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, 1998
[ ] 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.)
11001 Executive Center Drive, Little Rock, Arkansas 72211
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (501) 228-2700
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
---- ----
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of April 30, 1998 totaled 45,536,426.
<PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page
No.
----
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
(unaudited) and December 31, 1997 3
Consolidated Statements of Earnings for the Three Months
Ended March 31, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
March 31, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,420 $ 3,074
Loans receivable, net 223,367 291,209
Real estate inventories 103,426 93,139
Property and equipment, net 24,610 24,370
Restricted cash and escrow accounts 20,199 25,607
Investment in and net amount due
from unconsolidated subsidiary 17,779 -
Other assets 30,334 26,533
-------- --------
$425,135 $463,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements $115,992 $170,081
Deferred revenue 27,075 29,769
Accounts payable 16,544 20,398
Accrued income taxes 14,109 12,566
Other liabilities 51,214 43,936
-------- --------
224,934 276,750
-------- --------
Stockholders' Equity:
Common stock, $.01 par value,
100,000,000 shares authorized,
49,914,440 and 49,491,666 shares
issued as of March 31, 1998 and
December 31, 1997, respectively 499 495
Paid-in capital 112,444 107,920
Retained earnings 87,488 79,083
Unamortized value of restricted stock (230) (316)
Treasury stock, at cost, 4,550,306 shares
in 1998 and 4,573,266 shares in 1997 - -
-------- --------
200,201 187,182
-------- --------
$425,135 $463,932
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
Three Months Ended
March 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES
Vacation ownership interests, net $60,205 $47,952
Resort management 9,600 7,040
Interest 10,299 8,301
Other 5,690 5,491
------- -------
85,794 68,784
------- -------
EXPENSES
Vacation ownership interests 16,675 13,052
Provision for loan losses 2,917 1,775
Selling 29,160 24,090
Resort management 8,104 5,945
General and administrative 7,819 7,722
Interest, net 3,624 2,193
Other 4,241 4,222
------- -------
72,540 58,999
------- -------
Earnings before net earnings of unconsolidated
subsidiary and provision for income taxes 13,254 9,785
Net earnings of unconsolidated subsidiary 251 -
------- -------
Earnings before provision for income taxes 13,505 9,785
Provision for income taxes 5,100 3,734
------- -------
Net earnings $ 8,405 $ 6,051
======= =======
BASIC EARNINGS PER SHARE $.19 $.14
==== ====
DILUTED EARNINGS PER SHARE $.18 $.13
==== ====
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 44,276 43,505
====== ======
Diluted 47,113 46,719
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
Three Months Ended
March 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 8,405 $ 6,051
Adjustments to reconcile net earnings to net
cash (used in) provided by operating activities:
Depreciation 1,652 1,164
Amortization 251 573
Provision for loan losses 2,917 1,775
Net earnings of unconsolidated subsidiary (251) -
Tax benefit from employee stock benefit plans 1,056 366
Changes in operating assets and liabilities:
Real estate inventories (10,287) (4,388)
Deferred revenue, accounts payable
and other liabilities (2,676) 308
Other (3,068) 3,862
--------- --------
Net cash (used in) provided by operating activities (2,001) 9,711
--------- --------
INVESTING ACTIVITIES
Purchases of property and equipment, net (1,446) (1,507)
Principal collections on loans receivable 37,864 31,382
Originations of loans receivable (50,125) (42,588)
Sales of loans receivable to
unconsolidated subsidiary 64,729 -
Net investment activities of net liabilities
of assets held for sale - (8,293)
--------- --------
Net cash provided by (used in)investing activities 51,022 (21,006)
--------- --------
FINANCING ACTIVITIES
Proceeds from financing arrangements 128,374 95,240
Repayments of financing arrangements (182,463) (87,209)
Activity related to employee stock benefit plans 2,667 554
Net decrease (increase) in restricted
cash and escrow accounts 4,747 (3,894)
---------- --------
Net cash (used in) provided by financing activities (46,675) 4,691
---------- --------
Net increase (decrease) in cash and cash equivalents 2,346 (6,604)
Cash and cash equivalents, beginning of period 3,074 13,316
---------- --------
Cash and cash equivalents, end of period $ 5,420 $ 6,712
========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 3,898 $ 3,083
========== ========
Income taxes paid $ 2,897 $ 100
========== ========
Capitalized interest $ 139 $ 193
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PREPARATION
- ------ -------------------------------------
Organization
------------
Fairfield Communities, Inc. ("Fairfield" and together with its
consolidated subsidiaries, the "Company") is one of the largest vacation
ownership companies in the United States in terms of property owners and
vacation units constructed. The Company's operations consist of 25 resorts
located in 11 states and the Bahamas. Of the Company's 25 resorts, 15 are
located in destination areas with popular vacation attractions and 10 are
located in scenic regional locations.
The accompanying consolidated financial statements of 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. The interim financial information is unaudited, but
reflects all adjustments consisting only of normal recurring accruals which are,
in the opinion of management, necessary for a fair presentation of the results
of operations for such interim periods. Operating results for the three months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the entire year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Annual Report on Form
10-K for the year ended December 31, 1997. All significant intercompany balances
and transactions have been eliminated in consolidation.
Basis of Preparation
--------------------
Fairfield Receivables Corporation ("FRC") was incorporated on January
13, 1998 as a wholly owned but unconsolidated special purpose subsidiary of
Fairfield Acceptance Corporation ("FAC"), which is itself a wholly owned,
consolidated subsidiary of the Company. Statement of Financial Accounting
Standards ("SFAS") No. 125, requires that qualifying special purpose entities,
which engage in qualified sales of financial assets with affiliated companies,
be accounted for on an unconsolidated basis using the equity method of
accounting. See Note 12 for condensed financial information of Fairfield
Receivables Corporation.
NOTE 2 - NEW ACCOUNTING STANDARDS
- ------ ------------------------
In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131, which the Company will be required to adopt in the fourth quarter of 1998,
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. SFAS No. 131 also establishes standards for related
disclosures about products and services, geographic areas of operations and
major customers. Management is currently studying and analyzing SFAS No. 131 as
well as the Company's operations to determine the applicability of SFAS No. 131.
NOTE 3 - MERGERS AND ACQUISITIONS
- ------ ------------------------
On December 19, 1997, the Company acquired all of the outstanding
common stock of Vacation Break U.S.A., Inc. ("Vacation Break") in exchange for
approximately 10,632,000 shares of its common stock. The resorts acquired by the
Company in conjunction with the merger are located in Pompano Beach, Florida
(four resorts), Orlando, Florida and a 50%-owned resort located in the Bahamas.
The merger was accounted for as a pooling of interests and, accordingly, all
prior period financial information has been restated as if the merger took place
at the beginning of such periods.
Additionally, on December 19, 1997, Fairfield acquired the remaining
45% minority interest in Vacation Break's joint ventures in the Palm Aire and
Royal Vista resorts for approximately $13.5 million in cash. These acquisitions
have been accounted for as purchases and the total results of operations of
these resorts have been included in the consolidated financial statements from
the date of acquisition.
<PAGE>
NOTE 4 - STOCKHOLDERS' EQUITY
- ------ --------------------
On December 11, 1997, Fairfield's Board of Directors declared a
two-for-one common stock split in the form of a stock dividend effective January
30, 1998 to shareholders of record on January 15, 1998. All references to
numbers of shares, per share amounts and average shares outstanding in the
consolidated financial statements have been restated.
NOTE 5 - LOANS RECEIVABLE
- ------ ----------------
Loans receivable consisted of the following (In thousands):
<TABLE>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Contracts $230,822 $302,519
Mortgages 7,892 9,538
-------- --------
238,714 312,057
Less allowance for loan losses (15,347) (20,848)
-------- --------
$223,367 $291,209
======== ========
</TABLE>
During March 1998, the Company sold approximately $82.0 million of
contracts receivable to FRC, its wholly owned, unconsolidated qualifying special
purpose subsidiary (see Note 12). Except for the repurchase of defective
contracts receivable, as defined by the Receivables Purchase Agreement dated
January 15, 1998, the Company is not obligated to repurchase contracts
receivable sold to FRC. It is anticipated, however, that the Company will
repurchase defaulted contracts receivable from FRC to facilitate the remarketing
of the underlying collateral. The Company maintains an allowance for loan losses
in connection with its option to repurchase the defaulted contracts receivable
from FRC. This allowance, totaling $4.7 million at March 31, 1998, is included
in "Other liabilities" in the Consolidated Balance Sheet.
NOTE 6 - VACATION OWNERSHIP INTERESTS
- ------ ----------------------------
Sales of vacation ownership interests are summarized as follows (In
thousands):
<TABLE>
Three Months Ended
March 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Vacation ownership interests $60,359 $46,911
Less: Deferred revenue on current year sales, net (1,790) (7,555)
Add: Revenue recognized on prior year sales 1,636 8,596
------- -------
$60,205 $47,952
======= =======
</TABLE>
<PAGE>
NOTE 7- REAL ESTATE INVENTORIES
- ------ -----------------------
Real estate inventories are summarized as follows (In thousands):
<TABLE>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Land:
Under development $ 19,549 $20,186
Undeveloped 9,276 6,480
-------- -------
28,825 26,666
-------- -------
Residential housing:
Vacation ownership interests 70,434 62,410
Homes 4,167 4,063
-------- -------
74,601 66,473
-------- -------
$103,426 $93,139
======== =======
</TABLE>
NOTE 8 - FINANCING ARRANGEMENTS
- ------ ----------------------
Financing arrangements are summarized as follows (In thousands):
<TABLE>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Revolving credit agreements $ 47,234 $ 94,101
Notes payable collateralized by
contracts receivable:
Fairfield Capital Corporation 54,965 60,147
Fairfield Funding Corporation 10,597 12,330
Notes payable - other 3,196 3,503
-------- --------
$115,992 $170,081
======== ========
</TABLE>
On January 15, 1998, the Company amended, in their entirety, the previously
existing revolving credit agreements between Fairfield, FAC and their primary
lender. The Amended and Restated Revolving Credit Agreements (the "Credit
Agreements") provide borrowing availability to Fairfield of up to $40.0 million
(including up to $10.0 million for letters of credit) and up to $20.0 million
for FAC (including up to $1.0 million for letters of credit). The Credit
Agreements mature in January 2001 and bear interest at variable interest
rates equal to the base rate of the primary lender minus .25%, in the
case of Fairfield and, in the case of FAC, at the base rate of the primary
lender minus .75%. The respective interest rates at March 31, 1998 for Fairfield
and FAC were 8.25% and 7.75%, respectively.
On February 2, 1998, FAC entered into an interest rate swap agreement with
its primary lender, which provides for a fixed interest rate of 5.63% on $50.0
million of outstanding debt. This agreement is subject to the scheduled
amortization of a pool of contracts receivable and will expire in February
2002.
On January 15, 1998, FRC, a wholly owned, unconsolidated qualifying special
purpose subsidiary of FAC, entered into a Credit Agreement (the "FRC Agreement")
which provides for borrowings of up to $150.0 million for the purchase of
contracts receivable from FAC pursuant to the Receivables Purchase Agreement,
among Fairfield as originator, FAC as seller and FRC as purchaser. During March
1998, approximately $82.0 million of contracts receivable were sold from FAC to
FRC, with FRC funding the purchase of contracts receivable through advances from
the FRC Agreement of $64.7 million. The FRC Agreement bears interest at
commercial paper rates (approximately 6% at March 31, 1998). See Note 12 for
condensed financial information of FRC.
<PAGE>
NOTE 9 - NET LIABILITIES OF ASSETS HELD FOR SALE
- ------ ---------------------------------------
During the first quarter of 1997, the Company transferred $7.9 million in
cash and assets collateralizing the 10% Senior Subordinated Secured Notes (the
"FCI Notes"), with an appraised market value of $7.2 million, in settlement of
the FCI Notes. The indenture trustee, at the direction of the majority
noteholders, filed suit in the United States District Court for the Southern
District of New York, contesting the Company's method of satisfying this
obligation and claiming a default under the indenture securing the FCI Notes. On
April 24, 1998, the court entered an order denying the relief sought by the
indenture trustee and granting the Company's motion for summary judgment. The
time for the indenture trustee to appeal the court's order has not yet expired
(see Note 14).
NOTE 10 - EARNINGS PER SHARE
- ------- ------------------
The following table sets forth the computation of basic and diluted
earnings per share ("EPS") (In thousands, except per share data):
<TABLE>
Three Months Ended
March 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Numerator:
Net income - Numerator for basic and diluted EPS $ 8,405 $ 6,051
======= =======
Denominator:
Denominator for basic EPS - weighted average shares 44,276 43,505
Effect of dilutive securities:
Restricted common stock 90 180
Options and warrants 2,140 2,107
Common stock held in escrow 607 366
Other - 561
------- -------
Dilutive potential common shares 2,837 3,214
------- -------
Denominator for diluted EPS - adjusted weighted
average shares and assumed conversions 47,113 46,719
======= =======
Basic earnings per share $.19 $.14
==== ====
Diluted earnings per share $.18 $.13
==== ====
</TABLE>
NOTE 11 - FAIRFIELD ACCEPTANCE CORPORATION
- ------- --------------------------------
Condensed consolidated financial information for FAC is summarized as
follows (In thousands):
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash $ 1,412 $ 494
Loans receivable, net 110,285 111,071
Restricted cash 3,438 3,749
Due from parent 3,933 6,710
Investment in and net amount due
from unconsolidated subsidiary 17,779 -
Other assets 2,847 2,390
-------- --------
$139,694 $124,414
======== ========
LIABILITIES AND EQUITY
Financing arrangements $ 85,562 $ 72,477
Accrued interest and other liabilities 635 703
Equity 53,497 51,234
-------- --------
$139,694 $124,414
======== ========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
Three Months Ended
March 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues $4,835 $3,946
Expenses 1,840 1,521
------ ------
Earnings before net earnings of unconsolidated
subsidiary and provision for income taxes 2,995 2,425
Net earnings of unconsolidated subsidiary 251 -
------ ------
Earnings before provision for income taxes 3,246 2,425
Provision for income taxes 1,103 951
------ ------
Net earnings $2,143 $1,474
====== ======
</TABLE>
NOTE 12 - FAIRFIELD RECEIVABLES CORPORATION
- ------- ---------------------------------
FRC was incorporated on January 13, 1998 for the specific purpose of
purchasing contracts receivable from FAC, with the purchases funded by advances
from the FRC Agreement, which provides for borrowings of up to $150.0 million.
FRC is a wholly owned, unconsolidated qualifying special purpose subsidiary of
FAC. SFAS No. 125 requires that qualifying special purpose entities, which
engage in qualified sales of financial assets with affiliated companies, be
accounted for on an unconsolidated basis, using the equity method of accounting.
The purchase of contracts receivable by FRC is subject to a Receivables Purchase
Agreement dated January 15, 1998 between Fairfield as originator, FAC as seller
and FRC as purchaser. The Receivables Purchase Agreement substantially restricts
the transfer of assets from FRC to FAC.
During March 1998, approximately $82.0 million of contracts receivable were
sold from FAC to FRC, with FRC funding the purchase of contracts receivable
through advances from the FRC Agreement of $64.7 million. The FRC Agreement
bears interest at commercial paper rates (approximately 6% at March 31, 1998).
In March 1998, FRC entered into certain interest rate swap and cap
transactions with its primary lender to provide for a fixed interest rate of
5.78% on $59.8 million of outstanding indebtedness through June 2004, unless
terminated earlier by the primary lender (early termination may occur at the
option of the primary lender in March 2001). Interest rate differentials to be
paid under the terms of the interest rate swap and cap agreements are recognized
as an adjustment of interest expense related to the designated financing
arrangment.
Condensed financial information for FRC is summarized as follows (In
thousands):
CONDENSED BALANCE SHEET
March 31,
1998
----
ASSETS
Loans receivable, net $82,039
Restricted cash 661
-------
$82,700
=======
LIABILITIES AND EQUITY
Financing arrangements $78,859
Accrued interest and other liabilities 256
Due to parent 840
Equity 2,745
-------
$82,700
=======
<PAGE>
CONDENSED STATEMENT OF EARNINGS
Three Months Ended
March 31,
1998
----
Revenues $662
Expenses 264
----
Earnings before provision for income taxes 398
Provision for income taxes 147
----
Net earnings $251
====
NOTE 13 - SUPPLEMENTAL INFORMATION
- ------- ------------------------
Included in other assets at March 31, 1998 and December 31, 1997 are
(i) other receivables of $7.4 million and $5.5 million, respectively (consisting
primarily of receivables from property owner associations), (ii) $2.1 million
and $2.0 million, respectively, related to assets of the Company's life
insurance subsidiary and (iii) unamortized capitalized financing costs totaling
$3.2 million and $2.4 million, respectively.
Included in other liabilities at March 31, 1998 and December 31, 1997 are
(i) accruals totaling $12.4 million and $14.0 million, respectively, related to
the Company's employee compensation programs and related benefits, (ii) accruals
totaling $6.6 million and $5.6 million, respectively, for the fulfillment costs
associated with the Company's Discovery Vacations program, (iii) deposits
associated with sales contracts totaling $6.8 million and $6.6 million,
respectively, and (iv) an accrued liability of $4.7 million at March 31, 1998
in connection with the Company's option to repurchase defaulted contracts
receivable from FRC.
Other revenues for the three months ended March 31, 1998 and 1997
include home sales revenue totaling $3.0 million and $2.5 million, respectively,
and lot sales revenue totaling $1.2 million and $2.0 million, respectively.
Other expenses for the three months ended March 31, 1998 and 1997 include cost
of home sales, including selling expenses, totaling $2.6 million and $2.2
million, respectively, and cost of lot sales of $.4 million and $.5 million,
respectively.
NOTE 14 - CONTINGENCIES
- ------- -------------
In July 1993 and September 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, 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
plaintiffs have asserted in court appearances that the actions focus on
recreation fees collected in Pagosa for lots from September 1, 1992 (which is
the effective date of Fairfield's Chapter 11 bankruptcy reorganization plan) to
the present. 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 nature of the litigation, Fairfield is unable
to determine with certainty the dollar amount sought by plaintiffs, but
estimates that it has collected approximately $600,000 in recreation fees during
the relevant period for lots at Pagosa. Fairfield filed various proceedings
alleging that the Recreation Fee Litigation, and certain other related cases
described below, violated the discharge granted to Fairfield in its Chapter 11
bankruptcy reorganization and the injunction issued by the Bankruptcy Court for
the Eastern Division of Arkansas, Western Division (the "Bankruptcy Court"),
against prosecution of any claims discharged in the bankruptcy proceedings. The
Bankruptcy Court decisions were appealed to the United States District Court,
Eastern Division of Arkansas, Western Division, with subsequent appeals to the
Court of Appeals for the Eighth Circuit. By opinion filed April 27, 1998, the
Court of Appeals held that the actions, in general, are not barred by the
Bankruptcy Court's discharge order and injunction. Two
<PAGE>
additional related lawsuits were also filed in the Archuleta County District
Court, raising similar issues and demands as the Storm and Daleske cases. The
Fiedler case, filed in October 1994, was filed individually, while the second of
these cases, the Lobdell case, was filed in November 1994, as a purported class
action. The Colorado District Court entered summary judgment against Fairfield
in the Fiedler case, holding that the individual lot in question is not subject
to the recreation fee, based upon facts unique to the Fiedler case. Fairfield
appealed the summary judgment decision in the Fiedler case. Motions and cross
motions for summary judgment have been filed in Colorado state court in three of
the cases and remain pending. Fairfield intends to defend vigorously the
Recreation Fee Litigation, and the two related cases, including any attempt to
certify a class in any of the cases, and believes that it has substantive
defenses. Fairfield has previously implemented recreation fee charges at certain
other of its resort sites which are not subject to the pending action.
In December 1993, Charlotte T. Curry, who, with her husband, purchased a
lot from Fairfield under an installment sale contract subsequently sold to First
Federal Savings and Loan Association of Charlotte ("First Federal"), filed suit
against First Federal in Superior Court in Mecklenburg County, North Carolina,
alleging breach of contract, breach of fiduciary duty and unfair trade
practices. In April 1994, the complaint was 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 sought class action certification, contested the
method used by Fairfield to calculate refunds for lot purchasers whose
installment sale contracts were cancelled 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
sought damages, punitive damages, treble damages under North Carolina law for
unfair trade practices and RICO, prejudgment interest and attorneys' 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. By order filed September 15, 1995, the court
denied the plaintiff's motion for class certification. The plaintiff appealed
the denial of the motion for class certification to the North Carolina Court of
Appeals, which dismissed the appeal by order dated January 8, 1997.
Subsequently, the plaintiff requested that the Supreme Court of North Carolina
grant discretionary review of the decision denying class certification, which
the Supreme Court of North Carolina declined. In April 1998, the plaintiff in
the Curry case dismissed the lawsuit. On January 7, 1998, the attorneys who
previously represented Ms. Curry filed another lawsuit (the Scarvey lawsuit),
currently pending in Superior Court in Mecklenburg County, North Carolina, as a
purported class action, against First Federal, alleging breach of contract,
breach of fiduciary duty and unfair trade practices, and seeking damages as
outlined above in the Curry case. The Scarvey case seeks to relitigate the North
Carolina courts' refusal to certify the Curry case as a class action and asserts
that the Curry case tolled the statute of limitations for Ms. Scarvey's claims,
which are alleged to post-date Ms. Curry's claims. Under the Stock Purchase
Agreement for the sale of First Federal, Fairfield agreed to indemnify the buyer
against any liability in the Curry litigation. Fairfield does not believe that
it is obligated under the Stock Purchase Agreement to indemnify the buyer of
First Federal for the Scarvey litigation, but the buyer has asserted that it
intends to file a third party action against Fairfield contesting Fairfield's
interpretation of the Stock Purchase Agreement and asserting other common law
statutory grounds for indemnification. Fairfield also cancelled defaulted lot
installment sales contracts owned by it and its subsidiaries (other than First
Federal), using the same method of calculating refunds as was at issue in the
Curry litigation.
During the first quarter of 1997, the Company transferred $7.9 million in
cash and the assets collateralizing the 10% Senior Subordinated Secured Notes
(the "FCI Notes"), with an appraised market value of $7.2 million (the "Real
Estate Collateral"), in settlement of the FCI Notes. The indenture trustee, at
the direction of the majority noteholders, filed suit in the United States
District Court for the Southern District of New York, contesting the Company's
method of satisfying this obligation and claiming a default under the indenture
securing the FCI Notes. This action alternatively (a) disputed the Company's
right to transfer the Real Estate Collateral in satisfaction of the FCI Notes,
seeking instead a cash payment of $7.2 million, plus penalty interest and the
fees and expenses of the action, or (b) disputed the $7.9 million cash transfer,
seeking instead the issuance of 1,764,706 shares (after giving
<PAGE>
effect to the 2-for-1 share stock split, effective January 30, 1998) of
Fairfield's Common Stock (the "Contested Shares"), previously reserved for
issuance if a deficiency resulted on the FCI Notes at maturity. Pursuant to the
indenture for the FCI Notes, the noteholders are entitled to retain, as a
premium, up to $2.0 million from the proceeds of the collateral transferred in
satisfaction of the FCI Notes (including, if applicable, shares of Fairfield's
Common Stock) in excess of the amount of principal and accrued interest due at
maturity. The indenture trustee has asserted that the $2.0 million premium limit
is not applicable to the Contested Shares, accordingly claimed entitlement to
all of the Contested Shares and on September 24, 1997 filed a motion seeking to
require the immediate issuance and sale of the Contested Shares, with the
proceeds to be held in escrow, pending the outcome of the litigation. The
Company opposed the indenture trustee's motion and requested summary judgment,
asserting that the noteholders were not entitled to any of the Contested Shares.
The indenture trustee indicated that the Real Estate Collateral was sold for
approximately $4.4 million. The court on April 24, 1998 entered an order denying
the relief sought by the indenture trustee and granting the Company's motion for
summary judgment. The time for the indenture trustee to appeal the court's order
has not yet expired. The Contested Shares are not included in the number of
shares outstanding for earnings per share or other purposes.
On March 28, 1997, a lawsuit was filed against Vacation Break in the
Circuit Court for Pinellas County, Florida by Market Response Group & Laser
Company, Inc. ("MRG&L") alleging that Vacation Break and others conspired to
boycott MRG&L and fix prices for mailings in violation of the Florida Antitrust
Act, and in concert with others, engaged in various acts of unfair competition,
deceptive trade practices and common law conspiracy. The complaint also alleges
that Vacation Break breached its contract with MRG&L, that Vacation Break
misappropriated proprietary information from MRG&L and that Vacation Break
interfered with, and caused other companies to breach their, contracts with
MRG&L. The complaint demands that Vacation Break indemnify MRG&L for costs
incurred by it to defend a 1996 Federal Trade Commission action. While the
Company cannot calculate the total amount of damages sought by MRG&L under its
complaint, it appears to be in excess of $50.0 million.
The Company intends to vigorously defend this action and assert
counterclaims if and when appropriate. Under the terms of the Principal
Stockholders Agreement, entered into in connection with the acquisition of
Vacation Break, Fairfield has been indemnified for (a) 75% of the damages which
may be incurred in connection with the MRG&L litigation and (b) 25% of the
expense incurred in defending the MRG&L litigation, in excess of the June 30,
1997 reserve on Vacation Break's books, with the maximum amount of
indemnification to be $6.0 million. Such indemnification agreement has been
collateralized by, and recourse under the indemnity agreement is limited to, the
pledge of shares of Fairfield's Common Stock, valued as of December 18, 1997,
(adjusted for stock splits and certain other similar items) and the proceeds
thereof.
The Company is involved in various other or threatened lawsuits and
contingencies on an ongoing basis as a result of its day-to-day operations.
However, the Company does not believe that any of these other or threatened
lawsuits or contingencies will have a materially adverse effect on the Company's
financial position or results of operations.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
On December 19, 1997, the Company acquired all of the outstanding
common stock of Vacation Break U.S.A., Inc. ("Vacation Break") in exchange for
approximately 10,632,000 shares of its common stock. The resorts acquired by the
Company in conjunction with the merger are located in Pompano Beach, Florida
(four resorts), Orlando, Florida and a 50%-owned resort located in the Bahamas.
The merger was accounted for as a pooling of interests and, accordingly, all
prior period financial information has been restated as if the merger took place
at the beginning of such periods.
Additionally, on December 19, 1997, Fairfield acquired the remaining
45% minority interest in Vacation Break's joint ventures in the Palm Aire and
Royal Vista resorts for approximately $13.5 million in cash. These acquisitions
have been accounted for as purchases and the total results of operations of
these resorts have been included in the consolidated financial statements from
the date of acquisition.
The following table sets forth certain consolidated operating
information for the three months ended March 31, 1998 and 1997, respectively.
<TABLE>
March 31, March 31,
1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
As a percentage of total revenues:
Vacation ownership interests 70.2% 69.7%
Resort management 11.2 10.2
Interest income 12.0 12.1
Other revenue 6.6 8.0
----- -----
Total revenues 100.0% 100.0%
===== =====
As a percentage of related revenues:
Cost of sales - vacation ownership interests 27.7% 27.2%
Selling expense 47.4% 48.2%
Provision for loan losses 4.7% 3.5%
As a percentage of total revenues:
General and administrative expense 9.1% 11.2%
Interest expense, net 4.2% 3.2%
Other expense 4.9% 6.1%
</TABLE>
Gross sales of vacation ownership interests ("VOIs") increased 29% to
$60.4 million for the three months ended March 31, 1998 as compared to $47.0
million for the three months ended March 31, 1997. Gross VOI sales at the
Company's destination resorts continue to be the largest dollar contributor to
total VOI sales. Gross VOI sales for the three months ended March 31, 1998
increased 21% at the Company's 15 destination resorts, 45% at the Company's ten
regional resorts and 109% at the Company's six off-site sales offices.
Net VOI revenues increased 25% to $60.2 million for the three months
ended March 31, 1998 from $48.0 million for the three months ended March 31,
1997. The increase in net VOI revenues is attributable to the same factors as
noted above, which was slightly offset by the net deferral of revenue of
$154,000 during the three months ended March 31, 1998, related to the percentage
of completion method of accounting, as compared to net revenue recognition of
$1.0 million during the three months ended March 31, 1997. Under the percentage
of completion method of accounting, 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.
<PAGE>
VOI cost of sales, as a percentage of VOI sales, was 27.7% and 27.2%
for the three months ended March 31, 1998 and 1997, respectively. VOI cost of
sales is expected to increase during future periods as the lower product cost
(primarily land purchased at lower prices during earlier years) at certain of
the Company's resorts form a smaller mix of the Company's total VOI sales.
Effective May 1, 1998, the Company initiated sales price increases to offset the
higher product cost.
The provision for loan losses, as a percentage of related net revenues,
increased to 4.7% for the three months ended March 31, 1998 compared to 3.5% for
the three months ended March 31, 1997. The Company provides for losses on
contracts receivable by a charge against earnings at the time of sale at a rate
based upon the Company's historical cancellation experience and management's
estimate of future losses. The allowance for contracts receivable is maintained
at a level believed adequate by management based upon periodic valuation of the
contracts receivable portfolio. Management anticipates the provision for loan
losses will remain relatively constant during the remainder of 1998.
Selling expenses, including commissions, as a percentage of related net
revenues, were 47.4% and 48.2%, for the three months ended March 31, 1998 and
1997, respectively. The Company continues to benefit from improved sales
efficiencies experienced at its destination resorts, including its destination
resorts located in Pompano Beach, Florida; Orlando, Florida and Nashville,
Tennessee. Management anticipates continued improvement in sales efficiencies
due to the integration of the Vacation Break sales and marketing operation and
economies created by the Apex merger.
Interest
--------
Interest income increased 24% to $10.3 million for the three months
ended March 31, 1998 as compared to $8.3 million for the three months ended
March 31, 1997. This increase is primarily attributable to an increase in the
average balance of outstanding contracts receivable ($263.9 million for the
three months ended March 31, 1998 versus $232.8 million for the three months
ended March 31, 1997).
Interest expense, net of amounts capitalized, totaled $3.6 million and
$2.2 million for the three months ended March 31, 1998 and 1997, respectively.
This increase is primarily attributable to an increase in the average
outstanding balance of interest-bearing debt ($159.8 million for the three
months ended March 31, 1998 as compared to $121.7 million for the three months
ended March 31, 1997).
In March 1998, the Company sold approximately $82.0 million of contracts
receivable to FRC, a wholly owned, unconsolidated special purpose subsidiary of
FAC. SFAS No. 125 requires that qualifying special purpose entities, which
engage in qualifying sales of financial assets with affiliated companies, be
accounted for on an unconsolidated basis using the equity method of accounting.
FRC financed the purchase described above through advances of $64.7
million drawn on the FRC Credit Agreement, which provides for borrowings of up
to $150.0 million for purchases of contracts receivable from FAC. Management
intends to fully utilize the FRC Credit Agreement due to the favorable interest
rates available through this financing alternative. The utilization of the FRC
Credit Agreement coupled with the retirement of substantially all of the secured
obligations of Vacation Break, through advances from the Fairfield and FAC
Revolving Credit Agreements, resulted in a reduction in the Company's weighted
average interest rate on financing arrangements collateralized by contracts
receivable to 8.9% from 9.7%, respectively, for the three month periods ended
March 31, 1998 and 1997. Management anticipates that the Company's weighted
average interest rate will continue to decline during 1998 as the effect of its
new credit facilities are fully realized.
In February 1998, FAC entered into an interest rate swap agreement with its
primary lender, which provides for a fixed interest rate of 5.63% on $50.0
million of outstanding debt. This agreement is subject to the scheduled
amortization of a pool of contracts receivable and will expire in February 2002.
In March 1998, FRC entered into certain interest rate swap and cap transactions
with its primary lender to provide for a fixed interest rate of 5.78%on $59.8
million of outstanding indebtedness through June 2004, unless terminated earlier
by the primary lender (early termination may occur at the option of the primary
lender in March 2001). The Company uses interest rate swap and cap agreements to
manage the interest rate characteristics of certain of its outstanding financing
arrangements to a more desirable fixed rate basis and to limit the Company's
exposure to rising interest rates. Interest rate differentials to be paid under
the terms of the interest rate swap and cap agreements are recognized as an
adjustment of interest expense related to the designated financing arrangement.
<PAGE>
General and Administrative
--------------------------
General and administrative expenses, as a percent of total revenues,
decreased from 11.2% for the three months ended March 31, 1997 to 9.1% for the
three months ended March 31, 1998. This decrease is due primarily to benefits
realized from the integration of the Vacation Break operational infrastructure
with that of Fairfield's. Management anticipates the realization of additional
benefits as the integration process continues throughout the remainder of 1998.
Other
-----
Other revenues for the three months ended March 31, 1998 and 1997 include
home sales revenue totaling $3.0 million and $2.5 million, respectively, and lot
sales revenue totaling $1.2 million and $2.0 million, respectively. Other
expenses for the three months ended March 31, 1998 and 1997 include cost of home
sales, including selling expenses, totaling $2.6 million and $2.2 million,
respectively, and cost of lot sales of $.4 million and $.5 million,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company's cash and cash equivalents totaled
$5.4 million, an increase of $2.3 million from December 31, 1997. Cash used in
operating activities totaled $2.0 million for the three months ended March 31,
1998 compared to cash provided by operating activities of $9.7 million for the
three months ended March 31, 1997. The fluctuation in operating cash results
primarily from an increase in real estate inventories in 1998 compared to 1997.
During the three months ended March 31, 1998, the Company increased its VOI
construction activity at several of its resorts, including Branson, Missouri and
the Royal Vista resort in Pompano Beach, Florida. Additionally, the Company
purchased, for future VOI development, a 20 acre site located in Sedona,
Arizona.
Cash provided by investing activities totaled $51.0 million for the
three months ended March 31, 1998 compared to cash used in investing activities
of $21.0 million for the three months ended March 31, 1997. As a result of
increased VOI sales volumes, originations of loans receivable exceeded principal
collections by $12.3 million for the three months ended March 31, 1998, as
compared to $11.2 million for the three months ended March 31, 1997. In 1998,
the Company received $64.7 million in cash from the sale of contracts receivable
to FRC. Additionally, in 1997, the Company repaid $8.3 million of outstanding
indebtedness under the FCI Notes (see Note 9 of "Notes to Consolidated Financial
Statements").
Cash used in financing activities totaled $46.7 million for the three
months ended March 31, 1998 compared to cash provided by financing activities of
$4.7 million for the three months ended March 31, 1997. During the three months
ended March 31, 1998, repayments of financing arrangements exceeded proceeds by
$54.1 million. During the three months ended March 31, 1997, proceeds from
financing arrangements exceeded repayments by $8.0 million.
On January 15, 1998, the Company amended, in their entirety, the
previously existing revolving credit agreements between Fairfield, FAC and their
primary lender. The Amended and Restated Revolving Credit Agreements (the
"Credit Agreements") provide borrowing availability to Fairfield of up to $40.0
million (including up to $10.0 million for letters of credit) and up to $20.0
million for FAC (including up to $1.0 million for letters of credit). The Credit
Agreements mature on January 31, 2001. At March 31, 1998, Fairfield and FAC had
a combined borrowing availability of $12.8 million.
At March 31, 1998, Fairfield Capital Corporation ("FCC"), a wholly
owned subsidiary of FAC, had outstanding borrowings of $55.0 million under the
FCC Agreement, which provides for the purchases of contracts receivable from
FAC. There are no additional fundings available under the FCC Agreement. At
March 31, 1998, contracts receivable totaling $73.0 million collateralized the
FCC borrowings.
Fairfield Funding Corporation ("FFC") is a wholly owned subsidiary of
FAC with outstanding borrowings of $10.6 million at March 31, 1998, issued under
private placement notes. There are no additional fundings available under the
FFC credit facility. Contracts receivable totaling $19.5 million at March 31,
1998 collateralized these borrowings.
<PAGE>
On January 15, 1998, FRC, a wholly owned, unconsolidated qualifying
special purpose subsidiary of FAC, entered into a Credit Agreement (the "FRC
Agreement") which provides for borrowings of up to $150.0 million for the
purchase of contracts receivable from FAC pursuant to the Receivable Purchase
Agreement, among Fairfield as originator, FAC as seller and FRC as purchaser. As
of March 31, 1998, approximately $82.0 million of contracts receivable and $64.7
million of borrowings were held by FRC.
The Company intends to continue its growth-oriented strategy and,
accordingly, may from time to time acquire additional vacation ownership
resorts, additional land upon which vacation ownership resorts may be expanded
or developed and companies operating resorts or having vacation ownership
assets, management, or sales and marketing expertise commensurate with the
Company's operations in the vacation ownership industry. The Company is
currently evaluating the acquisition of certain additional land parcels for the
expansion of existing resorts and the development of additional resorts. In
addition, the Company is also evaluating certain VOI and property management
acquisitions to integrate into or expand the operations of the Company. The
Company expects to finance its short- and long-term cash needs, including
potential acquisitions, from (i) contract payments generated from its contracts
receivable portfolio, (ii) operating cash flows, (iii) borrowings under its
credit facilities, and (iv) future financings, including additional
securitizations of contracts receivable.
FORWARD-LOOKING INFORMATION
This Quarterly Report includes certain forward-looking statements,
including (without limitation) statements with respect to anticipated future
operating and financial performance, growth and acquisition opportunities and
other similar forecasts and statements of expectation. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended to
identify these forward-looking statements. Forward-looking statements made by
the Company and its management are based on estimates, projections, beliefs and
assumptions of management at the time of such statements and are not guarantees
of future performance. The Company disclaims any obligation to update or revise
any forward-looking statement based on the occurrence of future events, the
receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially
from those expressed in forward-looking statements made by the Company and its
management as a result of a number of risks, uncertainties and assumptions,
including those relating to the operations and results of operations following
the merger with Vacation Break. Representative examples of these factors include
(without limitation) general industry and economic conditions; interest rate
trends; regulatory changes; cost of capital and capital requirements;
availability of real estate properties; competition from national hospitality
companies and other competitive factors and pricing pressures; shifts in
customer demands; changes in operating expenses, including employee wages,
commission structures, benefits and training; economic cycles; the continued
availability of financing in the amounts and at the terms necessary to support
the Company's future business; assumed cost savings and other synergistic
benefits of the merger with Vacation Break and the success achieved or problems
encountered in integrating the operations of Vacation Break into the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Incorporated by reference (see Note 14 of "Notes to
Consolidated Financial Statements").
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K was filed on January 5, 1998,
announcing the completion of the Vacation Break, U.S.A.,
Inc. merger. The Registrant additionally reported the
completion of the merger with Apex Marketing, Inc. and the
acquisitions of Ocean Ranch Development, Inc. and Palm
Resort Group, Inc.
A Current Report on Form 8-K/A was filed on March 4, 1998,
amending the Form 8-K filed on January 5, 1998, presenting
the historical and pro forma financial statements of
Fairfield Communities, Inc. and Vacation Break U.S.A., Inc.
<PAGE>
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 11, 1998 /s/Robert W. Howeth
------------------- ---------------------------------------------
Robert W. Howeth, Senior Vice President and
Chief Financial Officer
Date: May 11, 1998 /s/William G. Sell
------------------- ----------------------------------------------
William G. Sell, Vice President and Controller
(Chief Accounting Officer)
<PAGE>
FAIRFIELD COMMUNITIES, INC.
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
3(a) Second Amended and Restated Certificate of Incorporation of the
Registrant, effective September 1, 1992 (previously filed with
the Registrant's Current Report on Form 8-K dated September 1,
1992 and incorporated herein by reference)
3(b) Certificate of Amendment to Amended and Restated Certificate of
Incorporation of the Registrant (previously filed as Exhibit 4.2
to the Registrant's Form S-8, SEC File No. 333-42901, and
incorporated herein by reference)
3(c) Fifth Amended and Restated Bylaws of the Registrant, dated May 9,
1996 (previously filed with the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by reference)
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, dated September 1, 1992, related to
the Senior Subordinated Secured Notes (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 Supplemented and Restated
Indenture, 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 Supplemented and Restated
Indenture, dated September 1, 1992 (previously filed with the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference) 4.4 Third
Supplemental Indenture to the Supplemented and Restated
Indenture, dated March 18, 1993 (previously filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
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 Amended and Restated Revolving Credit Agreement between
Fairfield Communities, Inc. and BankBoston, N.A. dated January
15, 1998 (attached)
10.2 Amended and Restated Revolving Credit Agreement between Fairfield
Acceptance Corporation and BankBoston, N.A. dated January 15,
1998 (attached)
10.3 Credit Agreement among Fairfield Receivables Corporation,
EagleFunding Capital Corporation, Fairfield Acceptance
Corporation, Fairfield Communities, Inc., BankBoston Securities,
Inc. and BankBoston, N. A. dated January 15, 1998 (attached)
10.4 Receivables Purchase Agreement between Fairfield Acceptance
Corporation, Fairfield Communities, Inc. and Fairfield
Receivables Corporation dated January 15, 1998 (attached)
10.5 Fourth Amended and Restated Operating Agreement dated January 15,
1998 by and between Fairfield Communities, Inc., Fairfield Myrtle
Beach, Inc., Sea Gardens Beach and Tennis Resort, Inc., Vacation
Break Resorts, Inc., Vacation Break Resorts at Star Island, Inc.,
Palm Vacation Group, Ocean Ranch Vacation Group and Fairfield
Acceptance Corporation (attached)
27 Financial Data Schedule (attached)
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
DATED as of January 15, 1998
between
FAIRFIELD COMMUNITIES, INC.
and
BANKBOSTON, N.A.
and
BANKBOSTON, N.A., as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
1. DEFINITIONS AND RULES OF INTERPRETATION. ................................1
1.1. Definitions. ....................................................1
1.2. Rules of Interpretation. .......................................29
2. THE REVOLVING CREDIT FACILITY. .........................................31
2.1. Commitment to Lend. ............................................31
2.2. Reduction of Total Commitment. .................................31
2.3. The Revolving Credit Notes. ....................................31
2.4. Interest on Revolving Credit Loans. ............................32
2.5. Requests for Revolving Credit Loans. ...........................32
2.6. Conversion Options. ............................................33
2.6.1. Conversion to Different Type of Revolving Credit Loan..33
2.6.2. Continuation of Type of Revolving Credit Loan. .......33
2.6.3. Eurodollar Rate Loans. ...............................34
2.7. Funds for Revolving Credit Loan. ...............................34
2.7.1. Funding Procedures. ..................................34
2.7.2. Advances by Agent. ...................................35
2.8. Change in Borrowing Base. ......................................35
2.9. Settlements. ...................................................36
2.9.1. General. .............................................36
2.9.2. Failure to Make Funds Available. .....................36
2.9.3. No Effect on Other Banks. ............................37
2.10. Repayments of Revolving Credit Loans Prior to Event of Default..37
2.10.1. Credit for Funds Received in Concentration Account....37
2.10.2. Application of Payments Prior to Event of Default.....38
2.11. Repayments of Revolving Credit Loans After Event of Default.....39
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. ...............................39
3.1. Maturity. ......................................................39
3.2. Mandatory Repayments of Revolving Credit Loans. ................39
3.3. Optional Repayments of Revolving Credit Loans. .................40
4. LETTERS OF CREDIT. .....................................................40
4.1. Letter of Credit Commitments.....................................40
4.1.1. Commitment to Issue Letters of Credit. ...............40
4.1.2. Letter of Credit Applications. .......................41
4.1.3. Terms of Letters of Credit. ..........................41
4.1.4. Reimbursement Obligations of Banks. ..................41
4.1.5. Participations of Banks. .............................41
4.2. Reimbursement Obligation of the Borrower. ......................41
<PAGE>
4.3. Letter of Credit Payments. .....................................42
4.4. Obligations Absolute. ..........................................43
4.5. Reliance by Issuer. ............................................43
4.6. Letter of Credit Fee. ..........................................44
5. CERTAIN GENERAL PROVISIONS. ............................................44
5.1. Administrative Fee. ............................................44
5.2. Funds for Payments. ............................................44
5.2.1. Payments to Agent. ...................................44
5.2.2. No Offset, etc. ......................................45
5.3. Computations. ..................................................45
5.4. Inability to Determine Eurodollar Rate. ........................45
5.5. Illegality. ....................................................46
5.6. Additional Costs, etc. .........................................46
5.7. Capital Adequacy. ..............................................48
5.8. Certificate. ...................................................48
5.9. Indemnity. .....................................................49
5.10. Interest After Default. ........................................49
5.10.1. Overdue Amounts. ....................................49
5.10.2. Amounts Not Overdue. ................................49
5.11. HLT Classification. ...........................................49
6. COLLATERAL SECURITY AND GUARANTIES. ....................................50
6.1. Security of Borrower. ..........................................50
6.2. Guaranties and Security of Subsidiary Guarantors. ..............50
7. REPRESENTATIONS AND WARRANTIES. ........................................51
7.1. Corporate; Partnership Authority. ..............................51
7.1.1. Organization; Good Standing. .........................51
7.1.2. Authorization. .......................................52
7.1.3. Enforceability. ......................................52
7.2. Governmental Approvals. ........................................52
7.3. Title to Properties; Leases. ...................................52
7.4. Financial Statements. ..........................................53
7.4.1. Fiscal Year. .........................................53
7.4.2. Financial Statements. ................................53
7.5. No Material Changes, etc. ......................................53
7.6. Franchises, Patents, Copyrights, etc. ..........................54
7.7. Litigation. ....................................................54
7.8. No Materially Adverse Contracts, etc. ..........................55
7.9. Compliance with Other Instruments, Laws, etc. ..................55
7.10. Tax Status. ...................................................55
7.11. No Event of Default. ..........................................55
7.12. Holding Company and Investment Company Acts. ..................55
7.13. Absence of Financing Statements, etc. .........................55
7.14. Perfection of Security Interest. ..............................56
7.15. Certain Transactions. .........................................56
<PAGE>
7.16. Employee Benefit Plans. .......................................56
7.16.1. In General. .........................................56
7.16.2. Terminability of Welfare Plans. .....................57
7.16.3. Guaranteed Pension Plans. ...........................57
7.16.4. Multiemployer Plans. ................................57
7.17. Use of Proceeds. ..............................................58
7.17.1. General. ............................................58
7.17.2. Regulations U and X. ................................58
7.17.3. Ineligible Securities. ..............................58
7.18. Environmental Compliance. .....................................58
7.19. Subsidiaries, etc. ............................................60
7.20. Bank Accounts. ................................................60
7.21. Disclosure. ...................................................60
7.22. FairShare Program. ............................................61
8. AFFIRMATIVE COVENANTS OF THE BORROWER. .................................61
8.1. Punctual Payment. ..............................................61
8.2. Maintenance of Office. .........................................61
8.3. Records and Accounts. ..........................................62
8.4. Financial Statements, Certificates and Information. ............62
8.5. Notices. .......................................................65
8.5.1. Defaults. ............................................65
8.5.2. Environmental Events. ................................65
8.5.3. Notification of Claim against Collateral. ............65
8.5.4. Notice of Litigation and Judgments. ..................66
8.6. Corporate Existence; Maintenance of Properties. ................66
8.7. Insurance. .....................................................66
8.8. Taxes. .........................................................68
8.9. Inspection of Properties and Books, etc. .......................68
8.9.1. General. .............................................68
8.9.2. Collateral Reports. ..................................68
8.9.3. Commercial Finance Examinations. .....................69
8.9.4. Environmental Assessments. ...........................69
8.9.5. Communications with Accountants. .....................69
8.9.6. Title Rundowns. ......................................70
8.10. Compliance with Laws, Contracts, Licenses, and Permits. .......70
8.11. Employee Benefit Plans. .......................................70
8.12. Use of Proceeds. ..............................................71
8.13. Mortgaged Property. ...........................................71
8.14. Bank Accounts. ................................................71
8.14.1. General. ............................................71
8.14.2. Acknowledgment of Application. ......................72
8.15. Maintenance and Collection of Base Contracts; Custodian. ......72
<PAGE>
8.16. Servicing of Base Contracts. ..................................73
8.17. Legal Opinions. ...............................................74
8.18. Further Assurances. ...........................................74
8.19. Computer Equipment. ...........................................74
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. ............................75
9.1. Restrictions on Indebtedness. ..................................75
9.2. Restrictions on Liens. .........................................77
9.3. Restrictions on Investments. ...................................79
9.4. Distributions. .................................................80
9.5. Merger, Consolidation and Disposition of Assets. ...............80
9.5.1. Mergers and Acquisitions. ............................80
9.5.2. Disposition of Assets. ...............................80
9.5.3. Disposition of Stock. ................................82
9.6. Sale and Leaseback. ............................................82
9.7. Compliance with Environmental Laws. ............................82
9.8. Subordinated Debt. .............................................82
9.9. Employee Benefit Plans. ........................................82
9.10. Business Activities. ..........................................83
9.11. Fiscal Year. ..................................................83
9.12. Transactions with Affiliates. .................................83
9.13. Bank Accounts. ................................................84
9.14. No Termination or Amendments. .................................84
10. FINANCIAL COVENANTS OF THE BORROWER. ..................................84
10.1. Consolidated Operating Margin Covenant. .......................84
10.2. Debt Service Coverage Ratio. ..................................85
10.3. Liabilities to Worth Ratio. ...................................85
10.4. Consolidated Tangible Net Worth. ..............................85
11. CLOSING CONDITIONS. ...................................................85
11.1. Loan Documents. ...............................................85
11.2. Certified Copies of Charter Documents. ........................85
11.3. Corporate, Action. ............................................85
11.4. Incumbency Certificate. .......................................86
11.5. Validity of Liens. ............................................86
11.6. Perfection Certificates and UCC Search Results. ...............86
11.7. Certificates of Insurance. ....................................86
11.8. Agency Account Agreements. ....................................86
11.9. Borrowing Base Report. ........................................87
11.10. Base Contracts Aging Report. .................................87
11.11. Opinion of Counsel. ..........................................87
11.12. Payment of Fees. .............................................87
11.13. Other Documents. .............................................87
11.14. Repayment of Existing Credit Agreement. ......................87
12. CONDITIONS TO ALL BORROWINGS. .........................................88
12.1. Representations True; No Event of Default. ....................88
<PAGE>
12.2. No Legal Impediment. ..........................................88
12.3. Governmental Regulation. ......................................88
12.4. Proceedings and Documents. ....................................88
12.5. Borrowing Base Report. ........................................89
13. EVENTS OF DEFAULT; ACCELERATION; ETC. .................................89
13.1. Events of Default and Acceleration. ...........................89
13.2. Termination of Commitments. ...................................93
13.3. Remedies. .....................................................93
13.4. Distribution of Collateral Proceeds. ..........................93
14. SETOFF. ...............................................................94
15. THE AGENT. ............................................................95
15.1. Authorization. ................................................95
15.2. Employees and Agents. .........................................96
15.3. No Liability. .................................................96
15.4. No Representations. ...........................................96
15.4.1. General. ............................................96
15.4.2. Closing Documentation, etc. .........................97
15.5. Payments. .....................................................97
15.5.1. Payments to Agent. ..................................97
15.5.2. Distribution by Agent. ..............................98
15.5.3. Delinquent Banks. ...................................98
15.6. Holders of Notes. .............................................99
15.7. Indemnity. ....................................................99
15.8. Agent as Bank. ................................................99
15.9. Resignation. ..................................................99
15.10. Notification of Defaults and Events of Default. .............100
15.11. Authorization of Collateral Agency Agreement. ...............100
15.12. Duties in the Case of Enforcement. ..........................100
16. EXPENSES AND INDEMNIFICATION. ........................................100
16.1. Expenses. ....................................................100
16.2. Indemnification. .............................................101
16.3. Survival. ....................................................102
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. .......................102
17.1. Sharing of Information with Section 20 Subsidiary. ...........102
17.2. Confidentiality. .............................................103
17.3. Prior Notification. ..........................................103
17.4. Other. .......................................................103
18. SURVIVAL OF COVENANTS, ETC. ..........................................103
19. ASSIGNMENT AND PARTICIPATION. ........................................104
19.1. Conditions to Assignment by Banks. ...........................104
19.2. Certain Representations and Warranties; Limitations; Covenants.105
19.3. Register. ....................................................106
<PAGE>
19.4. New Notes. ...................................................106
19.5. Participations. ..............................................107
19.6. Disclosure. ..................................................107
19.7. Assignee or Participant Affiliated with the Borrower. ........107
19.8. Miscellaneous Assignment Provisions. .........................108
19.9. Assignment by Borrower. ......................................108
20. NOTICES, ETC. ........................................................108
21. GOVERNING LAW. .......................................................109
22. HEADINGS. ............................................................110
23. COUNTERPARTS. ........................................................110
24. ENTIRE AGREEMENT, ETC. ...............................................110
25. WAIVER OF JURY TRIAL. ................................................110
26. CONSENTS, AMENDMENTS, WAIVERS, ETC. ..................................111
27. SEVERABILITY. ........................................................111
28. RELEASE OF SECURITY. .................................................112
29. SUPERIOR RIGHTS OF BASE CONTRACT PURCHASER. ..........................112
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
January 15, 1998, by and among FAIRFIELD COMMUNITIES, INC. (the "Borrower" or
"FCI"), a Delaware corporation having its principal place of business at 11001
Executive Center Drive, Little Rock, Arkansas 72211, and BANKBOSTON, N.A., a
national banking association, and the other lending institutions listed on
Schedule 1 and BankBoston, N.A. as agent for itself and such other lending
- ---------
institutions.
WHEREAS, BKB, the Agent, the Borrower and Fairfield Myrtle Beach, Inc.
entered into an Amended and Restated Revolving Credit Agreement dated as of
September 28, 1993, as amended by (i) Consent, Waiver and Agreement dated as of
September 23, 1994, (ii) First Amendment to Amended and Restated Revolving
Credit Agreement dated as of May 13, 1994, (iii) Second Amendment to Amended and
Restated Revolving Credit Agreement dated as of December 9, 1994, (iv) Third
Amendment to Amended and Restated Revolving Credit Agreement dated as of
December 19, 1994, (v) Fourth Amendment to Amended and Restated Revolving Credit
Agreement dated as of November 20, 1995, (vi) Fifth Amendment to Amended and
Restated Revolving Credit Agreement dated as of January 25, 1996, (vii) Sixth
Amendment to Amended and Restated Revolving Credit Agreement dated as of
December 12, 1996, (viii) Seventh Amendment to Amended and Restated Revolving
Credit Agreement dated as of December 19, 1997, and (ix) Eighth Amendment to
Amended and Restated Revolving Credit Agreement dated as of February 13, 1998
(as so amended, the "Existing Credit Agreement");
WHEREAS, BKB and the Agent have agreed with the Borrower subject to the
conditions contained herein, to amend and restate the Existing Credit Agreement;
NOW, THEREFORE, the Borrower, BKB and the Agent agree that the Existing
Credit Agreement is amended and restated in its entirety as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. DEFINITIONS. The following terms shall have the meanings set forth
-----------
in this ss.1 or elsewhere in the provisions of this Credit Agreement referred
to below:
Administrative Fee. See ss.5.1.
------------------
<PAGE>
Affiliate. Any Person that would be considered to be an affiliate of
---------
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agency Account Agreement. See ss.8.14.1.
------------------------
Agent's Head Office. The Agent's head office located at 100 Federal Street,
-------------------
Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Banks.
-----
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may be
------------------------
approved by the Agent.
Approved Projects. (i) All portions of those vacation ownership resorts and
-----------------
developments identified on Schedule 1-A hereto, and (ii) vacation ownership
resorts and developments acquired, developed, owned and operated by FCI or any
of the Subsidiary Guarantors after the date of this Credit Agreement which are
(a) located in an Existing Resort City, (b) approved by the Agent and the Banks,
or (c) Startup Projects; provided, however, that a Startup Project shall cease
to be an Approved Project at such time as FCI and/or its Subsidiaries have made
expenditures for or with respect to such Startup Project in excess of
$15,000,000.
Assignment and Acceptance. See ss.19.1.
-------------------------
Balance Sheet Date. September 30, 1997.
------------------
Banks. BKB and the other lending institutions listed on Schedule 1 hereto
-----
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to ss.19.
Base Contract Default. With respect to any Base Contract, when the obligor
---------------------
thereunder is at the relevant time of determination ninety (90) or more days
delinquent in the payment of any installment or other periodic payment of
principal, interest or amounts due thereunder.
Base Contracts. Lot Contracts and Timeshare Contracts.
--------------
Base Rate. The higher of (i) the annual rate of interest announced from
---------
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the
<PAGE>
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
funds brokers of recognized standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
---------------
reference to the Base Rate.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a national
---
banking association, in its individual capacity.
BKB Concentration Account. See ss.8.14.1.
-------------------------
Borrower. As defined in the preamble hereto.
--------
Borrowing Base. At the relevant time of reference thereto, an amount
---------------
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Banks and the Agent pursuant to ss.8.4(f) which is equal to the
sum of:
(a) 75% of the aggregate Principal Balances of all Eligible Base Contracts;
plus
- ----
(b) 85% of the aggregate Principal Balances of all Eligible Prime Base
Contracts; plus
----
(c) 65% of the aggregate Principal Balances of all Eligible Green Base
Contracts; provided, that in no event shall the weighted average rate of
--------
interest accruing on the aggregate Principal Balances of all Eligible Base
Contracts, Eligible Prime Base Contracts and Eligible Green Base Contracts
included in the Borrowing Base under clauses (a), (b) and (c) be less than
twelve percent (12%) per annum, and if such weighted average rate of interest is
less than twelve percent (12%) at any time of determination, Eligible Base
Contracts, Eligible Prime Base Contracts and Eligible Green Base Contracts
having an interest rate of less than twelve percent (12%) shall be excluded from
the Borrowing Base in an amount sufficient to cause such weighted average rate
of interest to equal or exceed twelve percent (12%), and further provided, that
------- --------
in no event shall the portion of the Borrowing Base under clauses (a), (b) and
(c) attributable to Base Contracts for Vacation Club Memberships exceed
$10,000,000; plus
<PAGE>
(d) 100% of the net book value of Eligible Construction Work in Progress;
provided, that the portion of the Borrowing Base attributable to any phase of
- --------
Eligible Construction Work in Progress under this clause (d) shall be (i)
reduced for each calculation of the Borrowing Base by an amount equal to 18 3/4%
of the total sales of VOIs generated by such phase to such date of calculation
and (ii) reduced to zero (0) from and after the third anniversary of the first
day of the month in which such phase of such Eligible Construction Work in
Progress was granted a certificate of occupancy.
Borrowing Base Report. A Borrowing Base Report signed by the senior vice
----------------------
president, treasurer or chief financial officer of the Borrower and in
substantially the form of Exhibit A hereto.
------- -
Business Day. Any day on which banking institutions in Boston,
--------------
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
---------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the Borrower
--------------------
or any of its Subsidiaries in connection with (i) the purchase or lease by the
Borrower or any of its Subsidiaries of Capital Assets that would be required to
be capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles, excluding any such amounts related
---------
directly to the development and construction of shelter held for sale or lots
(including without limitation acquisition of land for future development) but
including any amounts related to the development of any amenities at any resort
- ---------
development; or (ii) the lease of any assets by the Borrower or any of its
Subsidiaries as lessee under any synthetic lease referred to in clause (vi) of
the definition of the term "Indebtedness" to the extent that such assets would
have been Capital Assets had the synthetic lease been treated for accounting
purposes as a Capitalized Lease.
Capitalized Leases. Leases under which the Borrower or any of its
-------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance
<PAGE>
sheet of the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See ss.7.18(a).
-------
Closing Date. The first date on which the conditions set forth in ss.11
-------------
have been satisfied and any Revolving Credit Loans are to be made or any Letter
of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Borrower and
----------
its Subsidiaries that are or are intended to be subject to the security
interests and liens created by the Security Documents.
Collateral Agency Agreement. The Collateral Agency Agreement, dated as of
---------------------------
January 15, 1998, by and among (i) the Collateral Agent; (ii) the Agent and the
Banks; (iii) the FAC Agent and the banks under the FAC Credit Agreement; (iv)
EagleFunding Capital Corporation; and (v) the Borrower, FAC, FMB, FRC and the VB
Originating Subsidiaries.
Collateral Agent. BankBoston, N.A., acting as Collateral Agent for the
-----------------
Agent and the Banks under the Collateral Agency Agreement.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
---------- -------- -
thereto as the amount of such Bank's commitment to make Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for the
account of, the Borrower, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Commitment Percentage. With respect to each Bank, the percentage set forth
---------------------
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
-------- -
all of the Banks.
Consolidated or consolidated. With reference to any term defined herein,
------------------------------
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income (or Deficit). The consolidated net income (or
---------------------------------------
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles.
<PAGE>
Consolidated Operating Cash Flow. For any period, an amount equal to (i)
---------------------------------
the sum of (A) Earnings Before Interest and Taxes for such period, plus (B)
----
depreciation, amortization and all other noncash charges for such period, less
----
(ii) the sum of (A) cash payments for all taxes paid during such period, plus
(B) Capital Expenditures made during such period.
Consolidated Tangible Net Worth. The excess of Consolidated Total Assets
--------------------------------
over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the
foregoing; plus
(b) all amounts representing any write-up in the book value of
any assets of the Borrower or its Subsidiaries resulting from a
revaluation thereof subsequent to the Balance Sheet Date; plus
(c) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any subscriptions receivable.
Consolidated Total Assets. The sum of (i) all assets ("consolidated balance
-------------------------
sheet assets") of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles, plus (ii)
----
without duplication, all assets leased by the Borrower or any Subsidiary as
lessee under any synthetic lease referred to in clause (vi) of the definition of
the term "Indebtedness" to the extent that such assets would have been
consolidated balance sheet assets had the synthetic lease been treated for
accounting purposes as a Capitalized Lease, plus (iii) without duplication, all
----
sold receivables referred to in clause (vii) of the definition of the term
"Indebtedness" to the extent that such receivables would have been consolidated
balance sheet assets had they not been sold.
Consolidated Total Interest Expense. For any period, the aggregate amount
------------------------------------
of interest required to be paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the Borrower and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of any Capitalized Lease, or any
synthetic lease referred to in clause (vi) of the
<PAGE>
definition of the term "Indebtedness," and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.
Consolidated Total Liabilities. All liabilities of the Borrower and its
--------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Borrower and its Subsidiaries and all other Indebtedness of
the Borrower and its Subsidiaries, whether or not so classified.
Consolidated Total Revenue. For any period, the consolidated revenue of the
--------------------------
Borrower and its Subsidiaries determined in accordance with generally accepted
accounting principles.
Conversion Request. A notice given by the Borrower to the Agent of the
-------------------
Borrower's election to convert or continue a Loan in accordance with ss.2.6.
Credit Agreement. This Amended and Restated Revolving Credit Agreement,
-----------------
including the Schedules and Exhibits hereto.
Custodial Agreements. Collectively, (i) the Sixth Amended and Restated
---------------------
Custodial Agreement, dated as of December 2, 1996, among the Borrower, certain
of the Borrower's Subsidiaries, the Collateral Agent, BKB, the Agent, FAC Agent,
Capital Markets Assurance Corporation and First Commercial Trust Company, N.A.,
as "Custodian", and the Amended and Restated Bailment Agreement, dated as of
December 2, 1996, by and among FCI, FAC and First Commercial Trust Company,
N.A., as "Custodian", and (ii) the Custodial Agreement, dated as of January 15,
1998, among the Borrower, certain of the Borrower's Subsidiaries, the Collateral
Agent, BKB, the Agent, FAC Agent, EagleFunding Capital Corporation and First
Security Trust Company of Nevada, N.A., as "Custodian", and the Bailment
Agreement, dated as of January 15, 1998, among FCI, FAC and First Security Trust
Company of Nevada, N.A.
Custodian. Each Custodian under the Custodial Agreements..
---------
Default. Any of the events specified in Section 13.1, whether or not any
-------
requirement for the giving of notice or the lapse of time, or both, has been
satisfied.
Delinquent Bank. See ss.15.5.3.
---------------
Determination Date. The last date of each calendar month.
-------------------
<PAGE>
Distribution. The declaration or payment of any dividend on or in respect
------------
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
------- -
Domestic Lending Office. Initially, the office of each Bank designated as
-----------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or is to
-------------
be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with ss.2.6.
Earnings Before Interest and Taxes. The Consolidated Net Operating Income
----------------------------------
(or Deficit) of the Borrower and its Subsidiaries for any period, after all
expenses and other proper charges but before payment or provision for any income
taxes or interest expense for such period, determined in accordance with
generally accepted accounting principles, after eliminating therefrom all
extraordinary nonrecurring items of income (or loss).
Eligible Assignee. Any of (i) a commercial bank or finance company
------------------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
--------
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance or other Person company, commercial finance company or other financial
<PAGE>
institution approved by the Agent, such approval not to be unreasonably
withheld.
Eligible Base Contract. Any Base Contract as to which the Borrower or any
-----------------------
of the Subsidiary Guarantors (other than FAC) is the obligee thereunder and
which satisfies each of the following requirements:
(a) Which is subject to a valid and perfected Lien in favor of the Agent
for the benefit of the Banks; provided, however, that with respect to any Base
Contract originated prior to February 13, 1998 by any VB Originating Subsidiary,
the failure to deliver the original copy of such Base Contract (or in the case
of a Base Contract consisting of a sales contract and a separate promissory
note, a copy of such sales contract and the original of such promissory note) to
the Custodian prior to any relevant date of determination occurring prior to
April 15, 1998 shall not disqualify such Base Contract as an Eligible Base
Contract by reason of this clause (a) so long as the original copy of such Base
Contract (or in the case of a Base Contract consisting of a sales contract and a
separate promissory note, a copy of such sales contract and the original of such
promissory note) is delivered to the Custodian as soon as possible and in any
event on or before April 15, 1998, and any such Base Contact not so delivered by
April 15, 1998 shall cease to be an Eligible Base Contract;
(b) (i) Which is a legal, valid and binding obligation that has not been
canceled or terminated (regardless of whether the obligor thereunder is legally
entitled to do so) or been declared ineligible by the Borrower or any of its
Subsidiaries, and (ii) as to which all periods of time during which the obligor
thereunder may rescind, cancel or terminate such Base Contract have expired
without the obligor having exercised any such right;
(c) Which is not in Base Contract Default;
(d) As to which the obligor thereunder has paid a downpayment in an amount
equal to at least 10% of the total principal amount due thereunder (including in
such total any cash downpayments made under such Base Contract at origination,
principal payments made under any other Base Contract which has been "traded in"
in connection with the origination of the subject Base Contract, and
downpayments under such Base Contract made over a period not exceeding six (6)
months from the date of origination of such Base Contract);
(e) Which arises from transactions in a jurisdiction where the Borrower or
any Subsidiary of the Borrower which originates Base Contracts maintains its
right to do business, unless the Borrower has
<PAGE>
demonstrated to the satisfaction of the Majority Lenders in their sole
discretion that the legality, validity, binding effect and enforceability of
such Base Contract has not been impaired by any failure to maintain the right to
do business in such jurisdiction;
(f) Which is substantially in the form of Exhibit D attached hereto or in a
------- -
form containing material variations from the attached form which has been
approved in writing by the Agent;
(g) With respect to a Timeshare Contract as to which the underlying unit is
(i) complete and ready for occupancy, and (ii) free of all liens and
encumbrances (except with respect to the underlying units in the vacation
ownership resort known as Vacation Break at Star Island located at Kissimmee,
Florida, which may not be free of all liens and encumbrances);
(h) That requires the obligor thereunder to pay the unpaid principal
balance over an original term of not greater than one hundred twenty (120)
months;
(i) Which is related to an Approved Project, provided that a Base Contract
which has previously been an Eligible Base Contract and is related to a vacation
ownership resort or development which subsequently loses its status as an
Approved Project shall remain an Eligible Base Contract (as long as such Base
Contract would otherwise qualify as an Eligible Base Contract hereunder);
(j) As to which any installment payable thereunder has not been deferred
subsequent to January 31, 1998 other than pursuant to a Permitted Deferral;
(k) As to which the Borrower or such Subsidiary Guarantor has a valid
ownership interest in an underlying VOI or Lot subject only to Permitted Liens,
except as otherwise provided in clause (1) below;
(l) Where (i) if the related VOI or Lot has been deeded to the obligor of
the related Base Contract, on the date on which such Base Contract was granted
as security to the Collateral Agent for the benefit of the Agent and the Banks
(except as otherwise provided in clause (C) below): (A) the Borrower or such
Subsidiary Guarantor has a valid and enforceable first lien mortgage, deed of
trust, vendor's lien or retention of title of record on such VOI or Lot, (B)
such mortgage, deed of trust, vendor's lien or retention of title shall be
assigned to the Collateral Agent for the benefit of the Agent and the Banks, (C)
the original of such recorded or unrecorded mortgage, deed of trust, vendor's
lien or
<PAGE>
retention of title (or a copy of such recorded mortgage, deed of trust, vendor's
lien or retention of title if the original recorded copy is not available) shall
be delivered to the custody of the Custodian as soon as possible, but in any
event within one hundred and eighty (180) days, after the deeding of such VOI or
Lot, and (D) if any mortgage, deed of trust, vendor's lien or retention of title
relating to such Base Contract is a deed of trust, a trustee, duly qualified
under applicable law to serve as such, has been properly designated in
accordance with applicable law and currently so serves; (ii) if the related VOI
or Lot has not been deeded to the obligor of the related Base Contract, is not
located in Florida and is not related, and has not been related within the past
one hundred and eighty (180) days, to an Eligible Green Base Contract, on the
date on which such contract was granted as security to the Collateral Agent for
the benefit of the Agent and the Banks, a nominee under the Title Clearing
Agreements has legal title to such VOI or Lot and the Borrower or such
Subsidiary Guarantor has an equitable interest in such VOI or Lot underlying the
related Base Contract, which equitable interest shall be assigned to the
Collateral Agent for the benefit of the Agent and the Banks, (iii) if the
related VOI or Lot was the subject of an Eligible Green Base Contract, the
Borrower shall have caused the VOI or Lot to comply with the requirements of
clause (i) or (ii) immediately above, as applicable, as soon as possible, but in
any event within one hundred and eighty (180) days, after the date upon which
such Base Contract ceased to be an Eligible Green Base Contract and (iv) if the
obligor's interest in the VOI is represented by a Vacation Club Membership, the
Collateral Agent shall have a perfected security interest in the Borrower's
rights under the Vacation Club Agreement.
(m) Which was issued in a transaction which complied, and is in compliance
in all material respects, with all requirements of applicable federal, state and
local laws, including those relating to usury, truth-in-lending, land sales,
vacation time share sales, consumer credit and disclosure laws;
(n) Where payments to be made thereunder are denominated and payable in
United States dollars;
(o) The underlying ownership interest which is the subject of such Base
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
timeshare regime at the Fairfield Pagosa resort in Archuleta County, Colorado,
an undivided leasehold interest) in a lodging unit or group of lodging units at
an Approved Project, or (iii) is a lot at an Approved Project, or (iv) is a
Vacation Club Membership and (B) in the case of a fixed week which has been
converted into an undivided interest
<PAGE>
in a fee simple or a leasehold interest, or which has become subject to the Fair
Share Plus Program, which conversion or other modification does not give rise to
the extension of the maturity of any payments under such Base Contract;
(p) Which was originated by the Borrower or such Subsidiary Guarantor, and
has been (or in the case of Base Contracts originated prior to January 31, 1998
by the VB Originating Subsidiaries, from and after January 31, 1998 will be)
consistently serviced by the Borrower or FAC in the ordinary course of its
respective business;
(q) Which has not been specifically reserved against by the Borrower or
such Subsidiary Guarantor , and has not been classified by the Borrower or such
Subsidiary Guarantor as uncollectable or charged off;
(r) As to which the payment obligation of the obligor thereunder is not
subject to any material dispute between such obligor and the Borrower or such
Subsidiary Guarantor;
(s) Where the obligor thereunder is a United States citizen and has a
United States mailing address, or with respect to Base Contracts constituting
not more than 5% of the aggregate Principal Balances of all Eligible Base
Contracts as of the relevant date of determination, where the obligor thereunder
is not a United States citizen or does not have a United States mailing address;
(t) Where the obligor thereunder is not an Affiliate of the Borrowers or
any of its Subsidiaries;
(u) That is fully amortizing pursuant to a required set of regular monthly
payments of principal and interest;
(v) That is not an obligation of an obligor that is bankrupt or otherwise
involved, whether voluntary or involuntary, in any case or proceeding under any
bankruptcy, reorganization, arrangement, insolvency, adjustment of debt,
dissolution, liquidation or similar law of any jurisdiction; and
(w) Which is not an Eligible Prime Base Contract.
Eligible Construction Work in Progress. Any ongoing construction of a
-----------------------------------------
vacation ownership resort or development acquired, developed, owned and operated
by the Borrower or any Subsidiary Guarantor (other than FAC) intended to create
improvements that will be occupied by owners of VOI's and that otherwise
satisfies the following requirements:
<PAGE>
(a) Prior to commencement of such construction, all required permits for
such construction shall have been obtained;
(b) With respect to any building in excess of three stories in height, such
construction (i) shall be monitored by an engineer acceptable to the Agent which
has experience in building structures similar to the proposed resort buildings
or, at the discretion of the Agent, the Borrower's in-house engineer, and (ii)
shall be performed by a qualified general contractor which shall be bonded if
requested by the Agent; and
(c) The Borrower shall have submitted to the Agent evidence satisfactory to
the Agent that it has contributed equity to such project under construction
equal to twenty-five percent (25%) of the budget for acquisition and
construction of such project, or, if less than the full project is under
imminent construction at the relevant date of calculation, such phases as are to
be included in Eligible Construction Work in Progress, which budget shall have
been submitted to the Agent and shall be in form and substance satisfactory to
the Agent; and
(d) If requested by the Agent pursuant to ss.8.9.6, the Agent shall have
received an updated report from a title insurance company or other evidence
satisfactory to the Agent which confirms that there are no liens of mechanics or
materialmen with respect to obligations more than thirty (30) days overdue or
other material impairments of title to such resort or development.
Eligible Green Base Contract. Any Timeshare Contract which would be an
------------------------------
Eligible Base Contract hereunder but for the qualification contained in clause
(g) of the definition of "Eligible Base Contract" and with respect to which the
underlying unit is anticipated to be completed and ready for occupancy within
one (1) year following the origination of such Timeshare Contract; provided that
--------
any such Timeshare Contract shall cease to be an Eligible Green Base Contract
one (1) year following the origination of such Timeshare Contract; and provided
-------
further that an Eligible Green Base Contract need not comply with the
- -------
requirements contained in clause (b)(ii) of the definition of "Eligible Base
Contract".
Eligible Prime Base Contract. Any Timeshare Contract which would qualify as
----------------------------
an Eligible Base Contract hereunder but for the qualification contained in
clause (w) of the definition of "Eligible Base Contract" and which meets the
following additional qualifications:
(a) the obligor thereunder is not in Prime Contract Default;
(b) (i) the obligor thereunder has paid a downpayment in an amount equal to
at least 15% of the total principal amount due thereunder
<PAGE>
(including in such total any cash downpayments made under such Base Contract at
origination, principal payments made under any other Base Contract which has
been "traded in" in connection with the origination of the subject Base
Contract, and downpayments under such Base Contract made over a period not
exceeding six (6) months from the date of origination of such Base Contract), or
(ii) the Obligor thereunder (A) has paid a downpayment in an amount equal to at
least 10% of the total principal amount due thereunder (including in such total
any cash downpayments made under such Base Contract at origination and principal
payments made under any Base Contract which has been "traded in" in connection
with the origination of the subject Base Contract) and (B) has made a minimum of
---
six (6) consecutive, regular monthly payments of principal and interest;
provided that until July 31, 1998, those Base Contracts originated prior to
- --------
January 31, 1998 by the VB Originating Subsidiaries shall be deemed to have
satisfied the requirements of this clause (b)(ii)(B).
Employee Benefit Plan. Any employee benefit plan within the meaning of
------------------------
ss.3(3) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See ss.7.18(a).
------------------
EPA. See ss.7.18(b).
---
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
---------------
Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
------------------------
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
--------------------------
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
<PAGE>
Eurodollar Business Day. Any day on which commercial banks are open for
-------------------------
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated as
-------------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
----------------
Loan, the rate of interest equal to (i) the rate per annum (rounded upwards to
the nearest 1/16 of one percent) at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
the eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of the Reference Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans bearing interest calculated
---------------------
by reference to the Eurodollar Rate.
Event of Default. See ss.13.1.
----------------
Excluded Subsidiaries. FCC, FRC and FFC.
---------------------
Existing Resort Cities. Any of Flagstaff, Arizona; Fairfield Bay, Arkansas;
----------------------
Ventura, California; Kissimmee, Florida; Orlando, Florida; Pompano Beach,
Florida; Villa Rica, Georgia; Branson, Missouri; Lake Lure, North Carolina; New
Bern, North Carolina; Saphire, North Carolina; Edisto Island, South Carolina;
Myrtle Beach, South Carolina; Fairfield Glade, Tennessee; Pagosa Springs,
Colorado; Nashville, Tennessee; Broward County, Florida; Alexandria, Virginia
and Williamsburg, Virginia. In addition, any city in which a Startup Project
exists and has generated positive net income for each of four (4) consecutive
months shall be deemed an Existing Resort City.
Extension Request. See ss.3.4.
-----------------
FAC. Fairfield Acceptance Corporation, a Delaware corporation and a
---
wholly-owned subsidiary of the Borrower.
<PAGE>
FAC Agent. BankBoston, N.A., acting as agent for the banks under the FAC
---------
Credit Agreement.
FAC Credit Agreement. The Amended and Restated Revolving Credit Agreement,
--------------------
dated as of January 15, 1998, by and among FAC, BKB and the other banks who may
become parties thereto, and the FAC Agent.
Fair Share Plus Program. The program pursuant to which the occupancy and
------------------------
use of a VOI is assigned to the trust created by the Amended and Restated Fair
Share Vacation Plan Use Management Trust Agreement, effective as of January 1,
1996, among the Borrower and certain Subsidiaries of the Borrower and third
party developers as may be named by an amendment or addendum thereto, as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms of this Agreement (the "Fair Share Plus
Agreement"), in exchange for annual symbolic points which are used to establish
the location, timing, length of stay and unit type of a vacation; including,
without limitation, systems relating to reservations, accounting and collection,
disbursement and enforcement of assessments in respect of contributed units.
FCC. Fairfield Capital Corporation, a Delaware corporation and a
---
wholly-owned subsidiary of FAC.
FCI. As defined in the preamble hereto.
---
FFC. Fairfield Funding Corporation, a Delaware corporation and a
---
wholly-owned subsidiary of FAC.
FMB. Fairfield Myrtle Beach, Inc., a Delaware corporation and a
---
wholly-owned subsidiary of the Borrower.
FRC. Fairfield Receivables Corporation, a Delaware corporation and a
---
wholly-owned Subsidiary of FAC.
generally accepted accounting principles. (i) When used in ss.10, whether
-----------------------------------------
directly or indirectly through reference to a capitalized term used therein,
means (A) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on the Balance Sheet Date, and (B) to the
extent consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the year ended on the Balance Sheet
Date, and (ii) when used in general, other than as provided above, means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B)
<PAGE>
consistently applied with past financial statements of the Borrower adopting the
same principles, provided that in each case referred to in this definition of
"generally accepted accounting principles" a certified public accountant would,
insofar as the use of such accounting principles is pertinent, be in a position
to deliver an unqualified opinion (other than a qualification regarding changes
in generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
-------------------------
meaning of ss.3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guaranty. The Guaranty, dated or to be dated on or prior to the Closing
--------
Date, made by each Subsidiary Guarantor in favor of the Banks and the Agent
pursuant to which each Subsidiary Guarantor guarantees to the Banks and the
Agent the payment and performance of the Obligations and otherwise in form and
substance satisfactory to the Banks and the Agent.
Hazardous Substances. See ss.7.18(b).
--------------------
Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses,
(iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
are being contested in good faith),
<PAGE>
(v) every obligation of such Person under any Capitalized Lease,
(vi) every obligation of such Person under any lease (a "synthetic
lease") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes,
(vii) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (C) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith,
(viii) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights,
(ix) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices,
(x) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in
<PAGE>
any of clauses (i) through (x) (the "primary obligation") of another Person
(the "primary obligor"), in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person (A) to
purchase or pay (or advance or supply funds for the purchase of) any
security for the payment of such primary obligation, (B) to purchase
property, securities or services for the purpose of assuring the payment of
such primary obligation, or (C) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (y) any synthetic lease shall be the
stipulated loss value, termination value or other equivalent amount and (z) any
equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt in
---------------------
by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. ss.24, Seventh), as amended.
Interest Payment Date. (i) As to any Base Rate Loan, the last day of the
----------------------
calendar month with respect to interest accrued during such calendar month,
including, without limitation, the calendar month which includes the Drawdown
Date of such Base Rate Loan; and (ii) as to any Eurodollar Rate Loan, the last
day of each calendar month included in the Interest Period for such Eurodollar
Rate Loan and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (i) initially,
---------------
the period commencing on the Drawdown Date of such Loan and ending on the last
day of one of the periods set forth below, as selected by the Borrower in a Loan
Request or as otherwise required by the terms of this Credit Agreement (A) for
any Base Rate Loan, the last day of the
<PAGE>
calendar month and (B) for any Eurodollar Rate Loan, 1, 2, or 3 months; and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Revolving Credit Loan and ending on the last
day of one of the periods set forth above, as selected by the Borrower in a
Conversion Request; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in ss.2.6,
the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base
Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date shall end on the Revolving Credit Loan
Maturity Date.
Interim Concentration Account. See ss.8.14.
-----------------------------
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness
of, or for loans, advances, capital contributions or transfers of property
to, or in respect of any guaranties (or other commitments as described
under Indebtedness), or obligations of, any Person. In determining the
aggregate amount of Investments outstanding at any particular time: (i) the
amount of any Investment represented by a guaranty shall be taken at not
less than the principal amount of the obligations guaranteed and still
outstanding; (ii) there shall be included as an Investment all interest
<PAGE>
accrued with respect to Indebtedness constituting an Investment unless and
until such interest is paid; (iii) there shall be deducted in respect of
each such Investment any amount received as a return of capital (but only
by repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (iv) there shall not be deducted in respect of
any Investment any amounts received as earnings on such Investment, whether
as dividends, interest or otherwise, except that accrued interest included
as provided in the foregoing clause (ii) may be deducted when paid; and (v)
there shall not be deducted from the aggregate amount of Investments any
decrease in the value thereof. Any purchase of assets acquired primarily
for purposes of operating the business of the Borrower and its Subsidiaries
shall not be deemed to be an Investment, nor shall any prepayment of or
advance for fees or expenses for services or goods in the Borrower's normal
course of business (including prepayments or advances under marketing
agreements).
Letter of Credit. See ss.4.1.1.
----------------
Letter of Credit Application. See ss.4.1.1.
----------------------------
Letter of Credit Fee. See ss.4.6.
--------------------
Letter of Credit Participation. See ss.4.1.4.
------------------------------
Lien. (i) With respect to real property, a first priority mortgage or
----
deed of trust lien, and (ii) with respect to personal property, a fully
perfected first priority security interest.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
--------------
Applications, the Letters of Credit, the Collateral Agency Agreement, the
Security Documents and the fee letter agreement described in ss.5.1.
Loan Request. See ss.2.5.
------------
Loans. The Revolving Credit Loans.
-----
Local Accounts. See ss.8.14.
--------------
Lot. Any lot related to a Base Contract.
---
Lot Contracts. Any installment contract or contract for deed or
--------------
contracts or notes secured by a mortgage, deed of trust, vendor's lien or
retention of title entered into with a purchaser of one or more individual
lots or plots or tracts of land and the improvements thereon.
<PAGE>
Majority Banks. As of any date, the Banks holding at least fifty-one
---------------
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitutes at least fifty-one percent (51%) of the Total Commitment.
Material Adverse Effect. With respect to any event or circumstance, a
-------------------------
material adverse effect on
(a) the business, properties, operations, profits, prospects, or condition
(financial or otherwise) of the Borrower and its Subsidiaries (taken as a
whole);
(b) the ability of any of the Borrower and the Subsidiary Guarantors to
perform its respective obligations under any of the Loan Documents to which it
is a party;
(c) the validity or enforceability of, or collectibility of amounts payable
under, the Credit Agreement, the Notes or any of the other Loan Documents;
(d) the status, existence, perfection or priority of the Collateral Agent's
liens or security interests in the Collateral; or
(e) the value, validity, enforceability or collectibility of the Loans, the
Guaranty, or any of the Collateral (as applicable).
Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries
----------------------
may at any time draw under outstanding Letters of Credit, as such aggregate
amount may be reduced from time to time pursuant to the terms of the Letters of
Credit.
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
------------------
Mortgages. The several mortgages and deeds of trust granted by the Borrower
---------
and its Subsidiary Guarantors to the Agent pursuant to and in accordance with
the provisions of ss.8.13 hereof with respect to the fee and leasehold interests
of the Borrower and such Subsidiary Guarantors in the Real Estate and in form
and substance satisfactory to the Banks and the Agent.
Multiemployer Plan. Any multiemployer plan within the meaning of ss.3(37)
-------------------
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
<PAGE>
Notes. The Revolving Credit Notes.
-----
Obligations. All indebtedness, obligations and liabilities of any of the
-----------
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of
Credit Application, Letter of Credit or other instruments at any time evidencing
any thereof.
Operating Account. One or more of the Borrower's operating accounts with
------------------
the Agent.
Operating Agreement. The Fourth Amended and Restated Operating Agreement,
--------------------
dated as of January 15, 1998, by and among the Borrower, FAC, FMB and the VB
Originating Subsidiaries.
outstanding. With respect to the Loans, the aggregate unpaid principal
-----------
thereof as of any date of determination.
Partnership Subsidiaries. Palm Vacation Group, a Florida general
--------------------------
partnership, and Ocean Break Vacation Group, a Florida general partnership.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA
----
and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
------------------------
Security Agreements.
Permitted Deferral. With respect to any Base Contract, deferrals of not
-------------------
more than three installments payable thereunder from and after January 31, 1998.
Permitted Liens. Liens, security interests and other encumbrances permitted
---------------
by ss.9.2.
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
<PAGE>
POA. The property owners' association or similar time-share owner body for
---
each VOI Regime or Project or relevant portion of either thereof, in each case
established pursuant to the declarations, articles or similar charter documents
applicable to each such VOI Regime, Project or portion thereof.
Points. With respect to a VOI unit at any VOI Regime, the number of points
------
of symbolic value assigned to such unit pursuant to the FairShare Plus Program.
Prime Contract Default. With respect to any Base Contract, when the obligor
----------------------
thereunder is at the relevant time of determination sixty-one (61) or more days
delinquent in the payment of any installment or other periodic payment of
principal, interest or amounts due thereunder.
Principal Balance. With respect to a Base Contract, and as of a date of
------------------
determination, the unpaid principal balance of such Base 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
Base Contract and (y) any related installment note which together constitute one
and the same Base Contract.
Project. Any vacation ownership resort and development which is owned
-------
and/or operated by FCI or any of its Subsidiaries and with respect to which Base
Contracts are originated or expected to be originated.
RCRA. See ss.7.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee or
------------
sublessee) by the Borrower or any of its Subsidiaries.
Receivables Purchase Agreements. Collectively, the Receivables Purchase
---------------------------------
Agreement, dated as of January 15, 1998, among FRC, FAC, FCI, FMB and the VB
Originating Subsidiaries, the Amended and Restated Receivables Purchase
Agreement, dated as of July 31, 1996, among FCC, FAC, FCI and FMB, and the
Receivables Purchase Agreement, dated as of September 28, 1993, among FFC, FAC,
FCI and FMB.
Record. The grid attached to a Note, or the continuation of such grid, or
------
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Bank. BKB.
--------------
<PAGE>
Register. See ss.19.3.
--------
Reimbursement Obligation. The Borrower's obligation to reimburse the Agent
------------------------
and the Banks on account of any drawing under any Letter of Credit as provided
in ss.4.2.
Request Date. See ss.3.4.
------------
Revolving Credit Loan Maturity Date. January 31, 2001.
-----------------------------------
Revolving Credit Loans. Revolving credit loans made or to be made by the
-----------------------
Banks to the Borrower pursuant to ss.2.
Revolving Credit Note Record. A Record with respect to a Revolving Credit
-----------------------------
Note.
Revolving Credit Notes. See ss.2.3.
----------------------
SARA. See ss.7.18(a).
----
Section 20 Subsidiary. A Subsidiary of the bank holding company controlling
---------------------
any Bank, which Subsidiary has been granted authority by the Federal Reserve
Board to underwrite and deal in certain Ineligible Securities.
Securitization. Any transaction in which one or more pools of Base
--------------
Contracts and related assets are sold to a single-purpose bankruptcy-remote
entity and then pledged to secure the equity raised or debt incurred by such
entity to purchase such Base Contracts, which equity or underlying debt is
marketed (either publicly or privately) to third party investors.
Security Agreements. The several Security Agreements, dated or to be dated
-------------------
on or prior to the Closing Date, between the Borrower and the Subsidiary
Guarantors and the Collateral Agent and in form and substance satisfactory to
the Banks and the Agent.
Security Documents. The Guaranty, the Security Agreements, the Mortgages,
------------------
if applicable, and all other agreements, instruments and documents now or
hereafter securing the Obligations, including, without limitation, Uniform
Commercial Code financing statements required to be executed or delivered
pursuant to any Security Document.
Settlement. The making or receiving of payments, in immediately available
----------
funds, by the Banks, to the extent necessary to cause each Bank's actual share
of the outstanding amount of Revolving Credit Loans
<PAGE>
(after giving effect to any Loan Request) to be equal to such Bank's Commitment
Percentage of the outstanding amount of such Revolving Credit Loans (after
giving effect to any Loan Request), in any case where, prior to such event or
action, the actual share is not so equal. Settlement Amount. See ss.2.9.1.
Settlement Date. (a) The Drawdown Date relating to any Loan Request, (b)
----------------
Friday of each week, or if a Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Agent, on any
Business Day following a day on which the account officers of the Agent active
upon the Borrower's account become aware of the existence of an Event of
Default, (d) any Business Day on which the amount of Revolving Credit Loans
outstanding from BKB plus BKB's Commitment Percentage of the sum of the Maximum
Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater
than BKB's Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Revolving Credit
Loans outstanding increases or decreases by more than $500,000 as compared to
the previous Settlement Date, (f) any day on which any conversion of a Base Rate
Loan to a Eurodollar Rate Loan occurs, or (g) any Business Day on which (i) the
amount of outstanding Revolving Credit Loans decreases and (ii) the amount of
the Agent's Revolving Credit Loans outstanding equals zero Dollars ($0).
Settling Bank. See ss.2.9.1.
-------------
Startup Project. Any vacation ownership resort and development acquired,
---------------
developed, owned and operated by FCI or any of its Subsidiary Guarantors which
is not located in an Existing Resort City and which has never generated positive
net income for each of four (4) consecutive months.
Subordinated Debt. Unsecured Indebtedness of the Borrower or any of its
------------------
Subsidiaries which may be outstanding from time to time with the express written
consent of the Banks, that is expressly subordinated and made junior to the
payment and performance in full of the Obligations, and evidenced as such by a
written instrument containing subordination provisions in form and substance
approved by the Banks in writing (it being understood that the Banks shall have
no obligation to consent to the incurrence of any such Subordinated Debt, and
may refuse to consent for any reason or no reason).
Subsidiary. Any corporation, association, trust, partnership or other
----------
business entity of which the designated parent shall at any time
<PAGE>
own directly or indirectly through a Subsidiary or Subsidiaries at least a
majority (by number of votes) of the outstanding Voting Stock, including,
without limitation, the Partnership Subsidiaries with respect to the Borrower.
Subsidiary Guarantors. Each of FMB, FAC, Vacation Break, the VB Originating
---------------------
Subsidiaries, and any other Subsidiary of FCI which becomes a part to the
Guaranty after the Closing Date.
Timeshare Contract. Any installment contract or contract for deed, or
-------------------
contracts or notes secured by a mortgage, deed of trust, vendor's lien or
retention of title entered into with a purchaser or lessee of one or more VOIs.
Title Clearing Agreements. (a) The Seventh Amended and Restated Title
---------------------------
Clearing Agreement (Lawyers), dated as of January 15, 1998, as further amended
from time to time, among FCI, FAC, Lawyers Title Insurance Corporation, Capital
Markets Assurance Corporation, First Commercial Trust Company, N.A., the
Collateral Agent, BKB, the Agent and the FAC Agent; (b) the Fourth Amended and
Restated Supplementary Trust Agreement (Arizona), dated as of January 15, 1998,
as further amended from time to time, among FCI, FAC, First American Title
Insurance Company, First Commercial Trust Company, N.A., Capital Markets
Assurance Corporation, the Collateral Agent, BKB, the Agent and the FAC Agent,;
(c) the Fifth Amended and Restated Title Clearing Agreement (Colorado), dated as
of January 15, 1998, as further amended from time to time, among FCI, FAC,
Capital Markets Assurance Corporation, Colorado Land Title Company, First
Commercial Trust Company, N.A., the Collateral Agent, BKB, the Agent and the FAC
Agent; (d) the Westwinds Fourth Amended and Restated Title Clearing Agreement,
dated as of January 15, 1998, as further amended from time to time, among FCI,
FMB, FAC, Lawyers Title Insurance Corporation, Capital Markets Assurance
Corporation, First Commercial Trust Company, N.A., Resort Funding, Inc., the
Collateral Agent, BKB, the Agent and the FAC Agent; (e) the Second Amended and
Restated Nashville Title Clearing Agreement, dated as of January 15, 1998, as
further amended from time to time, among FAC, FCI, Lawyers Title Insurance
Corporation, Capital Markets Assurance Corporation, the Collateral Agent, BKB,
the Agent and the FAC Agent; (f) the Second Amended and Restated Seawatch
Plantation Title Clearing Agreement dated as of January 15, 1998, as further
amended from time to time, among FCI, FAC, FMB, Lawyers Title Insurance
Corporation, Capital Markets Assurance Corporation, the Collateral Agent, BKB,
the Agent and the FAC Agent and (g) any similar agreement governing the
<PAGE>
obligations of any new or successor nominee holding title to any VOIs or Lots at
Projects.
Total Commitment. The sum of the Commitments of the Banks, as in effect
-----------------
from time to time.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan, or a
----
Eurodollar Rate Loan.
UDI. A VOI consisting of either (a) an undivided interest in fee simple (as
---
tenants in common with all other undivided interest owners) in a lodging unit or
group of lodging units at a Project, or (b) an undivided leasehold interest (as
tenants in common with all other undivided interest owners) in any lodging unit
located at the Harbortown Marina Resort Hotel Project in Ventura County,
California or Pagosa Mountain Meadows VOI Regime at the Pagosa Project in
Archuleta County, Colorado.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
---------------
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the
-------------------------------
Borrower does not reimburse the Agent and the Banks on the date specified in,
and in accordance with, ss.4.2.
Vacation Break. Vacation Break USA, Inc., a Florida corporation and a
---------------
wholly-owned subsidiary of the Borrower.
VB Originating Subsidiaries. Collectively, Sea Gardens Beach and Tennis
-----------------------------
Resort, Inc., a Florida corporation, Vacation Break Resorts, Inc., a Florida
corporation, Vacation Break Resorts at Star Island, Inc., a Florida corporation,
Palm Vacation Group, a Florida general partnership, and Ocean Ranch Vacation
Group, a Florida general partnership.
Vacation Club Agreement. The Membership Agreement for Fairfield
---------------------------
Destinations Vacation Club entered into by FCI, Fairfield Destinations Vacation
Club, Inc., FairShare Vacation Owners Association, as trustee of Fairshare
Vacation Plan Use Management Trust and each person that subsequently purchases a
membership in Fairfield's Destination Vacation Club.
Vacation Club Membership. A Membership, as defined in the Vacation Club
-------------------------
Agreement.
<PAGE>
Ventura Contracts. Timeshare Contracts with respect to the development in
-----------------
Ventura County, California known as the "Harbortown Marina Resort Hotel".
VOI. The underlying ownership interest which is the subject of a Timeshare
---
Contract, which ownership interest shall consist of either (i) a fixed week or
undivided fee simple interest (or, in the case of Ventura Contracts or those
Timeshare Contracts for the Pagosa Mountain Meadows timeshare regime at
Fairfield Pagosa, undivided leasehold interest in real property) for a period of
time each year (whether pursuant to the Fair Share Plus Program or otherwise) in
a lodging unit or group of lodging units located at a vacation resort or
development owned and/or operated by the Borrower or any of its Subsidiaries, or
(ii) a Vacation Club Membership.
VOI Regime. Any of the various interval ownership regimes located at
-----------
Projects, each of which is an arrangement, established under applicable state
law, whereby all or a designated portion of a Project is made subject to a
declaration permitting the transfer of VOIs therein, which VOIs shall in each
case constitute real property under the applicable local law of each of the
jurisdictions in which such regime is located.
Voting Stock. Stock or similar interests, of any class or classes (however
------------
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
<PAGE>
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts, have the meanings
assigned to them therein, with the term "instrument" being that defined
under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "ss." refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and "until" each mean "to
but excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are, however,
cumulative and are to be performed in accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others,
the Agent and the Borrower and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the
other Loan Documents are not intended to be construed against the Agent or
any of the Banks merely on account of the Agent's or any Bank's involvement
in the preparation of such documents.
<PAGE>
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Revolving Credit Loan Maturity Date
upon notice by the Borrower to the Agent given in accordance with ss.2.5, such
sums as are requested by the Borrower up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided
that the sum of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) plus the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations shall not at any time exceed the lesser of (i)
the Total Commitment and (ii) the Borrowing Base. The Revolving Credit Loans
shall be made pro rata in accordance with each Bank's Commitment Percentage.
Each request for a Revolving Credit Loan hereunder shall constitute a
representation and warranty by the Borrower that the conditions set forth in
ss.11 and ss.12, in the case of the initial Revolving Credit Loans to be made on
the Closing Date, and ss.12, in the case of all other Revolving Credit Loans,
have been satisfied on the date of such request.
2.2. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at any
-----------------------------
time and from time to time upon five (5) Business Days prior written notice to
the Agent to reduce by $1,000,000 or an integral multiple thereof or terminate
entirely the Total Commitment, whereupon the Commitments of the Banks shall be
reduced pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated. Promptly
after receiving any notice of the Borrower delivered pursuant to this ss.2.2,
the Agent will notify the Banks of the substance thereof. No reduction or
termination of the Commitments may be reinstated.
2.3. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
-----------------------------
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit B hereto (each a "Revolving Credit Note"), dated as of the Closing
------- -
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about
<PAGE>
the time of the Drawdown Date of any Revolving Credit Loan or at the time of
receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall be prima facie evidence of the
----- -----
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Revolving
Credit Note Record shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.4. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in
------------------------------------
ss.5.10,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate of one-quarter
of one percent (1/4%) per annum below the Base Rate.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate of two and
one-half percent (2 1/2%) per annum above the Eurodollar Rate
determined for such Interest Period.
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
2.5. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to the
------------------------------------
Agent written notice in the form of Exhibit C hereto (or telephonic notice
confirmed in a writing in the form of Exhibit C hereto) of each Revolving Credit
Loan requested hereunder (a "Loan Request") prior to (i) 1:00 p.m. (Boston,
Massachusetts time) on the proposed Drawdown Date of any Base Rate Loan and (ii)
no less than four (4) Eurodollar Business Days prior to the proposed Drawdown
Date of any Eurodollar Rate Loan. Each such notice shall specify (A) the
principal amount of the Revolving Credit Loan requested, (B) the proposed
Drawdown Date of such Revolving Credit Loan, (C) the Interest Period for such
Revolving Credit Loan and (D) the Type of such Revolving Credit Loan. Promptly
upon receipt of any such notice, the Agent shall notify each of the Banks
thereof. Each Loan Request shall be irrevocable and binding on the Borrower and
shall obligate the Borrower to accept the Revolving Credit
<PAGE>
Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request
shall be accompanied by a notice setting forth the borrowing availability of the
Borrower taking into account the most recent Borrowing Base Report delivered to
the Agent pursuant to ss.8.4(f) hereof and reflecting (i) usage of the credit
facilities hereunder since the date of such Borrowing Base Report and (ii)
drawdown and repayments of the Revolving Credit Loans. Each Loan Request for a
Eurodollar Rate Loan shall be in a minimum aggregate amount of $1,000,000 or an
integral multiple thereof.
2.6. CONVERSION OPTIONS.
------------------
2.6.1. CONVERSION TO DIFFERENT TYPE OF REVOLING CREDIT LOAN. The Borrower
-----------------------------------------------------
may elect from time to time to convert any outstanding Revolving Credit Loan to
a Revolving Credit Loan of another Type, provided that (i) with respect to any
such conversion of a Revolving Credit Loan to a Base Rate Loan, the Borrower
shall give the Agent at least three (3) Business Days prior written notice of
such election; (ii) with respect to any such conversion of a Base Rate Loan to a
Eurodollar Rate Loan, the Borrower shall give the Agent at least four (4)
Eurodollar Business Days prior written notice of such election; (iii) with
respect to any such conversion of a Eurodollar Rate Loan into a Base Rate Loan,
such conversion shall only be made on the last day of the Interest Period with
respect thereto and (iv) no Loan may be converted into a Eurodollar Rate Loan
when any Default or Event of Default has occurred and is continuing. On the date
on which such conversion is being made each Bank shall take such action as is
necessary to transfer its Commitment Percentage of such Revolving Credit Loans
to its Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Revolving Credit Loans of any Type may be
converted into a Revolving Credit Loan of another Type as provided herein,
provided that any partial conversion shall be in an aggregate principal amount
of $1,000,000 or a whole multiple thereof. Each Conversion Request relating to
the conversion of a Revolving Credit Loan to a Eurodollar Rate Loan shall be
irrevocable by the Borrower.
2.6.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving Credit
---------------------------------------------
Loan of any Type may be continued as a Revolving Credit Loan of the same Type
upon the expiration of an Interest Period with respect thereto by compliance by
the Borrower with the notice provisions contained inss.2.6.1; provided that no
--------
Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
<PAGE>
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto ending during the continuance of any Default or Event of
Default of which officers of the Agent active upon the Borrower's account have
actual knowledge. In the event that the Borrower fails to provide any such
notice with respect to the continuation of any Eurodollar Rate Loan as such,
then such Eurodollar Rate Loan shall be automatically converted to a Base Rate
Loan on the last day of the first Interest Period relating thereto. The Agent
shall notify the Banks promptly when any such automatic conversion contemplated
by this ss.2.6 is scheduled to occur.
2.6.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar Rate
----------------------
Loans shall be in such amounts and be made pursuant to such elections so that,
after giving effect thereto, the aggregate principal amount of all Eurodollar
Rate Loans having the same Interest Period shall not be less than $1,000,000 or
a whole multiple of $1,000,000 in excess thereof. The Borrower may not request
or elect a Eurodollar Rate Loan pursuant toss.2.5, elect to convert a Base Rate
Loan to a Eurodollar Rate Loan pursuant toss.2.6.1, or elect to continue a
Eurodollar Rate Loan pursuant toss.2.6.2 if, after giving effect thereto, there
would be greater than four (4) Eurodollar Rate Loans then outstanding. Any Loan
Request for a Eurodollar Rate Loan that would create greater than four (4)
Eurodollar Rate Loans outstanding shall be deemed to be a Loan Request for a
Base Rate Loan.
2.7. FUNDS FOR REVOLVING CREDIT LOAN. Funds for Revolving Credit Loan.
-------------------------------
2.7.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston time) on the
-------------------
proposed Drawdown Date of any Revolving Credit Loans, each of the Banks will
make available to the Agent, at the Agent's Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the amount
of the requested Revolving Credit Loans. Upon receipt from each Bank of such
amount, and upon receipt of the documents required byss.ss.11 and 12 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate amount
of such Revolving Credit Loans made available to the Agent by the Banks. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any Drawdown Date the amount of its Commitment Percentage of
the requested Revolving Credit Loans shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent the amount of such
other Bank's
<PAGE>
Commitment Percentage of any requested Revolving Credit Loans. The Agent may
also, without conferring with the Banks, make Revolving Credit Loans which are
Base Rate Loans in the amount requested on such Drawdown Date not later than
3:00 p.m. (Boston time) by depositing such amount into the Borrower's account
with the Agent.
2.7.2. ADVANCES BY AGENT. The Agent may, unless notified to the contrary by
-----------------
any Bank prior to a Drawdown Date, assume that such Bank has made available to
the Agent on such Drawdown Date the amount of such Bank's Commitment Percentage
of the Revolving Credit Loans to be made on such Drawdown Date, and the Agent
may (but it shall not be required to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If any Bank makes available to
the Agent such amount on a date after such Drawdown Date, such Bank shall pay to
the Agent on demand an amount equal to the product of (i) the average computed
for the period referred to in clause (iii) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (ii) the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans, times (iii) a fraction,
the numerator of which is the number of days that elapse from and including such
Drawdown Date to the date on which the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans shall become immediately available to
the Agent, and the denominator of which is 365. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Agent by such
Bank. If the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans is not made available to the Agent by such Bank within three (3)
Business Days following such Drawdown Date, the Agent shall be entitled to
recover such amount from the Borrower on demand, with interest thereon at the
rate per annum applicable to the Revolving Credit Loans made on such Drawdown
Date.
2.8. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
-------------------------
monthly (or at such other interval as may be specified pursuant to ss.8.4(f)) by
the Agent by reference to the Borrowing Base Report, commercial finance and
collateral audit reports, and other information obtained by or provided to the
Agent. The Agent shall give to the Borrower written notice of any change in the
Borrowing Base determined by the Agent.
<PAGE>
2.9. SETTLEMENTS.
-----------
2.9.1. GENERAL. On each Settlement Date, the Agent shall, not later
-------
than 11:00 a.m. (Boston time), give telephonic or facsimile notice (i) to
the Banks and the Borrower of the respective outstanding amount of
Revolving Credit Loans made by the Agent on behalf of the Banks from the
immediately preceding Settlement Date through the close of business on the
prior day and the amount of any Eurodollar Rate Loans to be made (following
the giving of notice pursuant toss.2.5) on such date pursuant to a Loan
Request and (ii) to the Banks of the amount (a "Settlement Amount") that
each Bank (a "Settling Bank") shall pay to effect a Settlement of any
Revolving Credit Loan. A statement of the Agent submitted to the Banks and
the Borrower or to the Banks with respect to any amounts owing under this
ss.2.9 shall be prima facie evidence of the amount due and owing. Each
----- -----
Settling Bank shall, not later than 3:00 p.m. (Boston time) on such
Settlement Date, effect a wire transfer of immediately available funds to
the Agent in the amount of the Settlement Amount for such Settling Bank.
All funds advanced by any Bank as a Settling Bank pursuant to this ss.2.9
shall for all purposes be treated as a Revolving Credit Loan made by such
Settling Bank to the Borrower and all funds received by any Bank pursuant
to this ss.2.9 shall for all purposes be treated as repayment of amounts
owed with respect to Revolving Credit Loans made by such Bank. In the event
that any bankruptcy, reorganization, liquidation, receivership or similar
cases or proceedings in which the Borrower is a debtor prevent a Settling
Bank from making any Revolving Credit Loan to effect a Settlement as
contemplated hereby, such Settling Bank will make such dispositions and
arrangements with the other Banks with respect to such Revolving Credit
Loans, either by way of purchase of participations, distribution, pro tanto
--- -----
assignment of claims, subrogation or otherwise as shall result in each
Bank's share of the outstanding Revolving Credit Loans being equal, as
nearly as may be, to such Bank's Commitment Percentage of the outstanding
amount of the Revolving Credit Loans.
2.9.2. FAILURE TO MAKE FUNDS AVAILABLE. The Agent may, unless notified
-------------------------------
to the contrary by any Settling Bank prior to a Settlement Date, assume
that such Settling Bank has made or will make available to the Agent on
such Settlement Date the amount of such Settling Bank's Settlement Amount,
and the Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Borrower a corresponding amount. If any
Settling Bank makes available to the Agent such amount on a date after
<PAGE>
such Settlement Date, such Settling Bank shall pay to the Agent on demand
an amount equal to the product of (i) the average computed for the period
referred to in clause (iii) below, of the weighted average interest rate
paid by the Agent for federal funds acquired by the Agent during each day
included in such period, times (ii) the amount of such Settlement Amount,
times (iii) a fraction, the numerator of which is the number of days that
elapse from and including such Settlement Date to the date on which the
amount of such Settlement Amount shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the Agent
submitted to such Settling Bank with respect to any amounts owing under
thisss.2.9.2 shall be prima facie evidence of the amount due and owing to
the Agent by such Settling Bank. If such Settling Bank's Settlement Amount
is not made available to the Agent by such Settling Bank within three (3)
Business Days following such Settlement Date, the Agent shall be entitled
to recover such amount from the Borrower on demand, with interest thereon
at the rate per annum applicable to the Revolving Credit Loans as of such
Settlement Date.
2.9.3. NO EFFECT ON OTHER BANKS. The failure or refusal of any
--------------------------
Settling Bank to make available to the Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Bank's Settlement
Amount shall not (i) relieve any other Settling Bank from its several
obligations hereunder to make available to the Agent the amount of such
other Settling Bank's Settlement Amount or (ii) impose upon any Bank, other
than the Settling Bank so failing or refusing, any liability with respect
to such failure or refusal or otherwise increase the Commitment of such
other Bank.
2.10. REPAYMENTS OF REVOLVING CREDIT LOANS PRIOR TO EVENT OF DEFAULT.
2.10.1. CREDIT FOR FUNDS RECEIVED IN CONCENTRATION ACCOUNT. Prior to
---------------------------------------------------
the occurrence of an Event of Default as to which the account officers of
the Agent active upon the Borrower's account have actual knowledge, (i) all
funds and cash proceeds in the form of money, checks and like items
received in the BKB Concentration Account as contemplated by ss.8.14 shall
be credited, on the same Business Day on which the Agent determines that
good collected funds have been received, and, prior to the receipt of good
collected funds, on a provisional basis until final receipt of good
collected funds, and applied as contemplated by ss.2.10.2, (ii) all funds
and cash proceeds in the form of a wire transfer received in the BKB
Concentration Account as contemplated by ss.8.14 shall be
<PAGE>
credited on the same Business Day as the Agent's receipt of such amounts
(or up to such later date as the Agent determines that good collected funds
have been received), and applied as contemplated by ss.2.10.2, and (iii)
all funds and cash proceeds in the form of an automated clearing house
transfer received in the BKB Concentration Account as contemplated by
ss.8.14 shall be credited, on the next Business Day following the Agent's
receipt of such amounts (or up to such later date as the Agent determines
that good collected funds have been received), and applied as contemplated
by ss.2.10.2. For purposes of the foregoing provisions of this ss.2.10.1,
the Agent shall not be deemed to have received any such funds or cash
proceeds on any day unless received by the Agent before 2:30 p.m. (Boston
time) on such day. The Borrower further acknowledges and agrees that any
such provisional credits or credits in respect of wire or automatic
clearing house funds transfers shall be subject to reversal if final
collection in good funds of the related item is not received by, or final
settlement of the funds transfer is not made in favor of, the Agent in
accordance with the Agent's customary procedures and practices for
collecting provisional items or receiving settlement of funds transfers.
2.10.2. APPLICATION OF PAYMENTS PRIOR TO EVENT OF DEFAULT.
(a) Prior to the occurrence of an Event of Default of which
the account officers of the Agent active on the Borrower's
account have knowledge, all funds transferred to the BKB
Concentration Account and for which the Borrower has received
credits shall be applied to the Obligations as follows:
(i) first, to pay amounts then due and payable under
this Agreement, the Notes and the other Loan Documents,
including any mandatory repayment of the Revolving Credit
Loans under ss.3.2;
(ii) second, if and to the extent requested by the
Borrower pursuant to and in accordance with the provisions
of ss.3.3, to the optional repayment of the Revolving Credit
Loans; and
(iii) third, except as otherwise required by ss.4.2(b)
and (c), to the Operating Account.
<PAGE>
(b) All repayments of the Revolving Credit Loans
pursuant to this ss.2.10.2 shall be allocated among the
Banks making such Revolving Credit Loans, in proportion, as
nearly as practicable, to the respective unpaid principal
amount of such Revolving Credit Loans outstanding, with
adjustments to the extent practicable to equalize any prior
payments or repayments not exactly in proportion. Prior to
any Settlement Date, however, all repayments of the
Revolving Credit Loans shall be applied in accordance with
this ss.2.10.2, first to outstanding Revolving Credit Loans
of the Agent.
2.11. REPAYMENTS OF REVOLVING CREDIT LOANS AFTER EVENT OF DEFAULT.
-------------------------------------------------------------------
Following the occurrence and during the continuance of an Event of Default of
which the account officers of the Agent active on the Borrower's account have
knowledge, the Agent in its sole and absolute discretion, may apply all funds
transferred to the BKB Concentration Account and for which the Borrower has
received credits to the Obligations in accordance with ss.13.4.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the sum
----------------------------------------------
of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (i) the
Total Commitment and (ii) the Borrowing Base, then the Borrower shall
immediately pay the amount of such excess to the Agent for the respective
accounts of the Banks for application: first, to any Unpaid Reimbursement
Obligations; second, to the Revolving Credit Loans; and third, to provide to the
Agent cash collateral for Reimbursement Obligations as contemplated by ss.4.2(b)
and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of
Revolving Credit Loans shall be allocated among the Banks, in proportion, as
nearly as practicable, to each Reimbursement Obligation or (as the case may be)
the respective unpaid principal amount of each Bank's Revolving Credit Note,
with adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion.
<PAGE>
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall have
---------------------------------------------
the right, at its election, to repay the outstanding amount of the Revolving
Credit Loans, as a whole or in part, at any time without penalty or premium,
provided that any full or partial prepayment of the outstanding amount of any
- --------
Eurodollar Rate Loans pursuant to this ss.3.3 may be made only on the last day
of the Interest Period relating thereto. The Borrower shall give the Agent, no
later than 12:00 noon, Boston time, at least one (1) Business Day prior written
notice of any proposed prepayment pursuant to this ss.3.3 of Base Rate Loans,
and four (4) Eurodollar Business Days notice of any proposed prepayment pursuant
to this ss.3.3 of Eurodollar Rate Loans, in each case specifying the proposed
date of prepayment of Revolving Credit Loans and the principal amount to be
prepaid. Each such partial prepayment of the Revolving Credit Loans shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment, shall be applied, in the absence of instruction by the
Borrower, first to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans, at the Agent's option, and shall be in an integral
multiple of $500,000 in the case of a partial prepayment of Eurodollar Rate
Loans. Each partial prepayment shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Bank's Revolving Credit Note, with adjustments to the extent practicable
to equalize any prior repayments not exactly in proportion.
4. LETTERS OF CREDIT.
-----------------
4.1. LETTER OF CREDIT COMMITMENTS.
----------------------------
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
-------------------------------------
conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance upon
the agreement of the Banks set forth inss.4.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the
Borrower and agreed to by the Agent; provided, however, that, after giving
-------- -------
effect to such request, (a) the sum of the aggregate Maximum Drawing Amount
and all Unpaid Reimbursement Obligations shall not exceed $10,000,000 at
any one time and (b) the sum of (i) the Maximum Drawing Amount, (ii) all
Unpaid Reimbursement Obligations, and (iii) the amount of all Revolving
Credit Loans outstanding shall not
<PAGE>
exceed the lesser of (A) the Total Commitment and (B) the Borrowing Base.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
---------------------------------
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
----------------------------
extended or renewed hereunder shall, among other things, (i) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (ii) have an expiry date no later than the date
which is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or otherwise provides for one or more nominated persons,
forty-five (45) days) prior to the Revolving Credit Loan Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject to
the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees
----------------------------------
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Commitment Percentage, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the Borrower
pursuant to ss.4.2 (such agreement for a Bank being called herein the
"Letter of Credit Participation" of such Bank).
4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank shall
-----------------------
be treated as the purchase by such Bank of a participating interest in the
Borrower's Reimbursement Obligation under ss.4.2 in an amount equal to such
payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to ss.4.2.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the Agent
----------------------------------------
to issue, extend and renew each Letter of Credit and the Banks to participate
therein, the Borrower hereby agrees to reimburse or pay to the Agent, for the
account of the Agent or (as the case may be) the Banks, with respect to each
Letter of Credit issued, extended or renewed by the Agent hereunder,
<PAGE>
(a) except as otherwise expressly provided in ss.4.2(b) and (c),
on each date that any draft presented under such Letter of Credit is
honored by the Agent, or the Agent otherwise makes a payment with
respect thereto, (i) the amount paid by the Agent under or with
respect to such Letter of Credit, and (ii) the amount of any taxes,
fees, charges or other costs and expenses whatsoever incurred by the
Agent or any Bank in connection with any payment made by the Agent or
any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by the
Agent for the benefit of the Banks and the Agent as cash collateral
for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with ss.13, an amount equal to the
then Maximum Drawing Amount on all Letters of Credit, which amount
shall be held by the Agent for the benefit of the Banks and the Agent
as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this ss.4.2 at any time from the date such amounts become due
and payable (whether as stated in this ss.4.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in ss.5.10 for overdue principal on the
Revolving Credit Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
--------------------------
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
ss.4.2 on or before the date that such draft is paid or other payment is made by
the Agent, the Agent may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for
<PAGE>
federal funds acquired by the Agent during each day included in such period,
times (ii) the amount equal to such Bank's Commitment Percentage of such Unpaid
- -----
Reimbursement Obligation, times (iii) a fraction, the numerator of which is the
-----
number of days that elapse from and including the date the Agent paid the draft
presented for honor or otherwise made payment to the date on which such Bank's
Commitment Percentage of such Unpaid Reimbursement obligation shall become
immediately available to the Agent, and the denominator of which is 360. The
responsibility of the Agent to the Borrower and the Banks shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.
4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this ss.4 shall
--------------------
be absolute and unconditional under any and all circumstances and irrespective
of the occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the Borrower
may have or have had against the Agent, any Bank or any beneficiary of a Letter
of Credit. The Borrower further agrees with the Agent and the Banks that the
Agent and the Banks shall not be responsible for, and the Borrower's
Reimbursement Obligations under ss.4.2 shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or other party
to which any Letter of Credit may be transferred or any claims or defenses
whatsoever of the Borrower against the beneficiary of any Letter of Credit or
any such transferee. The Agent and the Banks shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit.
The Borrower agrees that any action taken or omitted by the Agent or any Bank
under or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith, shall be binding upon the Borrower and shall
not result in any liability on the part of the Agent or any Bank to the
Borrower.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with ss.4.4, the
------------------
Agent shall be entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document 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, independent accountants and other
experts selected by the Agent. The
<PAGE>
Agent shall not be required to take any discretionary action under this Credit
Agreement (and shall be fully protected in acting or refraining from acting)
unless it shall first have received such advice or concurrence of the Majority
Banks as it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action; provided that nothing in this ss.4.5 shall require the Agent to obtain
the consent of the Majority Banks before taking any action with respect to a
Letter of Credit. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Credit Agreement in accordance with a
request of the Majority Banks, and such request and any action taken or failure
to act pursuant thereto shall be binding upon the Banks and all future holders
of the Revolving Credit Notes or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or
--------------------
any extension or renewal of any Letter of Credit pay a fee (in each case, a
"Letter of Credit Fee") to the Agent (i) in respect of each standby Letter of
Credit an amount equal to one and one-half percent (1 1/2%) per annum of the
face amount of such standby Letter of Credit, of which an amount equal to
one-fourth of one percent (1/4%) per annum of the face amount of such standby
Letter of Credit shall be for the account of the Agent, as a fronting fee, and
the balance of which Letter of Credit Fee shall be for the accounts of the Banks
in accordance with their respective Commitment Percentages. In respect of each
Letter of Credit, the Borrower shall also pay to the Agent for the Agent's own
account, at such other time or times as such charges are customarily made by the
Agent, the Agent's customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.
5. CERTAIN GENERAL PROVISIONS.
--------------------------
5.1. ADMINISTRATIVE FEE. The Borrower agrees to pay to the Agent an
-------------- ---
administrative fee (the "Administrative Fee") as set forth in that certain fee
letter agreement of even date herewith between the Agent and the Borrower.
5.2. FUNDS FOR PAYMENTS.
------------------
5.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
-------------------
Reimbursement Obligations, Administrative Fees, Letter of Credit Fees and
any other amounts due hereunder or under any of the other Loan Documents
shall be made to the Agent, for the respective accounts of the Banks and
the Agent, at the Agent's Head
<PAGE>
Office or at such other location in the Boston, Massachusetts, area that
the Agent may from time to time designate, in each case in immediately
available funds.
5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
---------------
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
5.3. COMPUTATIONS. All computations of interest on the Loans and Letter of
------------
Credit Fees shall be based on a 360-day year and paid for the actual number of
days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Revolving Credit Note
Records from time to time shall be considered correct and binding on the
Borrower unless within five (5) Business Days after receipt of any notice by the
Agent or any of the Banks of such outstanding amount, the Agent or such Bank
shall notify the Borrower to the contrary.
5.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that
<PAGE>
would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Agent shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower and the Banks) to the Borrower and the Banks. In such event (i) any
Loan Request or Conversion Request with respect to Eurodollar Rate Loans shall
be automatically withdrawn and shall be deemed a request for Base Rate Loans,
(ii) each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan, and (iii) the
obligations of the Banks to make Eurodollar Rate Loans shall be suspended until
the Agent determines that the circumstances giving rise to such suspension no
longer exist, whereupon the Agent shall so notify the Borrower and the Banks.
5.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this ss.5.5, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder.
5.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
---------------------
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with
<PAGE>
respect to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Bank's Commitment or the Loans (other than taxes based upon or
measured by the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any
class of loans, letters of credit or commitments of which any of the Loans
or such Bank's Commitment forms a part, and the result of any of the
foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit,
or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such
Bank or the Agent hereunder on account of such Bank's
Commitment, any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of
which payment or foregone interest or Reimbursement
Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by
such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or
<PAGE>
the Agent such additional amounts as will be sufficient to compensate such Bank
or the Agent for such additional cost, reduction, payment or foregone interest
or Reimbursement Obligation or other sum; provided, that with respect to
payments required pursuant to ss.5.6(c), the Borrower shall not be required to
pay such additional amounts if the Obligations are repaid in full within 180
days following such demand, and from and after such time, no Letters of Credit
are outstanding, the Banks have no further obligations to make Loans hereunder
and the Agent has no further obligations to issue, extend or renew any Letters
of Credit hereunder.
5.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
-----------------
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower and such Bank shall thereafter attempt to negotiate
in good faith, within thirty (30) days of the day on which the Borrower receives
such notice, an adjustment payable hereunder that will adequately compensate
such Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrower receives such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's reasonable determination, provide adequate compensation. Each
Bank shall allocate such cost increases among its customers in good faith and on
an equitable basis.
5.8. CERTIFICATE. A certificate setting forth any additional amounts
-----------
payable pursuant to ss.ss.5.6 or 5.7 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the
<PAGE>
Borrower, shall be conclusive, absent manifest error, that such amounts are due
and owing.
5.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold each
---------
Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (ii)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
relating thereto in accordance with ss.2.5 or ss.2.6 or (iii) the making of any
payment of a Eurodollar Rate Loan or the making of any conversion of any such
Loan to a Base Rate Loan on a day that is not the last day of the applicable
Interest Period with respect thereto, including interest or fees payable by such
Bank to lenders of funds obtained by it in order to maintain any such Loans.
5.10. INTEREST AFTER DEFAULT.
----------------------
5.10.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
----------------
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per annum
equal to four percent (4%) above the Base Rate until such amount shall be
paid in full (after as well as before judgment).
5.10.2. AMOUNTS NOT OVERDUE. During the continuance of a Default or an
-------------------
Event of Default the principal of the Revolving Credit Loans not overdue
shall, until such Default or Event of Default has been cured or remedied or
such Default or Event of Default has been waived by the Majority Banks
pursuant to ss.26, bear interest at a rate per annum equal to the greater
of (i) four percent (4%) above the rate of interest otherwise applicable to
such Revolving Credit Loans pursuant toss.2.5 and (ii) the rate of interest
applicable to overdue principal pursuant toss.5.10.1.
5.11.1. HLT CLASSIFICATION. If, after the date hereof, the Agent determines
------------------
or is advised by any Bank that such Bank has determined, or the Agent receives
notice from or is advised by any Bank that such Bank has received notice from
any governmental authority, central bank or comparable agency having
jurisdiction over such Bank, that any of the
<PAGE>
Commitments, Loans, Letters of Credit or Letter of Credit Participations are
classified as a "highly leveraged transaction" (an "HLT Classification")
pursuant to any existing regulations regarding "highly leveraged transactions"
or any modification, amendment or interpretation thereof, or the adoption of new
regulations regarding "highly leveraged transactions" after the date hereof by
any governmental authority, central bank or comparable agency, the Agent shall
promptly give notice of such HLT Classification to the Borrower and the Banks.
The Agent, the Banks and the Borrower shall thereupon commence negotiations in
good faith to agree on the extent to which fees, interest rates and/or margins
hereunder should be increased so as to reflect such HLT Classification. If the
Borrower and the Majority Banks agree on the amount of such increase or
increases, this Credit Agreement shall be promptly amended to give effect to
such increase or increases. If the Borrower and the Majority Banks fail to so
agree and the Borrower has failed to refinance the Obligations within ninety
(90) days after notice is given by the Agent as provided above, then the Agent
shall, if so requested by the Majority Banks, by notice to the Borrower
terminate the Commitments, and the Commitments shall thereupon terminate, with
the provisions of ss.ss.3.2 and 4.2(c) then becoming applicable. The Agent and
the Banks acknowledge that an HLT Classification is not a Default or an Event of
Default.
6. COLLATERAL SECURITY AND GUARANTIES.
----------------------------------
6.1. SECURITY OF BORROWER. The Obligations shall be secured by a perfected
--------------------
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the property, rights and interests of
the Borrower, whether now owned or hereafter acquired, described in the Security
Documents to which the Borrower is a party, including, without limitation, all
Base Contracts.
6.2. GUARANTIES AND SECURITY OF SUBSIDIARY GUARANTORS. The Obligations
--------------------------------------------------
shall also be guaranteed pursuant to the terms of the Guaranty. The obligations
of the Subsidiary Guarantors under the Guaranty shall be in turn secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the property, rights and
interests of each such Subsidiary Guarantor, whether now owned or hereafter
acquired, described of the Security Documents to which such Subsidiary Guarantor
is a party, including, without limitation, all Base Contracts. Promptly and in
any event within thirty (30) days after the Borrower or any of its Subsidiaries
acquires the capital stock of, or creates, any new Subsidiary which has
originated or is expected to originate Base Contracts, or the Borrower
determines that any Subsidiary of the Borrower who is not a Subsidiary Guarantor
hereunder will acquire or originate Base Contracts
<PAGE>
in the future, the Borrower will cause such new originating Subsidiary to become
a party to the Guaranty, as a guarantor thereunder, and to grant to the
Collateral Agent, for the benefit of the Banks and the Agent, a perfected first
priority security interest (subject only to Permitted Liens entitled to priority
under applicable law) in the Collateral, including, without limitation, all Base
Contracts, pursuant to a security agreement and Uniform Commercial Code
financing statements substantially the same as the Security Documents delivered
at the Closing.
The security interests in Collateral owned by FAC shall be released by the
Collateral Agent when the Collateral Agent releases security interests granted
in the same Collateral by FAC under the FAC Credit Agreement, except when such
release occurs by reason of the payment and satisfaction in full of FAC's
obligations under the FAC Credit Agreement and termination of the obligations of
BKB and other banks who are parties thereto to make any loans to FAC or to
issue, extend or renew any letters of credit for the account of FAC.
7. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agent as follows:
7.1. CORPORATE; PARTNERSHIP AUTHORITY.
--------------------------------
7.1.1. ORGANIZATION; GOOD STANDING. (a) Each of the Borrower and
----------------------------
its Subsidiaries (other than the Partnership Subsidiaries) and each
general partner of each Partnership Subsidiary (i) is a corporation
duly organized, validly existing and in good standing under the laws
of its state of incorporation, (ii) has all requisite corporate power
to own its property and conduct its business as now conducted and as
presently contemplated, and (iii) is in good standing as a foreign
corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so
qualified would not have a materially adverse effect on the business,
assets or financial condition of the Borrower, such Subsidiary or such
general partner.
(b) Each Partnership Subsidiary (i) is a general partnership duly
organized and validly existing under the laws of its state of
organization, (ii) has all requisite partnership power to own its
property and conduct its business as now conducted and as presently
contemplated, and (iii) is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a
failure to be so qualified would not have a material adverse
<PAGE>
effect on the business, assets or financial condition of such
Partnership Subsidiary.
7.1.2. AUTHORIZATION. The execution, delivery and performance of
-------------
this Credit Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the
corporate authority (and in the case of the Partnership Subsidiaries,
partnership authority) of such Person, (ii) have been duly authorized
by all necessary corporate proceedings (and, in the case of the
Partnership Subsidiaries, partnership proceedings), (iii) do not
conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which the Borrower or
any of its Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower or any of its
Subsidiaries, except where such conflict, breach or contravention
would not have a Material Adverse Effect, and (iv) do not conflict
with any provision of the corporate charter, bylaws or partnership
agreement, as the case may be, of, or any material agreement or other
instrument binding upon, the Borrower or any of its Subsidiaries.
7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Borrower or any of
its Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to
the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance
----------------------
by the Borrower and any of its Subsidiaries of this Credit Agreement and
the other Loan Documents to which the Borrower or any of its Subsidiaries
is or is to become a party and the transactions contemplated hereby and
thereby do not require the approval or consent of, or filing with, any
governmental agency or authority other than those already obtained, except
where the failure to obtain such consent or approval would not have a
Material Adverse Effect.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3
-------- ---
hereto, the Borrower and its Subsidiaries own all of the
<PAGE>
assets reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired since that date
(except property and assets sold or otherwise disposed of in the ordinary
course of business since that date), subject to no rights of others,
including any mortgages, leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens.
7.4. FINANCIAL STATEMENTS.
--------------------
7.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries has
-----------
a fiscal year which is the twelve months ending on December 31 of each
calendar year.
7.4.2. FINANCIAL STATEMENTS. There has been furnished to each of
--------------------
the Banks (i) a consolidated balance sheet of the Borrower and its
Subsidiaries (other than Vacation Break and its Subsidiaries) as at
December 31, 1996 and as at the Balance Sheet Date, (ii) consolidated
statements of income of the Borrower and its Subsidiaries (other than
Vacation Break and its Subsidiaries) for the fiscal periods then
ended, certified by Ernst & Young LLP in the case of the annual
financial statements, (iii) a consolidated balance sheet of Vacation
Break and its Subsidiaries as at December 31, 1996 and as at the
Balance Sheet Date, and (iv) consolidated statements of income of
Vacation Break and its Subsidiaries for the fiscal periods then ended,
certified by Coopers & Lybrand L.L.P in the case of the annual
financial statements. Such balance sheets and statements of income
have been prepared in accordance with generally accepted accounting
principles and fairly present the financial condition of the Borrower
as at the close of business on the date thereof and the results of
operations for the fiscal periods then ended. There are no contingent
liabilities of the Borrower or any of its Subsidiaries as of such
dates involving material amounts, known to the officers of the
Borrower, which were not disclosed in such balance sheet and the notes
related thereto or pursuant toss.7.7 hereof.
7.5. NO MATERIAL CHANGES, ETC. Except as disclosed on Schedule 7.5
--------------------------
hereto, since the Balance Sheet Date there has occurred no materially
adverse change in the financial condition or business of the Borrower and
its Subsidiaries taken as a whole as shown on or reflected in the
consolidated balance sheets of the Borrower and its Subsidiaries and
Vacation Break and its Subsidiaries as at the Balance Sheet Date, or the
consolidated statements of income for the fiscal period then ended, other
than changes in the ordinary course of business that have not had any
<PAGE>
Material Adverse Effect. Since the Balance Sheet Date, the Borrower has not
made any Distribution.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and
---------------------------------------
its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted
without known conflict with any rights of others.
7.7. LITIGATION. Except as otherwise disclosed on FCI's report on Form
----------
10-K for the year ended December 31, 1996 and Form 10-Q's for the quarters
ended March 31, 1997, June 30, 1997, and September 30, 1997 (collectively
the "Base Report"), which Base Report shall have been delivered to the
Agent prior to the Closing Date, or as otherwise set forth on Schedule 7.7,
------------
there are no actions, suits, proceedings or investigations of any kind
pending or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries 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
Loan Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Credit Agreement or any of the other Loan
Documents, (iii) seeking any determination or ruling that would adversely
affect the performance by the Borrower or any of its Subsidiaries of its
respective obligations under this Credit Agreement or any of the other Loan
Documents, (iv) seeking any determination or ruling that would adversely
affect the validity or enforceability of this Credit Agreement or any of
the other Loan Documents or any action taken or to be taken pursuant
thereto, or (v) seeking any determination or ruling that would, if
adversely determined, be reasonably likely to have a Material Adverse
Effect or result in any substantial liability not covered by insurance or
for which adequate reserves are not maintained on the consolidated balance
sheet of the Borrower and its Subsidiaries; provided, however, that in the
-------- -------
event the Agent shall receive a report dated subsequent to the date of the
Base Report, which report shall disclose the existence of, and accurately
describe, one or more proceedings or investigations which are not disclosed
in the Base Report, and the Agent shall not identify in writing to the
Borrower, within 90 days of the receipt of such report, one or more of the
proceedings or investigations described in such report as constituting a
proceeding or investigation of a type described in one or more of clauses
(i) through (v) above, the existence of each such proceeding or
investigation not so identified to the Borrower shall be deemed not to
constitute a breach of the representation and warranty of this ss. 7.7.
<PAGE>
7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor
---------------------------------------
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or
is expected in the future to have a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's
officers, to have any Material Adverse Effect.
7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the
-------------------------------------------------
Borrower nor any of its Subsidiaries is in violation of any provision of
its charter documents, bylaws, or any agreement or instrument to which it
may be subject or by which it or any of its properties may be bound or any
decree, order, judgment, statute, license, rule or regulation, in any of
the foregoing cases in a manner that could result in the imposition of
substantial penalties or have a Material Adverse Effect.
7.10. TAX STATUS. The Borrower and its Subsidiaries (i) have made or
----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject,
(ii) have paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and by appropriate proceedings
and (iii) have set aside on their books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. Except for taxes being
contested as provided in (ii) above, there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Borrower know of no basis for any
such claim.
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
-------------------
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
------------------------------------------------
Borrower nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company
Act of 1935; nor is it an "investment company", or an "affiliated company"
or a "principal underwriter" of an "investment company", as such terms are
defined in the Investment Company Act of 1940.
7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
--------------------------------------
Permitted Liens, there is no financing statement, security agreement,
chattel mortgage, real estate mortgage or other document filed
<PAGE>
or recorded with any filing records, registry or other public office, that
purports to cover, affect or give notice of any present or possible future
lien on, or security interest in, any assets or property of the Borrower or
any of its Subsidiaries or any rights relating thereto.
7.14. PERFECTION OF SECURITY INTEREST. All filings, assignments,
---------------------------------
pledges and deposits of documents or instruments have been made and all
other actions have been taken that are necessary or advisable, under
applicable law, to establish and perfect the Collateral Agent's security
interest in the Collateral. The Collateral and the Collateral Agent's
rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower or a Subsidiary
Guarantor party to one of the Security Agreements is the owner of the
Collateral free from any lien, security interest, encumbrance and any other
claim or demand, except for Permitted Liens.
7.15. CERTAIN TRANSACTIONS. Except for arm's length transactions
---------------------
pursuant to which the Borrower or any of its Subsidiaries makes payments in
the ordinary course of business upon terms no less favorable than the
Borrower or such Subsidiary could obtain from third parties, none of the
officers, directors, or employees of the Borrower or any of its
Subsidiaries is presently a party to any transaction with the Borrower or
any of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Borrower, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
7.16. EMPLOYEE BENEFIT PLANS.
----------------------
7.16.1. IN GENERAL. Each Employee Benefit Plan and each
-----------
Guaranteed Pension Plan has been maintained and operated in compliance
in all material respects with the provisions of ERISA and, to the
extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions and the
bonding of fiduciaries and other persons handling plan funds as
required byss.412 of ERISA. The Borrower has heretofore delivered to
the Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be
submitted underss.103(d) of ERISA, with respect to each Guaranteed
Pension Plan.
<PAGE>
7.16.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit Plan,
------------------------------
which is an employee welfare benefit plan within the meaning ofss.3(1)
orss.3(2)(B) of ERISA, provides benefit coverage subsequent to
termination of employment, except as required by Title I, Part 6 of
ERISA or the applicable state insurance laws. The Borrower may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion
of the Borrower without liability to any Person other than for claims
arising prior to termination.
7.16.3. GUARANTEED PENSION PLANS. Each contribution required to
------------------------
be made to a Guaranteed Pension Plan, whether required to be made to
avoid the incurrence of an accumulated funding deficiency, the notice
or lien provisions ofss.302(f) of ERISA, or otherwise, has been timely
made. No waiver of an accumulated funding deficiency or extension of
amortization periods has been received with respect to any Guaranteed
Pension Plan, and neither the Borrower nor any ERISA Affiliate is
obligated to or has posted security in connection with an amendment to
a Guaranteed Pension Plan pursuant toss.307 of ERISA or ss.401(a)(29)
of the Code. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any Guaranteed Pension
Plan and there has not been any ERISA Reportable Event (other than an
ERISA Reportable Event as to which the requirement of 30 days notice
has been waived), or any other event or condition which presents a
material risk of termination of any Guaranteed Pension Plan by the
PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed
for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning ofss.4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed
Pension Plans, disregarding for this purpose the benefit liabilities
and assets of any Guaranteed Pension Plan with assets in excess of
benefit liabilities.
7.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
--------------------
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan underss.4201 of ERISA
or as a result of a sale of assets described inss.4204 of ERISA.
Neither the Borrower nor any ERISA Affiliate has been notified that
any Multiemployer Plan is in reorganization or insolvent under and
within the meaning of ss.4241 or ss.4245 of ERISA
<PAGE>
or is at risk of entering reorganization or becoming insolvent, or
that any Multiemployer Plan intends to terminate or has been
terminated underss.4041A of ERISA.
7.17. USE OF PROCEEDS.
---------------
7.17.1. GENERAL. The proceeds of the Loans shall be used for
-------
working capital and general corporate purposes of the Borrower and its
Subsidiaries. The Borrower will obtain Letters of Credit solely for
general corporate purposes.
7.17.2. REGULATION U AND X. No portion of any Loan is to be used,
------------------
and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.17.3. INELIGIBLE SECURITIES. No portion of the proceeds of any
---------------------
Loans is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of (a) knowingly purchasing, or providing
credit support for the purchase of, Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20
Subsidiary makes a market in such Ineligible Securities, (b) knowingly
purchasing, or providing credit support for the purchase of, during
the underwriting or placement period, any Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (c)
making, or providing credit support for the making of, payments of
principal or interest on Ineligible Securities underwritten or
privately placed by a Section 20 Subsidiary and issued by or for the
benefit of the Borrower or any Subsidiary or other Affiliate of the
Borrower.
7.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all
-------------------------
necessary steps to investigate the past and present condition and usage of
the Real Estate and the operations conducted thereon and, based upon such
diligent investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of the
Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended
<PAGE>
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the
Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or
the environment (hereinafter "Environmental Laws"), which violation
would have a Material Adverse Effect;
(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. ss.6903(5), any hazardous substances as defined by 42 U.S.C.
ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C.
ss.9601(33) and any toxic substances, oil or hazardous materials or
other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") which any one of them has generated,
transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or
has ordered that any Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that it is or shall be a named party
to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on Schedule 7.18 attached hereto: (i) no
-------- ----
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate; (ii) in the course of any activities
conducted by the Borrower, its Subsidiaries or operators of its
properties, no Hazardous Substances have been generated or are being
used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past
or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would
have a material
<PAGE>
adverse effect on the value of any of the Real Estate or adjacent
properties or the environment; (iv) to the best of the Borrower's
knowledge, there have been no releases on, upon, from or into any real
property in the vicinity of any of the Real Estate which, through soil
or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only
by carriers having an identification number issued by the EPA, treated
or disposed of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of the
Borrower's knowledge, operating in compliance with such permits and
applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries or any of the Real
Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal
or remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of
an environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a
condition to the recording of any Mortgage or to the effectiveness of
any other transactions contemplated hereby.
7.19. SUBSIDIARIES, ETC. The Subsidiaries of the Borrower are listed
------------------
on Schedule 7.19. Each of the Subsidiaries of the Borrower listed on
-------- ----
Schedule 7.19 is, either directly or indirectly, a wholly-owned Subsidiary
-------- ----
of the Borrower. Except as set forth on Schedule 7.19 hereto, neither the
-------- ----
Borrower nor any Subsidiary of the Borrower is engaged in any joint venture
or partnership with any other Person.
7.20. BANK ACCOUNTS. Schedule 7.20 sets forth the account numbers and
------------- -------- ----
location of all Local Accounts, Interim Concentration Accounts and other
bank accounts of the Borrower or any of its Subsidiaries.
7.21. DISCLOSURE. None of this Credit Agreement or any of the other
----------
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact (known to the Borrower or any of its Subsidiaries in
the case of any document or information not furnished by it or any of its
Subsidiaries) necessary in order to make the statements herein or therein
not misleading. There is no fact known to the Borrower
<PAGE>
or any of its Subsidiaries which has a Material Adverse Effect, or which is
reasonably likely in the future to have a Material Adverse Effect,
exclusive of effects resulting from changes in general economic conditions,
legal standards or regulatory conditions.
7.22. FAIRSHARE PROGRAM.
-----------------
(a) On any date of determination, for each VOI Regime for which
the constituent VOIs are comprised primarily of UDIs, the ratio of (i)
the total number of Points actually allocated to a VOI Regime pursuant
to the Fair Share Plus Program at such time for the next succeeding
twelve month period, divided by (ii) the total number of Points which
----------
are allocable to available occupiable space in such VOI Regime over
such twelve month period does not exceed a ratio of 1.0 to 1.0.
(b) On any date of determination, for each owner of a UDI who is
a member of the FairShare Plus Program, the ratio of (i) the number of
Points allocated to such owner in a VOI Regime in return for assigning
his VOI to the FairShare Plus Program trust divided by (ii) the total
----------
number of Points assigned to all UDI owners in such VOI Regime does
not exceed the percentage of such owner's undivided interest in such
VOI Regime as described in such owner's Base Contract (and related
deed).
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Bank has any obligation to make any Loans or the Agent has any obligation
to issue, extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
-----------------
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Administrative Fee and all
other amounts provided for in this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is a party, all
in accordance with the terms of this Credit Agreement and such other Loan
Documents.
8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
----------------------
executive office at 11001 Executive Center Drive, Little Rock, Arkansas
72211, or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Agent, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents to which the Borrower is a party may be given or made.
<PAGE>
8.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each of
--------------------
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (ii) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (iii) at all times engage Ernst & Young
LLP or other independent certified public accountants satisfactory to the Agent
as the independent certified public accountants of the Borrower and its
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm's (or any successor firm's) engagement as the
independent certified public accountants of the Borrower and its Subsidiaries
and the appointment in such capacity of a successor firm as shall be
satisfactory to the Agent.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower will
--------------------------------------------------
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than one
hundred twenty (120) days after the end of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such year,
each setting forth in comparative form the figures for the previous fiscal
year and all such consolidated statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
certified without qualification by Ernst & Young LLP or by other
independent certified public accountants satisfactory to the Agent,
together with a written statement from such accountants to the effect (i)
that they have read a copy of this Credit Agreement, (ii) that, in making
the examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default under ss.ss.9 or 10 hereof,
or, if such accountants shall have obtained knowledge of any then existing
Default or Event of Default they shall disclose in such statement any such
Default or Event of Default and (iii) that, based upon certain agreed upon
procedures, they have reviewed the most recent Borrowing Base Report of the
Borrower and the calculations of the Borrowing Base made by the Borrower in
preparing such Borrowing Base Report and have determined that such
Borrowing Base Report and calculations are accurate in all material
respects, or if such accountants have obtained knowledge of any inaccuracy,
they shall disclose in such statement any such inaccuracy; provided that
--------
<PAGE>
such accountants shall not be liable to the Banks for failure to obtain
knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than sixty (60)
days after the end of each fiscal quarter (other than the fourth fiscal
quarter) of the Borrower (i) copies of the unaudited consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated statement of income and consolidated
statement of cash flow for the portion of Borrower's fiscal year then
elapsed, each setting forth in comparative form (A) the figures from the
previous fiscal year and (B) the Borrower's annual budget delivered
pursuant to ss.8.4(h) hereof, broken down by resort and all in reasonable
detail and prepared in accordance with generally accepted accounting
principles, together with a certification by the principal financial or
accounting officer of the Borrower that the information contained in such
financial statements fairly presents the financial position of the Borrower
and its Subsidiaries on the date thereof and for the period then elapsed
(subject to year-end adjustments);
(c) as soon as practicable, but in any event not later than
twenty-five (25) days after the end of each fiscal month, (i) copies of the
Borrower's internal monthly management report which shall include unaudited
consolidated balance sheet of the Borrower and its Subsidiaries and the
unaudited consolidating balance sheet of the Borrower and its Subsidiaries
(done by resort), each as at the end of such fiscal month, and the related
consolidated statement of income and consolidating statement of income
(done by resort) for the portion of the Borrower's fiscal year then
elapsed, each (except for the consolidating statements) setting forth in
comparative form (A) the figures from the previous fiscal year and (B) the
Borrower's annual budget delivered pursuant to ss.8.4(h) hereof, broken
down by resort and all in reasonable detail and prepared in accordance with
generally accepted accounting principles;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, (i) a statement certified by
the principal financial or accounting officer of the Borrower in
substantially the form of Exhibit E hereto and setting forth in reasonable
detail computations evidencing compliance with each of the covenants set
forth in ss.10 hereof), and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since the Balance Sheet
Date, and certifying that no Default or Event of Default exists as of the
date of
<PAGE>
such certificate, or if a Default or Event of Default does exist specifying
the nature and proposed remedy thereof;
(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of the Borrower;
(f) within three Business Days after the fifteenth (15th) day of each
calendar month, or at such earlier time as the Agent may reasonably
request, a Borrowing Base Report setting forth the Borrowing Base as at the
end of such calendar month or other date so requested by the Agent,
provided that immediately prior to the occurrence of a sale or other
--------
disposition of assets permitted by ss.9.5.2 hereof, the Borrower shall
deliver to the Banks (A) a Borrowing Base Report setting forth the
Borrowing Base prior to such permitted sale or disposition and (B) a
Borrowing Base Report indicating the Borrowing Base after giving effect to
such sale or disposition (provided, however, that for so long as the Banks
hereunder and the banks under the FAC Credit Agreement are identical, the
Borrowing Base Reports required by the foregoing clauses (A) and (B) need
not be delivered to the Agent prior to the sale or disposition of Base
Contracts to FAC pursuant to paragraph (ii) of ss.9.5.2);
(g) at the same time as the Borrowing Base Report are delivered in
accordance with paragraph (f) above, a Base Contracts aging report;
(h) not later than December 31 of each fiscal year of the Borrower, a
draft annual consolidated budget for the Borrower and its Subsidiaries as
well as draft annual budgets for each resort, prepared on a monthly basis,
for the next following fiscal year, and not later than February 15 of each
fiscal year of the Borrower, a final annual consolidated budget for the
Borrower and its Subsidiaries as well as final annual budgets for each
resort, prepared on a monthly basis, for such fiscal year;
(i) from and after the date on which the Banks hereunder and the banks
under the FAC Credit Agreement cease to be identical, at least two days
prior to any sales of Base Contracts by the Borrower or any of its
Subsidiaries to FAC, the list of Base Contracts which the Borrower or such
Subsidiary proposes to sell to FAC pursuant to the Operating Agreement (and
a copy of such list
<PAGE>
shall be sent to each nominee under each Title Clearing Agreement);
(j) from time to time such other financial data and information
(including accountants' management letters) as the Agent or any Lender may
reasonably request.
8.5. NOTICES.
-------
8.5.1. DEFAULTS. The Borrower will promptly notify the Agent and each
--------
of the Banks in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal, guarantor, surety or otherwise, the Borrower shall
forthwith give written notice thereof to the Agent and each of the Banks,
describing the notice or action and the nature of the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice to
--------------------
the Agent and each of the Banks (i) of any violation of any Environmental
Law that the Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (ii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any federal, state or local
environmental agency or board, that has the potential to materially affect
the assets, liabilities, financial conditions or operations of the Borrower
or any of its Subsidiaries, or the Collateral Agent's security interests
pursuant to the Security Documents.
8.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower will,
-----------------------------------------
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the Collateral, or the Collateral Agent's rights with respect to the
Collateral, are subject in an amount equal to or greater than $500,000.
<PAGE>
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and will
----------------------------------
cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Borrower or any of its Subsidiaries and stating the nature
and status of such litigation or proceedings. The Borrower will, and will
cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks, in writing, in form and detail satisfactory to the Agent, within ten
(10) days of any judgment not covered by insurance, final or otherwise,
against the Borrower or any of its Subsidiaries in an amount in excess of
$1,000,000.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will do
-----------------------------------------------
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company or limited liability partnership. It
(i) will cause all of its properties and those of its Subsidiaries used or
useful in the conduct of its business or the business of its Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment, (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (iii) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this ss.8.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrower, desirable in the conduct of its or their business and that do not have
a Material Adverse Effect.
8.7. INSURANCE. The Borrower will, and will cause each of its Subsidiaries
---------
to, maintain with financially sound and reputable insurers insurance with
respect to its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such
<PAGE>
periods as may be reasonable and prudent, all of which insurance shall be
reasonably satisfactory to the Agent.
Without limiting the generality of the foregoing:
(a) The Borrower shall, and shall cause its Subsidiaries (1) to use its
best efforts, in the case of Projects where the Borrower or any of its
Subsidiaries 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 Projects where the Borrower or any of its Subsidiaries
does not maintain primary or substantial responsibility for management,
administration or other services of a similar nature, to cause each of the POAs
for each Projects, to (A) maintain one or more policies of "all-risk" property
and general 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 under the applicable Title Clearing Agreement). 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 respective declaration (or any similar charter document)
relating to each VOI Regime.
(b) The Borrower shall maintain separate errors and omissions coverage
insuring the Collateral Agent's, the Agent's and the Banks' respective risks
against loss through errors of the Borrower's or the Servicer's officers and
employees involved in the servicing of Base Contracts covering such actions and
in an amount no less than $2,000,000 per occurrence and naming the Collateral
Agent and the Agent, as a loss payee. The Borrower shall also maintain a
separate fidelity bond coverage insuring the Collateral Agent's, the Agent's and
the Banks' respective risks against losses through wrongdoing of the Borrower's
or the Servicer's officers and employees involved in the servicing of Contracts
covering such actions and in an amount no less than $2,000,000 per
<PAGE>
occurrence and naming the Collateral Agent and the Agent, as an additional loss
payee. Each such insurance policy required pursuant to this ss.8.7(b) shall
provide for written notice to the Agent by the insurer at least 30 days prior to
the cancellation of such insurance. Evidence reasonably satisfactory to the
Agent of all renewals or replacements necessary to maintain such insurance from
time to time in force shall be delivered by the Borrower to the Agent prior to
the expiration date of the then current insurance policy.
8.8. TAXES. The Borrower will, and will cause each of its Subsidiaries to,
-----
duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
--------
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
-------- -------
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
----------------------------------------
8.9.1. GENERAL. The Borrower shall permit the Banks, through the
-------
Agent or any of the Banks' other designated representatives, to visit
and inspect any of the properties of the Borrower or any of its
Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and
to discuss the affairs, finances and accounts of the Borrower and its
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as the Agent or
any Bank may reasonably request. All visits and inspections conducted
by the Agent shall be at the expense of the Borrower.
8.9.2. COLLATERAL REPORTS. No more frequently than once during
-------------------
each calendar year, or more frequently as determined by the Agent if
an Event of Default shall have occurred and be continuing, upon the
request of the Agent, the Borrower will obtain and deliver to the
Agent, or, if the Agent so elects, will cooperate with the Agent in
the Agent's obtaining, a report of an independent collateral
<PAGE>
auditor satisfactory to the Agent (which may be affiliated with one of
the Banks) with respect to the Base Contracts included in the
Borrowing Base, which report shall indicate whether or not the
information set forth in the Borrowing Base Report most recently
delivered is accurate and complete in all material respects based upon
a review by such auditors of the Base Contracts (including
verification with respect to the amount, aging, identity and credit of
the respective account debtors and the billing practices of the
Borrower or its applicable Subsidiary). All such collateral value
reports shall be conducted and made at the expense of the Borrower.
8.9.3. COMMERCIAL FINANCE EXAMINATIONS. No more frequently than
-------------------------------
once each calendar year, or more frequently as determined by the Agent
if an Event of Default shall have occurred and be continuing, upon the
request of the Agent, the Borrower will permit the Banks, through the
Agent or any of the Bank's other designated representatives, to
conduct a commercial finance examination of the Borrower and its
Subsidiaries, at such reasonable times and intervals as the Agent will
request. All such commercial finance examinations shall be conducted
and made at the expense of the Borrower.
8.9.4. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of
--------------------------
Default shall have occurred, the Agent may, from time to time, in its
discretion for the purpose of assessing and ensuring the value of any
Mortgaged Property, obtain one or more environmental assessments or
audits of such Mortgaged Property prepared by a hydrogeologist, an
independent engineer or other qualified consultant or expert approved
by the Agent to evaluate or confirm (i) whether any Hazardous
Materials are present in the soil or water at such Mortgaged Property
and (ii) whether the use and operation of such Mortgaged Property
complies with all Environmental Laws. Environmental assessments may
include without limitation detailed visual inspections of such
Mortgaged Property including any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and ground water samples, as well as such other
investigations or analyses as the Agent deems appropriate. All such
environmental assessments shall be conducted and made at the expense
of the Borrower.
8.9.5. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower authorizes
-------------------------------
the Agent and, if accompanied by the Agent, the Banks to communicate
directly with the Borrower's independent certified public accountants
and authorizes such accountants to disclose to
<PAGE>
the Agent and the Banks any and all financial statements and other
supporting financial documents and schedules including copies of any
management letter with respect to the business, financial condition
and other affairs of the Borrower or any of its Subsidiaries. At the
request of the Agent, the Borrower shall deliver a letter addressed to
such accountants instructing them to comply with the provisions of
this ss.8.9.5.
8.9.6. TITLE RUNDOWNS. For each Eligible Construction Work in
--------------
Progress included in the Borrowing Base, the Borrower shall notify the
Agent as to the identity of the nationally-recognized title insurance
company that is providing title insurance to the Borrower for such
resort or development, and the Borrower authorizes the Agent to obtain
a report from such title insurance company or other evidence
satisfactory to the Agent, at the expense of the Borrower, not more
frequently than monthly, as to the status of title for the real
property of such project.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
---------------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (i) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (ii) the
provisions of its charter documents and by-laws, (iii) all agreements and
instruments by which it or any of its properties may be bound and (iv) all
applicable decrees, orders, and judgments. If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of
any government shall become necessary or required in order that the
Borrower or any of its Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to which the Borrower or such
Subsidiary is a party, the Borrower will, or (as the case may be) will
cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of the Borrower or such Subsidiary to
obtain such authorization, consent, approval, permit or license and furnish
the Agent and the Banks with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (i) promptly upon
------------------------
filing the same with the Department of Labor or Internal Revenue Service,
furnish to the Agent a copy of the most recent actuarial statement required
to be submitted under ss.103(d) of ERISA and Annual Report, Form 5500, with
all required attachments, in respect of each Guaranteed Pension Plan and
(ii) promptly upon receipt or dispatch, furnish to the Agent any notice,
report or demand sent or received in respect of a Guaranteed Pension Plan
under ss.ss.302, 4041, 4042, 4043, 4063, 4065,
<PAGE>
4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under
ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.
8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
---------------
solely for working capital and general corporate purposes. The Borrower
will obtain Letters of Credit solely for general corporate purposes.
8.13. MORTGAGED PROPERTY. If an Event of Default shall occur and be
-------------------
continuing, upon the request of the Agent from time to time during the
continuance of such Event of Default, the Borrower shall, and shall cause
its Subsidiary Guarantors to, forthwith deliver to the Collateral Agent a
fully executed mortgage or deed of trust over any or all real property then
owned by the Borrower or any Subsidiary Guarantor, including, without
limitation, all VOI's and Lots, such mortgage or deed of trust to be in
form and substance satisfactory to the Agent, together with title insurance
policies, surveys, evidences of insurances with the Agent named as loss
payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate may be requested by the
Agent. The Borrower further agrees that, following the taking of such
actions with respect to such real estate, the Collateral Agent shall have
for the benefit of the Banks and the Agent a valid and enforceable first
priority mortgage or deed of trust over such real estate, free and clear of
all defects and encumbrances except for Permitted Liens.
8.14. BANK ACCOUNTS.
-------------
8.14.1. GENERAL. On or prior to the Closing Date, the Borrower
-------
will, and will cause each of its Subsidiary Guarantors to, (i)
establish one or more depository accounts (collectively, the "BKB
Concentration Account") under the control of the Agent for the benefit
of the Banks and the Agent, in the name of the Borrower, (ii) instruct
all account debtors and other obligors, pursuant to notices of
assignment and instruction letters in form and substance satisfactory
to the Agent, to remit all cash proceeds of Base Contracts directly to
the BKB Concentration Account or to local depository accounts ("Local
Accounts") or concentration depository accounts ("Interim
Concentration Accounts") with financial institutions which have
entered into agency account agreements and, if applicable, lock box
agreements (collectively, "Agency Account Agreements") in form and
substance satisfactory to the Agent, or the BKB Concentration Account,
(iii) direct all depository institutions with Local Accounts to cause
all funds held in each such Local Account to be transferred no less
frequently than once each day to, and only to, an Interim
Concentration Account or the BKB
<PAGE>
Concentration Account, (iv) direct all depository institutions with
Interim Concentration Accounts to cause all funds of the Borrower and
its Subsidiaries held in such Interim Concentration Accounts to be
transferred daily to, and only to, the BKB Concentration Account, and
(v) at all times ensure that immediately upon the Borrower's or any of
the Subsidiary Guarantors' receipt of any funds constituting or cash
proceeds of any Collateral, all such amounts shall have been deposited
in a Local Account, an Interim Concentration Account or the BKB
Concentration Account.
8.14.2. ACKNOWLEDGMENT OF APPLICATION. The Borrower hereby agrees
-----------------------------
that all amounts received by the Agent in the BKB Concentration
Account will be the sole and exclusive property of the Agent, for the
accounts of the Banks and the Agent, to be applied in accordance
ss.2.10 or ss.2.11 as applicable.
8.15. MAINTENANCE AND COLLECTION OF BASE CONTRACTS; CUSTODIAN.
-------------------------------------------------------
(a) On or before the Closing Date, and thereafter promptly upon
the origination of Base Contracts by the Borrower and the Subsidiary
Guarantors, the Borrower will, and will cause each such Subsidiary
Guarantor to, deliver or cause to be delivered directly to the
Custodian for the benefit of the Collateral Agent pursuant to the
Custodial Agreements all original copies of the Base Contracts of the
Borrower and such Subsidiary Guarantor (or in the case of Base
Contracts consisting of a sales contract and a separate promissory
note, a copy of such sales contract and the original of such
promissory note), together with all papers and contracts related to
such Base Contract. The Custodian will hold, maintain and keep custody
of all such Base Contracts for the benefit of the Collateral Agent as
set forth in the Custodial Agreements. The Borrower and the Subsidiary
Guarantors will be responsible for collection on all of their Base
Contracts.
(b) The Custodian shall at all times maintain control of the Base
Contracts for the benefit of the Collateral Agent pursuant to the
Custodial Agreements. The Borrower and the Subsidiary Guarantors may
access the Base Contracts at Custodian's storage facility (as
described in the Custodial Agreements) only for the purposes and upon
the terms and conditions set forth herein and in the Custodial
Agreements.
(c) The Borrower will, and will cause each Subsidiary Guarantor
to, at all times comply with the terms of and their
<PAGE>
obligations under the Custodian Agreements, and shall not enter into
any modification, amendment or supplement of or to, and shall not
terminate, any of the Custodial Agreements without the prior written
consent of the Majority Banks.
8.16. SERVICING OF BASE CONTRACTS. The Borrower will manage, administer,
---------------------------
service and make collections on the Base Contracts included in the Collateral
and perform all contractual and customary undertakings of the holder of the Base
Contracts to the obligors thereunder. In managing, administering, servicing and
making collections on the Base Contracts, the Borrower will exercise that degree
of skill and care consistent with the practices employed by prudent lending
institutions which originate and service instruments and agreements similar to
the Base Contracts or other time share loans in the jurisdictions where the
Approved Projects are located and the Borrower's written credit standards and
collections policies, so long as such practices and policies are in the best
interests of the Banks. The Borrower shall maintain such books of account,
computer data files and other records as will enable the Agent and the
Collateral Agent to determine the status of each Base Contract included in the
Collateral and will enable each such Base Contract to be serviced by another
Person. The Borrower will, consistent with the foregoing provisions, act in such
a manner as will maximize the receipt of scheduled collections in respect of the
Base Contracts. The Borrower shall not appoint any other Person as its agent to
perform the servicing obligations and duties described in this Section 8.16
without the prior written consent of the Banks; provided that the Borrower may
appoint FAC as its agent under this ss.8.16 so long as the Borrower remains
primarily liable to the Agent and the Banks for the performance of such duties
and obligations. If an Event of Default shall have occurred and be continuing,
the Agent may, and at the request of the Majority Banks shall, in addition to
its other rights and remedies available to it under this Credit Agreement and
the other Loan Documents, by written notice given to the Borrower, require the
Borrower to promptly transfer all servicing obligations and duties described in
this Section 8.16 to a successor servicer which is (i) a financial institution
having a net worth of not less than $100,000,000 and whose regular business
includes the servicing of consumer finance receivables (similar to the Base
Contracts, if possible) and (ii) satisfactory to the Agent and the Banks. Any
such successor servicer shall be appointed pursuant to a written agreement
satisfactory to the Agent and the Banks, which agreement shall set forth in
greater detail the responsibilities and duties of such successor servicer. Upon
appointment of such successor servicer, all of the rights and obligations of the
Borrower with respect to the servicing of Base Contracts shall terminate and
pass to and be vested in the successor servicer, all as set forth in the
agreement by which such successor servicer is appointed.
<PAGE>
8.17. LEGAL OPINIONS. In the event that the Borrower or any Subsidiary
---------------
Guarantor originates or expects to originate Base Contracts for VOIs or Lots at
an Approved Project which is not located in a state included in the Existing
Resort Cities on the Closing Date, the Borrower shall furnish to the Agent and
the Banks an opinion of local counsel to the Borrower and the Subsidiary
Guarantors for the jurisdiction in which such Approved Project is located
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 with respect to the execution and filing of any financing
statements and continuation statements as is necessary to maintain the first
priority lien and security interest of the Collateral Agent in the Collateral
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 and security interest.
In addition, neither the Borrower nor any Subsidiary Guarantor will change its
chief executive office and principal place of business or remove any portion of
the Collateral that consists of money or is evidenced by an instrument,
certificate or other writing (including any Base Contract) from the jurisdiction
in which it is held on the Closing Date unless the Agent and the Banks shall
have first received an opinion of counsel to the effect that the lien and
security interests granted to the Collateral Agent with respect to such property
will continue to be maintained after giving effect to such action or actions.
8.18. FURTHER ASSURANCES. The Borrower will, and will cause each of its
-------------------
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
8.19. COMPUTER EQUIPMENT. The Borrower represents and warrants to the Agent
------------------
and the Banks that as of the date hereof all computer software, tapes, disks and
other electronic media relating to the Base Contracts, any VOI Regime, the Fair
Share Plus Program, the Reservation System and the Fairfield Destinations
Vacation Club operate on computer hardware that is available to the general
public without significant modification. If at any time after the date hereof,
the foregoing representation shall cease to be accurate, the Borrower shall
promptly, and in any event within thirty (30) days thereafter, grant to the
Collateral Agent under the Security Agreements a security interest in and lien
on any specialized or modified computer hardware required to run such computer
software.
<PAGE>
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligations to issue,
extend or renew any Letters of Credit:
9.1. RESTRICTIONS ON IDEBTEDNESS. The Borrower will not, and will not
-----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) current liabilities of the Borrower or such Subsidiary incurred in
the ordinary course of business not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies and
liabilities under employee benefit plans, including, without limitation,
pension plans, to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of ss.8.8;
(d) Indebtedness in an aggregate amount not to exceed $1,000,000 at
any time in respect of judgments or awards that have been in force for less
than the applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which the Borrower or such Subsidiary
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) Indebtedness of the Borrower in respect of its obligation to
repurchase defaulted Base Contracts previously sold to FAC in accordance
with the terms of ss.4 of the Operating Agreement (as in effect on the
Closing Date);
<PAGE>
(g) Securitizations with respect to which the obligor is a
special-purpose, bankruptcy-remote Subsidiary of FAC, neither FCI, FAC, nor
any of FCI's other Subsidiaries is directly or indirectly liable for any
indebtedness or obligations incurred by such special-purpose,
bankruptcy-remote Subsidiary, and neither FCI, FAC nor any of FCI's other
Subsidiaries is obligated to repurchase defaulted contracts sold to such
special-purpose, bankruptcy-remote Subsidiary as part of such
Securitization;
(h) purchase-money Indebtedness (exclusive of any Indebtedness
permitted pursuant to (j) below) incurred in connection with the
acquisition of any real or tangible personal property by the Borrower or
its Subsidiaries (other than FAC and Excluded Subsidiaries) or the
construction of improvements on any real property owned by the Borrower or
its Subsidiaries (other than FAC and Excluded Subsidiaries), provided that
(A) such Indebtedness is non-recourse to the Borrower or such Subsidiary
and (B) such Indebtedness does not exceed in the aggregate at any time ten
percent (10%) of Consolidated Tangible Net Worth;
(i) Indebtedness existing on the date hereof and listed and described
on Schedule 9.1 hereto and renewals which do not increase the amount
-------------
thereof, in each case satisfactory to the Agent;
(j) Indebtedness of the Borrower under Capitalized Leases in an amount
not to exceed $15,000,000 in the aggregate at any time outstanding; and
(k) Indebtedness or obligations of FAC or its Subsidiaries permitted
under ss.9.1 of the FAC Credit Agreement;
(l) unsecured Indebtedness of a Subsidiary Guarantor to the Borrower
or of the Borrower to a Subsidiary Guarantor which is expressly
subordinated and made junior to the payment and performance of the
Obligations;
(m) Subordinated Debt; and
(n) Indebtedness of the Borrower not described in the foregoing
clauses (a)-(m) which is incurred to develop one or more Projects for which
the Agent and the Majority Banks have refused to provide financing,
provided that (A) such Indebtedness does not at anytime exceed $25,000,000
-------------
in the aggregate, and (B) the collateral securing such Indebtedness shall
be limited to the Project for which such Indebtedness is used and the Base
Contracts originated for VOIs or Lots located in such Project.
<PAGE>
9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
---------------------
any of its Subsidiaries to, (i) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property
or assets of any character whether now owned or hereafter acquired, or upon
the income or profits therefrom; (ii) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other obligation
in priority to payment of its general creditors; (iii) acquire, or agree or
have an option to acquire, any property or assets upon conditional sale or
other title retention or purchase money security agreement, device or
arrangement; (iv) suffer to exist for a period of more than thirty (30)
days after the same shall have been incurred any Indebtedness or claim or
demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (v) sell, assign, pledge or otherwise transfer any
"receivables" as defined in clause (vii) of the definition of the term
"Indebtedness," with or without recourse; provided that the Borrower or any
of its Subsidiaries may create or incur or suffer to be created or incurred
or to exist:
(a) liens on assets other than the Collateral to secure taxes,
assessments and other government charges in respect of obligations not
overdue or liens on assets other than the collateral to secure claims
for labor, material or supplies in respect of obligations not overdue;
(b) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(c) liens on assets other than the Collateral in respect of
judgments or awards that have been in force for less than the
applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which the Borrower or such
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(d) liens of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties other than the Collateral in
respect of obligations (i) not more than thirty (30) days overdue or
(ii) which are being contested in good faith and for which a surety
bond has been obtained in an amount sufficient to effect satisfaction
and discharge thereof;
<PAGE>
(e) encumbrances on Real Estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property
and defects and irregularities in the title thereto, landlord's or
lessor's liens under leases to which the Borrower or a Subsidiary of
the Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the
use of the property affected in the ordinary conduct of the business
of the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on
the business of the Borrower individually or of the Borrower and its
Subsidiaries on a consolidated basis;
(f) liens existing on the date hereof and listed on Schedule 9.2
-----------
hereto;
(g) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money Indebtedness of the type and amount permitted
by ss.9.1(g), incurred in connection with the acquisition of such real
or personal property or construction of improvements on such real
property, which security interests or mortgages cover only the real or
personal property so acquired or to be improved, provided that such
real or personal property does not constitute Collateral;
(h) liens in favor of the Agent or the Collateral Agent for the
benefit of the Banks and the Agent under the Loan Documents;
(i) liens on those Base Contracts and other assets transferred to
a special-purpose bankruptcy-remote Subsidiary of FAC to secure the
Indebtedness of such Subsidiary described in ss.9.1(g);
(j) liens on the collateral described in ss.9.1(n) hereof to
secure the Indebtedness permitted by ss.9.1(n); and
(k) liens of FAC and its Subsidiaries permitted under ss.9.2 of
the FAC Credit Agreement.
Without limiting this ss.9.2, in no event shall the Borrower or any of its
Subsidiaries create or incur or suffer to be created or incurred or to exist any
lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind on any Base Contracts or other receivables arising in
connection with (i) any real estate or related improvement at any time included
in the definition of Eligible Construction Work in Progress hereunder, or (ii)
any real estate or related improvements with
<PAGE>
respect to which Eligible Base Contracts, Eligible Prime Base Contracts or
Eligible Green Base Contracts have been generated and included in the Borrowing
Base hereunder.
9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
-----------------------------
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by the
Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Service, Inc., and not less than "A 1" if rated by Standard and
Poor's Rating Group;
(d) Investments existing on the date hereof and listed on Schedule
--------
10.3 hereto;
----
(e) Investments with respect to Indebtedness permitted by ss.9.1(l) so
long as such entities remain Subsidiaries of the Borrower;
(f) Investments existing on the date hereof consisting of Investments
by the Borrower in Subsidiaries of the Borrower;
(g) Investments consisting of promissory notes received as proceeds of
asset dispositions permitted by ss.9.5.2(ii);
(h) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business;
(i) Investments consisting of capital contributions to or promissory
notes received as proceeds from a special-purpose bankruptcy-remote
Subsidiary of FAC by reason of a disposition of assets pursuant to a
Securitization so long as such Securitization is permitted by ss.9.1(g) and
such disposition of assets is permitted by ss.9.5.2(iv); and
<PAGE>
(j) repurchases by the Borrower of up to and including 60,000 shares
of restricted common stock issued to John W. McConnell in exchange for the
payment by the Borrower of a corresponding value in withholding taxes to
federal and state taxing authorities pursuant to and in accordance with
that certain Restricted Stock Agreement dated ____________, 1996 (the "Tax
Payment Surrender") if and to the extent that such repurchases are
permitted under ss.9.4.
9.4. DISTRIBUTIONS. The Borrower will not make any Distributions except
-------------
that the Borrower may make Distributions to its stockholders consisting of the
declaration and payment of dividends and the Tax Payment Surrender so long as
(a) after giving effect to such Distributions on a pro forma basis, the Borrower
is in compliance with each of the covenants set forth in ss.10 hereof, (b) such
Distributions are made no more frequently than quarterly during each calendar
year, and (c) no Default or Event of Default has occurred and is continuing, or
would occur after giving effect to such Distributions. Any Subsidiary of the
Borrower may make Distributions to the Borrower.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and will not
------------------------
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary course of
business consistent with past practices) except the merger or consolidation
of one or more of the Subsidiaries of the Borrower with and into the
Borrower, or the merger or consolidation of two or more Subsidiaries (other
than Excluded Subsidiaries) of the Borrower.
9.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will not
----------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition of assets, other than the sale of lots, homes and VOI's, in
each case in the ordinary course of business consistent with past
practices, without the prior written approval of the Majority Banks, except
as set forth below:
(i) The Borrower or such Subsidiary may sell or substitute assets so
long as (a) such sales are for cash to unrelated third parties in an arms
length transaction, (b) such assets are not, and are not intended to be,
Collateral, (c) the proceeds of each such sale are deposited in the BKB
Concentration Account, and applied in accordance with the provisions of
ss.2.10, and (d) no Default or Event
<PAGE>
of Default has occurred and is continuing, or would occur after giving
effect to such disposition.
(ii) FMB and the VB Originating Subsidiaries may sell or substitute
Base Contracts and beneficial interests in VOIs and Lots underlying such
Base Contracts to the Borrower, and the Borrower may sell or substitute
Base Contracts and beneficial interests in VOIs and Lots underlying such
Base Contracts to FAC, and FAC may sell or substitute Base Contracts and
beneficial interests in VOIs and Lots underlying such Base Contracts to
FCC, FRC and FFC, provided that (a) the terms of each such sale are no less
-------------
favorable than those contained in the Operating Agreement (with respect to
sales from FMB and the VB Originating Subsidiaries to the Borrower and
sales from the Borrower to FAC) or the Receivables Purchase Agreements
(with respect to sales from FAC to FCC, FRC and FFC), and (b) the proceeds
of each such sale are deposited in the BKB Concentration Account and
applied in accordance with the provisions of ss.2.10 or ss.2.11, as
applicable, or, if such sale is by FAC and the FAC Credit Agreement is
still in force and effect, as required by the FAC Credit Agreement, and (c)
no Default or Event of Default has occurred or is continuing, or would
occur after giving effect to such disposition.
(iii) The Borrower or its Subsidiaries may sell Base Contracts and
beneficial interests in VOIs and Lots underlying such Base Contracts to
unrelated third parties provided that (a) each such sale is for cash, (b)
-------------
the purchase price of the Base Contracts sold shall not be less than 80% of
the principal components of such Base Contracts plus all accrued and unpaid
interest on such Base Contracts, (c) the proceeds of each such sale are
deposited in the BKB Concentration Account and applied in accordance with
the provisions of ss.2.10 or ss.2.11, as applicable, or, if such sale is by
FAC and the FAC Credit Agreement is still in force and effect, as required
by the FAC Credit Agreement, and (d) no Default or Event of Default has
occurred or is continuing, or would occur after giving effect to such
disposition.
(iv) The Borrower or its Subsidiaries may sell Base Contracts and
beneficial interests in VOIs and Lots underlying such Base Contracts to
special-purpose bankruptcy-remote Subsidiaries of FAC (other than FCC, FRC
and FFC) pursuant to Securitizations permitted by ss.9.1(g), provided that
------------
(a) the cash portion of the purchase price of the Base Contracts sold shall
not be less than 80% of the principal components of such Base Contracts
plus all accrued and unpaid interest on such Base Contracts, (b) the cash
proceeds of
<PAGE>
such sale are deposited in the BKB Concentration Account and applied in
accordance with the provisions of ss.2.10 or ss.2.11, as applicable, or, if
such sale is by FAC and the FAC Credit Agreement is still in force and
effect, as required by the FAC Credit Agreement, and (c) no Default or
Event of Default has occurred and is continuing, or would occur after
giving effect to such disposition.
9.5.3. DISPOSITION OF STOCK. The Borrower will not, and will not
---------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition or issuance of any stock of a Subsidiary to any Person
other than the Borrower.
9.6. SALE AND LEASEBACK. The Borrower will not, and will not permit
-------------------
any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall
sell or transfer any property owned by it in order then or thereafter to
lease such property or lease other property that the Borrower or any
Subsidiary of the Borrower intends to use for substantially the same
purpose as the property being sold or transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on
Schedule 7.18 hereto, the Borrower will not, and will not permit any of its
-------------
Subsidiaries to, (i) use any of the Real Estate or any portion thereof for
the handling, processing, storage or disposal of Hazardous Substances, (ii)
cause or permit to be located on any of the Real Estate any underground
tank or other underground storage receptacle for Hazardous Substances,
(iii) generate any Hazardous Substances on any of the Real Estate, (iv)
conduct any activity at any Real Estate or use any Real Estate in any
manner so as to cause a release (i.e. releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (v) otherwise conduct any
activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law in any material respect or bring such Real
Estate in violation of any Environmental Law in any material respect.
9.8. SUBORDINATED DEBT. The Borrower will not, and will not permit any
-----------------
of its Subsidiaries to, amend, supplement or otherwise modify the terms of
any of the Subordinated Debt or prepay, redeem or repurchase any of the
Subordinated Debt.
9.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
------------------------
Affiliate will
<PAGE>
(a) engage in any "prohibited transaction" within the meaning of
ss.406 of ERISA or ss.4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in ss.302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
ss.302(f) or ss.4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to ss.307 of ERISA or ss.401(a)(29)
of the Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of ss.4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets
of such Plans, disregarding for this purpose the benefit liabilities
and assets of any such Plan with assets in excess of benefit
liabilities.
9.10. BUSINESS ACTIVITIES. The Borrower will not, and will not permit
-------------------
any of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the
businesses conducted by them on the Closing Date and in related businesses.
9.11. FISCAL YEAR. The Borrower will not, and will not permit any of
-----------
it Subsidiaries to, change the date of the end of its fiscal year from that
set forth in ss.7.4.1.
9.12. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will
-----------------------------
not permit any of its Subsidiaries to, engage in any transaction with any
Affiliate (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
Affiliate or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any such Affiliate has a
substantial interest or is an officer, director, trustee or partner, unless
such transaction (a) is on terms no more favorable to such Person than
would have been obtainable on an arm's-length basis in the ordinary
<PAGE>
course of business, and (b) if such transaction has a value of equal to or
greater than $100,000, it has been disclosed to and approved by the
Majority Banks unless such transaction is for the fees, expenses and
disbursements of counsel to the Borrower and its Subsidiaries.
9.13. BANK ACCOUNTS. The Borrower will not, and will not permit any of
-------------
its Subsidiaries to, (i) establish any bank accounts other than those Local
Accounts, Interim Concentration Accounts and other accounts, all listed on
Schedule 7.20, without giving ten (10) days prior written notice to the
--------------
Agent, (ii) violate directly or indirectly any Agency Account Agreement or
other bank agency or lock box agreement in favor of the Agent for the
benefit of the Banks and the Agent with respect to such account, or (iii)
deposit into any of the payroll accounts listed on Schedule 7.20 any
--------------
amounts in excess of amounts necessary to pay current payroll obligations
from such accounts.
9.14. NO TERMINATION OR AMENDMENTS. Unless the Majority Banks give
-------------------------------
their prior written consent, the Borrower will keep in full force in
effect, and will not waive, amend, modify or terminate, the Fair Share Plus
Agreement, the Vacation Club Agreement, the Operating Agreement, the
Custodial Agreements, or any of the Title Clearing Agreements, or amend or
modify the Receivables Purchase Agreements; provided, that (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 Base Contracts to be sold or pledged to
secure debt under a Securitization, and (B) the FairShare Plus 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 Agent an opinion of counsel in form and
substance acceptable to the Agent to the effect that such amendment or
modification will not adversely affect in any material respect the
respective interests of the Agent or the Banks.
10. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Bank has any obligation to make any Loans or the Agent has any obligation
to issue, extend or renew any Letters of Credit:
10.1. CONSOLIDATED OPERATING MARGIN COVENANT. The Borrower will not
---------------------------------------
permit, as of the last day of any fiscal quarter, the ratio of Consolidated
Earnings before Interest and Taxes to Consolidated Total
<PAGE>
Revenue for the period of four (4) consecutive fiscal quarters ended on
such date to be less than twelve and one-half percent (12.5%).
10.2. DEBT SERVICE COVERAGE RATIO. The Borrower will not permit the
-----------------------------
ratio of (i) Consolidated Operating Cash Flow for any period of four (4)
consecutive fiscal quarters to (ii) the sum of (A) Consolidated Total
Interest Expense for such period, plus (B) any mandatory scheduled
----
repayments of principal on any Indebtedness of the Borrower or any of its
Subsidiaries paid or due and payable during such period, to be less than
2.0 to 1 at any time.
10.3. LIABILITIES TO WORTH RATIO. The Borrower will not permit the
---------------------------
ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth
to exceed 2.25 to 1 at any time.
10.4. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not permit
--------------------------------
Consolidated Tangible Net Worth at any time to be less than the sum of (i)
$160,000,000 plus (ii) on a cumulative basis, 60% of positive Consolidated
----
Net Income for each fiscal quarter beginning with the fiscal quarter ended
December 31, 1997, plus (iii) 100% of the proceeds of any sale by the
----
Borrower of (A) equity securities issued by the Borrower, or (B) warrants
or subscription rights for equity securities issued by the Borrower.
11. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit
Loans and the Term Loan and of the Agent to issue any initial Letters of
Credit shall be subject to the satisfaction of the following conditions
precedent on or prior to March 18, 1998:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
--------------
executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of
the Banks. Each Bank shall have received a fully executed copy of each such
document.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
-------------------------------------
have received from the Borrower and each of its Subsidiaries a copy,
certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (i) its charter or other
incorporation documents as in effect on such date of certification, and
(ii) its by-laws as in effect on such date.
11.3. CORPORATE, ACTION. All corporate action necessary for the valid
------------------
execution, delivery and performance by the Borrower and each of its
<PAGE>
Subsidiaries of this Credit Agreement and the other Loan Documents to which
it is or is to become a party shall have been duly and effectively taken,
and evidence thereof satisfactory to the Banks shall have been provided to
each of the Banks.
11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received
-----------------------
from the Borrower and each of its Subsidiaries an incumbency certificate,
dated as of the Closing Date, signed by a duly authorized officer of the
Borrower or such Subsidiary, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (i) to sign, in the
name and on behalf of each of the Borrower of such Subsidiary, each of the
Loan Documents and Subordination Documents to which the Borrower or such
Subsidiary is or is to become a party; (ii) in the case of the Borrower, to
make Loan Requests and Conversion Requests and to apply for Letters of
Credit; and (iii) to give notices and to take other action on its behalf
under the Loan Documents.
11.5. VALIDITY OF LIENS. The Security Documents shall be effective to
-----------------
create in favor of the Agent a legal, valid and enforceable first (except
for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral. All filings, recordings,
deliveries of instruments and other actions necessary or desirable in the
opinion of the Agent to protect and preserve such security interests shall
have been duly effected. The Agent shall have received evidence thereof in
form and substance satisfactory to the Agent.
11.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall
-----------------------------------------------
have received from each of the Borrower and its Subsidiaries a completed
and fully executed Perfection Certificate and the results of UCC searches
with respect to the Collateral, indicating no liens other than Permitted
Liens and otherwise in form and substance satisfactory to the Agent.
11.7. CERTIFICATES OF INSURANCE. The Agent shall have received (i) a
-------------------------
certificate of insurance from an independent insurance broker dated as of
the Closing Date, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained
in accordance with the provisions of the Security Agreements and (ii)
certified copies of all policies evidencing such insurance (or certificates
therefore signed by the insurer or an agent authorized to bind the
insurer).
11.8. AGENCY ACCOUNT AGREEMENTS. The Borrower shall have established
--------------------------
the BKB Concentration Account, and the Agent shall have
<PAGE>
received an Agency Account Agreement executed by each depository
institution with a Local Account or an Interim Concentration Account.
11.9. BORROWING BASE REPORT. The Agent shall have received from the
----------------------
Borrower the initial Borrowing Base Report dated as of the Closing Date.
11.10. BASE CONTRACTS AGING REPORT. The Agent shall have received from
---------------------------
the Borrower the most recent Base Contracts aging report of the Borrower
and its Subsidiaries dated as of a date which shall be no more than fifteen
(15) days prior to the Closing Date and the Borrower shall have notified
the Agent in writing on the Closing Date of any material deviation from the
Base Contracts values reflected in such Base Contracts aging report and
shall have provided the Agent with such supplementary documentation as the
Agent may reasonably request.
11.11. OPINION OF COUNSEL. Each of the Banks and the Agent shall have
------------------
received a favorable legal opinion addressed to the Banks and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the
Banks and the Agent, from: (a) the Rose Law Firm, counsel to the Borrower
and its Subsidiaries, and (b) local counsel to the Borrower and the
Subsidiary Guarantors for the jurisdictions in which each Existing Resort
City is located (other than California).
11.12. PAYMENT OF FEES. The Borrower shall have paid to the Agent the
---------------
Administrative Fee pursuant to ss.5.1.
11.13. OTHER DOCUMENTS. The Agent shall have received evidence
----------------
satisfactory to it that the Custodial Agreements, the Title Clearing
Agreements, the Operating Agreement, the Fair Share Plus Agreement, the
Vacation Club Agreement and each other document, agreement or instrument
evidencing Subordinated Debt are in full force and effect as of the Closing
Date and that no party thereto is in default under any of the
aforementioned agreements, and all such documents shall be in form and
substance satisfactory to the Lenders in all respects. The Agent shall have
also received an executed copy of each of the above-listed agreements
together with all amendments, supplements and waivers with respect thereto.
11.14. REPAYMENT OF EXISTING CREDIT AGREEMENT. The Borrower shall have
--------------------------------------
repaid the Loans outstanding under the Existing Credit Agreement in an
amount sufficient to cause compliance with the terms and conditions of this
Credit Agreement.
<PAGE>
12. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Loan, including the Revolving
Credit Loan and the Term Loan, and of the Agent to issue, extend or renew
any Letter of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions
precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
----------------------------------------------
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with this
Credit Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Letter of Credit, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate do not have a
Material Adverse Effect, and to the extent that such representations and
warranties relate expressly to an earlier date).
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
-------------------
regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank would make it illegal for such Bank to make such Loan
or to participate in the issuance, extension or renewal of such Letter of
Credit or in the reasonable opinion of the Agent would make it illegal for
the Agent to issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
------------------------
statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with
--------------------------
the transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be satisfactory in
substance and in form to the Banks and to the Agent and the Agent's Special
Counsel, and the Banks, the Agent and such counsel shall have received all
information and such counterpart originals or certified or other copies of
such documents as the Agent may reasonably request.
<PAGE>
12.5. BORROWING BASE REPORT. The Agent shall have received the most
----------------------
recent Borrowing Base Report required to be delivered to the Agent in
accordance with ss.8.4(f) and, if requested by the Agent, a Borrowing Base
Report dated within five (5) days of the Drawdown Date of such Loan or of
the date of issuance, extension or renewal of such Letter of Credit.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
------------------------------------
events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or
any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
(b) the Borrower or any of its Subsidiaries shall fail to pay any
interest on the Loans, the Administrative Fee, any Letter of Credit
Fee, or other sums due hereunder or under any of the other Loan
Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in ss.ss.8.1, 8.2, 8.4(f), 8.5, 8.6, 8.7, 8.9, 8.12, 8.14,
8.15, 9 or 10 hereof;
(d) the Borrower or any of its Subsidiaries shall fail to perform
any term, covenant or agreement contained herein or in any of the
other Loan Documents (other than those specified elsewhere in this
ss.13.1) for thirty (30) days after written notice of such failure has
been given to the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to
or in connection with this Credit Agreement, as such representation or
warranty may be updated in writing from time to time by the Borrower
or any of its Subsidiaries, shall prove to have been false in any
material respect upon the date when made or deemed to have been made
or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized
Leases, or fail to observe or perform any material term,
<PAGE>
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing borrowed money or credit received or in respect
of any Capitalized Leases for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the Borrower or
any of its Subsidiaries or of any substantial part of the assets of
the Borrower or any of its Subsidiaries or shall commence any case or
other proceeding relating to the Borrower or any of its Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against the Borrower or any of its
Subsidiaries and the Borrower or any of its Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein
or such petition or application shall not have been dismissed within
forty-five (45) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any Subsidiary of the Borrower
in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries that,
with other outstanding final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate
$1,000,000;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or
the Subordinated Debt shall be prepaid, redeemed or repurchased in
whole or in part;
<PAGE>
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or
liens in a substantial portion of the Collateral shall cease to be
perfected, or shall cease to have the priority contemplated by the
Security Documents, in each case otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of the Borrower or any of
its Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to
the effect that, any one or more of the Loan Documents is illegal,
invalid or unenforceable in accordance with the terms thereof;
(l) the Borrower or any ERISA Affiliate incurs any liability to
the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in
an aggregate amount exceeding $500,000, or the Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of
ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $500,000, or any of the following occurs with respect to a
Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure
to make a required installment or other payment (within the meaning of
ss.302(f)(1) of ERISA), provided that the Agent determines in its
--------
reasonable discretion that such event (A) could be expected to result
in liability of the Borrower or any of its Subsidiaries to the PBGC or
such Guaranteed Pension Plan in an aggregate amount exceeding $500,000
and (B) could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by the
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan or for the imposition of a lien in favor
of such Guaranteed Pension Plan; or (ii) the appointment by a United
States District Court of a trustee to administer such Guaranteed
Pension Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan;
(m) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
thirty (30) days;
<PAGE>
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than
fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Borrower or any of its Subsidiaries if such event or circumstance is
not covered by business interruption insurance and would have a
Material Adverse Effect;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired
by the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a material adverse effect on
the business or financial condition of the Borrower or such
Subsidiary;
(p) the Borrower or any of its Subsidiaries shall be indicted for
a state or federal crime, or any civil or criminal action shall
otherwise have been brought against the Borrower or any of its
Subsidiaries, a punishment for which in any such case could include
the forfeiture of any assets of the Borrower or such Subsidiary
included in the Borrowing Base or any assets of the Borrower or such
Subsidiary not included in the Borrowing Base but having a fair market
value in excess of $200,000; or
(q) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act)
of 20% or more of the outstanding shares of common stock of the
Borrower; or, during any period of twelve consecutive calendar months,
individuals who were directors of the Borrower on the first day of
such period shall cease to constitute a majority of the board of
directors of the Borrower; or
(r) if there shall exist an "Event of Default" under (and as
defined in) the FAC Credit Agreement;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest
<PAGE>
or other notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the event of any Event of Default specified in
--------
ss.ss.13.1(g), 13.1(h) or 13.1(j), all such amounts shall become immediately due
and payable automatically and without any requirement of notice from the Agent
or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
-----------------------------
Default specified in ss.13.1(g), ss.13.1(h) or ss.13.1(j) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of the
Banks shall be relieved of all further obligations to make Loans to the Borrower
and the Agent shall be relieved of all further obligations to issue, extend or
renew Letters of Credit. If any other Event of Default shall have occurred and
be continuing, the Agent may and, upon the request of the Majority Banks, shall,
by notice to the Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the credit hereunder
shall terminate immediately and each of the Banks shall be relieved of all
further obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve the Borrower or any of its Subsidiaries of any of
the Obligations.
13.3. REMEDIES. In case any one or more of the Events of Default shall have
--------
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to ss.13.1, each Bank, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may, with the
consent of the Majority Banks but not otherwise, proceed to protect and enforce
its rights by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Credit Agreement and the other Loan Documents or any instrument pursuant to
which the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such Bank.
No remedy herein conferred upon any Bank or the Agent or the holder of any Note
or purchaser of any Letter of Credit Participation is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of law.
13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that the Agent
--------------------------------------
receives proceeds as contemplated by ss.2.11 or in the event that, following the
occurrence or during the continuance of any Default or
<PAGE>
Event of Default, the Agent or any Bank, as the case may be, receives any monies
in connection with the enforcement of any of the Security Documents, or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that (i) distributions
-------- -------
shall be made (A) pari passu among Obligations with respect to the
---- -----
Administrative Fee payable pursuant to ss.5.1 and all other Obligations and
(B) with respect to each type of Obligation owing to the Banks, such as
interest, principal, fees and expenses, among the Banks pro rata, and (ii)
--- ----
the Agent may in its discretion make proper allowance to take into account
any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to ss.9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
14. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such
<PAGE>
Bank. Each of the Banks agrees with each other Bank that (i) if an amount to be
set off is to be applied to Indebtedness of the Borrower to such Bank, other
than Indebtedness evidenced by the Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Notes held by such Bank or constituting Reimbursement Obligations owed to such
Bank, and (ii) if such Bank shall receive from the Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against the Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
--- -----
otherwise as shall result in each Bank receiving in respect of the Notes held by
it or Reimbursement obligations owed it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part of such
--------
excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
15. THE AGENT.
---------
15.1. AUTHORIZATION.
-------------
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that
--------
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to
<PAGE>
create an agency, trust or other fiduciary relationship between the Agent
and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation of
the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
15.2. EMPLOYEE AND AGENTS. The Agent may exercise its powers and execute
--------------------
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
-------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS.
------------------
15.4.1. GENERAL. The Agent shall not be responsible for the execution
-------
or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any
time constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such
<PAGE>
collateral security or for the validity, enforceability or collectability
of any such amounts owing with respect to the Notes, or for any recitals or
statements, warranties or representations made herein or in any of the
other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries,
or be bound to ascertain or inquire as to the performance or observance of
any of the terms, conditions, covenants or agreements herein or in any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or
records of the Borrower or any of its Subsidiaries. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request delivered
to it by the Borrower or any holder of any of the Notes shall have been
duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis
and decision to enter into this Credit Agreement.
15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
----------------------------
compliance with the conditions set forth inss.11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be to be
consent to or approved by or acceptable or satisfactory to such Bank,
unless an officer of the Agent active upon the Borrower's account shall
have received notice from such Bank prior to the Closing Date specifying
such Bank's objection thereto and such objection shall not have been
withdrawn by notice to the Agent to such effect on or prior to the Closing
Date.
15.5. PAYMENTS.
--------
15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
------------------
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
--- ----
the Agent for the account of the
<PAGE>
Banks except as otherwise expressly provided herein or in any of the other
Loan Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
----------------------
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
-----------------
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (i) to make available to the Agent its pro rata share of
--- ----
any Loan or to purchase any Letter of Credit Participation or (ii) to
comply with the provisions ofss.14 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata
--- ---
share of such payments due and payable to all of the Banks, in each case
as, when and to the full extent required by the provisions of this Credit
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied.
A Delinquent Bank shall be deemed to have assigned any and all payments due
to it from the Borrower, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. The Delinquent Bank hereby authorizes the Agent to distribute
such payments to the nondelinquent Banks in proportion to their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
Obligations. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned
payments to all outstanding Loans and Unpaid Reimbursement Obligations of
the nondelinquent Banks, the Banks' respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations have returned to
those in effect
1
<PAGE>
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note
----------------
or the purchaser of any Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by ss.16), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
15.8. AGENT AS BANK. In its individual capacity, BKB shall have the same
-------------
obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
15.9 RESIGNATION. The Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan
2
<PAGE>
Documents shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
15.1O NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
------------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this ss.15.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
15.11. AUTHORIZATION OF COLLATERAL AGENCY AGREEMENT. Each Bank hereby
------------------------------------------------
authorizes the Agent to execute and deliver the Collateral Agency Agreement on
behalf of the Banks. Each Bank further authorizes the Agent and the Collateral
Agent to perform their respective duties under the Collateral Agency Agreement
in accordance with the terms and provisions thereof.
15.12. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
----------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (i) so requested by
the Majority Banks and (ii) the Banks have provided to the Agent and/or the
Collateral Agent such additional indemnities and assurances against expenses and
liabilities as the Agent and the Collateral Agent may reasonably request, direct
the Collateral Agent to proceed to enforce the provisions of the Security
Documents authorizing the sale or other disposition of all or any part of the
Collateral and exercise all or any such other legal and equitable and other
rights or remedies as it may have in respect of such Collateral. The Majority
Banks may request in writing that the Agent direct the Collateral Agent as to
the method and the extent of any such sale or other disposition, the Banks
hereby agreeing to indemnify and hold the Agent and/or the Collateral Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such requests and directions, provided that the Agent
need not comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
16. EXPENSES AND INDEMNIFICATION.
----------------------------
16.1. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein,
3
<PAGE>
(ii) any taxes (including any interest and penalties in respect thereto) payable
by the Agent or any of the Banks (other than taxes based upon the Agent's or any
Bank's net income) on or with respect to the transactions contemplated by this
Credit Agreement (the Borrower hereby agreeing to indemnify the Agent and each
Bank with respect thereto), (iii) the reasonable fees, expenses and
disbursements of the Agent's Special Counsel or any local counsel to the Agent
incurred in connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, any amendments, modifications, approvals, consents or
waivers hereto or hereunder, or the cancellation of any Loan Document upon
payment in full in cash of all of the Obligations or pursuant to any terms of
such Loan Document for providing for such cancellation, (iv) the fees, expenses
and disbursements of the Agent or any of its affiliates incurred by the Agent or
such affiliate in connection with the preparation, syndication, administration
or interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and surveyor, engineering and appraisal
charges, (v) any fees, costs, expenses and bank charges, including bank charges
for returned checks, incurred by the Agent in establishing, maintaining or
handling agency accounts, lock box accounts and other accounts for the
collection of any of the Collateral; (vi) all reasonable out-of-pocket expenses
(including without limitation reasonable attorneys' fees and costs, which
attorneys may be employees of any Bank or the Agent, and reasonable consulting,
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower or any of its Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's or the Agent's relationship with the Borrower or any of its Subsidiaries
and (vii) all reasonable fees, expenses and disbursements of any Bank or the
Agent incurred in connection with UCC searches, UCC filings or mortgage
recordings.
16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
---------------
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Loans or Letters of Credit, (ii) the reversal or withdrawal of any
provisional credits granted by the Agent upon the transfer of funds from lock
box, bank
4
<PAGE>
agency or concentration accounts or in connection with the provisional honoring
of checks or other items, (iii) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of the Borrower or
any of its Subsidiaries comprised in the Collateral, (iv) the Borrower or any of
its Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (v) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the preparation
therefor, the Banks and the Agent and its affiliates shall be entitled to select
their own counsel and, in addition to the foregoing indemnity, the Borrower
agrees to pay promptly the reasonable fees and expenses of such counsel. If, and
to the extent that the obligations of the Borrower under this ss.16.2 are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law.
16.3. SURVIVAL. The covenants contained in this ss.16 shall survive payment
--------
or satisfaction in full of all other Obligations.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
-----------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in each case, that any such Section 20
Subsidiary receiving such information shall be bound by the confidentiality
provisions of this Credit Agreement. Such authorization shall survive the
payment and satisfaction in full of all of Obligations.
5
<PAGE>
17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf of
---------------
itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(a) after such information shall have become public other than through a
violation of this ss.17, (b) to the extent required by statute, rule, regulation
or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to
bank examiners or any other regulatory authority having jurisdiction over any
Bank or the Agent, or to auditors or accountants, (e) to the Agent, any Bank or
any Section 20 Subsidiary, (f) in connection with any litigation to which any
one or more of the Banks, the Agent or any Section 20 Subsidiary is a party, or
in connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (g) to a Subsidiary or affiliate of such Bank as provided
in ss.17.1 or (h) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant agrees to be bound by the
provisions of ss.19.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law
------------------
or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such
non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
17.4. OTHER. In no event shall any Bank or the Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
ss.17 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Loans or Reimbursement Obligations from any Bank.
18. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any
6
<PAGE>
documents or other papers delivered by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Loans and the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any Letter
of Credit or any amount due under this Credit Agreement or the Notes or any of
the other Loan Documents remains outstanding or any Bank has any obligation to
make any Loans or the Agent has any obligation to issue, extend or renew any
Letter of Credit, and for such further time as may be otherwise expressly
specified in this Credit Agreement. All statements contained in any certificate
or other paper delivered to any Bank or the Agent at any time by or on behalf of
the Borrower or any of its Subsidiaries pursuant hereto or in connection with
the transactions contemplated hereby shall constitute representations and
warranties by the Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
----------------------------
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
---------------------------------
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); provided that (i) the
--------
Agent shall have given its prior written consent to such assignment, (ii) each
such assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (iii) each
assignment shall be in an amount that is a whole multiple of $1,000,000, and
(iv) the parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit F hereto (an "Assignment and
------- -
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (y) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in ss.19.3, be
released from its obligations under this Credit Agreement.
<PAGE>
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
-----------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
and its Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations, or the performance or observance by the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their obligations
under this Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in ss.7.4 and ss.8.4 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision
to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
8
<PAGE>
this Credit Agreement and the other Loan Documents as are delegated to the
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
--- ----
Letters of Credit.
19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $2,000.
19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed
---------
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall
9
<PAGE>
be dated the effective date of such in Assignment and Acceptance and shall
otherwise be substantially the form of the assigned Notes. Within five (5) days
of issuance of any new Notes pursuant to this ss.20.4, the Borrower shall
deliver an opinion of counsel, addressed to the Banks and the Agent, relating to
the due authorization, execution and delivery of such new Notes and the
legality, validity and binding effect thereof, in form and substance
satisfactory to the Banks. The surrendered Notes shall be cancelled and returned
to the Borrower.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
-------
that (i) each such participation shall be in an amount of not less than
$1,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures made
----------
in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- --------
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any assignee
----------------------------------------------------
Bank is an Affiliate of the Borrower, then any such assignee Bank shall have no
right to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Agent pursuant to ss.13.1 or ss.13.2, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the
10
<PAGE>
other Loan Documents be made without regard to such assignee Bank's interest in
any of the Loans or Reimbursement Obligations. If any Bank sells a participating
interest in any of the Loans or Reimbursement Obligations to a participant, and
such participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank hereunder
or under any of the other Loan Documents for purposes of granting consents or
waivers or for purposes of agreeing to amendments or modifications to any of the
Loan Documents or for purposes of making requests to the Agent pursuant to
ss.13.1 or ss.13.2 to the extent that such participation is beneficially owned
by the Borrower or any Affiliate of the Borrower, and the determination of the
Majority Banks shall for all purposes of this Credit Agreement and the other
Loan Documents be made without regard to the interest of such transferor Bank in
the Loans or Reimbursement Obligations to the extent of such participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain
-----------------------------------
its rights to be indemnified pursuant to ss.17 with respect to any claims or
actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. If any Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Majority Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this ss.19 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under ss.4 of
the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the enforcement
thereof shall release the pledgor Bank from its obligations hereunder or under
any of the other Loan Documents.
19.9 ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer any
----------------------
of its rights or obligations under any of the Loan Documents without the prior
written consent of each of the Banks.
20. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given
11
<PAGE>
pursuant to this Credit Agreement or the Notes or any Letter of Credit
Applications shall be in writing and shall be delivered in hand, mailed by
United States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower, at 11001 Executive Center Drive, Little Rock,
Arkansas 72211, Attention: President, or at such other address for notice
as the Borrower shall last have furnished in writing to the Person giving
the notice;
(b) if to the Agent, at 115 Perimeter Center Place, N.E., Suite 500,
Atlanta, GA 30346, USA, Attention: Lori Litow, Vice President, with a copy
to the Agent at 100 Federal Street, Boston, Massachusetts 02110, Attention:
Real Estate Department, or such other address for notice as the Agent shall
last have furnished in writing to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
----------
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
21. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
12
<PAGE>
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN ss.20. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
22. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
ss.26.
25. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of which rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit
<PAGE>
Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
-----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing, the
rate of interest on the Notes (other than interest accruing pursuant to
ss.5.10.2 following the effective date of any waiver by the Majority Banks of
the Default or Event of Default relating thereto), the amount of the Commitments
of the Banks, and the amount of Administrative Fee or Letter of Credit Fees
payable to such Bank hereunder may not be changed without the written consent of
the Borrower and the written consent of each Bank affected thereby; the
Revolving Credit Loan Maturity Date may not be postponed without the written
consent of each Bank affected thereby; this ss.26 and the definition of Majority
Banks may not be amended, without the written consent of all of the Banks; and
the amount of the Administrative Fee or any Letter of Credit Fees payable for
the Agent's account and ss.15 may not be amended without the written consent of
the Agent. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.
27. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
28. RELEASE OF SECURITY.
-------------------
(a) At such time as a purchaser of a Lot or VOI pursuant to a Base Contract
has paid in full the purchase price or the requisite percentage of the purchase
price for deeding pursuant to a Base Contract and has otherwise fully discharged
all of such purchaser's obligations and responsibilities required to be
discharged as a condition to deeding, the Agent, acting on behalf of the Banks,
will cause the Collateral Agent (or its duly appointed attorney-in-fact
authorized to act on its behalf), on request and appropriate certification by
the Borrower or its authorized representative, to execute and deliver, at the
Borrower's expense, such termination statements or mortgage releases, as the
case may be, and to take such other actions as may be reasonably necessary to
terminate and remove the Collateral Agent's underlying mortgage lien or security
interest in the real estate and in the case where a purchaser has fully
performed the obligations under a Base Contract, such action as may be
reasonably necessary to terminate and remove the Collateral Agent's security
interest in such Base Contract.
(b) If the Borrower or any of the Subsidiary Guarantors sell or otherwise
transfer any of their assets in accordance with ss.9.5 hereof, the Agent, acting
on behalf of the Banks, will cause the Collateral Agent (or its duly appointed
attorney-in-fact authorized to act on its behalf) on the date that all payments
made by the purchaser or transferee are deposited with the Agent at the time the
receipt and application of the net cash proceeds of such sale in accordance with
ss.2.10 hereof, to execute and deliver, at the Borrower's expense, such
termination statements, mortgage releases or subordination agreements, as the
case may be, and to take such other actions, as may be reasonably necessary to
subordinate or terminate and remove the Collateral Agent's mortgage or security
interest in the assets being sold.
29. SUPERIOR RIGHTS OF BASE CONTRACT PURCHASER.
------------------------------------------
(a) Notwithstanding any other provision contained in this
Agreement, the rights of any purchaser of any Lot or VOI subject to a
Base Contract shall, so long as such purchaser is not in default
thereunder, be superior to those of the Agent and the Banks hereunder,
and neither the Agent nor the Banks shall, so long as such purchaser
is not in default thereunder, interfere with such purchaser's use and
enjoyment of the Lot or VOI subject thereto.
(b) If pursuant to the terms of the Security Documents, the Agent
or the Banks shall acquire any Lot or VOI subject to a Base Contract,
the Agent and the Banks hereby specifically agree to
<PAGE>
release, cause to be released or convey, as the case may be, any Lot
or VOI from any lien or title of the Agent or the Banks upon the
request of the party purchaser (including such party's heirs,
successors and assigns) to the Base Contract and upon completion of
all payments and the performance of all the terms and conditions
required to be made and performed by such purchaser under such Base
Contract.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
FAIRFIELD COMMUNITIES, INC.
By: /s/Robert W. Howeth
---------------------------------
Name: Robert W. Howeth
Title: Sr. Vice President
BANKBOSTON, N.A., individually and as Agent
By: /s/Paul Divito
---------------------------------
Name: Paul DiVito
Title: Managing Director
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
DATED as of January 15, 1998
between
FAIRFIELD ACCEPTANCE CORPORATION
and
BANKBOSTON, N.A.
and
BANKBOSTON, N.A., as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
1. DEFINITIONS AND RULES OF INTERPRETATION....................................1
1.1. Definitions. ...................................................1
1.2. Rules of Interpretation. ......................................29
2. THE REVOLVING CREDIT FACILITY. .........................................30
2.1. Commitment to Lend. ...........................................30
2.2. Reduction of Total Commitment. ................................31
2.3. The Revolving Credit Notes. ...................................32
2.4. Interest on Revolving Credit Loans. ...........................32
2.5. Requests for Revolving Credit Loans. ..........................33
2.6. Conversion Options. ...........................................33
2.6.1. Conversion to Different Type of Revolving Credit Loan.33
2.6.2. Continuation of Type of Revolving Credit Loan. ......34
2.6.3. Eurodollar Rate Loans. ..............................34
2.7. Funds for Revolving Credit Loan. ..............................35
2.7.1. Funding Procedures. .................................35
2.7.2. Advances by Agent. ..................................35
2.8. Change in Borrowing Base. .....................................36
2.9. Settlements. ..................................................36
2.9.1. General. ............................................36
2.9.2. Failure to Make Funds Available.......................37
2.9.3. No Effect on Other Banks. ...........................38
2.10. Repayments of Revolving Credit Loans Prior to Event of Default..38
2.10.1. Credit for Funds Received in Concentration Account...38
2.10.2. Application of Payments Prior to Event of Default....39
2.11. Repayments of Revolving Credit Loans After Event of Default....40
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. ...............................40
3.1. Maturity. .....................................................40
3.2. Mandatory Repayments of Revolving Credit Loans. ................41
3.3. Optional Repayments of Revolving Credit Loans. ................41
4. LETTERS OF CREDIT. .....................................................42
4.1. Letter of Credit Commitments....................................42
4.1.1. Commitment to Issue Letters of Credit.................42
4.1.2. Letter of Credit Applications. ......................42
4.1.3. Terms of Letters of Credit. .........................42
4.1.4. Reimbursement Obligations of Banks. .................43
<PAGE>
4.1.5. Participations of Banks. ............................43
4.2. Reimbursement Obligation of the Borrower. .....................43
4.3. Letter of Credit Payments. ....................................44
4.4. Obligations Absolute. .........................................45
4.5. Reliance by Issuer. ...........................................45
4.6. Letter of Credit Fee. .........................................46
5. CERTAIN GENERAL PROVISIONS. ............................................46
5.1. Administrative Fee. ...........................................46
5.2. Funds for Payments. ...........................................46
5.2.1. Payments to Agent. ..................................46
5.2.2. No Offset, etc. .....................................46
5.3. Computations. .................................................47
5.4. Inability to Determine Eurodollar Rate..........................47
5.5. Illegality. ...................................................48
5.6. Additional Costs, etc. ........................................48
5.7. Capital Adequacy. .............................................50
5.8. Certificate. ..................................................50
5.9. Indemnity. ....................................................50
5.10. Interest After Default. ......................................51
5.10.1. Overdue Amounts......................................51
5.10.2. Amounts Not Overdue..................................51
5.11. HLT Classification. ..........................................51
6. COLLATERAL SECURITY AND GUARANTIES. ....................................52
6.1. Security of Borrower. .........................................52
6.2. Guaranties and Security of Guarantors...........................52
7. REPRESENTATIONS AND WARRANTIES. ........................................53
7.1. Corporate Authority. ..........................................53
7.1.1. Incorporation; Good Standing..........................53
7.1.2. Authorization. ......................................53
7.1.3. Enforceability. .....................................54
7.2. Governmental Approvals. .......................................54
7.3. Title to Properties; Leases. ..................................54
7.4. Financial Statements. .........................................54
7.4.1. Fiscal Year. ........................................54
7.4.2. Financial Statements..................................54
7.5. No Material Changes, etc. .....................................55
7.6. Franchises, Patents, Copyrights, etc............................55
7.7. Litigation. ...................................................55
7.8. No Materially Adverse Contracts, etc............................56
7.9. Compliance with Other Instruments, Laws, etc....................56
7.10. Tax Status. ..................................................56
7.11. No Event of Default............................................57
7.12. Holding Company and Investment Company Acts....................57
7.13. Absence of Financing Statements, etc. ........................57
<PAGE>
7.14. Perfection of Security Interest. .............................57
7.15. Certain Transactions. ........................................57
7.16. Employee Benefit Plans. ......................................58
7.16.1. In General. ........................................58
7.16.2. Terminability of Welfare Plans.......................58
7.16.3. Guaranteed Pension Plans. ..........................58
7.16.4. Multiemployer Plans. ...............................59
7.17. Use of Proceeds. .............................................59
7.17.1. General. ...........................................59
7.17.2. Regulations U and X..................................59
7.17.3. Ineligible Securities................................59
7.18. Environmental Compliance.......................................60
7.19. Subsidiaries, etc. ...........................................62
7.20. Bank Accounts. ...............................................62
7.21. Disclosure. ..................................................62
7.22. FairShare Program. ...........................................62
8. AFFIRMATIVE COVENANTS OF THE BORROWER....................................63
8.1. Punctual Payment. .............................................63
8.2. Maintenance of Office...........................................63
8.3. Records and Accounts............................................63
8.4. Financial Statements, Certificates and Information..............63
8.5. Notices. ......................................................66
8.5.1. Defaults. ...........................................66
8.5.2. Environmental Events. ...............................66
8.5.3. Notification of Claim against Collateral..............67
8.5.4. Notice of Litigation and Judgments. .................67
8.6. Corporate Existence; Maintenance of Properties. ...............67
8.7. Insurance. ....................................................68
8.8. Taxes. ........................................................69
8.9. Inspection of Properties and Books, etc. ......................70
8.9.1. General. ............................................70
8.9.2. Collateral Reports. .................................70
8.9.3. Commercial Finance Examinations. ....................70
8.9.4. Environmental Assessments. ...........................71
8.9.5. Communications with Accountants.......................71
8.10. Compliance with Laws, Contracts, Licenses, and Permits.........71
8.11. Employee Benefit Plans. ......................................72
8.12. Use of Proceeds. .............................................72
8.13. Mortgaged Property. ..........................................72
8.14. Bank Accounts. ...............................................72
8.14.1. General. ...........................................72
8.14.2. Acknowledgment of Application........................73
8.15 .................................................................73
<PAGE>
Maintenance and Collection of Base Contracts; Custodian........73
8.16. Borrower's Transactions With FCI .............................74
8.17. Servicing of Base Contracts. .................................75
8.18. Legal Opinions. ..............................................76
8.19. Further Assurances. ..........................................76
8.20. Computer Equipment. ..........................................77
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. ............................77
9.1. Restrictions on Indebtedness. ..................................77
9.2. Restrictions on Liens. ........................................78
9.3. Restrictions on Investments. ..................................80
9.4. Distributions. ................................................81
9.5. Merger, Consolidation and Disposition of Assets.................81
9.5.1. Mergers and Acquisitions. ...........................81
9.5.2. Disposition of Assets. ..............................81
9.5.3. Disposition of Stock. ...............................82
9.6. Sale and Leaseback..............................................82
9.7. Compliance with Environmental Laws..............................82
9.8. Subordinated Debt. ............................................83
9.9. Employee Benefit Plans. .......................................83
9.10. Business Activities. .........................................84
9.11. Fiscal Year. .................................................84
9.12. Transactions with Affiliates. ................................84
9.13. Bank Accounts. ...............................................84
9.14. No Termination or Amendments. .................................84
10. FINANCIAL COVENANTS OF THE BORROWER. ..................................85
10.1. Debt Service Coverage Ratio. ..................................85
10.2. Liabilities to Worth Ratio. ...................................85
10.3. Consolidated Tangible Net Worth. ..............................85
11. CLOSING CONDITIONS. ...................................................85
11.1. Loan Documents. ...............................................85
11.2. Certified Copies of Charter Documents. ........................86
11.3. Corporate, Action. ............................................86
11.4. Incumbency Certificate. .......................................86
11.5. Validity of Liens. ............................................86
11.6. Perfection Certificates and UCC Search Results. ...............86
11.7. Certificates of Insurance. ....................................87
11.8. Agency Account Agreements. ....................................87
11.9. Borrowing Base Report. ........................................87
11.10. Base Contracts Aging Report. .................................87
11.11. Opinion of Counsel. ..........................................87
11.12. Payment of Fees. .............................................87
11.13. Other Documents. .............................................87
11.14. Repayment of Existing Credit Agreement. ......................88
12. CONDITIONS TO ALL BORROWINGS. .........................................88
<PAGE>
12.1. Representations True; No Event of Default. ....................88
12.2. No Legal Impediment. ..........................................88
12.3. Governmental Regulation. ......................................88
12.4. Proceedings and Documents. ....................................89
12.5. Borrowing Base Report. ........................................89
13. EVENTS OF DEFAULT; ACCELERATION; ETC. .................................89
13.1. Events of Default and Acceleration. ...........................89
13.2. Termination of Commitments. ...................................93
13.3. Remedies. .....................................................93
13.4. Distribution of Collateral Proceeds. ..........................94
14. SETOFF. ...............................................................95
15. THE AGENT. ............................................................96
15.1. Authorization. ................................................96
15.2. Employees and Agents. .........................................96
15.3. No Liability. .................................................97
15.4. No Representations. ...........................................97
15.4.1. General. ...........................................97
15.4.2. Closing Documentation, etc. ........................98
15.5. Payments. .....................................................98
15.5.1. Payments to Agent. .................................98
15.5.2. Distribution by Agent. .............................98
15.5.3. Delinquent Banks. ..................................98
15.6. Holders of Notes. .............................................99
15.7. Indemnity. ....................................................99
15.8. Agent as Bank. ................................................99
15.9. Resignation. .................................................100
15.10. Notification of Defaults and Events of Default. .............100
15.11. Authorization of Collateral Agency Agreement. ...............100
15.12. Duties in the Case of Enforcement. ..........................100
16. EXPENSES AND INDEMNIFICATION. ........................................101
16.1. Expenses. ....................................................101
16.2. Indemnification. .............................................102
16.3. Survival. ....................................................103
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. .......................103
17.1. Sharing of Information with Section 20 Subsidiary. ...........103
17.2. Confidentiality. .............................................103
17.3. Prior Notification. ..........................................104
17.4. Other. .......................................................104
18. SURVIVAL OF COVENANTS, ETC. ..........................................104
19. ASSIGNMENT AND PARTICIPATION. ........................................105
19.1. Conditions to Assignment by Banks. ...........................105
19.2. Certain Representations and Warranties; Limitations; Covenants.105
<PAGE>
19.3. Register. ....................................................107
19.4. New Notes. ...................................................107
19.5. Participations. ..............................................107
19.6. Disclosure. ..................................................108
19.7. Assignee or Participant Affiliated with the Borrower. ........108
19.8. Miscellaneous Assignment Provisions. .........................109
19.9. Assignment by Borrower. ......................................109
20. NOTICES, ETC. ........................................................110
21. GOVERNING LAW. .......................................................110
22. HEADINGS. ............................................................110
23. COUNTERPARTS. ........................................................111
24. ENTIRE AGREEMENT, ETC. ...............................................111
25. WAIVER OF JURY TRIAL. ................................................111
26. CONSENTS, AMENDMENTS, WAIVERS, ETC. ..................................111
27. SEVERABILITY. ........................................................112
28. RELEASE OF SECURITY. .................................................112
29. SUPERIOR RIGHTS OF BASE CONTRACT PURCHASER.............................113
@@
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
January 15, 1998, by and among FAIRFIELD ACCEPTANCE CORPORATION (the "Borrower"
or "FAC"), a Delaware corporation having its principal place of business at
11001 Executive Center Drive, Little Rock, Arkansas 72211, and BANKBOSTON, N.A.,
a national banking association, and the other lending institutions listed on
Schedule 1 and BankBoston, N.A. as agent for itself and such other lending
- ----------
institutions.
WHEREAS, BKB, the Agent and the Borrower entered into a Third Amended
and Restated Revolving Credit Agreement dated as of September 28, 1993, as
amended by (i) Consent, Waiver and Agreement dated as of September 23, 1994,
(ii) First Amendment to Third Amended and Restated Revolving Credit Agreement
dated as of December 9, 1994, (iii) Second Amendment to Third Amended and
Restated Revolving Credit Agreement dated as of December 19, 1994, (iv) Third
Amendment to Third Amended and Restated Revolving Credit Agreement dated as of
December 12, 1996, (v) Fourth Amendment to Third Amended and Restated Revolving
Credit Agreement dated as of December 19, 1997, and (vi) Fifth Amendment to
Third Amended and Restated Revolving Credit Agreement dated as of February 13,
1998 (as so amended, the "Existing Credit Agreement");
WHEREAS, BKB and the Agent have agreed with the Borrower, subject to
the conditions contained herein, to amend and restate the Existing Credit
Agreement;
NOW, THEREFORE, the Borrower, BKB and the Agent agree that the Existing
Credit Agreement is amended and restated in its entirety as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. Definitions. The following terms shall have the meanings set forth in
-----------
this ss.1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Administrative Fee. See ss.5.1.
------------------
Affiliate. Any Person that would be considered to be an affiliate of
---------
the Borrower under Rule 144(a) of the Rules and Regulations of the
<PAGE>
Securities and Exchange Commission, as in effect on the date hereof, if the
Borrower were issuing securities.
Agency Account Agreement. See ss.8.14.1.
------------------------
Agent's Head Office. The Agent's head office located at 100 Federal
--------------------
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Banks.
-----
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may
-----------------------
be approved by the Agent.
Approved Projects. (i) All portions of those vacation ownership resorts
-----------------
and developments identified on Schedule 1-A hereto, and (ii) vacation ownership
resorts and developments acquired, developed, owned and operated by FCI or any
of its Subsidiaries after the date of this Credit Agreement which are (a)
located in any of the Existing Resort Cities, (b) approved by the Agent and the
Banks or (c) Startup Projects, provided, however, that a Startup Project shall
cease to be an Approved Project at such time as FCI and/or its Subsidiaries have
made expenditures for or with respect to such Startup Project in excess of
$15,000,000.
Assignment and Acceptance. See ss.19.1.
-------------------------
Balance Sheet Date. September 30, 1997.
------------------
Banks. BKB and the other lending institutions listed on Schedule 1
-----
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to ss.19.
Base Contract Default. With respect to any Base Contract, when the
-----------------------
obligor thereunder is at the relevant time of determination ninety (90) or more
days delinquent in the payment of any installment or other periodic payment of
principal, interest or amounts due thereunder.
Base Contracts. Lot Contracts and Timeshare Contracts.
--------------
Base Rate. The higher of (i) the annual rate of interest announced from
---------
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds
<PAGE>
brokers, as published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three funds brokers of recognized standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
---------------
reference to the Base Rate.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a national
---
banking association, in its individual capacity.
BKB Concentration Account. See ss.8.14.1.
-------------------------
Borrower. As defined in the preamble hereto.
--------
Borrowing Base. At the relevant time of reference thereto, an amount
---------------
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Banks and the Agent pursuant to ss.8.4(f) which is equal to the
sum of:
(a) 75% of the aggregate Principal Balances of all Eligible Base Contracts;
plus
- ----
(b) 85% of the aggregate Principal Balances of all Eligible Prime Base
Contracts; plus
----
(c) 65% of the aggregate Principal Balance of all Eligible Green Base
Contracts; provided, that in no event shall the weighted average rate of
--------
interest accruing on the aggregate Principal Balances of all Eligible Base
Contracts, Eligible Prime Base Contracts and Eligible Green Base Contracts
included in the Borrowing Base under clauses (a), (b) and (c) be less than
twelve percent (12%) per annum, and if such weighted average rate of interest is
less than twelve percent (12%) at any time of determination, Eligible Base
Contracts, Eligible Prime Base Contracts and Eligible Green Base Contracts
having an interest rate of less than twelve percent (12%) shall be excluded from
the Borrowing Base in an amount sufficient to cause such weighted average rate
of interest to equal or exceed twelve percent (12%), and further provided, that
------- --------
in no event shall the portion of the Borrowing Base under clauses (a), (b) and
(c) attributable to Base Contracts for Vacation Club Memberships exceed
$10,000,000; plus
(d) 25% of the FRC Subordinated Interest, so long as the FRC Subordinated
Note is a legal, valid and binding obligation and no default has occurred and is
continuing under any of the FRC Subordinated Note, the FRC Receivables Purchase
Agreement or the FRC Credit Agreement.
<PAGE>
Borrowing Base Report. A Borrowing Base Report signed by the senior
----------------------
vice president, treasurer or chief financial officer of the Borrower and in
substantially the form of Exhibit A hereto.
---------
Business Day. Any day on which banking institutions in Boston,
-------------
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
---------------------
Borrower or any of its Subsidiaries in connection with (i) the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles, or (ii) the lease of
any assets by the Borrower or any of its Subsidiaries as lessee under any
synthetic lease referred to in clause (vi) of the definition of the term
"Indebtedness" to the extent that such assets would have been Capital Assets had
the synthetic lease been treated for accounting purposes as a Capitalized Lease.
Capitalized Leases. Leases under which the Borrower or any of its
-------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See ss.7.18(a).
------
Closing Date. The first date on which the conditions set forth in ss.11
------------
have been satisfied and any Revolving Credit Loans are to be made or any Letter
of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Borrower and
----------
the Guarantors that are or are intended to be subject to the security interests
and liens created by the Security Documents.
<PAGE>
Collateral Agency Agreement. The Collateral Agency Agreement, dated as
---------------------------
of January 15, 1998, by and among (i) the Collateral Agent; (ii) the Agent and
the Banks; (iii) the FCI Agent and the banks under the FCI Credit Agreement;
(iv) EagleFunding Capital Corporation; and (v) the Borrower, FCI, FMB, FRC and
the VB Originating Subsidiaries.
Collateral Agent. BankBoston, N.A., acting as collateral agent for the
-----------------
Agent and the Banks under the Collateral Agency Agreement.
Commitment. With respect to each Bank, the amount set forth on Schedule
---------- --------
1 hereto as the amount of such Bank's commitment to make Loans to, and to
- -
participate in the issuance, extension and renewal of Letters of Credit for the
account of the Borrower, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Commitment Percentage. With respect to each Bank, the percentage set forth
---------------------
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
----------
all of the Banks.
Consolidated or consolidated. With reference to any term defined
------------------------------
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income (or Deficit). The consolidated net income (or
-------------------------------------
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles.
<PAGE>
Consolidated Operating Cash Flow. For any period, an amount equal to
---------------------------------
(i) the sum of (A) Earnings Before Interest and Taxes for such period, plus (B)
----
depreciation, amortization and all other noncash charges for such period, less
----
(ii) the sum of (A) cash payments for all taxes paid during such period, plus
(B) Capital Expenditures made during such period.
Consolidated Tangible Net Worth. The excess of Consolidated Total Assets
--------------------------------
over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand
<PAGE>
names, copyrights, patents and licenses, and rights with respect to
the foregoing; plus
(b) all amounts representing any write-up in the book value of
any assets of the Borrower or its Subsidiaries resulting from a
revaluation thereof subsequent to the Balance Sheet Date; plus
(c) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any subscriptions receivable.
Consolidated Total Assets. The sum of (i) all assets ("consolidated
---------------------------
balance sheet assets") of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles,
plus (ii) without duplication, all assets leased by the Borrower or any
- ----
Subsidiary as lessee under any synthetic lease referred to in clause (vi) of the
definition of the term "Indebtedness" to the extent that such assets would have
been consolidated balance sheet assets had the synthetic lease been treated for
accounting purposes as a Capitalized Lease, plus (iii) without duplication, all
----
sold receivables referred to in clause (vii) of the definition of the term
"Indebtedness" to the extent that such receivables would have been consolidated
balance sheet assets had they not been sold.
Consolidated Total Interest Expense. For any period, the aggregate
--------------------------------------
amount of interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease, or any synthetic lease referred to in clause (vi) of the
definition of the term "Indebtedness," and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.
Consolidated Total Liabilities. All liabilities of the Borrower and its
------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Borrower and its Subsidiaries and all other Indebtedness of
the Borrower and its Subsidiaries, whether or not so classified.
Consolidated Total Revenue. For any period, the consolidated revenue of the
--------------------------
Borrower and its Subsidiaries determined in accordance with generally accepted
accounting principles.
<PAGE>
Contract Settlement Date. The 15th day of each calendar month and the last
------------------------
day of each calendar month.
Conversion Request. A notice given by the Borrower to the Agent of the
-------------------
Borrower's election to convert or continue a Loan in accordance with ss.2.6.
Credit Agreement. This Amended and Restated Revolving Credit Agreement,
-----------------
including the Schedules and Exhibits hereto.
Custodial Agreements. Collectively, (i) the Sixth Amended and Restated
--------------------
Custodial Agreement, dated as of December 2, 1996, among the Borrower, FCI and
certain of FCI's Subsidiaries, the Collateral Agent, BKB, the Agent, the FCI
Agent, Capital Markets Assurance Corporation and First Commercial Trust Company,
N.A., as "Custodian", and the Amended and Restated Bailment Agreement, dated as
of December 2, 1996, by and between FCI, FAC and First Commercial Trust Company,
N.A., as "Custodian", and (ii) the Custodial Agreement, dated as of January 15,
1998, among the Borrower, FCI and certain of FCI's Subsidiaries, the Collateral
Agent, BKB, the Agent, FAC Agent, EagleFunding Capital Corporation, and First
Security Trust Company of Nevada, N.A, as "Custodian", and the Bailment
Agreement, dated as of January 15, 1998, among FCI, FAC and First Security Trust
Company of Nevada, N.A.
Custodian. Each Custodian under the Custodial Agreements.
---------
Default. Any of the events specified in ss.13.1, whether or not any
-------
requirement for the giving of notice or the lapse of time, or both, has been
satisfied.
Delinquent Bank. See ss.15.5.3.
---------------
Determination Date. The last date of each calendar month.
------------------
Distribution. The declaration or payment of any dividend on or in
------------
respect of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
<PAGE>
Dollars or $. Dollars in lawful currency of the United States of
-------- -
America.
Domestic Lending Office. Initially, the office of each Bank designated
-----------------------
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
----------
any, located within the United States that will be making or maintaining Base
Rate Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or
-------------
is to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with ss.2.6.
Earnings Before Interest and Taxes. The Consolidated Net Operating
------------------------------------
Income (or Deficit) of the Borrower and its Subsidiaries for any period, after
all expenses and other proper charges but before payment or provision for any
income taxes or interest expense for such period, determined in accordance with
generally accepted accounting principles, after eliminating therefrom all
extraordinary nonrecurring items of income (or loss).
Eligible Assignee. Any of (i) a commercial bank or finance company
------------------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
--------
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance or other Person company, commercial finance company or other financial
institution approved by the Agent, such approval not to be unreasonably
withheld.
Eligible Base Contract. Any Base Contract as to which the Borrower is the
-----------------------
obligee thereunder and which satisifies each of the following requirements:
(a) Which is subject to a valid and perfected Lien in favor of the
Agent for the benefit of the Banks; provided, however, that with respect to
<PAGE>
any Base Contract originated prior to February 13, 1998 by any VB Originating
Subsidiary, the failure to deliver the original copy of such Base Contract (or
in the case of a Base Contract consisting of a sales contract and a separate
promissory note, a copy of such sales contract and the original of such
promissory note) to the Custodian prior to any relevant date of determination
occurring prior to April 15, 1998 shall not disqualify such Base Contract as an
Eligible Base Contract by reason of this clause (a) so long as the original copy
of such Base Contract (or in the case of a Base Contract consisting of a sales
contract and a separate promissory note, a copy of such sales contract and the
original of such promissory note) is delivered to the Custodian as soon as
possible and in any event on or before April 15, 1998, and any such Base Contact
not so delivered by April 15, 1998 shall cease to be an Eligible Base Contract;
(b) (i) Which is a legal, valid and binding obligation that has not
been cancelled or terminated (regardless of whether the obligor thereunder is
legally entitled to do so) or been declared ineligible by the Borrower and (ii)
as to which all periods of time during which the obligor thereunder may rescind,
cancel or terminate such Base Contract have expired without the obligor having
exercised any such right;
(c) Which is not in Base Contract Default;
(d) As to which the obligor thereunder has paid a downpayment in an
amount equal to at least 10% of the total principal amount due thereunder
(including in such total any cash downpayments made under such Base Contract at
origination, principal payments made under any other Base Contract which has
been "traded in" in connection with the origination of the subject Base
Contract, and downpayments under such Base Contract made over a period not
exceeding six (6) months from the date of origination of such Base Contract).
(e) Which arises from transactions in a jurisdiction where the Borrower
or any Subsidiary of the Borrower which originates Base Contracts maintains its
right to do business, unless the Borrower has demonstrated to the satisfaction
of the Majority Lenders in their sole discretion that the legality, validity,
binding effect and enforceability of such Base Contract has not been impaired by
any failure to maintain the right to do business in such jurisdiction;
(f) Which is substantially in the form of Exhibit D attached hereto or
---------
in a form containing material variations from the attached form which has been
approved in writing by the Agent;
<PAGE>
(g) With respect to a Timeshare Contract as to which the underlying
unit is (i) complete and ready for occupancy, and (ii) free of all liens and
encumbrances (except with respect to the underlying units in the vacation
ownership resort known as Vacation Break at Star Island located at Kissimmee,
Florida, which may not be free of all liens and encumbrances);
(h) That requires the obligor thereunder to pay the unpaid principal
balance over an original term of not greater than one hundred twenty (120)
months;
(i) Which is related to an Approved Project, provided that a Base
--------
Contract which has previously been an Eligible Base Contract and is related to a
vacation ownership resort or development which subsequently loses its status as
an Approved Project shall remain an Eligible Base Contract (as long as such Base
Contract would otherwise qualify as an Eligible Base Contract);
(j) As to which any installment payable thereunder has not been deferred
subsequent to January 31, 1998 other than pursuant to a Permitted Deferral;
(k) As to which the Borrower has a valid ownership interest in an
underlying VOI or Lot subject only to Permitted Liens, except as otherwise
provided in clause (1) below;
(l) Where (i) if the related VOI or Lot has been deeded to the obligor
of the related Base Contract, on the date on which such Base Contract was
granted as security to the Collateral Agent for the benefit of the Agent and the
Banks (except as otherwise provided in clause (C) below): (A) the Borrower has a
valid and enforceable first lien mortgage, deed of trust, vendor's lien or
retention of title of record on such VOI or Lot, (B) such mortgage, deed of
trust, vendor's lien or retention of title shall be assigned to the Collateral
Agent for the benefit of the Agent and the Banks, (C) the original of such
recorded or unrecorded mortgage, deed of trust, vendor's lien or retention of
title (or a copy of such recorded mortgage, deed of trust, vendor's lien or
retention of title if the original recorded copy is not available) shall be
delivered to the custody of the Custodian as soon as possible, but in any event
within one hundred and eighty (180) days after the deeding of such VOI or Lot,
and (D) if any mortgage, deed of trust, vendor's lien or retention of title
relating to such Base Contract is a deed of trust, a trustee, duly qualified
under applicable law to serve as such, has been properly designated in
accordance with applicable law and currently so serves, (ii) if the related VOI
or Lot has not been deeded to the obligor of the related Base Contract, is not
located
<PAGE>
in Florida and is not related, and has not been related within the past one
hundred and eighty (180) days, to an Eligible Green Base Contract, on the date
on which such contract was granted as security to the Collateral Agent for the
benefit of the Agent and the Banks, a nominee under the Title Clearing
Agreements has legal title to such VOI or Lot and the Borrower has an equitable
interest in such VOI or Lot underlying the related Base Contract, which
equitable interest shall be assigned to the Collateral Agent for the benefit of
the Agent and the Banks, and (iii) if the related VOI or Lot was the subject of
an Eligible Green Base Contract, the Borrower shall have caused the VOI or Lot
to comply with the requirements of clause (i) or (ii) immediately above, as
applicable, as soon as possible, but in any event within one hundred and eighty
(180) days after the date upon which such Base Contract ceased to be an Eligible
Green Base Contract.
(m) Which was issued in a transaction which complied, and is in
compliance in all material respects, with all requirements of applicable
federal, state and local laws, including those relating to usury,
truth-in-lending, land sales, vacation time share sales, consumer credit and
disclosure laws;
(n) Where payments to be made thereunder are denominated and payable in
United States dollars;
(o) The underlying ownership interest which is the subject of such Base
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
timeshare regime at the Fairfield Pagosa resort in Archuleta County, Colorado,
an undivided leasehold interest) in a lodging unit or group of lodging units at
an Approved Project, or (iii) is a lot at an Approved Project, 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 Fair
Share Plus Program, which conversion or other modification does not give rise to
the extension of the maturity of any payments under such Base Contract;
(p) Which was originated by FCI or a Subsidiary of FCI, and has been
(or in the case of Base Contracts originated prior to January 31, 1998 by the VB
Originating Subsidiaries, from and after January 31, 1998 will be) consistently
serviced by the Borrower or FCI in the ordinary course of its respective
business;
<PAGE>
(q) Which has not been specifically reserved against by the Borrower,
and has not been classified by the Borrower as uncollectable or charged off;
(r) As to which the payment obligation of the obligor thereunder is not
subject to any material dispute between such obligor and the Borrower;
(s) Where the obligor thereunder is a United States citizen and has a
United States mailing address, or with respect to Base Contracts constituting
not more than 5% the aggregate Principal Balances of all Eligible Base Contracts
as of the relevant date of determination, where the obligor thereunder is not a
United States citizen or does not have a United States mailing address;
(t) Where the obligor thereunder is not an Affiliate of the Borrower,
FCI or any of FCI's Subsidiaries;
(u) That is fully amortizing pursuant to a required set of regular
monthly payments of principal and interest;
(v) That is not an obligation of an obligor that is bankrupt or
otherwise involved, whether voluntary or involuntary, in any case or proceeding
under any bankruptcy, reorganization, arrangement, insolvency, adjustment of
debt, dissolution, liquidation or similar law of any jurisdiction and
(w) Which is not an Eligible Prime Base Contract.
Eligible Green Base Contract. Any Timeshare Contract which would be an
----------------------------
Eligible Base Contract hereunder but for the qualification contained in clause
(g) of the definition of "Eligible Base Contract" and with respect to which the
underlying unit is anticipated to be completed and ready for occupancy within
one (1) year following the origination of such Timeshare Contract; provided that
any such Timeshare Contract shall cease to be an Eligible Green Base Contract
one (1) year following the origination of such Timeshare Contract and provided
--------
further that an Eligible Green Base Contract need not comply with the
- -------
requirements contained in clause (b)(ii) of the definition of "Eligible Base
Contract".
Eligible Prime Base Contract. Any Timeshare Contract which would
------------------------------
qualify as an Eligible Base Contract hereunder but for the qualification
contained in clause (w) of the definition of "Eligible Base Contract" and which
meets the following additional qualifications:
<PAGE>
(a) the obligor thereunder is not in Prime Contract Default;
(b) (i) the obligor thereunder has paid a downpayment in an amount
equal to at least 15% of the total principal amount due thereunder (including in
such total any cash downpayments made under such Base Contract at origination,
principal payments made under any other Base Contract which has been "traded in"
in connection with the origination of the subject Base Contract, and
downpayments under such Base Contract made over a period not exceeding six (6)
months from the date of origination of such Base Contract), or (ii) the Obligor
thereunder (A) has paid a downpayment in an amount equal to at least 10% of the
total principal amount due thereunder (including in such total any cash
downpayments made under such Base Contract at origination and principal payments
made under any Base Contract which has been "traded in" in connection with the
origination of the subject Base Contract) and (B) has made a minimum of six (6)
consecutive, regular monthly payments of principal and interest; provided that
until July 31, 1998, Base Contracts originated prior to January 31, 1998 by the
VB Originating Subsidiaries shall be deemed to have satisfied the requirements
of this clause (b)(ii)(B).
Employee Benefit Plan. Any employee benefit plan within the meaning of
----------------------
ss.3(3) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See ss.7.18(a).
------------------
EPA. See ss.7.18(b).
---
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
---------------
Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
------------------------
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
---------------------------
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in
<PAGE>
Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
-----------------------
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
---------------------------
designated as such in Schedule 1 hereto; thereafter, such other office of such
----------
Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
----------------
Rate Loan, the rate of interest equal to (i) the rate per annum (rounded upwards
to the nearest 1/16 of one percent) at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
the eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of the Reference Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans bearing interest calculated
---------------------
by reference to the Eurodollar Rate.
Event of Default. See ss.13.1.
----------------
Existing Resort Cities. Any of Flagstaff, Arizona; Fairfield Bay,
------------------------
Arkansas; Ventura, California; Kissimmee, Florida; Orlando, Florida; Pompano
Beach, Florida; Villa Rica, Georgia; Branson, Missouri; Lake Lure, North
Carolina; New Bern, North Carolina; Saphire, North Carolina; Edisto Island,
South Carolina; Myrtle Beach, South Carolina; Fairfield Glade, Tennessee; Pagosa
Springs, Colorado; Nashville, Tennessee; Broward County, Florida; Alexandria,
Virginia; and Williamsburg, Virginia. In addition, any city in which a Startup
Project exists and has generated positive net income for each of four (4)
consecutive months shall be deemed an Existing Resort City.
Excluded Subsidiaries. FCC, FRC and FFC.
---------------------
<PAGE>
FAC. As defined in the preamble hereto.
---
Fair Share Plus Program. The program pursuant to which the occupancy
-------------------------
and use of a VOI is assigned to the trust created by the Amended and Restated
Fair Share Vacation Plan Use Management Trust Agreement, effective as of January
1, 1996, among FCI and certain Subsidiaries of FCI and third party developers as
may be named by an amendment or addendum thereto, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement (the "Fair Share Plus Agreement"),
in exchange for annual symbolic points which are used to establish the location,
timing, length of stay and unit type of a vacation; including, without
limitation, systems relating to reservations, accounting and collection,
disbursement and enforcement of assessments in respect of contributed units.
FCC. Fairfield Capital Corporation, a Delaware corporation and a
---
wholly-owned subsidiary of FAC.
FFC. Fairfield Funding Corporation, a Delaware corporation and a wholly-
---
owned subsidiary of FAC.
FCI. Fairfield Communities, Inc. a Delaware corporation and the parent of
---
the Borrower.
FCI Agent. BankBoston, N.A., acting as agent for the banks under the FCI
---------
Credit Agreement.
FCI Credit Agreement. The Amended and Restated Revolving Credit Agreement,
--------------------
dated as of January 15, 1998, by and among FCI, BKB and the other banks who may
become parties thereto, and the FCI Agent.
FMB. Fairfield Myrtle Beach, Inc. a Delaware corporation and a wholly-owned
---
subsidiary of FCI.
FRC. Fairfield Receivables Corporation, a Delaware corporation and wholly-
---
owned subisidiary of FCI.
FRC Credit Agreement. The Credit Agreement, dated as of January 15, 1998,
--------------------
by and among FRC, EagleFunding Capital Corporation, FAC, FCI, BankBoston
Securities, Inc., as deal agent, and the Collateral Agent.
FRC Subordinated Interest. The unpaid principal amount of the FRC
----------------------------
Subordinated Note.
<PAGE>
generally accepted accounting principles. (i) When used in ss.10,
------------------------------------------
whether directly or indirectly through reference to a capitalized term used
therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(B) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided above,
means principles that are (A) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (B) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
------------------------
meaning of ss.3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantors. Each of FCI, FMB, Vacation Break, the VB Originating
----------
Subsidiaries and any other Subsidiary of FCI which becomes a party to the
Guaranty after the Closing Date.
Guaranty. The Guaranty, dated or to be dated on or prior to the Closing
--------
Date, made by each Guarantor in favor of the Banks and the Agent pursuant to
which each Guarantor guarantees to the Banks and the
<PAGE>
Agent the payment and performance of the Obligations and otherwise in form and
substance satisfactory to the Banks and the Agent.
Hazardous Substances. See ss.7.18(b).
--------------------
Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person,
(iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized Lease,
(vi) every obligation of such Person under any lease (a
"synthetic lease") treated as an operating lease under generally
accepted accounting principles and as a loan or financing for U.S.
income tax purposes,
(vii) all sales by such Person of (A) accounts or general
intangibles for money due or to become due, (B) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (C) other receivables (collectively "receivables"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person
relating thereto or a disposition of defaulted receivables for
collection and not as a financing arrangement, and together with any
obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in
connection therewith,
<PAGE>
(viii) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights,
(ix) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or
arrangement (including, without limitation, caps, floors, collars and
similar agreements), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices,
(x) every obligation in respect of Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent that such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such
entity, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor and such terms are
enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or
otherwise acting as surety for, any obligation of a type described in
<PAGE>
any of clauses (i) through (x) (the "primary obligation") of another
Person (the "primary obligor"), in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such
Person (A) to purchase or pay (or advance or supply funds for the
purchase of) any security for the payment of such primary obligation,
(B) to purchase property, securities or services for the purpose of
assuring the payment of such primary obligation, or (C) to maintain
working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be
<PAGE>
the amount of unrecovered capital or principal investment of the purchaser
(other than the Borrower or any of its wholly-owned Subsidiaries) thereof,
excluding amounts representative of yield or interest earned on such investment,
(y) any synthetic lease shall be the stipulated loss value, termination value or
other equivalent amount and (z) any equity related purchase obligation shall be
the maximum fixed redemption or purchase price thereof inclusive of any accrued
and unpaid dividends to be comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt in
---------------------
by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. ss.24, Seventh), as amended.
Interest Payment Date. (i) As to any Base Rate Loan, the last day of the
----------------------
calendar month with respect to interest accrued during such calendar month,
including, without limitation, the calendar month which includes the Drawdown
Date of such Base Rate Loan; and (ii) as to any Eurodollar Rate Loan, the last
day of each calendar month included in the Interest Period for such Eurodollar
Rate Loan and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (i) initially,
---------------
the period commencing on the Drawdown Date of such Loan and ending on the last
day of one of the periods set forth below, as selected by the Borrower in a Loan
Request or as otherwise required by the terms of this Credit Agreement (A) for
any Base Rate Loan, the last day of the calendar month and (B) for any
Eurodollar Rate Loan, 1, 2, or 3 months; and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Revolving Credit Loan and ending on the last day of one of the periods set
forth above, as selected by the Borrower in a Conversion Request; provided that
--------
all of the foregoing provisions relating to Interest Periods are subject to the
following:
(a) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(b) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
<PAGE>
(c) if the Borrower shall fail to give notice as provided in
ss.2.6, the Borrower shall be deemed to have requested a conversion of
the affected Eurodollar Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day
of the then current Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan
that begins on the last Eurodollar Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Eurodollar Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date shall end on the Revolving Credit
Loan Maturity Date.
Interim Concentration Account. See ss.8.14.1.
-----------------------------
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof. Any purchase of assets
acquired primarily for purposes of operating the business of the Borrower and
its Subsidiaries shall not be deemed to be an Investment, nor shall any
prepayment of or advance for fees or expenses for services or goods in the
Borrower's normal course of business (including prepayments or advances under
marketing agreements).
Letter of Credit. See ss.4.1.1.
----------------
Letter of Credit Application. See ss.4.1.1.
----------------------------
Letter of Credit Fee. See ss.4.6.
--------------------
<PAGE>
Letter of Credit Participation. See ss.4.1.4.
------------------------------
Lien. (i) With respect to real property, a first priority mortgage or deed
----
of trust lien, and (ii) with respect to personal property, a fully perfected
first priority security interest.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
---------------
Applications, the Letters of Credit, the Collateral Agency Agreement, the
Security Documents and the fee letter agreement described in ss.5.1.
Loan Request. See ss.2.5.
------------
Loans. The Revolving Credit Loans.
-----
Local Account. See ss.8.14.1.
-------------
Lot. Any lot related to a Base Contract.
---
Lot Contracts. Any installment contract or contract for deed or
--------------
contracts or notes secured by a mortgage, deed of trust, vendor's lien or
retention of title entered into with a purchaser of one or more individual lots
or plots or tracts of land and the improvements thereon.
Majority Banks. As of any date, the Banks holding at least fifty-one
---------------
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitutes at least fifty-one percent (51%) of the Total Commitment.
Material Adverse Effect. With respect to any event or circumstance, a
-----------------------
material adverse effect on
(a) the business, properties, operations, profits, prospects, or
condition (financial or otherwise) of the Borrower and its Subsidiaries (taken
as a whole);
(b) the ability of any of the Borrower and the Guarantors to perform
its respective obligations under any of the Loan Documents to which it is a
party;
(c) the validity or enforceability of, or collectibility of amounts
payable under, the Credit Agreement, the Notes or any of the other Loan
Documents;
<PAGE>
(d) the status, existence, perfection or priority of the Collateral
Agent's liens or security interests in the Collateral; or
(e) the value, validity, enforceability or collectibility of the Loans,
the Guaranty, or any of the Collateral (as applicable).
Maximum Drawing Amount. The maximum aggregate amount that the
------------------------
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
------------------
Mortgages. The several mortgages and deeds of trust granted by the
---------
Borrower and its Subsidiaries (other than Excluded Subsidiaries) to the Agent
pursuant to and in accordance with the provisions of ss.8.13 hereof with respect
to the fee and leasehold interests of the Borrower and such Subsidiaries in the
Real Estate and in form and substance satisfactory to the Banks and the Agent.
Multiemployer Plan. Any multiemployer plan within the meaning of
-------------------
ss.3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Notes. The Revolving Credit Notes.
-----
Obligations. All indebtedness, obligations and liabilities of any of
-----------
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Application, Letter of Credit or other instruments
at any time evidencing any thereof.
Operating Account. One or more of the Borrower's operating accounts
------------------
with the Agent.
Operating Agreement. The Fourth Amended and Restated Operating
---------------------
Agreement, dated as of January 15, 1998, by and among the Borrower, FCI, FMB and
the VB Originating Subsidiaries.
<PAGE>
outstanding. With respect to the Loans, the aggregate unpaid principal
-----------
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of
----
ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
-----------------------
Security Agreements.
Permitted Deferral. With respect to any Base Contract, deferrals of
-------------------
not more than three installments payable thereunder from and after January 31,
1998.
Permitted Liens. Liens, security interests and other encumbrances
----------------
permitted by ss.9.2.
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
POA. The property owners' association or similar time-share owner body
---
for each VOI Regime or Project or relevant portion of either thereof, in each
case established pursuant to the declarations, articles or similar charter
documents applicable to each such VOI Regime, Project or portion thereof.
Points. With respect to a VOI unit at any VOI Regime, the number of
------
points of symbolic value assigned to such unit pursuant to the FairShare Plus
Program.
Prime Contract Default. With respect to any Base Contract, when the
-----------------------
obligor thereunder is at the relevant time of determination sixty-one (61) or
more days delinquent in the payment of any installment or other periodic payment
of principal, interest or amounts due thereunder.
Principal Balance. With respect to a Base Contract, and as of a date of
-----------------
determination, the unpaid principal balance of such Base 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
Base Contract and (y) any related installment note which together constitute one
and the same Base Contract.
<PAGE>
Project. Any vacation ownership resort and development which is owned
-------
and/or operated by FCI or any of its Subsidiaries and with respect to which Base
Contracts are originated or expected to be originated.
RCRA. See ss.7.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee
-----------
or sublessee) by the Borrower or any of its Subsidiaries.
Receivables Purchase Agreements. Collectively, the FRC Receivables
---------------------------------
Purchase Agreement, the Amended and Restated Receivables Purchase Agreement,
dated as of July 31, 1996, among FCC, FAC, FCI and FMB, and the Receivables
Purchase Agreement, dated as of September 28, 1993, among FFC, FAC, FCI and FMB.
Record. The grid attached to a Note, or the continuation of such grid,
------
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Bank. BKB.
--------------
Register. See ss.19.3.
--------
Reimbursement Obligation. The Borrower's obligation to reimburse the
-------------------------
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in ss.4.2.
Repurchase Default. With respect to any Base Contracts of the Borrower,
------------------
when the obligor thereunder is at the relevant time of determination more than
(90) days delinquent in the payment of any installment or other periodic payment
of principal, interest or amounts due thereunder.
Request Date. See ss.3.4.
------------
Revolving Credit Loan Maturity Date. January 31, 2001.
-----------------------------------
Revolving Credit Loans. The Tranche A Loans and Tranche B Loans.
----------------------
Revolving Credit Note Record. A Record with respect to a Revolving
----------------------------
Credit Note.
Revolving Credit Notes. See ss.2.3.
----------------------
SARA. See ss.7.18(a).
----
<PAGE>
Section 20 Subsidiary. A Subsidiary of the bank holding company
-----------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Securitization. Any transaction in which one or more pools of Base
--------------
Contracts and related assets are sold to a single-purpose bankruptcy-remote
entity and then pledged to secure the equity raised or debt incurred by such
entity to purchase such Base Contracts, which equity or underlying debt is
marketed (either publicly or privately) to third party investors.
Security Agreements. The several Security Agreements, dated or to be
-------------------
dated on or prior to the Closing Date, between the Borrower and the Guarantors
and the Collateral Agent and in form and substance satisfactory to the Banks and
the Agent.
Security Documents. The Guaranty, the Security Agreements, the
-------------------
Mortgages, if applicable, and all other agreements, instruments and documents
now or hereafter securing the Obligations, including, without limitation,
Uniform Commercial Code financing statements required to be executed or
delivered pursuant to any Security Document.
Settlement. The making or receiving of payments, in immediately
----------
available funds, by the Banks, to the extent necessary to cause each Bank's
actual share of the outstanding amount of Revolving Credit Loans (after giving
effect to any Loan Request) to be equal to such Bank's Commitment Percentage of
the outstanding amount of such Revolving Credit Loans (after giving effect to
any Loan Request), in any case where, prior to such event or action, the actual
share is not so equal.
Settlement Amount. See ss.2.9.1.
-----------------
Settlement Date. (a) The Drawdown Date relating to any Loan Request,
----------------
(b) Friday of each week, or if a Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Agent, on any
Business Day following a day on which the account officers of the Agent active
upon the Borrower's account become aware of the existence of an Event of
Default, (d) any Business Day on which the amount of Revolving Credit Loans
outstanding from BKB plus BKB's Commitment Percentage of the sum of the Maximum
Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater
than BKB's Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Revolving Credit
Loans outstanding increases or decreases by more than
<PAGE>
$500,000 as compared to the previous Settlement Date, (f) any day on which any
conversion of a Base Rate Loan to a Eurodollar Rate Loan occurs, or (g) any
Business Day on which (i) the amount of outstanding Revolving Credit Loans
decreases and (ii) the amount of the Agent's Revolving Credit Loans outstanding
equals zero Dollars ($0).
Settling Bank. See ss.2.9.1.
-------------
Startup Project. Any vacation ownership resort and development
----------------
acquired, developed, owned and operated by FCI or any of the other Guarantors
which is not located in an Existing Resort City and which has never generated
positive net income for each of four (4) consecutive months.
Subordinated Debt. Unsecured Indebtedness of the Borrower or any of its
-----------------
Subsidiaries which may be outstanding from time to time with the express written
consent of the Banks, that is expressly subordinated and made junior to the
payment and performance in full of the Obligations, and evidenced as such by the
Subordination and Intercreditor Agreement or by another written instrument
containing subordination provisions in form and substance approved by the Banks
in writing (it being understood that the Banks shall have no obligation to
consent to the incurrence of any such Subordinated Debt, and may refuse to
consent for any reason or no reason).
Subsidiary. Any corporation, association, trust, partnership or other
----------
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock, including, without limitation, the VB
Partnership Subsidiaries with respect to FCI.
Tax Sharing Agreement. The Amended and Restated Tax Sharing Agreement,
---------------------
dated September 28, 1993, between FCI and the Borrower.
Timeshare Contract. Any installment contract or contract for deed, or
------------------
contracts or notes secured by a mortgage, deed of trust, vendor's lien or
retention of title entered into with a purchaser or lessee of one or more VOIs.
Title Clearing Agreements. (a) The Seventh Amended and Restated Title
--------------------------
Clearing Agreement (Lawyers), dated as of January 15, 1998, as further amended
from time to time, among FCI, FAC, Lawyers Title Insurance Corporation, Capital
Markets Assurance Corporation, First Commercial Trust Company, N.A., the
Collateral Agent, BKB, the Agent and the FCI Agent; (b) the Fourth Amended and
Restated Supplementary
<PAGE>
Trust Agreement (Arizona), dated as of January 15, 1998, as further amended from
time to time, among FCI, FAC, First American Title Insurance Company, First
Commercial Trust Company, N.A., Capital Markets Assurance Corporation, the
Collateral Agent, BKB, the Agent and the FCI Agent; (c) the Fifth Amended and
Restated Title Clearing Agreement (Colorado), dated as of January 15, 1998, as
amended from time to time, among FCI, FAC, Capital Markets Assurance
Corporation, Colorado Land Title Company, First Commercial Trust Company, N.A.,
the Collateral Agent, BKB, the Agent and the FCI Agent; (d) the Westwinds Fourth
Amended and Restated Title Clearing Agreement, dated as of January 15, 1998, as
further amended from time to time, among FCI, FMB, FAC, Lawyers Title Insurance
Corporation, Capital Markets Assurance Corporation, First Commercial Trust
Company, N.A., Resort Funding, Inc., the Collateral Agent, BKB, the Agent and
the FCI Agent; (e) the Second Amended and Restated Nashville Title Clearing
Agreement, dated as of January 15, 1998, as further amended from time to time,
among FAC, FCI, Lawyers Title Insurance Corporation, Capital Markets Assurance
Corporation, the Collateral Agent, BKB, the Agent and the FCI Agent; (f) the
Second Amended and Restated Seawatch Plantation Title Clearing Agreement, dated
as of January 15, 1998, as further amended from time to time, among FCI, FAC,
FMB, Lawyers Title Insurance Corporation, Capital Markets Assurance Corporation,
the Collateral Agent, BKB, the Agent and the FCI Agent; and (g) any similar
agreement governing the obligations of any new or successor nominee holding
title to any VOIs or Lots at Projects.
Total Commitment. The sum of the Commitments of the Banks, as in
-----------------
effect from time to time.
Tranche A Borrowing Base. That portion of the Borrowing Base
----------------------------
attributable to clauses (a), (b) and (c) of the definition of Borrowing Base set
forth herein.
Tranche B Borrowing Base. That portion of the Borrowing Base
----------------------------
attributable to clause (d) of the definition of Borrowing Base set forth herein.
Tranche A Loans. The revolving credit loans made or to be made by the
---------------
Banks to the Borrower pursuant to ss2.1(a).
Tranche B Loans. The revolving credit loans made or to be made by the
---------------
Banks to the Borrower pursuant to ss 2.1(b).
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan,
----
or a Eurodollar Rate Loan.
<PAGE>
UDI. A VOI consisting of either (a) an undivided interest in fee simple
---
(as tenants in common with all other undivided interest owners) in a lodging
unit or group of lodging units at a Project, or (b) an undivided leasehold
interest (as tenants in common with all other undivided interest owners) in any
lodging unit located at the Harbortown Marina Resort Hotel Project in Ventura
County, California or Pagosa Mountain Meadows VOI Regime at the Pagosa Project
in Archuleta County, Colorado.
Uniform Customs. With respect to any Letter of Credit, the Uniform
----------------
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for
---------------------------------
which the Borrower does not reimburse the Agent and the Banks on the date
specified in, and in accordance with, ss.4.2.
Vacation Break. Vacation Break USA, Inc., a Florida corporation and a
--------------
wholly-owned Subsidiary of FCI.
VB Originating Subsidiaries. Collectively, Sea Garden Beach and Tennis
---------------------------
Resort, Inc., a Florida corporation, Vacation Break Resorts, Inc., a Florida
corporation, Vacation Break Resorts at Star Island, Inc., a Florida corporation,
Palm Vacation Group, a Florida general partnership, and Ocean Ranch Vacation
Group, a Florida general partnership.
VB Partnership Subsidiaries. Collectively, Palm Vacation Group, a
-----------------------------
Florida general partnership, and Ocean Ranch Vacation Group, a Florida general
partnership.
Ventura Contracts. Timeshare Contracts with respect to the development
-----------------
in Ventura County, California known as the "Harbortown Marina Resort Hotel".
VOI. The underlying ownership interest which is the subject of a
Timeshare Contract, which ownership interest shall consist of either a fixed
week or undivided fee simple interest (or, in the case of Ventura Contracts or
those Timeshare Contracts for the Pagosa Mountain Meadows timeshare regime at
Fairfield Pagosa, undivided leasehold interest in real property) for a period of
time each year (whether pursuant to the FairShare Plus Program or otherwise) in
a lodging unit or group of lodging units located at a vacation resort or
development owned and/or operated by the Borrower or any of its Subsidiaries.
<PAGE>
VOI Regime. Any of the various interval ownership regimes located at
----------
Projects, each of which is an arrangement, established under applicable state
law, whereby all or a designated portion of a Project is made subject to a
declaration permitting the transfer of VOIs therein, which VOIs shall in each
case constitute real property under the applicable local law of each of the
jurisdictions in which such regime is located.
Voting Stock. Stock or similar interests, of any class or classes
-------------
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2 RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
<PAGE>
(h) Reference to a particular "ss." refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not to
any particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation
of periods of time from a specified date to a later specified date, the
word "from" means "from and including," the words "to" and "until" each
mean "to but excluding," and the word "through" means "to and
including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the
same or similar matters. All such limitations, tests and measurements
are, however, cumulative and are to be performed in accordance with the
terms thereof.
(l) This Credit Agreement and the other Loan Documents are the
result of negotiation among, and have been reviewed by counsel to,
among others, the Agent and the Borrower and are the product of
discussions and negotiations among all parties. Accordingly, this
Credit Agreement and the other Loan Documents are not intended to be
construed against the Agent or any of the Banks merely on account of
the Agent's or any Bank's involvement in the preparation of such
documents.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1 COMMITMENT TO LEND.
------------------
(a) Subject to the terms and conditions set forth in this Credit
Agreement, each of the Banks severally agrees to lend to the Borrower and the
Borrower may borrow, repay, and reborrow from time to time from the Closing Date
up to but not including the Revolving Credit Loan Maturity Date upon notice by
the Borrower to the Agent given in accordance with ss.2.5, Tranche A Loans in
such sums as are requested by the Borrower up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of
-----
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations; provided
--------
that the sum of the outstanding amount of the Tranche A Loans (after giving
effect to all amounts requested) plus the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations
<PAGE>
shall not at any time exceed the lesser of (i) the sum of the Total Commitment
minus the outstanding amount of Tranche B Loans and (ii) the Tranche A Borrowing
- -----
Base. The Tranche A Loans shall be made pro rata in accordance with each Bank's
--- ----
Commitment Percentage. Each request for a Tranche A Loan hereunder shall
constitute a representation and warranty by the Borrower that the conditions set
forth in ss.11 and ss.12, in the case of the initial Tranche A Loans to be made
on the Closing Date, and ss.12, in the case of all other Tranche A Loans, have
been satisfied on the date of such request.
(b) Subject to the terms and conditions set forth in this Credit
Agreement, each of the Banks severally agrees to lend to the Borrower and the
Borrower may borrow, repay, and reborrow from time to time from the Closing Date
up to but not including the Revolving Credit Loan Maturity Date upon notice by
the Borrower to the Agent given in accordance with ss.2.5, Tranche B Loans in
such sums as are requested by the Borrower up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment; provided that the sum of the outstanding amount of
--------
the Tranche B Loans (after giving effect to all amounts requested) shall not at
any time exceed the least of (i) $7,968,750, (ii) the sum of (A) the Total
Commitment minus (B) the sum of the outstanding amount of Tranche A Loans plus
----- ----
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations and (iii)
the Tranche B Borrowing Base. The Tranche B Loans shall be made pro rata in
--- ----
accordance with each Bank's Commitment Percentage. Each request for a Tranche B
Loan hereunder shall constitute a representation and warranty by the Borrower
that the conditions set forth in ss.11 and ss.12, in the case of the initial
Tranche B Loans to be made on the Closing Date, and ss.12, in the case of all
other Tranche B Loans, have been satisfied on the date of such request.
2.2 REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at any
-----------------------------
time and from time to time upon five (5) Business Days prior written notice to
the Agent to reduce by $1,000,000 or an integral multiple thereof or terminate
entirely the Total Commitment, whereupon the Commitments of the Banks shall be
reduced pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated. Promptly
after receiving any notice of the Borrower delivered pursuant to this ss.2.2,
the Agent will notify the Banks of the substance thereof. No reduction or
termination of the Commitments may be reinstated.
<PAGE>
2.3 THE REVOLVING CREDIT NOTES.
--------------------------
The Revolving Credit Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit B hereto (each a
------- -
"Revolving Credit Note"), dated as of the Closing Date and completed with
appropriate insertions. One Revolving Credit Note shall be payable to the order
of each Bank in a principal amount equal to such Bank's Commitment or, if less,
the outstanding amount of all Revolving Credit Loans made by such Bank, plus
interest accrued thereon, as set forth below. The Borrower irrevocably
authorizes each Bank to make or cause to be made, at or about the time of the
Drawdown Date of any Revolving Credit Loan or at the time of receipt of any
payment of principal on such Bank's Revolving Credit Note, an appropriate
notation on such Bank's Revolving Credit Note Record for such Revolving Credit
Note reflecting the making of such Revolving Credit Loan or (as the case may be)
the receipt of such payment. The outstanding amount of the Revolving Credit
Loans set forth on such Bank's Revolving Credit Note Record for such Revolving
Credit Note shall be prima facie evidence of the principal amount thereof owing
----- -----
and unpaid to such Bank, but the failure to record, or any error in so
recording, any such amount on such Bank's Revolving Credit Note Record for such
Revolving Credit Note shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.4 INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
----------------------------------
in ss.5.10,
(a) Each Base Rate Loan that is a Tranche A Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at
the rate of three-quarters of one of one percent (3/4%) per annum below
the Base Rate.
(b) Each Base Rate Loan that is a Tranche B Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at
the rate of three-quarters of one percent (3/4%) per annum above the
Base Rate.
(c) Each Eurodollar Rate Loan that is a Tranche A Loan shall
bear interest for the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with respect thereto
at the rate of two percent (2%) per annum above the Eurodollar Rate
determined for such Interest Period.
<PAGE>
(d) Each Eurodollar Rate Loan that is a Tranche B Loan shall
bear interest for the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with respect thereto
at the rate of three and one-half percent (3 1/2%) per annum above the
Eurodollar Rate determined for such Interest Period.
(e) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
2.5. REQUESTS FOR REVOLVING CREDIT LOANS.
-----------------------------------
The Borrower shall give to the Agent written notice in the
form of Exhibit C hereto (or telephonic notice confirmed in a writing
------- -
in the form of Exhibit C hereto) of each Revolving Credit Loan
------- -
requested hereunder (a "Loan Request") (i) prior to 1:00 p.m. (Boston
time) on the proposed Drawdown Date of any Base Rate Loan and (ii) no
less than four (4) Eurodollar Business Days prior to the proposed
Drawdown Date of any Eurodollar Rate Loan. Each such notice shall
specify (A) the principal amount of the Revolving Credit Loan
requested, (B) the proposed Drawdown Date of such Revolving Credit
Loan, (C) the Interest Period for such Revolving Credit Loan (D)
whether such Loan is to be a Tranche A Loan or a Tranche B Loan, and
(E) the Type of such Revolving Credit Loan. Promptly upon receipt of
any such notice, the Agent shall notify each of the Banks thereof. Each
Loan Request shall be irrevocable and binding on the Borrower and shall
obligate the Borrower to accept the Revolving Credit Loan requested
from the Banks on the proposed Drawdown Date. Each Loan Request shall
be accompanied by a notice setting forth the borrowing availability of
the Borrower taking into account the most recent Borrowing Base Report
delivered to the Agent pursuant to ss.8.4(f) hereof and reflecting (i)
usage of the credit facilities hereunder since the date of such
Borrowing Base Report and (ii) drawdown and repayments of the Revolving
Credit Loans. Each Loan Request for a Eurodollar Rate Loan shall be in
a minimum aggregate amount of $1,000,000 or an integral multiple
thereof.
2.6. CONVERSION OPTIONS.
------------------
2.6.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
---------------------------------------------------------
Borrower may elect from time to time to convert any outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type,
provided that (i) with respect to any such conversion
--------
<PAGE>
of a Revolving Credit Loan to a Base Rate Loan, the Borrower shall
give the Agent at least three (3) Business Days prior written notice
of such election; (ii) with respect to any such conversion of a Base
Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent
at least four (4) Eurodollar Business Days prior written notice of
such election; (iii) with respect to any such conversion of a
Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only
be made on the last day of the Interest Period with respect thereto
and (iv) no Loan may be converted into a Eurodollar Rate Loan when any
Default or Event of Default has occurred and is continuing. On the
date on which such conversion is being made each Bank shall take such
action as is necessary to transfer its Commitment Percentage of such
Revolving Credit Loans to its Domestic Lending Office or its
Eurodollar Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided
--------
that any partial conversion shall be in an aggregate principal amount
of $1,000,000 or a whole multiple thereof. Each Conversion Request
relating to the conversion of a Revolving Credit Loan to a Eurodollar
Rate Loan shall be irrevocable by the Borrower.
2.6.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving
---------------------------------------------
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower with the notice provisions contained in
ss.2.6.1; provided that no Eurodollar Rate Loan may be continued as such
--------
when any Default or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance of any
Default or Event of Default of which officers of the Agent active upon the
Borrower's account have actual knowledge. In the event that the Borrower
fails to provide any such notice with respect to the continuation of any
Eurodollar Rate Loan as such, then such Eurodollar Rate Loan shall be
automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto. The Agent shall notify the Banks promptly
when any such automatic conversion contemplated by this ss.2.6 is scheduled
to occur.
2.6.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
---------------------
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the
<PAGE>
aggregate principal amount of all Eurodollar Rate Loans having the same
Interest Period shall not be less than $1,000,000 or a whole multiple of
$1,000,000 in excess thereof. The Borrower may not request or elect a
Eurodollar Rate Loan pursuant to ss.2.5, elect to convert a Base Rate Loan
to a Eurodollar Rate Loan pursuant to ss.2.6.1, or elect to continue a
Eurodollar Rate Loan pursuant to ss.2.6.2 if, after giving effect thereto,
there would be greater than four (4) Eurodollar Rate Loans then
outstanding. Any Loan Request for a Eurodollar Rate Loan that would create
greater than four (4) Eurodollar Rate Loans outstanding shall be deemed to
be a Loan Request for a Base Rate Loan.
2.7 FUNDS FOR REVOLVING CREDIT LOAN.
---------------------------------
2.7.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston time) on
------------------
the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks
will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
Percentage of the amount of the requested Revolving Credit Loans. Upon
receipt from each Bank of such amount, and upon receipt of the documents
required by ss.ss.11 and 12 and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make available
to the Borrower the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks. The failure or refusal of any Bank to
make available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Commitment Percentage of the requested Revolving
Credit Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of such other Bank's
Commitment Percentage of any requested Revolving Credit Loans. The Agent
may also, without conferring with the Banks, make Revolving Credit Loans
which are Base Rate Loans in the amount requested on such Drawdown Date not
later than 3:00 p.m. (Boston time) by depositing such amount in the
Borrower's account with the Agent.
2.7.2. ADVANCES BY AGENT. The Agent may, unless notified to the
-----------------
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding
<PAGE>
amount. If any Bank makes available to the Agent such amount on a date
after such Drawdown Date, such Bank shall pay to the Agent on demand an
amount equal to the product of (i) the average computed for the period
referred to in clause (iii) below, of the weighted average interest rate
paid by the Agent for federal funds acquired by the Agent during each day
included in such period, times (ii) the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans, times (iii) a fraction, the
-----
numerator of which is the number of days that elapse from and including
such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
----- -----
and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such Drawdown Date.
2.8. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
------------------------
monthly (or at such other interval as may be specified pursuant to
ss.8.4(f)) by the Agent by reference to the Borrowing Base Report,
commercial finance and collateral audit reports, and other information
obtained by or provided to the Agent. The Agent shall give to the Borrower
written notice of any change in the Borrowing Base determined by the Agent.
2.9. SETTLEMENTS.
-----------
2.9.1. GENERAL. On each Settlement Date, the Agent shall, not
-------
later than 11:00 a.m. (Boston time), give telephonic or facsimile
notice (i) to the Banks and the Borrower of the respective outstanding
amount of Revolving Credit Loans made by the Agent on behalf of the
Banks from the immediately preceding Settlement Date through the close
of business on the prior day and the amount of any Eurodollar Rate
Loans to be made (following the giving of notice pursuant to ss.2.5)
on such date pursuant to a Loan Request and (ii) to the Banks of the
amount (a "Settlement Amount") that each Bank (a "Settling Bank")
shall pay to effect a Settlement of any Revolving Credit Loan. A
statement of the Agent submitted to
<PAGE>
the Banks and the Borrower or to the Banks with respect to any amounts
owing under this ss.2.9 shall be prima facie evidence of the amount
----- -----
due and owing. Each Settling Bank shall, not later than 3:00 p.m.
(Boston time) on such Settlement Date, effect a wire transfer of
immediately available funds to the Agent in the amount of the
Settlement Amount for such Settling Bank. All funds advanced by any
Bank as a Settling Bank pursuant to this ss.2.9 shall for all purposes
be treated as a Revolving Credit Loan made by such Settling Bank to
the Borrower and all funds received by any Bank pursuant to this
ss.2.9 shall for all purposes be treated as repayment of amounts owed
with respect to Revolving Credit Loans made by such Bank. In the event
that any bankruptcy, reorganization, liquidation, receivership or
similar cases or proceedings in which the Borrower is a debtor prevent
a Settling Bank from making any Revolving Credit Loan to effect a
Settlement as contemplated hereby, such Settling Bank will make such
dispositions and arrangements with the other Banks with respect to
such Revolving Credit Loans, either by way of purchase of
participations, distribution, pro tanto assignment of claims,
--- -----
subrogation or otherwise as shall result in each Bank's share of the
outstanding Revolving Credit Loans being equal, as nearly as may be,
to such Bank's Commitment Percentage of the outstanding amount of the
Revolving Credit Loans.
2.9.2. FAILURE TO MAKE FUNDS AVAILABLE. The Agent may, unless
-------------------------------
notified to the contrary by any Settling Bank prior to a Settlement
Date, assume that such Settling Bank has made or will make available
to the Agent on such Settlement Date the amount of such Settling
Bank's Settlement Amount, and the Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the
Borrower a corresponding amount. If any Settling Bank makes available
to the Agent such amount on a date after such Settlement Date, such
Settling Bank shall pay to the Agent on demand an amount equal to the
product of (i) the average computed for the period referred to in
clause (iii) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included
in such period, times (ii) the amount of such Settlement Amount, times
(iii) a fraction, the numerator of which is the number of days that
elapse from and including such Settlement Date to the date on which
the amount of such Settlement Amount shall become immediately
available to the Agent, and the denominator of which is 360. A
statement of the Agent submitted to such Settling Bank with respect to
any amounts owing under this ss.2.9.2 shall be prima facie evidence of
the amount
<PAGE>
due and owing to the Agent by such Settling Bank. If such Settling
Bank's Settlement Amount is not made available to the Agent by such
Settling Bank within three (3) Business Days following such Settlement
Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum
applicable to the Revolving Credit Loans as of such Settlement Date.
2.9.3. NO EFFECT ON OTHER BANKS. The failure or refusal of any
------------------------
Settling Bank to make available to the Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Bank's
Settlement Amount shall not (i) relieve any other Settling Bank from
its several obligations hereunder to make available to the Agent the
amount of such other Settling Bank's Settlement Amount or (ii) impose
upon any Bank, other than the Settling Bank so failing or refusing,
any liability with respect to such failure or refusal or otherwise
increase the Commitment of such other Bank.
2.10. REPAYMENTS OF REVOLVING CREDIT LOANS PRIOR TO EVENT OF DEFAULT.
--------------------------------------------------------------
2.10.1 CREDIT FOR FUNDS RECEIVED IN CONCENTRATION ACCOUNT. Prior
--------------------------------------------------
to the occurrence of an Event of Default as to which the account
officers of the Agent active upon the Borrower's account have actual
knowledge, (i) all funds and cash proceeds in the form of money,
checks and like items received in the BKB Concentration Account as
contemplated by ss.8.14 shall be credited, on the same Business Day on
which the Agent determines that good collected funds have been
received, and, prior to the receipt of good collected funds, on a
provisional basis until final receipt of good collected funds, to or
in respect of the Obligations or, as the case may be, to the Operating
Account as contemplated by ss.2.10.2, (ii) all funds and cash proceeds
in the form of a wire transfer received in the BKB Concentration
Account as contemplated by ss.8.14 shall be credited on the same
Business Day as the Agent's receipt of such amounts (or up to such
later date as the Agent determines that good collected funds have been
received), to or in respect of the Obligations or, as the case may be,
to the Operating Account as contemplated by ss.2.10.2, and (iii) all
funds and cash proceeds in the form of an automated clearing house
transfer received in the BKB Concentration Account as contemplated by
ss.8.14 shall be credited, on the next Business Day following the
Agent's receipt of such amounts (or up to such later date as the Agent
determines that good collected funds have been received), to or in
respect of the
<PAGE>
Obligations or, as the case may be, to the Operating Account as
contemplated by ss.2.10.2. For purposes of the foregoing provisions of
this ss.2.10.1, the Agent shall not be deemed to have received any
such funds or cash proceeds on any day unless received by the Agent
before 2:30 p.m. (Boston time) on such day. The Borrower further
acknowledges and agrees that any such provisional credits or credits
in respect of wire or automatic clearing house funds transfers shall
be subject to reversal if final collection in good funds of the
related item is not received by, or final settlement of the funds
transfer is not made in favor of, the Agent in accordance with the
Agent's customary procedures and practices for collecting provisional
items or receiving settlement of funds transfers.
2.10.2 APPLICATION OF PAYMENTS PRIOR TO EVENT OF DEFAULT.
-------------------------------------------------
(a) Prior to the occurrence of an Event of Default of which
the account officers of the Agent active on the Borrower's
account have knowledge, all funds transferred to the BKB
Concentration Account and for which the Borrower has received
credits shall be applied to the Obligations as follows:
(i) first, to pay amounts then due and payable under
this Agreement, the Notes and the other Loan Documents;
(ii) second, to reduce Tranche B Loans which are Base
Rate Loans;
(iii) third, to reduce Tranche B Loans which are
Eurodollar Rate Loans;
(iv) fourth, to reduce Tranche A Loans which are Base
Rate Loans;
(v) fifth, to reduce Tranche A Loans which are
Eurodollar Rate Loans; and
(vi) sixth, except as otherwise required by ss.4.2(b)
and (c), to the Operating Account.
(b) All prepayments of Eurodollar Rate Loans prior to the
end of an Interest Period shall obligate the Borrower to pay any
breakage costs associated with such Eurodollar Rate
<PAGE>
Loans in accordance with ss.5.10. Prior to the occurrence of an
Event of Default, the Borrower may elect to avoid such breakage
costs by providing to the Agent cash in an amount sufficient to
cash collateralize such Eurodollar Rate Loans, but in no event
shall the Borrower be deemed to have paid such Eurodollar Rate
Loans until such cash has been paid to the Agent for application
to such Eurodollar Rate Loans. The Agent may elect to cause such
cash collateral to be deposited into either (i) a cash collateral
account pursuant to the terms of a cash collateral agreement
executed by the Borrower and the Agent and in form and substance
satisfactory to the Agent, or (ii) the Borrower's Operating
Account with appropriate instructions prohibiting the Borrower's
withdrawal of such funds so long as they remain cash collateral.
In each case, the Borrower agrees to execute and deliver to the
Agent such instruments and documents, including Uniform
Commercial Code financing statements and agreements with any
third party depository banks, as the Agent may request.
(c) All repayments of the Revolving Credit Loans
pursuant to this ss.2.10.2 shall be allocated among the Banks
making such Revolving Credit Loans, in proportion, as nearly
as practicable, to the respective unpaid principal amount of
such Revolving Credit Loans outstanding, with adjustments to
the extent practicable to equalize any prior payments or
repayments not exactly in proportion. Prior to any Settlement
Date, however, all repayments of the Revolving Credit Loans
shall be applied in accordance with this ss.2.10.2, first to
outstanding Revolving Credit Loans of the Agent.
2.11. REPAYMENTS OF REVOLVING CREDIT LOANS AFTER EVENT OF DEFAULT.
--------------------------------------------------------------
Following the occurrence and during the continuance of an Event of Default of
which the account officers of the Agent active on the Borrower's account have
knowledge, the Agent, in its sole and absolute discretion, may apply all funds
transferred to the BKB Concentration Account and for which the Borrower has
received credits to the Obligations in accordance with ss.13.4.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving
<PAGE>
Credit Loans outstanding on such date, together with any and all accrued and
unpaid interest thereon.
3.2 MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time (A) the
----------------------------------------------
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (i) the
Total Commitment and (ii) the Borrowing Base, or (B) the sum of the outstanding
amount of the Tranche A Loans, the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the lesser of (i) the sum of the Total
Commitment minus the outstanding amount of Tranche B Loans, or (ii) the Tranche
A Borrowing Base, or (C) the outstanding amount of the Tranche B Loans exceeds
the least of (i) $7,968,750, (ii) the sum of (x) the Total Commitment minus (y)
-----
the sum of the outstanding amount of Tranche A Loans plus the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations, or (iii) the Tranche B
Borrowing Base, then the Borrower shall immediately pay the amount of such
excess to the Agent for the respective accounts of the Banks for application:
first, to any Unpaid Reimbursement Obligations (in the case of (A) or (B) only);
second, to the Tranche A Loans (in the case of (A) or (B) only) and/or the
Tranche B Loans (in the case of (A) or (B) only), as the case may be; and third,
to provide to the Agent cash collateral for Reimbursement Obligations as
contemplated by ss.4.2(b) and (c). Each payment of any Unpaid Reimbursement
Obligations or prepayment of Revolving Credit Loans shall be allocated among the
Banks, in proportion, as nearly as practicable, to each Reimbursement Obligation
or (as the case may be) the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior payments or repayments not exactly in proportion.
3.3 OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall
---------------------------------------------
have the right, at its election, to repay the outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the outstanding amount
--------
of any Eurodollar Rate Loans pursuant to this ss.3.3 may be made only on the
last day of the Interest Period relating thereto. The Borrower shall give the
Agent, no later than 12:00 noon, Boston time, at least one (1) Business Day
prior written notice of any proposed prepayment pursuant to this ss.3.3 of Base
Rate Loans, and four (4) Eurodollar Business Days notice of any proposed
prepayment pursuant to this ss.3.3 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be accompanied by the payment of accrued interest on the
principal
<PAGE>
prepaid to the date of prepayment, shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and then
to the principal of Eurodollar Rate Loans, at the Agent's option, and shall be
in an integral multiple of $500,000 in the case of a partial prepayment of
Eurodollar Rate Loans. Each partial prepayment shall be allocated among the
Banks, in proportion, as nearly as practicable, to the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments to the
extent practicable to equalize any prior repayments not exactly in proportion.
4. LETTERS OF CREDIT.
-----------------
4.1 LETTER OF CREDIT COMMITMENTS.
----------------------------
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
-------------------------------------
conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter
of Credit Application"), the Agent on behalf of the Banks and in
reliance upon the agreement of the Banks set forth in ss.4.1.4 and
upon the representations and warranties of the Borrower contained
herein, agrees, in its individual capacity, to issue, extend and renew
for the account of the Borrower one or more standby letters of credit
(individually, a "Letter of Credit"), in such form as may be requested
from time to time by the Borrower and agreed to by the Agent;
provided, however, that, after giving effect to such request, (a) the
-------- -------
sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $1,000,000 at any one time
and (b) the sum of (i) the Maximum Drawing Amount, (ii) all Unpaid
Reimbursement Obligations, and (iii) the amount of all Tranche A Loans
outstanding shall not exceed the lesser of (A) the sum of the Total
Commitment minus the outstanding amount of Tranche B Loans and (B) the
-----
Tranche A Borrowing Base.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
-----------------------------
Application shall be completed to the satisfaction of the Agent. In
the event that any provision of any Letter of Credit Application shall
be inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
--------------------------
extended or renewed hereunder shall, among other things, (i) provide
for the payment of sight drafts for honor thereunder when
<PAGE>
presented in accordance with the terms thereof and when accompanied by
the documents described therein, and (ii) have an expiry date no later
than the date which is fourteen (14) days (or, if the Letter of Credit
is confirmed by a confirmer or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Revolving Credit
Loan Maturity Date. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
----------------------------------
agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each
draft paid by the Agent under each Letter of Credit to the extent that
such amount is not reimbursed by the Borrower pursuant to ss.4.2 (such
agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a
-----------------------
Bank shall be treated as the purchase by such Bank of a participating
interest in the Borrower's Reimbursement Obligation under ss.4.2 in an
amount equal to such payment. Each Bank shall share in accordance with
its participating interest in any interest which accrues pursuant to
ss.4.2.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce
----------------------------------------
the Agent to issue, extend and renew each Letter of Credit and the
Banks to participate therein, the Borrower hereby agrees to reimburse
or pay to the Agent, for the account of the Agent or (as the case may
be) the Banks, with respect to each Letter of Credit issued, extended
or renewed by the Agent hereunder,
(a) except as otherwise expressly provided in ss.4.2(b) and
(c), on each date that any draft presented under such Letter of Credit
is honored by the Agent, or the Agent otherwise makes a payment with
respect thereto, (i) the amount paid by the Agent under or with respect
to such Letter of Credit, and (ii) the amount of any taxes, fees,
charges or other costs and expenses whatsoever incurred by the Agent or
any Bank in connection with any payment made by the Agent or any Bank
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing
<PAGE>
Amount, an amount equal to such difference, which amount shall be held
by the Agent for the benefit of the Banks and the Agent as cash
collateral for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with ss.13, an amount equal to the then
Maximum Drawing Amount on all Letters of Credit, which amount shall be
held by the Agent for the benefit of the Banks and the Agent as cash
collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this ss.4.2 at any time from the date such amounts become due
and payable (whether as stated in this ss.4.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in ss.5.10 for overdue principal on the
Revolving Credit Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
-------------------------
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
ss.4.2 on or before the date that such draft is paid or other payment is made by
the Agent, the Agent may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the Agent
during each day included in such period, times (ii) the amount equal to such
Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrower and the Banks shall be only to determine that the documents (including
each draft) delivered
<PAGE>
under each Letter of Credit in connection with such presentment shall be in
conformity in all material respects with such Letter of Credit.
4.4. Obligations Absolute. The Borrower's obligations under this ss.4
--------------------
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under ss.4.2 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Agent or any
Bank to the Borrower.
4.5 RELIANCE BY ISSUER. To the extent not inconsistent with ss.4.4, the
------------------
Agent shall be entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document 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, independent accountants and other
experts selected by the Agent. The Agent shall not be required to take any
discretionary action under this Credit Agreement (and shall be fully protected
in acting or refraining from acting) unless it shall first have received such
advice or concurrence of the Majority Banks as it reasonably deems appropriate
or it shall first be indemnified to its reasonable satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action; provided that nothing in this
--------
ss.4.5 shall require the Agent to obtain the consent of the Majority Banks
before taking any action with respect to a Letter of Credit. The Agent shall in
<PAGE>
all cases be fully protected in acting, or in refraining from acting, under this
Credit Agreement in accordance with a request of the Majority Banks, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon the Banks and all future holders of the Revolving Credit Notes or of a
Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or
--------------------
any extension or renewal of any Letter of Credit pay a fee (in each case, a
"Letter of Credit Fee") to the Agent (i) in respect of each standby Letter of
Credit an amount equal to one and one-half percent (1.50%) per annum of the face
amount of such standby Letter of Credit, of which an amount equal to one-fourth
of one percent (1/4%) per annum of the face amount of such standby Letter of
Credit shall be for the account of the Agent, as a fronting fee, and the balance
of which Letter of Credit Fee shall be for the accounts of the Banks in
accordance with their respective Commitment Percentages. In respect of each
Letter of Credit, the Borrower shall also pay to the Agent for the Agent's own
account, at such other time or times as such charges are customarily made by the
Agent, the Agent's customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.
5. CERTAIN GENERAL PROVISIONS.
--------------------------
5.1. ADMINISTRATIVE FEE. The Borrower agrees to pay to the Agent an
------------------
administrative fee (the "Administrative Fee") as set forth in that certain fee
letter agreement of even date herewith between the Agent and the Borrower.
5.2 FUNDS FOR PAYMENTS.
------------------
5.2.1. PAYMENTS TO AGENTS. All payments of principal, interest,
--------------------
Reimbursement Obligations, Administrative Fees, Letter of Credit Fees and
any other amounts due hereunder or under any of the other Loan Documents
shall be made to the Agent, for the respective accounts of the Banks and
the Agent, at the Agent's Head Office or at such other location in the
Boston, Massachusetts, area that the Agent may from time to time designate,
in each case in immediately available funds.
5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
--------------
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or
<PAGE>
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Borrower will pay to the Agent, for the
account of the Banks or (as the case may be) the Agent, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
the Banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation been
imposed upon the Borrower. The Borrower will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document.
5.3. COMPUTATIONS. All computations of interest on the Loans and Letter
------------
of Credit Fees shall be based on a 360-day year and paid for the actual number
of days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Revolving Credit Note
Records from time to time shall be considered correct and binding on the
Borrower unless within five (5) Business Days after receipt of any notice by the
Agent or any of the Banks of such outstanding amount, the Agent or such Bank
shall notify the Borrower to the contrary.
5.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
--------------------------------------
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (i) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (ii) each Eurodollar Rate Loan will automatically,
on the last day of the then current Interest Period relating
<PAGE>
thereto, become a Base Rate Loan, and (iii) the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Banks.
5.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this ss.5.5, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder.
5.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
---------------------
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Bank's Commitment or the Loans (other than taxes based
upon or measured by the income or profits of such Bank or the Agent),
or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of
<PAGE>
the principal of or the interest on any Loans or any other amounts
payable to any Bank or the Agent under this Credit Agreement or any of
the other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of an office of any
Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or
any class of loans, letters of credit or commitments of which any of
the Loans or such Bank's Commitment forms a part, and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit,
or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank
or the Agent hereunder on account of such Bank's Commitment,
any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement Obligation
or other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is
calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank or the Agent from
the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by
such Bank or (as the case may be) the Agent at any time and from time
to time and as often as the occasion therefor may arise, pay to such
Bank or the Agent such additional amounts as will be sufficient to
compensate such Bank or the Agent for such additional cost, reduction,
payment or foregone interest or Reimbursement Obligation or other sum;
provided, that with respect to payments required pursuant to
--------
ss.5.6(c), the Borrower shall not be required to pay such additional
amounts if the Obligations are repaid in full within 180 days
following such demand, and from and
<PAGE>
after such time, no Letters of Credit are outstanding, the Banks have
no further obligations to make Loans hereunder and the Agent has no
further obligations to issue, extend or renew any Letters of Credit
hereunder.
5.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
----------------
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower and such Bank shall thereafter attempt to negotiate
in good faith, within thirty (30) days of the day on which the Borrower receives
such notice, an adjustment payable hereunder that will adequately compensate
such Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrower receives such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's reasonable determination, provide adequate compensation. Each
Bank shall allocate such cost increases among its customers in good faith and on
an equitable basis.
5.8. CERTIFICATE. A certificate setting forth any additional amounts
-----------
payable pursuant to ss.ss.5.6 or 5.7 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
5.9 INDEMNITY. The Borrower agrees to indemnify each Bank and to
---------
hold each Bank harmless from and against any loss, cost or expense
<PAGE>
(including loss of anticipated profits) that such Bank may sustain or incur as a
consequence of (i) default by the Borrower in payment of the principal amount of
or any interest on any Eurodollar Rate Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (ii) default by the Borrower in making a borrowing or conversion after
the Borrower has given (or is deemed to have given) a Loan Request or a
Conversion Request relating thereto in accordance with ss.2.5 or ss.2.6 or (iii)
the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans.
5.10 INTEREST AFTER DEFAULT.
----------------------
5.10.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
----------------
permitted by applicable law) interest on the Loans and all other
overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand
at a rate per annum equal to four percent (4%) above the Base Rate
until such amount shall be paid in full (after as well as before
judgment).
5.10.2. AMOUNTS NOT OVERDUE. During the continuance of a Default
-------------------
or an Event of Default the principal of the Revolving Credit Loans not
overdue shall, until such Default or Event of Default has been cured
or remedied or such Default or Event of Default has been waived by the
Majority Banks pursuant toss.26, bear interest at a rate per annum
equal to the greater of (i) four percent (4%) above the rate of
interest otherwise applicable to such Revolving Credit Loans pursuant
to ss.2.5 and (ii) the rate of interest applicable to overdue
principal pursuant toss.5.10.1.
5.11 HLT CLASSIFICATION. If, after the date hereof, the Agent determines
------------------
or is advised by any Bank that such Bank has determined, or the Agent receives
notice from or is advised by any Bank that such Bank has received notice from
any governmental authority, central bank or comparable agency having
jurisdiction over such Bank, that any of the Commitments, Loans, Letters of
Credit or Letter of Credit Participations are classified as a "highly leveraged
transaction" (an "HLT Classification") pursuant to any existing regulations
regarding "highly leveraged transactions" or any modification, amendment or
interpretation thereof,
<PAGE>
or the adoption of new regulations regarding "highly leveraged transactions"
after the date hereof by any governmental authority, central bank or comparable
agency, the Agent shall promptly give notice of such HLT Classification to the
Borrower and the Banks. The Agent, the Banks and the Borrower shall thereupon
commence negotiations in good faith to agree on the extent to which fees,
interest rates and/or margins hereunder should be increased so as to reflect
such HLT Classification. If the Borrower and the Majority Banks agree on the
amount of such increase or increases, this Credit Agreement shall be promptly
amended to give effect to such increase or increases. If the Borrower and the
Majority Banks fail to so agree and the Borrower has failed to refinance the
Obligations within ninety (90) days after notice is given by the Agent as
provided above, then the Agent shall, if so requested by the Majority Banks, by
notice to the Borrower terminate the Commitments, and the Commitments shall
thereupon terminate, with the provisions of ss.ss.3.2 and 4.2(c) then becoming
applicable. The Agent and the Banks acknowledge that an HLT Classification is
not a Default or an Event of Default.
6. COLLATERAL SECURITY AND GUARANTIES.
----------------------------------
6.1. SECURITY OF BORROWER. The Obligations shall be secured by a perfected
--------------------
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the property, rights and interests of
the Borrower, whether now owned or hereafter acquired, described in the Security
Documents to which the Borrower is a party, including, without limitation, all
Base Contracts.
6.2. GUARANTIES AND SECURITY OF GUARANTORS. The Obligations shall also be
-------------------------------------
guaranteed pursuant to the terms of the Guaranty. The obligations of the
Guarantors under the Guaranty shall be in turn secured by a perfected first
priority security interest (subject only to Permitted Liens entitled to priority
under applicable law) in all of the property, rights and interests of each such
Guarantor, whether now owned or hereafter acquired, described of the Security
Documents to which such Guarantor is a party, including, without limitation, all
Base Contracts. Promptly and in any event within thirty (30) days after FCI or
any of its Subsidiaries acquires the capital stock of, or creates, any new
Subsidiary which has originated or is expected to originate Base Contracts, or
FCI determines that any Subsidiary of FCI who is not a Guarantor hereunder will
acquire or originate Base Contracts in the future, the Borrower will cause such
new originating Subsidiary to become a party to the Guaranty, as a Guarantor
thereunder, and to grant to the Collateral Agent, for the benefit of the Banks
and the Agent, a perfected first priority security interest (subject only to
Permitted Liens entitled to priority under
<PAGE>
applicable law) in the Collateral, including, without limitation, all Base
Contracts, pursuant to a security agreement and Uniform Commercial Code
financing statements substantially the same as the Security Documents delivered
at the Closing.
The security interests created by the Security Documents in Collateral
owned by any of the Guarantors shall be released by the Collateral Agent when
the Collateral Agent releases security interests granted in the same Collateral
by such Guarantor under the FCI Credit Agreement, except when such release
occurs by reason of the payment and satisfaction in full of FCI's obligations
under the FCI Credit Agreement and termination of the obligations of BKB and
other banks who are parties thereto to make any loans to FCI or to issue, extend
or renew any letters of credit for the account of FCI.
7. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agent as
follows:
7.1. CORPORATE AUTHORITY.
-------------------
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and its
----------------------------
Subsidiaries (i) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, (ii)
has all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (iii) is
in good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Borrower or such Subsidiary.
7.1.2. AUTHORIZATION. The execution, delivery and performance
-------------
of this Credit Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the
corporate authority of such Person, (ii) have been duly authorized by
all necessary corporate proceedings, (iii) do not conflict with or
result in any breach or contravention of any provision of law,
statute, rule or regulation to which the Borrower or any of its
Subsidiaries is subject or any judgment, order, writ, injunction,
license or permit applicable to the Borrower or any of its
Subsidiaries, except where such conflict, breach or
<PAGE>
contravention would not have a Material Adverse Effect, and (iv) do
not conflict with any provision of the corporate charter or bylaws of,
or any material agreement or other instrument binding upon, the
Borrower or any of its Subsidiaries.
7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Borrower or any of
its Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to
the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance
----------------------
by the Borrower and any of its Subsidiaries of this Credit Agreement and the
other Loan Documents to which the Borrower or any of its Subsidiaries is or is
to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained, except where the failure to obtain
such consent or approval would not have a Material Adverse Effect.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule
---------------------------
7.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected in
the consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
7.4. FINANCIAL STATEMENTS.
--------------------
7.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries
-----------
has a fiscal year which is the twelve months ending on December 31 of
each calendar year.
7.4.2. FINANCIAL STATEMENTS. There has been furnished to each
--------------------
of the Banks a consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 1996 and as at the Balance Sheet Date
and consolidated statements of income of the Borrower and its
<PAGE>
Subsidiaries for the fiscal periods then ended, certified by Ernst &
Young LLP in the case of the annual financial statements. Such balance
sheets and statements of income have been prepared in accordance with
generally accepted accounting principles and fairly present the
financial condition of the Borrower as at the close of business on the
dates thereof and the results of operations for the fiscal periods
then ended. There are no contingent liabilities of the Borrower or any
of its Subsidiaries as of such dates involving material amounts, known
to the officers of the Borrower, which were not disclosed in such
balance sheets and the notes related thereto or pursuant to ss.7.7
hereof.
7.5. NO MATERIAL CHANGES, ETC. Except as disclosed on Schedule 7.5
------------------------
hereto, since the Balance Sheet Date there has occurred no materially adverse
change in the financial condition or business of the Borrower and its
Subsidiaries taken as a whole as shown on or reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date,
or the consolidated statement of income for the fiscal period then ended, other
than changes in the ordinary course of business that have not had any Material
Adverse Effect. Since the Balance Sheet Date, the Borrower has not made any
Distribution.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and its
------------------------------------
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
7.7 LITIGATION. Except as otherwise disclosed on FCI's report on Form
----------
10-K for the year ended December 31, 1996 and Form 10-Q's for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997 (collectively the "Base
Report"), which Base Report shall have been delivered to the Agent prior to the
Closing Date, or as otherwise set forth on Schedule 7.7, there are no actions,
------------
suits, proceedings or investigations of any kind pending or, to the best
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries or any of the Guarantors 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 Loan
Documents, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Credit Agreement or any of the other Loan Documents, (iii)
seeking any determination or ruling that would adversely affect the performance
by the Borrower or any of its Subsidiaries or any of the Guarantors of its
<PAGE>
respective obligations under this Credit Agreement or any of the other Loan
Documents, (iv) seeking any determination or ruling that would adversely affect
the validity or enforceability of this Credit Agreement or any of the other Loan
Documents or any action taken or to be taken pursuant thereto, or (v) seeking
any determination or ruling that would, if adversely determined, be reasonably
likely to have a Material Adverse Effect or result in any substantial liability
not covered by insurance or for which adequate reserves are not maintained on
the consolidated balance sheet of the Borrower and its Subsidiaries; provided,
--------
however, that in the event the Agent shall receive a report dated subsequent to
- ------
the date of the Base Report, which report shall disclose the existence of, and
accurately describe, one or more proceedings or investigations which are not
disclosed in the Base Report, and the Agent shall not identify in writing to the
Borrower, within 90 days of the receipt of such report, one or more of the
proceedings or investigations described in such report as constituting a
proceeding or investigation of a type described in one or more of clauses (i)
through (v) above, the existence of each such proceeding or investigation not so
identified to the Borrower shall be deemed not to constitute a breach of the
representation and warranty of this ss. 7.7.
7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor
------------------------------------
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries is a party to any contract or agreement that has or
is expected, in the judgment of the Borrower's officers, to have any Material
Adverse Effect.
7.9 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower
--------------------------------------------
nor any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or have a
Material Adverse Effect.
7.10 TAX STATUS. The Borrower and its Subsidiaries (i) have made or
----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (ii)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (iii) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to
<PAGE>
the periods to which such returns, reports or declarations apply. Except for
taxes being contested as provided in (ii) above, there are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Borrower know of no basis for any such
claim.
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
-------------------
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
-------------------------------------------
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
7.13 ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
------------------------------------
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or any
rights relating thereto.
7.14 PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges
-------------------------------
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Collateral Agent's security interest in the
Collateral. The Collateral and the Collateral Agent's rights with respect to the
Collateral are not subject to any setoff, claims, withholdings or other
defenses. The Borrower or a Guarantor party to one of the Security Agreements is
the owner of the Collateral free from any lien, security interest, encumbrance
and any other claim or demand, except for Permitted Liens.
7.15. CERTAIN TRANSACTIONS. Except for arm's length transactions
--------------------
pursuant to which the Borrower or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than the Borrower or
such Subsidiary could obtain from third parties, none of the officers,
directors, or employees of the Borrower or any of its Subsidiaries is presently
a party to any transaction with the Borrower or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement
<PAGE>
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
7.16. EMPLOYEE BENEFIT PLANS.
----------------------
7.16.1. IN GENERAL. Each Employee Benefit Plan and each
-----------
Guaranteed Pension Plan has been maintained and operated in compliance
in all material respects with the provisions of ERISA and, to the
extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions and the
bonding of fiduciaries and other persons handling plan funds as
required byss.412 of ERISA. The Borrower has heretofore delivered to
the Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be
submitted underss.103(d) of ERISA, with respect to each Guaranteed
Pension Plan.
7.16.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit Plan,
------------------------------
which is an employee welfare benefit plan within the meaning ofss.3(1)
orss.3(2)(B) of ERISA, provides benefit coverage subsequent to
termination of employment, except as required by Title I, Part 6 of
ERISA or the applicable state insurance laws. The Borrower may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion
of the Borrower without liability to any Person other than for claims
arising prior to termination.
7.16.3. GUARANTEED PENSION PLANS. Each contribution required
------------------------
to be made to a Guaranteed Pension Plan, whether required to be made
to avoid the incurrence of an accumulated funding deficiency, the
notice or lien provisions ofss.302(f) of ERISA, or otherwise, has been
timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to
any Guaranteed Pension Plan, and neither the Borrower nor any ERISA
Affiliate is obligated to or has posted security in connection with an
amendment to a Guaranteed Pension Plan pursuant toss.307 of ERISA or
ss.401(a)(29) of the Code. No liability to the PBGC (other than
required insurance premiums, all of which have been paid) has been
incurred by the Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not
<PAGE>
been any ERISA Reportable Event (other than an ERISA Reportable Event
as to which the requirement of 30 days notice has been waived), or any
other event or condition which presents a material risk of termination
of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans
within the meaning ofss.4001 of ERISA did not exceed the aggregate
value of the assets of all such Guaranteed Pension Plans, disregarding
for this purpose the benefit liabilities and assets of any Guaranteed
Pension Plan with assets in excess of benefit liabilities.
7.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
-------------------
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan underss.4201 of ERISA
or as a result of a sale of assets described inss.4204 of ERISA.
Neither the Borrower nor any ERISA Affiliate has been notified that
any Multiemployer Plan is in reorganization or insolvent under and
within the meaning ofss.4241 orss.4245 of ERISA or is at risk of
entering reorganization or becoming insolvent, or that any
Multiemployer Plan intends to terminate or has been terminated
underss.4041A of ERISA.
7.17. USE OF PROCEEDS.
---------------
7.17.1. GENERAL. The proceeds of the Loans shall be used to
-------
finance the Borrower's purchase of Base Contracts. The Borrower will
obtain Letters of Credit solely for general corporate purposes.
7.17.2. REGULATIONS U AND X. No portion of any Loan is to be
-------------------
used, and no portion of any Letter of Credit is to be obtained, for
the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.17.3. INELIGIBLE SECURITIES. No portion of the proceeds of
---------------------
any Loans is to be used, and no portion of any Letter of Credit is to
be obtained, for the purpose of (a) knowingly purchasing, or providing
credit support for the purchase of, Ineligible Securities from a
Section 20
<PAGE>
Subsidiary during any period in which such Section 20 Subsidiary makes
a market in such Ineligible Securities, (b) knowingly purchasing, or
providing credit support for the purchase of, during the underwriting
or placement period, any Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary, or (c) making, or
providing credit support for the making of, payments of principal or
interest on Ineligible Securities underwritten or privately placed by
a Section 20 Subsidiary and issued by or for the benefit of the
Borrower or any Subsidiary or other Affiliate of the Borrower.
7.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all necessary
------------------------
steps to investigate the past and present condition and usage of the Real
Estate and the operations conducted thereon and, based upon such diligent
investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of
the Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act,
or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would have a Material Adverse
Effect;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. ss.6903(5), any hazardous substances as defined by 42 U.S.C.
ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C.
ss.9601(33) and any toxic substances, oil or hazardous materials or
other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") which any one of them has generated,
transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or
has ordered that any Borrower or any of its
<PAGE>
Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is
or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence
of costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Substances;
(c) except as set forth on Schedule 7.18 attached hereto: (i)
-------------
no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is
located on any portion of the Real Estate; (ii) in the course of any
activities conducted by the Borrower, its Subsidiaries or operators of
its properties, no Hazardous Substances have been generated or are
being used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would
have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or
into any real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Real Estate; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best
of the Borrower's knowledge, operating in compliance with such permits
and applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries or any of the
Real Estate is subject to any applicable environmental law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice
to any governmental agency or
<PAGE>
the recording or delivery to other Persons of an environmental
disclosure document or statement by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the
recording of any Mortgage or to the effectiveness of any other
transactions contemplated hereby.
7.19. SUBSIDIARIES, ETC. The Subsidiaries of the Borrower are listed
-----------------
on Schedule 7.19. Each of the Subsidiaries of the Borrower listed on Schedule
------------- --------
7.19 is a wholly-owned Subsidiary of the Borrower. Neither the Borrower nor any
- ----
Subsidiary of the Borrower is engaged in any joint venture or partnership with
any other Person.
7.20. BANK ACCOUNTS. Schedule 7.20 sets forth the account numbers and
------------- -------- ----
location of all Local Accounts, Interim Concentration Accounts and other bank
accounts of the Borrower or any of its Subsidiaries.
7.21. DISCLOSURE. None of this Credit Agreement or any of the other
----------
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact (known to the Borrower or any of its Subsidiaries in the
case of any document or information not furnished by it or any of its
Subsidiaries) necessary in order to make the statements herein or therein not
misleading. There is no fact known to the Borrower or any of its Subsidiaries
which has a Material Adverse Effect, or which is reasonably likely in the future
to have a Material Adverse Effect, exclusive of effects resulting from changes
in general economic conditions, legal standards or regulatory conditions.
7.22. FAIRSHARE PROGRAM. (a) On any date of determination, for each VOI
-----------------
Regime for which the constituent VOIs are comprised primarily of UDIs, the ratio
of (i) the total number of Points actually allocated to a VOI Regime pursuant to
the Fair Share Plus Program at such time for the next succeeding twelve month
period, divided by (ii) the total number of Points which are allocable to
available occupiable space in such VOI Regime over such twelve month period does
not exceed a ratio of 1.0 to 1.0.
(b) On any date of determination, for each owner of a UDI who is a
member of the FairShare Plus Program, the ratio of (i) the number of Points
allocated to such owner in a VOI Regime in return for assigning his VOI to the
FairShare Plus Program trust divided by (ii) the total number of Points assigned
to all UDI owners in such VOI Regime does not exceed the percentage of such
owner's undivided interest in such VOI Regime as described in such owner's Base
Contract (and related deed).
<PAGE>
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay
----------------
or cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Administative Fee and all other
amounts provided for in this Credit Agreement and the other Loan Documents to
which the Borrower or any of its Subsidiaries is a party, all in accordance with
the terms of this Credit Agreement and such other Loan Documents.
8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
---------------------
executive office at 11001 Executive Center Drive, Little Rock, Arkansas 72211,
or at such other place in the United States of America as the Borrower shall
designate upon written notice to the Agent, where notices, presentations and
demands to or upon the Borrower in respect of the Loan Documents to which the
Borrower is a party may be given or made.
8.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each
--------------------
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (ii) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (iii) at all times engage Ernst & Young
LLP or other independent certified public accountants satisfactory to the Agent
as the independent certified public accountants of the Borrower and its
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm's (or any successor firm's) engagement as the
independent certified public accountants of the Borrower and its Subsidiaries
and the appointment in such capacity of a successor firm as shall be
satisfactory to the Agent.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
--------------------------------------------------
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
one hundred twenty (120) days after the end of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year, and the related consolidated
<PAGE>
statement of income and consolidated statement of cash flow for such
year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification by Ernst &
Young LLP or by other independent certified public accountants
satisfactory to the Agent, together with a written statement from such
accountants to the effect (i) that they have read a copy of this Credit
Agreement, (ii) that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event
of Default under ss.ss.9 or 10 hereof, or, if such accountants shall
have obtained knowledge of any then existing Default or Event of
Default they shall disclose in such statement any such Default or Event
of Default and (iii) that, based upon certain agreed upon procedures,
they have reviewed the most recent Borrowing Base Report of the
Borrower and the calculations of the Borrowing Base made by the
Borrower in preparing such Borrowing Base Report and have determined
that such Borowing Base Report and calculation are accurate in all
material respects, or if such accountants have obtained knowledge of
any inaccuracy, they shall disclose in such statement any such
inaccuracy; provided that such accountants shall not be liable to the
Banks for failure to obtain knowledge of any Default or Event of
Default;
(b) as soon as practicable, but in any event not later than
sixty (60) days after the end of each fiscal quarter (other than the
fourth fiscal quarter) of the Borrower (i) copies of the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal quarter, and the related consolidated statement
of income and consolidated statement of cash flow for the portion of
Borrower's fiscal year then elapsed, each setting forth in comparative
form (A) the figures from the previous fiscal year and (B) the
Borrower's annual budget delivered pursuant to ss.8.4(h) hereof, broken
down by resort and all in reasonable detail and prepared in accordance
with generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements
fairly presents the financial position of the Borrower and its
Subsidiaries on the date thereof and for the period then elapsed
(subject to year-end adjustments);
(c) as soon as practicable, but in any event not later than
twenty-five (25) days after the end of each fiscal month, (i) copies of
the Borrower's internal monthly management report which shall
<PAGE>
include unaudited consolidated balance sheet of the Borrower and its
Subsidiaries and the unaudited consolidating balance sheet of the
Borrower and its Subsidiaries (done by resort), each as at the end of
such fiscal month, and the related consolidated statement of income
and consolidating statement of income (done by resort) for the portion
of the Borrower's fiscal year then elapsed, each (except for the
consolidating statements) setting forth in comparative form (A) the
figures from the previous fiscal year and (B) the Borrower's annual
budget delivered pursuant to ss.8.4(h) hereof, broken down by resort
and all in reasonable detail and prepared in accordance with generally
accepted accounting principles;
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, (i) a
statement certified by the principal financial or accounting officer of
the Borrower in substantially the form of Exhibit E hereto and setting
---------
forth in reasonable detail computations evidencing compliance with each
of the covenants set forth in ss.10 hereof), and (if applicable)
reconciliations to reflect changes in generally accepted accounting
principles since the Balance Sheet Date, and certifying that no Default
or Event of Default exists as of the date of such certificate, or if a
Default or Event of Default does exist specifying the nature and
proposed remedy thereof;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of the Borrower;
(f) within three Business Days after the fifteenth (15th) day
of of each calendar month, or at such earlier time as the Agent may
reasonably request, (i) a Borrowing Base Report setting forth the
Borrowing Base as at the end of such calendar month or other date so
requested by the Agent, provided that immediately prior to the
--------
occurrence of a sale or other disposition of assets permitted by
ss.9.5.2 hereof, the Borrower shall deliver to the Banks (A) a
Borrowing Base Report setting forth the Borrowing Base prior to such
permitted sale or disposition and (B) a Borrowing Base Report
indicating the Borrowing Base after giving effect to such sale or
disposition (provided, however, that for so long as the Banks hereunder
and the banks under the FCI Credit Agreement are identical, the
Borrowing Base Reports required by the foregoing clauses (A) and (B)
need not be delivered to the Agent prior to the
<PAGE>
sale or disposition of Base Contracts to FCI pursuant to ss.8.16 and
paragraph (ii) of ss.9.5.2);
(g) at the same time as the Borrowing Base Report are
delivered in accordance with paragraph (f) above, a Base Contracts
aging report;
(h) not later than December 31 of each fiscal year of the
Borrower, a draft annual consolidated budget for the Borrower and its
Subsidiaries as well as draft annual budgets for each resort, prepared
on a monthly basis, for the next following fiscal year, and not later
than February 15 of each fiscal year of the Borrower, a final annual
consolidated budget for the Borrower and its Subsidiaries as well as
final annual budgets for each resort, prepared on a monthly basis, for
such fiscal year,
(i) from and after the date on which the Banks hereunder and
the banks under the FCI Credit Agreement cease to be identical, at
least two days prior to any sales of Base Contracts by FCI or any of
its Subsidiaries to the Borrower, the list of Base Contracts which the
Borrower proposes to buy from FCI or such Subsidiary pursuant to the
Operating Agreement; and
(j) from time to time such other financial data and
information (including accountants' management letters) as the Agent or
any Lender may reasonably request.
8.5. NOTICES.
-------
8.5.1. DEFAULTS. The Borrower will promptly notify the Agent and
--------
each of the Banks in writing of the occurrence of any Default or Event
of Default. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower or any of its Subsidiaries is a
party or obligor, whether as principal, guarantor, surety or
otherwise, the Borrower shall forthwith give written notice thereof to
the Agent and each of the Banks, describing the notice or action and
the nature of the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give
--------------------
notice to the Agent and each of the Banks (i) of any violation of any
Environmental Law that the Borrower or any of its Subsidiaries
<PAGE>
reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to
any federal, state or local environmental agency and (ii) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential
environmental liability, of any federal, state or local environmental
agency or board, that has the potential to materially affect the
assets, liabilities, financial conditions or operations of the
Borrower or any of its Subsidiaries, or the Collateral Agent's
security interests pursuant to the Security Documents.
8.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower
----------------------------------------
will, immediately upon becoming aware thereof, notify the Agent and
each of the Banks in writing of any setoff, claims (including, with
respect to the Real Estate, environmental claims), withholdings or
other defenses to which any of the Collateral, or the Collateral
Agent's rights with respect to the Collateral, are subject in an
amount equal to or greater than $500,000.
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will,
----------------------------------
and will cause each of its Subsidiaries to, give notice to the Agent
and each of the Banks in writing within fifteen (15) days of becoming
aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Borrower or any of
its Subsidiaries or to which the Borrower or any of its Subsidiaries
is or becomes a party involving an uninsured claim against the
Borrower or any of its Subsidiaries that could reasonably be expected
to have a materially adverse effect on the Borrower or any of its
Subsidiaries and stating the nature and status of such litigation or
proceedings. The Borrower will, and will cause each of its
Subsidiaries to, give notice to the Agent and each of the Banks, in
writing, in form and detail satisfactory to the Agent, within ten (10)
days of any judgment not covered by insurance, final or otherwise,
against the Borrower or any of its Subsidiaries in an amount in excess
of $1,000,000.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
----------------------------------------------
do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises
and those of its Subsidiaries and will not, and will not cause or
permit any of its Subsidiaries to, convert to a limited liability
company or limited liability partnership. It (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct
of its business or the business of its Subsidiaries to be maintained
and kept in good condition, repair and
<PAGE>
working order and supplied with all necessary equipment, (ii) will
cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the
Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at
all times, and (iii) will, and will cause each of its Subsidiaries to,
continue to engage primarily in the businesses now conducted by them
and in related businesses; provided that nothing in this ss.8.6 shall
prevent the Borrower from discontinuing the operation and maintenance
of any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of the Borrower, desirable in the
conduct of its or their business and that do not have a Material
Adverse Effect.
8.7. INSURANCE. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable
insurers insurance with respect to its properties and business against
such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in
similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as may be reasonable and prudent, all
of which insurance shall be reasonably satisfactory to the Agent.
Without limiting the generality of the foregoing:
(a) The Borrower shall, and shall cause its Subsidiaries (1)
to use its best efforts, in the case of Projects where the Borrower or
any of its Subsidiaries 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 Projects
where the Borrower or any of its Subsidiaries does not maintain primary
or substantial responsibility for management, administration or other
services of a similar nature, to cause each of the POAs for each
Projects, to (A) maintain one or more policies of "all-risk" property
and general 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
<PAGE>
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 under the applicable Title Clearing
Agreement). 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 respective declaration (or any similar charter document)
relating to each VOI Regime.
(b) The Borrower shall separate errors and omissions coverage
insuring the Collateral Agent's, the Agent's and the Banks' respective
risks against loss through errors of the Borrower's or the Servicer'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 and the Agent, as a loss payee. The
Borrower shall also maintain a separate fidelity bond coverage insuring
the Collateral Agent's, the Agent's and the Banks' respective risks
against losses through wrongdoing of the Borrower's or the Servicer'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 and the Agent, as an additional loss
payee. Each such insurance policy required pursuant to this ss.8.7(b)
shall provide for written notice to the Agent by the insurer at least
30 days prior to the cancellation of such insurance. Evidence
reasonably satisfactory to the Agent of all renewals or replacements
necessary to maintain such insurance from time to time in force shall
be delivered by the Borrower to the Agent prior to the expiration date
of the then current insurance policy.
8.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
-----
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
--------
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
-------- -------
Borrower will pay all such taxes, assessments, charges, levies or claims
<PAGE>
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
----------------------------------------
8.9.1. GENERAL. The Borrower shall permit the Banks, through the Agent
-------
or any of the Banks' other designated representatives, to visit and inspect
any of the properties of the Borrower or any of its Subsidiaries, to
examine the books of account of the Borrower and its Subsidiaries (and to
make copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times and intervals as the Agent or any Bank may reasonably request. All
visits and inspections by the Agent shall be conducted at the expense of
the Borrower.
8.9.2. COLLATERAL REPORTS. No more frequently than once during each
------------------
calendar year, or more frequently as determined by the Agent if an Event of
Default shall have occurred and be continuing, upon the request of the
Agent, the Borrower will obtain and deliver to the Agent, or, if the Agent
so elects, will cooperate with the Agent in the Agent's obtaining, a report
of an independent collateral auditor satisfactory to the Agent (which may
be affiliated with one of the Banks) with respect to the Base Contracts
included in the Borrowing Base, which report shall indicate whether or not
the information set forth in the Borrowing Base Report most recently
delivered is accurate and complete in all material respects based upon a
review by such auditors of the Base Contracts (including verification with
respect to the amount, aging, identity and credit of the respective account
debtors and the billing practices of the Borrower or its applicable
Subsidiary). All such collateral value reports shall be conducted and made
at the expense of the Borrower.
8.9.3. COMMERCIAL FINANCE EXAMINATIONS. No more frequently than once
--------------------------------
each calendar year, or more frequently as determined by the Agent if an
Event of Default shall have occurred and be continuing, upon the request of
the Agent, the Borrower will permit the Banks, through the Agent or any of
the Bank's other designated representatives, to conduct a commercial
finance examination of the Borrower and its Subsidiaries, at such
reasonable times and intervals as the Agent will request. All such
commercial finance examinations shall be conducted and made at the expense
of the Borrower.
<PAGE>
8.9.4. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default
-------------------------
shall have occurred, the Agent may, from time to time, in its discretion
for the purpose of assessing and ensuring the value of any Mortgaged
Property, obtain one or more environmental assessments or audits of such
Mortgaged Property prepared by a hydrogeologist, an independent engineer or
other qualified consultant or expert approved by the Agent to evaluate or
confirm (i) whether any Hazardous Materials are present in the soil or
water at such Mortgaged Property and (ii) whether the use and operation of
such Mortgaged Property complies with all Environmental Laws. Environmental
assessments may include without limitation detailed visual inspections of
such Mortgaged Property including any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and ground water samples, as well as such other
investigations or analyses as the Agent deems appropriate. All such
environmental assessments shall be conducted and made at the expense of the
Borrower.
8.9.5. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower authorizes the
-------------------------------
Agent and, if accompanied by the Agent, the Banks to communicate directly
with the Borrower's independent certified public accountants and authorizes
such accountants to disclose to the Agent and the Banks any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of the Borrower or any of its
Subsidiaries. At the request of the Agent, the Borrower shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this ss.8.9.5.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
----------------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (i) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (ii) the provisions of
its charter documents and by-laws, (iii) all agreements and instruments by which
it or any of its properties may be bound and (iv) all applicable decrees,
orders, and judgments. If any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Borrower or any of its
Subsidiaries may fulfill any of its obligations hereunder or any of the other
Loan Documents to which the Borrower or such Subsidiary is a party, the Borrower
will, or (as the case may be) will cause such Subsidiary to,
<PAGE>
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (i) promptly upon filing
----------------------
the same with the Department of Labor or Internal Revenue Service, furnish to
the Agent a copy of the most recent actuarial statement required to be submitted
under ss.103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under ss.ss.302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.
8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
---------------
solely to finance the Borrower's purchase of Base Contracts and to fund the
Borrower's operations. The Borrower will obtain Letters of Credit solely for
general corporate purposes.
8.13. MORTGAGED PROPERTY. If an Event of Default shall occur and be
------------------
continuing, upon the request of the Agent from time to time during the
continuance of such Event of Default, the Borrower shall, and shall cause its
Subsidiaries to, forthwith deliver to the Collateral Agent a fully executed
mortgage or deed of trust over any or all real property then owned by the
Borrower or any Subsidiary of the Borrower (other than Excluded Subsidiaries),
including, without limitation, all VOI's and Lots, such mortgage or deed of
trust to be in form and substance satisfactory to the Agent, together with title
insurance policies, surveys, evidences of insurances with the Agent named as
loss payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate may be requested by the Agent. The
Borrower further agrees that, following the taking of such actions with respect
to such real estate, the Collateral Agent shall have for the benefit of the
Banks and the Agent a valid and enforceable first priority mortgage or deed of
trust over such real estate, free and clear of all defects and encumbrances
except for Permitted Liens.
8.14. BANK ACCOUNTS.
-------------
8.14.1. GENERAL. On or prior to the Closing Date, the Borrower
-------
will, and will cause each of its Subsidiaries (other than Excluded
Subsidiaries) to, (i) establish one or more depository accounts
(collectively the "BKB Concentration Account") under the
<PAGE>
control of the Agent for the benefit of the Banks and the Agent, in
the name of the Borrower, (ii) instruct all account debtors and other
obligors, pursuant to notices of assignment and instruction letters in
form and substance satisfactory to the Agent, to remit all cash
proceeds of Base Contracts directly to the BKB Concentration Account
or to local depository accounts ("Local Accounts") or concentration
depository accounts ("Interim Concentration Accounts") with financial
institutions which have entered into agency account agreements and, if
applicable, lock box agreements (collectively, "Agency Account
Agreements") in form and substance satisfactory to the Agent, or the
BKB Concentration Account, (iii) direct all depository institutions
with Local Accounts to cause all funds held in each such Local Account
to be transferred no less frequently than once each day to, and only
to, an Interim Concentration Account or the BKB Concentration Account,
(iv) direct all depository institutions with Interim Concentration
Accounts to cause all funds of the Borrower and its Subsidiaries held
in such Interim Concentration Accounts to be transferred daily to, and
only to, the BKB Concentration Account, and (v) at all times ensure
that immediately upon the Borrower's or any of its Subsidiaries'
(other than Excluded Subsidiaries) receipt of any funds constituting
or cash proceeds of any Collateral, all such amounts shall have been
deposited in a Local Account, an Interim Concentration Account or the
BKB Concentration Account.
8.14.2. ACKNOWLEDGE OF APPLICATION. The Borrower hereby agrees
--------------------------
that all amounts received by the Agent in the BKB Concentration
Account will be the sole and exclusive property of the Agent, for the
accounts of the Banks and the Agent, to be applied in accordance
ss.2.10 or ss.2.11 as applicable.
8.15. MAINTENANCE AND COLLECTION OF BASE CONTRACTS; CUSTODIAN.
-------------------------------------------------------
(a) On or before the Closing Date, and thereafter promptly upon
the acquisition of Base Contracts by the Borrower or the origination
of Base Contracts by any of the Guarantors, the Borrower will deliver
or cause to be delivered directly to the Custodian for the benefit of
the Collateral Agent pursuant to the Custodial Agreements all original
copies of the Base Contracts of the Borrower and such Guarantor (or in
the case of Base Contracts consisting of a sales contract and a
separate promissory note, a copy of such sales contract and the
original of such promissory note), together with all contracts and
papers related to such Base
<PAGE>
Contract. The Custodian will hold, maintain and keep custody of all
such Base Contracts for the benefit of the Collateral Agent as set
forth in the Custodial Agreements. The Borrower will be responsible
for collection on all of its Base Contracts.
(b) The Custodian shall at all times maintain control of the Base
Contracts for the benefit of the Collateral Agent pursuant to the
Custodial Agreements. The Borrower may access the Base Contracts at
Custodian's storage facility (as described in the Custodial
Agreements) only for the purposes and upon the terms and conditions
set forth herein and in the Custodial Agreements.
(c) The Borrower will, and will cause each of the Guarantors to,
at all times comply with the terms of and their obligations under the
Custodian Agreements, and shall not enter into any modification,
amendment or supplement of or to, and shall not terminate, any of the
Custodial Agreements without the prior written consent of the Majority
Banks.
8.16. BORROWER'S TRANSACTIONS WITH FCI
--------------------------------
(a) Operating Agreement. The Operating Agreement shall set forth
-------------------
the following:
(1) the obligations of FCI to purchase Base Contracts from the
Borrower,
(2) the purchase price (100% of the outstanding principal
balance) to be paid by FCI for Eligible Base Contracts, Eligible Green
Base Contracts and Eligible Prime Base Contracts in Repurchase
Default,
(3) the terms of substituting a performing Base Contract of
equivalent outstanding principal amount for a Base Contract in
Repurchase Default (on the basis of 100% of the outstanding principal
balance of the Base Contract in Repurchase Default to 100% of the
performing Base Contract), and
(4) the purchase price (100% of the outstanding principal balance
plus all accrued but unpaid interest) to be paid to FCI by the
Borrower for an Eligible Base Contract, Eligible Green Base Contracts
and Eligible Prime Base Contract.
(b) Purchase of Base Contracts from FCI. From and after the
---------------------------------------
Closing Date, the Borrower may only purchase Base Contracts from FCI
in accordance with the Operating Agreement.
<PAGE>
(c) Procedure for Purchasing Base Contracts from FCI. On or immediately
------------------------------------------------
following each Contract Settlement Date, the Borrower shall deliver to the
Collateral Agent and to each nominee under each Title Clearing Agreement a list
of the Base Contracts (if any) that it has purchased from FCI on the such
Contract Settlement Date, together with all documentation relating thereto.
(d) Sale of Base Contracts to FCI. The Borrower may at any time sell a
------------------------------
Base Contract to FCI for a purchase price equal to or greater than 100% of such
Base Contract's outstanding principal balance. Proceeds of such sales shall be
applied as set forth in ss.2.10 or ss.2.11, as applicable.
(e) Tax Sharing. The Borrower may effect all transactions and make all
-----------
payments required by the Tax Sharing Agreement.
8.17. SERVICING OF BASE CONTRACTS. The Borrower will manage, administer,
---------------------------
service and make collections on the Base Contracts included in the Collateral
and perform all contractual and customary undertakings of the holder of the Base
Contracts to the obligors thereunder. In managing, administering, servicing and
making collections on the Base Contracts, the Borrower will exercise that degree
of skill and care consistent with the practices employed by prudent lending
institutions which originate and service instruments and agreements similar to
the Base Contracts or other time share loans in the jurisdictions where the
Approved Projects are located and the Borrower's written credit standards and
collection policies, so long as such practices and policies are in the best
interests of the Banks. The Borrower shall maintain such books of account,
computer data files and other records as will enable the Agent and the
Collateral Agent to determine the status of each Base Contract included in the
Collateral and will enable each such Base Contract to be serviced by another
Person. Pursuant to and in accordance with the Operating Agreement, the Borrower
may appoint FCI to perform one or more of its obligations under this ss.8.17.
The Borrower will, consistent with the foregoing provisions, act in
such a manner as will maximize the receipt of scheduled collections in respect
of the Base Contracts. The Borrower shall not appoint any other Person (other
then FCI as permitted above) as its agent to perform the servicing obligations
and duties described in this Section 8.16 without the prior written consent of
the Banks. If an Event of Default shall have occurred and be continuing, the
Agent may, and at the request of the Majority Banks shall, in addition to its
other rights and remedies available to it under this Credit Agreement and the
other Loan
<PAGE>
Documents, by written notice given to the Borrower, require the Borrower to
promptly transfer all servicing obligations and duties described in this Section
8.16 to a successor servicer which is (i) a financial institution having a net
worth of not less than $100,000,000 and whose regular business includes the
servicing of consumer finance receivables (similar to the Base Contracts, if
possible) and (ii) satisfactory to the Agent and the Banks. Any such successor
servicer shall be appointed pursuant to a written agreement satisfactory to the
Agent and the Banks, which agreement shall set forth in greater detail the
responsibilities and duties of such successor servicer. Upon appointment of such
successor servicer, all of the rights and obligations of the Borrower and any
agent of the Borrower with respect to the servicing of Base Contracts shall
terminate and pass to and be vested in the successor servicer, all as set forth
in the agreement by which such successor servicer is appointed.
8.18. LEGAL OPINIONS. In the event that any Guarantor originates or expects
--------------
to originate Base Contracts for VOIs or Lots at an Approved Project which is not
located in a state included in the Existing Resort Cities on the Closing Date,
the Borrower shall furnish to the Agent and the Banks an opinion of local
counsel to the Borrower and the Guarantors for the jurisdiction in which such
Approved Project is located 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 with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the first priority lien and security interest of the Collateral Agent
in the Collateral 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 and
security interests. In addition, neither the Borrower nor any Guarantor will
change its chief executive office and principal place of business or remove any
portion of the Collateral that consists of money or is evidenced by an
instrument, certificate or other writing (including any Base Contract) from the
jurisdiction in which it was held on the Closing Date unless the Agent and the
Banks shall have first received an opinion of counsel to the effect that the
lien and security interests granted to the Collateral Agent with respect to such
property will continue to be maintained after giving effect to such action or
actions.
8.19. FURTHER ASSURANCES. The Borrower will, and will cause each of
------------------
its Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.
<PAGE>
8.20. COMPUTER EQUIPMENT. The Borrower represents and warrants to the Agent
------------------
and the Banks that as of the date hereof all computer software, tapes, disks and
other electronic media relating to the Base Contracts, any VOI Regime, the Fair
Share Plus Program, the Reservation System and the Fairfield Destinations
Vacation Club operate on computer hardware that is available to the general
public without significant modification. If at any time after the date hereof,
the foregoing representation shall cease to be accurate, the Borrower shall
promptly, and in any event within thirty (30) days thereafter, grant to the
Collateral Agent under the Security Agreements a security interest in and lien
on any specialized or modified computer hardware required to run such computer
software.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligations to issue,
extend or renew any Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) current liabilities of the Borrower or such Subsidiary incurred in
the ordinary course of business not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in an aggregate amount not to exceed $1,000,000 at
any time in respect of taxes, assessments, governmental charges or levies
and claims for labor, materials and supplies and liabilities under employee
benefit plans, including, without limitation, pension plans, to the extent
that payment therefor shall not at the time be required to be made in
accordance with the provisions of ss.8.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal
<PAGE>
so long as execution is not levied thereunder or in respect of which the
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) Securitizations with respect to which the obligor is a
special-purpose, bankruptcy-remote Subsidiary of the Borrower, neither the
Borrower, FCI nor any of FCI's other Subsidiaries is directly or indirectly
liable for any indebtedness or obligations incurred by such special-purpose
bankruptcy remote Subsidiary, and neither the Borrower, FCI nor any of
FCI's other Subsidiaries is obligated to repurchase defaulted Base
Contracts sold to such special-purpose, bankruptcy-remote Subsidiary as
part of such Securitization;
(g) Indebtedness existing on the date hereof and listed and described
on Schedule 9.1 hereto and renewals which do not increase the amount
-------- ---
thereof, in each case satisfactory to the Agent;
(h) Subordinated Debt;
(i) Indebtedness of FRC, FCC and FFC to FAC under the Receivables
Purchase Agreements; and
(j) unsecured Indebtedness of the Borrower to a Guarantor which is
expressly subordinated and made junior to the payment and performance of
the Obligations.
9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit any
---------------------
of its Subsidiaries to, (i) create or incur or suffer to be created or incurred
or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or
other security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (ii) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors; (iii) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; (iv) suffer to exist for a period of more
<PAGE>
than thirty (30) days after the same shall have been incurred any Indebtedness
or claim or demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (v) sell, assign, pledge or otherwise transfer any "receivables"
as defined in clause (vii) of the definition of the term "Indebtedness," with or
without recourse; provided that the Borrower or any of its Subsidiaries may
create or incur or suffer to be created or incurred or to exist:
(a) liens on assets other than the Collateral to secure taxes,
assessments and other government charges in respect of obligations not
overdue or liens on assets other than the collateral to secure claims for
labor, material or supplies in respect of obligations not overdue;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(c) liens on assets other than the Collateral in respect of judgments
or awards that have been in force for less than the applicable period for
taking an appeal so long as execution is not levied thereunder or in
respect of which the Borrower or such Subsidiary shall at the time in good
faith be prosecuting an appeal or proceedings for review and in respect of
which a stay of execution shall have been obtained pending such appeal or
review;
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties other than the Collateral in respect of
obligations (i) not more than thirty (30) days overdue or (ii) or which are
being contested in good faith and for which a surety bond has been obtained
in an amount sufficient to effect satisfaction and discharge thereof;
(e) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the Borrower is
a party, and other minor liens or encumbrances none of which in the opinion
of the Borrower interferes materially with the use of the property affected
in the ordinary conduct of the business of the Borrower and its
Subsidiaries, which defects do not individually or in the aggregate have a
materially adverse effect on the business of the Borrower
<PAGE>
individually or of the Borrower and its Subsidiaries on a consolidated
basis;
(f) liens existing on the date hereof and listed on Schedule 9.2
--------- ---
hereto;
(g) liens in favor of the Collateral Agent for the benefit of the
Banks and the Agent under the Loan Documents; and
(h) liens on those Base Contracts and other assets transferred to a
special-purpose bankruptcy-remote Subsidiary of the Borrower to secure the
Indebtedness of such Subsidiary described in ss.9.1(f).
9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
---------------------------
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess
of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States
of America or any state thereof that at the time of purchase have been
rated and the ratings for which are not less than "P 1" if rated by
Moody's Investors Service, Inc., and not less than "A 1" if rated by
Standard and Poor's Rating Group;
(d) Investments existing on the date hereof and listed on
Schedule 10.3 hereto;
-------- ----
(e) Investments existing on the date hereof consisting of
Investments by the Borrower in Subsidiaries of the Borrower;
(f) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by ss.9.5.2(ii);
(g) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the
ordinary course of business; and
<PAGE>
(h) Investments consisting of capital contributions to or
promissory notes received as proceeds from a special-purpose
bankruptcy-remote Subsidiary of the Borrower by reason of a
disposition of Base Contracts pursuant to a Securitization so long as
such Securitization is permitted by ss.9.1(f) and such disposition of
Base Contracts is permitted by ss.9.5.2(iii).
9.4. DISTRIBUTIONS. The Borrower will not make any Distributions, except
-------------
that the Borrower may make Distributions to FCI consisting of the declaration
and payment of dividends so long as (a) after giving effect to such
Distributions on a pro forma basis, the Borrower is in compliance with each of
the covenants set froth in ss.10 hereof, (b) such Distributions are made no more
frequently than quarterly during each calendar year, (c) the Borrower is a
Subsidiary of FCI and FCI is a Guarantor, and (d) no Default or Event of Default
has occurred and is continuing, or would occur after giving effect to such
Distributions.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and will not
------------------------
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary course of
business consistent with past practices) except the merger or consolidation
of the Borrower with and into FCI, or the merger or consolidation of two or
more Subsidiaries of the Borrower.
9.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will not
---------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition of assets without the prior written approval of the
Majority Banks, except as set forth below:
(i) The Borrower may sell or substitute Base Contracts and
beneficial interests in VOIs and Lots underlying such Base Contracts
to FCI (pursuant to ss.8.16 hereto), FCC, FRC and FFC provided that
-------- ----
(a) the terms of each such sale are no less favorable than those
contained the Operating Agreement (with respect to sales from the
Borrower to FCI) or in the Receivables Purchase Agreements (with
respect to sales from the Borrower to FCC, FRC and FFC), (b) the
proceeds of each such sale are deposited in the BKB Concentration
Account and applied in accordance with the provisions of ss.2.10 or
ss.2.11, as applicable, and (c) no Default or Event of Default has
occurred and is continuing, or would occur after giving effect to such
disposition.
<PAGE>
(ii) The Borrower or its Subsidiaries may sell Base Contracts and
beneficial interests in VOIs and Lots underlying such Base Contracts
to unrelated third parties provided that (a) each such sale is for
-------- ----
cash, (b) the purchase price of the Base Contracts sold shall not be
less than 80% of the principal components of such Base Contracts plus
all accrued and unpaid interest on such Base Contracts, (c) the
proceeds of each such sale are deposited in the BKB Concentration
Account and applied in accordance with the provisions of ss.2.10 or
ss.2.11, as applicable, and (d) no Default or Event of Default has
occurred and is continuing, or would occur after giving effect to such
disposition.
(iii) The Borrower may sell Base Contracts and beneficial
interests in VOIs and Lots underlying such Base Contracts to
special-purpose bankruptcy-remote Subsidiaries of the Borrower (other
than FCC, FRC and FFC) pursuant to Securitizations permitted by
ss.9.1(f), provided that (a) the cash portion of the purchase price of
-------- ----
the Base Contracts sold shall not be less than 80% of the principal
components of such Base Contracts plus all accrued and unpaid interest
on such Base Contracts, (b) the cash proceeds of such sale are
deposited in the BKB Concentration Account and applied in accordance
with the provisions of ss.2.10 or ss.2.11, as applicable, and (c) no
Default or Event of Default has occurred and is continuing, or would
occur after giving effect to such disposition.
9.5.3. DISPOSITION OF STOCK. The Borrower will not, and will not
--------------------
permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition or issuance of any stock of a Subsidiary to any
Person other than the Borrower.
9.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any of
------------------
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property or lease
other property that the Borrower or any Subsidiary of the Borrower intends to
use for substantially the same purpose as the property being sold or
transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on Schedule
---------------------------------- ------
7.18 hereto, the Borrower will not, and will not permit any of its Subsidiaries
- ----
to, (i) use any of the Real Estate or any portion thereof for the handling,
processing, storage or disposal of Hazardous Substances, (ii) cause or permit to
be located on any of the Real Estate any underground tank or other underground
storage
<PAGE>
receptacle for Hazardous Substances, (iii) generate any Hazardous Substances on
any of the Real Estate, (iv) conduct any activity at any Real Estate or use any
Real Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) or threatened release of Hazardous Substances
on, upon or into the Real Estate or (v) otherwise conduct any activity at any
Real Estate or use any Real Estate in any manner that would violate any
Environmental Law in any material respect or bring such Real Estate in violation
of any Environmental Law in any material respect.
9.8. SUBORNIDATED DEBT. The Borrower will not, and will not permit any of
-----------------
its Subsidiaries to, amend, supplement or otherwise modify the terms of any of
the Subordinated Debt or prepay, redeem or repurchase any of the Subordinated
Debt.
9.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA Affiliate
----------------------
will
(a) engage in any "prohibited transaction" within the meaning of
ss.406 of ERISA or ss.4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in ss.302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
ss.302(f) or ss.4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to ss.307 of ERISA or ss.401(a)(29)
of the Code; or (e) permit or take any action which would result in
the aggregate benefit liabilities (with the meaning of ss.4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities.
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of ss4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets
of such Plans, disregarding for this purpose the benefit liabilities
and assets of any such Plan with assets in excess of benefit
liabilities.
<PAGE>
9.10. BUSINESS ACTIVITIES. The Borrower will not, and will not permit any
-------------------
of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
9.11. FISCAL YEAR. The Borrower will not, and will not permit any of it
------------
Subsidiaries to, change the date of the end of its fiscal year from that set
forth in ss.7.4.1.
9.12. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such Affiliate or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any such Affiliate has a substantial interest or is an officer,
director, trustee or partner, unless such transaction (a) is on terms no more
favorable to such Person than would have been obtainable on an arm's-length
basis in the ordinary course of business and (b) has been disclosed to and
approved by the Majority Banks.
9.13. BANK ACCOUNTS. The Borrower will not, and will not permit any of its
-------------
Subsidiaries to, (i) establish any bank accounts other than those Local
Accounts, Interim Concentration Accounts and other accounts, all listed on
Schedule 7.20, without giving ten (10) days prior written notice to the Agent,
- -------- ----
(ii) violate directly or indirectly any Agency Account Agreement or other bank
agency or lock box agreement in favor of the Agent for the benefit of the Banks
and the Agent with respect to such account, or (iii) deposit into any of the
payroll accounts listed on Schedule 7.20 any amounts in excess of amounts
-------- ----
necessary to pay current payroll obligations from such accounts.
9.14. NO TERMINATION OR AMENDMENTS. Unless the Majority Banks give their
----------------------------
prior written consent, the Borrower will keep in full force in effect, and will
not waive, amend, modify or terminate, the Tax Sharing Agreement, the Fair Share
Plus Agreement, the Operating Agreement, the Custodial Agreements, or any of the
Title Clearing Agreements, or amend or modify the Receivables Purchase
Agreements; 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
<PAGE>
thereunder as FCI, or (3) identifying a separate pool of Base Contracts to be
sold or pledged to secure debt under a Securitization, and (B) the FairShare
Plus 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 Agent an opinion of counsel in form
and substance acceptable to the Agent to the effect that such amendment or
modification will not adversely affect in any material respect the respective
interests of the Agent and the Banks.
10. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
10.1. DEBT SERVICE COVERAGE RATIO. The Borrower will not permit the ratio
---------------------------
of (i) Consolidated Operating Cash Flow for any period of four (4) consecutive
fiscal quarters to (ii) the sum of (A) Consolidated Total Interest Expense for
such period, plus (B) any mandatory scheduled repayments of principal on any
----
Indebtedness of the Borrower or any of its Subsidiaries paid or due and payable
during such period, to be less than 2.0 to 1 at any time.
10.2. LIABILITIES TO WORTH RATIO. The Borrower will not permit the ratio of
--------------------------
Consolidated Total Liabilities to Consolidated Tangible Net Worth to exceed 4.0
to 1 at any time.
10.3. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not permit
-------------------------------
Consolidated Tangible Net Worth at any time to be less than the sum of (i)
$47,600,000 plus (ii) on a cumulative basis, 100% of positive Consolidated Net
----
Income for each fiscal quarter beginning with the fiscal quarter ended September
30, 1997, plus (iii) 100% of the paid-in capital from FCI less any Distributions
----
made by the Borrower to FCI.
11. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit Loans and
the Term Loan and of the Agent to issue any initial Letters of Credit shall be
subject to the satisfaction of the following conditions precedent on or prior to
March 18, 1998:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
--------------
executed and delivered by the respective parties thereto, shall
<PAGE>
be in full force and effect and shall be in form and substance satisfactory to
each of the Banks. Each Bank shall have received a fully executed copy of each
such document.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall have
-------------------------------------
received from the Borrower and each of the Guarantors a copy, certified by a
duly authorized officer of such Person to be true and complete on the Closing
Date, of each of (i) its charter or other incorporation documents as in effect
on such date of certification, and (ii) its by-laws as in effect on such date.
11.3. CORPORATE, ACTION. All corporate action necessary for the valid
-----------------
execution, delivery and performance by the Borrower and each of the Guarantors
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
----------------------
the Borrower and each of the Guarantors an incumbency certificate, dated as of
the Closing Date, signed by a duly authorized officer of the Borrower or such
Guarantor, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (i) to sign, in the name and on behalf of
each of the Borrower of such Guarantor, each of the Loan Documents and
Subordination Documents to which the Borrower or such Guarantor is or is to
become a party; (ii) in the case of the Borrower, to make Loan Requests and
Conversion Requests and to apply for Letters of Credit; and (iii) to give
notices and to take other action on its behalf under the Loan Documents.
11.5. VALIDITY OF LIENS. The Security Documents shall be effective to
-----------------
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
and lien upon the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to the
Agent.
11.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall have
----------------------------------------------
received from each of the Borrower and its Subsidiaries and each of the
Guarantors a completed and fully executed Perfection Certificate and the results
of UCC searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
<PAGE>
11.7. CERTIFICATE OF INSURANCE. The Agent shall have received (i) a
------------------------
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements and (ii) certified copies of all
policies evidencing such insurance (or certificates therefore signed by the
insurer or an agent authorized to bind the insurer).
11.8. AGENCY ACCOUNT AGREEMENTS. The Borrower shall have established the
-------------------------
BKB Concentration Account, and the Agent shall have received an Agency Account
Agreement executed by each depository institution with a Local Account or an
Interim Concentration Account.
11.9. BORROWING BASE REPORT. The Agent shall have received from the
-----------------------
Borrower the initial Borrowing Base Report dated as of the Closing Date.
11.10. BASE CONTRACTS AGING REPORT. The Agent shall have received from the
---------------------------
Borrower the most recent Base Contracts aging report of the Borrower and its
Subsidiaries dated as of a date which shall be no more than fifteen (15) days
prior to the Closing Date and the Borrower shall have notified the Agent in
writing on the Closing Date of any material deviation from the Base Contracts
values reflected in such Base Contracts aging report and shall have provided the
Agent with such supplementary documentation as the Agent may reasonably request.
11.11. OPINION OF COUNSEL. Each of the Banks, the Agent and the Collateral
------------------
Agent shall have received a favorable legal opinion addressed to the Banks and
the Agent, dated as of the Closing Date, in form and substance satisfactory to
the Banks and the Agent, from: (a) the Rose Law Firm, counsel to the Borrower
and the Guarantors, and (b) local counsel to the Borrowers and the Guarantors
for the jurisdictions in which each Existing Resort City is located other than
California.
11.12. PAYMENT OF FEES. The Borrower shall have paid to the Agent the
---------------
Administrative Fee pursuant to ss.5.1.
11.13. OTHER DOCUMENTS. The Agent shall have received evidence satisfactory
---------------
to it that the Tax Sharing Agreement, the Custodial Agreements, the Title
Clearing Agreements, the Operating Agreement, the Fair Share Plus Agreement, the
FRC Subordinated Note, the FRC Receivables Purchase Agreement and each document,
agreement or instrument evidencing Subordinated Debt are in full force and
effect as of the Closing Date and that no party thereto is in default under any
of the
<PAGE>
aforementioned agreements, and all such documents shall be in form and substance
satisfactory to the Lenders in all respects. The Agent shall have also received
an executed copy of each of the above-listed agreements together with all
amendments, supplements and waivers with respect thereto.
11.14. REPAYMENT OF EXISTING CREDIT AGREEMENT. The Borrower shall have
--------------------------------------
repaid the Loans outstanding under the Existing Credit Agreement in an amount
sufficient to cause compliance with the terms and conditions of this Credit
Agreement.
12. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Loan, including the Revolving
Credit Loan and the Term Loan, and of the Agent to issue, extend or renew any
Letter of Credit, in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
--------------------------------------------------
representations and warranties of any of the Borrower and its Subsidiaries and
the Guarantors contained in this Credit Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with this
Credit Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate do not have a Material Adverse Effect, and to the
extent that such representations and warranties relate expressly to an earlier
date).
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
-------------------
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
-------------------------
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any
<PAGE>
applicable regulations of the Comptroller of the Currency or the Board of
Governors of the Federal Reserve System.
12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
--------------------------
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
12.5. BORROWING BASE REPORT. The Agent shall have received the most recent
---------------------
Borrowing Base Report required to be delivered to the Agent in accordance with
ss.8.4(f) and, if requested by the Agent, a Borrowing Base Report dated within
five (5) days of the Drawdown Date of such Loan or of the date of issuance,
extension or renewal of such Letter of Credit.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
-----------------------------------
("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or
any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
(b) the Borrower or any of the Guarantors shall fail to pay any
interest on the Loans, the Administrative Fee, any Letter of Credit
Fee, or other sums due hereunder or under any of the other Loan
Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in ss.ss.8.1, 8.2, 8.4(f), 8.5, 8.6, 8.7, 8.9, 8.12, 8.14,
8.15, 9 or 10 hereof;
(d) the Borrower or any of its Subsidiaries or any of the
Guarantors shall fail to perform any term, covenant or agreement
contained herein or in any of the other Loan Documents (other than
those specified elsewhere in this ss.13.1) for thirty (30) days after
written notice of such failure has been given to the Borrower by the
Agent;
<PAGE>
(e) any representation or warranty of the Borrower or any of its
Subsidiaries or any of the Guarantors in this Credit Agreement or any
of the other Loan Documents or in any other document or instrument
delivered pursuant to or in connection with this Credit Agreement, as
such representation and warranty may be updated in writing from time
to time by the Borrower or any of its Subsidiaries, shall prove to
have been false in any material respect upon the date when made or
deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries or any of the
Guarantors shall fail to pay at maturity, or within any applicable
period of grace, any obligation for borrowed money or credit received
or in respect of any Capitalized Leases, or fail to observe or perform
any material term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing borrowed money or credit
received or in respect of any Capitalized Leases for such period of
time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries or any of the
Guarantors shall make an assignment for the benefit of creditors, or
admit in writing its inability to pay or generally fail to pay its
debts as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver of
the Borrower or any of its Subsidiaries or any of the Guarantors or of
any substantial part of the assets of the Borrower or any of its
Subsidiaries or any of the Guarantors or shall commence any case or
other proceeding relating to the Borrower or any of its Subsidiaries
or any of the Guarantors under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any
of the foregoing, or if any such petition or application shall be
filed or any such case or other proceeding shall be commenced against
the Borrower or any of its Subsidiaries or any of the Guarantors and
the Borrower or any of its Subsidiaries or any of the Guarantors shall
indicate its approval thereof, consent thereto or acquiescence therein
or such petition or application shall not have been dismissed within
forty-five (45) days following the filing thereof;
<PAGE>
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries or any of the Guarantors bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree
or order for relief is entered in respect of the Borrower or any
Subsidiary of the Borrower or any of the Guarantors in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries or any
of the Guarantors that, with other outstanding final judgments,
undischarged, against the Borrower or any of its Subsidiaries or any
of the Guarantors exceeds in the aggregate $1,000,000;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or
the Subordinated Debt shall be prepaid, redeemed or repurchased in
whole or in part;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or
liens in a substantial portion of the Collateral shall cease to be
perfected, or shall cease to have the priority contemplated by the
Security Documents, in each case otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of the Borrower or any of
the Guarantors party thereto or any of their respective stockholders,
or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or
issue a judgment, order, decree or ruling to the effect that, any one
or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
(l) the Borrower or any ERISA Affiliate incurs any liability to
the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in
an aggregate amount exceeding $500,000, or the Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of
ERISA by a Multiemployer Plan requiring aggregate
<PAGE>
annual payments exceeding $500,000, or any of the following occurs
with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable
Event, or a failure to make a required installment or other payment
(within the meaning of ss.302(f)(1) of ERISA), provided that the Agent
--------
determines in its reasonable discretion that such event (A) could be
expected to result in liability of the Borrower or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $500,000 and (B) could constitute grounds
for the termination of such Guaranteed Pension Plan by the PBGC, for
the appointment by the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan or for the
imposition of a lien in favor of such Guaranteed Pension Plan; or (ii)
the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by
the PBGC of proceedings to terminate such Guaranteed Pension Plan;
(m) the Borrower or any of its Subsidiaries or any of the
Guarantors shall be enjoined, restrained or in any way prevented by
the order of any court or any administrative or regulatory agency from
conducting any material part of its business and such order shall
continue in effect for more than thirty (30) days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than
fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Borrower or any of its Subsidiaries or any of the Guarantors if such
event or circumstance is not covered by business interruption
insurance and would have a Material Adverse Effect or a materially
adverse effect on the business or financial condition of such
Guarantor;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired
by the Borrower or any of its Subsidiaries or any of the Guarantors if
such loss, suspension, revocation or failure to renew would have a
material adverse effect on the business or financial condition of the
Borrower or such Subsidiary or such Guarantor;
(p) the Borrower or any of its Subsidiaries or any of the
Guarantors shall be indicted for a state or federal crime, or any
civil
<PAGE>
or criminal action shall otherwise have been brought against the
Borrower or any of its Subsidiaries or any of the Guarantors, a
punishment for which in any such case could include the forfeiture of
any assets of the Borrower or such Subsidiary or such Guarantor
included in the Borrowing Base or any assets of the Borrower or such
Subsidiary or such Guarantor not included in the Borrowing Base but
having a fair market value in excess of $200,000; or
(q) FCI shall at any time legally or beneficially, cease to own
all of the issued and outstanding capital stock of the Borrower; or
(r) if there shall exist an "Event of Default" under (and as
defined in) the FCI Credit Agreement;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
of Default specified in ss.ss.13.1(g), 13.1(h) or 13.1(j), all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
----------------------------
Default specified in ss.13.1(g), ss.13.1(h) or ss.13.1(j) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of the
Banks shall be relieved of all further obligations to make Loans to the Borrower
and the Agent shall be relieved of all further obligations to issue, extend or
renew Letters of Credit. If any other Event of Default shall have occurred and
be continuing, the Agent may and, upon the request of the Majority Banks, shall,
by notice to the Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the credit hereunder
shall terminate immediately and each of the Banks shall be relieved of all
further obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve the Borrower or any of its Subsidiaries or any of
the Guarantors of any of the Obligations.
13.3. REMEDITES. In case any one or more of the Events of Default shall
---------
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to ss.13.1, each Bank,
<PAGE>
if owed any amount with respect to the Loans or the Reimbursement Obligations,
may, with the consent of the Majority Banks but not otherwise, proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.
13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that the Agent
--------------------------------------
receives proceeds as contemplated by ss.2.11 or in the event that, following the
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any of the Security Documents, or otherwise with respect to
the realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that (i) distributions
-------- -------
shall be made (A) pari passu among Obligations with respect to the
---- -----
Administrative Fee payable pursuant to ss.5.1 and all other Obligations and
(B) with respect to each type of Obligation owing to the Banks, such as
interest, principal, fees and expenses, among the Banks pro rata, and (ii)
--- ----
the
<PAGE>
Agent may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to ss.9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
14. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (i) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Notes held by such Bank or constituting Reimbursement Obligations owed to
such Bank, such amount shall be applied ratably to such other Indebtedness and
to the Indebtedness evidenced by all such Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, and (ii) if such Bank
shall receive from the Borrower, whether by voluntary payment, exercise of the
right of setoff, counterclaim, cross action, enforcement of the claim evidenced
by the Notes held by, or constituting Reimbursement Obligations owed to, such
Bank by proceedings against the Borrower at law or in equity or by proof thereof
in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by, or Reimbursement Obligations owed to, such Bank any amount in excess of
its ratable portion of the payments received by all of the Banks with respect to
the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
--- -----
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Notes held by it or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; provided that if
--------
all or
<PAGE>
any part of such excess payment is thereafter recovered from such Bank, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
15. THE AGENT.
---------
15.1. AUTHORIZATION.
-------------
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation of
the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute
--------------------
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the
<PAGE>
other Loan Documents. The Agent may utilize the services of such Persons as the
Agent in its sole discretion may reasonably determine, and all reasonable fees
and expenses of any such Persons shall be paid by the Borrower.
15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
-------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS.
------------------
15.4.1. GENERAL. The Agent shall not be responsible for the execution
-------
or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any
time constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Borrower or any of its Subsidiaries, or be bound to ascertain or inquire as
to the performance or observance of any of the terms, conditions, covenants
or agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Notes or to inspect any
of the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrower or any holder of
any of the Notes shall have been duly authorized or is true, accurate and
complete. The Agent has not made nor does it now make any representations
or warranties, express or implied, nor does it assume any liability to the
Banks, with respect to the credit worthiness or financial conditions of the
Borrower or any of its Subsidiaries. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based upon such information and documents as it has deemed appropriate,
made its own credit analysis and decision to enter into this Credit
Agreement.
<PAGE>
15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
----------------------------
compliance with the conditions set forth inss.11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be to be
consent to or approved by or acceptable or satisfactory to such Bank,
unless an officer of the Agent active upon the Borrower's account shall
have received notice from such Bank prior to the Closing Date specifying
such Bank's objection thereto and such objection shall not have been
withdrawn by notice to the Agent to such effect on or prior to the Closing
Date.
15.5. PAYMENTS.
--------
15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
------------------
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
--- ----
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
----------------------
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
-----------------
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (i) to make available to the Agent its pro rata share of
--- ----
any Loan or to purchase any Letter of Credit Participation or (ii) to
comply with the provisions ofss.14 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether
<PAGE>
by setoff or otherwise, is in excess of its pro rata share of such payments
--- ----
due and payable to all of the Banks, in each case as, when and to the full
extent required by the provisions of this Credit Agreement, shall be deemed
delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank
until such time as such delinquency is satisfied. A Delinquent Bank shall
be deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Loans, Unpaid Reimbursement
Obligations, interest, fees or otherwise, to the remaining nondelinquent
Banks for application to, and reduction of, their respective pro rata
--- ----
shares of all outstanding Loans and Unpaid Reimbursement Obligations. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to
the nondelinquent Banks in proportion to their respective pro rata shares
--- ----
of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent
Bank shall be deemed to have satisfied in full a delinquency when and if,
as a result of application of the assigned payments to all outstanding
Loans and Unpaid Reimbursement Obligations of the nondelinquent Banks, the
Banks' respective pro rata shares of all outstanding Loans and Unpaid
--- ----
Reimbursement Obligations have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.
15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note
----------------
or the purchaser of any Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by ss.16), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
15.8. AGENT AS BANK. In its individual capacity, BKB shall have the same
-------------
obligations and the same rights, powers and privileges in respect
<PAGE>
to its Commitment and the Loans made by it, and as the holder of any of the
Notes and as the purchaser of any Letter of Credit Participations, as it would
have were it not also the Agent.
15.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
------------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this ss.15.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
15.11. AUTHORIZATION OF COLLATERAL AGENCY AGREEMENT. Each Bank hereby
------------------------------------------------
authorizes the Agent to execute and deliver the Collateral Agency Agreement on
behalf of the Banks. Each Bank further authorizes the Agent and the Collateral
Agent to perform their respective duties under the Collateral Agency Agreement
in accordance with the terms and provisions thereof.
15.12. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
----------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (i) so requested by
the Majority Banks and (ii) the Banks have provided to the Agent and/or the
Collateral Agent such additional indemnities and assurances against expenses and
liabilities as the Agent and the
<PAGE>
Collateral Agent may reasonably request, direct the Collateral Agent to proceed
to enforce the provisions of the Security Documents authorizing the sale or
other disposition of all or any part of the Collateral and exercise all or any
such other legal and equitable and other rights or remedies as it may have in
respect of such Collateral. The Majority Banks may request in writing that the
Agent direct the Collateral Agent as to the method and the extent of any such
sale or other disposition, the Banks hereby agreeing to indemnify and hold the
Agent and/or the Collateral Agent, harmless from all liabilities incurred in
respect of all actions taken or omitted in accordance with such requests and
directions, provided that the Agent need not comply with any such direction to
--------
the extent that the Agent reasonably believes the Agent's compliance with such
direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
16. EXPENSES AND INDEMNIFICATION.
----------------------------
16.1. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel or any local counsel to the Agent incurred in connection with
the preparation, syndication, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, any
amendments, modifications, approvals, consents or waivers hereto or hereunder,
or the cancellation of any Loan Document upon payment in full in cash of all of
the Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (iv) the fees, expenses and disbursements of the Agent or any
of its affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, including all title insurance premiums
and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses
and bank charges, including bank charges for returned checks, incurred by the
Agent in establishing, maintaining or handling agency accounts, lock box
accounts and other accounts for the collection of any of the Collateral; (vi)
all reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent, and reasonable consulting,
<PAGE>
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower or any of its Subsidiaries or any of the Guarantors or the
administration thereof after the occurrence of a Default or Event of Default and
(B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrower or any of its Subsidiaries or any of the Guarantors and (vii) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred in
connection with UCC searches, UCC filings or mortgage recordings.
16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
---------------
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Loans or Letters of Credit, (ii) the reversal or withdrawal of any
provisional credits granted by the Agent upon the transfer of funds from lock
box, bank agency or concentration accounts or in connection with the provisional
honoring of checks or other items, (iii) any actual or alleged infringement of
any patent, copyright, trademark, service mark or similar right of the Borrower
or any of its Subsidiaries or any of the Guarantors comprised in the Collateral,
(iv) the Borrower or any of its Subsidiaries or any of the Guarantors entering
into or performing this Credit Agreement or any of the other Loan Documents or
(v) with respect to the Borrower and its Subsidiaries and their respective
properties and assets, the violation of any Environmental Law, the presence,
disposal, escape, seepage, leakage, spillage, discharge, emission, release or
threatened release of any Hazardous Substances or any action, suit, proceeding
or investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to, claims with respect to wrongful death, personal
injury or damage to property), in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding. In litigation, or the preparation therefor, the Banks and the Agent
and its affiliates shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this ss.16.2 are unenforceable for any reason,
the Borrower
<PAGE>
hereby agrees to make the maximum contribution to the payment in satisfaction of
such obligations which is permissible under applicable law.
16.3. SURVIVAL. The covenants contained in this ss.16 shall survive payment
--------
or satisfaction in full of all other Obligations.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
-----------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in each case, that any such Section 20
Subsidiary receiving such information shall be bound by the confidentiality
provisions of this Credit Agreement. Such authorization shall survive the
payment and satisfaction in full of all of Obligations.
17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf of
---------------
itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(a) after such information shall have become public other than through a
violation of this ss.17, (b) to the extent required by statute, rule, regulation
or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to
bank examiners or any other regulatory authority having jurisdiction over any
Bank or the Agent, or to auditors or accountants, (e) to the Agent, any Bank or
any Section 20 Subsidiary, (f) in connection with any litigation to which any
one or more of the Banks, the Agent or any Section 20 Subsidiary is a party, or
in connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (g) to a
<PAGE>
Subsidiary or affiliate of such Bank as provided in ss.17.1 or (h) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of ss.19.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law
------------------
or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such
non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
17.4. OTHER. In no event shall any Bank or the Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
ss.17 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Loans or Reimbursement Obligations from any Bank.
18. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries or
any of the Guarantors pursuant hereto shall be deemed to have been relied upon
by the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of any
of the Loans and the issuance, extension or renewal of any Letters of Credit, as
herein contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes or
any of the other Loan Documents remains outstanding or any Bank has any
obligation to make any Loans or the Agent has any obligation to issue, extend or
renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Bank or the Agent at any time by or
on behalf of the Borrower or any of its Subsidiaries or any of the Guarantors
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary or
such Guarantor hereunder.
<PAGE>
19. ASSIGNMENT AND PARTICIPATION.
----------------------------
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
---------------------------------
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); provided that (i) the
--------
Agent shall have given its prior written consent to such assignment, (ii) each
such assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (iii) each
assignment shall be in an amount that is a whole multiple of $1,000,000, and
(iv) the parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit F hereto (an "Assignment and
------- -
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (y) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in ss.19.3, be
released from its obligations under this Credit Agreement.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
-----------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
<PAGE>
(b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
and its Subsidiaries or any of the Guarantors or any other Person primarily
or secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or any of
the Guarantors or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of their obligations under this
Credit Agreement or any of the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in ss.7.4 and ss.8.4 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision
to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Credit Agreement are
required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata
--- ----
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
<PAGE>
19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
--------
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $2,000.
19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed
---------
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such in Assignment and Acceptance and shall otherwise be substantially the form
of the assigned Notes. Within five (5) days of issuance of any new Notes
pursuant to this ss.20.4, the Borrower shall deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and binding
effect thereof, in form and substance satisfactory to the Banks. The surrendered
Notes shall be cancelled and returned to the Borrower.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
--------
that (i) each such participation shall be in an amount of not less than
$1,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii)
<PAGE>
the only rights granted to the participant pursuant to such participation
arrangements with respect to waivers, amendments or modifications of the Loan
Documents shall be the rights to approve waivers, amendments or modifications
that would reduce the principal of or the interest rate on any Loans, extend the
term or increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled payment
date for principal or interest.
19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures made
----------
in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any assignee
----------------------------------------------------
Bank is an Affiliate of the Borrower, then any such assignee Bank shall have no
right to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Agent pursuant to ss.13.1 or ss.13.2, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans or Reimbursement Obligations. If any Bank
sells a participating interest in any of the Loans or Reimbursement Obligations
to a participant, and such participant is the Borrower or an Affiliate of the
Borrower, then such transferor Bank shall promptly notify the Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to ss.13.1 or ss.13.2 to the extent that such participation is
beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor
<PAGE>
Bank in the Loans or Reimbursement Obligations to the extent of such
participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain
-----------------------------------
its rights to be indemnified pursuant to ss.17 with respect to any claims or
actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. If any Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Majority Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this ss.19 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under ss.4 of
the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the enforcement
thereof shall release the pledgor Bank from its obligations hereunder or under
any of the other Loan Documents.
19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer any
----------------------
of its rights or obligations under any of the Loan Documents without the prior
written consent of each of the Banks.
20. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrower, at 11001 Executive Center Drive, Little Rock,
Arkansas 72211, Attention: President, or at such other address for notice
as the Borrower shall last have furnished in writing to the Person giving
the notice;
(b) if to the Agent, at 115 Perimeter Center Place, N.E., Suite 500,
Atlanta, GA 30346, USA, Attention: Lori Litow, Vice President, with a copy
to the Agent at 100 Federal Street, Boston,
<PAGE>
Massachusetts 02110, Attention: Real Estate Department, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
-------- -
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
21. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN ss.20. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
22. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
<PAGE>
23. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
ss.26.
25. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of which rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be
<PAGE>
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrower and the
written consent of the Majority Banks. Notwithstanding the foregoing, the rate
of interest on the Notes (other than interest accruing pursuant to ss.5.10.2
following the effective date of any waiver by the Majority Banks of the Default
or Event of Default relating thereto), the amount of the Commitments of the
Banks, and the amount of Letter of Credit Fees hereunder may not be changed
without the written consent of the Borrower and the written consent of each Bank
affected thereby; the Revolving Credit Loan Maturity Date may not be postponed
without the written consent of each Bank affected thereby; this ss.26 and the
definition of Majority Banks may not be amended, without the written consent of
all of the Banks; and the amount of the Administrative Fee or any Letter of
Credit Fees payable for the Agent's account and ss.15 may not be amended without
the written consent of the Agent. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of the Agent or any Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle the
Borrower to other or further notice or demand in similar or other circumstances.
27. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
28. RELEASE OF SECURITY.
-------------------
(a) At such time as a purchaser of a Lot or VOI pursuant to a Base Contract
has paid in full the purchase price or the requisite percentage of the purchase
price for deeding pursuant to a Base Contract and has otherwise fully discharged
all of such purchaser's obligations and responsibilities required to be
discharged as a condition to deeding, the Agent, acting on behalf of the Banks,
will cause the Collateral Agent (or its duly appointed attorney-in-fact
authorized to act on its behalf), on request and appropriate certification by
the Borrower or its authorized representative, to execute and deliver, at the
Borrower's expense, such termination statements or mortgage releases, as the
case may be, and to
<PAGE>
take such other actions as may be reasonably necessary to terminate and remove
the Collateral Agent's underlying mortgage lien or security interest in the real
estate and in the case where a purchaser has fully performed the obligations
under a Base Contract, such Action as may be reasonably necessary to terminate
and remove the Collateral Agent's security interest in such Base Contract.
(b) If the Borrower sells or otherwise transfers any assets in accordance
with ss.9.5 hereof, the Agent, acting on behalf of the Banks, will cause the
Collateral Agent (or its duly appointed attorney-in-fact authorized to act on
its behalf), on the date that all payments made by the purchaser or transferee
are deposited with the Agent at the time the receipt and application of the net
cash proceeds of such sale in accordance with ss.9.5.2 hereof, to execute and
deliver, at the Borrower's expense, such termination statements, mortgage
releases or subordination agreements, as the case may be, and to take such other
actions, as may be reasonably necessary to subordinate or terminate and remove
the Collateral Agent's mortgage or security interest in the assets being sold.
29. SUPERIOR RIGHTS OF BASE CONTRACT PURCHASER.
------------------------------------------
(a) Notwithstanding any other provision contained in this Agreement, the
rights of any purchaser of any Lot or VOI subject to a Base Contract shall, so
long as such purchaser is not in default thereunder, be superior to those of the
Agent and the Banks hereunder, and neither the Agent nor the Banks shall, so
long as such purchaser is not in default thereunder, interfere with such
purchaser's use and enjoyment of the Lot or VOI subject thereto.
(b) If pursuant to the terms of the Security Documents, the Agent or the
Banks shall acquire any Lot or VOI subject to a Base Contract, the Agent and the
Banks hereby specifically agree to release, cause to be released or convey, as
the case may be, any Lot or VOI from any lien or title of the Agent or the Banks
upon the request of the party purchaser (including such party's heirs,
successors and assigns) to the Base Contract and upon completion of all payments
and the performance of all the terms and conditions required to be made and
performed by such purchaser under such Base Contract.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
FAIRFIELD ACCEPTANCE CORPORATION
By: /s/ Robert W. Howeth
------------------------------------
Name: Robert W. Howeth
------------------------------------
Title: President
------------------------------------
BANKBOSTON, N.A., individually and as Agent
By: /s/ Paul DiVito
-----------------------------------
Name: Paul DiVito
-----------------------------------
Title: Managing Director
-----------------------------------
CREDIT AGREEMENT
Dated as of January 15, 1998
among
FAIRFIELD RECEIVABLES CORPORATION,
as Borrower
EAGLEFUNDING CAPITAL CORPORATION,
FAIRFIELD ACCEPTANCE CORPORATION,
as Servicer
FAIRFIELD COMMUNITIES, INC.,
BANCBOSTON SECURITIES, INC.,
as Deal Agent
and
BANKBOSTON, N.A.,
as Collateral Agent
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of January 15, 1998 (the "Credit Agreement"),
among FAIRFIELD RECEIVABLES CORPORATION, a Delaware corporation (the
"Borrower"), EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation
--------
("EagleFunding"), 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"),
-------- ---
BANCBOSTON SECURITIES, INC., a Massachusetts corporation ("BSI") in its capacity
---
as Deal Agent (in such capacity, the "Deal Agent") and BANKBOSTON, N.A., in its
capacity as Collateral Agent, (in such capacity, the "Collateral Agent").
----------------
W I T N E S S E T H:
WHEREAS, pursuant to the Receivables Purchase Agreement, the Borrower may
from time to time purchase and otherwise acquire, Contracts, related collateral
therefor and other related property from FAC; and
WHEREAS, the Borrower has requested that EagleFunding make the EagleFunding
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, EagleFunding will fund such loans by (i) the issuance of
Transaction Commercial Paper Notes or (ii) if EagleFunding is unable for any
reason to issue Commercial Paper Notes, by borrowing under the Liquidity
Agreement, dated as of the date hereof, among EagleFunding, the Liquidity
Providers and the Liquidity Agent; and
WHEREAS, as a condition precedent to the foregoing EagleFunding 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 Deal Agent and
EagleFunding, in all of its right, title and interest in, to and under the
Collateral as described herein, in order to secure the Obligations as described
herein; and
WHEREAS, subject to the terms and conditions set forth herein, EagleFunding
is willing to make the EagleFunding Loans to the Borrower and
<PAGE>
FAC has agreed to act as Servicer of the Pledged Contracts and FCI has agreed to
guarantee the servicing obligations of FAC hereunder;
WHEREAS, the parties hereto wish to enter into this Credit Agreement in
order to evidence the terms and conditions on which, from and after the
Effective Date, EagleFunding will make EagleFunding Loans on Borrowing Dates and
the Borrower will make additional Grants of Contracts on Contract Grant Dates;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions. As used in this Credit Agreement, the
--------------------
EagleFunding 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 EagleFunding 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, as amended, restated, supplemented or otherwise modified from time
to time after the date hereof, 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 EagleFunding 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
<PAGE>
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 EAGLEFUNDING LOANS
----------------------
SECTION 2.01. The EagleFunding Loans.
----------------------
(a) Subject to the terms and conditions hereof, EagleFunding agrees to make
loans ("EagleFunding Loans") on Contract Grant Dates during the period from the
-------------------
Effective Date to the Termination Date, in an aggregate outstanding principal
amount not to exceed at any time the lowest of (i) the Facility Limit in effect
at such time, (ii) the Borrowing Base in effect at such time, (iii) the Eligible
Contract Pool Principal Balance in effect at such time less the Minimum O/C
Amount, or (iv) the aggregate principal amount of advances and unused
commitments of the Liquidity Providers under the Liquidity Agreement; provided,
--------
however, that the first Borrowing to take place hereunder shall occur on the
- -------
Effective Date. The EagleFunding Loan made on the Effective Date and each
subsequent EagleFunding Loan shall be made in a principal amount of greater than
or equal to $5,000,000. Notwithstanding anything in the foregoing to the
contrary, under no circumstances shall EagleFunding make any EagleFunding Loan
if, after giving effect thereto, an O/C Shortfall or a Borrowing Base Shortfall
would exist.
(b) The Borrowing Base in effect on any date shall be determined by
reference to the most recent Settlement Report delivered by the Servicer to
EagleFunding in accordance with Section 6.01(b) hereof, as adjusted (i) on the
--------------
most recent 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, or which are otherwise not Eligible
Contracts, as of the next preceding Determination Date.
(c) All of the EagleFunding Loans shall mature, and become due and payable,
on the Maturity Date.
SECTION 2.02. Note. All of the EagleFunding Loans shall be evidenced by the
----
promissory note in the form attached hereto as Exhibit A (the "EagleFunding
---------- ------------
Note") appropriately completed, duly executed and delivered on behalf of the
- ----
Borrower and payable to the order of EagleFunding. The Borrowing Date and
principal amount of each EagleFunding Loan, the interest
<PAGE>
rate and Interest Period applicable thereto and each repayment or prepayment of
principal thereof shall be recorded in EagleFunding's internal records and,
prior to any transfer of the EagleFunding Note, on the grid schedule annexed
thereto, and the Borrower hereby authorizes EagleFunding to make such
recordation; provided, however, that the failure of EagleFunding 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
EagleFunding Loans in accordance with the terms hereof and of the EagleFunding
Note. Such updated grid schedules, or other proper records maintained by
EagleFunding (or by the Deal Agent on behalf of EagleFunding) in lieu thereof,
shall be presumptively correct evidence of the EagleFunding Loans made by
EagleFunding to the Borrower. The aggregate outstanding principal amount of the
EagleFunding Loans at any time shall be the aggregate principal amount owing on
the EagleFunding Note at such time.
SECTION 2.03. Making the EagleFunding Loans.
-----------------------------
(a) Notice of Borrowing. Whenever the Borrower wishes to make a Borrowing
-------------------
hereunder of EagleFunding Loans, it shall deliver to EagleFunding a notice
("Notice of Borrowing") in substantially the form of Exhibit B hereto no later
------------------- ---------
than 10:00 A.M. (Boston, Massachusetts 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. (Boston, Massachusetts 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 a
Contract Grant Date, (2)aggregate amount of such Borrowing requested and (3)
proposed Interest Period relating thereto and the proposed principal amount of
each EagleFunding 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 Deal Agent shall, following its review of the Borrower's
proposal, select (in the exercise of its sole discretion) the Interest Periods
for the EagleFunding Loan thereby requested. At least one Business Day prior to
the last day of each Interest Period for any EagleFunding Loan, the Borrower
shall request new Interest Periods for all EagleFunding Loans, or any portions
thereof, 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 EagleFunding Loan for which interest is requested to be
determined by reference to the Eurodollar Rate, such request shall be given not
later than 10:00 A.M. (Boston, Massachusetts time) at least three (3) Business
Days prior to the last day of the relevant Interest Period; and provided further
-------- -------
<PAGE>
that (x) the portion of any EagleFunding Loan assigned to an Interest Period for
which interest is requested to be determined by reference to the Eurodollar Rate
shall not be less than $1,000,000, and (y) any other portion of a EagleFunding
Loan assigned to an Interest Period shall not be less than $200,000. The Deal
Agent shall, on the date of any Borrowing hereunder and, so long as such
EagleFunding Loan is outstanding, on the first day of each successive Interest
Period for such EagleFunding Loan, notify the Borrower of the duration of the
relevant Interest Period and the interest rate which will be applicable to the
EagleFunding 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
Deal Agent. In addition, if a CP Disruption shall have occurred and be
continuing, EagleFunding, or the Deal Agent on its behalf, may, upon notice to
the Borrower, terminate any Interest Period then in effect if EagleFunding has
funded the EagleFunding Loan allocated to such Interest Period by issuing
Transaction Commercial Paper Notes. All outstanding EagleFunding Loans (and all
outstanding portions thereof) shall be assigned an Interest Period at all times,
which Interest Periods will be limited as set forth in the definition thereof.
(c) Funding. EagleFunding shall on the proposed Borrowing Date of each
-------
Borrowing, subject to satisfaction of the applicable conditions set forth in
Article III and the limitations set forth in Section 2.01, 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
EagleFunding, 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 aggregate principal amount of the EagleFunding 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
----------------------------------------------
EagleFunding Loans shall be payable in full on the Maturity Date. Each payment
hereunder or prepayment of principal of and interest on the EagleFunding 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 the Person to which such payment is owed not later than 10:30 A.M.
(Boston, Massachusetts time) on the date on which payable. Payments received by
a required recipient hereunder after such
<PAGE>
time shall be deemed to have been received on the next Business Day. All
payments by the Borrower under this Credit Agreement and the EagleFunding 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 EagleFunding Note or from the execution, delivery or
registration of, or otherwise with respect to, this Credit Agreement or the
EagleFunding Note. Whenever any payment to be made hereunder or under the
EagleFunding 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 EagleFunding Loans; Default Interest.
------------------------------------------------
(a) The Borrower shall pay to EagleFunding, as interest on the
EagleFunding Loans outstanding, the following amounts on the following dates:
(i) on any Interest Payment Date for EagleFunding Loans being funded or
maintained through the issuance of Transaction Commercial Paper Notes, interest
on such EagleFunding 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 EagleFunding Loans funded or
maintained through the making of Base Rate Advances under the Liquidity
Agreement, accrued and unpaid interest on such EagleFunding 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 EagleFunding Loans funded or
maintained through the making of Eurodollar Rate Advances under the Liquidity
Agreement, accrued and unpaid interest on such EagleFunding Loans at a rate per
annum equal at all times during each applicable Interest Period for each such
EagleFunding Loan to the Eurodollar Rate for such Interest Period, plus,
(1) 0.50% for the first 24 months that the underlying Eurodollar Rate
Advance remains outstanding,
(2) 0.75% from the 25th month to the 49th month that the underlying
Eurodollar Rate Advance remains outstanding,
<PAGE>
(3) 1.00% from the 49th month and for as long thereafter as the underlying
Eurodollar Rate Advance remains outstanding,
each computed on the basis of the actual number of days elapsed over a year of
360 days.
(b) Following the occurrence and during the continuance of an Event of
Default, and from and after the due date of any EagleFunding Loan until
such EagleFunding Loan is paid in full, the Borrower shall pay interest to
EagleFunding, payable on demand, on the outstanding principal amount of
each EagleFunding 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
EagleFunding Loan for such day.
SECTION 2.07. Voluntary and Mandatory Prepayment of EagleFunding
---------------------------------------------------
Loans. (a) The Borrower shall have the right on any Business Day and from time
- -----
to time to prepay any EagleFunding Loans, in whole or in part, upon at least
three Business Days' written notice to the Deal 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) the Borrower shall, in connection with any such prepayment,
indemnify EagleFunding and hold EagleFunding harmless from any funding loss
pursuant to the terms of Section 2.08, and (iii) any such voluntary prepayment,
------------
to the extent made with funds on deposit in the Collection Account, shall be
made subject to the provisions of Section 7.06. 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 Liquidation Trigger Date, the
Borrower shall be obligated to make principal repayments of the EagleFunding
Loans in an amount equal to the greatest of:
(i) an amount equal to the product of (a) the EagleFunding Loan Percentage
on such date and (b) the aggregate amount of all principal payments received on
the Pledged Contracts during the next preceding Settlement Period whether
scheduled or unscheduled, and whether by virtue of Obligor payments, liquidation
proceeds, Insurance Proceeds or other sources (excluding, however, all amounts
--------- -------
received by the Borrower under the Receivables Purchase Agreement in respect of
payments of amounts of Repurchase Price); and
(ii) the Borrowing Base Shortfall then in effect; and
(iii) the O/C Shortfall then in effect.
<PAGE>
To the extent any such repayments are made with funds on deposit in
the Collection Account, such repayments shall be subject to the provisions of
Section 7.06(b).
- --------------
(c) On each Business Day from and after the Liquidation Trigger Date,
the Borrower shall be obligated to make principal repayments of the EagleFunding
Loans in 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 to the extent required under Section 7.06(d)) after giving effect to the
----------------
required applications of such funds pursuant to clauses (i) through (iii) of
Section 7.06(d), and (ii) the then outstanding principal balance of the
- ---------------
EagleFunding Loans.
(d) In the event of any prepayment or repayment of an EagleFunding
Loan or any portion thereof on any date other than the last day of the Interest
Period applicable thereto, the Borrower shall indemnify EagleFunding and hold
EagleFunding harmless from any funding loss (in an amount equal to the amount of
interest EagleFunding 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 EagleFunding may sustain or incur as consequence
of such prepayment in accordance with Section 2.08.
------------
SECTION 2.08. Compensation. The Borrower shall, whether or not the
------------
Effective Date has occurred, compensate EagleFunding, upon its written request,
for all losses, expenses and liabilities, including, without limitation, any
indemnification payments owed by EagleFunding 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 an EagleFunding Loan
hereunder, (i) if for any reason the funding of any EagleFunding 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 EagleFunding
Loan occurs on a date which is not the last day of the Interest Period for such
EagleFunding Loan or (iii) as a consequence of any required prepayment of any
EagleFunding Loan or required conversion of any Eurodollar Rate Advance prior to
the last day of the Interest Period for the relevant EagleFunding Loan. Any
request for compensation under this Section 2.08 shall be accompanied by a copy
------------
of a statement from EagleFunding or the Deal 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.
<PAGE>
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, rating agency or similar agency (whether or not having the force of
law), and taking into account the obligations of the Liquidity Providers under
the Liquidity Agreement, and otherwise in connection with EagleFunding'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 EagleFunding (either directly or indirectly
through any increase in the costs to the Liquidity Providers) of making,
funding, or maintaining EagleFunding Loans or in the cost to EagleFunding of
agreeing to make, fund, or maintain EagleFunding 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
EagleFunding, by the submission of the certificate described below, pay to
EagleFunding, additional amounts sufficient to compensate EagleFunding, for such
increased cost; provided, however, that in the case of any such increased cost
-------- -------
incurred solely as a result of compliance with any guideline or request of any
rating agency, the Borrower's obligation to pay any additional amounts
identified on the certificate described below by way of compensation shall
neither accrue, nor become due and payable, prior to the 90th day following the
Borrower's receipt of such certificate (it being understood that the Borrower
shall have no obligation to pay any such additional amount incurred solely as a
result of a guideline or request of a rating agency if all outstanding
EagleFunding Loans and any other amounts outstanding hereunder are repaid in
full and in cash, and the Borrower shall have terminated the obligations of the
other parties hereto, prior to such 90th day following the Borrower's receipt of
such certificate). A certificate setting forth in reasonable detail the amount
of such increased cost submitted to the Borrower by EagleFunding or the Deal
Agent on behalf of EagleFunding shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any of EagleFunding or any Liquidity Provider 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, rating agency or similar agency (whether or not having the force of
law) which is introduced, implemented or received by EagleFunding or such
Liquidity Provider after the Effective Date, affects or would affect capital
adequacy or the amount of capital required or expected to be maintained
<PAGE>
by EagleFunding or such Liquidity Provider or any corporation controlling
EagleFunding or such Liquidity Provider and that the amount of such capital is
increased by or based upon the EagleFunding Loans or the existence of this
Credit Agreement, or upon the "Advances" of a Liquidity Provider, or such
Liquidity Provider's commitment to lend under the Liquidity Agreement, and other
commitments of that type, or has or would have the effect of reducing such
Person's rate of return on capital, then, upon demand by EagleFunding or the
Deal Agent on its behalf, by the submission of the certificate described below,
the Borrower shall pay to EagleFunding, from time to time as specified by
EagleFunding (as the case may be), additional amounts sufficient to compensate
EagleFunding, the relevant Liquidity Provider, (as the case may be), in the
light of such circumstances, to the extent that EagleFunding (as the case may
be) reasonably determines such increase in capital to be allocable to the
EagleFunding Loans or the existence of this Credit Agreement, or upon the
"Advances" of a Liquidity Provider or such Liquidity Provider's commitment to
lend under the Liquidity Agreement and other commitments of that type, or to the
extent that EagleFunding owes compensation to a Liquidity Provider in respect of
or on account of such events; provided, however, that in the case of any such
-------- -------
increase in capital required solely as a result of compliance with any
guideline, request or written interpretation of any rating agency, the
Borrower's obligation to pay any additional amounts identified on the
certificate described below by way of compensation shall neither accrue, nor
become due and payable, prior to the 90th day following the Borrower's receipt
of such certificate (it being understood that the Borrower shall have no
obligation to pay any such additional amount incurred solely as a result of a
guideline or request of a rating agency if all outstanding EagleFunding Loans
and any other amounts outstanding hereunder are repaid in full and in cash, and
the Borrower shall have terminated the obligations of the other parties hereto,
prior to such 90th day following the Borrower's receipt of such certificate). A
certificate setting forth in reasonable detail such amounts submitted to the
Borrower by EagleFunding or the Deal 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, FCI or the
-----
Servicer (if the Servicer is FAC or an Affiliate of FAC) under this Credit
Agreement and the EagleFunding 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 EagleFunding 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 EagleFunding (excluding a connection arising
solely from EagleFunding having executed, delivered or performed its obligations
or received a payment under, or enforced, this Credit Agreement, the
<PAGE>
EagleFunding Note or any other Facility Document to which EagleFunding 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 EagleFunding
Note or the Credit Agreement, (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), EagleFunding
------------
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower, FCI or the Servicer (if the Servicer is
FAC or an Affiliate of FAC), as the case may be, shall make such deductions, and
(iii) the Borrower, FCI or the Servicer (if the Servicer is FAC or an Affiliate
of FAC), as the case may be, 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, issuance or registration of, or otherwise with respect to, this Credit
Agreement or the EagleFunding Note (hereinafter "Other Taxes").
-----------
(c) The Borrower will indemnify EagleFunding 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
------------
EagleFunding 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
EagleFunding a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower or the Servicer fails to pay
any Taxes when due to the appropriate taxing authority or fails to remit to
EagleFunding the required receipts or other required documentary evidence, the
Borrower shall indemnify EagleFunding for any incremental Taxes, interest or
penalties that EagleFunding 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 EagleFunding Note.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrower will furnish to the Deal Agent, at its address
referred to in Section 14.02, the original or a certified copy of a receipt
--------------
evidencing payment thereof.
(e) If, in connection with an agreement or other document
providing liquidity support, credit enhancement or other similar support in
connection with this Credit Agreement or the funding or maintenance of any
EagleFunding Loans hereunder, EagleFunding is required to compensate a Liquidity
Provider in respect of taxes under circumstances similar to those
<PAGE>
described in this Section 2.10, then within ten days after demand by
-------------
EagleFunding, the Borrower shall pay to EagleFunding such additional amount or
amounts as may be necessary to pay such Liquidity Provider the amounts due or to
otherwise reimburse EagleFunding for any amounts paid by it.
(f) Without prejudice to the survival of any other agreement of
the Borrower or the Servicer hereunder, the agreements and obligations of the
Borrower and the Servicer (if the Servicer is FAC or an Affiliate of FAC)
contained in this Section 2.10 shall survive the termination of this Agreement.
------------
SECTION 2.11. Fees. In further consideration of the EagleFunding
----
Loans to be made to the Borrower hereunder, the Borrower agrees to pay to
EagleFunding, BSI and BKB, all fees specified in the Fee Letter, which fees will
be due and payable at the times and in the manner set forth in the Fee Letter.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Initial Borrowing. The
---------------------------------------------
making of any EagleFunding Loan on the Effective Date is subject to satisfaction
of each of the following conditions precedent:
(a) Each of the Deal Agent, the Collateral Agent and EagleFunding
shall have received all of the documents, covenants, authorizations, agreements
and instruments described on the List of Closing Documents attached as Exhibit C
------
hereto (including, without limitation, the Contract Schedule, giving effect to
the Grant of Contracts contemplated to correspond with the Effective Date, an
Interest Rate Hedge, and an Interest Rate Hedge Assignment), each in form and
substance satisfactory to the Deal Agent, and in each case where applicable (x)
duly executed by each of the parties thereto, (y) to the extent required in
Exhibit C, duly filed with the appropriate filing officer or other governmental
- ---------
authority of the listed jurisdiction, as evidenced by an appropriate
acknowledgment evidencing that such filing is of record, and (z) dated and/or
certified (as applicable) as of a date reasonably acceptable to the Deal Agent;
(b) All fees and expenses due and owing under the Facility
Documents (including, without limitation, all fees and expenses payable under
the Fee Letter entered into in connection with this Credit Agreement) shall have
been paid;
(c) Each of the Collateral Agent, the Deal Agent and EagleFunding
shall have received such other approvals, documents or opinions as it may
reasonably request;
<PAGE>
(d) In connection with the EagleFunding Loan and the Grant of
Contracts contemplated to correspond with the Effective Date, each of the
conditions precedent set forth in Section 3.02 have been satisfied;
------------
(e) The Certificate of Incorporation of the Borrower shall have
been filed in form and substance acceptable to the Deal Agent;
(f) Each of S&P, Moody's and DCR shall have confirmed to the Deal
Agent that the EagleFunding Loans constitute an "investment grade" risk; and
(g) EagleFunding shall have obtained all necessary internal
approvals for the transactions contemplated by the Facility Documents.
SECTION 3.02. Conditions Precedent to Each Borrowing. The making
--------------------------------------
of an EagleFunding Loan on any Contract Grant Date (including, without
limitation, the EagleFunding Loan contemplated to correspond with the Effective
Date hereunder) shall be subject to satisfaction of each of the following
conditions precedent, certain of which may have been satisfied for all
Borrowings on or prior to the initial Borrowing Date:
(a) Each of the Deal Agent, the Collateral Agent and EagleFunding
shall have received, on or before the relevant Borrowing Date (and corresponding
Contract Grant Date), any additional documents, consents, authorizations,
agreements, instruments and legal opinions reasonably requested by the Deal
Agent each in form and substance satisfactory to the Deal Agent;
(b) (i) Each of the Deal Agent, the Collateral Agent and
EagleFunding shall have received (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 possession of an executed original of all Contracts (or if the
Contract and promissory note are contained in separate documents, an original of
the promissory note) contemplated to be Granted on such Contract Grant Date, (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 such
Contract Grant Date (after giving effect to the Borrowing comprised of such
EagleFunding Loans, the application of the proceeds therefrom and the Grant of
Contracts contemplated to take place on such date, and (E) such other approvals
or documents as the Deal Agent may reasonably request in connection with the
contemplated Borrowing and Grant, and (ii) on the Borrowing Date of such
Borrowing, before and after giving effect to such Borrowing, to the contemplated
Grant of Contracts and to the application of the proceeds from such Borrowing,
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
<PAGE>
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):
(1) 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 date;
(2) no event has occurred and is continuing, or would result from such
Borrowing, which constitutes an Event of Default, Unmatured Event of Default,
Servicer Default or Unmatured Servicer Default (excluding an Unmatured Servicer
Default under Section 11.01(h)(2) which has been in existence for less than
forty-five days and is not a payment default), and there is no Termination Date
currently in effect;
(3) there exists no Borrowing Base Shortfall or O/C Shortfall; and
(4) (A) the proceeds of such EagleFunding Loan shall be used (I) to
fund a Purchase under the Receivables Purchase Agreement to occur simultaneously
with such Borrowing, or (II) 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 such Contract Grant Date, and (B) all conditions
to such Purchase under the Receivables Purchase Agreement on such date have been
satisfied;
(c) The Borrower shall have filed or recorded or caused to be filed or
recorded, each financing statement or other item required to be so filed or
recorded on or prior to such Contract Grant Date pursuant to Section 7.03(a) or
----------------
Section 7.03(b) (as the case may be) to be so filed or recorded;
- --------------
(d) Any existing Liens (other than in favor of the Collateral Agent)
on or otherwise encumbering the Contracts contemplated to be Granted on such
Contract Grant Date shall have been released;
(e) The initial balance of the Spread Account required to be funded on
the relevant Borrowing Date, pursuant to Section 7.07(b) (prior to giving effect
---------------
to the transactions which are contemplated to take place on the relevant
Borrowing Date) has been funded;
(f) All changes reasonably necessary to ensure the deposit in the
Collection Account of all funds received by the Collection Account Bank, from
the Lock Box Banks or directly from Obligors with respect to the Pledged
Contracts from and after the Cut-Off Date to the Contract Grant Date have been
made;
<PAGE>
(g) The Deal Agent shall have received an Officer's Certificate of (i)
each of FAC and FCI stating that (x) each Pledged Contract to be sold or Granted
by it on such Contract Grant Date has been properly identified as an asset of
the Borrower in its Records, and (y) that all conditions precedent to the
Purchase of Contracts and related assets under the Receivables Purchase
Agreement have been satisfied on and as of such Contract Grant Date, and (ii) of
the Servicer stating that each related Contract File is complete in all material
respects and (iii) of the Borrower, stating that all conditions precedent to the
making of such EagleFunding Loan have been satisfied on and as of such Contract
Grant Date;
(h) Not later than 12:00 noon, Boston, Massachusetts time, on the day
which is two Business Days prior to such Contract Grant Date, the Borrower or
the Servicer shall have (i) transmitted to the Deal Agent and the Collateral
Agent data with respect to the Contracts to be Granted to the Deal Agent to
enable it to perform their respective duties hereunder and under the Collateral
Agency Agreement and (ii) delivered or caused to be delivered (A) an amendment
to the Contract Schedule that reflects the Contracts contemplated to be Granted
to the Deal Agent and (B) the Contract Files and the original execution copies
of such Contracts to the Custodian;
(i) After giving effect to any releases and/or other changes to the
financing arrangements of FCI and its Subsidiaries to be effected in connection
with the contemplated Borrowing and related Grant, FCI and its Subsidiaries
shall have remaining committed financing facilities (other than the financing
facilities described in the Facility Documents) substantially equivalent in form
and substance to the BKB/FAC Agreement and the BKB/FCI Agreement, having (1) an
aggregate liquidity commitment to either or both of FCI and FAC of no less than
$25,000,000, of which at least $5,000,000 is unused and (2) a scheduled
expiration date occurring after the earlier of (i) the Scheduled Termination
Date then in effect or (ii) two years after the relevant Borrowing Date;
(j) Aggregate Liquidity Commitments for all Liquidity Providers under
the Liquidity Agreement, which pursuant to the terms of the Liquidity Agreement,
are required to remain outstanding for all periods prior to and including the
Scheduled Termination Date, exceed the contemplated outstanding principal
balance of all EagleFunding Loans (after giving effect to the contemplated
Borrowing);
(k) The Borrower shall have
(i) delivered to the Collateral Agent an Interest Rate Hedge
Assignment, pursuant to which the Borrower assigns an Interest Rate Hedge
entered into
<PAGE>
between the Borrower and an Eligible Hedge Provider, which Interest Rate Hedge:
(A) provides for the benefit of the Borrower an interest rate cap for a
notional amount equal to either (1) 100% of the principal amount of the
requested EagleFunding Loan or (2) an amount sufficient to result in Interest
Rate Hedges being in effect with respect to 90% of the aggregate principal
amount of all EagleFunding Loans outstanding upon the making of the requested
EagleFunding Loan, which amount shall amortize on a monthly basis for a term
equal to 84 months, assuming a schedule of payments and prepayments mutually
determined by the Borrower and the Deal Agent on or before such Contract Grant
Date (which schedule shall be based upon the historical amortization experience
of Contracts owned or serviced by FCI and/or its Affiliates, as well as the
relationship of the amortization schedules of any existing Interest Rate Hedges
with the actual amortization experience of the Contracts Granted to the
Collateral Agent hereunder at or about the time at which such existing Interest
Rate Hedges were entered into),
(B) becomes effective immediately upon the relevant Contract Grant Date,
(C) provides for payments by the Eligible Hedge Provider to the Collection
Account on the Business Day next preceding each Settlement Date based on the
then effective notional amount, in the event that the unweighted average for
each day in the Calculation Period preceding such Settlement Date of the rate
set forth in the Federal Reserve statistical release H.15(519) under the caption
"Commercial Paper" raised to a money market yield basis settled monthly exceeds
a per annum rate of interest chosen by the Borrower with the consent of the Deal
Agent (the "Cap Rate"), which Cap Rate, when applied to the then effective
notional amount of such Interest Rate Hedge shall cause the weighted average of
the Contract Rates for all of the Pledged Contracts (based on aggregate
Principal Balances outstanding) to exceed the weighted average of the Cap Rates
for all Interest Rate Hedges then in effect (based on aggregate notional amounts
outstanding) by a per annum rate of no less than 5%; and
(ii) paid the premium, in full and in cash, required to render such
Interest Rate Hedge effective for the duration of its scheduled term, provided,
--------
however, that such premium shall not be paid for with the proceeds of a transfer
- -------
from the Collection Account;
(l) The Grant contemplated to take place on such Contract Grant Date
shall have become effective;
(m) All fees and expenses due and owing as of such Contract Grant Date
under the Facility Documents, (including, without limitation, the Fee Letter)
shall have been paid in full and in cash;
<PAGE>
(n) The Deal Agent shall have received, to the extent it shall
reasonably require, certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party acceptable to the
Collateral Agent), dated a date reasonably acceptable to the Deal Agent, listing
all effective financing statements which name the Seller, each Originator, or
any Affiliate of any Originator identified by the Collateral Agent purporting to
assign an interest in Contracts to any Originator (in each case, under its
respective present name and any previous name) as debtor, and which are filed in
such jurisdictions as the Deal Agent shall reasonably require such searches to
have been made, together with copies of such financing statements where
reasonably required by the Deal Agent (none of which shall cover any Contracts
or other Collateral other than those financing statements to be released in
connection with such Contract Grant Date pursuant to subsection (d) above);
-------------
(o) On or prior to such Contract Grant Date, all such Contracts
contemplated to be Granted to the Collateral Agent on such date shall have been
included in the computer tape or other computer record format containing the
Servicer's master file for the Pledged Contracts, updated as of the close of
business as of the Business Day next preceding such Contract Grant Date; and
(p) With respect to all Developments owned by FCI and the
Subsidiaries, not less than 70% of all Available VOI Units shall have been sold
to Persons other than FCI or any Affiliate of FCI. "Available VOI Units" means
VOI Units which:
(1) are contained in completed buildings that have become subject to a
POA;
(2) have been registered for sale pursuant to applicable state law;
and
(3) have been made available for sale by an Originator.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
-------------------------------------------------
Borrower represents and warrants to each of EagleFunding, the Collateral Agent
and the Deal Agent, 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
<PAGE>
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 otherwise have a Material Adverse Effect.
(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), 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, and
each such required approval, authorization, consent, order, registration,
qualification, designation, declaration, notice or filing is listed on Exhibit D
---------
hereto (or in the case of any Borrowing on a Contract Grant Date hereunder, as
set forth in any addendum to such Exhibit D hereto prepared by the Borrower and
---------
accepted by the Deal Agent, in the exercise of its sole discretion).
(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
<PAGE>
Relief Laws or by general principles of equity (whether considered in a suit at
law or in equity).
(e) No Litigation. Except as otherwise disclosed on FCI's report on
--------------
Form 10-K for the year ended December 31, 1996 and Form 10-Q's for the quarters
ended March 31, 1997 and June 30, 1997 (collectively the "Base Report"), which
Base Report shall have been delivered to the Deal Agent prior to the Effective
Date, or as otherwise set forth on Schedule 4.01(e), 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 have a Material Adverse
Effect; provided, however, that in the event the Deal Agent shall receive a
-------- -------
report dated subsequent to the date of the Base Report, which report shall
disclose the existence of, and accurately describe, one or more proceedings or
investigations which are not disclosed in the Base Report, and the Deal Agent
shall not identify in writing to the Borrower, within 90 days of the receipt of
such report, one or more of the proceedings or investigations described in such
report as constituting a proceeding or investigation of a type described in one
or more of clauses (i) through (v) above, the existence of each such proceeding
or investigation not so identified to the Borrower shall be deemed not to
constitute a breach of the representation and warranty of this subsection (e).
(f) Use of Proceeds. All proceeds of any EagleFunding 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 hereunder on or about the
Effective Date or on any Contract Grant Date occurring thereafter.
(g) Perfection of Security Interests in Collateral.
----------------------------------------------
(i) Payment of the Obligations and the prompt observance and performance by
the Borrower of all of the terms and provisions of this Credit Agreement in
favor of EagleFunding, the Collateral Agent and the Deal Agent are secured by
the Collateral as more fully set forth in Article VII hereof. Upon the making of
-----------
each EagleFunding Loan, the Collateral Agent has a legal, valid,
<PAGE>
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 (other
than any Permitted Encumbrances); and
(ii) Upon the making of each EagleFunding Loan, the Borrower has a legal,
valid and perfected ownership interest in, and good title to, the Collateral
(including, without limitation, all Contracts contemplated to be Granted
hereunder on the Contract Grant Date corresponding to the making of the relevant
EagleFunding Loan), which interest in and title to the Collateral is free and
clear of all Liens (other than the Primary Lien and any Permitted Encumbrances).
(h) Accuracy of Information. All certificates, reports, financial
------------------------
statements and any other written information furnished by or on behalf of the
Borrower to EagleFunding, the Collateral Agent, or the Deal 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 any other written information 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 any of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time). No
part of the proceeds of any of the EagleFunding 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 any of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
<PAGE>
(k) Location of Chief Executive Office and Records. The principal
------------------------------------------------
place of business and chief executive office of the Borrower is located at Suite
1000, 5851 West Charleston Boulevard, Las Vegas, Nevada 89102, and the office of
Servicer where the Servicer maintains all of its Records, is located at 11001
Executive Center, Little Rock, Arkansas 72211, and neither the Borrower nor
Servicer operates its business or maintains the Records at any other locations
(provided that, at any time after the Effective Date, upon 30 days' prior
written notice to the Deal Agent and 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 only 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 E. From and after the
---------
Effective Date, none of FCI, the Seller or the Borrower have any right, title
and/or interest in or to any of the Lock-Box Accounts or the Post-Office Boxes
and maintain no lock-box accounts in their own names for the collection of
Payments in respect of Pledged Contracts. The Borrower has no other lock-box
accounts for the collection of Payments in respect of Pledged Contracts 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 independent director, who is (A)
reasonably acceptable to EagleFunding, (B) 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,
in the case of the Borrower, directors thereof) or relatives of any thereof, nor
trustees in bankruptcy for any thereof and (C) an individual with at least three
years' prior experience in transactions involving the securitization of
financial assets, including prior experience as an independent director for a
corporation (other than the Borrower) whose charter documents require the
unanimous consent of all independent directors before such corporation could
file a bankruptcy proceeding or consent to the institution of bankruptcy
proceedings against it, (iii) maintains its assets in a manner which facilitates
their identification and
<PAGE>
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 BKB 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 Agreement,
(xi)has agreed with each of FCI and FAC pursuant to the terms of the
Administrative Services Agreement to allocate among themselves shared corporate
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 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 EagleFunding, the Deal
Agent, the Collateral Agent and the Liquidity Providers 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.
<PAGE>
(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
each of the Deal Agent and EagleFunding, 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 (other than the
Primary Lien and any Permitted Encumbrances). All such Pledged Contracts and
other 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.
<PAGE>
(t) Solvency. The Borrower, both prior to and after giving effect to
--------
each Purchase, (including, without limitation, the Purchase contemplated to take
place in connection with the Effective Date) (i) is not "insolvent" (as such
term is defined in ss101(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) Effective Date Balance. The Aggregate Principal Balance of all
-----------------------
Pledged Contracts which are Eligible Contracts to be granted to the Collateral
Agent on the Effective Date is not less than $5,000,000.
(w) ERISA. There has been no (i) occurrence or expected occurrence of
-----
any Reportable Event with respect to any Plan of the Borrower or any ERISA
Affiliate, or any withdrawal from, or the termination, Reorganization or Plan
Insolvency of any Multiemployer Plan, or (ii) institution of proceedings or the
taking of any other action by PBGC or the Borrower or any ERISA Affiliates or
any such Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Plan Insolvency of, any such Plan.
(y) No Adverse Selection. No selection procedures adverse to any of
---------------------
EagleFunding, the Collateral Agent or the Deal Agent have been employed by any
of the Originator, the Seller or the Borrower in selecting (i) the Contracts for
inclusion in the Contract Pool on any Contract Grant Date, (ii) the Contracts
intended to be released from the Primary Lien under Section 7.11(c), or (iii)
----------------
the Contracts to be granted to the Collateral Agent pursuant to Section 7.12 as
------------
"Remarketed Contracts".
(z) FairShare Program.
(i) On any date of determination, for each VOI Regime for which the
constituent VOIs are comprised primarily of UDIs, the ratio of (a) the total
number of Points actually allocated to a VOI Regime pursuant to the Fair Share
Plus Program at such time for the next succeeding twelve month period, divided
-------
by (b) the total number of Points which are allocable to available occupiable
- --
space in such VOI regime over such twelve month period does not exceed a ratio
of 1.0 to 1.0.
(ii) On any date of determination, for each owner of a UDI who is a
member of the FairShare Plus Program, the ratio of (a) the number of Points
allocated to such owner in a VOI Regime in return for assigning his VOI to the
FairShare Plus Program trust divided by (b) the total number of Points assigned
------- --
to all UDI owners in such VOI Regime does not exceed the percentage of such
owner's undivided interest in such VOI Regime as described in such owner's
Contract (and related deed).
(aa) No Material Adverse Effect. No event or circumstance having a
---------------------------
Material Adverse Effect has occurred since the Balance Sheet Date.
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 Effective Date and each Contract Grant Date, and (other than in
the case of the representation and warranty set forth in subsection (aa) above)
on and as of the commencement of each Interest Period occurring hereunder. 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
- -----------------------------
EagleFunding, the Collateral Agent, and the Deal Agent, 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 Deal Agent, other than (i) extensions which are Permitted Deferrals, (ii)
modifications 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 and (iii) 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).
<PAGE>
(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 an Originator in the
-----------
ordinary course of its business, and was purchased (i) by FCI from FMB or a VB
Subsidiary (if applicable), (ii) by FAC from FCI, and (iii) by the Borrower from
FAC (pursuant to the terms of the Receivables Purchase Agreement), in each case
in the ordinary course of their respective businesses and in a transaction
constituting a "true sale".
(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, except where
such noncompliance would not have a Material Adverse Effect. None of the
Borrower, FAC or FCI has received notice of any material violation of any legal
requirements applicable to such VOI Regime, except where such noncompliance
would not have a Material Adverse Effect. The VOI Regime related to such
Contract complies with all applicable state statutes including, without
limitation, condominium statutes, time share 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 and time share regime under the laws of the State where
the related Development is located, except where such noncompliance would not
have a Material Adverse Effect.
(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.
<PAGE>
(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 Primary Lien or Permitted
Encumbrances). The Borrower has not sold, assigned or pledged such Contract to
any Person other than the Collateral Agent. 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 an Originator acquired the VOI or 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 an Originator acquired the VOI or
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, and the Borrower's right, title and interest therein
is free of any Liens other than any of the Primary Lien or any Permitted
Encumbrances.
(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 (after giving effect to any
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 Deal Agent.
(n) Equal Installments. Such Contract has a fixed 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) Original Contracts. All original executed copies of such Contract
------------------
(or if the Contract and promissory note are contained in separate documents, an
original of the promissory note) are in the custody of the Custodian, except to
the extent otherwise permitted pursuant to Section 4.02(v) hereof.
(p) Minimum Downpayment. Such Contract had a minimum Equity Percentage
-------------------
of 10% (or, in the case of Contracts the downpayment for which was financed,
15%) at origination (including in such total any cash down payments and Payments
made on any other Contract which has been "traded in"
<PAGE>
in connection with the origination of such Contract, and downpayments under such
Contract financed over a period not exceeding six months from the date of
origination of such Contract which have actually been paid within such six month
period).
(q) Contract Form/Governing Law. Such Contract was executed in
-----------------------------
substantially the form of one of the forms of Contract attached hereto as
Exhibit F (as such Exhibit F may be amended from time to time with the consent
- --------- ---------
of the Deal Agent in the exercise of its reasonable discretion in connection
with the Grant of Contracts originated at a Development with respect to which
Contracts have not previously been Granted to the Deal Agent hereunder), 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 or before the relevant Contract Grant Date, delivered to
the Deal Agent an Opinion of Counsel regarding the enforceability of the form or
forms of Contract used in such jurisdiction and such other matters as the Deal
Agent 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) 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.
(t) 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
<PAGE>
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(t) hereto, 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(t) hereto, 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 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(t) will have a Material Adverse
----------------
Effect, a material adverse effect on the interests of the EagleFunding or the
Collateral Agent in the Collateral or an adverse effect on EagleFunding, the
Deal Agent or the Collateral Agent.
(u) 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.
(v) Contract Files. The related Contract File contains:
--------------
(i) other than in the case of Contracts described in clause (ii) below, (A)
at least one original of each Pledged Contract (or if the Contract and
promissory note are contained in separate documents, an original of the
promissory note); except that this requirement shall not apply in the case of an
original Contract which has been removed from the Contract File for the
performance of collection services and other routine servicing requirements in
accordance with Section
-------
<PAGE>
5.01(n), or (B) an original Contract which has been identified as a missing
- ------
original contract and included on Exhibit B to the Custodian's Certificate
Acknowledging Receipt of Contracts delivered pursuant to the Receivables
Purchase Agreement in connection with the sale of Contracts to the Borrower on a
Contract Grant Date, and which is a Pledged Contract with respect to which the
Deal Agent shall have waived the application of this clause (i) in writing), and
(ii) in the case of any Contracts relating to VOIs located in Developments
in North Carolina or South Carolina, where two originals of a Pledged Contract
have been executed, one such original Contract, and the original Contract not in
the file contains the following legend (whether by stamp or otherwise) on the
face thereof;
"THIS COPY IS ONE OF TWO ORIGINALS, AND WAS EXECUTED SOLELY FOR
RECORDATION, TO THE EXTENT THAT POSSESSION OF THIS CONTRACT IS REQUIRED TO
TRANSFER OR PERFECT A TRANSFER OF ANY INTEREST IN OR TO THIS CONTRACT,
POSSESSION OF THE OTHER ORIGINAL HEREOF IS REQUIRED.)), and
(iii) in the case of any Contracts in respect of which the related VOI or
Lot has been deeded out to the relevant Obligor:
(A) a copy of the deed for the related VOI or Lot, and
(B) the original of any related recorded or unrecorded Mortgage (or a copy
of such recorded Mortgage, if the original of the recorded Mortgage is
unavailable)
(other than in the case of any Contract with respect to which the relevant
Mortgage and/or deed is outside the Contract File for purposes of recording such
Mortgage in the relevant local real property recording office, but only to the
extent that: (x) such Mortgage and copy of deed shall not have been outside of
the relevant Contract File for such purposes for more than (1) 180 days from the
relevant Contract Grant Date (in the case of Contracts relating to VOIs located
in the State of Florida), and (2) 180 days from the date on which the related
VOI or Lot is required to be deeded to an Obligor (in the case of Contracts
relating to VOIs or Lots located in any other Development), and (y) unless and
to the extent waived by the Deal Agent in writing, the Deal Agent shall have
received certificates of appropriate local real property recording officers, in
form and substance satisfactory to the Deal Agent, to the effect that the
Mortgage in question has been received for purposes of recordation and is in the
custody of such recording officer (in the case of Contracts relating to VOIs
located in the State of Florida)).
<PAGE>
(w) 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 Effective Date or any 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 G 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.
(x) Ground Leases. In the case of any Pledged 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 ground lease 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
ground lease has been fully paid through the date on which this representation
is made (or remade, as the case may be);
(y) Perfection of Security Interest. On and after the relevant Contract
--------------------------------
Grant Date:
(i) The Borrower shall have a legal, valid and perfected ownership interest
in, and good and marketable title to, the Contract, which interest in and title
to the Contract is free and clear of all Liens (other than the Primary Lien);
and
(ii) The Collateral Agent shall have a legal, valid, perfected and
enforceable Lien upon and first priority security interest in, to and under such
Contract, which Lien upon and security interest in, to and under such Contract
is free and clear of all Liens other than the Primary Lien.
<PAGE>
All of the representations and warranties of the Borrower set forth in
this Section 4.02 shall be deemed to be made, without further act by any Person,
------------
on and as of the applicable Cut-Off Date with respect to each Contract Grant
Date (including, without limitation, the Contract Grant Date expected to
correspond to the Effective Date), 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), (m), (o), (q), (r), (t), (u), (v) and (w)
thereof), (c), (d), (e), (h), (i), (j), (l), (n), (o), (t), (u), (v), (w), (x)
and (y). 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.
SECTION 4.03. Representations and Warranties Regarding the Contract
-------------------------------------------------------
Files. The Borrower represents and warrants to each of EagleFunding, the
- -----
Collateral Agent and the Deal Agent, as to each Pledged Contract, that:
(a) Possession. On or prior to each Contract Grant Date, the Custodian
----------
has possession of each original Pledged Contract (or if the Contract and
promissory note are contained in separate documents, an original of the
promissory note) and the related Contract File, and has acknowledged receipt of
such Pledged Contract, 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 any of the
-------- -------
Contracts not required to be in its respective Contract File pursuant to Section
------
4.02(v) hereof is not in the possession of the Custodian in its respective
- ------
Contract File does not constitute a breach of this representation).
(b) Marking Records. On or before each Contract Grant Date, 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, and a first priority
security interest herein is held by BankBoston, N.A. ("BKB") as
collateral agent for each of the secured parties under, the Collateral
Agency Agreement dated as of January 15, 1998 among BKB and each of
the secured parties named therein."
<PAGE>
The representations and warranties of the Borrower set forth in this
Section 4.03 shall be deemed to be remade, without further act by any Person, on
- ------------
and as of the Effective Date and each Contract Grant Date with respect to each
Contract Granted by the Borrower either before, or on and as of, each such date.
The representations and warranties set forth in this Section 4.03 shall survive
------------
any Grant of the respective Contracts by the Borrower.
ARTICLE V
GENERAL COVENANTS
-----------------
SECTION 5.01. Affirmative Covenants of the Borrower. From the
-----------------------------------------
Effective Date until the later of the Termination Date or the Collection Date,
the Borrower shall, unless the Deal 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
have a Material Adverse Effect.
(c) Audits. At any time and from time to time during regular business
------
hours, permit the Deal 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 Deal Agent
and/or its agents and 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 Deal Agent and/or its agents
and representatives, at Borrower's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto; and
<PAGE>
(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 initially be quarterly and
thereafter shall be limited to such number and frequency as shall be reasonable
in the exercise of the Deal 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). Each of the Deal 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) 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.
(g) 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
<PAGE>
(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 Deal 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 Deal Agent and deposit such Collections into a Lock-Box
Account or the Collection Account within one Business Day following such
Person's receipt thereof.
(h) 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.
(i) 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 (other than the Primary Lien and in the case of any VOIs or Lots, any
Permitted Encumbrance).
(j) Legal Opinion. On or before March 31 in each calendar year
--------------
commencing with 1999, the Borrower shall furnish to the Deal Agent (i) 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 (including, without
limitation, the Receivables Purchase Agreement), and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to maintain the Primary Lien in the Pledged Contracts and other
Collateral 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 Liens and (ii) such opinions of local counsel as the
Deal Agent may reasonably request. Such Opinion of Counsel shall also describe
the
<PAGE>
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 liens and security interests Granted
hereunder until March 31 in the following calendar year.
(k) 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(k) (or from the jurisdiction in which it was held as described
--------------
in the Opinion of Counsel delivered at the Effective Date if no Opinion of
Counsel has yet been delivered pursuant to this Section 5.01(k)) unless the Deal
--------------
Agent shall have first received an Opinion of Counsel to the effect that the
Primary Lien 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(n).
--------------
(l) 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.
(m) 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
services of a similar nature, to cause each of the POAs for each Development, to
(A) maintain one or more policies of "all-risk" property and general 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
<PAGE>
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 respective
Declaration (or any similar charter document) 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.
(n) Custodian.
---------
(i) On or before each Contract Grant Date, and thereafter promptly
upon the generation of any documents, instruments and agreements evidencing or
otherwise relating to the Pledged Contracts or related Collateral received by
any of the Borrower, FAC or any Originator, 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, including without limitation, all original Pledged
Contracts (or in the case of Pledged Contracts consisting of a sales contract
and a separate promissory note, the original of such promissory note),
installment promissory notes, mortgages, and all ancillary and collateral
documentation executed in connection therewith (collectively, the "Primary
Custodial Documents"). The Custodian shall hold, maintain and keep custody of
all such Primary Custodial Documents for the benefit of the Collateral Agent in
the secure fire retardant location at an office of the Custodian, which location
shall be reasonably acceptable to the Collateral Agent. In addition, the
Servicer shall obtain a copy of the each of the Primary Custodial Documents
described above on microfiche, CD-Rom or other format reasonably acceptable to
the Collateral Agent, which copy shall in each case be maintained in a fireproof
vault at a repository located outside of the offices of the Servicer or the
Borrower (which repository initially shall be Offsite Data Storage, Inc.,
Mabelvale, Arkansas, 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).
(ii) The Custodian shall at all times maintain control of the Primary
Custodial Documents for the benefit of the Collateral Agent on behalf of itself,
the Deal Agent and EagleFunding, in each case pursuant to the Custodial
Agreement. Each of FAC, FCI and the Borrower may access the Primary Custodial
Documents at the Custodian's storage facility only for the purposes and upon the
terms and conditions set forth herein and in the Custodial
<PAGE>
Agreement. Each of the Borrower and the Servicer may only remove Primary
Custodial Documents for collection services and other routine servicing
requirements from such facility in accordance with the terms of the Custodial
Agreement, all as set forth and pursuant to the "Bailment Agreement" (as defined
in, and attached as an exhibit 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.
(o) 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 Agreement;
(iii) (A) pay its own incidental administrative costs and expenses not
covered under the terms of the Administrative Services 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 Agreement, on the basis of actual use to the extent
practicable and, to the extent such allocation is not practicable, on a basis
<PAGE>
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", which satisfies
the requirements set forth in Section 4.01(n) hereof and under the Borrower's
---------------
Certificate of Incorporation, 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(o) 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
<PAGE>
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) not advance funds or other assets to, or commit to advance funds or
other assets to (other than by way of payments in respect of a Purchase on any
Contract Grant 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;
(xv) on or before March 31 of each year, beginning in 1999, the Borrower
shall deliver to the Deal 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 delivered
by Borrower's counsel and described in the List of Closing Documents attached at
Exhibit C remain true and correct at all times.
- ---------
(p) Computer Files. Mark or cause to be marked each Pledged Contract in its
--------------
computer files as described in Section 4.03(b) hereof.
--------------
(q) 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, 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
<PAGE>
to have a Material Adverse Effect, or which could otherwise be reasonably
expected to expose the Borrower to a material liability.
(r) Facility Documents. Comply in all material respects with the terms
------------------
of, employ the procedures outlined in and enforce the obligations of the Seller
and/or FCI (as the case may be) under the Receivables Purchase Agreement, and
all of the other Facility Documents to which such Person is a party, and take
all such action to such end as may be from time to time reasonably requested by
the Deal 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 Deal
Agent.
(s) Contract Schedule. Promptly amend the Contract Schedule to reflect
-----------------
terms or discrepancies that become known after the Contract Grant Date, and
promptly notify the Deal Agent of any such amendments.
(t) 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 other than
Collections, which are not material in the aggregate, have been mistakenly
forwarded by an Obligor directly to any of the Lock-Box Accounts, the Collection
Account or the Spread Account 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 Effective
----------------------------------
Date until the later of the Termination Date or the Collection Date, the
Borrower shall not, without the prior written consent of the Deal Agent:
(a) Sales, Liens, Etc. Against Receivables and Related Security.
-----------------------------------------------------------------
Except for the releases contemplated under Section 7.11 and 7.12 or in
------------- ----
connection with a sale of Pledged Contracts expressly approved in writing by the
Deal Agent, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist, any Lien (other than the Primary Lien or, with
respect to VOIs and Lots relating to Pledged Contracts, any Permitted
Encumbrances thereon) 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 Deal Agent of the existence of any Lien on any
Pledged Contract or any other Collateral, and the Borrower shall defend the
<PAGE>
right, title and interest of each of the Borrower and the Deal 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, and (iii) 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. (i) Make any
---------------------------------------------------
change in the character of its business, or, (ii) make any change in the Credit
Standards and Collection Policies, or deviate from the exercise of Customary
Practices, which change or deviation described in this clause (ii) 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 E or make any change in its
---------
instructions to Obligors regarding payments to be made to any Lock-Box Account
at a Lock-Box Bank, unless the Deal Agent shall have received (i) 30 days' prior
notice of such addition, termination or change; (ii) written confirmation from
the Borrower that after the effectiveness of any such termination, there shall
be at least one (1) Lock Box Account in existence; and (iii) 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
Deal Agent (and, at the option of the Deal 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 granting of the
Primary Lien as expressly permitted under the terms of this Credit Agreement.
<PAGE>
(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 Primary Lien
pursuant to Section 7.11.
------------
(i) Debt. Create, incur, assume or suffer to exist any Debt except for
----
Debt to EagleFunding, the Deal Agent or the Collateral Agent expressly
contemplated hereunder and (ii) 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 EagleFunding, the
Collateral Agent or any Liquidity Provider as provided for under this Credit
Agreement.
<PAGE>
(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 or in connection with a sale of Pledged Contracts expressly approved
in writing by the Deal Agent;
(ii) transactions related to the allocation of shared overhead expenses or
taxes as described in clause (iii) of Section 5.01(o); 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
------------------- -------
14.01, without the prior consent of the Deal 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
Plus 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 FairShare Plus 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 Deal Agent
an Opinion of Counsel in form and substance acceptable to the Deal Agent to the
effect that such amendment or modification will not adversely affect in any
material respect the respective interests of EagleFunding, the Collateral Agent
or the Deal Agent.
(m) Charter and By-Laws. Amend or otherwise modify its Certificate of
-------------------
Incorporation or By-laws in any manner which requires the consent of an
"Independent Director" (as defined in the Borrower's Certificate of
Incorporation).
<PAGE>
(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, in an effort to maximize the recoveries
thereon (in each such case, with the prior written consent of the Deal Agent).
(q) Insolvency Proceedings. Institute Insolvency Proceedings with
-----------------------
respect to the Borrower, FAC, FCI, or any Affiliate thereof or consent to the
institution of Insolvency Proceedings against the Borrower, FAC, FCI, or any
affiliate thereof or take any corporate action in furtherance of any such
action, or seek dissolution or liquidation in whole or in part of the Borrower,
FAC, FCI, or any Affiliate thereof.
(r) Prohibited Payments.
-------------------
(i) 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, (x) prior to giving
--------
effect to such declaration, payment or distribution of a Dividend, any amount of
unpaid principal or interest remains outstanding under the Subordinated Note, or
(y) after giving effect to such declaration, payment or distribution of a
Dividend the Borrower (A) would be "insolvent" (as such term is defined in
ss 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
<PAGE>
which the applicable requirements for release of the related Contract from the
Primary Lien under Section 7.11 have been satisfied);
------------
(ii) On or after the occurrence of the earliest to occur of any
Borrowing Base Shortfall, O/C Shortfall, Spread Account Shortfall or Event of
Default, 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).
--------------
ARTICLE VI
REPORTING REQUIREMENTS
----------------------
SECTION 6.01. Reporting Requirements of the Servicer. From the
------------------------------------------
Effective Date until the later of the Termination Date or the Collection Date,
the Servicer shall, unless the Deal Agent shall otherwise consent in writing,
furnish to the Deal Agent (or a designated agent or repository for the Deal
Agent as identified hereinbelow), or as otherwise notified by the Deal Agent to
the Servicer:
(a) Daily Reports. By not later than 3:00 p.m., Las Vegas, Nevada time
-------------
on each Business Day,
(x) a report on computer tape (or other computer record format
reasonably acceptable to the Deal 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 Deal Agent from time to time (which
repository initially shall be Offsite Data Storage, Inc., Mabelvale, Arkansas,
Nevada, and which repository shall in all cases provide an acknowledgment in
form and substance satisfactory to the Deal 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 Deal 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").
-----------------------
<PAGE>
Any transmission or other delivery of each such report to the Deal Agent, or a
repository therefor, as the case may be, shall be deemed to be a representation
and warranty by the Servicer to the Deal 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., Las Vegas, Nevada
------------------
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. Any transmission of such report to the
Deal Agent shall be deemed to be a representation and warranty by the Servicer
to the Deal 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 H, 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 are to be released on such
Settlement Date pursuant to Section 7.11.
------------
(d) Other Data. At the request of the Deal 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. Servicer
shall also provide to Deal Agent, from time to time at their reasonable request,
a report showing the number and principal balance of all duplicate original
Contracts absent from their related Contract File in accordance with the
exceptions set forth in clause (v) of Section 4.02 hereof.
(e) Annual Servicer's Certificate. On or before March 31 of each
-------------------------------
calendar year, beginning in 1999, 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
Effective 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.
<PAGE>
(f) Annual Report of Accountants. On or before March 31 of each
-------------------------------
calendar year, beginning in 1999, a statement prepared and delivered by a firm
of nationally recognized independent "Big 6" 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 11.02 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 Effective 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 Deal Agent
shall otherwise consent in writing, furnish to the Deal Agent:
<PAGE>
(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, unaudited consolidated statements of income and cash flows for each
of FCI and FAC 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
each of FCI and FAC as at the end of such quarterly period, setting forth in
each case figures from the income statement and statement of cash flows for the
corresponding quarterly period of the next preceding annual accounting period,
and from the year-end balance sheet for the next preceding annual accounting
period, 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, audited consolidated statements of income and cash flows for each of
FCI and FAC for such annual period, and a consolidated balance sheet of each of
FCI and FAC as at the end of such annual accounting period, setting forth in
each case figures from the financial statements for the next preceding annual
accounting period, and the end of the next preceding annual accounting period,
all in reasonable detail and certified by a firm of "Big 6" independent
accountants;
(c) as soon as practicable, and in any event not later than the
Settlement Date next succeeding each Determination Date, a written report
setting forth the following information (which written report may be included in
the Settlement Report with respect to the Calculation Period ending on such
Determination Date);
(i) for each Development, the total number and aggregate dollar value of
all Fixed Weeks, and the total number of Points and aggregate dollar value of
all UDIs, in each case sold by FCI or any of its Affiliates to a Person other
than FCI or any of its Affiliates during the Calculation Period ending on such
Determination Date,
(ii) for each Development, the total number and aggregate dollar value of
all Fixed Weeks, and the total number of Points and aggregate dollar value of
all UDIs, in each case beneficially owned by FCI or any of its Affiliates as of
such Determination Date, and
(iii) with respect to all VOI units relating to improvements located within
a Development, the construction of which was completed during the Calculation
Period ending on such Determination Date, (A) the total number and aggregate
dollar value of all Fixed Weeks, and the total number of Points and aggregate
<PAGE>
dollar value of all UDIs, in each case which have been sold by FCI or any of its
Affiliates to a Person other than FCI or any of its Affiliates on or prior to
such Determination Date, and (B) the total number and aggregate dollar value of
all Fixed Weeks, and the total number of Points and aggregate dollar value of
all UDIs, in each case beneficially owned by FCI or any of its Affiliates as of
such Determination Date.
(d) with respect to each VOI Regime (i) within 120 days after the
Effective Date, a copy of all policies of all-risk property and liability
insurance, in each case maintained by the relevant POA with financially sound
and reputable insurers, as required under in Section 5.01(m)(i), and (ii) no
------------------
later than one month prior to the expiration of said policy or policies, a copy
of the relevant replacement policy or policies (provided, however, that unless
-------- -------
FCI or any Affiliate of FCI is the property manager of the relevant VOI Regime
at the time of any determination hereunder, the Servicer's obligation to deliver
the information described in this Section 6.02(d) shall be limited to the extent
--------------
of the Servicer's reasonable efforts);
(e) as soon as practicable and in any event not later than 120 days
following the end of each annual accounting period, for each POA at each VOI
Regime: (i) the annual audited financial statements for such accounting period,
and (ii) the annual budgets for the next succeeding annual accounting period
(provided, however, that (x) unless FCI or any Affiliate of FCI is the property
-------- -------
manager of the relevant VOI Regime at the time of any determination hereunder,
the Servicer's obligation to deliver the information described in this Section
-------
6.02(e) shall be limited to the extent of the Servicer's reasonable efforts to
- ------
request such information from the relevant Persons, and (y) the financial
statements required to be delivered under clause (i) above shall be audited
financial statements only to the extent that audited annual financial statements
for such annual period are prepared for the relevant POA);
(f) to the extent not covered in subsections (a) through (e) above,
inclusive, as soon as practicable and in any event within ten (10) days after
such filing, any financial reports filed by either or both of FCI and FAC with
the Securities and Exchange Commission; and
(g) as soon as practicable, and in any event no later than 120 days
following the end of each calendar year, the following:
(i) an income statement for such year and a balance sheet as of the
end of such year for the FairShare Vacation Plan Use Management Trust, setting
forth in each case corresponding figures from the next preceding calendar year's
annual financial statements, all in reasonable detail and audited by a firm of
"Big 6" independent accountants, and
<PAGE>
(ii) a statement of key exchange operation statistics for the
FairShare Plus Program for such year, setting forth corresponding figures from
the next preceding calendar year's annual financial statements, all in
reasonable detail and audited by a firm of "Big 6" independent accountants and
in no less detail and scope than such statement audited by Ernst & Young LLP for
calendar year 1996.
SECTION 6.03. Miscellaneous Borrower and Servicer Reporting
----------------------------------------------------
Requirements. From the Effective 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 Deal
Agent shall otherwise consent in writing, furnish to the Deal Agent:
(a) as soon as available, and in any event not later than 50 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 95 days
following the end of each annual accounting period, audited statements of income
and cash flows for the Borrower for such year, and an audited balance sheet of
the Borrower 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 and certified by a firm of "Big 6" independent
accountants;
(c) to the extent not already delivered to the Deal 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;
<PAGE>
(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; and
(f) as soon as possible and in any event within two Business Days
after the occurrence of any proposed change in Credit Standards and Collections
Policies, the statement of the chief financial officer of the Borrower setting
forth details of such change in Credit Standards and Collections Policies.
ARTICLE VII
SECURITY INTEREST
SECTION 7.01. Grant of Primary Lien. To secure the prompt and complete
---------------------
payment when due of the Obligations and the timely performance by the Borrower
of all of the covenants and obligations to be performed by it pursuant to this
Credit Agreement in favor of any of the Collateral Agent, the Deal Agent and
EagleFunding, the Borrower hereby assigns and pledges to the Collateral Agent
and grants to the Collateral Agent, on behalf of the Collateral Agent, the Deal
Agent and EagleFunding a security interest (the "Primary Lien") in all of the
-------------
Borrower's right, title and interest in, to and under 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 (collectively, the
"Collateral"), including, without limitation, the following property and
----------
interests in property:
(a) all Pledged Contracts, together with all other Transferred Assets;
(b) the Receivables Purchase Agreement, the Administrative Services
Agreement and the Remarketing Agreement, including, without limitation, all
monies due and to become due to the Borrower from the Seller or FCI under or in
connection therewith (including, without limitation, all interest and finance
charges for late payments accrued thereon and proceeds of any liquidation or
sale of Pledged Contracts or resale of VOIs or Lots and all other Collections on
the Pledged Contracts);
(c) all computer software, tapes, disks and other electronic media, books,
records and documents relating to the Pledged Contracts; including, without
limitation, any such software, electronic media, books, records and documents
used
(i) to account for and service the Transferred Assets,
<PAGE>
(ii) in the management of any VOI Regimes, and the VOIs and Lots
located within such VOI Regimes,
(iii) in the monitoring of accounts receivables and third party
contracts relating to the management of properties located within any VOI
Regime, and
(iv) in managing and operating the FairShare Plus Program and the
Reservation System,
and all relevant licenses, sublicenses, contracts (including, without
limitation, service and maintenance contracts), warranties and guaranties
relating to any such software, electronic media, books, records and documents,
as the case may be (including, without limitation, all such rights arising under
such software, electronic media, books, records and documents, and any related
licenses, sublicenses, contracts, warranties and guaranties transferred by FAC
to the Borrower pursuant to the Receivables Purchase Agreement);
(d) any Interest Rate Hedge entered into from time to time hereafter, any
replacement agreement for any thereof, 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 by the Borrower, in whole or in part, for the
benefit of any of the Borrower, the Collateral Agent, the Deal Agent and/or
EagleFunding, all funds held therein or in such other accounts, all financial
assets, investment property and other investments from time to time on deposit,
or made with proceeds, in any such accounts, and all income arising from such
funds held in any such accounts or from such financial assets, investment
property and other investments;
(f) all Post Office Boxes, Lock-Box Accounts, and all other bank and
similar accounts into which Collections in respect of the Pledged Contracts are
or are intended to be deposited, 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) any accounts, inventory, machinery, equipment, fixtures, general
intangibles, chattel paper, contract rights, financial assets and other
investment
<PAGE>
property, instruments and documents, to the extent not described in any of
clauses (a) through (g) above;
(i) all proceeds of the foregoing property described in clauses (a) through
(h) above, any security therefor, and all interest, dividends, cash,
instruments, financial assets and other, investment property 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, condemnation or other disposition
of, any or all of the then existing Collateral, and including all payments under
Insurance Policies (whether or not any of EagleFunding, the Deal Agent 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
(j) all other monies or property of the Borrower coming into the actual
possession, custody or control of the Collateral Agent, the Deal Agent or
EagleFunding (whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise).
SECTION 7.02. Continuing Liability of the Borrower. The security
---------------------------------------
interests described above in Section 7.01 are granted as security only and shall
------------
not subject any of the Collateral Agent, the Deal Agent or EagleFunding or any
of 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
Deal Agent or EagleFunding, 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) (1) On or prior to the Contract Grant Date corresponding with the
Effective Date, the Borrower shall have caused, at its sole expense, the UCC-1
financing statements, assignments thereof and other items referred to in the
Closing Lists set forth in Exhibit C hereto as items which are required to be
---------
filed or recorded on or prior to such Contract Grant Date, to be so filed or
recorded in the appropriate offices, and (2) within five Business Days after
such Contract Grant Date, the Borrower shall cause each of the other UCC-1
financing statements, UCC-2 and UCC-3 amendment and/or termination statements,
and other similar items referred to in the Closing List set forth in Exhibit C
---------
hereto to be filed or recorded within five Business Days after such Contract
Grant Date, and in each such case shall thereafter promptly cause evidence of
such filings to be delivered to the Collateral Agent.
<PAGE>
(b) 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 Deal Agent or as the Deal Agent otherwise
deems necessary or advisable to perfect the Primary Lien 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 Deal Agent deems necessary or advisable to:
(i) Grant more effectively all or any portion of the Collateral; (ii) maintain
or preserve the Primary Lien Granted hereunder (and the priority thereof) 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 (including, without limitation, by cooperating with the Collateral
Agent, at the expense of the Borrower, in filing and recording such UCC
financing statements against such Obligors as the Deal Agent shall deem
necessary or advisable from time to time); (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 the Closing List set forth at
Exhibit C hereto to maintain the Primary Lien and security interests granted
- ---------
hereunder with respect to the Collateral.
(c) The Borrower shall, on or prior to the date of Grant of any
Contracts hereunder, deliver all original copies of the Contract (other than in
the case of any Contracts not required to be in the relevant Contract File
pursuant to Section 4.02(v)), 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 Deal 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 Deal Agent
and/or EagleFunding within two Business Days after the Borrower's
<PAGE>
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 Deal Agent.
(d) The Borrower hereby authorizes the Deal 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 the Deal Agent in its sole discretion, may deem
necessary or appropriate to further perfect the Primary Lien 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. Any expenses incurred by
the Deal Agent pursuant to the exercise of its rights under this Section 7.03(d)
---------------
shall be for the sole account and responsibility of the Borrower, and shall
constitute "Carrying Costs" payable by the Borrower hereunder.
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 Pledged Contract 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 Deal Agent at least
thirty (30) days' prior written notice thereof and shall have taken all action
necessary or reasonably requested by the Deal 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 Primary Lien of the Collateral Agent on behalf of itself, the Deal
Agent and EagleFunding in all of the Collateral.
SECTION 7.05. Lock-Box Accounts. 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(g), 5.01(t) 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 in the case of FAC acting in
<PAGE>
its capacity as the Servicer, to the extent expressly provided in the Lock-Box
Agreements or the Collection Account Agreement, respectively. The Deal Agent on
behalf of EagleFunding 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 Effective
-------------------
Date, the Borrower shall establish and maintain, or cause to be established and
maintained, for the sole and exclusive benefit of the Deal Agent on behalf of
the Collateral Agent, the Deal Agent and EagleFunding, and their respective
assigns, a cash collateral account (the "Collection Account"). The Collection
-------------------
Account shall be a special purpose segregated account, designated as the
"EagleFunding Deal Agent Collection Account", maintained either (i) with BKB or
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
Deal Agent, acting on behalf of itself, the Collateral Agent and EagleFunding.
In the event that the Collection Account Bank ceases to satisfy the requirements
set forth in clause (i) above, and such funds therein are not immediately
thereafter transferred to a segregated trust account as provided in clause (ii)
above, the Deal 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,
subject to a new Collection Account Agreement in form and substance satisfactory
to the Deal Agent.
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 the Deal Agent shall have the sole right,
-------- -------
upon written notice to the Collection Account Bank, to restrict the maturities
of any Permitted Investments held in the Collection Account and to direct the
withdrawal or liquidation of any such Permitted Investments, to be used solely
for the purposes and in the order of priority set forth at Section 7.06(d).
---------------
The taxpayer identification number associated with the Collection
Account shall be that of the Borrower and the Borrower will report for federal,
state and local income tax purposes the income, if any, earned on funds in the
Collection Account.
The Deal 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 Deal Agent pursuant to Section 6.01;
------------
provided, however, that the Deal Agent shall, pursuant to the terms of the
- -------- -------
<PAGE>
Collection Account Agreement, and absent further instructions to the Collection
Account Bank to the contrary from the Deal Agent (which instructions the Deal
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 Deal Agent
(which instructions the Deal 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 (including, without limitation, funds
representing Assessments or dues payable by Obligors to property owners'
associations or other entities), or (ii) 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 Deal 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 Deal Agent from the Servicer
from time to time). Notwithstanding anything herein to the contrary, the Deal
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 Deal 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) Application Prior to Liquidation Trigger Date. All funds in the
Collection Account shall be held in trust for the benefit of the Collateral
Agent, the Deal Agent and EagleFunding and, except as otherwise provided in
Section 7.06(d) below with respect to all periods from and after the Liquidation
- --------------
Trigger Date, shall be used on each day 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 accrued and unpaid interest on the EagleFunding Loans
(including in any such amount, the accrued and unpaid CP Dealer Fee then
outstanding) then due and payable and any other Carrying Costs
<PAGE>
(excluding the Servicing Fee so long as the Servicer is FAC or another
Affiliated of FCI) which are then due and payable;
(iii) To be retained in the Collection Account to the extent of any accrued
and unpaid Carrying Costs (excluding the Servicing Fee so long as the Servicer
is FAC or another Affiliate of FCI) which are not then due and payable;
(iv) [Reserved]
(v) If such day is a Settlement Date (or in the discretion of the Borrower,
on the Business Day immediately preceding such Settlement Date), to make any
mandatory repayments of the EagleFunding Loans as required in Section 2.07(b);
---------------
(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 payable at such time;
(viii) To pay Servicing Fees which are then due and payable;
(ix) To make any voluntary prepayments of the EagleFunding Loans as
provided in Section 2.07(a), upon the direction of the Borrower;
---------------
(x) 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), (2) the payment of any Dividend to the
extent permitted pursuant to the terms of Section 5.02(r) hereof, (3) the
---------------
payment of any and all tax obligations (and imputed tax obligations) then due
and payable by the Borrower, and (4) interest on Pledged Contracts which was
accrued and unpaid on the Cutoff Date relating thereto, but subsequently
deposited into the Collection Account; and
(xi) 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) and in accordance with the terms of the Collection Account
- ---------------
Agreement), shall certify to each of the Deal 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).
- ---------------
<PAGE>
If, on any Business Day prior to the Liquidation Trigger 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) Priority Among Carrying Costs. On each Business Day prior to the
Liquidation Trigger 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 (excluding the Servicing Fee so long as
the Servicer is FAC or another Affiliate of FCI) which are then due and payable,
such funds shall be applied to the Carrying Costs (excluding the Servicing Fee
so long as the Servicer is FAC or another Affiliate of FCI) in the following
order of priority:
(i) To pay any accrued and unpaid interest on the EagleFunding 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;
(ii) 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
amount is accrued but not then due and payable;
(iii) To pay any accrued and unpaid expenses of the Deal Agent and the
Collateral Agent 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;
(iv) [Reserved]
(v) To pay any accrued and unpaid Servicing Fee 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;
(vi) To pay all other Carrying Costs then due and payable (if any), other
than the ordinary course expenses of the Borrower and to be retained in the
Collection Account to the extent such amount is accrued but not then due and
payable; and
(vii) To pay ordinary course expenses of the Borrower to the extent the
same are due or past due.
<PAGE>
If, on any such Business Day, the funds on deposit in the Collection Account and
available for withdrawal under any of clauses (ii), (vi) or (vii) 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) Application After Liquidation Trigger Date. On each Business Day
from and after the Liquidation Trigger Date, notwithstanding anything herein or
elsewhere to the contrary, funds shall be withdrawn on any day from the
Collection Account solely upon direction of the Deal 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 Deal Agent and the
Successor Servicer in accordance with Section 11.02(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);
(ii) To pay any accrued and unpaid fee owing to the Custodian 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;
(iii) To pay any accrued and unpaid interest on the EagleFunding 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;
(iv) To repay the aggregate outstanding principal amount of any
EagleFunding Loans then outstanding;
(v) To pay any accrued and unpaid expenses of the Deal Agent and the
Collateral Agent 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;
(vi) 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
amount is accrued but not then due and payable;
(vii) To pay any other accrued and unpaid Obligations in respect of
Carrying Costs 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;
<PAGE>
(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
------------ ---
Obligations described in clause (ix) 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;
(x) To pay any accrued and unpaid Servicing Fee owed to any of FCI, FAC or
the Borrower, or any Affiliate of any thereof; and
(xi) To repay any unpaid Servicer Advances owing to FCI or any of its
Affiliates as Servicer; and
(xii) To be retained in the Collection Account and not subject to
withdrawal, transfer or remittance instructions of the Servicer; provided,
--------
however any funds remaining on deposit in the Collection Account after the later
- -------
of the Termination Date and the final payment, in full and in cash, of all of
the foregoing Obligations, and other obligations, fees and expenses, shall, at
the direction of the Deal Agent, be remitted to the Borrower or as otherwise
required by law.
If, on any such Business Day, the funds on deposit in the Collection Account and
available for withdrawal under any of clauses (vi), (vii), (viii), or (ix) 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.
SECTION 7.07. Spread Account. (a) On or prior to the Effective Date,
--------------
the Borrower shall establish and maintain, or cause to be established and
maintained, for the sole and exclusive benefit of the Deal Agent for the benefit
of itself, the Collateral Agent and EagleFunding and their respective assigns, a
cash collateral account (the "Spread Account"). The Spread Account shall be a
---------------
special purpose segregated account, designated as the "Eagle Funding Deal Agent
Spread Account", maintained either (i)with BKB or 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 Deal Agent. In the
event that the Spread Account Bank ceases to satisfy the requirements set forth
in clause (i) above, and such funds therein are not immediately thereafter
transferred to a segregated trust account as provided in clause (ii) above, the
Deal Agent shall be entitled to terminate the Spread Account and the Spread
Account Agreement, and transfer all funds and investments held therein to a new
Spread Account at an Eligible Depository Institution, subject to a new
<PAGE>
Spread Account Agreement in form and substance satisfactory to the Deal Agent.
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) upon written notice from the Deal Agent to
-------- -------
the Spread Account Bank, the Deal Agent shall have the sole right to restrict
the maturities of any Permitted Investments held in the Spread Account, and (y)
from and after the date after the Liquidation Trigger Date on any date on which
there are no remaining available funds on deposit in the Collection Account, the
Deal Agent shall have the sole right to direct the withdrawal or liquidation of
any such Permitted Investments to be used solely for the purposes and in the
applicable order of priority set forth at Section 7.06(d) hereof.
--------------
(b) The Borrower shall cause the Spread Account to be funded, at any
time, in the amount of the Spread Account Requirement then in effect.
(c) The Deal 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 Deal 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 9.09. The Servicer,
------------
in making any such instructions for the transfer of funds from the Spread
Account, shall simultaneously provide each of the Deal Agent and the Spread
Account Bank with a certificate of a Servicing Officer as to the existence and
size of any Spread Account Excess.
(d) On each Business Day from and after a Liquidation Trigger Date,
the Deal Agent shall have the sole right to direct the Spread Account Bank to
withdraw all or any portion of the funds on deposit the Spread Account for
transfer to the Collection Account, to be used solely for the purposes and in
the applicable order of priority set forth at Section 7.06(d) hereof.
---------------
<PAGE>
(e) Any funds remaining in the Spread Account after the later of the
Termination Date and the final payment, in full and in cash, of all of the
Obligations outstanding hereunder shall, at the direction of the Deal Agent, be
remitted to the Borrower or as otherwise required by law.
(f) The taxpayer identification number associated with the Spread
Account shall be that of the Borrower and the Borrower will report for federal,
state and local income tax purposes the income, if any, earned on funds in the
Spread Account.
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 Deal 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 and pursuant to the
Collateral Agency Agreement, 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
EagleFunding Note hereunder, and the Collateral Agent and the holder of the
EagleFunding 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 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 Deal Agent, or EagleFunding 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, and each of the Collateral Agent, the Deal Agent or
EagleFunding hereby consents to any such release by, or at the direction of, the
Collateral Agent.
(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 I (which certificate shall include a statement
---------
to the
<PAGE>
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 from the Custodian 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 be deemed, without the necessity
of taking any action, to have approved release by the Custodian of the Contract
Files to the Servicer (in all cases in accordance with the provisions of the
Custodial Agreement), (b) shall be deemed to approve the release by 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, 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 (each such Mortgage
constituting additional Collateral granted by the Borrower hereunder), and the
Servicer shall, promptly following the execution of each such Assignment of
Mortgage cause each such Assignment of Mortgage to be recorded in all proper
offices; provided that no such Assignment of Mortgage shall be required to be
filed with respect to VOIs or Lots located in Developments in the State of
Florida. 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, on or prior
--------------------------
to each Contract Grant Date, cause to be recorded in the proper offices all
Assignments of Mortgages 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 any State other than Florida.
SECTION 7.11. Releases.
--------
(a) Subject to Section 7.11(d), the Borrower shall, prior to the
---------------
occurrence of a Liquidation Trigger Date
(i) cause the release of any Pledged Contract from the Primary Lien of
this Credit Agreement by making all of the payments and allocations required to
be made under Section 7.06(b) on the first Settlement Date (the "Notice
--------------- ------
Settlement Date") occurring after the Borrower or the Servicer has become aware,
- ---------------
or has received written notice from the Deal Agent, of any uncured
<PAGE>
breach with respect to such Pledged Contract of a representation or warranty of
the Borrower in any of Sections 4.01(y), 4.02 or 4.03 or which becomes a
---------------- ---- ----
Canceled Contract pursuant to clause (c) of the definition of Canceled Contract
(each such Pledged Contract, a "Defective Contract" and each such date on which
------------------
a release occurs, a "Defective Contract Release Date"); and
--------------------------------
(ii) cause either of FAC or FCI to, simultaneously with such release,
satisfy its corresponding repurchase obligations under the Receivables Purchase
Agreement in respect of such Defective Contract;
provided, that all of the payments and allocations required to be made under
- --------
Section 7.06(b) on a Notice Settlement Date shall be made on the basis of a
- ---------------
Borrowing Base calculation which gives effect to the status of all Pledged
Contracts which became "Defective Contracts" prior to such Notice Settlement
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 preceding the relevant Notice
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) Subject to Section 7.11(d), in the event that any Pledged Contract
--------------
becomes a Defaulted Contract at any time after the Contract Grant Date for such
Contract, the Borrower shall, prior to the occurrence of the Liquidation Trigger
Date, on the first Settlement Date on which such Pledged Contract constitutes a
Defaulted Contract, cause such Defaulted Contract to be released from the
Primary Lien of this Credit Agreement by making all of the payments and
allocations required to be made under Section 7.06(b) on such Settlement Date (a
---------------
"Defaulted Contract Release Date"); provided, that all of the payments and
---------------------------------- --------
allocations required to be made under Section 7.06(b) on such Settlement Date
----------------
shall be made on the basis of a Borrowing Base calculation which gives effect to
the status of all Pledged Contracts which became "Defaulted Contracts" prior to
such Settlement Date.
<PAGE>
(c) Subject to Section 7.11(d), in the event that, as of any
---------------
Determination Date, (i) the Excess Concentration Reserve is greater than zero,
prior to the occurrence of the Liquidation Trigger Date, the Borrower shall (A)
prior to the next succeeding Settlement Date, identify (by reference to the
Contract Schedule) or cause the Servicer to identify to the Collateral Agent, in
writing, Pledged Contracts of a type or types the inclusion of which in the
Contract Pool has given rise to the existence of such Excess Concentration
Reserve (which Contracts shall consist of Pledged Contracts which are identified
by the Borrower on a basis which is not adverse to any of EagleFunding, the
Collateral Agent or the Deal Agent, and in an aggregate Principal Balance
approximately equal to (but not greater than) the amount of such Excess
Concentration Reserve (collectively, the "Overconcentration Contracts"), and (B)
---------------------------
cause such Overconcentration Contracts to be released from the Primary Lien of
this Credit Agreement by making all of the payments and allocations required to
be made under Section 7.06(b) on such Settlement Date (an "Overconcentration
-----------------
Contract Release Date"); provided, that all of the payments and allocations
- ----------------------- --------
required to be made under Section 7.06(b) on such Settlement Date shall be made
---------------
on the basis of a Borrowing Base calculation which gives effect to the
subtraction of the Excess Concentration Reserve from the Borrowing Base on the
Settlement Date; or
(ii) prior to the occurrence of an Event of Default, Borrower identifies Pledged
Contracts (on a basis which is not adverse to any of EagleFunding, the
Collateral Agent or the Deal Agent) the release of which from the Contract Pool
will not result in a Borrowing Base Shortfall, O/C Shortfall or Spread Account
Shortfall (the "Excess Collateral Contracts"), such Excess Collateral Contracts
shall be released on the Settlement Date next succeeding such Determination Date
(an "Excess Contract Release Date") from the Primary Lien of the Credit
Agreement in accordance with Section 7.03(e) below; provided that all of the
payments and allocations required to be made under 7.06(b) on such Settlement
Date shall be made on the basis of a Borrowing Base calculation which gives
effect to the removal of the Excess Collateral Contracts from the Borrowing Base
on the Settlement Date.
(d) Promptly after the occurrence of a Settlement Date constituting a
Defective Contract Release Date, a Defaulted Contract Release Date, an
Overconcentration Contract Release Date or an Excess Collateral Contract Release
Date, the Servicer shall delete the relevant Defective Contracts, Defaulted
Contracts or Overconcentration Contracts from the Contract Schedule and shall
notify the Deal Agent to do the same with respect to the records and any
computer files maintained by it; provided, however that in all events it shall
-------- -------
be a condition precedent to the effectiveness of the release of any Pledged
Contract pursuant to Section 7.11(a), (b) or (c) that the Borrower shall have
------- --- ---
delivered or caused the Servicer to have delivered to the Deal Agent, on the
Business Day next succeeding such Settlement Date a certificate substantially in
the form of Exhibit I hereto to the effect that (i) all of the
---------
<PAGE>
payments and allocations required to be made under Section 7.06 on such
-------------
Settlement Date from funds on deposit in the Collection Account shall have been
made to the appropriate Persons, in full and in cash; and (ii) after giving
effect to all of the payments and allocations required to be made under Section
-------
7.06 on such Settlement Date, there is no Borrowing Base Shortfall, O/C
- ----
Shortfall or Spread Account Shortfall in existence. In connection with the
release of a Defective Contract, Defaulted Contract, an Overconcentration
Contract or an Excess Collateral Contract and the related Collateral hereunder,
the Collateral Agent hereby appoints the Servicer as its agent and
attorney-in-fact (which appointment shall be evidenced by a recorded power of
attorney in the form attached hereto as Exhibit J, which pursuant to its terms
---------
is revocable at the option of the Collateral Agent upon written notice to the
Servicer) to execute all documents necessary to evidence such release.
(e) In connection with each release pursuant to Section 7.11(a), (b),
------- ---
or (c), and upon the satisfaction of the conditions precedent set forth in
---
Section 7.11(d), the Collateral Agent shall automatically and without further
- ---------------
action be deemed to consent to the transfer and assignment by Borrower to
Servicer, without recourse, representation or warranty, of all the right, title
and interest of Borrower in and to any Defective Contract, Defaulted Contract,
Overconcentration Contract, Excess Collateral Contract or any other Collateral
released pursuant to the terms thereof (including the interest in the underlying
VOI or Lot), and all monies thereafter due or to become due with respect
thereto, and all proceeds thereof and following such transfer and assignment by
Borrower, Collateral Agent shall be deemed to have such interest in the released
Collateral as is set forth in the Collateral Agency Agreement. 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.
(f) The obligation of the Borrower to effect the release of any
Defective Contract shall constitute the sole remedy hereunder respecing any
breach of the representations and warranties set forth in Sections 4.01(y),
-----------------
4.02, or 4.03 available hereunder to the Collateral Agent on behalf of itself,
- ---- ----
the Deal Agent and EagleFunding; provided, however, that this provision shall
-------- -------
not limit in any way any rights of any of the Collateral Agent, the Deal Agent
or EagleFunding (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.
(g) In the event the Deal Agent approves the sale of Pledged Contracts
pursuant to Section 5.02(a), Collateral Agent shall, simultaneously with the
consummation of such sale, execute such documents and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by
Borrower or Deal Agent to effect the conveyance of such Collateral to the
purchaser thereof free and clear of the Primary Lien; provided however,
<PAGE>
that the proceeds of any such sale shall be applied in accordance with Section
7.06 hereof.
SECTION 7.12. Remarketing Obligations.
-----------------------
(a) FCI's Obligations. In the event that either (i)the Borrower fails
-----------------
to effect, within one Business Day after a Settlement Date prior to which the
Borrower or the Servicer has become aware (or otherwise received written notice)
that any Pledged Contract has become a Defective Contract or a Defaulted
Contract, the release of such Pledged Contract from the Primary Lien of this
Credit Agreement pursuant to the terms of any of Sections 7.01(a), (b), and (c),
--------------- --- -
and Section 7.01(d), or (ii) a Contract becomes a Defaulted Contract, a
----------------
Defective Contract or an Overconcentration Contract at any time after the
earlier of (A) the Liquidation Trigger Date, or (B) the Termination Date if
either a Borrowing Base Shortfall, O/C Shortfall or a Spread Account Shortfall
is in existence (based upon the Settlement Report prepared for the most recently
ended Calculation Period):
(x) the Servicer shall, to the extent permitted by the terms of the
applicable Contract, at the sole cost and expense of the Servicer, enforce the
Borrower's rights and remedies against, and realize upon and obtain on behalf of
the Borrower, subject in all events to the Primary Lien, all of the relevant
Obligor's right, title and interest in, to and under the related VOI or Lot
(including, without limitation, such Obligor's right to possess the related VOI
or Lot) without any legal or judicial process (except to the extent otherwise
required by applicable law or pursuant to the terms of such Contract), and
(y) FCI shall exercise its best efforts, at its sole cost and expense, to
(1) assist the Servicer in the performance of its obligations described under
clause (x) above, and (2) remarket the VOI or Lot relating to such Defective
Contract or Defaulted Contract pursuant to the terms and conditions of the
Remarketing Agreement, and
(z) the Collateral Agent hereby agrees to submit such VOI or Lot to the
remarketing procedures described in the Remarketing Agreement, and, at the sole
cost and expense of FCI, to take any and all other reasonable actions as may be
reasonably 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 pursuant to the Remarketing Agreement by FCI and FAC to the
Borrower, and Granted pursuant to the Remarketing Agreement by the Borrower to
the Collateral Agent for the benefit of itself, the Deal Agent and EagleFunding
shall be a "Pledged Contract", and shall therefore constitute part of the
"Contract Pool" for purposes of this Credit Agreement and the other Facility
Documents and each reference to Pledged Contracts transferred "under
<PAGE>
the Receivables Purchase Agreement" or Granted hereunder (or words of similar
effect) shall include Remarketed Contracts so transferred or Granted 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 (f) or (x) thereof.
(ii) For the purposes of this Credit Agreement, the applicable
"Cut-Off Date" of a Remarketed Contract shall be the date of such Contract's
origination by FCI.
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.
ARTICLE VIII
THE DEAL AGENT
Section 8.01. Authorization and Action. EagleFunding hereby appoints and
------------------------
authorizes the Deal Agent to take such action as agent on its behalf and to
exercise such powers under this Credit Agreement as are delegated to the Deal
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto.
SECTION 8.02. Deal Agent's Reliance, Etc. Neither the Deal Agent nor any of
--------------------------
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them as Deal Agent under or in connection
with this Credit Agreement (including, without limitation, any action taken or
omitted to be taken by it or them if the Deal Agent is designated as Servicer
pursuant to Section 11.02) or any other agreement executed pursuant hereto,
--------------
except for its or their own negligence or willful malfeasance or misfeasance.
Without limiting the foregoing, the Deal Agent: (i) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or representation to any
<PAGE>
Person and shall not be responsible to any other Person for any statements,
warranties or representations made in or in connection with this Credit
Agreement or in connection with any of the other agreements executed pursuant
hereto; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Credit Agreement on the part of the Borrower or to inspect the property
(including the books and records) of the Borrower; (iv) shall not be responsible
to EagleFunding or any other Person for the due execution, legality, validity,
enforceability, genuineness or sufficiency of value of this Credit Agreement or
any other agreement, instrument or document furnished pursuant hereto; and (v)
shall incur no liability under or in respect of this Credit Agreement or any
other agreement executed pursuant hereto, by acting upon any notice (including
notice by telephone with respect to notices under Section 2.03), consent,
-------------
certificate or other instrument or writing (which may be by telex or facsimile)
believed by it to be genuine and signed or sent by the proper party or parties.
Notwithstanding anything in this Section 8.02 to the contrary, the foregoing
------------
provisions of this Section 8.02 shall not run in favor of the Deal Agent in
-------------
connection with any claim against the Deal Agent made by EagleFunding.
SECTION 8.03. Deal Agent and Affiliates. With respect to any interests
--------------------------
which may be assigned by EagleFunding to BKB pursuant to Section 14.04, BKB
shall have the same rights and powers under this Credit Agreement as would
EagleFunding if it were holding such interests and may exercise the same as
though BSI were not the Deal Agent. BKB and its Affiliates may generally engage
in any kind of business with the Borrower, any Originator or any Obligor, any of
their respective Affiliates and any Person who may do business with or own
securities of the Borrower, any Originator or any Obligor or any of their
respective Affiliates, all as if BKB were not the Deal Agent and without any
duty to account therefor to EagleFunding or any Liquidity Provider.
SECTION 8.04. Resignation of the Deal Agent. The Deal Agent may resign as
-----------------------------
Deal Agent hereunder at any time by giving not less than five (5) Business Days'
prior written notice to EagleFunding, the Borrower, the Servicer and the
Custodian, such resignation to be effective on the earlier of (i) the
appointment and acceptance of a successor Deal Agent as provided below and (ii)
the 30th day following delivery of such notice. Upon any such resignation,
EagleFunding shall appoint a financial institution of its choosing as Deal
Agent. Following the appointment of a successor Deal Agent and such successor
Deal Agent's acceptance thereof, such successor Deal Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Deal Agent as Deal Agent hereunder, and the resigning Deal Agent shall
be discharged from its duties and obligations as Deal Agent hereunder. After the
Deal Agent's resignation, the provisions of this Article VIII shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Deal Agent.
<PAGE>
ARTICLE IX
SERVICING OF CONTRACT POOL
--------------------------
SECTION 9.01. 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 EagleFunding, the
Deal Agent, the Collateral Agent 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 EagleFunding, the
Deal Agent or the Collateral Agent 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 the
Collateral Agent, 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, 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 a Servicing Officer, shall
furnish the Servicer with any reasonable documents or take any action reasonably
requested, which is 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 XI.
- ----------
SECTION 9.02. 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 9.03. 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 Deal Agent and the Collateral Agent to
determine the status of each Pledged Contract and will enable each Pledged
Contract to be serviced, in accordance with the terms of this Agreement, by a
Successor Servicer following a Service Transfer.
<PAGE>
SECTION 9.04. Inspection.
----------
(a) Inspection of Servicer. Each of the Borrower, EagleFunding, the
----------------------
Deal Agent, 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, and in the
event that the Servicer is FAC, of FCI (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 (and FCI's) compliance with this Agreement,
and each of the Borrower, EagleFunding, the Deal Agent and the Collateral Agent
and their representatives may examine and audit the same, and make photocopies
and computer tape replicas thereof, and each of the Servicer and FCI agrees to
render to the Borrower, EagleFunding, the Deal Agent and the Collateral Agent
and their representatives, at the Servicer's or FCI's sole cost and expense,
respectively, such clerical and other assistance as may be reasonably requested
with regard thereto. The Borrower, EagleFunding, the Deal Agent and the
Collateral Agent and their respective representatives shall also have the right
to discuss the Servicer's and FCI's affairs with the officers of the Servicer
and FCI and the Servicer'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 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 and FCI).
(b) Confidential Information. Each of the parties hereto agrees that,
------------------------
to the extent that any information obtained by any of EagleFunding, the Deal
Agent and the Collateral Agent or any of their respective representatives
pursuant to Section 9.04(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 or quasi-governmental authority
having jurisdiction over such Person, (v) any rating agency, (vi) any credit
enhancer, provider of reinsurance, provider of a letter of credit or provider of
liquidity, or prospective credit enhancer, provider of reinsurance, provider of
a letter of credit 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
<PAGE>
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 Deal Agent or the Collateral Agent, deliver an updated
copy of the Contract Schedule to the Deal Agent or the Collateral Agent, as the
case may be.
SECTION 9.05. Enforcement.
-----------
(a) The Servicer will, consistent with Section 9.02, 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)(x) or the proviso of Section 7.06(d)(xii), 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;
<PAGE>
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 and (iii) modifications in the applicability of a
PAC (which modification will, among other things, result in a change in the
relevant Contract Rate).
SECTION 9.06. 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 upon the reasonable request of the Servicer in
enforcement of rights and remedies of each of EagleFunding, the Collateral Agent
and the Deal Agent with respect to Pledged Contracts.
SECTION 9.07. 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 Deal 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 Deal 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 9.08. Servicer Insurance Coverage. The Servicer shall
------------------------------
maintain, and shall cause FCI to maintain, separate errors and omissions
coverage insuring the Collateral Agent's, the Deal Agent's and EagleFunding's
respective risks against loss through errors of the Servicer's, the Borrower'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 Deal Agent for the benefit of itself, the Collateral Agent and EagleFunding,
as a loss payee. The Servicer shall also maintain, and shall cause FCI to
<PAGE>
maintain, a separate fidelity bond coverage insuring the Collateral Agent's, the
Deal Agent's, EagleFunding'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 Deal Agent, for the benefit of itself, the Collateral
Agent and EagleFunding, as an additional loss payee. Each such insurance policy
required pursuant to this Section 9.08 shall provide for written notice to the
------------
Deal Agent by the insurer at least 30 days prior to the cancellation of such
insurance. Evidence reasonably satisfactory to the Deal 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 Deal Agent prior to the expiration
date of the then current insurance policy.
SECTION 9.09. Servicing Compensation. As compensation for its
------------------------
servicing activities hereunder, the Servicer shall be entitled to receive, on
the Settlement Date next succeeding the end of each Calculation Period (the
"Servicing Fee Payment Date"), the servicing fee (the "Servicing Fee") which
--------------------------- --------------
shall be equal to (a) one twelfth the product of 1.00% times the Contract Pool
-----
Principal Balance determined as of the end of such Calculation Period plus (b)
----
the Borrower's proportionate share of the fees and expenses payable to the
Custodian under the Custodial Agreement.
SECTION 9.10. 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 Deal Agent and EagleFunding, 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 9.11. 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 Effective Date, (2) in the
case of any Successor Servicer, the date of such appointment, and (3) in any
case, (x) as of each Contract Grant Date and (y) (other than in the case of the
representation set forth in subsection (h) below) on and as of the commencement
of each Interest Period occurring hereunder, to each of EagleFunding, the
Collateral Agent and the Deal Agent:
<PAGE>
(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 a Material Adverse Effect.
(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.
(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).
<PAGE>
(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 have a Material Adversely Effect.
(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.
(h) No Material Adverse Effect. No event or circumstance having a
----------------------------
Material Adverse Effect has occurred since the Balance Sheet Date.
The representations and warranties set forth in this Section 9.11
------------
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 and the Deal Agent.
SECTION 9.12. Additional Covenants of the Servicer. From the Effective
------------------------------------
Date until the later of the Termination Date or the Collection Date, unless the
Deal 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 E or
---------
make any change in its instructions to Obligors regarding payments to be made to
any Lock-Box Bank, unless the Deal 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
Deal Agent (and, at the option of the Deal Agent, the Servicer) and
<PAGE>
(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 Deal 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 Deal 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 Deal Agent and EagleFunding 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) any Contract Grant Date, 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, or
<PAGE>
(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 Deal Agent and
----------------------
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 interests 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(j) (or from the jurisdiction in which it was held as described in
- ----------------
the Opinion of Counsel delivered at the Effective Date if no Opinion of Counsel
has yet been delivered pursuant to Section 5.01(j)) unless the Deal Agent shall
---------------
have first received an Opinion of Counsel to the effect that the Primary Lien
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(n).
---------------
(i) Contract Schedule. The Servicer shall promptly amend the Contract
-----------------
Schedule to reflect terms or discrepancies that become known to the Servicer
after the Effective 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,(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
<PAGE>
benefit of BKB 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 Primary Lien (x) pursuant to Section 7.11, or (y) pursuant to Section
------------- -----
7.12 in connection with the satisfaction of the remarketing obligations
- ----
described therein.
(l) Change in Business or Credit and Collection Policy. The Servicer
---------------------------------------------------
shall not make any change in the Credit Standards and Collection Policies, or
deviate from the exercise of Customary Practices, which change or deviation
would materially impair the value or collectibility of any Pledged Contract.
(m) Keeping of Records and Books of Account. The Servicer shall
------------------------------------------
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).
SECTION 9.13. 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
Deal Agent or EagleFunding, 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.
<PAGE>
SECTION 9.14. 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 EagleFunding, the
Collateral Agent and the Deal 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
EagleFunding, the Collateral Agent or the Deal 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 Deal Agent and
EagleFunding, 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 Deal 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 Deal 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 Deal Agent or EagleFunding, may have against FAC or any other Person, the
Collateral or any other property.
(iii) FCI hereby agrees that its obligations under this Section
-------
9.14(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 Deal Agent or EagleFunding, 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
<PAGE>
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 Deal Agent or EagleFunding, (F)
the failure by any of the Collateral Agent, the Deal Agent or EagleFunding 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 Deal Agent or EagleFunding to provide
such information either now or in the future.
(v) FCI further agrees that:
(A) its obligations under this Section 9.14(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) neither the Deal Agent nor the Collateral Agent shall 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 9.14(b) shall
---------------
not be limited if any of the Collateral Agent, the Deal Agent or EagleFunding,
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.
<PAGE>
(vii) FCI hereby agrees not to exercise or assert any rights which it
may acquire by way of subrogation under this Section 9.14(b), if any, unless and
---------------
until all of the FAC Servicer Obligations shall have been paid and/or performed
in full and in cash. If any payment shall be made to FCI on account of any
subrogation rights at any time prior to the occurrence of the events described
in the preceding sentence, each and every amount so paid will be held in trust
for the benefit of the Collateral Agent, the Deal Agent or EagleFunding and
forthwith be paid to the Deal 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 9.14(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 Deal Agent
or EagleFunding, 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 9.14(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 Deal 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
-------
9.14(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 9.14(b), is received by the Deal Agent at its address for notice
----------------
set forth herein. Any such revocation shall not affect the rights of any of the
Collateral Agent, the Deal Agent or EagleFunding 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 Deal Agent.
(c) Management of Developments. FCI hereby covenants and agrees that
---------------------------
from the Effective Date until the later of the Termination Date or the
Collection Date, it shall
<PAGE>
(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
would be customary for prudent managers of similar time share properties; 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 would be customary for
prudent managers of similar time share properties.
(d) Management of FairShare Plus Program. FCI hereby covenants that
------------------------------------
from the Effective Date until the later of the Termination Date or the
Collection Date, it shall perform all of its duties and responsibilities related
to the operation and management of the FairShare Plus Program, as described more
fully in the FairShare Plus Agreement.
SECTION 9.15. 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 Deal 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 11.02 hereof.
-------------
SECTION 9.16. Merger or Consolidation of, or Assumption of the
------------------------------------------------------
Obligations of Servicer.
- -----------------------
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:
<PAGE>
(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 the 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 Deal Agent in form satisfactory to the Deal Agent,
the performance of every covenant and obligation of the Servicer hereunder;
(ii) the Servicer has delivered to the Deal 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 9.16, and all conditions precedent provided for herein relating to such
- ------------
transaction have been satisfied;
(iii) the Deal Agent has expressly approved 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 9.17. 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 the
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 X
EVENTS OF DEFAULT; REMEDIES
---------------------------
SECTION 10.01. 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 a Servicer Default; or
(b) The Borrower, the Servicer (if the Servicer is FAC or any
Affiliate thereof) or FCI shall fail to make any payment or deposit to be made
by it when due hereunder, and, solely in the case of any such payments, or
deposits,
<PAGE>
which do not constitute payments or deposits of principal or interest on the
EagleFunding Loans, such failure shall remain unremedied for three Business Days
after written notice from the Deal Agent; or
(c) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in Sections 5.01 or 5.02, which failure
-------------- ----
described in this subsection (c) shall remain unremedied for five Business Days
after written notice from the Deal 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 and 4.03 of this Credit Agreement,
------------- ----
shall prove to have been false or incorrect in any material respect when made or
deemed to be 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 Deal
Agent; or
(f) The Primary Lien shall for any reason, except in the case of the
releases contemplated pursuant to Section 7.11 and 7.12, cease or otherwise fail
------------ ----
to be a valid and perfected first priority security interest in the Collateral
in favor of the Collateral Agent;
(g) (i) An Insolvency Event shall occur with respect to the Borrower;
or (ii) the Borrower 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 any (1) Borrowing Base Shortfall, (2) O/C Shortfall or (3) Spread Account
Shortfall; 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 Effective 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
<PAGE>
(k) Borrower shall become (1) an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or under the control
of such 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) The Seller shall fail duly to observe and perform any covenant or
agreement set forth in the Receivables Purchase Agreement, which failure
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 Deal
Agent, as the case may be, or (ii) the date on which the Seller has actual
knowledge thereof; or
(m) EagleFunding shall determine that continuation of this Credit
Agreement without exercise of remedies under Section 10.02 will impose a
--------------
material adverse regulatory impact on EagleFunding; or
(n) Either (i) the product of four times the sum of the Default
Percentages for the three most recently concluded Calculation Periods exceeds
10.5% (or commencing on the tenth Settlement Date, 9.5%) or (ii) the sum of the
Default Percentages for the twelve most recently concluded Calculation Periods
exceeds 10% (or, commencing on the tenth Settlement Date, 9%); or
(o) Either (i) the fraction (stated as a percentage) of (A) the sum of
the Delinquency Percentages for the three most recently concluded Calculation
Periods divided by (B) three exceeds 4.0% or (ii) the fraction (stated as a
percentage) of (A) the sum of the Delinquency Percentages for the twelve most
recently concluded Calculation Periods divided by (B) twelve exceeds 3.5%; or
(p) The fraction (stated as a percentage) of (A) the outstanding
Principal Balance at the time of cancellation for all Contracts owned by FCI or
any of its Subsidiaries which have become Cancelled Contracts pursuant to
clauses (a) or (b) of such definition divided by (B) the original Principal
Balance for all Contracts owned by FCI or any of its Subsidiaries which do not
constitute Cancelled Contracts, determined on a quarterly basis (and reported
during the subsequent month) beginning with the Calculation Period ending March
31, 1998 for the immediately preceding seven calendar years (except excluding
Contracts originated by VB or any VB Subsidiaries prior to January 1, 1998),
exceeds 14.5%.
<PAGE>
SECTION 10.02. Remedies. During the existence of an Event of Default, each
--------
of the Deal Agent and the Collateral Agent on behalf of itself, EagleFunding and
the Deal Agent 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 then accrued and unpaid 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; (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; and (vi)
record, or cause to be recorded in each relevant jurisdiction any and all
Contract Conveyance Documents prepared, executed and delivered in accordance
with a Contract Grant Date in recordable form; provided, however, that in the
-------- -------
case of any event described in Section 10.01(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 EagleFunding Note to the contrary
notwithstanding, the Obligations then accrued and unpaid shall be immediately
due and payable and the Termination Date shall be deemed to have occurred
automatically.
The rights and remedies of a secured party which may be exercised by the
Deal Agent or Collateral Agent pursuant to clause (iv) of this Section 10.02
--------------
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 11.02, 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.
<PAGE>
SECTION 10.03. Optional Preservation of Collateral. If the Obligations
-----------------------------------
then accrued and unpaid have been accelerated following an Event of Default, to
the extent permitted by law, the Deal Agent may elect to retain the Collateral
intact for the benefit of itself and EagleFunding 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 10.03, the Deal 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 10.03, 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 10.02, 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 10.04. Restoration of Rights and Remedies. If any of the
-------------------------------------
Collateral Agent, the Deal Agent or EagleFunding 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 Deal Agent or EagleFunding 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 Deal Agent or EagleFunding shall
continue as though no such proceeding had been instituted.
SECTION 10.05. Waiver of Stay or Extension Laws. Each of FCI, 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 FCI, 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 Deal Agent and the Collateral Agent, but will suffer and permit
the execution of every such power as though no such law had been enacted.
<PAGE>
SECTION 10.06. Sale of Collateral.
------------------
(a) The power to effect any sale (a "Sale") of any portion of the
----
Collateral pursuant to Section 10.02 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 the 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 10.07. Recovery of Judgment. The Deal Agent's and 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 Deal Agent or EagleFunding
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 Deal Agent or
EagleFunding 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 XI
SERVICER DEFAULTS
-----------------
SECTION 11.01. 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 Deal 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 Deal Agent to the
effect that, in its reasonable good faith judgment and based on information it
believes to be
<PAGE>
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; or
(b) any failure (i) by the Servicer to deliver any other information
to the Deal 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) by the Servicer or FCI 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 or any of the other
Facility Documents to which it is a party, and, solely in the case of any such
payments which do not constitute payments of principal or interest on the
EagleFunding Loans, such failure shall remain unremedied for three Business Days
after written notice from the Deal Agent or (iii) by the Servicer to give
instructions or notice to the Deal Agent pursuant to Article IX 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; or
(c) any failure on the part of (i) the Servicer or FCI duly to observe
or perform any other covenants or agreements of the Servicer or FCI set forth in
this Credit Agreement or any of the other Facility Documents to which it is a
party, or (ii) if the Servicer is FAC, enforce and otherwise pursue any of its
rights against FCI under any of the Facility Documents at the direction of the
Deal Agent from time to time, which failure continues unremedied for a period of
ten days after the date on which written notice thereof, requiring the same to
be remedied, shall have been given to the Servicer by the Deal Agent, or to the
Servicer and the Collateral Agent by either of the Deal Agent or EagleFunding;
or the Servicer or FCI 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 11.02 and 14.04; or
-------------- -----
(d) any representation, warranty or certification made by the Servicer
or FCI 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 or deemed to be made; or
(e) (i) An Insolvency Event shall occur with respect to any of the
Servicer, the Seller, FAC, FCI, any other Originator, or any other Significant
Subsidiary of FCI; or (ii) any of the Servicer, the Seller, FAC or FCI, or any
other Affiliate of FCI, shall take any corporate action to authorize the filing
of any such Insolvency Proceeding;
<PAGE>
(f) there shall remain in force, undischarged, unsatisfied, unbonded
(or not otherwise fully insured) and unstayed, for more than thirty days,
whether or not consecutive, any final judgment rendered against FAC (if FAC or
any Affiliate of FAC is the Servicer), or against FCI, which, together with any
other outstanding final judgments against such Persons which have remained in
force, undischarged, unsatisfied, unbonded (or not otherwise fully insured) and
unstayed, for more than thirty days, exceed, in aggregate, an amount equal to
$1,000,000; or
(g) [Reserved]; or
(h) (1) other than in the cases described in clauses (2) and (3)
below, 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 (2) if the Servicer is FCI or an Affiliate of FCI, ninety (90) days shall
have elapsed after the occurrence of an "Event of Default" under the BKB/FAC
Agreement or the BKB/FCI Agreement (each such agreement, if terminated, being
deemed to be in effect in the form existing immediately prior to termination,
for purposes of determining the existence of an "Event of Default" under this
paragraph), and such "Event of Default" shall not have been cured or waived
during such ninety-day period, or BKB (or its agent) shall have otherwise taken
any action to accelerate its indebtedness under either such agreement or pursued
any other remedy against any obligor or its assets thereunder; or (3) if the
Servicer is FCI or 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 FAC or an Affiliate of FAC, FCI, or the
Borrower, the occurrence of any Event of Default; or
(j) any of the Collateral Agent, the Deal Agent or EagleFunding (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
<PAGE>
wire services), which they reasonably believe in good faith to be reliable, that
the Servicer or, for as long as FAC is the Servicer, FCI has ceased to conduct
its business in the ordinary course; or
(k) the Servicer shall fail to materially comply with the Credit
Standards and Collection Policies in the performance of its duties hereunder;
THEN, so long as such Servicer Default shall not have been remedied, the Deal
Agent by notice given in writing to the Servicer (a "Servicer Termination
---------------------
Notice"), may at the request and shall at the direction of EagleFunding,
- ------
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 11.02; and, without limitation, the Deal
-------------
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 Deal 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 11.01 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
<PAGE>
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 11.02. Appointment of Successor.
------------------------
(a) Appointment. On and after the receipt by the Servicer of a
-----------
Servicer Termination Notice pursuant to Section 11.01, or any permitted
--------------
resignation of the Servicer pursuant to Section 9.15, 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 Deal
Agent in writing or, if no such date is specified in such Servicer Termination
Notice, or otherwise specified by the Deal Agent, until a date mutually agreed
upon by the Servicer and the Deal Agent. The Deal 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 Deal Agent.
Notwithstanding the foregoing, the Deal 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 Deal 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 14.04, 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
<PAGE>
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 11.02 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 11.03. 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 or, if rated by DCR, its equivalent from DCR). 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.
<PAGE>
ARTICLE XII
INDEMNITIES
-----------
SECTION 12.01. 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 Deal Agent or EagleFunding 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 Deal Agent and EagleFunding expressly disclaim
any such obligation and liability.
SECTION 12.02. Tax Indemnification. The Borrower agrees to pay, and to
-------------------
indemnify, defend and hold harmless each of the Collateral Agent, the Deal Agent
and EagleFunding 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 any Grant of the Collateral 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 EagleFunding 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 12.03. Servicer's Indemnities. The Servicer shall defend and
-----------------------
indemnify each of the Collateral Agent, the Deal Agent, EagleFunding, 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, any Pledged Contract or any other Facility Document; 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 12.03 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 12.04. FAC's Indemnities. FAC shall defend and indemnify each
-----------------
of the Borrower, the Collateral Agent, the Deal Agent, EagleFunding and the
Servicer (if FAC is no longer the Servicer) against any and all costs, expenses,
losses, damages, claims and liabilities, including
<PAGE>
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 12.05. Borrower's Indemnities. Without limiting any other
-----------------------
rights which any of the Collateral Agent, the Deal Agent or EagleFunding or any
of their respective successors and assigns (each, an "Indemnified Party") may
------------------
have hereunder or under applicable law, the Borrower hereby agrees to defend and
indemnify each Indemnified Party from and against any and all costs, expenses,
losses, damages, claims and liabilities (including reasonable attorneys' fees)
(all of the foregoing being collectively referred to as "Indemnified Amounts")
--------------------
arising out of or resulting from this Credit Agreement, any Pledged Contract or
any other Facility Document, or any transaction contemplated hereby or thereby,
or from any action taken, or failure to take any action by the Borrower with
respect to this Credit Agreement, any Pledged Contract or any other Facility
Document, including, but not limited to, 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:
(i) the failure of the Custodian to maintain in the portion of its files
dedicated to Pledged Contracts, all original copies of each such Pledged
Contract (other than in the case of any Contracts not required to be in Contract
Files pursuant to Section 4.02(v));
---------------
(ii) any breach by the Borrower of any of its representations, warranties,
covenants or other obligations under this Credit Agreement or any other Facility
Document;
(iii) the failure to vest in the Borrower a first priority perfected
ownership interest in the Collateral, free and clear of any Lien (other than the
Primary Lien, and, with respect to Collateral other than Pledged Contracts,
Permitted Encumbrances), or the failure to vest in the Collateral Agent a first
priority perfected security interest in the Collateral for the benefit of
itself, the Deal Agent and EagleFunding, in each case free and clear of any Lien
(other than the Primary Lien and, with respect to Collateral other than Pledged
Contracts, Permitted Encumbrances);
(iv) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to perfection of
interests in any
<PAGE>
Collateral, whether at the time of any Contract Grant Date or at any subsequent
time;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Pledged Contract
(including, without limitation, a defense based on such Pledged Contract, this
Credit Agreement or any other Facility Document not being a legal, valid and
binding obligation of the obligor thereof, enforceable against it in accordance
with its terms), or any other claim resulting from the sale or Grant of a
Pledged Contract, this Credit Agreement or any other Facility Document;
(vii) any products liability, consumer liability, claim by any third party,
or other claim arising out of or in connection with any Lot or VOI which is the
subject of any Pledged Contract, this Credit Agreement or any other Facility
Document;
(viii) the commingling of Collections at any time with any other funds;
(ix) the Borrower's failure to maintain any Insurance Policy required under
this Credit Agreement or any other Facility Document;
(x) any failure of the Originator, the Seller or the Borrower to perform
its duties or obligations in accordance with applicable law;
(xi) any action or omission by the Originator, the Seller or the Borrower,
reducing or impairing the rights of the Collateral Agent with respect to any
Pledged Contract, or the value of any Pledged Contract (including, without
limitation, any cancellation or modification of any Pledged Contract by the
Originator, the Seller or the Owner, other than a Permitted Deferral); or
(xii) any investigation, litigation or proceeding related to this Credit
Agreement or the use of proceeds of the EagleFunding Loans or in respect of any
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 12.06. Operation of Indemnities. Any indemnification under
------------------------
this Article XII 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 Deal
<PAGE>
Agent or EagleFunding pursuant to this Article XII 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 XIII
THE COLLATERAL AGENT
--------------------
SECTION 13.01. Authorization and Action. Each of the Deal Agent and
-------------------------
EagleFunding (collectively with their respective successors and assigns, the
"Secured Creditors") hereby designates and appoints BKB as "Collateral Agent"
------------------
under this Credit Agreement, the Collateral Agency 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. To the extent that any provision
contained in this Article XIII conflicts with any provision contained in the
Collateral Agency Agreement, the Collateral Agency Agreement shall control. 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 XIII
------------
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 XIII. 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 on the
Collection Date.
SECTION 13.02. 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.
<PAGE>
SECTION 13.03. 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 13.02 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 any failure of any Obligor to perform its
obligations under any Pledged Contract, 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 13.03
-------------
is intended solely to govern the relationship between the Collateral Agent, on
the one hand, and the Secured Creditors, on the other.
SECTION 13.04. 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 the Deal Agent or EagleFunding made pursuant to the
Facility Documents.
SECTION 13.05. Notice of Termination Events; Etc. The Collateral Agent
---------------------------------
shall not be deemed to have knowledge or notice of the
<PAGE>
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 13.06. 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
decision 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, provided, however, that with reasonable
-------- -------
promptness following the reasonable request of a Secured Creditor, made in
<PAGE>
writing, the Collateral Agent shall make available to such Secured Creditor
information concerning the Contracts or the Developments, the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Other Parties which information (1) is actually in the
possession of the Collateral Agent at the time of such request, (2) has been
provided to the Collateral Agent by or on behalf of the Borrower or one of its
Affiliates, and (3) is described in such request with reasonable specificity.
SECTION 13.07. 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.
SECTION 13.08. Collateral Agent in Its Individual Capacity. Each of
--------------------------------------------
the Collateral Agent and EagleFunding 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 or EagleFunding were not the Collateral Agent or EagleFunding
hereunder, respectively. With respect to the transactions contemplated pursuant
to the Facility Documents, BKB as the Collateral Agent shall have the same
rights and powers under the Facility Documents as any other 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 BKB as the Collateral
Agent in its individual capacity.
SECTION 13.09. 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 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 the
Secured
<PAGE>
Creditors 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 XIII 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 13.10. 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 assignments from the Borrower to the Secured
Creditors of security interests in the Collateral, and (y) the secured party of
record on the various other assignments with respect to the Collateral as
described more fully in Exhibit C or Exhibit D, 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 one or more of
the Secured Creditors and that such listing will not affect in any way the
respective 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 XIII.
------------
ARTICLE XIV
MISCELLANEOUS
-------------
SECTION 14.01. 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 Deal Agent and EagleFunding,
the Borrower, FCI and the Servicer (with respect to an amendment, and with
respect to a material amendment, approved by S&P, Moody's and DCR) or (ii) the
Collateral Agent, the Deal Agent and EagleFunding, (with respect to a waiver or
consent by any of them), the Borrower (with respect to a waiver or consent by
it), FCI (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
<PAGE>
written understandings (except such understandings as are set forth in the Fee
Letter).
SECTION 14.02. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication 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 14.03. No Waiver; Remedies. No failure on the part of any of
--------------------
the Collateral Agent, the Deal Agent or EagleFunding 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 14.04. Binding Effect; Assignability; Termination. This Credit
------------------------------------------
Agreement shall be binding upon the Borrower, the Servicer, FCI, FAC,
EagleFunding, the Collateral Agent, the Deal 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,
and each of their respective successors and permitted assigns. None of the
Borrower, the Servicer or FCI may assign any of its rights or obligations
hereunder or any interest herein without the prior written consent of
EagleFunding, and the Collateral Agent. Each of EagleFunding, the Collateral
Agent and the Deal Agent 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 EagleFunding 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
EagleFunding in connection with the Credit Agreement (including, without
limitation, the "Liquidity Collateral Agent" under the Liquidity Security
Agreement), shall be entitled to exercise EagleFunding'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 EagleFunding's rights
under this Credit Agreement.
<PAGE>
This Credit Agreement shall create and constitute the continuing
obligations 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
--------
12.02, 12.03, 12.04, and 12.05), shall be continuing and shall survive any
- ----- ----- ----- -----
termination of this Credit Agreement; provided further, however, that to the
-------- ------- -------
extent that a payment, transfer or deposit is made by or on behalf of any of the
Borrower, the Servicer, FAC or FCI, to any of the Collateral Agent, the Deal
Agent or EagleFunding, 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 any of the Borrower, the Servicer FAC or FCI,
or its respective 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 hereunder in respect of such
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.
SECTION 14.05. Release of Collateral. Upon the termination of this
---------------------
Credit Agreement pursuant to Section 14.04, 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 interests of the
Collateral Agent in the Collateral.
SECTION 14.06. 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
<PAGE>
DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. 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 14.06 SHALL AFFECT THE RIGHT OF EAGLEFUNDING OR THE COLLATERAL AGENT TO
- -------------
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
EAGLEFUNDING OR THE COLLATERAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST
ANY OF THE BORROWER, FAC OR FCI OR ITS RESPECTIVE PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
SECTION 14.07. Costs, Expenses and Taxes. (a) In addition to the
--------------------------
rights of indemnification granted under Article XII hereof, 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 EagleFunding, the Collateral Agent and the Deal Agent
with respect thereto and with respect to advising EagleFunding, the Collateral
Agent and the Deal Agent as to its rights and remedies under this Credit
Agreement, the other Facility Documents, and the other agreements to be
delivered hereunder and thereunder, 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 EagleFunding, the Collateral Agent and the Deal
Agent 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
EagleFunding, the Collateral Agent and the Deal Agent, 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
<PAGE>
recording of this Credit Agreement, the other Facility Documents and the other
agreements, instruments and documents to be delivered hereunder and thereunder,
and agrees to indemnify each of EagleFunding, the Collateral Agent and the Deal
Agent 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.
(c) The Borrower agrees to pay, indemnify and hold each of
EagleFunding, the Collateral Agent and the Deal Agent and each of their
respective affiliates, control persons, officers, directors, shareholders,
employees, and agents (all the foregoing, collectively, the "indemnified
-----------
parties") 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 amounts"), provided that none of the Borrower, FAC or FCI shall
-------------------- --------
have any obligation hereunder to any indemnified party with respect to
indemnified amounts arising from the gross negligence or willful misconduct of
such indemnified party.
(d) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to EagleFunding
in connection with this Agreement or the funding or maintenance of EagleFunding
Loans hereunder, EagleFunding is required to compensate the Liquidity Agent or
any Liquidity Provider (or any other indemnified party under the Liquidity
Agreement) in respect of fees and expenses under circumstances similar to those
described in Section 14.07(a)(y), then within ten days after demand by
-------------------
EagleFunding accompanied by a certificate setting forth the amounts of
compensation so required and the calculations thereof in reasonable detail, the
Seller shall pay to EagleFunding such additional amount or amounts as may be
necessary to pay the applicable Liquidity Provider the amounts due or to
otherwise reimburse EagleFunding for any amounts paid by it.
SECTION 14.08. Limitations on Payments. Notwithstanding anything
-------------------------
herein or elsewhere to the contrary, the Borrower's obligations to make payments
hereunder, or under any of the other Facility Documents, to the extent that a
source of any such payment is the Collection Account and/or the funds or
investments maintained therein, shall be subject in all events to the
limitations on permitted payment dates and the designation of payment priorities
set forth in Section 7.06.
------------
SECTION 14.09. 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
<PAGE>
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 14.10. No Bankruptcy Petition Against EagleFunding. Each of
---------------------------------------------
the Borrower, FAC and FCI covenants and agrees (which agreement shall be binding
upon their respective successors and assigns) that it will not institute against
EagleFunding, or join any other Person in instituting against EagleFunding, any
Insolvency Proceeding under bankruptcy law or under any similar federal or state
law. The provisions of this Section 14.10 shall survive termination of this
Credit Agreement.
SECTION 14.11. Further Assurances. Each of the Borrower, FAC and FCI
------------------
covenants and agrees 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 Deal Agent or 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.
SECTION 14.12. Confidentiality. Except to the extent otherwise
---------------
required by applicable law or as may be necessary to enforce any rights in
respect of this Credit Agreement, or any related document, instrument or
agreement, EagleFunding shall, unless the provider thereof shall otherwise
consent in writing (i) maintain the confidentiality of information obtained as a
result of being a party hereto or to related documents from FCI, FMB, FAC, FRC,
any VB Subsidiary or a POA with respect to the operation, management, or
financial condition of any POA ("Confidential Information") and (ii) not
disclose, deliver or otherwise make available to any third party any part of any
such Confidential Information; provided, however, that EagleFunding may disclose
-------- -------
any Confidential Information (w) to its legal counsel, auditors and accountants,
(x) as may be required or requested by any central bank or governmental
authority, regulatory body or rating agency, (y) subject to a written
confidentiality agreement having terms substantially similar to this Section
-------
14.12, to any reinsurer, bank, financial institution or other party that extends
- -----
or is considering the extension of liquidity or of debt or equity financing to
EagleFunding, or is reinsuring or considering the reinsurance of the obligations
of EagleFunding, or (z) as may be required or appropriate in response to a court
order or in connection with any litigation; provided further, however, that
-------- ------- -------
EagleFunding shall not have any obligation of confidentiality whatsoever in
respect of any information which may be generally available to the public or
becomes available to the public through no fault of EagleFunding.
<PAGE>
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 RECEIVABLES
CORPORATION
By:_____________________________________
Title: President
Address: Suite 1000, 5851 West Charleston
Boulevard
Las Vegas, Nevada 89102
Attn: President
Telephone: (702) 878-9788 (Ext. ____)
Telecopy: (702) 878-4510
FAIRFIELD ACCEPTANCE
CORPORATION
By:/s/ W. Stevens
------------------------------------
Title: President
Address: 11001 Executive Center
Little Rock, Arkansas 72211
Attn: President
Telephone: (501) 664-6000
Telecopy: (501) 660-7151
FAIRFIELD COMMUNITIES, INC.
By:/s/Robert W. Howeth
------------------------------------
Title: Senior Vice President
Address: 11001 Executive Center
Little Rock, Arkansas 72211
Attn: President
Telephone:(501) 664-6000
Telecopy: (501) 660-7151
<PAGE>
EAGLEFUNDING FUNDING CAPITAL
CORPORATION
By: BancBoston Securities Inc.,
its Attorney-in-Fact
By: /s/Catherine Dawson
-----------------------------------
Title: Managing Director
Address: 100 Federal Street
Boston, Massachusetts 02110
Mail Stop: 01-10-02
Attn: Amy Roberts
Telephone: (617) 434-5796
Telecopy: (617) 434-9591
BANCBOSTON SECURITIES, INC.,
as Deal Agent
By: /s/Catherine Dawson
-------------------------------------
Title: Managing Director
Address: 100 Federal Street
Boston, Massachusetts 02110
Mail Stop: 01-10-02
Attn: Amy Roberts
Telephone: (617) 434-5796
Telecopy: (617) 434-9591
BANKBOSTON, N.A.,
as Collateral Agent
By: ____________________________________
Title: Vice President
Address: 100 Federal Street
Boston, Massachusetts 02110
Mail Stop: 01-10-02
Telephone: (617) 434-5796
Telecopy: (617) 434-9591
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement"), dated as of
January 15, 1998 is among FAIRFIELD ACCEPTANCE CORPORATION, a Delaware
corporation, as seller ("Seller"), FAIRFIELD COMMUNITIES, INC., a Delaware
corporation, and the parent corporation of Seller, as co-originator ("FCI"),
FAIRFIELD MYRTLE BEACH, INC., a Delaware corporation and a wholly-owned
subsidiary of FCI, as co-originator ("FMB"), SEA GARDENS BEACH AND TENNIS
RESORT, INC., a Florida corporation ("Sea Gardens"), VACATION BREAK RESORTS,
INC., a Florida corporation ("VBR"), VACATION BREAK RESORTS AT STAR ISLAND,
INC., a Florida corporation ("VBRS") (each of Sea Gardens, VBR and VBRS being
wholly-owned subsidiaries of Vacation Break, USA, Inc., a wholly-owned
subsidiary of FCI), PALM VACATION GROUP, a Florida general partnership ("PVG"),
OCEAN RANCH VACATION GROUP, a Florida general partnership ("ORVG")(each of Sea
Gardens, VBR, VBRS, PVG and ORVG are hereinafter collectively referred to as the
"VB Subsidiaries" and PVG and ORVG are hereinafter collectively referred to as
the "VB Partnerships") and FAIRFIELD RECEIVABLES CORPORATION, a special purpose
Delaware corporation, as purchaser (the "Company").
RECITALS
WHEREAS, FCI, FMB and the VB Subsidiaries have originated certain
Contracts in connection with the sale to Obligors of VOIs or Lots at various
Developments;
WHEREAS, in the ordinary course of their businesses, FCI purchases or
will purchase from FMB and the VB Subsidiaries, and Seller purchases or will
purchase from FCI, certain Contracts and related property (including an interest
in the VOIs or Lots underlying such Contracts);
WHEREAS, FCI, FMB, the VB Subsidiaries, Seller and the Company wish to
enter into this Agreement in order to among other things (i) effect the sale of
Contracts and related Transferred Assets to the Company on the Effective Date
and (ii) make additional sales of Contracts and related Transferred Assets from
time to time in the future on Contract Grant Dates; and
WHEREAS, the Company desires to finance the purchases of Contracts and
related property on the Effective Date and on each Contract Grant Date, in part
with advances made by EagleFunding Capital Corporation ("EagleFunding") pursuant
a Credit Agreement, dated as of December 15, 1997, (the "Credit Agreement"),
among Seller, as Servicer, Company, as Borrower, FCI, EagleFunding, BankBoston,
N.A., as Collateral Agent and BancBoston Securities, Inc., as Deal Agent, which
advances will be secured by, among other things, a pledge of the Contracts and
related property purchased by Company;
<PAGE>
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 each 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 EagleFunding.
"Purchase Price" shall mean either 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
-----
Effective Date pursuant to Section 4(c)(i)(A) below and the amount of
--------------------
transaction fees and expenses referred to in Section 4(c)(i)(A) below, plus (y)
------------------- ----
the Subsequent Purchase Price of Subsequent Contracts minus the amount of cash
-----
paid to Seller on any Contract Grant Date pursuant to Section 4(c)(ii)(A) below,
-------------------
minus (z) permitted repayments of principal under the Subordinated Note from and
- -----
after the Effective Date.
Section 2. Purchase and Sale of 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 Effective Date, all of the Seller's right, title and interest
in, to and under (but none of the obligations arising under) the Contracts
listed on the Contract Schedule delivered on the Effective Date (the "Initial
Contracts"), together with all other Transferred Assets relating thereto.
(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
<PAGE>
from time to time until the Termination Date to designate additional Eligible
Contracts to be offered for sale to the Company on Contract Grant Dates and the
Company shall, until the Termination Date and to the extent EagleFunding is
obligated to fund such Purchase through additional EagleFunding 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 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 the Contracts and the other Transferred Assets
relating thereto 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 Contracts and Transferred Assets.
(d) Recharacterization. To the extent that any transfer of Contracts
------------------
and other Transferred Assets relating thereto from (i) any of FMB or the VB
Subsidiaries to FCI or FCI to Seller, in each case pursuant to the Operating
Agreement or (ii) from Seller to the Company pursuant to 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 each of FMB and
the VB Subsidiaries shall be deemed to have granted to FCI, FCI shall have been
deemed to have granted to Seller, and Seller shall be deemed to have granted to
the Company, a first priority perfected security interest in all of FMB's, the
VB Subsidiaries', FCI's, or Seller's, as the case may be, right, title and
interest in, to and under such Contracts and other Transferred Assets relating
thereto, in order to secure the advance of the aggregate purchase price paid to
the Seller hereunder from time to time; and each of FMB, the VB Subsidiaries,
FCI and Seller, as the case may be, shall be deemed to have (i) collaterally
assigned all of its right, title and interest in, to and under the Contracts and
other Transferred Assets relating thereto pursuant to the assignments executed
in accordance with the Operating Agreement or Section 5(c) hereof, as
applicable, and (ii) waived any and all defenses to the enforceability of such
advance pursuant to this Section 2(d) including, without limitation, any defense
arising under usury laws.
(e) Security Interest in Transferred Assets. FCI, FMB, the VB
--------------------------------------------
Subsidiaries and Seller acknowledge that the Contracts and other Transferred
Assets relating thereto are subject to the security interest of Collateral Agent
for the benefit of itself and EagleFunding pursuant to the Credit Agreement, and
that EagleFunding has assigned its rights under the EagleFunding Note (together
with its related rights under the Credit Agreement) to the Liquidity Collateral
Agent pursuant to the Liquidity Agreement and Liquidity Security Agreement.
<PAGE>
(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 proceeds of the Contracts and other Transferred Assets
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 Contracts or other Transferred Assets relating
thereto and including all payments on Insurance Policies (whether or not any of
the Seller, FCI, FMB, the VB Subsidiaries, EagleFunding, 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 foregoing
property, and any security granted or purported to be granted in respect of any
said property; and
(ii) all other monies or property of the Seller specifically relating
to the Contracts and Transferred Assets, or the property described in clause (i)
above, coming into the actual possession or control of the Company, the
Collateral Agent, the Deal Agent or EagleFunding, (whether for safekeeping,
deposit, custody pledge transaction, collection or otherwise).
(g) Quitclaim of Residual Interest by FMB, the VB Subsidiaries and FCI.
------------------------------------------------------------------
(i) The parties hereto recognize that each of (A) FMB and the VB Subsidiaries
has previously sold, transferred and assigned, or in the future will sell,
transfer and assign, all of its right, title and interest in and to the
Contracts originated by it, and the other Transferred Assets relating thereto to
FCI and (B) FCI has previously sold, transferred and assigned, or in the future
will sell, transfer and assign, all of its right, title and interest in and to
the Contracts originated by it, and the other Transferred Assets relating
thereto to Seller, in each case pursuant to the terms of the Operating
Agreement, such sales and transfers being evidenced and memorialized by one or
more blanket assignments executed by such parties in favor of FCI or Seller, as
applicable. For the avoidance of any doubt and to further evidence the intent of
the parties hereto that all residual right, title and interest in the Contracts
and other Transferred Assets relating thereto are being sold and transferred to
the Company pursuant to this Agreement, each of FCI, FMB and the VB Subsidiaries
hereby irrevocably quitclaim any residual right, title and interest that any of
them may be deemed to have in and to any of the Contracts or other Transferred
Assets relating thereto directly to the Company.
(ii) To the extent that any quitclaim of Contracts and other
Transferred Assets relating thereto from FCI, FMB or the VB Subsidiaries to the
Company contemplated by Section 2(g) above 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 each of FCI, FMB or the VB Subsidiaries,
as
<PAGE>
applicable, shall have been deemed to grant to the Company a first priority
perfected security interest in all of FCI's, FMB's or the VB's Subsidiaries, as
the case may be, right, title and interest in, to and under such Contracts and
other Transferred Assets relating thereto in order to secure the advance of the
aggregate purchase price paid to the Seller hereunder from time to time and each
of FCI, FMB and the VB Subsidiaries, as the case may be, shall be deemed to have
waived any and all defenses to the enforceability of such advance pursuant to
this Section 2(g)(ii) including, without limitation, any defense arising under
usury laws.
Section 3. Purchase Price.
--------------
(a) The amount payable to the Seller for the Initial Contracts and
other related Transferred Assets on the Effective Date shall be an amount equal
to ninety-seven percent (97%) of the aggregate Principal Balance of the Initial
Contracts as of the applicable Cut-Off Date therefor (the "Initial Purchase
Price").
(b) The amount payable to the Seller by Company on each Contract Grant
Date subsequent to the Effective Date in connection with any Purchase of
Subsequent Contracts hereunder (the "Subsequent Purchase Price") shall be an
amount equal to ninety-seven percent (97%) of the aggregate Principal Balance of
the Subsequent Contracts as of the applicable Cut-Off Date therefor.
(c) 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 Contracts as of the
Cut-Off Date therefor and (y) the Purchase Price paid by the Company therefor,
shall be a capital contribution by Seller in accordance with Section 351 of the
IRC.
Section 4. Payment of Purchase Price.
-------------------------
(a) Effective Date. Payment for and delivery of the Initial Contracts
--------------
being purchased by the Company shall take place on the Effective Date, at such
time and place as shall be mutually agreed upon among the parties hereto.
Payment of the portion of the Initial Purchase Price to be paid in cash pursuant
hereto, shall be made by the Company on the Effective 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 Effective
Date.
(b) Contract Grant Dates. Payment for and delivery of the Subsequent
---------------------
Contracts to be purchased by the Company on a Contract Grant Date subsequent to
the Effective Date shall be made at such time and place and to such accounts and
such banks as the parties may mutually agree.
<PAGE>
(c) Manner of Payment of Purchase Price.
-----------------------------------
(i) Initial Purchase Price. On the Initial Closing Date, the
------------------------
Initial Purchase Price shall be paid to Seller in the manner provided below:
(A) in cash, in an amount equal to the difference of
(x) the aggregate Principal Balance of EagleFunding Loans being made on
the Effective Date, minus (y) transaction fees and expenses, if any,
payable by the Seller to the Company;
(B) to the extent that the Initial Purchase Price
exceeds the sum of the amount of the cash payment in Section 4(c)(i)(A)
------------------
above plus the amount of transaction fees and expenses referred to in
Section 4(c)(i)(A), such excess shall be paid, on the Effective Date,
------------------
by means of the Subordinated Note so that such Subordinated Note is
equal to the Subordinated Interest on the Effective Date.
(ii) Subsequent Purchase Price. On each Contract Grant Date
---------------------------
subsequent to the Effective Date, the Subsequent Purchase Price shall be paid to
Seller in the manner provided below:
(A) in cash, an amount equal to the difference of (x)
the aggregate Principal Balance of EagleFunding Loans being made on the
Contract Grant Date, minus (y) transaction fees and expenses, if any,
-----
payable by the Seller to the Company; and
(B) to the extent that the Subsequent Purchase Price
paid on any Subsequent Grant Date exceeds the sum of the amount of the
cash payment in Section 4(c)(ii)(A) above plus the amount of
---------------------
transaction fees and expenses referred to in Section 4(c)(ii)(A), such
-------------------
excess shall be paid, on the Contract Grant Date, by means of an
increase in the principal balance of the Subordinated Note so that such
Subordinated Note is equal to the Subordinated Interest on the Contract
Grant Date.
(e) 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
on the Effective Date or Contract Grant Date, as applicable, the Company shall
reimburse Seller for an amount equal to all accrued and paid interest on each
Contract at the Contract Rate through, and including, the Effective Date or
Contract Grant Date, as applicable. 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 Contract Grant 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
<PAGE>
amount of funds received with respect to the Initial Contracts or Subsequent
Contracts, as applicable, between the Cut-Off Date therefor and the applicable
Contract Grant Date.
Section 5. Conditions to Sale of Contracts.
-------------------------------
(a) Effective Date. The Company's obligations hereunder to purchase and
--------------
pay for the Initial Contracts and other Transferred Assets relating thereto on
the Effective Date are subject to the fulfillment of the following conditions on
or before such Effective Date:
(i) The Company shall have received (a) the Credit Agreement executed
by all the parties thereto and (b) all conditions to lending set forth in
Section 3.01 and 3.02 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, and a certificate to such
effect delivered by the Company pursuant to the Credit Agreement shall be
conclusive for purposes of this Agreement;
(ii) The representations and warranties of the Seller, FCI, FMB and the
VB Subsidiaries made herein and the Seller as Servicer under the Credit
Agreement shall be true and correct in all material respects on the Effective
Date.
(b) Subsequent Purchases. The Company's purchase of any Subsequent
---------------------
Contracts on any Contract Grant Date subsequent to the Effective Date is subject
to the fulfillment of the following conditions on or before such 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 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 Contract Grant Date.
(c) Form of Assignment. In connection with each sale and purchase of
-------------------
Contracts and related Transferred Assets hereunder, Seller shall execute an
assignment substantially in the form of Exhibit "A" hereto and deliver the same
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 transfer, pledge and
Grant all of its right, title and interest in, to and under the Contracts,
Transferred Assets and related property, which
<PAGE>
constitute the property conveyed or to be conveyed to it by the Seller to the
Collateral Agent for the benefit of EagleFunding pursuant to the Collateral
Agency Agreement. All Contracts conveyed or to be conveyed to the Company
hereunder 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 Contracts and related 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, FCI, FMB and the VB
-------------------------------------------------------------------
Subsidiaries.
- ------------
(a) General Representations and Warranties of Seller, FCI, FMB and the
-------------------------------------------------------------------
VB Subsidiaries. Seller, FCI, FMB and the VB Subsidiaries jointly and severally
- ---------------
represent and warrant to the Company as follows:
(i) Organization and Good Standing. (A) Seller, FCI, FMB and the VB
-------------------------------
Subsidiaries (other than the VB Partnerships) are corporations duly organized,
validly existing and in good standing under the laws of the state of their
organization 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, FCI, FMB and the VB Subsidiaries (other than the VB
Partnerships) 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, FCI, FMB or the VB
Subsidiaries (other than the VB Partnerships), or would have a Material Adverse
Effect.
(B) The VB Partnerships are general partnerships duly
organized and validly existing under the laws of the State of Florida and have
full 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
<PAGE>
Facility Documents to which they are a party. The VB Partnerships are duly
qualified to do business and are in good standing 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 VB Partnerships or would have a Material Adverse Effect.
(ii) Due Authorization and No Conflict. The execution, delivery and
-----------------------------------
performance by Seller, FCI, FMB and the VB Subsidiaries 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, FCI, FMB and the VB Subsidiaries by all necessary
corporate (or in the case of the VB Partnerships, partnership) action, do not
contravene (i) Seller's, FCI's, FMB's or the VB Subsidiaries' charter or by-laws
(or in the case of the VB Partnerships, partnership agreements), (ii) any law,
rule or regulation applicable to Seller, FCI or FMB or the VB Subsidiaries,
(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, FCI, FMB, the VB
Subsidiaries or their properties or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting Seller, FCI, FMB or their
properties (except where such contravention would not have a Material Adverse
Effect, 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, FCI, FMB or the VB Subsidiaries is a party
have been duly executed and delivered on behalf of Seller, FCI, FMB and the VB
Subsidiaries.
(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, FCI, FMB or the VB
Subsidiaries 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.
(iv) Enforceability of Facility Documents. Each of the Facility
---------------------------------------
Documents to which the Seller, FCI, FMB or the VB Subsidiaries is a party have
been duly and validly executed and delivered by the Seller, FCI, FMB or the VB
Subsidiaries and constitute the legal, valid and binding obligation of Seller,
FCI, FMB or the VB Subsidiaries, 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
<PAGE>
principles of equity (whether considered in a suit at law or in equity).
(v) No Litigation. Except as otherwise disclosed on FCI's annual report
-------------
on Form 10-K for the year ended December 31, 1996 and Forms 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
(collectively the "Base Reports"), which Base Reports shall have been delivered
to the Company, Collateral Agent, Deal Agent and EagleFunding prior to the
Effective Date, or except as otherwise set forth on Schedule 4.01(e) to the
Credit Agreement, there are no proceedings or investigations pending or, to the
best knowledge of Seller, FCI or FMB, threatened against the Seller, FCI, FMB or
the VB Subsidiaries 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, FCI, FMB or the VB
Subsidiaries 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 have a Material Adverse Effect;
provided, however, that in the event the Company, Collateral Agent, Deal Agent
or EagleFunding shall receive a report dated subsequent to the date of the Base
Reports, which report shall disclose the existence of, and accurately describe,
one or more proceedings or investigations which are not disclosed in the Base
Reports, and neither the Company, Collateral Agent, Deal Agent, nor EagleFunding
shall not identify in writing to the Seller, FCI, FMB or the VB Subsidiaries
within 90 days of the receipt of such report, one or more of the proceedings or
investigations described in such report as constituting a proceeding or
investigation of a type described in one or more of clauses (A) through (E)
above, the existence of each such proceeding or investigation not so identified
to Seller, FCI, FMB or the VB Subsidiaries shall be deemed not to constitute a
breach of the representation and warranty of this subsection (v).
(vi) Accuracy of Information. All certificates, reports, financial
------------------------
statements and any other written information furnished by or on behalf of the
Seller, FCI, FMB or the VB Subsidiaries to the Company, Collateral Agent, Deal
Agent or EagleFunding, 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 any other written
information hereafter furnished by Seller, FCI, FMB or the VB Subsidiaries 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
<PAGE>
state any material facts or any facts necessary to make the statements contained
therein not materially misleading.
(vii) Governmental Regulations. Neither Seller, FCI, FMB nor any of the
------------------------
VB Subsidiaries, 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 Seller, FCI, FMB, nor any of the VB
------------------
Subsidiaries 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 any of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as in effect from time to time). No part of the proceeds of any of the
EagleFunding 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 any of Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
(ix) Location of Chief Executive Office and Records. The principal
------------------------------------------------
place of business and chief executive office of Seller FCI and FMB, and the
office where Seller, FCI and FMB maintain all of their Records, is located at
11001 Executive Center Drive, Little Rock, Arkansas 72211 and the principal
place of business and chief executive office of each of the VB Subsidiaries is
located at 6400 North Andrews Avenue, Fort Lauderdale, Florida 33309 (provided
--------
that, at any time after the Closing Date, upon 30 days' prior written notice to
Collateral Agent, any of the Seller, FCI, FMB, and the VB Subsidiaries may
relocate its principal place of business and chief executive office, and/or the
office where Seller, FCI, FMB or such VB Subsidiary maintains all of its
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, FCI, FMB and the VB Subsidiaries).
(x) Lock-Box Accounts. Except in the case of any Lock-Box Account
------------------
pursuant to which only 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
<PAGE>
of contact persons of all the Lock-Box Banks maintaining such Lock-Box Accounts
and the related Post Office Boxes, are specified in Exhibit F to the Credit
---------
Agreement. From and after the Closing Date, neither FCI, FMB, nor the VB
Subsidiaries 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 their own names for the collection of Payments in respect of
Contracts. Neither the Seller, FCI, FMB, nor any of the VB Subsidiaries has any
other lock-box accounts for the collection of Payments in respect of Contracts,
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, FCI, FMB and the VB Subsidiaries have
furnished to each of the Company, Collateral Agent, Deal Agent, and
EagleFunding, true, correct and complete copies of each Facility Document to
which any of the Seller, FCI, FMB and the VB Subsidiaries are parties, each of
which is in full force and effect. Neither Seller, FCI, FMB, any of the VB
Subsidiaries, 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 any of the Seller, FCI, FMB or the VB Subsidiaries
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 Seller, FCI, FMB and the VB Subsidiaries, 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. Each of Seller, FCI, FMB and the VB Subsidiaries 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, FCI,
FMB and the VB Subsidiaries 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 Seller, FCI, FMB and the VB Subsidiaries both
--------
prior to and after giving effect to each Purchase of Contracts hereunder (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.
<PAGE>
(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) ERISA. There has been no (i) occurrence or expected occurrence of
-----
any Reportable Event with respect to any Plan of FCI, FMB, Seller or any ERISA
Affiliate, or any withdrawal from, or the termination, Reorganization or Plan
Insolvency of any Multiemployer Plan or (ii) institution of proceedings or the
taking of any other action by PBGC or FCI, FMB, Seller or any ERISA Affiliates
or any such Multiemployer Plan with respect to the withdrawal from or the
termination, Reorganization or Plan Insolvency of, any such Plan.
(xvii) No Adverse Selection. No selection procedures adverse to the
---------------------
Company, EagleFunding, the Collateral Agent or the Deal Agent have been employed
by any of Seller, FCI, FMB or the VB Subsidiaries in selecting the Contracts (i)
for inclusion in the Contract Pool on any Contract Grant Date, (ii) intended to
be released from the Primary Lien under Section 7.11(c), or (iii) to be granted
to the Collateral Agent pursuant to Section 7.12 as "Remarketed Contracts."
(xviii) FairShare Program. (a) On any date of determination, for each
-----------------
VOI Regime for which the constituent VOIs are comprised primarily of UDIs, the
ratio of (a) the total number of Points actually allocated to a VOI Regime
pursuant to the FairShare Plus Program at such time for the next succeeding
twelve month period, divided by (b) the total number of Points which are
-----------
allocable to occupiable space in such VOI regime over such twelve month period
does not exceed a ratio of 1.0 to 1.0.
(b) On any date of determination, for each owner of a UDI who is a
member of the FairShare Plus Program, the ratio of (a) the number of Points
allocated to such owner in a VOI Regime in return for assigning his VOI to the
FairShare Plus Program trust divided by (b) the total number of Points assigned
----------
to all UDI owners in such VOI Regime does not exceed the percentage of such
owner's undivided interest in such VOI Regime as described in such owner's
Contract.
The representations and warranties of Seller, FCI, FMB and the VB
Subsidiaries set forth in this Section 7(a) shall be deemed to be remade,
-------------
without further act by any Person, on and as of the Effective Date, and each
Contract Grant Date. The representations and warranties set forth in this
Section 7(a) shall survive the transfer and assignment of the Contracts to the
- -----------
Company.
(b) Representations and Warranties Regarding the Contracts. Seller and
------------------------------------------------------
FCI jointly and severally represent and warrant to the
<PAGE>
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 Deal Agent, other than (i) extensions which are Permitted Deferrals, (ii)
modifications, 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, and (iii) 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, FMB or one of
-----------
the VB Subsidiaries, as applicable, in the ordinary course of their businesses
and was purchased by (i) FCI from FMB or a VB Subsidiary (if such Contract was
not originated by FCI) or (ii) Seller from FCI in each case in the regular
course of their businesses pursuant to the Operating Agreement in transactions
constituting "true sales".
(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
<PAGE>
building laws and regulations and any other laws and regulations relating to the
use and occupancy of such VOI Regime; except where such noncompliance would not
have a Material Adverse Effect. Except as disclosed in the Base Reports, none of
the Seller, FCI, FMB or the VB Subsidiaries has received notice of any material
violation of any legal requirements applicable to such VOI Regime; except where
such noncompliance would not have a Material Adverse Effect. The VOI Regime
related to such Contract complies with all applicable state statutes including,
without limitation, condominium statutes, timeshare 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 and timeshare regime under the laws of the
State where the related Development is located; except where such noncompliance
would not have a Material Adverse Effect.
(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 Primary Lien). The Seller
has not sold, assigned or pledged such Contract to any Person other than the
Collateral Agent and the Company. 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 (or a Subsidiary thereof)
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
(or a Subsidiary thereof) 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 the Collateral Agent and the
Company, and the Seller's right, title and interest therein is free of any Liens
(other than the Primary Lien).
(xiii) No Defaults. As of the relevant Cut-Off Date, there is no
------------
default, breach, violation or event permitting acceleration
<PAGE>
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 (after
giving effect to Permitted Deferrals). None of Seller, FCI, FMB or the VB
Subsidiaries 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 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) Original Contracts. All original executed copies of such Contracts
------------------
are in the custody of the Custodian, except to the extent otherwise permitted
pursuant to Section 4.02(x) of the Credit Agreement.
(xvi) Minimum Downpayment. Such Contract had a minimum Equity
---------------------
Percentage of 10% (or in the case of Contracts the down payment for which was
financed, 15%) 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 and downpayments under such Contract
financed over a period not exceeding six months from the date of origination of
such Contract which have actually been paid within such six month period).
(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, (as such Exhibit D may be amended from time to time with the consent
of the Collateral Agent in the exercise of its reasonable discretion in
connection with the Purchase of Contracts on Contract Grant Dates originated at
a Development with respect to which the Contract forms relating thereto have not
been previously been approved by Collateral Agent and previously included on
said 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 or before the relevant Contract Grant Date,
delivered to the Collateral Agent an Opinion of Counsel regarding the
enforceability of the form or forms of Contract used in such jurisdiction and
such other matters as either such recipient shall reasonably request, and such
Contract is substantially in the form of one of the forms of Contracts attached
as an exhibit to such opinion.
(xviii) 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.
<PAGE>
(xvix) Reserved.
--------
(xx) 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.
(xxi) 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(t) 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(t) 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
<PAGE>
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(t) to the
----------------
Credit Agreement will have a Material Adverse Effect, a material adverse effect
on the interests of EagleFunding or the Collateral Agent in the Collateral or an
adverse effect on EagleFunding, the Collateral Agent or the Deal Agent.
(xxii) 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. There are no delinquent tax liens in respect of the VOI
or Lot underlying such Contract.
(xxiii) Reserved.
(xxiv) Contract Files. The related Contract File contains the documents
--------------
required by Section 4.02(v) of the Credit Agreement.
(xxv) 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 Effective Date or any 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 H 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.
<PAGE>
(xxvi) Ground Leases. In the case of any Contract relating to a VOI or
-------------
Lot located in Pagosa Mountain Meadows VOI Regime at the Pagosa Development in
Archuleta County, Colorado, (i) the ground lease 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
ground lease has been fully paid through the date on which this representation
is made (or remade, as the case may be).
(xxvii) Ownership Interest. On or after the relevant Contract Grant
-------------------
Date, the Company shall have a legal, valid and perfected ownership interest in,
and good and marketable title to, the Contract, which interest in and title to
the Contract is free and clear of all liens (other than the Primary Lien).
All of 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 each Cut-Off Date with respect to each Contract Purchased
by the Company on and as of the Effective Date and each Contract Grant Date. In
addition, each of the representations and warranties of Seller and FCI set forth
in the following subsections of this Section 7(b) 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), (m), (o),
(q), (r), (t), (u), (v) and (w) thereof), (iii), (iv), (v), (viii), (ix), (x),
(xii), (xiv), (xv), (xxi), (xxii), (xxiv), (xxv), (xxvi) and (xxvii). All of the
representations and warranties set forth in this Section 7(b) shall survive the
-----------
Purchase of the respective Contracts by the Company.
(c) 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 Effective Date and each
----------
Contract Grant Date, the Custodian will have possession of each original
Contract and the related Contract File being sold to Company on said date, 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
-------- -------
any of the Contracts not required to be in its respective Contract File pursuant
to Section 4.02(v) of the Credit Agreement is not in the possession of the
Custodian in its respective Contract File does not constitute a breach of this
representation).
(ii) Marking Records. On or before each Contract Grant Date, 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
<PAGE>
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 Collateral
Agency Agreement, dated as of January 15, 1998, by and among
BankBoston, N.A. and the secured parties thereto. A first priority
security interest herein is held by BankBoston, N.A. as Collateral
Agent for each of the secured parties under the Collateral Agency
Agreement.
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
- ------------
on and as of the Effective Date, and each Contract Grant 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(c) shall survive the
-----------
transfer and assignment of the respective Contracts to the Company.
(d) 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 Collateral Agent and shall inure to the benefit of the Company, the
Collateral Agent and EagleFunding and their respective designees, successors
and assigns.
(e) 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
Contracts and related 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(e), or Section 12(j) hereof, the Seller
----------- -------------
<PAGE>
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, expenses 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 the representations and warranties contained in this
Agreement. The agreements in this clause (e) 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 (e), 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, at the Repurchase Price defined immediately below,
any Contract sold by Seller to the Company 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 or the
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 the Business Day next preceding the relevant Notice Settlement Date,
cash in an amount sufficient to cure such deficiency or discrepancy. For
purposes of this Section 8(a) the term "Repurchase Price" shall mean an amount
equal to the product of (x) a factor of .97 multiplied by (y) the remaining
--------------
Principal Balance outstanding on such Contract as of the opening of business on
the latest Determination Date to occur prior to the Settlement Date on which the
repurchase is to be effected hereunder, together with accrued and unpaid
interest thereon at the Contract Rate from
<PAGE>
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 Settlement Date on which
such repurchase is made. 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(b) hereof. 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(b): 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, deposit or otherwise caused to be retained 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, 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(e), 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(b) and (c) available
---------------------
hereunder to the Company; provided, however, that this provision shall not limit
-----------------
in any way rights of the Company against any other Person.
<PAGE>
(d) FCI hereby irrevocably and unconditionally guarantees to the
Company, the Collateral Agent, the Deal Agent and EagleFunding the due and
punctual performance by Seller of all of its repurchase obligations set forth in
this Section 8. Such guaranty by FCI shall be on identical terms as FCI's
guaranty of Seller's servicing obligations as set forth in Section 9.14(b) of
the Credit Agreement.
Section 9. Covenants of Seller and FCI.
---------------------------
(a) Affirmative Covenants of Seller and FCI. At any time prior to the
----------------------------------------
Collection Date, 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
have a Material Adverse Effect.
(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:
(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.
<PAGE>
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
addresses 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
(other than the Primary Lien and in the case of any VOIs of Lots, any Permitted
Encumbrance thereon) 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
<PAGE>
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 on the Effective 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(n)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.
--------------------------
(A) 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 each of
the POA's for each Development, to (A) maintain one or more policies of
"all-risk" property and general 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
<PAGE>
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 respective Declaration (or
any similar charter document) relating to each VOI Regime.
(B) 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.
(xii) Separate Identity. Take such action (and cause FMB and the VB
------------------
Subsidiaries to take such action) as is necessary to ensure compliance with
Section 5.01(o) 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, 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, 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 any Contract Grant Date, and
promptly notify the Company and Deal Agent of any such amendments.
<PAGE>
(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 as required by the Credit Agreement) (provided that this
--------
Covenant shall not have been breached to the extent that items other than
Collections, 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 any of the Lock-Box Accounts), 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. At any time prior to the
---------------------------------------
Collection Date, Seller and FCI each covenants and agrees that it shall not,
without the prior written consent of the Company and the Collateral Agent and
Deal Agent:
(i) Sales, Liens, Etc. Against Receivables and Related Security. Except
-----------------------------------------------------------
for the releases contemplated under Section 7.11 and 7.12 of the Credit
------------------------
Agreement, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist, any Lien (other than the Primary Lien and with
respect to VOIs and Lots relating to Contracts, any Permitted Encumbrances
thereon) 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, and (iii) 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. (A) Make any
------------------------------------------------------
change in the character of its business, or (B) make any change in the Credit
Standards and Collection Policies or deviate
<PAGE>
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 E to the Credit Agreement
---------
or make any change in its instructions to Obligors regarding payments to be made
to any Lock-Box Account at a Lock-Box Bank, unless the Company and Deal Agent
shall have received (i) 30 days' prior written notice of such addition,
termination or change, (ii) written confirmation from the Seller or FCI that
after the effectiveness of any such termination, there shall be at least one (1)
Lock-Box Account in existence and (iii) 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, the
Collateral Agent and the Deal 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, fictitious names, assumed names or doing business names which existed on
the Effective Date without providing at least 30-days prior written notice to
the Company and the Deal 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 a
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.
- -----------
<PAGE>
(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 Primary Lien pursuant to
Section 7.11 of the Credit Agreement 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 Plus 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
FairShare Plus 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 Deal Agent an Opinion of
Counsel in form and substance acceptable to the Deal Agent to the effect that
such amendment or modification will not adversely affect in any material respect
the respective interests of EagleFunding, the Collateral Agent or the Deal
Agent.
(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 Effective Date, Company shall execute the Subordinated Note
substantially in the form of Exhibit "E" (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.
<PAGE>
(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
Deal 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 Deal Agent and Collateral Agent are irrevocably authorized and
empowered (in their 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
may be required to (i) collect the Subordinated Note for the account of
EagleFunding and to file appropriate claims or proofs of claim in respect of the
Subordinated Note, (ii) collect and receive any and all payments or distribution
which may be payable or deliverable upon or with respect to the Subordinated
Note. Seller shall execute and deliver to the Deal Agent and Collateral Agent
such powers of attorney, assignments or other instruments as the Deal Agent and
Collateral Agent may request in order to enable the Deal Agent or Collateral
Agent to enforce any and all claims with respect to, and any security interests
and other liens securing payment of, 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 the Deal
Agent and EagleFunding and shall be
<PAGE>
segregated from other funds and property held by Seller and shall be forthwith
paid over to the Deal 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 EagleFunding 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 Deal
Agent or 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 neither the Deal Agent nor
Collateral Agent shall have any duty whatsoever to the Seller as holder of the
Subordinated Note and that such Deal Agent and 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
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, except as permitted by the Credit Agreement.
(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 EagleFunding Loans pursuant to the Credit Agreement, and any other
Obligation, any extensions granted by EagleFunding, the Deal Agent, or
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
EagleFunding, the Deal Agent, Collateral Agent or the Liquidity Collateral 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
EagleFunding, the Collateral Agent, the Deal Agent and the Liquidity Collateral
Agent such additional documents and to take such further actions as
EagleFunding, the Collateral Agent, the Deal Agent and the Liquidity Collateral
Agent may hereafter
<PAGE>
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 EagleFunding, the Collateral Agent, the Deal Agent and
the Liquidity 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 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 any
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 to the
Collateral Agent for the benefit of the FAC Lenders and the FAC Agent and the
FCI Lenders and the FCI Agent or otherwise pledge or transfer the Subordinated
Note to a third party with the prior written consent of Deal 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 as of the Effective Date and each
Contract Grant Date, 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;
<PAGE>
(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; provided, however, that no such
------------------
amendment, waiver or modification shall be effective without the prior written
consent of the Deal Agent.
<PAGE>
(b) Software. (i) Subject to paragraph (b)(ii) below, FCI and each
Originator hereby grants a royalty free perpetual, irrevocable non-exclusive
license to Seller and the Company (which for all purposes of this License shall
include, without limitation, any secured party which enforces its rights against
Seller or the Company or any transferee of any such secured party which acquires
rights in connection with or subsequent to such enforcement), in, to and under
all rights of FCI and each Originator in or to all intellectual property
(including, without limitation, all computer software, tapes, disks and other
electronic media, books, records and documents) relating to the Contracts;
including, without limitation, any such software, electronic media, books,
records and documents used:
(A) to account for and service the Transferred Assets;
(B) in the management of any VOI resorts, and
the VOIs and Lots located within such VOI
resorts,
(C) in the monitoring of accounts receivables
and third party contracts relating to the
management of properties located within any
VOI resort, and
(D) in managing and operating the FairShare Plus
Program and the Reservation System;
and al rights of FCI in, to or under all relevant licenses, sublicenses, leases,
contracts (including, without limitation, service and maintenance contracts),
warranties and guaranties relating to any such software, electronic media,
books, records and documents, as the case may be, including without limitation,
all such rights arising under such software, electronic media, books, records
and documents (all of the rights described in this clause (i) being referred to
collectively referred to as the "Licensed Rights"). Each of Seller and the
Company shall have the right to use all of the Licensed Rights in connection
with the conduct of their respective business as each deems necessary or
appropriate, including without limitation the right to use such Licensed Rights
for the purposes specified in clauses b(i)(A)-(D) immediately above and the
right to assign, sublicense or otherwise transfer all or any part of such rights
to one or more third parties in connection with the transfer of all or any part
of the Transferred Assets (including, without limitation, any such transfer
pursuant to or in connection with the grant by Seller and/or the Company of a
security interest in any or all of its assets and/or the enforcement by any such
secured party of its interests in such assets).
(ii) The license granted to Seller and Company pursuant to clauses
(b)(i)(B)-(D) immediately above, shall only be deemed to confer upon Seller and
Company, and their respective successors and assigns, the sole right to
sub-license the use of such software,
<PAGE>
electronic media, books, records and documents (at no charge, except for
reimbursement of administrative, legal and other expenses associated with such
sub-license) to (A) FCI (as long as FCI or any of its subsidiaries is manager of
the subject POA) or the subject POA (in the event FCI or any of its subsidiaries
is not the manager of such POA) in the case of clauses (b)(i)(B)-(C) above or
(B) FCI (or if applicable any successor to FCI) under the FairShare Plus Program
in the case of clause (b)(i)(D) above; provided that, no such sub-license shall
be effective unless and until each of the following events have occurred: (x) an
Event of Default has occurred and is continuing under the Credit Agreement and
(y) FCI is unable to continue, or has been removed, as manager of the subject
POA or the FairShare Plus Program, such removal occurring other than as a result
of action instigated (whether by institution of a proxy contest or otherwise) by
the Company or its successors and assigns, including Collateral Agent.
(iii) All rights and licenses granted under or pursuant to this clause
(b) (the "License") are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the United States Bankruptcy Code (the "Code"), licenses to
rights in and to "intellectual property" as defined under the Code. The parties
hereto agree that each of the Seller and the Company, as licensee of such rights
under the License, shall have and retain and may fully exercise and exploit all
of their respective rights under the Code. The parties hereto further agree
that, in the event of the commencement of bankruptcy proceedings by or against
FCI under the Code, each of Seller and Company, as licensees, shall be entitled
to have and retain all of its rights under the License.
(iv) In an Event of Default has occurred and is continuing under the
Credit Agreement, FCI hereby agrees to provide to any of the persons or entities
described in clauses b(ii)(A) and (B) immediately above, and each of their
successors and assigns, immediately upon the written request of Seller or
Company, copies of all software (including without limitation both object code
and source code), tapes disks, other electronic media, books, records, documents
and other tangible embodiments of the Licensed Rights.
(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, but only to the
extent allowed by the Credit Agreement, Collateral Agent, Deal Agent or
EagleFunding has the right to assign its interest hereunder without the written
consent of either Seller or FCI, and the assignee shall succeed to the rights
hereunder of Collateral Agent, Deal Agent or EagleFunding.
(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.
<PAGE>
(e) Termination. Seller's and FCI's obligations under this Agreement
-----------
shall survive the sale of the Contracts to the Company, the Company's pledge of
the Contracts to the Collateral Agent under the Credit Agreement, and
EagleFunding's pledge and assignment under the Liquidity Security Agreement to
the Liquidity Collateral Agent and such obligations shall not terminate until
the satisfaction and payment of all Obligations under the Credit Agreement.
(f) Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Nevada 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, 11001 Executive Center Drive,
Little Rock, Arkansas 72211, 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, FMB and VB Subsidiaries, c/o Fairfield Communities, Inc., 11001
Executive Center Drive, Little Rock, Arkansas 72211, 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 Receivables
Corporation, Suite 1000, 5851 W. Charleston Blvd., Las Vegas, Nevada 89102,
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
100 Federal Street, Boston, MA 02110, Attention: Amy Roberts, 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 Deal Agent,
EagleFunding and the Liquidity Collateral 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
<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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 MYRTLE BEACH, INC.
By:/s/Robert W. Howeth
Its: Vice President
SEA GARDENS BEACH AND
TENNIS RESORT, INC.
By:/s/Robert W. Howeth
Its: Vice President
VACATION BREAK RESORTS, INC.
By:/s/Robert W. Howeth
Its: Vice President
VACATION BREAK RESORTS AT
STAR ISLAND, INC.
BY:/s/Robert W. Howeth
Its: Vice President
<PAGE>
PALM VACATION GROUP, by its
its General Partners:
Vacation Break Resorts at Palm
Aire, Inc.
By:/s/Robert W. Howeth
Its: Vice President
Palm Resort Group, Inc.
By:/s/Robert W. Howeth
Its: Vice President
OCEAN RANCH VACATION GROUP,
by its General Partners:
Vacation Break at Ocean Ranch, Inc.
By:/s/Robert W. Howeth
Its: Vice President
Ocean Ranch Development, Inc.
By:/s/Robert W. Howeth
Its: Vice President
FAIRFIELD RECEIVABLES CORPORATION
By:/s/Gordon W. Stewart
Its: President
FOURTH AMENDED AND RESTATED OPERATING AGREEMENT
-----------------------------------------------
THIS FOURTH AMENDED AND RESTATED OPERATING AGREEMENT ("Agreement") is
made and entered into as of January 15, 1998, by and between FAIRFIELD
COMMUNITIES, INC.("FCI"), a Delaware corporation, FAIRFIELD MYRTLE BEACH, INC.,
a Delaware corporation ("FMB"), SEA GARDENS BEACH AND TENNIS RESORT, INC., a
Florida corporation ("Sea Gardens"), VACATION BREAK RESORTS, INC., a Florida
corporation ("VBR"), VACATION BREAK RESORTS AT STAR ISLAND, INC., a Florida
corporation ("VBRS"), PALM VACATION GROUP, a Florida general partnership
("PVG"), OCEAN RANCH VACATION GROUP, a Florida general partnership("ORVG")(each
of Sea Gardens, VBR, VBRS, PVG and ORVG are hereinafter collectively referred
to as the "VB Subsidiaries"), and each of FCI, FMB and the VB Subsidiaries are
hereinafter referred to as "Originators") and FAIRFIELD ACCEPTANCE CORPORATION
("FAC"), a Delaware corporation and wholly owned subsidiary of FCI.
W I T N E S S E T H :
WHEREAS, each Originator is now and will become in the future the owner
of numerous receivables arising out of its sales of houses, condominiums,
townhouses, subdivided lots and timeshare intervals in the normal course of its
business;
WHEREAS, each of FMB and the VB Subsidiaries desire to sell, and FCI
desires to purchase from time to time, receivables generated by FMB and the VB
Subsidiaries;
WHEREAS, FCI desires to sell, and FAC desires to purchase from time to
time, receivables generated by FCI or purchased from the other Originators;
WHEREAS, FAC or its subsidiaries from time to time sell or pledge
receivables pursuant to certain Securitizations (as defined below);
WHEREAS, FAC desires to appoint FCI as its agent to bill, collect,
administer and service all such receivables owned by FAC or otherwise
administered and serviced by FAC pursuant to Securitizations; and
WHEREAS, FCI and FAC desire to enter into this Agreement in amendment
and restatement of, and in substitution for, that certain Third Amended and
Restated Operating Agreement dated as of December 9, 1994, executed by and
between FCI and FAC and to add each Originator other than FCI as a Party to this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
<PAGE>
1. Definitions. For the purposes of this Agreement, the
-----------
following definitions are used:
A. "Assigned Base Contract" means any Base Contract (and
related Transferred Assets) which, as of any date, FCI sells to FAC,
including any Base Contract subsequently pledged or sold by FAC, or its
subsidiaries, pursuant to a Securitization.
(b) "Base Contract" has the meaning set forth in the FAC Credit
Agreement.
(c) "Base Contract Completion" means full performance by an
Originator of all of its duties and obligations to the Obligor under a
Base Contract, including, but not limited to, completion of
improvements or amenities relating to the subject Properties and
delivery of certain services.
(d) "Business Day" means any day on which banking institutions
in Boston, Massachusetts are open for the transaction of banking
business.
(e) "Collections" has the meaning set forth in the FCI
Security Agreement.
(f) "Contract File" has the meaning set forth in the FCI
Security Agreement.
(g) "Contract Settlement Date" has the meaning as set forth in
the FAC Credit Agreement.
(h) "Document of Sale" means one of the following agreements:
(A) with respect to Base Contracts (and related
Transferred Assets) sold to FCI by an Originator other than
FCI from time to time, the Sale and Assignment of Contracts
and Assignment of Mortgages executed by each such Originator,
as assignor, in favor of FCI, as assignee, which shall be in
substantially the form of "Exhibit A" attached hereto;
---------
(B) with respect to Base Contracts (and related
Transferred Assets) sold to FAC by FCI from time to time
pursuant to Section 2(a) hereof, the Sale and Assignment of
Contracts and Assignment of Mortgages executed by FCI, as
assignor, in favor of FAC, as assignee, which shall be in
substantially the form of "Exhibit B" attached hereto;
---------
<PAGE>
(C) with respect to Base Contracts (and related
Transferred Assets) sold to FCI by FAC from time to time
pursuant to Section 2(g) hereof or repurchased by FCI from FAC
pursuant to Section 4 hereof, the Sale and Assignment of
Contracts and Assignment of Mortgages executed by FAC, as
assignor, in favor of FCI, as assignee, which shall be in
substantially the form of "Exhibit C" attached hereto;
---------
(i) "Effective Date" shall mean the effective date of this
Agreement, as stated above.
(j) "Fairshare Plus Program" has the meaning set forth in the
FCI Security Agreement.
(k) "FCI Credit Agreement" means that certain Amended and
Restated Revolving Credit Agreement, dated as of January 15, 1998,
executed by and among FCI and BankBoston, N.A., individually and as
agent for the benefit of itself and the other financial institutions
who now or may become lenders thereunder, as the same may be amended or
otherwise modified from time to time,
(m) "FCI Security Agreement" means the Amended and Restated
Security Agreement, dated as of January 15, 1998, between FCI and
BankBoston, N.A., as collateral agent.
(l) "FAC Credit Agreement" means that certain Amended and
Restated Revolving Credit Agreement, dated as of January 15, 1998,
executed by and among FAC and BankBoston, N.A., individually and as
agent for the benefit of itself and the other financial institutions
who now are or may become lenders thereunder, as the same may be
amended or otherwise modified from time to time.
(n) "Insurance Policy" has the meaning set forth in the
FCI Security Agreement.
(o) "Lots" has the meaning set forth in the FCI Security
Agreement.
(p) "Mortgage" has the meaning set forth in the FCI Security
Agreement.
(q) "Obligor" means the person or persons obligated to make
payments under a Base Contract.
(r) "Originator" shall have the meaning set forth in the
recitals to this Agreement and shall include any Subsidiary which
hereafter sells Base Contracts to FCI pursuant to this Agreement;
whereupon, and by reason of such sale, such
<PAGE>
Subsidiary shall therefore be deemed to have become a party hereto and
shall become subject to all of the obligations and have all of the
rights of an Originator hereunder with respect to such Base Contracts.
(s) "Payment" has the meaning set forth in the FCI Security
Agreement.
(t) "POA" has the meaning set forth in the FCI Security
Agreement.
(u) "Properties" means houses, condominiums, townhouses,
subdivided lots and fixed or undivided interest timeshare intervals
sold under Base Contracts.
(v) "Records" has the meaning set forth in the FCI Security
Agreement.
(w) "Reservation System" has the meaning set forth in the FCI
Security Agreement.
(x) "Repurchase Default" has the meaning set forth in the FAC
Credit Agreement.
(y) "Security Interests" means any security interests, liens
or other encumbrances on the Assigned Base Contracts in favor of any
third party.
(z) "Securitization(s)" has the meaning set forth in the FAC
Credit Agreement.
(aa) "Subsidiary" means a corporation or partnership more than
fifty percent (50%) of the voting capital stock or voting interests of
which are owned directly or indirectly by FCI, but does not include
FAC.
(bb) "Transferred Assets" has the meaning set forth in Section
2(h) hereof.
(cc) "Title Clearing Agreement" has the meaning set forth in
the FCI Security Agreement.
(dd) "Title Documents" means any deeds, mortgages, deeds of
trust, vendors' liens or other document evidencing liens or
encumbrances on the Properties securing the respective interests of
each Originator, FAC, the Obligors or any third parties.
(ee) "VOIs" has the meaning set forth in the FCI Security
Agreement.
<PAGE>
2. Sale and Ownership of Base Contracts.
------------------------------------
(a) Subject to the terms hereof, Section 8.16 of the FAC
Credit Agreement and Section 9.5.2(ii) of the FCI Credit Agreement, FCI
and FAC hereby agree that FCI may sell to FAC and FAC may purchase, as
hereinafter provided and as provided in the FAC Credit Agreement, all
of FCI's right, title and interest in and to such Base Contracts (and
related Transferred Assets) shall be described in the particular
Document of Sale executed by FCI in connection with each such sale.
(b) Sales of Base Contracts (and related Transferred Assets)
from FCI to FAC under this Agreement shall be accomplished by (i) FAC's
compliance with the requirements of Section 8.16 of the FAC Credit
Agreement and FCI's compliance with Section 9.5.2(ii) of the FCI Credit
Agreement, (ii) in connection with each sale, the delivery to and
acceptance by FAC of a Document of Sale executed by FCI, and (iii) in
connection with each sale, the satisfaction of all other requirements
of this Agreement.
(c) Concurrently with the sale to FAC pursuant to Section 2(a)
hereof of any Base Contract that was originated by an Originator other
than FCI, each such Originator shall execute and deliver to FCI a
Document of Sale which evidences the transfer, sale and assignment of
all of such Originator's right, title and interest in and to such Base
Contract.
(d) Each group of Base Contracts which are sold by FCI to FAC
from time to time shall be of a quality with respect to credit
worthiness of the Obligors and collection experience at least
equivalent to the quality of the aggregate portfolio of the Base
Contracts held by FCI and the other Originators at the time of such
sale. All such purchases by FAC shall be subject to all conditions and
stipulations, and shall otherwise be in compliance with all terms and
provisions, of the FAC Credit Agreement.
(e) FCI shall be obligated to repurchase Assigned Base
Contracts from FAC pursuant to Section 4 of this Agreement.
(f) No Originator shall be obligated to sell, nor shall FAC be
obligated to purchase, any Base Contracts (and related Transferred
Assets) under this Agreement.
(g) Subject to the terms of Sections 8.16(d) and 9.5.2(i) of
the FAC Credit Agreement, FCI and FAC hereby agree that FAC may sell to
FCI, and FCI may purchase all of FAC's right, title and interest in and
to such Base Contracts (and related Transferred Assets) as shall be
described in the
<PAGE>
particular Document of Sale executed by FAC in connection with each
such sale.
(h) Any sale and purchase of a Base Contract between (i) any
Originator other than FCI and FCI and (ii) FCI and FAC, shall be
evidenced by a Document of Sale and shall be deemed to include the
transfer from such parties of all of the applicable assignors' right,
title and interest in (A) such Base Contract, (B) all Payments, other
Collections and other funds received with respect to the such Base
Contracts on or after the effective date of such Document of Sale, (C)
the VOIs and Lots relating to such Base Contracts, and the Title
Clearing Agreements and the FairShare Plus Program insofar as they
relate to such VOIs or Lots, (D) any Mortgages relating to such Base
Contracts, (E) any Insurance Policies relating to such Base Contracts,
and (F) the Contract Files and other Records relating to such Base
Contracts and any interest in or other proceeds from any of the
foregoing, and any security therefor ((a)-(f) being collectively
referred to as the "Transferred Assets").
(i) In the event any Mortgage being transferred in conjunction
with an Assigned Base Contract pursuant to the terms of this Agreement
has not been filed of record in the appropriate county in which the
underlying Property relating to the Base Contract is located, then as a
condition subsequent to the effectiveness of such transfer, either FCI
or the Originator of such Assigned Base Contract, as appropriate, shall
cause such Mortgage to be so filed promptly following the date upon
which the underlying Property is deeded to the Obligor under such Base
Contract.
3. Purchase Price for Base Contracts.
---------------------------------
(a) The purchase price for any Base Contract (and related
Transferred Assets) purchased by FCI from FMB or any VB Subsidiary will
be equal to one hundred percent (100%) of the outstanding principal
balance remaining of such Base Contract at the time of purchase by FCI,
plus all accrued and unpaid interest thereon.
(b) The purchase price for any Base Contract (and related
Transferred Assets) purchased by FAC from FCI will be equal to one
hundred percent (100%) of the outstanding principal balance remaining
of such Base Contract at the time of purchase by FAC, plus all accrued
and unpaid interest thereon.
<PAGE>
4. Obligation to Repurchase
------------------------
In the event an Assigned Base Contract owned by FAC is in Repurchase
Default, FCI shall be obligated to repurchase such Assigned Base Contract as
follows:
(a) following the occurrence of such Repurchase Default, FCI
shall repurchase such Assigned Base Contract from FAC on the earliest
to occur of (i) the first Contract Settlement Date following a request
to so repurchase by FAC or (ii) the first Contract Settlement Date
following a request of the FAC Agent to effect such repurchase after an
Event of Default, by payment of a purchase price in the amount of one
hundred percent 100% of the principal balance remaining unpaid under
such Assigned Base Contract (the repurchase price determined in such
manner being hereinafter referred to as the "Default Repurchase
Price"); and
(b) FCI shall be obligated to repurchase Assigned Base
Contracts in Repurchase Default pursuant to this Section 4 of this
Agreement regardless of whether a Default or Event of Default may have
occurred and be continuing under the FAC Credit Agreement.
5. Documents.
---------
(a) Whenever Base Contracts (and related Transferred Assets)
are sold under this Agreement, the party selling such Base Contracts
(and related Transferred Assets) shall make available to the other
party, at its request and for its inspection and copying, the
following:
(i) Documents, if any, evidencing such Base Contracts
and any Title Documents or releases of Security Interests
relating thereto and any evidence of filing or recording
thereof.
(ii) A listing showing the original amount of the
Base Contracts and the amount remaining unpaid thereon if less
than the face amount.
(iii) Such other financial information then possessed
by the seller of the Base Contracts regarding the Obligors'
financial condition as the purchaser of such Base Contracts
may from time to time request.
(b) Nothing contained in this Agreement shall require any
party hereunder to give, unless otherwise required by applicable law,
notice to any Obligor that a Base Contract has been sold pursuant to
the terms hereof.
<PAGE>
6. Settlement. At the close of each Contract Settlement Date, the
----------
balance due between the parties shall thereupon be settled by payment in cash or
in such other manner as may be agreed upon between the parties. Each transfer at
the time of the settlement on a Contract Settlement Date shall for the purposes
hereof be deemed to have been made as of the end of such Contract Settlement
Date.
7. Representations, Warranties and Covenants. In connection with (i)
------------------------------------------
the sale of Base Contracts (and related Transferred Assets) pursuant to Section
2(a) hereof, FCI hereby represents and warrants to FAC, and (ii) the sale of
Base Contracts (and related Transferred Assets) pursuant to Section 2(a) hereof
that were originated by an Originator other than FCI, each Originator other than
FCI hereby represents and warrants to each of FCI and FAC, as follows:
(a) The figures set forth in each Document of Sale and
settlement statement delivered to FCI or FAC, as applicable, will be
true and correct as of the time made;
(b) At the time of sale of any Base Contracts, such Base
Contracts and Title Documents relating thereto will be valid and
legally enforceable in accordance with their respective terms;
(c) At the time of sale of any Base Contracts, beneficial
ownership in the Base Contracts will not have been conveyed or assigned
by FCI or any other Originator to a third party;
(d) Each Document of Sale executed and delivered to FCI or
FAC, as applicable, hereunder will vest in FCI or FAC, as applicable,
all right, title and interest in and to the Base Contracts and all
related property described by such Document of Sale;
(e) At the time of sale of Base Contracts to FAC, such Base
Contracts will be free and clear of all liens, encumbrances, setoffs,
counterclaims or other rights or defenses except as specifically
provided for under the terms of the Base Contracts, or as permitted by
the FAC Credit Agreement and Title Documents relating to the
Properties, the sale of which gave rise to the Base Contracts;
(f) At the time of sale of Base Contracts to FCI, such Base
Contracts will be free and clear of all liens, encumbrances, setoffs,
counterclaims or other rights and defenses except as specifically
provided for under the terms of the Base Contracts, or as permitted by
the FCI Credit
<PAGE>
Agreement and Title Documents relating to the Properties, the sale of
which gave rise to the Base Contracts;
(g) At the time of sale of any Base Contracts, such Base
Contracts will comply with any and all applicable laws and regulations;
(h) Each Originator, as applicable, shall at all times remain
solely responsible for Base Contract Completion and shall fully perform
its duties and obligations to the Obligors under the Base Contracts
originated by it in accordance with the terms thereof.
8. Services. Until a termination by FAC pursuant to this Section 8(e),
--------
FAC hereby appoints FCI to perform the following services for FAC, and FAC will
reimburse FCI for the reasonable fees and expenses FCI incurs in performing such
services as follows:
(a) To bill and collect all Assigned Base Contracts when due
and with the same diligence and procedures employed by FCI with respect
to its Base Contracts utilizing separate lock boxes for FCI, FAC (or
any FAC Subsidiaries under a Securitization) as soon as practicable. To
the extent payments on the Assigned Base Contracts are mistakenly
applied to reduce FCI's indebtedness under the FCI Credit Agreement,
FCI shall (after making appropriate adjustments for payments on FCI's
Base Contracts mistakenly applied to FAC's indebtedness under the FAC
Credit Agreement) make a settlement and remit all such payments to FAC
(or any FAC Subsidiaries under a Securitization) together with interest
calculated on a daily basis at a rate equivalent to the interest cost
to FAC or its Subsidiaries under the FAC Credit Agreement or
Securitization, as applicable.
(b) To perform such other acts and provide services,
including, without limitation, executive, financial, legal, tax,
accounting and other services as FAC may from time to time reasonably
request and FCI may agree to perform or provide.
(c) Nothing contained in this Agreement shall in any way
restrict FCI at any time from exchanging, renewing, extending or in any
way altering the Assigned Base Contracts being serviced by FCI,
provided that any such exchange, renewal, extension or alteration shall
be consistent with FCI's and FAC's then existing standard credit
policies. Appropriate adjustment shall be made for any such change,
renewal, extension or alteration on the Contract Settlement Date
immediately following the date such action took place.
<PAGE>
(d) FAC shall reimburse FCI for FCI's reasonable fees and
expenses for all services provided by FCI to FAC, provided the amount
of such reimbursement shall not exceed three quarters of one percent
(.75%) per annum of the aggregate outstanding principal balance of all
Assigned Base Contracts, and shall be payable monthly in arrears.
(e) FAC may terminate the services of FCI under this Section 8
upon providing five days prior written notice of such termination to
FCI. Such termination shall not act to terminate any other rights or
obligations of the parties under this Agreement.
9. Indemnification. FCI agrees to indemnify FAC against, and hold FAC
---------------
harmless from, any and all liabilities, losses, damages, costs and expenses
arising out of claims asserted against FAC by any third party relating to (i)
any wrongful or negligent act or omission to act of FCI, in performing any of
the services which FCI shall perform for or furnish to FAC pursuant to the
provisions of this Agreement, (ii) any breaches by FCI or any other Originator
of the representations and warranties in Section 7, and (iii) any failures by
FCI or any other Originator to timely and fully perform all of its covenants to
the Obligors under the Base Contracts, including, but not limited to, those
duties and obligations of an Originator relating to Base Contract Completion;
provided however, FAC shall promptly notify FCI in writing of each such claim
made or suit therein instituted against FAC and the details thereof, and shall
not pay or compromise any such claim or suit without the written approval of
FCI, and FCI shall be permitted to assume and direct the defense of any such
suit by counsel of its own choosing and at its own expense.
10. Records. FAC, FCI and the other Originators mutually agree to:
-------
(a) Safely maintain such documents as may be required for the
collection of Assigned Base Contracts.
(b) Keep such accounts and other records as will enable FAC
and FCI to determine at any time the status of all Assigned Base
Contracts, including whether such Assigned Base Contracts are in
Repurchase Default.
(c) Permit FCI or FAC, as applicable, on reasonable notice at
any time during normal business hours to inspect, audit, check and make
abstracts from accounts, records, correspondence and other papers
pertaining to Assigned Base Contracts.
(d) Deliver to FCI or FAC, as applicable, upon its request and
at its expense, any of said accounts, records,
<PAGE>
correspondence and other papers as the other party may deem reasonably
essential to enable it to enforce its rights, if then being
challenged, with respect to Assigned Base Contracts. The books and
records of each Originator and FAC will be made to reflect the sale of
Base Contracts.
11. Waivers. Each Originator and FAC hereby waive any failure or delay
-------
on the part of the other party in asserting or enforcing any of its rights or
in making any claims or demands hereunder.
12. Termination; Amendment. This Agreement may not be terminated,
----------------------
amended or modified except upon the written consent thereto of each Originator
and FAC, which will not be unreasonably withheld; provided that FCI and FAC
agree not to terminate, amend or modify this Agreement to the extent that such
action would be inconsistent with the termsof the FAC Credit Agreement or any
agreement entered into by FAC in connection with the issuance of securities by
FAC. All of FCI's and FAC's obligations hereunder with respect to the servicing
of Assigned Base Contracts shall otherwise continue in effect after the date of
termination until FAC shall have received payment of the balance remaining to be
paid on all Assigned Base Contracts owned by FAC on the date of termination or
until FCI shall have otherwise repurchased such Assigned Base Contracts pursuant
to the terms hereof, and thereupon this Agreement shall terminate for all
purposes, other than the rights of indemnification provided for herein, which
shall survive the termination of this Agreement.
13. Software.
--------
(a) Subject to paragraph (b) below, FCI and each Originator hereby
grants a royalty free, perpetual, irrevocable, non-exclusive license to FAC and
its successors and assigns which for all purposes of this license shall include,
without limitation, any secured party which enforces its rights against FAC or
any transferee of any such secured party which acquires rights in connection
with or subsequent to such enforcement, in, to and under all rights of FCI and
each Originator in or to all intellectual property (including, without
limitation, computer software, tapes, disks and other electronic media, books,
records and documents) relating to the Assigned Base Contracts; including,
without limitation, all rights of FCI and each Originator in, to or under any
such software, electronic media, books, records and documents used
(i) to account for and service the Assigned Base Contracts
and related Transferred Assets;
(ii) in the management of any VOI resorts, and the VOIs
and Lots located within such VOI resorts;
<PAGE>
(iii) in the monitoring of accounts receivables
and third party contracts relating to the
management of properties located within any
VOI resort;
(iv) in managing and operating the FairShare Plus Program;
(v) in managing and operating the Reservation System; and
(vi) in managing and operating the Fairfield Destinations
Vacation Club.
and all rights, title and interest of FCI and each Originator in, to or under
relevant licenses, sublicenses, leases, contracts (including, without
limitation, service and maintenance contracts), warranties and guaranties
relating to any such software, electronic media, books, records and documents,
as the case may be, including without limitation, all such rights arising under
such software, electronic media, books, records and documents (all of the rights
described in this clause (a) being referred to collectively as the "Licensed
Rights"). FAC shall have the right to use all of the Licensed Rights in
connection with the conduct of its business as it deems necessary or
appropriate, including without limitation the right to use such Licensed Rights
for the purposes specified in clauses (a)(i)-(vi) immediately above and the
right to assign, sublicense or otherwise transfer all or any part of such rights
to one or more third parties in connection with the transfer of all or any part
of the Assigned Base Contracts owned or serviced by FAC (including, without
limitation, any such transfer pursuant to or in connection with the grant by FAC
of a security interest in any or all of its assets and/or the enforcement by any
such secured party of its interests in such assets).
(b) The license granted to FAC pursuant to clauses (a)(ii)-(vii)
immediately above, shall only be deemed to confer upon FAC, and its respective
successors and assigns, the sole right to sub-license the use of such software,
electronic media, books, records and documents (at no charge, except for
reimbursement of administrative, legal and other expenses associated with such
sublicense) to (i) FCI (as long as FCI or any of its subsidiaries is manager of
the subject POA) or the subject POA (in the event FCI or any of its subsidiaries
is not the manager of such POA) in the case of clauses (a)(ii)-(iii) above or
(ii) FCI (or if applicable any successor to FCI) under the FairShare Plus
Program or Fairfield Destinations Club in the case of clause (a)(iv)-(v) above.
(c) All rights and licenses granted under or pursuant to this clause
(b) (the "License") are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the United States Bankruptcy
<PAGE>
Code (the "Code"), licenses to rights in and to "intellectual property" as
defined under the Code. The parties hereto agree that FAC, as licensee of such
rights under the License, shall have and retain and may fully exercise and
exploit all of its respective rights under the Code. The parties hereto further
agree that, in the event of the commencement of bankruptcy proceedings by or
against FCI under the Code, FAC, as licensee, shall be entitled to have and
retain all of its rights under the License.
(d) If an Event of Default has occurred and is continuing under the FAC
Credit Agreement, FCI hereby agrees to provide to any of the persons or entities
described in clauses b(i) and (ii) immediately above, and each of their
successors and assigns, immediately upon the written request of FAC, copies of
all software (including without limitation both object code and source code),
tapes disks, other electronic media, books, records, documents and other
tangible embodiments of the Licensed Rights.
14. Notices. Any notice, instruction, request, consent, demand or other
-------
communication required or contemplated by this Agreement to be in writing, shall
be given or made or communicated by United States first class mail, addressed
as follows:
If to an Originator: c/o Fairfield Communities, Inc.
11001 Executive Center Drive
Little Rock, AR 72211
Attention: President
If to FAC: Fairfield Acceptance Corporation
11001 Executive Center Drive
Little Rock, AR 72211
Attention: President
15. Successors and Assigns. The covenants, representations, warranties
----------------------
and agreements herein set forth shall be mutually binding upon, and inure to the
mutual benefit of, each Originator and its successors and assigns and FAC and
its successors and assigns.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Arkansas.
17. ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE FINAL, ENTIRE
-----------------
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OF ORAL,
RELATING TO THE SUBJECT MATTER HEREOF INCLUDING, WITHOUT LIMITATION, THAT
CERTAIN THIRD AMENDED AND RESTATED OPERATING AGREEMENT DATED AS OF DECEMBER 9,
1994 BY AND BETWEEN FCI AND FAC, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
<PAGE>
THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO.
18. Conflict With FAC Credit Agreement. If the terms of this Operating
----------------------------------
Agreement conflict in any manner with the terms and provisions of the FAC Credit
Agreement, the terms and provisions of the FAC Credit Agreement shall control.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and have
affixed their corporate seals as of the day and year first above written.
FAIRFIELD COMMUNITIES, INC.
By: /s/Ralph E. Turner
Title: Treasurer
FAIRFIELD ACCEPTANCE CORPORATION
By: /s/ Ralph E. Turner
Title: Treasurer
FAIRFIELD MYRTLE BEACH, INC.
By:/s/Ralph E. Turner
Name: /s/Ralph E. Turner
Title: Treasurer
SEA GARDENS BEACH AND TENNIS RESORT, INC.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
VACATION BREAK RESORTS, INC.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
<PAGE>
VACATION BREAK RESORTS AT STAR
ISLAND, INC.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
PALM VACATION GROUP, by its
General Partners:
VACATION BREAK RESORTS at
Palm Aire, Inc.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
PALM RESORT GROUP, INC.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
OCEAN RANCH VACATION GROUP,
by its General Partners:
VACATION BREAK at OCEAN RANCH, INC.
By: /s/Ralph E. Turner
Name: /s/Ralph E. Turner
Title: Treasurer
OCEAN RANCH DEVELOPMENT, INC.
By: /s/Ralph E. Turner
Name:/s/Ralph E. Turner
Title: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's March 31, 1998 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000276189
<NAME> Fairfield Communities, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 5,420
<SECURITIES> 0
<RECEIVABLES> 238,714
<ALLOWANCES> 15,347
<INVENTORY> 103,426
<CURRENT-ASSETS> 0
<PP&E> 43,338
<DEPRECIATION> 18,728
<TOTAL-ASSETS> 425,135
<CURRENT-LIABILITIES> 0
<BONDS> 115,992
0
0
<COMMON> 499
<OTHER-SE> 199,702
<TOTAL-LIABILITY-AND-EQUITY> 425,135
<SALES> 69,805
<TOTAL-REVENUES> 75,495
<CGS> 24,779
<TOTAL-COSTS> 29,020
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,917
<INTEREST-EXPENSE> 3,624
<INCOME-PRETAX> 13,505
<INCOME-TAX> 5,100
<INCOME-CONTINUING> 8,405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,405
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.18
</TABLE>
