least one original of each of
(i) the Contract (other than (A) in the case of a
Contract which has been removed from the Contract File
for the performance of collection services in accordance
with Section 5.01(p), or (B) a Contract which has been
--------------
identified as a missing original contract under the
Custodian's Certificate Acknowledging Receipt of
Contracts (a form of which is attached as Exhibit C to
the Receivables Purchase Agreement) delivered to the
Collateral Agent on the Closing Date), and
(ii) in the case of a VOI or Lot which has been
deeded out to the relevant Obligor (A) a copy of the deed
for the related VOI or Lot, and (B) a purchase money
Mortgage.
(y) Lock-Box Accounts. The Obligor of such
-----------------
Contract either
(1) shall have been instructed, pursuant to the
Servicer's routine distribution of a periodic statement
to such Obligor next succeeding
(A) the Closing Date (or any Subsequent
Contract Grant Date, as applicable), or
(B) the day on which a PAC ceased to apply to
such Contract, in the case of a Pledged Contract
formerly subject to a PAC,
but in no event later than the then next succeeding due
date for Payment under the related Pledged Contract, to
remit Payments thereunder to a Post Office Box for credit
to a Lock-Box Account, or directly to a Lock-Box Account,
in each case maintained at a Lock-Box Bank pursuant to
the terms of a Lock-Box Agreement substantially in the
form of Exhibit I hereto, or
---------
(2) has entered into a PAC, pursuant to which a
deposit account of such Obligor is made subject to a pre-
authorized debit in respect of Payments as they become
due and payable, and the Borrower has, and has caused
each of the Servicer, a Lock-Box Bank and/or the
Collection Account Bank, to take all necessary and
appropriate action to ensure that each such pre-
authorized debit is credited directly to a Lock-Box
Account.
(z) Ground Leases. In the case of any Contract
-------------
relating to a VOI or Lot located in either of Harbortown
Marina Resort Hotel in Ventura County, California or the
Pagosa Mountain Meadows VOI Regime at the Pagosa Development
in Archuleta County, Colorado, (i) the groundlease to which
the relevant Development is subject has a fixed term which
terminates after the maturity of such Contract, and (ii) all
rent due and payable for the term of the relevant groundlease
has been fully paid through the date of this representation.
All of the representations and warranties of the
Borrower set forth in this Section 4.02 shall be deemed to be
------------
remade, without further act by any Person, on and as of the
applicable Cut-Off Date with respect to the Closing Date and
each Subsequent Contract Grant Date, if any, with respect to
each Contract Granted by the Borrower on and as of each such
date. In addition, each of the representations and warranties
of the Borrower set forth in the following subsections of this
Section 4.02 shall be deemed to be remade, without further act
------------
by any Person, on and as of each Business Day hereunder
occurring prior to the Collection Date: subsections (a) (but
only with respect to the eligibility criteria set forth in the
definition of "Eligible Contract" in the Definitions List at
clauses (a), (b), (c), (d), (h), (k), (l), (o), (q), (p), (v)
and (w) thereof), (c), (d), (e), (h), (i), (j), (l), (u), (v),
(w), (x), (y) and (z). All of the representations and
warranties set forth in this Section 4.02 shall survive the
------------
Grant of the respective Contracts by the Borrower to the
Collateral Agent.
Notwithstanding anything in the foregoing to the
contrary, a representation of the Borrower set forth in this
Section 4.02 shall be deemed not to have been breached with
------------
respect to a Pledged Contract Granted to the Collateral Agent
on the Closing Date to extent that the following statements
are true:
(i) the existence of the condition giving rise
to such breach of a representation set forth in this
Section 4.02 shall have been identified in any of
------------
Exhibits B [Summary by Age of Contract], E [Summary
of Geographical Distribution of Obligors], G
[Summary by Equity Percentage], K [Summary by Year
of Origination], L [Summary of Original Terms], and
M [Summary of Months to Maturity] to the E&Y Audit
Report; and
(ii) the extent to which all Pledged Contracts
in the Contract Pool, taken as a whole, were subject
to such condition was accurately calculated and
described in the E&Y Audit Report as of the E&Y
Audit Date.
SECTION 4.03. Representations and Warranties
------------------------------
Regarding the Contract Pool. The Borrower represents and
---------------------------
warrants to each of Triple-A, the Collateral Agent, the
Administrative Agent, and the Surety that:
(i) E&Y Audit Report. The information set forth in
----------------
the E&Y Audit Report was true and correct in all material
respects as of the E&Y Audit Date; and
(ii) Seasoning of Contract Pool. As of the E&Y
--------------------------
Audit Date, the aggregate Principal Balances of all Contracts
in the Contract Pool with respect to which at least 60 months
have elapsed from the date on which such Contract was entered
into, constituted greater than 95% of the Contract Pool
Principal Balance at such time;
(iii) Equity Percentage. As of the E&Y Audit Date,
-----------------
the aggregate Principal Balance of all Contracts in the
Contract Pool with respect to which the Equity Percentage of
such Contract was greater than or equal to 40%, constituted
greater than 95% of the Contract Pool Principal Balance at
such time; and
(iv) Fixed Week Percentage. As of the Cut-Off
---------------------
Date relating to the Closing Date, the aggregate Principal
Balance of all Contracts in the Contract Pool with respect to
which the underlying ownership interest consisted of a fixed
week VOI (as opposed to an undivided interest in a fee simple,
whether or not pursuant to the FairShare Plus Program) or Lot
constituted greater than 90% of the Contract Pool Principal
Balance at such time.
A breach of a representation and warranty set forth
in this Section 4.03 shall be deemed to be a breach of such
------------
representation and warranty with respect to each Pledged
Contract. The representations and warranties made in this
Section 4.03 shall survive the Grant of the respective
------------
Contracts by the Borrower to the Collateral Agent.
SECTION 4.04. Representations and Warranties
-----------------------------
Regarding the Contract Files. The Borrower represents and
----------------------------
warrants to each of Triple-A, the Collateral Agent, the
Administrative Agent and the Surety, as to each Pledged
Contract, that:
(a) Possession. On or immediately prior to the
----------
Closing Date and each Subsequent Contract Grant Date (if any),
the Custodian will have possession of each original Pledged
Contract and the related Contract File, and shall have
acknowledged such receipt, and its undertaking to act as
bailee for purposes of perfection of the Collateral Agent's
interests in such original Pledged Contract and the related
Contract File (provided, however, that the fact that each of
-------- -------
the Contracts identified in Exhibit B to the Custodian's
Certificate Acknowledging Receipt of Contracts (a form of
which is attached as Exhibit C to the Receivables Purchase
Agreement) is not in the possession of the Custodian in its
respective Contract File does not constitute a breach of this
representation).
(b) Marking Records. By the Closing Date, or each
---------------
Subsequent Contract Grant Date (if any), both the Borrower and
FAC shall have caused the portions of the computer files
relating to the Pledged Contracts Granted on such date to the
Collateral Agent to be clearly and unambiguously marked to
indicate that such Pledged Contracts constitute part of the
Collateral Granted by the Borrower in accordance with the
terms of this Credit Agreement. In addition, prior to each
such Grant, each such Pledged Contract shall have been clearly
and unambiguously stamped or marked as follows:
"This Contract is part of the Collateral
under a Credit Agreement dated as of
March 28, 1995, and a security interest
herein is held by Capital Markets
Assurance Corporation as Collateral Agent
thereunder."
The representations and warranties of the Borrower
set forth in this Section 4.04 shall be deemed to be remade,
------------
without further act by any Person, on and as of the Closing
Date and each Subsequent Contract Grant Date, if any, with
respect to each Contract Granted by the Borrower on and as of
each such date. The representations and warranties set forth
in this Section 4.04 shall survive the Grant of the respective
------------
Contracts by the Borrower to the Collateral Agent.
ARTICLE V
GENERAL COVENANTS
-----------------
SECTION 5.01. Affirmative Covenants of the
----------------------------
Borrower. From the Closing Date until the later of the
--------
Termination Date or the Collection Date, the Borrower shall,
unless the Collateral Agent shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply in all
--------------------------
material respects, and cause each of the Servicer and any
subservicer to comply in all material respects, with all
applicable laws, rules, regulations and orders with respect to
it, its business and properties, and all Contracts and
Facility Documents to which it is a party (including, without
limitation, the laws, rules and regulations of each state
governing the sale of time share contracts).
(b) Preservation of Corporate Existence. Preserve
-----------------------------------
and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation, and maintain all necessary licenses and
approvals, in each jurisdiction except where the failure to
preserve and maintain such existence, rights, franchises,
privileges, qualifications, licenses and approvals would not
materially adversely affect (i) the value or collectibility of
any Pledged Contract or related Collateral, (ii) the
collectibility of the Triple-A Loans, (iii) the business,
properties, operations, prospects, profits or condition
(financial or otherwise) of the Borrower, Triple-A, the
Administrative Agent or the Collateral Agent, or (iv) the
ability of the Borrower to perform its obligations hereunder
and under the other Facility Documents to which it is a party.
(c) Audits. At any time and from time to time
------
during regular business hours, permit the Collateral Agent, or
its agents or representatives, access
(i) to the offices and properties of the Borrower
(including, without limitation, any repository used by
the Borrower, or the Servicer on the Borrower's behalf,
to store the computer tapes or other computer records
constituting the Servicer's Daily Report), in order to
examine and make copies of and abstracts from all books,
correspondence and Records of the Borrower as appropriate
to verify the Borrower's compliance with this Credit
Agreement, the Receivables Purchase Agreement, any other
Facility Documents to which it is a party and any other
agreement contemplated hereby or thereby, and the
Collateral Agent and/or its agent and their
representatives may examine and audit the same, and make
photocopies and computer tape or other computer replicas
thereof (as appropriate), and Borrower agrees to render
to the Collateral Agent and/or its agent and
representatives, at Borrower's cost and expense, such
clerical and other assistance as may be reasonably
requested with regard thereto; and
(ii) to the officers or employees of the Borrower in
order to discuss matters relating to the Contracts or the
Borrower's performance hereunder with any of the officers
or employees of the Borrower having knowledge of such
matters.
The number and frequency of any such audits shall be limited
to such number and frequency as shall be reasonable in the
exercise of the Collateral Agent's reasonable commercial
judgment. Each such audit shall be at the sole expense of the
Borrower (subject to the Borrower's right under the
Receivables Purchase Agreement to recover such expenses from
the Seller). The Collateral Agent and its agents and
representatives shall also have the right to discuss the
Borrower's affairs with the officers and employees of the
Borrower and Borrower's independent accountants and to verify
under appropriate procedures the validity, amount, quality,
quantity, value and condition of, or any other matter relating
to, the Collateral.
(d) Keeping of Records and Books of Account.
---------------------------------------
Maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing the Pledged Contracts in the event of the
destruction or loss of the originals thereof) and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all
Pledged Contracts (including, without limitation, records
adequate to permit the daily identification of all Collections
with respect to, and adjustments of amounts payable under,
each Pledged Contract).
(e) Performance and Compliance with Receivables
-------------------------------------------
and Contracts. At its expense, timely and fully perform and
-------------
comply, and cause the Seller and/or FCI to comply, in all
material respects, with all provisions, covenants and other
promises required to be observed by it or the Seller under the
Pledged Contracts.
(f) [Intentionally left blank].
--------------------------
(g) Credit Standards and Collection Policies.
----------------------------------------
Comply in all material respects with the Credit Standards and
Collections Policies and Servicer's Customary Practices in
regard to each Pledged Contract and the related Collateral.
(h) Collections. (1) Instruct all Obligors to
-----------
either
(A) send all Collections directly to a
Post Office Box or Lock-Box Account, or
(B) in the alternative, make Payments by
way of pre-authorized debits from a deposit account
of such Obligor pursuant to a PAC, which Payments
shall be electronically transferred directly to a
Lock-Box Account immediately upon each such debit
(provided that, for the avoidance of doubt, each Obligor
--------
may at any time cease to deposit its Collections directly
to a Post Office Box or a Lock-Box Account, or pursuant
to a PAC, so long as such Borrower promptly instructs
such Obligor to commence one of the two alternative
methods of funds transfer provided for in either of
subclauses (A) or (B) of this clause (1)).
-------------- - ----------
(2) In the case of funds transfers pursuant to
a PAC, take, or cause each of the Servicer, a Lock-Box
Bank and/or the Collection Account Bank to take, all
necessary and appropriate action to ensure that each such
pre-authorized debit is credited directly to a Lock-Box
Account.
(3) If the Borrower shall receive any
Collections, the Borrower shall hold such Collections in
trust for the benefit of the Collateral Agent and deposit
such Collections into a Lock-Box Account or the
Collection Account within one Business Day following
Borrower's receipt thereof.
(4) If either of FCI or FAC receives any
Collections, the Borrower shall cause FCI or FAC, as the
case may be, to hold such Collections in trust for the
benefit of the Collateral Agent and deposit such
Collections into a Lock-Box Account or the Collection
Account within one Business Day following such Person's
receipt thereof.
(i) Compliance with ERISA. Comply in all material
---------------------
respects with the provisions of ERISA, the IRC, and all other
applicable laws, and the regulations and interpretations
thereunder.
(j) Perfected Security Interest. Take such action
---------------------------
with respect to each Pledged Contract as is necessary to
ensure that the Borrower maintains, either a first priority
perfected security interest in, or a legal and valid ownership
interest in, any Collateral relating thereto, in each case
free and clear of any Liens.
(k) [Intentionally left blank].
--------------------------
(l) Legal Opinion. On or before March 31 in each
-------------
calendar year commencing with 1996, the Borrower shall furnish
to the Collateral Agent an Opinion of Counsel stating that, in
the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of
this Credit Agreement and any other requisite documents, and
with respect to the execution and filing of any financing
statements and continuation statements as is necessary to
maintain the Lien created by this Credit Agreement and
reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to
maintain such Lien. Such Opinion of Counsel shall also
describe the recording, filing, rerecording and refiling of
this Credit Agreement and any other requisite documents and
the execution and filing of any financing statements and
continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security
interest of this Credit Agreement until March 31 in the
following calendar year.
(m) Instruments. The Borrower shall not remove any
-----------
portion of the Collateral that consists of money or is
evidenced by an instrument, certificate or other writing
(including any Contract) from the jurisdiction in which it was
held at the date the most recent Opinion of Counsel was
delivered pursuant to this Section 5.01(m) (or from the
---------------
jurisdiction in which it was held as described in the Opinion
of Counsel delivered at the Closing Date if no Opinion of
Counsel has yet been delivered pursuant to this Section
-------
5.01(m)) unless the Collateral Agent shall have first received
-------
an Opinion of Counsel to the effect that the lien and security
interest created by this Credit Agreement with respect to such
property will continue to be maintained after giving effect to
such action or actions; provided, however, that each of the
-------- -------
Collateral Agent and the Servicer may remove Pledged Contracts
from such jurisdiction to the extent necessary to satisfy any
requirement of law or court order, in all cases in accordance
with the provisions of the Custodial Agreement and Section
-------
5.01(p).
------
(n) No Release. The Borrower shall not take any
----------
action and shall use its best efforts not to permit any action
to be taken by others that would release any Person from any
of such Person's covenants or obligations under any document,
instrument or agreement included in the Collateral, or which
would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or
effectiveness of, any such document, instrument or agreement,
except as expressly provided in this Credit Agreement or such
other instrument or document.
(o) Insurance and Condemnation.
--------------------------
(i) The Borrower shall, and shall cause FCI
(1) to use its best efforts, in the case of Developments
where FCI or any Subsidiary of FCI maintains primary or
substantial responsibility for management, administration
or other services of a similar nature, and (2) to do or
cause to be done all things which it may accomplish with
a reasonable amount of cost or effort, in the case of
Developments where FCI or any Subsidiary of FCI does not
maintain primary or substantial responsibility for
management, administration or other service of a similar
nature, to cause the property owners' association or
similar time-share owner body ("POA") for each
Development, to (A) maintain one or more policies of
general casualty and liability insurance with financially
sound and reputable insurers, providing coverage in scope
and amount which (x) satisfies the requirements of the
Declarations (or any similar charter document) governing
the POA for the maintenance of such insurance policies,
and (y) is at least consistent with the scope and amount
of such insurance coverage obtained by prudent POAs
and/or management of other similar developments in the
same jurisdiction; and (B) apply the proceeds of any such
insurance policies in the manner specified in the
relevant Declarations (or any similar charter document)
governing the POA and/or any similar charter documents of
such POA (which efforts shall include, in any case,
voting as a member of the POA or as a proxy or attorney-
in-fact for the Nominee). For the avoidance of doubt,
the parties hereto acknowledge that the ultimate
discretion and control relating to the maintenance of any
such insurance policies is vested in the POAs in
accordance with the various Declarations relating to each
VOI Regime.
(ii) The Borrower shall remit, and shall cause
each of FAC and FCI to remit, to the Collection Account,
the portion of any proceeds received pursuant to a
condemnation of property in any Development relating to
any of the VOIs or Lots.
(iii) The Borrower shall, and shall cause FCI,
to maintain each of (A) the Master Group Credit Life
Policy originally issued by American United Life
Insurance Company of Indiana to FCI, as beneficiary, and
(B) the Master Group Credit Life Policy originally issued
by American Bankers Life Assurance Company of Florida to
FCI, as beneficiary, in each case in full force and
effect, having a scope and amounts of coverage (on a per
Obligor basis) at least equal to the scope and amounts of
coverage in effect on and as of the date hereof.
(p) Custodian.
---------
(i) On or before the Closing Date, and
thereafter promptly upon the generation of documents,
instruments and agreements evidencing or otherwise
relating to the Pledged Contracts or related Collateral
received by any of the Borrower, FAC or FCI, the Borrower
shall deliver or cause to be delivered directly to the
Custodian for the benefit of the Collateral Agent
pursuant to the Custodial Agreement all such documents,
instruments and agreements of the Borrower (which shall
include all Pledged Contracts, installment promissory
notes and all ancillary and collateral documentation
executed in connection therewith). The Custodian shall
hold, maintain and keep custody of all such Pledged
Contracts for the benefit of the Collateral Agent as set
forth in the Custodial Agreement.
(ii) The Custodian shall at all times maintain
control of the documents, instruments and agreements
described in clause (i) above (the "Primary Custodial
-----------------
Documents") for the benefit of the Collateral Agent on
---------
behalf of Triple-A and the Surety Provider pursuant to
the Custodial Agreement. Each of FAC, FCI and the
Borrower may access the Pledged Contracts at the
Custodian's storage facility at the Servicer's
headquarters (as described in the Custodial Agreement)
only for the purposes and upon the terms and conditions
set forth herein and in the Custodial Agreement. Each of
the Borrower and the Servicer may only remove Primary
Custodial Documents for collection services from such
facility so long as the Primary Custodial Documents for
no more than 100 Pledged Contracts remain outstanding
from the facility at any one time, all as set forth and
pursuant to the "Bailment Agreement" (as defined in, and
attached as Exhibit "B" to, the Custodial Agreement).
(iii) The Borrower shall at all times comply, and
shall cause each of FCI and FAC to comply, with the terms
of, and their respective obligations under, the Custodial
Agreement, and shall not enter into any modification,
amendment or supplement of or to, and shall not
terminate, any of the Custodial Agreements, without the
Collateral Agent's prior written consent.
(q) Separate Identity. Take all actions required
-----------------
to maintain the Borrower's status as a separate legal entity.
Without limiting the foregoing, the Borrower shall:
(i) conduct all of its business, and make all
communications to third parties (including all invoices
(if any), letters, checks and other instruments) solely
in its own name (and not as a division of any other
Person), and require that its employees, if any, when
conducting its business identify themselves as such and
not as employees of any other Affiliate of the Borrower
(including, without limitation, by means of providing
appropriate employees with business or identification
cards identifying such employees as the Borrower's
employees);
(ii) compensate all employees, consultants and
agents directly or indirectly through reimbursement of
the Seller, from the Borrower's bank accounts, for
services provided to the Borrower by such employees,
consultants and agents and, to the extent any employee,
consultant or agent of the Borrower is also an employee,
consultant or agent of any Affiliate of the Borrower,
allocate the compensation of such employee, consultant or
agent between the Borrower and such Affiliate on a basis
which reflects the respective services rendered to the
Borrower and such Affiliate (provided that any fees and
--------
expenses payable to the Custodian under the Custodial
Agreement shall be the responsibility of the Servicer to
be paid out of its Servicing Fee) other than with respect
to the services covered under the terms of the
Administrative Services, Lease and Operating Agreement;
(iii) (A) pay its own incidental administrative costs
and expenses not covered under the terms of the
Administrative Services, Lease and Operating Agreement,
from its own funds, (B) allocate all other shared
overhead expenses (including, without limitation,
telephone and other utility charges, the services of
shared employees, consultants and agents, and reasonable
legal and auditing expenses) which are not reflected in
the Servicing Fee, and other items of cost and expense
shared between the Borrower and any Affiliate, pursuant
to the terms of the Administrative Services, Lease and
Operating Agreement, on the basis of actual use to the
extent practicable and, to the extent such allocation is
not practicable, on a basis reasonably related to actual
use or the value of services rendered, and (C) allocate
taxes on the basis set forth in the Tax Sharing
Agreement;
(iv) at all times have at least one "Independent
Director", as defined in and as required under the
Borrower's Certificate of Incorporation (who shall at no
time be a shareholder, officer, employee, or Affiliate of
the Borrower or any shareholder or Affiliate of the
Borrower) and have at least one officer responsible for
managing its day-to-day business and manage such business
by or under the direction of its board of directors;
(v) maintain its books and records separate from
those of any Affiliate;
(vi) prepare its financial statements separately
from those of its Affiliates and ensure that any
consolidated financial statements of each of FAC and FCI
have notes to the effect that the Borrower is a separate
corporate entity whose creditors have a claim on its
assets prior to those assets becoming available to its
equity holders and therefore to any creditors of FAC or
FCI, as the case may be;
(vii) not commingle its funds or other assets with
those of any of its Affiliates (other than in respect of
items of payment which are not material in the aggregate
and which have been mistakenly forwarded by an Obligor
directly to any of FCI, FAC or any of their respective
Affiliates), and not to hold its assets in any manner
that would create an appearance that such assets belong
to any such Affiliate, not maintain bank accounts or
other depository accounts to which any such Affiliate is
an account party, into which any such Affiliate makes
deposits or from which any such Affiliate has the power
to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity;
(viii) not permit any of its Affiliates to pay the
Borrower's operating expenses (except pursuant to
allocation arrangements that comply with the requirements
of subsection (ii) or (iii) of this Section 5.01(q) or
---------- ---- ----- ---------------
pursuant to the terms of the Receivables Purchase
Agreement);
(ix) not guarantee any obligation of any of its
Affiliates nor have any of its obligations guaranteed by
any such Affiliate, (either directly or by seeking credit
based on the assets of such Affiliate) or otherwise hold
itself out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery and a
telephone number separate from that of any Affiliate and
which telephone number will be answered in its own name,
and have all its officers and employees conduct all of
its business solely in its own name;
(xi) hold regular meetings of its board of directors
in accordance with the provisions of its Certificate of
Incorporation and otherwise take such actions as are
necessary on its part to ensure that all corporate
procedures required by its Certificate of Incorporation
and by-laws are duly and validly taken;
(xii) maintain a separate office from the offices of
any of its Affiliates and identify such office by a sign
in its own name;
(xiii) advance funds or other assets to, or commit to
advance funds or other assets to (other than by way of
payments in respect of the Purchase on the Closing Date
under the Receivables Purchase Agreement), or accept
funds from (other than by way of contributions to
capital) FAC or any of its Affiliates for any purpose or
transaction (other than in compliance with the provisions
of Section 5.02(k) with respect to transactions with
---------------
Affiliates), or permit FAC or any of its Affiliates to be
involved in the management of the Borrower;
(xiv) respond to any inquiries with respect to
ownership of a Pledged Contract by stating that it is the
owner of such Pledged Contract, and that such Pledged
Contract is Granted to the Collateral Agent for the
benefit of itself, the Administrative Agent, Triple-A and
the Surety;
(xv) on or before March 31 of each year, beginning in
1996, the Borrower shall deliver to the Collateral Agent
an Officer's Certificate stating that Borrower has,
during the preceding year, observed all of the requisite
corporate formalities and conducted its business and
operations in such a manner as required for the Borrower
to maintain its separate corporate existence from any
other entity; and
(xvi) take such other actions as are necessary on its
part to ensure that the facts and assumptions set forth
in the non-consolidation opinion described in Section
F.1.b. of the List of Closing Documents attached at
Exhibit O remain true and correct at all times.
---------
(r) Computer Files. Mark or cause to be marked
--------------
each Pledged Contract in its computer files as described in
Section 4.04(b) hereof.
---------------
(s) Taxes. File or cause to be filed, and cause
-----
each of its Affiliates with whom it shares consolidated tax
liability to file, all federal, state and local tax returns
which are required to be filed by it, except where the failure
to file such returns could not reasonably be expected to have
a material adverse effect on the value or collectibility of
the Pledged Contracts or the ability of the Borrower to
perform its obligations hereunder or under any other Facility
Document to which it is a party or which could otherwise be
reasonably expected to expose the Borrower to a material
liability. The Borrower shall pay or cause to be paid all
taxes shown to be due and payable on such returns or on any
assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good
faith by appropriate proceedings and with respect to which the
Borrower or the applicable Affiliate shall have set aside
adequate reserves on its books in accordance with GAAP, and
which proceedings could not reasonably be expected to have a
material adverse effect on the value or collectibility of the
Pledged Contracts or the ability of the Borrower to perform
its obligations hereunder or under any other Facility Document
to which it is a party or which could otherwise be reasonably
expected to expose the Borrower to a material liability.
(t) Facility Documents. Comply in all material
------------------
respects with the terms of, employ the procedures outlined in
and enforce the obligations of the Seller under the
Receivables Purchase Agreement, and all of the other Facility
Documents to which it is a party, and take all such action to
such end as may be from time to time reasonably requested by
the Collateral Agent, maintain all such Facility Documents in
full force and effect and make to the Seller or FCI such
reasonable demands and requests for information and reports or
for action as the Borrower is entitled to make thereunder and
as may be from time to time reasonably requested by the
Collateral Agent.
(u) Contract Schedule. Promptly amend the Contract
-----------------
Schedule to reflect terms or discrepancies that become known
after the Closing Date.
(v) Segregation of Collections. Prevent the
--------------------------
deposit into any of the Lock-Box Accounts, the Collection
Account or the Spread Account of any funds other than
Collections in respect of the Pledged Contracts (except, in
the case of the Spread Account, for the initial deposit
therein) (provided that this covenant shall not have been
--------
breached to the extent that items of payment, which are not
material in the aggregate, have been mistakenly forwarded by
an Obligor directly to any of FCI, FAC, or any of their
respective Affiliates, or deposited into a lockbox account
maintained for the benefit of FNBB under its credit
arrangements with FCI and FAC) and, to the extent that any
such funds are nevertheless deposited into any of such Lock-
Box Accounts, the Collection Account or the Spread Account,
promptly identify any such funds to the Servicer for
segregation and remittance to the owner thereof.
SECTION 5.02. Negative Covenants of the Borrower.
----------------------------------
From the Closing Date until the later of the Termination Date
or the Collection Date, the Borrower shall not, without the
prior written consent of the Collateral Agent:
(a) Sales, Liens, Etc. Against Receivables and
------------------------------------------
Related Security. Except for the releases contemplated under
----------------
Section 7.11, sell, assign (by operation of law or otherwise)
------------
or otherwise dispose of, or create or suffer to exist, any
Lien upon or with respect to, any Pledged Contract or any
other Collateral, or any interests in either thereof, or upon
or with respect to any Post Office Box, the Collection
Account, the Spread Account or any Lock-Box Account, or assign
any right to receive income in respect thereof. The Borrower
shall immediately notify the Collateral Agent of the existence
of any Lien on any Pledged Contract or any other Collateral,
and the Borrower shall defend the right, title and interest of
each of the Borrower and the Collateral Agent in, to and under
the Pledged Contracts and all other Collateral, against all
claims of third parties.
(b) Extension or Amendment of Contract Terms.
----------------------------------------
Extend, amend, waive or otherwise modify the terms of any
Pledged Contract, or permit the rescission or cancellation of
any Pledged Contract, whether for any reason relating to a
negative change in the related Obligor's creditworthiness or
inability to make any payment under the Pledged Contract or
otherwise; provided, however, that the following modifications
-------- -------
may be made to a Pledged Contract from time to time: (i)
extensions which are Permitted Deferrals, (ii) amendments
entered into in accordance with Customary Practices and Credit
Standards and Collections Policies, which do not reduce the
amount or extend the maturity of required Payments, (iii)
reductions in the amount of required principal Payments under
such Contract which do not alter the aggregate amount of
Collections anticipated to be received in the Collection
Account in respect of such Contract (as a result of any
release of prepaid premiums for Credit Life Insurance), and
(iv) modifications in the applicability of a PAC (which will,
among other things, result in a change in the relevant
Contract Rate).
(c) Change in Business or Credit and Collection
-------------------------------------------
Policy. Make any change in the character of its business or
------
in the Credit Standards and Collection Policies, or deviate
from the exercise of Customary Practices, which change or
deviation would, in either case, materially impair the value
or collectibility of any Pledged Contract.
(d) Change in Payment Instructions to Obligors.
------------------------------------------
Add or terminate any bank as a Lock-Box Bank from those listed
in Exhibit Q or make any change in its instructions to
---------
Obligors regarding payments to be made to any Lock-Box Bank,
unless the Collateral Agent shall have received (i) 30 days'
prior notice of such addition, termination or change and
(ii) prior to the effective date of such addition, termination
or change, (x) executed copies of Lock-Box Agreements executed
by each new Lock-Box Bank, the Borrower, and the Collateral
Agent (and, at the option of the Collateral Agent, the
Servicer) and (y) copies of all agreements and documents
signed by either the Borrower or the respective Lock-Box Bank
with respect to any new Lock-Box Account.
(e) Stock, Merger, Consolidation, Etc. Sell any
----------------------------------
shares of any class of its capital stock to any Person (other
than FAC) or consolidate with or merge into or with any other
corporation, or purchase or otherwise acquire all or
substantially all of the assets or capital stock, or other
ownership interest of, any Person or sell, transfer, lease or
otherwise dispose of all or substantially all of its assets to
any Person, except for the conveyances of a security interest
in favor of the Collateral Agent as expressly permitted under
the terms of this Credit Agreement.
(f) Change in Corporate Name, etc. Make any change
-----------------------------
to its corporate name, or use any trade names, fictitious
names, assumed names or "doing business as" names.
(g) ERISA Matters. (i) Engage or permit any ERISA
-------------
Affiliate to engage in any prohibited transaction for which an
exemption is not available or has not previously been obtained
from the DOL; (ii) permit to exist any accumulated funding
deficiency, as defined in Section 302(a) of ERISA and Section
412(a) of the IRC, or funding deficiency with respect to any
Benefit Plan other than a Multiemployer Plan; (iii) fail to
make any payments to any Multiemployer Plan that the Borrower
or any ERISA Affiliate may be required to make under the
agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to
result in any liability; or (v) permit to exist any occurrence
of any reportable event described in Title IV of ERISA which
represents a material risk of a liability of the Borrower or
any ERISA Affiliate under ERISA or the IRC; provided, however,
the Borrower's ERISA Affiliates may take or allow such
prohibited transactions, accumulated funding deficiencies,
payments, terminations and reportable events described in
clauses (i) through (iv) above so long as such events
occurring within any fiscal year of the Borrower, in the
aggregate, involve a payment of money by or an incurrence of
liability of any such ERISA Affiliate (collectively, "ERISA
-----
Liabilities") in an amount which does not exceed $500,000.
-----------
(h) Terminate or Reject Contracts. Without
-----------------------------
limiting anything in Section 5.02(b), terminate or reject any
---------------
Pledged Contract prior to the end of the term of such
Contract, whether such rejection or early termination is made
pursuant to an equitable cause, statute, regulation, judicial
proceeding or other applicable law (including, without
limitation, Section 365 of the Bankruptcy Code), unless prior
to such termination or rejection, such Pledged Contract and
any related Collateral have been released from the Lien of
this Credit Agreement pursuant to Section 7.11 in
------------
consideration of the retention in the Collection Account of an
appropriate Release Price therefor.
(i) Debt. Create, incur, assume or suffer to exist
----
any Debt except for Debt to Triple-A, the Administrative Agent
or the Collateral Agent expressly contemplated hereunder, (ii)
Debt to the Surety under the Insurance Agreement, and (iii)
Debt incurred in accordance with the terms of the Receivables
Purchase Agreement in connection with the funding of a
Purchase thereunder, which is evidenced by the Subordinated
Note (as defined therein, and subject to the subordination
provisions thereof).
(j) Guarantees. Guarantee, endorse or otherwise be
----------
or become contingently liable (including by agreement to
maintain balance sheet tests) in connection with the
obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course
of business and reimbursement or indemnification obligations
in favor of Triple-A, the Collateral Agent, or any Liquidity
Bank as provided for under this Credit Agreement.
(k) Limitation on Transactions with Affiliates.
-------------------------------------------
Enter into, or be a party to any transaction with any
Affiliate, except for:
(i) the transactions contemplated hereby and
by the Receivables Purchase Agreement;
(ii) transactions related to the allocation of
shared overhead expenses or taxes as described in
clause (iii) of Section 5.01(q); and
---------------
(iii) to the extent not otherwise prohibited
under this Credit Agreement, other transactions in
the nature of employment contracts and directors'
fees, upon fair and reasonable terms materially no
less favorable to the Borrower than would be
obtained in a comparable arm's-length transaction
with a Person not an Affiliate.
(l) Facility Documents. Except as otherwise
------------------
permitted under Section 13.01, without the prior consent of
-------------
the Collateral Agent (a) terminate, amend or otherwise modify
any Facility Document to which it is a party, or grant any
waiver or consent thereunder, (b) exercise any discretionary
rights granted to the Borrower under the Receivables Purchase
Agreement pursuant to provisions thereof providing for certain
actions to be taken "with the consent of the Company",
"acceptable to the Company" as "specified by the Company", "in
the reasonable judgment of the Company" or similar provisions
(it being understood that inaction by the Borrower shall not
be considered to be an exercise of such discretionary rights),
or (c) terminate, amend or otherwise modify the FairShare
Vacation Plan Use Management Trust Agreement dated as of June
26, 1991 (as amended from time to time, the "Trust
Agreement"); provided, however, (A) the Title Clearing
-------- -------
Agreements may be amended for the purposes of (1) making
additional properties subject thereto, (2) making an Affiliate
of FCI a party thereto having the same rights and obligations
thereunder as FCI or (3) identifying a separate pool of
Contracts (which shall not include the Pledged Contracts) to
be sold or pledged to secure debt under a pooling or pledge
arrangement similar to that evidenced by this Credit
Agreement, and (B) the Trust Agreement may be amended from
time to time (1) to substitute or add additional parties
thereto, (2) to comply with state and federal laws or
regulations, or (3) for any other purpose, provided that with
respect to this clause (3), the Borrower furnishes to the
Collateral Agent an Opinion of Counsel in form and substance
acceptable to the Collateral Agent to the effect that such
amendment or modification will not adversely affect in any
material respect the respective interests of Triple-A, the
Collateral Agent, the Administrative Agent or the Surety.
(m) Charter and By-Laws. Amend or otherwise modify
-------------------
its Certificate of Incorporation or By-laws in any manner
which requires the consent of the "Independent Director" (as
defined in the Borrower's Certificate of Incorporation).
(n) Lines of Business. Conduct any business other
-----------------
than that described in Section 4.01(q), or enter into any
---------------
transaction with any Person which is not contemplated by or
incidental to the performance of its obligations under the
Facility Documents to which it is a party.
(o) Accounting Treatment. Prepare any financial
--------------------
statements or other statements (including any tax filings
which are not consolidated with those of the FCI or FAC) which
shall account for the transactions contemplated by the
Receivables Purchase Agreement in any manner other than as the
sale of, or a capital contribution of, the Pledged Contracts
by the Seller to the Borrower.
(p) Limitation on Investments. Make or suffer to
-------------------------
exist any loans or advances to, or extend any credit to, or
make any investments (by way of transfer of property,
contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or
assets, or otherwise) in, any Affiliate or any other Person
except for (i) Permitted Investments, (ii) the purchase of
Contracts pursuant to the terms of the Receivables Purchase
Agreement and (iii) the acceptance of investments in exchange
for Defaulted Contracts, or pursuant to the terms of the
Remarketing Agreement, in an effort to maximize the recoveries
thereon (with the prior written consent of the Collateral
Agent).
(q) Insolvency Proceedings. Institute Insolvency
----------------------
Proceedings with respect to the Borrower or consent to the
institution of Insolvency Proceedings against it, or take any
corporate action in furtherance of any such action, or seek
dissolution or liquidation in whole or in part.
(r) Prohibited Payments.
-------------------
(i) Prior to the occurrence of any Borrowing Base
Shortfall, O/C Shortfall, Spread Account Shortfall or
Termination Date, pay or declare any dividend or other
distribution with respect to its capital stock, or make any
payment on account of the purchase, redemption or other
acquisition or retirement of its capital stock or any warrant,
option or other right to acquire any such capital stock,
either directly or indirectly (any such distribution or
payment being a "Dividend") if, after giving effect to such
declaration, payment or distribution of a Dividend the
Borrower (A) would be "insolvent" (as such term is defined in
101(32)(A) of the Bankruptcy Code), (B) would be unable to
pay its debts as they become due, or (C) would have
unreasonably small capital for the business in which it is
engaged or for any business or transaction in which it is
about to engage (provided that nothing in this clause (i)
shall prohibit the Borrower from effecting any Dividends
consisting of property constituting VOIs or Lots for which the
requirement of the retention of the related Release Price has
been satisfied.
(ii) On or after the occurrence of any Borrowing
Base Shortfall, O/C Shortfall, Spread Account Shortfall or
Termination Date, pay, distribute or declare any Dividend; or
(iii) make, or agree to make or schedule to be
made, any payments of principal or accrued interest in respect
of any subordinated Debt of Borrower (including, without
limitation, the Subordinated Note), except for payments of
principal and interest owing under the Subordinated Note as
permitted on any Settlement Date in accordance with the
provisions of Section 7.06(b)(ix).
-------------------
ARTICLE VI
REPORTING REQUIREMENTS
----------------------
SECTION 6.01. Reporting Requirements of the
-----------------------------
Servicer. From the Closing Date until the later of the
--------
Termination Date or the Collection Date, the Servicer shall,
unless the Collateral Agent shall otherwise consent in
writing, furnish to the Collateral Agent, or a designated
agent or repository therefor as identified hereinbelow or as
otherwise notified by the Collateral Agent to the Servicer:
(a) Daily Reports. By not later than 3:00 p.m.,
-------------
Little Rock, Arkansas time on each Business Day,
(x) a report on computer tape (or other computer
record format reasonably acceptable to the Collateral Agent)
containing the master file for each Pledged Contract, updated
through the close of business on the prior Business Day and
appropriately filled-out (which master file shall contain,
among other things, (i) the Contract Pool Principal Balance of
each Pledged Contract as of the close of business on the
preceding Business Day, (ii) the interest rate payable under
each Pledged Contract, and (iii) an identifying notation for
each Pledged Contract to which a PAC is applicable), which
tape shall be delivered to a repository which may be
designated by the Collateral Agent from time to time (which
repository initially shall be Central Records Services, Inc.
in North Little Rock, and which repository shall in all cases
provide an acknowledgment in form and substance satisfactory
to the Collateral Agent to the effect that such repository
maintains an account in the name of the Collateral Agent); and
(y) a report, by telecopy, containing such
information with respect to daily Collections and other
performance criteria concerning the Contract Pool, and in such
format, as the Collateral Agent may reasonably request from
time to time (each such report described in clause (x) or this
clause (y) being referred to herein as a "Servicer's Daily
Report").
Transmission or other delivery of each such report to the
Collateral Agent, or a repository therefor, as the case may
be, shall be deemed to be a representation and warranty by the
Servicer to the Collateral Agent that the information
contained therein is true and correct in all material
respects.
(b) Settlement Reports. By not later than 3:00
------------------
p.m., Little Rock, Arkansas time, on the second Business Day
preceding each Settlement Date, a Settlement Report,
appropriately filled-out, containing current information with
respect to the then most recently concluded Calculation
Period, in each case dated as of the next preceding
Determination Date. Transmission of such report to the
Collateral Agent shall be deemed to be a representation and
warranty by the Servicer to the Collateral Agent that the
information contained therein is true and correct in all
material respects.
(c) Certificate of Servicing Officer.
--------------------------------
Simultaneously with the delivery of the Settlement Report, a
certificate of a Servicing Officer substantially in the form
of Exhibit S, certifying the accuracy of such report and that
---------
no Event of Default or Unmatured Event of Default has
occurred, or if such event has occurred and is continuing,
specifying the event and its status. Such certificate shall
also identify which, if any, Pledged Contracts have become
Defective Contracts or Defaulted Contracts, and which of the
Defaulted Contracts are to be released on such Settlement Date
pursuant to Section 7.11, together with the release of
------------
Defective Contracts on such date.
(d) Other Data. At the request of the Collateral
----------
Agent, such underlying data in respect of the Pledged
Contracts, in addition to the data described in Sections
--------
6.01(a) (b) and (c) above, as can be generated by the
-------- --- ---
Servicer's existing data processing system without undue
modification or expense.
(e) Annual Servicer's Certificate. On or before
-----------------------------
March 31 of each calendar year, beginning in 1996, an
Officer's Certificate stating that (a) a review of the
activities of the Servicer during the preceding calendar year
(or, in the case of the first such Officer's Certificate, the
period since the Closing Date) and of its performance under
this Credit Agreement was made under the supervision of the
officer signing such certificate and (b) to the best of such
Servicing Officer's knowledge, based on such review, the
Servicer has fully performed all of its obligations under this
Credit Agreement throughout such year, or, if there has been a
default in the performance of any such obligation, specifying
each such default known to such officer and the nature and
status thereof.
(f) Annual Report of Accountants. On or before
----------------------------
March 31 of each calendar year, beginning in 1996, a statement
prepared and delivered by a firm of nationally recognized
independent "Big 5" public accountants (who may also render
other services to the Servicer, the Borrower or FCI), to the
effect that such firm, in connection with its annual
examination of the Servicer, has (A) made a study and
evaluation of the Servicer's internal accounting controls and
computer systems relative to the servicing of the Pledged
Contracts and that, on the basis of such examination, such
firm is of the opinion that (assuming the accuracy of reports
by the Servicer and third party agents) the system of internal
accounting controls in effect on the date of such statement
relating to servicing procedures in connection with the
Pledged Contracts performed by the Servicer, taken as a whole,
was sufficient for the prevention and detection of material
errors and material irregularities; and (B) compared the
mathematical calculations of each amount set forth in the
Servicer's Settlement Reports for each Calculation Period in
the preceding twelve-month period with the computer records of
the Servicer, and that such firm is of the opinion that such
amounts are in agreement; except in either case for such
exceptions as they believe to be immaterial and such other
exceptions as shall be set forth in such statement.
(g) Servicer Default. Within one Business Day
----------------
after a Servicing Officer becomes aware of the occurrence of a
Servicer Default, and each Unmatured Servicer Default,
notification of such occurrence, as soon as possible and in
any event (A) within three Business Days after a Servicing
Officer becomes aware of the occurrence of a Servicer Default
or Unmatured Servicer Default, the statement of the chief
financial officer or chief accounting officer or other
Servicing Officer setting forth details of such Servicer
Default or Unmatured Servicer Default, and the action which
the Servicer has taken and proposes to take with respect
thereto, and (B) within three Business Days after a Servicing
Officer becomes aware of the occurrence thereof, notice of any
other event, development or information which is reasonably
likely to materially and adversely affect the ability of the
Servicer to perform its obligations under this Credit
Agreement.
In the event that FAC is no longer acting as
Servicer, any Successor Servicer appointed and acting pursuant
to Section 10.02 shall deliver or make available to the
Borrower and FAC each certificate and report required to be
prepared, forwarded or delivered thereafter pursuant to the
provisions of this Section 6.01(g).
SECTION 6.02. Additional Reporting Requirements;
---------------------------------
FAC and FCI; SEC Filings. From the Closing Date until the
------------------------
later of the Termination Date or the Collection Date, the
Servicer shall, for so long as the Servicer is an Affiliate of
the Borrower (and thereafter, the Borrower shall), unless the
Collateral Agent shall otherwise consent in writing, furnish
to the Collateral Agent:
(a) as soon as available, and in any event not
later than the later of 50 days following the end of each
quarterly accounting period or 10 days following the filing of
a Form 10-Q, if any, with the Securities and Exchange
Commission, but in no event later than 65 days following the
end of such quarterly accounting period, consolidated
statements of income and cash flows for each of FCI and FAC
(and their respective subsidiaries) for the period from the
beginning of the current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of each of
FCI and FAC (and each of their respective subsidiaries) as at
the end of such quarterly period, setting forth in each case
figures for the corresponding period in the preceding fiscal
year, all in reasonable detail and certified by the authorized
financial officer of each of FCI and FAC, as applicable,
subject to changes resulting from normal year-end adjustments;
(b) as soon as practicable, and in any event not
later than the later of 95 days following the end of each
annual accounting period or within 10 days following the
filing of a Form 10-K, if any, with the Securities and
Exchange Commission, but in no event later than 125 days
following the end of such annual accounting period, audited
consolidated statements of income and cash flows for each of
FCI and FAC (and each of their respective subsidiaries) for
such year, and a consolidated balance sheet of each of FCI and
FAC (and each of their respective subsidiaries) as at the end
of such year, setting forth in each case corresponding figures
from the preceding annual financial statements, all in
reasonable detail and certified by a firm of "Big 5"
independent accountants; and
(c) to the extent not covered in subsections (a)
and (b) above, as soon as practicable and in any event within
ten (10) days after such filing, any financial reports filed
by the either or both of FCI and FAC with the Securities and
Exchange Commission.
SECTION 6.03. Miscellaneous Borrower and Servicer
-----------------------------------
Reporting Requirements. From the Closing Date until the later
----------------------
of the Termination Date or the Collection Date, the Servicer
shall, for so long as the Servicer is an Affiliate of the
Borrower (and thereafter, the Borrower shall), unless the
Collateral Agent shall otherwise consent in writing, furnish
to the Collateral Agent:
(a) as soon as available, and in any event not
later than 45 days following the end of each quarterly
accounting period, unaudited consolidated statements of income
and cash flows for the Borrower for the period from the
beginning of the current fiscal year to the end of such
quarterly period, and an unaudited consolidated balance sheet
of the Borrower as at the end of such quarterly period,
setting forth in each case figures for the corresponding
period in the preceding fiscal year (if any), all in
reasonable detail and certified by the chief financial officer
of the Borrower, subject to changes resulting from normal
year-end adjustments;
(b) as soon as practicable, and in any event not
later than 90 days following the end of each annual accounting
period, unaudited consolidated statements of income and cash
flows for the Borrower for such year, and an unaudited
consolidated balance sheet of the Borrower and its
subsidiaries as at the end of such year, setting forth in each
case corresponding figures from the preceding annual financial
statements (if any), all in reasonable detail, provided
however, that upon 90 days prior written request from the
Collateral Agent to Borrower, such financial statements shall
be audited and certified by a firm of "Big 5" independent
accountants;
(c) to the extent not already delivered to the
Collateral Agent pursuant to the terms of this Agreement,
promptly upon receipt thereof, copies of (i) all financial
statements delivered to the Borrower by the Seller pursuant to
the Receivables Purchase Agreement, and (ii) all other reports
and other written information not specified above which are
required to be delivered by the Seller (individually, or as
Servicer) to the Borrower pursuant to the terms of the
Receivables Purchase Agreement;
(d) as soon as possible and in any event within
five Business Days after the occurrence of each Event of
Default or Unmatured Event of Default, the statement of the
chief financial officer of the Borrower setting forth details
of such Event of Default or Unmatured Event of Default and the
action which the Borrower proposes to take with respect
thereto;
(e) promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any
Reportable Event defined in Article IV of ERISA which the
Borrower or any Affiliate files under ERISA with the IRS or
the PBGC or the DOL or which the Borrower receives from the
PBGC;
(f) promptly, from time to time, such other
information, documents, records or reports respecting the
Pledged Contracts, any other Collateral or the conditions or
operations, financial or otherwise, of the Borrower or the
Servicer as the Collateral Agent may from time to time
reasonably request.
ARTICLE VII
SECURITY INTEREST
-----------------
SECTION 7.01. Grant of Security Interests. To
---------------------------
secure the prompt and complete payment when due of the Obliga-
tions and the timely performance by the Borrower of all of the
covenants and obligations to be performed by it pursuant to
this Credit Agreement, the Borrower hereby assigns and pledges
to the Collateral Agent and grants to the Collateral Agent, on
behalf of the Collateral Agent, the Administrative Agent,
Triple-A and the Surety, a security interest in all of the
Borrower's right, title and interest in and to all property
and all interests in property of the Borrower of any kind or
nature, whether tangible or intangible, whether real or
personal, and whether now owned or existing or hereafter
arising or acquired and wheresoever located, including,
without limitation, the following property and interests in
property (collectively, the "Collateral"):
----------
(a) all Pledged Contracts, together with all
other Transferred Assets;
(b) all right, title and interest of the
Borrower in, to and under the Receivables Purchase
Agreement, including, without limitation, all monies
due and to become due to the Borrower from the
Seller or FCI under or in connection therewith;
(c) all right, title and interest of the Borrower
in, to and under all software used to account for the
Transferred Assets, and all relevant licenses and
sublicenses relating thereto (including, without
limitation, all such rights arising under software and
related licenses transferred to FAC by FCI pursuant to
the Operating Agreement);
(d) all right, title and interest of the Borrower
in, to and under the Interest Rate Hedge, any replacement
agreement therefor, and any other contract, instrument or
agreement in which the Borrower has any interest or
rights, pursuant to which the Borrower (or its assignor
or predecessor in interest) has hedged against movements
in interest rates, including, without limitation, all
monies due and to become due to the Borrower (or its
assignor or predecessor in interest) thereunder or in
connection therewith;
(e) the Collection Account, the Spread Account
and all other bank and similar accounts established
for the benefit of any of the Borrower, the
Collateral Agent, the Administrative Agent, Triple-A
or the Surety, all funds held therein or in such
other accounts, all investments from time to time
made with proceeds in any such accounts, and all
income arising from such funds held in any such
accounts or from such investments;
(f) all Post Office Boxes, lock boxes, Lock-
Box Accounts, and all other bank and similar
accounts relating to Collections in respect of the
Pledged Contracts, and all funds held therein or in
such other accounts;
(g) all certificates and instruments if any, from
time to time representing or evidencing any of the
foregoing property described in clauses (a) through (f)
above;
(h) all proceeds of the foregoing property
described in clauses (a) through (g) above,
including, without limitation, interest, dividends,
cash, instruments and other property from time to
time received, receivable or otherwise distributed
in respect of or in exchange for or on account of
the sale or other disposition of any or all of the
then existing Collateral and including all payments
under Insurance Policies (whether or not any of
Triple-A, the Surety or the Collateral Agent is the
loss payee thereof) or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the Collateral; and
(i) all other monies or property of the
Borrower coming into the actual possession, custody
or control of the Collateral Agent, the
Administrative Agent, the Surety or Triple-A
(whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise).
SECTION 7.02. Continuing Liability of the Borrower.
------------------------------------
The security interests described above are granted as security
only and shall not subject any of the Collateral Agent, the
Administrative Agent, Triple-A or the Surety, or their
respective assigns to, or transfer or in any way affect or
modify, any obligation or liability of the Borrower with
respect to, any of the Collateral or any transaction in
connection therewith. None of the Collateral Agent, the
Administrative Agent, Triple-A or the Surety, or their
respective assigns, shall be required or obligated in any
manner to make any inquiry as to the nature or sufficiency of
any payment received by it or the sufficiency of any
performance by any party under any such obligation, or to make
any payment or present or file any claim, or to take any
action to collect or enforce any performance or the payment of
any amount thereunder to which any such Person may be entitled
at any time.
SECTION 7.03. Filings; Further Assurances. (a) On
---------------------------
or prior to the Closing Date, the Borrower shall have caused,
at its sole expense, (1) the UCC-1 financing statements and
other items referred to in the Closing List set forth in
Exhibit O hereto as items which are required to be filed or
---------
recorded on or prior to the Closing Date, to be so filed or
recorded in the appropriate offices, and (2) within five
Business Days after the Closing Date, shall cause each of the
UCC-1 financing statements, UCC-2 and UCC-3 termination
statements, and other items referred to in the Closing List
set forth in Exhibit O hereto as items which are required to
---------
be filed or recorded within five Business Days after the
Closing Date, to be so filed or recorded in the appropriate
offices, and in each such case shall thereafter promptly cause
evidence of such filings to be delivered to the Collateral
Agent. The Borrower shall, at its sole expense, from time to
time prepare, execute and deliver, or cause to be prepared,
executed and delivered, all such financing statements,
continuation statements, instruments of further assurance and
other instruments, in such forms, and shall take such other
actions, as shall be required by the Collateral Agent or as
the Collateral Agent otherwise deems necessary or advisable to
perfect the security interest of the Collateral Agent in the
Collateral. The Servicer agrees, at its sole expense, to
cooperate with and assist the Borrower in taking any such
action (whether at the request of the Borrower or the
Collateral Agent). Without limiting the foregoing, the
Borrower shall from time to time, at its sole expense,
execute, file, deliver and record all such supplements and
amendments hereto and all such financing statements,
continuation statements, instruments of further assurance, or
other statements, specific assignments or other instruments or
documents and take any other action that either of the
Servicer or the Collateral Agent deems necessary or advisable
to: (i) Grant more effectively all or any portion of the
Collateral; (ii) maintain or preserve the Lien (and the
priority thereof) of this Credit Agreement or carry out more
effectively the purposes hereof; (iii) perfect, publish notice
of, or protect the validity of any Grant made or to be made
pursuant to this Credit Agreement; (iv) enforce any of the
Pledged Contracts or any of the other Collateral; (v) preserve
and defend title to any Pledged Contracts on all or any other
part of the Collateral, and the rights of the Collateral Agent
in such Pledged Contracts or other Collateral, against the
claims of all Persons and parties; or (vi) pay any and all
taxes levied or assessed upon all or any part of the
Collateral. The Borrower hereby designates the Servicer its
agent and attorney-in-fact to execute, upon the Borrower's
failure to do so, any financing statement, continuation
statement or other instrument required pursuant to this
Section 7.03 or required, as indicated in any opinion of
------------
Counsel delivered pursuant to Section F.1.a. or Section F.4.
of the Closing List set forth at Exhibit O hereto, to maintain
---------
the Lien and security interest of this Credit Agreement with
respect to the Collateral.
(b) The Borrower shall, on or prior to the date of
Purchase of any Contracts, deliver the original copy of the
Contract, together with related Contract File, to the
Custodian, in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to
the Collateral Agent. In the event that the Borrower receives
any other instrument or any writing which, in either event,
evidences a Pledged Contract or other Collateral, the Borrower
shall deliver such instrument or writing to the Custodian on
behalf of the Collateral Agent, the Administrative Agent,
Triple-A and the Surety within one Business Day after the
Borrower's receipt thereof, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent.
(c) The Borrower hereby authorizes the Collateral
Agent, and gives the Collateral Agent its irrevocable power of
attorney (which authorization is coupled with an interest and
is irrevocable), in the name of the Borrower or otherwise, to
execute, deliver, file and record any financing statement,
continuation statement, specific assignment or other writing
or paper and to take any other action that Triple-A in its
sole discretion may deem necessary or appropriate to further
perfect the security interests created hereby. The Borrower
agrees that a carbon, photographic, photostatic, or other
reproduction of this Credit Agreement or of a financing
statement is sufficient as a financing statement where
permitted by applicable law.
SECTION 7.04. Place of Business; Change of Name.
---------------------------------
As of the date hereof, the chief executive office of the
Borrower and principal place of business and the location
where the Borrower maintains all Records relating to the
Receivables and the other Collateral is listed at Section
-------
4.01(k). The Borrower will not (x) change its principal place
-------
of business or chief executive office from the location listed
in such Section 4.01(k), (y) change its name, identity or
---------------
corporate structure or (z) change the location of its Records
relating to the Collateral from the location listed in such
Section 4.01(k), unless in any such event the Borrower shall
---------------
have given the Collateral Agent at least thirty (30) days'
prior written notice thereof and shall have taken all action
necessary or reasonably requested by the Collateral Agent to
amend its existing financing statements and continuation
statements so that they are not misleading and to file
additional financing statements in all applicable
jurisdictions to perfect the security interests of the
Collateral Agent on behalf of itself, the Administrative
Agent, Triple-A and the Surety in all of the Collateral.
SECTION 7.05. Lock-Box Accounts; Collection
-----------------------------
Account. The Borrower has established and shall maintain a
-------
system of operations, accounts and instructions with respect
to the Obligors and Lock-Box Accounts at the Lock-Box Banks as
described in Sections 4.01(l), 5.01(h), 5.01(v) and 5.02(d),
---------------- ------- ------- -------
and shall establish and maintain the Collection Account as
provided in Section 7.06. Pursuant to the Lock-Box Agreement
------------
to which it is party, each Lock-Box Bank shall be irrevocably
instructed to initiate an electronic transfer of all funds on
deposit in the relevant Lock-Box Account to the Collection
Account on the Business Day on which such funds become
available. None of FCI, FAC or the Borrower, nor any Person
claiming by, through or under FCI, FAC or the Borrower, shall
have any control over the use of, or any right to withdraw any
item or amount from, any Lock-Box Account or the Collection
Account except as expressly provided in the Lock-Box
Agreements or the Collection Account Agreement, respectively.
The Collateral Agent on behalf of Triple-A and the Surety is
hereby irrevocably authorized and empowered, as the Borrower's
attorney-in-fact, to endorse any item deposited in a Post
Office Box, or presented for deposit in any Lock-Box Account
or the Collection Account, requiring the endorsement of the
Borrower, which authorization is coupled with an interest and
is irrevocable.
SECTION 7.06. Collection Account. (a) On or prior
------------------
to the Closing Date, the Borrower shall establish and
maintain, or cause to be established and maintained, for the
sole and exclusive benefit of the Collateral Agent on behalf
of the Collateral Agent, the Administrative Agent, Triple-A
and the Surety, and their respective assigns, a cash
collateral account (the "Collection Account"). The Collection
------------------
Account shall be a special purpose segregated account,
designated as the "Capital Markets Assurance Corporation
Collateral Agent Collection Account", maintained with either
(i) a Depository Institution which is an Eligible Depository
Institution, or (ii) in a segregated trust account in the
trust department of a Depository Institution, and shall be
under the sole dominion and control of, and in the name of,
the Collateral Agent, acting on behalf of Triple-A and the
Surety. In the event that the Collection Account Bank ceases
to be an Eligible Depository Institution, and such funds
therein are not immediately thereafter transferred to a
segregated trust account as provided in clause (ii) above, the
Collateral Agent shall be entitled to terminate the Collection
Account and the related Collection Account Agreement, and
transfer all funds and investments held therein to a new
Collection Account at an Eligible Depository Institution.
All funds held in the Collection Account, including
investment earnings thereon, may be invested in Permitted
Investments at the direction of the Servicer; provided,
--------
however, that from and after the Termination Date or otherwise
-------
upon the occurrence and during the continuance of any Event of
Default, the Collateral Agent shall have the sole right to
restrict the maturities of any investments held in the
Collection Account and to direct the withdrawal or liquidation
of any such investments, to be used solely for the purposes
and in the order of priority set forth at Section 7.06(d).
---------------
-57-<PAGE>
The Collateral Agent shall have the sole and
exclusive right to withdraw or order a transfer of funds from
the Collection Account, in all events in accordance with the
terms and provisions of this Section 7.06 and the information
------------
most recently delivered to the Collateral Agent pursuant to
Section 6.01; provided, however, that the Collateral Agent
------------ -------- -------
shall, pursuant to the terms of the Collection Account
Agreement, and absent further instructions to the Collection
Account Bank to the contrary from the Collateral Agent (which
instructions the Collateral Agent may give at any time),
permit the Servicer to make withdrawals or order transfers of
funds from the Collection Account, in all events in accordance
with the provisions of this Section 7.06 and the information
------------
most recently delivered pursuant to Section 6.01. In
------------
addition, notwithstanding anything in the foregoing to the
contrary, the Servicer shall be entitled on a daily basis
(absent further instructions to the Collection Account Bank to
the contrary from the Collateral Agent (which instructions the
Collateral Agent may give at any time)) to direct the
Collection Account Bank to make withdrawals or order transfers
of funds from the Collection Account, to the extent such funds
either (i) have been mistakenly deposited into the Collection
Account, (ii) represent Assessments or dues payable by an
Obligor to property owners' associations or other entities, or
(iii) relate to items subsequently returned for insufficient
funds or as a result of stop payments. In the case of any
withdrawal or transfer pursuant to the foregoing sentence, the
Servicer shall provide the Collateral Agent with notice of
such withdrawal or transfer, together with reasonable
supporting details, on the next Settlement Report to be
delivered by the Servicer following the date of such
withdrawal or transfer (or in such earlier written notice as
may be requested by the Collateral Agent from the Servicer
from time to time). Notwithstanding anything herein to the
contrary, the Collateral Agent shall be entitled on a daily
basis to direct the Collection Account Bank to make
withdrawals or order transfers of funds from the Collection
Account, in the amount of all reasonable and appropriate out-
of-pocket costs and expenses incurred by the Collateral Agent
in connection with any misdirected funds described in clause
(i) of the second foregoing sentence, which costs and expenses
shall constitute Obligations hereunder.
(b) All funds in the Collection Account shall be
held in trust for the benefit of the Collateral Agent, the
Administrative Agent, Triple-A and the Surety and, except as
otherwise provided in Section 7.06(d) below with respect to
---------------
each Business Day from and after the Termination Date, shall
be used solely for the following purposes and in the following
order of priority:
(i) If such day is a Settlement Date, provided
that no Servicer Default shall have occurred and be
continuing, to repay to the Servicer the amount of any
unpaid Servicer Advances with respect to formerly
Delinquent Contracts to the extent identified by the
Servicer in the relevant Settlement Report as having been
recovered from the relevant Obligor during the most
recently concluded Calculation Period and paid into the
Collection Account;
(ii) To pay any Carrying Costs which are then due
and payable;
(iii) To be retained in the Collection Account to
the extent of any accrued and unpaid Carrying Costs which
are not then due and payable;
(iv) If such day is a Settlement Date (or in the
discretion of Borrower, on the Business Day immediately
preceding such Settlement Date), to make any mandatory
prepayments of the Triple-A Loans as provided in Section
-------
2.07(b) in respect of any then existing Borrowing Base
-------
Shortfall;
(v) If such day is a Settlement Date, to remit to
the Surety to the extent of any Reimbursement Obligations
then outstanding and unpaid;
(vi) If such day is a Settlement Date, to remit to
the Spread Account to the extent of any Spread Account
Shortfall then in effect;
(vii) If such day is a Settlement Date, to pay any
other Obligations which may be due and owing at such
time; and
(viii) To make any voluntary prepayments of the
Triple-A Loans as provided in Section 2.07(a), upon the
---------------
direction of the Borrower;
(ix) If such day is a Settlement Date, upon
instructions of the Servicer, to be remitted to the
Borrower for any purposes not otherwise prohibited by
this Credit Agreement, including, without limitation, (1)
the payment of outstanding amounts of accrued interest
and principal then due and payable under the Subordinated
Note (or the prepayment of outstanding amounts of
principal then outstanding under the Subordinated Note),
and (2) the payment of any and all tax obligations (and
imputed tax obligations) then due and payable by the
Borrower, provided, however, that (A) any amounts of
-------- -------
Release Price required to be retained in the Collection
Account on such Settlement Date in respect of Defective
Contracts or Defaulted Contracts pursuant to Sections
--------
7.11(a), (b) or (c), and
------- --- ---
(B) any amounts required to be retained in the Collection
Account pursuant to clause (iii) above, shall in each
case be so retained and shall not be subject to such
withdrawal, transfer or remittance instructions of the
Servicer; and
(x) To be retained in the Collection Account.
Each of the Borrower and the Servicer, in making any request
for funds to be withdrawn from the Collection Account (or, in
the case of the Servicer, in directing the withdrawal of funds
from the Collection Account pursuant to Section 7.06(a)),
---------------
shall certify to each of the Collateral Agent and the
Collection Account Bank that the funds will be used for one of
the purposes described above in this Section 7.06(b).
---------------
If, on any Business Day prior to the Termination
Date, the funds on deposit in the Collection Account and
available for withdrawal under clause (ii) above are less than
-----------
the amount of the obligations described in such clause, such
available funds shall be allocated in the priority set forth
in Section 7.06(c) below; if, on any such Business Day, the
---------------
funds on deposit in the Collection Account and available for
withdrawal under clause (vii) above are less than the amount
------------
of the obligations described in such clause, such available
funds shall be allocated to the Persons to whom such
obligations are owed ratably according to the respective
amounts owed.
(c) On each Business Day prior to the Termination
Date, to the extent that the funds on deposit in the
Collection Account and available under clause (ii) of Section
------ ---- -------
7.06(b) are insufficient to pay all Carrying Costs which are
-------
then due and payable, such funds shall be applied to the
Carrying Costs in the following order of priority:
(i) To pay any accrued and unpaid interest on the
Triple-A Loans (including in any such amount, the accrued
and unpaid CP Dealer Fee then outstanding);
(ii) To pay any accrued and unpaid fees owing under
the Fee Letter;
(iii) To pay any accrued and unpaid expenses of the
Collateral Agent;
(iv) To pay any accrued and unpaid Servicing Fee;
and
(v) to pay all other Carrying Costs then due and
payable (if any), other than the ordinary course expenses
of the Borrower,
(vi) To pay ordinary course expenses of the
Borrower to the extent the same are due or past due.
If, on any such Business Day, the funds on deposit in the
Collection Account and available for withdrawal under any of
clauses (ii), (v) or (vi) above are less than the amount of
------- ---- --- ----
the due and unpaid obligations described in such clause, such
available funds shall be allocated to the Persons to whom such
obligations are owed ratably according to the respective
amounts owed.
(d) On each Business Day from and after the
Termination Date, funds shall be withdrawn from the Collection
Account solely upon direction of the Collateral Agent to be
used solely for the following purposes and in the following
order of priority;
(i) To pay any accrued and unpaid Servicing Fee
then due and payable (together with any accrued and
unpaid additional compensation then due and payable to a
Successor Servicer as agreed to between the Collateral
Agent and the Successor Servicer in accordance with
Section 10.02(c)), and to be retained in the Collection
----------------
Account to the extent such fee (or such additional
compensation) is accrued but not then due and payable (if
the Servicer is a Person other than any of FCI, FAC or
the Borrower, or any Affiliate of any thereof);
(iii) To pay any accrued and unpaid expenses of the
Collateral Agent then due and payable, and to be retained
in the Collection Account to the extent such fee is
accrued but not then due and payable;
(iv) To pay any accrued and unpaid interest on the
Triple-A Loans (including in any such amount, the accrued
and unpaid CP Dealer Fee then outstanding) then due and
payable, and to be retained in the Collection Account to
the extent such amount is accrued but not then due and
payable;
(v) To pay any accrued and unpaid fees owing under
the Fee Letter then due and payable, and to be retained
in the Collection Account to the extent such fees are
accrued but not then due and payable;
(vi) To repay the principal amount of any Triple-A
Loans then outstanding;
(vii) To repay to the Surety the amount of any
Reimbursement Obligations then outstanding;
(viii) To pay any other accrued and unpaid
Obligations which have not been paid pursuant to clauses
-------
(i) through (vii) above (except in respect of clauses
--- ----- -------
(ix) and (x) below);
---- ---
(ix) To pay any other accrued and unpaid Carrying
Costs which are due and payable but have not been paid
pursuant to clauses (i) through (viii) above (except with
----------- ------
respect to the Carrying Costs described in clause (x)
----------
below), and to be retained in the Collection Account to
the extent such amounts are accrued but not then due and
payable; and
(x) To pay any accrued and unpaid Servicing Fee
owed to any of FCI, FAC or the Borrower, or any Affiliate
of any thereof.
If, on any such Business Day, the funds on deposit in the
Collection Account and available for withdrawal under any of
clauses (v), (viii), (ix) or (x) above are less than the
------- --- ------ ---- ---
amount of the due and payable obligations described in such
clause, such available funds shall be allocated to the Persons
to whom such obligations are owed ratably according to the
respective amounts owed. Any funds remaining in the
Collection Account after payment, in full and in cash, of the
foregoing Obligations and other fees and expenses shall be
remitted to the Borrower or as otherwise required by law.
SECTION 7.07. Spread Account. (a) On or prior to
--------------
the Closing Date, the Borrower shall establish and maintain,
or cause to be established and maintained, for the sole and
exclusive benefit of the Collateral Agent for the benefit of
Triple-A, the Surety and their respective assigns, a cash
collateral account (the "Spread Account"). The Spread Account
--------------
shall be a special purpose segregated account, designated as
the "Capital Markets Assurance Corporation Collateral Agent
Spread Account", maintained with either (i) a Depository
Institution which is an Eligible Depository Institution, or
(ii) in a segregated trust account in the trust department of
a Depository Institution, and shall be under the sole dominion
and control of, and in the name of, the Collateral Agent. In
the event that the Spread Account Bank ceases to be an
Eligible Depository Institution, and such funds therein are
not immediately thereafter transferred to a segregated trust
account as provided in clause (ii) above, the Collateral Agent
shall be entitled to terminate the Spread Account and the
Collection Account Agreement, and transfer all funds and
investments held therein to a new Spread Account at an
Eligible Depository Institution.
All funds held in the Spread Account, including
investment earnings thereon, may be invested in Permitted
Investments at the direction of the Servicer; provided,
--------
however, that (x) from and after the Termination Date or
-------
otherwise upon the occurrence and during the continuance of
any Event of Default, the Collateral Agent shall have the sole
right to restrict the maturities of any investments held in
the Spread Account, and (y) from and after the date after the
Termination Date on which there are no remaining available
funds on deposit in the Collection Account, the Collateral
Agent shall have the sole right to direct the withdrawal or
liquidation of any such investments to be used solely for the
purposes and in the order of priority set forth at Section
-------
7.06(d).
-------
(b) The Borrower shall cause the Spread Account to
be funded, on the Closing Date, with an initial balance equal
in amount to the sum of (A) an amount equal to three percent
(3.0%) of the Contract Pool Principal Balance outstanding on
the Closing Date, and (B) the outstanding aggregate principal
balance of all Defaulted Contracts on the Closing Date.
(c) The Collateral Agent shall have the sole and
exclusive right to withdraw or order a transfer of funds from
the Spread Account, in all events in accordance with the terms
and provisions of Section 7.06 and this Section 7.07, and the
------------ ------------
information most recently delivered to the Collateral Agent
pursuant to Section 6.01; provided, however, that prior to
------------ -------- -------
the occurrence of the Termination Date, on each Business Day
next succeeding a Settlement Date, the Servicer shall instruct
the Spread Account Bank to transfer from the Spread Account to
the Servicer (or otherwise in accordance with the instructions
of the Servicer) an amount of funds held in the Spread Account
which shall in no event be greater than the excess (if any) on
such Business Day (the "Spread Account Excess") of the then
---------------------
outstanding balance of available funds held in the Spread
Account over the Spread Account Requirement in effect as of
the opening of Business on such Business Day (after giving
effect to all transactions and fund transfers required to take
place hereunder pursuant on the next preceding Settlement
Date). Any amount so transferred shall constitute an
additional Servicing Fee paid to the Servicer, and shall not
decrease the amount of any Servicing Fee otherwise payable to
the Servicer in accordance with Section 8.09. The Servicer,
------------
in making any such instructions for the transfer of funds from
the Spread Account, shall simultaneously provide each of the
Collateral Agent and the Spread Account Bank with a
certificate of a Servicing Officer as to the existence and
size of any Spread Account Excess.
(e) On each Business Day from and after the
Termination Date, to the extent that there are no remaining
available funds on deposit in the Collection Account, funds
shall be withdrawn from the Spread Account, solely upon the
direction of the Collateral Agent, to be used solely for the
purposes and in the order of priority set forth at Section
-------
7.06(d) hereof, giving effect to the terms thereof as if each
-------
reference therein to the "Collection Account" was, instead, a
reference to the Spread Account.
(f) Any funds remaining in the Spread Account after
payment, in full and in cash, of all of the Obligations
outstanding hereunder shall be remitted to the Borrower or as
otherwise required by law.
SECTION 7.08. Accounts, Generally. Any deposit
-------------------
made into any of the Lock-Box Accounts, the Collection Account
or the Spread Account hereunder shall be irrevocable, and
shall be held in such account in trust by the Collateral Agent
hereunder, together with all interest thereon, and applied
solely as provided herein.
SECTION 7.09. Rights of Obligors and Release of
---------------------------------
Contract Files.
--------------
(a) Notwithstanding any other provision contained
in this Credit Agreement, including the Collateral Agent's
remedies pursuant hereto, the rights of any Obligor to any Lot
or VOI subject to a Pledged Contract shall, so long as such
Obligor is not in default thereunder, be superior to those of
the Collateral Agent and the holder of the Triple-A Note
hereunder, and the Collateral Agent and the holder of the
Triple-A Note shall not, so long as such Obligor is not in
default thereunder, interfere with such Obligor's use and
enjoyment of the Lot or VOI subject thereto.
(b) If pursuant to the terms of this Credit
Agreement, the Collateral Agent shall acquire through
foreclosure on the Borrower's interest in any portion of the
Lot or VOI subject to a Pledged Contract, the Collateral Agent
hereby specifically agrees to release or cause to be released
any Lot or VOI from any lien of the Collateral Agent, the
Administrative Agent, the Surety or Triple-A upon the request
of the Obligor (including such Obligor's heirs, successors and
assigns) to the Pledged Contract, upon completion of all
payments and the performance of all the terms and conditions
required to be made and performed by such Obligor under such
Pledged Contract.
(c) At such time as an Obligor has paid in full the
purchase price or the requisite percentage of the purchase
price for deeding pursuant to a Pledged Contract and has
otherwise fully discharged all of such Obligor's obligations
and responsibilities required to be discharged as a condition
to deeding, the Servicer shall notify the Collateral Agent by
a certificate substantially in the form attached hereto as
Exhibit T (which certificate shall include a statement to the
---------
effect that all amounts received in connection with such
payment have been deposited in the Collection Account) of a
Servicing Officer and shall request delivery to it of the
related Contract Files. Upon receipt of such certificate and
request or at such earlier time as is required by applicable
law, the Collateral Agent (a) shall promptly direct the
Custodian to release the Contract Files to the Servicer (in
all cases in accordance with the provisions of Section
-------
5.01(p)), (b) shall approve the release by FGI and the Nominee
-------
of the related deed of title, and any documents and records
maintained in connection therewith, to the Obligor as provided
in the Title Clearing Agreement, provided that title to the
VOI or Lot has not already been deeded to the Obligor, and/or
(c) shall execute such documents and instruments of transfer
and assignment and take such other action as is necessary to
release its interest in the VOI or Lot subject to deeding (in
the case of any Pledged Contract which has been paid in full).
If a deed has been delivered to an Obligor and such Obligor's
obligations and responsibilities are not fully discharged, the
Servicer shall cause such Obligor to execute a Mortgage in
favor of FCI encumbering the related VOI or Lot, and each of
FCI, FAC and the Borrower shall cause such Mortgage to be
promptly collaterally assigned to the Collateral Agent
pursuant to one or more Assignments of Mortgage, and such
Mortgage shall constitute additional Collateral hereunder.
The Servicer shall cause each Contract File or any document
therein so released which relates to a Pledged Contract for
which the Obligor's obligations have not been fully discharged
to be returned to the Custodian for the sole benefit of the
Collateral Agent when the need therefor by the Servicer no
longer exists.
SECTION 7.10. Recordation of Assignments. The
--------------------------
Servicer shall, promptly following the Closing Date and each
Subsequent Contract Grant Date (if any), cause to be recorded
in the proper offices all Assignments of Mortgages
constituting Contract Conveyance Documents relating to
Mortgages Granted to the Collateral Agent on such date, to the
extent that the related VOIs or Lots are located in
Developments in the States of Arizona, Arkansas, Colorado or
Georgia or in any State with respect to which an Opinion of
Counsel required to be delivered in connection with such Grant
states that recordation is necessary or advisable to perfect
or protect the interest of the Collateral Agent in such
Mortgages in such State.
SECTION 7.11. Releases; Clean-up.
------------------
(a) Subject to Section 7.11(c), the Borrower shall
---------------
cause the release of any Pledged Contract from the Lien of
this Credit Agreement by retaining, or causing the Servicer to
retain, in the Collection Account pursuant to Section
-------
7.06(b)(ix), the Release Price therefor through the close of
-----------
business of the Collection Account Bank on the first
Settlement Date occurring after the Borrower (or the Servicer)
has become aware, or has received written notice from the
Collateral Agent, of any uncured breach of a representation or
warranty of the Borrower in any of Sections 4.02, 4.03 or 4.04
------------- ---- ----
(each such Pledged Contract, a "Defective Contract" and each
------------------
such date, a "Defective Contract Release Date"); provided,
------------------------------- --------
however, that with respect to any Pledged Contract incorrectly
-------
described on the Contract Schedule only with respect to its
Principal Balance as of the initial Cut-Off Date, which the
Borrower would otherwise be required to effect the release of
pursuant to this Section 7.11(a), the Borrower may, in lieu of
---------------
effecting the release of such Pledged Contract, deposit in the
Collection Account on the Business Day next following such
Settlement Date, cash in an amount sufficient to cure such
deficiency or discrepancy. The following defects with respect
to documents in any Contract File, to the extent they do not
impair the validity or enforceability of the subject document
under applicable law, shall not be deemed to constitute a
breach of the representations and warranties contained in
Section 4.02: misspellings of or omissions of initials in
------------
names; name changes from divorce or marriage; discrepancies as
to payment dates in a Contract of no more than 30 days;
discrepancies as to Payments of no more than $5.00;
discrepancies as to origination dates of not more than 30
days; inclusion of additional parties other than the primary
Obligor not listed in the Servicer's records or in the
Contract Schedule and non-substantive typographical errors and
other non-substantive minor errors of a clerical or
administrative nature.
(b) In the event that any Pledged Contract is a
Defaulted Contract at any time after the Closing Date, the
Borrower shall, on the first Settlement Date on which such
Pledged Contract constitutes a Defaulted Contract, cause such
Defaulted Contract to be released from the Lien of this Credit
Agreement by retaining, or causing the Servicer to retain, in
the Collection Account pursuant to Section 7.06(b)(ix), the
-------------------
Release Price for such Defaulted Contract through the close of
business of the Collection Account Bank on such second
consecutive (or first, as the case may be) Settlement Date (a
"Defaulted Contract Release Date").
-------------------------------
(c) The Borrower shall notify the Collateral Agent
of any Release Price required to be retained pursuant to
Section 7.11(a) or (b) at least one Business Day prior to the
------- ---
Settlement Date on which such Release Price shall be so
required to be retained, specifying the Defective Contract or
Defaulted Contract and the Release Price therefor. Promptly
after the Settlement Date on which such Release Price is
retained pursuant to Section 7.11(a) or (b), the Servicer
---------------- ---
shall delete such Defective Contract or Defaulted Contract
from the Contract Schedule and shall notify the Collateral
Agent to do the same with respect to the records and any
computer file maintained by it; provided that it shall be a
--------
condition precedent to the effectiveness of the release of any
relevant Defective Contract or Defaulted Contract pursuant to
Section 7.11(a) or (b) that the Borrower shall have delivered
------- ---
to the Collateral Agent evidence of retention in the
Collection Account of the relevant Release Price in respect of
such Defective Contract or Defaulted Contract and a
certificate, appropriately filled-out, substantially in the
form of Exhibit T. In connection with the release of a
Defaulted Contract or Defective Contract and the related
Collateral hereunder, Collateral Agent hereby appoints
Servicer as its agent and attorney-in-fact (which appointment
shall be revocable at the option of Collateral Agent upon
written notice to Servicer) to execute all documents necessary
to evidence such release.
(d) In the event that at any time the Contract Pool
Principal Balance is less than an amount equal to ten percent
(10%) of the Contract Pool Principal Balance in effect as of
the Closing Date, the Borrower may, at its election, cause all
of the outstanding Pledged Contracts in the Contract Pool at
such time, together with all other Collateral, to be released
from the Lien of this Credit Agreement by prepaying, on any
Settlement Date (a "Clean-Up Release Date"), all amounts of
---------------------
principal and interest outstanding under the Triple-A Loans,
in accordance with the terms of Section 2.07(a), together with
---------------
all other Obligations then outstanding hereunder, or otherwise
payable as a result of any such prepayment (including, without
limitation, any payments required under Section 2.08)
------------
(collectively, the "Clean-Up Amount").
---------------
(e) The Borrower shall notify the Collateral Agent
of the Clean-Up Amount to be paid pursuant to Section 7.11(d)
-------
at least three Business Days prior to the Clean-Up Release
Date. Upon obtaining the confirmation of the Collateral Agent
as to the calculation of the Clean-Up Amount, prior to 11:00
A.M. New York City time on the relevant Settlement Date, the
Borrower shall pay the Clean-Up Amount to a deposit account
designated by the Collateral Agent, for the benefit of the
Collateral Agent, the Administrative Agent, Triple-A and the
Surety; provided that it shall be a condition precedent to the
effectiveness of the release of any of the Collateral that the
Borrower shall have delivered to the Collateral Agent evidence
of deposit into such deposit account of the Clean-Up Amount.
(f) In connection with each release pursuant to
Section 7.11(a) or (b), or Section 7.11(d), and upon the
--------------- --- ---------------
satisfaction of the conditions precedent set forth in Section
-------
7.11(c) or in Section 7.11(e), as the case may be, the
------- ---------------
Collateral Agent shall automatically and without further
action be deemed to transfer, assign, set over and otherwise
convey to the Borrower, without recourse, representation or
warranty, all the right, title and interest of Collateral
Agent in and to any such Defective Contract, Defaulted
Contract or any other Collateral in respect of which the
Release Price has been retained or the Clean-Up Amount has
been paid, as the case may be, and all monies thereafter due
or to become due with respect thereto, and all proceeds
thereof. The Collateral Agent shall execute such documents
and instruments of transfer or assignment and take such other
actions as shall reasonably be requested by the Borrower to
effect the conveyance of such released Collateral pursuant to
this subsection.
(g) The obligation of the Borrower to effect the
release of any Defective Contract shall constitute the sole
remedy hereunder respecting any breach of the representations
and warranties set forth in Sections 4.02, 4.03, or 4.04,
------------- ---- ----
available hereunder to the Collateral Agent on behalf of
itself, the Administrative Agent, Triple-A and the Surety;
provided, however, that this provision shall not limit in any
-------- -------
way any rights of any of the Collateral Agent, the
Administrative Agent, Triple-A or the Surety (i) arising under
Article XI, (ii) against any Person other than the Borrower,
----------
or (iii) in respect of any decrease in the Borrowing Base as a
result of a Pledged Contract becoming a Defective Contract.
SECTION 7.12. Remarketing Obligations of FCI.
------------------------------
(a) FCI's Obligations. In the event that either
-----------------
(i) the Borrower fails to retain in the Collection Account
pursuant to Section 7.06(b)(ix) any Release Price required to
-------------------
be so retained in respect of any Defective Contract or
Defaulted Contract pursuant to either of Sections 7.11(a) or
----------------
7.11(b) for two consecutive Settlement Dates on which such
-------
retention is required, or (ii) a Contract becomes a Defaulted
Contract or Defective Contract at any time after the
Termination Date during which either a Borrowing Base
Shortfall or an O/C Shortfall is in existence (based upon the
Settlement Report prepared for the most recently ended
Calculation Period), FCI hereby agrees to exercise its best
efforts to remarket the VOI or Lot relating to such Defective
Contract or Defaulted Contract pursuant to the terms and
conditions of the Remarketing Agreement, and to treat each
such VOI or Lot no differently (with respect to priority of
remarketing effort and timing of resale) than any other VOI or
LOT and then held by FCI for sale for its own account, and the
Collateral Agent hereby agrees to submit such VOI or Lot to
the remarketing procedures described in the Remarketing
Agreement, and, at the sole expense of FCI, to take any and
all other reasonable actions as may be requested by FCI under
the terms of the Remarketing Agreement in order to facilitate
the remarketing of such VOI or Lot.
(b) Effect on Other Provisions of this Agreement.
--------------------------------------------
Each Remarketed Contract transferred by FCI to the Borrower or
FAC, and Granted by the Borrower to the Collateral Agent for
the benefit of the Collateral Agent, the Administrative Agent,
Triple-A and the Surety shall be a "Pledged Contract", and
shall therefore constitute part of the "Contract Pool", for
purposes of this Agreement and the other Facility Documents
and each reference to Pledged Contracts transferred "under the
Receivables Purchase Agreement" or "on the Closing Date" (or
words of similar effect) shall include Remarketed Contracts
transferred pursuant to the Remarketing Agreement; provided
--------
that the effect of the foregoing clause is specifically
qualified to the extent specifically set forth below:
(i) The Eligible Contract Pool Principal
Balance shall be determined without giving effect to the
existence of Remarketed Contracts. For purposes of
determining whether or not a Remarketed Contract
constitutes an "Eligible Contract" for any other purposes
of this Credit Agreement (including, by way of example
and not limitation, in order to determine whether or not
the representation set forth in Section 4.02(a) has been
---------------
breached with respect to a Remarketed Contract), the
definition of Eligible Contract shall be deemed not to
include clauses (e), (g), (j), (m) or (n) thereof.
(ii) For the purposes of the representation set
forth in Section 4.02(p), the reference therein to
---------------
"minimum Equity Percentage of 10%" shall, in the case of
any Remarketed Contract, be deemed to be a reference to
"minimum Equity Percentage of 15%".
(iii) The last paragraph of Section 4.02 shall
------------
be deemed not to apply to any Remarketed Contract.
(iv) The "Release Price" of any Remarketed
Contract for purposes of Sections 7.11(a) and (b) shall
---------------- ---
be deemed to be the remainder of (A) the Release Price of
the Defaulted Contract or Defective Contract which gave
rise to such Remarketed Contract (including, without
limitation, the Release Price determined pursuant to this
clause (iv) in the case of a Defaulted Contract or
Defective Contract originally constituting a Remarketed
Contract), minus (B) the aggregate principal portion of
-----
the Payment Amounts deposited into the Collection Account
in respect of such Remarketed Contract prior to the
applicable date of determination under Section 7.11(a) or
---------------
(b), as the case may be.
-
(v) To the extent that the characterization of
a Remarketed Contract as a Pledged Contract hereunder or
under the Receivables Purchase Agreement specifically
conflicts with the terms of the Remarketing Agreement,
such terms and provisions of the Remarketing Agreement
shall be controlling.
In addition, promptly after the Grant of any Remarketed
Contract to the Collateral Agent pursuant to the terms of the
Remarketing Agreement, the Servicer shall add such Remarketed
Contract to the Contract Schedule and shall notify the
Collateral Agent to do the same with respect to the records
and any computer file maintained by it.
(c) FNBB Undertakings. Pursuant to the terms of
-----------------
the Remarketing Agreement, FCI hereby agrees to cause FNBB, as
a lender and as agent for a group of banks, to release any and
all right, title and interest which FNBB has (individually,
and on behalf of such group of banks) in and to any Remarketed
Contract to be transferred to the Borrower, and FCI covenants
that each Remarketed contract transferred to the Borrower (and
subsequently Granted to the Collateral Agent) shall be free
and clear of any Liens of any Person (other than the
Collateral Agent).
ARTICLE VIII
SERVICING OF CONTRACT POOL
-------------------------
SECTION 8.01. Responsibility for Contract
---------------------------
Administration. The Servicer shall manage, administer,
--------------
service and make collections on the Pledged Contracts and
perform or cause to be performed all contractual and customary
undertakings of the holder of the Contracts to the Obligors,
on behalf of Triple-A, the Administrative Agent, the
Collateral Agent, the Surety and the Borrower (provided that
--------
nothing herein or in any of the other Facility Documents shall
constitute, or be deemed to constitute, an acceptance or
assumption on the part of any of Triple-A, the Administrative
Agent, the Collateral Agent, or the Surety of any obligations
arising under the Contracts whatsoever, whether in favor of
the Obligor thereof or any other Person). Without limiting
the generality of the foregoing, but subject to all other
provisions hereof, the Servicer may request a power of
attorney from each of Triple-A, the Administrative Agent, the
Surety and the Collateral Agent, and each of Triple-A, the
Administrative Agent, the Surety and the Collateral Agent
shall grant to the Servicer a limited power of attorney in the
form of that given FCI by the Nominee under the Title Clearing
Agreements (and revocable at any time at the option of the
Collateral Agent by telephonic notice to the Servicer),
executed and delivered by the Collateral Agent to the
Servicer, to execute and deliver and be authorized and
empowered by the Collateral Agent to execute and deliver, on
behalf of itself, and each of Triple-A, the Surety and the
Administrative Agent, or any of them, any and all instruments
of satisfaction or cancellation or of partial or full release
or discharge and all other comparable instruments with respect
to the Contracts, any Mortgages and the VOIs and Lots, but
only to the extent deemed useful or necessary by the Servicer.
The Collateral Agent, at the request of the
Servicing Officer, shall furnish the Servicer with any
reasonable documents or take any action reasonably requested,
necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder. FAC is
hereby appointed the Servicer until such time as any Servicer
Transfer shall be effected under Article X.
---------
SECTION 8.02. Standard of Care. In managing,
----------------
administering, servicing and making collections on the
Contracts pursuant to this Agreement, the Servicer will
exercise that degree of skill and care consistent with
Customary Practices and the Credit Standards and Collection
Policies.
SECTION 8.03 Records. The Servicer shall, during
-------
the period it is Servicer hereunder, maintain such books of
account, computer data files and other Records as will enable
the Collateral Agent to determine the status of each Pledged
Contact and will enable such Contact to be serviced, in
accordance with the terms of this Agreement, by a Successor
Servicer following a Service Transfer.
SECTION 8.04. Inspection.
----------
(a) Inspection of Servicer. Each of the Borrower,
----------------------
Triple-A, the Administrative Agent and the Collateral Agent,
and their respective representatives shall at all times upon
reasonable prior notice have full and reasonable access during
regular business hours to all offices and Records of the
Servicer (wheresoever located, including, without limitation,
any repository used by the Servicer on the Borrower's behalf,
to store the computer tapes constituting the Servicer's Daily
Report), as appropriate to verify the Servicer's compliance
with this Agreement, and each of the Borrower, Triple-A, the
Administrative Agent and the Collateral Agent and their
representatives may examine and audit the same, and make
photocopies and computer tape replicas thereof, and the
Servicer agrees to render to the Borrower, Triple-A, the
Administrative Agent and the Collateral and their
representatives, at Servicer's cost and expense, such clerical
and other assistance as may be reasonable requested with
regard thereto. The Borrower, Triple-A, the Administrative
Agent and the Collateral Agent and their respective
representatives shall also have the right to discuss the
Servicer's affairs with the officers of the Servicer and the
Servicer's independent accountants and to verify under
appropriate procedures the validity, amount, quality,
quantity, value and condition of, or any other matter relating
to, the Collateral. The number and frequency of any such
audits shall be limited to such number and frequency as shall
be reasonable in the exercise of the Collateral Agent's
reasonable commercial judgment. Each such audit shall be at
the sole expense of the Borrower (subject to the Borrower's
right under the Receivables Purchase Agreement to recover such
expenses from the Seller).
(b) Confidential Information. Each of the parties
------------------------
hereto agrees that, to the extent that any information
obtained by any of Triple-A, the Surety, the Administrative
Agent and the Collateral Agent or any of their respective
representatives pursuant to Section 8.04(a) shall be
---------------
Confidential Information, such Person may only disclose such
Confidential Information to (i) such Person's and its
Affiliates' directors, officers, employees, agents, trustees
and professional consultants, (ii) any assignee or
participant, or proposed assignee or participant with respect
to all or any part of such Person's interests with respect to
all or any part of the transactions contemplated hereby and by
the other Facility Documents, (iv) any governmental authority
having jurisdiction over such Person, (v) any rating agency,
(vi) any credit enhancer, provider of reinsurance or provider
of liquidity, or prospective credit enhancer, provider of
reinsurance or provider of liquidity with respect to all or
any part of the transactions contemplated hereby and by the
other Facility Documents, (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate
(1) in compliance with any law, rule, regulation or order
applicable to such Person (2) in response to any subpoena or
other legal process, (3) in connection with any litigation to
which such Person is or may become a party, (4) in order to
protect such Person's rights, title and interest in and to the
Collateral and in the transactions contemplated hereby and by
the other Facility Documents, or (5) as required by law or
regulation in connection with the sale of securities of any
such Person.
(c) Contract Schedule. At all times during the
-----------------
term hereof, promptly upon the request of the Administrative
Agent or the Collateral Agent, deliver an updated copy of the
Contract Schedule to the Administrative Agent or the
Collateral Agent, as the case may be.
SECTION 8.05. Enforcement.
-----------
(a) The Servicer will, consistent with Section
-------
8.02, act with respect to the Pledged Contracts in such manner
----
as will maximize the receipt of Collections in respect of such
Pledge Contracts.
(b) The Servicer may sue to enforce or collect upon
Pledged Contracts, in its own name, if possible, or as agent
for the Borrower. If the Servicer elects to commence a legal
proceeding to enforce a Pledged Contract, the act of
commencement shall be deemed to be an automatic assignment of
the Pledged Contract to the Servicer for purposes of
collection only. If, however, in any enforcement suit or
legal proceeding it is held that the Servicer may not enforce
a Pledged Contract on the grounds that it is not a real party
in interest or a holder entitled to enforce the Pledged
Contract, the Collateral Agent (or its designee) on behalf of
the Borrower shall, at the Servicer's expense, take such steps
as the Servicer and the Collateral Agent may mutually agree
are necessary to enforce the Pledged Contract, including
bringing suit in its name or the name of the Borrower. The
Servicer shall provide to the Collateral Agent reasonable
security or indemnity against the costs, expenses and
liabilities which may be incurred thereby.
(c) The Servicer, upon obtaining the prior written
consent of the Collateral Agent, may grant to the Obligor on
any Pledged Contract any rebate, refund or adjustment out of
the Collection Account that the Servicer in good faith
believes is required as a matter of law; provided that, on any
--------
Business Day on which such rebate, refund or adjustment is to
be paid hereunder, such rebate, refund or adjustment shall
only be paid to the extent of funds otherwise available for
distribution from the Collection Account pursuant to Section
-------
7.06(b)(ix) or the last sentence of Section 7.06(d), as
----------- ---------------
applicable.
(d) The Servicer will not permit any modification,
amendment, waiver, rescission or cancellation of any Pledged
Contract by the Obligor, whether for any reason relating to a
negative change in the related Obligor's creditworthiness or
inability to make any payment under the Pledged Contract or
otherwise, without the prior written consent of the Collateral
Agent; provided, however, that the following modifications may
be made to a Pledged Contract from time to time: (i)
extensions which are Permitted Deferrals, (ii) amendments,
entered into in accordance with Customary Practices and Credit
Standards and Collections Policies, which do not reduce the
amount or extend the maturity of required Payments,
(iii) reductions in the amount of required principal Payments
under such Contract which do not alter the aggregate amount of
Collections anticipated to be received in the Collection
Account in respect of such Contract (as a result of any
release of prepaid premiums for Credit Life Insurance), and
(iv) modifications in the applicability of a PAC (which
modification will, among other things, result in a change in
the relevant Contract Rate).
(e) Upon the death of an Obligor, the Servicer
shall, on behalf of the Collateral Agent, timely file a claim
with respect to any policy of Credit Life Insurance with
respect to the related Pledged Contract. The Collateral Agent
agrees to cooperate in the prosecution of each such claim.
(f) The Servicer shall, on behalf of the Collateral
Agent, promptly take all such actions as shall be required to
cancel any policy of Credit Life Insurance relating to any
Pledged Contract which becomes a Defaulted Contract with
respect to which the Release Price has not been retained as
required under Section 7.11(b), and to recover any unearned
---------------
premium in respect of such policy for the benefit of the
Collateral Agent, for payment or deposit into the Collection
Account. The Collateral Agent agrees to cooperate in the
prosecution of each such claim.
SECTION 8.06. Collateral Agent to Cooperate. Upon
-----------------------------
request of a Servicing Officer, but subject to all other
provisions hereof, the Collateral Agent shall perform such
other acts as are reasonably requested by the Servicer
(including, without limitation, the execution of documents)
and otherwise cooperate with the Servicer in enforcement of
rights and remedies of each of Triple-A, the Surety, the
Collateral Agent and the Administrative Agent with respect to
Pledged Contracts.
SECTION 8.07. Other Matters Relating to the
-----------------------------
Servicer. The Servicer is hereby authorized and empowered (i)
--------
to make withdrawals from time to time from the Collection
Account when specifically permitted pursuant to the terms of
Section 7.06 and the Collection Account Agreement, but only to
the extent that the Collateral Agent has not otherwise
instructed the Collection Account Bank in accordance with the
terms hereof and of the Collection Account Agreement, (ii) to
advise the Collateral Agent in connection with the amount of
permitted withdrawals from the Collection Account and the
Spread Account in accordance with the provisions hereof, (iii)
to the extent permitted pursuant to the other terms and
conditions of this Agreement, to execute and deliver, on
behalf of the Borrower, any and all instruments of
satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect
to the Pledged Contracts and, after the delinquency of any
Pledged Contract and to the extent permitted under and in
compliance with applicable law and regulations, to commence
enforcement proceedings with respect to such Pledged Contract
including, without limitation, the exercise of rights under
any power-of-attorney granted in any Pledged Contract and (iv)
to make any filings, reports, notices, applications,
registrations with, and to seek any authorization from the
Securities and Exchange Commission and any state securities
authority on behalf of the Borrower as may be necessary or
advisable to comply with any federal or state securities or
reporting requirements laws.
SECTION 8.08. Servicer Insurance Coverage. The
---------------------------
Servicer shall maintain, and shall cause FCI to maintain,
separate errors and omissions coverage insuring the Collateral
Agent's, the Administrative Agent's, Triple-A's and the
Surety's respective risks against loss through errors of the
Servicer's or FCI's officers and employees involved in the
servicing of Contracts covering such actions and in an amount
no less than $2,000,000 per occurrence and naming the
Collateral Agent for the benefit of itself, the Administrative
Agent, Triple-A and the Surety, as a loss payee. The Servicer
shall also maintain, and shall cause FCI to maintain, a
separate fidelity bond coverage insuring the Collateral
Agent's, the Administrative Agent's, Triple-A's and the
Surety's respective risks against losses through wrongdoing of
the Servicer's or FCI's officers and employees involved in the
servicing of Contracts covering such actions and in an amount
no less than $2,000,000 per occurrence and naming the
Collateral Agent, for the benefit of itself, the
Administrative Agent, Triple-A and the Surety, as an
additional named insured. Each such insurance policy required
pursuant to this Section 8.08 shall provide for written notice
------------
to the Collateral Agent by the insurer at least 30 days prior
to the cancellation of such insurance. Evidence reasonably
satisfactory to the Collateral Agent of all renewals or
replacements necessary to maintain such insurance from time to
time in force shall be delivered by the Servicer to the
Collateral Agent prior to the expiration date of the then
current insurance policy.
SECTION 8.09. Servicing Compensation. As
----------------------
compensation for its servicing activities hereunder, the
Servicer shall be entitled to receive, on the second
Settlement Date to occur in each calendar month (the
"Servicing Fee Payment Date"), the servicing fee (the
--------------------------
"Servicing Fee") which shall be equal to one twelfth the
-------------
product of (a) 0.375% times (b) the product of (i) 0.50 times
----- -----
(ii) the sum of the Contract Pool Principal Balance determined
as of the Determination Date next preceding such Settlement
Date, and the Contract Pool Principal Balance determined as of
the third Determination Date next preceding such Settlement
Date, and shall be paid to the Servicer pursuant to Sections
--------
7.06(b), (c) and (d). On the first Settlement Date to occur
------- --- ---
hereunder, the Servicing Fee shall be prorated, based on the
initial Contract Pool Principal Balance, from the Closing Date
to such first Settlement Date.
SECTION 8.10. Costs and Expenses. (a) The costs
------------------
and expenses incurred by the Servicer in carrying out its
duties hereunder, including without limitation the fees and
expenses incurred in connection with the enforcement of
Pledged Contracts, shall be paid by the Servicer and the
Servicer shall not be entitled to reimbursement hereunder.
(b) The Servicer agrees to pay all reasonable costs
and disbursements in connection with the perfection and
maintenance of perfection, as against all third parties, of
all of the right, title and interest of each of the Collateral
Agent, the Administrative Agent, Triple-A and the Surety in
and to the Collateral to the extent that such payments and
disbursements are not made by the Borrower in accordance with
Section 7.03.
------------
SECTION 8.11. Servicer Representations and
----------------------------
Warranties. FAC, as initial Servicer, hereby makes, and each
----------
Successor Servicer by acceptance of its appointment hereunder
shall make, the following representations and warranties, (1)
in the case of the initial Servicer, as of the Closing Date,
and (2) in the case of any Successor Servicer, the date of
such appointment, to each of Triple-A, the Collateral Agent
and the Administrative Agent:
(a) Due Incorporation and Good Standing. The
-----------------------------------
Servicer is a corporation, state banking corporation or
national banking association duly organized, validly existing
and in good standing under the applicable laws of its
jurisdiction of organization or incorporation and has, in all
material respects, full corporate power and authority and
legal right to own its properties and conduct its business
(including the servicing of Contracts) as such properties are
presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under each of
the Facility Documents to which it is a party. The Borrower
is duly qualified to do business and is in good standing as a
foreign corporation, and has obtained all necessary licenses
and approvals in each jurisdiction in which the servicing of
the Pledged Contracts in accordance with the terms of this
Credit Agreement requires such qualification, except where
failure to qualify or to obtain such licenses and approvals
would not have an adverse effect on (i) the value or
collectibility of any Pledged Contract or related Collateral,
(ii) the collectibility of the Triple-A Loans, (iii) the
business, properties, operations, prospects, profits or
condition (financial or otherwise) of the Servicer, or (iv)
the ability of the Servicer to perform its obligations
hereunder and under the other Facility Documents to which it
is a party.
(b) Due Authorization and No Conflict. The
---------------------------------
execution, delivery and performance by the Servicer of each of
the Facility Documents to which it is a party, and the
consummation of each of the transactions contemplated hereby
and thereby, have in all cases been duly authorized by the
Servicer by all necessary corporate action, and do not
contravene (i) the Servicer's charter or by-laws, (ii) any
law, rule or regulation applicable to the Servicer, (iii) any
contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond,
note, or other agreement or instrument binding on or affecting
the Servicer or its property or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting
the Servicer or its property. Each of the Facility Documents
to which the Servicer is a party have been duly executed and
delivered on behalf of the Servicer.
(c) Governmental and Other Consents. All
-------------------------------
approvals, authorizations, consents, orders or other actions
of, and all registration, qualification, designation,
declaration, notice to or filing with, any Person or of any
governmental body or official required in connection with the
execution and delivery by the Servicer of any of the Facility
Documents to which it is a party, the consummation of the
transactions contemplated hereby or thereby, the performance
of and the compliance with the terms hereof or thereof, have
been obtained, except where the failure so to do would not
have a material adverse effect on the value of the Collateral
or the interests of Triple-A or the Surety herein or therein.
(d) Enforceability of Facility Documents. Each of
------------------------------------
the Facility Documents to which the Servicer is a party have
been duly and validly executed and delivered by the Servicer
and constitute the legal, valid and binding obligation of the
Servicer enforceable in accordance with their respective
terms, except as enforceability may be subject to or limited
by Debtor Relief Laws or by general principles of equity
(whether considered in a suit at law or in equity).
(e) No Litigation. There are no proceedings or
-------------
investigations pending or, to the best knowledge of the
Servicer, threatened against the Servicer before any court,
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of
this Credit Agreement or any of the other Facility Documents,
(ii) seeking to prevent the consummation of any of the
transactions contemplated by this Credit Agreement or any of
the other Facility Documents, (iii) seeking any determination
or ruling that would adversely affect the performance by the
Servicer of its obligations under this Credit Agreement or any
of the other Facility Documents, (iv) seeking any
determination or ruling that would adversely affect the
validity or enforceability of this Credit Agreement or any of
the other Facility Documents, or (v) seeking any determination
or ruling that would, if adversely determined, be reasonably
likely to materially adversely affect (A) the value or
collectibility of any Pledged Contract or related Collateral,
(B) the collectibility of the Triple-A Loans, (C) the
business, properties, operations, prospects, profits or
condition (financial or otherwise) of the Borrower, Triple-A,
the Administrative Agent or the Collateral Agent, or (D) the
ability of the Borrower to perform its obligations hereunder
and under the other Facility Documents to which it is a party.
(f) Daily Reports and Borrowing Certificates. Each
----------------------------------------
Daily Report, Settlement Report, Borrowing Base Certificate
and any other report or certificate delivered by the Servicer
pursuant to this Credit Agreement shall be true and correct in
all material respects as of the date such report or
certificate is delivered.
(g) Servicer Default. No Servicer Default has
----------------
occurred and is continuing.
The representations and warranties set forth in this
Section 8.11 shall survive the Grant of Pledged Contracts to
------------
the Collateral Agent. Upon a discovery by the Borrower, the
Servicer or the Collateral Agent of a material breach of any
of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to
the other such parties.
SECTION 8.12. Additional Covenants of the Servicer.
------------------------------------
From the Closing Date until the later of the Termination Date
or the Collection Date, unless the Collateral Agent shall
otherwise consent in writing:
(a) Change in Payment Instructions to Obligors.
------------------------------------------
The Servicer shall not add or terminate any bank as a Lock-Box
Bank from those listed in Exhibit Q or make any change in its
---------
instructions to Obligors regarding payments to be made to any
Lock-Box Bank, unless the Collateral Agent shall have received
(i) 30 Business Days' prior notice of such addition,
termination or change and (ii) prior to the effective date of
such addition, termination or change, (x) executed copies of
Lock-Box Agreements executed by each new Lock-Box Bank, the
Borrower and the Collateral Agent (and, at the option of the
Collateral Agent, the Servicer) and (y) copies of all
agreements and documents signed by either the Borrower or the
respective Lock-Box Bank with respect to any new Lock-Box
Account.
(b) Collections. If the Servicer shall receive any
-----------
Collections, the Servicer shall hold such Collections in trust
for the benefit of the Collateral Agent and deposit such
Collections into a Lock-Box Account or the Collection Account
within one Business Day following Borrower's receipt thereof,
and (ii) if any of FAC, FCI or the Borrower receives any
Collections, the Servicer shall cause FAC, FCI or the
Borrower, as the case may be, to hold such Collections in
trust for the benefit of the Collateral Agent and deposit such
Collections into a Lock-Box Account or the Collection Account
within one Business Day following such Person's receipt
thereof.
(c) Compliance with Requirements of Law. The
-----------------------------------
Servicer shall maintain in effect all qualifications required
under all relevant laws, rules, regulations and orders in
order to service each Pledged Contract and shall comply in all
material respects with all applicable laws, rules, regulations
and orders with respect to it, its business and properties,
and the servicing of the Pledged Contracts (including, without
limitation, the laws, rules and regulations of each state
governing the sale of time share contracts).
(d) Protection of Rights. The Servicer shall take
--------------------
no action which would impair in any material respect the
rights of any of the Collateral Agent, the Administrative
Agent, Triple-A or the Surety in the Collateral.
(e) Credit Standards and Collection Policies. The
----------------------------------------
Servicer shall comply in all material respects with the Credit
Standards and Collection Policies and Customary Practices in
regard to each Pledged Contract.
(f) Notice to Obligors. The Servicer shall ensure
------------------
that the Obligor of each Contract either
(1) shall have been instructed, pursuant to the
Servicer's routine distribution of a periodic statement
to such Obligor next succeeding
(A) the Closing Date (or any Subsequent
Contract Grant Date, as applicable), or
(B) the day on which a PAC ceased to apply to
such Contract, in the case of a Pledged Contract
formerly subject to a PAC,
but in no event later than the then next succeeding due
date for Payment under the related Pledged Contract, to
remit Payments thereunder to a Post Office Box for credit
to a Lock-Box Account, or directly to a Lock-Box Account,
in each case maintained at a Lock-Box Bank pursuant to
the terms of a Lock-Box Agreement substantially in the
form of Exhibit I hereto, or
---------
(2) has entered into a PAC, pursuant to which a
deposit account of such Obligor is made subject to a pre-
authorized debit in respect of Payments as they become
due and payable, and the Borrower has, and has caused
each of the Servicer, a Lock-Box Bank and/or the
Collection Account Bank, to take all necessary and
appropriate action to ensure that each such pre-
authorized debit is credited directly to a Lock-Box
Account.
(g) Relocation of Servicer. The Servicer shall
----------------------
give the Collateral Agent at least 30 days prior written
notice of any relocation of any office from which it services
Contracts or keeps records concerning the Pledged Contracts or
of its principal place of business and chief executive office
and whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation
statement or of any new financing statement and shall file
such financing statement or amendments as may be necessary to
continue the perfection of the Collateral Agent's security
interest in the Pledged Contracts, and Related Collateral and
the proceeds thereof. The Servicer shall at all times
maintain each office from which it services Contracts and its
principal place of business and chief executive office within
the United States of America.
(h) Instruments. The Servicer shall not remove any
-----------
portion of the Collateral that consists of money or is
evidenced by an instrument, certificate or other writing
(including any Contract) from the jurisdiction in which it was
held at the date the most recent Opinion of Counsel was
delivered pursuant to Section 5.01(m) (or from the
---------------
jurisdiction in which it was held as described in the Opinion
of Counsel delivered at the Closing Date if no Opinion of
Counsel has yet been delivered pursuant to Section 5.01(m))
---------------
unless the Collateral Agent shall have first received an
Opinion of Counsel to the effect that the lien and security
interest created by this Credit Agreement with respect to such
property will continue to be maintained after giving effect to
such action or actions; provided, however, that each of the
-------- -------
Collateral Agent and the Servicer may remove Pledged Contracts
from such jurisdiction to the extent necessary to satisfy any
requirement of law or court order, in all cases in accordance
with the provisions of the Custodial Agreement and Section
-------
5.01(p).
-------
(i) Contract Schedule. The Servicer shall promptly
-----------------
amend the Contract Schedule to reflect terms or discrepancies
that become known to the Servicer after the Closing Date.
(j) Segregation of Collections. The Servicer shall
--------------------------
prevent the deposit into any of the Lock-Box Accounts, the
Collection Account or the Spread Account of any funds other
than Collections in respect of the Pledged Contracts (except,
in the case of the Spread Account, for the initial deposit
therein), (provided that this covenant shall not be breached
--------
to the extent that items of payment, which are not material in
the aggregate, have been mistakenly forwarded by an Obligor
directly to any of FCI, FAC or any of their respective
Affiliates, or deposited into a lock-box account maintained
for the benefit of FNBB under its credit arrangements with FCI
and FAC) and, to the extent that any such funds are
nevertheless deposited into any of such Lock-Box Accounts, the
Collection Account or the Spread Account, promptly segregate
such funds and provide for the remittance of such funds to the
owner thereof.
(k) Terminate or Reject Contracts. Without
-----------------------------
limiting anything in Section 5.02(b), the Servicer shall not
---------------
terminate or reject any Pledged Contract prior to the end of
the term of such Contract, whether such rejection or early
termination is made pursuant to an equitable cause, statute,
regulation, judicial proceeding or other applicable law
(including, without limitation, Section 365 of the Bankruptcy
Code), unless prior to such termination or rejection, such
Pledged Contract and any related Collateral have been released
from the Lien of this Credit Agreement pursuant to Section
-------
7.11 in consideration of the retention in the Collection
----
Account of an appropriate Release Price therefor.
SECTION 8.13. Advances by Servicer. On or before
--------------------
the close of business on the Business Day prior to each
Settlement Date and each Interest Payment Date, the Servicer
shall deposit in the Collection Account an amount equal to
Servicer Advances then due; provided, however, such a Servicer
-------- -------
Advance will only be required to be deposited by the Servicer
if there are insufficient funds in the Collection Account to
pay amounts then owing to the Collateral Agent, the
Administrative Agent, Triple-A or the Surety upon application
of such funds in accordance with payment priorities contained
in Sections 7.06(b), (c) and (d) of this Credit Agreement; and
---------------- --- ---
provided further, the Servicer shall only be required to make
-------- -------
such a Servicer Advance if the Servicer in good faith believes
that such Servicer Advance, if made, would not be a
Nonrecoverable Advance. Servicer Advances, if any, will be
for specific Delinquent Contracts which the Servicer
identifies.
SECTION 8.14. FCI and the Servicer.
--------------------
(a) Agent for the Servicer. The Servicer (to the
----------------------
extent that the Servicer is FAC) may, and is hereby authorized
to, perform any of its servicing responsibilities through FCI,
in its capacity as agent for the Servicer, and FCI shall have
all the rights and powers of the Servicer with respect to the
Pledged Contracts under this Credit Agreement, but the
Servicer shall not thereby be released from any of its
obligations under this Credit Agreement. Notwithstanding the
performance of any of its obligations hereunder by FCI, the
Servicer shall remain obligated and liable to each of Triple-
A, the Collateral Agent, the Surety and the Administrative
Agent, for the servicing of the Pledged Contracts in
accordance with the provisions of this Credit Agreement,
without any diminution of such obligation or liability by
virtue of such performance by FCI. The fees and expenses of
FCI in its capacity as agent for the Servicer shall be as
agreed between the Servicer and FCI from time to time and none
of Triple-A, the Collateral Agent or the Administrative Agent
shall have any responsibility therefor.
(b) Guaranty of Servicer Obligations. (i) FCI
--------------------------------
hereby irrevocably and unconditionally guarantees to each of
the Collateral Agent, the Administrative Agent, Triple-A and
the Surety the due and punctual performance by FAC of all of
its obligations in its capacity as Servicer hereunder
(collectively, the "FAC Servicer Obligations").
------------------------
(ii) It shall not be a condition to the accrual of
the obligations of FCI hereunder that the Collateral Agent or
any other Person shall have first made any request of or
demand upon or given any notice to FAC or have initiated any
action or proceeding against FAC in respect thereof. The
Collateral Agent may proceed to enforce the obligations of FCI
under the foregoing paragraph without first pursuing or
exhausting any right or remedy which any of the Collateral
Agent, the Administrative Agent, Triple-A or the Surety may
have against FAC or any other Person, the Collateral or any
other property.
(iii) FCI hereby agrees that its obligations under
this Section 8.14(b) shall be unconditional, irrespective of
---------------
(A) the validity, enforceability, avoidance, subordination,
discharge, or disaffirmance by any Person (including a trustee
in bankruptcy) of the FAC Servicer Obligations, any Pledged
Contract or any of the other Collateral, (B) the absence of
any attempt to collect any Payments from the Obligor related
thereto or any guarantor, or to collect the FAC Servicer
Obligations from FAC or any other Person, (C) the waiver,
consent, extension, forbearance or granting of any indulgence
by any of the Collateral Agent, the Administrative Agent,
Triple-A or the Surety with respect to any provision of any
instrument evidencing the FAC Servicer Obligations or any
Pledged Contract, (D) any change of the time, manner or place
of performance of, or in any other term of any of the FAC
Servicer Obligations or any Pledged Contract, including
without limitation, any amendment to or modification of any of
the Facility Documents, (E) any law, regulation or order of
any jurisdiction affecting any term of any of the FAC Servicer
Obligations, any Pledged Contract, or rights of any of the
Collateral Agent, the Administrative Agent, Triple-A or the
Surety, (F) the failure by any of the Collateral Agent, the
Administrative Agent, Triple-A or the Surety to take any steps
to perfect and maintain perfected its respective interest in
any Collateral, (G) any exchange or release of any Collateral
or other property in which an interest was acquired pursuant
to the Facility Documents, (H) any failure to obtain any
authorization or approval from, or to notify or file with, any
governmental authority or regulatory body, which
authorization, approval, notification or filing was required
in connection with the performance of the obligations of FAC
or FCI hereunder or (I) any impossibility or impracticability
of performance, illegality, force majeure, any act of
government, or other circumstances which might constitute a
defense available to, or a discharge of, the FAC Servicer
Obligations or any of FCI's obligations hereunder, or any
other circumstance, event or happening whatsoever whether
foreseen or unforeseen and whether similar to or dissimilar to
anything referred to above, or (J) any termination of FAC as
Servicer, and appointment of a Successor Servicer.
(iv) FCI hereby waives promptness, diligence, notice
of default by FAC, notice of the incurrence of any FAC
Servicer Obligations and any other notice with respect to any
of the FAC Servicer Obligations and the Facility Documents and
any other document related thereto. FCI hereby warrants that
its has adequate means to obtain from FAC on a continuing
basis, all information concerning the financial condition of
FAC and the Collateral, and that it is not relying any of the
Collateral Agent, the Administrative Agent, Triple-A or the
Surety to provide such information either now or in the
future.
(v) FCI further agrees that:
(A) its obligations under this Section 8.14(b)
---------------
shall not be limited by any valuation, estimation or
disallowance made in connection with any proceedings
involving FAC filed under the Bankruptcy Code
(whether pursuant to Section 502 thereof or any
other Section thereof); and
(B) the Collateral Agent shall not be under
any obligation to marshall any assets in favor of or
against or in payment of any or all of the FAC Servicer
Obligations.
(vi) FCI hereby waives all set-offs and
counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest,
notices of dishonor and notices of acceptance of or reliance
upon this Credit Agreement. FCI's obligations under this
Section 8.14(b) shall not be limited if any of the Collateral
---------------
Agent, the Administrative Agent, Triple-A or the Surety, is
precluded for any reason (including without limitation, the
application of the automatic stay under Section 362 of the
Bankruptcy Code) from enforcing or exercising any right or
remedy with respect to the FAC Servicer Obligations.
(vii) FCI hereby agrees not to exercise or assert
any rights which it may acquire by way of subrogation under
this Section 8.14(b), if any, unless and until all of the FAC
---------------
Servicer Obligations shall have been performed in full. If
any payment shall be made to FCI on account of any subrogation
rights at any time prior to the occurrence of the events des-
cribed in the preceding sentence, each and every amount so
paid will be held in trust for the benefit of the Collateral
Agent, the Administrative Agent, Triple-A and the Surety and
forthwith be paid to the Collateral Agent to be credited and
applied to the FAC Servicer Obligations to the extent then
unsatisfied, in accordance with the terms of this letter of
undertaking or any document delivered in connection therewith.
(viii) The agreements of FCI in this Section
-------
8.14(b) shall remain in full force and effect until all of the
-------
FAC Servicer Obligations shall have been performed in full;
provided that to the extent that FAC makes a payment, transfer
--------
or deposit to any of the Borrower, the Collateral Agent, the
Administrative Agent, Triple-A or the Surety, which payment,
transfer or deposit (or any part thereof) is subsequently
invalidated, declared to be fraudulent or preferential or set
aside and required to be repaid to FAC, its estate, trustee or
receiver or any other Person, under any bankruptcy law, state
or federal law, common law or equitable cause, then to the
extent of such repayment, the agreements of FCI hereunder in
respect of such FAC Servicer Obligations or part thereof which
had been so repaid, shall be reinstated and continued in full
force and effect as of the date such initial payment, transfer
or deposit occurred.
(ix) FCI acknowledges that (i) performance of all
of the terms contained in this Section 8.14(b) is necessary,
---------------
and (ii) substantial performance shall not be deemed
sufficient performance. In addition, FCI consents to an award
of specific performance if sought by the Collateral Agent in
the event a court of competent jurisdiction determines a
breach of any of its obligations hereunder to have occurred.
(x) In the event that, notwithstanding anything in
this Section 8.14(b) to the contrary, FCI has the right under
---------------
applicable law to revoke its obligations hereunder, this
Credit Agreement shall continue in full force and effect until
a written revocation executed by FCI, specifically referring
to this Section 8.14(b), is received by the Collateral Agent
---------------
at its address for notice set forth herein. Any such
revocation shall not affect the rights of any of the
Collateral Agent, the Administrative Agent, Triple-A or the
Surety hereunder with respect to any of the FAC Servicer
Obligations (including without limitation any FAC Servicer
Obligations which are contingent or unmatured) which arose on
or prior to the date on which the above-referenced revocation
was received by the Collateral Agent.
(c) Management of Developments. FCI hereby
--------------------------
covenants and agrees that from the Closing Date until the
later of the Termination Date or the Collection Date, it shall
(i) with respect to Developments where FCI or any
Subsidiary of FCI maintains primary or substantial
responsibility for management, administration or other
services of a similar nature, whether by way of contract
or pursuant to any relevant VOI Regime, do or cause to be
done all things necessary to maintain each such
Development (including, without limitation, all grounds,
waters and improvements thereon) in at least as good
condition, repair and working order as such Development
shall have enjoyed as of December 9, 1994; and
(ii) with respect to Developments where FCI or any
Subsidiary of FCI does not maintain primary or
substantial responsibility for management, administration
or other services of a similar nature, do or cause to be
done all things which it may accomplish with a reasonable
amount of cost or effort, consistent with its
relationship (whether contractual or otherwise) with the
Person having such primary or substantial responsibility
for management, administration or other services), in
order to maintain each such Development (including,
without limitation, all grounds, waters and improvements
thereon) in at least as good condition, repair and
working order as such Development shall have enjoyed as
of December 9, 1994.
SECTION 8.15. The Servicer not to Resign. The
--------------------------
Servicer shall not resign from the obligations and duties
hereby imposed on it hereunder except upon determination that
(i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no
reasonable action which can be taken to make the performance
of its duties hereunder permissible under applicable law. Any
such determination permitting the resignation of the Servicer
pursuant to clause (i) hereof shall be evidenced by an Opinion
of Counsel to such effect delivered to the Collateral Agent.
No such resignation shall be effective until a Successor
Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 10.02
-------------
hereof.
SECTION 8.16. Merger or Consolidation of, or
------------------------------
Assumption of the Obligations of Servicer.
-----------------------------------------
(a) The Servicer shall not consolidate with or
merge into any other corporation or convey or transfer its
properties and assets substantially as an entirety to any
Person, unless:
(i) the corporation formed by such
consolidation or into which the Servicer is merged
or the Person which acquires by conveyance or
transfer the properties and assets of Servicer
substantially as an entirety shall be a corporation
organized and existing under the laws of the United
States of America or any state or the District of
Columbia and, if the Servicer is not the surviving
entity, shall expressly assume by an agreement
supplemental hereto, executed and delivered to the
Collateral Agent in form satisfactory to the
Collateral Agent, the performance of every covenant
and obligation of the Servicer hereunder;
(ii) the Servicer has delivered to the
Collateral Agent an Officer's Certificate and an
Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and
such supplemental agreement comply with this Section
8.16, and all conditions precedent provided for
herein relating to such transaction have been
satisfied;
(iii) a confirmation from each of S&P and
Moody's that the Triple-A Loans will continue to
satisfy the criteria of such rating agencies for
"investment-grade" transactions without giving
effect to the Surety Bonds, after giving effect to
such merger, consolidation, conveyance or transfer;
and
(iv) immediately prior to and after the
consummation of such merger, consolidation,
conveyance or transfer, no event which, with notice
or passage of time or both, would become a Servicer
Event of Default under the terms of this Agreement
shall have occurred and be continuing.
SECTION 8.17. Examination of Records. Each of the
----------------------
Borrower and the Servicer shall clearly and unambiguously
identify each Pledged Contract in its respective computer or
other records to reflect that such Pledged Contract has been
Granted to the Collateral Agent pursuant to this Agreement.
Each of Borrower and the Servicer shall, prior to the sale or
transfer to a third party of any Contract similar to the
Pledged Contracts held in its custody, examine its computer
and other records to determine that such Contract is not a
Pledged Contract.
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
---------------------------
SECTION 9.01. Events of Default. Each of the
-----------------
following events shall constitute a "Event of Default" within
----------------
the meaning of this Credit Agreement:
(a) The occurrence of the Termination Date or a
Servicer Default; or
(b) The Borrower shall fail to make any payment or
deposit to be made by it when due hereunder, or any retention
in the Collection Account pursuant to Section 7.11(a) or
---------------
Section 7.11(b) when required hereunder, and, solely in the
---------------
case of any such payments, deposits or retention, which do not
constitute payments or deposits of principal or interest on
the Triple-A Loans, such failure shall remain unremedied for
three Business Days after written notice from the Collateral
Agent; or
(c) The Borrower shall fail to perform or observe
any term, covenant or agreement contained in Section 5.02 and
------------
any such failure shall remain unremedied for five Business
Days after written notice from the Collateral Agent; or
(d) Any representation or warranty made or deemed
to be made by the Borrower, or any of its officers or
employees, under or in connection with this Credit Agreement,
any other Facility Document, any Settlement Report or other
information or report delivered pursuant hereto, other than
any representation or warranty set forth in any of Sections
--------
4.02, 4.03 and 4.04 of this Credit Agreement, shall prove to
---- ---- ----
have been false or incorrect in any material respect when
made; or
(e) The Borrower shall fail to perform or observe
any other term, covenant or agreement contained in this Credit
Agreement or in any other Facility Document on its part to be
performed or observed and any such failure shall remain
unremedied for ten Business Days after written notice from the
Collateral Agent; or
(f) The security interest of the Collateral Agent
in the Collateral shall for any reason, except in the case of
the releases contemplated pursuant to Section 7.11, cease or
------------
otherwise fail to create a valid and perfected first priority
interest in the Collateral; or
(g) (i) An Insolvency Event shall occur with
respect to any of the Borrower, the Seller, FAC or FCI; or
(ii) any of the Borrower, the Seller, FAC or FCI shall take
any corporate action to authorize the filing of any such
Insolvency Proceeding; or
(h) As of the close of business on any Settlement
Date, there shall exist (x) any Borrowing Base Shortfall or
O/C Shortfall or (y) any Spread Account Shortfall, to the
extent that a Spread Account Shortfall was in existence on the
next preceding Settlement Date; or
(i) The Seller shall cease to own 100% of the
issued and outstanding stock of the Borrower, or FCI shall
cease to own 100% of the issued and outstanding stock of the
Seller; or
(j) There shall have occurred, since the Closing
Date, a material adverse change in the financial condition of
the Borrower or there shall have occurred any event which
materially and adversely affects the collectibility of the
Pledged Contracts generally or the ability of the Borrower to
perform hereunder; or
(k) Borrower shall become (1) an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, or shall become under the control of an
"investment company", (2) a "public utility company" or a
"holding company," a "subsidiary company" or an "affiliate" of
any public utility company within the meaning of Section
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility
Holding Company Act of 1935, or (3) otherwise subject to any
other federal or state statute or regulation limiting its
ability to incur or pay indebtedness; or
(l) [Reserved];
(m) failure on the part of the Seller duly to
observe and perform any covenant or agreement set forth in the
Receivables Purchase Agreement, which continues unremedied for
a period of 30 days after the earlier of (i) the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Seller by the Borrower,
the Servicer or the Collateral Agent, as the case may be, or
(ii) the date on which the Seller has actual knowledge
thereof; or
(n) Triple-A or the Surety shall determine that
continuation of this Credit Agreement without exercise of
remedies under Section 9.02 will impose a material adverse
------------
regulatory impact on Triple-A or the Surety, as the case may
be.
SECTION 9.02. Remedies. During the existence of an
--------
Event of Default, the Collateral Agent on behalf of Triple-A
may, by written notice to the Borrower, take any or all of the
following actions, at the same or different times:
(i) declare the Termination Date to have occurred;
(ii) declare the Obligations to be immediately due and
payable; (iii) pursue any other legal or equitable remedy
available under this Credit Agreement or any of the other
Facility Documents (including, without limitation, the
institution of any equitable proceedings for specific
performance of any of the obligations of the Borrower, the
Servicer or FCI hereunder or thereunder); (iv) exercise any
rights and remedies of a secured party under Article 9 of the
UCC or under any other applicable laws, rules or regulations,
which rights and remedies shall be cumulative to those
provided for under this Credit Agreement and the other
Facility Documents; and (v) obtain from the Custodian such
original copies of the Pledged Contracts as it may reasonably
request for the purpose of undertaking enforcement against an
Obligor; provided, however, that in the case of any event
-------- -------
described in Section 9.01(g) above, then, automatically upon
---------------
the occurrence of such event without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or
in the Triple-A Note to the contrary notwithstanding, the
Obligations shall be immediately due and payable and the
Termination Date shall be deemed to have occurred auto-
matically.
The rights and remedies of a secured party which may
be exercised by the Collateral Agent pursuant to clause (iv)
of this Section 9.02 shall include, without limitation, the
------------
right to (x) identify and engage a Successor Servicer to act
as servicer for the Pledged Contracts in the event of a
Servicer Default in accordance with the provisions of Section
-------
10.02, and (y) without notice except as specified below
-----
solicit and accept bids for and sell the Collateral or any
part thereof in one or more parcels at a public or private
sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. Each of
the Borrower and the Servicer agrees that, to the extent
notice of sale shall be required by law, five Business Days'
notice to the Borrower of the time and place of any public
sale or the time after which any private sale is to be made
shall constitute reasonable notification and that it shall be
commercially reasonable for the Collateral Agent to sell the
Collateral on an as-is where-is basis, without representation
or warranty of any kind. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given and may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned.
SECTION 9.03. Optional Preservation of Collateral.
-----------------------------------
If the Obligations have been accelerated following an Event of
Default, to the extent permitted by law, the Collateral Agent
may elect to retain the Collateral intact for the benefit of
itself, the Administrative Agent, Triple-A and the Surety and
in such event it shall deposit all funds received with respect
to the Collateral in the Collection Account and apply such
funds in accordance with the payment priorities set forth in
Section 7.06, as if there had not been such an acceleration.
------------
Until the Collateral Agent has elected, or has
determined not to elect, to retain the Collateral pursuant to
this Section 9.03, the Collateral Agent shall continue to
------------
apply all distributions received on such Collateral in
accordance with Section 7.06. If the Collateral Agent
------------
determines to retain the Collateral as provided in this
Section 9.03, such determination shall be deemed to be a
------------
rescission and annulment (but not a waiver) of the
aforementioned Event of Default and its consequences pursuant
to Section 9.02, but no such rescission and annulment shall
------------
extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
SECTION 9.04. Restoration of Rights and Remedies.
----------------------------------
If any of the Collateral Agent, the Administrative Agent,
Triple-A or the Surety has instituted any proceeding to
enforce any right or remedy under this Credit Agreement and
such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to such Person, then
and in every such case the Borrower, the Servicer, FCI, the
Collateral Agent, the Administrative Agent, Triple-A and the
Surety shall, subject to any determination in such proceeding,
be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of
each of the Collateral Agent, the Administrative Agent,
Triple-A or the Surety shall continue as though no such
proceeding had been instituted.
SECTION 9.05. Waiver of Stay or Extension Laws.
--------------------------------
Each of the Borrower and the Servicer hereby covenants (to the
extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Credit
Agreement or any of the other Facility Documents to which it
is a party; and each of the Borrower and the Servicer (to the
extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it
will not, on the basis of any such law, hinder, delay or
impede the execution of any power herein granted to the
Collateral Agent, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 9.06. Sale of Collateral.
------------------
(a) The power to effect any sale (a "Sale") of any
----
portion of the Collateral pursuant to Section 9.02 hereof
------------
shall not be exhausted by any one or more Sales as to any
portion of such Collateral remaining unsold, but shall
continue unimpaired until the entire Collateral shall have
been sold or all amounts payable on Obligations and otherwise
under this Agreement with respect thereto shall have been
paid, whichever occurs later. The Collateral Agent may from
time to time postpone any Sale by public announcement made at
the time and place of such Sale.
(b) The Collateral Agent shall execute and deliver
an appropriate instrument of conveyance transferring its
interest in any portion of the Collateral in connection with a
Sale thereof. In addition, the Collateral Agent is hereby
irrevocably appointed the agent and attorney-in-fact of each
of the Borrower and the Servicer to transfer and convey the
Borrower's interest in any portion of the Collateral in
connection with a Sale thereof, and to take all action
necessary to effect such Sale. No purchaser or transferee at
such Sale shall be bound to ascertain the Collateral Agent's
authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
SECTION 9.07. Recovery of Judgment. The Collateral
--------------------
Agent's right to seek and recover judgment on the Obligations
or otherwise under this Credit Agreement or any of the other
Facility Documents shall not be affected by the seeking,
obtaining or application of any other relief under or with
respect to this Credit Agreement. None of the rights or
remedies of any of the Collateral Agent, the Administrative
Agent, Triple-A or the Surety hereunder or under any of the
other Facility Documents shall be impaired by the recovery of
any judgment by any of the Collateral Agent, the
Administrative Agent, Triple-A or the Surety against the
Borrower or by the levy of any execution under such judgment
upon any portion of the Collateral or upon any of the assets
of the Borrower.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults. If any one of
-----------------
the following events (a "Servicer Default") shall occur and be
----------------
continuing:
(a) any failure by the Servicer to deliver to the
Collateral Agent any information or reports required pursuant
to Section 6.01(a), (d), (e) or (f), which continues
--------------------------------
unremedied for a period of five Business Days after such
report is due; provided, however, the Servicer shall not be
-------- -------
entitled to cure any future failure to deliver any Servicer's
Daily Report pursuant to Section 6.01(a) after the Servicer
---------------
shall have received written notice from to the Collateral
Agent to the effect that, in its reasonable good faith
judgment and based on information it believes to be reliable,
it has determined that the Servicer is no longer able (or, in
the future may no longer be able) to discharge its duties
effectively under this Credit Agreement or under any of the
other Facility Documents to which it is a party;
(b) any failure by the Servicer (i) to deliver any
other information to the Collateral Agent required pursuant to
Section 6.01 (including, without limitation, the failure to
------------
deliver any Settlement Report) on or before the date such
information or Settlement Report is required to be given or
made under the terms of this Credit Agreement, (ii) to make
any payment, transfer or deposit on or before the date such
payment, transfer or deposit is required to be made under the
terms of this Credit Agreement, and, solely in the case of any
such payments which do not constitute payments of principal or
interest on the Triple-A Loans, such failure shall remain
unremedied for three Business Days after written notice from
the Collateral Agent or (iii) to give instructions or notice
to the Collateral Agent pursuant to Article VIII on or before
------------
the date such instruction or notice is required to be made or
given under the terms of this Credit Agreement, and such
failure shall remain unremedied for five Business Days;
(c) any failure on the part of the Servicer duly to
observe or perform any other covenants or agreements of the
Servicer set forth in this Credit Agreement or any of the
other Facility Documents to which it is a party which
continues unremedied for a period of ten days after the date
on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer by the
Collateral Agent, or to the Servicer and the Collateral Agent
by any of the Administrative Agent, the Surety or Triple-A; or
the Servicer shall assign its duties under this Credit
Agreement or under any of the other Facility Documents to
which it is a party, except as permitted in accordance with
the terms of Sections 10.02 and 13.04;
-------------- -----
(d) any representation, warranty or certification
made by the Servicer in this Agreement or any other Facility
Document to which it is a party or in any certificate
delivered pursuant to this Credit Agreement or any other
Facility Document to which it is a party shall prove to have
been incorrect in any material respect when made;
(e) the Servicer shall become subject to an
Insolvency Event;
(f) a final judgment is rendered against FAC while
acting as Servicer in an amount greater than $1,000,000 and,
within 45 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or
within 45 days after the expiration of any such stay, such
judgment is not discharged;
(g) if the Servicer is FAC, it shall fail the FAC
Liquidity Requirements; or
(h) (i) the Servicer or any Affiliate of the
Servicer shall fail to pay any principal of or premium or
interest on any Debt, if the aggregate principal amount of
such Debt is $1,000,000 or more, when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any
other default under any agreement or instrument relating to
any such Debt or any other event, shall occur and shall
continue after the applicable grace period, if any, specified
in such agreement or instrument if the effect of such default
or event is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared
to be due and payable or required to be prepaid (other than by
a regularly scheduled required prepayment) prior to the stated
maturity thereof; or (ii) if the Servicer is an Affiliate of
FCI, the occurrence of an "Event of Default" or an event which
with the giving of notice or lapse of time or both would
constitute an "Event of Default" under the FNBB Agreement; or
(iii) if the Servicer is an Affiliate of FCI, the occurrence
of an "Event of Default" or an event which with the giving of
notice or lapse of time or both would constitute an "Event of
Default" under the Pledge and Servicing Agreement for the
Interval Ownership and Lot Contract Pay-Through Notes (7.58%)
Series 1993-A, issued by Fairfield Funding Corporation; or
(i) if the Servicer is an Affiliate of the
Borrower, the occurrence of any Event of Default; or
(j) any of the Collateral Agent, the Administrative
Agent, Triple-A or the Surety (A) shall receive notice from
the Servicer that the Servicer is no longer able to discharge
its duties under this Agreement or (B) shall determine, in
their respective reasonable judgment and based upon published
reports (including wire services), which they reasonably
believe in good faith to be reliable, that the Servicer: (1)
has experienced a material adverse change in its business,
assets, liabilities, operations, or financial condition, (2)
has defaulted on any of its material obligations (other than
those included in this Agreement), or (3) has ceased to
conduct its business in the ordinary course.
THEN, so long as such Servicer Default shall not have been
remedied, the Collateral Agent by notice given in writing to
the Servicer (a "Servicer Termination Notice"), may terminate
---------------------------
all of the rights and obligations of the Servicer as Servicer
under this Agreement (such termination being herein called a
"Servicer Transfer"). After receipt by the Servicer of such
-----------------
Termination Notice, all authority and power of the Servicer
under this Agreement shall pass to and be vested Successor
Servicer appointed pursuant to Section 10.02; and, without
-------------
limitation, the Collateral Agent is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) to
execute and deliver, on behalf of the Servicer, as attorney-
in-fact or otherwise, all documents and other instruments upon
the failure of the Servicer to execute or deliver such
documents or instruments, and to do and accomplish all other
acts or things necessary or appropriate to effect the purposes
of such transfer of servicing rights.
The Servicer agrees to cooperate with the Collateral
Agent and such Successor Servicer in effecting the termination
of the responsibilities and rights of the Servicer to conduct
servicing hereunder, including, without limitation, the
transfer to such Successor Servicer of all authority of the
Servicer to service the Pledged Contracts provided for under
this Agreement, including, without limitation, all authority
over any Collections which shall on the date of transfer be
held by the Servicer for deposit or withdrawal in a Lock-box
Account or the Collection Account or which shall thereafter be
received by the Servicer with respect to the Pledged
Contracts, and in assisting the Successor Servicer in
enforcing all rights under this Agreement including, without
limitation, allowing the Successor Servicer's personnel access
to the Servicer's premises for the purpose of collecting
payments on the Pledged Contracts made at such premises. The
Servicer shall promptly transfer its electronic records
relating to the Pledged Contracts to the Successor Servicer in
such electronic form as the Successor Servicer may reasonably
request and shall promptly transfer to the Successor Servicer
all other records, correspondence and documents necessary for
the continued servicing of the Pledged Contracts in the manner
and at such times as the Successor Servicer shall reasonably
request. The Servicer shall allow the Successor Servicer
access to the Servicer's officers and employees. To the
extent that compliance with this Section 10.01 shall require
-------------
the Servicer to disclose to the Successor Servicer information
of any kind which the Servicer reasonably deems to be
confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality
agreements as the Servicer shall deem necessary to protect its
interest and as shall be satisfactory in form and substance to
the Successor Servicer. The Servicer hereby consents to the
entry against it of an order for preliminary, temporary or
permanent injunctive relief by any court of competent
jurisdiction, to ensure compliance by the Servicer with the
provisions of this paragraph.
SECTION 10.02. Appointment of Successor.
------------------------
(a) Appointment. On and after the receipt by the
-----------
Servicer of a Servicer Termination Notice pursuant to Section
-------
10.01, or any permitted resignation of the Servicer pursuant
-----
to Section 8.15, the Servicer shall continue to perform all
------------
servicing functions under this Agreement until the date
specified in the Servicer Termination Notice or otherwise
specified by the Collateral Agent in writing or, if no such
date is specified in such Servicer Termination Notice, or
otherwise specified by the Collateral Agent, until a date
mutually agreed upon by the Servicer and the Collateral Agent.
The Collateral Agent shall as promptly as possible after the
giving of a Termination Notice appoint a successor servicer
(in any case, the "Successor Servicer") and such Successor
------------------
Servicer shall accept its appointment by a written assumption
in a form acceptable to the Collateral Agent. Notwithstanding
the foregoing, the Collateral Agent shall, if it is unwilling
or legally unable so to act, petition a court of competent
jurisdiction to appoint any established financial institution
having a net worth of not less than $100,000,000 and whose
regular business includes the servicing of receivables similar
to the Pledged Contracts or if no such institution is
available, other consumer finance receivables, as the
Successor Servicer hereunder.
(b) Duties and Obligations of Successor Servicer.
--------------------------------------------
Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to
servicing functions under this Credit Agreement and shall be
subject to all the responsibilities and duties relating
thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Credit Agreement to the
Servicer shall be deemed to refer to the Successor Servicer.
(c) Compensation of Successor Servicer. In
----------------------------------
connection with such appointment and assumption, the
Collateral Agent may make such arrangements for the
compensation of the Successor Servicer out of Collections as
it and such Successor Servicer shall agree.
(d) Termination of Servicer's Authority. All
-----------------------------------
authority and power granted to any Successor Servicer under
this Agreement shall automatically cease and terminate upon
termination of this Agreement pursuant to Section 13.04, and
-------------
shall pass to and be vested in the Borrower and, without
limitation, the Borrower is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such
transfer of servicing rights upon termination of this
Agreement. The Successor Servicer shall cooperate with the
Borrower in effecting the termination of the responsibilities
and rights of the Successor Servicer to conduct servicing on
the Pledged Contracts. The Successor Servicer shall transfer
its electronic records relating to the Pledged Contracts to
the Borrower in such electronic form as the Borrower may
reasonably request and shall transfer all other records,
correspondence and documents relating to the Pledged Contracts
to the Borrower in the manner and at such times as the
Borrower shall reasonably request. To the extent that
compliance with this Section 10.02 shall require the Successor
-------------
Servicer to disclose the information of any kind which the
Successor Servicer deems to be confidential, the Borrower
shall be required to enter into such customary licensing and
confidentiality agreements as the Successor Servicer shall
deem necessary to protect its interests and as shall be
reasonably satisfactory in form and substance to the Borrower.
SECTION 10.03. Certain Matters Affecting the
-----------------------------
Successor Servicer. The Successor Servicer hereunder shall be
------------------
entitled to the following rights, remedies, and protections in
carrying out its duties as Servicer hereunder: (i) the
Successor Servicer shall not be liable for any act or omission
in carrying out its duties, in the absence of its gross
negligence, bad faith or willful misconduct; (ii) the
Successor Servicer may rely on and be fully protected in
acting or refraining from acting in accordance with any
resolution, certificate, letter, statement, instrument,
opinion, report, notice, request, consent order, appraisal,
bond, or other document received by it which it has reason to
believe is genuine and signed or presented to it by a proper
party; (iii) the Successor Servicer may consult with counsel,
and any opinion from such counsel (so long as such counsel is
not an employee of the Successor Servicer or an Affiliate of
the Successor Servicer) shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by the Successor Servicer in good faith in
accordance with such opinion; and (iv) the Successor Servicer
shall not be required to expend or risk its own funds for
extraordinary expenses or otherwise incur extraordinary
financial liability in the performance of its duties hereunder
if it reasonably believes that the repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it (which assurance shall be deemed to
have been given by an unsecured indemnity agreement from an
institutional investor having a long term unsecured
indebtedness rating of at least A or its equivalent from
either of S&P or Moody's). The reference to extraordinary
expenses and liabilities in clause (iv) of the preceding
sentence refers to the out-of-pocket costs and expenses,
including any attorneys' fees and expenses, incurred in
connection with suits against Obligors for the enforcement of
Pledged Contracts pursuant hereto, together with the risk of
any liabilities or counterclaims which could be incurred in
connection therewith.
ARTICLE XI
INDEMNITIES
SECTION 11.01. Liabilities to Obligors. No
-----------------------
obligation or liability to any Obligor under any of the
Pledged Contracts is intended to be assumed by any of the
Collateral Agent, the Administrative Agent, Triple-A or the
Surety under or as a result of this Credit Agreement, any of
the other Facility Documents and the transactions contemplated
hereby and thereby, and, to the maximum extent permitted by
law, each of the Collateral Agent, the Administrative Agent,
Triple-A and the Surety expressly disclaim any such obligation
and liability.
SECTION 11.02. Tax Indemnification. The Borrower
-------------------
agrees to pay, and to indemnify, defend and hold harmless each
of the Collateral Agent, the Administrative Agent, Triple-A
and the Surety from any taxes which may at any time be
asserted with respect to the Purchase of the Pledged Contracts
and the other Transferred Assets by the Borrower, or the Grant
of the Pledged Contracts and the other Transferred Assets to
the Collateral Agent, including, without limitation, any
sales, transfer, mortgage, gross receipts, general
corporation, personal property, privilege or license taxes
(but not including any federal, state or other income taxes
arising out of distributions in respect of the Triple-A Loans,
other than any such income taxes imposed by a jurisdiction in
which the indemnified person is not otherwise subject to tax
on its income) and costs, expenses and reasonable counsel fees
in defending against the same.
SECTION 11.03. Servicer's Indemnities. The
----------------------
Servicer shall defend and indemnify each of the Collateral
Agent, the Administrative Agent, Triple-A, the Surety, and FAC
(if it is no longer the Servicer) and any of their respective
successors and permitted assigns, against any and all costs,
expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of
litigation, in respect of any action taken, or failure to take
any action by the Servicer (but not by any predecessor
Servicer) with respect to this Credit Agreement or any Pledged
Contract; provided, however, that if a Successor Servicer is
-------- -------
acting as Servicer, such indemnity shall apply only in respect
of any grossly negligent action taken, or grossly negligent
failure to take any action, or reckless disregard of duties
hereunder, or bad faith or willful misconduct by such
Successor Servicer. This indemnity shall survive any Servicer
Transfer (but a Servicer's obligations under this Section
-------
11.03 shall not relate to any actions of any Successor
-----
Servicer after a Servicer Transfer) and any payment of the
amount owing under, or any purchased release by the Borrower
of any such Pledged Contract.
SECTION 11.04. FAC's Indemnities. FAC shall defend
-----------------
and indemnify each of the Borrower, the Collateral Agent, the
Administrative Agent, Triple-A, the Surety, and the Servicer
(if FAC is no longer the Servicer) against any and all costs,
expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of
litigation, in respect of (i) the breach of any
representation, warranty or covenant of FAC made hereunder or
any representation, warranty or covenant of FAC made under the
Receivables Purchase Agreement (including, without limitation,
any indemnification obligation of FAC thereunder) and (ii) any
action taken, or any failure to take action, by FAC at any
time whatsoever with respect to this Credit Agreement, any of
the other Facility Documents to which it is a party, or any
Pledged Contract.
SECTION 11.05. Miscellaneous Indemnities. Without
-------------------------
limiting any other rights which any of the Collateral Agent,
the Administrative Agent, Triple-A or the Surety, or any of
their respective successors and assigns (each, an "Indemnified
-----------
Party") may have hereunder or under applicable law, the
-----
Borrower hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses and liabilities
(including reasonable attorneys' fees) (all of the foregoing
being collectively referred to as "Indemnified Amounts")
-------------------
arising out of or resulting from any breach by the Borrower of
its representations, warranties, covenants or other
obligations under this Credit Agreement or any other Facility
Document (including, by way of example and not limitation, any
and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel
and expenses of litigation, arising as a result of or
otherwise in connection with the failure of the Custodian to
maintain in the portion of its files dedicated to Pledged
Contracts, a single original copy of each such Pledged
Contract), excluding, however, (a) Indemnified Amounts to the
--------- -------
extent resulting from willful misconduct, bad faith or gross
negligence on the part of such Indemnified Party, (b) recourse
for uncollectible Contracts or (c) any income or franchise
taxes (or any interest, penalties or additions to tax with
respect thereto) incurred by such Indemnified Party arising
out of or as a result of this Credit Agreement or the interest
Granted hereunder in Pledged Contracts.
SECTION 11.06. Operation of Indemnities.
------------------------
Indemnification under this Article XI shall include, without
----------
limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer has made any
indemnity payments to any of the Borrower, the Collateral
Agent, the Administrative Agent, Triple-A, or the Surety
pursuant to this Article XI and if any such indemnified party
----------
thereafter collects any of such amount from others, each such
indemnified party shall promptly repay such amounts collected
to the Servicer without interest.
ARTICLE XII
THE COLLATERAL AGENT
SECTION 12.01. Authorization and Action. Each of
------------------------
the Collateral Agent, the Administrative Agent, Triple-A, and
the Surety (collectively with their respective successors and
assigns, the "Secured Creditors") hereby designates and
-----------------
appoints CapMAC as "Collateral Agent" under this Credit
Agreement and each of the other Facility Documents, and
authorizes the Collateral Agent to take such actions as agent
on its behalf and to exercise such powers as are delegated to
the Collateral Agent by the terms of the Facility Documents,
together with such powers as are reasonably incidental
thereto. The Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth in the
Facility Documents. In addition, the Collateral Agent shall
not have any fiduciary relationship with any Person, and no
implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Collateral Agent
shall be read into the Facility Documents or otherwise exist
for the Collateral Agent. The provisions of this Article XII
-----------
govern the relationship between the Collateral Agent and the
Secured Creditors and are solely for the benefit of the
Collateral Agent and the Secured Creditors, and none of the
Borrower, the Servicer, FAC or FCI (collectively, the "Other
-----
Parties") shall have any rights as a third-party beneficiary
-------
or otherwise under any of the provisions of this Article XII.
-----------
In performing its functions and duties under the Facility
Documents, the Collateral Agent shall act solely as agent for
the Secured Creditors and does not assume nor shall be deemed
to have assumed any obligation or relationship of trust or
agency with or for any of the Other Parties or any of their
respective successors or assigns. The Collateral Agent shall
not be required to take any action which exposes the
Collateral Agent to personal liability or which is contrary to
the terms of any of the Facility Documents or applicable law.
The appointment and authority of the Collateral Agent under
the Facility Documents shall terminate upon the indefeasible
payment in full of all of the Obligations.
SECTION 12.02. Delegation of Duties. The
--------------------
Collateral Agent may execute any of its duties under the
Facility Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall
not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable
care.
SECTION 12.03. Exculpatory Provisions. Neither the
----------------------
Collateral Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or
omitted to be taken by it or them or any Person described in
Section 12.02 under or in connection with the Facility
-------------
Documents (except for its, their or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any
manner to any of the Secured Creditors for any recitals,
statements, representations or warranties made by any of the
Other Parties contained in any of the Facility Documents or in
any certificate, report, statement or other document referred
to or provided for in, or received under or in connection
with, any of the Facility Documents or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of the Facility Documents or any other document
furnished in connection therewith, or for any failure of any
of the Other Parties to perform its respective obligations
thereunder, or for the satisfaction of any conditions
specified in Article III of this Credit Agreement. The
Collateral Agent shall not be under any obligation to any
Secured Creditor to ascertain or to inquire as to the
observance or performance of any of the agreements or
covenants contained in, or conditions of, the Facility
Documents, or to inspect the properties, books or records of
any of the Other Parties. This Section 12.03 is intended
-------------
solely to govern the relationship between the Collateral
Agent, on the one hand, and the Secured Creditors, on the
other.
SECTION 12.04. Reliance by Collateral Agent. The
----------------------------
Collateral Agent shall in all cases be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation,
counsel to any of the Other Parties), independent accountants
and other experts selected by the Collateral Agent. The
Collateral Agent shall in all cases be fully justified in
failing or refusing to take any action under any of the
Facility Documents or any other document furnished in
connection therewith unless it shall first receive such advice
or concurrence of the Secured Creditors or all of them, as
applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Secured Creditors
against any and all liability, cost and expense which may be
incurred by it by reason of taking or continuing to take any
such action. The Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the
Facility Documents, in accordance with a request of Triple-A
made pursuant to the Facility Documents.
SECTION 12.05. Notice of Termination Events; Etc.
----------------------------------
The Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default, Servicer
Default, Unmatured Event of Default or Unmatured Servicer
Default unless the Collateral Agent has received notice from a
Secured Creditor or one of the Other Parties referring to this
Credit Agreement, stating that any Event of Default, Servicer
Default, Unmatured Event of Default or Unmatured Servicer
Default, has occurred hereunder and describing such Event of
Default, Servicer Default, Unmatured Event of Default or
Unmatured Servicer Default. The Collateral Agent shall take
such action with respect to such Event of Default, Servicer
Default, Unmatured Event of Default or Unmatured Servicer
Default as shall be directed by all of the Secured Creditors;
provided that unless and until the Collateral Agent shall have
--------
received such directions, the Collateral Agent may (but shall
not be obligated to) take such action, or refrain from taking
such action, with respect to such Event of Default, Servicer
Default, Unmatured Event of Default or Unmatured Servicer
Default as the Collateral Agent shall deem advisable and in
the best interests of the Secured Creditors.
SECTION 12.06. Non-Reliance on Collateral Agent and
------------------------------------
Other Secured Creditors. Each Secured Creditor expressly
-----------------------
acknowledges that neither the Collateral Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it
and that no act by the Collateral Agent hereafter taken,
including, without limitation, any review of the affairs of
any of the Other Parties, shall be deemed to constitute any
representation or warranty by the Collateral Agent. Each
Secured Creditor represents and warrants to the Collateral
Agent that it has, independently and without reliance upon the
Collateral Agent or any other Secured Creditor and based on
such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the
Contracts, Developments, and the business, operations,
property, prospects, financial and other conditions and
creditworthiness of the Other Parties, and made its own deci-
sion to enter into this Credit Agreement and any of the other
Facility Documents to which it is a party. Each Secured
Creditor also represents that it will, independently and
without reliance upon the Collateral Agent or any other
Secured Creditor, and based on such documents and information
as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not
taking action under this Credit Agreement and any of the other
Facility Documents, and to make such investigation as it deems
necessary to inform itself as to the Contracts and the
Developments, and the business, operations, property,
prospects, financial and other condition and creditworthiness
of each of the Other Parties. The Collateral Agent shall not
have any duty or responsibility to provide any Secured
Creditor with any credit or other information concerning the
Contracts or the Developments, the business, operations,
property, prospects, financial and other condition or
creditworthiness of the Other Parties which may come into the
possession of the Collateral Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 12.07. Reimbursement and Indemnification.
---------------------------------
Each of the Secured Creditors agrees to reimburse and
indemnify the Collateral Agent and its officers, directors,
employees, representatives and agents ratably according to
their pro rata shares of outstanding Obligations, to the
extent not paid or reimbursed by the Other Parties (i) for any
amounts for which the Collateral Agent, acting in its capacity
as Collateral Agent hereunder, is entitled to reimbursement by
the Other Parties hereunder and (ii) for any other expenses
incurred by the Collateral Agent, in its capacity as
Collateral Agent and acting on behalf of the Secured
Creditors, in connection with the administration and
enforcement of the Facility Documents, the Contracts, the VOIs
and Lots, and any of the other Collateral relating thereto.
SECTION 12.08. Collateral Agent in Its Individual
----------------------------------
Capacity. Each of the Collateral Agent and Triple-A and each
--------
of its respective Affiliates may make loans to, accept
deposits from and generally engage in any kind of business
with the Other Parties or any Affiliate of the Other Parties
as though the Collateral Agent and Triple-A were not the
Collateral Agent or Triple-A hereunder, respectively. With
respect to the transactions contemplated pursuant to the
Facility Documents, the Collateral Agent shall have the same
rights and powers under the Facility Documents as any Secured
Creditor and may exercise the same as though it were not the
Collateral Agent, and the terms "Secured Creditor," and
"Secured Creditors" shall include the Collateral Agent in its
individual capacity.
SECTION 12.09. Successor Collateral Agents. The
---------------------------
Collateral Agent may, upon thirty (30) days' notice to the
Borrower and each of the Secured Creditors, and the Collateral
Agent shall, upon the direction of all of the Secured
Creditors (other than the Collateral Agent, in its individual
capacity), resign as Collateral Agent. If the Collateral
Agent shall resign as Collateral Agent under the Facility
Documents, then the Secured Creditors during such thirty (30)
day period shall appoint a successor agent, which successor
agent shall be approved by the Borrower, which approval shall
not be unreasonably withheld or delayed, whereupon such
successor agent shall succeed to the rights, powers and duties
of the Collateral Agent and the term "Collateral Agent" shall
mean such successor agent, effective upon its appointment, and
the former Collateral Agent's rights, powers and duties as
Collateral Agent shall be terminated, without any other or
further act or deed on the part of such former Collateral
Agent or any of the parties to this Credit Agreement. If for
any reason no successor Collateral Agent is appointed by
Triple-A during such thirty (30) day period, then effective
upon the termination of such thirty (30) day period, the
Secured Creditors shall perform all of the duties of the
Collateral Agent under the Facility Documents and the Borrower
shall make all payments in respect of the Obligations directly
to the applicable Secured Creditor and for all purposes shall
deal directly with the Secured Creditors. After any retiring
Collateral Agent's resignation hereunder as Collateral Agent,
the provisions of this Article XII shall inure to its benefit
-----------
as to any actions taken or omitted to be taken by it while it
was Collateral Agent under the Facility Documents.
SECTION 12.10. UCC Filings and Title Certificates.
----------------------------------
The Secured Creditors and the Other Parties expressly
recognize and agree that the Collateral Agent may be listed as
(x) the secured party of record on the various Uniform
Commercial Code filings required to be made under this Credit
Agreement in order to perfect the collateral assignment from
the Borrower to the Secured Creditors of a security interest
in the Collateral, and (y) the secured party of record on the
various other assignments recorded with respect to the
Collateral as described more fully in Exhibit O, that such
---------
listings shall be for administrative convenience only in
creating a record or nominee secured party to take certain
actions under the Facility Documents on behalf of the Secured
Creditors and that such listing will not affect in any way the
status of the Secured Creditors as the beneficial owners of
their respective security interests in the Collateral. In
addition, such listings shall impose no duties on the
Collateral Agent other than those expressly and specifically
undertaken in accordance with the provisions of this Article
-------
XII.
---
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Amendments, Etc. No amendment to or
----------------
waiver of any provision of this Credit Agreement nor consent
to any departure by the Borrower or the Servicer, shall in any
event be effective unless the same shall be in writing and
signed by (i) the Collateral Agent, the Administrative Agent,
Triple-A and the Surety, the Borrower and the Servicer (with
respect to an amendment) or (ii) the Collateral Agent, the
Administrative Agent, Triple-A and the Surety, (with respect
to a waiver or consent by any of them), the Borrower (with
respect to a waiver or consent by it), or the Servicer (with
respect to a waiver or consent by it), as the case may be, and
then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which
given. This Credit Agreement contains a final and complete
integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute
the entire agreement (together with the exhibits hereto) among
the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings (except
such understandings as are set forth in the Fee Letter or the
Legal Fee Letter).
SECTION 13.02. Notices, Etc. All notices and
-------------
other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex com-
munication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at
its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All
such notices and communications shall be effective, upon
receipt, or in the case of delivery by mail, five days after
being deposited in the mails, or, in the case of notice by
telex, when telexed against receipt of answer back, or in the
case of notice by facsimile copy, when verbal communication of
receipt is obtained, in each case addressed as aforesaid,
except that notices and communications pursuant to Article II
shall not be effective until received.
SECTION 13.03. No Waiver; Remedies. No failure on
-------------------
the part of any of the Collateral Agent, the Administrative
Agent, Triple-A or the Surety to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by
law.
SECTION 13.04. Binding Effect; Assignability;
-----------------------------
Termination. This Credit Agreement shall be binding upon the
-----------
Borrower, the Servicer, Triple-A, the Collateral Agent, the
Administrative Agent and their respective successors and
permitted assigns (which successors of the Borrower shall
include a trustee in bankruptcy), and shall inure to the
benefit of each such Person, the Surety and each of their
respective successors and permitted assigns. Neither the
Borrower nor the Servicer may assign any of its rights and
obligations hereunder or any interest herein without the prior
written consent of Triple-A and the Collateral Agent. Each of
Triple-A, the Collateral Agent, the Administrative Agent and
the Surety may assign at any time its rights and obligations
hereunder and interests herein to any other Person without the
consent of the Borrower or the Servicer. Without limiting the
foregoing, the Borrower hereby acknowledges that Triple-A has
agreed pursuant to the Liquidity Agreement, the Liquidity
Security Agreement and certain related agreements that,
subject to the restrictions set forth therein, and under
certain circumstances as described therein, certain parties
providing credit enhancement and/or liquidity for Triple-A in
connection with the Credit Agreement (including, without
limitation, the "Liquidity Collateral Agent" under the
Liquidity Security Agreement), shall be entitled to exercise
Triple-A's rights under this Credit Agreement and in addition,
shall constitute third-party beneficiaries of this Credit
Agreement. The Borrower hereby consents to the foregoing and
agrees to cooperate with any such Person electing to exercise
Triple-A's rights under this Credit Agreement. This Credit
Agreement shall create and constitute the continuing obliga-
tions of the parties hereto in accordance with its terms, and
shall remain in full force and effect until such time, after
the Termination Date, as the Collection Date shall occur;
provided, however, that the rights and remedies with respect
-------- -------
to any breach of any representations, warranties or covenants
made by any of the Borrower, the Servicer, FAC or FCI
(including, without limitation, the covenants of each of the
Borrower, the Servicer and FAC under Sections 11.02, 11.03,
-------------- -----
11.04, and 11.05), shall be continuing and shall survive any
----- -----
termination of this Credit Agreement.
SECTION 13.05. Release of Collateral. Upon the
---------------------
termination of this Credit Agreement pursuant to Section
-------
13.04, the Collateral Agent shall release all liens and assign
-----
to the Borrower (without recourse, representation or warranty)
all right, title and interest of the Collateral Agent in and
to the Collateral, and all proceeds thereof. The Collateral
Agent shall execute and deliver such instruments of
assignment, in each case without recourse, as shall be
reasonably requested by Borrower to release the security
interest of the Collateral Agent in the Collateral.
SECTION 13.06. GOVERNING LAW; WAIVER OF JURY TRIAL.
------------------------------------
THIS CREDIT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF
THE COLLATERAL AGENT IN THE COLLATERAL OR REMEDIES HEREUNDER
OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH OF THE
BORROWER, THE SERVICER, FAC AND FCI HEREBY AGREES TO THE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF
NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE
BY REGISTERED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL
HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID, OR, AT
THE OPTION OF EITHER TRIPLE-A OR THE COLLATERAL AGENT, BY
SERVICE UPON CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK,
NEW YORK 10019, WHICH EACH OF THE BORROWER, FAC AND FCI HEREBY
IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING
SERVICE OF PROCESS. EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN OR
AMONG THE PARTIES HERETO, OR ANY OF THEM, ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN THEM IN CONNECTION WITH THIS CREDIT AGREEMENT.
INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING
CONSENT TO JURISDICTION, EACH OF THE BORROWER, FAC AND FCI
HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND
----- --- ----------
ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS
IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS
SECTION 13.06 SHALL AFFECT THE RIGHT OF TRIPLE-A OR THE
COLLATERAL AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF TRIPLE-A OR THE
COLLATERAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 13.07. Costs, Expenses and Taxes. (a) The
-------------------------
Borrower agrees to pay on demand
(x) all reasonable costs and expenses in connection
with the preparation, execution, delivery and
administration (including periodic auditing fees as
provided for in Section 5.01(c), and any requested
---------------
amendments, waivers or consents) of this Credit Agreement
and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for Triple-A, the
Collateral Agent, the Administrative Agent and the Surety
with respect thereto and with respect to advising Triple-
A, the Collateral Agent, the Administrative Agent and the
Surety as to its rights and remedies under this Credit
Agreement (subject, in the case of fees and expenses of
counsel, to the terms of the letter dated October 24,
1994 among CapMAC, and FCI with respect to such counsel's
fees and expenses (the "Legal Fee Letter")), and the
----------------
other agreements executed pursuant hereto, and
(y) all reasonable costs and expenses, if any
(including reasonable counsel fees and expenses), in
connection with the enforcement or preservation of the
rights and remedies of each of Triple-A, the Collateral
Agent, the Administrative Agent and the Surety under this
Credit Agreement, the other Facility Documents and the
other agreements and documents to be delivered hereunder
and thereunder.
(b) The Borrower agrees to pay, indemnify and hold
each of Triple-A, the Collateral Agent, the Administrative
Agent and the Surety harmless from and against any and all
stamp, sales, excise and other taxes and fees payable or
determined to be payable in connection with the execution,
delivery, filing and recording of this Credit Agreement, the
other Facility Documents and the other agreements and
documents to be delivered hereunder and thereunder, and agrees
to indemnify each of Triple-A, the Collateral Agent, the
Administrative Agent and the Surety and their respective
assignees against any liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and
fees.
(d) The Borrower agrees to pay, indemnify and hold
each of Triple-A, the Collateral Agent, the Administrative
Agent and the Surety harmless from and against any and all
other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance, administration and
management of this Credit Agreement, the other Facility
Documents and the other agreements and documents to be
delivered hereunder and thereunder (all the foregoing,
collectively, the "indemnified liabilities"), provided that
----------------------- --------
none of the Borrower, FAC or FCI shall have any obligation
hereunder to any of Triple-A, the Collateral Agent, the
Administrative Agent and the Surety with respect to
indemnified liabilities arising from the gross negligence or
willful misconduct of any of Triple-A, the Collateral Agent,
the Administrative Agent and the Surety.
SECTION 13.08. Execution in Counterparts;
-------------------------
Severability. This Credit Agreement may be executed in any
-------------
number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any
provision in or obligation under this Credit Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 13.09. No Bankruptcy Petition Against
------------------------------
Triple-A. Each of the Borrower, FAC and FCI covenants and
--------
agrees that it will not institute against Triple-A, or join
any other Person in instituting against Triple-A, any
Insolvency Proceeding under bankruptcy law or under any
similar federal or state law.
SECTION 13.10. Further Assurances. Each of the
------------------
Borrower, FAC and FCI covenants and agrees that agree to do
and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably
requested by the Collateral Agent more fully to effect the
purposes of this Credit Agreement, including, without
limitation, the execution of any financing statements or
continuation statements relating to the Pledged Contracts for
filing under the provisions of the UCC of any applicable
jurisdiction.
IN WITNESS WHEREOF, the parties below have caused
this Credit Agreement to be duly executed by their duly
authorized officers and delivered as of the day and year first
above written.
FAIRFIELD CAPITAL CORPORATION
By: /s/ Robert W. Howeth
----------------------------------
Title: President
Address: 2800 Cantrell Road
Little Rock, Arkansas 72202
Attn: President
Telephone: (501) 664-6000 (Ext. 581)
Telecopy: (501) 660-7151
FAIRFIELD ACCEPTANCE CORPORATION
By: /s/ Robert W. Howeth
-------------------------------
Title: President
Address: 2800 Cantrell Road
Little Rock, Arkansas 72202
Attn: President
Telephone: (501) 664-6000 (Ext. ____)
Telecopy: (501) 660-7151
FAIRFIELD COMMUNITIES, INC.
By: /s/ Robert W. Howeth
-------------------------
Title: Senior Vice President
Address: 2800 Cantrell Road
Little Rock, Arkansas 72202
Attn: President
Telephone: (501) 664-6000
Telecopy: (501) 660-7151
TRIPLE-A ONE FUNDING CORPORATION
By: Capital Markets Assurance
Corporation, its Attorney-in-Fact
By: /s/ Eric Rosensweig
-----------------------------------
Title: Vice President
Address: 885 Third Avenue
New York, New York 10022
Attn: Head of Exposure Management
Telephone: (212) 755-1155
Telecopy: (212) 755-5487
CAPITAL MARKETS ASSURANCE CORPORATION
By: /s/ Eric Rosensweig
----------------------------------
Title: Vice President
Address: 885 Third Avenue
New York, New York 10022
Attn: Head of Exposure Management
Telephone: (212) 755-1155
Telecopy: (212) 755-5487
APPENDIX A
to
CREDIT AGREEMENT
DEFINITIONS LIST
----------------
Unless otherwise defined therein, the capitalized terms
used in the documents listed below shall have the meanings set
forth in the Definitions List below.
1. Receivables Purchase Agreement, dated as of March 28,
1995 (the "Receivables Purchase Agreement"), by and
------------------------------
among FCI, FAC and the Borrower, as the same may be
amended, supplemented or otherwise modified from time
to time in accordance with the terms of the Credit
Agreement.
2. Credit Agreement, dated as of March 28, 1995 (the
"Credit Agreement"), among the Borrower, FAC,
-----------------
individually and as Servicer, FCI, Triple-A and CapMAC,
as the Administrative Agent and the Collateral Agent,
as the same may be amended, supplemented or otherwise
modified from time to time.
3. Insurance and Indemnity Agreement, dated as of March
28, 1995 (the "Insurance Agreement"), among Triple-A,
-------------------
the Borrower, the Liquidity Agent and CapMAC, as the
Administrative Agent and the Collateral Agent, as the
same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of the
Credit Agreement.
4. Fee Letter Agreement, dated as of March 28, 1995, (the
"Fee Letter"), among FAC, FCI, the Borrower, Triple-A,
----------
and CapMAC, individually and as the Administrative
Agent and the Collateral Agent, as the same may be
amended, supplemented or otherwise modified from time
to time in accordance with the terms of the Credit
Agreement.
DEFINITIONS LIST
"Advance" means an "Advance" funded to Triple-A
-------
under the Liquidity Agreement.
"Administrative Agent" means CapMAC in its capacity
--------------------
as "Administrative Agent" for Triple-A.
"Administrative Services, Lease and Operating
--------------------------------------------
Agreement" means the Administrative Services, Lease and
---------
Operating Agreement, dated as of March 28, 1995, entered into
among FAC, FCI and the Borrower, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with the terms of the Credit Agreement.
"Affiliate" means, with respect to any Person, a
---------
Person: (i) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, such Person; (ii) that beneficially owns
or holds 10% or more of any class of the voting stock (or, in
the case of a Person that is not a corporation, 10% or more of
the equity interest) of such Person; or (iii) 10% or more of
the voting stock (or, in the case of a Person that is not a
corporation, 10% or more of the equity interest) of which is
beneficially owned or held, directly or indirectly, by such
Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting stock or an equity interest, by contract,
or otherwise.
"Assessments" means any assessments, including but
-----------
not limited to, real estate taxes, recreation fees, community
club or property owners association dues, water and sewer
improvement district assessments or other similar assessments,
made with respect to a VOI or Lot, the nonpayment of which
would result in the imposition of a Lien or other encumbrance
upon the VOI or Lot.
"Assignment of Mortgages" means an assignment
-----------------------
(including any collateral assignment) of any Mortgage.
"Banco Santander" means Banco Santander, a Spanish
---------------
bank, New York Branch.
"Bankruptcy Code" means Title 11 of the United
---------------
States Code (11 U.S.C. Section 101 et seq.), as amended from
time to time, or any successor statute.
"Base Rate" means a fluctuating interest rate per
---------
annum equal to the higher of (i) the rate of interest
published in the New York edition of the Wall Street Journal
as the prime rate, or, in the event that no such rate is
published, the rate of interest announced publicly by the
Liquidity Agent in New York, New York, as its prime or
reference rate, whether or not such rate is the lowest rate
offered by such institution to its corporate borrowers and
(ii) 1/2 of one percent per annum above the Federal Funds
Rate.
"Base Rate Advance" means an Advance which bears
-----------------
interest at the Base Rate.
"Benefit Plan" means a defined benefit plan as
------------
defined in Section 3(35) of ERISA (other than a Multiemployer
Plan) in respect of which any of FCI, FAC or any ERISA
Affiliate is, or at any time within the immediately preceding
six (6) years was, an "employer" as defined in Section 3(5) of
ERISA.
"Borrower" means Fairfield Capital Corporation, a
--------
Delaware corporation.
"Borrowing" means a borrowing of Triple-A Loans
---------
under the Credit Agreement.
"Borrowing Base" means, on any day, the product of
--------------
(i) the Eligible Contract Pool Principal Balance on such day,
and (ii) .85 (or such other factor as the Administrative Agent
and the Servicer may agree upon in connection with any
Subsequent Contract Grant Date).
"Borrowing Base Certificate" means an Officer's
--------------------------
Certificate of the Servicer, substantially in the form of
Exhibit A to the Credit Agreement, as to (i) the outstanding
amount of Borrowing Base as of any Determination Date, and
(ii) the existence and amount of any Borrowing Base Shortfall
as of such Determination Date.
"Borrowing Base Shortfall" means, at any time, the
------------------------
amount, if any, by which the then outstanding principal amount
of the Triple-A Loans exceeds the Borrowing Base then in
effect.
"Borrowing Date" means, with respect to any
--------------
Borrowing, the date on which such Borrowing is funded, which
date, other than in the case of the Closing Date, shall be a
Subsequent Contract Grant Date.
"Business Day" means any day other than a Saturday,
------------
Sunday or public holiday or the equivalent for banks in New
York City or Little Rock, Arkansas; provided that, when used
in connection with any Eurodollar Rate Advance or other
matters concerning the Eurodollar Rate, the term "Business
Day" means any such day on which dealings are carried on in
the London interbank market and on which banks are open for
business in London, England.
"Calculation Period" means each period commencing on
------------------
the day next succeeding a Determination Date and ending on
(and including) the day of the next succeeding Determination
Date.
"Cancelled Contract" means a Contract with respect
------------------
to which cancellation or foreclosure actions have or should
have been commenced in accordance with Customary Practices
and/or Credit Standards and Collection Policies by reason of
(a) uncollectibility in whole or in part, (b) relinquishment
by the Obligor of its rights in and to the related VOI or Lot,
or (c) termination in connection with origination of a new
Contract.
"CapMAC" means Capital Markets Assurance
------
Corporation, a New York stock insurance company.
"Carrying Costs" means, at any time during a
--------------
Settlement Period, the aggregate amount of (i) all accrued and
unpaid interest, fees, premiums and other expenses owing by
the Borrower to Triple-A, the Collateral Agent, the Dealer,
the Surety, the Servicer and the Administrative Agent
(including, without limitation, all fees owed under the Fee
Letter, collateral audit fees and expenses, the Servicing Fee,
the compensation owing to any Successor Servicer pursuant to
Section 10.02(c) of the Credit Agreement, the CP Dealer Fees
and the Surety Bond Premium) plus (ii) all ordinary course
----
operating expenses incurred by the Borrower during such
Settlement Period (including rent, salaries, professional fees
and expenses incurred in connection therewith); provided that
--------
in the event that any such expenses are the subject of
allocations made pursuant to the Administrative Services,
Lease and Operating Agreement, "Carrying Costs" shall include
such expenses only to the extent allocated to the account of
the Borrower thereunder, and provided further that, for the
-------- -------
avoidance of doubt, "Carrying Costs" shall not include any
taxes payable by or on behalf of the Borrower, or any payments
in respect of imputed taxes payable by the Borrower pursuant
to the terms of any agreement between the Borrower and any of
its Affiliates (including, without limitation, the Tax Sharing
Agreement).
"Closing Date" means the date on which the Borrower
------------
makes its initial Borrowing and Grant under the Credit
Agreement, and its initial Purchase under the Receivables
Purchase Agreement.
"Collateral" has the meaning assigned to such term
----------
in Section 7.01 of the Credit Agreement.
"Collateral Agent" means CapMAC in its capacity as
----------------
"Collateral Agent" for Triple-A pursuant to the Credit
Agreement, and any successor Collateral Agent.
"Collection Account" has the meaning assigned
------------------
thereto in Section 7.06 of the Credit Agreement.
"Collection Account Agreement" means the Collection
----------------------------
Account Agreement dated as of March 28, 1995, among the
Collection Account Bank, the Servicer and the Collateral
Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms of the
Credit Agreement.
"Collection Account Bank" means the bank at which
-----------------------
the Collection Account is maintained.
"Collection Date" means the date following the
---------------
Termination Date on which (i) the aggregate outstanding
Triple-A Loans have been paid in full, (ii) each of Triple-A
and CapMAC has received all interest, fees and other amounts
payable under the Credit Agreement and the other Facility
Documents, (iii) the Surety Bonds have been discharged (other
than through payment thereunder), and (iv) all other
Obligations outstanding under the Credit Agreement and the
other Facility Documents (other than the Subordinated Note)
have been paid in full.
"Collections" means, with respect to any Pledged
-----------
Contract, all cash collections and other cash proceeds of such
Pledged Contract, including, without limitation, (i) all
Payments or recoveries made to the Lock-Box Accounts or
received by the Borrower or the Servicer in respect of such
Pledged Contract, (ii) any Insurance Proceeds relating to such
Pledged Contract, and (iii) the deposit into the Collection
Account of the Release Price in respect of such Pledged
Contract in accordance with the terms of Section 7.11 of the
Credit Agreement.
"Commercial Paper Notes" means the short-term
----------------------
promissory notes of Triple-A denominated in dollars, and
issued from time to time, including, without limitation, the
Transaction Commercial Paper Notes.
"Contract" means an interval ownership or lot
--------
contract agreement and installment note relating to the sale
of one or more VOI's or Lots to an Obligor, together with any
separate Obligor's installment note for the payment of the
balance of the purchase price thereof.
"Contract Conveyance Documents" means, with respect
-----------------------------
to each Contract Granted by the Borrower to the Collateral
Agent on the Closing Date, or any Subsequent Contract Grant
Date, the following documents:
(a) an original assignment or assignments, in
recordable form, of such Contract and certain related
property from FCI to FAC, and from FAC to the Borrower,
in one of the forms attached to the Credit Agreement as
Exhibit B;
---------
(b) an original collateral assignment or
assignments, in recordable form, of such Contract and
certain related property from the Borrower to the
Collateral Agent in the form attached to the Credit
Agreement as Exhibit C;
---------
(c) if the related VOI or Lot has been deeded to
the Obligor, an original Assignment or Assignments of
Mortgage, in recordable form, assigning any Mortgage
related to such Contract from FCI to FAC and from FAC to
the Borrower, in one of the forms attached to the Credit
Agreement as Exhibit D;
---------
(d) if the related VOI or Lot has been deeded to
the Obligor, an original Assignment or Assignments of
Mortgage, in recordable form, collaterally assigning any
Mortgage related to such Contract from the Borrower to
the Collateral Agent, in the form attached to the Credit
Agreement as Exhibit E;
---------
(e) if the Contract financed the purchase by the
Obligor of Credit Life Insurance, an original
acknowledgment signed by the issuer or its authorized
agent of any Credit Life Insurance of the assignment of
the Borrower's rights therein pursuant to the Credit
Agreement in the form delivered to the Collateral Agent
on the Closing Date; and
(f) in the case of any Subsequent Contract Grant
Date, any such other documents, instruments or agreements
as may be required by the Collateral Agent in order to
more fully effect the Grant of any relevant Contracts and
any related Collateral.
"Contract Documents" means the Contract and all
------------------
papers and documents related to a Contract, including all
applicable promissory notes endorsed in blank, the original of
any related recorded or unrecorded Mortgage and a copy of any
recorded or unrecorded warranty deed transferring legal title
to the related VOI or Lot to the Obligor, tax receipts,
insurance policies, insurance premium receipts, ledger sheets,
payment records, insurance claim files and correspondence,
repossession files and correspondence, the original of any
related assignment, modification or assumption agreement or,
if such original is unavailable, a copy thereof, current and
historical computerized data files, and all other papers and
records of whatever kind or description, whether developed or
originated by FAC, FCI or another, required to document,
service or enforce a Contract.
"Contract File" means the Contract Documents
-------------
pertaining to a particular Pledged Contract and any additional
amendments, supplements, extensions, modifications or waiver
agreements required to be added to the Contract File pursuant
to the Credit Agreement, Credit Standards and Collection
Policies and/or Customary Practices.
"Contract Financing" means any indebtedness or
------------------
obligation of FAC primarily secured by Contracts.
"Contract Pool" means all Contracts Granted or
-------------
purported to be Granted to the Collateral Agent by the
Borrower for the benefit of each of the Collateral Agent, the
Administrative Agent, Triple-A and the Surety pursuant to the
Credit Agreement, the Contract Conveyance Documents and any of
the other Facility Documents relating thereto, as identified
in the Contract Schedule, and shall include all Remarketing
Contracts Granted or purported to be Granted to the Collateral
Agent by the Borrower pursuant to the Remarketing Agreement to
the extent described in Section 7.12(b) of the Credit
Agreement.
"Contract Pool Principal Balance" means, as of the
-------------------------------
date of determination, the aggregate Principal Balance of all
Contracts in the Contract Pool on such date.
"Contract Rate" means, with respect to a Pledged
-------------
contract, the annual rate at which interest accrues on such
Pledged Contract, as modified from time to time in accordance
with (a) the terms of PAC (if applicable) or (b) the terms of
such Pledged Contract, if such Pledged Contract provides for a
variable interest rate.
"Contract Schedule" means the Pledged Contract list,
-----------------
attached hereto as Schedule 1, as amended from time to time on
----------
each Subsequent Contract Grant Date, and as provided in
Sections 5.01(u), 7.11(c) and 7.12(b) of the Credit Agreement,
--------------- ------------------
which list shall set forth the following information with
respect to each contract therein as of the applicable date:
(a) the Contract number;
(b) the Obligor's name;
(c) the Development in which the related VOI or Lot
is located;
(d) as to fixed VOIs, the building, unit and week
thereof, as to undivided interest VOIs, the
phase number thereof; and as to Lots, the
subdivision, block and number thereof;
(e) the current Contract Rate together with a
notation of any variable rate Contracts;
(f) whether the Obligor has elected PAC with
respect to the Contract;
(g) whether the Obligor is covered by a policy of
Credit Life Insurance and the amount of any
insurance premium for such policy financed
pursuant to the Contract;
(h) the original term of the Contract;
(i) the original and outstanding (as of the
applicable Cut-Off Date) Principal Balance;
(j) the date of execution of the Contract;
(k) the amount of the Payments on the Contract;
(l) the original Sales Price; and
(m) whether the related VOI or Lot has been deeded
to the Obligor.
"CP Dealer Fee" means, on any day, the fees payable
-------------
to the Dealer in respect of any Transaction Commercial Paper
Notes.
"CP Disruption" means the inability of Triple-A, at
-------------
any time, whether as a result of a prohibition or any other
event or circumstance whatsoever, to raise funds through the
issuance of its commercial paper notes (whether or not
constituting Transaction Commercial Paper Notes) in the United
States commercial paper market.
"Credit Life Insurance" means any policy of
---------------------
insurance acquired by the Obligor providing for payment of the
principal amount outstanding under a Contract upon the
Obligor's death.
"Credit Life Insurance Proceeds" means proceeds of,
------------------------------
or any unearned premium recovered in respect of, any Credit
Life Insurance received by the Servicer, which shall
constitute Collections.
"Credit Standards and Collections Policies" means
-----------------------------------------
the Credit Standards and Collections Policies of FAC and FCI,
a copy of which is attached to the Credit Agreement as Exhibit
-------
F, as the same may be amended from time to time in accordance
-
with the provisions of Section 5.02(c) of the Credit
Agreement.
"Custodial Agreement" means, collectively, the
-------------------
Fourth Amended and Restated Custodial Agreement, dated as of
March 28, 1995, among FAC, FCI, the Borrower, the Collateral
Agent, Triple-A, FNBB, as "Agent" and "Lender", First
Commercial Trust Company, N.A. as "Custodian", the Bailment
Agreement (attached thereto as Exhibit "B") by and between FCI
and the Custodian, and the Lease and Access Agreement
(attached thereto as Exhibit "A") by and among the Borrower
and the Custodian, each as executed and in effect on the
Closing Date in the form approved by the Collateral Agent, and
as the same may be amended, supplemented or otherwise modified
from time to time thereafter in accordance with the terms of
the Credit Agreement.
"Custodian" means, at any time, the "Custodian"
---------
under the Custodial Agreement at such time.
"Customary Practices" means the Borrower's, the
-------------------
Servicer's and/or FCI's practices, as applicable, with respect
to the servicing and administration of Contracts as in effect
from time to time, which practices shall be consistent with
the practices employed by prudent lending institutions which
originate and service instruments and agreements similar to
the Contracts or other timeshare loans in the jurisdictions in
which the Developments are located, so long as such practices
are in the best interests of Triple-A. In no event shall
Customary Practices include any deferral of Payments due under
any Pledged Contract except for Permitted Deferrals.
"Cut-Off Date" means (a) with respect to the Closing
------------
Date, March 31, 1995, or (b) with respect to each Subsequent
Contract Grant Date, such date as the Collateral Agent and the
Borrower shall mutually agree.
"Dealer" or "Commercial Paper Dealer" Any dealer or
-----------------------------------
placement agent of the Commercial Paper Notes.
"Debt" of any Person means (a) indebtedness of such
----
Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d)
obligations of such Person as lessee under leases which have
been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (e)
obligations secured by any lien or other charge upon property
or assets owned by such Person, even though such Person has
not assumed or become liable for the payment of such
obligations, (f) obligations of such Person under direct or
indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, indebtedness or
obligations of others of the types referred to in clauses (a)
through (e) above, and (g) liabilities in respect of unfunded
vested benefits under plans covered by Title IV of the
Employee Retirement Income Security Act of 1974, as amended.
"Debtor Relief Laws" means the Bankruptcy Code and
------------------
all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency,
reorganization, suspension of payments, or similar debtor
relief laws from time to time in effect affecting the rights
of creditors generally.
"Defaulted Contract" means any Pledged Contract (a)
------------------
with any Payment delinquent 60 days or more as of any
Determination Date, (b) with respect to which the Servicer
shall have determined in good faith that the Obligor will not
resume making Payments, (c) with respect to which the related
Obligor is subject to an Insolvency Event, (d) which has
become a Defective Contract and as to which the Borrower has
failed to pay the Release Price pursuant to Section 7.11 of
the Credit Agreement on the due date therefor, or (e) which
has otherwise become a Cancelled Contract.
"Defaulted Contract Release Date" has the meaning
-------------------------------
assigned to such term in Section 7.11(b) of the Credit
Agreement.
"Defective Contract" has the meaning assigned to
------------------
such term in Section 7.11(a) of the Credit Agreement.
"Defective Contract Release Date" has the meaning
-------------------------------
assigned to such term in Section 7.11(a) of the Credit
Agreement.
"Delinquent Contract" means any Pledged Contract
-------------------
with any Payment delinquent more than 30 days (regardless of
any Permitted Deferrals occurring during such period) at any
time of determination.
"Depository Institution" means a depository
----------------------
institution or trust company, incorporated under the laws of
the United States or any State thereof, that is subject to
supervision and examination by federal and/or state banking
authorities.
"Determination Date" means the 15th day and the last
------------------
day of each calendar month.
"Developments" means each FCI resort or development
------------
listed on Appendix B to the Credit Agreement.
"DOL" means the United States Department of Labor
---
and any successor department or agency.
"Eligible Contract" means, except as otherwise
-----------------
approved by the Administrative Agent and the Liquidity Agent,
a Pledged Contract:
(a) (i) Where the related VOI or Lot is located in
a Development, (ii) where the unit for a
related VOI is complete and ready for occupancy
and is not in need of maintenance or repair,
except for ordinary, routine maintenance and
repairs which are not substantial in nature or
cost and where such unit contains no structural
defects materially affecting its value and is
in good tenantable condition, (iii) where the
related VOI Regime is contiguous to a
dedicated, physically-open, all-weather street,
and is adequately serviced by public (or
private if complying with all material and
applicable local laws, regulations and
ordinances) water and sewer systems and
utilities, (iv) where the related VOI Regime is
not in need of maintenance or repair, except
for ordinary, routine maintenance and repairs
which are not substantial in nature or cost and
where such VOI Regime contains no structural
defects materially affecting its value, and (v)
where there is no legal, judicial or
administrative proceeding pending or threatened
for the total or partial condemnation of any
VOI Regime which would have a material adverse
effect on the value of the related VOI Regime
or unit;
(b) Where the rights of the Obligor thereunder are
subject to declarations, covenants and
restrictions of record affecting the
Development, including any Contract where the
rights of the Obligor thereunder have been
subjected to the FairShare Plus Program;
(c) As to which the Borrower has a valid ownership
interest in the related VOI or Lot subject only
to (i) the interest therein of the Obligor or
Nominee, as the case may be, (ii) the Lien of
unbilled and unpaid Assessments, (iii)
covenants, conditions and restrictions, rights
of way, easements and other matters of public
record, such exceptions appearing of record
being consistent with the normal business
practices of FAC and FCI or specifically
disclosed in the applicable land sales
registrations filed with the applicable
regulatory agencies, and (iv) other matters to
which properties of the same type as those
underlying the Contracts are commonly subject
which do not materially interfere with the
benefits of the security intended to be
provided by such Contract;
(d) Where (i) if the related VOI or Lot has been
deeded to the Obligor of the related Contract,
on the date on which such Contract was Granted
to the Collateral Agent the Borrower has a
valid and enforceable first lien Mortgage on
such VOI or Lot, which Mortgage shall be
assigned to the Collateral Agent for the
benefit of itself, the Administrative Agent,
Triple-A and the Surety pursuant to the
Contract Conveyance Documents, (ii) if the
related VOI or Lot has not been deeded to the
Obligor of the related Contracts, on the date
on which such Contract was Granted to the
Collateral Agent, the Nominee has legal title
to such VOI or Lot and the Borrower has an
equitable interest in such VOI or Lot
underlying the related Contract, which
equitable interest shall be assigned to the
Collateral Agent for the benefit of Triple-A
pursuant to the Contract Conveyance Documents,
and (iii) if any Mortgage is a deed of trust, a
trustee, duly qualified under applicable law to
serve as such, had been properly designated in
accordance with applicable law and currently so
serves;
(e) That requires the Obligor to pay the unpaid
principal balance over a remaining term from
November 15, 1994 of not greater than 60
months;
(f) That requires the Obligor to pay the unpaid
principal balance over an original term of not
greater than 120 months;
(g) Where, as of the E&Y Audit Date, at least 30
months had elapsed from the date on which such
Contract was entered into;
(h) Where Payments are denominated and payable in
United States dollars;
(i) Which is not a Defective Contract or a
Defaulted Contract;
(j) Which (i) as of the E&Y Audit Date was not a
Delinquent Contract, and (ii) no Payment
required to be made thereunder was, more than
once during the 18 months preceding the E&Y
Audit Date, delinquent for 60 days or more;
(k) As to which, if the Contract finances the
purchase by Obligor of Credit Life Insurance,
(i) such policy is in full force and effect and
has been validly and effectively assigned by
way of security, pursuant to all applicable
laws, rules and regulations, to the Collateral
Agent, (ii) the full premium therefor has been
paid, and (iii) the insurance company issuing
such policy or guaranteeing payment under such
policy to the relevant insured parties and
their respective assignees is rated "A" by A.M.
Best Company, Inc.;
(l) The underlying ownership interest which is the
subject of such Contract (A) either (i)
consists of a fixed week, or (ii) is an
undivided interest in a fee simple (or, in the
case of Harbortown Marina Resort Hotel
Development in Ventura County California or the
Pagosa Mountain Meadows VOI Regime at the
Pagosa Development in Archuleta County,
Colorado, an undivided leasehold interest) in a
lodging unit or group of lodging units at a
Development, or (iii) is a lot at a
Development, and (B) in the case of a fixed
week which has been converted into an undivided
interest in a fee simple or a leasehold
interest, or which has become subject to the
FairShare Plus Program, which conversion or
other modification does not give rise to the
extension of the maturity of any Payments under
such Contract;
(m) (i) Where the ratio of (A) the excess of the
Sales Price of the related VOI or Lot over the
Principal Balance of such Contract, to (B) the
Sales Price of the related VOI or Lot (the
"Equity Percentage" of such Contract) is
-----------------
greater than or equal to 30%;
(n) Which has been transferred (x) by FCI to FAC
pursuant to the Operating Agreement, and (y)
and by FAC to the Borrower pursuant to the
Receivables Purchase Agreement, in each case on
terms and conditions acceptable to the
Collateral Agent;
(o) Which was originated and has been consistently
serviced in accordance with Customary Practices
and Credit Standards and Collections Policies;
(p) Which has not been specifically reserved
against by FAC, FCI or the Borrower, and has
not been classified by FAC, FCI or the Borrower
as uncollectible or charged off;
(q) As to which the payment obligation of the
Obligor is not subject to any material dispute
between the Obligor and any of the Borrower,
the Servicer, FAC and/or FCI;
(r) Which arises from transactions in a
jurisdiction where FCI, and each Subsidiary of
FCI which conducts business in such
jurisdiction, is duly qualified to do business
in such jurisdiction, absent a demonstration to
the satisfaction of the Collateral Agent (in
the exercise of its sole discretion) that the
legality, validity, binding effect and
enforceability of such Pledged Contract has not
been impaired by such condition;
(s) Which is substantially in the form of Exhibit G
---------
to the Credit Agreement or in a form containing
material variations from such form which has
been approved in writing by the Collateral
Agent, in the exercise of its sole discretion;
(t) Which have not been cancelled or terminated
(regardless of whether the Obligor thereof is
legally entitled to do so) or declared
ineligible by any of the Borrower, the
Servicer, FAC or FCI, and constitute legal,
valid, binding and enforceable obligations of
the Obligors thereof;
(u) As to which no installments payable thereunder
have been deferred (except for Permitted
Deferrals) subsequent to November 21, 1994;
(v) Where each Obligor has a United States mailing
address, or is a participant in PAC using a
United States bank; and
(w) Where the Obligor is not an Affiliate of any of
FCI, FAC or the Borrower.
"Eligible Contract Pool Principal Balance" means, as
----------------------------------------
of any date of determination, the aggregate Principal Balances
of all Eligible Contracts in the Contract Pool; provided,
--------
however, that in the case of any Pledged Contract which is not
-------
an Eligible Contract as a result solely of the application of
any of the criteria set forth under any of clauses (e), (f),
-----------------
(g), (j), (m) or (v) of the definition of "Eligible Contract"
-------------------
set forth in this Definitions List, the Principal Balance of
such Contract shall nevertheless be included in the
calculation of "Eligible Contract Pool Balance" to the extent
---------------------
that the following statements are true:
(i) the existence of the condition(s) giving
rise to such failure to satisfy the above-listed
eligibility criteria shall have been identified in
any of Exhibits B [Summary by Age of Contract], E
[Summary of Geographical Distribution of Obligors],
G [Summary by Equity Percentage], K [Summary by Year
of Origination], L [Summary of Original Terms], and
M [Summary of Months to Maturity] to the E&Y Audit
Report; and
(ii) the extent to which all Pledged Contracts
in the Contract Pool, taken as a whole, were subject
to each such condition was accurately calculated and
described in the E&Y Audit Report as of the E&Y
Audit Date.
"Eligible Depository Institution" means a Depository
-------------------------------
Institution, the short term unsecured senior indebtedness of
which is rated at least A-1 by S&P and P-1 by Moody's.
"Equity Percentage" has the meaning assigned to such
------------------
term under clause (m) of the definition of the term "Eligible
---------
Contracts" set forth in this Definitions List.
"ERISA" means the U.S. Employee Retirement Income
-----
Security Act of 1974, as amended from time to time, and any
successor statute.
"ERISA Affiliate" means any (i) corporation which is
---------------
a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the IRC) as FAC, FCI or the
Borrower; (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning
of Section 414(c) of the IRC) with FAC, FCI or the Borrower or
(iii) member of the same affiliated service group (within the
meaning of Section 414(m) of the IRC) as FAC, FCI or the
Borrower, any corporation described in clause (i) above or any
partnership or other trade or business described in clause
(ii) above.
"Eurocurrency Liabilities" has the meaning assigned
------------------------
to that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Rate" means for a Eurodollar Rate
---------------
Advance and the relevant Interest Period, an interest rate per
annum equal to an interest rate per annum determined by the
Liquidity Agent equal to the quotient of (i) the rate at which
it would offer deposits in United States dollars to prime
banks in the London interbank market for a period equal to
such Interest Period and in a principal amount of not less
than $1,000,000 at or about 11:00 A.M. (London time) on the
second Business Day before (and for value on) the first day of
such Interest Period, divided by, (ii) one minus the
Eurodollar Reserve Percentage (expressed as a decimal)
applicable to the Liquidity Agent for that Interest Period.
"Eurodollar Rate Advance" means an Advance which
-----------------------
bears interest at a rate per annum calculated by reference to
the Eurodollar Rate.
"Eurodollar Reserve Percentage" of any Liquidity
-----------------------------
Bank for the Interest Period for any Eurodollar Rate Advance
means the reserve percentage applicable during such Interest
Period (or, if more than one such percentage shall be so
applicable, the daily average of such percentages for those
days in such Interest Period during which any such percentage
shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such
Liquidity Bank with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a
term equal to such Interest Period.
"Event of Default" has the meaning assigned to such
----------------
term in Section 9.01 of the Credit Agreement.
"E&Y Audit Report" means the letter from Ernst &
----------------
Young LLP to FAC dated December 9, 1994, together with each of
the exhibits attached thereto.
"E&Y Audit Date" means November 15, 1994.
--------------
"FAC" means Fairfield Acceptance Corporation, a
---
Delaware corporation.
"FAC Liquidity Requirements" means, as of the next
--------------------------
preceding quarter-end for which a balance sheet and statements
of income and cash flows are available from FAC in accordance
with Section 6.02(a) of the Credit Agreement, (a) a minimum
net worth of $18,000,000, (b) a debt-to-equity ratio of not
more than
7-to-1 including any Contract Financing in "debt", and (c) a
debt-to-equity ratio of not more than 4-to-1 excluding any
Contract Financing from "debt".
"Face Amount" means (i) with respect to any
-----------
Commercial Paper Notes issued on a discount basis, the face
amount of any such Commercial Paper Notes and (ii) with
respect to any Commercial Paper Notes issued on an interest-
bearing basis, the sum of the principal amount thereof and the
amount of all interest stated to accrue thereon through the
stated maturity date.
"Facility Documents" means, collectively, the
------------------
Receivables Purchase Agreement, the Credit Agreement, the
Triple-A Note, the Custodial Agreement, the Lock-Box
Agreements, the Collection Account Agreement, the Title
Clearing Agreements, the Contract Conveyance Documents, the
Insurance Agreement, the Surety Bonds, the Liquidity
Agreement, the Liquidity Security Agreement, the Remarketing
Agreement, the Administrative Services, Lease and Operating
Agreement, the Subordinated Note, the Tax Sharing Agreement,
the Interest Rate Hedge and the Interest Rate Hedge
Assignment, the Financing Statements, and all other
agreements, documents and instruments delivered pursuant
thereto or in connection therewith.
"Facility Limit" means $21,400,000, as such amount
--------------
may be reduced pursuant to Section 2.04.
------------
"FairShare Plus Program" means the marketing program
----------------------
pursuant to which the occupancy and use of a VOI is assigned
to the trust created by the FairShare Vacation Plan Use
Management Trust Agreement dated as of June 26, 1991 among
FCI, certain of its predecessor subsidiaries (including
Fairfield Harbour, Inc., Fairfield in the Carolinas, Inc.,
Fairfield Ocean Ridge, Inc., Fairfield Sunrise Village, Inc.,
Fairfield Pagosa, Inc., Fairfield Plantation, Inc., and
Fairfield Williamsburg, Inc.), Fairfield Myrtle Beach, Inc.,
and such other subsidiaries and third party developers as may
be named by an amendment or addendum thereto, in exchange for
annual symbolic points which are used to establish the
location, timing, length of stay and unit type of a vacation.
"FCI" means Fairfield Communities, Inc., a Delaware
---
corporation and the parent of FAC.
"Federal Funds Rate" means, for any day, a
------------------
fluctuating interest rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average
of the quotations for such day for such transactions received
by the Liquidity Agent from three Federal funds brokers of
recognized standing selected by it.
"FFC" means Fairfield Funding Corporation, a
---
Delaware corporation.
"Financing Statements" means, collectively, the UCC-
--------------------
1 financing statements, and the UCC-2 and UCC-3 amendment,
partial release and termination statements, to be executed and
delivered in connection with any of the transactions
contemplated hereby or any of the other Facility Documents
(including, without limitation, the financing statements
identified on Exhibit O to the Credit Agreement).
---------
"FNBB" means the First National Bank of Boston,
----
individually and as Agent.
"FNBB Agreement" means the Third Amended and
--------------
Restated Revolving Credit Agreement, dated as of September 28,
1993 between FAC and FNBB, as amended pursuant to the First
Amendment to Third Amended and Restated Revolving Credit
Agreement, dated as of December 9, 1994, between FAC and FNBB
and the Second Amendment to Third Amended and Restated
Revolving Credit Agreement, dated as of December 19, 1994,
between FAC and FNBB.
"GAAP" means generally accepted accounting
----
principles that are (i) consistent with the principles
promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time,
and (ii) consistently applied with past financial statements
of FCI and its Subsidiaries adopting the same principles,
provided that a certified public accountant would, insofar as
--------
the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted
accounting principles) as to financial statements in which
such principles have been properly applied.
"Grant" means, as to any asset or property, to
-----
pledge, assign and grant a security interest in such asset or
property. A Grant of a Contract and the related Contract File
or any instrument, agreement, account or other item of
Collateral shall include all rights, powers and options of the
Granting party thereunder or with respect thereto, including
without limitation the immediate and continuing right to
claim, collect, receive and give receipt for principal,
interest and other payments in respect of the Pledged
Contracts, principal and interest payments and receipts in
respect of the Eligible Investments, Insurance Proceeds,
purchase prices and all other moneys payable thereunder and
all income, proceeds, products, rents and profits thereof, to
give and receive notices and other communications, to make
waivers or other agreements, to exercise all such rights and
options, to bring proceedings in the name of the Granting
party or otherwise, and generally to do and receive anything
which the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Indemnified Amounts" has the meaning assigned to
-------------------
such term in Section 11.05 of the Credit Agreement.
"Indemnified Party" has the meaning assigned to such
-----------------
term in Section 11.05 of the Credit Agreement.
"Insolvency Event" means, with respect to a speci-
----------------
fied Person, (a) the filing of a decree or order for relief by
a court having jurisdiction in the premises in respect of such
Person or any substantial part of its property in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or the
appointing of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or
for any substantial part of its property, or the ordering of
the winding-up or liquidation of such Person's business; or
(b) the commencement by such Person of a voluntary case under
any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by such Person to the
entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of
or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or the
making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due or the admission by
such Person of its inability to pay its debts generally as
they become due.
"Insolvency Proceeding" means any proceeding of the
---------------------
sort described in the definition of Insolvency Event.
"Insurance Policy" means any policy or contract of
----------------
insurance.
"Insurance Proceeds" means proceeds of any Insurance
------------------
Policy relating to any Pledged Contract, or the related VOI or
Lot, to the extent such proceeds are not either to be applied
to the restoration of any improvements on the related VOI or
Lot or released to the Obligor in accordance with Customary
Practices, including any refund of unearned premium.
"Interest Payment Date" means, with respect to any
---------------------
Triple-A Loan, the last day of the Interest Period then
applicable to such Triple-A Loan.
"Interest Period" means, with respect to any
---------------
Triple-A Loan, commencing on the date such Triple-A Loan is
advanced until the Interest Payment Date therefor, and
thereafter commencing on the last day of the then existing
Interest Period for such Triple-A Loan until the next Interest
Payment Date therefor, a period selected by the Administrative
Agent and notified to the Borrower in accordance with Section
-------
2.03(b) of the Credit Agreement. Such Interest Period shall
------
be:
(i) if such Triple-A Loan is funded through the
issuance of Transaction Commercial Paper Notes, a period
of from 1 to 90 days;
(ii) if such Triple-A Loan is funded through Base
Rate Advances, a period of from 1 to 30 days;
(iii) if such Triple-A Loan is funded through
Eurodollar Rate Advances, a period of one, two or three
months;
provided, however, that
-------- -------
(x) whenever the last day of an Interest Period
would otherwise occur on a day other than a Business Day,
the last day of such Interest period shall be extended to
occur on the next succeeding Business Day, unless such
extension would cause the last day of an Interest Period
described in clause (iii) above to occur in the next
following calendar month, in which event the last day of
such Interest Period shall be deemed to occur on the
immediately preceding Business Day;
(y) whenever an Interest Period described in clause
(iii) above commences on the last Business Day in a month
or on a date for which there is no numerically
corresponding day in the month in which such Interest
Period would otherwise end, the last day of such Interest
Period shall occur on the last Business Day of the month
in which such Interest Period ends; and
(z) no Interest Period described in clause (iii)
above may end later than the Scheduled Termination Date.
"Interest Rate Hedge" means the interest rate cap
-------------------
agreement entered into by FAC and the Swap Provider, dated as
of December 9, 1994, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the
terms of the Credit Agreement, and any replacement agreement
therefor entered into with the prior written consent of the
Collateral Agent.
"Interest Rate Hedge Assignment" means an assignment
------------------------------
in substantially the form of Exhibit H to the Credit Agreement
---------
pursuant to which FAC assigns to the Borrower, and the
Borrower assigns by way of security to the Collateral Agent,
all of its respective right, title and interest in and to the
Interest Rate Hedge.
"IRC" means the Internal Revenue Code of 1986, as
---
amended from time to time, and any successor statute.
"IRS" means the Internal Revenue Service of the
---
United States of America.
"Legal Fee Letter" has the meaning assigned to such
----------------
term in Section 13.07(a) of the Credit Agreement.
---------------
"Lien" means any mortgage, deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any
confidential sale or other title retention agreement, any
financing lease having substantially the same economic effect
as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code (other than any
such financing statement filed for informational purposes
only) or comparable law of any jurisdiction to evidence any of
the foregoing.
"Liquidity Agent" means Banco Santander, in its
---------------
capacity as the agent for the Liquidity Banks under the
Liquidity Agreement.
"Liquidity Agreement" means that certain Liquidity
-------------------
Agreement dated as of March 28, 1995 by and among Triple-A,
the Liquidity Banks party thereto and the Liquidity Agent, as
the same may be amended, supplemented or otherwise modified
from time to time.
"Liquidity Banks" means the financial institutions
---------------
party to the Liquidity Agreement as "Liquidity Banks"
thereunder.
"Liquidity Security Agreement" means that certain
----------------------------
Liquidity Security Agreement dated as of March 28, 1995 by and
among Triple-A, CapMAC and Banco Santander, in its capacity as
the Liquidity Agent and as "Liquidity Collateral Agent" under
the Liquidity Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Lock-Box Account" means an account maintained at a
----------------
Lock-Box Bank, subject to a Lock-Box Agreement, for the
purpose of receiving Collections.
"Lock-Box Agreement" means the agreements, in
------------------
substantially the form of Exhibit I hereto, among the
---------
Borrower, the Collateral Agent, and the applicable Lock-Box
Bank (and if required by the Collateral Agent, the Servicer)
which agreement sets forth the rights of the Collateral Agent,
the Borrower and the applicable Lock-Box Bank with respect to
the disposition and application of the Collections received
into the applicable Lock-Box Account, including, without
limitation, the right of the Collateral Agent to direct the
Lock-Box Bank to remit all Collections directly to the
Collateral Agent.
"Lock-Box Bank" means any of the banks holding one
-------------
or more lock-box accounts for receiving Collections from the
Receivables.
"Lot" means any Development lot related to a Pledged
---
Contract.
"Maturity Date" means the earliest to occur of (i)
-------------
the Scheduled Termination Date, (ii) the date on which all
amounts owing under Triple-A Loans hereunder are accelerated
and become due and payable pursuant to Section 9.02 of the
------------
Credit Agreement, and (iii) the date on which all amounts of
principal and interest then outstanding under the Triple-A
Loans would be required to be repaid as a result of
application of amounts on deposit in the Collection Account
pursuant to Section 7.06 of the Credit Agreement.
------------
"Minimum O/C Amount" means $1,000,000.
------------------
"Moody's" means Moody's Investor Service, Inc., and
------
any successor thereto.
"Mortgage" means any mortgage, deed of trust,
--------
purchase money deed of trust or deed to secure debt granted by
an Obligor to the originator of the Contract encumbering the
related VOI or Lot to secure Payments or other obligations
under such Contract.
"Multiemployer Plan" means a "multiemployer plan" as
------------------
defined in Section 4001(a)(3) of ERISA which is, or within the
immediately preceding six (6) years was, contributed to by
either the Seller or any ERISA Affiliate.
"Nominee" means (a) Lawyer's Title Insurance
-------
Corporation under the Fifth Amended and Restated Title
Clearing Agreement (Lawyer's), dated as of March 28, 1995, as
amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof, by and among FCI, FAC,
the Collateral Agent, First Commercial Trust Company, N.A.,
FNBB and Lawyers Title Insurance Corporation; (b) Colorado
Land Title Company under the Third Amended and Restated Title
Clearing Agreement (Colorado), dated as of March 28, 1995, as
amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof, by and among FCI, FAC,
the Collateral Agent, First Commercial Trust Company, N.A.,
FNBB and Colorado Land Title Company; (c) Lawyer's Title
Insurance Corporation under the Third Amended and Restated
Title Clearing Agreement (Westwinds), dated as of November 15,
1992, as amended by a First Amendment, dated as of September
28, 1993 and a Second Amendment, dated as of March 28, 1995,
as amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof, by and among FCI,
FAC, Fairfield Myrtle Beach, Inc., the Collateral Agent, First
Commercial Trust Company, N.A., FNBB and Lawyer's Title
Insurance Corporation; and (d) First American Title Insurance
Company under the Third Amended and Restated Supplementary
Trust Agreement (Arizona), dated as of March 28, 1995, as
amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof, by and among FCI, FAC,
the Collateral Agent, First Commercial Trust Company, N.A.,
FNBB and First American Title Insurance Company.
"Nonrecoverable Advance" means any portion of a
----------------------
Servicer Advance made or to be made in respect of a Pledged
Contract which has not been previously reimbursed to the
Servicer and which, in the reasonable good faith judgment of
the Servicer, will not be ultimately recoverable from Payments
or other recoveries in respect of such Contract. The
determination by the Servicer that it has made a
Nonrecoverable Advance shall be evidenced by a certificate of
a Servicing Officer delivered to the Collateral Agent and
detailing the reasons for such determination.
"Notice of Borrowing" has the meaning assigned to
-------------------
such term in Section 2.03 of the Credit Agreement.
------------
"Obligations" means all present and future
indebtedness and other liabilities and obligations (howsoever
created, arising or evidenced, whether direct or indirect,
absolute or contingent, or due or to become due) of the
Borrower to Triple-A, the Collateral Agent, the Administrative
Agent, the Surety and/or the Indemnified Parties, arising
under or in connection with the Credit Agreement, the Triple-A
Note, the Fee Letter, the Insurance Agreement and any other
Facility Documents to which it is a party or the transactions
contemplated thereby and shall include, without limitation,
all liability for principal of and interest on the Triple-A
Loans, prepayment premiums, closing fees, audit fees, expense
reimbursements, indemnifications, and other amounts due or to
become due under the Facility Documents, including, without
limitation, interest, premiums, fees and other obligations
that accrue after the commencement of an Insolvency Proceeding
(in each case whether or not allowed as a claim in such
Insolvency Proceeding).
"Obligor" means, with respect to any Contract, the
-------
Person or Persons obligated to make Payments thereon.
"O/C Shortfall" means at any time, the excess, if
-------------
any, of the Minimum O/C Amount over an amount equal to (i) the
Eligible Contract Pool Principal Balance in effect on such
Business Day, minus (ii) the then outstanding principal amount
of the Triple-A Loans.
"Officer's Certificate" means a certificate signed
---------------------
by the President, any Senior Vice President or the Treasurer
of the Borrower or the Servicer, as the case may be.
"Operating Agreement" means the Third Amended and
-------------------
Restated Operating Agreement, dated as of December 9, 1994,
between FCI and FAC, as the same may be amended, supplemented
or otherwise modified from time to time thereafter.
"Opinion of Counsel" means a written opinion of
------------------
independent counsel, in form and substance satisfactory to the
Collateral Agent, which independent counsel may be regular
outside counsel for the Borrower, the Servicer or the
Collateral Agent.
"Other Parties" has the meaning assigned to such
-------------
term in Section 12.01 of the Credit Agreement.
"Other Taxes" has the meaning assigned to such term
-----------
in Section 2.10(b) of the Credit Agreement.
"PAC" means the arrangement whereby an Obligor makes
---
Payments under a Contract via pre-authorized debit in exchange
for a 1% per annum reduction in the Contract interest rate.
"Payment" means the scheduled monthly, quarterly,
-------
semi-annual or annual payment of principal and interest on a
Contract.
"PBGC" means the Pension Benefit Guaranty
----
Corporation and any Person succeeding to the functions
thereof.
"Permitted Deferral" means the grant of an extension
------------------
of Payments on a Contract; provided, however, (a) Obligors may
-------- -------
not be solicited for an extension, (b) such extension must be
a Customary Practice and made in accordance with Credit
Standards and Collections Policies, and (c) a Pledged Contract
may not be extended subsequent to November 21, 1994 (i) on
more than two separate occasions or (ii) for an aggregate
period of more than 60 days.
"Permitted Investments" means (i) securities issued
---------------------
or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof
having maturities on or before the first Settlement Date after
the date of acquisition; (ii) time deposits and certificates
of deposit having maturities on or before the first Settlement
Date after the date of acquisition, maintained with or issued
by any commercial bank having capital and surplus in excess of
$500,000,000 and having a short term senior unsecured debt
rating of at least A-1 by S&P, and at least P-1 by Moody's;
(iii) repurchase agreements having maturities on or before the
first Settlement Date after the date of acquisition for
underlying securities of the types described in clauses (i)
and (ii) above or clause (iv) below with any institution
having a short term senior unsecured debt rating of at least
A-1 by S&P, and at least P-1 by Moody's; and (iv) commercial
paper maturing on or before the first Settlement Date after
the date of acquisition and having a short term senior
unsecured debt rating of at least A-1 by S&P, and at least P-1
by Moody's.
"Person" means an individual, partnership, corpora-
------
tion (including a business trust), joint stock company, trust,
unincorporated association, limited liability company, joint
venture, government (or any agency or political subdivision
thereof) or other entity.
"Plan" means an employee benefit plan defined in
----
Section 3(3) of ERISA in respect of which the Seller or any
ERISA Affiliate is, or within the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA.
"Pledged Contract" means any Contract in the
----------------
Contract Pool, and shall include all Remarketed Contracts
Granted or purported to be Granted to the Collateral Agent by
the Borrower pursuant to the Remarketing Agreement to the
extent described in Section 7.12(b) of the Credit Agreement.
"Post Office Box" means each post office box to
---------------
which Obligors are directed to mail payments in respect of the
Pledged Contracts.
"Principal Balance" means, with respect to a
-----------------
Contract, and as of a date of determination, the unpaid
principal balance of such Contract on such date; provided that
--------
the amount of any such principal balance shall in all cases be
determined without duplication of amounts outstanding under
(x) the relevant interval ownership or lot contract agreement
and (y) any related installment note, which together
constitute one and the same "Contract".
"Purchase" means a purchase (whether by means of
--------
cash payment or by capital contribution) of Pledged Contracts
and related collateral and other property by the Borrower from
the Seller pursuant to Sections 2(a) and (b) of the
Receivables Purchase Agreement.
"Purchase Price" has the meaning assigned to such
--------------
term in Section 1 of the Receivables Purchase Agreement.
"Records" means all copies of Pledged Contracts (not
-------
including originals) and other documents, books, records and
other information (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software
and related property and rights) maintained by the Borrower or
the Servicer or any of their respective Affiliates with
respect to Pledged Contracts, the related Collateral, and the
related Obligors.
"Reimbursement Obligations" means, at any time, all
-------------------------
reimbursement or repayment obligations (and all interest
accrued thereon) then owing to the Surety under the Insurance
Agreement in respect of (i) any payments made by the Surety
under any Surety Bond or (ii) any payment or advance made by
the Surety in lieu of a payment under such related Surety Bond
in accordance with Section 3.02 of the Insurance Agreement.
"Release Price" means, with respect to a Pledged
-------------
Contract to be released hereunder, an amount equal to the
remaining Principal Balance outstanding on such Pledged
Contract as of the opening of business on the latest
Determination Date to occur prior to the Settlement Date on
which the release is to be effected hereunder, together with
accrued and unpaid interest thereon at the Contract Rate from
the earlier of (i) the last due date as to which the Obligor
paid interest under such Contract or (ii) such Determination
Date, to the date on which such release is made.
"Remarketed Contract" has the meaning assigned to
-------------------
such term in Section 2 of the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing
---------------------
Agreement, dated as of March 28, 1995, between FCI and the
Collateral Agent, in substantially the form of Exhibit J, as
---------
the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of the Credit
Agreement.
"Reportable Event" means any of the events described
----------------
in Section 4043 of ERISA.
"Sales Price" means, with respect to any Pledged
-----------
Contract, the total purchase price of the related VOI or Lot,
including any premium paid in respect of a policy of Credit
Life Insurance.
"Scheduled Liquidity Commitment Termination Date"
-----------------------------------------------
has the meaning assigned to that term in the Liquidity
Agreement.
"Scheduled Termination Date" means December 9, 1999.
--------------------------
"Secured Creditors" has the meaning assigned to such
-----------------
term in Section 12.01 of the Credit Agreement.
"Seller" means FAC.
------
"Servicer" means FAC, until any Service Transfer
--------
hereunder, and thereafter means the new servicer appointed
pursuant to Article X of the Credit Agreement.
---------
"Servicer Advance" means amounts required to be
----------------
advanced by the Servicer pursuant to Section 8.13 of the
Credit Agreement, equal to delinquent payments on any
Delinquent Contracts.
"Servicer Default" means the defaults specified in
----------------
Section 10.01 of the Credit Agreement.
"Servicer's Daily Report" shall have the meaning
-----------------------
specified in Section 6.01(a) of the Credit Agreement.
"Servicer Termination Notice" shall have the meaning
---------------------------
specified in Section 10.01 of the Credit Agreement.
"Servicer Transfer" means the transfer specified in
-----------------
Section 10.01 of the Credit Agreement.
"Servicing Fee" has the meaning assigned to that
-------------
term in Section 8.09 of the Credit Agreement.
"Servicing Officer" means any officer of the
-----------------
Servicer involved in, or responsible for, the administration
and servicing of the Pledged Contracts whose name appears on a
list of servicing officers furnished to the Collateral Agent
by the Servicer, as such list may be amended from time to
time.
"Settlement Date" means each of the fifth and the
---------------
20th day of each month; provided that in the event that such
day in any such month is not a Business Day, the "Settlement
Date" shall instead be the next succeeding Business Day to
occur after such fifth or 20th day, as the case may be;
provided further that the first Settlement Date shall be April
20, 1995.
"Settlement Period" means each period commencing on
------------------
the day next succeeding Settlement Date and ending on (and
including) the day of the next succeeding Settlement Date.
"Settlement Report" means a report, in substantially
-----------------
the form of Exhibit K to the Credit Agreement, furnished by
the Servicer to the Collateral Agent pursuant to Section
6.01(b) of the Credit Agreement.
"S&P" means Standard & Poors Ratings Group, a
---
division of McGraw-Hill Corporation, and any successor
thereto.
"Spread Account" has the meaning assigned thereto in
--------------
Section 7.07 of the Credit Agreement.
"Spread Account Bank" means the bank maintaining the
-------------------
Spread Account.
"Spread Account Requirement" means, at any time, the
--------------------------
greater of (i) the sum of (A) an amount equal to three percent
(3.0%) of the Contract Pool Principal Balance outstanding at
such time, and (B) the then outstanding aggregate Principal
Balance of all Defaulted Contracts which have not been
released from the Lien of the Credit Agreement by the
Collateral Agent pursuant to Section 7.11(b) of the Credit
Agreement (including all Defaulted Contracts required to be
released on the Settlement Date with respect to which the
Spread Account Requirement is being calculated), and (ii)
$400,000.
"Spread Account Shortfall" means, at any time, the
------------------------
excess (if any) of (i) the Spread Account Requirement in
effect at such time, over (ii) the outstanding balance of
funds on deposit in the Spread Account at such time.
"Subordinated Note" means the promissory note dated
-----------------
as of March 28, 1995, and made by the Borrower to the order of
FAC, as referred to in Section 10 of the Receivables Purchase
Agreement, and as the same may be amended supplemented or
otherwise modified from time to time in accordance with the
terms of the Credit Agreement.
"Subsequent Contract Grant Date" means each
------------------------------
Settlement Date occurring after the Closing Date on which the
Borrower determines, in the exercise of its sole discretion,
to Grant additional Pledged Contracts to the Collateral Agent
and to request an additional Borrowing from Triple-A in
respect thereof; provided that, absent the prior written
--------
consent of each of the Administrative Agent, the Collateral
Agent and Triple-A, there shall be no additional Borrowing
Dates or Subsequent Contract Grant Dates following the Closing
Date.
"Subsidiary" means, as to any Person, any corpora-
----------
tion or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of
the Board of Directors or other Persons performing similar
functions are at the time directly or indirectly owned by such
Person.
"Successor Servicer" means the servicer appointed
------------------
pursuant to Section 10.02 of the Credit Agreement.
"Surety" means CapMAC.
------
"Surety Bonds" means the Surety Bonds for the
------------
benefit of Triple-A and the Liquidity Banks to be issued by
the Surety under the Insurance Agreement.
"Swap Provider" means the First National Bank of
-------------
Boston, in its capacity as a party to the Interest Rate Hedge.
"Taxes" has the meaning assigned to such term in
-----
Section 2.10(a) of the Credit Agreement.
"Tax Sharing Agreement" means the Tax Sharing
---------------------
Agreement, dated as of March 28, 1995, among FAC and the
Borrower, in substantially the form of Exhibit L, as the same
---------
may be amended, supplemented or otherwise modified from time
to time in accordance with the terms of the Credit Agreement.
"Termination Date" means the earliest to occur of
----------------
the following events: (i) the declaration by the Borrower,
pursuant to at least two Business Days' prior written notice
to the Administrative Agent, of the occurrence of the
"Termination Date" hereunder, (ii) the occurrence of an Event
of Default described in Section 9.01(g) of the Credit
Agreement, (iii) the declaration by the Collateral Agent on
behalf of Triple-A, of the occurrence of the "Termination
Date" in the event of the occurrence of any Event of Default
other than an Event of Default described in Section 9.01(g) of
the Credit Agreement, and (iv) the Scheduled Termination Date.
"Title Clearing Agreement" means the Title Clearing
------------------------
Agreements described under the definition of "Nominee" set
forth in this Definitions List, or any similar such agreement
governing the obligations of any successor Nominee.
"Transaction Commercial Paper Notes" means the
----------------------------------
Commercial Paper Notes issued by Triple-A in connection with
the transactions contemplated by the Facility Documents,
including any portion of such short-term promissory notes that
are identified on the books and records of Triple-A as issued
in respect of the transactions contemplated by the Facility
Documents.
"Transferred Assets" means any and all right, title
------------------
and interest of the Borrower in, to or under:
(a) the Pledged Contracts, including, without
limitation, all Payments, other Collections and other
funds received with respect to the Pledged Contracts on
or after the applicable Cut-Off Date, and any other
monies due or to become due on or after the applicable
Cut-Off Date in respect of any such Pledged Contracts,
and any security therefor;
(b) the VOIs and Lots relating to such Pledged
Contracts, and the Title Clearing Agreements and the
FairShare Plus Program insofar as they relate to such
VOIs and Lots;
(c) any Mortgages relating to the Pledged
Contracts;
(d) any Insurance Policies (including, without
limitation, Credit Life Insurance) relating to the
Pledged Contracts;
(e) the Contract Files and other Records relating
to such Pledged Contracts;
(f) the Contract Conveyance Documents relating to
the Pledged Contracts; and
(g) any interest in or other proceeds from any of
the foregoing, and any security therefor.
"Triple-A" means Triple-A One Funding Corporation, a
--------
Delaware corporation.
"Triple-A Loan" has the meaning assigned to such
-------------
term in Section 2.01 of the Credit Agreement.
"Triple-A Note" has the meaning assigned to such
-------------
term in Section 2.02 of the Credit Agreement.
"UCC" means the Uniform Commercial Code as from time
---
to time in effect in the State of New York, except that, with
respect to the perfection or priority of any security interest
created under the UCC, the term "UCC" means the Uniform
---
Commercial Code as in effect in the jurisdiction whose law
governs the perfection and effect of perfection or non-
perfection of such security interest.
"Unmatured Event of Default" means any event which,
--------------------------
with the giving of notice or the passage of time or both,
would constitute an Event of Default.
"Unmatured Servicer Default" means any event which,
--------------------------
with the giving of notice or the passage of time or both,
would constitute a Servicer Default.
"VOI" means the underlying ownership interest which
---
is the subject of a Contract, which ownership interest shall
consist of (a) either a fixed week or undivided interest in
fee simple in a lodging unit or group of lodging units at a
Development, or (b) an undivided leasehold interest in any
lodging unit located at the Harbortown Marina Resort Hotel
Development in Ventura County California or the Pagosa
Mountain Meadows VOI Regime at the Pagosa Development in
Archuleta County, Colorado).
"VOI Regime" means any of the various interval
----------
ownership regimes or phases listed on Schedule 2 hereto, each
of which is an arrangement, established under applicable state
law, whereby a designated portion of a Development is made
subject to a declaration permitting the transfer of VOIs
therein.
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is
made as of the 28th day of March, 1995, among FAIRFIELD
ACCEPTANCE CORPORATION, a Delaware corporation, as seller
("Seller"), Fairfield Communities, Inc., a Delaware
corporation, and the parent corporation of Seller, as
originator ("FCI") and FAIRFIELD CAPITAL CORPORATION, a
special purpose Delaware corporation, as purchaser (the
"Company").
RECITALS
--------
WHEREAS, FCI (together with certain of its predecessor
subsidiaries and an existing subsidiary), have originated
certain Contracts in connection with the sale to Obligors of
VOIs or Lots at various Developments;
WHEREAS, in the ordinary course of its business Seller
has purchased from FCI certain Contracts and related property
(including beneficial ownership to the VOIs or Lots underlying
such Contracts);
WHEREAS, Seller wishes to sell certain of such Contracts
and related property to Company on the Closing Date, and
Company desires to purchase such Contracts and related
property from Seller;
WHEREAS, Seller and Company may wish to make additional
sales and purchases of Contracts and related property from
time to time in the future; and
WHEREAS, contemporaneously with the transactions
contemplated herein, Company desires to finance the purchases
of such Contracts and related property with advances made by
Triple-A One Funding Corporation ("Triple-A") pursuant to a
Credit Agreement, dated as of March 28, 1995, among Seller, as
Servicer, Company, as Borrower, FCI, Triple-A and Capital
Markets Assurance Corporation, as Collateral Agent and
Administrative Agent (the "Credit Agreement"), which advances
will be secured by a pledge of the Contracts and related
property purchased by Company.
NOW, THEREFORE, in consideration of the purchase price
set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:
Section 1. Definitions
-----------
All terms used but not otherwise specifically defined
herein shall have the meanings ascribed to them in the
Definitions List, dated as of the date hereof, that refers to
this "Receivables Purchase Agreement" and which is
incorporated herein by this reference. Whenever used in this
Agreement, the following words and phrases shall have the
following meanings:
"Contracts" shall mean an interval ownership or lot
---------
contract agreement and installment note relating to the sale
of one or more VOIs or Lots to an Obligor, together with any
separate Obligor's installment note for the payment of the
balance of the purchase price thereof which constitutes the
Initial Contracts and Subsequent Contracts, as such terms are
defined hereinafter, which may from time to time be purchased
by the Company from the Seller hereunder and thereafter
pledged and assigned by the Company to Collateral Agent for
the benefit of itself and Triple-A pursuant to the Credit
Agreement.
"Purchase Price" shall mean the Initial Purchase Price or
--------------
Subsequent Purchase Price, as applicable, as such terms are
defined hereinafter.
"Subordinated Interest" shall mean (x) the Initial Purchase
---------------------
Price of the Initial Contracts minus the sum of the amount of
-----
cash paid to Seller on the Initial Closing Date pursuant to
Section 4(c)(i) below and the amount of transaction fees and
---------------
expenses referred to in Section 4(c)(i) below, plus (y) the
--------------- ----
Subsequent Purchase Price of Subsequent Contracts minus the
-----
amount of cash paid to Seller on the any Subsequent Contract
Grant Date pursuant to Section 4(c)(i) below, minus (z) permitted
--------------- ----
repayments of principal under the Subordinated Note.
Section 2. Purchase and Sale of Initial Contracts.
--------------------------------------
(a) Initial Contracts. Subject to the terms and conditions
-----------------
and in reliance on the representations, warranties, covenants
and agreements set forth in this Agreement, the Seller shall
sell and assign, without recourse (except as expressly
provided herein), to the Company and the Company shall
purchase from the Seller, on the Initial Closing Date referred
to herein, all of the Seller's right, title and interest in,
to and under (but none of the obligations arising under) the
following (collectively the "Transferred Assets"):
(i) the Contracts listed on the Contract Schedule
delivered on the Initial Closing Date (the "Initial
Contracts"), including, without limitation, all Payments,
other Collections and other funds received with respect to the
Initial Contracts on or after the applicable Cut-Off Date, and
any security therefor;
(ii) the VOIs and Lots relating to such Initial
Contracts, and the Title Clearing Agreements and the FairShare
Plus Program insofar as they relate to such VOIs and Lots;
(iii) any Mortgages relating to such Initial Contracts;
(iv) any Insurance Policies relating to such Initial
Contracts (including, without limitation, Credit Life
Insurance);
(v) the Contract Files and other Records relating to
such Initial Contracts;
(vi) the Contract Conveyance Documents relating to such
Initial Contracts; and
(vii) any interest on or other proceeds from any of the
foregoing, and any security therefor.
(b) Subsequent Purchases. The Seller and Company
--------------------
acknowledge that pursuant to this Agreement and the Credit
Agreement, the Seller, at its option and in its sole
discretion, shall be entitled from time to time until the
Termination Date to designate additional Eligible Contracts to
be offered for sale to the Company on each Subsequent Contract
Grant Date and the Company may, in the exercise of its sole
discretion, until the Termination Date and to the extent
Triple-A has agreed to fund such Purchase through additional
Triple-A Loans to the Company under the Credit Agreement,
purchase from Seller all of Seller's right, title and interest
in, to and under the Eligible Contracts as listed on a
supplement to the Contract Schedule delivered by Seller on
each Subsequent Contract Grant Date (the "Subsequent
Contracts"), together with all other Transferred Assets
relating thereto.
(c) Treatment as Sale. It is the express and specific
-----------------
intent of the parties that the transfer of Transferred Assets
from the Seller to Company, as provided in this Section 2 (each,
------- --
a "Purchase"), is and shall be construed for all purposes as a
true, complete and absolute sale of such Transferred Assets.
(d) Recharacterization. To the extent that any transfer
------------------
of Transferred Assets from FCI to Seller, or any transfer
contemplated by this Agreement, is not treated as a sale under
applicable law, it is intended that this Agreement shall
constitute a security agreement under applicable law and that
FCI shall have been deemed to grant to Seller, and Seller
shall be deemed to have granted to the Company, a first
priority security interest in all of FCI's or Seller's, as the
case may be, right, title and interest in, to and under the
Transferred Assets.
(e) Security Interest in Transferred Assets. The Seller
---------------------------------------
acknowledges that the Transferred Assets are subject to the
security interest of Collateral Agent for the benefit of
itself, the Administrative Agent, the Surety and Triple-A
pursuant to the Credit Agreement and that Triple-A has
assigned its rights under the Triple-A Note (together with its
related rights under the Credit Agreement) to the Liquidity
Agent pursuant to the Liquidity Agreement and Liquidity
Security Agreement.
(f) Other Property. In connection with each Purchase
--------------
hereunder the Seller also sells, transfers and assigns to
Company, all of its right, title and interest in, to and under
the following related property:
(i) all rights of the Seller in, to and under all
software used to account for the Transferred Assets, and all
relevant licenses and sublicenses relating thereto.
(ii) all right, title and interest of the Seller in, to
and under the Interest Rate Hedge, any replacement agreement
therefor, and any other contract, instrument, or agreement in
which the Seller has any interest or rights, pursuant to which
the Seller (or its assignor or predecessor in interest) has
hedged against movements in interest rates in connection with
the Transferred Assets, including, without limitation, all
monies to become due to the Seller (or its assignor or
predecessor in interest) thereunder or in connection
therewith;
(iii) all proceeds of the foregoing property described
in clauses (i) and (ii) above, including without limitation,
interest dividends, cash, instruments and other property from
time to time received, receivable, or otherwise distributed in
respect of or in exchange for or on account of the sale or
other disposition of any or all of the then existing
Transferred Assets and including all payment on Insurance
Policies (whether or not any of Triple-A, the Surety or the
Collateral Agent is the loss payee thereof) or any indemnity,
warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to any of the Collateral; and
(iv) all other monies or property of the Seller coming
into the actual possession or control of the Company, the
Collateral Agent, the Administrative Agent, the Surety or
Triple-A (whether for safekeeping, deposit, custody pledge
transaction, collection or otherwise).
Section 3. Purchase Price.
--------------
(a) The amount payable to the Seller by Company for the
Initial Contracts on the Initial Closing Date (the "Initial
Purchase Price") shall be equal to $24,390,300.81. The
parties intend, and each of the Seller and Company shall
reflect in their financial accounting and tax records that the
difference between (x) the aggregate unpaid principal balance
of the Initial Contracts as of the Cut-Off Date and (y) the
Initial Purchase Price shall be a capital contribution by
Seller in accordance with Section 351 of the IRC.
(b) The amount payable to the Seller by Company on each
Subsequent Contract Grant Date prior to the Termination Date
in connection with any Purchase of Subsequent Contracts
hereunder (the "Subsequent Purchase Price") shall be as agreed
upon at the time of such Purchase between the Seller and the
Company.
Section 4. Payment of Purchase Price.
-------------------------
(a) Initial Closing Date. Payment for and delivery of
--------------------
the Initial Contracts being purchased by the Company shall
take place at a closing at the offices of Sidley & Austin, 875
Third Avenue, New York, New York 10022, at 10:00 a.m. on April
10, 1995, or such other time and place as shall be mutually
agreed upon among the parties hereto (such date and time being
referred to herein as the "Initial Closing Date"). Payment of
the portion of the Initial Purchase Price to be paid in cash
pursuant hereto, shall be made by the Company on the Initial
Closing Date in immediately available funds to the Seller to
such accounts at such banks as the Seller shall designate to
the Company not less than one Business Day prior to the
Initial Closing Date.
(b) Subsequent Contract Grant Dates. Payment for and
-------------------------------
delivery of the Subsequent Contracts to be purchased by the
Company on a Subsequent Contract Grant Date shall be made at
such time and place and to such accounts and such banks as the
parties may mutually agree.
(c) Manner of Payment of Purchase Price. On the Closing
-----------------------------------
Date, the Initial Purchase Price shall be paid to Seller in
the manner provided below:
(i) in cash, in an amount equal to $20,285,814.04 (which
amount is net of transaction fees and expenses payable by
Seller in an amount equal to $143,394.63).
(ii) to the extent that the Initial Purchase Price
exceeds the sum of the amount of the cash payment in Section 4(c)(i)
---------------
above, and the amount of transaction fees and expenses
referred to in Section 4(c)(i), such excess shall be paid, on the Closing
---------------
Date, by means of the issuance to the Seller of the
Subordinated Note in an initial principal amount equal to the
Subordinated Interest on the Initial Closing Date. On each
Subsequent Contract Grant Date, the principal amount of the
Subordinated Note shall be adjusted to equal the Subordinated
Interest on such Subsequent Contract Date.
(d) Scheduled Payments Under Contracts and Cut-Off Dates.
-----------------------------------------------------
The Company shall be entitled to all Payments, other
Collections and all other funds with respect to any Contract
received after the Cut-Off Date therefor; provided that the
Company shall reimburse Seller for an amount equal to Ninety-
Seven Percent (97%) of accrued interest on the Initial
Contracts at the Contract Rate from, but excluding, the Cut-
Off Date through, and including, the Initial Closing Date.
The principal balance of each Contract as of the Cut-Off Date
therefor is determined after deduction of payments of
principal received before and on such Cut-Off Date. On each
Closing Date hereunder, the Company hereby authorizes and
instructs the Servicer, to either (i) deposit, on the
Company's behalf, in the Collection Account established
pursuant to the Credit Agreement or (ii) credit against the
portion of the Purchase Price to be paid in cash, the
aggregate amount of funds received with respect to the Initial
Contracts or Subsequent Contracts, as applicable, between the
Cut-Off Date therefor and the applicable Closing Date.
Section 5. Conditions to Sale of Contracts.
-------------------------------
(a) Initial Closing. The Company's obligations hereunder
---------------
to purchase and pay for any Transferred Assets on the Initial
Closing Date are subject to the fulfillment of the following
conditions on or before such Initial Closing Date:
(i) The Company shall have received (a) the Credit
Agreement executed by all the parties thereto and (b) all
conditions to closing set forth in Section 3.01 and 3.03 of the
---------------------
Credit Agreement shall have been fulfilled, to the extent they
are capable of being fulfilled prior to the performance by the
Company of its obligations under this Agreement;
(ii) The representations and warranties of the Seller
made herein and as Servicer under the Credit Agreement shall
be true and correct in all material respects on the Initial
Closing Date.
(b) Subsequent Purchases. The Company's purchase of any
--------------------
Subsequent Contracts on any Subsequent Contract Grant Date are
subject to the fulfillment of the following conditions on or
before such Subsequent Contract Grant Date:
(i) The Credit Agreement shall be in full force and
effect;
(ii) All conditions to borrowing set forth in Sections 3.02
------------
and 3.03 of the Credit Agreement shall have been fulfilled, to
--------
the extent the same are capable of being fulfilled prior to
performance by the Company of its obligations hereunder; and
(iii) The representations and warranties of Seller made
herein and as Servicer in the Credit Agreement shall be true
and correct in all material respects on the Subsequent
Contract Grant Date.
(c) Form of Assignment. In connection with each sale and
------------------
purchase of Contracts and Transferred Assets hereunder, the
Seller shall execute assignments (which may be blanket
assignments) substantially in the form of Exhibit "A" hereto
and deliver the same, and if there are any Mortgages relating
to a Contract, Assignments of Mortgages, to the Company, and
the Company shall thereupon execute and deliver to the Seller,
a form of certificate substantially in the form of Exhibit "B"
hereto.
Section 6. Transfer of Contracts.
---------------------
Pursuant to the Credit Agreement, the Company will, on
the Initial Closing Date or Subsequent Grant Date, transfer,
pledge and Grant all of its right, title and interest in, to
and under the Contracts, Transferred Assets and related
property, which constitute the property conveyed to it by the
Seller on such Initial Closing Date or Subsequent Grant Date,
to the Collateral Agent for the benefit of itself, the
Administrative Agent, the Surety and Triple-A. Immediately
following the sale of Contracts pursuant to this Agreement,
and the pledge of such Contracts pursuant to the Credit
Agreement, such Contracts shall be held by Custodian pursuant
to the terms of the Custodial Agreement for the benefit of the
Company and Collateral Agent. Upon each Purchase hereunder,
Custodian shall execute and deliver to the Company, a form of
certificate acknowledging receipt of the Contracts
substantially in the form of Exhibit "C" hereto.
Each of FCI and the Seller acknowledges that, pursuant to
the Credit Agreement, the Company may transfer, pledge and
grant all of its right, title and interest in, to and under
the Transferred Assets, all of its right, title and interest
hereunder, and its right to exercise the remedies created
hereunder including, without limitation, Section 7(g) hereof, to
------------
Collateral Agent. Each of FCI and the Seller agrees that,
upon such assignment, Collateral Agent may enforce directly,
without joinder of the Company, all of Seller's and FCI's
obligations hereunder, including without limitation, the
repurchase
obligations of the Seller set forth in Section 8 hereof, with
---------
respect to breaches of the representations and warranties set
forth in Section 7 hereof.
---------
Section 7. Representations and Warranties of Seller and FCI.
------------------------------------------------
(a) General Representations and Warranties of Seller and
----------------------------------------------------
FCI. Seller and FCI jointly and severally represent and warrant
---
as of the date of this Agreement, as of the Initial Closing
Date, and as of each Subsequent Contract Grant Date, as
follows:
(i) Due Incorporation and Good Standing. Seller and FCI
------------------------------------
are corporations duly organized, validly existing and in good
standing under the laws of the state of Delaware, and have
full corporate power, authority and legal right to own their
properties and conduct their businesses as such properties are
presently owned and such businesses are presently conducted,
and to execute, deliver and perform their obligations under
each of the Facility Documents to which they are a party.
Seller and FCI are duly qualified to do business and are in
good standing as a foreign corporations, and have obtained all
necessary licenses and approvals in each jurisdiction in which
failure to qualify or to obtain such licenses and approvals
would render any Contract unenforceable by Seller or FCI or
would have a material adverse effect on (A) the value or
collectibility of any Contract or related Collateral, (B) the
business, properties, operations, prospects, profits or
condition (financial or otherwise) of Seller or FCI, Triple-A,
the Administrative Agent or the Collateral Agent, or (D) the
ability of Seller or FCI to perform their obligations
hereunder and under the other Facility Documents to which they
are a party.
(ii) Due Authorization and No Conflict. The execution,
---------------------------------
delivery and performance by Seller and FCI of each of the
Facility Documents to which they are a party, and the
consummation of the transactions contemplated hereby and under
the Facility Documents have in all cases been duly authorized
by Seller and FCI by all necessary corporate action, do not
contravene (i) Seller's or FCI's charter or by-laws, (ii) any
law, rule or regulation applicable to Seller or FCI, (iii) any
contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, deed of trust, security
agreement, bond, note, or other agreement or instrument
binding on or affecting Seller or FCI or their property or
(iv) any order, writ, judgment, award, injunction or decree
binding on or affecting Seller or FCI or their properties
(except where such contravention would not have a material
adverse effect on (A) the value or collectibility of any
Contract or related Collateral, (B) the business, properties,
operations, prospects, profits or condition (financial or
otherwise) of Seller or FCI, the Administrative Agent or the
Collateral Agent, or (C) the ability of Seller or FCI to
perform their obligations hereunder and under the other
Facility Documents to which they are a party), and do not
result in or require the creation of any Lien upon or with
respect to any of their properties; and no transaction
contemplated hereby requires compliance with any bulk sales
act or similar law . Each of the other Facility Documents to
which Seller or FCI is a party have been duly executed and
delivered on behalf of Seller or FCI.
(iii) Governmental and Other Consents. All approvals,
-------------------------------
authorizations, consents, orders or other actions of, and all
registration, qualification, designation, declaration, notice
to or filing with, any Person or of any governmental body or
official required in connection with the execution and
delivery of any of the Facility Documents to which Seller or
FCI is a party, the consummation of the transactions
contemplated hereby or thereby, the performance of and the
compliance with the terms hereof or thereof, have been
obtained, except where the failure so to do would not have a
material adverse effect on the value of the Collateral or the
interests of Triple-A or the Surety herein or therein, and
each such required approval, authorization, consent, order,
registration, qualification, designation, declaration, notice
or filing is listed on Exhibit P to the Credit Agreement (or
in the case of any Purchase on a Subsequent Contract Grant
Date, as set forth in any addendum to such Exhibit P to the
Credit Agreement prepared by Seller and accepted by the
Company).
(iv) Enforceability of Facility Documents. Each of the
------------------------------------
Facility Documents to which the Seller or FCI is a party have
been duly and validly executed and delivered by the Seller or
FCI and constitute the legal, valid and binding obligation of
Seller or FCI, as applicable, enforceable in accordance with
their respective terms, except as enforceability may be
subject to or limited by Debtor Relief Laws or by general
principles of equity (whether considered in a suit at law or
in equity).
(v) No Litigation. There are no proceedings or
-------------
investigations pending or, to the best knowledge of Seller or
FCI, threatened against the Seller or FCI before any court,
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (A) asserting the invalidity of
this Agreement or any of the other Facility Documents, (B)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the other Facility
Documents, (C) seeking any determination or ruling that would
adversely affect the performance by Seller or FCI of their
obligations under this Agreement or any of the other Facility
Documents, (D) seeking any determination or ruling that would
adversely affect the validity or enforceability of this
Agreement or any of the other Facility Documents, or (E)
seeking any determination or ruling that would, if adversely
determined, be reasonably likely to materially adversely
affect (x) the value or collectibility of any Contract or
related Collateral, (y) the business, properties, operations,
prospects, profits or condition (financial or otherwise) of
Seller or FCI, the Administrative Agent or the Collateral
Agent, or (z) the ability of Seller or FCI to perform their
obligations hereunder and under the other Facility Documents
to which they are a party.
(vi) Accuracy of Information. All certificates, reports,
-----------------------
financial statements and similar writings furnished by or on
behalf of the Seller or FCI to Company, Collateral Agent,
Triple-A or Administrative Agent at any time pursuant to any
requirement of, or in response to any request of any such
party under, this Agreement or any other Facility Document or
any transaction contemplated hereby or thereby, have been, and
all such certificates, reports, financial statements and
similar writings hereafter furnished by Seller or FCI to such
parties will be, true and accurate in every respect material
to the transactions contemplated hereby on the date as of
which any such certificate, report, financial statement or
similar writing was or will be delivered, and shall not omit
to state any material facts or any facts necessary to make the
statements contained therein not materially misleading.
(vii) Governmental Regulations. Neither FCI, nor Seller,
------------------------
is (i) an "investment company" registered or required to be
registered or required to be registered under the Investment
Company Act of 1940, as amended, (ii) a "public utility
company" or a "holding company," a "subsidiary company" or an
"affiliate" of any public utility company within the meaning
of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public
Utility Holding Company Act of 1935, as amended, or (iii)
otherwise subject to any other federal or state statute or
regulation limiting its ability to incur or pay indebtedness.
(viii) Margin Regulations. Neither FCI, nor Seller, is
------------------
engaged, principally or as one of its important activities, in
the business of extending credit for the purpose of
"purchasing" or "carrying" any margin stock (as each of the
quoted terms is defined or used in Regulation G, T, U or X).
No part of the proceeds of any of the Triple-A Loans has been
used for so purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with,
the provisions of Regulation G, T, U or X.
(ix) Location of Chief Executive Office and Records. The
-----------------------------------------------
principal place of business and chief executive office of
Seller and FCI, and the office where Seller and FCI maintain
all of their Records, is located at 2800 Cantrell Road, Little
Rock, Arkansas 72202 (provided that, at any time after the Closing
--------
Date, upon 30 days' prior written notice to FCC and Collateral
Agent, either the Seller or FCI may relocate its principal
place of business and chief executive office, and/or the
office where Seller and FCI maintain all of their Records, to
such other locations within the United States where all action
required by Section 7.04 of the Credit Agreement shall have been taken
------------
and completed (giving effect to the provisions of such Section 7.04
------------
as if each reference to the "Borrower" therein is, instead, a
reference to each of the Seller and FCI).
(x) Lock-Box Accounts. Except in the case of any Lock-Box
-----------------
Account pursuant to which Collections in respect of Contracts
subject to a PAC are deposited, each of the Seller and FCI has
filed a standing delivery order with the United States Postal
Service authorizing each Lock-Box Bank to receive mail
delivered to the related Post Office Box. The account numbers
of all Lock-Box Accounts, together with the names, addresses,
ABA numbers and names of contact persons of all the Lock-Box
Banks maintaining such Lock-Box Accounts and the related Post
Office Boxes, are specified in Exhibit Q to the Credit Agreement.
---------
From and after the Closing Date, neither FCI, nor Seller shall have
any right, title and/or interest in or to any of the Lock-Box
Accounts or the Post-Office Boxes and will maintain no lock-
box accounts in its own name for the collection of Payments.
Neither the Seller nor FCI has any other lock-box accounts for
the collection of Payments except for the Lock-Box Accounts.
(xi) Facility Documents. This Agreement is the only
------------------
agreement pursuant to which Seller sells the Company
Contracts, other Transferred Assets or any other assets of a
similar nature. The Seller and FCI have furnished to
Collateral Agent true, correct and complete copies of each
Facility Document to which the Seller and FCI are parties,
each of which is in full force and effect. Neither Seller,
FCI nor any Affiliate thereof is in default of any of its
obligations thereunder in any material respect. All
Contracts and related assets are purchased without recourse to
the Seller or FCI except as described in this Agreement. The
Purchases by Company under this Agreement constitute valid and
true sales and transfers for consideration (and not merely a
pledge of assets for security purposes), enforceable against
creditors of each of FCI and FAC and no Contract or related
Collateral shall constitute property of the Seller.
(xii) Ownership of the Company. One hundred percent (100%)
-----------------------
of the outstanding capital stock of the Company is directly
owned (both beneficially and of record) by Seller. Such stock
is validly issued, fully paid and nonassessable and there are
no options, warrants or other rights to acquire capital stock
from the Company.
(xiii) Taxes. The Seller and FCI have filed or caused to
-----
be filed all Federal, state and local tax returns which are
required to be filed by them, and have paid or caused to be
paid all taxes shown to be due and payable on such returns or
on any assessments received by them, other than any taxes or
assessments, the validity of which are being contested in good
faith by appropriate proceedings and with respect to which
Seller and FCI have set aside adequate reserves on their books
in accordance with GAAP and which proceedings have not given
rise to any Lien.
(xiv) Solvency. Each of FCI and Seller, both prior to and
--------
after giving effect to the Purchase of Initial Contracts on
the Closing Date, and after giving effect to each subsequent
Purchase, if any, on a Subsequent Contract Grant Date (i) is
not "insolvent" (as such term is defined in 101(32)(A) of the
Bankruptcy Code); (ii) is able to pay its debts as they become
due; and (iii) does not have unreasonably small capital for
the business in which it is engaged or for any business or
transaction in which it is about to engage.
(xv) Reporting and Accounting Treatment. For reporting and
---------------------------------
accounting purposes, and in their books of account and
records, the Seller and FCI will treat the Purchase of each
Contract pursuant to this Agreement as a purchase of, or
absolute assignment of, the Seller's full right, title and
ownership interest in each Contract, and the Seller and FCI
have not in any other manner accounted for or treated the
transactions.
(xvi) Closing Balance. The Eligible Contract Pool
---------------
Principal Balance as of the Closing Date is not less than
$25,190,300.81.
The representations and warranties of Seller and FCI set
forth in this Section 7(b) shall be deemed to be remade, without
------------
further act by any Person, on and as of the Closing Date and
each Subsequent Contract Grant Date. The representations and
warranties set forth in this Section 7(b) shall survive the
------------
transfer and assignment of the Contracts to the Company.
(c) Representations and Warranties Regarding the Contracts.
------------------------------------------------------
Seller and FCI jointly and severally represent and warrant to
the Company as to each Contract conveyed on and as of the
related Cut-Off Date (except as otherwise expressly stated) as
follows:
(i) Eligibility. Such Contract is an Eligible Contract.
-----------
(ii) Contract Schedule. The information set forth in the
------------------
Contract Schedule is true and correct with respect to such
Contract.
(iii) No Waivers. The terms of such Contract have not been
----------
waived, altered, modified, or extended in any respect, without
the prior written consent of the Collateral Agent, other than
(i) extensions which are Permitted Deferrals, (ii) amendments,
entered into in accordance with Customary Practice and Credit
Standards and Collections Policies, which do not reduce the
amount or extend the maturity of required Payments, (iii)
reductions in the amount of required principal Payments under
such Contract which do not alter the aggregate amount of
Collections anticipated to be received in the Collection
Account in respect of such Contract (as a result of any
release of prepaid premiums for Credit Life Insurance), and
(iv) modifications in the applicability of a PAC (which will,
among other things, result in a change in the relevant
Contract Rate).
(iv) Binding Obligation. Such Contract is the legal, valid
------------------
and binding obligation of the Obligor thereunder and is
enforceable against the Obligor in accordance with its terms,
except as such enforceability may be limited by Debtor Relief
Laws, or by general principles of equity (whether considered
in a suit at law or in equity).
(v) No Defenses. Such Contract is not subject to any right
-----------
of rescission, setoff, counterclaim or defense, including the
defense of usury, the operations of any of the terms of such
Contract or the exercise of any right thereunder will not
render such Contract unenforceable in whole or in a manner
materially affecting the value or collectibility of the
Contract or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and
no such right of rescission, setoff, counterclaim or defense
has been asserted with respect thereto.
(vi) Origination. Such Contract was originated by FCI (or
-----------
a subsidiary thereof) in the regular course of its business
and was purchased by FAC in the regular course of its
business.
(vii) Lawful Assignment. Such Contract was not originated
-----------------
in and is not subject to the laws of any jurisdiction the laws
of which would make the transfer of the Contract under this
Agreement or the Grant of such Contract under the Credit
Agreement unlawful.
(viii) Compliance with Law. The requirements of any
-------------------
federal, state or local law, including, without limitation,
usury, truth in lending and equal credit opportunity laws,
applicable to such Contract have been complied with. The VOI
Regime related to such Contract is in compliance with any and
all applicable zoning and building laws and regulations and
any other laws and regulations relating to the use and
occupancy of such VOI Regime. None of the Seller or FCI has
received notice of any material violation of any legal
requirements applicable to such VOI Regime. The VOI Regime
related to such Contract complies with all applicable state
statutes including, without limitation, condominium statutes,
or filings relating to interstate land sales (if applicable),
and the requirements of any governmental authority or local
authority having jurisdiction and constitutes a valid and
conforming condominium under the laws of the State where the
related Development is located; except where such
noncompliance would not have a material adverse effect on (A)
the value or collectibility of any Contract or related
Collateral, (B) the business, properties, operations,
prospects, profits or condition (financial or otherwise) of
Seller or FCI, the Administrative Agent or the Collateral
Agent, or (C) the ability of Seller or FCI to perform their
obligations hereunder and under the other Facility Documents
to which they are a party.
(ix) Contract in Force. Such Contract is in full force and
----------------
effect and has not been satisfied in whole or in part, or
rescinded.
(x) No Subordination. Such Contract has not been
----------------
subordinated in whole or in part.
(xi) Capacity of Parties. All parties to such Contract had
-------------------
capacity to, execute the Contract.
(xii) Good Title. The Seller has good and marketable title
---------
to such Contract free and clear of any Lien (other than the
lien in favor of the Collateral Agent Granted pursuant to the
Credit Agreement). The Seller has not sold, assigned or
pledged such Contract to any Person other than FCC. As to the
related VOI or Lot, either, (i) a generally accepted form of
title insurance policy, insuring the fee estate ownership of
the Lot or the real property subject to the VOI Regime by the
Persons owning the respective interests therein, and their
successors and assigns was effective at the time the
originator acquired the Lot or at the time of registration of
the VOI Regime, is valid and remains in full force and effect,
and was issued by a title insurer qualified to do business in
the applicable jurisdiction; or (ii) at the time the
originator acquired the Lot or at the time of registration of
the VOI Regime, such fee estate ownership had been verified by
an attorney's opinion of title, the form and substance of
which is of a type acceptable for purposes of registration of
sales of VOI or Lots, and which may be relied upon by Persons
subsequently owning the respective interests therein, and
their successors and assigns. The Seller has not sold,
assigned, or pledged its interest in the related VOI or Lot to
any Person other than FCC.
(xiii) No Defaults. As of the relevant Cut-Off Date, there
-----------
is no default, breach, violation or event permitting
acceleration existing under the Contract and no event which,
with the giving of notice or the expiration of any grace or
cure period or both, would constitute such a default, breach,
violation or event permitting acceleration under such Contract
(except Permitted Deferrals). None of Seller or FCI has
waived any such default, breach, violation or event permitting
acceleration without obtaining the prior written consent of
the Collateral Agent.
(xiv) Equal Installments. Such Contract has a fixed or
------------------
floating rate of interest and provides for payments which
fully amortize the loan over its term. Interest accrues on
such Contract on an actuarial (i.e., pre-computed) basis.
(xv) One Original. All original executed copies of such
------------
Contract are in the custody of the Custodian other than to the
extent permitted pursuant to Section 7(c)(xxii).
------------------
(xvi) Minimum Downpayment. Such Contract had a minimum
-------------------
equity of 10% at origination (including in such total any cash
down payments and Payments made on any other Contract which
has been "traded in" in connection with the origination of
such Contract).
(xvii) Contract Form/Governing Law. Such Contract was
---------------------------
executed in substantially the form of one of the forms of
Contract attached hereto as Exhibit D, except for changes
required by applicable law and certain other modifications
which do not, individually or in the aggregate, affect the
enforceability or collectibility of such Contract. In
addition, such Contract was originated in and is governed by
the laws of the State in which the related Development is
located, and each such State is a jurisdiction as to the law
of which the Company shall have on the Closing Date delivered
to the Agent an Opinion of Counsel regarding the
enforceability of the form or forms of Contract used in such
jurisdiction and such other matters as they shall reasonably
request, and such Contract is substantially in the form of one
of the forms of Contract attached as an exhibit to such
opinion.
(xvii) No Event of Default. No Event of Default (or
-------------------
Unmatured Event of Default) will occur as a result of the
Purchase of the Contract by the Company pursuant to this
Agreement.
(xviii) Interest in Real Property. The VOI or Lot
-------------------------
underlying such Contract is an interest in real property
consisting of either (a) a fixed week or undivided interest in
fee simple in a lodging unit or group of lodging units at a
Development, (b) an undivided leasehold interest in any
lodging unit located at the Harbortown Marina Resort Hotel in
Ventura County, California or the Pagosa Mountain Meadows VOI
Regime at the Pagosa Development in Archuleta County, Colorado
or (c) if a lot, a fee simple interest in real property; and
in each case such VOI or Lot has been deeded to the Nominee
pursuant to the terms of one of the Title Clearing Agreements,
or has been deeded to the relevant Obligor in accordance with
the requirements of the applicable Contract or applicable law.
(xix) Environmental Compliance. Each VOI Regime related
------------------------
to a Contract is now, and at all times during FCI's (or any
Affiliate of FCI's) ownership thereof has been free of
contamination from any substance, material or waste identified
as toxic or hazardous according to any federal; state or local
law, rule, regulation or order governing, imposing standards
of conduct with respect to, or regulating in any way the
discharge, generation, removal, transportation, storage or
handling of toxic or hazardous substances, materials or waste
(hereinafter referred to as "Environmental Laws"), including,
without limitation, any --------------------
PCB, radioactive substance, methane, asbestos, volatile
hydrocarbons, petroleum products or wastes, industrial
solvents or any other material or substance which now or
hereafter may cause or constitute a health, safety or other
environmental hazard to any person or property (any such
substance together with any substance, material or waste
identified as toxic or hazardous under any Environmental Law
now in effect or hereinafter enacted shall be referred to
herein as "Contaminants"). Neither FCI nor any Affiliate of
------------
FCI has caused
or suffered to occur any discharge, spill, uncontrolled loss
or seepage of any petroleum or chemical product or any
Contaminant onto any property comprising or adjoining any of
the VOI Regimes, and neither FCI nor any Affiliate of FCI nor
any Obligor or Occupant of all or part of any of the VOI
Regimes is now or has been involved in operations at; any VOI
Regime which could lead to liability for FCI, the Company, any
other Affiliate of FCI or any other owner of any VOI Regime or
the imposition of a lien on such VOI Regime under any
Environmental Law.
Except as set forth on Schedule 4.02(u) to the Credit
----------------
Agreement, all property owned, managed, or controlled by FCI
or any Affiliate of FCI and located within a Development is
now, and has at all times during FCI's (or any Affiliate of
FCI's) ownership, management or control thereof been free of
contamination from any Contaminants. Except as set forth on
Schedule 4.02(u) to the Credit Agreement, neither FCI nor any
----------------
Affiliate of FCI has caused or suffered to occur any
discharge, spill, uncontrolled loss or seepage of any
Contaminants onto any property comprising or adjoining any of
the Developments, and neither FCI nor any Affiliate of FCI nor
any Obligor or occupant of all or part of any of any
Development is now or has been involved in operations at any
Development which could lead to liability for FCI, the
Company, any other Affiliate of FCI or any other owner of any
Development or the imposition of a lien on such Development
under any Environmental Law. None of the matters set forth on
Schedule 4.02(u) to the Credit Agreement
----------------
will have a material adverse effect on the value of the
Collateral or the interests of Triple-A, the Surety or the
Collateral Agent therein or an adverse effect on Triple-A, the
Surety or the Collateral Agent.
(xx) Tax Liens. All taxes applicable to such Contract and
---------
the related VOI or Lot have been paid; except where the
failure to pay would not have a material adverse effect on the
Contract or the interests of Triple A or Surety therein.
There are no delinquent tax liens in respect of the VOI or Lot
underlying such Contract.
(xxi) Credit Life Insurance. If such Contract also
---------------------
financed a policy of Credit Life Insurance: (i) the Company
has been assigned a valid beneficial interest in such policy;
(ii) the Company has the power and authority to pledge its
interest as the beneficiary of such policy, and it has so
pledged its interest to the Collateral Agent pursuant to
various effective Documents of Pledge and Assignment; (iii)
the Company has the sole power and authority to direct the
cancellation of such policy in the event of nonpayment of such
Contract and the sole right to receive any unearned premium in
the event of cancellation of such policy; and (iv) the Company
has the power and authority to assign its right to receive any
unearned premium with respect to such policy, and it has so
pledged its right to the Collateral Agent pursuant to various
effective Documents of Pledge and Assignment.
(xxii) Contract Files. The related Contract File contains
--------------
at least one original of each of
(i) the Contract (other than (A) in the case of a
Contract which has been removed from the Contract File
for the performance of collection services in accordance with
Section 5.01(p), or (B) a Contract which has been identified
---------------
as a missing original contract under the Custodian's
Certificate Acknowledging Receipt of Contracts (a form of
which is attached as Exhibit C to the Receivables
Purchase Agreement) delivered to the Collateral Agent on
the Closing Date), and
(ii) in the case of a VOI or Lot which has been
deeded out to the relevant Obligor, (A) a copy of the
deed for the related VOI or Lot, and (B) a purchase money
Mortgage.
(xxiii) Lock-Box Accounts. The Obligor of such Contract
------------------
either:
(1) shall have been instructed, pursuant to the
Seller's routine distribution of a periodic statement to
such Obligor next succeeding
(A) the Initial Closing Date (or any Subsequent
Contract Grant Date, as applicable), or
(B) the day on which a PAC ceased to apply to
such Contract, in the case of a Contract formerly
subject to a PAC,
but in no event later than the then next succeeding due
date for Payment under the related Contract, to remit
Payments thereunder to a Post Office Box for credit to a
Lock-Box Account, or directly to a Lock-Box Account, in
each case maintained at a Lock-Box Bank pursuant to the
terms of a Lock-Box Agreement substantially in the form
of Exhibit I of the Credit Agreement, or
--------
(2) has entered into a PAC, pursuant to which a
deposit account of such Obligor is made subject to a pre-
authorized debit in respect of Payments as they become
due and payable, and the Seller has, and has caused, a
Lock-Box Bank and/or the Collection Account Bank, to take
all necessary and appropriate action to ensure that each
such pre-authorized debit is credited directly to a Lock-
Box Account.
(xxiv) Ground Leases. In the case of any Contract relating
------------
to a VOI or Lot located in either of Harbortown Marina Resort
Hotel in Ventura County, California or the Pagosa Mountain
Meadows VOI Regime at the Pagosa Development in Archuleta
County, Colorado, (i) the groundlease to which the relevant
Development is subject has a fixed term which terminates after
the maturity of such Contract, and (ii) all rent due and
payable for the term of the relevant groundlease has been
fully paid through the date of this representation.
All of the representations and warranties of Seller and
FCI set forth in this Section 7(c) shall be deemed to be remade,
------------
without further act by any Person, on and as of each Cut-Off
Date with respect to each Contract Purchased by the Company on
and as of each Closing Date. In addition, each of the
representations and warranties of Seller and FCI set forth in
the following subsections of this Section 7(c) shall be deemed
to be remade, -----------
without further act by any Person, on and as of each Business
Day hereunder occurring prior to the Collection Date:
subsections (i) (but only with respect to the eligibility
criteria set forth in the definition of "Eligible Contract" in
the Definitions List at clauses (a), (b), (c), (d), (h), (k),
(l), (o), (q), (p), (v) and (w) thereof), (iii), (iv), (v),
(viii), (ix), (xii), (xix), (xx) and (xxi), (xxii), (xxiii)
and (xxiv). All of the representations and warranties set
forth in this Section 7(c)
------------
shall survive the Purchase of the respective Contracts by the
Company.
Notwithstanding anything in the foregoing to the
contrary, a representation of the Seller and FCI set forth in
this Section 7(c) shall be deemed not to have been breached with
------
respect to a Contract on the Closing Date to extent that the
following statements are true:
(i) the existence of the condition giving rise to
such breach of a representation set forth in this Section 7(c)
-----------
shall have been identified in any of Exhibits B (Summary
by Age of Contract) - E (Summary of Geographical
Distribution of Obligors), G (Summary by Equity
Percentage), K (Summary by Year of Origination), L
(Summary of Original Terms), and N (Summary of Months to
Maturity) to the E&Y Audit Report; and
(ii) the extent to which all Contracts in the
Contract Pool, taken as a whole, were subject to such
condition was accurately calculated and described in the
E&Y Audit Report as of the E&Y Audit Date.
(d) Representations and Warranties Regarding the Contract
-----------------------------------------------------
Pool. Seller and FCI jointly and severally represent and warrant
----
to Company with respect to the Initial Contracts that:
(i) E&Y Audit Report. The information set forth in the E&Y
----------------
Audit Report was true and correct in all material respects as
of the E&Y Audit Date; and
(ii) Seasoning of Contract Pool. As of the E&Y Audit
---------------------------
Date, the aggregate Principal Balances of all Initial
Contracts in the Contract Pool with respect to which at least
60 months have elapsed from the date on which such Contract
was entered into, constituted greater than 95% of the Contract
Pool Principal Balance at such time;
(iii) Equity Percentage. As of the E&Y Audit Date, the
-----------------
aggregate Principal Balance of all Initial Contracts in the
Contract Pool with respect to which the Equity Percentage of
such Contract was greater than or equal to 40%, constituted
greater than 95% of the Contract Pool Principal Balance at
such time; and
(iv) Fixed Week Percentage. As of the Cut-Off Date, the
----------------------
aggregate Principal Balance of all Initial Contracts in the
Contract Pool with respect to which the underlying ownership
interest consisted of a fixed week VOI (as opposed to an
undivided interest in a fee simple, whether or not pursuant to
the FairShare Plus Program) or Lot constituted greater than
90% of the Contract Pool Principal Balance at such time.
A breach of a representation and warranty set forth in
this Section 7(d) shall be deemed to be a breach of such
------------
representation and warranty with respect to each Initial
Contract. The representations and warranties made in this
Section 7(d) shall survive the transfer and assignment of the
------------
respective Initial Contracts by the Company.
(e) Representations and Warranties Regarding the Contract
----------------------------------------------------
Files. Seller and FCI jointly and severally represent and
-----
warrant to the Company as to each Contract and the related
Contract File conveyed by it hereunder as follows:
(i) Possession. On or immediately prior to the Closing
----------
Date and each Subsequent Contract Grant Date (if any), the
Custodian will have possession of each original Contract and
the related Contract File, and shall have acknowledged such
receipt, and its undertaking to act as bailee for purposes of
perfection of the Collateral Agent's interests in such
original Contract and the related Contract File (provided,
however, that the fact that --------
-------
each of the Contracts identified in Exhibit B to the
Custodian's Certificate Acknowledging Receipt of Contracts (a
form of which is attached as Exhibit C hereto) is not in the
possession of the Custodian in its respective Contract File
does not constitute a breach of this representation).
(ii) Marking Records. By the Closing Date, or each
---------------
Subsequent Contract Grant Date (if any), the Seller shall have
caused the portions of the computer files relating to the
Contracts Granted on such date to the Collateral Agent to be
clearly and unambiguously marked to indicate that such
Contract constitutes part of the Collateral Granted by the
Company in accordance with the terms of the Credit Agreement.
In addition, prior to each such Grant, each such Contract
shall have been clearly and unambiguously stamped or marked as
follows:
"This Contract is part of the Collateral under
a Credit Agreement dated as of March 28, 1995, and a
security interest herein is held by Capital Markets
Assurance Corporation as Collateral Agent
thereunder."
The representations and warranties of Seller and FCI set
forth in this Section 7(e) shall be deemed to be remade, without
------------
further act by any Person, on and as of the relevant Closing
Date with respect to the Contracts conveyed to the Company on
and as of each such date. The representations and warranties set
forth in this Section 7(e) shall survive the transfer and assignment
------------
of the respective Contracts to the Company.
(f) Survival of Representations and Warranties. It is
------------------------------------------
understood and agreed that the representations and warranties
contained in this Section 7 shall remain operative and in full
----------
force and effect, shall survive the transfer and conveyance of
the Contracts by the Seller to the Company and the Grant by
the Company to Triple-A and shall inure to the benefit of the
Company, the Collateral Agent, the Administrative Agent, the
Surety and Triple-A and their respective designees, successors
and assigns.
(g) Seller's and FCI's Indemnification of the Company.
----------------------------------------------------
The Seller and FCI shall jointly and severally indemnify, defend
and hold harmless the Company against any and all claims,
losses and liabilities (including reasonable attorneys' fees)
(all of the foregoing being collectively referred to as "Indemnified
-----------
Amounts"), which (i) may at any time be imposed on, incurred by
-------
or asserted against the Company in any way relating to or
arising out of this Agreement or the transactions contemplated
hereby or any action taken or omitted by the Company under or
in connection with any of the foregoing, (ii) would not have
been imposed on, incurred by or asserted against the Company
but for its having purchased the Transferred Assets hereunder
or (iii) relate to the services underlying the Contracts or
any of the other Transferred Assets or any act or omission to
act by the Seller in respect of any of the Transferred Assets,
excluding, however, (a) recourse
--------- -------
for uncollectible Payments under the Contracts or to insure
against default by the Obligors thereunder, (b) any income,
franchise or other taxes (or interest or penalties with
respect thereto) incurred by the Company arising out of or as
a result of this Agreement or the Transferred Assets conveyed
hereunder in respect of any Contract and (c) any claim,
expense, cost or liability of the Company under the Credit
Agreement or Liquidity Agreement. Without in any way limiting
the foregoing, except as otherwise provided in this
Section 7.3, or Section 12(j) hereof
----------- -------------
the Seller shall pay to the Company, on demand, any and all
amounts necessary to indemnify the Company from and against
any and all Indemnified Amounts relating to or resulting from:
(w) any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in
paying, any sales, gross receipts, intangible personal
property, privilege or license taxes, but not including taxes
imposed upon the Company under the laws of the United States
or any jurisdiction within the United States in which the
Company is organized or maintains its principal office or in
which the Company books this transaction; (x) any and all
recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, any taxes
which may arise at any time and from time to time in the
future in respect of this Agreement, the transactions
contemplated hereby and the subject matter hereof and thereof;
(y) costs, expense and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be
performed by the Seller hereunder or imposed against the
Company or the Seller, the property involved or otherwise, or
(z) any and all loss, penalties, fines, forfeitures, legal
fees and related costs, judgments and other costs and expenses
resulting from any claim, demand, defense or assertion based
on or grounded upon, or resulting from, a breach of Seller's
or FCI's representations and warranties contained in this
Agreement. The agreements in this clause (g) shall survive
the collection of all Contracts, the termination of this
Agreement and the payment of all amounts payable hereunder and
under the Contracts. For purposes of this clause (g), any
reference to the Company shall include any officer, director,
employee, agent or affiliate thereof, or any successor or
assignee thereof.
Section 8. Repurchases of Contracts for Breach of
--------------------------------------
Representations and Warranties.
------------------------------
(a) Repurchase Obligation. Subject to Section 8(b) hereof,
--------------------- -----------
Seller shall repurchase from the Company any Contract sold by
it to the Company, for an amount equal to the Release Price
therefor (such amount, the "Repurchase Price"), on the first
Settlement Date occurring following the last day of the
immediately preceding Calculation Period in which Seller
becomes aware or receives written notice from the Company,
Triple-A or Collateral Agent that such Contract is a
"Defective Contract"; provided,
--------
however, that with respect to any Contract incorrectly described
-------
on the Contract Schedule only with respect to its Principal
Balance on the relevant Cut-Off Date, which Seller would
otherwise be required to repurchase pursuant to this Section
-------
8(a), Seller may, in lieu of repurchasing such Contract, pay to
----
the Company on such Settlement Date, cash in an amount
sufficient to cure such deficiency or discrepancy. The
Company hereby directs the Seller, for so long as the Credit
Agreement is in effect, to make such payment on its behalf to
the Collection Account pursuant to Section 7.11(a) of the
Credit Agreement. The ---------------
following defects with respect to documents in any Contract
File, to the extent they do not impair the validity or
enforceability of the subject document under applicable law,
shall not be deemed to constitute a breach of the
representations and warranties contained in Section 7(c):
misspellings of or omissions of ------------
initials in names; name changes from divorce or marriage;
discrepancies as to payment dates in a Contract of no more
than 30 days; discrepancies as to Payments of no more than
$5.00; discrepancies as to origination dates of not more than
30 days; inclusion of additional parties other than the
primary Obligor not listed in the Servicer's records or in the
Contract Schedule and non-substantive typographical errors and
other non-substantive minor errors of a clerical or
administrative nature.
(b) Repurchases. Seller shall notify the Company of any
-----------
repurchase not less than two Business Days prior to the date
on which such repurchase shall be effected, specifying the
Defective Contract and the Repurchase Price therefor. Upon
the repurchase of a Defective Contract pursuant to Section
8(a), Seller shall, -------
----
prior to 11:00 A.M. New York City time on the relevant
Settlement Date deposit, on behalf of the Company, in the
Collection Account the Repurchase Price.
Upon each repurchase, the Company shall, automatically
and without further action be deemed to sell, transfer,
assign, set over and otherwise convey to the Seller or FCI, as
the case may be, without recourse, representation or warranty,
all the right, title and interest of the Company in and to
such Defective Contract, the VOI or Lot, the Contract File
relating thereto, all monies due or to become due with respect
thereto, all Payments and proceeds thereof (including Payments
received from and including the Determination Date next
preceding the date of transfer) and all other assets related
thereto as described in Sections 2 and 3 hereof. The Company
----------------
shall execute such
documents, releases and instruments of transfer or assignment
and take such other actions as shall reasonably be requested
by the Seller to effect the conveyance of such Defective
Contract, and the VOI or Lot and Contract File related thereto
pursuant to this subsection.
(c) Except for the remedies set forth in Section 7(g), the
-----------
obligation of Seller to repurchase any Defective Contract
shall constitute the sole remedy against Seller, FCI or their
affiliates, respecting any breach of the representations and
warranties set forth in Section 7(c), (d) and (e) available
-------------------------
hereunder to the Company; provided, however, that this provision
-----------------
shall not limit in any way rights of the Company against any
other Person.
Section 9. Covenants of Seller and FCI.
---------------------------
(a) Affirmative Covenants of Seller and FCI. So long as
---------------------------------------
the Company has any obligation under the Credit Agreement to
assign and convey Contracts to the Collateral Agent for the
benefit of itself and Triple-A and its successor and assigns,
Seller and FCI each covenants and agrees that it shall:
(i) Compliance with Laws, Etc. Comply in all material
-------------------------
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties, and
all Contracts and Facility Documents to which it is a party.
(ii) Preservation of Corporate Existence. Preserve and
-----------------------------------
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation, and maintain all necessary licenses and
approvals, in each jurisdiction except where the failure to
preserve and maintain such existence, rights, franchises,
privileges, qualifications, licenses and approvals would not
materially adversely affect (A) the value or collectibility of
any Contract or related Collateral, (B) the business,
properties, operations, prospects, profits or condition
(financial or otherwise) of Seller or FCI, the Administrative
Agent or the Collateral Agent, or (C) the ability of either
FCI or Seller to perform its obligations hereunder or under
the other Facility Documents to which it is a party.
(iii) Audits. At any time and from time to time during
-----
regular business hours, permit the Company, and/or its agents,
representatives or assigns, access (including, without
limitation, any repository used by Seller or FCI to store the
computer tapes or other computer records constituting the
Daily Report):
(i) to the offices and properties of Seller or FCI
(including, without limitation, any repository used by
Seller or FCI to store the computer tapes or other
computer records constituting the daily report) in order
to examine and make copies of and abstracts from all
books, correspondence and Records of Seller or FCI as
appropriate to verify the Seller's or FCI's compliance
with this Agreement, or any other Facility Documents to
which Seller or FCI is a party and any other agreement
contemplated hereby or thereby, and the Company and/or
its agents, representatives and assigns may examine and
audit the same, and make photocopies thereof (and
computer tapes or other computer replicas thereof, as
appropriate), and Seller and FCI agrees to render to the
Company and/or its agents, representatives and assigns,
at Seller's and FCI's cost and expense, such clerical and
other assistance as may be reasonably requested with
regard thereto; and
(ii) to the officers or employees of Seller and FCI
in order to discuss matters relating to the Contracts or
Seller's or FCI's performance hereunder with any of such
officers or employees of Seller and FCI having knowledge
of such matters.
Each such audit shall be at the sole expense of Seller and
FCI. The number and frequency of any such audits shall be
limited to such number and frequency as shall be reasonable in
the exercise of the Company's, or its assigns', reasonable
commercial judgment. The Company and its agents,
representatives and assigns shall also have the right to
discuss Seller's and FCI's affairs with the officers and
employees of Seller and FCI and Seller's and FCI's independent
accountants and to verify under appropriate procedures the
validity, amount, quality, quantity, value and condition of,
or any other matter relating to, the Contracts and related
Collateral.
(iv) Keeping of Records and Books of Account. Maintain and
--------------------------------------
implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing
the Contracts in the event of the destruction or loss of the
originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or
advisable for the collection of all Contracts (including,
without limitation, records adequate to permit the daily
identification of all Collections with respect to, and
adjustments of amounts payable under, each Contract).
(v) Performance and Compliance with Receivables and
-----------------------------------------------
Contracts. At its expense, timely and fully perform and comply
---------
in all material respects with all provisions, covenants and
other promises required to be observed by Seller or FCI under
the Contracts.
(vi) Location of Records. Maintain its principal place of
-------------------
business and chief executive office, and the offices where it
maintains its Records, at the address referred to in Section
-------
4.01(k) of the Credit Agreement or, in any such case, upon 30
------
days' prior written notice to the Company, at such other
locations within the United States where all action required
by Section 7.04 of the Credit Agreement shall have been taken and
------------
completed (giving effect to the provisions of such Section 7.04
------------
as if each reference to the "Borrower" therein is instead a
reference to each of the Seller and FCI). Each of Seller and
FCI will at all times maintain its chief executive office and
the offices where it keeps the Records within the United
States of America.
(vii) Compliance with ERISA. Comply in all material
---------------------
respects with the provisions of ERISA, the IRC, and all other
applicable laws, and the regulations and interpretations
thereunder.
(viii) Ownership Interest. Take such action with respect to
------------------
each Contract as is necessary to ensure that the Company
maintains either a first priority perfected security interest
in or a legal and valid ownership interest in such Contract
and the related Collateral, in each case free and clear of any
Liens, and respond to any inquiries with respect to ownership
of a Contract sold by it hereunder by stating that, from and
after the applicable Closing Date relating thereto, it is no
longer the owner of such Contract and that ownership of such
Contract is held by the Company subject to the lien of the
Credit Agreement and the Liquidity Security Agreement;
(ix) Instruments. Not remove any portion of the Contracts
-----------
or related Collateral that consists of money or is evidenced
by an instrument, certificate or other writing from the
jurisdiction in which it was held at the date the most recent
Opinion of Counsel delivered pursuant to Section 5.01(j) of the Credit
---------------
Agreement (or from the jurisdiction in which it was held as
described in the Opinion of Counsel delivered at the Closing
Date if no Opinion of Counsel has yet been delivered pursuant
to Section 5.01(j) of the Credit Agreement) unless the Collateral
---------------
Agent shall have first received an Opinion of Counsel to the
effect that the lien and security interest created by the
Credit Agreement with respect to such property will continue
to be maintained after giving effect to such action or
actions; provided, however, that each of the Collateral Agent and the
-------- -------
Servicer may remove Pledged Contracts from such jurisdiction
to the extent necessary to satisfy any requirement of law or
court order, in all cases in accordance with the provisions of
the Custodial Agreement and Section 5.01(p) of the Credit
Agreement. ---------------
(x) No Release. Not take any action and shall use its best
----------
efforts not to permit any action to be taken by others that
would release any Person from any of such Person's covenants
or obligations under any document, instrument or agreement,
hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness or, any such document,
instrument or agreement, except as expressly provided in this
Agreement or the Credit Agreement or such other instrument or
document.
(xi) Insurance and Condemnation.
---------------------------
FCI (1) shall use its best efforts, in the case of
Developments where FCI or any subsidiary of FCI maintains
primary or substantial responsibility for management,
administration or other services of a similar nature, and
(2) shall do or cause to be done all things which it may
accomplish with a reasonable amount of cost or effort, in
the case of Developments where FCI or any Subsidiary of
FCI does not maintain primary or substantial
responsibility for management, administration or other
services of a similar nature, to cause the property
owners' association or similar time-share owner body
("POA") for each Development, to (A) maintain one or more
policies of general casualty and liability insurance with
financially sound and reputable insurers providing
coverage in scope and amount which (x) satisfies the
requirements of the Declarations (or any similar charter
document) governing the POA for the maintenance of such
insurance policies, and (y) is at least consistent with
the scope and amount of such insurance coverage obtained
by prudent POAs and/or management of other similar
developments in the same jurisdiction; and (B) apply the
proceeds of any such insurance policies in the manner
specified in the relevant Declarations (or any similar
charter document) governing the POA and/or any similar
charter documents of such POA (which exercise of best
efforts shall include voting as a member of the POA or as
a proxy or attorney-in-fact for a member). For the
avoidance of doubt, the parties acknowledge that the
ultimate discretion and control relating to the
maintenance of any such insurance policies is vested in
the POA in accordance with the various Declarations
relating to each VOI Regime.
(ii) Each of FAC and FCI shall remit to the
Collection Account, the portion of any proceeds received
pursuant to a condemnation of property in any Development
relating to any of the VOIs or Lots.
(iii) FCI shall maintain each of (A) the Master
Group Credit Life Policy originally issued by American
United Life Insurance Company of Indiana to FCI, as
beneficiary, and (B) the Master Group Credit Life Policy
originally issued by American Bankers Life Assurance
Company of Florida to FCI, as beneficiary, in each case
in full force and effect, having a scope and amounts of
coverage (on a per Obligor basis) at least equal to the
scope and amounts of coverage in effect on and as of the
date hereof.
(xii) Separate Identity. Take such action as is necessary
-----------------
to ensure compliance with Section 5.01(q) of the Credit
---------------
Agreement.
(xiii) Computer Files. Mark or cause to be marked each
--------------
Contract in its computer files that the Contracts conveyed to
Company hereunder have been pledged to Collateral Agent.
(xiv) Taxes. File or cause to be filed, and cause each of
-----
its Affiliates with whom it shares consolidated tax liability
to file, all federal, state and local tax returns which are
required to be filed by it, except where the failure to file
such returns could not reasonably be expected to have a
material adverse effect on the value or collectibility of the
Contracts or the ability of the Seller or FCI to perform its
obligations hereunder or under any other Facility Document to
which it is a party or which could otherwise be reasonably
expected to expose Seller or FCI to a material liability.
Each of Seller and FCI shall pay or cause to be paid all taxes
shown to be due and payable on such returns or on any
assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good
faith by appropriate proceedings and with respect to which the
Seller, FCI or the applicable Affiliate shall have set aside
adequate reserves on its books in accordance with GAAP, and
which proceedings could not reasonably be expected to have a
material adverse effect on the value or collectibility of the
Contracts or the ability of Seller or FCI to perform its
obligation hereunder or under any other Facility Document to
which it is a party or which could otherwise be reasonably
expected to expose Seller or FCI to a material liability.
(xv) Facility Documents. Comply in all material respects
------------------
with the terms of, and employ the procedures outlined under
this Agreement and all of the other Facility Documents to
which it is a party, and take all such action to such end as
may be from time to time reasonably requested by the Company
to maintain all such Facility Documents in full force and
effect.
(xvi) Contract Schedule. Promptly amend the Contract
------------------
Schedule to reflect terms or discrepancies that become known
after the Closing Date.
(xvii) Segregation of Collections. Prevent the deposit into
--------------------------
any of the Lock-Box Accounts, the Collection Account or the
Spread Account of any funds other than Collections in respect
of the Pledged Contracts (except, in the case of the Spread
Account, for the initial deposit therein) (provided that this Covenant
--------
shall not have been breached to the extent that items of
payment, which are not material in the aggregate, have been
mistakenly forwarded to an Obligor directly to any of FCI, FAC
or any of their respective Affiliates, or deposited into a
lock-box account maintained for the benefit of FNBB under its
credit arrangements with FCI or FAC) and, to the extent that
any such funds are nevertheless deposited into any of such
Lock-Box Accounts, the Collection Account or the Spread
Account, promptly identify any such funds to the Servicer for
segregation and remittance to the owner thereof.
(b) Negative Covenants of Seller and FCI. So long as the
-------------------------------------
Company has any obligation under the Credit Agreement to
assign and convey Contracts to Collateral Agent for the
benefit of itself and Triple-A and its successors and assigns,
Seller and FCI each covenants and agrees that it shall not,
without the prior written consent of the Company and
Collateral Agent:
(i) Sales, Liens, Etc. Against Receivables and Related
--------------------------------------------------
Security. Except for the releases contemplated under Section
-------- -------
7.11 of the Credit Agreement, sell, assign (by operation of law
----
or otherwise) or otherwise dispose of, or create or suffer to
exist, any Lien upon or with respect to, any Contract or any
Transferred Assets, or any interests in either thereof, or
upon or with respect to any Lock-Box Account to which any
Collections are sent, or assign any right to receive income in
respect thereof. Each of FCI and Seller shall immediately
notify the Company of the existence of any Lien on any
Contract or Transferred Assets, and shall defend the right,
title and interest of the Company in, to and under the
Contracts and Transferred Assets, against all claims of third
parties.
(ii) Extension or Amendment of Contract Terms. Extend,
----------------------------------------
amend, waive or otherwise modify the terms of any Contract
(other than by way of a Permitted Deferral or in accordance
with Customary Practices), or permit the rescission or
cancellation of any Contract, whether for any reason relating
to a negative change in the related Obligor's creditworthiness
or inability to make any payment under the Contract or otherwise;
provided, however, that the following modifications may be made
-------- -------
to a Pledged Contract from time to time: (i) extensions which are
Permitted Deferrals, (ii) amendments, entered into in
accordance with Customary Practices and Credit Standards and
Collections Policies, which do not reduce the amount or extent
the maturity of required Payments, (iii) reductions in the
amount of required principal Payments under such Contract
which do not alter the aggregate amount of Collections
anticipated to be received in the Collection Account in
respect of such Contract (as a result of any release of
prepaid premiums for Credit Life Insurance), and (iv)
modifications in the applicability of a PAC (which will, among
other things, result in a change in the relevant Contract
Rate).
(iii) Change in Business or Credit and Collection Policy.
---------------------------------------------------
Make any change in the character of its business or in the
Credit Standards and Collection Policies, or deviate from the
exercise of Customary Practices, which change or deviation
would, in either case, materially impair the value or
collectibility of any Contract.
(iv) Change in Payment Instructions to Obligors. Add or
-------------------------------------------
terminate any bank as a Lock-Box Bank from those listed in
Exhibit O to the Credit Agreement or make any change in its
---------
instructions to Obligors regarding payments to be made to any
Lock-Box Bank, unless the Company and Collateral Agent shall
have received (i) 30 days' prior written notice of such
addition, termination or change and (ii) prior to the
effective date of such addition, termination or change, (x)
executed copies of Lock-Box Agreements executed by each new
Lock-Box Bank, the Seller, the Company, the Servicer and the
Collateral Agent and (y) copies of all agreements and
documents signed by either the Company or the respective Lock-
Box Bank with respect to any new Lock-Box Account.
(v) Change in Corporate Name, Etc. Make any change to its
-----------------------------
corporate name, trade names, fictitious names, assumed names
or doing business names which existed on the Closing Date
without providing at least 30-days prior written notice to the
Company and the Collateral Agent to the extent all action
required by Section 7.04 of the Credit Agreement shall have been
------------
taken and completed (giving effect to the provisions of such Section
7.04 -------
----
as if each reference to the "Borrower" therein is instead a
reference to each of Seller and FCI).
(vi) ERISA Matters. (i) Engage or permit any ERISA
-------------
Affiliate to engage in any prohibited transaction for which an
exemption is not available or has not previously been obtained
from the DOL; (ii) permit to exist any accumulated funding
deficiency, as defined in Section 302(a) of ERISA and Section
412(a) of the IRC, or funding deficiency with respect to any
Benefit Plan other than Multiemployer Plan; (iii) fail to make
any payments to any Multiemployer Plan that Seller, FCI or any
ERISA Affiliate may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining
thereto; (iv) terminate any Benefit Plan so as to result in
any liability; (v) permit to exist any occurrence of any
reportable event described in Title IV of ERISA which
represents a material risk of a liability of Seller, FCI or
any ERISA Affiliate under ERISA or the IRC; provided, however,
Seller's or FCI's ERISA -------- -------
Affiliates may take or allow such prohibited transactions,
accumulated funding deficiencies, payments, terminations and
reportable events described in clauses (i) through (iv) above
so long as such events occurring within any fiscal year of
Seller or FCI, in the aggregate, involve a payment of money by
or an incurrence of liability of any such ERISA Affiliate
(collectively, "ERISA Liabilities") in an amount which does
-----------------
not exceed $500,000.
(vii) Terminate or Reject Contracts. Without limiting
-----------------------------
anything in Section 9(b)(ii) above, terminate or reject any
----------------
Contract prior to the end of the term of such Contract,
whether such rejection or early termination is made pursuant
to an equitable cause, statute, regulation, judicial
proceeding or other applicable law (including, without
limitation, Section 365 of the Bankruptcy Code), unless prior
to such termination or rejection, such Contract and any
related Collateral have been released from the Lien of the
Credit Agreement pursuant to Section 7.11 thereof in consideration
------------
of the payment of an appropriate Release Price therefor.
(viii) Facility Documents. Except as otherwise permitted
------------------
under the Credit Agreement, (a) terminate, amend or otherwise
modify any Facility Document to which it is a party, or grant
any waiver or consent thereunder, or (b) terminate, amend or
otherwise modify the FairShare Vacation Plan Use Management
Trust Agreement dated as of June 26, 1991 (as amended from
time to time, the "Trust Agreement"); provided, however, (A) the Title
-------- -------
Clearing Agreements may be amended for the purposes of (1)
making additional properties subject thereof, (2) making an
Affiliate of FCI a party thereto having the same rights and
obligations thereunder as FCI or (3) identifying a separate
pool of Contracts (which shall not include the Pledged
Contracts) to be sold or pledged to secure debt under a
pooling or pledge arrangement similar to that evidenced by
this Credit Agreement, and (B) the Trust Agreement may be
amended from time to time (1) to substitute or add additional
parties thereto, (2) to comply with state and federal laws or
regulations, or (3) for any other purpose, provided that with
respect to this clause (3), FCI or Seller furnishes to the
Company and Collateral Agent an Opinion of Counsel in form and
substance acceptable to the Collateral Agent to the effect
that such amendment or modification will not adversely affect
in any material respect the respective interests of Triple-A,
the Collateral Agent, the Administrative Agent or the Surety.
(ix) Accounting Treatment. Prepare any financial
--------------------
statements or other statements which shall account for the
transactions contemplated by this Agreement in any manner
other than as the sale of, or a capital contribution of, the
Contracts by the Seller to the Company.
(x) Insolvency Proceedings. Institute Insolvency
----------------------
Proceedings with respect to the Company or consent to the
institution of Insolvency Proceedings against the Company, or
take any corporate action in furtherance of any such action,
or allow the Company to seek dissolution or liquidation in
whole or in part.
Section 10. Seller Subordinated Note.
------------------------
(a) On the Closing Date, Company shall issue to the
Seller the subordinated note substantially in the form of
Exhibit "_" (the "Subordinated Note"). The principal amount
of the Subordinated Note shall be calculated pursuant to the
Settlement Report and, on any day, shall be equal to the
Subordinated Interest on such day.
(b) Interest on the principal amount of the Subordinated
Note shall accrue at a rate set forth in the Subordinated
Note. Principal and interest payments on the Subordinated
Note may be made only at the times and to the extent permitted
by the Credit Agreement. Principal amounts outstanding on the
Subordinated Note shall increase concurrently with the payment
of the Purchase Price pursuant to the terms hereof. Except to
the extent permitted by the Credit Agreement, Seller agrees
not to ask, demand, sue for or take or receive from Company in
cash or other property, by set-off or in any other manner,
payment of all or any part of the Subordinated Note.
(c) The Seller agrees upon any distribution of all or
any of the assets of Company to creditors of Company upon the
dissolution, winding up, total or partial liquidation,
arrangement, reorganization, adjustment protection, relief, or
composition of Company or its debts, any payment or
distribution of any kind in respect of the Subordinated Note
(including, without limitation, cash, property, securities and
any payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of
Company being subordinated to the payment of the Subordinated
Note) that otherwise would be payable or deliverable upon or
with respect to the Subordinated Note, directly or indirectly,
by set-off or in any other manner, including, without
limitation, from or by way of the Collateral, shall be paid or
delivered directly to the Collateral Agent for application (in
the case of cash) to or as Collateral (in the case of non-cash
property) for the payment or prepayment in full of, the
Obligations until the Obligations shall have been indefeasibly
paid in full in cash. The Collateral Agent is irrevocably
authorized and empowered (in its own name or in the name of
the Seller or otherwise), but shall have no obligation, to
demand, sue for, collect and receive every payment or
distribution referred to in the preceding sentence and give
acquittance therefor and to file claims and proofs of claim
and take such other action (including, without limitation,
voting the Subordinated Note and enforcing any security
interest or other lien securing payment of the Subordinated
Note) as the Collateral Agent may request to (i) collect the
Subordinated Note for the account of Triple-A and the Surety
and to file appropriate claims or proofs of claim in respect
of the Subordinated Note, (ii) execute and deliver to the
Collateral Agent such powers of attorney, assignments or other
instruments as the Collateral Agent may request in order to
enable the Collateral Agent to enforce any and all claims with
respect to, and any security interests and other liens
securing payment of, the Subordinated Note, (iii) collect and
receive any and all payments or distribution which may be
payable or deliverable upon or with respect to the
Subordinated Note.
(d) All payments or distributions upon or with respect
to the Subordinated Note that are received by the Seller
contrary to the provisions of the Credit Agreement shall be
received in trust for the benefit of Triple-A, shall be
segregated from other funds and property held by Seller and
shall be forthwith paid over to the Collateral Agent in the
same form as so received (with any necessary endorsement) to
be applied (in the case of cash) to, or held as Collateral (in
the case of non-cash property) for the payment or prepayment
in full of the Obligations until the Obligations shall have
been indefeasibly paid in full in cash. The Seller agrees
that no payment or distribution to Triple-A or the Surety
pursuant to the provisions of the Subordinated Note shall
entitle the Seller to exercise any rights of subrogation in
respect thereof against Company until the Obligations shall
have been indefeasibly paid in full in cash. The Seller and
Company hereby waive promptness, diligence, notice of
acceptance and any other notice with respect to any of the
Obligations and any requirement that the Collateral Agent
protect, secure, perfect or insure any security interest or
lien on any property subject thereto or exhaust any right or
take any action against Company or any other Person or any
Collateral.
(e) The Seller agrees and confirms that the Collateral
Agent shall not have any duty whatsoever to the Seller as
holder of the Subordinated Note and that the Collateral Agent
shall not be liable to the Seller for any action taken or
omitted, to the extent authorized under terms of the Credit
Agreement or this Agreement, with respect to the Subordinated
Note.
(f) Prior to the indefeasible payment in full in cash of
the other Obligations, the Seller will not seek to collect any
amounts owing under the Subordinated Note in any manner or
exercise or enforce any of its rights under the Subordinated
Note.
(g) The Seller and Company further agree that at no time
hereafter will any part of the indebtedness represented by the
Subordinated Note be represented by any negotiable instruments
or other writings except the Subordinated Note.
(h) The Seller and Company waive notice of and consent
to the creation of the Triple-A Loans pursuant to the Credit
Agreement, and any other Obligation, any extensions granted by
Triple-A, the Surety, the Collateral Agent or the Liquidity
Collateral Agent with respect thereto, the taking or releasing
of Collateral or any obligors or guarantors for the payment
thereof, and the releasing of the Seller or any other
subordinating creditors. No failure or delay by Triple-A, the
Surety, the Collateral Agent or the Liquidity Agent to
exercise any right granted herein, or in any other agreement
or bylaw shall constitute a waiver of such right or of any
other right.
(i) The Seller and Company agree to execute and deliver
to Triple-A, the Surety, the Collateral Agent and the
Liquidity Agent such additional documents and to take such
further actions as Triple-A, the Surety, the Collateral Agent
and the Liquidity Agent may hereafter reasonably require to
evidence the subordination of the Subordinated Note.
(j) The terms of the Subordinated Note and the
subordination effected hereby, and the rights of Triple-A, the
Surety, the Collateral Agent and the obligation of the Seller
and Company arising hereunder, shall not be affected, modified
or impaired in any manner or to any extent by (i) any
amendment or modification of or supplement to any provision of
the Facility Documents, or any instrument or document executed
or delivered pursuant thereto or in connection with the
transactions contemplated thereby; (ii) the validity or
enforceability of any of such documents; (iii) any exercise or
non-exercise of any right, power or remedy under or in respect
of the other Obligations or any instruments or documents
related thereto or arising at law; or (iv) any waiver, consent
release, indulgence, extension, renewal, modification, delay
or other action, inaction, or omission in respect of the other
Obligation or any of the instruments or documents related
thereto.
(k) Neither the Subordinated Note nor any right of the
Seller to receive any payment thereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed; provided, however, that the Seller may pledge
--------- ------
or otherwise transfer the Subordinated Note with the prior
written consent of Collateral Agent; provided, further, that any
-------- -------
assignee of the Subordinated Note shall be bound by all of the
terms applicable to the Subordinated Note set forth in the
Facility Documents.
Section 11. Representations and Warranties of the Company.
----------------------------------------------
The Company represents and warrants that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power, authority, and legal
right to own its properties and conduct its business as such
properties are presently owned and as such business is
presently conducted, and to execute, deliver and perform its
obligations under this Agreement. The Company is duly
qualified to do business and is in good standing as a foreign
corporation, and has obtained all necessary licenses and
approvals in each jurisdiction necessary to carry on its
business as presently conducted and to perform its obligations
under this Agreement;
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions provided
for in this Agreement have been duly approved by all necessary
corporate action on the part of the Company;
(c) This Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against it in
accordance with its terms, except as such enforceability may
be subject to or limited by Debtor Relief Laws and except as
such enforceability may be limited by general principles of
equity;
(d) The execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the
fulfillment of the terms hereof applicable to the Company will
not conflict with, violate, result in any breach of the
material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default
under any provision of any existing law or regulation or any
order or decree of any court applicable to the Company or its
certificate of incorporation or bylaws or any indenture,
contract, agreement, mortgage, deed of trust, or other
instrument to which the Company is a party or by which it or
its properties is bound;
(e) There are no proceedings or investigations pending
or, to the best knowledge of the Company, threatened against
the Company before any court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (A)
asserting the invalidity of this Agreement, (B) seeking to
prevent the consummation of any of the transactions
contemplated by this Agreement, (C) seeking any determination
or ruling that, in the
reasonable judgment of the Company, would adversely affect the
performance by the Company of its obligations under this
Agreement, or (D) seeking any determination or ruling that
would adversely affect the validity or enforceability of this
Agreement;
(f) All approvals, authorizations, consents, orders or
other actions of any person or entity or any governmental body
or official required in connection with the execution and
delivery of this Agreement by the Company, the performance by
it of the transactions contemplated hereby and the fulfillment
of the terms hereof, have been obtained and are in full force
and effect; and
(g) The Company is solvent and will not become insolvent
after giving effect to the transactions contemplated by this
Agreement; the Company has not incurred Debts beyond its
ability to pay; and the Company, after giving effect to the
transactions contemplated by this Agreement, will have an
adequate amount of capital to conduct its business in the
foreseeable future.
Section 12. Miscellaneous.
-------------
(a) Amendment. This Agreement may be amended from time to
---------
time or the provisions hereof may be waived or otherwise
modified by the parties hereto by written agreement signed by
the parties hereto and the Collateral Agent; provided, however, no such
-------- -------
amendment, waiver or modification shall be effective without
the prior written consent of the Collateral Agent.
(b) Software. FCI hereby grants a royalty free perpetual
--------
license to FAC, and its successors and assigns, in, to and
under all software used to account for the Transferred Assets,
and all relevant licenses and sublicenses, if any, relating
thereto (the "Software") to use, assign or sublicense such
Software in connection with the transactions contemplated by
the Facility Documents.
(c) Assignment. The Company has the right to assign its
----------
interest under this Agreement as may be required to effect the
purposes of the Credit Agreement, without the consent of the
Seller or FCI, and the assignee shall succeed to the rights
hereunder of the Company. In addition, Collateral Agent
and/or Triple-A has the right to assign its interest hereunder
as may be required to effect the purposes of the Liquidity
Security Agreement without the written consent of either
Seller or FCI, and the assignee shall succeed to the rights
hereunder of Collateral Agent and/or Triple-A.
(d) Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which counterparts shall be
deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
(e) Termination. Seller's and FCI's obligations under this
-----------
Agreement shall survive the sale of the Contracts to the
Company and the Company's pledge and assignment of the
Contracts to the Collateral Agent, and Triple-A's pledge and
assignment under the Liquidity Security Agreement to the
Liquidity Agent.
(f) Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of Arkansas and the
obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
(g) Notices. All demands and notices hereunder shall be
-------
in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, postage
prepaid, or by express delivery service, to (i) in the case of
Seller, Fairfield Acceptance Corporation, 2800 Cantrell Road,
Little Rock, Arkansas 72202, Attention: President, or such
other address as may hereafter be furnished to the Company and
FCI in writing by Seller, (ii) in the case of FCI, Fairfield
Communities, Inc., 2800 Cantrell Road, Little Rock, Arkansas
72202, Attention: President, or such other address as may
hereafter be furnished to Seller or the Company in writing by
FCI, and (c) in the case of the Company, Fairfield Capital
Corporation, 2800 Cantrell Road, Little Rock, Arkansas 72202,
Attention: President, or such other address an may be
furnished to Seller or FCI in writing by the Company; with a
copy of any such notice to Collateral Agent at 885 Third
Avenue, New York, New York 10022, Attention: Head of Exposure
Management, or such other address as may hereafter be
furnished to Seller or FCI in writing by the Collateral Agent.
(h) Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement
shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this
Agreement.
(i) Successors and Assigns. This Agreement shall be binding
----------------------
upon each of Seller, FCI and the Company and their respective
successors and assigns, as may be permitted hereunder, and
shall inure to the benefit of each of the Seller, FCI and the
Company and each of the Collateral Agent, the Administrative
Agent, Triple-A, the Surety and the Liquidity Agent to the
extent explicitly contemplated hereby (including, without
limitation, with respect to the Subordination provisions of
Section 10 hereof).
----------
(j) Costs, Expenses and Taxes. (A) Each of Seller and FCI
------------------------
jointly and severally agrees to pay on demand to Company (x)
all reasonable costs and expenses incurred or reimbursed (or
to be reimbursed) by Company in connection with the
preparation, execution and delivery (including any requested
amendments, waivers or consents) of this Agreement, the other
Facility Documents and the other documents to be delivered
hereunder and thereunder, including, without limitation,
reasonable fees and out-of-pocket expenses of counsel
(subject, in the case of fees and expenses of counsel, to the
terms of the Fee Letter and (y) all reasonable costs and
expenses, if any, incurred or reimbursed (or to be reimbursed)
by Company (including reasonable counsel fees and expenses),
in connection with the enforcement or preservation of the
rights and remedies under this Agreement and each of the other
documents to be delivered hereunder.
(B) Each of Seller and FCI jointly and severally agrees
to pay, indemnify and hold Company harmless from and against
any and all stamp, sales, excise and other taxes and fees
payable or determined to be payable by or reimbursed (or to be
reimbursed) by Company in connection with the execution,
delivery, filing and recording of this Agreement, the other
Facility Documents and the other agreements and documents to
be delivered hereunder and thereunder, and against any
liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
[This space intentionally left blank.]
IN WITNESS WHEREOF, the parties have caused their names
to be signed hereto by their respective officers thereunto
duly authorized, all as of the day and year first above
written.
FAIRFIELD ACCEPTANCE CORPORATION
By /s/ Robert W. Howeth
------------------------------
Its: President
FAIRFIELD COMMUNITIES, INC.
By: /s/ Robert W. Howeth
----------------------------
Its: Senior Vice President
FAIRFIELD CAPITAL CORPORATION
By: /s/ Robert W. Howeth
-----------------------------
Its: President
EXHIBIT 11
----------
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Primary
------------------
Three Months Ended
March 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Weighted average shares:
Shares outstanding 12,360,213 12,027,895
Estimated increase in shares
outstanding due to allowed
claims exceeding $ 85 million (1) 709,486 1,116,105
Less treasury stock and shares
held by wholly owned subsidiaries (2,395,295) (2,395,295)
Net effect of dilutive warrants
based on the treasury stock method 359,094 346,814
Contingent issuance -
Holders of FCI Notes (2) - -
---------- ----------
Total weighted average shares
outstanding 11,033,498 11,095,519
========== ==========
Net earnings $152,000 $1,078,000
======== ==========
Earnings per share $0.01 $0.10
===== =====
Fully Diluted
------------------
Three Months Ended
March 31,
------------------
1995 1994
---- ----
<C> <C>
12,360,213 12,027,895
709,486 1,116,105
(2,395,295) (2,395,295)
378,615 373,333
588,235 588,235
---------- ----------
11,641,254 11,710,273
========== ==========
$152,000 $1,078,000
======== ==========
$0.01 $0.09
===== =====
</TABLE>
(1) In accordance with the terms of the plans of
reorganization the number of shares to be issued to
unsecured claim holders will increase if the amount of
the allowed unsecured claims exceeds $85 million. The
number of shares issued will be increased to a number
equal to 10,000,000 multiplied by the quotient of the
total amount of the allowed unsecured claims divided by
$85 million. For purposes of the earnings per share
computation, the estimated amount of allowed claims,
exclusive of the contingent issuance for the holders of
the FCI Notes, totaled $111.1 million as of March 31,
1995.
(2) In accordance with the terms of the plans of
reorganization, Fairfield has reserved, but not issued,
588,235 shares of Common Stock for the benefit of the
holders of the FCI Notes in the event the proceeds from
the sale of the collateral securing the FCI Notes, or the
value of any such collateral not sold, is insufficient to
repay the FCI Notes.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's March 31, 1995 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 14482
<SECURITIES> 0
<RECEIVABLES> 143624
<ALLOWANCES> 11206
<INVENTORY> 32748
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 216457
<CURRENT-LIABILITIES> 0
<BONDS> 103292
<COMMON> 124
0
0
<OTHER-SE> 67693
<TOTAL-LIABILITY-AND-EQUITY> 216457
<SALES> 16935
<TOTAL-REVENUES> 20359
<CGS> 7266
<TOTAL-COSTS> 9677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 945
<INTEREST-EXPENSE> 2275
<INCOME-PRETAX> 245
<INCOME-TAX> 93
<INCOME-CONTINUING> 152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
Fairfield Communities, Inc.
10% Senior Subordinated Secured Notes
Ombudsman Report
For the Period Ending
March 31, 1995
Prepared by
Houlihan Lokey Howard & Zukin
--------------------------------------------------
Date Prepared:
May 3, 1995
Introduction
---------------------------------------------------------------------------
In connection with Houlihan Lokey Howard & Zukin's role ("Houlihan Lokey")
as the official ombudsman ("Ombudsman") to the Fairfield Communities, Inc.
("Fairfield" or the "Company") Senior Subordinated Secured Noteholders
("Noteholders"), the following is the quarterly report regarding the
Noteholders' collateral for the quarter ending March 31, 1995.
The Noteholders' collateral (the "Collateral") consists of all of
Fairfield's interest in its (i) Fairfield Pointe Alexis development
(excluding certain lots pledged as Collateral to the First National Bank of
Boston) located in Tarpon Springs, Florida ("Pointe Alexis"); (ii)
Harbour Ridge joint venture in Stuart, Florida ("Harbour Ridge"); and (iii)
Sugar Island joint venture in St. Croix, U.S. Virgin Islands ("Sugar
Island"). Noteholders previously had Collateral interests in the Bald
Mountain Golf Course at the Fairfield Mountain Development ("Bald Mountain
Golf Course") until it was sold on February 9, 1993 and the Harbour Golf
Course at the Fairfield Harbour development in New Bern, North Carolina
("Harbour Golf Course") until it was sold on October 8, 1993.
In addition, Fairfield has reserved, but not issued, 588,235 shares of its
common stock (approximately five percent of the outstanding Fairfield
common stock on a fully-diluted basis) on behalf of the Noteholders to be
issued, in whole or part, and to the extent that the Collateral sale
proceeds are insufficient to fully repay the principal and accrued interest
on the Senior Subordinated Secured Notes ("Notes"). As of April 24, 1995,
the trading price of Fairfield's common stock was 5 1/2.
Pursuant to Fairfield's plan of reorganization, efforts are underway to
liquidate all of the Fairfield controlled Collateral (Pointe Alexis) and to
continue receipt of cash flow distributions from Collateral consisting of
Fairfield general and limited partnership interests (Sugar Island and
Harbour Ridge). Fairfield also must maintain the Collateral it controls
until the liquidation process is complete.
Collateral proceeds during the quarter ended March 31, 1995 totaled
approximately $908,425 (excluding approximately $40,096 funded to the
Noteholders' Operating Account which is used to pay administrative expenses
at Pointe Alexis). The balance in the Noteholders' Interest Payment
Account was $879,271 as of March 31, 1995.
Since the effective date of Fairfield's Chapter 11 plan of reorganization,
Noteholders have received distributions totaling $12,014,644, of which
$4,005,365 was interest and $8,009,279 was principal. The remaining
principal balance outstanding as of March 31, 1995 was $14,805,665 which
amount is secured by all of the Collateral outlined in this report
(including the cash balances mentioned above).
This report will serve to more fully describe the Collateral as well as to
update the Noteholders with the respect to both the condition and expected
cash flow of all of the remaining Collateral.<PAGE>
Pointe Alexis
---------------------------------------------------------------------------
Fairfield Pointe Alexis is divided into two separate developments, Pointe
Alexis South and Pointe Alexis North (Harbour Watch), both located in
Tarpon Springs, Florida.
Pointe Alexis South is a Fairfield community master planned for 271 units.
As of March 31, 1995, 167 lots had been sold and closed, 47 were vacant
lots with roads and improvements installed, and 57 were raw land with no
improvements. The aggregate release price (the amount which must be paid
to Noteholders upon sale of each unit) for all the remaining lots is
$1,200,375 although some of the interior lots may never yield any
appreciable value and even many of the water-front lots may eventually need
to be sold at prices well below the current release prices. Originally
developed as a retirement community, Pointe Alexis has both single- and
multi-family product. As a result of Fairfield's Chapter 11 filing and
limited sales at Pointe Alexis, however, the Company limited construction
activity to projects in progress and began marketing tracts of land in bulk
to other developers. This strategy will continue going forward. Lot
prices range from $12,000 to $20,000 but may be discounted if large tracts
of land are sold in bulk.
The community surrounding the development consists mostly of lower income
housing and access from the Tampa airport is poor; however, some of the
lots (especially the water-front lots) do have appeal. In addition, Pointe
Alexis is one of the few remaining sites in Florida where gulf-front
properties can be purchased at relatively inexpensive prices, and the
Tarpon Springs area does have a strong retirement community. A market does
exist for Pointe Alexis lots, albeit at significantly discounted prices
from historical levels. At the current sales and release prices, the
remaining land inventory will likely liquidate over three or four years as
undeveloped lots are sold in small to medium sized tracts to developers.
As an alternative, the entire project could be sold in a single bulk sale,
or sold through an auction, although these alternatives would likely
require an aggregate sales price well below the aforementioned release
price.
During the quarter ended March 31, 1995, at Pointe Alexis South, Fairfield
recorded 2 lot sales and 0 lot closing compared to 7 lot sales and 5 lot
closings during the quarter ended March 31, 1994. Total revenues at Pointe
Alexis South during the first quarter ended March 31, 1995 totaled $0
compared to $108,000 during the first quarter ended March 31, 1994.
Harbour Watch shares the same location and access problems as Pointe Alexis
South, but has superior marketing characteristics and Collateral value.
Harbour Watch is a gated community
with card-controlled access. From inception, it has been operated as a lot
sale development with
no home building operations conducted by Fairfield (in contrast to Pointe
Alexis South). Lot prices generally range from $50,000 for interior lots
to $170,000 or more for water-front lots with docks. The master plan calls
for sales of 180 lots. As of March 31, 1995, 114 lots had been sold and
closed, and 66 were developed with roads and available for sale. Of the 66
remaining lots, the First National Bank of Boston has a first lien on 12
lots. The aggregate release price on the lots pledged as Collateral to the
Noteholders is $1,852,578, which reflects a 13% price reduction effective
as of January 1, 1995. The reduction was approved by the Ombudsman due to
limited sales activity and to generate funds for expenses at Pointe Alexis.
If sales activity continues to be slow, and no buyer materializes for a
bulk purchase, remaining lots may be sold through an auction format which
could prompt further decreases in release prices.
---------------------------------------------------------------------------
During the quarter ended March 31, 1995, at Harbour Watch, Fairfield
recorded 2 lot sales and 3 lot closings, compared to 2 lot sales and 5 lot
closings during the quarter ended March 31, 1994. Total revenues at
Harbour Watch during the quarter ended March 31, 1995 were $294,200
compared to $629,000 during the quarter ended March 31, 1994.
Many of the homes which have been built are quite large and expensive,
particularly some of the water-front homes. There is an ongoing sales
effort in place with a sales trailer at the entrance to the community.
During the quarter ending March 31, 1995, construction of several new homes
continued, maintaining the community's positive ambiance of ongoing
activity. Since completing the development of the water-front property, 2
water-front lots have been sold. As of the date of this report, there were
10 water-front lots available for sale at Harbour Watch with an aggregate
release price of $723,888.
Pointe Alexis South and Harbour Watch collectively had monthly cash
operating expenses of approximately $219,074 during the quarter ended March
31, 1995, which, together with closing costs and commissions, may be funded
out of excess sale proceeds (the sale price that is in excess of the
release price).
As the Ombudsman, Houlihan Lokey will continue to monitor the spread
between the sales prices and release prices and its relationship with
operating expenses and closing costs. At its discretion, Houlihan Lokey
can instruct Fairfield to increase (up to the levels in the March 31, 1989
Indenture) or decrease release prices as appropriate. As mentioned above,
Houlihan Lokey approved a 13% reduction in Harbour Watch release prices
effective as of January 1, 1995. Based on the slow sales pace at Pointe
Alexis discussed above, further reductions in the sales and release prices
at both Pointe Alexis South and Harbour Ridge may be required during 1995,
particularly if an auction sale format is pursued.
Harbour Ridge
---------------------------------------------------------------------------
Harbour Ridge is a for-sale luxury recreational community located on a
beautiful stretch of land fronting on the St. Lucie River approximately one
hour from the West Palm Beach Airport in Stuart, Florida. The Collateral
interest entitles Noteholders to 35.5 percent of the net partnership cash
flow. The community is a high-end luxury community with a strong seasonal
element, as opposed to year-round residence, with prices ranging from
approximately $175,000 to approximately $1 million. Primary emphasis is on
a golf and clubhouse lifestyle, with a secondary emphasis on boating.
There are also boat slips for sale ranging in price from $15,000 to
$40,000.
The managing general partner of Harbour Ridge is Harbour Ridge, Inc., the
principals of which have years of experience and success in the business
which are clearly expressed in the competent and professional look and feel
of the project. The homes are attractively designed and appear well built.
The clubhouse also is attractively designed and is surrounded by two golf
courses, one designed by Joe Lee and the other by Pete Dye.
During our recent trip to the Community we met with the managing general
partner and toured the undeveloped lot sites. The project is proceeding as
planned and, at current sales activity, could be concluded by mid-1996.
During the quarter ending March 31, 1995, 6 units were sold, leaving
approximately 18 more units to be sold. A total of 678 units have been
sold since the inception of the project. Although many of the choicest
sites have been previously sold, there remains an excellent cross section
and mix of single-family/multi-family, water-front/non-water-front
properties with varying prices.
The Noteholders received a distribution of $794,025 from Harbour Ridge
during the quarter ending March 31, 1995. Current projections indicate
that an additional $1.0 to $1.5 million of cash flow should be generated
for the Noteholders.
Sugar Island
---------------------------------------------------------------------------
The Sugar Island Partnership (the "Partnership") was formed during 1984 to
purchase approximately 4,091 acres of land located on the island of St.
Croix, Territory of the Virgin Islands of the United States. The managing
general partner is Delray Land, Inc. ("Delray"). The Partnership paid $10
million for the property. At the time of the purchase, the property was
undeveloped except for the 166-acre Fountain Valley Golf Course (renamed
Carambola Golf Club) designed by Robert Trent Jones. Fairfield's interest
in the Partnership entitles it to 30% of the total net cash flow
distributed.
To date, the Partnership has sold 883 acres of the property in two separate
transactions. During 1986, the Partnership sold 855 acres of the inland
property to Danested Associates ("Danested") for an aggregate purchase
price of $10.7 million. Danested has developed condominiums and vacant
lots designated for single-family homes on the property. Also during 1986,
the Partnership sold 28.5 acres of water-front land to the Davis Beach
Company for approximately $2.5 million for use in the development of the
157-unit Carambola Beach Resort (not included in the Collateral). Danested
had entered into an option to purchase approximately 1,069 additional acres
of land for $12.0 million, but the option expired unexercised on March 31,
1991. The land that was under option to Danested is located in the central
part of the island. It is mostly flat and easily developed but for the
most part has no direct ocean views. Danested also had an option to
purchase the Carambola Golf Club (the "Golf Club") for $7.5 million which
expired unexercised on March 31, 1993.
The remaining parcel of 2,139 acres is arguably some of the most beautiful
land on St. Croix. The terrain is mountainous and covered with dense
foliage. Most of the property has ocean views. The coastal portions are
set in a series of coves ideal for development but currently there are no
significant natural beaches and very limited road access. Development of
the property will be difficult and expensive, limiting the number of
potential buyers. The Partnership has indicated that it is considering
selling small sections of land or even individual lots, if possible. The
cost of holding the property is relatively low. The Partnership leases the
land to local farmers which results in a 95% property tax exemption.
The Carambola Beach Resort (the "Resort") is a five-star development and
was completely rebuilt following hurricane Hugo in 1990. As a result of
decreasing tourism and occupancy rates, however, the senior Resort lenders
decided to foreclose on the hotel property and shut down hotel operations
during June 1991. The Resort remained closed until an investment group,
operating through a Radisson Hotel International franchise agreement,
purchased the property on June 8, 1993. During 1994 the resort was
reported to have occupancy of approximately 30%, although occupancy had
increased to over 50% by the end of the year. During the first quarter of
1995 (the peak tourism season) the Resort had occupancy of approximately
65%. Tourism is off substantially in St. Croix thus far during 1995.
Although the buyer of the Resort has indicated that it has no interest in
purchasing the Golf Club at this time, increased play since the Resort
opened has increased annual cash flow at the Golf Club to approximately
$200,000. Total rounds played increased from 25,400 during 1993 to 31,200
during 1994. During the first quarter of 1995, the Golf Club reported
13,400 total rounds
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of golf compared to 12,100 during the first quarter of 1994. According to
Delray, the Golf Club will continue to reinvest excess cash in new golf
carts and course maintenance which, combined with increasing insurance
costs (principally hurricane) will likely prevent any partnership
distributions during 1995.
A severe drought continues to plague St. Croix (even through the rainy
season) and the golf course has deteriorated as a result. Many of the
water hazards are dry (the water having been used to irrigate the greens)
and the fairways are dry with many areas totally burned-out. Although the
soil in St. Croix is very rich and the golf course should replenish itself
quickly when the drought breaks, some of the trees which have now died may
take years to replenish.
As of the preparation of this report, St. Croix had passed legislation
legalizing gambling on the island. According to Delray, gambling on the
island should increase interest in the Partnership property for the
development of new hotels and/or casinos.
From a Collateral value perspective, Sugar Island should generate cash flow
for the Noteholders, although the magnitude and the time frame over which
the cash flow will be realized are difficult to determine. The Golf Club
could be sold (or leased on a long-term basis) within the next one or two
years, but the undeveloped land acreage could take several years to sell.
Bald Mountain Golf Course
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The Bald Mountain Golf Course is one of two golf courses located at the
Fairfield Mountains development in Rutherford County, North Carolina. The
18-hole, par 72, 6,689 yard Bald Mountain Golf Course was designed by
William B. Lewis and sits on approximately 115 acres, with Bermuda grass
tees and fairways, bent grass greens, 28 sand traps and 10 water hazards.
The Bald Mountain Golf Course is located behind a gated entrance and
attracts almost exclusively Fairfield residents and timeshare owners.
On February 9, 1993, Fairfield completed the sale of the Bald Mountain Golf
Course to the Fairfield Mountains Development Property Owners Association
(the "Mountain POA") for net cash proceeds of $1,787,519.74.
In addition to the sale proceeds, the Mountains POA withdrew various claims
alleging its rights to golf course ownership.
Harbour Golf Course
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The Harbour Golf Course is one of two golf courses located at the Fairfield
Harbour development in New Bern, North Carolina. The 18-hole, par 72,
6,600-yard Harbour Golf Course was designed by Dominic Palumbo and is
located on approximately 188 acres with narrow sloping fairways, a site-
wide canal system, 77 sand traps and 3 lakes. The course does not allow
access to the general public.
On October 8, 1993, Fairfield completed the sale of the Harbour Golf Course
to the Fairfield Harbour Property Owners' Association for net cash proceeds
of $1,947,948.26. Subsequently, an additional $22,800 was received in
connection with the release of certain contingent closing costs.
