SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to__________
Commission File Number: 0-18201
EQUIVEST FINANCE, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2346270
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
2 Clinton Square, Syracuse, New York 13202
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (315) 422-9088
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock. $.05 par value.
Series One Class A 12 1/2 % Cumulative Convertible Preferred Stock
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(Title of Class)
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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-KSB or any amendment to
this Form 10-KSB |_|.
The Company's revenues for the most recent fiscal year were $15,964,486.
The aggregate market value of the approximate 2,360,000 shares of Common Stock
of the Company outstanding as of December 31, 1997 held by non-affiliates of the
Company was approximately $12,685,000 calculated on the basis of the closing
price of such stock on that date. The total number of shares outstanding of the
Company's Common Stock, as of December 31, 1997, was 21,834,443.
<PAGE>
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1997
INDEX
PART I PAGE
Item 1 Business 3
Item 2 Properties 14
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of Security Holders 15
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters 16
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 7 Financial Statements 22
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 22
PART III
Item 9 Directors, Executive Officers, Promoters & Control Persons;
Compliance with Section 16(a) of the Exchange Act 24
Item 10 Executive Compensation 26
Item 11 Security Ownership of Certain Beneficial Owners and Management 31
Item 12 Certain Relationships and Related Transactions 31
PART IV
Item 13 Exhibits, List Reports on Form 8-K 32
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PART I
Item 1. Business
Introduction
General. Equivest Finance, Inc. (the "Company") is a holding company
which, through its wholly-owned subsidiary, Resort Funding, Inc. ("Resort
Funding") provides financing to resort developers through hypothecation loans,
through the purchase of developers' vacation ownership interests ("VOIs" or
"timeshare intervals") and through the direct financing of resort properties to
be developed and sold to consumers pursuant to timeshare interval programs. The
Company's commitments on any single project for the purchase of consumer
receivables or for hypothecation loans typically range from $1 million to $20
million. Commitments on any single project for acquisition and development
financing typically range from $200,000 to $10 million.
Prior to acquiring Resort Funding (formerly known as Bennett Funding
International, Ltd.), the Company was an insurance premium finance company
licensed under the laws of the State of Florida. In 1995 the Company
discontinued operations as an insurance premium finance company. Since February,
1996, all of the Company's business has been conducted through Resort Funding.
Loan Program. Resort Funding's two primary products are (i) the financing
of consumer timeshare receivables, and (ii) making loans to fund the
acquisition, development and construction of timeshare resorts. The consumer
notes are originated by the timeshare developers with interest rates generally
ranging from 10-18%, and amortization periods from 36-120 months (typically, 84
months). Resort Funding will either purchase the consumer notes at a negotiated
price from the developer or, alternatively, it may lend against the consumer
notes at a negotiated rate with the developer, in either case subject to
satisfactory underwriting approval of each individual consumer. Consumer loans
are usually over-collateralized, and they are typically structured with full
recourse to the developer.
Resort Funding's ability to acquire timeshare receivables and to make
receivable loans is not only reliant upon offering attractive
receivable-financing products, but has become increasingly dependent on its
ability to provide a flexible acquisition and development program to the project
developer. Acquisition and development lending is provided to developers to
acquire, construct and renovate resort properties. Resort Funding provides
acquisition and development loans that are primarily floating rate loans with a
minimum rate of interest, and maturities ranging from 3 to 5 years. Such loans
generally require the developer to amortize the loan through a release fee for
every timeshare interval sold. In addition, these loans may include a fixed
amortization period if certain sales volumes are not achieved. Acquisition and
development loans are typically over-collateralized and are secured by mortgages
on the resort, coupled with personal or corporate guarantees from the developer.
In addition, Resort Funding provides pre-construction financing to support
timeshare interval sales while construction is taking place. These funds are
usually required by developers because most states, in an effort to protect
consumers, require that all money collected from the consumer (pursuant to the
sale of the timeshare interval) be placed in escrow until a certificate of
occupancy for the resort is issued. The terms of these pre-construction loans
vary in length from 6 to 18 months and typically provide for a loan of up to 50%
of each timeshare interval sale, with the timeshare contract and cash receipts
used as collateral. The 50% advance allows the developer to fund its sales and
marketing costs. Once the certificate of occupancy is issued, a reconciliation
takes place and all of the approved consumer contracts are
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either purchased or hypothecated. The proceeds, along with the cash receipts,
are used to pay off the interim loan.
At December 31, 1997, Resort Funding had agreements for resort development
financing with 17 developers covering 23 timeshare resort complexes. Resort
Funding's consumer contract lending results from timeshare interval purchases at
resorts owned by these developers, as well as a number of other resort
developments whose construction was not financed by Resort Funding. At December
31, 1997, Resort Funding was committed to lend approximately $10 million for
resort construction or renovation. Resort Funding has agreements in place to
purchase timeshare interval contracts from 33 resorts, and hypothecation loans
relating to another 4 resorts.
Bankruptcy of Affiliated Companies and Related Litigation. Effective
February 16, 1996, the Company entered into an Agreement and Plan of Exchange
(the "Exchange Agreement"), between the Company, The Bennett Funding Group, Inc.
("BFG") and Resort Funding, pursuant to which the Company acquired all of the
common stock of Resort Funding from BFG in exchange for the issuance to BFG of
10,000 shares of the Company's Series 2 Preferred Stock and 3,000 shares of the
Company's Convertible Preferred Stock. As a result of the Exchange Agreement and
certain prior investments, BFG and an affiliate of BFG acquired beneficial
ownership of approximately 86% of the Company's voting shares.
On March 29, 1996, subsequent to the closing of the transactions
contemplated by the Exchange Agreement, BFG, along with its affiliate Bennett
Management & Development Corp. ("BMDC"), also a principal stockholder of the
Company, filed voluntary petitions (the "Petitions") for reorganization (Case
Nos. 96-61376 and 96-61379, respectively)(the "Bankruptcy Cases") under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Northern District of New York (the "Bankruptcy
Court").
On April 18, 1996, the U.S. Department of Justice appointed, and the
Bankruptcy Court approved, the Hon. Richard C. Breeden as trustee in bankruptcy
(the "Trustee") for BFG and BMDC, as well as for certain other related debtors
(collectively, the "Estate"). Mr. Breeden was subsequently appointed Trustee of
Aloha Capital Corporation ("ACC"), The Processing Center ("TPC") and certain
other affiliates of BFG. Mr. Breeden served as Chairman of the United States
Securities and Exchange Commission (the "SEC") from 1989 to 1993, following
several years' service in the White House and as a lawyer in private practice.
Mr. Breeden was the chairman of the world-wide financial services industry group
of the accounting firm of Coopers & Lybrand from 1993 to September 1996, when he
resigned to establish Richard C. Breeden & Co. in Greenwich, Connecticut, a firm
specializing in aiding troubled companies and consulting on global capital
markets.
The Petitions were filed after (i) the SEC filed a civil complaint (the
"Civil Complaint") in the United States District Court for the Southern District
of New York (the "Court") against BFG, BMDC, certain of their affiliates and
Patrick R. Bennett, the former Chief Financial Officer of BFG (Case No. 96 Civ.
2237 (JES)) and (ii) the United States Attorney for the Southern District of New
York filed a criminal complaint (the "Criminal Complaint") in the Court against
Patrick Bennett alleging perjury and criminal violations of the anti-fraud
provisions of the federal securities laws. The Civil Complaint alleged numerous
violations of the anti-fraud provisions of the federal securities laws, based in
part on allegations of sales of fictitious equipment leases, fraudulent
misrepresentations to investors in private placements of debt securities, and
misappropriation of corporate assets. In June 1996, the Trustee filed an
adversary proceeding seeking more than $1 billion in damages from, among others,
prior
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controlling stockholders of BFG and its affiliates and certain of their
business associates, BFG's previous auditing firm and others.
On June 26, 1997, a federal grand jury issued a 43-count indictment
against Patrick Bennett, his brother Michael, and two associates on charges
ranging from conspiracy to obstruction of justice. The defendants were arraigned
on July 3, 1997, and were released after posting personal recognizance bonds.
Notwithstanding the allegations of fraudulent financial dealings at BFG
and BMDC, the Trustee has advised the Company that he has concluded, based on
his investigations to date, that the operations of Resort Funding were not
involved in the fraudulent activities detailed in the complaints described above
and in the Trustee's adversary proceeding. Moreover, the Trustee has advised the
Company that he has determined not to challenge the transactions effected
pursuant to the Exchange Agreement.
Risk Factors
Bankruptcy of Affiliated Companies; Relationship to Bankruptcy. BFG and
BMDC, both affiliates of the Company, have filed Petitions in the Bankruptcy
Court. The Trustee has to date been successful in staying numerous civil actions
against various defendants, including the Company and Resort Funding, raising
allegations that the defendants were involved in the alleged wrongdoings of BFG
and BMDC and its principals. In addition, notwithstanding the allegations of
fraudulent financial dealings at BFG and BMDC, the Trustee has advised the
Company that he has concluded, based on his investigations to date, that the
operations of the Company and Resort Funding did not involve the fraudulent
activities detailed in the Civil Complaint, the Criminal Complaint, and the
Trustee's adversary proceeding. However, there can be no assurance that the
Trustee's continuing investigations of BFG and BMDC will not yield different
conclusions which could affect the Company. In certain instances, assets
belonging to Resort Funding may have been recorded in the name(s) of certain
affiliated companies which have since filed Petitions, while the economic
substance of the transactions has been recorded by Resort Funding. Restoring
title of such assets to Resort Funding will require approval of the Bankruptcy
Court, which approval cannot be assured.
The Company utilizes certain of its affiliates, including BFG and TPC, for
certain administrative requirements, including some aspects of the Company's
consumer receivable servicing. There can be no assurance that the services
currently available from the bankrupt entities will continue to be available in
the future on the same terms, or at all.
On November 24, 1997, the Trustee received Bankruptcy Court approval for
the conversion, effective October 30, 1997, of approximately $25 million owed to
BFG through intercompany notes into common stock of the Company at a price of
$5.375 per share. At December 31, 1997, after the conversion of the intercompany
notes into equity, the Trustee beneficially controlled approximately 91% of the
Company's outstanding shares of voting stock on behalf of the consolidated
Bennett estate.
In response to a request from the Committee of Uncensored Creditors of the
bankrupt Bennett entities (the "Creditors' Committee"), the Trustee has agreed
that the shares of the Company owned by the bankrupt Bennett entities will not
be voted without consultation with the Creditors' Committee and Bankruptcy Court
approval. The Creditors' Committee has also requested that additional members be
added to the Board of Directors of the Company and has suggested possible
candidates. These matters are under consideration by the Board of Directors of
the Company. It is unclear whether the Creditors' Committee or the Office of the
U.S. Trustee will make additional requests concerning the corporate governance
of the Company and what, if any, impact such suggestions (whether or not acted
upon) may have upon the Company's performance.
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management could lead to resignations among current officers and directors of
the Company. In such event there can be no assurance that the Company's funding
sources will continue to provide financing, or that necessary new sources of
funding will become available. If efforts to draw the Company closer into the
bankruptcy process are made and are successful, the Company could experience
material financial losses notwithstanding its strong financial condition.
Market for the Company's Common Stock and Preferred Stock. The Company was
delisted from the National Association of Securities Dealers Automated Quotation
System ("NASDAQ Stock Market") in February, 1996. The Company's application for
relisting on the NASDAQ Stock Market was approved and the Company's common stock
resumed trading on the NASDAQ Stock Market on February 24, 1998 under the symbol
"EQUI."
Additional Financing Requirements. Resort Funding's business is capital
intensive. On November 14, 1997, the Company closed a new, $105 million
financing facility (the "CSFB Facility") with Credit Suisse First Boston
Mortgage Capital LLC ("CSFB"). The CSFB Facility includes a revolving facility
of $30 million for funding acquisition and development loans to developers, with
the balance of $75 million to be used for receivables financing. The CSFB
Facility has a materially lower rate of interest than the Company's previous
financing arrangements.
Prior to closing the CSFB transaction, Resort Funding's primary source of
funding for new originations was a $50 million purchase/pledge facility with
Holland Limited Securitization Inc. ("HLS"), a multi-seller commercial paper
issuer sponsored by ING (U.S.) Capital Markets, Inc. ("ING"). The ING facility
was assigned to CSFB as part of the CSFB transaction. In addition to the
assignment of the ING facility relating to the purchase of consumer receivables,
the consumer receivables element of the CSFB Facility now provides funding for
the hypothecation loans originated by Resort Funding. The CSFB Facility also
provides, subject to additional documentation between Resort Funding and CSFB,
for the inclusion of receivables from foreign projects, as well as a higher
advance rate on funding draws.
At December 31, 1997, $19,398,000 was available for acquisition and
development lending and $10,602,000 was the balance of funds used under the
facility. At December 31, 1997, $31,044,000 was available under the consumer
receivables portion of the CSFB Facility, and $43,956,000 was the balance of
funds used under that facility. The consumer receivables portion of the CSFB
Facility is over-collateralized by approximately $17,000,000.
Impact of Real Estate Economic Cycles and Lack of Product. The risks
associated with the Company's business become more acute in an economic
slowdown. Such an environment is generally characterized by decreased demand for
vacation real estate and declining real estate values in many areas of the
country. Delinquencies, foreclosures, and loan losses generally increase during
economic slowdowns or recessions. Any future slowdowns could adversely affect
future operations of the Company. Moreover, there can be no assurance that the
timeshare industry will not decrease even in a stable economic environment,
whether in response to sales practice abuses, oversupply, undersupply or other
factors. Failure by developers to generate new timeshare intervals would also
adversely affect the Company's results.
Availability of Other Financing Sources. The ready availability of
financing for new timeshare projects through IPOs, as well as generous terms
offered by more lenders, could result in overbuilding and an oversupply of
intervals in the timeshare market. This could lead to
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declining values or over-saturation for timeshare assets similar to other real
estate over-expansions. In addition, the availability of financing at rates and
on terms more favorable than those offered by Resort Funding may negatively
affect Resort Funding's ability to provide additional financing to certain of
its existing customers, as well as its ability to attract new customers.
Further, lenders who traditionally did not provide financing to Resort Funding's
target customers may be forced to do so as other loans made by such lenders are
repaid as a result of financings in the capital markets by developer customers
of such firms. This phenomenon exposes the Company to more intense competition
for new acquisition and development loans which, among other things, increases
pressure to lower lending rates of interest.
Prepayments. A significant portion of the Company's revenues has been
comprised of interest earned over the term of the VOIs purchased or
hypothecated. If prepayments are made, as may happen due to future changes in
interest rates or other factors, a decrease in earnings will result. The
Company's hypothecation loans generally prohibit prepayment by developers during
a stated period. Then, prepayment is permitted but a premium is added to the
prepayment amount for a portion of the loan term.
Dependence on Senior Management and Directors. The Company's success
depends upon the continued contributions of Resort Funding's small senior
management team, its board of directors, and the Trustee. The loss of services
of certain of Resort Funding's executive officers, directors or the Trustee
could have a material adverse effect upon the Company's business. The Trustee
serves as chief executive officer of the Company and as chairman of the
Company's board of directors, solely as a representative of the Estate. The
Trustee has no employment contract or other agreement with the Company to
require his continued involvement, and he does not receives any salary or other
compensation from the Company. The Trustee's principal duty is to creditors of
the Estate, as majority shareholder of the Company. If the shares of stock owned
by the Estate were liquidated, there can be no assurance that the Trustee would
remain with the Company. If the Trustee were no longer chief executive officer
of the Company, there can be no assurance that the Company could retain such a
person with comparable experience and stature without a reasonable period of
time. Any such replacement would require compensation arrangements which would
have a negative impact on the Company's earnings.
Regulation. The operations of the Company are subject to extensive
regulation by federal, state and local government authorities and are subject to
various laws and judicial and administrative decisions imposing various
requirements and restrictions including, among other things, regulating credit
granting activities, establishing maximum interest rates and finance charges,
requiring disclosure to customers, and setting collection, repossession and
claims-handling procedures and other trade practices. Although the Company
believes that it is in compliance in all material respects with applicable
local, state and federal laws, rules and regulations, there can be no assurance
that more restrictive laws, rules and regulations will not be adopted in the
future which could make compliance much more difficult or expensive,
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restrict the Company's ability to sell loans, further limit or restrict the
amount of interest and other charges earned under loans purchased by the
Company, or otherwise adversely affect the business or prospects of the Company.
Environmental Liabilities. In the course of its business, the Company may
acquire in the future properties securing loans it has arranged that are in
default. There is a risk that hazardous substances or waste could be discovered
on such properties after foreclosure by the Company. In such event, the Company
might be required to remove such substances from the affected properties at its
sole cost and expense. There can be no assurance that the cost of such removal
would not substantially exceed the value of the affected properties or the loans
secured by the properties or that the Company would have adequate remedies
against the prior owner or other responsible parties, or that the Company would
not find it difficult or impossible to sell the affected properties either prior
to or following any such removal.
Withdrawal of Audited Financials. On March 29, 1996, Mahoney Cohen Rashba
& Pokart, PC ("Mahoney Cohen") sent a letter to BFG resigning as BFG's auditor
and withdrawing its reports on all financial statements of BFG and its related
entities, including Resort Funding. In the letter, Mahoney Cohen stated that
such financial statements were based on, among other things, information
supplied by Patrick Bennett and, in light of the allegations that Mr. Bennett
had provided Mahoney Cohen with false and misleading information relating to BFG
and BMDC, Mahoney Cohen claimed it had no choice but to withdraw its reports on
such financial statements. Mahoney Cohen is among the defendants of the
Trustee's adversary proceeding as a result of their audits of BFG. The Company
subsequently hired the accounting firm of Firley, Moran, Freer & Eassa, P.C.
("FMFE") to serve as its independent auditor, and FMFE has issued its opinion of
the financial statements for the years ended December 31, 1997, December 31,
1996 and December 31, 1995; audited financial statements for the years ended
December 31, 1997, and December 31, 1996 are included herein.
Preferred Stock Dividends. As of December 31, 1997 the Company had
cumulative undeclared and unpaid dividends on its preferred stock of $162,657.
No Common Stock dividends can be paid until all preferred stock dividends are
paid. On January 6, 1998, the Company issued a redemption notice with regard to
its Series 1 Class A 12.5% Preferred Stock, which stock was mandatorily
redeemable commencing during the year ended December 31, 1997. The redemption
date for the preferred stock was February 13, 1998, and the Company is required
to pay all accrued but unpaid dividends upon redemption of the preferred shares.
See "Management's Discussion and Analysis - Liquidity and Capital Resources."
Collection and Delinquency Rules Associated with VOI Loans. Resort
Funding's collection of payments due under the VOI loans is subject to certain
risks associated with VOI ownership. Although individual owners are generally
obligated to make payments under their notes irrespective of any defect in,
damage to, or change in conditions of the vacation resort (such as erosion,
construction on adjacent or nearby properties, or environmental problems) or any
breach of contract by the property owners' association to provide certain
services to the VOI borrowers (including any such breach resulting from a
destruction of the resort or the bankruptcy of the resort developer), or of any
other loss of benefits of ownership of their unit (including cessation of the
ability of the borrowers to exchange their timeshare intervals in the resort for
timeshare intervals in other unaffiliated resorts), any such material defect,
damage, change, breach of contract, bankruptcy or loss of benefits is likely to
result in a delay in payment or default by a substantial number of the borrowers
whose VOIs are affected. In many cases the relatively small unpaid principal
amount of individual VOI notes may make normal judicial collection procedures
uneconomical. In addition, the bankruptcy of a resort developer would most
likely preclude such developer from honoring chargeback commitments. See
"Acquisition and Development Loan Portfolio."
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Competition. The financing of VOI loans is highly competitive and many of
Resort Funding's competitors have significantly greater financial resources.
Resort Funding typically targets resorts acquired and constructed by established
developers. There can be no assurance that Resort Funding's strategies will be
effective.
Mismatch of Interest Rates. Loans to consumers for timeshare purchases are
at fixed interest rates and Resort Funding borrows at a floating interest rate.
Because Resort Funding does not utilize interest rate hedges at this time, this
mismatch, in an increasing interest rate environment, could adversely affect
Resort Funding's performance.
Concentration of Acquisition and Development Loans. There is substantial
concentration of Resort Funding's acquisition and development loan portfolio in
a small number of borrowers. A default by any of these developers could
materially affect Resort Funding's performance. See "Acquisition and Development
Loan Portfolio".
Servicing and Year 2000 Compliance. The computer software and hardware
platform for Resort Funding's loan servicing program is owned by a bankrupt
affiliate. The platform is not yet Year 2000 compliant. There can be no
assurance that the bankrupt affiliate will continue to make the servicing
platform unavailable to Resort Funding, that Resort Funding will be able to
acquire the servicing platform from the bankrupt affiliate, or that the
affiliate will cause the platform to become Year 2000 compliant. Resort Funding
has previously used unaffiliated third parties on occasion to perform its loan
servicing, at a cost; if necessary, the Company believes it will be able to make
arrangements with a third party to perform such services.
In addition, some of the Company's own computer systems use software which
identifies dates only by the last two digits of a year. Therefore, these systems
cannot distinguish between dates in the year 2000 and dates in the year 1900. As
a result, functions using these systems would not work properly in the year
2000. The Company is working to identify and to address any systems which are
non-compliant and expects that all programs and systems will be corrected,
tested and functional, or replaced in the ordinary course of business, prior to
December 31, 1999. The costs of any corrective measures are not expected to be
material. However, there can be no assurance that the Company's corrective
efforts will not be delayed or that costs will not exceed expectations, or that
all of the Company's systems will be corrected as of January 1, 2000.
VOI Loans
Underwriting. Resort Funding has established loan underwriting criteria
and procedures designed to minimize credit losses on its portfolio. The loan
underwriting process includes reviewing each borrower's credit application
(which includes employment and salary information, banking information and
current debts), reviewing each borrower's credit history through one of the
major credit bureau agencies, calculating debt-to-income ratios for
affordability, and a telephone verification to each borrower confirming the
terms and conditions of the contract in addition to confirming the correct
billing address. The primary focus of Resort Funding's underwriting is to assess
the likelihood that the borrower will repay the loan as agreed. However, because
of the relatively small size of developers funded by Resort Funding, unique
aspects of particular projects, or other factors, Resort Funding can and does
depart from its normal loan underwriting criteria on a case-by-case basis.
Collections and Delinquencies. Resort Funding believes that its low annual
delinquency rate of approximately 2% (after chargebacks of such delinquent
contracts to
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developers as described below) for the VOI portfolio is attributable to the
application of its credit underwriting criteria, collection efforts as soon as a
borrower is 10-15 days delinquent, personal and corporate guarantees, and Resort
Funding's reserve on every loan. There can be no assurance that this favorable
experience will continue.
In July 1997, a resort developer customer of Resort Funding in Las Vegas,
Nevada filed for bankruptcy court protection. To date, Resort Funding has
purchased approximately $2.5 million of VOI loans from the now bankrupt
developer. Although the performance of these VOI loans has to date been
consistent with the balance of Resort Funding's portfolio, the bankrupt
developer has indicated that it will reject the receivables purchase contract
with Resort Funding, and therefore will no longer be required to replace or
repurchase contracts that become delinquent. If Resort Funding no longer has
recourse to the developer to repurchase or replace the delinquent contracts,
Resort Funding may experience material losses related to this portfolio. Resort
Funding has filed a contingent claim in the developer's bankruptcy case with
regard to the VOI contracts. There can be no assurance that Resort Funding's
claim will be allowed by the bankruptcy court, or that the claim will be paid in
full. In addition, Resort Funding has outstanding acquisition and development
loans to this developer of approximately $6.2 million.
Collection efforts are managed on a daily basis and, unless dictated
otherwise, consist of telephone contact and dunning notices. Collection services
usually begin when an account is 10 days delinquent. At that time, Resort
Funding attempts to contact the borrower and determine the reason for the
delinquency and to attempt to bring the account current. Resort Funding also
generates and mails weekly delinquency reports to developers. This is done in an
effort to make the developer aware of any delinquent accounts and to encourage
the developer to assist with certain delinquent accounts. If the status of the
account continues to deteriorate, an analysis of the delinquency is reviewed by
Resort Funding's collection manager to determine the appropriate action.
Generally, under a purchase facility with a developer, when a loan becomes 90
days delinquent and it is determined the amounts are uncollectible from the
borrower, the loan is charged back to the developer. For Resort Funding's
hypothecation loans, when a VOI loan becomes 60 days delinquent, it is no longer
eligible for inclusion in the facility and the developer must (i) either replace
the ineligible contract with an eligible one, or (ii) the developer must pay
Resort Funding an amount equal to the outstanding principal balance of such
ineligible VOI loan.
Regulations and practices regarding the liabilities of the borrower in
default vary greatly from state to state. To the extent permitted by applicable
law, Resort Funding collects late charges and returned check fees and records
these items as additional revenue.
Loan Servicing. Resort Funding's previous lending arrangements required
that the VOI portfolio be serviced jointly by an unaffiliated third party and
Resort Funding. Resort Funding's new financing agreements with CSFB permit
Resort Funding to service the VOI portfolio so long as it is not in default of
the loan. Resort Funding services approximately 17,000 VOI borrowers on a
complete basis, utilizing its own facilities and personnel and those of TPC.
This complete service includes issuing monthly invoices to customers, processing
payments and collection procedures.
Characteristics of the VOI Portfolio. The following table sets forth the
characteristics of the VOI portfolio of Resort Funding as of December 31, 1997:
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Percentage of Percentage of
Principal Principal Number of Number of
Principal Balance Amount Amount Loans Loans
- ----------------- ------ ------ ----- -----
<S> <C> <C> <C> <C>
Less than $4,000 $12,623,000 13.9% 5,209 30.3%
- --------------------------------------------------------------------------------------------------------------------
$4,000 - $5,999 $29,547,000 32.4% 5,900 34.3%
- --------------------------------------------------------------------------------------------------------------------
$6,000 - $7,999 $26,326,000 28.9% 3,817 22.2%
- --------------------------------------------------------------------------------------------------------------------
$8,000 - $9,999 $12,863,000 14.1% 1,463 8.5%
- --------------------------------------------------------------------------------------------------------------------
Greater than $9,999 $ 9,700,000 10.7% 800 4.7%
- --------------------------------------------------------------------------------------------------------------------
Total $91,059,000 100.0% 17,189 100.0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the weighted average interest rate of the VOI loans
included in Resort Funding's portfolio was 13.5% and the weighted average
remaining maturity was approximately 63 months. The following table sets forth
as of December 31, 1997 the distribution of interest rates payable on the VOI
loans:
- -------------------------------------------------------------------------------
Percentage of
Principal Principal
Interest Rate Amount Amount
- ------------- ------ ------
Less than 10.0% $ 1,000 --%
- -------------------------------------------------------------------------------
10.0% - 11.9% $ 5,385,000 5.9%
- -------------------------------------------------------------------------------
12.0% - 13.9% $ 53,136,000 58.4%
- -------------------------------------------------------------------------------
14.0% - 15.9% $ 32,006,000 35.1%
- -------------------------------------------------------------------------------
Greater than 15.9% $ 531,000 .6%
- -------------------------------------------------------------------------------
Total $ 91,059,000 100.0%
- -------------------------------------------------------------------------------
At December 31, 1997, Resort Funding's VOI borrowers resided in all 50 states,
the District of Columbia and 6 territories and foreign countries.
Acquisition and Development Loan Portfolio
General. Resort Funding also provides acquisition and development loans to
resort developers. At December 31, 1997, Resort Funding's outstanding
receivables for acquisition and development loans totaled $40,200,000. Resort
Funding has an underwriting process for acquisition and development loans which
includes site inspection and a review of the following: developer's experience
and financial condition, market suitability for timeshare development, resort
sales and marketing program (including market competition and sales team
experience), and the development budget. The final approval for the acquisition
and development loan is made by the Resort Funding's credit committee, which is
comprised of senior management.
Characteristics of Acquisition and Development Loan Portfolio.
- --------------------------------------------------------------------------------
Percentage of
# of Resorts Principal Balance Principal Amount Principal Amount
- --------------------------------------------------------------------------------
12 < $1 million $ 5,100,000 12.7 %
- --------------------------------------------------------------------------------
3 $1-$2 million $ 4,600,000 11.4 %
- --------------------------------------------------------------------------------
3 $2-$3 million $ 7,000,000 17.4 %
- --------------------------------------------------------------------------------
2 $3-$4 million $ 6,900,000 17.2 %
- --------------------------------------------------------------------------------
3 > $5 million $16,600,000 41.3 %
- --------------------------------------------------------------------------------
Total $40,200,000 100.0 %
- --------------------------------------------------------------------------------
11
<PAGE>
Interest rates on acquisition and development loans generally range from
10.5 to 14%.
As previously noted, in July 1997, a Las Vegas, Nevada developer and
customer of Resort Funding filed for bankruptcy court protection. As of December
31, 1997, the developer had outstanding indebtedness on its acquisition and
development loans of approximately $6,200,000, secured by first and third
mortgages on the property. This amount owed includes principal, accrued
interest, and certain other fees relating to such loans. The appraised value of
this property is substantially in excess of the debt owed to Resort Funding.
Resort Funding filed secured claims in the developer's bankruptcy case relating
to the acquisition and development loans. On December 31, 1997 the bankrupt
developer filed its disclosure statement and joint plan of reorganization. The
plan of reorganization lists Resort Funding's claims among the class of secured
claims which, if allowed, the developer proposes to pay in full, together with
all accrued unpaid interest. There can be no assurance that Resort Funding's
claims will be allowed or that the developer's plan of reorganization will be
approved by the bankruptcy court. A loss by Resort Funding on these loans could
have a material impact on Resort Funding's financial statements, and the
Company.
In September, 1997, Resort Funding commenced foreclosure proceedings
against a resort property located in Hilton Head, South Carolina which was
approximately four months delinquent in payment of its obligations to Resort
Funding under an acquisition and development loan agreement. On November 3,
1997, Resort Funding reached an agreement with the developer to settle the
arrears. As part of the agreement, the developer paid Resort Funding all past
due amounts in full and remitted payment in advance for installments due for
October, November and December, 1997. As additional security for future
payments, the developer agreed to grant Resort Funding a deed in lieu of
foreclosure to be held in escrow pending Resort Funding's receipt of all other
payments as they become due. However, in January, 1998, the developer refused to
deliver the deed in lieu of foreclosure and terminated the November 3 agreement.
On March 17, 1998, the developer filed an answer and counterclaims in the
foreclosure action alleging, among other things, that it was not in default of
the loan agreements. Resort Funding intends to pursue vigorously its claims and
defend the counterclaims. As of December 31, 1997, the balance owed to Resort
Funding under the referenced loan was approximately $3.4 million. Resort
Funding's acquisition and development loan agreement provides that principal
will be repaid through release fees on interval units sold. As of December 31,
1997, the developer had not sold any interval units. There can be no assurance
Resort Funding will receive principal payments relating to this obligation in
the short term, or that it will not incur a loss on this loan.
Regulation
The industry is subject to extensive regulation by the federal government,
as well as by the states and foreign jurisdictions in which the resort
properties are located and in which vacation packages and VOIs are marketed and
sold. At the federal level, the Federal Trade Commission has taken the most
active regulatory role through the Federal Trade Commission Act, which prohibits
unfair or deceptive acts or competition in interstate commerce. Other federal
legislation to which Resort Funding is or may be subject appears in the
Securities Act of 1933, the Truth in Lending Act, the Equal Opportunity Credit
Act and the Interstate Land Sales Full Disclosure Act. In addition, many states
have adopted specific laws and regulations with respect to the sale of vacation
packages and interval ownership programs.
Resort Funding is a member of the American Resort Developers Association
("ARDA"), the principal trade association representing the segment of the
leisure industry that deals with ownership of resort and vacation products.
Membership in ARDA entitles Resort Funding to
12
<PAGE>
various benefits and services, including advertising in ARDA publications and
exhibiting at trade shows. ARDA has adopted a Code of Standards and Ethics,
which sets forth standards of conduct and ethics to which Resort Funding is
subject.
Competition
The financing of resort developers through the purchase or hypothecation
of VOIs and the direct financing of developers' acquisition and development of
resort properties is highly competitive, with competition occurring primarily on
the basis of interest rates of the loans, fees and customer service. Competitors
in the financing business include commercial financial institutions, major
lodging, hospitality and entertainment companies and finance companies, most of
which have significantly greater resources than the Company. There can be no
assurance that Resort Funding will not face increased competition from
competitors currently in the business or from new entities entering the
business.
Resort Funding believes that it competes principally on the basis of (i)
superior industry knowledge and experience; (ii) providing timely and complete
customer service; (iii) providing acquisition and development loans; (iv)
attracting borrowers whose needs are not met by traditional financial
institutions and (v) providing developers with complete consumer receivable
servicing.
Employees
As of December 31, 1997, Resort Funding had 23 full-time and 9 part-time
employees. Resort Funding's employees are not covered by a collective bargaining
agreement. Resort Funding considers its relations with its employees to be good.
13
<PAGE>
Item 2. Properties
The Company's offices are located at 2 Clinton Square, Syracuse, New York
13202. The Company leases approximately 6,500 square feet of office space from
an affiliated entity at a cost of $6,752 per month on a month-to-month basis.
The lease payments are adjusted annually to reflect increases in real estate
taxes and operating expenses.
Item 3. Legal Proceedings
The Company is involved in various legal actions and claims arising in the
ordinary course of business. Management believes there is no merit to any such
claims against the Company. In addition, the Company has been named as a
defendant in certain civil actions related to the Petition. See "Business-Risk
Factors". The outcome of this litigation and its impact on the Company is not
presently determinable.
In January 1996, Joseph Mooney, former Senior Executive Vice President and
Director of the Company, filed a lawsuit in the Circuit Court of Broward County,
Florida against the Company, Murray Bacal (the former Chairman of the Board of
the Company), and another defendant alleging, among other things, that the
Company breached its obligations to him under a termination agreement and a
prior letter of intent that Mr. Mooney claims would have permitted him to
acquire certain assets of the Company. Mr. Mooney alleged that the Company
tortuously interfered with certain business opportunities he had. Mr. Mooney's
suit seeks certain declaratory and equitable relief, compensatory damages in
excess of $1,050,000, plus prejudgment interest, court costs, reasonable
attorneys fees and such other relief as the court may deem appropriate. In
December 1996, Mr. Mooney moved for summary judgment on certain limited aspects
of his claims. On February 4, 1997, the court granted partial summary judgment
to Mr. Mooney with respect to his claim that the termination agreement had been
breached. The court ruled that Mr. Mooney was entitled to damages in the amount
of $33,472.50, together with interest in the amount of $4,069.78, with respect
to the breach. The Company determined not to appeal this judgment since the
amount awarded is covered by insurance. The Company believes that it has
meritorious defenses to the remaining allegations in the complaint and intends
to defend the matter vigorously. In addition, the Company filed certain
counterclaims against Mr. Mooney alleging that Mr. Mooney had wrongfully
retained certain Company property and had wrongfully interfered with the
Company's conduct of its business, all in violation of the terms of the
termination agreement. The counterclaims further allege that Mr. Mooney
knowingly and feloniously obtained, or converted to his own use and benefit, at
least $250,000 of the Company's money. The counterclaims seek compensatory
damages, treble damages, pre- and post-judgment interest, costs, attorney's fees
and such further relief as the court deems appropriate. Mr. Mooney has answered,
denying liability on the Company's counterclaims. The Company intends to
vigorously defend its interests against Mr. Mooney's claims, and pursue its
counterclaims.
In March, 1996, the State of Florida asserted a claim against the Company
seeking the return of approximately $402,000 of unclaimed property pursuant to
Florida's abandoned property laws. The claim arises out of the insurance premium
finance business formerly conducted by the Company. The Company does not dispute
the calculation of the amount at issue. However, the Company has taken the
position that Florida's abandoned property laws do not apply to any portion of
the claim which arose prior to 1990 (approximately $325,000), when the statutes
were amended. No assessment of the Company's position can be made at this time.
Item 4. Submission of Matters to a Vote of Security Holders
14
<PAGE>
On October 29, 1997, stockholders holding in the aggregate approximately
86% of the outstanding shares of the Company voted to increase the number of
authorized shares of Common Stock of the Company to 50,000,000 shares, and to
adopt the Company's 1997 Long-Term Incentive Plan.
15
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
On June 25, 1991, each of the Company's Common Stock commenced trading on
the NASDAQ Stock Market as a small-capitalization issue. In February 1996 the
Company's stock was delisted from the NASDAQ Stock Market and traded on the
over-the-counter market until the Company's application for relisting on the
NASDAQ small-capitalization market was granted in February, 1998. The Company's
Common Stock resumed trading on the NASDAQ Stock Market on February 24, 1998.
The high and low bids of the Company's Common Stock are shown for the calendar
periods indicated:
COMMON STOCK
Quarter High Bid Low Bid
------- -------- -------
1997 1st 3 1/4 1/2
1997 2nd 3 1 1/4
1997 3rd 4 3/8 1 5/8
1997 4th 6 4 1/8
Such quotations reflected inter-dealer price, without retail mark-up,
mark-down or commission, and did not necessarily represent an actual
transaction. The high and low bids shown above relate only to periods in which
any actual trading occurred.
16
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
SELECTED FINANCIAL DATA
Equivest Finance, Inc. and Subsidiaries
Year Ended Year Ended
12/31/97 12/31/96
-------- --------
Revenues:
Interest $ 15,109,200 $ 12,997,700
Gain on sales of contracts 29,700 422,300
Other income 825,600 843,300
------------ ------------
Total Revenue 15,964,500 14,263,300
Costs and Expenses:
Provision for doubtful receivables 925,000 178,500
Debt related costs including amortization of
financing costs 1,063,400 903,600
Interest 8,076,600 8,270,600
Selling, general and administrative 2,475,100 3,221,400
------------ ------------
Total Costs and Expenses 12,540,100 12,574,100
------------ ------------
Income Before Provision for Income Taxes 3,424,400 1,689,200
Provision for Income Taxes
Current 510,000 195,000
Deferred (317,000) (166,000)
------------ ------------
Total Provision for Income Taxes 193,000 29,000
------------ ------------
Net Income $ 3,231,400 $ 1,660,200
============ ============
Equivest Finance, Inc. and Subsidiaries Comparison of Year Ended December 31,
1997 to December 31, 1996
Results of Operations
Income before income taxes increased 102.7% to $3,424,400 and net income
increased 94.6% to $3,231,400 for the year ended December 31, 1997, from
$1,689,200 and $1,660,200, respectively, for the same period in 1996. The
increase resulted primarily from increased interest income as a result of
portfolio growth, increased interest income from related-party notes receivable,
as well as an increase in fee income. The portfolio growth and the increase in
fee income were due primarily to a growth in the company's originations. Total
originations for 1997 increased 37% to $72 million, from $52 million in 1996.
The growth in related-party notes receivable arises from approximately $18
million in loans made to the Trustee at 10% in connection with the Settlement
Loans (see section on Interest Expense for further detail). These loans
increased interest income by $564,000 in 1997. The increase in profitability
also resulted from decreased expenses due to significantly lower application,
recording and processing fees paid to an affiliate of the Company, and certain
nonrecurring expenses incurred during 1996 in connection with the consummation
of the stock exchange transaction. These increases were partially offset by a
one-time special origination fee received in the first quarter of 1996, half of
which was discounted in the first quarter of 1997 when the asset was sold. An
increase in the provision for doubtful accounts, increased debt issue costs
associated with the Settlement Loans, and lower average outstanding balances on
the acquisition and development loans also reduced overall profitability.
Revenues increased 11.9% to $15,964,500 for the year ended December 31,
1997, from $14,263,400 for the same period in 1996. The increase was due
primarily to an increase in interest income as a result of portfolio growth,
interest income from notes receivable from a
17
<PAGE>
related party and higher cash balances, and an increase in fee income. This
increase was partially offset by a one-time special origination fee received in
the first quarter of 1996, half of which was discounted in the first quarter of
1997 when the asset was sold. Service fee income, interest income on acquisition
and development loans, and gains on the sale of consumer contracts also had a
negative impact on the overall increase in revenues.
Interest Income
Interest income on loans increased 16.2% to $15,109,200 for the year ended
December 31, 1997, from $12,997,700 for the same period in 1996, primarily due
to growth in the portfolio held for investment, income from notes receivable
from a related party, and higher cash balances. Interest on consumer notes
increased 18.9% to $10,176,000 for the year ended December 31, 1997 from
$8,561,700 for the same period in 1996, as a result of growth in the portfolio
held for investment. The growth in interest income on consumer notes was
augmented by an increase of $564,000 in interest income on notes receivable from
a related party, which notes existed in lower average balances and for
approximately only one month in the same period a year earlier. This increase in
interest income more than offset a decrease of 5.8% or $247,400 in interest
received on acquisition and development loans to developers, due to lower than
average balances outstanding compared to the same period in 1996.
Gain on Sale of Contracts
Interest revenue was partially offset by a decrease of 93.0% on gains on
the sale of consumer contracts, to $29,700 for the year ended December 31, 1997
from $422,300 for the same period in 1996. This decrease was primarily caused by
a portfolio purchased at a discount in 1996 coupled with a prohibition by Resort
Funding's then primary lender, ING (U.S.) Capital Markets, Inc. ("ING"), on
sales of loans using ING's commercial paper facility after April 1996.
Other Income
Other income decreased by 0.2% to $825,600 for the year ended December 31,
1997, from $843,300 for the same period in 1996. The year-to-date decrease was
primarily due to a one-time special origination fee received in the first
quarter of 1996, half of which was discounted in the first quarter of 1997 when
the asset was sold. Other income also decreased due to the elimination of
service fees received from ING after the first quarter of 1996. The decreases
were partially offset by an increase in commitment fees.
Provision for Doubtful Accounts
The provision for doubtful receivables increased 418.13% to $925,000 for
the year ended December 31, 1997, from $178,500 for the same period in 1996, as
a result of an increase in new originations.
18
<PAGE>
Debt Issue Costs and Amortization
Debt issue costs and amortization increased 17.6% to $1,063,400 for the
year ended December 31, 1997, from $903,600 for the same period in 1996. The
increase was primarily attributable to the amortization of debt issue costs for
the 3% per annum arrangement fee charged by the bankrupt estate of BFG and other
affiliated companies (the "Estate") relating to the Settlement Loans. Resort
Funding is obligated to pay the arrangement fee to the Estate based on the
unpaid principal balance of the new term loans. The increases in amortization of
debt issue costs were offset by decreases in debt issue costs associated with
other lenders.
Interest Expense
Interest expense decreased 2.3% to $8,076,600 for the year ended December
31, 1997, from $8,270,600 for the same period in 1996, primarily due to lower
interest rates and the conversion of approximately $25 million of related party
debt to equity during the fourth quarter. The interest expense on the ING/CSFB
consumer facility increased 44.5% to $3,690,100 for the year ending December 31,
1997 from $2,553,200 for same period of 1996. This increase was primarily due to
higher levels of borrowing (caused by ING's prohibition on the sales of the
loans by Resort Funding) and an increase in the interest rate charged on the ING
facility. However, once the CSFB facility closed in November of 1997, the
interest rate on the consumer receivables facility decreased by almost 300 basis
points. Based on the outstanding amount at closing, $43.4 million, and the
interest rate savings, almost 3%, the decrease in interest rates for the last
five weeks of the year saved the company approximately $125,000. Effective
October 30, 1997, the Company also converted approximately $25 million of debt
into equity through the issuance of Equivest common stock. This transaction is
projected to result in annual interest savings of approximately $1.9 million,
and lowered the September 30, 1997 debt-to-equity ratio from approximately 17 to
1 down to approximately 2.6 to 1. The conversion of the debt significantly
raised the year-end book value per share of the common stock from $.24 at the
end of 1996 to $1.49 at the end of 1997. Total net worth rose 705.7% from
$4,037,200 at December 31, 1996, to $32,528,400 at December 31, 1997.
Interest expense on other bank notes decreased 28.0% to $2,526,800 for the
year ended December 31, 1997, from $3,507,800 for the same period in 1996, due
to a decrease in interest rates. The average interest rates on other bank notes
decreased to 6.4% for the year 1997, from 10.0% for the same period in 1996. The
decrease in interest rates is due primarily to the addition of certain loans
relating to the settlement of the claims made by several lenders (the "Banks")
in the bankruptcy case of Bennett Funding Group, Inc. ("BFG") and its affiliate,
Aloha Capital Corporation (collectively, the "Debtors"), arising out of
lease-financing agreements pursuant to which the Banks made loans to the
Debtors. The settlements, which were approved by the United States Bankruptcy
Court for the Northern District of New York (the "Bankruptcy Court"), required
the Banks to make new, interest-only term loans to Resort Funding at favorable
1/2 to 4% interest rates (the "Settlement Loans"), ranging in term from 30 to
120 months, with an average duration of 70 months. The majority of the
Settlement Loans were closed between November 1996 and January 1997. The
remainder closed between June 1997 and August 1997. The weighted average
interest rate on the Settlement Loans is 2.1%. The beneficial effect of the
extremely low interest rates of the Settlement Loans is partially offset by a 3%
per annum arrangement fee paid by Resort Funding to BFG. The remainder of the
decrease in interest expense in other bank notes is due to lower borrowing rates
in 1997 with other banks and the addition of a new facility with CSFB at lower
than the interest rates for comparable borrowings in 1996.
Selling, General and Administrative
Selling, General and Administrative costs decreased 23.2% to $2,475,100
for the year ended December 31, 1997, from $3,221,400 for the same period in
1996. The decrease was
19
<PAGE>
primarily a result of the significant reduction of application, recording and
processing fees paid to an affiliate of the Company, certain nonrecurring
expenses incurred in 1996 in connection with consummation of the stock exchange
agreement and lower office-related costs in 1997. The decreases were slightly
offset by higher outside services expenditures. The Company's administrative
expenses, primarily insurance costs and non-recurring expenses associated with
discontinued operations, decreased by 74.7% to $122,100 for the year ended
December 31, 1997, from $482,600 for the same period in 1996.
Provision for Income Taxes
The provision for income taxes for the year ended December 31, 1997
increased 565.5% to $193,000, from $29,000 for the same period in 1996. The
increase was primarily attributable to the provision for state income taxes,
since the current period tax provision includes the utilization of net operating
loss carryforwards which partially shelter the Company's book income from
federal taxes. The current portion of the provision relates to currently payable
state income taxes and federal alternative minimum tax, and the deferred portion
of the provision relates to the provision for doubtful accounts. The provision
for income taxes for the year ended December 31, 1996 also reflects the
utilization of net operating loss carryforwards (but only for the period after
February 16, 1996).
20
<PAGE>
Liquidity and Capital Resources
Resort Funding's primary source of financing for new originations is a
$105 million revolving credit facility with CSFB. At December 31, 1997,
$19,398,000 was available for acquisition and development loans under the
facility and $10,602,000 was the balance of funds used for acquisition and
development loans under the facility. For VOI receivables purchases or
hypothecation lending, $31,044,000 was available under the facility at December
31, 1997 and $43,956,000 was the balance of funds used for receivables purchases
or hypothecation lending. The CSFB debt is collateralized by the collateral
assignment of mortgages on the resort properties, security agreements on the
pledged receivables and by assignments of payments due on the collateral.
Additionally, the facility agreements contain both specific and general
covenants including maintenance of specified collateralization, default rates
with respect to pledged receivables, tangible and overall net worth
requirements. Since December 31, 1997 interest on borrowings has been
approximately 8.5%.
In September 1996, the Trustee submitted a motion on behalf of BFG and ACC
(collectively, the "Debtors") pursuant to Federal Rule of Bankruptcy Procedure
9019 for approval of the compromise and settlement of the claim(s) of certain
lenders (the "Banks") to BFG and ACC arising out of the lease-financing
agreements pursuant to which the Banks made loans to the Debtors. The
settlements, which were approved by the Bankruptcy Court, required the Banks to
make new, interest-only term loans to Resort Funding at favorable 1/2 to 4%
interest rates (the "Settlement Loans"). Additional such settlements have been
entered into from time to time with a total amount through December 31, 1997, of
approximately $22,700,000. At December 31, 1997, Resort Funding's outstanding
balance on the Settlement Loans was approximately $22,600,000, on which interest
is payable in monthly installments. Resort Funding is obligated to pay an
arrangement fee of 3% per annum to the Trustee based on the unpaid principal
balance of the Settlement Loans. As of December 31, 1997, a portion of the
proceeds of the Settlement Loans, approximately $19,000,000, had been on-loaned
to the Trustee to purchase the Banks' loans to BFG and ACC under the terms of
the settlements. Resort Funding's loan to the Trustee bears interest at 10% per
annum and is non-recourse to the Trustee and the Estate. At December 31, 1997,
the Trustee had repaid approximately $15,000,000 of the on-loan. The Trustee
pledged certain lease payment collateral to Resort Funding to secure the loans
from Resort Funding.
In December 1996, Resort Funding received approval of a bond exchange
agreement with its public bondholders. The outstanding bond principal balance
and accrued and unpaid interest of approximately $3,400,000 were exchanged for
unsecured promissory notes which bear interest at 8% per annum payable monthly.
The promissory notes mature on December 1, 1998. Resort Funding is current on
its obligations under the notes.
In October, 1997, the board of directors for the Company approved an
increase in the number of authorized shares of Common Stock of the Company to
50,000,000 shares, and the Company's Articles of Incorporation were amended to
reflect the increase. On November 24, 1997, the Trustee received Bankruptcy
Court approval for the conversion, effective October 30, 1997, of approximately
$25 million owed to BFG through intercompany notes into 4,645,596 shares of
Common Stock of the Company at a price of $5.375 per share. After the
conversion, the Trustee beneficially controlled 89.1% of the outstanding shares
of Common Stock of the Company.
In February, 1996, the Company issued 10,000 shares of Series 2 Preferred
Stock, par value $3.00 (the "Series 2 Preferred Stock"), and 3,000 shares of
Convertible Preferred Stock (the "Convertible Preferred Stock") to BFG in
exchange for all of the stock of Resort Funding. The October 1997 increase in
authorized shares of Common Stock resulted in the automatic
21
<PAGE>
conversion of the 3,000 shares of Convertible Preferred Stock into 7,500,000
shares of Common Stock.
The Series 2 Preferred Stock dividends are cumulative and payable
quarterly when declared by the Company at the rate of $60.00 per annum per
share. At December 31, 1997, the cumulative undeclared and unpaid dividends
amounted to $154,333. Dividends on the Company's Common Stock cannot be paid
until such Convertible Preferred Stock Dividends are paid in full. The holder of
the Series 2 Preferred Stock is entitled to the number of votes which equals 20%
of the total number of votes of the Company, after taking into account Common
Stock and Convertible Preferred Stock. The Company may at its option any time
after the February 16, 2002, redeem the Series 2 Preferred Stock in whole or
part at the $10,000,000 liquidation value plus accrued and unpaid dividends.
In July 1991, the Company issued 575,000 shares of Series 1 Class A 12
1/2% Cumulative Convertible Preferred Stock, par value $3.00 (the "Cumulative
Convertible Preferred Stock"). As of December 31, 1997, 9,915 shares of the
Cumulative Convertible Preferred Stock remained outstanding. On January 6, 1998,
the Company issued a redemption notice with regard to Cumulative Convertible
Preferred Stock (the stock was manditorily redeemable commencing during the
fiscal year ended December 31, 1997). The redemption date for the preferred
stock was February 13, 1998, and the Company paid all accrued but unpaid
dividends upon redemption of the preferred shares. Dividends on the Company's
Common Stock could not be paid until such Cumulative Convertible Preferred Stock
dividends are paid in full.
Item 7. Financial Statements
The information required by Item 7 appears in Annex A to this report, which
follows the signature page.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On March 29, 1996, Mahoney Cohen sent a letter to BFG resigning as BFG's
auditor and withdrawing its reports on all financial statements of BFG and its
related entities, including Resort Funding. In the letter, Mahoney Cohen stated
that such financial statements were based on, among other things, information
supplied by Patrick Bennett and, in light of the allegations in the Civil
Complaint, including allegations that Mr. Bennett had provided Mahoney Cohen
with false and materially misleading information relating to BFG and BMDC,
Mahoney Cohen claimed it had no choice but to withdraw its reports on such
financial statements. Although there were no allegations in the Civil Complaint
that Mr. Bennett had provided false or materially misleading information
regarding Resort Funding to Mahoney Cohen in connection with its reports on
Resort Funding's financial statements, Mahoney Cohen nevertheless subsequently
confirmed that its letter of resignation and withdrawal covered reports on
financial statements of Resort Funding as well. Prior to such resignation and
withdrawal of reports, Resort Funding had no disagreements with Mahoney Cohen as
to any matter of accounting principles or practices, financial statement
disclosure or audit scope or procedure, and Mahoney Cohen's reports on its
financial statements did not contain any adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
On April 5, 1996, the Company received a letter from Puritz & Weintraub,
the Company's independent accountants, stating that such firm was resigning as
the Company's auditor effective as of the date of such letter. The opinions of
Puritz & Weintraub with respect
22
<PAGE>
to the financial statements of the Company for the periods ended August 31, 1994
and 1995 and December 31, 1995 did not contain any adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles, nor has there been any disagreement as to any matter of
accounting principles or practices, financial statement disclosure or audit
scope or procedure during the Company's two most recent fiscal years or any
subsequent interim period.
In October 1996, the Company engaged FMFE to audit the financial
statements. FMFE audited the Company's financial statements for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995. The audited
financial statements for the periods ended December 31, 1997 and 1996 are
included in Annex A and also include FMFE's unqualified audit opinion for these
periods.
23
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters & Control Persons; Compliance
with Section 16(a) of the Exchange Act.
On October 2, 1997, Thomas J. Hamel, as sole director of the Company,
appointed Richard C. Breeden, George W. Carmany III and John R. Petty to the
Board of Directors for the Company, and Richard C. Breeden was elected by the
Board of Directors to serve as Chairman of the Board. The Directors of the
Company are as follows:
Name Age Principal Occupation
---- --- --------------------
Richard C. Breeden 48 Trustee, Bennett Funding Group, Inc.
Thomas J. Hamel 39 President & Chief Operating Officer,
Resort Funding, Inc.
George W. Carmany III 58 Chairman of the Board,
New England Medical Center
John R. Petty 67 Chairman, Federal National
Payables Inc. and TECSEC, Inc.
George W. Carmany, III is President of The G.W. Carmany Co., Inc. in
Boston, MA, advisors to and investors in small companies. A graduate of Amherst
College, Mr. Carmany began his business career with Bankers Trust Company as an
officer in its International Banking Department in New York, and later as
Executive Director of its merchant banking subsidiary in Australia. From
1975-1995 he served in a variety of senior positions with American Express
Company, including Senior Vice President, Corporate Strategic Planning. At
American Express Bank, Mr. Carmany served as Senior Executive Vice President and
Chief Administrative Officer before joining American Express' subsidiary The
Boston Company as Senior Executive Vice President, Treasurer and Director, a
position he held until the sale of that company to Mellon Bank Corporation. Mr.
Carmany subsequently served as Chairman of the Olympia and York Noteholder's
Steering Committee, and he is Chairman of the New England Medical Center, Inc.
Mr. Carmany serves as a director or trustee of numerous organizations, including
Ekco Group, Inc., Bentley College, the U.S.S. Constitution Museum and The South
Street Seaport Museum. Mr. Carmany's family owned and operated resort hotels in
various locations in the United States.
John R. Petty, former Chairman and Chief Executive Officer of Marine
Midland Bank, is currently Chairman of Federal National Payables, Inc. Bethesda,
MD and TECSEC, Inc., Vienna, VA. Following his graduation from Brown University,
and a tour in the US Navy, Mr. Petty joined the Chase Manhattan Bank, where he
worked until serving in the U.S. Treasury Department from 1966 - 1972, primarily
as Assistant Secretary of the Treasury for International Affairs. After five
years as a partner of Lehman Brothers, Mr. Petty joined Marine Midland, as
President and/or Chairman and CEO from 1976 - 1988. Since retiring from Marine,
Mr. Petty has pursued a variety of interests including serving as Chairman of
the Nippon Credit Trust Company. He has formed and managed finance companies and
is a principal in high technology ventures. Mr. Petty has served as a director
of numerous public companies, including Hongkong and Shanghai Banking
Corporation, RCA, NBC, Hercules, Inc., Anixter International Corporation, ANTEC
Corporation, and others. He is a Trustee of American University, a member of the
Council on Foreign Relations and of the Inter-American Dialogue, and President
of the Foreign Bondholders Protective Council.
Richard C. Breeden is Trustee of the Bennett Funding Group, Inc. and
President and CEO of Richard C. Breeden & Co., Inc., in Greenwich, CT. Breeden &
Co. provides consulting and management services in turnarounds, bankruptcies and
other corporate distress situations, as well as consulting on global and
domestic capital markets. A graduate of Stanford
24
<PAGE>
University and the Harvard Law School, Mr. Breeden served in the White House as
a senior economics and financial advisor to President George Bush. From
1989-1993 he served as Chairman of the U.S. Securities and Exchange Commission.
Mr. Breeden has served on numerous boards and commissions, including the North
American Advisory Board of Daimler-Benz A.G., The Philadelphia Stock Exchange,
Inc., the German-American Chamber of Commerce, and advisory commissions on
capital markets in Italy, China and Russia. Mr. Breeden is a Trustee of St.
Paul's Cathedral Trust in America and the National Policy Association in
Washington, D.C. Mr. Breeden serves as a director of the Company in his capacity
as Trustee and as a representative of the Estate.
On October 3, 1997, the Board of Directors of the Company appointed the
following officers of the Company:
Name Age Title
---- --- -----
Richard C. Breeden 48 Chief Executive Officer
Thomas J. Hamel 39 President and Chief Operating
Officer
Gerald L. Klaben, Jr. 34 Chief Financial Officer and
Executive Vice-President,
Treasurer
Lisa M. Henson 34 Vice-President
James R. Petrie 34 Controller
Eric C. Cotton 33 Secretary
Richard C. Breeden serves as a director of the Company and Chief Executive
Officer in his capacity as Trustee of the Estate.
Thomas J. Hamel is a director of the Company and has been President and
Chief Operating Officer of Resort Funding since November 1996. From 1992 through
October 1996, Mr. Hamel served as Executive Vice-President of Resort Funding and
was responsible for business development.
Gerald L. Klaben Jr. has been Executive Vice President and Chief Financial
Officer of Resort Funding since July 1996. From November 1989 through July 1996,
he served as a financial officer of the Pyramid Companies, one of the largest
developers of shopping malls in the Northeastern United States.
Lisa M. Henson has been Vice President of Resort Funding since July 1996.
From June 1995 through July 1996, she served as Treasurer of Resort Funding.
From 1991 through June, 1996, she served as Assistant Treasurer of Resort
Funding.
James R. Petrie has been Controller of Resort Funding since September
1996. From June 1992 to September 1996, he served in various accounting and
financial capacities for the Pyramid Companies.
Eric C. Cotton has been General Counsel of Resort Funding since June 1997.
From July 1990 through June 1997, he served as Assistant General Counsel of the
Pyramid Companies.
The Board of Directors established an audit committee and compensation
committee on October 29, 1997. The Company does not have a nominating committee.
During the twelve months ended December 31, 1997, the Company's Board of
Directors met three times.
25
<PAGE>
All directors of the Company will hold office until the next annual
stockholders' meeting and until the election and qualification of their
successors. Officers hold their respective positions until they resign or are
removed by the Board of Directors.
Section 16 of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of a registered class of the Company's equity securities to file various reports
with the SEC concerning their holdings of, and transactions in, securities of
the Company. Copies of these filings must be furnished by the Company.
In the case of Thomas J. Hamel, John R. Petty, Richard C. Breeden
(individually), George W. Carmany III, Gerald L. Klaben Jr., James R. Petrie,
Lisa M. Henson and Eric C. Cotton, a Form 5 report relating to one transaction
was not filed on a timely basis. In addition, in the case of Richard C. Breeden
in his capacity as Trustee for the Estate, a Form 5 report relating to eight
transactions was not filed on a timely basis.
Item 10. Executive Compensation
The table below provides information concerning compensation paid by the
Company for the fiscal years ended 1997, 1996, and August 31, 1995 to each
executive officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term Compensation
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------------------
(e) (f)
Other Annual Restricted (g) (i)
(a) (b) (c) (d) Compensation Stock Number of (h) All other
Name & Principal Position Year Compensation Bonus (1) Awards Options LTIP Payouts Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard C. Breeden 1997 -0- -0- -0- -0- -0-(2) -0- -0-
Chairman, CEO
(3)
Thomas J. Hamel 1997 $227,463 $80,000 -0- -0- 300,000 -0- -0-
Director, 1996 $217,958 -0- -0- -0- -0- -0- -0-
President,COO 1995 $224,019 -0- -0- -0- -0- -0- -0-
Gerald L. Klaben, Jr 1997 $149,819 $25,000 -0- -0- 75,000 -0- -0-
CFO, Executive 1996 $58,385 -0- -0- -0- -0- -0- -0-
Vice-President
Murray Bacal 1995 $141,750 $0 (4) -0- -0- -0- -0-
Chairman, CEO
(4), (5), (6)
Joseph Mooney 1995 $148,749 $10,000 $14,500 -0- 0 -0- -0-
Senior Exec. V.P
(7), (8)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include reimbursements for out-of-pocket expenses incurred on
behalf of the Company or amounts charged to a loan account.
(2) The Estate is the beneficial holder of 200,000 stock options issued in the
name of Mr. Breeden as Trustee.
(3) Mr. Breeden's does not receive any compensation from the Company. He is
entitled to reasonable reimbursement of out-of-pocket expenses related to
the Company's business activities.
26
<PAGE>
in the name of Mr. Breeden, who holds the entire value of such options for
the benefit of the Estate.
(4) Includes consulting fees pursuant to a contract with MBS Investments, Inc.
(see description below)
(5) See description below under "Employment/Consulting Agreements."
(6) Mr. Bacal resigned in May 1995.
(7) Mr. Mooney resigned in May 1995.
(8) Mr. Mooney exercised his option to purchase 1,000 shares in May 1995.
COMMON STOCK OPTION GRANTS - 1997
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
- --------------------------------------------------------------------------------
Exercise
Number of % of or Base Grant
Options Total Price Expiration Date
Name Granted Options ($/share) Date Value(1)
- --------------------------------------------------------------------------------
Bennett Funding
Group, Inc.
(Richard C.
Breeden,
Trustee)(2) 200,000 23.3% $5.05 12/23/07 $446,000
- --------------------------------------------------------------------------------
Thomas J.
Hamel 300,000 35.0% $1.00 5/29/02 $81,000
- --------------------------------------------------------------------------------
Gerald L.
Klaben, Jr. 75,000 8.7% $1.00 5/29/02 $21,000
- --------------------------------------------------------------------------------
(1) The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1997 - dividend yield of -0-%,
expected volatility of 2.96%, risk-free interest rates of 6.26%, and
expected lives of 5 and 10 years.
(2) Bennett Funding Group, Inc. is the beneficial holder of 200,000 stock
options issued in the name of Richard C. Breeden as Trustee for BFG. Mr.
Breeden has no personal interest in such options.
Resort Funding formed a Profit Sharing and 401(k) pension plan (the
"Plan") for its employees on January 1, 1997. The Plan qualifies under Internal
Revenue Code section 401(a) and the eligibility and contribution requirements
are not more favorable for highly compensated employees than for other
employees. Employees are allowed to contribute from 1% to 15% of their annual
compensation. The Plan provides that on an annual basis, Resort Funding may
provide matching contributions based upon the employee contributions and is also
able to make a voluntary profit sharing contribution on behalf of each employee
which will be allocated based upon the employee's compensation. For 1997, Resort
Funding provided matching funds for the first 4% contributed by each employee.
On October 29, 1997, the Company's board of directors approved the
Company's 1997 Long-Term Incentive Plan (the "LTIP"), which became effective as
of December 31, 1997. According to the terms of the LTIP, key employees and
directors of the Company may be granted stock options for shares of the
Company's common stock. The LTIP is administered by the compensation committee
(the "Compensation Committee") of the Company's board of directors.
27
<PAGE>
According to the LTIP, up to 1,600,000 shares of common stock may be awarded
during the period in which the LTIP is effective, at an exercise price and on
terms and conditions determined by the Compensation Committee. No more than
400,000 shares may be granted during a calendar year to any individual. The term
of the LTIP is 10 years, but the Company's board of directors may discontinue
the LTIP in its discretion.
Employment and Consulting Agreements
Resort Funding entered into an employment agreement with Thomas Hamel on
May 29, 1997 pursuant to which he is serving as Resort Funding's President and
Chief Operating Officer for a three-year term and thereafter for successive
one-year renewal terms unless either party elects not to renew the agreement,
pursuant to the terms set forth therein. The agreement provides for an annual
base salary of $220,000 during the first year, increased annually at the
discretion of the Board of Directors of Resort Funding (but not less than the
percentage increase in the urban consumer price index). The agreement also
provides for a bonus of $80,000 in 1997, and a bonus each year thereafter based
on performance measures agreed to by the parties (but not less than $80,000).
The Trustee is a party to the agreement solely for the purpose of agreeing (i)
to recommend to the Board of Directors of the Company the issuance of stock
options ("Options") to Mr. Hamel covering 300,000 shares of Common Stock of the
Company (the "Option Shares"); (ii) to take related actions intended to
facilitate issuance of the Option Shares; and (iii) to seek the opinion of the
Board of Directors of Resort Funding as to the level and nature of stock
incentives that should be provided to Mr. Hamel thereafter (for the years after
1997, the agreement provides that Mr. Hamel's total compensation should include
an incentive component). The agreement provides that the Options (i) shall have
an exercise price of $1.00 per share; (ii) shall expire on the fifth anniversary
of the date of grant; (iii) shall vest as to 150,000 Option Shares 18 months
following the date of the agreement and, as to the remaining 150,000 Option
Shares, on the third anniversary of the agreement (provided Mr. Hamel is
employed by Resort Funding on each such date); and (iv) shall expire 60 days
after Mr. Hamel's employment terminates (if Mr. Hamel's employment terminates
after the vesting of such Options but before the exercise thereof). Mr. Hamel
will be released from his obligations under the agreement if the issuance of
such Options is not approved by the Board of Directors of Resort Funding within
90 days after their initial meeting following reconstitution of such Board with
at least two duly elected members other than Mr. Hamel.
In addition, the agreement provides Mr. Hamel with employee benefits on
the same terms as those available to senior executive officers of Resort
Funding. Resort Funding has also agreed to provide at least $600,000 of life
insurance for Mr. Hamel. Under the agreement, Resort Funding may terminate Mr.
Hamel's employment at any time for any reason, and Mr. Hamel may terminate his
employment for any reason at any time upon 90 days prior written notice. If,
prior to the agreement termination date then in effect, Mr. Hamel resigns for
"Good Reason" (as defined in the agreement) arising following a "Change of
Control" (as defined in the agreement), or is terminated by Resort Funding for
any reason other than for "Cause" (as defined in the agreement), then Mr. Hamel
(provided he executes a release) will be entitled to receive a cash severance
amount equal to 100% of the remaining then-current base salary and bonus due
through such agreement termination date (or due for the year of termination, if
the termination or resignation occurs subsequent to the third anniversary of the
agreement), plus the immediate vesting of all outstanding Options. "Change of
Control" is defined in the agreement so as to include the filing by Resort
Funding of a case under the Bankruptcy Code (other than a pre-packaged
bankruptcy filed on the motion of Mr. Breeden, in which it is proposed that the
agreement be continued), provided a bankruptcy trustee is appointed for Resort
Funding. In such event, prior to the filing of such case, Resort Funding agrees
to confess judgment in Mr. Hamel's favor in an amount equal to the outstanding
compensation then due under the agreement. Resort Funding also has agreed that
if it should entertain a formal offer for the acquisition of a
28
<PAGE>
controlling stake of its voting shares or all or substantially all of its
assets, then it will inform Mr. Hamel of such offer and invite him to submit a
competing offer.
Mr. Hamel has agreed to preserve the confidentiality of information
regarding Resort Funding. Mr. Hamel has also agreed that, during the period
commencing on the date of the agreement and ending on the date of the later of
the third anniversary of the date of the agreement or the date his employment
terminates (or one year following such later date if he terminates his
employment without Good Reason following the second anniversary of the date of
the agreement), he will not become employed by, consult with or otherwise become
involved with any "Prohibited Entity" (as defined in the agreement). During such
period, Mr. Hamel has further agreed not to employ any employee, agent or
representative of Resort Funding or its affiliates, or to seek to influence any
such individual to terminate his or her relationship with such entity. Such
non-compete and non-solicitation covenants will become void, however, if, prior
to the third anniversary of the agreement, the Trustee ceases to be a member of
the Board of Directors of Resort Funding other than by reason of his death,
disability or voluntary resignation. In such event, Mr. Hamel may terminate his
employment upon 90 days' notice, but will not be entitled to any severance
payments. Resort Funding also has agreed to indemnify Mr. Hamel if he incurs any
liabilities as a result of his affiliation with Resort Funding.
Resort Funding entered into an employment agreement with Gerald Klaben on
July 15, 1996 pursuant to which he is serving as Resort Funding's Executive Vice
President and Chief Financial Officer for a three-year term and thereafter for
successive one-year renewal terms unless either party elects not to renew the
agreement at least 90 days prior to the end of the original term or any renewal
term. The termination provisions of Mr. Klaben's contract are substantially
similar to those contained in Mr. Hamel's employment agreement described above.
The agreement, as amended in January, 1997, provides for an annual base salary
of $150,000 during the first year, increased annually by the same percentage
increase as the urban consumer price index. In addition, the agreement provides
for a bonus of $50,000 in 1997 and permits the board of directors of Resort
Funding to grant bonuses, incentive compensation and equity participation based
on Mr. Klaben's performance, and to provide other benefits on the same terms as
those available to senior executive officers of Resort Funding. Mr. Klaben's
contract also includes the granting of 75,000 shares of Common Stock of the
Company (the "Option Shares"). The terms of the Options for Mr. Klaben, with the
exception of number of shares, are substantially similar to those set forth in
Mr. Hamel's employment agreement. Resort Funding has also agreed to provide at
least $350,000 of life insurance for Mr. Klaben. Mr. Klaben has agreed to
preserve the confidentiality of information regarding Resort Funding.
Richard C. Breeden serves as chief executive officer and as chairman of
the board of directors of the Company in his capacity as Trustee and as a
representative of the Estate, the majority shareholder of the Company's stock.
There is no employment contract or other agreement with the Company to require
Mr. Breeden's continued involvement with the Company, and Mr. Breeden receives
no compensation for serving as a director, chairman and CEO, other than his
compensation as Trustee. If the shares of stock owned by the Estate were
liquidated, there can be no assurance that the Trustee would remain with the
Company. In the event of his departure, it is unlikely that a replacement with
comparable experience and stature to Mr. Breeden could be found who would serve
without compensation.
Joseph Mooney resigned from the Company as Senior Executive Vice President
and Director in May 1995 pursuant to a termination agreement effective May 19,
1995, the terms of which provided for Mr. Mooney to be retained on a consulting
basis through November 19, 1995 at the rate of $2,500 per month. In addition,
Mr. Mooney was to receive $75,000 in severance pay, plus certain other benefits
totaling approximately $7,000 through May 31, 1996. See Item 3 Legal
Proceedings.
29
<PAGE>
On June 11, 1993, the Company entered into a consulting agreement with MBS
Investments, Inc. ("MBS" or "Consultant"), a private company controlled by
Murray Bacal, which was to expire on June 11, 2003. Pursuant to that agreement,
MBS agreed to provide the services of Murray Bacal or such other person
acceptable to the Company to serve as Chairman of the Board of Directors and
Chief Executive Officer. The Consultant was to receive a consulting fee of
$40,000 per month through May 11, 1999, and $50,000 thereafter. Compensation for
consulting could be increased by incentive earnings based bonuses as approved by
a majority of the Board of Directors not having such incentives. The Consultant
also received life insurance in the amount of $2,000,000 on the life of Mr.
Bacal payable to the Consultant's designee as beneficiary, as well as disability
insurance in an amount to approximate his compensation. The Company was not
obliged to pay more than $25,000 for such disability insurance. The Company also
paid $750 per month to be applied by the Consultant to the costs of an
automobile, and the Company reimbursed MBS for the cost of one
secretary-assistant, not to exceed $25,000 per year. The Company agreed to use
its best efforts to cause Mr. Bacal to be nominated for election to the Board of
Directors each year during the term of the agreement. On April 21, 1994, the
consulting agreement was terminated by mutual consent. On May 1, 1994, the
Company agreed to pay MBS the sum of $15,000, per month plus $750 for auto
expenses, on a month-to-month basis. The Company also agreed to reimburse MBS
for the cost of one secretary-assistant, not to exceed $25,000 per year. Mr.
Bacal resigned as Chairman of the Board of Directors and as a Director on May
31, 1995.
30
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of December 31, 1997 on the
Company's voting securities with respect to the share ownership by management
and beneficial owners of more than 5% of the outstanding amount of such stock.
Amount and
Name and Address Nature of Beneficial Percent
Title of Class of Beneficial Owner(1) Ownership (2) of Class
Common Stock Bennett Management & 7,121,285 32.6%
Development Corporation
2 Clinton Square
Syracuse, NY 13202
Bennett Funding Group, Inc. 12,349,596 56.6%
2 Clinton Square
Syracuse, NY 13202
Richard C. Breeden (3) 3,000 0.01%
Series 2 Preferred The Bennett Funding Group, Inc. 10,000 100.0%
Stock(4) 2 Clinton Square
Syracuse, NY 13202
(1) Except as otherwise noted below, each person has sole voting power and
investment power with respect to the voting securities indicated as owned
beneficially by such person.
(2) Except as otherwise noted below, all voting securities listed are
owned both of record and beneficially.
(3) Mr. Breeden's shares are held individually and not in his capacity as
Trustee. In response to a request from the Creditors' Committee, Mr.
Breeden has agreed to dispose of these shares.
(4) The Series 2 Preferred Stock is entitled to 20% of the total number of
votes of the Company.
Item 12. Certain Relationships and Related Transactions
Bankruptcy of Affiliated Companies. Effective February 16, 1996, the
Company entered into the Exchange Agreement, among the Company, BFG, and Resort
Funding, pursuant to which the Company acquired all of the common stock of
Resort Funding from BFG in exchange for the issuance to BFG of 10,000 shares of
the Series 2 Preferred Stock and 3,000 shares of the Convertible Preferred
Stock.
31
<PAGE>
PART IV
Item 13. Exhibits, Listed Reports on Form 8-K
(a) Index to Consolidated Financial Statements and Schedules
1. Financial Statements
The following financial statements of the Company are included in
Annex A:
Annex Page
Report of Independent Certified Public Accountant's
Consolidated Financial Statements 1
Consolidated Balance Sheet as of December 31, 1997 and
December 31, 1996 2-3
Consolidated Statement of Operations for the years ended
December 31, 1997 and December 31, 1996 4
Consolidated Statement of Equity Accounts for the years
ended December 31, 1997 and December 31, 1996 5
Consolidated Statement of Cash Flows for the years ended
December 31, 1997 and December 31, 1996 6-7
Notes to Consolidated Financial Statements 9-24
2. All Schedules have been omitted because they are not applicable or the
required information is shown in the financial statements.
3. Reports on Form 8-K. The Company filed the following reports on Form 8-K
during the last quarter of the period covered by this report:
a. November 6, 1997 Form 8-K announcing recapitalization
b. November 6, 1997 Form 8-K announcing third-quarter earnings
c. December 8, 1997 Form 8-K announcing CSFB financing facility
4. The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Exchange dated February 16, 1996, by and among
The Bennett Funding Group, Inc., Bennett Funding International, Ltd.
and Equivest Finance, Inc. (incorporated by reference to Exhibit 2
contained in the Company's Form 8-K dated February 16, 1996).
3.1 Certificate of Incorporation and Amendments thereto (incorporated by
reference to Exhibits 3(a), 3(b) and 3(d) to Registration Statement
on Form S-18, File No. 33-24855-A).
3.2 Certificate of Amendment to Certificate of Incorporation
(incorporated by reference to Exhibit 3(b) to Form 10-K for the
fiscal year ended August 31, 1989).
32
<PAGE>
3.3 Form of Certificate of Amendment to Certificate of Incorporation
(incorporated by reference to Exhibit 3(d) in the Registrant's Form
S-1 Registration Statement, File No. 33-39758).
3.4 Form of Certificate of Amendment to Certificate of Incorporation
increasing authorized shares of Common Stock dated February 19, 1998
3.5 Statement establishing Series 2 Preferred Stock (incorporated by
reference to Exhibit 2 contained in the Company's Form 8-K dated
February 16, 1996).
3.6 Statement establishing Convertible Preferred Stock (incorporated by
reference to Exhibit 2 contained in the Company's Form 8-K dated
February 16, 1996).
3.7 By-laws, as amended to date (incorporated by reference to Exhibit
3(a) in the Company's Form S-18 Registration Statement, File No.
33-24855-A).
10.2 Form of Indenture (incorporated by reference to Exhibit 4(e) filed
with the Registration Statement on Form S-18, File No. 33-24855-A).
10.3 Short Term Bond Exchange Agreement
10.4 Receivables Financing Facility extended by Holland Limited
Securitization, Inc. and Internationale Nederlanden (U.S.) Capital
Markets, Inc. to Bennett Funding International, Ltd. and BFICP
Corporation
10.5 Assignment, Release and Custodial Agreement between Resort Funding,
Inc., BFICP Corporation, Credit Suisse First Boston Mortgage Capital
LLC, ING (U.S.) Capital Markets Corporation, ING (U.S.) Capital
Markets, Inc., Holland Limited Securitization, Inc., First Trust of
New York, N.A. and Concord Servicing Corporation
10.6 $75,000,000 Receivables Financing Facility extended by Credit Suisse
First Boston Mortgage Capital LLC to Resort Funding, Inc.
10.7 $30,000,000 Acquisition and Development Financing Facility extended
by Credit Suisse First Boston Mortgage Capital LLC to Resort
Funding, Inc.
10.8 Order dated November 24, 1997, of the United States Bankruptcy Court
for the Northern District of New York, authorizing conversion of
Resort Funding, Inc. debt to Bennett Funding Group into shares of
Equivest Finance, Inc. Common Stock
10.9 Resort Funding, Inc. Profit Sharing & 401k Plan
10.10 Equivest Finance, Inc. 1997 Long Term Incentive Plan
10.11 Employment Agreement dated May 29, 1997, by and between Thomas J.
Hamel and Richard C. Breeden, as Trustee
10.11 Employment Agreement dated July 26, 1996 by and between Gerald L.
Klaben, Jr. and Richard C. Breeden, as Trustee
33
<PAGE>
11. Computation of earnings per share. See Notes to Consolidated
Financial Statements.
21. Subsidiaries of the Company. Resort Funding, Inc., a Delaware
corporation, and BFICP Corporation, a Delaware corporation
99.1 Letter from Mahoney Cohen to BFG, dated March 29, 1996, resigning as
BFG's auditors.
99.2 Letter from Puritz and Weintraub to the Company, dated April 5,
1996, resigning as the Company's auditors.
27 Financial Data Schedule.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned hereunto
duly authorized.
EQUIVEST FINANCE, INC.
By:____________________________
(Gerald L. Klaben, Jr.,
Chief Financial Officer)
34
<PAGE>
Audited Consolidated Financial Statements
EQUIVEST FINANCE, INC.
AND SUBSIDIARIES
December 31, 1997 and 1996
<PAGE>
Audited Consolidated Financial Statements
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
Independent Auditor's Report................................................ 1
Consolidated Balance Sheets................................................. 2
Consolidated Statements of Income........................................... 4
Consolidated Statements of Equity Accounts.................................. 5
Consolidated Statements of Cash Flows....................................... 6
Notes to Consolidated Financial Statements.................................. 7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Equivest Finance, Inc.
Syracuse, New York
We have audited the accompanying consolidated balance sheets of Equivest
Finance, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, equity accounts, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Equivest Finance, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
FIRLEY, MORAN, FREER & EASSA, P.C.
Syracuse, New York
February 20, 1998
F-1
<PAGE>
CONSOLIDATED BALANCE SHEETS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31,
1997 1996
------------ ------------
ASSETS
Cash and cash equivalents $ 4,620,479 $ 4,037,201
Receivables:
Accounts receivable 1,437,928 6,234,491
Notes and advance receivable 119,210,250 90,307,500
Less allowance for doubtful receivables (2,442,244) (1,979,182)
------------ ------------
118,205,934 94,562,809
Accounts receivable--related party -0- 671,411
Notes receivable--related party 4,023,431 7,537,968
------------ ------------
122,229,365 102,772,188
Deferred financing costs, less amortization
of $1,969,700 in 1997 and $922,702 in 1996 4,125,972 3,859,554
Cash--restricted 855,138 1,128,773
+ Accrued interest receivable 341,107 425,471
Deferred taxes 1,141,536 824,536
Other assets 170,370 156,084
------------ ------------
$133,483,967 $113,203,807
============ ============
F-2
<PAGE>
<TABLE>
<CAPTION>
December 31,
1997 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and other liabilities:
Accounts payable $ 434,072 $ 715,698
Accounts payable--related parties 11,235 680,842
Accrued expenses and other liabilities 519,109 994,788
------------- -------------
964,416 2,391,328
Notes payable 99,961,357 82,942,196
Notes payable--related party -0- 23,803,257
------------- -------------
100,925,773 109,136,781
SUBSEQUENT EVENTS, CONTINGENCIES AND
COMMITMENTS
12.5% REDEEMABLE CONVERTIBLE PREFERRED STOCK
$3 par value; 1,000,000 shares
authorized, 9,915 shares outstanding 29,745 29,745
PREFERRED AND COMMON STOCK AND OTHER CAPITAL
Cumulative Redeemable Preferred Stock--Series 2
Class A, $3 par value; 15,000 shares authorized,
10,000 shares outstanding 30,000 30,000
Cumulative Convertible Preferred Stock--Series 2,
$3 par value; 3,000 shares authorized, -0- shares
outstanding in 1997, and 3,000 shares outstanding
in 1996 -0- 9,000
Common Stock, $.05 par value; 50,000,000 shares authorized,
21,834,443 shares outstanding in 1997 and 9,484,847
shares outstanding in 1996 1,091,723 474,243
Additional paid in capital 32,078,721 6,330,956
Retained earnings (deficit) (671,995) (2,806,918)
------------- -------------
32,528,449 4,037,281
------------- -------------
$ 133,483,967 $ 113,203,807
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended
December 31,
1997 1996
------------ ------------
<S> <C> <C>
REVENUE
Interest $ 15,109,185 $ 12,997,682
Gains on sales of contracts 29,689 422,328
Other income 825,612 843,349
------------ ------------
15,964,486 14,263,359
COSTS AND EXPENSES
Provision for doubtful receivables 925,000 178,543
Interest 8,076,569 8,270,593
Debt related costs including amortization
of financing costs 1,063,377 903,613
Selling, general and administrative 2,475,117 3,221,365
------------ ------------
12,540,063 12,574,114
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,424,423 1,689,245
PROVISION FOR INCOME TAXES
Current 510,000 195,000
Deferred credit (317,000) (166,000)
------------ ------------
193,000 29,000
------------ ------------
NET INCOME $ 3,231,423 $ 1,660,245
============ ============
EARNINGS PER COMMON SHARE Basic earnings per Common Share:
Net income $ .22 $ .12
============ ============
Diluted earnings per Common Share:
Net income $ .15 $ .07
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF EQUITY ACCOUNTS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Redeemable
Preferred Convertible Additional
Stock-- Preferred Paid Retained
Series 2 Stock-- Common Stock in Earnings
Total Class A Series 2 Shares Amount Capital (Deficit)
----- ------- -------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 $2,377,036 $30,000 $9,000 9,484,847 $474,243 $6,330,956 $(4,467,163)
Net income 1,660,245 1,660,245
----------- ------- ----- ---------- ---------- ----------- ---------
Balances, December 31, 1996 4,037,281 30,000 9,000 9,484,847 474,243 6,330,956 (2,806,918)
Conversion of debt owed
to related party 24,970,079 4,645,596 232,280 24,737,799
Conversion of Series 2
Preferred Stock to
Common Stock -0- (9,000) 7,500,000 375,000 (366,000)
Dividends on Series 2
Preferred Stock paid in
Common Stock shares -0- 23,721 1,186 126,314 (127,500)
Dividends on Series 2 Class A
Preferred Stock paid in
Common Stock shares -0- 180,279 9,014 959,986 (969,000)
Common Stock warrants issued 289,666 289,666
Net income 3,231,423 3,231,423
----------- ------- ----- ---------- ---------- ----------- ---------
Balances, December 31, 1997 $32,528,449 $30,000 $ -0- 21,834,443 $1,091,723 $32,078,721 $(671,995)
=========== ======= ===== ========== ========== =========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended
December 31,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income $3,231,423 $1,660,245
Adjustments to reconcile net income to net cash
from (used in) operating activities:
Amortization and depreciation 1,048,534 733,903
Provision for doubtful receivables 925,000 178,543
Deferred tax credit (317,000) (166,000)
Gains on sales of contracts (29,689) (422,328)
Changes in assets and liabilities:
Increase in other assets (1,218,644) (2,754,358)
Decrease (increase) in accounts receivable--
related party 163,025 (671,411)
Decrease (increase) in restricted cash 273,635 (864,295)
Increase (decrease) in accounts payable
and accrued expenses 1,473,509 (3,815,884)
Decrease in accounts payable--related parties (365,585) (1,469,308)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,184,208 (7,590,893)
CASH FLOWS USED IN INVESTING ACTIVITIES
Increase in receivables, net (25,745,306) (17,433,818)
Proceeds from sales of contracts 1,206,870 6,966,882
(Purchase) sale of equipment (26,230) 22,951
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (24,564,666) (10,443,985)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from recourse notes payable 21,042,826 26,096,575
Payments on recourse notes payable (14,092,955) (15,944,991)
Proceeds from non-recourse notes payable 23,821,115 36,785,065
Payments on non-recourse notes payable (14,109,373) (15,547,922)
Repayment of loans to related party (6,545,967) (12,482,296)
Payments on notes receivable--related party 9,960,503 5,044,328
(Payments on) proceeds from notes payable (112,413) 280,156
Payments on loans payable--related party -0- (3,461,770)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,963,736 20,769,145
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 583,278 2,734,267
Cash and cash equivalents at beginning of year 4,037,201 1,302,934
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $4,620,479 $4,037,201
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business : Equivest Finance, Inc. (Equivest) and
subsidiaries (collectively, the "Company"), includes Equivest Capital Funding,
Inc. (inactive) and Resort Funding, Inc. and its subsidiary, BFICP Corporation.
Equivest is a holding company. Resort Funding, Inc. and its subsidiary, BFICP
Corporation, provide financing to domestic and foreign timeshare resort
developers ("Resorts") which includes consumer lending for timeshare intervals,
hypothecation loans to resort developers who pledge timeshare loans as
collateral, and resort acquisition and development lending.
The Company is majority owned by The Bennett Funding Group, Inc. (BFG) and its
affiliate, Bennett Management and Development Corporation (BMDC) which,
together, own approximately 91% of the Company's voting shares.
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Equivest and its subsidiaries, Equivest Capital Funding,
Inc. and Resort Funding, Inc. and its subsidiary, BFICP Corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates: The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
costs and expenses during the reporting period. Actual results could differ from
the Company's estimates.
Cash and Cash Equivalents: Cash and cash equivalents consist of cash and money
market investment accounts. These accounts are maintained at several banks;
nevertheless, several are concentrated credit risks because they customarily
exceed the FDIC $100,000 insured limit.
Allowance for Doubtful Receivables: Receivables have been reduced by an
allowance for doubtful receivables. The allowance is an amount which management
believes will be adequate to absorb possible losses on existing receivables. The
evaluation considers past loss experience, known and inherent risks in the
portfolio, adverse conditions that may affect the borrower's ability to repay,
the estimated value of underlying collateral, and current economic conditions.
Receivables are charged against the allowance when management believes that
collectibility is unlikely.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
The Company follows Statement of Financial Accounting Standards No 114
"Accounting by Creditors for Impairment of a Loan" (SFAS 114). Under SFAS 114,
the allowance for doubtful receivables for loans identified as impaired is
specifically determined using the loan's projected discounted cash flow or its
net collateral value.
Because of uncertainties in the estimation process, it is at least reasonably
possible that management's estimate of loan losses inherent in the loan
portfolio and the related allowance will change in the near term. That amount
cannot be estimated.
Deferred Financing Costs: Deferred financing costs represent unamortized
expenses associated with issuing certain debt and fees payable to a Trustee
resulting from bank settlement transactions (see Note F). Amortization of these
costs is charged to operations on a straight-line basis over the term of the
associated debt and does not differ materially from that computed using the
effective interest method. The amortization of deferred financing costs amounted
to $1,046,998 and $712,367 for 1997 and 1996, respectively.
Interest Income: The Company recognizes interest income on consumer financing
contracts using the interest method over the term of the contract. It recognizes
interest income on outstanding resort acquisition and development loans when
earned, based upon the terms of the loan agreements.
The accrual of interest on an impaired loan is discontinued when unpaid
interest, together with the loan principal outstanding, exceeds the loan's
projected cash flow or the loan's net collateral value.
Gains on Sales of Contracts and Transfers of Assets: Gains on sales of contracts
result from periodic sales of consumer receivables on a nonrecourse basis. The
Company records gains to the extent net proceeds exceed the net investment in
the consumer receivables sold. Proceeds from sales of consumer receivables
aggregated $1,206,870 and $6,966,882 in 1997 and 1996, respectively.
Effective January 1, 1997 the Company adopted Statement of Financial Accounting
Standards No. 125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (SFAS 125). SFAS 125 became effective
January 1, 1997 and covers the accounting for transfer and servicing of
financial assets where the transferor has some continuing involvement with the
assets transferred or with the transferee. Under this statement, when it
applies, the Company will recognize the financial and servicing assets it
controls and the liabilities it has incurred from the transfer; and will
derecognize financial assets when control has been surrendered, and derecognize
liabilities when extinguished. The Company had no transactions subject to this
statement in 1997.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Other Income: Other income primarily represents fees which are recognized as
income when the Company performs the related service. These services include
billing services for developers and loan commitment, chargeback and collection
fees charged to resorts.
Income Taxes: The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109
is an asset and liability approach to accounting for deferred income taxes. This
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactments of
changes in tax laws or rates. A valuation allowance is established as a
reduction of deferred tax assets when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Earnings Per Share: The Company computes earnings per share under Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
supersedes Accounting Principles Board Opinion No. 15 and became effective for
periods ending after December 15, 1997. Earnings per share for 1996 have been
restated to reflect SFAS 128. SFAS 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock (such as
options, warrants and convertible securities) outstanding that trade in a public
market. Those entities that have only common stock outstanding present basic
earnings per share amounts. All other entities present basic and diluted per
share amounts. Diluted per share amounts assume the conversion, exercise or
issuance of all potential common stock instruments unless the effect is to
reduce a loss or increase the income per common share from continuing
operations.
Stock-Based Compensation: The Company follows Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. Because the
exercise price of employee stock options approximates the market price of the
underlying stock on the date of grant, no compensation expense is recorded under
APB 25. The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
(SFAS 123).
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE B--RECEIVABLES
Accounts receivable consist of: (1) amounts due from timeshare interval owners
for maintenance and service charges which the Company remits to the resorts upon
receipt, (2) the principal amount of unpaid and delinquent timeshare interval
contracts which are receivable from resorts under the recourse provisions of
applicable financing agreements and (3) at December 31, 1996, an amount due from
a bank in connection with its financing facility. Receivables are stated at
their unpaid principal balances. Amounts due resorts for maintenance and service
charges are included in accounts payable.
Notes and advance receivables include: (1) amounts receivable from timeshare
interval owners less the unearned income and holdbacks on funds borrowed under
those contracts, (2) loans to resorts for acquisition and development of resort
properties, (3) hypothecation loans to resorts pledged by the resort's loans
from timeshare internal owners, and (4) retained interests in receivables sold
under securitization agreements. Interest rates on these receivables range from
10.5% to 18% per annum.
The following are the components of notes and advance receivable as of December
31:
1997 1996
------------- ------------
Timeshare receivables:
Consumer contract receivables $128,696,480 $94,047,861
Unearned interest income (37,594,853) (27,846,532)
Holdbacks (17,320,018) (12,385,961)
------------- ------------
73,781,609 53,815,368
Resort receivables:
Acquisition and development 40,153,185 31,475,174
Hypothecation loans 5,275,456 1,569,968
------------- ------------
45,428,641 33,045,142
Retained interest in securitized receivables -0- 3,446,990
$119,210,250 $90,307,500
Substantially all consumer contracts are with full recourse to the resort
developers. Also, the Company's practice is to withhold approximately fifteen
percent of the purchase price of the consumer contracts until the contract
receivable has been fully collected. The amount of funds withheld comprises
holdbacks on consumer contracts.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE B--RECEIVABLES--Continued
Retained interests in securitized receivables at December 31, 1996 represent the
discounted amount of collections from securitized receivables over the amounts
due to investors in the securitizations. Realization of the carrying value
amount is based on the declines during the period in the present value of the
projected collections using the same discount rate as was appropriate at the
time of securitization. The Company repurchased these receivables in 1997.
Unearned interest income relates to consumer timeshare contracts and represents
the unamortized interest to be recorded in income over the remaining loan terms.
The Company has classified three resort loans as impaired under SFAS 114 at
December 31, 1997. Two of the three debtors have not made principal payments in
accordance with their contractual agreements. The third debtor, whose loan was
also classified as impaired at December 31, 1996, filed for bankruptcy
protection in July 1997. The outstanding balance of impaired loans amounted to
$10,132,607 and $5,315,117 at December 31, 1997 and 1996, respectively. The
average outstanding amounts during 1997 and 1996 were $9,765,342 and $5,147,591.
The Company has no allowance for losses specifically related to these loans
because it believes the market value of the collateral significantly exceeds its
loan investment including unpaid interest. During 1997 and 1996, the Company
recorded interest income on these loans of $1,276,856 and $666,850,
respectively. Interest is current on two loans. Cumulative unpaid interest on
the third loan, $1,411,579 at December 31, 1997 and $666,950 at December 31,
1996, is included in the outstanding loan balance pursuant to the terms of the
loan agreement.
The activity in the allowance for doubtful receivables for the years ended
December 31, 1997 and 1996 follows:
1997 1996
----------- -----------
Balance at beginning of year $1,979,182 $1,850,724
Provision for doubtful receivables 925,000 178,543
Charge-offs and recoveries, net (461,938) (50,085)
----------- -----------
Balance at end of year $2,442,244 $1,979,182
=========== ===========
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE B--RECEIVABLES--Continued
The Company's concentration of credit risk in its accounts and notes receivable
is believed to be substantially mitigated by credit and evaluation procedures.
The Company generally requires collateral and holdbacks and has set up reserves
for potential credit losses which have been within management's expectations.
At December 31, 1997, the Company had agreements for resort development
financing with 17 developers covering 23 timeshare resort complexes. The
Company's consumer contract and hypothecation lending arises from these resorts
and a limited number of other resort developments. At December 31, 1997, the
Company was committed to lend approximately $10 million in funds for resort
construction or renovation. The Company has also agreed to make hypothecation
loans to, or purchase consumer timeshare interval contracts from, 37 resorts,
subject to satisfactory underwriting approval of each individual consumer.
Based on their maturity dates, the notes and advance receivables are due during
the years ending December 31 as follows: 1998--$25,310,490; 1999--$25,085,923;
2000--$28,149,408; 2001--$23,509,481; and 2002 and thereafter--$17,154,948.
NOTE C--RELATED PARTY TRANSACTIONS
Recapitalization: At December 31, 1996, the Company owed its parent company,
BFG, a net total of $23,712,688 of which $23,803,257 was payable under unsecured
demand notes bearing interest at 10 1/2% per annum.
Effective October 30, 1997, the Company increased its number of authorized
shares of Common Stock from 10,000,000 to 50,000,000. The Company then issued
4,645,596 shares to BFG in full satisfaction of its indebtedness to BFG at
November 24, 1997. The net liabilities which were satisfied totaled $24,970,079
and included the demand notes described above and accrued interest. The
conversion price of $5.375 per share was determined using the average closing
price of the Company's Common Stock for ten days preceding Board of Directors'
approval of the transaction.
Concurrently, the Company issued 7,500,000 shares of Common Stock to BFG in
exchange for the 3,000 outstanding shares of Cumulative Convertible--Series 2
Preferred Stock. The Preferred Stock was mandatorily convertible at the rate of
2,500 common shares to 1 preferred share when the Company had a sufficient
number of authorized shares of Common Stock. As part of this transaction, the
Company issued 23,721 shares of Common Stock to BFG in payment of cumulative
dividends of $127,500 through October 31, 1997.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE C--RELATED PARTY TRANSACTIONS--Continued
Notes Receivable: Notes receivable--related party is comprised of the following
as of December 31, 1997 and 1996:
1997 1996
---------- ----------
Due from bankruptcy Trustee $4,023,431 $7,437,968
Due from BMDC -0- 100,000
---------- ----------
$4,023,431 $7,537,968
========== ==========
The notes due from the bankruptcy Trustee bear interest at 10% per annum and are
collateralized by third-party leases. These notes arose in connection with
financing transactions negotiated by the Trustee which are described in Note F.
In the event of default, the Company can apply unpaid amounts to a fee payable
to the Trustee in connection with these financing transactions.
The amount due from BMDC at December 31, 1996 was offset against amounts due to
BFG as part of the recapitalization described above.
Income and Expense: Interest income earned on the notes receivable from
bankruptcy Trustee amounted to $625,511 for 1997 and $61,467 for 1996.
Interest expense incurred on the related party debt amounted to $1,475,609 for
the year ended December 31, 1997 and $2,050,773 for the year ended December 31,
1996.
Other: The Company leases its office facilities from BFG. In 1997 its five year
lease was terminated without penalty when the Company relocated within the same
property. Currently rent is paid on a month-to-month basis ($6,752 per month)
until a new lease agreement is finalized. Rent expense for the office facilities
amounted to $146,399 in 1997 and $161,213 in 1996.
The Company currently receives limited administrative services from BFG related
to billing consumer amounts due under timeshare interval contracts. The expense
amounted to $63,500 and $85,871 during 1997 and 1996, respectively.
Under an agreement which expired March 31, 1996, the Company paid BFG $422,115
in 1996 for various administrative services including billing, collection, legal
and management services.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE D--RESTRICTED CASH
Restricted cash includes $801,443 and $951,079 at December 31, 1997 and 1996,
respectively, on deposit at financial institutions as security under lending
agreements. It also includes $13,774 at December 31, 1997 and $139,065 at
December 31, 1996 in other accounts required under its financing and credit
facilities. The remaining restricted cash of $39,921 and $38,629 at December 31,
1997 and 1996, respectively, is a dual signature account held jointly by the
Company and a resort developer. The cash is available only as payment for
chargebacks on timeshare contracts after approval by both joint account holders.
All restricted cash accounts are held in interest bearing accounts and several
exceed the FDIC insured limit of $100,000.
NOTE E--NOTES PAYABLE
Notes payable consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Amount outstanding under $75,000,000 receivables
financing facility $43,956,667 $33,323,221
Amount outstanding under $30,000,000 credit facility
for financing resort acquisition and development, less
unamortized discount of $289,666 10,312,017 -0-
Collateralized notes payable to banks in monthly installments through 2001
with interest ranging from
9% to 11% per annum 10,176,221 20,902,915
Nonrecourse collateralized notes payable to banks in monthly installments
through 2001 with interest ranging
from 10.5% to 11% per annum 6,154,357 6,441,959
Collateralized notes payable to banks and others
in monthly installments through 2004 with interest
from 1/2% to 4% per annum 22,571,318 16,130,521
----------- -----------
Subtotal 93,170,580 76,798,616
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE E--NOTES PAYABLE--Continued
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Balances brought forward $93,170,580 $76,798,616
Fee payable to bankruptcy Trustee in connection with arrangement of 1/2% to
4% notes payable above,
due in varying annual amounts 3,387,066 2,627,440
Unsecured promissory notes payable maturing December 1,
1998; interest at 8% per annum 3,403,711 3,516,140
----------- -----------
$99,961,357 $82,942,196
=========== ===========
</TABLE>
The receivables financing and credit facilities and the collateralized notes
payable are collateralized by security agreements and assignment of payments due
on timeshare contract notes receivable, notes receivable from resorts and, as
further described below, third-party leases.
Receivable Financing and Credit Facilities: In November 1997 the Company
obtained a $75 million credit facility from a bank to be used to fund the
financing of timeshare receivables. The facility has a two-year revolving period
ending in November 1999 and a one-year payment period ending in November 2000.
The Company can extend the revolving period one year for a fee of 1% of the
unused facility. Outstanding balances bear interest at a floating rate (7.8688%
at December 31, 1997). In this transaction, the bank took an assignment of the
Company's previous $50 million purchase/pledge financing facility. This facility
provides that qualifying contract notes receivable can be either securitized and
sold to the bank without recourse or used as collateral for borrowings. In
connection with the assignment, the Company repurchased receivables previously
sold to the predecessor bank at the outstanding principal balance of $6,404,619.
Currently, no securitization and sale transactions have taken place. The Company
and the bank intend that the additional $25 million provided by the facility
will be used to fund hypothecation loans to resorts.
The Company also obtained a $30 million credit facility from the bank to be used
to fund acquisition and development loans to resorts. It has a two-year
revolving term ending in November 1999 and a one-year payment period ending in
November 2000. Outstanding balances bear interest at a floating rate (8.8688% at
December 31, 1997). In connection with this transaction, the bank received
warrants for the purchase of 250,000 shares of the Company's Common Stock as
described in Note K. The warrants were valued at $289,666. This has been
accounted for as a discount in consideration for making the loan and will be
amortized as interest expense over the loan term.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE E--NOTES PAYABLE--Continued
The agreements contain both specific and general covenants including maintenance
of specific collateralization and default rates with respect to pledged
receivables and tangible and overall net worth requirements.
1/2% to 4% Collateralized Notes Payable: Beginning in November 1996, the Company
has obtained financing at favorable interest rates from banks and others who
were creditors of affiliates which had filed for bankruptcy protection as
described in Note G. The bankruptcy Trustee arranged this financing and borrowed
part of the proceeds from the Company in order to settle the bankrupts'
obligations with those creditors. The notes receivable from the related
bankrupts are collateralized by third-party leases owned by the affiliated
entities. As part of these financing arrangements, the Company assigned its
collateral interest in the third-party leases to these lenders. As consideration
for the financing, the Company will pay a fee to the bankrupt Trustee based on
an annual rate of approximately 3% of the unpaid principal balance of the loans.
The Company is recognizing this fee as interest over the various loan terms.
Subsequent maturities of notes payable for the years ending December 31 are:
1998-- $9,613,674; 1999--$6,841,613; 2000--$61,965,122; 2001--$6,460,492;
2002--$5,674,112; and thereafter $9,406,344.
NOTE F--INCOME TAXES
The Company files a consolidated federal income tax return which includes all of
its subsidiaries. The Company will, if approved by applicable state authorities,
file combined state income tax returns beginning in 1997. Each company filed
separate state income tax returns during 1996.
The consolidated provisions for income taxes included in the accompanying
Statements of Income consist of the following for the years ended December 31,
1997 and 1996:
1997 1996
Current provision:
Federal $ 72,000 $ -0-
State 438,000 195,000
--------- ---------
510,000 195,000
Deferred provision (benefit):
Federal (280,000) 31,000
State (37,000) (197,000)
--------- ---------
(317,000) (166,000)
$193,000 $ 29,000
========= =========
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE F--INCOME TAXES--Continued
The provisions for income taxes for 1997 and 1996 are less than amounts computed
by applying the statutory rate (34%) to income before income taxes for the
following reasons:
1997 1996
----------- ---------
Income taxes at statutory rates $1,164,000 $589,000
State income taxes, net of federal income tax benefit 264,000 129,000
Reduction of valuation allowance (1,307,000) (714,000)
Alternative minimum tax 72,000 -0-
Other items -0- 25,000
----------- ---------
Provision for income taxes $193,000 $29,000
=========== =========
The Company has valuation allowances for its net operating loss carryforwards
because there is no assurance that the Company will generate sufficient taxable
earnings to utilize the unrestricted loss carryforwards before they expire.
Management believes that all other net deductible temporary differences will
reverse during periods in which the Company generates net taxable income.
The change in valuation allowance in 1997 reflects a decrease of $1,306,906 for
the use of operating loss carryforwards. The valuation allowance changed in 1996
to reflect a decrease of $534,000 for the use of net operating loss
carryforwards and a decrease of $180,000 to eliminate an allowance previously
established for deferred state income taxes.
Net deferred tax assets included in the accompanying consolidated balance sheets
are comprised of the following at December 31, 1997 and 1996:
1997 1996
----------- -----------
Receivable allowance $888,822 $694,408
Net operating loss carryforwards 232,615 1,539,521
Depreciation 97,438 -0-
State income taxes, net of federal benefit 155,276 130,128
----------- -----------
1,374,151 2,364,057
Valuation allowance (232,615) (1,539,521)
----------- -----------
$1,141,536 $824,536
=========== ===========
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE F--INCOME TAXES--Continued
The Company has federal net operating loss carryforwards of approximately
$684,000 at December 31, 1997 which expire in the following years:
2007--$443,000; and 2009--$241,000.
NOTE G--CONTINGENCIES AND COMMITMENTS
On March 28, 1996, the Company's majority owners (BFG and BMDC) were named in a
series of suits filed by the Securities and Exchange Commission. On March 29,
1996, both entities and several other of their affiliates filed for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code. Those companies are
currently being managed for the benefit of their creditors by the Court
appointed bankruptcy Trustee. The ultimate impact of these events on the
Company's business and operations is not presently determinable.
The Company has been named with BFG and its affiliates in two class action type
claims brought in connection with investments made by the claimants through BFG
or its other affiliates. The complaints have not yet been answered and it is too
early to assess the likelihood of an unfavorable outcome. One action has been
stayed by an order of the Bankruptcy Court and the other will likely be stayed.
The Company is a defendant in a legal action filed by a former officer and
director of the Company against the Company and other parties containing
numerous allegations. The Company believes that this legal action is lacking in
merit and intends to vigorously defend the lawsuit.
The Company is a defendant in a claim for payment of unclaimed property under
Florida abandoned property law of approximately $402,000. It arose in connection
with a premium finance business previously carried on by Equivest. The Company
does not dispute the amount but approximately $325,000 of the claim had been
held by the Company before enactment of the law in 1990. The Company intends to
contest the claim for that portion and has recorded a liability of $77,000 for
the balance. No assessment of the Company's position can be made at this time.
The Company has employment agreements with two of its executive officers that
provide for lump sum severance payments and accelerated vesting of options upon
termination of employment under certain circumstances including change of
control, as defined. The Company's minimum payment obligation under the
severance provisions of these agreements was $1,033,000 at December 31, 1997.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE H--12.5% REDEEMABLE CONVERTIBLE PREFERRED STOCK
Each share of this issue of preferred stock is convertible into 2.81 shares of
Common Stock at any time until August 26, 2006. The Company has an option to
redeem the shares at $4 per share at any time prior to that date and a
requirement to redeem any remaining outstanding shares at par value on that
date. The Company redeemed this preferred stock effective February 13, 1998 and
all cumulative undeclared and unpaid dividends were paid. At December 31, 1997
these amounted to $8,324 ($4,606 at December 31, 1996).
NOTE I--CUMULATIVE REDEEMABLE PREFERRED STOCK
The parent company (BFG) is the holder of this issue. It is entitled to the
number of votes which equals 20% of the total number of voting shares of the
Company's stock after taking into account both Common and Convertible Preferred
Stock. In the event of liquidation, these shares have a liquidation value of
$1,000 per share ($10,000,000 in total) plus all accrued and unpaid dividends.
This issue is equal in preference to the 12.5% Preferred Stock described in Note
H. The Company may, at its option any time after February 16, 2002, redeem this
stock in whole or in part at its liquidation value plus accrued and unpaid
dividends. Dividends on this issue are cumulative and payable quarterly when
declared by the Company at the rate of $60 per annum per share and the Company
issued 180,279 shares of Common Stock in payment of cumulative dividends of
$969,000 through September 30, 1997. At December 31, 1997, the cumulative
undeclared and unpaid dividends amount to $154,333.
NOTE J--FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair Value
of Financial Instruments" (SFAS 107) requires the disclosure of the estimated
fair value of on and off balance sheet financial instruments. A financial
instrument is defined by SFAS 107 as cash, evidence of an ownership interest in
an entity, or a contract that creates a contractual obligation or right to
deliver or to receive cash or another financial instrument from a second entity
on potentially favorable terms.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE J--FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued
Fair value estimates are made at a point in time, based on relevant market data
and information about the financial instrument. SFAS 107 specifies that fair
values should be calculated based on the value of one trading unit without
regard to any premium or discount that may result from concentrations of
ownership of a financial instrument, possible income tax ramifications,
estimated transaction costs that may result from bulk sales, or the relationship
between various financial instruments. Fair values for the Company's financial
instruments are based on judgments regarding current economic conditions,
interest rate characteristics, loss experience and other factors. Many of these
estimates involve uncertainties and matters of significant judgement and cannot
be determined with precision. Therefore, the calculated fair value estimates
cannot always be sustained by comparison to independent markets and in most
cases, would not be realizable in a current sale of the instrument. Changes in
assumptions could significantly affect the instruments.
Fair value estimates do not include anticipated future business or the values of
assets, liabilities and customer relationships that are not considered financial
instruments. Other assets and liabilities that are not considered financial
instruments include deferred tax assets, deferred financing costs and accounts
payable and accrued expenses. Accordingly, the estimated fair value amounts of
financial instruments do not represent the entire value of the Company.
Cash and Restricted Cash: The carrying amounts reported in the balance sheets
are their estimated fair values since the amounts are payable on demand.
Accounts and Notes Receivable: The estimated fair value of accounts and notes
receivable were developed using estimated cash flows and maturities based upon
contractual interest rates and historical experience and discounting those cash
flows using current market interest rates. The Company's carrying amount and
fair value of accounts and notes receivables are summarized as follows:
1997 1996
----------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ----------- -----------
$118,205,934 $121,071,554 $94,562,809 $94,562,809
The carrying value of the Company's commitments to lend as disclosed in Note D
approximates their fair value.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE J--FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued
Notes Payable: The fair value of notes payable are estimated using rates
available to the Company at December 31, 1997 and 1996 for similar debt and
remaining maturities. The carrying amount and fair value of notes payable are
summarized as follows:
1997 1996
----------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ----------- -----------
$99,961,357 $96,363,881 $ 82,942,196 $77,229,196
Notes Payable--Related Party: It was not practicable to estimate the fair value
of these notes outstanding at December 31, 1996 because of the nature of the
indebtedness and resultant excessive cost to estimate their fair values.
12.5% Redeemable Convertible Preferred Stock: It is not practicable, because of
cost, to determine the estimated fair value of this relatively small amount
outstanding.
NOTE K--STOCK OPTIONS AND WARRANTS
Stock Options: At December 31, 1997, the Company has two stock-based
compensation plans which are described in greater detail below. The Company
applied APB Opinion No. 25 and related interpretations in accounting for its
plans. Using these criteria, no compensation cost has been recognized for the
stock option portion of the plans. Had compensation cost been determined for the
Company's stock option portion of the plans, based on the fair value at the
grant dates for awards under those plans consistent with the alternative method
set forth under SFAS 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
1997 1996
---------- ----------
Net income:
As reported $3,231,423 $1,660,245
Pro forma 3,213,423 1,660,245
Net income per common share:
As reported .22 .12
Pro forma .21 .12
Weighted average fair value of options granted
under the 1997 Incentive Long-Term Plan 1.38 --
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE K--STOCK OPTIONS AND WARRANTS--Continued
The fair value of each option grant is estimated on the date of grant using the
Black-Sholes option pricing model with the following weighted average
assumptions used for grants in 1997-- dividend yield of -0-%, expected
volatility of 2.96%, risk-free interest rates of 6.26%, and expected lives of 10
and 5 years.
1988 Stock Option Plan: The Company has a stock option plan which reserves
100,000 shares of Common Stock. The Plan provides that no options may be granted
after September 1, 1999. There were no options issued, cancelled or exercised
during 1997 and 1996 and there were no options outstanding at December 31, 1997
or 1996.
1997 Long-Term Incentive Plan: The 1997 long-term incentive plan (1997 Plan)
became effective September 1, 1997. Under the Plan, nonqualified and incentive
stock options may be granted to employees and directors as detailed in the Plan.
The exercise price for the options shall be determined by the compensation
committee of the Board of Directors. The maximum number of shares of Common
Stock which may be issued under the 1997 Plan is 1,600,000. The term of the Plan
is ten years; however, the Board of Directors may discontinue the plan at its
discretion.
Stock option transactions for 1997 were:
Shares of Weighted
Common Stock
------------------
average
Available Under exercise
for option option price
------------ ------------ ------------
Balance January 1, 1997 100,000 -0- $ -0-
Shares reserved under 1997 Plan 1,600,000 -0- -0-
Granted (858,100) 858,100 3.28
------------ ------------ ------------
Balances at December 31, 1997 841,900 858,100 $3.28
============ ============ ============
The following table summarizes information concerning currently outstanding and
exercisable options:
Exercise Prices
---------------------
$1.00 $5.05
----- -----
Number outstanding 375,000 483,100
Remaining contractual life, in years 4.4 10
Number exercisable -0- -0-
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE K--STOCK OPTIONS AND WARRANTS--Continued
Common Stock Warrants: In November 1997, the Company issued warrants to purchase
250,000 shares of Common stock to a bank in connection with the credit facility
as described in Note F. The warrants may be exercised at any time prior to
November 2002, in whole or in part and in any order, by purchasing 125,000
shares at $3.50 per share and 125,000 shares at $4.00 per share. None of these
warrants were exercised in 1997.
NOTE L--EARNINGS PER COMMON SHARE
Pursuant to SFAS 128, a reconciliation of the numerators and the denominators of
the basic and diluted per-share computations for income from continuing
operations follows:
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net Income $3,231,423
Less: Preferred Stock dividends (731,218)
Basic earnings per share:
Income available to common stockholders 2,500,205 11,582,587 $.22
====
Effect of dilutive securities:
Cumulative Convertible--Series 2 preferred stock 127,500 6,226,027
12.5% Redeemable Convertible preferred stock 3,718 27,861
Warrants 9,154
Stock options 68,273
---------- ----------
Diluted earnings per share:
Income available to common stockholders
plus assumed conversions $2,631,423 17,913,902 $.15
========== ========== ====
</TABLE>
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
NOTE L--EARNINGS PER COMMON SHARE--Continued
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Net Income $1,660,245
Less: Preferred Stock dividends (527,051)
Basic earnings per share:
Income available to common stockholders 1,133,194 9,484,847 $.12
====
Effect of dilutive securities:
Cumulative Convertible--Series 2 preferred stock 7,500,000
12.5% Redeemable Convertible preferred stock 3,718 27,861
---------- ----------
Diluted earnings per share:
Income available to common stockholders
plus assumed conversions $1,136,912 17,012,708 $.07
========== ========== ====
</TABLE>
The Company granted options to purchase 483,100 shares of common stock at $5.05
per share during the year ended December 31, 1997. These options were not
included in computing the diluted per share data because to do so would have
resulted in increasing the earnings per share data as compared to the amounts
reported for the basic per share data.
NOTE M--SUPPLEMENTAL CASH FLOWS INFORMATION
The following supplemental cash flow information is provided for interest and
income taxes paid and for noncash transactions during the years ended December
31, 1997 and 1996:
1997 1996
---------- ----------
Interest paid $6,779,790 $6,223,101
Income taxes paid 338,000 124,682
Noncash transactions:
Conversion of related party debt to Common Stock 24,970,079 -0-
Payment of dividends on Series 2 Preferred Stock
with shares of Common Stock 1,096,500 -0-
Issuance of Common Stock warrants in consideration
of credit agreement 289,666 -0-
Conversion of Convertible Preferred Stock Series 2
to Common Stock 9,000 -0-
F-24
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
EQUIVEST FINANCE, INC.
Pursuant to the requirements of Section 607.1006, Florida Statutes, the
undersigned does hereby make, swear to, adopt and file this Certificate of
Amendment to the Articles of Incorporation of EQUIVEST FINANCE, INC.
("Corporation"), which Corporation was incorporated under the laws of the State
of Florida on August 31, 1983, under Charter No. G62115;
1. The Board of Directors has proposed to the shareholders of the
Corporation to increase the number of authorized shares of Common Stock of the
Corporation from 10,000,000, par value of $.05, to 50,000,000, par value $.05,
and the Board of Directors has consented to such amendment.
2. The voting groups entitled to vote on the amendment are as follows: (i)
the holders of the Common Stock, and (ii) the holders of the Common Stock,
Convertible Preferred Stock and Series 2 Preferred Stock, voting as a group. No
other groups of shareholders are entitled to vote as a group with respect to the
amendment.
3. A majority of the shareholders in each voting group have consented to
such amendment. Therefore III.A of the Corporation's Articles of Incorporation
shall be deleted in its entirety and the following inserted in its place:
"A. 50,000,000 common shares at a par value of $.05 per share and"
4. All other provisions of the Corporation's Articles of Incorporation
shall remain in full force and effect, unaltered except as expressly provided
above.
5. The foregoing amendment to the Articles of Incorporation was adopted by
the Corporation's Board of Directors and a majority of the shareholders entitled
to vote thereon on the 29th day of October, 1997. The number of votes cast were
sufficient for approval.
DATED this 19th day of February, 1998.
EQUIVEST FINANCE, INC.
****CORPORATE SEAL****
By: /s/ Gerald L. Klaben, Jr.
-------------------------
Gerald L. Klaben, Jr.
Executive Vice President
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF ONODAGA )
The foregoing was acknowledged before me this 19th day of February, 1998,
by Gerald L. Klaben, Jr., to me personally known, and he acknowledged before me
that he executed the foregoing Certificate of Amendment, under oath, for the
purposes therein set forth with full authority in the premises.
****NOTARIAL SEAL**** /s/ Jacqueline A. Davy
--------------------------------
NOTARY PUBLIC, State of New York
[SEAL]
SHORT TERM BOND EXCHANGE AGREEMENT
THIS SHORT TERM BOND EXCHANGE AGREEMENT ("Agreement") is made by and
between the party indicated below as Holder ("Holder") and Resort Funding, Inc.
formerly known as Bennett Funding International, Ltd., a Delaware corporation,
with offices at Two Clinton Square, Syracuse, New York 13202 ("RFI").
WHEREAS, Holder received a Short Term Bond issued by RFI dated May 5, 1995
with a maturity date of August 28, 1995 (the "Note").
WHEREAS, RFI desires to cancel the Note and issue a new note with a
principal balance equal to the accrued and unpaid principal and interest on the
Note, such interest and principal balance to be due and payable as defined below
(the "New Note").
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. Upon the execution of this Agreement and acceptance by the holders of
ninety percent (90%) of the principal amount of the Notes currently
outstanding (the "Minimum Acceptance Level") RFI shall be obligated to
cancel the Note and issue a New Note.
2. Upon the execution of this Agreement and receipt of notice from RFI that
the Minimum Acceptance Level has been reached, Holder shall be obligated
to submit their Notes for cancellation and accept the New Notes in
replacement thereof.
3. The terms of the New Note shall be as follows:
a) The maturity date of the New Note will be December 1, 1998 (the
"Maturity Date").
b) Interest on the principal balance of the New Note shall be paid
monthly at the rate of eight percent (8.0%) per annum.
c) The principal balance of the New Note shall be due and payable on
the Maturity Date.
4. This Agreement contains the entire agreement of the parties and supercedes
any previous agreements and representations, whether oral or written, with
respect to the subject matter herein.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to the principles of conflict
of laws.
IN WITNESS WHEREOF, the parties have executed this Short Term Bond
Exchange Agreement this ___ day of November, 1996.
Holder Resort Funding, Inc.
Signature: _________________________ By:___________________________
Thomas J. Hamel
Print Name: _________________________ Executive Vice President
Address: _________________________
_________________________
_________________________
Execution Copy
U.S. $50,000,000
RECEIVABLES LOAN AND SECURITY AGREEMENT
Dated as of May 25, 1995
Among
BFICP CORPORATION
as the Borrower
and
BENNETT FUNDING INTERNATIONAL, LTD.
as the Servicer
and
HOLLAND LIMITED SECURITIZATION, INC.
as a Lender
and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC.
as the Agent
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I.
DEFINITIONS............................... 1
SECTION 1.01. Certain Defined Terms........................................ 1
SECTION 1.02. Other Terms.................................................. 25
SECTION 1.03. Computation of Time Periods.................................. 25
ARTICLE II.
THE RECEIVABLES FACILITY....................... 25
SECTION 2.01. Borrowings................................................... 25
SECTION 2.02. The Initial Borrowing and Subsequent Borrowings.............. 25
SECTION 2.03. Termination or Reduction of the Borrowing Limit.............. 26
SECTION 2.04. Selection of Fixed Periods................................... 26
SECTION 2.05. Settlement Procedures........................................ 27
SECTION 2.06. Spread Account............................................... 30
SECTION 2.07. Special Settlement Procedures................................ 31
SECTION 2.08. Payments and Computations, Etc............................... 31
SECTION 2.09. Fees......................................................... 32
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality................ 33
SECTION 2.11. Taxes........................................................ 34
SECTION 2.12. Assignment of the Originator Sale Agreement.................. 36
SECTION 2.13. Payment of Support Obligations............................... 37
SECTION 2.14. Grant of a Security Interests................................ 38
SECTION 2.15. Evidence of Debt............................................. 39
ARTICLE III.
CONDITIONS OF LOANS.......................... 39
SECTION 3.01. Conditions Precedent to Initial Borrowing.................... 39
SECTION 3.02. Conditions Precedent to All Borrowings and Remittances
of Collections.............................................. 39
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.................... 40
SECTION 4.01. Representations and Warranties of the Borrower............... 40
SECTION 4.02. Representations and Warranties of the Lender................. 45
ARTICLE V.
GENERAL COVENANTS OF THE BORROWER.................... 46
SECTION 5.01. General Covenants............................................ 46
SECTION 5.02. Financial Covenants.......................................... 51
ii
<PAGE>
Section Page
- ------- ----
ARTICLE VI.
ADMINISTRATION, COLLECTION AND
MONITORING OF RECEIVABLES....................... 52
SECTION 6.01. Appointment and Designation of the Servicer.................. 52
SECTION 6.02. Collection of Receivables by the Servicer; Extensions
and Amendments of Receivables............................... 53
SECTION 6.03. Distribution and Application of Collections.................. 53
SECTION 6.04. Segregation of Collections................................... 54
SECTION 6.05. Other Rights of the Agent.................................... 54
SECTION 6.06. Records; Audits.............................................. 54
SECTION 6.07. Periodic Settlement Reporting................................ 55
SECTION 6.08. Collections and Lock-Boxes................................... 56
SECTION 6.09. UCC Matters; Protection and Perfection of Pledged Assets..... 56
SECTION 6.10. Obligations of the Borrower With Respect to Receivables...... 57
SECTION 6.11. Rights of obligors and Release of Contract Files............. 58
SECTION 6.12. Recordation of Assignments................................... 59
SECTION 6.13. Costs and Expenses........................................... 59
SECTION 6.14. Servicer Representations and Warranties...................... 59
SECTION 6.15. Additional Covenants of the Servicer......................... 61
SECTION 6.16. Standby Servicer............................................. 63
SECTION 6.17. The Servicer not to Resign................................... 63
SECTION 6.18. Releases..................................................... 63
ARTICLE VII.
EVENTS OF DEFAULT........................... 65
SECTION 7.01. Events of Default............................................ 65
ARTICLE VIII.
SERVICER DEFAULTS........................... 69
SECTION 8.01. Servicer Defaults............................................ 69
SECTION 8.02. Appointment of Successor..................................... 71
SECTION 8.03. Certain Matters Affecting the Successor Servicer............. 72
ARTICLE IX.
INDEMNIFICATION............................ 73
SECTION 9.01. Indemnities by the Borrower.................................. 73
SECTION 9.02. Indemnities by the Servicer.................................. 75
ARTICLE X.
MISCELLANEOUS.............................. 77
SECTION 10.01. Amendments and Waivers....................................... 77
SECTION 10.02. Notices, Etc................................................. 78
SECTION 10.03. No Waiver; Remedies.......................................... 78
iii
<PAGE>
Section Page
- ------- ----
SECTION 10.04. Binding Effect; Assignability................................ 78
SECTION 10.05. Term of this Agreement....................................... 79
SECTION 10.06. Governing Law; Jury Waiver................................... 79
SECTION 10.07. Costs, Expenses and Taxes.................................... 79
SECTION 10.08. No Proceedings............................................... 80
SECTION 10.09. Recourse Against Certain Parties............................. 80
SECTION 10.10. Execution in Counterparts; Severability; Integration......... 81
iv
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I Approved Developments
SCHEDULE II Contract Schedule
SCHEDULE III Description of Credit and Collection Policy
SCHEDULE IV Developments
SCHEDULE V VOI Regimes
SCHEDULE VI Condition Precedent Documents
SCHEDULE VII Lock-Box Banks
SCHEDULE VIII Tradenames, Fictitious Names and "Doing Business
As" Names
SCHEDULE IX Environmental Issues
EXHIBITS
EXHIBIT A Form of Commercial Paper Settlement Report
EXHIBIT B Form of Contract Assignment
EXHIBIT C Form of Assignment of Mortgage
EXHIBIT D Form of Developer Sale Agreement
EXHIBIT E Form of Monthly Settlement Report
EXHIBIT F Form of Borrowing Date/Spread Account Surplus
Settlement Report
EXHIBIT G "Limited Purpose" Provisions of Borrower's
Certificate of Incorporation
EXHIBIT H Form of Officer's Release Certificate
v
<PAGE>
THIS RECEIVABLES LOAN AND SECURITY AGREEMENT (the "Agreement") is
made as of May 25, 1995, among:
(1) BFICP CORPORATION, a Delaware corporation (the "Borrower");
(2) BENNETT FUNDING INTERNATIONAL, LTD., a Delaware corporation
(sometimes referred to herein as the "Originator"), as the
"Servicer" (as defined herein);
(3) HOLLAND LIMITED SECURITIZATION, INC., a Delaware corporation
("HLS"); and
(4) INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. ("ING
Capital"), as agent (the "Agent").
IT IS AGREED as follows;
ARTICLE I.
DEFINITIONS
SECTION 1.01. Certain Defined Terms. (a) Certain capitalized terms
used throughout this Agreement are defined above or in this Section 1.01.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined).
"Adverse Claim" means a lien, security interest, charge, encumbrance
or other right or claim of any Person (other than, with respect to the
Pledged Assets, any lien, security interest, charge, encumbrance or other
right or claim in favor of the Lender (or the Agent on behalf of the
Lender)).
"Affected Party" has the meaning assigned to that term in Section
2.10.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Agent's Account" means a subaccount within a special account
(account number 550-023569 at Chemical Bank, Newark, New Jersey) in the name of
the Lender, the Agent or the Collateral Trustee, as from time to time designated
by the Agent by notice to the Borrower and the Servicer.
"Agent's Bank" means Chemical Bank.
<PAGE>
"Agent's Fee" has the meaning assigned to that term in Section
2.09(a).
"Agreement" means this Receivables Loan and Security Agreement, as
the same may be amended, restated, supplemented or otherwise modified from time
to time hereafter.
"Aggregate Concentration Limit" means at any time, (a) for the
obligors of any one Approved Development, (i) on and after the date hereof but
before the first anniversary hereof, an amount equal to 10t of the Gross
Eligible Receivables Balance at such time, (ii) an and after the first
anniversary hereof but before the second anniversary hereof, an amount equal to
7.5% of the Gross Eligible Receivables Balance at such time, and (iii) Oil and
after the second anniversary hereof, an amount equal to 10% of the Gross
Eligible Receivables Balance at such time and (b) for the obligors of any other
Development, an amount equal to 3% of the Gross Eligible Receivables Balance at
such time.
"Aggregate Large Receivables Limit" means at any time an amount
equal to 5% of the Gross Eligible Receivables Balance at such time.
"Alternative Rate" means, with respect to any Fixed Period for all
Loans allocated to such Fixed Period, an interest rate per annum equal to sum of
the Base Rate plus 2.0%.
"Approved Development" means any Development that is designated as
an Approved Development on Schedule I and any other Development that (a) was
developed by a Developer that satisfies the Originator's Developer underwriting
standards (a copy of which is attached as an annex to Schedule I), (b) has been
inspected by the Agent or a representative of the Agent and (c) the Agent has
designated (in a writing delivered to the Borrower from time to time) as an
Approved Development; provided, however, that any designation by the Agent of a
Development as an "Approved Development" may be withdrawn by the Agent in its
sole discretion in a writing delivered to the Borrower at any time that the
Development Default Ratio for such Development shall have exceeded 2.O% for
three consecutive months ad any such withdrawal shall be effective commencing on
the first day of the month immediately succeeding the month in which such notice
is delivered to the Borrower.
"Assignment and Acceptance" means an assignment and acceptance
entered into by the Lender and an assignee pursuant to Section 10.04.
"Base Rate" means, on any date, a fluctuating rate of interest per
annum equal to the arithmetic average of the rates of interest publicly
announced by The Chase Manhattan Bank, N.A., Citibank, N.A. and Morgan Guaranty
Trust Company of New York (or their respective successors) as their respective
prime commercial lending rates (or, as to any such bank that does not announce
such a rate, such bank's "base,, or other rate determined by the Lender to be
the equivalent rate announced by such bank), except that, if any such bank
shall, for any period, cease to announce publicly its prime commercial lending
(or equivalent) rate, the Agent shall, during such period, determine the "Base
Rate", based upon the prime commercial lending (or equivalent) rates announced
publicly by the other such banks or, if each such bank ceases to announce
publicly its prime commercial lending (or equivalent) rate, based upon the prime
commercial lending (or
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<PAGE>
equivalent) rates announced publicly by other banks reasonably acceptable to the
Borrower. The prime commercial lending (or equivalent) rates used in computing
the Base Rate are not intended to be the lowest rates of interest charged by
such banks in connection with extensions of credit to debtors. The Base Rate
shall change as and when such banks, prime commercial lending (or equivalent)
rates change.
"Benefit Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate of the
Borrower is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing of Loans under this Agreement.
"Borrowing Base Deficiency" means at any time that the Required
overcollateralization Percentage exceeds the overcollateralization Percentage,
an amount equal to the remainder of (a) the product of (i) the sum of loot plus
the Required Overcollateralization Percentage multiplied by (ii) the Facility
Amount minus (b) the sum of (i) the Pledged Receivables Balance plus (ii)
amounts on deposit in the Spread Account plus (iii) the amount of Collections on
deposit in the Agent's Account to be applied in accordance with Section 2.05 on
the next Settlement Date.
"Borrowing Base Surplus" means at any time that the
Overcollateralization Percentage exceeds the Required Overcollateralization
Percentage, an amount equal to the remainder of (a) the sum of (i) the Pledged
Receivables Balance plus (ii) amounts on deposit in the Spread Account plus
(iii) the amount of Collections on deposit in the Agent's Account to be applied
in accordance with Section 2.05 on the next Settlement Date minus (b) the
product of (i) the sum of 100% plus the Required Overcollateralization
Percentage multiplied by (ii) the Facility Amount.
"Borrowing Date" means, with respect to any Borrowing, the date on
which such Borrowing is funded, which date, other than in the case of the
initial Borrowing, shall be a Subsequent Borrowing Date.
"Borrowing Date/Spread Account Surplus Settlement Report" means a
report, in substantially the form of Exhibit F, furnished by the Servicer to the
Agent for the Lender pursuant to Section 6.07(c).
"Borrowing Limit" means, at any time, $50,000,000 as such amount may
be adjusted from time to time pursuant to Section 2.03 (the "Maximum Borrowing
Limit"), less the aggregate Capital outstanding under the Receivables Purchase
Agreement; provided, however, that at all times, on or after the Termination
Date, the "Borrowing Limit" shall mean the aggregate outstanding Loans and
provided, further, that the Maximum Borrowing Limit shall in no event exceed the
aggregate commitments of the lenders providing credit enhancement and liquidity
support to the Lender in connection with the transactions contemplated by this
Agreement.
"Business Day" means a day of the year other than a Saturday or a
Sunday on which banks are not authorized or required to close in New York City.
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<PAGE>
"Capital" has the meaning assigned to such term in the Receivables
Purchase Agreement.
"Capital Limit" means, at any time, an amount equal to the quotient
of (a) the sum of (i) the Pledged Receivables Balance at such time, plus (ii)
the aggregate amount at the time an deposit in the Spread Account, plus (iii)
the amount of Collections on deposit in the Agent's Account to be applied in
accordance with Section 2.05 on the next Settlement Date divided by (b) 100%
plus the Minimum Overcollateralization Percentage at such time.
"Carrying Cost Reserve Amount" means, with respect to a Business Day
that is not a Settlement Date, the sum of (a) the Borrowing Base Deficiency as
of such Business Day (or as of the date of the related Borrowing Date/Spread
Account Surplus Settlement Report) Plus (b) aggregate accrued and unpaid (i)
Yield, (ii) Liquidation Fees, (iii) Facility Fee, (iv) Servicer Fee and (v)
obligations of the Borrower to the Lender hereunder other than the amounts
described in the foregoing clauses (i) (iv) (collectively, the fees and amounts
described in the foregoing clauses (i)-(v), the "Carrying Costs"), each as of
such Business Day (or as of the date of the related Borrowing Date/Spread
Account Surplus Settlement Report) plus (c) the aggregate Carrying Costs that
will accrue from such Business Day (or, if used as the basis for the
calculations in the preceding clause (b), from the date of the related Borrowing
Date/Spread Account Surplus Settlement Report) and be payable pursuant to
Section 2.05 on the next Settlement Date after such Business Day (after giving
effect to any Borrowing to be made on such Business Day); provided, that, for
purposes of the foregoing, Yield that will accrue from such date shall be
calculated assuming that all Loans allocated to a Fixed Period commencing on or
after such day will bear interest at the Alternative Rate minus the per annum
rate at which the usage fee payable to the Lender (either directly or through
the Agent) is calculated pursuant to the terms of the fee letter executed by the
Borrower and the Lender.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Trustee" means BankAmerica National Trust Company and
any successor collateral agent and trustee with respect to the commercial paper
and the liquidity and credit support providers of the Lender.
"Collection Date" means the date following the Termination Date on
which (a) the aggregate outstanding Loans have been paid in full and all Yield
and all other obligations have been paid in full and (b) the outstanding
"Capital" under the Receivables Purchase Agreement has been reduced to zero and
Lender and the Agent have received all of the other amounts payable to them
under the Receivables Purchase Agreement or any other agreement, excluding,
however, this Agreement, executed pursuant thereto or in connection therewith.
"Collections" means, (a) with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable, and any Collection of such Receivable deemed to have been received
pursuant to Section 2.07, (b) any amounts paid to the Borrower (or the Agent or
any
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<PAGE>
Lender or assignees thereof) pursuant to the terms of the Originator Sale
Agreement with respect to any Pledged Receivables, (c) any amounts paid to the
Borrower (or the Agent or any Lender or assignees thereof) pursuant to the terms
of any Developer Sale Agreements with respect to any Pledged Receivables and (d)
any amounts paid to the Lender under any Purchased Rate Cap that are ratably
allocable to this Agreement (as opposed to the Receivables Purchase Agreement)
based on outstanding Capital and principal amount of Loans.
"Commercial Paper Settlement Report" means a report, in
substantially the form of Exhibit A, furnished by the Servicer to the Agent for
the Lender pursuant to Section 6.07(d).
"Concentration Limit" means at any time, for the Obligors of any one
Development, the portion of the Aggregate Concentration Limit for such Obligors
that is specified by the Borrower on the latest Monthly Settlement Report as
being allocated to this Agreement (as opposed to the Receivables Purchase
Agreement); the sum of the Concentration Limits for the Obligors of any one
Development under this Agreement and the Receivables Purchase Agreement shall
equal the Aggregate Concentration Limit for such Obligors. If the Borrower fails
to provide the Servicer with an appropriate allocation of an Aggregate
Concentration Limit for the Obligors of a Development, the Concentration Limit
under this Agreement for such Obligors will equal zero and the "Concentration
Limit" under the Receivables Purchase Agreement for such Obligors shall equal
the Aggregate Concentration Limit for such Obligors.
"Contract" means an interval ownership or lot contract agreement and
installment note relating to the sale of one or more VOI's or Lots to an
Obligor, together with any separate obligor's installment note for the payment
of the balance of the purchase price thereof.
"Contract Conveyance Documents" means, with respect to each Pledged
Contract, the following documents:
(a) an original assignment or assignments, in recordable form, of
such Contract and certain related property from the Originator to the
Borrower and subsequent assignment of such Contract and related property
from the Borrower to HLS, and the subsequent collateral assignment to the
Collateral Trustee, in one of the forms attached to this Agreement as
Exhibit B;
(b) if the related VOI or Lot has been deeded to the Obligor, an
original Assignment or Assignments of mortgage, in recordable form,
assigning any Contract Mortgage related to such Contract from the
Originator to the Borrower and subsequently collaterally assigning such
Contract Mortgage from the Borrower to HLS, and subsequently collaterally
assigning such Contract Mortgage from HLS to the Collateral Trustee, in
one of the forms attached to this Agreement as Exhibit C;
(c) if the Contract financed the purchase by the obligor of Credit
Life Insurance, an original acknowledgment signed by the issuer of any
Credit Life insurance of the assignment of the Borrower's rights therein
pursuant to this Agreement in the form delivered to the Collateral Trustee
on the initial Borrowing Date; and
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(d) in the case of any Subsequent Borrowing Date, any such other
documents, instruments or agreements as may be required by the Agent in
order to more fully effect the transfer of the Pledged Receivables and any
related Pledged Assets.
"Contract Documents" means the Contract and all papers and documents
related to a Contract, including all applicable promissory notes endorsed in
blank, the original of any related recorded or unrecorded Contract Mortgage and
a copy of any recorded or unrecorded warranty deed transferring legal title to
the related VOI or Lot to the Obligor, tax receipts, insurance policies,
insurance premium receipts, ledger sheets, payment records, insurance claim
files and correspondence, repossession files and correspondence, the original of
any related assignment, modification or assumption agreement or, if such
original is unavailable, a copy thereof, current and historical computerized
data files, and all other papers and records of whatever kind or description,
whether developed or originated by the Originator, the Borrower or another
Person, required to document, service or enforce a Contract.
"Contract File" means the Contract Documents pertaining to a
particular Pledged Contract and any additional amendments, supplements,
extensions, modifications or waiver agreements required to be added to the
Contract File pursuant to this Agreement or Credit and Collection Policy.
"Contract Mortgage" means any mortgage, deed of trust, purchase
money deed of trust or deed to secure debt granted by an obligor to the
originator of the Contract encumbering the related VOI or Lot to secure Payments
or other obligations under such Contract
"Contract Rate" means, with respect to a Pledged Contract, the
annual fixed rate at which interest accrues on such Pledged Contract.
"Contract Schedule" means the Pledged Contract list, attached hereto
as Schedule II, as amended from time to time to add new Pledged Contracts and to
remove certain Pledged Contracts, in each case in accordance with this
Agreement, which list shall set forth the following information with respect to
each contract therein as of the applicable date:
(a) the Contract number;
(b) the obligor's name;
(c) the Development in which the related VOI or Lot is located;
(d) the current Contract Rate;
(e) whether the Obligor is covered by a policy of Credit Life
Insurance and the amount of any insurance premium for such policy financed
pursuant to the Contract;
(f) the original term of the Contract;
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<PAGE>
(g) the original and current Outstanding Balance (as of the
applicable Cut-Off Date);
(h) the amount of the Payments on the Contract;
(i) the original purchase price of such Contract paid or to be paid
by the Originator under the applicable Developer sale Agreement; and
(j) whether the related VOI or Lot has been deeded to the obligor.
"CP Rate" means, with respect to any Fixed Period for all Loans
allocated to such Fixed Period, the rate equivalent to the rate (or if more than
one rate, the weighted average of the rates) at which commercial paper notes of
the Lender having a term equal to such Fixed Period and to be issued to fund the
applicable Loans by the Lender may be sold by any placement agent or commercial
paper dealer selected by the Lender, as agreed between each such agent or dealer
and the Lender and notified by the Lender to the Agent and the Servicer;
provided, however, if the rate (or rates) as agreed between any such agent or
dealer and the Lender with regard to any Fixed Period for the applicable Loans
is a discount rate (or rates), the "CP Rate" for such Fixed Period shall be the
rate (or if more than one rate, the weighted average of the rates) resulting
from converting such discount rate (or rates) to an interest-bearing equivalent
rate per annum.
"Credit and Collection Policy" means those credit and collection
policies and practices of the Servicer and the originator relating to
Developers, Contracts and Receivables described in Schedule III, as modified in
compliance with this Agreement.
"Credit Life Insurance" means any policy of insurance acquired by
the obligor providing for payment of the principal amount outstanding under a
Contract upon the Obligor's death.
"Credit Life Insurance Proceeds" means Proceeds of, or any unearned
premium recovered in respect of, any Credit Life Insurance, which shall
constitute Collections.
"Cut-Off Date" means (a) with respect to the initial Borrowing, May
1, 1995, or (b) with respect to each Subsequent Borrowing Date, such date as the
Agent and the Borrower shall mutually agree.
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d) obligations of such Person
as lessee under leases which shall have been or should be, in accordance with
GAAP, recorded as capital leases, (e) obligations secured by an Adverse Claim
upon property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations and (f) obligations
of such Person under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise
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to assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred-to in clauses (a) through (e) above.
"Default Ratio" means the ratio (expressed as a percentage) computed
as of the last day of each calendar month by dividing (a) the aggregate
Outstanding Balance of all Pledged Receivables and Pledged Receivables that
became Defaulted Receivables at any time during the month then ending plus
(without duplication) the amount of all Receivables which were written off the
books of the Borrower during such month, by (b) the average aggregate Gross
Eligible Receivables Balance excluding all Defaulted Receivables) during such
month.
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part thereof, exclusive of any advances made by the Servicer or any
Person other than the Obligor, remains unpaid for more than 90 days from the
original due date for such payment, (b) as to which the obligor thereof has
taken any action, or suffered any event to occur, of the type described in
Section 7.01(f), or (c) which, consistent with the Credit and Collection Policy,
has been or should be written off the Borrower's books as uncollectible.
"Defective Contract" has the meaning assigned to such term in
Section 6.18 of this Agreement.
"Defective Contract Release Date" has the meaning assigned to such
term in Section 6.18 of this Agreement.
"Delinquency Ratio" means the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (a) the sum of
the aggregate Outstanding Balance of all Pledged Receivables that were
Delinquent Receivables as of such date, by (b) the aggregate Outstanding Balance
of all Pledged Receivables as of the last day of such month.
"Delinquent Receivable" means a Receivable that is not a Defaulted
Receivable and (a) as to which any payment or part thereof, exclusive of any
advances made by the Servicer or any Person other than the obligor, remains
unpaid for more than 30 days from the original due date for such payment or (b)
which, consistent with the Credit and Collection Policy, has been or should be
classified as delinquent by the Servicer.
"Depository Institution" means a depository institution or trust
company, incorporated under the laws of the United States or any State thereof,
that is subject to supervision and examination by federal and/or state banking
authorities.
"Developer" means a Person from which the Originator purchased
Receivables and related assets pursuant to a "Contract of Sale of Time Share
Receivables with Recourse" substantially in the form of Exhibit D or in such
other form as may be acceptable to the Agent (each a "Developer Sale
Agreement").
"Developer Mortgage" means any mortgage or deed of trust or deed to
secure debt granted by a Developer to the Originator to secure the Developer's
obligations under a Developer
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Sale Agreement between the Originator and such Developer encumbering the related
Development.
"Developer Sale Agreement" has the meaning assigned to that term in
the definition of "Developer."
"Development Default Ratio" means at any time, for the Pledged
Receivables and Purchased Receivables related to a Development, the ratio
(expressed as a percentage) computed as of the last day of each calendar month
by dividing (a) the aggregate Outstanding Balance of all such Pledged
Receivables and Purchased Receivables that became Defaulted Receivables at any
time during the month then ending plus (without duplication) the amount of all
Receivables related to such Development which were written off the books of the
Borrower during such month, by (b) the average aggregate Outstanding Balance of
all Pledged Receivables and Purchased Receivables (excluding all Defaulted
Receivables) during such month, in each case related to such Development.
"Developments" means each resort or development listed on Schedule
IV to this Agreement, as subsequently amended from time to time with the written
consent of the Agent.
"Discount Amount" means at any time an amount equal to:
BL - BL
----
1.05
where:
BL = the Borrowing Limit in effect on the date of determination.
"Eligible Assignee" means each of ING Capital, any receivables
investment vehicle sponsored by ING Capital or any of its Affiliates, any
financial institution providing credit enhancement or liquidity support to the
Lender in connection with the transactions contemplated by this Agreement and
any Affiliate of any of the foregoing; provided, that, no such financial
institution providing credit enhancement or liquidity support to the Lender that
is not an Affiliate of ING Capital shall be an Eligible Assignee without the
prior written consent of the Borrower, which consent shall not be unreasonably
withheld.
"Eligible Contract" means, except as otherwise approved by the
Agent, a Contract:
(a) (i) where the related VOI or Lot is located in a Development,
(ii) where the unit for a related VOI is complete and ready for occupancy
and is not in need of maintenance or repair, except for ordinary, routine
maintenance and repairs which are not substantial in nature or cost and
where such unit contains no structural defects materially affecting its
value and is in good tenantable condition, (iii) where the related VOI
Regime is contiguous to a dedicated, physically-open, all-weather street,
and is adequately serviced by public (or private if complying with all
material and applicable local laws, regulations and ordinances) water and
sewer systems and utilities, (iv) where the related VOI Regime is not in
need of maintenance or repair, except for ordinary, routine maintenance
and repairs which are not
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substantial in nature or cost and where such VOI Regime contains no
structural defects materially affecting its value, and (v) where there is
no legal, judicial or administrative proceeding pending or threatened for
the total or partial condemnation of any VOI Regime which would have a
material adverse effect on the value of the related VOI Regime or unit;
(b) where the rights of the Obligor thereunder are subject to
declarations, covenants and restrictions of record affecting the related
VOI Regime;
(c) as to which the Borrower has a valid ownership interest in the
related VOI or Lot subject only to (i) the interest therein of the
Obligor, (ii) the lien of unbilled and unpaid assessments, (iii)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record, such exceptions appearing of record being
consistent with the normal business practices of the Originator or
specifically disclosed in the applicable land sales registrations filed
with the applicable regulatory agencies, and (iv) other matters to which
properties of the same type as those underlying the Contracts are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by such Contract;
(d) where (i) if the related VOI or Lot has been deeded to the
Obligor of the related Contract, on the date on which the Receivables
arising under such Contract were Pledged hereunder, the Borrower had a
valid and enforceable first lien Contract Mortgage on such VOI or Lot,
which Contract mortgage has been assigned to the Collateral Trustee for
the benefit of itself, the Agent and the Lender pursuant to the Contract
Conveyance Documents, (ii) if the related VOI or Lot has not been deeded
to the Obligor of the related Contracts, on the date on which the
Receivables arising under such Contract were Pledged hereunder, the
Developer had legal title to such VOI or Lot and the Borrower had an
equitable interest in such VOI or Lot underlying the related Contract,
which equitable interest has been assigned to the Collateral Trustee
pursuant to the Contract Conveyance Documents, and (iii) if any Contract
Mortgage is a deed of trust, a trustee, duly qualified under applicable
law to serve as such, had been properly designated in accordance with
applicable law and currently so serves;
(e) that has a Contract Rate that is equal to or greater than the
sum of (i) the thirty day commercial paper index rate set forth in the
most recent weekly statistical release designated H.15(519) published by
the Board of Governors of the Federal Reserve System (or any successor
publication) as of the applicable Cut-off Date with respect to the
Receivables arising under such Contract plus (ii) 3.45% (accruing on an
actuarial (pre-computed) basis);
(f) that provides for equal monthly Payments of principal or
principal and interest (except for the final monthly Payment which is no
greater than 110% of each preceding monthly Payment) which fully amortize
the related loan over its term;
(g) that requires the Obligor to pay the unpaid principal balance on
or before April 30, 2008 over an original term of not greater than 120
months and over a remaining
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term (at the time of pledge to the Lender) of not greater than 84 months;
(h) where at least two Payments with respect to such Contract have
been received by the originator;
(i) which is not a Defective Contract;
(j) as to which, if the Contract financed the purchase by the
Obligor of Credit Life Insurance, (i) such policy is in full force and
effect and has been validly and effectively assigned by way of security,
pursuant to all applicable laws, rules and regulations, to the Collateral
Trustee, (ii) the full premium therefor has been paid, and (iii) the
insurance company issuing such policy is rated at least "All by A.M. Best
Company, Inc.;
(k) the underlying ownership interest which is the subject of such
Contract consists of (i) a fixed week, (ii) an undivided interest in fee
simple in a lodging unit or group of lodging units at a Development Agent
or (iii) such other interest or right with respect to a lodging unit or
group of lodging units at a Development that has been approved of by the
Agent in writing (including a right to use a lodging unit or group of
lodging units at a Development if approved of by the Agent in writing);
(l) which was originated and has been consistently serviced in
accordance with the Credit and Collection Policies;
(m) which has not been reserved against by the Originator or the
Borrower (except for purchase price amounts held back by the Originator
pursuant to the terms of a Developer Sale Agreement and for reserves
established by the Originator with respect to all Receivables);
(n) as to which the payment obligation of the Obligor is not subject
to any material dispute between the Obligor and any of the Developer, the
Borrower, the Servicer and/or the Originator;
(o) which arises from transactions in a jurisdiction where the
Originator is duly qualified to do business in such jurisdiction, if the
Originator is required to be qualified to do business in such
jurisdiction;
(p) which have not been canceled or terminated (regardless of
whether the Obligor thereof is legally entitled to do so) or declared
ineligible by any of the Borrower, the Servicer or the Originator, and
constitute legal, valid, binding and enforceable obligations of the
Obligors thereof fee from any dispute, offset, counterclaim or defense
whatsoever;
(q) where such Contract had a minimum equity of 10% at origination
(calculated using the Sales Price for such Contract and including in such
total equity any cash down payments and Payments made on any other
Contract which has been "traded in" in connection with the origination of
such Contract).
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(r) the performance of which has been completed by the Borrower, the
related Developer and by all other parties other than the Obligor and
there are no executory obligations to be performed thereunder except by
the Obligor;
(s) as to which 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 and neither the Borrower nor
the originator has waived any such default, breach, violation or event
permitting acceleration without obtaining the prior written consent of the
Agent;
(t) where, if such Contract also financed a policy of Credit Life
Insurance: (i) the Borrower is the sole assignee of the sole beneficiary
of such policy; (ii) the Borrower has the power and authority to pledge
its interest as the assignee of the beneficiary of such policy, and it has
so pledged its interest to the Collateral Trustee pursuant to an effective
assignment; (iii) the Borrower has the sole power and authority to cancel
such policy in the event of nonpayment of such Contract and the sole right
to receive any unearned premium in the event of cancellation of such
policy; and (iv) the Borrower has the power and authority to assign its
right to receive any unearned premium with respect to such policy, and it
has so pledged its right to the Collateral Trustee pursuant to an
effective assignment; and
(u) where no payment or any part thereof due from the related
Developer to the Borrower, the Originator or any Affiliate of the
originator (whether pursuant to the related Developer Sale Agreement or
otherwise) remains unpaid past the original due date for such payment.
"Eligible Depository Institution" means a Depository Institution,
the short term unsecured senior indebtedness of which is rated at least A-1 by
S&P and F-1 by Fitch, if rated by Fitch.
"Eligible Developer Sale Agreement" means, except as otherwise
approved by the Agent, a Developer Sale Agreement:
(a) entered into with a Developer which is a United States resident
(unless otherwise approved of by the Agent in writing and each of S&P and
Fitch is notified in writing of such approval), is not an Affiliate of any
of the parties hereto, and is not a government or a governmental
subdivision or agency;
(b) payment obligations under which are denominated and payable only
in United States dollars in the United States;
(c) the assignment of which (including, without limitation, the sale
of an undivided percentage interest therein and the assignment of any
Related Security) does not contravene or conflict with any applicable
laws, rules or regulations or any contractual or
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other restriction, limitation or encumbrance;
(d) which does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no party
thereto is in violation of any such law, rule or regulation in any
material respect; and
(e) which satisfies all applicable requirements of the Credit and
Collection Policy.
"Eligible Receivable" means, at any time, a Receivable:
(a) the obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto, and is not a government or a
governmental subdivision or agency;
(b) which is not a Defaulted Receivable or a Delinquent Receivable
and the obligor of which is not the Obligor of any Defaulted Receivables;
(c) unless pledged to secure the initial Borrowing, as to which no
payment or any part thereof has remained unpaid for more than 30 days from
the original due date for such payment on two or more separate occasions
and as to which no payment or any part thereof has remained unpaid for
more than 60 days from the original due date for such payment on one or
more occasions;
(d) which arises under an Eligible Contract and which was purchased
from a Developer under an Eligible Developer Sale Contract;
(e) (i) is denominated and payable only in United States dollars in
the United States and (ii) no portion of which is payable on account of
sales taxes;
(f) which arises in the ordinary course of the originator's
business;
(g) the assignment of which (including, without limitation, the sale
of an undivided percentage interest therein and the assignment of any
Related Security) does not contravene or conflict with any applicable
laws, rules or regulations or any contractual or other restriction,
limitation or encumbrance;
(h) which has not been compromised, adjusted or modified (including
by extension of time or payment or the granting of any discounts,
allowances or credits);
(i) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no party to the Contract related
thereto is in violation of any such law, rule
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or regulation in any material respect;
(j) which satisfies all applicable requirements of the Credit and
Collection Policy;
(k) which, if originated prior to June 30, 1994, is insured by the
Generali Commercial Lines Policy dated June 13, 1993 (or a comparable
policy acceptable to the Agent) for a term not less than five years;
(l) which has been transferred by the Originator to the Borrower
pursuant to the Originator Sale Agreement; and
(m) which has an Outstanding Balance which is not greater than
$30,000.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means (a) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Borrower; (b) a trade or business (whether or not incorporated)
under common control (within the meaning of Section 414(c) of the Code) with the
Borrower or (c) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Borrower, any corporation
described in clause (a) above or any trade or business described in clause (b)
above.
"Event of Default" has the meaning assigned to that term in Section
7.01.
"Facility Amount" means at any time the sum of (a) the face amount
of outstanding commercial paper notes of the Lender issued to fund Loans
hereunder plus (b) the amount of Loans allocated to Fixed Periods bearing
interest at the Alternative Rate plus (c) to the extent not already included in
the face amount of the outstanding commercial paper described in clause (a)
above, the accrued and unpaid Yield on the foregoing amounts described in
clauses (a) and (b) above, in each case at such time.
"Facility Fee" has the meaning assigned to that term in Section
2.09.
"Fitch" means Fitch Investors Service, L.P. (or its predecessor or
successors in interest) if and so long as it has rated and is continuing to rate
commercial paper notes of the Lender, and otherwise means such other nationally
recognized statistical rating organization as may be designated by the Agent.
"Fixed Period" for any outstanding Loans means (a) if Yield in
respect of all or any part thereof is computed by reference to the CP Rate, a
period of I to and including 90 days and (b) if Yield in respect thereof is
computed at the Alternative Rate, a period of 1 to and including 30 days, in
each case, as determined pursuant to Section 2.04.
"GAAP" means generally accepted accounting principles as in effect
from time to
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time in the United States.
"Gross Eligible Receivables Balance" means, at any time, the
aggregate Outstanding Balance of Eligible Receivables which constitute Pledged
Receivables or that constitute Purchased Receivables under the Receivables
Purchase Agreement.
"Indemnified Amounts" has the meaning assigned to that term in
Section 9.01.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Pledged Assets pursuant to the
Originator Sale Agreement and excluding commission, travel and similar advances
to officers, employees and directors made in the ordinary course of business.
"Issuer" means HLS and any other Lender whose principal business
consists of issuing commercial paper or other securities to fund its acquisition
and maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
"Large Receivable" means a Receivable that has an Outstanding
Balance greater than $20,000.
"Large Receivables Limit" means at any time, the portion of the
Aggregate Large Receivables Limit that is specified by the Borrower on the
latest Monthly Settlement Report as being allocated to this Agreement (as
opposed to the Receivables Purchase Agreement); the sum of the Large Receivables
Limit under this Agreement and the "Large Receivables Limit" under the
Receivables Purchase Agreement shall equal the Aggregate Large Receivables
Limit. If the Borrower fails to provide the Servicer with an allocation of the
Aggregate Large Receivables Limit, the Large Receivables Limit under this
Agreement will equal zero and the "Large Receivables Limit" under the
Receivables Purchase Agreement shall equal the Aggregate Large Receivables Limit
for such Obligors.
"Lender" means HLS or any other Person that agrees, pursuant to the
pertinent Assignment and Acceptance, to make Loans secured by Pledged Assets
pursuant to Article II of this Agreement.
"Liquidation Fee" means, for the Loans allocated to each Fixed
Period (computed without regard to any shortened duration of such Fixed Period
as a result of the occurrence of the Termination Date) during which such Loans
are repaid (in whole or in part) or the applicable Yield Rate for such Loans is
for any reason changed, the amount, if any, by which (a) the Yield (calculated
without taking into account any Liquidation Fee) which would have accrued on the
amount of the payment of such Loans during such Fixed Period (as so computed) if
such payment had not been made or if the applicable Yield Rate had remained
unchanged, as the case may be, exceeds (b) the sum of (i) Yield actually
received by the Lender in respect of such Loans for such Fixed Period and (ii)
if applicable, the income, if any, received by the Lender from the Lender's
investing the proceeds of such payments on such Loans.
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<PAGE>
"Loan" means a loan made by the Lender to the Borrower pursuant to
Article II.
"Lock Box" means a post office box to which Collections are remitted
for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a
Lock-Box Account.
"Lock-Box Account" means an account maintained by the Agent at a
bank or other financial institution for the purpose of receiving Collections
from the related Lock Box.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Lot" means any Development lot related to a Pledged Contract. .,
maximum Borrowing Limit" has the meaning assigned to that term in the definition
of Borrowing Limit.
"Minimum Overcollateralization Percentage" means thirty percent
(30%).
"Monthly Settlement Report" means a report, in substantially the
form of Exhibit E, furnished by the Servicer to the Agent for the Lender
pursuant to Section 6.07(b).
"Multiemployer Plan" means a multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Borrower or any
ERISA Affiliate on behalf of its employees.
"Obligations" means all present and future indebtedness and other
liabilities and obligations (howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, or due or to become due) of the
Borrower to the Lender, the Agent, the Servicer, and/or any other Person,
arising under or in connection with this Agreement and the other documents or
the transactions contemplated thereby (excluding the Receivables Purchase
Agreement) and shall include, without limitation, all liability for principal of
and interest on the Loans, closing fees, unused line fees, audit fees, expense
reimbursements, indemnifications, and other amounts due or to become due under
this Agreement, including, without limitation, interest, fees and other
obligations that accrue after the commencement of an insolvency proceeding (in
each case whether or not allowed as a claim in such insolvency proceeding).
"Obligor" means a Person obligated to make payments pursuant to a
Contract.
"Originator" means Bennett Funding International, Ltd. a Delaware
corporation, formerly known as The Processing Center, Inc.
"Originator Sale Agreement" means the Receivables Purchase and Sale
Agreement of even date herewith among the Originator, the Borrower and the
Servicer, together with all instruments, documents and agreements executed by
the Originator in connection therewith, in each case as the same may from time
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof.
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"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Overeollateralization Percentage" means at any time the remainder
of (a) a fraction, expressed as a percentage, the numerator of which is (i) the
sum of (A) the Pledged Receivables Balance plus (B) amounts on deposit in the
Spread Account plus (C) the amount of Collections on deposit in the Agent's
Account to be applied in accordance with Section 2.05 on the next Settlement
Date and the denominator of which is (ii) the Facility Amount minus (b) 100%.
"Payment" means the scheduled monthly payment of principal and
interest on a Contract.
"Permitted Investments" means (a) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of no more than 90 days from the date
of acquisition; (b) time deposits and certificates of deposit having maturities
of no more than 90 days from the date of acquisition, maintained with or issued
by any commercial bank having capital and surplus in excess of $500,000,000 and
having a short-term rating not less than A-1 or the equivalent thereof from S&P
and, if rated by Fitch, not less than F-1 or the equivalent thereof from Fitch;
(c) repurchase obligations for underlying securities of the types described in
clauses (a) or (b) above with a term of not more than ten days and maturing no
later than go days after the date of acquisition; and (d) commercial paper
maturing within 90 days after the date of acquisition and having a rating of not
less than A-1 or the equivalent thereof from S&P and if rated by Fitch, not less
than F-1 or the equivalent thereof from Fitch.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government (or any agency or political subdivision thereof) or other
entity.
"Pledge" means the pledge of any Receivable pursuant to Article II
and or the substitution of any Receivable pursuant to Section 6.18 for any
existing Pledged Receivable.
"Pledged Assets" has the meaning assigned to that term in Section
2.14(a).
"Pledged Contract" means a Contract under which a Pledged Receivable
arises.
"Pledged Receivable" means any Receivable pledged by the Borrower
pursuant to Article II and any Receivable substituted pursuant to Section 6.18
for any existing Pledged Receivable.
"Pledged Receivables Balance" means, at any time, the remainder of
(a) aggregate outstanding Balance of Eligible Receivables which constitute
Pledged Receivables minus (b) the aggregate amounts by which the aggregate
Outstanding Balance of any such Eligible Receivables related to each Development
exceeds the Concentration Limit with respect to such Development minus (c) the
aggregate amounts by which the aggregate Outstanding Balance of any such
Eligible
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Receivables that are Large Receivables exceeds the Large Receivables Limit minus
(d), if positive, the product of RB x (1 - APP/OBPR), where RB = the aggregate
Outstanding Balance of Eligible Receivables which constitute Pledged Receivables
at the time, APP = the aggregate purchase price paid or to be paid by the
originator pursuant to the Developer Sale Agreements for the Eligible
Receivables which constitute Pledged Receivables at such time and OBPR = the
aggregate Outstanding Balance of such Pledged Receivables at the time the
originator purchased such Pledged Receivables pursuant to the Developer Sale
Agreements.
"Purchased Assets" has the meaning assigned to such term in the
Receivables Purchase Agreement.
"Purchased Rate Cap" has the meaning assigned to such term in
certain Sinking Fund Account Agreement dated as of the date hereof among the
Originator, the Lender, the Agent, the Collateral Trustee and ING Capital, as
calculation agent.
"Purchased Receivables" has the meaning assigned to such term in the
Receivables Purchase Agreement.
"Receivable" means the indebtedness of any Obligor under a Contract
whether constituting an account, chattel paper, instrument or general
intangible, (a) which arises from a sale of a VOI or Lot by a Developer and (b)
in which the Borrower has acquired an interest pursuant to the Originator Sale
Agreement. Each Receivable shall include each Payment and every right to payment
of any interest or finance charges and other obligations of such Obligor with
respect thereto.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement of even date herewith among the Lender, the Agent, the Borrower and
the Servicer, as the same may from time to time be amended, supplemented or
otherwise modified in accordance with the terms hereof.
"Records" means all Contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to Receivables and the related Obligors which the
Borrower has itself generated, in which the Borrower has acquired an interest
pursuant to the Originator Sale Agreement or in which the Borrower has otherwise
obtained an interest.
"Related Security" means with respect to any Receivable:
(a) the Contract under which such Receivable arose;
(b the VOIs and Lots relating to such Receivable;
(c) any Contract Mortgages relating to the Pledged contracts and all
other security interests or liens and property subject thereto from time
to time purporting to secure
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<PAGE>
payment of such Receivable, whether pursuant to the Contract related to
such Receivable or otherwise;
(d) all guarantees, indemnities, warranties, letters of credit,
insurance policies (including Credit Life Insurance and credit default
insurance) and proceeds and premium refunds thereof and other agreements
or arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise; provided, however, if any such
guarantee, indemnity, warranty, letter of credit, insurance policy,
agreement, or arrangement supporting or securing payment of such
Receivables support or secure payment of any Receivable which is not a
Pledged Receivable, only the portion supporting or securing the Pledged
Receivables shall be Related Security;
(e) the Contract Files and other Records relating to such
Receivables;
(f) the Contract Conveyance Documents and any Developer Mortgages
relating to such Receivable;
(g) all of the Borrower's right and title to, and interest in, the
Originator Sale Agreement, the Developer Sale Agreements and the
assignment to the Agent of all UCC financing statements filed by the
Borrower against the Originator under or in connection with the Originator
Sale Agreement; and
(h) all proceeds of the foregoing.
"Release Price" means, with respect to a Pledged Contract to be
released hereunder, an amount equal to the remaining Outstanding Balance on such
Pledged Contract as of the opening of business on the Settlement Date on which
the release is to be effected hereunder, together with accrued and unpaid
interest thereon at the Contract Rate from the last due date as to which the
Obligor paid interest under such Contract.
"Required Overcollateralization Percentage" means thirty-three
percent (33%).
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill (or its predecessor or successors in interest) if and so long as it has
rated and is continuing to rate commercial paper notes of the Lender, and
otherwise means such other nationally recognized statistical rating organization
as may be designated by the Agent.
"Sales Price" means, with respect to any Pledged Receivable, the
total purchase price of the related VOI or Lot, including any premium paid in
respect of a policy of Credit Life Insurance.
"Servicer" means at any time the Person then authorized pursuant to
Section 6.01 to service, administer and collect Receivables.
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"Servicer Default" means the defaults specified in Section 8.01 of
this Agreement.
"Servicer Fee" has the meaning assigned to that term in Section
2.09.
"Servicing Fee Rate" means 1.00% per annum, so long as the
originator or any of its Affiliates is the Servicer, and otherwise means the
percentage set forth in the Standby Servicer Fee Letter or such other percentage
per annum which the Servicer and the Agent may agree upon in writing from time
to time.
"Settlement Date" means July 15, 1995 and thereafter the 15th day of
each month; provided that if such day is not a Business Day, the "Settlement
Date,, for such month shall he the first Business Day to occur after such 15th
day.
"Spread Account" has the meaning assigned thereto in Section 2.06 of
this Agreement.
"Spread Account Bank" means the bank maintaining the Spread Account.
"Spread Account surplus Date" has the meaning assigned to that term
in Section 2.06(b).
"Standby Servicer" means The Chase Manhattan Bank N.A. and any
substitute Standby Servicer appointed by the Agent pursuant to Section 6.17.
"Standby Servicer Fee" has the meaning assigned to that term in
Section 2.09(a).
"Standby Servicer Fee Letter" means the letter agreement dated as of
May 25, 1995, between the Standby Servicer and the Agent, as amended or
otherwise modified from time to time.
"Subsequent Borrowing Date" means each Business Day occurring after
the initial Borrowing Date on which the Borrower determines, in the exercise of
its sole discretion, to request an .additional Borrowing from the Lender and to
pledge additional Eligible Receivables to the Lender in respect thereof.
"Successor Servicer" has the meaning assigned to that term in
Section 8.02(a).
"Termination Date" means the earliest of (a) May 24, 2000, (b) the
date of termination of the Borrowing Limit pursuant to Section 2.03, (c) the
date of the declaration or automatic occurrence of the Termination Date pursuant
to Section 7.01 and (d) the date on which (i) all of the lenders providing
liquidity to the Lender with respect to this Agreement, (ii) all of the
commitments of all of the lenders under any agreement evidencing any such
liquidity support facility, (iii) any lender providing enhancement support to
the Lender with respect to this Agreement or (iv) any commitment of a lender
under any agreement evidencing any such enhancement support facility, is/are
terminated for any reason and replacement lenders and/or commitments, as the
case may be, are not obtained by the Lender prior to such termination.
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"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
"United States" means the United States of America,
"VOI" means the underlying ownership interest which is the subject
of a Pledged Contract, which ownership interest shall consist of either a fixed
week or undivided interest in fee simple in a lodging unit or group of lodging
units at a Development or such other interest or right with respect to a lodging
unit or group of lodging units at a Development that has been approved of by the
Agent in writing.
"VOI Regime" means any of the various interval ownership regimes
listed on Schedule V hereto, each of which is an arrangement, established under
applicable state law, whereby a designated portion of a Development is made
subject to a declaration permitting the transfer of VOIs therein.
"Yield" means, for all Loans allocated to any Fixed Period during
any such Fixed Period, the product of
YRT x C x ED
---
360
where:
C = the Loans allocated to such Fixed Period,
ED = the actual number of days elapsed during such Fixed Period, and
YRT = the Yield Rate for such Fixed Period;
provided, however that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or otherwise returned by the Lender
to the Borrower or any other Person for any reason.
"Yield Rate" means, for any Fixed Period for all Loans allocated to
such Fixed Period:
(i) to the extent the Lender will be funding the applicable
Loan on the first day of such Fixed Period through the issuance of
commercial paper, a rate equal to the CP Rate for such Fixed Period,
and
(ii) to the extent the Lender will not be funding the
applicable Loan on the first day of such Fixed period through the
issuance of commercial paper, a rate equal
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to the Alternative Rate for such Fixed Period or such other rate as
the Agent and the Borrower shall agree to in writing.
SECTION 1.02. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 1.03. Computation of Time Periods. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
ARTICLE II.
THE RECEIVABLES FACILITY.
SECTION 2.01. Borrowings. On the terms and conditions hereinafter
set forth, the Lender shall make loans ("Loans") to the Borrower secured by
Pledged Assets from time to time during the period from the date hereof until
the Termination Date. Under no circumstances shall the Lender make Loans if,
after giving effect to such Borrowing of Loans, either (a) the
overcollateralization Percentage would be less than Required
Overcollateralization Percentage or (b) the aggregate Loans outstanding
hereunder would exceed the lesser of (i) the Borrowing Limit minus the Discount
Amount or (ii) the Capital Limit as determined by reference to the most recent
Monthly Settlement Report or Borrowing Date/Spread Account Surplus Settlement
Report delivered by the Servicer to the Lender in accordance with Section 6.07
hereof.
SECTION 2.02. The Initial Borrowing and Subsequent Borrowings.
(a) Until the occurrence of the Termination Date, the Lender will
make Loans on any Business Day at the request of the Borrower, subject to
and in accordance with the terms and conditions of Section 2.01 and 2.02.
After the Collection Date has occurred, the Lender and the Agent, in
accordance with their respective interests, shall assign and transfer to
the Borrower their respective remaining interest in the Pledged Assets to
the Borrower free and clear of any Adverse Claim resulting solely from an
act or omission by the Lender or the Agent, but without any other
representation or warranty, express or implied.
(b) The initial Borrowing and each Subsequent Borrowing shall
be made on at least three Business Days' notice from the Borrower to the
Agent. Each such notice shall specify (i) the aggregate amount of such
Borrowing, which shall be in an amount equal to or greater than $500,000,
(ii) the date of such Borrowing, (iii) the requested Fixed Period(s) and
requested applicable Yield Rate (i.e. CP Rate or Alternative Rate) for
such Borrowing, and the allocations of Loans to each such requested Fixed
Period and (iv) the Contracts under which the Receivables to be pledged in
connection with such Borrowing arose together with an amendment to the
Contract Schedule with respect to such contracts (and upon such Borrowing,
such Receivables shall be "Pledged Receivables" hereunder). The Agent
shall notify the Borrower whether the duration of the initial Fixed
Periods and the
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<PAGE>
applicable Yield Rate described in such notice is acceptable or, if not
applicable, the Agent shall advise the Borrower of such Fixed Periods and
applicable Yield Rate as may be acceptable. On the date of such Borrowing,
the Lender shall, upon satisfaction of the applicable conditions set forth
in Article III, make available to the Borrower in same day funds, the
amount of such Borrowing (net of amounts payable to or for the benefit of
the Lender to repay Loans on such Borrowing Date pursuant to Section 2.05,
as the case may be, by payment to the account which the Borrower has
designated in writing with the consent of the Agent.
(c) It is expressly acknowledged that each Borrowing hereunder shall
be made without recourse to the Borrower; provided, however, that the
Borrower shall be liable to the Agent and the Lender (i) for all
representations, warranties, covenants and indemnifications made by such
Borrower pursuant to the terms of this Agreement to the extent described
in Section 9.01, (ii) for all obligations to remit any deemed Collections
of Pledged Receivables pursuant to Section 2.07, and (iii) for all fees,
costs, expenses, taxes and other indemnifications owed under this
Agreement.
(d) The Loans mature on May 24, 2008. All Obligations shall be
immediately due and payable on such date.
SECTION 2.03. Termination or Reduction of the Borrowing Limit. The
Borrower may, upon at least five Business Days' notice to the Agent, terminate
in whole or reduce in part the portion of the Borrowing Limit that exceeds the
greater of the outstanding Loans and the sum of the aggregate Loans plus the
Discount Amount; provided, however, that each partial reduction of the Borrowing
Limit shall be in an aggregate amount equal to $5,000,000 or an integral
multiple thereof.
SECTION 2.04. Selection of Fixed Periods. At all times hereafter
until the Termination Date, the Borrower shall, subject to the Agent's and the
Lender's approval and the limitations described below, select (a) Fixed Periods
and allocate a portion of the outstanding Loans to each selected Fixed Period,
so that the outstanding Loans are at all times allocated to one or more Fixed
Periods and (b) Yield Rates to apply to such Loans for such Fixed Periods. The
initial Fixed Period(s) and Yield Rate(s) applicable to the Loans arising as a
result of the initial Borrowing shall be specified in the notice relating to the
Borrowing described in Section 2.02(b). Each subsequent Fixed Period shall
commence on the last day of the immediately preceding Fixed Period, and the
duration of and Yield Rate applicable to such subsequent Fixed Period shall be
such as the Borrower shall select and the Agent shall approve on notice from the
Borrower received by the Agent (including notice by telephone, confirmed in
writing) not later than 12:30 P.M. (New York City time) on such last day, except
that if the Agent shall not have received such notice before 12:30 P.M. or the
Agent and the Borrower shall not have so mutually agreed before 2:00 P.M. (New
York City time) on such last day, such Fixed Period shall be one day and the
applicable Yield Rate shall be the Alternative Rate, until the Agent receives
notice from the Borrower requesting a Fixed Period and applicable Yield Rate,
which, if accepted by the Agent, shall be the Fixed Period and the applicable
Yield Rate; provided, that, notwithstanding the foregoing, on and after the
occurrence of any Event of Default (unless waived in accordance with the terms
and conditions hereof), the Lender
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<PAGE>
shall cease to issue commercial paper notes to fund and maintain Loans hereunder
and the applicable Yield Rate shall be the Alternative Rate. Any Fixed Period
which would otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day. Any Fixed Period which commences before the
Termination Date and would otherwise end on a date occurring after the
Termination Date shall end on the Termination Date. On or after the Termination
Date, the Agent shall have the right to allocate outstanding Loans to Fixed
Periods of such duration as shall be selected by the Agent. The Lender shall, on
the first day of each Fixed Period, notify the Agent of the Yield Rate for the
Loans allocated to such Fixed Period.
SECTION 2.05. Settlement Procedures. The Servicer, as agent for the
Agent and the Lender, will instruct the Agent's Bank, and the Agent may instruct
the Agent's Bank, to apply funds on deposit in the Agent's Account and the
Spread Account as described in this Section 2.05, subject to the provisions of
Section 2.13(b) of the Receivables Purchase Agreement.
(a) Yield and Liquidation Fees. The Servicer shall, and the Agent
may, on each Business Day (including any Settlement Date), direct the
Agent's Bank to set aside in the Agent's Account for transfer at the
further direction of the Lender or the Agent or any other duly authorized
agent of the Lender (whether on such day or on a subsequent day) an amount
equal to the Yield through such day on the Loans allocable to the Lender
and not so previously set aside and the amount of any unpaid Liquidation
Fees owed to the Lender on such day. On the last day of each Fixed Period,
the Agent shall notify the Servicer of, and direct the Agent's Bank to
pay, such funds to be paid to the Lender in respect of full payment of
accrued Yield for such Fixed Period. on any Business Day on which an
amount is set aside in respect of Liquidation Fees pursuant to this
Section 2.05(a), the Agent shall direct the Agent's Bank to pay such funds
to the Lender in payment of such Liquidation Fees.
(b) Fixed Period Loan Repayment. The Servicer shall, and the Agent
may, on the last day of each Fixed Period that is not a Settlement Date,
direct the Agent's Bank to transfer monies held by the Agent's Bank in the
Agent's Account in excess of the aggregate amounts that would, if such
last day was a Settlement Date, be set aside on such Settlement Date to
pay amounts pursuant to Section 2.05(a) and 2.05(c)(i)-(vii), to pay the
Agent for the account of the Lender in prepayment of the Loans, an amount
equal to the aggregate Loans allocated to such Fixed Period or, prior to
the Termination Date, if lower, an amount equal to the excess, if any, of
aggregate Loans immediately prior to such distribution over the Capital
Limit on such date (without giving effect to amounts on deposit in the
Agent's Account on such date that would otherwise be included in the
calculation of the Capital Limit but after giving effect to any Borrowing
made on such date and any other distributions of amounts on deposit in the
Agent's Account or the Spread Account made on such date).
(c) Settlement Date Transfers from Agent's Account. The Servicer
shall, and the Agent may, on each Settlement Date direct the Agent's Bank
to transfer monies held by the Agent's Bank in the Agent's Account in
excess of the aggregate amounts set aside on such Settlement Date pursuant
to Section 2.05(a), in the following amounts and priority:
(i) to the Borrower, any monies held in the Agent's Account
that are not
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Collections and that are to be remitted to the Borrower pursuant to
Section 6.03;
(ii) to the Agent for the account of the Lender in an amount
equal to (and for payment of) the Facility Fee which has accrued and
is unpaid as of the last day of the preceding month;
(iii) if neither the Borrower nor the originator, nor any
Affiliate of either of them, is the Servicer, to the Agent for the
account of the Servicer in an amount equal to the Servicer Fee which
is accrued and unpaid as of the last day of the preceding month;
(iv) to the Spread Account in an amount equal to the Borrowing
Base Deficiency (if any) as of such Settlement Date;
(v) so long as no Borrowing Base Deficiency shall exist or
would be created by such transfer, to the Agent for the account of
the Servicer (if the Servicer is the Borrower, the Originator or any
Affiliate of either of them) in an amount equal to the Servicer Fee
which is accrued and unpaid as the last day of the preceding month;
(vi) so long as no Borrowing Base Deficiency shall exist or
would be created by such transfer, to the Agent for the account of
the Lender in an amount equal to the aggregate amount of all other
obligations of the Borrower to the Lender hereunder other than
Yield, Liquidation Fees and the amounts described in clauses (i)
through (iv) above;
(vii) prior to the Termination Date if such Settlement Date is
a Borrowing Date, to the Borrower in an amount equal to the Loan to
be made hereunder on such date (which amount shall constitute a Loan
hereunder to the same extent as if such amount had been advanced
directly by the Lender to the Borrower on such date);
(viii) to the Agent for the account of the Lender in repayment
of Loans (A) prior to the Termination Date, in an amount equal to
the Borrowing Base Surplus on such date, if any, immediately prior
to such distribution (without giving effect to amounts on deposit in
the Agent's Account on such date that would otherwise be included in
the calculation of the Borrowing Base Surplus but after giving
effect to any Borrowing made on such date and any other
distributions of amounts on deposit in the Agent's Account or the
Spread Account made on such date) and (B) on and after the
Termination Date, in an amount necessary to repay the Loans in full;
and
(ix) on and after the Termination Date, to the Agent for the
account of the Lender in an amount necessary to reduce outstanding
Capital and other amounts due under the Receivables Purchase
Agreement to zero;
(x) to the Borrower, any remaining amounts.
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Upon its receipt of funds pursuant to clause (ii) above in respect of the
Facility Fee, the Agent shall retain a portion thereof in the amount of the
accrued and unpaid Agent's Fee, and a portion thereof in the amount of the
accrued and unpaid Standby Servicer Fee (each as of the last day of the
preceding month) and shall apply the balance of funds as directed by the Lender.
Upon its receipt of funds pursuant to clause (iii) or (v) above, the Agent shall
distribute such funds to the Servicer in payment of any accrued and unpaid
Servicer Fee. Upon its receipt of funds pursuant to clause (vi) above, the Agent
shall apply such funds as directed by the Lender or as otherwise provided in
this Agreement.
(d) Borrowing Date Transfers. The Servicer shall, and the Agent may,
on each Borrowing Date that is not a Settlement Date direct the Agent's
Bank to transfer monies held by the Agent's Bank in the Agent's Account in
excess of the Carrying Cost Reserve Amount as of such Borrowing Date, to
the Borrower (which amount shall constitute a Loan hereunder to the same
extent as if such amount had been advanced directly by the Lender to the
Borrower on such date).
(e) Application of Spread Account Monies. To the extent that there
are insufficient available funds on deposit in the Agent's Account for the
payment of the amounts payable pursuant to Section 2.05(a),
2.05(c)(ii)-(iii) and 2.05(c!)(vi), funds shall be withdrawn by the
Collateral Trustee from the Spread Account to the extent of such
insufficiency, solely upon the direction of the Agent, to be used solely
for the purposes and in the order of priority set forth at Section 2.05(a)
and 2.05(c)(ii)-(iii) and 2.05(c)(vi) hereof, giving effect to the terms
thereof as if each reference therein to the "Agent's Account" was,
instead, a reference to the Spread Account and on and after the
Termination Date, funds may be withdrawn from the Spread Account by the
Collateral Trustee and deposited into the Agent's Account to be applied in
accordance with Section 2.05(a)-(c).
(f) Borrower Deficiency Payments. Notwithstanding anything to the
contrary contained in this Section 2.05 or in any other provision in this
Agreement, if, on any Business Day the outstanding amount of Loans shall
exceed the lesser of (i) the Borrowing Limit minus the Discount Amount or
(ii) the Capital Limit, then, the Borrower shall remit to the Agent, prior
to any Borrowing and in any event no later than the close of business of
the Agent on the next succeeding Business Day, a payment (to be applied by
the Agent in its sole discretion either to fund the Spread Account or to
repay Loans allocated to Fixed Periods selected by the Agent, in its sole
discretion) in such amount as may be necessary to reduce outstanding Loans
to an amount less than or equal to the lesser of (i) the Borrowing Limit
minus the Discount Amount and (ii) the Capital Limit.
SECTION 2.06. Spread Account.
(a) On or prior to the initial Borrowing Date, the Agent shall
establish and maintain, or cause to be established and maintained, for the
sole and exclusive benefit of the Collateral Trustee for the benefit of
the Agent and the Lender and their respective assigns, a cash collateral
account (the "Spread Account"). The Spread Account shall be a subaccount
within a special account maintained with a Depository Institution which is
an Eligible
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Depository Institution (provided, however, that the Depository Institution
at which such Spread Account is established and maintained need not be an
Eligible Depository Institution in the event that the Spread Account is
maintained as a fully segregated trust account with the trust department
of such Depository Institution) but shall be under the sole dominion and
control of, and in the name of, the Collateral Trustee.
(b) Prior to the occurrence of the Termination Date, on at least
three Business Days' notice from the Borrower to the Agent, the Borrower
may, on any Business Day that is not a Settlement Date (each such day a
"Spread Account Surplus Date") (provided that a Spread Account Surplus
Date shall occur no more frequently than once a week), instruct the
Servicer to instruct the Spread Account Bank to transfer from the Spread
Account to the Borrower, an amount of funds held in the Spread Account
which shall in no event be greater than (i) the Borrowing Base surplus (if
any) on such Spread Account Surplus Date, if such Spread Account Surplus
Date is the Business Day next succeeding a Settlement Date or (ii) the
excess of the Borrowing Base Surplus (if any) over the Carrying Cost
Reserve Amount on such Spread Account Surplus Date, if such Spread Account
Surplus Date is not on such a Business Day (any such amount of funds, the
"Spread Account Excess"). The Borrower, in making any such instructions
for the transfer of funds from the Spread Account, shall simultaneously
provide each of the Agent and the Spread Account Bank with a copy of a
Borrowing Date/Spread Account Surplus Settlement Report together with a
certificate of an officer of the Borrower as to the existence and size of
any Spread Account Excess.
(c) Any funds remaining in the Spread Account after the Collection
Date has occurred shall be remitted to the Borrower or as otherwise
required by law.
SECTION 2.07. Special Settlement Procedures. If on any day the
Outstanding Balance of any Pledged Receivable is reduced or canceled as a result
of a setoff in respect of any claim by the obligor thereof against the
Originator, the Borrower, the related Developer or any other Person (whether
such claim arises out of the same or a related transaction or an unrelated
transaction), the Borrower shall be deemed to have received on such day a
Collection of such Pledged Receivable in the amount of such reduction,
cancellation or adjustment. If on any day any of the representations or
warranties in Section 4.01(h) is no longer true with respect to a Pledged
Receivable, the Borrower shall be deemed to have received on such day a
Collection of such Pledged Receivable in full.
SECTION 2.08. Payments and Computations, Etc.
(a) All amounts to be paid or deposited by the Borrower or the
Servicer hereunder shall be paid or deposited in accordance with the terms
hereof no later than 11:00 A.M. (New York City time) on the day when due
in lawful money of the United States in immediately available funds to the
Agent's Account. The Borrower shall, to the extent permitted by law, pay
to the Agent interest on all amounts not paid or deposited within one
Business Day after the date such amounts are due hereunder (whether owing
by the Borrower individually or as Servicer) at 2%- per annum above the
Alternative Rate, payable on demand; provided, however, that such interest
rate shall not at any time exceed the
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maximum rate permitted by applicable law. Such interest shall be retained
by the Agent except to the extent that such failure to make a timely
payment or deposit has continued beyond the date for distribution by the
Agent of such overdue amount to the Lender, in which case such interest
accruing after such date shall be for the account of, and distributed by
the Agent to the Lender. Any Obligation hereunder shall not be reduced by
any distribution of any portion of Collections if at any time such
distribution is rescinded or returned by the Lender to the Borrower or any
other Person for any reason. All computations of interest and all
computations of Yield, Liquidation Yield, Liquidation Fee and other fees
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first but excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Yield, interest or any fee
payable hereunder, as the case may be.
(c) If any Borrowing requested by the Borrower and approved by the
Lender and the Agent pursuant to Section 2.02 or any selection of a
subsequent Fixed Period and applicable Yield Rate for any Loans allocated
to such Fixed Period requested by the Borrower and approved by the Agent
pursuant to Section 2.04 is not for any reason whatsoever made or
effectuated (other than through the sole fault of the Lender and/or
Agent), as the case may be, on the date specified therefor, the Borrower
shall indemnify the Lender against any loss, cost or expense incurred by
the Lender, including, without limitation, any loss (including loss of
anticipated profits, net of anticipated profits in the reemployment of
such funds in the manner determined by the Lender), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by the Lender to fund or maintain such Loans during such
Fixed Period.
SECTION 2.09. Fees. (a) The Borrower shall pay the Lender (either
directly or through the Agent) certain fees (the "Facility Fee") in the amounts
and on the dates set forth in a fee letter executed between the Borrower and the
Lender. The Lender shall pay to the Agent, for its own account, certain fees
(the "Agent's Fee") in the amounts and on the dates set-forth in a fee letter
executed between the Lender and the Agent. The Lender shall pay to the Standby
Servicer out of the Facility Fee, a collection fee (the "Standby Servicer Feel,)
in the amounts and on the dates set forth in the Standby Servicer Fee Letter.
(b) The Lender shall pay to the Servicer a collection fee (the
"Servicer Fee") equal to the Servicing Fee Rate on the daily average
aggregate Outstanding Balance of Pledged Receivables other than Defaulted
Receivables, from the date hereof until the later of the Termination Date
or the Collection Date, payable on each Settlement Date.
(c) All of the fees payable pursuant to this Section 2.09 shall be
payable only from Collections pursuant to, and subject to the priority of
payment set forth in, Section 2.05.
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SECTION 2.10. Increased Costs; Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii)
the compliance by the Lender or any affiliate thereof (each of which, an
"Affected Party") with any guideline or request from any central bank or
other governmental agency or authority (whether or not having the force of
law), (A) shall subject an Affected Party to any tax (except for taxes on
the overall net income of such Affected Party), duty or other charge with
respect to the Pledged Assets, the obligation to make Loans hereunder, or
on any payment made hereunder or (B) shall impose, modify or deem
applicable any reserve requirement (including, without limitation, any
reserve requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding any reserve requirement, if any, included in
the determination of Yield), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Affected Party or (C) shall impose any other condition affecting
the Pledged Assets or the Lender's rights hereunder, the result of which
is to increase the cost to any Affected Party or to reduce the amount of
any sum received or receivable by an Affected Party under this Agreement,
then within ten days after demand by such Affected Party (which demand
shall be accompanied by a statement setting forth the basis for such
demand), the Borrower shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for
such additional or increased cost incurred or such reduction suffered to
the extent such additional or increased costs or reduction are incurred or
suffered in connection with the Pledged Assets, any obligation to make
Loans hereunder, any of the Lender's rights hereunder, or any payment made
hereunder. The Lender agrees that it will use its best efforts to reduce
or eliminate any claim for compensation pursuant to this Section 2.10(a),
provided that nothing contained herein shall obligate the Lender to take
any action which, in the opinion of the Lender, is unlawful or otherwise
disadvantageous to the Lender.
(b) If either (i) the introduction of or any change in .or in the
interpretation of any law, guideline, rule, regulation, directive or
request or (ii) compliance by any Affected Party with any law, guideline,
rule, regulation, directive or request from any central bank or other
governmental authority or agency (whether or not having the force of law),
including, without limitation, compliance by an Affected Party with any
request or directive regarding capital adequacy, has or would have the
effect of reducing the rate of return on the capital of any Affected Party
as a consequence of its obligations hereunder or arising in connection
herewith to a level below that which any such Affected Party could have
achieved but for such introduction, change or compliance (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material, then
from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis
for such demand), the Borrower shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party
for such reduction.
(c) If as a result of any event or circumstance similar to those
described in
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Section 2.10(a) or 2.10(b), any Affected Party is required to compensate a
bank or other financial institution providing liquidity support, credit
enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of Loans hereunder, then
within ten days after demand by such Affected Party, the Borrower shall
pay to such Affected Party such additional amount or amounts as may be
necessary to reimburse such Affected Party for any amounts paid by it.
(d) In determining any amount provided for in this Section 2.10, the
Affected Party may use any reasonable averaging and attribution methods.
Any Affected Party making a claim under this Section 2.10 shall submit to
the Borrower a certificate as to such additional or increased cost or
reduction, which certificate shall be conclusive absent demonstrable
error. As of the date hereof, the Lender certifies that to the best of its
knowledge, there is no event or circumstance that would lead the Lender to
make a claim under this Section 2.10.
SECTION 2.11. Taxes.
(a) Any and all payments by the Borrower or the Servicer hereunder
shall be made, in accordance with Section 2.08, free and clear of and
without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of the Lender and the Agent, net
income taxes that are imposed by the United States and franchise taxes and
net income taxes that are imposed on the Lender or the Agent by the state
or foreign jurisdiction under the laws of which the Lender or the Agent
(as the case may be) is organized or conducts business or any political
subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower or the Servicer shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder
to the Lender or the Agent, (i) the Borrower shall make an additional
payment to the Lender or the Agent, as the case may be, in an amount
sufficient so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.11),
the Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower or the Servicer, as the case may be, shall make such deductions
and (iii) the Borrower or the Servicer, 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) The Borrower will indemnify the Lender and the Agent for the
full amount of Taxes (including, without limitation, any Taxes imposed by
any jurisdiction on amounts payable under this Section 2.11) paid by the
Lender or the Agent (as the case may be) in connection with the Pledged
Assets, any obligation to make Loans hereunder, or any other payment made
to the Lender and/or the Agent hereunder and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto; provided that the Lender or the Agent, as appropriate, making a
demand for indemnity payment shall provide the Borrower, at its address
referred to in Section 10.02, with a certificate from the relevant taxing
authority or from a responsible officer of the Lender or the Agent stating
or otherwise
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evidencing that the Lender or the Agent has made payment of such Taxes and
will provide a copy of or extract from documentation, if available,
furnished by such taxing authority evidencing assertion or payment of such
Taxes. This indemnification shall be made within ten days from the date
the Lender or the Agent (as the case may be) makes written demand
therefor.
(c) Within 30 days after the date of any payment by the Borrower of
any Taxes, the Borrower will furnish to the Agent, at its address referred
to in Section 10.02, appropriate evidence of payment thereof.
(d) If the Lender is not created or organized under the laws of the
United States or a political subdivision thereof, the Lender shall, to the
extent that it may then do so under applicable laws and regulations,
deliver to the Borrower (with, in the case of the Lender, a copy to the
Agent) (i) within 15 days after the date hereof, or, if later, the date on
which the Lender becomes a Lender pursuant to Section 10.04 hereof, two
(or such other number as may from time to time be prescribed by applicable
laws or regulations) duly completed copies of IRS Form 4224 or Form 1001
(or any successor forms or other certificates or statements which may be
required from time to time by the relevant United States taxing
authorities or applicable laws or regulations), as appropriate, to permit
the Borrower to make payments hereunder for the account of the Agent or
the Lender, as the case may be, without deduction or withholding of United
states federal income or similar taxes and (ii) upon the obsolescence of
or after the occurrence of any event requiring a change in, any form or
certificate previously delivered pursuant to this Section 2.11(d), copies
(in such numbers as may from time to time be prescribed by applicable laws
or regulations) of such additional, amended or successor forms,
certificates or statements as may be required under applicable laws or
regulations to permit the Borrower to make payments hereunder for the
account of the Agent or the Lender, as the case may be, without deduction
or withholding of United States federal income or similar taxes.
(e) For any period with respect to which the Lender or the Agent has
failed to provide the Borrower with the appropriate form, certificate or
statement described in Section 2.11(d) (other than if such failure is due
to a change in law occurring after the date of this Agreement), the Agent
or the Lender, as the case may be, shall not be entitled to
indemnification under Section 2.11(a) or 2.11(b) with respect to any
Taxes.
(f) Within 30 days of the written request of the Borrower therefor,
the Agent and the Lender, as appropriate, shall execute and deliver to the
Borrower such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to
assist the Borrower in applying for refunds of taxes remitted hereunder.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the
Lender in connection with this Agreement or the funding or maintenance of
Loans hereunder, the Lender is required to compensate a bank or other
financial institution in respect of taxes under circumstances
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similar to those described in this Section 2.11 or under Section 10.07(b)
then within ten days after demand by the Lender, the Borrower shall pay to
the Lender such additional amount or amounts as may be necessary to
reimburse the Lender for any amounts paid by it.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the parties
contained in this Section 2.11 shall survive the termination of this
Agreement.
SECTION 2.12. Assignment of the Originator Sale Agreement. The
Borrower hereby assigns to the Agent, for the benefit of the Lender hereunder,
all of the Borrower's right and title to and interest in the Originator Sale
Agreement with respect to the Pledged Receivables and Pledged Assets. The
Borrower confirms and agrees that the Agent shall have, following an Event of
Default, the sole right to enforce the Borrower's rights and remedies under the
Originator Sale Agreement with respect to the Pledged Receivables and the
Pledged Assets for the benefit of the Lender (including, without limitation the
Borrower's right to enforce the Originator's rights and remedies under the
Developer Sale Agreements), but without any obligation on the part of the Agent,
the Lender or any of their respective Affiliates, to perform any of the
obligations of the Borrower under the Originator Sale Agreement. In addition,
the Borrower confirms and agrees that the Borrower will send to the originator
any notice requested by the Agent of any "Event of Termination" under the
Originator Sale Agreement or any event or occurrence that would, upon notice to
the originator or upon the passage of time or both, would be such an "Event of
Termination." The Borrower further confirms and agrees that such assignment to
the Agent shall terminate upon the Collection Date; provided, however, that the
rights of the Agent and the Lender pursuant to such assignment with respect to
rights and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Originator Sale Agreement, which rights and remedies survive the termination of
the Originator Sale Agreement, shall be continuing and shall survive any
termination of such assignment.
SECTION 2.13. Payment of Support Obligations. (a) As used in this
Section 2.13, the following terms shall have the following meanings:
"Secured Parties" means the Agent and the Lender and their
respective successor and assigns.
"Support Obligations" has the meaning assigned to that term in
Section 2.13(b).
"Supporting Collateral" has the meaning assigned to that term in
Section 2.14(b).
"Supporting Receivables" means, at any time after the Trigger Date
under the Receivables Purchase Agreement, all outstanding Purchased Receivables
at such time.
"Trigger Date" means, the date following the Termination Date under
the Receivables Purchase Agreement and this Agreement on which (i) the
outstanding Loans have been reduced to lot or less of the principal amount of
the Loans that were outstanding hereunder on the Termination Date or (ii) the
outstanding Capital under the Receivables Purchase Agreement has
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been reduced to lot or less of the principal amount of the Capital that was
outstanding under the Receivables Purchase Agreement on the Termination Date.
"Unused Collections" means, with respect to the Receivables Purchase
Agreement, an amount equal to the aggregate amount of "Collections" with respect
to Purchased Assets under the Receivables Purchase Agreement, which were
received after the Termination Date under the Receivables Purchase Agreement but
on or prior to the Trigger Date and which were not applied against Capital and
the other amounts payable under the Receivables Purchase Agreement.
(b) To support the prompt recovery in full of all the Obligations
hereunder, the Borrower hereby unconditionally and irrevocably agrees to
pay to the Agent, for the benefit of the Secured Parties, (and the
Servicer, as agent for the Agent and the Purchaser, will instruct the
Agent's Bank, and the Agent, in the absence of the Servicer's instruction,
may instruct the Agent's Bank, to apply funds on deposit in the "Agent's
Account" under the Receivables Purchase Agreement to pay) the amounts
described in the following sentences of this Section 2.13(b) at the times
therein specified for payment of such amounts. In the event that there
shall be outstanding and to the extent of any Obligations, the Borrower
shall pay or cause to be paid to deposited into the Agent's Account (such
payment obligations, the "Support Obligations") (and the Servicer, as
agent for the Agent and the Borrower, will instruct the Agent's Bank, and
the Agent, in the absence of the Servicer's instruction, may instruct the
Agent's Bank, to apply funds on deposit in the "Agent's Account" under the
Receivables Purchase Agreement to pay such Support obligations), (a) on
the Trigger Date, all Unused Collections and (b) thereafter, on each day
an amount equal to the product of (i) all Collections of Supporting
Receivables not previously remitted to the Agent's Account multiplied by
(ii) the ratio of (A) outstanding Loans on such day to (B) the sum of
outstanding Capital and outstanding Loans on such day. All amounts
remitted to the Agent's Account pursuant to this Section 2.13 shall be
applied to such Obligations as provided in Section 2.05(a)-(c). The
Borrower's payment obligations under this Section 2.13 shall terminate on
the Collection Date.
(c) Each of the Borrower and the Servicer hereby acknowledges and
agrees that its representations, warranties, covenants, agreements,
undertakings and obligations set forth in the Receivables Purchase
Agreement with respect to the Supporting Collateral shall remain binding
and in full force and effect for purposes hereof until the Collection Date
under the Receivables Purchase Agreement.
SECTION 2.14. Grant of a Security Interests.
(a) To secure the prompt and complete payment when due of the
obligations and the performance by the Borrower of all of the covenants
and obligations to be performed by it pursuant to this Agreement, the
Borrower hereby assigns and pledges to the Agent and grants to the Agent,
on behalf of the Lender and the Agent (and their respective successors and
assigns), a security interest in all of the Borrower's right, title and
interest in and to all of the following property and interests in property
(collectively, the "Pledged Assets"), whether tangible or intangible and
whether now owned or existing or hereafter arising or acquired
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and wheresoever located;
(i) all Pledged Receivables, together with all Related
Security, Contracts, Records and other Pledged Assets related
thereto, including, without limitation, all Collections and other
monies due and to become due to the Borrower in respect of any
Receivable and any security therefor received on or after the
applicable Cut-Off Date;
(ii) all right, title and interest of the Borrower in, to and
under the Originator Sale Agreement, including, without limitation,
all monies due and to become due to the Borrower under or in
connection therewith;
(iii) all right, title and interest of the Borrower in, to and
under all Purchased Rate Caps;
(iv) the Agent's Account, lock boxes, Lock-Box Accounts, and
all other bank and similar accounts relating to the collection of
Pledged Receivables and all funds held therein or in such other
accounts, and all income from the investment of funds in the Agent's
Account and such other accounts; and
(v) all proceeds of the foregoing property described in
clauses (i) through (iv) above, including 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 Pledged Assets.
(b) To secure payment and performance of the Support Obligations,
Borrower hereby grants to the Agent, for its benefit and the benefit of
the other Secured Parties, a security interest in all of the Borrower's
right, title and interest in and to all now owned or existing and from
time to time hereafter arising or acquired Purchased Assets under the
Receivables Purchase Agreement (the "Supporting collateral").
SECTION 2.15. Evidence of Debt. The Lender shall maintain an account
or accounts evidencing the indebtedness of the Borrower to the Lender resulting
from each Loan owing to the Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder. The entries made in such account(s) of the Lender shall be conclusive
and binding for all purposes, absent manifest error.
ARTICLE III.
CONDITIONS OF LOANS.
SECTION 3.01. Conditions Precedent to Initial Borrowing. The initial
Borrowing hereunder is subject to the condition precedent that the Agent shall
have received on or before the date of such Borrowing the items listed in
Schedule VI, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent and the Lender.
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SECTION 3.02. Conditions Precedent to Al Borrowings and Remittances
of Collections. Each Borrowing (including the initial Borrowing) from the
Borrower by the Lender shall be subject to the further conditions precedent that
(a) with respect to any such Borrowing (other than the initial Borrowing) on or
prior to the date of such Borrowing, the Servicer shall have delivered to the
Agent, in form and substance satisfactory to the Agent, a completed Monthly
Settlement Report or Borrowing Date/Spread Account Surplus Settlement Report
containing information accurate as of a date no more than three Business Days
prior to the date of such Borrowing and containing such additional information
as may be reasonably requested by the Agent; (b) on the date of such Borrowing,
the following statements shall be true, and the Borrower by accepting the amount
of such Borrowing shall be deemed to have certified that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of
such date (including, without limitation, that the Receivables to be
Pledged on such date are Eligible Receivables),
(ii) No event has occurred and is continuing, or would result
from such Borrowing, which constitutes an Event of Default or an
Event of Termination under the Receivables Purchase Agreement,
(iii) On and as of such day, after giving effect to such
Borrowing, the (A) Overcollateralization Percentage equals or
exceeds the Required Overcollateralization Percentage and (B)
aggregate outstanding Loans do not exceed the lesser of (x) the
Borrowing Limit minus the Discount Amount, or (y) the Capital Limit,
and
(iv) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or
governmental body, agency or instrumentality shall prohibit or
enjoin, the making of such Loans by the Lender in accordance with
the provisions hereof,
(c) Agent's receipt of a notice from the Collateral Trustee
confirming that the Collateral Trustee has received; (i) all Contracts,
promissory notes and any deed of titles contained in the Contract Files
required to be delivered to it pursuant to Section 5.01(h), (ii) a timely
copy of the notice of Borrowing delivered to the Agent pursuant to Section
2.02, appropriately filled-out and executed by the Borrower and (iii) an
amendment to the Contract Schedule required pursuant to Section 2.02 (any
such notice to be sent by the Collateral Trustee to the Agent only after
the Collateral Trustee's receipt of such items).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
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(a) The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction named at
the beginning hereof and is duly qualified to do business, and is in good
standing, in every jurisdiction in which the nature of its business
requires it to be so qualified.
(b) The execution, delivery and performance by the Borrower of this
Agreement, the Originator Sale Agreement and all other documents to be
delivered by it hereunder or thereunder, including the Borrower's use of
the proceeds of Loans, are within the Borrower's corporate powers, have
been duly authorized 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 binding on
ox 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, and do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to
any of its properties (other than in favor of the Lender or the Agent for
the benefit of the Lender with respect to the Pledged Receivables and
related Pledged Assets); and no transaction contemplated hereby or by the
Originator Sale Agreement requires compliance with any bulk sales act or
similar law. This Agreement and the Originator Sale Agreement have each
been duly executed and delivered by the Borrower.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower
of this Agreement, the Originator Sale Agreement or any other document or
instrument to be delivered hereunder or thereunder, except for the filing
of the UCC financing statements described in Schedule VI, all of which
financing statements have been duly filed and are in full force and
effect.
(d) This Agreement, the Originator Sale Agreement and each other
document or instrument to be delivered by the Borrower hereunder or
thereunder constitute the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
moratorium, or other similar laws affecting the rights of creditors.
(e) To the knowledge of the Borrower, the consolidated balance
sheets of the Originator and its consolidated subsidiaries as at December
31, 1994 and March 31, 1995, and the related statements of income,
shareholders, equity and cash flows for the fiscal year and fiscal quarter
then ended, copies of which have been furnished to the Agent, fairly
present, in all material respects, the consolidated financial condition of
the Originator and its consolidated subsidiaries as at such date and the
consolidated results of the operations of the Originator and its
consolidated subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied, and since December 31, 1994
there has been no material adverse change in any such condition or
operations.
(f) There is no pending or to the knowledge of the Borrower,
threatened, action
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or proceeding affecting the Borrower or to the knowledge of the Borrower,
the Originator or any other subsidiaries of the Originator before any
court, governmental agency or arbitrator that may materially adversely
affect the financial condition of the Originator, the Borrower or any
other subsidiaries of the Originator or the ability of the Originator to
perform its obligations under the originator sale Agreement or the ability
of the Borrower to perform its obligations under this Agreement. None of
the Borrower, and, to the knowledge of the Borrower, the Originator or any
subsidiary of the originator is in default with respect to any order of
any court, arbitrator or governmental body except for defaults with
respect to orders of governmental agencies which defaults are not material
to the business or operations of the originator, the Borrower or any other
subsidiary of the Originator.
(g) No proceeds of any Loans will be used by the Borrower to acquire
any security in any transaction which is subject to Section 13 or 14 of
the Securities Exchange Act of 1934, at; amended.
(h) Each Receivable, together with the Contract related thereto,
shall, at-all times, be owned by the Borrower free and clear of any
Adverse Claim except as provided herein or in the Receivables Purchase
Agreement, and upon each Borrowing, the Lender shall acquire a valid and
perfected first priority security interest in each Pledged Receivable then
existing or thereafter arising and in the Related Security and Collections
with respect thereto, free and clear of any Adverse Claim except as
provided hereunder or under the Receivables Purchase Agreement. No
effective financing statement or other instrument similar in effect
covering any Receivable or the Related Security or Collections with
respect thereto shall at any time be on file in any recording office
except such as may be filed in favor of the Agent relating to this
Agreement or the Receivables Purchase Agreement.
(i) As of the close of business on each Business Day prior to the
Termination Date, the aggregate amount of Loans outstanding shall not
exceed the lesser of (x) the Borrowing Limit minus the Discount Amount on
such Business Day or (y) the Capital Limit on such Business Day.
(j) No Monthly Settlement Report, Borrowing Date/Spread Account
Surplus Settlement Report, Commercial Paper Settlement Report (each if
prepared by the Borrower, or to the extent that information contained
therein is supplied by the Borrower), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished
by the Borrower to the Agent or the Lender in connection with this
Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Agent or
the Lender, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of
fact or omits or shall omit to state a material fact or any fact necessary
to make the statements contained therein not misleading.
(k) The principal place of business and chief executive office of
the Borrower and the office where the Borrower keeps all the Records are
located at the address of the Borrower referred to in Section 10.02 hereof
(or at such other locations as to which the
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notice and other requirements specified in Section 6.09 shall have been
satisfied).
(l) The names and addresses of all the Lock-Box Banks, together with
the account numbers of all Lock-Box Accounts of the Borrower at such
Lock-Box Banks, the address of each Lock-Box, and the names, addresses and
account numbers of all accounts to which collections of the Receivables
outstanding before the initial Borrowing hereunder have been sent, are
specified in Schedule VII (which shall be deemed to be amended in respect
of terminating or adding any Lock-Box Account or Lock-Box Bank upon
satisfaction of the notice and other requirements specified in respect
thereof).
(m) Except as described in Schedule VIII, the Borrower has no trade
names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(n) The Originator Sale Agreement is the only agreement pursuant to
which the Borrower purchases Receivables; the Borrower has furnished to
the Agent true, correct and complete copies of the Originator Sale
Agreement; and the Originator Sale Agreement is in full force and effect
and no event or circumstance has occurred that would constitute an Event
of Default pursuant to Section 7.01(i).
(o) The Borrower shall have given reasonably equivalent value to the
Originator in consideration for the transfer to the Borrower of the
Receivables and Related Security under the Originator Sale Agreement, no
such transfer shall have been made for or on account of an antecedent debt
owed by the Originator to the Borrower, and no such transfer is or may be
voidable or subject to avoidance under any section of the Bankruptcy Code.
(p) The Certificate of Incorporation of the Borrower includes
substantially the provisions set forth on Exhibit G hereto, and the
Originator has confirmed in writing to the Borrower that, so long as the
Borrower is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Borrower to file a voluntary petition under
the Bankruptcy Code or any other bankruptcy or insolvency laws. Each of
the Borrower and the Originator has been advised in writing by its counsel
that in light of the circumstances described in the preceding sentence and
other relevant facts, the filing of a voluntary petition under the
Bankruptcy Code for the purpose of making the assets of the Borrower
available to satisfy claims of the creditors of the Originator would not
result in making such assets available to satisfy such creditors under the
Bankruptcy Code.
(q) The Borrower is solvent; at the time of (and immediately after)
each transfer by the Originator to the Borrower under the Originator Sale
Agreement, the Borrower shall have been solvent; and at the time of (and
immediately after) each Borrowing hereunder, the Borrower shall have been
solvent.
(r) The Borrower accounts for the transfers to it from the
Originator of interests in Receivables, Related Security and collections
under the Originator Sale Agreement as sales of such Receivables, Related
Security and Collections in its books, records and financial
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statements, in each case consistent with GAAP and with the requirements
set forth herein.
(s) The sole and exclusive business of the Borrower is the purchase
of Receivables and Related Security pursuant to the Originator Sale
Agreement for its own account and for resale to the Lender pursuant to the
terms of the Receivables Purchase Agreement.
(t) The Borrower is operated as an entity with assets and
liabilities distinct from those of the Originator and any Affiliates
thereof (other than the Borrower), and the Borrower hereby acknowledges
that the Agent and the Lender are entering into the transactions
contemplated by this Agreement in reliance upon the Borrower's identity as
a separate legal entity from the Originator and from each such other
Affiliate of the Originator.
(u) To the best knowledge of the Borrower, each VOI Regime related
to a Pledged Contract is now, and at all times during originator's (or any
Affiliate of Originator'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 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, volatile hydrocarbons, 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 "Hazardous Waste"). To
the knowledge of the Borrower, neither the Originator nor any Affiliate of
the Originator has caused or suffered to occur any discharge, spill,
uncontrolled loss or seepage of any petroleum or chemical product or any
Hazardous Waste onto any property adjoining any of the VOI Regimes, and,
to the best knowledge of the Borrower, neither the Originator nor any
Affiliate of the Originator 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 the Originator, the Borrower,
any other Affiliate of the Originator or any other owner of any VOI Regime
or the imposition of a lien on such VOI Regime under any Environmental
Law.
To the best knowledge of the Borrower, except as set forth on Schedule IX, each
Development related to a Pledged Contract is now, and at all times has been free
of contamination from any substance, material or waste identified as toxic or
hazardous according to the Environmental Laws, including, without limitation,
Hazardous Waste. To the knowledge of the Borrower, except as set forth on
Schedule IX, neither the Originator nor any Affiliate of the Originator has
caused or suffered to occur any discharge, spill, uncontrolled loss or seepage
of any petroleum or chemical product or any Hazardous Waste onto any property
adjoining any of the Developments, and to the best knowledge of the Borrower
neither the Originator nor any Affiliate of the Originator 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 the Originator,
the Borrower, any
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other Affiliate of the Originator 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 IX will have a material adverse effect on the
value of the Pledged Assets or the interest of the Agent and the Lender therein
or an adverse effect on the Lender or the Agent.
(v) The Borrower is not an "investment company" within the meaning
of the Investment Company Act of 1940.
SECTION 4.02. Representations and Warranties of the Lender. The
Lender represents and warrants as follows:
(a) The Lender is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction named at the
beginning hereof and is duly qualified to do business, and is in good
standing, in every jurisdiction in which the nature of its business
requires it to be so qualified.
(b) The execution, delivery and performance by the Lender of this
Agreement and all other documents to be delivered by it hereunder or
thereunder, are within the Lender's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Lender's charter or by-laws, (ii) any law, rule or regulation applicable
to the Lender, (iii) any contractual restriction binding on or affecting
the Lender or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting the Lender or its property.
This Agreement has been duly executed and delivered by the Lender.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Lender of
this Agreement or any other document or instrument to be delivered
hereunder.
(d) This Agreement and each other document or instrument to be
delivered by the Lender hereunder constitute the legal, valid and binding
obligation of the Lender enforceable against the Lender in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, or other similar laws affecting the rights of creditors.
ARTICLE V.
GENERAL COVENANTS OF THE BORROWER.
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence. The
Borrower will comply in all material respects with all applicable laws,
rules, regulations and orders and preserve and maintain its corporate
existence, and will preserve and maintain its rights,
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franchises, qualifications and privileges in all material respects.
(b) Sales, Liens, Etc. Except as otherwise provided herein or in the
Receivables Purchase Agreement, the Borrower will not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Adverse claim upon or with respect to, any Receivable
or the related Contract, Collections or Related Security, or upon or with
respect to any Lock-Box Account or any other account to which any
Collections of any Receivable are sent, or assign any right to receive
income in respect thereof or (ii) create or suffer to exist any Adverse
Claim upon or with respect to any of the Borrower's assets.
(c) General Reporting Requirements. The Borrower will provide to the
Agent (with a copy for the Lender) (and to S&P and Fitch, with respect to
items described in clause (vii)) the following:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of
the Borrower, a balance sheet of the Borrower and the related
statements of income, shareholders' equity and cash flows each for
the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, prepared in accordance with
GAAP consistently applied and certified by the chief financial
officer of the Borrower;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, a copy of the
balance sheet of the Borrower and the related statements of income,
shareholders' equity and cash flows for such year, each prepared in
accordance with GAAP consistently applied and reported on by
nationally recognized independent public accountants acceptable to
the Agent;
(iii) as soon as received from the Originator and in any event
within 45 days after the end of each of the first three quarters of
each fiscal year of the Originator, to the extent received from the
Originator, consolidated balance sheets of the Originator and its
consolidated subsidiaries and the related statements of income,
shareholders, equity and cash flows each for the period commencing
at the end of the previous fiscal year and ending with the end of
such quarter, prepared in accordance with GAAP consistently applied
and certified by a senior financial officer of the Originator;
(iv) as soon as received from the Originator and in any event
within 120 days after the end of each fiscal year of the Originator,
to the extent received from the Originator, a copy of the
consolidated balance sheets of the Originator and its consolidated
subsidiaries and the related statements of income, shareholders,
equity and cash flows for such year, each prepared in accordance
with GAAP consistently applied and reported on by nationally
recognized independent public accountants acceptable to the Agent;
(v) promptly after the receipt thereof, copies of all reports
which the
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Originator sends to any of its securityholders and copies of all
reports and registration statements which the Originator files with
the Securities and Exchange Commission or any national securities
exchange other than registration statements relating to employee
benefit plans and to registrations of securities for selling
securityholders;
(vi) 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 ERISA Affiliate
files under ERISA with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or
which the Borrower or any ERISA Affiliate receives from such
Corporation;
(vii) as soon as possible and in any event within five days
after the occurrence of each Event of Default or each event which,
with the giving of notice or lapse of time or both, would constitute
an Event of Default, a statement of the chief financial officer of
the Borrower setting forth details of such Event of Default or event
and the action which the Borrower has taken and proposes to take
with respect thereto;
(viii) promptly following receipt thereof, copies of all
financial statements, settlement statements, portfolio and other
reports, notices, disclosures, certificates, budgets and other
written material delivered or made available to the Borrower by the
originator pursuant to the terms of the originator Sale Agreement;
and
(ix) promptly following the Agent's request therefor, such
other information respecting the Receivables or the conditions or
operations, financial or otherwise of the Borrower as the Agent may
from time to time request in order to protect the interests of the
Agent or the Lender in connection with this Agreement.
(d) Merger, Etc. The Borrower will not merge or consolidate with, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of
its assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any Person, other than, with respect to asset dispositions, in
connection herewith.
(e) Accounting of Originator Sale Agreement Purchases. The Borrower
will not account for or treat (whether in financial statements or
otherwise) the transactions contemplated by the Originator Sale Agreement
in any manner other than the sale of Receivables and Related Security by
the Originator to the Borrower.
(f) Nature of Business. The Borrower will engage in no business
other than the purchase of Receivables and Related Security from the
originator, the resale of such Receivables and Related Security to the
Lender and the other transactions permitted or contemplated by this
Agreement and the Receivables Purchase Agreement.
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(g) Originator Receivables. With respect to each Receivable acquired
by the Borrower from the originator, the Borrower will (i) acquire such
Receivable pursuant to and in accordance with the terms of the Originator
Sale Agreement, (ii) take all action necessary to perfect, protect and
more fully evidence the Borrower's ownership of such Receivable,
including, without limitation, (A) filing and maintaining effective
financing statements (Form UCC-1) against the originator in all necessary
or appropriate filing offices, and filing continuation statements,
amendments or assignments with respect thereto in such filing offices and
(B) executing or causing to be executed such other instruments or notices
as may be necessary or appropriate and (iii) take all additional action
that the Agent may reasonably request to perfect, protect and more fully
evidence the respective interests of the parties to this Agreement in the
Receivables and other Pledged Assets related thereto.
(h) Possession. On or immediately prior to the initial Borrowing
Date and each Subsequent Borrowing Date (if any), the Borrower shall
deliver to the collateral Trustee each original Pledged Contract and each
promissory note and other instrument in the related Contract File, and
mark, and cause the originator to mark the portions of the computer files
relating to the Pledged Receivables pledged on such date to the Lender to
clearly and unambiguously indicate that such Pledged Receivables
constitute part of the Pledged Assets in which a security interest has
been granted by the Borrower in accordance with the terms of this
Agreement.
(i) Maintenance of Separate Existence. The Borrower will do all
things necessary to maintain its corporate existence separate and apart
from the Originator and all other Affiliates of the Borrower, including,
without limitation, (i) practicing and adhering to corporate formalities,
such as maintaining appropriate corporate books and records; (ii)
maintaining at least one corporate director and one corporate officer who
is not an officer, director or employee of any of its Affiliates; (iii)
owning or leasing pursuant to written leases all office furniture and
equipment necessary to operate its business; (iv) refraining from (A)
guaranteeing or otherwise becoming liable for any obligations of any of
its Affiliates, (E) having obligations guaranteed by its Affiliates, (C)
holding itself out as responsible for debts of any of its Affiliates or
for decisions or actions with respect to the affairs of any of its
Affiliates, and (D) being directly or indirectly named as a direct or
contingent beneficiary or loss payee on any insurance policy of any
Affiliate; (v) maintaining all of its deposit and other bank accounts and
all of its assets separate from those of any other Person; (vi)
maintaining all of its financial records separate and apart from those of
any other Person and ensuring that any of the Originator's consolidated
financial statements or other public information for the Borrower and its
Affiliates on a consolidated basis contain appropriate disclosures
concerning the Borrower's separate existence; (vii) compensating all its
employees, officers, consultants and agents for services provided to it by
such Persons, or reimbursing any of its Affiliates in respect of services
provided to it by employees, officers, consultants and agents of such
Affiliate, out of its own funds; (viii) maintaining office space separate
and apart from that of any of its Affiliates (even if such office space is
subleased from or is on or near premises occupied by any of its
Affiliates) and a separate telephone number which will be answered only in
its name; (ix) accounting for and managing all of its liabilities
separately from those of any of its Affiliates, including, without
limitation, payment
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directly by the Borrower of all payroll, accounting and other
administrative expenses and taxes; (x) allocating, on an arm's-length
basis, all shared corporate operating services, leases and expenses,
including, without limitation, those associated with the services of
shared consultants and agents and shared computer equipment and software;
(xi) refraining from paying dividends or making distributions, loans or
other advances to any of its Affiliates more frequently-than once during
any fiscal quarter and, in each case, as duly authorized by its board of
directors and in accordance with applicable corporation law; (xii)
refraining from filing or otherwise initiating or supporting the filing of
a motion in any bankruptcy or other insolvency proceeding involving the
Borrower, the Originator or any other Affiliate of the Borrower to
substantively consolidate the assets and liabilities of the Borrower with
the assets and liabilities of any such Person or any other Affiliate of
the Borrower; (xiii) maintaining adequate capitalization in light of its
business and purpose; (xiv) conducting all of its business (whether
written or oral) solely in its own name; and (xv) taking all other actions
necessary to maintain the accuracy of the factual assumptions set forth in
the legal opinion of Dechert Price & Rhoads special counsel to the
Originator and the Borrower, issued in connection with the Originator Sale
Agreement and relating to the issues of substantive consolidation and true
sale of the Receivables and related assets.
(j) Supplemental Opinions. (i) The Borrower will cause to be
delivered to the Agent within six months (but not later than the 30th day)
prior to the end of each five year period after the initial Borrowing
hereunder, a supplemental opinion of counsel to the Borrower and the
Originator in form and substance reasonably satisfactory to the Agent,
reaffirming the opinions set forth in the opinion letter of Dechert Price
& Rhoads delivered to the Agent in connection with the initial Borrowing
hereunder pursuant to Section 3.01 with respect to the continued validity
of the security interest of the Lender in the Pledged Assets hereunder,
and (ii) the Borrower will cause to be delivered to the Agent within 30
days following the Agent's request therefor, a supplemental opinion of
counsel to the Borrower and the Originator in form and substance
reasonably satisfactory to the Agent, reaffirming the opinions set forth
in the opinion letter of Dechert Price & Rhoads delivered to the Agent in
connection with the initial Borrowing hereunder pursuant to Section 3.01.
(k) Transactions with Affiliates. The Borrower will not enter into,
or be a party to, any transaction with any of its Affiliates, except (i)
the transactions permitted or contemplated by this Agreement, the
Receivables Purchase Agreement and the Originator Sale Agreement, and (ii)
other transactions (including, without limitation, the lease of office
space or computer equipment or software by the Borrower to or from an
Affiliate) (A) in the ordinary course of business, (B) pursuant to the
reasonable requirements of the Borrower's business, (C) upon fair and
reasonable terms that are no less favorable to the Borrower than could be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower, and (D) not inconsistent with the factual
assumptions set forth in the opinion letter issued by Dechert Price &
Rhoads delivered to the Agent pursuant to Section 3.01, as such
assumptions may be modified in any subsequent opinion letter delivered
pursuant to Section 5.01(j). It is understood that any compensation
arrangement for officers shall be permitted under clause (ii)(A) through
(C) above if such arrangement has been expressly approved by the board of
directors of the Borrower.
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(l) Debt; Investments. The Borrower will not incur any Debt other
than (i) Debt arising hereunder, under the Receivables Purchase Agreement
or under the originator Sale Agreement and (ii) Debt owing to the
Originator evidenced by promissory notes in form and substance
satisfactory to the Agent and not inconsistent with the factual
assumptions set forth in the opinion letter issued by Dechert Price &
Rhoads delivered to the Agent pursuant to Section 3.01, as such
assumptions may be modified in any subsequent opinion letter delivered
pursuant to Section 5.01(j). The Borrower will not make any Investments
other than Permitted Investments.
(m) Change in the Originator Sale Agreement. The Borrower will not
amend, modify, waive or terminate any terms or conditions of the
Originator Sale Agreement without the written consent of the Agent, and
shall perform its obligations thereunder.
(n) Amendment to Certificate of Incorporation. The Borrower will not
amend, modify or otherwise make any change to its Certificate of
Incorporation to delete or otherwise nullify or circumvent the provisions
set forth in Exhibit G hereto.
(o) Terminate or Reject Contracts. The Borrower will not, without
the written consent of the Agent, 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
Pledged Assets have been released pursuant to Section 6.18 in
consideration of the payment of an appropriate Release Price therefor.
SECTION 5.02. Financial Covenants.
(a) Dividends, etc. The Borrower will not declare or pay, directly
or indirectly, any dividend or make any other distribution (by reduction
of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any shares of its capital stock or
directly or indirectly redeem, purchase, retire or otherwise acquire for
value any shares of any class of its capital stock or set aside any amount
for any such purpose if, after giving effect to such dividend,
distribution, redemption, purchase, retirement or acquisition, the
Borrower's tangible net worth in accordance with GAAP would be less than
the amount set forth in Section 5.02(b).
(b) Net Worth. The Borrower shall maintain a tangible net worth
(determined in accordance with GAAP and including subordinated debt) of at
least the difference between (i) the aggregate Outstanding Balance of
Eligible Receivables which constitute Pledged Receivables at the time
minus (ii) the amount referred to in clause (i) divided by 1.03, but in no
event less than $250,000.
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ARTICLE VI.
ADMINISTRATION, COLLECTION AND MONITORING OF RECEIVABLES.
SECTION 6.01. Appointment and Designation of the Servicer. The
Borrower, the Lender and the Agent hereby appoint the Person (the "Servicer")
designated by the Agent from time to time (with the approval of the Lender)
pursuant to this Section 6.01, as their agent to service, administer and collect
the Receivables and otherwise to enforce their respective rights and interests
in and under the Receivables, the Related Security and the Contracts. The
Servicer's authorization under this Agreement shall terminate on the Collection
Date. Until the Agent gives notice to the Borrower of a designation of a new
Servicer, or consents to the appointment by the Borrower of a new "Servicer"
under and pursuant to the Originator Sale Agreement, the Originator is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. Upon and after the occurrence of any
Servicer Default, the Agent may at any time (with the approval of the Lender),
designate as Servicer any Person to succeed the Originator or any successor
Servicer, on the condition in each case that any such Person so designated shall
agree to perform the duties and obligations of the Servicer pursuant to the
terms hereof. Each of the Borrower and the Originator hereby grants to any
successor Servicer an irrevocable power of attorney to take any and all steps in
the Borrower's or the Servicer's name, as applicable, and on behalf of the
Borrower necessary or desirable, in the determination of the successor Servicer,
to collect all amounts due under any and all Receivables, including, without
limitation, endorsing the Borrower's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts. The Servicer may, with the prior consent of the Agent, subcontract
with any other Person for servicing, administering or collecting the
Receivables, provided that the Servicer shall remain liable for the performance
of the duties and obligations of the Servicer pursuant to the terms hereof.
Subject to the proviso of the preceding sentence, the Agent consents to the
Servicer subcontracting for such services with The Processing Center; provided,
that such consent shall be automatically revoked if The Processing Center ceases
to be an Affiliate of the Originator. Notwithstanding anything to the contrary
contained in this Agreement, the Servicer, if not the Borrower or the
Originator, shall have no obligation to collect, enforce or take any other
action described in this Article VI with respect to any Receivable that is not a
Pledged Receivable other than to deliver to the Borrower the Collections and
documents with respect to any such Receivable that is not a Pledged Receivable
as described in Sections 6.03 and 6.06(b).
SECTION 6.02. Collection of Receivables by the Servicer; Extensions
and Amendments of Receivables. The Servicer shall take or cause to be taken all
such actions as may be necessary or advisable to collect each Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy; provided, however, that, (a) following an Event of Default,
the Agent shall have the absolute and unlimited right to direct the Servicer
(whether the Servicer is the Borrower, the originator or otherwise) to commence
or settle any legal action, to enforce collection of any Pledged Receivable or
to foreclose upon or repossess any Related Security and (b) the Servicer shall
not make the Agent or the Lender a party to any litigation without the express
written consent of the Agent or the Lender, as the case may be. Neither the
Originator nor the Borrower will extend, amend or otherwise modify the terms of
any Pledged Receivable, or amend, modify or waive any term or condition of any
Contract related thereto.
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SECTION 6.03. Distribution and Application of Collections. The
Servicer shall set aside for the account of the Borrower and the Lender
Collections of Receivables in accordance with Section 2.05 and 6.08. The
Servicer shall as soon as practicable following receipt turn over to the
Borrower the collections of any Receivable which is not a Pledged Receivable
less, in the event neither the Borrower nor the originator is the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering such Receivables to the extent not
covered by the Servicer Fee received by it and the Servicer shall as soon as
practicable following receipt turn over to the Borrower amounts received by the
Servicer or deposited into the Agent's Account with respect to taxes and/or
maintenance fees remitted by Obligors that are not Collections. Any payment by
an Obligor in respect of any indebtedness owed by it to the Borrower shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law or by instruction of the Agent, be applied as a Collection of any Pledged
Receivable of such Obligor (in the order of the age of such Receivables,
starting with the oldest such Pledged Receivable) to the extent of any amounts
then due and payable thereunder before being applied to any other Receivable or
other indebtedness of such Obligor.
SECTION 6.04. Segregation of Collections. The Servicer shall not
commingle funds constituting Collections with any other funds of the Servicer or
the Originator for more than two Business Days.
SECTION 6.05. Other Rights of the Agent. At any time following the
occurrence of an Event of Default or the designation of a Servicer other than
the Originator, the Borrower or any Affiliate thereof pursuant to Section 6.01:
(a) The Agent may or, at the request of the Agent, the Borrower
shall (in either case, at the Borrower's expense) direct the Obligors of
Receivables, or any of them, to pay all amounts payable under any
Receivable directly to the Agent or its designee; and
(b) The Borrower shall, at the Agent's request and at the Borrower's
expense, (i) assemble all Records and make the same available to the Agent
or its designee at a place selected by the Agent or its designee, and (ii)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Receivables in a manner acceptable to
the Agent and, promptly following receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer,
to the Agent or its designee.
SECTION 6.06. Records; Audits.
(a) The Borrower will maintain and implement, or cause the
Originator to maintain and implement, administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing the Receivables in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records
and other information reasonably necessary or advisable for the collection
of all Receivables (including, without limitation, records adequate to
permit the daily identification of each new
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Pledged Receivable and all Collections of and adjustments to each existing
Pledged Receivable).
(b) The Servicer, whether or not the Borrower, shall hold all
Records (other than those delivered to the Collateral Trustee in
accordance with this Agreement) in trust for the Borrower and the Lender
in accordance with their respective interests. Subject to the receipt of
contrary instructions from the Agent, the Borrower will deliver all
Records to such Servicer; provided, however, that the Servicer, if other
than the Borrower, shall as soon as practicable upon demand deliver to the
Borrower all Records in its possession relating to Receivables of the
Borrower other than Pledged Receivables, and copies of Records in its
possession relating to Pledged Receivables.
(c) The Borrower will, from time to time during regular business
hours as requested by the Agent, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
Records and (ii) to visit the offices and properties of the Borrower for
the purpose of examining such Records and to discuss matters relating to
the Receivables or the Borrower's performance hereunder with any of the
officers or employees of the Borrower having knowledge of such matters.
(d) The Servicer shall permit the Agent to cause reviews of the
Pledged Receivables to be conducted as of the close of each calendar
quarter and year by a firm of nationally recognized certified public
accountants selected by the Agent, which reviews, among other things, may
(based on a statistically significant sample of Pledged Receivables which
were Pledged in the relevant period)(i) confirm the conformity of the
Pledged Receivables with the related identifications thereof supplied to
the Agent or the Lender hereunder, (ii) recalculate and verify the
accuracy of data included in the reports delivered pursuant to Section
6.07 (including without limitation the absence of the occurrence of any
Events of Default), and (iii) confirm the conformity of the Pledged
Receivables with the Credit and Collection Policy.
SECTION 6.07. Periodic Settlement Reporting.
(a) The Borrower will deliver to the Agent (i) prior to each
Settlement Date, a report identifying the Pledged Receivables (and the
aged balance thereof) as of the last day of the immediately preceding
month, (ii) on the Termination Date, a report identifying the Pledged
Receivables (and the aged balance thereof) on the day immediately
preceding the Termination Date and (iii) upon the Agent's request, on each
day, a report identifying the Pledged Receivables (and the aged balance
thereof) on such day.
(b) Prior to each Settlement Date, the Servicer shall prepare and
forward to the Agent for the Lender (and to S&P and Fitch), a Monthly
Settlement Report relating to all Pledged Receivables, as of the close of
business of the Servicer on the last day of the immediately preceding
month.
(c) On the Business Day immediately preceding each Borrowing Date
that is not
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a Settlement Date and on the Business Day immediately preceding each
Spread Account Surplus Date, the Servicer shall prepare and forward to the
Agent for the Lender, a Borrowing Date/Spread Account Surplus Settlement
Report, as of a date no more than three Business Days prior to such
Borrowing Date or Spread Account Surplus Date, as applicable.
(d) On the Business Day immediately preceding the last day of each
Fixed Period that is not a Settlement Date, the Servicer shall prepare and
forward to the Agent for the Lender, a Commercial Paper Settlement Report,
as of the close of business of the Servicer on the second Business Day
immediately preceding such last day.
SECTION 6.08. Collections and Lock-Boxes. The Borrower or the
Servicer on its behalf will instruct all Obligors to cause all Collections to be
either (a) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve
such Collections promptly and deposit the same to the respective Lock-Box
Accounts or (b) deposited directly into a Lock-Box Account and will cause any
Collections effectuated by pre-authorized debits of Obligor accounts to be
deposited directly into a Lock-Box Account or the Agent's Account. Each Lock-Box
Bank will remit Collections deposited into the respective Lock-box Accounts to
the Agent's Account on a daily basis in accordance with Section 2.05. If the
Borrower receives any Collections, the Borrower will remit such Collections
(including, without limitation, any Collections deemed to have been received
pursuant to Section 2.07) to a Lock-Box Account or the Agent's Account within
one Business Day following the Borrower's receipt thereof. The Borrower will not
add or terminate any bank as a Lock-Box Bank to or from those listed in Schedule
VII or make any change in its instructions to obligors regarding payments to be
made to the Borrower or payments to be made to any Lock Box or any Lock-Box
Bank, unless the Agent shall have given its written consent to such addition,
termination or change and all actions reasonably requested by the Agent to
protect and perfect the interest of the Agent and the Lender in the Collections
of Pledged Receivables have been taken and completed. The Agent shall have the
exclusive ownership and control of the Lock-Box Accounts.
SECTION 6.09. UCC Matters; Protection and Perfection of Pledged
Assets.
(a) The Borrower will keep its principal place of business and chief
executive office, and the office where it keeps the Records, at the
address of the Borrower referred to in Section 4.01(k) or, upon 30 days'
prior written notice to the Agent, at such other locations within the
United States where all actions reasonably requested by the Agent to
protect and perfect the interest of the Agent and the Lender in the
Pledged Receivables have been taken and completed. The Borrower will not
make any change to its corporate name or use any tradenames, fictitious
names, assumed names, "doing business as" names or other names other than
those described in Schedule VIII, unless prior to the effective date of
any such name change or use, the Borrower delivers to the Agent such
executed financing statements as the Agent may request to reflect such
name change or use, together with such other documents and -instruments as
the Agent may request in connection therewith. The Borrower agrees that
from time to time, at its expense, it will promptly execute and deliver
all further instruments and documents, and take all further action that
the Agent may reasonably request in order to perfect, protect or more
fully evidence the Lender's interest in the Pledged Assets acquired
hereunder, or to enable the Lender or the Agent to exercise or
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enforce any of their respective rights hereunder. Without limiting the
generality of the foregoing, the Borrower will upon the request of the
Agent: (a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate or as the Agent may request,
and (b) mark its master data processing records evidencing such Pledged
Receivables with a legend acceptable to the Agent, evidencing that the
Lender has acquired an interest therein as provided in this Agreement and
(c) notify Generali Underwriters, Inc. of the assignment of the Generali
Commercial Lines Policy with respect to the Pledged Receivables that it
insures. The Borrower hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Pledged Receivables and
the Related Security now existing or hereafter arising without the
signature of the Borrower where permitted by law. A carbon, photographic
or other reproduction of this Agreement or any financing statement
covering the Pledged Receivables, or any part thereof shall be sufficient
as a financing statement. The Borrower shall, upon the request of the
Agent at any time and at the Borrower's expense, notify the obligors of
Pledged Receivables, or any of them, of the ownership of Pledged Assets by
the Lender. If the Borrower fails to perform any of its agreements or
obligations under this Section 6.09, the Agent may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Borrower upon the Agent's demand therefor. For
purposes of enabling the Agent to exercise its rights described in the
preceding sentence and elsewhere in this Article VI, the Borrower and the
Lender hereby authorize the Agent and its successors and assigns to take
any and all steps in the Borrower's name and on behalf of the Borrower and
the Lender necessary or desirable, in the determination of the Agent, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing the Borrower's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
contracts.
(b) In the event that the Borrower receives any other instrument or
any writing which, in either event, evidences a Pledged Receivable, a
Pledged Contract or other Pledged Assets, the Borrower shall deliver such
instrument or writing to the Collateral Trustee within one Business Day
after the Borrower's receipt thereof, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Agent
and the Collateral Trustee.
SECTION 6.10. Obligations of the Borrower With Respect to
Receivables. The Borrower will (a) at its expense, regardless of any exercise by
the Agent or the Lender of its rights hereunder, timely and fully perform and
comply with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables to the same extent
as if Pledged Assets had not been pledged hereunder and (b) pay when due any
taxes, including without limitation, sales and excise taxes, payable in
connection with the Pledged Receivables. In no event shall the Agent or the
Lender have any obligation or liability with respect to any Pledged Receivables
or related Contracts, nor shall any of them be obligated to perform any of the
obligations of the Borrower or the Originator or any of their Affiliates
thereunder. The Borrower will timely and fully comply in all material respects
with the Credit and Collection Policy
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in regard to each Pledged Receivable and the related Contract. The Borrower will
not make any change in the character of its business or in the Credit and
Collection Policy, which change would, in either case, impair the collectibility
of any Pledged Receivable.
SECTION 6.11. Rights of Obligors and Release of Contract Files.
(a) Notwithstanding any other provision contained in this Agreement,
including the Lender's remedies pursuant hereto, the rights of any obligor
to any Lot or VOI subject to a Pledged Contract shall, so long as such
Obligor is not in default thereunder, be superior to those of the Lender
hereunder, and the Lender 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 Agreement, the Lender shall
acquire through foreclosure any portion of the Lot or VOI subject to a
Pledged Contract, the Lender hereby specifically agrees to release or
cause to be released any Lot or VOI from any lien of the Lender upon the
request of the Obligor (including such Obligor's heirs, successors and
assigns) to the Pledged Contract, upon completion of all payments and the
performance of all the terms and conditions required to be made and
performed by such Obligor under such Pledged Contract.
(c) At such time as an obligor has paid in full the purchase price
or the requisite percentage of the purchase price for deeding pursuant to
a Pledged Contract and has otherwise fully discharged all of such
obligor's obligations and responsibilities required to be discharged as a
condition to deeding, the Servicer shall notify the Agent by a certificate
substantially in the form attached hereto as Exhibit H (which certificate
shall include a statement to the effect that all amounts received in
connection with such payment have been deposited in the Agent's Account)
of an officer of the Servicer and shall request delivery to it (i) of the
Contract Files (or the portion thereof in the Collateral Trustee's
possession) related to a Pledged Contract pursuant to which the Obligor
has paid the purchase price in full or (ii) of the deeds of title, and any
documents and records maintained in connection therewith related to a
Pledged Contract pursuant to which the Obligor has paid the requisite
percentage of the purchase price for deeding. Upon receipt of such
certificate and request or at such earlier time as is required by
applicable law, the Agent (a) shall promptly direct the Collateral Trustee
to release the Contract Files (or the portion thereof in the Collateral
Trustee's possession) to the Servicer or (b) shall approve the release by
the Collateral Trustee of the related deed of title, and any documents and
records maintained in connection therewith, as applicable, to the Obligor,
provided that title to the VOI or Lot has not already been deeded to the
Obligor.
SECTION 6.12. Recordation of Assignments. The Servicer shall,
promptly following the initial Borrowing Date and each Subsequent Borrowing Date
(if any), cause to be filed for recordation in the proper offices (a) all
Assignments of Mortgages constituting Contract Conveyance Documents relating to
Receivables Pledged by the Lender on such date and (b) an assignment of each
Developer Mortgage related to Receivables Pledged by the Lender on such date,
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except to the extent that the related VOIs or Lots are located in Developments
in any State with respect to which an opinion of counsel (in a form acceptable
to the Agent) has been delivered to the Agent stating that recordation is not
necessary or advisable to perfect or protect the interest of the Lender in such
Contract Mortgages or Developer Mortgages, as applicable in such State.
SECTION 6.13. 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 Receivables and
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 Agent and the Lender to the extent that such
payments and disbursements are not made by the Borrower in accordance with
Section 10.07.
SECTION 6.14. Servicer Representations and Warranties. The
Originator, as initial Servicer, hereby makes, and each Successor Servicer by
acceptance of its appointment hereunder shall make, the following
representations and warranties as of each Borrowing Date and, (1) in the case of
the initial Servicer, as of the date hereof, and (2) in the case of any
Successor Servicer, the date of such appointment, to each of the Lender and the
Agent:
(a) Due Incorporation and Good Standing. The Servicer is a
corporation, state banking corporation or national banking association
duly organized, validly existing and in good standing under the applicable
laws of its jurisdiction of organization or incorporation and has, in all
material respects, full corporate power and authority and legal right to
own its properties and conduct its business (including the servicing of
Contracts) as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its. obligations
under this Agreement and each other document to be delivered by it
hereunder. The Servicer 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
Receivables in accordance with the terms of this Agreement requires such
qualification, except where failure to qualify or to obtain such licenses
and approvals would not (i) have an adverse effect on the value or
collectibility of any Pledged Receivable or related Pledged Assets or the
ability of the Servicer to perform its obligations hereunder and under the
other documents delivered by it hereunder or (ii) have a material adverse
effect on the business, properties, operations, prospects. profits or
condition (financial or otherwise) of the Servicer.
(b) Due Authorization and No Conflict. The execution, delivery and
performance by the Servicer of this Agreement, the originator Sale
Agreement and each other document to be delivered by it hereunder and
thereunder, and the consummation of each of the transactions contemplated
hereby and thereby, have in all cases been duly
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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. This Agreement, the Originator Sale Agreement, and each
other document delivered by it hereunder or thereunder 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 this Agreement, the Originator Sale
Agreement and each other document delivered by it hereunder and
thereunder, the consummation of the transactions contemplated hereby or
thereby, the performance of and the compliance with the terms hereof or
thereof, have been obtained, except where the failure so to do would not
have a material adverse effect on the value of the Pledged Assets or the
interests of the Lender or therein.
(d) Enforceability. This Agreement, the Originator Sale Agreement
and each other document 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, subject to applicable bankruptcy,
insolvency, moratorium, or other similar laws affecting the rights of
creditors.
(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 Agreement, the Originator Sale Agreement or any of the
other documents delivered by it hereunder or thereunder, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or any of the other related documents, (iii) seeking any
determination or ruling that would adversely affect the performance by the
Servicer of its obligations under this Agreement, the originator Sale
Agreement or any other document delivered by it hereunder or thereunder,
(iv) seeking any determination or ruling that would adversely affect the
validity or enforceability of this Agreement, the Originator Sale
Agreement or any of the other documents delivered by it hereunder or
thereunder, or (v) seeking any determination or ruling that would have a
material adverse effect on the business, operations, condition (financial
or otherwise), properties, assets or prospects of the Servicer.
(f) Settlement Reports and Certificates. Each Monthly Settlement
Report, Borrowing Date/Spread Account Surplus Settlement Report and
Commercial Paper Settlement Report and any other report or certificate
delivered by the Servicer pursuant to this Agreement shall be true and
correct in all material respects as of the date such report or certificate
is delivered.
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(g) Servicer Default. No Servicer Default has occurred and is
continuing.
The representations and warranties set forth in this Section 6.14
shall survive the making of Loans by the Lender. Upon a discovery by the
Borrower, the Servicer or the Agent of a material breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other such parties.
SECTION 6.15. Additional Covenants of the Servicer. From the date
hereof until the later of the Termination Date or the Collection Date, the
Servicer shall, unless the Agent shall .otherwise consent in writing:
(a) Change in Payment Instructions to Obligors. Not add or terminate
any bank as a Lock-Box Bank from those listed in Schedule VII or make any
change in its instructions to obligors regarding payments to be made to
any Lock-Box Bank, unless the 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, 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
Lender and deposit such Collections into a Lock-Box Account or the Agent's
Account within one Business Day following Servicer's receipt thereof, and
(ii) if either of the originator or the Borrower receives any Collections,
the Servicer shall cause the Originator or the Borrower, as the case may
be, to hold such Collections in trust for the benefit of the Lender and
deposit such Collections into a Lock-Box Account or the Agent's 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, except
where failure to qualify would not have an adverse effect on the ability
of the Servicer to perform its obligations hereunder and under the other
documents delivered by it hereunder and the Servicer 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.
(d) Protection of Rights. The Servicer shall take no action which
would impair in any material respect the rights of any of the Agent or the
Lender in the Pledged Assets.
(e) Credit Standards and Collection Policies. The Servicer shall
comply in all material respects with the Credit and Collection Policies in
regard to each Pledged Receivable and related Pledged Contract.
(f) Examination of Records. The Servicer will, from time to time
during regular
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business hours as requested by the Agent, permit the Agent, or its agents
or representatives, (i) to examine and make copies of and abstracts from
all Records and (ii) to visit the offices and properties of the Servicer
for the purpose of examining such Records and to discuss matters relating
to the Receivables or the Servicer's performance hereunder with any of the
officers or employees of the Servicer having knowledge of such matters.
(g) Financial Statements. The Servicer will furnish to the Agent the
financial statements, reports, financial and other information and notices
described in Section 5.02 of the Originator Sale Agreement, when required
to be furnished by the Originator thereunder and, promptly, such other
information as the Agent may from time to time reasonably request.
SECTION 6.16. Standby Servicer. The Standby Servicer shall perform
the obligations from time to time applicable to it under this Agreement,
including without limitation, under Section 6.01 and to become the Successor
Servicer hereunder if so appointed by the Agent. In order to permit the Standby
Servicer to be prepared to perform its obligations hereunder in the event that a
Servicer Default, the Servicer and the Standby Servicer agree to undertake the
procedures and perform the other obligations described in the Standby Servicing
Agreement.
Subject to the terms of any agreement between the Standby Servicer
and the Lender or the Agent, the Standby Servicer may resign at any time by not
less than 60 days' notice to the Agent and the Servicer. In addition, the
Standby Servicer may be removed at any time without cause by the Lender or the
Agent by not less than 60 days' notice then given in writing to the Standby
Servicer, the Servicer and the Borrower. In the event of any such resignation or
removal, the Standby Servicer may be replaced by the Agent by notice given in
writing to the Servicer and the Borrower.
SECTION 6.17. 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 Agent. Unless otherwise required by
applicable law, no such resignation shall be effective until a Successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 8.02 hereof.
SECTION 6.18. Releases; Right of First Refusal.
(a) Subject to Section 6.18(c), the Borrower shall on the next
Settlement Date or Borrowing Date occurring after the Borrower has become
aware, or has received written notice from the Agent, of any uncured
breach of a representation or warranty of the Borrower in Section 4.01
with respect to any Pledged Receivable effectuate a release of the
security interest granted hereunder in such Pledged Receivable (each
related Pledged Contract, a "Defective Contract" and each such date, a
"Defective Contract Release Date") by either (i) prepaying a portion of
the Loans by depositing in the Agent's Account the
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Release Price for such Pledged Receivables or (ii) prior to the
Termination Date, conveying a new substitute Receivable(s) to the Lender
that (A) on the applicable Defective Contract Release Date is an Eligible
Receivable (and the Borrower shall be deemed to have represented and
warranted as such), (B) has an outstanding Balance at least equal to the
Outstanding Balance of the Pledged Receivable for which it is being
substituted, (C) has a remaining term that is no longer than the remaining
term of the Pledged Receivable for which it is being substituted and (D)
after giving effect to the substitution of which would not cause either
(1) the Overcollateralization Percentage to be less than Required
overcollateralization Percentage or (2) the aggregate Loans outstanding
hereunder to exceed the lesser of a) the Borrowing Limit minus the
Discount Amount or b) the Capital Limit as determined by reference to the
most recent Monthly Settlement Report or Borrowing Date/Spread Account
Surplus Settlement Report delivered by the Servicer to the Lender in
accordance with Section 6.07 hereof. On the date of any such substitution
in accordance with the preceding sentence, such new Eligible Receivable
shall become a Pledged Receivable and the Receivable so replaced shall
cease to be a Pledged Lease Receivable.
(b) The Borrower may, at its election, obtain the release of any
Pledged Receivable at any time after the date hereof by either (i)
depositing into the Agent's Account the Release Price therefor or (ii)
prior to the Termination Date, conveying a new substitute Receivable(s) to
the Lender if such substitute Receivable(s) satisfy all of the criteria of
Section 6.18(a)(ii)(A)-(D), in each case on any Settlement Date; provided,
that in the event that after giving effect to such release the aggregate
Outstanding Balance of Pledged Receivables would be less than an amount
equal to ten percent (10k) of the Outstanding Balance of Pledged
Receivables as of the initial Borrowing Date, the Borrower may only obtain
such release by, in addition to depositing the aggregate Release Price for
the Pledged Receivables to be released, paying on such Settlement Date,
all Obligations then outstanding hereunder (including, without limitation,
all Loans), or otherwise payable as a result of any such payment.
(c) The Borrower shall notify the Agent of any Release Price to be
paid or any Receivables to be substituted pursuant to Section 6.18(a) or
(b) at least one Business Day prior to the Settlement Date or Borrowing
Date on which such Release Price shall be paid and/or Receivables
substituted, as applicable, specifying the Contract and the Release Price
and/or Receivables to be substituted therefor. Prior to 11:00 A.M. New
York City time on the relevant Settlement Date or Borrowing Date, the
Borrower shall deposit in the Agent's Account the applicable Release Price
or, with respect to Receivables to be substituted, shall have satisfied
all of the requirements of Section 3.02 with respect to any new
Receivables to be substituted as if such new Receivables were to be
Pledged on such date. Promptly thereafter, the Servicer shall delete such
Contract from the Contract Schedule and shall notify the Agent to do the
same with respect to the records and any computer file maintained by it;
provided that it shall be a condition precedent to the effectiveness of
the release of any relevant Contract pursuant to Section 6.18(a) or (b)
that the Borrower shall have delivered to the Agent evidence of deposit in
the Agent's Account of the relevant Release Price or of the satisfaction
of the conditions for substitution of new Receivable(s) in respect of such
Contract.
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(d) In connection with each release pursuant to Section 6.18(a) or
(b), and upon the satisfaction of the conditions precedent set forth in
Section 6.18(b) or (c), as the case may be, the Agent shall automatically
and without further action be deemed to transfer, assign, set over and
otherwise convey to the Borrower, without recourse, representation or
warranty, all the right, title and interest of Agent in and to any such
Defective Contract, Contract or any other Pledged Assets in respect of
which the Release Price has been paid or in respect of which new
Receivables have been substituted, as the case may be, and all monies
thereafter due or to become due with respect thereto, and all proceeds
thereof. In connection with each release pursuant to this Section 6.18
upon the satisfaction of the applicable conditions precedent set forth in
this Section 6.18, the Agent shall promptly direct the Collateral Trustee
to release the Contract Files (or the portion thereof in the Collateral
Trustee's possession) to the Servicer (or to the Borrower if the Borrower
so directs). The 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 release of such Pledged Assets
pursuant to this subsection.
ARTICLE VII.
EVENTS OF DEFAULT.
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur:
(a) (i) The Servicer (if other than the Agent) shall fail to perform
or observe any term, covenant or agreement hereunder (other than as
referred to in clause (ii) of this Section 7.01(a)) and such failure shall
remain unremedied for three Business Days or (ii) either the Servicer (if
other than the Agent) or the Borrower shall fail to make any payment or
deposit to be made by it hereunder when due; or
(b) (i) Any representation or warranty made or deemed to be made by
the Borrower (or any of its officers) under or in connection with this
Agreement or any Monthly Settlement Report, Borrowing Date/Spread Account
Surplus Settlement Report, Commercial Paper Settlement Report or other
information or report delivered pursuant hereto shall prove to have been
false or incorrect in any material respect when made and (ii) any
representation or warranty made or deemed to be made by the originator or
the Servicer (or any of their respective officers or agents) under or in
connection with the Originator Sale Agreement shall prove to have been
false or incorrect when made; provided, however, that if any such
representation or warranty relates solely to a Pledged Receivable which is
released by the Lender in accordance with Section 6.18, the breach of such
representation or warranty shall not give rise to an Event of Default
pursuant to this subsection (b); or
(c) Either the Borrower or the originator shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement
or in the Originator Sale Agreement (or, with respect to the Borrower, in
any other material agreement) on its part to
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be performed or observed and any such failure shall remain unremedied for
three Business Days after written notice thereof shall have been given by
the Agent to the Borrower; or
(d) The Borrower or the Originator shall fail to pay any principal
of or premium or interest on any Debt in an amount in excess of $10,000
(with respect to the Borrower) or $250,000 (with respect to the
Originator), 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 Debt in an
amount in excess of $10,000 (with respect to the Borrower) or $750,000
(with respect to the Originator) 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
(e) The Lender shall cease to have a valid and perfected first
priority security interest in each Pledged Receivable and the Related
Security and Collections with respect thereto or (ii) any purchase by the
Borrower of a Receivable from the Originator shall, for any reason, cease
to create in favor of the Borrower a valid and perfected first priority
security interest in each Pledged Receivable and the Related Security and
Collections with respect thereto; provided, however, that if any such
cessation of perfection relates solely to a Pledged Receivable which is
released by the Lender in accordance with Section 6.18, such cessation
shall not give rise to an Event of Default pursuant to this subsection
(e); or
(f) (i) The Borrower or the Originator shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Borrower or the Originator seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property; or (ii) the Borrower or the
Originator shall take any corporate action to authorize any of the actions
set forth in clause (i) above in this Section 7.01(f); or
(g) The Default Ratio for three consecutive months shall exceed
1.20%; or
(h) There shall have been any material adverse change in the
financial condition or operations of the originator since December 31,
1994 until the date hereof, or there shall have occurred any event which
materially adversely affects the collectibility of the Receivables or
there shall have occurred any other event which materially adversely
affects the ability of the Borrower or the originator to collect
Receivables or to perform their respective obligations hereunder and under
the Originator Sale Agreement; or
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(i) (i) There shall have occurred an "Event of Termination" under
the Originator Sale Agreement, or (ii) the Originator Sale Agreement shall
have ceased to be valid, binding and enforceable as against any of the
parties thereto without any amendment, modification, waiver or termination
of any terms or conditions thereof, other than as agreed to in writing by
the Agent, or (iii) the Originator shall have terminated the Originator
Sale Agreement for any reason, or (iv) the assignment to the Agent of all
of the Borrower's right and title to and interest in the Originator Sale
Agreement shall have ceased, for any reason, to be fully effective and
enforceable by the Agent as against any of the parties of the Originator
Sale Agreement; or
(j) The Originator shall cease to own (whether directly or
indirectly) 100% of the issued and outstanding stock of the Borrower; or
(k) A regulatory, tax or accounting body has ordered that the
activities of the Lender, or any Affiliate of the Lender, contemplated
hereby be terminated or, as a result of any other event or circumstance,
the activities of the Lender contemplated hereby may reasonably be
expected to cause the Lender, the Person then acting as the administrator
or the manager for the Lender, or any of their respective Affiliates to
suffer materially adverse regulatory, accounting or tax consequences; or
(l) The Borrower shall fail to make payment as specified in Section
2.05(f) and such failure shall remain unremedied for more than one
Business Day after written notice thereof shall have been given by the
Agent to the Borrower; or
(m) The Overcollateralization Percentage shall be less than the
Minimum Overcollateralization Percentage at any time; or
(n) The commercial paper dealer of the Lender is unable to retire
maturing commercial paper issued to fund or maintain Loans hereunder
through the issuance of new commercial paper for 90 consecutive days; or
(o) The Originator has a tangible net worth (as defined in GAAP
plus, if not otherwise included, non-redeemable subordinated debt) of less
than $5,000,000; or
(p) The Bennett Funding Group, Inc., Patrick R. Bennett, Michael A.
Bennett or their Affiliates, singularly or in combination, shall cease to
own at least 51%, of the voting stock of the Originator; or
(q) The Borrower or any ERISA Affiliate of the Borrower shall have
(i) engaged in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States
Department of Labor; (ii) permitted to exist any accumulated funding
deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the Code, or funding deficiency with respect to any Benefit Plan other
than a Multiemployer Plan; (iii) failed to make any payments to any
Multiemployer Plan that the
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Borrower or any ERISA Affiliate may be required to make under the
agreement relating to such Multi-employer Plan or any law pertaining
thereto; (iv) terminated any Benefit Plan so as to result in a liability;
or (v) permitted 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 Code, if such
prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any fiscal year of the
Borrower, in the aggregate, involve a payment of money or an incurrence of
liability by the Borrower or any ERISA Affiliate in an amount in excess of
$25,000; or
(r) A Servicer Default shall have occurred; or
(s) There shall have occurred an "Event of Termination" under the
Receivables Purchase Agreement, then, and in any such event, the Agent
may, by notice to the Borrower, declare the Termination Date to have
occurred, except that, in the case of any event described in Section
7.01(j) or clause (i) of Section 7.01(f) above, the Termination Date shall
be deemed to have occurred automatically upon the occurrence of such
event. Upon any such declaration or automatic occurrence, the Agent and
the Lender shall have, in addition to all other rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under
the UCC of the applicable jurisdiction and other applicable laws, which
rights shall be cumulative.
ARTICLE VIII
SERVICER DEFAULTS.
SECTION 8.01. 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 Agent any Monthly
Settlement Report, Borrowing Date/Spread Account Surplus Settlement Report
or Commercial Paper Settlement Report pursuant to Section 6.07 on or
before the date such delivery is due under the terms of this Agreement; or
(b) any failure by the Servicer to deliver any other information to
the Agent required pursuant to Section 6.01 on or before the date such
information, payment, transfer, deposit, instruction or notice is required
to be made or given under the terms of this Agreement, which continues
unremedied for a period of three Business Days after such information is
due under the terms of this Agreement; or
(c) any failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in
this Agreement or any of the other related documents to which it is a
party which continues unremedied for a period of ten Business Days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Agent, or to the
Servicer and the
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Agent by the Lender; or the Servicer shall assign its duties under this
Agreement or under any of the other related documents to which it is a
party, except as permitted in accordance with the terms of Sections 8.02
and 10.04; or
(d) any representation, warranty or certification made by the
Servicer in this Agreement or any other related document to which it is a
party or in any certificate delivered pursuant to this Agreement or any
other Transaction Document to which it is a party shall prove to have been
incorrect in any material respect when made; or
(e) The Borrower or the originator shall fail to pay any principal
of or premium or interest on any Debt in an amount in excess of $10,000
(with respect to the Borrower) or $250,000 (with respect to the
Originator), 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 Debt in an
amount in excess of $10,000 (with respect to the Borrower) or $750,000
(with respect to the Originator) 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
(f) a final judgment is rendered against the Servicer while acting
as Servicer in an amount greater than $1,000,000 and, within 45 days after
entry thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 45 days after the expiration of any such stay,
such judgment is not discharged; or
(g) either the Agent or the Lender (i) shall receive notice from the
Servicer that the Servicer is no longer able to discharge its duties under
this Agreement or (ii) shall determine, in their respective reasonable
judgment and based upon published reports (including wire services), which
they reasonably believe in good faith to be reliable, that the Servicer:
(A) has experienced a material adverse change in its business, assets,
liabilities, operations, or financial condition, (B) has defaulted on any
of its material obligations (other than those included in this Agreement),
or (C) has ceased to conduct its business in the ordinary course, then, so
long as such Servicer Default shall not have been remedied, the Agent by
notice given in writing to the Servicer (a "Servicer Termination Notice"),
may terminate all of the rights and obligations of the Servicer as
Servicer under this Agreement (such termination being herein called a
"Servicer Transfer"). After receipt by the Servicer of such Servicer
Termination Notice, all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Standby Servicer or another
Successor Servicer appointed pursuant to Section 8.02; and, without
limitation, the 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
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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 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 Receivables and related Pledged Assets
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
Agent's Account or which shall thereafter be received by the Servicer with
respect to the Pledged Receivables, 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
Assets made at such premises. The Servicer shall promptly transfer its
electronic records relating to the Pledged Assets 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 Assets 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.
SECTION 8.02. Appointment of Successor.
(a) Appointment. On and after the receipt by the Servicer of a
Servicer Termination Notice pursuant to Section 8.01, or any permitted
resignation of the Servicer pursuant to Section 6.17, 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 Agent in writing or, if no such date is specified in such Servicer
Termination Notice, or otherwise specified by the Agent, until a date
mutually agreed upon by the Servicer and the Agent. The Agent shall as
promptly as possible after the giving of a Termination Notice appoint the
Standby Servicer or another 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 Agent.
Notwithstanding the foregoing, the 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 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 Agreement to the Servicer shall be deemed to refer to
the Successor Servicer.
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(c) Compensation of Successor Servicer. In connection with such
appointment and assumption, the 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
10.05, and shall pass to and be vested in the Borrower and, without
limitation, the Borrower is hereby authorized and empowered to execute and
deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish
all other acts or things necessary or appropriate to effect the purposes
of such transfer of servicing rights upon termination of this Agreement.
The Successor Servicer shall cooperate with the Borrower in effecting the
termination of the responsibilities and rights of the Successor Servicer
to conduct servicing on the Pledged Contracts The Successor Servicer shall
transfer its electronic records relating to the Pledged Contracts to the
Borrower in such electronic form as the Borrower may reasonably request
and shall transfer all other records, correspondence and documents
relating to the Pledged Contracts to the Borrower in the manner and at
such times as the Borrower shall reasonably request. To the extent that
compliance with this Section 8.02 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 8.03. 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
Fitch). 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
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enforcement of Pledged Contracts pursuant hereto, together with the risk of any
liabilities or counterclaims which could be incurred in connection therewith.
ARTICLE IX.
INDEMNIFICATION
SECTION 9.01. Indemnities by the Borrower. Without limiting any
other rights which the Agent, the Lender or any of their respective Affiliates
may have hereunder or under applicable law, the Borrower hereby agrees to
indemnify the Agent, the Lender, and each of their respective Affiliates from
and against any and all damages, losses, claims, liabilities and related costs
and expenses, including reasonable attorneys, fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result of this
Agreement or the ownership of Pledged Assets or in respect of any Receivable or
any contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of the Agent,
the Lender or such Affiliate or (b) recourse (except as otherwise specifically
provided in this Agreement) for uncollectible Pledged Receivables; provided,
however, that the liability for Indemnified Amounts partially attributable to
other Persons from whom the Lender purchases receivables or to whom the Lender
makes loans shall be reasonably allocated between the Borrower and such other
Persons by the Lender. Without limiting the foregoing, the Borrower shall
indemnify the Agent, the Lender and each of their respective Affiliates for
Indemnified Amounts relating to or resulting from;
(i) any Pledged Receivable treated as or represented by the
Borrower to be an Eligible Receivable which is not at the applicable
time an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by the Borrower, the Servicer (if the Originator or one of its
Affiliates) or any of their respective officers under or in
connection with this Agreement, which shall have been false or
incorrect in any material respect when made or deemed made or
delivered;
(iii) the failure by the Borrower or the Servicer (if the
Originator or one of its Affiliates) to comply with any term,
provision or covenant contained in this Agreement or any agreement
executed in connection with this Agreement, or with any applicable
law, rule or regulation with respect to any Receivable, the related
Contract or the Related Security, or the nonconformity of any
Receivable, the related Contract or the Related Security with any
such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Lender or
to transfer to the Lender, a first priority security interest in the
Receivables which are, or are purported to be, Pledged Receivables,
together with all Collections and Related Security, free and clear
of any Adverse Claim (except as otherwise provided herein or in the
Receivables Purchase Agreement) whether existing at the time of the
related Borrowing or at any time thereafter;
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(v) the failure to maintain, as of the close of business on
each Business Day prior to the Termination Date, an aggregate amount
of Loans outstanding which is less than or equal to the lesser of
(x) the Borrowing Limit minus the Discount Amount on such Business
Day, or (y) the Capital Limit on such Business Day;
(vi) the failure to file, 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 any Receivables which are, or are purported to be, Pledged
Receivables, whether at the time of any Borrowing or at any
subsequent time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the obligor) of the obligor to the
payment of any Receivable which is, or is purported to be, a Pledged
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such obligor enforceable against it in
accordance with its terms), or any other claim resulting from the
sale VOIs or Lots related to such Receivable or the furnishing or
failure to furnish such VOIs or Lots;
(viii) any failure of the Borrower or the Servicer (if the
Originator or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or
any failure by the Originator, the Borrower or any Affiliate thereof
to perform its respective duties under the Contracts;
(ix) any breach of contract or personal injury or property
damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with the VOIs or the Lots which
are the subject of any Receivable or Contract;
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in
connection with the Pledged Receivables;
(xi) any repayment by the Agent or the Lender of any amount
previously distributed in payment of Loans or payment of Yield or
any other amount due hereunder, in each case which amount the Agent
or the Lender believes in good faith is required to be repaid;
(xii) the commingling of Collections of Pledged Receivables at
any time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Loans or the Pledged Assets
or in respect of any Receivable, Related Security or Contract;
(xiv) any failure by the Borrower to give reasonably
equivalent value to the
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originator in consideration for the transfer by the originator to
the Borrower of any Receivables or Related Security, or any attempt
by any Person to void or otherwise avoid any such transfer under any
statutory provision or common law or equitable action, including,
without limitation, any provision of the Bankruptcy Code; or
(xv) any failure of the Borrower, the Originator or any of
their respective agents or representatives (including, without
limitation, agents, representatives and employees of the Originator
acting pursuant to authority granted under Section 6.01) to remit to
the Servicer or the Agent, Collections of Pledged Receivables
remitted to the Borrower or any such agent or representative.
Any amounts subject to the indemnification provisions of this Section 9.01 shall
be paid by the Borrower to the Agent within two Business Days following the
Agent's written demand therefor.
SECTION 9.02. Indemnities by the Servicer. Without limiting any
other rights which the Agent, the Lender or any of their respective Affiliates
may have hereunder or under applicable law, the Servicer hereby agrees to
indemnify the Agent, the Lender, and each of their respective Affiliates from
and against any and all Indemnified Amounts awarded against or incurred by any
of them arising out of or as a result of this Agreement or the ownership of
Pledged Assets or in respect of any Receivable or any Contract, excluding,
however, (a) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of the Agent, the Lender or such Affiliate or
(b) recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Pledged Receivables; provided, however, that the liability for
Indemnified Amounts partially attributable to other Persons acting as servicers
for receivables purchased by the Lender or collateral pledged to the Lender
shall be reasonably allocated between the Servicer and such other Persons by the
Lender. Without limiting the foregoing, the Servicer shall indemnify the Agent,
the Lender and each of their respective Affiliates for Indemnified Amounts
relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Servicer (if the Originator or one of its Affiliates) or
any of their respective officers under or in connection with this
Agreement, which shall have been false or incorrect in any material
respect when made or deemed made or delivered;
(ii) the failure by the Servicer (if the Originator or one of
its Affiliates) to comply with any term, provision or covenant
contained in this Agreement or any agreement executed in connection
with this Agreement, or with any applicable law, rule or regulation
with respect to any Receivable, the related Contract or the Related
Security, or the nonconformity of any Receivable, the related
Contract or the Related Security with any such applicable law, rule
or regulation;
(iii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable which is, or is purported to be, a Pledged
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any
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<PAGE>
other claim resulting from the sale VOIs or Lots related to such
Receivable or the furnishing or failure to furnish such VOIs or
Lots;
(iv) any failure of the Servicer (if the Originator or one of
its Affiliates) to perform its duties or obligations in accordance
with the provisions of this Agreement or any failure by the
Originator, the Borrower or any Affiliate thereof to perform its
respective duties under the Contracts;
(v) any breach of contract or personal injury or property
damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with the VOls or the Lots which
are the subject of any Receivable or Contract;
(vi) any repayment by the Agent or the Lender of any amount
previously distributed in payment of Loans or payment of Yield or
any other amount due hereunder, in each case which amount the Agent
or the Lender believes in good faith is required to be repaid;
(vii) the commingling by the Servicer of Collections of
Pledged Receivables at any time with other funds;
(viii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Loans, Pledged Assets or in
respect of any Receivable, Related Security or contract; or
(ix) any failure of the Borrower, the Originator or any of
their respective agents or representatives (including, without
limitation, agents, representatives and employees of the Originator
acting pursuant to authority granted under Section 6.01) to remit to
the Servicer or the Agent, Collections of Pledged Receivables
remitted to the Borrower or any such agent or representative.
Any amounts subject to the indemnification provisions of this Section 9.02 shall
be paid by the Servicer to the Agent within two Business Days following the
Agent's written demand therefor.
The applicable Affected Party shall deliver to the indemnifying
party under Section 9.01 and Section 9.02, within a reasonable time after the
Affected Party's receipt thereof, copies of all notices and documents (including
court papers) received by the Affected Party relating to the claim giving rise
to the Indemnified Amounts. Each Affected Party will cooperate with the Borrower
and the Servicer in connection with any claim giving rise to the Indemnified
Amounts to minimize the liability of such indemnifying parties, provided that
nothing contained herein shall obligate any Affected Party to take any action
which, in the opinion of the applicable Affected Party, is unlawful or otherwise
disadvantageous to such Affected Party.
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ARTICLE X.
MISCELLANEOUS
SECTION 10.01. Amendments and Waivers.
(a) Except as provided in Section 10.01(b), no amendment or
modification of any provision of this Agreement shall be effective without
the written agreement of the Borrower, the Servicer, the Agent and the
Lender, and no termination or waiver of any provision of this Agreement or
consent to any departure therefrom by the Borrower or the Servicer shall
be effective without the written concurrence of the Agent and the Lender.
Any waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
(b) Notwithstanding the provisions of Section 10.01(a), in the event
that there is more than one Lender, the written consent of each Lender
shall be required for any amendment, modification or waiver (i) reducing
any outstanding Loans, or the Yield thereon, for any Fixed Period, (ii)
postponing any date for any payment of any Loan, or the Yield thereon, for
any Fixed Period, or (iii) modifying the provisions of this Section 10.01
and (iv) increasing the Capital Limit or the Borrowing Limit or (v)
reducing the Required overcollateralization Percentage and the Minimum
overcollateralization Percentage.
SECTION 10.02. 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 specified in such party's
Assignment and Acceptance 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 (a) notice by
mail, five days after being deposited in the United States mails, first class
postage prepaid, (b) notice by telex, when telexed against receipt of
answerback, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to Article
II shall not be effective until received.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Agent or the Lender 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 10.04. Binding Effect; Assignability. This Agreement shall
be binding upon and inure to the benefit of the Borrower, the Agent, the Lender
and their respective successors and permitted assigns. This Agreement and the
Lender's rights and obligations hereunder and interest herein shall be
assignable in whole or in part (including by way of the sale of participation
interests therein) by the Lender and its successors and assigns. Neither the
Borrower nor the Servicer may assign any of its rights and obligations hereunder
or any interest herein without the prior written consent of the Lender and the
Agent. The parties to each assignment or participation
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<PAGE>
made pursuant to this Section 10.04 shall execute and deliver to the Agent for
its acceptance and recording in its books and records, an Assignment and
Acceptance or a participation agreement or other transfer instrument reasonably
satisfactory in form and substance to the Agent and the Borrower. Each such
assignment or participation shall be effective as of the date specified in the
applicable Assignment and Acceptance or other agreement or instrument only after
the execution, delivery, acceptance and recording as described in the preceding
sentence. The Agent shall notify the Borrower of any assignment or participation
thereof made pursuant to this Section 10.04. The Lender may, in connection with
any assignment or participation or any proposed assignment or participation
pursuant to this Section 10.04, disclose to the assignee or participant or
proposed assignee or participant any information relating to the Borrower and
the Pledged Assets furnished to the Lender by or on behalf of the Borrower or
the Servicer.
SECTION 10.05. Term of this Agreement. This Agreement, including,
without limitation, the Borrower's obligation to observe its covenants set forth
in Articles V and VI, and the Servicer's obligation to observe its covenants set
forth in Article VI, shall remain in full force and effect until the collection
Date; provided, however, that the rights and remedies with respect to any breach
of any representation and warranty made or deemed made by the Borrower pursuant
to Articles III and IV and the indemnification and payment provisions of Article
IX and Article X and the provisions of Section 10.08 and Section 10.09 shall be
continuing and shall survive any termination of this Agreement.
SECTION 10.06. Governing Law; Jury Waiver. THIS 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 LENDER IN THE PLEDGED RECEIVABLES, OR REMEDIES HEREUNDER, IN RESPECT
THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN-RESPECT OF ANY LITIGATION ARISING
DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.
SECTION 10.07. Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted to the
Agent, the Lender and its Affiliates under Article VIII hereof, the
Borrower agrees to pay on demand all costs and expenses of the Lender and
the Agent incurred in connection with the preparation, execution,
delivery, administration (including periodic auditing), or any waiver or
consent issued in connection with, this Agreement and the other documents
to be delivered hereunder or in connection herewith or incurred in
connection with any amendment or modification of this Agreement and other
documents to be delivered hereunder or in connection herewith that is
necessary or requested by any of the Borrower, the Originator, Fitch or
S&P or made necessary or desirable as a result of the actions of any
regulatory, tax or accounting body affecting the Lender and its
Affiliates, including, without limitation, the reasonable fees and
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out-of-pocket expenses of counsel for the Agent and the Lender with
respect thereto and with respect to advising the Agent and the Lender as
to their respective rights and remedies under this Agreement and the other
documents to be delivered hereunder or in connection herewith, and all
costs. and expenses, if any (including reasonable counsel fees and
expenses), incurred by the Agent or the Lender in connection with the
enforcement of this Agreement and the other documents to be delivered
hereunder or in connection herewith.
(b) The Borrower shall pay on demand any and all commissions of
placement agents and dealers in respect of commercial paper notes issued
to fund the Loans and any and all stamp, sales, excise and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement, the other documents to
be delivered hereunder or any agreement or other document providing
liquidity support, credit enhancement or other similar support to the
Lender in connection with this Agreement or the funding or maintenance of
Loans hereunder.
(c) The Borrower shall pay on demand all other costs, expenses and
taxes (excluding income taxes) incurred by any Issuer or any general or
limited partner or shareholder of such Issuer ("Other Costs"), including,
without limitation, the cost of auditing such Issuer's books by certified
public accountants, the cost of rating such Issuer's commercial paper by
independent financial rating agencies, the taxes (excluding income taxes)
resulting from such Issuer's operations, and the reasonable fees and
out-of-pocket expenses of counsel for the Issuer or any counsel for any
general or limited partner or shareholder of the Issuer with respect to
(i) advising such Person as to its rights and remedies under this
Agreement and the other documents to be delivered hereunder or in
connection herewith, (ii) the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith and (iii)
advising such Person as to the issuance of the Issuer's commercial paper
notes to fund Loans and action in connection with such issuance.
SECTION 10.08. No Proceedings. Each of the Borrower, the Agent, the
Servicer and the Lender each hereby agrees that it will not institute against,
or join any other Person in instituting against, any Issuer any proceedings of
the type referred to in clause (i) of Section 7.01(f) so long as any commercial
paper issued by such Issuer shall be outstanding or there shall not have elapsed
one year and one day since the last day on which any such commercial paper shall
have been outstanding.
SECTION 10.09. Recourse Against Certain Parties. No recourse under
or with respect to any obligation, covenant or agreement (including, without
limitation, the payment of any fees or any other obligations) of the Lender as
contained in this Agreement or any other agreement, instrument or document
entered into by it pursuant hereto or in connection herewith shall be had
against any administrator of the Lender or any incorporator, affiliate,
stockholder, officer, employee or director of the Lender or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Lender contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in
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connection herewith are, in each case, solely the corporate obligations of the
Lender, and that no personal liability whatsoever shall attach to or be incurred
by any administrator of the Lender or any incorporator, stockholder, affiliate,
officer, employee or director of the Lender or of any such administrator, as
such, or any other them, under or by reason of any of the obligations, covenants
or agreements of the Lender contained in this Agreement or in any other such
instruments, documents or agreements, or which are implied therefrom, and that
any and all personal liability of every such administrator of the Lender and
each incorporator, stockholder, affiliate, officer, employee or director of the
Lender or of any such administrator, or any of them, for breaches by the Lender
of any such obligations, covenants or agreements, which liability may arise
either at common law or at equity, by statute or constitution, or otherwise, is
hereby expressly waived as a condition of and in consideration for the execution
of this Agreement. The provisions of this Section 10.09 shall survive the
termination of this Agreement.
SECTION 10.10. Execution in Counterparts; Severability; Integration.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement. In case any provision in or obligation under this
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. This Agreement contains the
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 among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings other than the fee letters
described in Section 2.09.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER: BFICP CORPORATION
By
------------------------------------
Title:
BFICP Corporation
Two Clinton Square
Syracuse, New York 13202
Attention:
Facsimile No.:
Telephone No.:
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THE SERVICER: BENNETT FUNDING INTERNATIONAL, LTD.
By
------------------------------------
Title:
Bennett Funding International, Ltd.
Two Clinton Square
Syracuse, New York 13202
Attention: William P. Crowley
Facsimile No.: (315) 422-9359
Telephone No.:
THE AGENT: INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC.
By
------------------------------------
Title:
Internationale Nederlanden (U.S.)
Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.; 212-593-3362
Confirmation No.: 212-446-0966
72
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER: BFICP CORPORATION
By
------------------------------------
Title:
BFICP Corporation
Two Clinton Square
Syracuse, New York 13202
Attention:
Facsimile No.:
Telephone No.:
THE SERVICER: BENNETT FUNDING INTERNATIONAL, LTD.
By
------------------------------------
Title:
Bennett Funding International, Ltd.
Two Clinton Square
Syracuse, New York 13202
Attention: William P. Crowley
Facsimile No.: (315) 422-9359
Telephone No.:
THE AGENT: INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC.
By
------------------------------------
Title:
Internationale Nederlanden (U.S.)
Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.; 212-593-3362
Confirmation No.: 212-446-0966
73
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THE LENDER: HOLLAND LIMITED SECURITIZATION, INC.
By Internationale Nederlanden
(U.S.) Capital Markets, Inc.,
as attorney-in-fact
By
------------------------------------
Title:
Holland Limited Securitization,
Inc.
c/o International Nederlanden
(U.S.) Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.: 212-593-3362
Confirmation No.: 212-446-0966
c/o Lord Securities Corporation
2 Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
Facsimile No.: 212-346-9008
Telephone No.: 212-346-9012
74
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Execution Copy
U.S. $50,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of May 25, 1995
Among
CORPORATION
as the Seller
and
BENNETT FUNDING INTERNATIONAL, LTD.
as the Servicer
and
HOLLAND LIMITED SECURITIZATION, INC.
as a Purchaser
and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC.
as the Agent
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I.
DEFINITIONS................................ 1
SECTION 1.01. Certain Defined Terms....................................... 1
SECTION 1.02. Other Terms................................................. 25
SECTION 1.03. Computation of Time Periods................................. 25
ARTICLE II.
THE RECEIVABLES FACILITY......................... 25
SECTION 2.01. Purchases of Purchased Assets............................... 25
SECTION 2.02. The Initial Purchase and Subsequent Purchases............... 25
SECTION 2.03. Termination or Reduction of the Purchase Limit.............. 26
SECTION 2.04. Selection of Fixed Periods.................................. 26
SECTION 2.05. Settlement Procedures....................................... 27
SECTION 2.06. Spread Account.............................................. 30
SECTION 2.07. Special Settlement Procedures............................... 31
SECTION 2.08. Payments and Computations, Etc.............................. 31
SECTION 2.09. Fees........................................................ 32
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality............... 33
SECTION 2.11. Taxes....................................................... 34
SECTION 2.12. Assignment of the originator Sale Agreement................. 36
SECTION 2.13. Payment of Covered Obligations; Grant of Security Interest.. 37
ARTICLE III.
CONDITIONS OF PURCHASES......................... 39
SECTION 3.01. Conditions Precedent to Initial Purchase.................... 39
SECTION 3.02. Conditions Precedent to All Purchases and Remittances
of Collections............................................ 39
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES...................... 40
SECTION 4.01. Representations and Warranties of the Seller................ 40
SECTION 4.02. Representations and Warranties of the Purchaser............. 44
ARTICLE V.
GENERAL COVENANTS OF THE SELLER..................... 45
SECTION 5.01. General Covenants........................................... 45
SECTION 5.02. Financial Covenants......................................... 51
ii
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ARTICLE VI.
ADMINISTRATION, COLLECTION AND
MONITORING OF RECEIVABLES........................ 51
SECTION 6.01. Appointment and Designation of the Servicer................. 51
SECTION 6.02. Collection of Receivables by the Servicer; Extensions
and Amendments of Receivables.............................. 52
SECTION 6.03. Distribution and Application of Collections................. 52
SECTION 6.04. Segregation of Collections.................................. 53
SECTION 6.05. Other Rights of the Agent................................... 53
SECTION 6.06. Records; Audits............................................. 53
SECTION 6.07. Periodic Settlement Reporting............................... 54
SECTION 6.08. Collections and Lock-Boxes.................................. 55
SECTION 6.09. UCC Matters; Protection and Perfection of Purchased Assets.. 55
SECTION 6.10. Obligations of the Seller With Respect to Receivables....... 57
SECTION 6.11. Rights of Obligors and Release of Contract Files............ 57
SECTION 6.12. Recordation of Assignments.................................. 58
SECTION 6.13. Costs and Expenses.......................................... 58
SECTION 6.14. Servicer Representations and Warranties..................... 58
SECTION 6.15. Additional Covenants of the Servicer........................ 61
SECTION 6.16. Standby Servicer............................................ 62
SECTION 6.17. The Servicer not to Resign.................................. 63
SECTION 6.18. Repurchases; Clean-up....................................... 63
ARTICLE VII.
EVENTS OF TERMINATION.......................... 66
SECTION 7.01. Events of Termination....................................... 66
ARTICLE VIII
SERVICER DEFAULTS............................ 70
SECTION 8.01. Servicer Defaults........................................... 70
SECTION 8.02. Appointment of Successor.................................... 72
SECTION 8.03. Certain Matters Affecting the Successor Servicer............ 73
ARTICLE IX.
INDEMNIFICATION............................. 74
SECTION 9.01. Indemnities by the Seller................................... 74
SECTION 9.02. Indemnities by the Servicer................................. 76
ARTICLE X.
MISCELLANEOUS.............................. 78
SECTION 10.01. Amendments and Waivers..................................... 78
SECTION 10.02. Notices, Etc............................................... 79
SECTION 10.03. No Waiver; Remedies........................................ 79
SECTION 10.04. Binding Effect; Assignability.............................. 79
SECTION 10.05. Term of this Agreement..................................... 80
iii
<PAGE>
SECTION 10.06. Governing Law; Jury Waiver................................. 80
SECTION 10.07. Costs, Expenses and Taxes.................................. 80
SECTION 10.08. No Proceedings............................................. 81
SECTION 10.09. Recourse Against Certain Parties........................... 81
SECTION 10.10. Execution in Counterparts; Severability; Integration....... 82
iv
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I Approved Developments
SCHEDULE II Contract schedule
SCHEDULE III Description of Credit and Collection Policy
SCHEDULE IV Developments
SCHEDULE V VOI Regimes
SCHEDULE VI Condition Precedent Documents
SCHEDULE VII Lock-Box Banks
SCHEDULE VIII Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IX Environmental Issues
EXHIBITS
EXHIBIT A Form of Commercial Paper Settlement Report
EXHIBIT B Form of Contract Assignment
EXHIBIT C Form of Assignment of Mortgage
EXHIBIT D Form of Developer Sale Agreement
EXHIBIT E Form of Monthly Settlement Report
EXHIBIT F Form of Purchase Date/Spread Account Surplus
Settlement Report
EXHIBIT G "Limited Purpose,, Provisions of Seller's
Certificate of Incorporation
EXHIBIT H Form of officer's Release Certificate
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THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made as of
May 25, 1995, among:
(1) BFICP CORPORATION, a Delaware corporation (the "Seller");
(2) BENNETT FUNDING INTERNATIONAL, LTD., a Delaware corporation
(sometimes referred to herein as the "Originator"), as the
"Servicer" (as defined herein)
(3) HOLLAND LIMITED SECURITIZATION, INC., a Delaware corporation
("HLS"); and
(4) INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL MARKETS, INC. ("ING"
Capital"), as agent (the "Agent").
IT IS AGREED as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Certain Defined Terms. (a) Certain capitalized terms
used throughout this Agreement are defined above or in this Section 1.01.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
"Adverse Claim" means a lien, security interest, charge, encumbrance
or other right or claim of any Person (other than, with respect to the Purchased
Assets, any lien, security interest, charge, encumbrance or other right or claim
in favor of the Purchaser (or the Agent on behalf of the Purchaser)).
"Affected Party" has the meaning assigned to that term in Section
2.10.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Agent's Account" means a subaccount within a special account
(account number 550-023569 at Chemical Bank, Syracuse, New York in the name of
the Purchaser, the Agent or the Collateral Trustee, as from time to time
designated by the Agent by notice to the Seller and the Servicer.
"Agent's Bank" means Chemical Bank.
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"Agent's Fee" has the meaning assigned to that term in Section
2.09(a).
"Agreement" means this Receivables Purchase Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time
hereafter.
"Aggregate Concentration Limit" means at any time, (a) for the
Obligors of any one Approved Development, (i) on and after the date hereof but
before the first anniversary hereof, an amount equal to 10% of the Gross
Eligible Receivables Balance at such time, (ii) on and after the first
anniversary hereof but before the second anniversary hereof, an amount equal to
7.5% of the Gross Eligible Receivables Balance at such time, and (iii) on and
after the second anniversary hereof, an amount equal to 5.0% of the Gross
Eligible Receivables Balance at such time and (b) for the Obligors of any other
Development, an amount equal to 3% of the Gross Eligible Receivables Balance at
such time.
"Aggregate Large Receivables Limit" means at any time an amount
equal to 5% of the Gross Eligible Receivables Balance at such time.
"Alternative Rate" means, with respect to any Fixed Period for all
Capital allocated to such Fixed Period, an interest rate per annum equal to sum
of the Base Rate plus 2.0%.
"Approved Development" means any Development that is designated as
an Approved Development on Schedule I and any other Development that (a) was
developed by a Developer that satisfies the Originator's Developer underwriting
standards (a copy of which is attached as an annex to Schedule 1), (b) has been
inspected by the Agent or a representative of the Agent and (c) the Agent has
designated (in a writing delivered to the Seller from time to time) as an
Approved Development; provided, however, that any designation by the Agent of a
Development as an "Approved Development" may be withdrawn by the Agent in its
sole discretion in a writing delivered to the Seller at any time that the
Development Default Ratio for such Development shall have exceeded 2.0% for
three consecutive months and any such withdrawal shall be effective commencing
on the first day of the month immediately succeeding the month in which such
notice is delivered to the Seller.
"Assignment and Acceptance" means an assignment and acceptance
entered into by the Purchaser and an assignee pursuant to Section 10.04.
"Base Rate" means, on any date, a fluctuating rate of interest per
annum equal to the arithmetic average of the rates of interest publicly
announced by The Chase Manhattan Bank, N.A., Citibank, N.A. and Morgan Guaranty
Trust Company of New York (or their respective successors) as their respective
prime commercial lending rates (or, as to any such bank that does not announce
such a rate, such bank's "base" or other rate determined by the Purchaser to be
the equivalent rate announced by such bank), except that, if any such bank
shall, for any period, cease to announce publicly its prime commercial lending
(or equivalent) rate, the Agent shall, during such period, determine the "Base
Rate" based upon the prime commercial lending (or equivalent) rates announced
publicly by the other such banks or, if each such bank ceases to announce
publicly its prime commercial lending (or equivalent) rate, based upon the prime
commercial lending (or
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equivalent) rates announced publicly by other banks reasonably acceptable to the
Seller. The prime commercial lending (or equivalent) rates used in computing the
Base Rate are not intended to be the lowest rates of interest charged by such
banks in connection with extensions of credit to debtors. The Base Rate shall
change as and when such banks, prime commercial lending (or equivalent) rates
change.
"Benefit Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Seller or any ERISA Affiliate of the
Seller is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means a day of the year other than a Saturday or a
Sunday on which banks are not authorized or required to close in New York City.
"Capital" means the sum of the amounts paid to the Seller for the
initial Purchase and in connection with each Subsequent Purchase pursuant to
Section 2.02, reduced from time to time by Collections received and distributed
to the Purchaser on account of such Capital pursuant to Section 2.05; provided,
however, that such capital shall not be reduced by any distribution of any
portion of Collections if at any time such distribution is rescinded or returned
by the Purchaser to the Seller or any other Person for any reason.
"Capital Base Deficiency" means at any time that the Required
Overcollateralization Percentage exceeds the Overcollateralization Percentage,
an amount equal to the remainder of (a) the product of (i) the sum of 1001 plus
the Required Overcollateralization Percentage multiplied by (ii) the Facility
Amount minus (b) the sum of (i) the Purchased Receivables Balance plus (ii)
amounts on deposit in the Spread Account plus (iii) the amount of Collections on
deposit in the Agent's Account to be applied in accordance with Section 2.05 on
the next Settlement Date.
"Capital Base Surplus" means at any time that the
Overcollateralization Percentage exceeds the Required Overcollateralization
Percentage, an amount equal to the remainder of (a) the sum of (i) the Purchased
Receivables Balance plus (ii) amounts on deposit in the Spread Account plus
(iii) the amount of Collections on deposit in the Agent's Account to be applied
in accordance with Section 2.05 on the next Settlement Date minus (b) the
product of (i) the sum of 100% plus the Required overcollateralization
Percentage multiplied by (ii) the Facility Amount.
"Capital Limit" means, at any time, an amount equal ro the quotient
of (a) the sum of (i) the Purchased Receivables Balance at such time, plus (ii)
the aggregate amount at the time on deposit in the Spread Account, plus (iii)
the amount of Collections on deposit in the Agent's Account to be applied in
accordance with Section 20 on the next Settlement Date divided by (b) 100% plus
the Minimum overcollateralization Percentage at such time.
"Carrying Cost Reserve Amount" means, with respect to a Business Day
that is not a Settlement Date, the sum of (a) the Capital Base Deficiency as of
such Business Day (or as of the date of the related Purchase Date/Spread Account
Surplus Settlement Report) plus (b) aggregate accrued and unpaid (i) Yield, (ii)
Liquidation Fees, (iii) Facility Fee, (iv) Servicer Fee and (v) obligations of
the Seller to the Purchaser hereunder other than the amounts described in the
foregoing clauses (i)-(iv) (collectively, the fees and amounts described in the
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foregoing clauses (i)-(v), the "Carrying Costs"), each as of such Business Day
(or as of the date of the related Purchase Date/Spread Account surplus
Settlement Report) plus (c) the aggregate Carrying Costs that will accrue from
such Business Day (or, if used as the basis for the calculations in the
preceding clause (b), from the date of the related Purchase Date/Spread Account
Surplus Settlement Report) and be payable pursuant to Section 2.05 on the next
Settlement Date after such Business Day (after giving effect to any Purchase to
be made on such Business Day); provided, that, for purposes of the foregoing,
Yield that will accrue from such date shall be calculated assuming that all
Capital allocated to a Fixed Period commencing on or after such day will bear
interest at the Alternative Rate minus the per annum rate at which the usage fee
payable to the Purchaser (either directly or through the Agent) is calculated
pursuant to the terms of the fee letter executed by the Seller and the
Purchaser.
"Code", means the Internal Revenue Code of 1986, as amended.
"Collateral Trustee" means BankAmerica National Trust company and
any successor collateral agent and trustee with respect to the commercial paper
and the liquidity and credit support providers of the Purchaser.
"Collection Date" means the date following the Termination Date on
which (a) the aggregate outstanding Capital has been reduced to zero, the
Purchaser has received all Yield and other amounts due to the Purchaser in
connection with this Agreement and the Agent has received all amounts due to it
in connection with this Agreement and (b) the outstanding loans under the
Receivables Loan Agreement has been reduced to 'zero' and Purchaser and the
Agent have received all of the other obligations payable to them under the
Receivables Loan Agreement or any other agreement, excluding, however, this
Agreement, executed pursuant thereto or in connection therewith.
"Collections" means, (a) with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable, and any Collection of such Receivable deemed to have been received
pursuant to Section 2.07, (b) any amounts paid to the Seller (or the Agent or
any Purchaser or assignees thereof) pursuant to the terms of the Originator Sale
Agreement with respect to any Purchased Receivables, (c) any amounts paid to the
Seller (or the Agent or any Purchaser or assignees thereof) pursuant to the
terms of any Developer Sale Agreements with respect to any Purchased Receivables
and (d) any amounts paid to the Purchaser under any Purchased Rate Cap that are
ratably allocable to this Agreement (as opposed to the Receivables Loan
Agreement) based on outstanding Capital and the principal amount of Loans under
the Receivables Loan Agreement.
"Commercial Paper Settlement Report" means a report, in
substantially the form of Exhibit A, furnished by the Servicer to the Agent for
the Purchaser pursuant to Section 6.07(d).
"Concentration Limit" means at any time, for the Obligors of any one
Development, the portion of the Aggregate Concentration Limit for such Obligors
that is specified by the Seller on the latest Monthly Settlement Report as being
allocated to this Agreement (as opposed to the
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Receivables Loan Agreement); the sum of the Concentration Limits for the
Obligors of any one Development under this Agreement and the Receivables Loan
Agreement shall equal the Aggregate Concentration Limit for such Obligors. If
the Seller fails to provide the Servicer with an appropriate allocation of an
Aggregate Concentration Limit for the Obligors of a Development, the
Concentration Limit under this Agreement for such Obligors will equal the
Aggregate Concentration Limit for such Obligors and the "Concentration Limit"
under the Receivables Loan Agreement for such Obligors shall equal zero.
"Contract" means an interval ownership or lot contract agreement and
installment note relating to the sale of one or more VOI's or Lots to an
obligor, together with any separate obligor's installment note for the payment
of the balance of the purchase price thereof.
"Contract Conveyance Documents" means, with respect to each
Purchased Contract, the following documents:
(a) an original assignment or assignments, in recordable form, of
such Contract and certain related property from the Originator to the
Seller and subsequent assignment of such Contract and related property
from the Seller to HLS, and the subsequent collateral assignment to the
collateral Trustee, in one of the forms attached to this Agreement as
Exhibit B;
(b) if the related VOI or Lot has been deeded to the obligor, an
original Assignment or Assignments of Mortgage, in recordable form,
assigning any Contract Mortgage related to such Contract from the
originator to the Seller and subsequently assigning such Contract Mortgage
from the Seller to HLS, and subsequently collaterally assigning such
Contract Mortgage from HLS to the Collateral Trustee, in one of the forms
attached to this Agreement as Exhibit C;
(c) if the Contract financed the purchase by the obligor of Credit
Life Insurance, an original acknowledgment signed by the issuer of any
credit Life Insurance of the assignment of the Seller's rights therein
pursuant to this Agreement in the form delivered to the Collateral Trustee
on the initial Purchase Date; and
(d) in the case of any Subsequent Purchase Date, any such other
documents, instruments or agreements as may be required by the Agent in
order to more fully effect the transfer of the Purchased Receivables and
any related Purchased Assets.
"Contract Documents" means the Contract and all papers and documents
related to a Contract, including all applicable promissory notes endorsed in
blank, the original of any related recorded or unrecorded Contract mortgage and
a copy of any recorded or unrecorded warranty deed transferring legal title to
the related VOI or Lot to the Obligor, tax receipts, insurance policies,
insurance premium receipts, ledger sheets, payment records, insurance claim
files and correspondence, repossession files and correspondence, the original of
any related assignment, modification or assumption agreement or, if such
original is unavailable, a copy thereof, current and historical computerized
data files, and all other papers and records of whatever kind or description,
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whether developed or originated by the Originator, the Seller or another Person,
required to document, service or enforce a Contract.
"Contract File" means the Contract Documents pertaining to a
particular Purchased Contract and any additional amendments. supplements,
extensions, modifications or waiver agreements required to be added to the
Contract File pursuant to this Agreement or Credit and Collection Policy.
"Contract Mortgage" means any mortgage, deed of trust, purchase
money deed of trust or deed to secure debt granted by an obligor to the
originator of the Contract encumbering the related VOI or Lot to secure Payments
or other obligations under such Contract.
"Contract Rate" means, with respect to a Purchased Contract, the
annual fixed rate at which interest accrues on such Purchased Contract.
"Contract Schedule" means the Purchased Contract list, attached
hereto as Schedule II, as amended from time to time to add new Purchased
Contracts and to remove certain Purchased Contracts, in each case in accordance
with this Agreement, which list shall set forth the following information with
respect to each contract therein as of the applicable date:
(a) the Contract number;
(b) the obligor's name;
(c) the Development in which the related VOI or Lot is located;
(d) the current Contract Rate;
(e) whether the Obligor is covered by a policy of Credit Life
Insurance and the amount of any insurance premium for such
policy financed pursuant to the Contract;
(f) the original term of the Contract;
(g) the original and current Outstanding Balance (as of the
applicable Cut-Off Date);
(h) the amount of the Payments on the Contract;
(i) the original purchase price of such contract paid or to be
paid by the originator under the applicable Developer Sale
Agreement; and
(j) whether the related VOI or Lot has been deeded to the Obligor.
"CP Rate" means, with respect to any Fixed Period for all Capital
allocated to such
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Fixed Period, the rate equivalent to the rate (or if more than one rate, the
weighted average of the rates) at which commercial paper notes of the Purchaser
having a term equal to such Fixed Period and to be issued to fund the applicable
Purchase by the Purchaser may be sold by any placement agent or commercial paper
dealer selected by the Purchaser, as agreed between each such agent or dealer
and the Purchaser and notified by the Purchaser to the Agent and the Servicer;
Provided, however, if the rate (or rates) as agreed between any such agent or
dealer and the Purchaser with regard to any Fixed Period for the applicable
Purchase is a discount rate (or rates), the "CP Rate" for such Fixed Period
shall be the rate (or if more than one rate, the weighted average of the rates)
resulting from converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"Credit and Collection Policy" means those credit and collection
policies and practices of the Servicer and the Originator relating to
Developers, Contracts and Receivables described in Schedule III, as modified in
compliance with this Agreement.
"Credit Life Insurance" means any policy of insurance acquired by
the Obligor providing for payment of the principal amount outstanding under a
Contract upon the Obligor's death.
"Credit Life Insurance Proceeds" means proceeds of, or any unearned
premium recovered in respect of, any Credit Life Insurance, which shall
constitute Collections.
"Cut-Off Date" means (a) with respect to the initial Purchase, May
1, 1995, or (b) with respect to each Subsequent Purchase Date, such date as the
Agent and the Seller shall mutually agree.
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d) obligations of such Person
as lessee under leases which shall have been or should be, in accordance with
GAAP, recorded as capital leases, (e) obligations secured by an Adverse Claim
upon property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations and (f) obligations
of such Person under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) above.
"Default Ratio" means the ratio (expressed as a percentage) computed
as of the last day of each calendar month by dividing (a) the aggregate
Outstanding Balance of all Purchased Receivables and Pledged Receivables that
became Defaulted Receivables at any time during the month then ending plus
(without duplication) the amount of all Receivables which were written off the
books of the Seller during such month, by (b) the average aggregate Gross
Eligible Receivables Balance (excluding all Defaulted Receivables) during such
month.
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part
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thereof, exclusive of any advances made by the Servicer or any Person other than
the Obligor, remains unpaid for more than 90 days from the original due date for
such payment, (b) as to which the Obligor thereof has taken any action, or
suffered any event to occur, of the type described in Section 7.01(f), or (c)
which, consistent with the Credit and Collection Policy, has been or should be
written off the Seller's books as uncollectible.
"Defaulted Receivable Release Date" has the meaning assigned to such
term in Section 6.18 of this Agreement.
"Defective Contract" has the meaning assigned to such term in
Section 6.18 of this Agreement.
"Defective Contract Release Date" has the meaning assigned to such
term in Section 6.18 of this Agreement.
"Delinquency Ratio" means the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (a) the sum of
the aggregate Outstanding Balance of all Purchased Receivables that were
Delinquent Receivables as of such date, by (b) the aggregate Outstanding Balance
of all Purchased Receivables as of the last day of such month.
"Delinquent Receivable" means a Receivable that is not a Defaulted
Receivable and (a) as to which any payment or part thereof, exclusive of any
advances made by the Servicer or any Person other than the obligor, remains
unpaid for more than 30 days from the original due date for such payment or (b)
which, consistent with the Credit and Collection Policy, has been or should be
classified as delinquent by the Servicer.
"Depository Institution" means a depository institution or trust
company, incorporated under the laws of the United States or any State thereof,
that is subject to supervision and examination by federal and/or state banking
authorities.
"Developer" means a Person from which the originator purchased
Receivables and related assets pursuant to a "Contract of Sale of Time Share
Receivables with Recourse" substantially in the form of Exhibit D or in such
other form as may be acceptable to the Agent (each a "Developer Sale
Agreement").
"Developer Mortgage" means any mortgage or deed of trust or deed to
secure debt granted by a Developer to the Originator to secure the Developer's
obligations under a Developer Sale Agreement between the originator and such
Developer encumbering the related Development.
"Developer Sale Agreement" has the meaning assigned to that term in
the definition of "Developer."
"Development Default Ratio" means at any time, for the Purchased
Receivables and Pledged Receivables related to a Development, the ratio
(expressed as a percentage) computed as of the last day of each calendar month
by dividing (a) the aggregate outstanding Balance of all such
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Purchased Receivables and Pledged Receivables that became Defaulted Receivables
at any time during the month then ending plus (without duplication) the amount
of all Receivables related to such Development which were written off the books
of the Seller during such month, by (b) the average aggregate Outstanding
Balance of all Purchased Receivables and Pledged Receivables (excluding all
Defaulted Receivables) during such month, in each case related to such
Development.
"Developments" means each resort or development listed on Schedule
IV to this Agreement, as subsequently amended from time to time with the written
consent of the Agent.
"Discount Amount" means at any time an amount equal to:
PL - PL
----
1.05
where:
PL = the Purchase Limit in effect on the date of determination.
"Eligible Assignee" means each of ING Capital, any receivables
investment vehicle sponsored by ING Capital or any of its Affiliates, any
financial institution providing credit enhancement or liquidity support to the
Purchaser in connection with the transactions contemplated by this Agreement and
any Affiliate of any of the foregoing; provided, that, no such financial
institution providing credit enhancement or liquidity support to the Purchaser
that is not an Affiliate of ING Capital shall be an Eligible Assignee without
the prior written consent of the Seller, which consent shall not be unreasonably
withheld.
"Eligible Contract" means, except as otherwise approved by the
Agent, a Contract:
(a) (i) where the related VOI or Lot is located in a Development,
(ii) where the unit for a related VOI is complete and ready for occupancy
and is not in need of maintenance or repair, except for ordinary, routine
maintenance and repairs which are not substantial in nature or cost and
where such unit contains no structural defects materially affecting its
value and is in good tenantable condition, (iii) where the related VOI
Regime is contiguous to a dedicated, physically-open, all-weather street,
and is adequately serviced by public (or private if complying with all
material and applicable local laws, regulations and ordinances) water and
sewer systems and utilities, (iv) where the related VOI Regime is not in
need of maintenance or repair, except for ordinary, routine maintenance
and repairs which are not substantial in nature or cost and where such VOI
Regime contains no structural defects materially affecting its value, and
(v) where there is no legal, judicial or administrative proceeding pending
or threatened for the total or partial condemnation of any VOI Regime
which would have a material adverse effect on the value of the related VOI
Regime or unit;
(b) where the rights-of the obligor thereunder are subject to
declarations, covenants and restrictions of record affecting the related
VOI Regime;
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(c) as to which the Seller has a valid ownership interest in the
related VOI or Lot subject only to (i) the interest therein of the
Obligor, (ii) the lien of unbilled and unpaid assessments, (iii)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record, such exceptions appearing of record being
consistent with the normal business practices of the Originator or
specifically disclosed in the applicable land sales registrations filed
with the applicable regulatory agencies, and (iv) other matters to which
properties of the same type as those underlying the Contracts are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by such Contract;
(d) where (i) if the related VOI or Lot has been deeded to the
Obligor of the related Contract, on the date on which the Receivables
arising under such Contract were Purchased hereunder, the Seller had a
valid and enforceable first lien Contract Mortgage on such VOI or Lot,
which Contract Mortgage has been assigned to the collateral Trustee for
the benefit of itself, the Agent and the Purchaser pursuant to the
Contract Conveyance Documents, (ii) if the related VOI or Lot has not been
deeded to the Obligor of the related Contracts, on the date on which the
Receivables arising under such Contract were Purchased hereunder, the
Developer had legal title to such VOI or Lot and the Seller had an
equitable interest in such VOI or Lot underlying the related Contract,
which equitable interest has been assigned to the collateral Trustee
pursuant to the Contract Conveyance Documents, and (iii) if any Contract
Mortgage is a deed of trust, a trustee, duly qualified under applicable
law to serve as such, had been properly designated in accordance with
applicable law and currently so serves;
(e) that has a Contract Rate that is equal to or greater than the
sum of (i) the thirty day commercial paper index rate set forth in the
most recent weekly statistical release designated H.15(519) published by
the Board of Governors of the Federal Reserve System (or any successor
publication) as of the applicable Cut-Off Date with respect to the
Receivables arising under such Contract plus (ii) 3.45%; (accruing on an
actuarial (pre-computed) basis);
(f) that provides for equal monthly Payments of principal or
principal and interest (except for the final monthly Payment which is no
greater than 110% of each preceding monthly Payment) which fully amortize
the related loan over its term;
(g) that requires the Obligor to pay the unpaid principal balance on
or before April 30, 2008 over an original term of not greater than 120
months and over a remaining term (at the time of sale to the Purchaser) of
not greater than 84 months;
(h) where at least two Payments with respect to such Contract have
been received by the originator;
(i) which is not a Defective Contract;
(j) as to which, if the Contract financed the purchase by the
Obligor of Credit
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Life Insurance, (i) such policy is in full force and effect and has been
validly and effectively assigned by way of security, pursuant to all
applicable laws, rules and regulations, to the Collateral Trustee, (ii)
the full premium therefor has been paid, and (iii) the insurance company
issuing such policy is rated at least "All by A.M. Best Company, Inc.;
(k) the underlying ownership interest which is the subject of such
Contract consists of (i) a fixed week, (ii) an undivided interest in fee
simple in a lodging unit or group of lodging units at a Development Agent
or (iii) such other interest or right with respect to a lodging unit or
group of lodging units at a Development that has been approved of by the
Agent in writing (including a right to use a lodging unit or group of
lodging units at a Development if approved of by the Agent in writing);
(1) which was originated and has been consistently serviced in
accordance with the Credit and Collection Policies; which has not been
reserved against by the Originator or the Seller (except for purchase
price amounts held back by the Originator pursuant to the terms of a
Developer Sale Agreement and for reserves established by the Originator
with respect to all Receivables);
(n) as to which the payment obligation of the Obligor is not subject
to any material dispute between the Obligor and any of the Developer, the
Seller, the Servicer and/or the Originator;
(o) which arises from transactions in a jurisdiction where the
Originator is duly qualified to do business in such jurisdiction, if the
Originator is required to be qualified to do business in such
jurisdiction;
(p) which have not been canceled or terminated (regardless of
whether the Obligor thereof is legally entitled to do so) or declared
ineligible by any of the Seller, the Servicer or the Originator, and
constitute legal, valid, binding and enforceable obligations of the
obligors thereof fee from any dispute, offset, counterclaim or defense
whatsoever;
(q) where such Contract had a minimum equity of 10% at origination
(calculated using the Sales Price for such Contract and including in such
total equity any cash down payments and Payments made on any other
Contract which has been "traded in" in connection with the origination of
such Contract);
(r) the performance of which has been completed by the Seller, the
related Developer and by all other parties other than the Obligor and
there are no executory obligations to be performed thereunder except by
the Obligor;
(s) as to which 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 and neither the Seller nor the
Originator has waived any such default, breach, violation or event
permitting acceleration
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without obtaining the prior written consent of the Agent;
(t) where, if such contract also financed a policy of Credit Life
Insurance: (i) the Seller is the sole assignee of the sole beneficiary of
such policy;
(ii) the Seller has the power and authority to pledge its
interest as the assignee of the beneficiary of such policy, and it has so
pledged its interest to the Collateral Trustee pursuant to an effective
assignment; (iii) the Seller has the sole power and authority to cancel
such policy in the event of nonpayment of such Contract and the sole right
to receive any unearned premium in the event of cancellation of such
policy; and (iv) the Seller has the power and authority to assign its
right to receive any unearned premium with respect to such policy, and it
has so pledged its right to the Collateral Trustee pursuant to an
effective assignment; and
(u) where no payment or any part thereof due from the related
Developer to the Seller, the Originator or any Affiliate of the Originator
(whether pursuant to the related Developer Sale Agreement or otherwise)
remains unpaid past the original due date for such payment.
"Eligible Depository Institution" means a Depository Institution,
the short term unsecured senior indebtedness of which is rated at least A-1 by
S&P and F-1 by Fitch, if rated by Fitch.
"Eligible Developer Sale Agreement" means, except as otherwise
approved by the Agent, a Developer Sale Agreement:
(a) entered into with a Developer which is a United States resident
(unless otherwise approved of by the Agent in writing and each of S&P and
Fitch is notified in writing of such approval), is not an Affiliate of any
of the parties hereto, and is not a government or a governmental
subdivision or agency; payment obligations under which are denominated and
payable only in United States dollars in the United States;
(b) payment obligations under which are denominated and payable only
in United States dollars in the United States;
(c) the assignment of which (including, without limitation, the sale
of an undivided percentage interest therein and the assignment of any
Related Security) does not contravene or conflict with any applicable
laws, rules or regulations or any contractual or other restriction,
limitation or encumbrance;
(d) which does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no party
thereto is in violation of any such law, rule or regulation in any
material respect; and
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(e) which satisfies all applicable requirements of the Credit and
Collection Policy.
"Eligible Receivable" means, at any time, a Receivable:
(a) the Obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto, and is not a government or a
governmental subdivision or agency;
(b) which is not a Defaulted Receivable or a Delinquent Receivable
and the Obligor of which is not the Obligor of any Defaulted Receivables;
(c) unless included in the initial Purchase, as to which no payment
or any part thereof has remained unpaid for more than 30 days from the
original due date for such payment on two or more separate occasions and
as to which no payment or any part thereof has remained unpaid for more
than 60 days from the original due date for such payment on one or more
occasions;
(d) which arises under an Eligible Contract and which was purchased
from a Developer under an Eligible Developer Sale Contract;
(e) (i) is denominated and payable only in United States dollars in
the United States and (ii) no portion of which is payable on account of
sales taxes;
(f) which arises in the ordinary course of the originators business;
(g) the assignment of which (including, without limitation, the sale
of an undivided percentage interest therein and the assignment of any
Related Security) does not contravene or conflict with any applicable
laws, rules or regulations or any contractual or other restriction,
limitation or encumbrance;
(h) which has not been compromised, adjusted or modified (including
by extension of time or payment or the granting of any discounts,
allowances or credits);
(i) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no party to the Contract related
thereto is in violation of any such law, rule or regulation in any
material respect;
(j) which satisfies all applicable requirements of the Credit and
Collection Policy;
(k) which, if originated prior to June 30, 1994, is insured by the
General Commercial Lines Policy dated June 13, 1993 (or a comparable
policy acceptable to the Agent) for a term not less than five years;
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(l) which has been transferred by the originator to the Seller
pursuant to the Originator Sale Agreement; and
(m) which has an Outstanding Balance which is not greater than
$30,000.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate", means (a) any corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the code) as the Seller; (b) a trade or business (whether or not
incorporated) under common control (within the meaning of section 414(c) of the
Code) with the Seller or (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as the Seller, any
corporation described in clause (a) above or any trade or business described in
clause (b) above.
"Event of Termination" has the meaning assigned to that term in
Section 7.01.
"Facility Amount" means at any time the sum of (a) the face amount
of outstanding commercial paper notes of the Purchaser issued to fund Purchases
hereunder plus (b) the amount of Capital allocated to Fixed Periods bearing
interest at the Alternative Rate plus (c) to the extent not already included in
the face amount of the outstanding commercial paper described in clause (a)
above, the accrued and unpaid Yield on the foregoing amounts described in
clauses (a) and (b) above, in each case at such time.
"Facility Fee" has the meaning assigned to that term in Section
2.09.
"Fitch" means Fitch Investors Service, L.P. (or its predecessor or
successors in interest) if and so long as it has rated and is continuing to rate
commercial paper notes of the Purchaser, and otherwise means such other
nationally recognized statistical rating organization as may be designated by
the Agent.
"Fixed Period" for any outstanding Capital means (a) if Yield in
respect of all or any part thereof is computed by reference to the CP Rate, a
period of 1 to and including 90 days and (b) if Yield in respect thereof is
computed at the Alternative Rate, a period of 1 to and including 30 days, in
each case, as determined pursuant to Section 2.04.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"Gross Eligible Receivables Balance" means, at any time, the
aggregate Outstanding Balance of Eligible Receivables which constitute Purchased
Receivables or that constitute Pledged Receivables under the Receivables Loan
Agreement.
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"Indemnified Amounts" has the meaning assigned to that term in
Section 9.01.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Purchased Assets pursuant to the
Originator Sale Agreement and excluding commission, travel and similar advances
to officers, employees and directors made in the ordinary course of business.
"Issuer" means HLS and any other Purchaser whose principal business
consists of issuing commercial paper or other securities to fund its acquisition
and maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
"Large Receivable" means a Receivable that has an Outstanding
Balance greater than $20,000.
"Large Receivables Limit" means at any time, the portion of the
Aggregate Large Receivables Limit that is specified by the Seller on the latest
monthly Settlement Report as being allocated to this Agreement (as opposed to
the Receivables Loan Agreement); the sum of the Large Receivables Limit under
this Agreement and the "Large Receivables Limit" under the Receivables Loan
Agreement shall equal the Aggregate Large Receivables Limit. If the Seller fails
to provide the Servicer with an allocation of the Aggregate Large Receivables
Limit, the Large Receivables Limit under this Agreement will equal the Aggregate
Large Receivables Limit for such Obligors and the "Large Receivables Limit"
under the Receivables Loan Agreement shall equal zero.
"Liquidation Fee" means, for the Capital allocated to each Fixed
Period (computed without regard to any shortened duration of such Fixed Period
as a result of the occurrence of the Termination Date) during which such Capital
is reduced or the applicable Yield Rate for such Capital is for any reason
changed, the amount, if any, by which (a) the Yield (calculated without taking
into account any Liquidation Fee) which would have accrued on the amount of the
reduction of Capital during such Fixed Period (as so computed) if such reduction
had not been made or if the applicable Yield Rate had remained unchanged, as the
case may be, exceeds (b) the sum of (i) Yield actually received by the Purchaser
in respect of such Capital for such Fixed Period and (ii) if applicable, the
income, if any, received by the Purchaser from the Purchaser's investing the
proceeds of reductions of Capital.
"Lock Box" means a post office box to which Collections are remitted
for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a
Lock-Box Account.
"Lock-Box Account" means an account maintained by the Agent at a
bank or other financial institution for the purpose of receiving Collections
from the related Lock Box.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Lot" means any Development lot related to a Purchased Contract.
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"Minimum Overcollateralization Percentage" means thirty percent
(30%).
"Monthly Settlement Report" means a report, in substantially the
form of Exhibit E, furnished by the Servicer to the Agent for the Purchaser
pursuant to Section 6.07(b).
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Seller or any
ERISA Affiliate on behalf of its employees.
"Obligations" has the meaning assigned to such term in the
Receivables Loan Agreement.
"Obligor" means a Person obligated to make payments pursuant to a
Contract.
"Originator" means Bennett Funding International, Ltd. a Delaware
corporation, formerly known as The Processing Center, Inc.
"Originator Sale Agreement" means the Receivables Purchase and Sale
Agreement of even date herewith among the Originator, the Seller and the
Servicer, together with all instruments, documents and agreements executed by
the originator in connection therewith, in each case as the same may from time
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Overcollateralization Percentage" means at any time the remainder
of (a) a fraction, expressed as a percentage, the numerator of which is (i) the
sum of (A) the Purchased Receivables Balance plus (B) amounts on deposit in the
Spread Account plus (C) the amount of Collections on deposit in the Agent's
Account to be applied in accordance with Section 2.05 on the next Settlement
Date and the denominator of which is (ii) the Facility Amount minus (b) 100%.
"Payment" means the scheduled monthly payment of principal and
interest on a Contract.
"Permitted Investments" means (a) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of no more than 90 days from the date
of acquisition; (b) time deposits and certificates of deposit having maturities
of no more than 90 days from the date of acquisition, maintained with or issued
by any commercial bank having capital and surplus in excess of $500,000,000 and
having a short-term rating not less than A-1 or the equivalent thereof from S&P
and, if rated by Fitch, not less than F-1 or the equivalent thereof from Fitch;
(c) repurchase obligations for underlying securities of the types described in
clauses (a) or (b) above with a term of not more than ten days and maturing no
later than 90 days after the date of acquisition; and (d) commercial paper
maturing
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within 90 days after the date of acquisition and having a rating of not less
than A-1 or the equivalent thereof from S&P and if rated by Fitch, not less than
F-1 or the equivalent thereof from Fitch.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government (or any agency or political subdivision thereof) or other
entity.
"Pledged Assets" has the meaning assigned to such term in the
Receivables Loan Agreement.
"Pledged Receivables" has the meaning assigned to such term in the
Receivables Loan Agreement.
"Purchase" means a purchase by the Purchaser of Purchased Assets
from the Seller pursuant to Article II.
"Purchase Date" means, with respect to any Purchase, the date on
which such Purchase is funded, which date, other than in the case of the initial
Purchase, shall be a Subsequent Purchase Date.
"Purchase Date/Spread Account Surplus Settlement Report" means a
report, in substantially the form of Exhibit F, furnished by the Servicer to the
Agent for the Purchaser pursuant to Section 6.07(c).
"Purchase Limit" means, at any time, $50,000,000 as such amount may
be adjusted from time to time pursuant to Section 2.03 (the "Maximum Purchase
Limit"), less the aggregate principal amount of the "Loans" outstanding under
the Receivables Loan Agreement; provided, however, that at all times, on or
after the Termination Date, the "Purchase Limit" shall mean the aggregate
outstanding Capital and provided, further, that the Maximum Purchase Limit shall
in no event exceed the aggregate commitments of the lenders providing credit
enhancement and liquidity support to the Purchaser in connection with the
transactions contemplated by this Agreement.
"Purchased Assets" means (i) all then outstanding Purchased
Receivables, (ii) all Related Security relating to such Purchased Receivables
and (iii) all Collections with respect to, and other proceeds of, such Purchased
Receivables received on or after the applicable Cut-Off Date.
"Purchased Contract" means a Contract under which a Purchased
Receivable arises.
"Purchased Rate Cap" has the meaning assigned to such term in
certain Sinking Fund Account Agreement dated as of the date hereof among the
Originator, the Purchaser, the Agent, the Collateral Trustee and ING Capital, as
calculation agent.
"Purchased Receivable" means any Receivable purchased from the
Seller pursuant to Article II and any Receivable substituted pursuant to Section
6.18 for any existing Purchased Receivable.
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"Purchased Receivables Balance" means, at any time, the remainder of
(a) aggregate Outstanding Balance of Eligible Receivables which constitute
Purchased Receivables minus (b) the aggregate amounts by which the aggregate
Outstanding Balance of any such Eligible Receivables related to each Development
exceeds the Concentration Limit with respect to such Development minus (c) the
aggregate amounts by which the aggregate Outstanding Balance of any such
Eligible Receivables that are Large Receivables exceeds the Large Receivables
Limit minus (d), if positive, the product of RB x (1 - APP/OBPR), where RB = the
aggregate Outstanding Balance of Eligible Receivables which constitute Purchased
Receivables at the time, APP = the aggregate purchase price paid or to be paid
by the originator pursuant to the Developer Sale Agreements for the Eligible
Receivables which constitute Purchased Receivables at such time and OBPR = the
aggregate Outstanding Balance of such Purchased Receivables at the time the
Originator purchased such Purchased Receivables pursuant to the Developer Sale
Agreements.
"Purchaser" means HLS or any other Person that agrees, pursuant to
the pertinent Assignment and Acceptance, to purchase Purchased Assets pursuant
to Article II of this Agreement.
"Receivable" means the indebtedness of any Obligor under a Contract
whether constituting an account, chattel paper, instrument or general
intangible, (a) which arises from a sale of a VOI or Lot by a Developer and (b)
in which the Seller has acquired an interest pursuant to the Originator Sale
Agreement. Each Receivable shall include each Payment and every right to payment
of any interest or finance charges and other obligations of such Obligor with
respect thereto.
"Receivables Loan Agreement" means the Receivables Loan and Security
Agreement of even date herewith among the Purchaser, the Agent, the Seller and
the Servicer, as the same may from time to time be amended, supplemented or
otherwise modified in accordance with the terms hereof.
"Records" means all Contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to Receivables and the related obligors which the Seller
has itself generated, in which the Seller has acquired an interest pursuant to
the Originator Sale Agreement or in which the Seller has otherwise obtained an
interest.
"Related Security" means with respect to any Receivable:
(a) the Contract under which such Receivable arose;
(b) the VOIs and Lots relating to such Receivable;
(c) any Contract Mortgages relating to the Purchased Contracts and
all other security interests or liens and property subject thereto from
time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
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(d) all guarantees, indemnities, warranties, letters of credit,
insurance policies (including Credit Life Insurance and credit default
insurance) and proceeds and premium refunds thereof and other agreements
or arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise; provided, however, if any such
guarantee, indemnity, warranty, letter of credit, insurance policy,
agreement, or arrangement supporting or securing payment of such
Receivables support or secure payment of any Receivable which is not a
Purchased Receivable, only the portion supporting or securing the
Purchased Receivables shall be Related Security;
(e) the Contract Files and other Records relating to such
Receivables;
(f) the Contract Conveyance Documents and any Developer Mortgages
relating to such Receivable;
(g) all of the Seller's right and title to, and interest in, the
originator Sale Agreement, the Developer Sale Agreements and the
assignment to the Agent of all UCC financing statements filed by the
Seller against the Originator under or in connection with the originator
Sale Agreement; and
(h) all proceeds of the foregoing.
"Repurchase Price" means, with respect to a Purchased Contract to be
repurchased hereunder, an amount equal to the remaining Outstanding Balance on
such Purchased Contract as of the opening of business on the Settlement Date on
which the repurchase is to be effected hereunder, together with accrued and
unpaid interest thereon at the Contract Rate from the last due date as to which
the Obligor paid interest under such Contract.
"Required Overcollateralization Percentage" means thirty-three
percent (33%).
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill (or its predecessor or successors in interest) if and so long as it has
rated and is continuing to rate commercial paper notes of the Purchaser, and
otherwise means such other nationally recognized statistical rating organization
as may be designated by the Agent.
"Sales Price" means, with respect to any Purchased Receivable, the
total purchase price of the related VOI or Lot, including any premium paid in
respect of a policy of Credit Life Insurance.
"Servicer" means at any time the Person then authorized pursuant to
Section 6.01 to service, administer and collect Receivables.
"Servicer Default" means the defaults specified in Section 8.01 of
this Agreement.
"Servicer Fee" has the meaning assigned to that term in Section
2.09.
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"Servicing Fee Rate" means 1.00% per annum, so long as the
originator or any of its Affiliates is Servicer, and otherwise means the
percentage set forth in the Standby Servicer Fee Letter or such other percentage
per annum which the Servicer and the Agent may agree upon in writing from time
to time.
"Settlement Date" means July 15, 1995 and thereafter the 15th day of
each month; provided that if such day is not a Business Day, the "Settlement
Date" for such month shall be the first Business Day to occur after such 15th
day.
"Spread Account" has the meaning assigned thereto in Section 2.06 of
this Agreement.
"Spread Account Bank" means the bank maintaining the Spread Account.
"Spread Account Surplus Date" has the meaning assigned to that term
in Section 2.06(b).
"Standby Servicer" means The Chase Manhattan Bank N.A. and any
substitute Standby Servicer appointed by the Agent pursuant to Section 6.17.
"Standby Servicer Fee" has the meaning assigned to that term in
Section 2.09(a).
"Standby Servicer Fee Letter" means the letter agreement dated as of
May 25, 1995, between the Standby Servicer and the Agent, as amended or
otherwise modified from time to time.
"Subsequent Purchase Date" means each Business Day occurring after
initial Purchase Date on which the Seller determines, in the exercise of its
sole discretion, to sell additional Eligible Receivables to the Purchaser and to
request an additional Purchase from the Purchaser in respect thereof.
"Successor Servicer" has the meaning assigned to that term in
Section 8.02(a).
"Termination Date" means the earliest of (a) May 24, 2000, (b) the
date of termination of the Purchase Limit pursuant to Section 2.03, (c) the date
of the declaration or automatic occurrence of the Termination Date pursuant to
Section 7.01 and (d) the date on which (i) all of the lenders providing
liquidity to the Purchaser with respect to this Agreement, (ii) all of the
commitments of all of the lenders under any agreement evidencing any such
liquidity support facility, (iii) any lender providing enhancement to the
Purchaser with respect to this Agreement or (iv) any commitment of a lender
under any agreement evidencing any such enhancement support facility, is/are
terminated for any reason and replacement lenders and/or commitments, as the
case may be, are not obtained by the Purchaser prior to such termination.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
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"United States" means the United States of America.
"VOI" means the underlying ownership interest which is the subject
of a Purchased Contract, which ownership interest shall consist of either a
fixed week or undivided interest in fee simple in a lodging unit or group of
lodging units at a Development or such other interest or right with respect to a
lodging unit or group of lodging units at a Development that has been approved
of by the Agent in writing.
"VOI Regime" means any of the various interval ownership regimes
listed on Schedule V hereto, each of which is an arrangement, established under
applicable state law, whereby a designated portion of a Development is made
subject to a declaration permitting the transfer of VOIs therein.
"Yield" means, for all Capital allocated to any Fixed Period during
any such Fixed Period, the product of
YRT x C x ED
--
360
where:
C = the Capital allocated to such Fixed Period,
ED = the actual number of days elapsed during such Fixed Period, and
YRT = the Yield Rate for such Fixed Period;
provided, however that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or otherwise returned by the
Purchaser to the Seller or any other Person for any reason.
"Yield Rate" means, for any Fixed Period for all Capital allocated
to such Fixed Period:
(i) to the extent the Purchaser will be funding the applicable
Purchase on the first day of such Fixed Period through the issuance of
commercial paper, a rate equal to the CP Rate for such Fixed Period, and
(ii) to the extent the Purchaser will not be funding the applicable
Purchase on the first day of such Fixed period through the issuance of
commercial paper, a rate equal to the Alternative Rate for such Fixed
Period or such other rate as the Agent and the Seller shall agree to in
writing.
SECTION 1.02. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
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SECTION 1.03. Computation of Time Periods. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
ARTICLE II.
THE RECEIVABLES FACILITY
SECTION 2.01. Purchases of Purchased Assets. On the terms and
conditions hereinafter set forth, the Purchaser shall purchase Purchased Assets
from the seller from time to time during the period from the date hereof until
the Termination Date. Under no circumstances shall the Purchaser make the
initial Purchase or any Subsequent Purchase if, after giving effect to such
Purchase, either (a) the Overcollateralization Percentage would be less than
Required Overcollateralization Percentage or (b) the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit minus
the Discount Amount or (ii) the Capital Limit as determined by reference to the
most recent Monthly Settlement Report or Purchase Date/Spread Account Surplus
Settlement Report delivered by the Servicer to the Purchaser in accordance with
Section 6.07 hereof.
SECTION 2.02. The Initial Purchase and Subsequent Purchases. (a)
Until the occurrence of the Termination Date, the Purchaser will make Purchases
on any Business Day at the request of the Seller, subject to and in accordance
with the terms and conditions of Section 2.01 and 2.02. After the Collection
Date has occurred, the Purchaser and the Agent, in accordance with their
respective interests, shall assign and transfer to the Seller their respective
remaining interest in the Purchased Assets to the Seller free and clear of any
Adverse Claim resulting solely from an act or omission by the Purchaser or the
Agent, but without any other representation or warranty, express or implied.
(b) The initial Purchase and each Subsequent Purchase shall be made
on at least three Business Days' notice from the Seller to the Agent. Each
such notice shall specify (i) the aggregate amount of such Purchase, which
shall be in an amount equal to or greater than $500,000, (ii) the date of
such Purchase or Subsequent Purchase, (iii) the requested Fixed Period(s)
and requested applicable Yield Rate (i.e. CP Rate or Alternative Rate) for
the Capital arising as a result of such Purchase, and the allocations of
Capital to each such requested Fixed Period and (iv) the Contracts under
which the Receivables to be included in such Purchase arose together with
an amendment to the Contract Schedule with respect to such Contracts. The
Agent shall notify the Seller whether the duration of the initial Fixed
Periods and the applicable Yield Rate described in such notice is
acceptable or, if not applicable, the Agent shall advise the Seller of
such Fixed Periods and applicable Yield Rate as may be acceptable. On the
date of such Purchase, the Purchaser shall, upon satisfaction of the
applicable conditions set forth in Article III, make available to the
Seller in same day funds, the amount of such Purchase (net of amounts
payable to or for the benefit of the Purchaser to reduce Capital on such
Purchase Date pursuant to Section 2.05), as the case
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may be, by payment to the account which the Seller has designated in
writing with the consent of the Agent.
(c) It is expressly acknowledged that each Purchase hereunder shall
be made without recourse to the Seller; provided, however, that the Seller
shall be liable to the Agent and the Purchaser (i) for all
representations, warranties, covenants and indemnifications made by such
Seller pursuant to the terms of this Agreement to the extent described in
Section 9.01, (ii) for all obligations to remit any deemed Collections of
Purchased Receivables pursuant to Section 2.07, and (iii) for all fees,
costs, expenses, taxes and other indemnifications owed under this
Agreement.
SECTION 2.03. Termination or Reduction of the Purchase Limit. The
Seller may, upon at least five Business Days, notice to the Agent, terminate in
whole or reduce in part the portion of the Purchase Limit that exceeds the
greater of the outstanding capital and the sum of the aggregate Capital plus the
Discount Amount; provided, however, that each partial reduction of the Purchase
Limit shall be in an aggregate amount equal to $5,000,000 or an integral
multiple thereof.
SECTION 2.04. Selection of Fixed Periods. At all times hereafter
until the Termination Date, the Seller shall, subject to the Agent's and the
Purchaser's approval and the limitations described below, select (a) Fixed
Periods and allocate a portion of the outstanding Capital to each selected Fixed
Period, so that the outstanding Capital is at all times allocated to one or more
Fixed Periods and (b) Yield Rates to apply to such Capital for such Fixed
Periods. The initial Fixed Period(s) and Yield Rate(s) applicable to the Capital
arising as a result of the initial Purchase shall be specified in the notice
relating to the Purchase described in Section 2.02(b). Each subsequent Fixed
Period shall commence on the last day of the immediately preceding Fixed Period,
and the duration of and Yield Rate applicable to such subsequent Fixed Period
shall be such as the Seller shall select and the Agent shall approve on notice
from the Seller received by the Agent (including notice by telephone, confirmed
in writing) not later than 12:30 P.M. (New York City time) on such last day,
except that if the Agent shall not have received such notice before 12:30 P.M.
or the Agent and the Seller shall not have so mutually agreed before 2:00 P.M.
(New York City time) on such last day, such Fixed Period shall be one day and
the applicable Yield Rate shall be the Alternative Rate, until the Agent
receives notice from the Seller requesting a Fixed Period and applicable Yield
Rate, which, if accepted by the Agent, shall be the Fixed Period and the
applicable Yield Rate; provided, that, notwithstanding the foregoing, on and
after the occurrence of any Event of Termination (unless waived in accordance
with the terms and conditions hereof), the Purchaser shall cease to issue
commercial paper notes to fund and maintain Purchases hereunder and the
applicable Yield Rate shall be the Alternative Rate. Any Fixed Period which
would otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day. Any Fixed Period which commences before the
Termination Date and would otherwise end on a date occurring after the
Termination Date shall end on the Termination Date. On or after the Termination
Date, the Agent shall have the right to allocate outstanding Capital to Fixed
Periods of such duration as shall be selected by the Agent. The Purchaser shall,
on the first day of each Fixed Period, notify the Agent of the Yield Rate for
the Capital allocated to such Fixed Period.
SECTION 2.05. Settlement Procedures. The Servicer, as agent for the
Agent and
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the Purchaser, will instruct the Agent's Bank, and the Agent may instruct the
Agent's Bank, to apply funds on deposit in the Agent's Account and the Spread
Account as described in this Section 2.05, subject to the provisions of Section
2.13(b) of the Receivables Loan Agreement.
(a) Yield and Liquidation Fees. The Servicer shall, and the Agent
may, on each Business Day (including any Settlement Date), direct the
Agent's Bank to set aside in the Agent's Account for transfer at the
further direction of the Purchaser or the Agent or any other duly
authorized agent of the Purchaser (whether on such day or on a subsequent
day) an amount equal to the Yield through such day on the Capital
allocable to the Purchaser and not so previously set aside and the amount
of any unpaid Liquidation Fees owed to the Purchaser on such day. On the
last day of each Fixed Period, the Agent shall notify the Servicer of, and
direct the Agent's Bank to pay, such funds to be paid to the Purchaser in
respect of full payment of accrued Yield for such Fixed Period. on any
Business Day on which an amount is set aside in respect of Liquidation
Fees pursuant to this Section 2.05(a), the Agent shall direct the Agent's
Bank to pay such funds to the Purchaser in payment of such Liquidation
Fees.
(b) Fixed Period Capital Reductions. The Servicer shall, and the
Agent may, on the last day of each Fixed Period that is not a Settlement
Date, direct the Agent's Bank to transfer monies held by the Agent's Bank
in the Agent's Account in excess of the aggregate amounts that would, if
such last day was a Settlement Date, be set aside on such Settlement Date
to pay amounts pursuant to Section 2.05(a) and 2.O5(c)(i)-(vii), to pay
the Agent for the account of the Purchaser in reduction of Capital in an
amount equal to the aggregate Capital allocated to such Fixed Period or,
prior to the Termination Date, if lower, an amount equal to the excess, if
any, of Capital immediately prior to such distribution over the Capital
Limit on such date (without giving effect to amounts on deposit in the
Agent's Account on such date that would otherwise be included in the
calculation of the Capital Limit but after giving effect to any Purchase
of Receivables made on such date and any other distributions of amounts on
deposit in the Agent's Account or the Spread Account made on such date).
(c) Settlement Date Transfers from Agent's Account. The Servicer
shall, and the Agent may, on each Settlement Date direct the Agent's Bank
to transfer monies held by the Agent's Bank in the Agent's Account in
excess of the aggregate amounts set aside on such Settlement Date pursuant
to Section 2.05(a), in the following amounts and priority:
(i) to the Seller, any monies held in the Agent's Account that
are not Collections and that are to be remitted to the Seller pursuant to
Section 6.03;
(ii) to the Agent for the account of the Purchaser in an
amount equal to (and for payment of) the Facility Fee which has accrued
and is unpaid as of the last day of the preceding month;
(iii) if neither the Seller nor the originator, nor any
Affiliate of either of them, is the Servicer, to the Agent for the account
of the Servicer in an amount equal to the Servicer Fee which is accrued
and unpaid as of the last day of the preceding month;
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(iv) to the Spread Account in an amount equal to the Capital
Base Deficiency (if any) as of such Settlement Date;
(v) so long as no Capital Base Deficiency shall exist or would
be created by such transfer, to the Agent for the account of the Servicer
(if the Servicer is the Seller, the Originator or any Affiliate of either
of them) in an amount equal to the Servicer Fee which is accrued and
unpaid as the last day of the preceding month;
(vi) So long as no Capital Base Deficiency shall exist or
would be created by such transfer, to the Agent for the account of the
Purchaser in an amount equal to the aggregate amount of all other
obligations of the Seller to the Purchaser hereunder other than Yield,
Liquidation Fees and the amounts described in clauses (i) through (iv)
above;
(vii) prior to the Termination Date, to the Seller to pay the
amount equal to the purchase price of any Receivables being Purchased
hereunder on such date;
(viii) to the Agent for the account of the Purchaser in
reduction of Capital (A) prior to the Termination Date, in an amount equal
to the Capital Base Surplus on such date, if any, immediately prior to
such distribution (without giving effect to amounts on deposit in the
Agent's Account on such date that would otherwise he included in the
calculation of the Capital Base Surplus but after giving effect to any
Purchase of Receivables made on such date and any other distributions of
amounts on deposit in the Agent's Account or the Spread Account made on
such date) and (B) on and after the Termination Date, in an amount
necessary to reduce Capital to zero; and
(ix) on and after the Termination Date, to the Agent for the
account of the Purchaser in an amount necessary to reduce outstanding
obligations under the Receivables Loan Agreement to zero;
(x) to the Seller, any remaining amounts.
Upon its receipt of funds pursuant to clause (ii) above in respect of the
Facility Fee, the Agent shall retain a portion thereof in the amount of the
accrued and unpaid Agent's Fee, and a portion thereof in the amount of the
accrued and unpaid standby Servicer Fee (each as of the last day of the
preceding month) and shall apply the balance of funds as directed by the
Purchaser. Upon its receipt of funds pursuant to clause (iii) or (v) above, the
Agent shall distribute such funds to the Servicer in payment of any accrued and
unpaid Servicer Fee. Upon its receipt of funds pursuant to clause (vi) above,
the Agent shall apply such funds as directed by the Purchaser or as otherwise
provided in this Agreement.
(d) Purchase Date Transfers. The Servicer shall, and the Agent may,
on each Purchase Date that is not a Settlement Date direct the Agent's Bank to
transfer monies held by the Agent's Bank in the Agent's Account in excess of the
Carrying Cost Reserve Amount as of such Purchase Date, to the Seller to pay the
purchase price of any Receivables being Purchased
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hereunder-on such date.
(e) Application of Spread Account Monies. To the extent that there
are insufficient available funds on deposit in the Agent's Account for the
payment of the amounts payable pursuant to Section 2.05(a), 2.05(c)(ii)-(iii)
and 2.05(c)(vi), funds shall be withdrawn by the Collateral Trustee from the
Spread Account to the extent of such insufficiency, solely upon the direction of
the Agent, to be used solely for the purposes and in the order of priority set
forth at Section 2.05(a) and 2.05(c)(ii)-(iii) and 2.05(c)(vi) hereof, giving
effect to the terms thereof as if each reference therein to the "Agent's
Account" was, instead, a reference to the Spread Account and on and after the
Termination Date, funds may be withdrawn from the Spread Account by the
Collateral Trustee and deposited into the Agent's Account to be applied in
accordance with Section 2.05(a)-(c).
(f) Seller Deficiency Payments. Notwithstanding anything to the
contrary contained in this Section 2.05 or in any other provision in this
Agreement, if, on any Business Day the outstanding amount of Capital shall
exceed the lesser of (i) the Purchase Limit minus the Discount Amount or (ii)
the Capital Limit, then, the Seller shall remit to the Agent, prior to any
Purchase and in any event no later than the close of business of the Agent on
the next succeeding Business Day, a payment (to be applied by the Agent in its
sole discretion either to fund the Spread Account or to reduce outstanding
Capital allocated to Fixed Periods selected by the Agent, in its sole
discretion) in such amount as may be necessary to reduce outstanding Capital to
an amount less than or equal to the lesser of (i) the Purchase Limit minus the
Discount Amount and (ii) the Capital Limit.
SECTION 2.06. Spread Account. (a) On or prior to the initial
Purchase Date, the Agent shall establish and maintain, or cause to be
established and maintained, for the sole and exclusive benefit of the Collateral
Trustee for the benefit of the Agent and the Purchaser and their respective
assigns, a cash collateral account (the "Spread Account"). The Spread Account
shall be a subaccount within a special account maintained with a Depository
Institution which is an Eligible Depository Institution (provided, however, that
the Depository Institution at which such Spread Account is established and
maintained need not be an Eligible Depository Institution in the event that the
Spread Account is maintained as a fully segregated trust account with the trust
department of such Depository Institution) but shall be under the sole dominion
and control of, and in the name of, the Collateral Trustee.
(b) Prior to the occurrence of the Termination Date, on at least
three Business Days, notice from the Seller to the Agent, the Seller may,
on any Business Day that is not a Settlement Date (each such day a "Spread
Account Surplus Date") (provided that a Spread Account Surplus Date shall
occur no more frequently than once a week), instruct the Servicer to
instruct the Spread Account Bank to transfer from the Spread Account to
the Seller, an amount of funds held in the Spread Account which shall in
no event be greater than (i) the Capital Base Surplus (if any) on such
Spread Account Surplus Date, if such Spread Account Surplus Date is the
Business Day next succeeding a Settlement Date or (ii) the excess Capital
Base Surplus (if any) over the Carrying Cost Reserve Amount on such Spread
Account Surplus Date, if such Spread Account Surplus Date is not on such a
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Business Day (any such amount of funds, the "Spread Account Excess"). The
Seller, in making any such instructions for the transfer of funds from the
Spread Account, shall simultaneously provide each of the Agent and the
Spread Account Bank with a copy of a Purchase Date/Spread Account Surplus
Settlement Report together with a certificate of an officer of the Seller
as to the existence and size of any Spread Account Excess.
(c) Any funds remaining in the Spread Account after the Collection
Date has occurred shall be remitted to the Seller or as otherwise required
by law.
SECTION 2.07 Special Settlement Procedures. If on any day the
Outstanding Balance of any Purchased Receivable is reduced or canceled as a
result of a setoff in respect of any claim by the Obligor thereof against the
Originator, the Seller, the related Developer or any other Person (whether such
claim arises out of the same or a related transaction or an unrelated
transaction), the Seller shall be deemed to have received on such day a
Collection of such Purchased Receivable in the amount of such reduction,
cancellation or adjustment. If on any day any of the representations or
warranties in Section 4.01(h) is no longer true with respect to a Purchased
Receivable, the Seller shall be deemed to have received on such day a Collection
of such Purchased Receivable in full.
SECTION 2.08. Payments and Computations, Etc. (a) All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 A.M. (New York
City time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Agent interest on all amounts not paid or
deposited within one Business Day after the date such amounts are due hereunder
(whether owing by the Seller individually or as Servicer) at 2% per annum above
the Alternative Rate, payable on demand; provided, however, that such interest
rate shall not at any time exceed the maximum rate permitted by applicable law.
Such interest shall be retained by the Agent except to the extent that such
failure to make a timely payment or deposit has continued beyond the date for
distribution by the Agent of such overdue amount to the Purchaser, in which case
such interest accruing after such date shall be for the account of, and
distributed by the Agent to the Purchaser. All computations of interest and all
computations of Yield, Liquidation Yield, Liquidation Fee and other fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Yield, interest or any fee
payable hereunder, as the case may be.
(c) If any Purchase requested by the Seller and approved by the
Purchaser and the Agent pursuant to Section 2.02 or any selection of a
subsequent Fixed Period and applicable Yield Rate for any Capital
allocated to such Fixed Period requested by the Seller and approved by the
Agent pursuant to Section 2.04 is not for any reason whatsoever made or
effectuated (other than through the sole fault of the Purchaser and/or
Agent), as the case
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may be, on the date specified therefor, the Seller shall indemnify the
Purchaser against any loss, cost or expense incurred by the Purchaser,
including, without limitation, any loss (including loss of anticipated
profits, net of anticipated profits in the reemployment of such funds in
the manner determined by the Purchaser), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by the Purchaser to fund or maintain such Purchase during such
Fixed Period.
SECTION 2.09. Fees. (a) The Seller shall pay the Purchaser (either
directly or through the Agent) certain fees (the "Facility Fee") in the amounts
and on the dates set forth in a fee letter executed between the Seller and the
Purchaser. The Purchaser shall pay to the Agent, for its own account, certain
fees (the "Agent's Feel') in the amounts and on the dates set forth in a fee
letter executed between the Purchaser and the Agent. The Purchaser shall pay to
the Standby Servicer out of the Facility Fee, a collection fee (the "Standby
Servicer Fee") in the amounts and on the dates set forth in the Standby Servicer
Fee Letter.
(b) The Purchaser shall pay to the Servicer a collection fee (the
"Servicer Fee") equal to the Servicing Fee Rate on the daily average aggregate
Outstanding Balance of Purchased Receivables other than Defaulted Receivables,
from the date hereof until the later of the Termination Date or the Collection
Date, payable on each Settlement Date.
(c) All of the fees payable pursuant to this Section 2.09 shall be
payable only from Collections pursuant to, and subject to the priority of
payment set forth in, Section 2.05.
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality. (a) If
either (i) the introduction of or any change (including, without limitation, any
change by way of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation or (ii) the compliance by the Purchaser
or any affiliate thereof (each of which, an "Affected Party") with any guideline
or request from any central bank or other governmental agency or authority
(whether or not having the force of law), (A) shall subject an Affected Party to
any tax (except for taxes on the overall net income of such Affected Party),
duty or other charge with respect to the Purchased Assets, or any right to make
Purchases hereunder, or on any payment made hereunder or (B) shall impose,
modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve requirement, if any, included
in the determination of Yield), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Affected Party or (C) shall impose any other condition affecting the Purchased
Assets or the Purchaser's rights hereunder, the result of which is to increase
the cost to any Affected Party or to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, then within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis for such demand), the seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such additional or increased cost incurred or such reduction
suffered to the extent such additional or increased costs or reduction are
incurred or suffered in connection with the Purchased Assets, any right to make
Purchases hereunder, any of the Purchaser's rights hereunder, or any payment
made hereunder. The Purchaser agrees that it will use its best efforts to reduce
or eliminate any claim for compensation
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pursuant to this Section 2.10(a), provided that nothing contained herein shall
obligate the Purchaser to take any action which, in the opinion of the
Purchaser, is unlawful or otherwise disadvantageous to the Purchaser.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or
request or (ii) compliance by any Affected Party with any law, guideline,
rule, regulation, directive or request from any central bank or other
governmental authority or agency (whether or not having the force of law),
including, without limitation, compliance by an Affected Party with any
request or directive regarding capital adequacy, has or would have the
effect of reducing the rate of return on the capital of any Affected Party
as a consequence of its obligations hereunder or arising in connection
herewith to a level below that which any such Affected Party could have
achieved but for such introduction, change or compliance (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material, then
from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis
for such demand), the Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party
for such reduction.
(c) If as a result of any event or circumstance similar to those
described in Section 2.10(a) or 2.10(b), any Affected Party is required to
compensate a bank or other financial institution providing liquidity
support, credit enhancement or other similar support to such Affected
Party in connection with this Agreement or the funding or maintenance of
Purchases hereunder, then within ten days after demand by such Affected
Party, the Seller shall pay to such Affected Party such additional amount
or amounts as may be necessary to reimburse such Affected Party for any
amounts paid by it.
(d) In determining any amount provided for in this Section 2.10, the
Affected Party may use any reasonable averaging and attribution methods.
Any Affected Party making a claim under this Section 2.10 shall submit to
the Seller a certificate as to such additional or increased cost or
reduction, which certificate shall be conclusive absent demonstrable
error. As of the date hereof, the Purchaser certifies that to the best of
its knowledge, there is no event or circumstance that would lead the
Purchaser to make a claim under this Section 2.10.
SECTION 2.11. Taxes. (a) Any and all payments by the Seller or the
Servicer hereunder shall be made, in accordance with Section 2.08, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of the Purchaser and the Agent, net income taxes
that are imposed by the United States and franchise taxes and net income taxes
that are imposed on the Purchaser or the Agent by the state or foreign
jurisdiction under the laws of which the Purchaser or the Agent (as the case may
be) is organized or conducts business or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Seller or the
Servicer shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to the Purchaser or the
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Agent, (i) the Seller shall make an additional payment to the Purchaser or the
Agent, as the case may be, in an amount sufficient so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.11), the Purchaser or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Seller or the Servicer, as the case may be, shall
make such deductions and (iii) the Seller or the Servicer, 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) The Seller will indemnify the Purchaser and the Agent for the
full amount of Taxes (including, without limitation, any Taxes imposed by
any jurisdiction on amounts payable under this Section 2.11) paid by the
Purchaser or the Agent (as the case may be) in connection with the
Purchased Assets, any right to make Purchases hereunder, or any other
payment made to the Purchaser and/or the Agent hereunder and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto; provided that the Purchaser or the Agent, as appropriate,
making a demand for indemnity payment shall provide the Seller, at its
address referred to in Section 10.02, with a certificate from the relevant
taxing authority or from a responsible officer of the Purchaser or the
Agent stating or otherwise evidencing that the Purchaser or the Agent has
made payment of such Taxes and will provide a copy of or extract from
documentation, if available, furnished by such taxing authority evidencing
assertion or payment of such Taxes. This indemnification shall be made
within ten days from the date the Purchaser or the Agent (as the case may
be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of
any Taxes, the Seller will furnish to the Agent, at its address referred
to in Section 10.02, appropriate evidence of payment thereof.
(d) If the Purchaser is not created or organized under the laws of
the United States or a political subdivision thereof, the Purchaser shall,
to the extent that it may then do so under applicable laws and
regulations, deliver to the Seller (with, in the case of the Purchaser, a
copy to the Agent) (i) within 15 days after the date hereof, or, if later,
the date on which the Purchaser becomes a Purchaser pursuant to Section
10.04 hereof, two (or such other number as may from time to time be
prescribed by applicable laws or regulations) duly completed copies of IRS
Form 4224 or Form 1001 (or any successor forms or other certificates or
statements which may be required from time to time by the relevant United
States taxing authorities or applicable laws or regulations), as
appropriate, to permit the Seller to make payments hereunder for the
account of the Agent or the Purchaser, as the case may be, without
deduction or withholding of United States federal income or similar taxes
and (ii) upon the obsolescence of or after the occurrence of any event
requiring a change in, any form or certificate previously delivered
pursuant to this Section 2.11(d), copies (in such numbers as may from time
to time be prescribed by applicable laws or regulations) of such
additional, amended or successor forms, certificates or statements as may
be required under applicable laws or regulations to permit the Seller to
make payments hereunder for the account of the Agent or the Purchaser, as
the case may be, without deduction or withholding of United States federal
income or similar taxes.
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(e) For any period with respect to which the Purchaser or the Agent
has failed to provide the Seller with the appropriate form, certificate or
statement described in Section 2.11(d) (other than if such failure is due
to a change in law occurring after the date of this Agreement), the Agent
or the Purchaser, as the case may be, shall not be entitled to
indemnification under Section 2.11(a) or 2.11(b) with respect to any
Taxes.
(f) Within 30 days of the written request of the Seller therefor,
the Agent and the Purchaser, as appropriate, shall execute and deliver to
the Seller such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to
assist the Seller in applying for refunds of taxes remitted hereunder.
(g) If, in connection with an agreement or other document-providing
liquidity support, credit enhancement or other similar support to the
Purchaser in connection with this Agreement or the funding or maintenance
of Purchases hereunder, the Purchaser is required to compensate a bank or
other financial institution in respect of taxes under circumstances
similar to those described in this Section 2.11 or under Section 10.07(b)
then within ten days after demand by the Purchaser, the Seller shall pay
to the Purchaser such additional amount or amounts as may be necessary to
reimburse the Purchaser for any amounts paid by it.
(h) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the parties contained
in this Section 2.11 shall survive the termination of this Agreement.
SECTION 2.12. Assignment of the Originator Sale Agreement. The
Seller hereby assigns to the Agent, for the benefit of the Purchaser hereunder,
all of the Seller's right and title to and interest in the Originator Sale
Agreement with respect to the Purchased Receivables and Purchased Assets. The
Seller confirms and agrees that the Agent shall have, following an Event of
Termination, the sole right to enforce the Seller's rights and remedies under
the Originator Sale Agreement with respect to the Purchased Receivables and the
Purchased Assets for the benefit of the Purchaser (including, without limitation
the Seller's right to enforce the originator's rights and remedies under the
Developer Sale Agreements), but without any obligation on the part of the Agent,
the Purchaser or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Originator Sale Agreement. In addition, the
Seller confirms and agrees that the Seller will send to the Originator any
notice requested by the Agent of any "Event of Termination" under the Originator
Sale Agreement or any event or occurrence that would, upon notice to the
Originator or upon the passage of time or both, would be such an "Event of
Termination."' The Seller further confirms and agrees that such assignment to
the Agent shall terminate upon the Collection Date; provided, however, that the
rights of the Agent and the Purchaser pursuant to such assignment with respect
to rights and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Originator Sale Agreement, which rights and remedies survive the termination of
the Originator Sale Agreement, shall be continuing and shall survive any
termination of such assignment.
SECTION 2.13. Payment of Covered Obligations; Grant of Security
Interest.
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(a) As used in this Section 2.13, the following terms shall have the
following meanings:
This has been added to ensure that the Purchaser will be able to trigger an
Event of Termination when the Originator breaches obligations under the
Originator Sale Agreement.
"Covered Obligations" has the meaning assigned to that term in
Section 2.13(b).
"Secured Parties" means the Agent and the Purchaser and their
respective successor and assigns.
"Support Obligations" has the meaning assigned to that term in
Section 2.13(b).
"Supporting Collateral" has the meaning assigned to that term in
Section 2.13(c).
"Supporting Receivables" means, at any time after the Trigger Date
under the Receivables Loan Agreement, all outstanding Pledged Receivables at
such time.
"Trigger Date" means, the date following the Termination Date under
the Receivables Loan Agreement and this Agreement on which (i) the outstanding
loans under the Receivables Loan Agreement have been reduced to 10% or less of
the original principal amount of the loans that were outstanding under the
Receivables Loan Agreement on the Termination Date or (ii) the outstanding
Capital under this Agreement has been reduced to 10% or less of the original
principal amount of the Capital that was outstanding under this Agreement on the
Termination Date.
"Unused Collections" means, with respect to the Receivables Loan
Agreement, an amount equal to the aggregate amount of "Collections" with respect
to Pledged Assets under the Receivables Loan Agreement, which were received
after the Termination Date under the Receivables Loan Agreement but on or prior
to the Trigger Date and which were not applied against the loans and the other
Obligations payable under the Receivables Loan Agreement.
(b) To support the prompt recovery in full of all capital and all
other amounts owing to the Secured Parties hereunder (such Capital and
other amounts are hereinafter referred to collectively as the "Covered
Obligations"), the Seller hereby unconditionally and irrevocably agrees to
pay to the Agent, for the benefit of the Secured Parties, (and the
Servicer, as agent for the Agent and the Purchaser, will instruct the
Agent's Bank, and the Agent, in the absence of the Servicer's instruction,
may instruct the Agent's Bank, to apply funds on deposit in the "Agent's
Account" under the Receivables Loan Agreement to pay) the amounts
described in the following sentences of this Section 2.13(b) at the times
therein specified for payment of such amounts. In the event that there
shall be outstanding and to the extent of any Covered Obligations, the
Seller shall pay or cause to be paid to deposited into the Agent's Account
(such payment obligations, the "Support Obligations") (and the Servicer,
as agent for the Agent and the Purchaser, will instruct the Agent's Bank,
and the
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Agent may, in the absence of the Servicer's instruction, instruct the
Agent's Bank, to apply funds on deposit in the "Agent's Account" under the
Receivables Loan Agreement to pay such Support Obligations), (a) on the
Trigger Date, all Unused Collections and (b) thereafter, on each day an
amount equal to the product of (i) all Collections of Supporting
Receivables not previously remitted to the Agent's Account multiplied by
(ii) the ratio of (A) outstanding Capital on such day to (B) the sum of
outstanding Capital and outstanding Loans under the Receivables Loan
Agreement on such day. All amounts remitted to the Agent's Account
pursuant to this Section 2.13 shall be applied to such Covered Obligations
as provided in Section 2,05(a)-(c). The Seller's payment obligations under
this Section 2.13 shall terminate on the Collection Date.
(c) To secure payment and performance of the Support obligations and
Seller's other obligations under this Agreement, Seller hereby grants to the
Agent, for its benefit and the benefit of the other Secured Parties, a security
interest in all of the Seller's right, title and interest in and to all now
owned or existing and from time to time hereafter arising or acquired Pledged
Assets under the Receivables Loan Agreement (the "Supporting Collateral").
(d) Each of the Seller and the Servicer hereby acknowledges and
agrees that its representations, warranties, covenants, agreements, undertakings
and obligations set forth in the Receivables Loan Agreement with respect to the
Supporting Collateral shall remain binding and in full force and effect for
purposes hereof until the Collection Date under the Receivables Loan Agreement.
ARTICLE III.
CONDITIONS OF PURCHASES.
SECTION 3.01. Conditions Precedent to Initial Purchase. The initial
Purchase hereunder is subject to the condition precedent that the Agent shall
have received on or before the date of such purchase the items listed in
Schedule VI, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent and the Purchaser.
SECTION 3.02. Conditions Precedent to All Purchases and Remittances
of Collections. Each Purchase (including the initial Purchase) from the Seller
by the Purchaser shall be subject to the further conditions precedent that (a)
with respect to any such Purchase (other than the initial Purchase) on or prior
to the date of such Purchase, the Servicer shall have delivered to the Agent, in
form and substance satisfactory to the Agent, a completed Monthly Settlement
Report or Purchase Date/Spread Account Surplus Settlement Report containing
information accurate as of a date no more than three Business Days prior to the
date of such Purchase and containing such additional information as may be
reasonably requested by the Agent; (b) on the date of such Purchase, the
following statements shall be true, and the Seller by accepting the amount of
such Purchase shall be deemed to have certified that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of such
date (including, without limitation, that the Receivables to be Purchased
on such date are Eligible Receivables),
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(ii) No event has occurred and is continuing, or would result
from such purchase or reinvestment, which constitutes an Event of
Termination or an Event of Default under the Receivables Loan Agreement,
(iii) On and as of such day, after giving effect to such
Purchase, the (A) Overcollateralization Percentage equals or exceeds the
Required overcollateralization Percentage and (S) outstanding Capital does
not exceed the lesser of (x) the Purchase Limit minus the Discount Amount,
or (y) the Capital Limit, and
(iv) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase by the Purchaser in accordance with the provisions hereof,
(c) Agent's receipt of a notice from the Collateral Trustee
confirming that the Collateral Trustee has received: (i) all Contracts,
promissory notes and any deed of titles contained in the contract Files required
to be delivered to it pursuant to Section 5.01(h), (ii) a timely copy of the
notice of Purchase delivered to the Agent pursuant to Section 2.02,
appropriately filled-out and executed by the Seller and (iii) an amendment to
the Contract Schedule required pursuant to Section 2.02 (any such notice to be
sent by the Collateral Trustee to the Agent only after the Collateral Trustee's
receipt of such items).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.
SECTION 4.01. Representations and Warranties of the Seller. The
Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction named at the
beginning hereof and is duly qualified to do business, and is in good
standing, in every jurisdiction in which the nature of its business
requires it to be so Qualified.
(b) The execution, delivery and performance by the Seller of this
Agreement, the originator Sale Agreement and all other documents to be
delivered by it hereunder or thereunder, including the Seller's use of the
proceeds of Purchases, are within the Seller's corporate powers, have been
duly authorized by all necessary corporate action, do not contravene (i)
the Seller's charter or by-laws, (ii) any law, rule or regulation
applicable to the Seller, (iii) any contractual restriction binding on or
affecting the Seller or its property or (iv) any order, writ, judgment,
award, injunction or decree binding on or affecting the Seller or its
property, and do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to
any of its properties (other than in favor of the Purchaser or the Agent
for the benefit of the Purchaser with respect to the Purchased Receivables
and related Purchased Assets); and no transaction contemplated hereby or
by the
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Originator sale Agreement requires compliance with any bulk sales act or
similar law. This Agreement and the Originator Sale Agreement have each
been duly executed and delivered by the Seller.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of
this Agreement, the Originator Sale Agreement or any other document or
instrument to be delivered hereunder or thereunder, except for the filing
of the UCC financing statements described in Schedule VI, all of which
financing statements have been duly filed and are in full force and
effect.
(d) This Agreement, the Originator Sale Agreement and each other
document or instrument to be delivered by the Seller hereunder or
thereunder constitute the legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium, or other
similar laws affecting the rights of creditors.
(e) To the knowledge of the Seller, the consolidated balance sheets
of the Originator and its consolidated subsidiaries as at December 31,
1994 and March 31, 1995, and the related statements of income,
shareholders' equity and cash flows for the fiscal year and fiscal quarter
then ended, copies of which have been furnished to the Agent, fairly
present, in all material respects, the consolidated financial condition of
the Originator and its consolidated subsidiaries as at such date and the
consolidated results of the operations of the Originator and its
consolidated subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied, and since December 31, 1994
there has been no material adverse change in any such condition or
operations.
(f) There is no pending or to the knowledge of the Seller,
threatened, action or proceeding affecting the Seller or to the knowledge
of the Seller, the Originator or any other subsidiaries of the Originator
before any court, governmental agency or arbitrator that may materially
adversely affect the financial condition of the Originator, the Seller or
any other subsidiaries of the Originator or the ability of the Originator
to perform its obligations under the Originator Sale Agreement or the
ability of the Seller to perform its obligations under this Agreement.
None of the Seller, and, to the knowledge of the Seller, the Originator or
any subsidiary of the Originator is in default with respect to any order
of any court, arbitrator or governmental body except for defaults with
respect to orders of governmental agencies which defaults are not material
to the business or operations of the Originator, the Seller or any other
subsidiary of the Originator.
(g) No proceeds of any Purchase will be used by the Seller to
acquire any security in any transaction which is subject to Section 13 or
14 of the Securities Exchange Act of 1934, as amended.
(h) Each Receivable, together with the Contract related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse
Claim except as provided herein
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or in the Receivables Loan Agreement, and upon each Purchase, the
Purchaser shall acquire a valid and perfected first priority look
ownership or security interest in each Purchased Receivable then existing
or thereafter arising and in the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim except as provided
hereunder or under the Receivables Loan Agreement. No effective financing
statement or other instrument similar in effect covering any Receivable or
the Related Security or Collections with respect thereto shall at any time
be on file in any recording office except such as may be filed in favor of
the Agent relating to this Agreement or the Receivables Loan Agreement.
(i) As of the close of business on each Business Day prior to the
Termination Date, the amount of Capital outstanding shall not exceed the
lesser of (x) the Purchase Limit minus the Discount Amount on such
Business Day or (y) the capital Limit on such Business Day.
(j) No Monthly Settlement Report, Purchase Date/Spread Account
surplus Settlement Report, Commercial Paper Settlement Report (each if
prepared by the Seller, or to the extent that information contained
therein is supplied by the Seller), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished
by the Seller to the Agent or the Purchaser in connection with this
Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Agent or
the Purchaser, as the case may be, at such time) as of the date so
furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not
misleading.
(k) The principal place of business and chief executive office of
the Seller and the office where the Seller keeps all the Records are
located at the address of the Seller referred to in Section 10.02 hereof
(or at such other locations as to which the notice and other requirements
specified in Section 6.09 shall have been satisfied).
(1) The names and addresses of all the Lock-Box Banks, together with
the account numbers of all Lock-Box Accounts of the Seller at such
Lock-Box Banks, the address of each Lock-Box, and the names, addresses and
account numbers of all accounts to which Collections of the Receivables
outstanding before the initial Purchase hereunder have been sent, are
specified in Schedule VII (which shall be deemed to be amended in respect
of terminating or adding any Lock-Box Account or Lock-Box Bank upon
satisfaction of the notice and other requirements specified in respect
thereof).
(m) Except as described in Schedule VIII, the Seller has no trade
names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(n) The Originator Sale Agreement is the only agreement pursuant to
which the Seller purchases Receivables; the Seller has furnished to the
Agent true, correct and complete copies of the Originator Sale Agreement;
and the Originator Sale Agreement is in
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full force and effect and no event or circumstance has occurred that would
constitute an Event of Termination pursuant to Section 7.01(i).
(o) The Seller shall have given reasonably equivalent value to the
Originator in consideration for the transfer to the Seller of the
Receivables and Related Security under the Originator Sale Agreement, no
such transfer shall have been made for or on account of an antecedent debt
owed by the Originator to the Seller, and no such transfer is or may be
voidable or subject to avoidance under any section of the Bankruptcy Code.
(p) The Certificate of Incorporation of the Seller includes
substantially the provisions set forth on Exhibit G hereto, and the
Originator has confirmed in writing to the Seller that, so long as the
Seller is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Seller to file a voluntary petition under
the Bankruptcy Code or any other bankruptcy or insolvency laws. Each of
the Seller and the Originator has been advised in writing by its counsel
that in light of the circumstances described in the preceding sentence and
other relevant facts, the filing of a voluntary petition under the
Bankruptcy Code for the purpose of making the assets of the Seller
available to satisfy claims of the creditors of the Originator would not
result in making such assets available to satisfy such creditors under the
Bankruptcy Code.
(q) The Seller is solvent; at the time of (and immediately after)
each transfer by the Originator to the Seller under the Originator Sale
Agreement, the Seller shall have been solvent; and at the time of (and
immediately after) each Purchase hereunder, the Seller shall have been
solvent.
(r) The Seller accounts for the transfers to it from the Originator
of interests in Receivables, Related Security and Collections under the
Originator Sale Agreement as sales of such Receivables, Related Security
and Collections in its books, records and financial statements, in each
case consistent with GAAP and with the requirements set forth herein.
(s) The sole and exclusive business of the Seller is the purchase of
Receivables and Related Security pursuant to the Originator Sale Agreement
for its own account and for resale to the Purchaser pursuant to the terms
of this Agreement.
(t) The Seller is operated as an entity with assets and liabilities
distinct from those of the Originator and any Affiliates thereof (other
than the Seller), and the Seller hereby acknowledges that the Agent and
the Purchaser are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal
entity from the Originator and from each such other Affiliate of the
Originator.
(u) To the best knowledge of the Seller, each VOI Regime related to
a Purchased Contract is now, and at all times during Originator's (or any
Affiliate of Originator'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 or regulating in any way the discharge, generation,
removal,
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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,
volatile hydrocarbons, 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 "Hazardous Waste"). To
the knowledge of the Seller, neither the Originator nor any Affiliate of
the Originator has caused or suffered to occur any discharge, spill,
uncontrolled loss or seepage of any petroleum or chemical product or any
Hazardous Waste onto any property adjoining any of the VOI Regimes, and,
to the best knowledge of the Seller, neither the Originator nor any
Affiliate of the Originator 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 the Originator, the Seller,
any other Affiliate of the Originator or any other owner of any VOI Regime
or the imposition of a lien on such VOI Regime under any Environmental
Law.
To the best knowledge of the Seller, except as set forth on Schedule
IX, each Development related to a Purchased Contract is now, and at all
times has been free of contamination from any substance, material or waste
identified as toxic or hazardous according to the Environmental Laws,
including, without limitation, Hazardous Waste. To the knowledge of the
Seller, except as set forth on Schedule IX, neither the Originator nor any
Affiliate of the Originator has caused or suffered to occur any discharge,
spill, uncontrolled loss or seepage of any petroleum or chemical product
or any Hazardous Waste onto any property adjoining any of the
Developments, and to the best knowledge of the Seller neither the
Originator nor any Affiliate of the Originator 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 the
Originator, the Seller, any other Affiliate of the Originator 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 IX
will have a material adverse effect on the value of the Purchased Assets
or the interest of the Agent and the Purchaser therein or an adverse
effect on the Purchaser or the Agent.
(v) The Seller is not an "investment company" within the meaning of
the Investment Company Act of 1940.
SECTION 4.02. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants as follows:
(a) The Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction named at
the beginning hereof and is duly qualified to do business, and is in good
standing, in every jurisdiction in which the nature of its business
requires it to be so qualified.
(b) The execution, delivery and performance by the Purchaser of this
Agreement
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and all other documents to be delivered by it hereunder or thereunder, are
within the Purchaser's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Purchaser's charter
or by-laws, (ii) any law, rule or regulation applicable to the Purchaser,
(iii) any contractual restriction binding on or affecting the Purchaser or
its property or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting the Purchaser or its property. This
Agreement has been duly executed and delivered by the Purchaser.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Purchaser
of this Agreement or any other document or instrument to be delivered
hereunder.
(d) This Agreement and each other document or instrument to be
delivered by the Purchaser hereunder constitute the legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium, or other similar laws affecting the rights of
creditors.
ARTICLE V.
GENERAL COVENANTS OF THE SELLER.
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws,
rules, regulations and orders and preserve and maintain its corporate
existence, and will preserve and maintain its rights, franchises,
qualifications and privileges in all material respects.
(b) Sales, Liens, Etc. Except as otherwise provided herein or in the
Receivables Loan Agreement, the Seller will not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Adverse Claim upon or with respect to, any Receivable
or the related Contract, Collections or Related Security, or upon or with
respect to any Lock-Box Account or any other account to which any
Collections of any Receivable are sent, or assign any right to receive
income in respect thereof or (ii) create or suffer to exist any Adverse
Claim upon or with respect to any of the Seller's assets.
(c) General Reporting Requirements. The Seller will provide to the
Agent (with a copy for the Purchaser) (and to S&P and Fitch, with respect
to items described in clause (vii)) the following:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Seller, a balance sheet of the Seller and the related statements of
income, shareholders, equity and cash flows each for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter,
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prepared in accordance with GAAP consistently applied and certified by the
chief financial officer of the Seller;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Seller, a copy of the balance
sheet of the Seller and the related statements of income, shareholders,
equity and cash flows for such year, each prepared in accordance with GAAP
consistently applied and reported on by nationally recognized independent
public accountants acceptable to the Agent;
(iii) as soon as received from the originator and in any event
within 45 days after the end of each of the first three quarters of each
fiscal year of the Originator, to the extent received from the originator,
consolidated balance sheets of the Originator and its consolidated
subsidiaries and the related statements of income, shareholders, equity
and cash flows each for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, prepared in
accordance with GAAP consistently applied and certified by a senior
financial officer of the Originator;
(iv) as soon as received from the Originator and in any event
within 120 days after the end of each fiscal year of the Originator, to
the extent received from the originator, a copy of the consolidated
balance sheets of the originator and its consolidated subsidiaries and the
related statements of income, shareholders' equity and cash flows for such
year, each prepared in accordance with GAAP consistently applied and
reported on by nationally recognized independent public accountants
acceptable to the Agent;
(v) promptly after the receipt thereof, copies of all reports
which the Originator sends to any of its securityholders and copies of all
reports and registration statements which the Originator files with the
Securities and Exchange Commission or any national securities exchange
other than registration statements relating to employee benefit plans and
to registrations of securities for selling securityholders;
(vi) 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 Seller or any ERISA Affiliate files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Seller or any
ERISA Affiliate receives from such Corporation;
(vii) as soon as possible and in any event within five days
after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, a statement of the chief financial officer of the
Seller setting forth details of such Event of Termination or event and the
action which the Seller has taken and proposes to take with respect
thereto;
(viii) promptly following receipt thereof, copies of all
financial statements, settlement statements, portfolio and other reports,
notices, disclosures, certificates, budgets and other written material
delivered or made available to the Seller by the Originator
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pursuant to the terms of the Originator Sale Agreement; and
(ix) promptly following the Agent's request therefor, such
other information respecting the Receivables or the conditions or
operations, financial or otherwise, of the Seller as the Agent may from
time to time request in order to protect the interests of the Agent or the
Purchaser in connection with this Agreement.
(d) Merger, Etc. The Seller will not merge or consolidate with, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of
its assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any Person, other than, with respect to asset dispositions, in
connection herewith.
(e) Accounting of Purchases. The Seller will not account for or
treat (whether in financial statements or otherwise) the transactions
contemplated hereby or by the Originator Sale Agreement in any manner
other than the sale of Receivables and Related Security by the Seller to
the Purchaser or the sale of the Receivables and Related Security by the
Originator to the Seller, as the case may be.
(f) Nature of Business. The Seller will engage in no business other
than the purchase of Receivables and Related Security from the Originator,
the resale of such Receivables and Related Security to the Purchaser and
the other transactions permitted or contemplated by this Agreement and the
Receivables Loan Agreement.
(g) Originator Receivables. With respect to each Receivable acquired
by the Seller from the Originator, the Seller will (i) acquire such
Receivable pursuant to and in accordance with the terms of the Originator
Sale Agreement, (ii) take all action necessary to perfect, protect and
more fully evidence the Seller's ownership of such Receivable, including,
without limitation, (A) filing and maintaining effective financing
statements (Form UCC-1) against the Originator in all necessary or
appropriate filing offices, and filing continuation statements, amendments
or assignments with respect thereto in such filing offices and (B)
executing or causing to be executed such other instruments or notices as
may be necessary or appropriate and (iii) take all additional action that
the Agent may reasonably request to perfect, protect and more fully
evidence the respective interests of the parties to this Agreement in the
Receivables and other Purchased Assets related thereto.
(h) Possession. On or immediately prior to the initial Purchase Date
and each Subsequent Purchase Date (if any), the Seller shall deliver to
the Collateral Trustee each original Purchased Contract and each Contract,
promissory note and deed of title in the related Contract File, and mark,
and cause the originator to mark the portions of the computer files
relating to the Purchased Receivables sold on such date to the Purchaser
to clearly and unambiguously indicate that such Purchased Receivables
constitute part of the Purchased Assets purchased by the Seller in
accordance with the terms of this Agreement.
(i) Maintenance of Separate Existence. The Seller will do all things
necessary to
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maintain its corporate existence separate and apart from the Originator
and all other Affiliates of the Seller, including, without limitation, (i)
practicing and adhering to corporate formalities, such as maintaining
appropriate corporate books and records; (ii) maintaining at least one
corporate director and one corporate officer who is not an officer,
director or employee of any of its Affiliates; (iii) owning or leasing
pursuant to written leases all office furniture and equipment necessary to
operate its business; (iv) retraining from (A) guaranteeing or otherwise
becoming liable for any obligations of any of its Affiliates, (B) having
obligations guaranteed by its Affiliates, (C) holding itself out as
responsible for debts of any of its Affiliates or for decisions or actions
with respect to the affairs of any of its Affiliates, and (D) being
directly or indirectly named as a direct or contingent beneficiary or loss
payee on any insurance policy of any Affiliate; (v) maintaining all of its
deposit and other bank accounts and all of its assets separate from those
of any other Person; (vi) maintaining all of its financial records
separate and apart from those of any other Person and ensuring that any of
.the Originator's consolidated financial statements or other public
information for the Seller and its Affiliates on a consolidated basis
contain appropriate disclosures concerning the Seller's separate
existence; (vii) compensating all its employees, officers, consultants and
agents for services provided to it by such Persons, or reimbursing any of
its Affiliates in respect of services provided to it by employees,
officers, consultants and agents of such Affiliate, out of its own funds;
(viii) maintaining office space separate and apart from that of any of its
Affiliates (even if such office space is subleased from or is on or near
premises occupied by any of its Affiliates) and a separate telephone
number which will be answered only in its name; (ix) accounting for and
managing all of its liabilities separately from those of any of its
Affiliates, including, without limitation, payment directly by the Seller
of all payroll, accounting and other administrative expenses and taxes;
(x) allocating, on an arm's-length basis, all shared corporate operating
services, leases and expenses, including, without limitation, those
associated with the services of shared consultants and agents and shared
computer equipment and software; (xi) refraining from paying dividends or
making distributions, loans or other advances to any of its Affiliates
more frequently than once during any fiscal quarter and, in each case, as
duly authorized by its board of directors and in accordance with
applicable corporation law; (xii) refraining from filing or otherwise
initiating or supporting the filing of a motion in any bankruptcy or other
insolvency proceeding involving the Seller, the originator or any other
Affiliate of the Seller to substantively consolidate the assets and
liabilities of the Seller with the assets and liabilities of any such
Person or any other Affiliate of the Seller; (xiii) maintaining adequate
capitalization in light of its business and purpose; (xiv) conducting all
of its business (whether written or oral) solely in its own name; and (xv)
taking all other actions necessary to maintain the accuracy of the factual
assumptions set forth in the legal opinion of Dechert Price & Rhoads
special counsel to the originator and the Seller, issued in connection
with the originator Sale Agreement and relating to the issues of
substantive consolidation and true sale of the Receivables and related
assets.
(j) Supplemental Opinions. (i) The Seller will cause to be delivered
to the Agent within six months (but not later than the 30th day) prior to
the end of each five year period after the initial Purchase hereunder, a
supplemental opinion of counsel to the Seller and the Originator in form
and substance reasonably satisfactory to the Agent, reaffirming the
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opinions set forth in the opinion letter of Dechert Price & Rhoads
delivered to the Agent in connection with the initial Purchase hereunder
pursuant to Section 3.01 with respect to the continued validity of the
ownership or security interest of the Purchaser in the Purchased Assets
hereunder, and (ii) the Seller will cause to be delivered to the Agent
within 30 days following the Agent's request therefor, a supplemental
opinion of counsel to the Seller and the Originator in form and substance
reasonably satisfactory to the Agent, reaffirming the opinions set forth
in the opinion letter of Dechert Price & Rhoads delivered to the Agent in
connection with the initial Purchase hereunder pursuant to Section 3.01.
(k) Transactions with Affiliates. The Seller will not enter into, or
be a party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement, the Receivables
Loan Agreement and the Originator Sale Agreement, and (ii) other
transactions (including, without limitation, the lease of office space or
computer equipment or software by the Seller to or from an Affiliate) (A)
in the ordinary course of business, (B) pursuant to the reasonable
requirements of the Seller's business, (C) upon fair and reasonable terms
that are no less favorable to the Seller than could be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of the
Seller, and (D) not inconsistent with the factual assumptions set forth in
the opinion letter issued by Dechert Price & Rhoads delivered to the Agent
pursuant to Section 3.01, as such assumptions may be modified in any
subsequent opinion letter delivered pursuant to Section 5.01(i). It is
understood that any compensation arrangement for officers shall be
permitted under clause (ii)(A) through (C) above if such arrangement has
been expressly approved by the board of directors of the Seller.
(l) Debt; Investments. The Seller will not incur any Debt other than
(i) Debt arising hereunder, under the Receivables Loan Agreement or under
the originator Sale Agreement and (ii) Debt owing to the Originator
evidenced by promissory notes in form and substance satisfactory to the
Agent and not inconsistent with the factual assumptions set forth in the
opinion letter issued by Dechert Price & Rhoads delivered to the Agent
pursuant to Section 3.01, as such assumptions may be modified in any
subsequent opinion letter delivered pursuant to Section 5.01(i). The
Seller will not make any Investments other than Permitted Investments.
(m) Change in the Originator Sale Agreement. The Seller will not
amend, modify, waive or terminate any terms or conditions of the
Originator Sale Agreement without the written consent of the Agent, and
shall perform its obligations thereunder.
(n) Amendment to Certificate of Incorporation. The Seller will not
amend, modify or otherwise make any change to its Certificate of
Incorporation to delete or otherwise nullify or circumvent the provisions
set forth in Exhibit G hereto.
(o) Terminate or Reject Contracts. The Seller will not, without the
written consent of the Agent, terminate or reject any Purchased 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,
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without limitation, section 365 of the Bankruptcy Code), unless prior to
such termination or rejection, such Purchased Contract and any related
Purchased Assets have been repurchased pursuant to Section 6.18 in
consideration of the payment of an appropriate Repurchase Price therefor.
SECTION 5.02. Financial Covenants.
(a) Dividends, etc. The Seller will not declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any shares of its capital stock or
directly or indirectly redeem, purchase, retire or otherwise acquire for
value any shares of any class of its capital stock or set aside any amount
for any such purpose if, after giving effect to such dividend,
distribution, redemption, purchase, retirement or acquisition, the
Seller's tangible net worth in accordance with GAAP would be less than the
amount set forth in Section 5.02(b).
(b) Net Worth. The Seller shall maintain a tangible net worth
(determined in accordance with GAAP and including subordinated debt) of at
least the difference between (i) the aggregate Outstanding Balance of
Eligible Receivables which constitute Purchased Receivables at the time
minus (ii) the amount referred to in clause (i) divided by 1.03, but in no
event less than $250,000.
ARTICLE VI.
ADMINISTRATION, COLLECTION AND MONITORING OF RECEIVABLES.
SECTION 6.01. Appointment and Designation of the Servicer. The
Seller, the Purchaser and the Agent hereby appoint the Person (the "Servicer")
designated by the Agent from time to time (with the approval of the Purchaser)
pursuant to this Section 6.01, as their agent to service, administer and collect
the Receivables and otherwise to enforce their respective rights and interests
in and under the Receivables, the Related Security and the Contracts. The
Servicer's authorization under this Agreement shall terminate on the Collection
Date. Until the Agent gives notice to the Seller of a designation of a new
Servicer, or consents to the appointment by the Seller of a new "Servicer" under
and pursuant to the Originator Sale Agreement, the Originator is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. Upon and after the occurrence of any
Servicer Default, the Agent may at any time (with the approval of the Purchaser)
designate as Servicer any Person to succeed the Originator or any successor
Servicer, on the condition in each case that any such Person so designated shall
agree to perform the duties and obligations of the Servicer pursuant to the
terms hereof. Each of the Seller and the Originator hereby grants to any
successor Servicer an irrevocable power of attorney to take any and all steps in
the Seller's or the Servicer's name, as applicable, and on behalf of the Seller
necessary or desirable, in the determination of the successor Servicer, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing the Seller's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts. The Servicer may, with the prior consent of the Agent, subcontract
with any
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other Person for servicing, administering or collecting the Receivables,
provided that the Servicer shall remain liable for the performance of the duties
and obligations of the Servicer pursuant to the terms hereof. Subject to the
provison of the preceding sentence, the Agent consents to the Servicer
subcontracting for such services with The Processing Center; provided, that,
such consent shall be automatically revoked if The Processing Center ceases to
be an Affiliate of the Originator. Notwithstanding anything to the contrary
contained in this Agreement, the Servicer, if not the Seller or the originator,
shall have no obligation to collect, enforce or take any other action described
in this Article VI with respect to any Receivable that is not a Purchased
Receivable other than to deliver to the Seller the Collections and documents
with respect to any such Receivable that is not a Purchased Receivable as
described in Sections 6.03 and 6.06(b).
SECTION 6.02. Collection of Receivables by the Servicer; Extensions
and Amendments of Receivables. The Servicer shall take or cause to be taken all
such actions as may be necessary or advisable to collect each Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy; provided, however, that, (a) following an Event of
Termination, the Agent shall have the absolute and unlimited right to direct the
Servicer (whether the Servicer is the Seller, the Originator or otherwise) to
commence or settle any legal action, to enforce collection of any Purchased
Receivable or to foreclose upon or repossess any Related Security and (b) the
Servicer shall not make the Agent or the Purchaser a party to any litigation
without the express written consent of the Agent or the Purchaser, as the case
may be. Neither the Originator nor the Seller will extend, amend or otherwise
modify the terms of any Purchased Receivable, or amend, modify or waive any term
or condition of any Contract related thereto.
SECTION 6.03. Distribution and Application of Collections. The
Servicer shall set aside for the account of the Seller and the Purchaser
Collections of Receivables in accordance with Section 2.05 and 6.08. The
Servicer shall as soon as practicable following receipt turn over to the Seller
the collections of any Receivable which is not a Purchased Receivable less, in
the event neither the Seller nor the Originator is the Servicer, all reasonable
and appropriate out-of-pocket costs and expenses of such Servicer of servicing,
collecting and administering such Receivables to the extent not covered by the
Servicer Fee received by it and the Servicer shall as soon as practicable
following receipt turn over to the Seller amounts received by the Servicer or
deposited into the Agent's Account with respect to taxes and/or maintenance fees
remitted by obligors that are not Collections. Any payment by an Obligor in
respect of any indebtedness owed by it to the Seller shall, except as otherwise
specified by such Obligor or otherwise required by contract or law or by
instruction of the Agent, be applied as a Collection of any Purchased Receivable
of such Obligor (in the order of the age of such Receivables, starting with the
oldest such Purchased Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other Receivable or other
indebtedness of such Obligor.
SECTION 6.04. Segregation of Collections. The Servicer shall not
commingle funds constituting Collections with any other funds of the Servicer or
the originator for more than two Business Days.
SECTION 6.05. Other Rights of the Agent. At any time following the
occurrence
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of an Event of Termination or the designation of a Servicer other than the
Originator, the Seller or any Affiliate thereof pursuant to Section 6.01:
(a) The Agent may or, at the request of the Agent, the Seller shall
(in either case, at the seller's expense) direct the Obligors of
Receivables, or any of them, to pay all amounts payable under any
Receivable directly to the Agent or its designee; and
(b) The Seller shall, at the Agent's request and at the Seller's
expense, (i) assemble all Records and make the same available to the Agent
or its designee at a place selected by the Agent or its designee, and (ii)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Receivables in a manner acceptable to
the Agent and, promptly following receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer,
to the Agent or its designee.
SECTION 6.06. Records; Audits.
(a) The Seller will maintain and implement, or cause the Originator
to maintain and implement, administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
the Receivables in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all Receivables
(including, without limitation, records adequate to permit the daily
identification of each new Purchased Receivable and all Collections of and
adjustments to each existing Purchased Receivable).
(b) The Servicer, whether or not the Seller, shall hold all Records
(other than those delivered to the Collateral Trustee in accordance with
this Agreement) in trust for the Seller and the Purchaser in accordance
with their respective interests. Subject to the receipt of contrary
instructions from the Agent, the Seller will deliver all Records to such
servicer; provided, however, that the Servicer, if other than the Seller,
shall as soon as practicable upon demand deliver to the Seller all Records
in its possession relating to Receivables of the Seller other than
Purchased Receivables, and copies of Records in its possession relating to
Purchased Receivables.
(c) The Seller will, from time to time during regular business hours
as requested by the Agent, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
Records and (ii) to visit the offices and properties of the Seller for the
purpose of examining such Records and to discuss matters relating to the
Receivables or the Seller's performance hereunder with any of the officers
or employees of the Seller having knowledge of such matters.
(d) The Servicer shall permit the Agent to cause reviews of the
Purchased Receivables to be conducted as of the close of each calendar
quarter and year by a firm of nationally recognized certified public
accountants selected by the Agent, which reviews, among other things, may
(based on a statistically significant sample of Purchased Receivables
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which were Purchased in the relevant period)(i) confirm the conformity of
the Purchased Receivables with the related identifications thereof
supplied to the Agent or the Purchaser hereunder, (ii) recalculate and
verify the accuracy of data included in the reports delivered pursuant to
Section 6.07 (including without limitation the absence of the occurrence
of any Events of Termination), and (iii) confirm the conformity of the
Purchased Receivables with the Credit and Collection Policy.
SECTION 6.07. Periodic Settlement Reporting.
(a) The Seller will deliver to the Agent (i) prior to each
Settlement Date, a report identifying the Purchased Receivables (and the
aged balance thereof) as of the last day of the immediately preceding
month, (ii) on the Termination Date, a report identifying the Purchased
Receivables (and the aged balance thereof) on the day immediately
preceding the Termination Date and (iii) upon the Agent's request, on each
day, a report identifying the Purchased Receivables (and the aged balance
thereof) on such day.
(b) Prior to each Settlement Date, the Servicer shall prepare and
forward to the Agent for the Purchaser (and to S&P and Fitch), a Monthly
Settlement Report relating to all Purchased Receivables, as of the close
of business of the Servicer on the last day of the immediately preceding
month.
(c) On the Business Day immediately preceding each Purchase Date
that is not a Settlement Date and on the Business Day immediately
preceding each Spread Account Surplus Date, the Servicer shall prepare and
forward to the Agent for the Purchaser, a Purchase Date/Spread Account
Surplus Settlement Report, as of a date no more than three Business Days
prior to such Purchase Date or Spread Account Surplus Date, as applicable.
(d) On the Business Day immediately preceding the last day of each
Fixed Period that is not a Settlement Date, the Servicer shall prepare and
forward to the Agent for the Purchaser, a Commercial Paper Settlement
Report, as of the close of business of the Servicer on the second Business
Day immediately preceding such last day.
SECTION 6.08. Collections and Lock-Boxes. The Seller or the Servicer
on its behalf will instruct all obligors to cause all Collections to be either
(a) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve such
Collections promptly and deposit the same to the respective Lock-Box Accounts or
(b) deposited directly into a Lock-Box Account and will cause any Collections
effectuated by pre-authorized debits of Obligor accounts to be deposited
directly into a Lock-Box Account or the Agent's Account. Each Lock-Box Bank will
remit Collections deposited into the respective Lock-Box Accounts to the Agent's
Account on a daily basis in accordance with Section 2.05. If the Seller receives
any Collections, the Seller will remit such Collections (including, without
limitation, any Collections deemed to have been received pursuant to Section
2.07) to a Lock-Box Account or the Agent's Account within one Business Day
following the Seller's receipt thereof. The Seller will not add or terminate any
bank as a Lock-Box Bank to or from those listed in Schedule VII or make any
change in its instructions to Obligors regarding payments to be made to the
Seller or payments to be made to any Lock Box or any Lock-Box Bank,
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unless the Agent shall have given its written consent to such addition,
termination or change and all actions reasonably requested by the Agent to
protect and perfect the interest of the Agent and the Purchaser in the
Collections of Purchased Receivables have been taken and completed. The Agent
shall have the exclusive ownership and control of the Lock-Box Accounts.
SECTION 6.09. UCC Matters; Protection and Perfection of Purchased
Assets.
(a) The Seller will keep its principal place of business and chief
executive office, and the office where it keeps the Records, at the
address of the Seller referred to in Section 4.01(k) or, upon 30 days,
prior written notice to the Agent, at such other locations within the
United States where all actions reasonably requested by the Agent to
protect and perfect the interest of the Agent and the Purchaser in the
Purchased Receivables have been taken and completed. The Seller will not
make any change to its corporate name or use any tradenames, fictitious
names, assumed names, "doing business as" names or other names other than
those described in Schedule VIII, unless prior to the effective date of
any such name change or use, the Seller delivers to the Agent such
executed financing statements as the Agent may request to reflect such
name change or use, together with such other documents and instruments as
the Agent may request in connection therewith. The Seller agrees that from
time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the
Agent may reasonably request in order to perfect, protect or more fully
evidence the Purchaser's interest in the Purchased Assets acquired
hereunder, or to enable the Purchaser or the Agent to exercise or enforce
any of their respective rights hereunder. Without limiting the generality
of the foregoing, the Seller will upon the request of the Agent: (a)
execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as
may be necessary or appropriate or as the Agent may request, and (b) mark
its master data processing records evidencing such Purchased Receivables
with a legend acceptable to the Agent, evidencing that the Purchaser has
acquired an interest therein as provided in this Agreement and (c) notify
Generali Underwriters, Inc. of the assignment of the Generali Commercial
Lines Policy with respect to the Purchased Receivables that it insures.
The Seller hereby authorizes the Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Purchased Receivables and the Related
Security now existing or hereafter arising without the signature of the
Seller where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Purchased Receivables, or any part thereof shall be sufficient as a
financing statement. The Seller shall, upon the request of the Agent at
any time and at the Seller's expense, notify the Obligors of Purchased
Receivables, or any of them, of the ownership of Purchased Assets by the
Purchaser. if the Seller fails to perform any of its agreements or
obligations under this Section 6.09, the Agent may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Seller upon the Agent's demand therefor. For
purposes of enabling the Agent to exercise its rights described in the
preceding sentence and elsewhere in this Article VI, the Seller and the
Purchaser hereby authorize the Agent and its successors and assigns to
take any and all steps in the Seller's name-and on behalf of the
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Seller and the Purchaser necessary or desirable, in the determination of
the Agent, to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Seller's name on checks and
other instruments representing Collections and enforcing such Receivables
and the related Contracts.
(b) In the event that the Seller receives any other instrument or
any writing which, in either event, evidences a Purchased Receivable, a
Purchased Contract or other Purchased Assets, the Seller shall deliver
such instrument or writing to the Collateral Trustee within one Business
Day after the Seller's receipt thereof, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Agent
and the Collateral Trustee.
SECTION 6.10. Obligations of the Seller With Respect to Receivables.
The Seller will (a) at its expense, regardless of any exercise by the Agent or
the Purchaser of its rights hereunder, timely and fully perform and comply with
all material provisions, covenants and other promises required to be observed by
it under the Contracts related to the Receivables to the same extent as if
Purchased Assets had not been sold hereunder and (b) pay when due any taxes,
including without limitation, sales and excise taxes, payable in connection with
the Purchased Receivables. In no event shall the Agent or the Purchaser have any
obligation or liability with respect to any Purchased Receivables or related
Contracts, nor shall any of them be obligated to perform any of the obligations
of the Seller or the originator or any of their Affiliates thereunder. The
Seller will timely and fully comply in all material respects with the Credit and
Collection Policy in regard to each Purchased Receivable and the related
Contract. The Seller will not make any change in the character of its business
or in the Credit and Collection Policy, which change would, in either case,
impair the collectibility of any Purchased Receivable.
SECTION 6.11. Rights of Obligors and Release of Contract Files.
(a) Notwithstanding any other provision contained in this Agreement,
including the Purchaser's remedies pursuant hereto, the rights of any
obligor to any Lot or VOI subject to a Purchased Contract shall, so long
as such Obligor is not in default thereunder, be superior to those of the
Purchaser hereunder, and the Purchaser 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 Agreement, the Purchaser shall
acquire through foreclosure any portion of the Lot or VOI subject to a
Purchased Contract, the Purchaser hereby specifically agrees to release or
cause to be released any Lot or VOI from any lien of the Purchaser upon
the request of the Obligor (including such obligor's heirs, successors and
assigns) to the Purchased 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 Purchased Contract.
(c) At such time as an Obligor has paid in full the purchase price
or the requisite percentage of the purchase price for deeding pursuant to
a Purchased Contract and has
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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 Agent by a certificate substantially in the form
attached hereto as Exhibit H (which certificate shall include a statement
to the effect that all amounts received in connection with such payment
have been deposited in the Agent's Account) of an officer of the Servicer
and shall request delivery to it (i) of the Contract File (or the portion
thereof in the Collateral Trustee's possession) related to a Purchased
Contract pursuant to which the Obligor has paid the purchase price in full
or, (ii) of the deeds of title, and any documents and records maintained
in connection therewith, related to a Purchased Contract pursuant to which
the obligor has paid the requisite percentage of the purchase price for
deeding. Upon receipt of such certificate and request or at such earlier
time as is required by applicable law, the Agent (a) shall promptly direct
the Collateral Trustee to release the Contract Files (or the portion
thereof in the Collateral Trustee's possession) to the Servicer or (b)
shall approve the release by the Collateral Trustee of the related deed of
title, and any documents and records maintained in connection therewith,
as applicable, to the obligor, provided that title to the VOI or Lot has
not already been deeded to the Obligor.
SECTION 6.12. Recordation of Assignments. The Servicer shall,
promptly following the initial Purchase Date and each Subsequent Purchase Date
(if any), cause to be filed for recordation in the proper offices (a) all
Assignments of Mortgages constituting Contract Conveyance Documents relating to
Receivables Purchased by the Purchaser on such date and (b) an assignment of
each Developer Mortgage related to Receivables Purchased by the Purchaser on
such date, except to the extent that the related VOIs or Lots are located in
Developments in any state with respect to which an opinion of counsel (in a form
acceptable to the Agent) has been delivered to the Agent stating that
recordation is not necessary or advisable to perfect or protect the interest of
the Purchaser in such Contract Mortgages or Developer Mortgages, as applicable
in such State.
SECTION 6.13. 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 Purchased Receivables and
Purchased 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 Agent and the Purchaser to the extent that such
payments and disbursements are not made by the seller in accordance with
Section 10.07.
SECTION 6.14. Servicer Representations and Warranties. The
originator, as initial Servicer, hereby makes, and each Successor Servicer by
acceptance of its appointment hereunder shall make, the following
representations and warranties as of each Purchase Date and, (1) in the case of
the initial Servicer, as of the date hereof, and (2) in the case of any
Successor Servicer, the date of such appointment. to each of the Purchaser and
the Agent:
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(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 this Agreement and each other document to be delivered by it
hereunder. The Servicer 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 Purchased
Receivables in accordance with the terms of this Agreement requires such
qualification, except where failure to qualify or to obtain such licenses
and approvals would not (i) have an adverse effect on the value or
collectibility of any Purchased Receivable or related Purchased Assets or
the ability of the Servicer to perform its obligations hereunder and under
the other documents delivered by it hereunder or (ii) have a material
adverse effect on the business, properties, operations, prospects, profits
or condition (financial or otherwise) of the Servicer.
(b) Due Authorization and No Conflict. The execution, delivery and
performance by the Servicer of this Agreement, the Originator Sale
Agreement and each other document to be delivered by it hereunder and
thereunder, 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.
This Agreement, the Originator Sale Agreement, and each other document
delivered by it hereunder or thereunder 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 this Agreement, the Originator Sale
Agreement and each other document delivered by it hereunder and
thereunder, the consummation of the transactions contemplated hereby or
thereby, the performance of and the compliance with the terms hereof or
thereof, have been obtained, except where the failure so to do would not
have a material adverse effect on the value of the Purchased Assets or the
interests of the Purchaser or therein.
(d) Enforceability. This Agreement, the Originator Sale Agreement
and each other document 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, subject to applicable bankruptcy,
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insolvency, moratorium, or other similar laws affecting the rights of
creditors.
(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 Agreement, the originator Sale Agreement or any of the
other documents delivered by it hereunder or thereunder, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or any of the other related documents, (iii) seeking any
determination or ruling that would adversely affect the performance by the
Servicer of its obligations under this Agreement, the Originator sale
Agreement or any other document delivered by it hereunder or thereunder,
(iv) seeking any determination or ruling that would adversely affect the
validity or enforceability of this Agreement, the Originator Sale
Agreement or any of the other documents delivered by it hereunder or
thereunder, or (v) seeking any determination or ruling that would have a
material adverse effect on the business, operations, condition (financial
or otherwise), properties, assets or prospects of the Servicer.
(f) Settlement Reports and Certificates. Each Monthly Settlement
Report, Purchase Date/Spread Account Surplus Settlement Report and
Commercial Paper Settlement Report and any other report or certificate
delivered by the Servicer pursuant to this Agreement shall be true and
correct in all material respects as of the date such report or certificate
is delivered.
(g) Servicer Default. No Servicer Default has occurred and is
continuing.
The representations and warranties set forth in this Section 6.14
shall survive the Purchase of Receivables by the Purchaser. Upon a discovery by
the Seller, the Servicer or the Agent of a material breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other such parties.
SECTION 6.15. Additional Covenants of the Servicer. From the date
hereof until the later of the Termination Date or the Collection Date, the
Servicer shall, unless the Agent shall otherwise consent in writing:
(a) Change in Payment Instructions to Obligors. Not add or terminate
any bank as a Lock-Box Bank from those listed in Schedule VII or make any
change in its instructions to Obligors regarding payments to be made to
any Lock-Box Bank, unless the 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, copies of
all agreements and documents signed by either the Seller 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
Purchaser and deposit such Collections into a Lock-Box Account or the
Agent's Account within one Business Day following
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Servicer's receipt thereof, and (ii) if either of the Originator or the
Seller receives any Collections, the servicer shall cause the Originator
or the Seller, as the case may be, to hold such Collections in trust for
the benefit of the Purchaser and deposit such Collections into a Lock-Box
Account or the Agent's 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 Purchased Contract, except
where failure to qualify would not have an adverse effect on the ability
of the servicer to perform its obligations hereunder and under the other
documents delivered by it hereunder and the Servicer 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
Purchased Contracts.
(d) Protection of Rights. The Servicer shall take no action which
would impair in any material respect the rights of any of the Agent or the
Purchaser in the Purchased Assets.
(e) Credit Standards and Collection Policies. The servicer shall
comply in all material respects with the Credit and Collection Policies in
regard to each Purchased Receivable and related Purchased Contract.
(f) Examination of Records. The Servicer will, from time to time
during regular business hours as requested by the Agent, permit the Agent,
or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records and (ii) to visit the offices and properties of
the Servicer for the purpose of examining such Records and to discuss
matters relating to the Receivables or the Servicer's performance
hereunder with any of the officers or employees of the Servicer having
knowledge of such matters.
(g) Financial Statements. The Servicer will furnish to the Agent the
financial statements, reports, financial and other information and notices
described in Section 5.02 of the Originator Sale Agreement, when required
to be furnished by the Originator thereunder and, promptly, such other
information as the Agent may from time to time reasonably request.
SECTION 6.16. Standby Servicer. The Standby Servicer shall perform
the obligations from time to time applicable to it under this Agreement,
including without limitation, under Section 6.01 and to become the Successor
Servicer hereunder if so appointed by the Agent. In order to permit the Standby
Servicer to be prepared to perform its obligations hereunder in the event that a
Servicer Default, the Servicer and the Standby Servicer agree to undertake the
procedures and perform the other obligations described in the Standby Servicing
Agreement.
Subject to the terms of any agreement between the standby Servicer
and the Purchaser or the Agent, the Standby Servicer may resign at any time by
not less than 60 days' notice to the Agent and the Servicer. In addition, the
Standby Servicer may be removed at any time without cause by the Purchaser or
the Agent by not less than 60 days' notice then given in writing to
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the Standby Servicer, the Servicer and the Seller. In the event of any such
resignation or removal, the Standby Servicer may be replaced by the Agent by
notice given in writing to the Servicer and the Seller.
SECTION 6.17. 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 Agent. Unless otherwise required by
applicable law, no such resignation shall be effective until a Successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 8.02 hereof.
SECTION 6.18. Repurchases; Clean-up; Right of First Refusal.
(a) Subject to Section 6.18(c), the Seller shall repurchase any
Purchased Receivable (together with the related Purchased Assets) on the
next Settlement Date or Purchase Date occurring after the Seller has
become aware, or has received written notice from the Agent, of any
uncured breach of a representation or warranty of the Seller in Section
4.01 with respect to such Purchased Receivable (each related Purchased
Contract, a "Defective Contract" and each such date, a "Defective contract
Release Date") by either (i) depositing in the Agent's Account the
Repurchase Price therefor or (ii) prior to the Termination Date, conveying
a new substitute Receivable(s) to the Purchaser that (A) on the applicable
Defective Contract Release Date is an Eligible Receivable (and the Seller
shall be deemed to have represented and warranted as such), (B) has an
Outstanding Balance at least equal to the Outstanding Balance of the
Purchased Receivable for which it is being substituted, (C) has a
remaining term that is no longer than the remaining term of the Purchased
Receivable for which it is being substituted and (D) after giving effect
to the substitution of which would not cause either (1) the
Overcollateralization Percentage to be less than Required
overcollateralization Percentage or (2) the aggregate Capital outstanding
hereunder to exceed the lesser of a) the Purchase Limit minus the Discount
Amount or b) the Capital Limit as determined by reference to the most
recent Monthly Settlement Report or Purchase Date/Spread Account Surplus
Settlement Report delivered by the Servicer to the Purchaser in accordance
with Section 6.07 hereof. On the date of any such substitution in
accordance with the preceding sentence, such new Eligible Receivable shall
become a Purchased Receivable and the Receivable so replaced shall cease
to be a Purchased Lease Receivable.
(b) In the event that any Purchased Receivable becomes a Defaulted
Receivable at any time after the date hereof, the Seller may, at its
election, repurchase such Defaulted Receivable by depositing into the
Agent's Account the Repurchase Price therefor on any Settlement Date (a
"Defaulted Receivable Release Date").
(c) The Seller shall notify the Agent of any Repurchase Price to be
paid or any
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Receivables to be substituted pursuant to Section 6.18(a) or (b) at least
one Business Day prior to the Settlement Date or Purchase Date on which
such Repurchase Price shall be paid and/or Receivables substituted, as
applicable, specifying the Defective Contract or Defaulted Contract and
the Repurchase Price and/or Receivables to be substituted therefor. Prior
to 11:00 A.M. New York City time on the relevant Settlement Date or
Purchase Date, the Seller shall deposit in the Agent's Account the
applicable Repurchase Price or, with respect to Receivables to be
substituted, shall have satisfied all of the requirements of Section 3.02
with respect to any new Receivables to be substituted as if such new
Receivables were to be Purchased on such date. Promptly thereafter, the
Servicer shall delete such Defective Contract or Defaulted Contract from
the Contract Schedule and shall notify the Agent to do the same with
respect to the records and any computer file maintained by it; provided
that it shall be a condition precedent to the effectiveness of the
repurchase of any relevant Defective Contract or Defaulted Contract
pursuant to Section 6.18(a) or (b) that the Seller shall have delivered to
the Agent evidence of deposit in the Agent's Account of the relevant
Repurchase Price or of the satisfaction of the conditions for substitution
of new Receivable(s) in respect of such Defective Contract or Defaulted
Contract.
(d) In the event that any time the aggregate Outstanding Balance of
Purchased Receivables is less than an amount equal to ten percent (10%) of
the Outstanding Balance of Purchased Receivables as of the initial
Purchase Date, the Seller may, at its election, repurchase all of the
outstanding Purchased Receivables at such time, together with all other
Purchased Assets, by paying, on any Settlement Date (a "Clean-Up
Repurchase Date"), the aggregate Repurchase Price for all such Purchased
Receivables, to the Agent's Account, and by paying all other obligations
owing the Agent and the Purchaser then outstanding hereunder (including,
without limitation, all Capital), or otherwise payable as a result of any
such payment (collectively, the "Clean-Up Amount").
(e) The Seller shall notify the Agent of the Clean-Up Amount to be
paid pursuant to Section 6.18(d) at least three Business Days prior to the
Clean-Up Repurchase Date. Upon obtaining the confirmation of the Agent as
to the calculation of the Clean-Up Amount, prior to 11:00 A.M. New York
City time on the relevant Settlement Date, the Seller shall pay the
Clean-Up Amount to a deposit account designated by the Agent, for the
benefit of the Agent and the Purchaser; provided that it shall be a
condition precedent to the effectiveness of the repurchase of any of the
Purchased Assets that the Seller shall have delivered to the Agent
evidence of deposit into such deposit account of the Clean-Up Amount.
(f) If the Purchaser or any Eligible Assignee (the "Transferring
Owner"), desires to exercise its right to assign all or a portion of the
Purchased Receivables (and related Purchased Assets) or any interest
therein (the "Offered Assets"), and the proposed assignee is any Person
other than an Eligible Assignee, the Transferring Owner shall first give
written notice (the "Transferor's Notice") to the Seller stating that the
Transferring owner's desire to make such transfer and the price which the
Transferring owner proposes to be paid for the offered Assets (the
"Offered Price"). Upon receipt of the Transferor's Notice, the Seller
shall have the irrevocable and exclusive option to purchase all of the
Offered Assets at the offered
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Price. The Seller's option under this Section 6,18(f) shall be exercisable
by a written notice to the Transferring Owner (which notice shall be
irrevocable and binding on the Seller), given no later than fifteen (15)
days from the date of the Transferor's Notice. If the Seller does not
exercise its option to purchase the Offered Assets at the offered Price
and deposit such Offered Price in available funds into the Agent's Account
within such fifteen day period, the Transferring owner shall be free to
sell the offered Assets to any Person at the same price as the offered
Price and on substantially similar terms.
(g) In connection with each repurchase pursuant to Section 6.18(a)
or (b), Section 6.18(d) or Section 6.18(f), and upon the satisfaction of
the conditions precedent set forth in Section 6.18(b),(c), (e) or (f), as
the case may be, the Agent shall automatically and without further action
be deemed to transfer, assign, set over and otherwise convey to the
Seller, without recourse, representation or warranty, all the right, title
and interest of Agent in and to any such Defective Contract, Defaulted
Contract or any other Purchased Assets in respect of which the Repurchase
Price, the Clean-Up Amount, or Offered Price has been paid or in respect
of which new Receivables have been substituted, as the case may be, and
all monies thereafter due or to become due with respect thereto, and all
proceeds thereof. In connection with each repurchase pursuant to this
Section 6.18 upon the satisfaction of the applicable conditions precedent
set forth in this Section 6.18, the Agent shall promptly direct the
Collateral Trustee to release the contract Files (or the portion thereof
in the Collateral Trustee's possession) to the Servicer (or to the Seller
if the Seller so directs). The Agent shall execute such documents 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
repurchased Purchased Assets pursuant to this subsection.
ARTICLE VII.
EVENTS OF TERMINATION.
SECTION 7.01. Events of Termination. If any of the following events
("Events of Termination") shall occur:
(a) (i) The Servicer (if other than the Agent) shall fail to perform
or observe any term, covenant or agreement hereunder (other than as
referred to in clause (ii) of this Section 7.01(a)) and such failure shall
remain unremedied for three Business Days or (ii) either the Servicer (if
other than the Agent) or the Seller shall fail to make any payment or
deposit to be made by it hereunder when due; or
(b) (i) Any representation or warranty made or deemed to be made by
the Seller (or any of its officers) under or in connection with this
Agreement or any monthly Settlement Report, Purchase Date/Spread Account
Surplus Settlement Report, Commercial Paper Settlement Report or other
information or report delivered pursuant hereto shall prove to have been
false or incorrect in any material respect when made and (ii) any
representation or warranty made or deemed to be made by the Originator or
the Servicer (or any of their respective officers or agents) under or in
connection with the Originator Sale Agreement
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shall prove to have been false or incorrect when made; provided, however,
that if any such representation or warranty relates solely to a Purchased
Receivable which is repurchased by the Seller in accordance with Section
6.18, the breach of such representation or warranty shall not give rise to
an Event of Termination pursuant to this subsection (b); or
(c) Either the Seller or the Originator shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement
or in the Originator Sale Agreement (or, with respect to the Seller, in
any other material agreement) on its part to be performed or observed and
any such failure shall remain unremedied for three Business Days after
written notice thereof shall have been given by the Agent to the Seller;
or
(d) The Seller or the Originator shall fail to pay any principal of
or premium or interest on any Debt in an amount in excess of $10,000 (with
respect to the Seller) or $250,000 (with respect to the Originator), 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 Debt in an amount in excess of
$10,000 (with respect to the Seller) or $750,000 (with respect to the
Originator) 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
(e) Either (i) any Purchase shall for any reason, except to the
extent permitted by the terms hereof, cease to create a valid and
perfected first priority 100% ownership or security interest in each
Purchased Receivable and the Related Security and Collections with respect
thereto or (ii) any purchase by the Seller of a Receivable from the
Originator shall, for any reason, cease to create in favor of the Seller a
valid and perfected first priority ownership or security interest in each
Purchased Receivable and the Related Security and Collections with respect
thereto; provided, however, that if any such cessation of ownership or
perfection relates solely to a Purchased Receivable which is repurchased
by the Seller in accordance with Section 6.18, such cessation shall not
give rise to an Event of Termination pursuant to this subsection (e); or
(f) (i) The Seller or the Originator shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Seller or the Originator seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property; or (ii) the Seller or the
Originator shall take any corporate action to authorize
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any of the actions set forth in clause (i) above in this Section 7.01(f);
or
(g) The Default Ratio for three consecutive months shall exceed
1.20%; or
(h) There shall have been any material adverse change in the
financial condition or operations of the Originator since December 31,
1994 until the date hereof, or there shall have occurred any event which
materially adversely affects the collectibility of the Receivables or
there shall have occurred any other event which materially adversely
affects the ability of the Seller or the Originator to collect Receivables
or to perform their respective obligations hereunder and under the
Originator Sale Agreement; or
(i) (i) There shall have occurred an "Event of Termination" under
the Originator Sale Agreement, or (ii) the Originator Sale Agreement shall
have ceased to be valid, binding and enforceable as against any of the
parties thereto without any amendment, modification, waiver or termination
of any terms or conditions thereof, other than as agreed to in writing by
the Agent, or (iii) the Originator shall have terminated the Originator
Sale Agreement for any reason, or (iv) the assignment to the Agent of all
of the seller's right and title to and interest in the Originator Sale
Agreement shall have ceased, for any reason, to be fully effective and
enforceable by the Agent as against any of the parties of the Originator
Sale Agreement; or
(j) The Originator shall cease to own (whether directly or
indirectly) 100% of the issued and outstanding stock of the Seller; or
(k) A regulatory, tax or accounting body has ordered that the
activities of the Purchaser, or any Affiliate of the Purchaser,
contemplated hereby be terminated or, as a result of any other event or
circumstance, the activities of the Purchaser contemplated hereby may
reasonably be expected to cause the Purchaser, the Person then acting as
the administrator or the manager for the Purchaser, or any of their
respective Affiliates to suffer materially adverse regulatory, accounting
or tax consequences; or
(l) The Seller shall fail to make payment as specified in Section
2,05(f) and such failure shall remain unremedied for more than one
Business Day after written notice thereof shall have been given by the
Agent to the Seller; or
(m) The Overcollateralization Percentage shall be less than the
Minimum Overcollateralization Percentage at any time; or
(n) The commercial paper dealer of the Purchaser is unable to retire
maturing commercial paper issued to fund or maintain Purchases hereunder
through the issuance of new commercial paper for 90 consecutive days; or
(o) The Originator has a tangible net worth (as defined in GAAP
plus, if not otherwise included, non-redeemable subordinated debt) of less
than $5,000;000; or
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(p) The Bennett Funding Group, Inc., Patrick R. Bennett, Michael A.
Bennett or their Affiliates, singularly or in combination, shall cease to
own at least 51% of the voting stock of the originator; or
(q) The Seller or any ERISA Affiliate of the Seller shall have (i)
engaged in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States
Department of Labor; (ii) permitted to exist any accumulated funding
deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the Code, or funding deficiency with respect to any Benefit Plan other
than a Multiemployer Plan; (iii) failed to make any payments to any
Multiemployer Plan that the Seller or any ERISA Affiliate may be required
to make under the agreement relating to such Multi-employer Plan or any
law pertaining thereto; (iv) terminated any Benefit Plan so as to result
in a liability; or (v) permitted to exist any occurrence of any reportable
event described in Title IV of ERISA which represents a material risk of a
liability of the Seller or any ERISA Affiliate under ERISA or the Code, if
such prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events occurring within any fiscal year of the
Seller, in the aggregate, involve a payment of money or an incurrence of
liability by the Seller or any ERISA Affiliate in an amount in excess of
$25,000; or
(r) A Servicer Default shall have occurred; or
(s) There shall have occurred an "Event of Default" under the
Receivables Loan Agreement, then, and in any such event, the Agent may, by
notice to the Seller, declare the Termination Date to have occurred,
except that, in the case of any event described in Section 7.01(l) or
clause (i) of Section 7.01(f) above, the Termination Date shall be deemed
to have occurred automatically upon the occurrence of such event. Upon any
such declaration or automatic occurrence, .the Agent and the Purchaser
shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the
UCC of the applicable jurisdiction and other applicable laws, which rights
shall be cumulative.
ARTICLE VIII
SERVICER DEFAULTS.
SECTION 8.01. 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 Agent any Monthly
Settlement Report, Purchase Date/Spread Account Surplus Settlement Report
or Commercial Paper Settlement Report pursuant to Section 6.07 on or
before the date such delivery is due under the terms of this Agreement; or
(b) any failure by the Servicer to deliver any other information to
the Agent required pursuant to Section 6.01 on or before the date such
information, payment, transfer,
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deposit, instruction or notice is required to be made or given under the
terms of this Agreement, which continues unremedied for a period of three
Business Days after such information is due under the terms of this
Agreement; or
(c) any failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in
this Agreement or any of the other related documents to which it is a
party which continues unremedied for a period of ten Business Days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the servicer by the Agent, or to the
Servicer and the Agent by the Purchaser; or the Servicer shall assign its
duties under this Agreement or under any of the other related documents to
which it is a party, except as permitted in accordance with the terms of
Sections 8.02 and 10.04; or
(d) any representation, warranty or certification made by the
Servicer in this Agreement or any other related document to which it is a
party or in any certificate delivered pursuant to this Agreement or any
other Transaction Document to which it is a party shall prove to have been
incorrect in any material respect when made; or
(e) The Seller or the Originator shall fail to pay any principal of
or premium or interest on any Debt in an amount in excess of $10,000 (with
respect to the Seller) or $250,000 (with respect to the Originator), 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 Debt in an amount in excess of
$10,000 (with respect to the Seller) or $750,000 (with respect to the
Originator) 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
(f) a final judgment is rendered against the Servicer while acting
as Servicer in an amount greater than $1,000,000 and, within 45 days after
entry thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 45 days after the expiration of any such stay,
such judgment is not discharged; or
(g) either the Agent or the Purchaser (i) shall receive notice from
the Servicer that the Servicer is no longer able to discharge its duties
under this Agreement or (ii) shall determine, in their respective
reasonable judgment and based upon published reports (including wire
services), which they reasonably believe in good faith to be reliable,
that the Servicer: (A) has experienced a material adverse change in its
business, assets, liabilities, operations, or financial condition, (B) has
defaulted on any of its material obligations (other than those included in
this Agreement), or (c) has ceased to conduct its business in the ordinary
course, then, so long as such Servicer Default shall not have been
remedied, the
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Agent by notice given in writing to the Servicer (a "Servicer Termination
Notice"), may terminate all of the rights and obligations of the Servicer
as Servicer under this Agreement (such termination being herein called a
"Servicer Transfer"). After receipt by the Servicer of such Servicer
Termination Notice, all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Standby Servicer or another
Successor Servicer appointed pursuant to Section 8.02; and, without
limitation, the 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 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 Purchased Receivables and related Purchased
Assets 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 Agent's Account or which shall thereafter be received by the Servicer
with respect to the Purchased Receivables, 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
Purchased Assets made at such premises. The Servicer shall promptly
transfer its electronic records relating to the Purchased Assets 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 Purchased Assets 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.
SECTION 8.02. Appointment of Successor.
(a) Appointment. On and after the receipt by the Servicer of a
Servicer Termination Notice pursuant to Section 8.01, or any permitted
resignation of the Servicer pursuant to Section 6.17, 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 Agent in writing or, if no such date is specified in such Servicer
Termination Notice, or otherwise specified by the Agent, until a date
mutually agreed upon by the Servicer and the Agent. The Agent shall as
promptly as possible after the giving of a Termination Notice appoint the
Standby servicer or another 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 Agent.
Notwithstanding the foregoing, the 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
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Purchased 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 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 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 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
10.05, and shall pass to and be vested in the Seller and, without
limitation, the Seller is hereby authorized and empowered to execute and
deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish
all other acts or things necessary or appropriate to effect the purposes
of such transfer of servicing rights upon termination of this Agreement.
The Successor Servicer shall cooperate with the Seller in effecting the
termination of the responsibilities and rights of the Successor Servicer
to conduct servicing on the Purchased Contracts. The Successor Servicer
shall transfer its electronic records relating to the Purchased Contracts
to the Seller in such electronic form as the Seller may reasonably request
and shall transfer all other records, correspondence and documents
relating to the Purchased Contracts to the Seller in the manner and at
such times as the Seller shall reasonably request. To the extent that
compliance with this Section 8.02 shall require the Successor Servicer to
disclose the information of any kind which the Successor Servicer deems to
be confidential, the Seller 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 Seller.
SECTION 8.03. 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
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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 Fitch). 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 Purchased Contracts pursuant
hereto, together with the risk of any liabilities or counterclaims which could
be incurred in connection therewith.
ARTICLE IX.
INDEMNIFICATION
SECTION 9.01. Indemnities by the Seller. Without limiting any other
rights which the Agent, the Purchaser or any of their respective Affiliates may
have hereunder or under applicable law, the Seller hereby agrees to indemnify
the Agent, the Purchaser, and each of their respective Affiliates from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or as a result of this
Agreement or the ownership of Purchased Assets or in respect of any Receivable
or any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of the Agent,
the Purchaser or such Affiliate or (b) recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Purchased
Receivables; provided, however, that the liability for Indemnified Amounts
partially attributable to other Persons from whom the Purchaser purchases
receivables or to whom the Purchaser makes loans shall be reasonably allocated
between the Seller and such other Persons by the Purchaser. Without limiting the
foregoing, the Seller shall indemnify the Agent, the Purchaser and each of their
respective Affiliates for Indemnified Amounts relating to or resulting from:
(i) any Purchased Receivable treated as or represented by the
Seller to be an Eligible Receivable which is not at the applicable time an
Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by the Seller, the servicer (if the originator or one of its
Affiliates) or any of their respective officers under or in connection
with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
(iii) the failure by the Seller or the Servicer (if the
Originator or one of its Affiliates) to comply with any term, provision or
covenant contained in this Agreement or any agreement executed in
connection with this Agreement, or with any applicable law, rule or
regulation with respect to any Receivable, the related Contract or the
Related Security, or
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the nonconformity of any Receivable, the related Contract or the Related
Security with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Purchaser
or to transfer to the Purchaser, legal and equitable title to and
ownership of, a 100% ownership or security interest in the Receivables
which are, or are purported to be, Purchased Receivables, together with
all Collections and Related Security, free and clear of any Adverse Claim
(except as otherwise provided herein or in the Receivables Loan Agreement)
whether existing at the time of the Purchase of such Receivable or at any
time thereafter;
(v) the failure to maintain, as of the close of business on
each Business Day prior to the Termination Date, an amount of capital
outstanding which is less than or equal to the lesser of (x) the Purchase
Limit minus the Discount Amount on such Business Day, or (y) the Capital
Limit on such Business Day;
(vi) the failure to file, 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 any
Receivables which are, or are purported to be, Purchased Receivables,
whether at the time of any Purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the obligor) of the obligor to the payment of
any Receivable which is, or is purported to be, a Purchased Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale VOIs or Lots related to such Receivable or
the furnishing or failure to furnish such VOIs or Lots;
(viii) any failure of the Seller or the Servicer (if the
Originator or one of its Affiliates) to perform its duties or obligations
in accordance with the provisions of this Agreement or any failure by the
Originator, the Seller or any Affiliate thereof to perform its respective
duties under the Contracts;
(ix) any breach of contract or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with the VOls or the Lots which are the
subject of any Receivable or Contract;
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in connection
with the Purchased Receivables;
(xi) any repayment by the Agent or the Purchaser of any amount
previously distributed in reduction of Capital or payment of Yield or any
other amount due hereunder, in each case which amount the Agent or the
Purchaser believes in good faith is required to be repaid;
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(xii) the commingling of Collections of Purchased Receivables
at any time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or the ownership of
Purchased Assets or in respect of any Receivable, Related Security or
Contract;
(xiv) any failure by the Seller to give reasonably equivalent
value to the Originator in consideration for the transfer by the
Originator to the Seller of any Receivables or Related Security, or any
attempt by any Person to void or otherwise avoid any such transfer under
any statutory provision or common law or equitable action, including,
without limitation, any provision of the Bankruptcy Code; or
(xv) any failure of the Seller, the Originator or any of their
respective agents or representatives (including, without limitation,
agents, representatives and employees of the Originator acting pursuant to
authority granted under Section 6.01) to remit to the Servicer or the
Agent, Collections of Purchased Receivables remitted to the Seller or any
such agent or representative.
Any amounts subject to the indemnification provisions of this Section 9.01 shall
be paid by the Seller to the Agent within two Business Days following the
Agent's written demand therefor.
SECTION 9.02. Indemnities by the Servicer. Without limiting any
other rights which the Agent, the Purchaser or any of their respective
Affiliates may have hereunder or under applicable law, the Servicer hereby
agrees to indemnify the Agent, the Purchaser, and each of their respective
Affiliates from and against any and all Indemnified Amounts awarded against or
incurred by any of them arising out of or as a result of this Agreement or the
ownership of Purchased Assets or in respect of any Receivable or any Contract,
excluding, however, (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of the Agent, the Purchaser or such
Affiliate or (b) recourse (except as otherwise specifically provided in this
Agreement) for uncollectible Purchased Receivables; provided, however, that the
liability for Indemnified Amounts partially attributable to other Persons acting
as servicers for receivables purchased by the Purchaser Or collateral pledged to
the Purchaser shall be reasonably allocated between the Servicer and such other
Persons by the Purchaser. without limiting the foregoing, the Servicer shall
indemnify the Agent, the Purchaser and each of their respective Affiliates for
Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Servicer (if the originator or one of its Affiliates) or any
of their respective officers under or in connection with this Agreement,
which shall have been false or incorrect in any material respect when made
or deemed made or delivered;
(ii) the failure by the Servicer (if the Originator or one of
its Affiliates) to comply with any term, provision or covenant contained
in this Agreement or any agreement executed in connection with this
Agreement, or with any applicable law, rule or regulation
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with respect to any Receivable, the related Contract or the Related
Security, or the nonconformity of any Receivable, the related Contract or
the Related Security with any such applicable law, rule or regulation;
(iii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment of
any Receivable which is, or is purported to be, a Purchased Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale VOIs or Lots related to such Receivable or
the furnishing or failure to furnish such VOIs or Lots;
(iv) any failure of the Servicer (if the Originator or one of
its Affiliates) to perform its duties or obligations in accordance with
the provisions of this Agreement or any failure by the Originator, the
Seller or any Affiliate thereof to perform its respective duties under the
Contracts;
(v) any breach of contract or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with the VOIs or the Lots which are the
subject of any Receivable or Contract;
(vi) any repayment by the Agent or the Purchaser of any amount
previously distributed in reduction of capital or payment of Yield or any
other amount due hereunder, in each case which amount the Agent or the
Purchaser believes in good faith is required to be repaid;
(vii) the commingling by the Servicer of Collections of
Purchased Receivables at any time with other funds;
(viii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or reinvestments or the
ownership of Purchased Assets or in respect of any Receivable, Related
Security or Contract; or
(ix) any failure of the Seller, the originator or any of their
respective agents or representatives (including, without limitation,
agents, representatives and employees of the Originator acting pursuant to
authority granted under Section 6.01) to remit to the Servicer or the
Agent, Collections of Purchased Receivables remitted to the seller or any
such agent or representative.
Any amounts subject to the indemnification provisions of this Section 9.02 shall
be paid by the Servicer to the Agent within two Business Days following the
Agent's written demand therefor.
The applicable Affected Party shall deliver to the indemnifying party under
Section 9.01 and Section 9.02, within a reasonable time after the Affected
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the Affected Party relating to the claim giving rise
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to the Indemnified Amounts. Each Affected Party will cooperate with the Seller
and the Servicer in connection with any claim giving rise to the Indemnified
Amounts to minimize the liability of such indemnifying parties, provided that
nothing contained herein shall obligate any Affected Party to take any action
which, in the opinion of the applicable Affected Party, is unlawful or otherwise
disadvantageous to such Affected Party.
ARTICLE X.
MISCELLANEOUS
SECTION 10.01. Amendments and Waivers.
(a) Except as provided in Section 10.01(b), no amendment or
modification of any provision of this Agreement shall be effective without
the written agreement of the Seller, the Servicer, the Agent and the
Purchaser, and no termination or waiver of any provision of this Agreement
or consent to any departure therefrom by the Seller or the Servicer shall
be effective without the written concurrence of the Agent and the
Purchaser. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) Notwithstanding the provisions of Section 10.01(a), in the event
that there is more than one Purchaser, the written consent of each
Purchaser shall be required for any amendment, modification or waiver (i)
reducing any Capital, or the Yield thereon, for any Fixed Period, (ii)
postponing any date for any payment of any Capital, or the Yield thereon,
for any Fixed Period, or (iii) modifying the provisions of this Section
10.01 and (iv) increasing the Capital Limit or the Purchase Limit or (v)
reducing the Required overcollateralization Percentage and the Minimum
Overcollateralization Percentage.
SECTION 10.02. 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 specified in such party's
Assignment and Acceptance 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 (a) notice by
mail, five days after being deposited in the United States mails, first class
postage prepaid, (b) notice by telex, when telexed against receipt of
answerback, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to Article
II shall not be effective until received.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Agent or the Purchaser 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.
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SECTION 10.04. Binding Effect; Assignability. This Agreement shall
be binding upon and inure to the benefit of the Seller, the Agent, the Purchaser
and their respective successors .and permitted assigns. This Agreement and the
Purchaser's rights and obligations hereunder and interest herein shall be
assignable in whole or in part (including by way of the sale of participation
interests therein) by the Purchaser and its successors and assigns. Neither the
Seller nor the Servicer may assign any of its rights and obligations hereunder
or any interest herein without the prior written consent of the Purchaser and
the Agent. The parties to each assignment or participation made pursuant to this
Section 10.04 shall execute and deliver to the Agent for its acceptance and
recording in its books and records, an Assignment and Acceptance or a
participation agreement or other transfer instrument reasonably satisfactory in
form and substance to the Agent and the Seller. Each such assignment or
participation shall be effective as of the date-specified in the applicable
Assignment and Acceptance or other agreement or instrument only after the
execution, delivery, acceptance and recording as described in the preceding
sentence. The Agent shall notify the Seller of any assignment or participation
thereof made pursuant to this Section 10.04. The Purchaser may, in connection
with any assignment or participation or any proposed assignment or participation
pursuant to this Section 10.04, disclose to the assignee or participant or
proposed assignee or participant any information relating to the Seller and the
Purchased Assets furnished to the Purchaser by or on behalf of the Seller or the
Servicer.
SECTION 10.05. Term of this Agreement. This Agreement, including,
without limitation, the Seller's obligation to observe its covenants set forth
in Articles V and VI, and the Servicer's obligation to observe its covenants Bet
forth in Article VI, shall remain in full force and effect until the Collection
Date; provided, however, that the rights and remedies with respect to any breach
of any representation and warranty made or deemed made by the Seller pursuant to
Articles III and IV and the indemnification and payment provisions of Article IX
and-Article X and the provisions of Section 10.08 and Section 10.09 shall be
continuing and shall survive any termination of this Agreement.
SECTION 10.06. Governing Law; Jury Waiver. THIS 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 PURCHASER IN THE PURCHASED RECEIVABLES, OR REMEDIES HEREUNDER, IN RESPECT
THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. RACE OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING
DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.
SECTION 10.07. Costs. Expenses and Taxes. (a) in addition to the
rights of indemnification granted to the Agent, the Purchaser and its Affiliates
under Article VIII hereof, the Seller agrees to pay on demand all costs and
expenses of the Purchaser and the Agent incurred in connection with the
preparation, execution, delivery, administration (including periodic auditing),
or any waiver or consent issued in connection with, this Agreement and the other
documents to be
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delivered hereunder or in connection herewith or incurred in connection with any
amendment or modification of this Agreement and other documents to be delivered
hereunder or in connection herewith that is necessary or requested by any of the
Seller, the originator, Fitch or S&P or made necessary or desirable as a result
of the actions of any regulatory, tax or accounting body affecting the Purchaser
and its Affiliates, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent and the Purchaser with respect
thereto and with respect to advising the Agent and the Purchaser as to their
respective rights and remedies under this Agreement and the other documents to
be delivered hereunder or in connection herewith, and all costs and expenses, if
any (including reasonable counsel fees and expenses), incurred by the Agent or
the Purchaser in connection with the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith.
(b) The Seller shall pay on demand any and all commissions of
placement agents and dealers in respect of commercial paper notes issued
to fund the Purchase of any Purchased Assets and any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this
Agreement, the other documents to be delivered hereunder or any agreement
or other document providing liquidity support, credit enhancement or other
similar support to the Purchaser in connection with this Agreement or the
funding or maintenance of Purchases hereunder.
(c) The Seller shall pay on demand all other costs, expenses and
taxes (excluding income taxes) incurred by any Issuer or any general or
limited partner or shareholder of such Issuer ("Other Costs"), including,
without limitation, the cost of auditing such Issuer's books by certified
public accountants, the cost of rating such Issuer's commercial paper by
independent financial rating agencies, the taxes (excluding income taxes)
resulting from such Issuer's operations, and the reasonable fees and
out-of-pocket expenses of counsel for the Issuer or any counsel for any
general or limited partner or shareholder of the Issuer with respect to
(i) advising such Person as to its rights and remedies under this
Agreement and the other documents to be delivered hereunder or in
connection herewith, (ii) the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith and (iii)
advising such Person as to the issuance of the Issuer's commercial paper
notes to fund the Purchase of any Purchased Assets and action in
connection with such issuance.
SECTION 10.08. No Proceedings. Each of the Seller, the Agent, the
Servicer and the Purchaser each hereby agrees that it will not institute
against, or join any other Person in instituting against, any Issuer any
proceedings of the type referred to in clause (i) of Section 7.01(f) so long as
any commercial paper issued by such Issuer shall be outstanding or there shall
not have elapsed one year and one day since the last day on which any such
commercial paper shall have been outstanding.
SECTION 10.09. Recourse Against Certain Parties. No recourse under
or with respect to any obligation, covenant or agreement (including, without
limitation, the payment of any fees or any other obligations) of the Purchaser
as contained in this Agreement or any other agreement, instrument or document
entered into by it pursuant hereto or in connection herewith
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shall be had against any administrator of the Purchaser or any incorporator,
affiliate, stockholder, officer, employee or director of the Purchaser or of any
such administrator, as such, by the enforcement of any assessment or by any
legal or equitable proceeding, by virtue of any statute or otherwise; it being
expressly agreed and understood that the agreements of the Purchaser contained
in this Agreement and all of the other agreements, instruments and documents
entered into by it pursuant hereto or in connection herewith are, in each case,
solely the corporate obligations of the Purchaser, and that no personal
liability whatsoever shall attach to or be incurred by any administrator of the
Purchaser or any incorporator, stockholder, affiliate, officer, employee or
director of the Purchaser or of any such administrator, as such, or any other
them, under or by reason of any of the obligations, covenants or agreements of
the Purchaser contained in this Agreement or in any other such instruments,
documents or agreements, or which are implied therefrom, and that any and all
personal liability of every such administrator of the Purchaser and each
incorporator, stockholder, affiliate, officer, employee or director of the
Purchaser or of any such administrator, or any of them, for breaches by the
Purchaser of any such obligations, covenants or agreements, which liability may
arise either at common law or at equity, by statute or constitution, or
otherwise, is hereby expressly waived as a condition of and in consideration for
the execution of this Agreement. The provisions of this Section 10.09 shall
survive the termination of this Agreement.
SECTION 10.10. Execution in Counterparts; Severability; Integration.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement. In case any provision in or obligation under this
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. This Agreement contains the
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 among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings other than the fee letters
described in Section 2.09.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: BFICP CORPORATION
By:______________________________________
Title:
BFICP Corporation
Two Clinton Square
Syracuse, New York 13202
Attention:
Facsimile No.:
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Telephone No.:
THE SERVICER: BENNETT FUNDING INTERNATIONAL, LTD.
By:______________________________________
Title:
Bennett Funding International, Ltd.
Two Clinton Square
Syracuse, New York 13202
Attention: William P. Crowley
Facsimile No.: (315) 422-9359
Telephone No.:
THE AGENT: INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC.
By:______________________________________
Title:
Internationale Nederlanden (U.S.)
Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.: 212-593-3362
Confirmation No.: 212-446-0966
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: BFICP CORPORATION
By:______________________________________
Title:
BFICP Corporation
Two Clinton Square
Syracuse, New York 13202
Attention:
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Facsimile No.:
Telephone No.:
THE SERVICER: BENNETT FUNDING INTERNATIONAL, LTD.
By:______________________________________
Title:
Bennett Funding International, Ltd.
Two Clinton Square
Syracuse, New York 13202
Attention: William P. Crowley
Facsimile No.: (315) 422-9359
Telephone No.:
THE AGENT: INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKETS, INC.
By:______________________________________
Title:
Internationale Nederlanden (U.S.)
Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.: 212-593-3362
Confirmation No.: 212-446-0966
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THE PURCHASER: HOLLAND LIMITED SECURITIZATION, INC.
By: Internationale Nederlanden
(U.S.) Capital Markets, Inc.,
as attorney-in-fact
By:______________________________________
Title:
Holland Limited Securitization, Inc.
c/o International Nederlanden
(U.S.) Capital Markets, Inc.
135 East 57th Street
New York, New York 10022-2101
Attention: Joseph Weingarten
Facsimile No.: 212-593-3362
Confirmation No.: 212-446-0966
c/o Lord Securities Corporation
2 Wall Street, 19th Floor
New York, New York 10005
Attention; Andrew L. Stidd
Facsimile No.: 212-346-9008
Telephone No. 212-346-9012
RESORT FUNDING, INC.
RECEIVABLES FINANCING FACILITY
ASSIGNMENT, RELEASE AND CUSTODIAL AGREEMENT
THIS ASSIGNMENT, RELEASE AND CUSTODIAL AGREEMENT (the "Agreement") is made as of
the 24th day of November, 1997, and among
RESORT FUNDING, INC., formerly known as Bennett Funding International,
Ltd., a Delaware corporation ("RFI," and in its capacity as Servicer under
the RPA (as hereinafter defined) and the RLSA (as hereinafter defined),
the "Servicer");
BFICP CORPORATION, a Delaware corporation ("BFICP");
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited
liability company ("CSFB," and in its capacity as Agent under the RLSA
pursuant to this Agreement and the RLSA, the "Agent," and in its capacity
as Calculation Agent pursuant to this Agreement and the Sinking Fund
Agreement (as hereinafter defined), the "Calculation Agent");
ING (U.S.) CAPITAL CORPORATION, formerly known as Internationale
Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("ING
Capital");
ING (U.S.) CAPITAL MARKETS, INC., formerly known as Internationale
Nederlanden (U.S.) Capital Markets, Inc., a Delaware corporation ("ING
Markets," in its capacity as Agent under the RPA and the RLSA, the
"Initial Agent," in its capacity as Calculation Agent under the Sinking
Fund Agreement, the "Initial Calculation Agent," in its capacity as
Liquidity Agent under the Liquidity Agreement (as hereinafter defined),
the "Liquidity Agent," and in its capacity as Enhancement Agent under the
Enhancement Agreement (as hereinafter defined), the "Enhancement Agent");
HOLLAND LIMITED SECURITIZATION, INC., a Delaware corporation ("HLS");
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, a national banking
association ("First Trust"), in its capacity as former Trustee (as
successor Trustee to BankAmerica National Trust Company ("BA")) pursuant
to the Collateral Trust Agreement (as hereinafter defined) (the
"Trustee"), in its capacity as Custodian pursuant to Section 5 of the
Assignment Agreement (as hereinafter defined) (the "Initial Custodian"),
in its capacity as Custodian pursuant to this Agreement (the "Custodian"),
and in its capacity as Collateral Agent pursuant to the Sinking Fund
Agreement (the "Collateral Agent"); and
CONCORD SERVICING CORPORATION, an Arizona corporation ("Concord"), in its
capacity as temporary servicer under the RPA and the RLSA pursuant to the
Servicing Agreement (as hereinafter defined) (the "Temporary Servicer"),
and in its capacity as standby servicer under the RPA and the RLSA
pursuant to the Standby Servicing Agreement (as hereinafter defined) (the
"Standby Servicer").
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Capitalized terms used in this Agreement, unless otherwise defined herein, have
the meanings ascribed to such terms in the RPSA, RPA, RLSA, Collateral Trust
Agreement and Sinking Fund Agreement (each as defined in the Recitals, Part A).
RECITALS
A. Existing and Prior Agreements
BFICP and RFI are parties to the Receivables Purchase and Sale Agreement dated
as of May 25, 1995 (the "RPSA"), pursuant to which, among other things, RFI
sold, transferred, conveyed and assigned to BFICP all of RFI's right title and
interest in and to the Assets, as described and identified in the RPSA.
BFICP, RFI as Servicer, ING Capital, as assignee of HLS and as the Initial
Agent, are parties, and HLS was a party, to the Receivables Purchase Agreement
dated as of May 25, 1995 (the "RPA"), pursuant to which, among other things,
BFICP sold the Purchased Assets, as described and identified in the RPA,
initially to HLS and subsequently to ING Capital.
BFICP as Borrower, RFI as Servicer, ING Capital, as assignee of HLS, as a Lender
and as the Initial Agent, are parties, and HLS was a party, to the Receivables
Loan and Security Agreement dated as of May 25, 1995 (the "RLSA" and together
with the RPA, the Transfer Agreements) pursuant to which, among other things,
the Lender agreed to make Loans to BFICP and BFICP, as security for the Loans,
granted a lien and security interest in the Pledged Assets, as described and
identified in the RLSA, to the Initial Agent for its benefit and for the benefit
of the Lender.
BFICP is the maker of a Promissory Note payable to RFI dated May 25, 1995 (the
"Promissory Note"), pursuant to Section 2.02(c) of the RPSA.
RFI and ING Capital, as assignee of HLS, as secured parties, First Trust as
successor to BA, as Collateral Agent, and as assignee of ING Markets, as
Calculation Agent (the "Initial Calculation Agent"), are parties, and HLS and
ING Markets, as Calculation Agent, were parties, to a Sinking Fund Account
Agreement dated as of May 25, 1995 (the "Sinking Fund Agreement")
The Chase Manhattan Bank (National Association), as Standby Servicer, RFI and
HLS were parties to a Standby Servicing Agreement dated as of May 25, 1995 (the
"Initial Standby Servicing Agreement").
Concord, as temporary servicer, and RFI are parties to a Servicing Agreement
dated as of April 15, 1996 (the "Servicing Agreement").
The Processing Center, Inc., as subservicer, and RFI are parties to a
subservicing Service Agreement dated as of October 2, 1995 (the "Subservicing
Agreement").
HLS and First Trust (as successor to BA), as the Trustee, were parties to a
Collateral Trust and Security Agreement dated as of May 25, 1995 (the
"Collateral Trust Agreement"), pursuant to
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which, among other things, HLS granted a lien and security interest in all of
its interest in the Pledged Assets to the Trustee.
HLS, as the Borrower, ING Markets as the sole Liquidity Lender and the Liquidity
Agent were parties to a Liquidity Agreement dated as of May 25, 1995 (the
"Liquidity Agreement").
HLS, as the Borrower, ING Markets as the sole Enhancement Lender and the
Enhancement Agent were parties to an Enhancement Agreement dated as of May 25,
1995 (the "Enhancement Agreement," and with the Collateral Trust Agreement, the
Liquidity Agreement and the Guaranty (as hereinafter defined), the "Terminated
Agreements).
Internationale Nederlanden Bank N.V., as the Guarantor under a Guaranty in favor
of HLS as the Borrower dated May 25, 1995 (the "Guaranty"), was the guarantor of
the obligations of ING Markets, in its capacities as Liquidity Lender under the
Liquidity Agreement and Enhancement Lender under the Enhancement Agreement.
BFICP, RFI, ING Capital, as assignee of HLS, and ING Markets, the Initial Agent,
the Trustee, the Initial Collection Agent and the Collateral Agent are parties,
and HLS was a party, to certain agreements, documents and instruments executed
by or in favor or for the benefit of BFICP, RFI, HLS, ING Capital and ING
Markets in connection with the Transfer Agreements and the RPSA, including,
without limitation, the Promissory Note, the Sinking Fund Agreement, the
Servicing Agreement and the Subservicing Agreement, but not including the
Terminated Agreements and the Initial Standby Servicing Agreement (collectively,
with the Transfer Agreements, the RPSA and the Assignment Agreement (as
hereinafter defined), the "Assigned Agreements").
HLS, ING Markets, ING Capital, the Trustee, the Initial Custodian, BFICP and RFI
are parties to the Assignment and Custodial Agreement dated as of June 17, 1996
(the "Assignment Agreement").
B. Transactions Pursuant to the Assignment Agreement
Pursuant to the Assignment Agreement, among other things:
1. HLS sold and assigned to ING Markets, and ING Markets purchased and
assumed, all of HLS's rights and obligations (including the Purchased
Assets and Pledged Assets) under the Assigned Agreements.
2. ING Markets sold and assigned to ING Capital, and ING Capital purchased
and assumed, all of ING Markets' rights and obligations (including the
Purchased Assets and Pledged Assets) under the Assigned Agreements.
3. As of June 18, 1996, ING Capital became a party to the Assigned
Agreements and HLS and ING Markets (except in its capacity as Initial
Agent) each relinquished its rights and were released from its obligations
under the Assigned Agreements.
4. ING Markets released HLS from any existing obligation or liability
under or in connection with the Terminated Agreements.
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5. HLS, ING Markets and the Trustee terminated the Terminated Agreements
on June 18, 1996 and agreed that none of HLS, ING Markets or the Trustee
shall have any future obligation or liability thereunder or in connection
therewith.
6. ING Capital and the Trustee agreed that the Initial Custodian be
designated as the custodian under, and have such duties and obligations as
provided in Section 5 of the Assignment Agreement.
C. Transactions Pursuant to this Agreement
Pursuant to this Agreement among other things, and upon the terms and subject to
the conditions provided in this Agreement, and effective on the date hereof (the
"Effective Date"):
1. ING Capital wishes to sell and assign to CSFB, and CSFB wishes to
purchase and assume, all of ING Capital's rights and obligations
(including the Purchased Assets and Pledged Assets) under the Assigned
Agreements.
2. CSFB wishes to become a party to the Assigned Agreements, the Agent
pursuant to the RPA and RLSA and the Calculation Agent pursuant to the
Sinking Fund Agreement, and ING Capital and ING Markets, in their
respective capacities as the Initial Agent and the Initial Calculation
Agent, each wishes to relinquish its rights and be released from its
obligations under the Initial Assigned Agreements.
3. CSFB wishes to designate First Trust as the custodian under, and to
have such duties and obligations as provided, in this Agreement, and First
Trust wishes to be so designated.
4. RFI, BFICP, ING Capital, ING Markets, ING Markets as the Initial Agent
and the Initial Calculation Agent, HLS, the Trustee, First Trust as the
Initial Custodian, the Custodian and the Collateral Agent, Concord as the
Temporary Servicer and the Standby Servicer, CSFB and CSFB as the Agent
and the Calculation Agent (each a "Party" and collectively, the "Parties")
wish to enter into the other transactions provided in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
including the assignment of rights and assumption of obligations, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. Recitals. RFI, BFICP, ING Capital, ING Markets and ING Markets as the Initial
Agent and Initial Calculation Agent confirm and represent to CSFB that the
statements in Parts A and B of the Recitals set forth above (all of the
Recitals, the "Recitals") are true and correct as of the date hereof; Concord
and First Trust as the Trustee, the Initial Custodian and the Collateral Agent
confirm and represent to CSFB that the Statements in Parts A and B of the
Recitals that relate to agreements and transactions to which they are parties
(and no other) are true and correct as of the date hereof (RFI, BFICP, ING
Capital, ING Markets, ING Markets as the Initial Agent and Initial Calculation
Agent, Concord and First Trust as the Trustee, the Initial Custodian
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and the Collateral Agent, collectively, the "Initial Parties"); and the Initial
Parties (other than First Trust and Concord) and CSFB confirm that the
statements in Part C of the Recitals are true and correct as of the date hereof
and agree that the Recitals shall be incorporated in this Agreement.
2. Assignment and Assumption.
a. In consideration of the sum of US$43,322,563.94 paid by CSFB to ING
Capital in immediately available funds on the Effective Date, ING Capital
hereby sells, assigns, transfers, grants and conveys to CSFB, without any
representation, recourse or undertaking other than as specifically set
forth in this Agreement, and CSFB hereby purchases and accepts the
assignment, transfer, grant and conveyance from ING Capital of, all of ING
Capital's rights under the Assigned Agreements, including, without
limitation, all of ING Capital's right, title and interest in and to the
Purchased Assets and the Pledged Assets, and including the Purchased
Receivables identified on Schedule A attached hereto and made a part
hereof and the Pledged Receivables identified on Schedule B attached
hereto and made a part hereof and any and all liens and encumbrances on
the Purchased Assets and the Pledged Assets (ING Capital's right, title
and interest in the foregoing being collectively, the "Interest"). CSFB
hereby assumes all of ING Capital's obligations under the Assigned
Agreements, including, without limitation, any commitment of ING Capital
to make Loans and Advances; provided, however, that such assumption shall
include only specific obligations of ING Capital under the Assigned
Agreements and no other or further obligations shall be implied or
imputed. As of the Effective Date (a) CSFB shall be a party to the
Assigned Agreements to which ING Capital is a party in the place and stead
of ING Capital, and (b) ING Capital shall relinquish its rights and be
released from its obligations under the Assigned Agreements to the other
parties to the Assigned Agreements as of the Effective Date, subject to
its representations and warranties in Section 3.
b. Each of the Trustee, the Initial Agent, ING Markets, HLS and the
Initial Calculation Agent hereby assigns, transfers, grants and conveys to
CSFB, without any representation, recourse or undertaking other than as
specifically set forth in this Agreement, all of its respective right,
title and interest in and to the Purchased Assets and Pledged Assets. As
of the Effective Date (a) CSFB shall be a party to the Assigned Agreements
to which the Initial Agent and the Initial Calculation Agent are parties
in the place and stead of the Initial Agent (in its capacity as the Agent)
and the Initial Calculation Agent (in its capacity as the Calculation
Agent), and (b) the Trustee, the Initial Agent, ING Markets, HLS and the
Initial Calculation Agent shall relinquish their rights and be released
from their obligations under the Assigned Agreements to the other parties
to the Assigned Agreements as of the Effective Date, subject to their
representations and warranties in Section 3.
c. Each of RFI and BFICP hereby assigns, transfers, grants and conveys to
CSFB, all of its respective right, title and interest in and to the
Purchased Assets and Pledged Assets.
d. Each of RFI, BFICP, ING Capital and ING Markets hereby agrees that it
shall deliver, and, in the case of ING Capital, cause HLS, the Initial
Agent or the Trustee to deliver (i) UCC-3 Termination Statements and any
other release documentation as may
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be reasonably requested by CSFB to evidence the release of their
respective interests in the Purchased Assets and Pledged Assets, and (ii)
UCC-1 Financing Statements and UCC-3 Amendments to evidence the interests
of CSFB in the Purchased Assets and the Pledged Assets.
3. Representations and Warranties.
a. ING Capital and ING Markets, including in its capacities as the Initial
Agent and the Initial Calculation Agent, jointly and severally, represent
and warrant to CSFB that: (i) ING Capital is the legal and beneficial
owner of the Interest and has the full power and authority to sell,
assign, transfer and convey the Interest to CSFB as provided in this
Agreement; (ii) none of ING Capital or ING Markets has created any adverse
claims, liens or encumbrances on or against the Interest, other than as
specifically provided in the Assigned Agreements; (iii) each of ING
Capital, ING Markets and HLS is duly organized and validly existing under
its jurisdiction of organization and this Agreement has been duly
authorized, and executed and delivered by its authorized officers, (iv)
each of the Assigned Agreements executed by ING Capital, ING Markets and
HLS and this Agreement is the legal, valid and binding agreement of ING
Capital, ING Markets and HLS, is enforceable against ING Capital, ING
Markets and HLS in accordance with its terms and the Assignment Agreement
was fully sufficient to effect and accomplish the transactions provided
therein; (v) ING Capital has delivered, or caused another Party to
deliver, to CSFB, prior to the Effective Date, true and complete, original
or photostatic, certified copies of each of the Assigned Agreements and
all exhibits, schedules and attachments thereto, showing all required
signatures thereon, and, as and if requested by CSFB, true and complete
certified copies of other agreements, documents and instruments relating
to the Assigned Agreements and the transactions provided therein; (vi)
there are no legal actions or proceedings pending against or, to the
knowledge of ING Capital or ING Markets, threatened against, in each case,
ING Capital or ING Markets, which relate to the Assigned Agreements, the
Purchased Receivables, the Pledged Receivables or this Agreement or the
transactions contemplated herein; and (vii) none of ING Capital, ING
Markets, HLS or the Initial Agent has created any lien, security interest,
charge or encumbrance or other similar right or claim on or against, or
sold, assigned, transferred or conveyed, or, except as may have been
requested or directed by RFI or BFICP from time to time, executed any
assignment, conveyance, release, discharge, satisfaction or other
instruments or cancellation affecting, the Purchased Assets or Pledged
Assets, other than to or in favor of the Trustee, HLS, ING Markets, ING
Capital or the Initial Agent as provided and permitted by the Assigned
Agreements or the Terminated Agreements.
b. RFI and BFICP, jointly and severally, represent and warrant to CSFB
that: (i) each of RFI and BFICP is duly organized and validly existing
under its jurisdiction of organization and this Agreement has been duly
authorized, and executed and delivered by its authorized officers, (ii)
each of the Assigned Agreements executed by RFI and BFICP and this
Agreement is the legal, valid and binding agreement of RFI and BFICP, is
enforceable against RFI and BFICP in accordance with its terms and the
Assignment Agreement was fully sufficient to effect and accomplish the
transactions provided therein; (iii) neither of RFI or BFICP is in breach
or default of any of its obligations under the Assigned Agreements or of
any of the provisions of the Assigned Agreements to be
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performed by it; (iv) neither of RFI or BFICP has knowledge of any breach
or default by any of the other parties to the Assigned Agreements of any
of their obligations under the Assigned Agreements or of any of the
provisions of the Assigned Agreements to be performed by them: (v)
Schedule A and Schedule B completely and accurately set forth and
identify, respectively, all of the Purchased Receivables and the Pledged
Receivables; (vi) to the knowledge of RFI and BFICP, ING Capital owns the
Purchased Receivables, free and clear of any and all adverse claims, liens
or encumbrances other than those provided or permitted in the Assigned
Agreements; (vii) there are no legal actions or proceedings pending or, to
the knowledge of RFI or BFICP, threatened, related to the Assigned
Agreements, the Purchased Receivables, the Pledged Receivables or this
Agreement or the transactions contemplated herein; and (viii) none of RFI,
BFICP, the Initial Agent or the Initial Custodian, or, to the knowledge of
RFI or BFICP, ING Capital, ING Markets, HLS, the Trustee or the Collateral
Agent, has created or permitted any lien, security interest, charge or
encumbrance or other similar right or claim on or against, or sold,
assigned, transferred or conveyed, or executed any assignment, conveyance,
release, discharge, satisfaction or other instruments or cancellation
affecting, the Purchased Assets or Pledged Assets, other than to or in
favor of the Trustee, HLS, ING Capital or the Initial Agent as provided
and permitted by the Assigned Agreements or the Terminated Agreements.
c. First Trust represents and warrants to CSFB that: (i) First Trust is
duly organized and validly existing under its jurisdiction of organization
and this Agreement has been duly authorized, and executed and delivered by
its authorized officers, (ii) each of the Assigned Agreements executed by
First Trust and this Agreement is the legal, valid and binding agreement
of First Trust in its capacities as Collateral Agent and Initial Custodian
and is enforceable against First Trust in such capacities in accordance
with its terms; (iii) First Trust, in its capacities as Collateral Agent
and Initial Custodian, is not in breach or default of any of its
obligations under the Assigned Agreements or of any of the provisions of
the Assigned Agreements to be performed by it in such capacities; (iv)
First Trust has no knowledge of any breach or default by any of the other
parties to the Assigned Agreements of any of their obligations under the
Assigned Agreements or of any of the provisions of the Assigned Agreements
to be performed by them; (v) to the knowledge of First Trust, there are no
legal actions or proceedings pending or threatened, related to the
Assigned Agreements, the Purchased Receivables, the Pledged Receivables or
this Agreement or the transactions contemplated herein; and (vi) First
Trust has not, in its capacities as Trustee, Collateral Agent or Initial
Custodian, created or permitted any lien, security interest, charge or
encumbrance or other similar right or claim, nor executed any assignment,
conveyance, release, discharge, satisfaction or other instrument or
cancellation affecting, the Purchased Assets or Pledged Assets.
d. RFI represents and warrants to CSFB that the data pertaining to the
Purchased Receivables and Pledged Receivables which it has provided to
CSFB is complete and accurate. Concord represents and warrants to CSFB
that the data pertaining to the Purchased Receivables and Pledged
Receivables which it has provided to CSFB is complete and accurate to the
best of its knowledge.
e. ING Capital, ING Markets, RFI, BFICP and First Trust represent and
warrant to CSFB that First Trust was substituted for and succeeded BA as
Trustee under the
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Collateral Trust Agreement and as Collateral Agent under the Sinking Fund
Agreement and that BA has no further rights or obligations under either
agreement.
f. ING Capital, ING Markets, RFI and BFICP represent and warrant to CSFB
that the Initial Standby Servicing Agreement has been terminated and that
none of the parties thereto have any further rights or obligations
thereunder.
4. Representations and Warranties by CSFB. CSFB: (a) represents and warrants to
the Initial Parties that (i) CSFB is duly organized and validly existing under
its jurisdiction of organization and this Agreement has been duly authorized,
and executed and delivered by its authorized officers, and (ii) this Agreement
is the legal, valid and binding agreement of CSFB and is enforceable against
CSFB in accordance with its terms; and (b) subject to the representations and
warranties of ING Capital in Section 3.a., confirms to the Initial Parties that
it has received original or photostatic copies of each of the Assigned
Agreements and all exhibits, schedules and attachments thereto, showing all
required signatures thereon, and, as and if requested by it, copies of other
agreements, documents and instruments relating to the Assigned Agreements and
the transactions provided therein.
5. Custodial Agreement. CSFB hereby designates First Trust as Custodian pursuant
to the provisions of this Section 5 (the "Custodian"), and First Trust hereby
accepts such designation and agrees to perform the duties and obligations of the
Custodian as provided in this Section 5, which shall replace in their entirety
the provisions of Section 5 of the Assignment Agreement, effective on the
Effective Date.
a. ING Capital hereby directs First Trust as the Initial Custodian to
execute and deliver this Agreement and to deliver to the Custodian (i) all
Related Security related to the Purchased Assets and the Pledged Assets
currently in the possession of the Initial Custodian (the "Initial Related
Security"), and (ii) the "Sinking Fund Account" (as defined in the Sinking
Fund Agreement) and all funds in the Sinking Fund Account, and the Initial
Custodian agrees to comply with such direction.
b. All Initial Related Security, and any Related Security delivered to
Custodian in connection with any Purchases or Loans made after the
Effective Date (collectively, the "Related Security"), shall be sent to
and held by the Custodian pursuant to the terms of this Section 5.
c. On and after the Effective Date (i) provisions in the Assigned
Agreements providing for the delivery of Related Security to the Trustee
or providing for the maintenance of possession of such Related Security by
the Trustee shall be deemed to provide for the delivery of such Related
Security to the Custodian or for the maintenance of possession of such
Related Security by the Custodian, as the case may be, and (ii) references
in the Sinking Fund Agreement to the Trustee shall be deemed to be
references to the Custodian.
d. On the day that any Related Security is delivered to the Custodian, the
Custodian shall send to the Agent notice to the effect that such Related
Security has been received and is being held by the Custodian pursuant to
this Agreement. The Custodian agrees
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not to release any Related Security to any Person (including, without
limitation, BFICP or RFI) without the prior written consent of the Agent.
e. The Custodian shall maintain the Sinking Fund Account at the office of
the Custodian.
f. All Related Security coming into the possession of the Custodian, and
the Sinking Fund Account and all funds deposited in the Sinking Fund
Account, shall be held by the Custodian (i) for the benefit of the Agent
and CSFB, and (ii) as agent on behalf of the Agent and CSFB for the
purpose of perfecting the interests of the Agent and CSFB therein. All
Related Security shall be made available for the Agent to take possession
of on any Business Day, upon the Agent's request therefor.
g. The Custodian hereby agrees not to assert any statutory or possessory
liens or encumbrances of any kind in favor of the Custodian or First Trust
with respect to the Related Security, the Sinking Fund Account or any
funds in the Sinking Fund Account, and hereby waives all such liens and
encumbrances.
h. First Trust shall serve as Custodian from the Effective Date until
either (i) the Agent removes First Trust as Custodian by delivering
written notice of such removal to the Custodian, or (ii) First Trust
resigns as Custodian by delivering 90 days prior written notice to the
Agent of First Trust's intention to resign as Custodian.
6. Servicing Agreement.
a. BFICP, RFI, ING Capital, the Initial Agent and Concord acknowledge that
Concord is presently acting as Temporary Servicer in place of RFI as
Servicer under the RPA and the RLSA pursuant to the Servicing Agreement.
RFI, CSFB and Concord acknowledge that RFI has given a written termination
notice dated October 24, 1997 (the "Notice Commencement Date") to Concord
of RFI's election to terminate the Servicing Agreement. Concord agrees
that it will continue to act as Temporary Servicer and provide all
services required of it under the Servicing Agreement for the 90 day
period following the Notice Commencement Date (the "Notice Period"), and
RFI agrees to pay to Concord (i) all unpaid servicing fees accrued under
the Servicing Agreement through the Notice Commencement Date and the
termination fee and other unpaid amounts provided for in the Servicing
Agreement, and (ii) all servicing fees as required by the Servicing
Agreement for the Notice Period.
b. Notwithstanding Section 6.a., CSFB or CSFB as Agent, or RFI with the
prior approval of CSFB or CSFB as Agent, may elect to terminate the
Servicing Agreement at any time during the Notice Period effective
immediately upon notice to Concord of such intention and payment to
Concord of an amount equal to the total of (i) the servicing fees which
were earned by Concord under the Servicing Agreement, to the extent not
then paid, during the Notice Period and through the date of termination,
and (ii) the servicing fees which Concord would have earned under the
Servicing Agreement, had the termination not occurred, during the Notice
Period subsequent to the date of termination based upon the number of
accounts being serviced by Concord on the date of termination.
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c. RFI, CSFB as Agent and Concord agree that commencing upon the effective
termination of the Servicing Agreement and the payment of all amounts due
Concord thereunder, as above provided, Concord will serve and act as the
Standby Servicer under the RPA and the RLSA pursuant to a Standby
Servicing Agreement to be entered into on or about the Effective Date (the
"Standby Servicing Agreement").
d. RFI acknowledges and agrees that in the event Concord, as Servicer
under the Servicing Agreement or as Standby Servicer under the Standby
Servicing Agreement (collectively, the "Servicing Agreements"), is due any
amounts under either of the Servicing Agreements that are not paid when
due as provided in the Servicing Agreements, that CSFB as Agent has the
right to cause such amounts to be paid from the Agent's Account (as
defined in the RPA) prior to the payment therefrom of any amounts due RFI.
e. RFI agrees that it will take no action with regard to either of the
Servicing Agreements, except as specifically provided herein, without the
prior approval of CSFB or CSFB as Agent, and will take action that is
permitted by the Servicing Agreements, as may be directed by CSFB or CSFB
as Agent.
7. Consent by Initial Parties and Custodian. The Initial Parties and First
Trust, in its capacity as Custodian, hereby consent to the transactions
contemplated by this Agreement. Such consent, shall, however, not be deemed to
bind First Trust or Concord to any provision of this Agreement that does not
specifically contain an agreement, representation or warranty by First Trust or
Concord, as the case may be, or refer to any Assigned Agreement to which it is a
party.
8. Inspection of Books and Records. RFI, BFICP, First Trust and Concord each
hereby agrees to provide CSFB and its designated representatives with the right
to inspect and copy, upon reasonable notice and during normal business hours,
its books and records related to the Assigned Agreements and the transactions
provided therein and herein. CSFB agrees to maintain the confidentiality of such
books and records that are in fact confidential and marked or otherwise
identified as such.
9. Further Assurances. Each of the Initial Parties hereby agrees to execute and
deliver such agreements, documents, instruments, consents, approvals and
assurances as CSFB may reasonably request to further effectuate and confirm the
transactions contemplated by this Agreement and the rights of CSFB provided in
this Agreement and the Assigned Agreements, provided that neither First Trust
nor Concord shall assume any additional liabilities nor relinquish any of their
rights under any of the agreements described herein to which they are parties.
10. Certain Assignments by CSFB. The Parties hereby consent and agree that CSFB
may at any time and from time to time assign its rights and obligations as Agent
and/or Calculation Agent to any entity or entities legally qualified to act in
such capacity or capacities, and to substitute such entity or entities in the
place and stead of CSFB in such capacity or capacities. CSFB agrees to promptly
give notice of any such assignment and substitution to all other Persons that
are then parties to the Assigned Agreements.
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11. Releases.
a. Release by RFI and BFICP. Effective as of the Effective Date, RFI and
BFICP hereby release and discharge each of ING Capital, ING Markets (in
all of its capacities described in this Agreement) and HLS and its
successors and assigns, including CSFB, from and against any and all
liabilities, obligations, claims, damages, demands, controversies, actions
and causes of action whatsoever, whether at law or in equity, which either
RFI or BFICP or its successors or assigns may have against ING Capital,
ING Markets or HLS by reason of or in any way arising out of or resulting
from, on or before the Effective Date, the Assigned Agreements or the
Terminated Agreements and any of the transactions provided in any of such
Agreements or any agreement, document or instrument related thereto.
b. Release by ING Capital, ING Markets and HLS. Effective as of the
Effective Date, after the payment in full of the amounts described in
Sections 2.a. and 13.j., ING Capital, ING Markets (in all of its
capacities described in this Agreement) and HLS hereby release and
discharge each of RFI and BFICP and its successors and assigns from and
against any and all liabilities, obligations, claims, damages, demands,
controversies, actions and causes of action whatsoever, whether at law or
in equity, which either ING Capital, ING Markets and HLS or its successors
or assigns may have against RFI or BFICP by reason of or in any way
arising out of or resulting from, on or before the Effective Date, the
Assigned Agreements or the Terminated Agreements and any of the
transactions provided in any of such Agreements or any agreement, document
or instrument related thereto.
12. Indemnifications
a. Indemnification by RFI and BFICP. RFI and BFICP, jointly and severally,
covenant and agree to indemnify, defend and hold harmless CSFB from and
against any and all damages, claims, causes of action, demands, fines and
expenses (including reasonable attorney's fees and expenses), that CSFB
may sustain or incur as a result or consequence of the breach by RFI or
BFICP of any of its agreements, covenants, representations or warranties
under this Agreement.
b. Indemnification by ING Capital and ING Markets. ING Capital and ING
Markets, jointly and severally, covenant and agree to indemnify, defend
and hold harmless CSFB from and against any and all damages, claims,
causes of action, demands, fines and expenses (including reasonable
attorney's fees and expenses), that CSFB may sustain or incur as a result
or consequence of the breach by ING Capital or ING Markets of any of its
agreements, covenants, representations or warranties under this Agreement.
13. General Provisions.
a. Legal Actions or Proceedings. The Parties agree and consent to the
exclusive jurisdiction of the state courts in New York County, New York
and the United States District Court for the Southern District of New
York, and that such courts shall have personal jurisdiction over the
Parties and jurisdiction over the subject matter of this Agreement, for
all purposes of this Agreement and any actions or proceedings
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commenced by any Party hereunder, except that any actions or proceedings
involving Concord and relating to Section 6 of this Agreement shall be
brought in the State of Arizona, County of Maricopa. The prevailing party
in any such action or proceeding shall be entitled to recover from the
other party or parties all of the prevailing party's court costs and
reasonable attorney's, accountant's and paralegal fees and expenses,
including in any pre-trial, appellate or post-judgment and related
bankruptcy proceedings. Nothing contained herein shall be deemed to affect
any provisions of any of the Assigned Agreements.
b. Notices. Any notice, request, demand or other communication required or
permitted under this Agreement (a "notice") shall be in writing and
delivered by registered or certified mail, return receipt requested,
effective three days after posting, or by hand delivery or private
overnight courier (such as Federal Express) effective upon receipt, or by
telephonic facsimile transmission effective upon confirmation of receipt
by the sending Party on its transmission equipment, addressed to the
Initial Parties (except ING Capital and ING Markets) at the addresses and
attention of the individuals, if any, designated in and pursuant to the
Assigned Agreements, and addressed to CSFB at 11 Madison Avenue, New York,
New York 10010, attention Michael Szwajkowski, Vice President, facsimile
telephone number (212) 325-8299, and to ING Capital or ING Markets at 135
East 57th Street, New York, New York 10022, attention William Austin,
General Counsel, facsimile telephone number (212) 409-7990, or to such
other address, individual or facsimile telephone number as a Party may
advise the other Parties by notice.
c. Entire Agreement and Amendments. This Agreement represents the entire
agreement among the Parties with respect to the subject matter hereof and
shall not be modified or affected by any prior offer, proposal, statement
or representation, oral or written, made by or for any Party in connection
with such subject matter or the terms hereof. This Agreement may not be
amended, modified or terminated except by an instrument in writing signed
by all of the Parties.
d. Survival. All of the agreements, covenants, representations and
warranties of the Parties shall survive the execution and delivery of this
Agreement and the termination of this Agreement for any reason.
e. Severability. Should any provision or clause hereof be held to be
invalid, such invalidity shall not affect any other provision or clause
hereof which can be given effect without such invalid provision or clause.
f. Waiver. The waiver by any Party of a breach, or the failure by any
Party to claim a breach, of any provision of this Agreement shall not
constitute a waiver of any subsequent breach or affect in any way the
effectiveness of such provision.
g. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without
regard to conflict of laws principles. Nothing contained herein shall be
deemed to affect any provisions of any of the Assigned Agreements.
12
<PAGE>
h. Headings and Sections. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement. All
references in this Agreement to "Sections" are references to Sections of
this Agreement unless otherwise specifically stated.
i. Assignment. This Agreement shall inure to the benefit of and be binding
upon the Parties and their successors and permitted assigns (including by
merger or consolidation). This Agreement and the rights, duties and
obligations of CSFB hereunder may be freely assigned by CSFB. This
Agreement, and the duties and obligations of the other Parties hereunder,
may not be assigned by any other Party without the express prior written
consent of CSFB, which consent may be withheld or delayed in its sole
discretion.
j. Expenses. RFI agrees to pay or reimburse all reasonable costs and
expenses, including, without limitation, attorney's fees and costs,
incurred by CSFB, ING Capital and ING Markets in connection with the
negotiation, preparation and execution of this Agreement and the
consummation of the transactions provided herein.
k. Counterparts. This Agreement may be executed and delivered in any
number of counterparts and by different Parties in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
[Signatures begin on page 14]
13
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first above written.
RESORT FUNDING, INC.
By: /s/ Thomas Hamel
----------------------------------
Name: Thomas Hamel
--------------------------------
Title: President
-------------------------------
BFICP CORPORATION
By /s/ Eric Cotton
----------------------------------
Name: Eric Cotton
--------------------------------
Title: Secretary
-------------------------------
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
By: /s/ David Arzi
----------------------------------
Name: David Arzi
--------------------------------
Title: V.P.
-------------------------------
ING (U.S.) CAPITAL CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ING (U.S.) CAPITAL MARKETS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
14
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first above written.
RESORT FUNDING, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
BFICP CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ING (U.S.) CAPITAL CORPORATION
By: /s/ Evan Binder
----------------------------------
Name: Evan Binder
--------------------------------
Title: Managing Director
-------------------------------
ING (U.S.) CAPITAL MARKETS, INC.
By: /s/ Evan Binder
----------------------------------
Name: Evan Binder
--------------------------------
Title: Managing Director
-------------------------------
14
<PAGE>
HOLLAND LIMITED SECURITIZATION, INC.
By: ING (U.S.) Capital Markets, Inc.
as attorney in fact
By: /s/ Evan Binder
----------------------------------
Name: Evan Binder
--------------------------------
Title: Managing Director
-------------------------------
FIRST TRUST OF NEW YORK, N.A.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONCORD SERVICING CORPORATION
By: /s/ Robert Bertrand
---------------------------------
Name: Robert Bertrand
-------------------------------
Title: President and CEO
------------------------------
[Acknowledgements begin on page 16]
15
<PAGE>
HOLLAND LIMITED SECURITIZATION, INC.
By: ING (U.S.) Capital Markets, Inc.
as attorney in fact
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FIRST TRUST OF NEW YORK, N.A.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONCORD SERVICING CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[Acknowledgements begin on page 16]
15
<PAGE>
HOLLAND LIMITED SECURITIZATION, INC.
By: ING (U.S.) Capital Markets, Inc.
as attorney in fact
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FIRST TRUST OF NEW YORK, N.A.
By: /s/ Ward A. Spooner
----------------------------------
Name: Ward A. Spooner
--------------------------------
Title: Vice President
-------------------------------
CONCORD SERVICING CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[Acknowledgements begin on page 16]
15
LOAN AND SECURITY AGREEMENT
$75,000,000 Credit Facility
provided by
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
to
RESORT FUNDING, INC.
As of February 11, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITION OF TERMS .......................................... 1
1.1 Advance ...................................................... 1
1.2 Advance Request .............................................. 1
1.3 Affiliate .................................................... 1
1.4 Agreement .................................................... 2
1.5 Applicable Borrowing Base Percentage ......................... 2
1.6 Applicable Declaration........................................ 2
1.7 Applicable Jurisdiction ...................................... 2
1.8 Applicable Laws .............................................. 2
1.9 Applicable Mortgage .......................................... 2
1.10 Applicable Resort ............................................ 2
1.11 Applicable Timeshare Documents ............................... 2
1.12 Applicable Timeshare Owners' Association ..................... 3
1.13 Applicable Underlying Borrower ............................... 3
1.14 Applicable Underlying Guarantor .............................. 3
1.15 Applicable Underlying Loan ................................... 3
1.16 Applicable Underlying Loan Collateral ........................ 3
1.17 Applicable Underlying Loan Documents ......................... 3
1.18 Assignment ................................................... 4
1.19 Backup Servicer .............................................. 4
1.20 Backup Servicer's Agreement .................................. 4
1.21 Base Rate .................................................... 4
1.22 Borrower ..................................................... 4
1.23 Borrowing Base ............................................... 4
1.24 Borrowing Term ............................................... 5
1.25 Business Day ................................................. 5
1.26 Closing Date ................................................. 5
1.27 Code.......................................................... 5
1.28 Collateral.................................................... 5
1.29 Commitment.................................................... 7
1.30 Common Elements .............................................. 7
1.31 Common Furnishings ........................................... 7
1.32 Consumer Note Receivable ..................................... 7
1.33 Custodial Agreement .......................................... 8
1.34 Custodian .................................................... 8
1.35 Debtor Relief Laws ........................................... 8
1.36 Default ...................................................... 8
1.37 Default Rate ................................................. 8
1.38 Eligible Consumer Note Receivable ............................ 8
1.39 Eligible Note Receivable ..................................... 10
1.40 Encumbered Interval .......................................... 11
1.41 Encumbered Personal Property.................................. 12
1.42 Environmental Laws ........................................... 12
1.43 Event of Default.............................................. 12
<PAGE>
1.44 Financial Statements ......................................... 12
1.45 GAAP.......................................................... 12
1.46 Guarantor .................................................... 13
1.47 Guaranty ..................................................... 13
1.48 Hazardous Materials .......................................... 13
1.49 Initial Advance .............................................. 13
1.50 Initial Underlying Loan Advance .............................. 13
1.51 Interest Rate ................................................ 13
1.52 Interval ..................................................... 13
1.53 Interval Mortgage ............................................ 13
1.54 Land.......................................................... 14
1.55 Lien.......................................................... 14
1.56 Loan.......................................................... 14
1.57 Loan Documents ............................................... 14
1.58 Loan-to-Value Ratio .......................................... 15
1.59 Lockbox Agent ................................................ 15
1.60 Lockbox Agreement ............................................ 15
1.61 Mandatory Prepayment ......................................... 15
1.62 Maturity Date ................................................ 15
1.63 Minimum Monthly Interest Payment ............................. 16
1.64 Minimum Net Worth Requirement ................................ 16
1.65 Note.......................................................... 16
1.66 Note Receivable .............................................. 16
1.67 Obligations .................................................. 16
1.68 Payment Authorization Agreement .............................. 16
1.69 Permitted Liens and Encumbrances ............................. 16
1.70 Person ....................................................... 16
1.71 Phase I Environmental Inspection ............................. 17
1.72 Pledged Consumer Note Receivable ............................. 17
1.73 Pledged Note Receivable ...................................... 17
1.74 Purchase Price ............................................... 17
1.75 Purchaser .................................................... 17
1.76 Prime Rate.................................................... 17
1.77 Qualified Borrower ........................................... 18
1.78 Qualified Borrower Underwriting Guidelines ................... 18
1.79 Qualified Loan ............................................... 18
1.80 Qualified Loan Underwriting Guidelines ....................... 18
1.81 Qualified Resort.............................................. 18
1.82 Qualified Resort Underwriting Guidelines...................... 18
1.83 Release Fee .................................................. 19
1.84 Servicing Agent .............................................. 19
1.85 Servicing Agreement .......................................... 19
1.86 Survey ....................................................... 19
1.87 Timeshare Construction Credit Facility ....................... 19
1.88 Underlying Guaranty .......................................... 19
1.89 Unit.......................................................... 19
<PAGE>
SECTION 2. THE LOAN ..................................................... 20
2.1 Purposes ..................................................... 20
2.2 Qualified Loans .............................................. 20
2.3 Advances ..................................................... 20
2.4 Interest Rate ................................................ 21
2.5 Payments ..................................................... 22
2.6 Prepayments .................................................. 23
2.7 Guaranty ..................................................... 24
SECTION 3. COLLATERAL ................................................... 24
3.1 Grant of Security Interest ................................... 24
3.2 Security Interest in All Pledged Notes Receivable ............ 24
3.3 Financing Statements ......................................... 24
3.4 Location of Collateral........................................ 24
3.5 Protection of Collateral; Reimbursement ...................... 25
3.6 Cross-Collateralization and Default .......................... 26
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES ....... 26
4.1 The Loan ..................................................... 26
4.2 Applicable Underlying Loans .................................. 28
4.3 Funding Procedures ........................................... 33
4.4 Advances Do Not Constitute a Waiver .......................... 37
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES ....................... 37
5.1 Organization, Standing, Qualification ........................ 37
5.2 Organization, Standing, Qualification ........................ 37
5.3 Authorization, Enforceability, Etc............................ 37
5.4 Financial Statements and Business Condition .................. 40
5.5 Taxes ........................................................ 40
5.6 Title to Properties; Prior Liens ............................. 41
5.7 Subsidiaries, Affiliates, and Capital Structure .............. 41
5.8 Litigation, Proceedings, Etc.................................. 41
5.9 Environmental Matters ........................................ 41
5.10 Full Disclosure .............................................. 41
5.11 Use of Proceeds/Margin Stock ................................. 42
5.12 No Defaults .................................................. 42
5.13 Restrictions of Borrower or Guarantors ....................... 42
5.14 Broker's Fees ................................................ 42
5.15 Tax Identification/Social Security Numbers ................... 43
5.16 Legal Compliance.............................................. 43
5.17 Applicable Resorts ........................................... 43
5.18 Applicable Timeshare Documents and Reports ................... 44
5.19 Continuation and Investigation ............................... 44
<PAGE>
SECTION 6. COVENANTS .................................................... 44
6.1 Affirmative Covenants ........................................ 44
6.2 Negative Covenants ........................................... 54
6.3 Minimum Net Worth Requirement ................................ 55
SECTION 7. EVENTS OF DEFAULT ............................................ 56
7.1 The Loan ..................................................... 56
7.2 Applicable Underlying Loans .................................. 58
SECTION 8. REMEDIES ..................................................... 61
8.1 Remedies Upon Default ........................................ 61
8.2 Notice of Sale ............................................... 63
8.3 Application of Collateral; Termination of Agreements ......... 64
8.4 Rights of Lender Regarding Collateral ........................ 64
8.5 Delegation of Duties and Rights .............................. 64
8.6 Lender Not in Control ........................................ 65
8.7 Waivers ...................................................... 65
8.8 Cumulative Rights ............................................ 65
8.9 Expenditures by Lender ....................................... 65
8.10 Diminution in Value of Collateral ............................ 65
SECTION 9. CERTAIN RIGHTS OF LENDER ..................................... 66
9.1 Protection of Collateral ..................................... 66
9.2 Performance by Lender ........................................ 66
9.3 No Liability of Lender ....................................... 66
9.4 Right to Defend Action Affecting Security .................... 68
9.5 Expenses ..................................................... 68
9.6 Lender's Right of Set-Off .................................... 68
9.7 Right of Lender to Extend Time of Payment,
Substitute, Release Security, Etc ............................ 68
9.8 Assignment of Lender's Interest .............................. 68
9.9 Notice to Purchaser .......................................... 68
9.10 Collection of the Notes ...................................... 69
9.11 Power of Attorney ............................................ 69
9.12 Relief from Automatic Stay, Etc .............................. 70
9.13 Investigations and Inquiries ................................. 70
9.14 Verification of Use .......................................... 71
SECTION 10. TERM OF AGREEMENT ............................................ 71
SECTION 11. MISCELLANEOUS ................................................ 71
11.1 Notices ...................................................... 71
11.2 Survival ..................................................... 72
11.3 Governing Law ................................................ 72
11.4 Limitation on Interest ....................................... 72
11.5 Invalid Provisions ........................................... 73
<PAGE>
11.6 Successors and Assigns ....................................... 73
11.7 Amendment .................................................... 74
11.8 Counterparts; Effectiveness .................................. 75
11.9 Lender Not a Fiduciary ....................................... 75
11.10 Release and Return of Notes Receivable ....................... 75
11.11 Accounting Principles ........................................ 75
11.12 Entire Agreement ............................................. 75
11.13 Litigation ................................................... 76
11.14 Incorporation of Exhibits and Schedules ...................... 76
11.15 Consent to Advertising and Publicity of
Applicable Timeshare Documents ............................... 76
11.16 Directly or Indirectly ....................................... 76
11.17 Captions ..................................................... 77
11.18 Gender ....................................................... 77
11.19 No Duty ...................................................... 77
11.20 Reimbursement for Taxes ...................................... 77
11.21 Submissions .................................................. 77
11.22 Confidentiality .............................................. 78
<PAGE>
LIST OF EXHIBITS
EXHIBIT "A" Form of Hypothecation Loan Agreement
EXHIBIT "B" Backup Servicer's Agreement
EXHIBIT "C" Custodial Agreement
EXHIBIT "D" Form of Pledge and Assignment of Note Receivable and
Applicable Mortgage
EXHIBIT "E" Form of Pledge and Assignment of Consumer Notes
Receivable and Interval Mortgages
EXHIBIT "F" Form of Assignment of Underlying Guarantee
EXHIBIT "G" Form of Lockbox Agreement
EXHIBIT "H" Permitted Liens and Encumbrances
EXHIBIT "I" Qualified Borrower Underwriting Guidelines
EXHIBIT "J" Qualified Loan Underwriting Guidelines
EXHIBIT "K" Qualified Resort Underwriting Guidelines
EXHIBIT "L" Form of Servicing Agreement
EXHIBIT "M" Form of Advance Request
EXHIBIT "N" Pending Litigation
EXHIBIT "O" Form of Borrowing Base Report
EXHIBIT "P" Form of Assignment to Assignee
EXHIBIT "Q" Approval Time Frames
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is made and entered into as of February
11, 1998, by and among RESORT FUNDING, INC., a Delaware corporation
("Borrower"), EQUIVEST FINANCE, INC., a Florida corporation ("Guarantor"), and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability
company ("Lender").
In consideration of the mutual covenants and agreements contained herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Agreement, intending to be legally
bound, hereby agree as follows:
SECTION 1. DEFINITION OF TERMS
The capitalized terms used in this Agreement are defined in this Section
1. The definitions include the singular and plural forms of the terms defined.
1.1 Advance. A portion of the proceeds of the Loan advanced from time to
time by Lender to Borrower in accordance with the terms of this Agreement.
1.2 Advance Request. Defined in Section 4.3 of this Agreement.
1.3 Affiliate.
(a) Any shareholder, officer, director, general partner, or member
of Borrower; and
(b) Any Person that, directly or indirectly, through one (1) or more
intermediaries, controls, is controlled by, or is under common control with
Borrower or for which any other Affiliate of Borrower is an officer, director,
shareholder, general partner, or member. For purposes of the definition of
"Affiliate:" (i) a Person that, either alone or pursuant to an arrangement or
understanding with one (1) or more other Persons, (A) owns, controls, or has the
power to vote (including by proxy) greater than fifty percent (50%) of any class
of voting securities of a corporation or that determines in any manner the
election or appointment of a majority of the directors thereof; or (B) has the
power or practical ability to exercise a controlling influence over the
management or policies of such corporation, shall be presumed to be in control
of said corporation; and (ii) a Person shall be deemed to be in control of a
Person other than a corporation if he or it, either alone or pursuant to an
arrangement or understanding with one (1) or more other Persons, (A) owns,
controls, or has the power to vote (including by proxy) greater than fifty
percent (50%) of the equity or beneficial interest of such Person; or (B) has
the power or practical ability to exercise a controlling influence over the
management or policies of such Person.
<PAGE>
1.4 Agreement. This Loan and Security Agreement by and among Borrower,
Guarantor, and Lender (including the exhibits and schedules hereto), as it may
be amended and/or restated from time to time.
1.5 Applicable Borrowing Base Percentage. The lesser of (a) seventy-five
percent (75%); and one hundred percent (100%) of an Applicable Underlying Loan's
Loan-to-Value Ratio.
1.6 Applicable Declaration. With respect to an Applicable Resort, the
declaration of condominium, declaration of covenants, conditions, and
restrictions, master deed, or similar document, together with any amendments or
restatements thereof, that establishes the underlying form of ownership of such
Applicable Resort and is recorded in the appropriate public records of the
Applicable Jurisdiction.
1.7 Applicable Jurisdiction. With respect to an Applicable Resort, the
state, county, municipality, and/or other governmental jurisdiction in which
such Applicable Resort is located.
1.8 Applicable Laws. With respect to an Applicable Resort, any and all
federal, state, and local statutes, ordinances, rules, regulations, court orders
and decrees, administrative orders and decrees, and other legal requirements of
any and every conceivable type to which Borrower, Guarantor, such Applicable
Resort or any portion thereof, or all or any portion of the Collateral or any
Applicable Underlying Loan Collateral is or becomes subject from time to time.
1.9 Applicable Mortgage. A mortgage or deed of trust, if any, that secures
the payment by an Applicable Underlying Borrower of all principal, interest, and
other amounts owed to Borrower by such Applicable Underlying Borrower in
connection with an Applicable Underlying Loan.
1.10 Applicable Resort. A Qualified Resort in connection with which
Borrower has made a Qualified Loan to a Qualified Borrower.
1.11 Applicable Timeshare Documents. All Applicable Declarations and other
documents and instruments relating to an Applicable Resort and/or the Units,
Common Elements, Common Furnishings, and Intervals thereat, including but not
limited to the project documents, registrations and other approvals, business
licenses, Applicable Timeshare Owners' Association agreements and corporate
documents and other documents used in the marketing, sale, and financing of such
Intervals. Each Applicable Timeshare Document shall be in form and content
acceptable to Lender, in its sole discretion. Lender shall have received and
approved true, correct, and complete copies of all Applicable Timeshare
Documents as a condition precedent to any Advances hereunder in
<PAGE>
respect of the Applicable Resort to which such Applicable Timeshare Documents
pertain.
1.12 Applicable Timeshare Owners' Association. With respect to each
Applicable Resort, a not-for-profit corporation or other legal entity organized
under the laws of the Applicable Jurisdiction.
1.13 Applicable Underlying Borrower. A Qualified Borrower that is the
maker of a Pledged Note Receivable.
1.14 Applicable Underlying Guarantor. Any Person that has executed and
delivered an Underlying Guaranty in favor of Borrower in connection with an
Applicable Underlying Loan.
1.15 Applicable Underlying Loan. A Qualified Loan as to which Lender has
agreed, in its sole and absolute discretion, to make certain Advances hereunder.
1.16 Applicable Underlying Loan Collateral. Any and all collateral granted
or available to Borrower to secure the payment by an Applicable Underlying
Borrower of all principal, interest, and other amounts owed to Borrower by such
Applicable Underlying Borrower in connection with an Applicable Underlying Loan.
1.17 Applicable Underlying Loan Documents. All documents and instruments
that evidence or secure an Applicable Underlying Loan, including but not limited
to any Notes Receivable, Applicable Mortgages, and Underlying Guarantees
executed and delivered to Borrower in connection therewith. The form and content
of each Applicable Underlying Loan Document shall be satisfactory to Lender, in
its sole and absolute discretion, and approved by Lender in writing prior to any
Advances hereunder in respect of the Applicable Underlying Loan to which such
Applicable Underlying Loan Document pertains. Lender hereby approves as one (1)
of the Applicable Underlying Loan Documents the form of Hypothecation Loan
Agreement attached as Exhibit "A" hereto and incorporated herein by this
reference. Borrower agrees not to amend, restate, or otherwise modify any
Applicable Underlying Documents in a material manner without Lender's prior
written consent, which consent may be granted or withheld, in Lender's sole and
absolute discretion. Copies of any such amended, restated, or otherwise modified
Applicable Underlying Loan Document, as so approved by Lender and fully executed
and delivered by Borrower, shall be provided to Lender and Servicing Agent
promptly following the effective date thereof. Modifications to incorporate
changes required for the financing of (a) Interval Mortgages secured by
Intervals which are timeshare licenses or timeshare estates which are undivided
interests, or (b) contracts for deed shall not be considered material
modifications.
<PAGE>
1.18 Assignment. That certain Assignment, Release and Custodial Agreement
dated on or about November 24, 1997, by and among Lender, Borrower, BFICP
Corporation, ING (U.S.) Capital Corporation, ING (U.S.) Capital Markets, Inc.,
Holland Limited Securitization, Inc., First Trust of New York, N.A., and Concord
Servicing Corporation, together with the letter agreement dated November 24,
1997, between Borrower and Lender and any and all related documents or
instruments involving Lender and Borrower, among other parties.
1.19 Backup Servicer. Monterey Financial Services, Inc. or such other
Person as Lender, in its sole discretion, engages from time to time, at
Borrower's cost and expense, to exercise certain rights and perform certain
duties and responsibilities of Lender hereunder, including but not limited to
verifying Borrower's compliance with all of the terms, provisions, and
conditions hereof and of the other Loan Documents.
1.20 Backup Servicer's Agreement. An Agreement by and among Lender,
Borrower, and Backup Servicer in substantially the form of Exhibit "B" attached
hereto and incorporated herein by this reference, pursuant to which Backup
Servicer is engaged to perform the duties and responsibilities delegated to it
by Lender hereunder and thereunder.
1.21 Base Rate. On any given date, a fluctuating rate of interest equal to
the interest rate per annum offered for one (1) month deposits in U.S. dollars
in the London interbank market that appears on Telerate Page 3750 or such other
page as may replace Page 3750 on that service or such other service or services
as may be nominated by the British Bankers Association for the purpose of
displaying such rate (collectively, "Telerate Page 3750") as of 9:00 a.m. New
York time on the date in question (the "Libor Rate"); provided, however, that in
the event that (i) more than one (1) such Libor Rate is published, then the
average of such rates shall apply; or (ii) no such Libor Rate is published, then
the Libor Rate shall be determined from such comparable financial reporting
company as Lender, in its sole discretion, shall select.
1.22 Borrower. Resort Funding, Inc., a Delaware corporation, together with
its successors and assigns.
1.23 Borrowing Base. As to a particular Pledged Note Receivable, the
lesser of (a) seventy-five percent (75%) of the aggregate outstanding principal
balance of each of the Eligible Consumer Notes Receivable that comprise a
portion of Borrower's Applicable Underlying Loan Collateral for the Applicable
Underlying Loan; and (b) one hundred percent (100%) of the outstanding principal
balance of such Pledged Note Receivable, in each case as of the date of any
Advance by Lender in respect thereof. Notwithstanding the foregoing or any other
term, provision, or condition hereof to the contrary, under no circumstances
shall the outstanding principal balance of the Note ever exceed
<PAGE>
ninety-five percent (95%) of the aggregate outstanding principal balance of all
Eligible Consumer Notes Receivable (the "Maximum Aggregate Advance Percentage").
1.24 Borrowing Term. A period of twenty-four (24) calendar months
following the earlier to occur of (a) the date of the Initial Advance; or (b)
April 11, 1998; provided, however, that within ninety (90) days prior to the
expiration thereof, Borrower may elect to extend the Borrowing Term for an
additional twelve (12) calendar months by so notifying Lender in writing and
paying Lender an extension fee equal to one percent (1%) of the amount by which
$75,000,000 exceeds the sum of the outstanding principal balance of the Note and
the outstanding principal balance of the Assignment as of the end of the initial
twenty-four (24) calendar month period of the Borrowing Term.
1.25 Business Day. Each day that is not a Saturday, Sunday, or a legal
holiday under the laws of the State of New York or the United States.
1.26 Closing Date. The date of this Agreement.
1.27 Code. The version of the Uniform Commercial Code in effect from time
to time in an Applicable Jurisdiction, as amended from time to time.
1.28 Collateral. Collectively, the Pledged Notes Receivable and Applicable
Mortgages (if any), together with all accounts, chattel paper, and general
intangibles related thereto and the cash and non-cash proceeds thereof, and all
now owned or hereafter acquired right, title, and interest of Borrower in and to
all Applicable Underlying Loan Collateral for any and all of the Pledged Notes
Receivable and Applicable Mortgages (if any), including but not limited to the
following (to the extent applicable):
(a) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in all Applicable Mortgages (if any)
that secure any Pledged Notes Receivable;
(b) An absolute and unconditional first collateral assignment in and
pledge of all of Borrower's right, title, and interest in all Pledged Consumer
Notes Receivable generated from the sale of Intervals at a Qualified Resort,
together with all accounts, chattel paper, and general intangibles related
thereto and the cash and non-cash proceeds thereof;
(c) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in and to all Interval Mortgages that
secure the payment of Pledged Consumer Notes Receivable;
(d) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in and to the Encumbered Intervals,
together with all appurtenant rights and interests, including, without
limitation,
<PAGE>
appurtenant rights and interests in and to the Common Elements and Common
Furnishings and all easement, license, and use rights in and to all Applicable
Resort facilities and amenities, all as described and set forth in the
Applicable Timeshare Documents;
(e) An absolute and unconditional first collateral assignment and
pledge in and to all of Borrower's right, title, and interest in all documents,
instruments, accounts, chattel paper, and general intangibles relating to the
Pledged Consumer Notes Receivable, the Interval Mortgages, and the other
Applicable Underlying Loan Collateral (including the cash and non-cash proceeds
thereof);
(f) An absolute and unconditional first collateral assignment and
pledge in and to all of Borrower's right, title, and interest in all furniture,
furnishings, and fixtures of every kind and description (and all improvements
and accessions thereto, including, without limitation, the Common Furnishings)
located in or on or used in connection with any Encumbered Interval;
(g) An absolute and unconditional first collateral assignment of all
other agreements to which any Applicable Underlying Borrower is or becomes a
party or holds any interest and which in any way relate to the use, occupancy,
maintenance, or enjoyment of any Encumbered Intervals or Encumbered Personal
Property, including but not limited to utility contracts, maintenance
agreements, management agreements, service contracts, and any agreement
guaranteeing the performance of the obligations contained in any of the
foregoing agreements (to the extent that assignments thereof are obtained by
Borrower from the Applicable Underlying Borrower);
(h) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in and to any and all easements,
contracts, leasehold interests (whether as lessor or lessee), permits, licenses,
and approvals in respect of all or any portion of an Applicable Resort;
(i) First priority Liens in and to all of Borrower's right, title,
and interest in and to all books, records, reports, computer tapes, computer
disks, and software relating to all or any portion of the Collateral;
(j) Extensions, additions, improvements, betterments, renewals,
substitutions, and replacements of, for, or to any of the Collateral, wherever
located, together with the products, proceeds, issues, rents, and profits
thereof and any replacements, additions, or accessions thereto or substitutions
thereof, and all rights in or under insurance policies and to the proceeds of
any insurance policies covering any of the other Collateral, all rights to
unearned or refunded insurance premiums, and the proceeds of any condemnation
awards or any claims regarding any of the other Collateral;
<PAGE>
(k) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in and to any rights inuring to an
Applicable Underlying Borrower related to easements, leasehold interests
(whether as lessor or lessee), franchises, permits, approvals, licenses,
facilities, and amenities on, affecting, or appur-tenant to the Applicable
Resorts and rights to occupy, use, and enjoy any such facilities or amenities
and any Encumbered Intervals;
(l) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in, to and under all Payment
Authorization Agreements signed and delivered by or on behalf of a Purchaser of
an Encumbered Interval and all accounts and proceeds relating thereto or
deriving therefrom;
(m) An absolute and unconditional first collateral assignment of all
of Borrower's right, title, and interest in and to any rights inuring to an
Applicable Underlying Borrower or Borrower pursuant to any designation of such
Applicable Underlying Borrower or Borrower as an "institutional mortgagee," an
"institutional lender," or a "mortgagee" in connection with any Encumbered
Interval as provided in the Applicable Underlying Timeshare Documents; and
(n) All now owned or hereafter acquired right, title, and interest
of Borrower as previously assigned or pledged to Lender in and to any and all of
the collateral for the Timeshare Construction Credit Facility and any other
timeshare-related loan or credit facility between Lender and Borrower or an
Affiliate of Borrower.
1.29 Commitment. The term sheet issued by Lender to Borrower, dated July
24, 1997, and subsequently accepted by Borrower on behalf of itself and
Guarantor.
1.30 Common Elements. The common areas and facilities, as defined or
provided for in the Applicable Declaration and/or other Applicable Timeshare
Documents, including, without limitation, the Land and all improvements thereto
except for the Units that have been dedicated to the condominium or comparable
form of ownership, as well as any limited common elements, as those terms are
defined and used in the Applicable Declaration.
1.31 Common Furnishings. All furniture, furnishings, fixtures, appliances,
carpeting, and equipment located in a Unit or elsewhere within an Applicable
Resort and available for use by Purchasers in accordance with the terms and
conditions of the Applicable Timeshare Documents.
1.32 Consumer Note Receivable. A promissory note, installment sales
contract, or other evidence of indebtedness made and executed by a Purchaser
<PAGE>
in favor of an Applicable Underlying Borrower in connection with such
Purchaser's acquisition of an Interval.
1.33 Custodial Agreement. That certain Custodial Agreement dated as of
February 11, 1998, by and among Lender, Borrower, and Custodian, a copy of which
is attached as Exhibit "C" hereto and incorporated herein by this reference,
pursuant to which Custodian will maintain custody of all original Applicable
Underlying Loan Documents including, without limitation, all Pledged Consumer
Notes Receivable and related collateral documents and take certain actions in
connection therewith.
1.34 Custodian. First Trust of New York, N.A. or such other Person as
Lender, in its sole discretion, engages from time to time, at Borrower's sole
cost and expense, to maintain custody of all original Applicable Underlying Loan
Documents and take certain actions in connection therewith.
1.35 Debtor Relief Laws. Any applicable liquidation, conservatorship,
receivership, bankruptcy, moratorium, rearrangement, insolvency, reorganization,
or similar law, proceeding, or device providing for the relief of debtors from
time to time in effect and generally affecting the rights of creditors.
1.36 Default. An event or condition, the occurrence of which immediately
is or, with the lapse of time or the giving or notice or both, would become, an
Event of Default hereunder.
1.37 Default Rate. The Interest Rate plus four percent (4%) per annum;
provided, however, that the Default Rate shall in no event exceed the highest
interest rate permitted to be charged under any applicable usury laws.
1.38 Eligible Consumer Note Receivable. A Pledged Consumer Note Receivable
that satisfies each of the following criteria:
(a) The Applicable Underlying Borrower is the sole payee;
(b) It arises from a bona fide sale by an Applicable Underlying
Borrower of one (1) or more Intervals;
(c) The Interval sale from which it arises has not been canceled by
the Purchaser, any statutory or other applicable cancellation or rescission
period has expired, and the Interval sale otherwise complies fully with the
terms, provisions, and conditions of this Agreement, the other Loan Documents,
the Applicable Underlying Loan Documents, and all Applicable Laws;
(d) It is secured by an Interval Mortgage on the purchased Interval,
which Interval Mortgage has been assigned to Borrower by the Applicable
Underlying Borrower and then assigned by Borrower to Lender;
<PAGE>
(e) Principal and interest payments on it are payable to the
Applicable Underlying Borrower in legal tender of the United States;
(f) Payments of principal and interest on it are due in equal
monthly installments;
(g) It shall have an original term of no more than one hundred
twenty (120) months;
(h) A cash down payment and/or other cash payments have been
received by the Applicable Underlying Borrower from the Purchaser or the maker
of the Pledged Consumer Note Receivable in an amount equal to at least ten
percent (10%) of the original purchase price of the relevant Interval, and the
Purchaser has received no cash or other rebates of any kind;
(i) No monthly installment due with respect to the Pledged Consumer
Note Receivable is more than thirty (30) days' contractually past due at the
time of an Advance in respect of such Pledged Consumer Note Receivable or more
than the lesser of (A) ninety (90); or (B) the comparable number set forth in
the definition of "eligible note receivable" or its equivalent in the Applicable
Underlying Loan Documents, days' contractually past due thereafter;
(j) The interest rate on the Pledged Consumer Note Receivable is not
less than fifty (50) basis points in excess of the interest rate charged by
Borrower to the Applicable Underlying Borrower as set forth in the Applicable
Underlying Loan Documents;
(k) The Purchaser of the relevant Interval has access to a Unit
within the Applicable Resort during any use period reserved by or assigned to
such Purchaser, all in accordance with the Applicable Timeshare Documents;
(l) Neither the Purchaser of the relevant Interval nor any other
maker of the Consumer Note Receivable is an Affiliate of, or related to, or
employed by the Applicable Underlying Borrower or Borrower;
(m) The Purchaser or other obligor has no claim against the
Applicable Underlying Borrower, Borrower, or any Affiliate of the Applicable
Underlying Borrower or Borrower, or any defense, set-off, or counterclaim with
respect to the Consumer Note Receivable;
(n) The maximum outstanding principal balance of such Consumer Note
Receivable does not exceed $25,000 (or such greater amount as may be approved in
writing in advance by Lender);
<PAGE>
(o) The Consumer Note Receivable is executed by a U.S. or Canadian
resident; provided, however, that no more than ten percent (10%) of the
aggregate outstanding principal balance of all Eligible Consumer Notes
Receivable from any Applicable Resort or Applicable Underlying Borrower shall at
any time be comprised of Consumer Notes Receivable executed by Canadian
residents, with all remaining obligors being U.S. residents;
(p) The original of the Consumer Note Receivable and all related
documents have been endorsed by the Applicable Underlying Borrower to Borrower
and then endorsed by Borrower to Lender in the manner prescribed by Lender and
delivered to Lender or Custodian as provided in this Agreement, and the terms
thereof and all instruments related thereto shall comply in all respects with
all Applicable Laws;
(q) Each Unit in the Applicable Resort which the relevant Purchaser
has the right to occupy, pursuant to the Applicable Timeshare Documents, has
been completed and furnished in accordance with the terms and provisions of such
Purchaser's purchase contract, the Applicable Resort's public offering
statement, and the other Applicable Timeshare Documents, a certificate of
occupancy for each such Unit (or the building in which the Unit is located) has
been issued, and such Unit is not subject to any Lien (other than the Lien
created by such Interval Mortgage and the Permitted Liens and Encumbrances) that
has not previously been consented to in writing by Lender; and
(r) The forms of promissory note, mortgage, federal truth-in-lending
disclosure statement, purchase contract, and other documents and instruments
relating to the Interval purchase transaction giving rise to such Consumer Note
Receivable have been approved in advance by Lender in writing.
1.39 Eligible Note Receivable. A Pledged Note Receivable that satisfies
each of the following criteria:
(a) The Applicable Underlying Loan that it evidences was originated
by Borrower in the ordinary course of its business;
(b) Advances by Borrower under such Note Receivable may be used by
the Applicable Underlying Borrower solely for purposes of providing purchase
money financing to a Purchaser in connection with an Interval at the Qualified
Resort related to such Applicable Underlying Borrower, to pay down or pay off
loans secured by such Qualified Resort or otherwise in compliance with the
Applicable Underlying Loan Documents;
<PAGE>
(c) The Applicable Resort's Applicable Underlying Loan Documents
have been approved in writing by Lender in its sole and absolute discretion;
(d) Borrower is the sole payee;
(e) Principal and interest payments on it are payable to Borrower in
legal tender of the United States;
(f) It provides for the payment to Borrower of interest at the
minimum floating rate of (i) the Libor Rate plus 3.5% per annum; or (ii) the
Prime Rate plus 1.0% per annum, in each case redetermined no less frequently
than quarterly;
(g) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, is an Affiliate of Borrower or Guarantor;
(h) No monthly installment or other amount due with respect to the
Note Receivable is more than thirty (30) days' contractually past due at the
time of its pledge to Lender hereunder, and no such monthly installment becomes
more than sixty (60) days' contractually past due thereafter;
(i) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, has any claim against Borrower, Guarantor, or any
Affiliate thereof, and no defense, set-off, or counterclaim exists with respect
to the Note Receivable at the time of any Advance in respect thereof; and
(j) The original of the Note Receivable and all related documents
and instruments, the terms of each of which shall comply fully with all
Applicable Laws, have been endorsed in the manner prescribed by Lender and
delivered to Custodian.
Notwithstanding a particular Note Receivable's satisfaction of all
of the foregoing criteria or any terms, provisions, or conditions hereof to the
contrary:
(i) Lender's Advances in connection with any one (1)
particular Applicable Underlying Borrower shall in no event exceed $20,000,000
without Lender's prior written consent, which consent may be granted or withheld
in Lender's sole and absolute discretion; and
(ii) Lender's Advances in connection with any one (1)
particular Applicable Resort shall in no event exceed $10,000,000 without
Lender's prior written consent, which consent may be granted or withheld in
Lender's sole and absolute discretion.
<PAGE>
1.40 Encumbered Interval. Any Interval that is encumbered by the Lien of
an Interval Mortgage.
1.41 Encumbered Personal Property. All furniture, furnishings, fixtures,
appliances, equipment, inventory, supplies, accounts, chattel paper, and general
intangibles at any time located at, arising out of the use of, and/or used or
useful in connection with the management or operation of any Encumbered
Interval, whether now owned or hereafter acquired by Borrower or an Applicable
Underlying Borrower, together with all improvements and accessions thereto and
replacements thereof and the cash and non-cash proceeds thereof, a Lien against
which constitutes Applicable Underlying Loan Collateral for a Pledged Note
Receivable.
1.42 Environmental Laws. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act of 1976, as amended from time to time
("RCRA"), the Superfund Amendments and Reauthorization Act of 1986, as amended,
the federal Clean Air Act, the federal Clean Water Act, the federal Safe
Drinking Water Act, the federal Toxic Substances Control Act, the federal
Hazardous Materials Transportation Act, the federal Emergency Planning and
Community Right to Know Act of 1986, the federal Endangered Species Act, the
federal Occupational Safety and Health Act of 1970, the federal Water Pollution
Control Act, and any and all comparable statutes or ordinances enacted in an
Applicable Jurisdiction, as all of the foregoing laws may be amended from time
to time, and any rules or regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal statutes, ordinances, rules,
or regulations, either in existence as of the date hereof or enacted or
promulgated after the date of this Agreement, that concern the management,
control, storage, discharge, treatment, containment, removal, and/or transport
of Hazardous Materials or other substances that are or may become a threat to
public health or the environment; together with any common law theory involving
Hazardous Materials or substances that are (or alleged to be) hazardous to human
health or the environment, based on nuisance, trespass, negligence, strict
liability, or other tortious conduct, or any other federal, state, or local
statute, ordinance, regulation, rule, policy, or determination pertaining to
health, hygiene, the environment, or environmental conditions.
1.43 Event of Default. Defined in Section 7 of this Agreement.
1.44 Financial Statements. The tax returns, balance sheets, and statements
of income and expense of Borrower and Guarantor and the related notes and
schedules delivered by Borrower prior to the Closing Date, together with the
financial statements and reports of Guarantor delivered to Lender prior
<PAGE>
to the Closing Date; and the monthly and annual financial statements and reports
required to be provided to Lender pursuant to Section 6.1(g) hereof.
1.45 GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board which are applicable under the
circumstances as of the date in question.
1.46 Guarantor. Equivest Finance, Inc., a Florida corporation, together
with its successors and assigns.
1.47 Guaranty. That certain Guaranty executed by Guarantor and delivered
to Lender concurrently with Borrower's and Guarantor's execution and delivery of
this Agreement. The Guaranty shall be the absolute and unconditional guaranty of
payment and performance of the Loan and all amounts secured by or under the Loan
Documents.
1.48 Hazardous Materials. "Hazardous substances," "hazardous waste,"
"hazardous constituents," "toxic substances," or "solid waste," as defined in
the Environmental Laws, and any other contaminant or any material, waste, or
substance that is petroleum or petroleum based, asbestos, polychlorinated
biphenyls, flammable explosives, or radioactive materials.
1.49 Initial Advance. The first Advance by Lender hereunder.
1.50 Initial Underlying Loan Advance. As to a particular Applicable
Underlying Loan, the first Advance by Lender hereunder in connection therewith.
1.51 Interest Rate. The Base Rate plus 1.90% per annum. The Interest Rate
charged for each calendar month shall be fixed based upon the Base Rate
published or otherwise determined prior to and in effect as of the first
Business Day of such calendar month. The Interest Rate shall be calculated based
on a 360 day year and charged for the actual number of days elapsed.
1.52 Interval. An undivided fee simple timeshare interest in a particular
Unit or in an entire Applicable Resort as a whole, as a tenant in common with
other owners of undivided interests in such Unit or Applicable Resort, or a
lease, license, or other form of "right-to-use" timeshare interest, including
but not limited to a points-based vacation club membership, together with all
rights, benefits, privileges, and interests appurtenant thereto, including but
not limited to the right to use and occupy a Unit within an Applicable Resort
and the Common Elements and Common Furnishings appurtenant to such Unit and/or
the Applicable Resort during a reserved or assigned use period, all as more
<PAGE>
specifically described in the Applicable Declaration and/or other Applicable
Timeshare Documents.
1.53 Interval Mortgage. A properly recorded or registered mortgage, deed
of trust, contract for deed, or other security instrument acceptable to Lender,
in its sole discretion, that creates a valid and enforceable first priority Lien
against the Encumbered Interval identified therein in accordance with all
Applicable Laws (which Encumbered Interval relates to an Applicable Resort) and
secures in part the payment of all principal, interest, and other amounts owed
by a Purchaser to an Applicable Underlying Borrower, pursuant to a Pledged
Consumer Note Receivable.
1.54 Land. The real property upon which any portion of an Applicable
Resort is situated.
1.55 Lien. Any mortgage, security interest, or other interest in property
securing an obligation owed to, or valid claim by, a Person other than the owner
of such property, whether such interest arises in equity or is based on common
law, statute, or contract.
1.56 Loan. The subject revolving credit facility in the maximum principal
amount of $75,000,000 as described in this Agreement and evidenced and secured
by the Loan Documents.
1.57 Loan Documents. Collectively, the following documents and
instruments, as each may be amended, renewed, extended, restated, or
supplemented from time to time:
(a) This Agreement;
(b) The Note;
(c) The Guaranty;
(d) The Pledges and Assignments of Notes Receivable and Applicable
Mortgages (in the form of Exhibit "D," attached hereto and incorporated herein
by this reference;
(e) The Pledges and Assignments of Consumer Notes Receivable and
Interval Mortgages (in the form of Exhibit "E," attached hereto and incorporated
herein by this reference);
(f) Assignments of the Underlying Guarantees (in the form of Exhibit
"F," attached hereto and incorporated herein by this reference);
(g) The Custodial Agreement;
<PAGE>
(h) The Servicing Agreement;
(i) The Backup Servicer's Agreement;
(j) The Lockbox Agreement;
(k) UCC-1 and UCC-3 financing statements covering the Collateral, to
be recorded in the appropriate public records of each Applicable Jurisdiction
and filed in the office of the Secretary of State of each Applicable
Jurisdiction in which any of the Collateral is located; and
(l) All such other assignments, agreements, documents, instruments,
certificates, and materials as Lender may require in order to evidence or secure
the Obligations, to evidence and perfect the rights, Liens, and security
interests of Lender contemplated by the Loan Documents, and otherwise to
effectuate the transactions contemplated hereby.
1.58 Loan-to-Value Ratio. As to each Applicable Underlying Loan, the
percentage determined by dividing the outstanding principal balance of the
Pledged Note Receivable evidencing such Applicable Underlying Loan as of the
date in question by the aggregate outstanding principal balance of all Eligible
Consumer Notes Receivable which comprise a portion of the Applicable Underlying
Loan Collateral for such Pledged Note Receivable as of such date.
1.59 Lockbox Agent. OnBank & Trust Company or such other Person as Lender
engages, in its sole discretion, at Borrower's sole cost and expense, to
receive, deposit, and disburse all amounts paid by or on behalf of each
Applicable Underlying Borrower and each Applicable Underlying Guarantor in
accordance with the terms, provisions, and conditions hereof, of the Lockbox
Agreement, and of the Applicable Underlying Loan Documents.
1.60 Lockbox Agreement. That certain agreement by and among Lender,
Borrower, and Lockbox Agent in substantially the form of Exhibit "G," attached
hereto and incorporated herein by this reference, pursuant to which Lockbox
Agent is engaged, at Borrower's sole cost and expense, to receive, deposit, and
disburse all amounts paid by or on behalf of each Applicable Underlying Borrower
and each Applicable Underlying Guarantor in accordance with the terms,
provisions, and conditions hereof, of the Lockbox Agreement, and of the
Applicable Underlying Loan Documents.
1.61 Mandatory Prepayment. Any prepayment of the Loan required by Section
2.6(b) of this Agreement.
1.62 Maturity Date. The date that is twelve (12) calendar months following
the expiration of the Borrowing Term; provided, however, that in the
<PAGE>
event that Borrower elects to extend the Borrowing Term for an additional twelve
(12) calendar months in the manner provided in Section 1.24 hereof, the Maturity
Date shall be the last day of such extended Borrowing Term.
1.63 Minimum Monthly Interest Payment. The total amount of interest
computed at the Interest Rate that has accrued on the outstanding principal
balance of the Loan during the immediately preceding calendar month.
1.64 Minimum Net Worth Requirement. A tangible net worth as determined in
accordance with GAAP, without taking into consideration any amounts due Borrower
from Guarantor or any other Affiliate of Borrower, of $20,000,000.
1.65 Note. That certain Promissory Note that evidences the Loan, dated as
of the Closing Date, made and executed by Borrower to the order of Lender and
delivered to Lender concurrently with Borrower's and Guarantor's execution of
this Agreement.
1.66 Note Receivable. A promissory note that is now or hereafter made and
executed by an Applicable Underlying Borrower to the order of Borrower,
evidences an Applicable Underlying Loan, and may be secured in part by an
Applicable Mortgage.
1.67 Obligations. All present and future indebtedness, liabilities,
obligations, and responsibilities, both financial and otherwise, to which
Borrower is subject under any of the Loan Documents, whether direct or indirect,
absolute or contingent, including but not limited to all amounts due or becoming
due to Lender in respect of the Loan or any of the Loan Documents, including
principal, interest, prepayment premiums, contributions, taxes, insurance
premiums, loan charges, custodial fees, attorneys' and paralegals' fees and
expenses and other fees or expenses incurred by Lender or advanced to or on
behalf of Borrower by Lender, pursuant to any of the Loan Documents or in
connection with Lender's enforcement of the prompt and complete payment and
performance by Borrower and Guarantor of all indebtedness, liabilities,
obligations, and responsibilities owed by Borrower, pursuant to this Agreement,
any of the other Loan Documents, or otherwise.
1.68 Payment Authorization Agreement. The pre-authorized electronic debit
agreement (or provision of a Consumer Note Receivable) by a Purchaser which
provides for payment of a Consumer Note Receivable to the Applicable Underlying
Borrower.
1.69 Permitted Liens and Encumbrances. Those liens and encumbrances
affecting all or a portion of the Collateral or any Applicable Underlying Loan
Collateral to which Lender consents in writing, as set forth on Exhibit "H,"
<PAGE>
attached hereto and incorporated herein by this reference, as amended or
restated from time to time.
1.70 Person. A natural person, corporation, partnership, limited liability
company, joint venture, association, estate, trust, government, governmental
subdivision or agency, other legal entity, or any combination thereof.
1.71 Phase I Environmental Inspection. A Phase I environmental assessment
of an Applicable Resort, including, without limitation, the relevant Land and
all improvements thereto. In the event that any Phase I Environmental Assessment
of an Applicable Resort is unacceptable to Lender for any reason or is not
available, Borrower shall provide Lender with a written report or reports
covering such Applicable Resort, prepared by one (1) or more appropriate
licensed professionals acceptable to Lender, which confirm(s):
(a) The absence of any Hazardous Materials of any kind or nature at
the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction; and
(b) That the applicable engineering firm has obtained, reviewed, and
included within its report a CERCLIS printout from the Environmental Protection
Agency (the "EPA"), statements from the EPA and other applicable state and local
authorities, and such other information as Lender may reasonably require, all of
which information shall confirm that there is no known or suspected hazardous or
toxic waste located at the Applicable Resort or in such proximity thereto as to
create a material risk of contamination of all or any portion of the Collateral
or any Applicable Underlying Loan Collateral.
1.72 Pledged Consumer Note Receivable. A Consumer Note Receivable that has
been and remains pledged to Borrower by an Applicable Underlying Borrower,
pursuant to the Applicable Underlying Loan Documents, and which has then been
pledged and remains pledged to Lender by Borrower, pursuant to this Agreement or
any of the other Loan Documents.
1.73 Pledged Note Receivable. A Note Receivable that has been and remains
pledged to Lender by Borrower, pursuant to this Agreement or any of the other
Loan Documents.
1.74 Purchase Price. The total purchase price of an Interval, as set forth
in a Purchaser's purchase contract, pursuant to which such Purchaser agrees to
purchase and the Applicable Underlying Borrower agrees to sell such Interval.
<PAGE>
1.75 Purchaser. Any Person who purchases one or more Intervals and is the
maker of a Consumer Note Receivable.
1.76 Prime Rate. The prime or reference rate of interest as announced or
published from time to time by Chase Manhattan Bank, N.A. If such bank shall,
for any period, cease to announce or publish its prime or reference rate, then
Lender shall, during such period, determine the Prime Rate based upon the prime
rates announced or published by such other bank as is reasonably acceptable to
Borrower.
1.77 Qualified Borrower. The developer of an interval ownership,
condominium, timeshare, or vacation ownership project, the creditworthiness for
a receivables/hy-pothecation loan and other qualifications of which are
satisfactory to Lender, in its reasonable discretion, based upon the Qualified
Borrower Underwriting Guidelines, Borrower's recommendations, and any other
factors that Lender deems relevant. No Person shall be deemed a Qualified
Borrower hereunder unless and until Lender has so designated such Person in
writing.
1.78 Qualified Borrower Underwriting Guidelines. Those general
underwriting criteria and guidelines set forth or to be set forth in Exhibit
"I," attached hereto and incorporated herein by this reference, upon which
Lender will rely in part in determining whether a particular Person shall be
deemed a Qualified Borrower hereunder.
1.79 Qualified Loan. A receivables/hypothecation loan made by Borrower to
a Qualified Borrower in connection with a Qualified Resort. Each Qualified Loan
must satisfy the Qualified Loan Underwriting Guidelines and be designated as
such by Lender in writing.
1.80 Qualified Loan Underwriting Guidelines. Those general criteria and
guidelines set forth or to be set forth in Exhibit "J," attached hereto and
incorporated herein by this reference, upon which Lender will rely in part in
determining whether a particular loan shall be deemed a Qualified Loan
hereunder.
1.81 Qualified Resort. An interval ownership, condominium, timeshare
project, and/or vacation ownership project that satisfies the Qualified Resort
Underwriting Guidelines consisting of, among other things, certain Land, Units,
Common Elements, and Intervals, whether now existing or hereafter added, in one
(1) or more buildings or phases, and all related Common Furnishings, easements,
licenses, rights, interests, and other appurtenances, as more fully described in
the Applicable Declaration and the other Applicable Timeshare Documents, as the
same may be amended from time to time. Without the prior written approval of
Lender, which approval may be granted or withheld by Lender, in its sole and
absolute discretion, every Qualified Resort shall be
<PAGE>
located in the United States, countries that are under the legal jurisdiction of
the United States, Canada, Caribbean islands that are under the legal
jurisdiction of Great Britain or the Netherlands, the Bahamas, or Ireland.
1.82 Qualified Resort Underwriting Guidelines. Those general underwriting
criteria and guidelines set forth or to be set forth in Exhibit "K," attached
hereto and incorporated herein by this reference, upon which Lender will rely in
part in determining whether a particular interval ownership, condominium,
timeshare project, and/or vacation ownership project shall be deemed a Qualified
Resort hereunder.
1.83 Release Fee. A fee or amount, if any, required to be paid by an
Applicable Underlying Borrower to Borrower in consideration for the release of
all or a portion of any Applicable Underlying Loan Collateral from the Lien of
an Applicable Mortgage or any other Lien in favor of Borrower. For purposes of
this Agreement, the term "Release Fee" shall include any other payments, however
denominated, required to be made by an Applicable Underlying Borrower to
Borrower upon the sale of an Interval at an Applicable Resort, pursuant to the
Applicable Underlying Loan Documents.
1.84 Servicing Agent. For so long as no Event of Default has occurred
hereunder, Borrower or an Affiliate of Borrower; thereafter, Backup Servicer or
such other Person as Lender engages, in its sole discretion, at Borrower's sole
cost and expense. Servicing Agent shall service each Applicable Underlying Loan,
which shall include but not be limited to the collection of all amounts owed
Borrower by the Applicable Underlying Borrower, pursuant to the Applicable
Underlying Loan Documents, subject to the terms, provisions, and conditions of
Section 2 hereof and of the Servicing Agreement and the Lockbox Agreement.
1.85 Servicing Agreement. An agreement by and among Lender, Borrower, and
Servicing Agent (if different from Borrower and Backup Servicer) in
substantially the form of Exhibit "L," attached hereto and incorporated herein
by this reference, that provides for the servicing of each Applicable Underlying
Loan.
1.86 Survey. An as-built survey of an Applicable Resort prepared in
accordance with the ALTA/ACSM 1988 Minimum Survey Requirements by a licensed
surveyor and certified by the applicable surveyor to the Applicable Underlying
Borrower.
1.87 Timeshare Construction Credit Facility. The $30,000,000 timeshare
construction credit facility as evidenced in part by that certain Loan and
Security Agreement dated as of November 14, 1997, by and among Borrower,
Guarantor, and Lender.
<PAGE>
1.88 Underlying Guaranty. A document or instrument executed by an
Applicable Underlying Guarantor and delivered to Borrower, pursuant to which one
(1) or more Persons guarantees the absolute and unconditional payment and
performance of the Applicable Underlying Loan and all amounts secured by or
under the Applicable Underlying Loan Documents.
1.89 Unit. An apartment, condominium unit, or other structure that is
affixed to real property at an Applicable Resort and designed and available,
pursuant to applicable law, for use and occupancy as a vacation residence by one
(1) or more individuals, together with all related Common Elements, Common
Furnishings, easements, and other appurtenances thereto.
SECTION 2. THE LOAN
Lender hereby agrees to make the Loan, including Advances thereunder, in
accordance with all of the terms, provisions, and conditions hereof and of the
other Loan Documents.
2.1 Purposes. The proceeds of the Loan shall be used exclusively to enable
Borrower to make Qualified Loans to Qualified Borrowers in connection with
Qualified Resorts or to reimburse Borrower for Advances previously made for
Qualified Loans to Qualified Borrowers in connection with Qualified Resorts.
2.2 Qualified Loans. Pending the amendment hereof to include the Qualified
Borrower Underwriting Guidelines, the Qualified Loan Underwriting Guidelines,
and the Qualified Resort Underwriting Guidelines, Exhibits "I," "J," and "K"
hereto, respectively (if not already attached hereto as of the Closing Date),
Lender shall have the right, in its sole and absolute discretion, to determine
whether a particular loan constitutes a Qualified Loan hereunder. Thereafter,
Lender shall make such determinations in its reasonable discretion, based
generally upon the Qualified Loan Underwriting Guidelines, the Qualified
Borrower Underwriting Guidelines, the Qualified Resort Underwriting Guidelines,
and upon the analysis and recommendations of Borrower. However, Lender shall
have the absolute and unconditional right to conduct its own due diligence with
respect to each loan that Borrower proposes be deemed a Qualified Loan
hereunder, the reasonable costs of which shall be borne by Borrower. As part of
such due diligence, Lender may, in its sole discretion, make or cause to be
made, at Borrower's sole cost and expense, Lender's own physical inspection of
the Applicable Resort and all contemplated Applicable Underlying Loan
Collateral. No loan shall be deemed a Qualified Loan hereunder unless and until
Lender has so designated it in writing.
2.3 Advances.
(a) Borrowing Term. No Advances of the Loan will be made by Lender
hereunder after the last day of the Borrowing Term.
<PAGE>
(b) Maximum Amount of Loan. Upon the terms and provisions and
subject to the conditions set forth in this Agreement, including but not limited
to Sections 1.39 and 2.3(e) hereof, and provided that no Event of Default then
exists, Lender shall advance to Borrower, and Borrower may borrow, repay, and
reborrow, principal under the Loan in an amount not to exceed at any time the
lesser of the aggregate amount of the Borrowing Base or $75,000,000 (subject to
Section 2.3(e) below); provided, however, that for purposes of this Section, the
Borrowing Base of any Applicable Underlying Loan in connection with which (i) a
monthly payment is more than sixty (60) days' contractually past due; or (ii) an
Event of Default listed in Section 7.2 hereof has occurred, shall be deemed
zero. Lender shall have no obligation whatsoever to make any Advance that would
cause the aggregate outstanding principal balance of the Loan to exceed
$75,000,000 (subject to Section 2.3(e) below). In the event that the proceeds of
the Loan and any other amounts required to be paid by Borrower hereunder are
insufficient to pay all costs to which it is contemplated hereunder that such
proceeds will be applied, or if the use of the Loan proceeds varies materially
(as determined reasonably and in good faith by Lender) from the uses described
herein, then Lender shall have no obligation to fund (or continue funding) the
Loan or any portion thereof. The proceeds of the Loan will be disbursed by
Lender solely for the purposes set forth in Section 2.1 hereof.
(c) Minimum Advance Amounts; Frequency of Advances. Without the
prior written consent of Lender, Advances of the Loan shall (i) be in respect of
Eligible Notes Receivable that are secured in part by pledges of Eligible
Consumer Notes Receivable and collateral assignments of Interval Mortgages from
the Applicable Underlying Borrower to Borrower which are then collaterally
assigned by Borrower to Lender; (ii) be in amounts of not less than $500,000
each; and (iii) occur no more frequently than on a weekly basis.
(d) Maximum Applicable Underlying Loan Advance Percentage. Under no
circumstances shall Lender be obligated to make any Advance hereunder in respect
of a funding request submitted to Borrower by or on behalf of an Applicable
Underlying Borrower that exceeds the Applicable Borrowing Base Percentage of the
aggregate outstanding principal balance of all Eligible Consumer Notes
Receivable with respect to which such funding request and Advance are made.
(e) Maximum Amount Outstanding Under the Loan and the ING
Agree-ment. Under no circumstances (and irrespective of the aggregate amount of
the Borrowing Base) shall the sum of (i) the outstanding principal amount of the
Note as of a particular date; plus (ii) the total amount funded by Lender as of
such date pursuant to the Assignment, ever exceed Seventy-Five Million Dollars
($75,000,000) (the "Maximum Funded Amount"). Borrower expressly acknowledges and
agrees that if, for example, Lender has funded a total of Forty Million Dollars
($40,000,000) pursuant to the Assignment as of a particular date,
<PAGE>
then the maximum outstanding principal balance of the Note as of such date shall
not exceed Thirty Five Million Dollars ($35,000,000), subject to Sections 1.23
and 2.3(b) hereof.
2.4 Interest Rate. The aggregate principal amount of all Advances of the
Loan that are outstanding from time to time shall bear interest at a rate equal
to the Interest Rate. The average monthly outstanding principal balance of the
Loan shall bear interest in arrears as of Lender's wiring of funds through its
actual receipt of repayment of the Loan (if received by Lender later than 12
noon, E.S.T., then interest accrual shall be through the next Business Day
following such receipt). Immediately upon the occurrence of an Event of Default,
any and all principal and other amounts owed Lender hereunder or pursuant to the
Note or any of the other Loan Documents may, in Lender's sole discretion, bear
interest at the Default Rate.
2.5 Payments. Borrower agrees punctually to pay or cause to be paid to
Lender, via wire transfer, all principal and interest due under the Note or
otherwise in respect of the Loan. Borrower shall make the following payments on
the Loan:
(a) Weekly.
(i) Upon the closing of each Applicable Underlying Loan,
Borrower shall direct or otherwise cause the Applicable Underlying Borrower and
Applicable Underlying Guarantor, if any, in writing: (a) to direct or otherwise
cause the Purchasers and makers of all Pledged Consumer Notes Receivables to pay
all monies due thereunder to the Lockbox Agent in accordance with the terms of
the Applicable Underlying Loan Documents; and (b) to pay Lockbox Agent all
interest, principal, Release Fees, if any, prepayments (both voluntary and
mandatory), and other amounts of any and every description payable to Borrower
by or on behalf of such Applicable Underlying Borrower or Applicable Underlying
Guarantor, if any, pursuant to the applicable Pledged Note Receivable or any
other Applicable Underlying Loan Documents (hereinafter collectively referred to
as the "Aggregate Weekly Collections"). The Aggregate Weekly Collections shall
be deposited by Lockbox Agent into the lockbox account established and
maintained by Lockbox Agent in accordance with the provisions of the Lockbox
Agreement (the "Lockbox Account"). Following any advance by Borrower of an
Applicable Underlying Loan from Borrower to the Applicable Underlying Borrower
from which any Release Fees and/or other amounts due Borrower from the
Applicable Underlying Borrower under the Applicable Underlying Loan Documents
have been subtracted, Borrower shall pay all such subtracted amounts, together
with any additional amounts paid to or otherwise received from time to time by
Borrower in connection with an Applicable Underlying Loan, including but not
limited to any amounts received by Borrower upon its realization upon any
Applicable Underlying Loan Collateral, directly to Lender (in the form so
received, properly endorsed to Lender, if
<PAGE>
appropriate), to be included within the Aggregate Weekly Collections and applied
by Lender in the manner set forth below, upon the earlier of: (A) the date as of
which the total of such subtracted and other amounts paid to or received by
Borrower equals or exceeds $100,000; or (B) the Friday immediately following the
date as of which any such amount was subtracted from an advance to the
Applicable Underlying Borrower or otherwise paid to or received by Borrower. On
each Business Day, Lockbox Agent shall remit, via wire transfer, all amounts
then deposited in the Lockbox Account directly to Lender, to be held in a
collection account (the "Collection Account") and applied by Lender in
accordance with the terms, provisions, and conditions hereof.
(ii) On each Friday prior to the Maturity Date, Lender will
apply one hundred percent (100%) of the Aggregate Weekly Collections wired to
the Collection Account or paid by Borrower directly to Lender during the seven
(7) day period ending at 9:00 a.m. New York time on such Friday, in the
following order of priority: (A) first, to reimburse Lender for all costs,
expenses, and other amounts due Lender hereunder or pursuant to the other Loan
Documents other than principal and interest, including but not limited to Backup
Servicer's fee, if any; (B) second, to pay Lender all interest which has accrued
and is owed Lender, pursuant to the Note, with respect to such seven (7) day
period; and (C) third, to reduce the outstanding principal balance of the Note.
(b) Monthly. Notwithstanding any provision of Section 2.5(a) above
or any other term, provision, or condition hereof or of any other Loan Document
to the contrary, on or before the fifteenth (15th) day of each calendar month,
Borrower shall pay Lender via wire transfer, in arrears, the Minimum Monthly
Interest Payment due with respect to the immediately preceding calendar month,
commencing with the month immediately succeeding the month in which the Closing
Date occurs, to the extent that said Minimum Monthly Interest Payment exceeds
the sum of all amounts applied on a weekly basis by Lender to interest which has
accrued and is owed Lender, pursuant to the Note, with respect to such preceding
calendar month, pursuant to Section 2.5(a) hereof.
(c) Final Payment. Notwithstanding any term, provision, or condition
hereof to the contrary, the entire outstanding principal balance of the Loan,
together with any and all accrued but unpaid interest thereon and all other
Obligations, shall immediately be paid via wire transfer by Borrower to Lender
and otherwise be satisfied in full on or before the earlier to occur of (i) the
occurrence of an Event of Default hereunder; or (ii) the Maturity Date.
2.6 Prepayments.
(a) Voluntary. Borrower may prepay the Loan, in whole or in part,
without premium or penalty, at any time, in its sole discretion.
<PAGE>
(b) Mandatory. If at any time and for any reason, the outstanding
unpaid principal balance of a particular Pledged Note Receivable exceeds such
Pledged Note Receivable's Borrowing Base, then, within ten (10) days following
Borrower's receipt of telecopied notice from Lender of the occurrence of such
excess over Borrowing Base or, absent such telecopied notice, within fifteen
(15) days after the end of the calendar month in which such excess first
occurred, Borrower shall either (A) prepay the outstanding principal balance of
such Pledged Note Receivable in an amount equal to the difference between the
outstanding principal balance of the Pledged Note Receivable and such Pledged
Note Receivable's Borrowing Base; or (B) collaterally assign to Lender, all of
Borrower's right, title, and interest in and to additional Eligible Consumer
Notes Receivable as Collateral for such Pledged Note Receivable so that the
outstanding principal balance of such Pledged Note Receivable is equal to or
less than such Pledged Note Receivable's Borrowing Base. Any such pledge and
delivery to Lender of additional Eligible Consumer Notes Receivable shall comply
with the document delivery and recordation requirements set forth in Section 4.2
of this Agreement and shall be accompanied by Borrower's written certification
to the effect that such additional Pledged Consumer Notes Receivable are
Eligible Consumer Notes Receivable and that, after giving effect to the pledge
to Lender of such additional Eligible Consumer Notes Receivable, the outstanding
principal balance of the applicable Pledged Note Receivable is equal to or less
than such Pledged Note Receivable's Borrowing Base.
No prepayment premium or penalty shall be due Lender in connection with
any voluntary or mandatory prepayment of the Loan.
2.7 Guaranty. Payment and performance by Borrower of one hundred percent
(100%) of all of the Obligations shall be unconditionally guaranteed, jointly
and severally, by Guarantor.
SECTION 3. COLLATERAL
3.1 Grant of Security Interest. To secure the prompt and complete payment
and performance when due of all of the Obligations, for value received, Borrower
hereby unconditionally and irrevocably assigns, pledges, and grants to Lender a
continuing first priority Lien and security interest in and to the Collateral.
3.2 Security Interest in All Pledged Notes Receivable. Notwithstanding
that Lender is obligated, subject to the terms and conditions set forth herein
and in the other Loan Documents, to make Advances only in respect of Eligible
Notes Receivable, Lender shall have a continuing first priority Lien and
security interest in and to all of the Pledged Notes Receivable and Pledged
Consumer Notes Receivable (by virtue of a collateral assignment to Lender of all
of Borrower's right, title, and interest thereto) and may collect and shall
receive all payments made under or in respect of all Pledged Notes Receivable
and by virtue of a
<PAGE>
collateral assignment of all of Borrower's right, title, and interest in and to
the Pledged Consumer Notes Receivable, including Eligible Notes Receivable and
Eligible Consumer Notes Receivable that may become ineligible, until any of the
same are released by Lender, if at all, pursuant to Section 11.10 below.
3.3 Financing Statements. Borrower agrees, at its own expense, to execute
the UCC-1 and UCC-3 financing statements provided for by the Code, together with
any and all other appropriate instruments and documents, and to take such other
action as may be required to perfect and to continue the perfection of Lender's
first priority Liens and security interests in the Collateral. In addition,
unless prohibited by law, Borrower hereby authorizes Lender to execute and file
any such financing statements on Borrower's behalf.
3.4 Location of Collateral. Except for Encumbered Personal Property that
is replaced in the ordinary course of business, all tangible Collateral (other
than Collateral delivered to Lender or Custodian) shall remain, at all times,
within the Applicable Resort at which it is located on the Closing Date, and
Borrower may not transfer or cause the transfer of any such Collateral from such
premises without the prior written approval of Lender.
3.5 Protection of Collateral; Reimbursement. The portion of the Collateral
consisting of (a) the original Pledged Notes Receivable; (b) the original
Applicable Mortgages; and (c) all other original Loan Documents shall be
delivered, at Borrower's expense, to Lender at its address as set forth in
Section 11.1 hereof and, except as otherwise expressly provided herein to the
contrary, held in Lender's possession, custody, and control until all of the
Obligations have been fully satisfied. The portion of the Collateral consisting
of (i) the original Pledged Consumer Notes Receivable; (ii) true copies of fully
executed Interval Mortgages, originals of which shall be delivered to Lender or
Custodian promptly following the recordation or registration thereof; (iii) the
original purchase contract (including any addenda thereto) related to such
Pledged Consumer Notes Receivable and Interval Mortgages; and (iv) originals or
true copies of the related truth-in-lending disclosure statements and, if
required by Lender, loan applications, Interval deeds, the related Purchaser's
acknowledgments, receipts, owner's policies of title insurance, Payment
Authorization Agreements, and exchange company applications and disclosures,
shall be delivered, at Borrower's expense, to Lender at its address set forth in
Section 11.1 hereof and, except as otherwise expressly provided herein to the
contrary, held in Lender's possession, custody, and control until all of the
Obligations have been fully satisfied. Alternatively, Lender, in its sole
discretion, may elect for Custodian to maintain possession, custody, and control
of all such documents and instruments during such period of time. Each original
Pledged Note Receivable and original Pledged Consumer Note Receivable delivered
to Lender shall be duly endorsed with the words: "Pay to the order of Credit
Suisse First Boston Mortgage Capital LLC, with recourse to the maker of the
promissory note to which this allonge is attached but without recourse to Resort
Funding, Inc.,
<PAGE>
except to the extent provided in that certain Loan and Security Agreement dated
February 11, 1998, by and among Credit Suisse First Boston Mortgage Capital LLC,
Resort Funding, Inc., and Equivest Finance, Inc." Each original Pledged Consumer
Note Receivable, prior to its endorsement by Borrower to Lender, shall be duly
endorsed in a manner approved by Lender by the Applicable Underlying Borrower to
Borrower. The portion of the Collateral delivered to Lender or Custodian as
described above shall be segregated by Lender or Custodian, as the case may be,
and stored in a secure, fire-resistant filing cabinet, access to which is
limited in a commercially reasonable manner. Borrower and Guarantor agree that
such storage is and shall be deemed to constitute reasonable care by Lender with
respect to such Collateral. Except to the extent expressly included in the
Custodian's fee as set forth in the Custodial Agreement, all insurance and other
expenses of protecting the Collateral, including, without limitation, storing,
warehousing, insuring, handling, maintaining, and shipping the Collateral, and
any and all excise, property, intangible, sales, and use taxes imposed by any
state, federal, or local governmental authority on any of the Collateral or in
respect of the sale thereof shall be paid by Borrower. Any and all other amounts
for which Borrower may become liable hereunder and all costs and expenses
(including attorneys' and paralegals' fees, legal expenses, and court costs)
that Lender may incur in enforcing or protecting its Lien on, or rights and
interest in, the Collateral or any of its rights or remedies under this
Agreement or any other Loan Document or in respect to any of the transactions to
be had hereunder or thereunder, until paid by Borrower to Lender with interest
at the Default Rate, shall be included among the Obligations and, as such, shall
be secured by all of the Collateral. Provided that Lender or Custodian retains
the original Pledged Notes Receivable, Applicable Mortgages and original Pledged
Consumer Notes Receivable, delivered to it in a secure, fire-resistant filing
cabinet as provided above, Lender shall not be liable or responsible in any way
for the safekeeping of any of the Collateral or for any loss or damage thereto
or for any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, Lockbox Agent, Backup Servicer,
Custodian, or any other Person whomsoever, excluding damages or losses that
occur as a result of Lender's gross negligence or willful misconduct.
3.6 Cross-Collateralization and Default. The Collateral shall secure all
of the Obligations as well as Borrower's obligations pursuant to the Timeshare
Construction Credit Facility, and all Liens, pledges, assignments, mortgages,
security interests, and collateral granted to or for the benefit of Lender
pursuant thereto or any other related documents or instruments shall also secure
the Obligations. In addition, the Loan and the Timeshare Construction Credit
Facility shall be cross-defaulted such that any event of default with respect to
the Timeshare Construction Credit Facility shall constitute an Event of Default
hereunder, and vice versa.
<PAGE>
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES
The obligation of Lender to enter into this Agreement and to make any
Advances of the Loan shall be subject to the complete satisfaction of each of
the conditions precedent set forth in the Commitment, in addition to all of the
conditions precedent set forth below and elsewhere in the Loan Documents:
4.1 The Loan. On or prior to the Closing Date:
(a) Execution and Delivery. Borrower and Guarantor shall execute and
cause to be notarized, witnessed, and attested, as appropriate, and delivered to
Lender the Loan Documents, together with such additional documents and
certifications as Lender and its counsel may reasonably require in order to
ensure that all conditions precedent to the closing of the Loan and the making
of Advances hereunder have been satisfied in all respects.
(b) Opinion of Borrower's Counsel. Lender shall have received from
duly licensed counsel for Borrower and Guarantor acceptable to Lender such legal
opinions in form and substance satisfactory to Lender, dated as of the Closing
Date, as may be required by Lender, in its reasonable discretion.
(c) Representations, Warranties, Covenants, and Agreements. The
representations and warranties contained in the Loan Documents and in any
certificates delivered to Lender in connection with the closing shall be true
and correct in all material respects, and all covenants and agreements required
to have been complied with and performed by Borrower shall have been fully
complied with and performed to the satisfaction of Lender.
(d) No Prohibitions. Neither Borrower nor Guarantor shall have taken
any action or permitted any condition to exist that would have been prohibited
by any provision of this Agreement, the Commitment, or the Assignment.
(e) Borrower's and Guarantor's Background Documents. Borrower shall
have delivered to Lender, and Lender shall have approved each of the following:
(i) Borrower's and Guarantor's Organizational Documents.
Copies of Borrower's and Guarantor's organizational documents, including but not
limited to their respective articles of incorporation and bylaws, together with
any amendments thereto, certified to be true and complete by Borrower's and
Guarantor's Secretaries, respectively.
<PAGE>
(ii) Good Standing Certificates. Current good standing
certificates issued by the Delaware and Florida Secretaries of State for
Borrower and Guarantor, respectively.
(iii) Resolutions. Certified resolutions of Borrower's and
Guarantor's boards of directors authorizing the execution of all Loan Documents
and the performance of all Obligations thereunder.
(f) Financial Statements. Lender shall have received and approved
the Financial Statements required pursuant hereto to be delivered to Lender, or
otherwise required by Lender, for Borrower and Guarantor, all in form and
substance satisfactory to Lender.
(g) Proceedings Satisfactory. All actions taken in connection with
the execution and delivery of the Loan Documents, and all documents and papers
related thereto, shall be completely satisfactory to Lender and its counsel.
Lender and its counsel shall have received copies of all such documents and
papers as Lender or its counsel may reasonably request in connection therewith,
all in form and substance satisfactory to Lender and its counsel, in their sole
discretion.
(h) Expenses. Borrower shall have paid all fees, expenses, and other
amounts required to be paid prior to or on the Closing Date, pursuant to this
Agreement.
4.2 Applicable Underlying Loans. At least ten (10) Business Days prior to
the date of each Initial Underlying Loan Advance, Borrower shall deliver to
Lender and Servicing Agent a sworn written certificate, in form and content
satisfactory to Lender, in its sole discretion, confirming, to the extent
applicable, that:
(a) Applicable Underlying Loan Documents. The Applicable Underlying
Borrower and the Applicable Underlying Guarantor have executed and delivered to
Borrower the Applicable Underlying Loan Documents.
(b) Title Policies. To the extent available and commonly required by
lenders in the Applicable Jurisdiction in connection with loans similar to the
Applicable Underlying Loan, the Applicable Underlying Borrower has delivered to
Borrower a commitment to issue an ALTA extended coverage lender's policy of
title insurance insuring in favor of Borrower, together with its successors and
assigns, including but not limited to Lender, to the extent of its interest in
the Applicable Underlying Loan, the first priority of the Lien of each
applicable Interval Mortgage in and to each applicable Encumbered Interval,
without exception for filed or unfiled mechanics' liens or claims or for matters
that an accurate survey would disclose, subject only to such exceptions and
conditions to title as Borrower and Lender shall have approved in writing and
such affirmative coverage as Borrower or Lender deems reasonably necessary
<PAGE>
(the "Title Policy"). Such Title Policy shall be in an amount not less than the
original principal amount of the applicable Note Receivable and be issued by a
title insurance company satisfactory to Borrower and Lender in all respects (the
"Title Insurance Company"). Final Title Policies delivered at the time of each
advance of the Applicable Underlying Loan must insure that each applicable
Interval Mortgage creates a first priority Lien in and to the applicable
Encumbered Interval in favor of Lender, to the extent of its interest in the
Applicable Underlying Loan, and Borrower, with such exceptions and conditions to
title as Borrower and Lender shall have approved in writing.
Each such Title Policy shall contain such affirmative coverage as
Lender deems reasonably necessary, including but not limited to an affirmative
statement that the Title Policy insures Borrower, together with its successors
and assigns, including but not limited to Lender, to the extent of its interest
in the Applicable Underlying Loan, against all mechanics' and materialmen's
liens arising from or out of construction of the Applicable Resort, and, to the
extent available and commonly required by lenders in the Applicable
Jurisdiction, shall contain endorsements in form and content acceptable to
Lender: (A) insuring against matters that would be disclosed on an accurate
survey of the Land; (B) insuring that no building restriction or similar
exception to title disclosed on the Title Policy has been violated and that any
violation thereof would not create or result in any reversion, reverter, or
forfeiture of title; (C) a zoning endorsement in the form typically issued in
the Applicable Jurisdiction; and (D) insuring over any environmental superlien
or similar lien upon all or any portion of the Applicable Resort. Such Title
Policy shall provide that Borrower and Lender, to the extent of its interest,
shall receive an endorsement to the Title Policy on the date of each advance of
the Applicable Underlying Loan: (i) indicating that since the date of the
immediately preceding advance, there has been no change in the state of title
and no mechanics' or materialmen's lien, claim, or lien or similar notice has
been filed against any of the Applicable Underlying Loan Collateral; (ii)
updating the Title Policy to the date of such advance; and (iii) increasing the
coverage of the Title Policy by an amount equal to the amount of such advance if
the Title Policy does not by its own terms provide for such an increase. The
condition of title to all Applicable Underlying Loan Collateral must be
satisfactory to Lender in all respects, in its sole discretion, as a condition
precedent to Lender's obligation to make any Advances hereunder in respect of
the Applicable Underlying Loan that is secured by Borrower's Lien in and to such
Applicable Underlying Loan Collateral.
In lieu of the Title Policy required by this Section, Lender may, in its
sole and absolute discretion, accept a title opinion rendered by a completely
independent attorney for the Applicable Underlying Borrower which fully
satisfies all of the general requirements of this Section.
(c) Opinions of Applicable Underlying Borrower's Counsel. Borrower
has received from counsel for the Applicable Underlying Borrower and
<PAGE>
the Applicable Underlying Guarantor, licensed in the Applicable Jurisdiction and
acceptable to Borrower and Lender, legal opinions in form and substance
satisfactory to Borrower and Lender, dated as of the date of closing of the
Applicable Underlying Loan, covering such items as may be required by Borrower
and Lender, including, without limitation, that the Applicable Underlying Loan
Documents are valid, binding, and enforceable in accordance with their terms and
that they do not violate any applicable usury or other Applicable Laws. Each
such legal opinion shall also be addressed to Lender and expressly state that it
may be relied upon by Lender for any and all purposes.
(d) Applicable Underlying Borrower's Background Documents. The
Applicable Underlying Borrower has delivered to Borrower and Borrower has
approved each of the following (to the extent that Borrower has previously
delivered any of these documents with respect to the Applicable Underlying
Borrower or the Applicable Resort in connection with the Timeshare Construction
Credit Facility, Lender may waive delivery in connection with the Applicable
Underlying Loan):
(i) Applicable Underlying Borrower's Organizational Documents.
Copies of the Applicable Underlying Borrower's organizational documents,
including but not limited to its articles of incorporation, bylaws, partnership
agreement, and other relevant documents, as applicable, together with any
amendments thereto, certified to be true and complete by the Applicable
Underlying Borrower's Secretary or other authorized representative.
(ii) Good Standing Certificates. Current good standing
certificates issued by the appropriate Secretaries of State for the Applicable
Underlying Borrower and the Applicable Underlying Guarantor.
(iii) Resolutions. Certified resolutions of the Applicable
Underlying Borrower's and Applicable Underlying Guarantor's boards of directors
or general partners, as applicable, or such other evidence of authority as is
appropriate for the Applicable Underlying Borrower's and Applicable Underlying
Guarantor's form of business organization, authorizing the execution of all
Applicable Underlying Loan Documents and the performance of all obligations of
the Applicable Underlying Borrower and Applicable Underlying Guarantor
thereunder.
(iv) Survey. An as-built survey satisfactory to Borrower and
Lender and prepared by a licensed surveyor satisfactory to Borrower, Lender, and
the Title Insurance Company in accordance with Borrower's requirements, of the
Applicable Resort's Land, showing the location and dimensions of all Units,
Common Elements, and other improvements thereto and indicating the routes of
ingress and egress for public access to the Applicable Resort, all utility
lines, walks, drives, recorded or visible easements and rights-of-way on such
Land, and showing that there are no encroachments,
<PAGE>
improvements, projections, or easements (recorded or unrecorded) on the property
lines. The survey shall certify the acreage of the Land and shall indicate
whether the Land is located within any flood hazard area. The survey must be
prepared in accordance with the standards set forth by ALTA/ACSM and those of
any and all surveyors' bureaus or associations of the Applicable Jurisdiction as
well as any and all Applicable Laws and must be certified to Borrower, Lender,
and the Title Insurance Company. The surveyor's certificate placed on the survey
shall include a statement that said survey locates any and all such items set
forth as exceptions in the Title Policy as Borrower may require, and otherwise
satisfy all of Borrower's and Lender's survey requirements, and shall include
any other information required by Lender, Borrower, or the Title Insurance
Company.
(v) Environmental Report. An environmental report or reports
covering the Applicable Resort, including all Mortgaged Real Property,
confirming (to the extent relevant, in Lender's reasonable discretion):
(A) The absence of Hazardous Materials on, under, or
affecting the Land or any other real property or personal property comprising
the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction;
(B) That the engineering or environmental consulting
firm has obtained, reviewed, and included within its report a CERCLIS printout
from the Environmental Protection Agency (the "EPA"), statements from the EPA
and other applicable state and local authorities, and such other information as
Borrower or Lender may reasonably require, including, without limitation, a
Phase I Environmental Inspection, all of which information shall confirm that
there are no known or suspected Hazardous Materials located at, used or stored
on, or transported to or from the Applicable Resort or in such proximity thereto
as to create a material risk of contamination of any the Applicable Underlying
Loan Collateral, except for commercially reasonable amounts thereof commonly
found at residential and resort properties in the Applicable Jurisdiction;
(C) The absence of radon gas at the Applicable Resort,
including all of the Units, or, if radon gas is found to be present in any part
of the Applicable Resort or the Units, that such presence is of a nature or
magnitude so as to be fully in compliance with applicable standards under the
Environmental Laws and all other applicable laws or standards; and
(D) The absence of friable asbestos within the Units,
Common Elements, or elsewhere at the Applicable Resort or, if asbestos is found
to be present in any part of the Applicable Resort, that such presence is of a
nature or magnitude that is able to be removed by a licensed removal
<PAGE>
contractor for a guaranteed maximum sum satisfactory to Borrower and Lender and
included in the Applicable Approved Construction Budget.
(d) Evidence of Insurance. Borrower has received certified copies of
all insurance policies and endorsements thereto or other evidence satisfactory
to Borrower and Lender, in the sole discretion of each, relating to the
Applicable Resort, including but not limited to the Encumbered Intervals. In
addition, Borrower has received written evidence that the Applicable Underlying
Borrower has obtained and is maintaining or has caused the Applicable Timeshare
Owners' Association to obtain and maintain all policies of insurance required by
and in accordance with Section 6.1(c) hereof, including but not limited to
copies of the most current paid insurance premium invoices for such policies.
(e) Applicable Laws. Borrower has received evidence satisfactory to
Borrower and Lender that all Encumbered Intervals at the Applicable Resort are
and will be in compliance with all applicable zoning, building, and other
Applicable Laws in connection with the construction, development, establishment,
and operation of the Applicable Resort and the sale, use, marketing, and
occupancy of Units and Intervals thereat.
(f) Litigation. Borrower has received evidence satisfactory to
Borrower and Lender that there exists no pending or threatened bankruptcy,
foreclosure, or other material litigation or judgments outstanding against or
with respect to the Applicable Resort, all or any portion of the Applicable
Underlying Loan Collateral, the Applicable Underlying Borrower, or the
Applicable Underlying Guarantor (each a "Material Party"). The term "other
material litigation" as used herein shall not include matters in which (i) a
Material Party is a plaintiff and no counterclaim is pending; or (ii) Borrower
and Lender determine, in their sole discretion, that such litigation is
immaterial due to settlement, insurance coverage, frivolity, or amount or nature
of claim. Borrower shall have obtained an independent search, at Borrower's or
the Applicable Underlying Borrower's expense, confirming that no such
bankruptcy, foreclosure action, or other material litigation or judgment exists.
(g) Code/Other Searches. Borrower has obtained such searches of the
applicable public records as it deems necessary under all Applicable Laws to
verify that it has a first and prior perfected Lien and security interest
covering all of the Applicable Underlying Loan Collateral.
(h) Taxes and Assessments. Borrower has received copies of the most
current tax bills related to the Applicable Resort, together with evidence
satisfactory to it that all taxes and assessments owed by or for which the
Applicable Underlying Borrower or the Applicable Timeshare Owners' Association
is responsible for collection have been paid, which taxes and assessments
include, without limitation, sales taxes, room occupancy taxes,
<PAGE>
payroll taxes, personal property taxes, excise taxes, intangible taxes, real
property taxes, income taxes, and any assessments related to the Applicable
Resort and/or the Units or Intervals thereat. Borrower shall also have received
information satisfactory to Borrower and Lender disclosing the tax
identification numbers, tax rates, estimated tax values, assessment ratios, and
estimated assessment values or amounts with respect to the Applicable Resort and
the Land and the identities of the taxing authorities having jurisdiction over
the Land and the Applicable Resort as well as the instrumentalities and entities
having the power and jurisdiction to impose assessments against the Land or the
Applicable Resort.
(i) Financial Statements. Borrower has received the financial
statements required by the Applicable Underlying Loan Documents to be delivered
to Borrower, or otherwise required by Borrower, for the Applicable Underlying
Borrower and the Applicable Underlying Guarantor, all in form and substance
satisfactory to Borrower and Lender.
(j) Interval Sales. To the extent applicable, Borrower has received
written evidence to the effect that the Applicable Underlying Borrower has
complied in all respects with all Applicable Laws relating to the marketing and
sale of Intervals, including but not limited to any Encumbered Intervals, at the
Applicable Resort, including but not limited to timeshare registration statutes,
rules, and regulations.
(k) Management and Property Contract. Borrower has received a copy
of the management contract for the Applicable Resort (the "Management Contract")
and Borrower and Lender have determined to their mutual satisfaction that the
Applicable Resort is being managed by a professional management company
acceptable to Borrower and Lender.
(l) Miscellaneous. Such other matters as Lender shall reasonably
require.
True copies or, to the extent required hereby, originals of all of the
above-referenced documents, instruments, forms, opinions, and other materials
shall be delivered to Servicing Agent, either prior to or contemporaneously with
Borrower's execution and delivery to Lender of the sworn written certificate
required by this Section 4.2. Servicing Agent's written acknowledgment of
receipt and recommendation of approval of each such item is an absolute
condition precedent to Lender's obligation to make any Advances hereunder in
respect of the Applicable Underlying Loan(s) to which Borrower's Initial
Underlying Loan Request and any subsequent Advance Requests (as such term is
defined in Section 4.3 below) pertain; provided, however, that in the event that
the initial Servicing Agent has been replaced by Backup Servicer and Backup
Servicer fails to provide Lender with such written acknowledgment of receipt and
recommendation of approval or, alternatively, notification that Backup Servicer
<PAGE>
does not recommend Lender's approval of each such item, within ten (10) Business
Days following Backup Servicer's actual receipt of all applicable documents,
instruments, forms, opinions, and other materials, then, for purposes of this
Section 4.2, Backup Servicer shall be deemed to have provided Lender with its
recommendation of approval of each such item in connection with the relevant
Advance.
4.3 Funding Procedures. Subject to Section 2.3 hereof, from time to time
during the Borrowing Term, Borrower may submit to Lender a written request for
an Advance hereunder (hereinafter sometimes called an "Advance Request") in
substantially the form of Exhibit "M," attached hereto and incorporated herein
by this reference. Provided that no Event of Default hereunder then exists, each
Advance approved by Lender and Servicing Agent shall be made within ten (10)
Business Days following the last to occur of (a) Lender's receipt of the
applicable Advance Request and all items required to be submitted to Lender
hereunder, including but not limited to those items referenced in this Section
4.3 (to the extent applicable); (b) Servicing Agent's written notification to
Lender that all items submitted to Servicing Agent for its review pursuant
hereto and the Servicing Agreement are acceptable; provided, however, that in
the event that the initial Servicing Agent has been replaced by Backup Servicer
and Backup Servicer fails to provide Lender with such written notification or,
alternatively, notification that Backup Servicer has not determined each such
item to be acceptable, within ten (10) Business Days following Backup Servicer's
actual receipt of all applicable documents, instruments, forms, opinions, and
other materials required to be furnished thereto by Borrower hereunder, then,
for purposes of this Section 4.3, Backup Servicer shall be deemed to have
provided Lender with written notification that all items submitted to Backup
Servicer for its review, pursuant hereto and the Backup Servicer's Agreement,
are acceptable, and (c) Lender's receipt of a written certification from
Custodian that confirms that Custodian has in its possession each of the
documents, instruments, and other items required to be delivered to Custodian
pursuant to Section 3.5 hereof (unless Lender, in its sole discretion, has
elected to take possession of such documents, instruments, and other items
itself).
In particular, the obligation of Lender to make any Advance hereunder
shall be subject to the satisfaction of all of the following conditions
precedent:
(a) Requests for Advances. Each Advance Request shall:
(i) Be in writing;
(ii) Be accompanied by a sworn written certificate containing
all of the certifications required to be included in the certificate described
in Section 4.2 above and dated as of the date of such Advance Request;
<PAGE>
(iii) Specify the principal amount of the Advance requested,
and designate the Applicable Underlying Loan(s) to which the proceeds of such
Advance pertain;
(iv) Certify the amount of the then current Borrowing Base of
the Applicable Underlying Loan(s) in question;
(v) Confirm that all representations and warranties of
Borrower contained in this Agreement are true and correct as of the date of the
Advance Request and, after giving effect to the making of the requested Advance,
will be true and correct as of the date on which the requested Advance is to be
made;
(vi) State that no Default or Event of Default exists as of
the date of the Advance Request and, after giving effect to the making of such
requested Advance, no Default or Event of Default would exist as of the date on
which the requested Advance is to be made;
(vii) Be delivered to the office of Lender as set forth in
Section 11.1 hereof and to Servicing Agent at its address as set forth in the
Servicing Agreement at least ten (10) Business Days prior to the date of the
requested Advance;
(viii) Be signed by a duly authorized officer of Borrower;
(ix) As to each Applicable Underlying Loan in respect of which
the requested Advance is sought, contain Borrower's sworn written certificate to
the effect that, to the extent applicable:
(A) It has received no notice of any asserted or
threatened defense, offset, counterclaim, discount, or allowance in respect of
each Consumer Note Receivable to be pledged to Lender through a collateral
assignment of all of Borrower's right, title, and interest therein in connection
with such requested Advance or in respect of any previously Pledged Consumer
Notes Receivable;
(B) It has received no notice of any asserted or
threatened defense, offset, counterclaim, discount, or allowance in respect of
any Pledged Note Receivable; and
(C) It has received such additional items as Lender
shall reasonably require, including, without limitation, an aging report of the
Pledged Consumer Notes Receivable and a delinquency report showing which
Consumer Notes Receivable for the subject Advance are more than thirty (30)
days' contractually past due and the duration of each delinquency. Both reports
shall be in form and substance satisfactory to the Lender.
<PAGE>
(b) Review and Approval by Servicing Agent. Each and every item
listed in Section 4.3(a) above, together with true copies of all documents,
instruments, forms, certificates, opinions, and other materials received by
Borrower from an Applicable Underlying Borrower in connection with a request for
an advance under an Applicable Underlying Loan has been delivered to Servicing
Agent by Borrower, and Servicing Agent has reviewed same and provided Lender
with its written acknowledgment of receipt, its recommendation of approval of
each such item, and its opinion concerning the complete satisfaction of any and
all requirements and conditions precedent to Advances hereunder in respect of
the Applicable Underlying Loan.
(c) Other Conditions. In addition to the other conditions set forth
in this Agreement, the making of each Advance under the Loan shall be subject to
the satisfaction of all of the following conditions as of the date of such
Advance:
(i) All of the conditions set forth in the Commitment, this
Agreement, the Assignment, and the other Loan Documents have been fully
satisfied by Borrower, including but not limited to the proper recordation or
registration, pursuant to all Applicable Laws, of the Pledges and Assignments of
Notes Receivable and Applicable Mortgages (in the form of Exhibit "D" hereto)
and other Loan Documents, assigning to Lender all of Borrower's right, title and
interest in and to each such Pledged Note Receivable and the related Applicable
Mortgage and the Pledges and Assignments of Consumer Notes Receivable and
Interval Mortgages for each Applicable Underlying Loan, assigning to Lender all
of Borrower's right, title and interest in and to each such Pledged Consumer
Note Receivable and the related Interval Mortgage, in the Applicable
Jurisdictions and the filing of all appropriate UCC-1 and UCC-3 financing
statements in accordance with the provisions of the Code, this Agreement, and
the other Loan Documents (or the deposit of all such documents and instruments
in escrow with the Title Insurance Company, if appropriate);
(ii) No Default or Event of Default exists immediately prior
to the making of such requested Advance or, after giving effect thereto,
immediately after the making of such requested Advance;
(iii) Each document, instrument, contract, and agreement
required to have been executed and delivered in connection with any prior
Advance is consistent with the terms of this Agreement and remains in full force
and effect;
(iv) The date on which such requested Advance is to be made is
a Business Day;
(v) Advances shall be made not more often than on a weekly
basis;
<PAGE>
(vi) Lender has determined that the requested Advance, when
added to the aggregate outstanding principal balance of all previous Advances,
if any, under the Loan, and the total amount funded by Lender pursuant to the
ING Agreement does not exceed the Maximum Funded Amount, that each Pledged Note
Receivable as to which such Advance is sought remains an Eligible Note
Receivable hereunder and is not in excess of the Borrowing Base, and that the
Maximum Aggregate Advance Percentage has not been exceeded;
(vii) All representations and warranties contained herein, in
the other Loan Documents, and in any certificates delivered to Lender in
connection with the Loan are true and correct in all material respects;
(viii) Lender has received evidence satisfactory to Lender, in
its sole but reasonable discretion, that the Applicable Resort, the Applicable
Underlying Loan Collateral, and the Applicable Underlying Borrower are in
compliance with all Applicable Laws; and
(ix) The Interval Mortgages, the collateral assignments
thereof to Borrower from the Applicable Underlying Borrower and to Lender from
Borrower and the UCC financing statements, if required by Lender, shall each
have been duly recorded or registered in the Applicable Jurisdiction in
accordance with all Applicable Laws. All of Borrower's right, title, and
interest in and to all Interval Mortgages and Pledged Consumer Notes Receivable
assigned by Borrower to Lender hereunder must have evidence thereon of payment
of all required documentary stamps and intangible taxes, if any are required.
The funding of the requested Advance, delivery of the Collateral, issuance of
the Title Policy, if any, and recording or registration of the collateral
assignments or any releases and the UCC financing statements may, in Lender's
discretion, be effected by way of an escrow arrangement with the Title Company
or other fiduciary, the form and substance of which shall be satisfactory to
Lender.
(d) Payments by Lender. Lender may, at any time and without a
request therefor having been submitted by Borrower, advance Loan proceeds for
the purpose of paying interest on the Loan, real estate taxes, insurance
premiums, fees and expenses of Lender's counsel, or to cure an Event of Default.
After the occurrence of an Event of Default or of an event or the existence of a
condition which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder, Lender may, as to an Applicable
Underlying Loan, pay the cost of any of Borrower's undertakings pursuant to the
Loan Documents. Notwithstanding the foregoing provisions of this Section 4.3(d)
and except as otherwise provided herein to the contrary, Lender shall furnish
Borrower with written notice of Lender's intent to take any of the foregoing
actions and afford Borrower ten (10) days in which to take such actions itself
prior to Lender's doing so.
<PAGE>
4.4 Advances Do Not Constitute a Waiver. No Advance hereunder shall
constitute a waiver of any condition to Lender's obligation to make further
Advances hereunder.
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor, jointly and severally, hereby represent and
warrant to Lender as follows:
5.1 Organization, Standing, Qualification. Borrower (a) is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires licensing and qualification; and (b) has
all requisite power, corporate or otherwise, to conduct its business and to
execute, deliver, and perform its obligations under the Loan Documents.
5.2 Organization, Standing, Qualification. Guarantor is (a) a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires licensing and qualification; and (b) has
all requisite power, corporate or otherwise, to conduct its business and to
execute, deliver, and perform its obligations under the Loan Documents.
5.3 Authorization, Enforceability, Etc.
(a) The execution, delivery and performance by Borrower and
Guarantor of the Loan Documents has been duly authorized by all necessary
corporate actions by Borrower and Guarantor and does not and will not (i)
violate any provision of Borrower's or Guarantor's articles of incorporation,
bylaws, or any agreement, law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award presently in effect to which
Borrower or Guarantor is a party or is subject; (ii) result in, or require the
creation or imposition of, any Lien upon or with respect to any asset of
Borrower or Guarantor other than Liens in favor of Lender; or (iii) result in a
breach of, or constitute a default by Borrower or Guarantor under, any
indenture, loan, or credit agreement or any other agreement, document,
instrument, or certificate to which Borrower or Guarantor is a party or by which
it or any of its assets are bound or affected, including but not limited to any
loan from or agreement of any type with a third party lender.
(b) No approval, authorization, order, license, permit, franchise,
or consent of, or registration, declaration, qualification, or filing with, any
governmental authority or other Person is required in connection with the
<PAGE>
execution, delivery, and performance by Borrower or Guarantor of any of the Loan
Documents.
(c) The Loan Documents constitute legal, valid, and binding
obligations of Borrower and Guarantor, enforceable against Borrower and
Guarantor in accordance with their respective terms. To the best of Borrower's
knowledge after good faith diligent inquiry, the Applicable Underlying Loan
Documents constitute legal, valid, and binding obligations of the relevant
Applicable Underlying Borrowers and Applicable Underlying Guarantors,
enforceable against each of them in accordance with the respective terms of such
Applicable Underlying Loan Documents.
(d) Borrower has good and marketable title to all of the Collateral,
free and clear of any Lien, security interest, charge, or encumbrance except for
the Liens or security interests created by this Agreement or any Loan Document
or otherwise created in favor of Lender or those Permitted Liens and
Encumbrances as set forth on Exhibit "H" hereto. No financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
Lender.
(e) The execution and delivery of the Loan Documents, the delivery
and endorsement to Lender of the Pledged Notes Receivable and Pledged Consumer
Notes Receivable, the filing and recordation of UCC-1 and UCC-3 financing
statements in each Applicable Jurisdiction, and the recordation or registration
in the Applicable Jurisdiction in accordance with all Applicable Laws of the
Pledges and Assignments of Notes Receivable and the Pledges and Assignments of
Consumer Notes Receivable and Interval Mortgages create in favor of Lender valid
and perfected continuing first priority Liens and security interests in and to
all of the Collateral. The Collateral secures the full payment and performance
of the Obligations.
(f) To the best of Borrower's knowledge after good faith diligent
inquiry, none of the Pledged Notes Receivable or Pledged Consumer Notes
Receivable is forged or has affixed thereto any unauthorized signatures or has
been entered into by any Person without the required legal capacity, and during
the term of this Agreement, none will be forged, or will have affixed thereto
any unauthorized signatures.
(g) To the best of Borrower's knowledge after good faith diligent
inquiry, there have been no material modifications or amendments whatsoever to
the Pledged Notes Receivable or the Applicable Mortgages, other than those
expressly approved by Lender in writing, the originals of which have been
delivered to Custodian.
<PAGE>
(h) Borrower has received no notice that there have been any
material modifications or amendments to the Pledged Consumer Notes Receivable or
the Interval Mortgages.
(i) Borrower has received no notice that any of the makers of the
Pledged Notes Receivable and the Pledged Consumer Notes Receivable have any
defenses, offsets, claims, or counterclaims, relating to the Pledged Notes
Receivable, any of the other Applicable Underlying Loan Documents or the Pledged
Consumer Notes Receivable.
(j) The Applicable Mortgages, if any, constitute and will continue
to constitute valid and enforceable first and exclusive Liens and security
interests on the Encumbered Intervals.
(k) The Interval Mortgages constitute and will continue to
constitute valid and enforceable first and exclusive Liens and security
interests on the Encumbered Intervals.
(l) The Pledged Notes Receivable and the Applicable Mortgages are
and shall remain in full force and effect as valid and binding obligations of
the respective Applicable Underlying Borrowers in favor of Lender, as holder.
(m) The Pledged Consumer Notes Receivable and the Interval Mortgages
are and shall remain in full force and effect as valid and binding obligations
of the respective Purchasers in favor of Lender, as collateral assignee.
(n) The grant of the Liens and security interests described herein
by Borrower in favor of Lender has not adversely affected and will not adversely
affect the validity or enforceability of the obligations of the respective
Applicable Underlying Borrowers under any of the Applicable Underlying Loan
Documents.
(o) The grant of the Liens and security interests described herein
by the Applicable Underlying Borrowers to Borrower and by Borrower to Lender has
not affected and will not adversely affect the validity or enforceability of the
obligations of the respective makers of the Pledged Consumer Notes Receivable
under such Pledged Consumer Notes Receivable or the corresponding Interval
Mortgages.
(p) Lender is not and shall not be required to take, and Borrower
has taken, any and all required steps to protect Lender's Liens and security
interests in the Collateral (other than maintaining or causing Custodian to
maintain possession, custody, and control of the portion of the Collateral
constituting instruments and timely filing continuation statements for UCC
<PAGE>
financing statements); and Lender is not and shall not be required to collect or
realize upon the Collateral or any distribution of interest or principal, nor
shall loss of, or damage to, any Collateral release Borrower or Guarantor from
any of the Obligations.
5.4 Financial Statements and Business Condition. The Financial Statements
fairly present the respective financial conditions and results of operations of
Borrower and Guarantor as of the date or dates thereof and for the periods
covered thereby. There are no material liabilities, direct or indirect, fixed or
contingent, of Borrower or Guarantor as of the dates of such Financial
Statements that are not reflected therein or in the notes thereto that have not
otherwise been disclosed to Lender in writing. Except for any such changes
heretofore expressly disclosed in writing to Lender, there have been no material
adverse changes in the respective financial conditions of Borrower or Guarantor
from the financial conditions shown in their respective Financial Statements,
nor have Borrower or Guarantor incurred any material liabilities, direct or
indirect, fixed or contingent, that are not shown in their respective Financial
Statements. Borrower and Guarantor are able to pay all of their respective debts
as they become due, and Borrower and Guarantor, as the case may be, will
maintain such solvent financial condition, giving effect to the Obligations, as
long as Borrower or Guarantor are obligated to Lender under this Agreement or
any of the other Loan Documents. Neither Borrower's nor Guarantor's Obligations
under this Agreement and the other Loan Documents will render Borrower or
Guarantor unable to pay their respective debts as they become due.
5.5 Taxes. Borrower represents and warrants that to the best of Borrower's
knowledge after good faith diligent inquiry, each Applicable Underlying
Borrower: (a) has paid in full all ad valorem taxes and other taxes and
assessments levied against the Applicable Underlying Loan Collateral, on or
before the due date of such taxes and assessments, and Borrower knows of no
basis for any additional taxes or assessments against any Applicable Resort or
Applicable Underlying Loan Collateral; and (b) has filed all tax returns
required to have been filed by it and has paid or will pay, prior to
delinquency, all taxes shown to be due and payable on such returns, including
interest and penalties, and all other taxes that are payable by it. To the best
of Borrower's knowledge after good faith diligent inquiry, no tax audit is
pending or threatened with respect to Borrower, Guarantor, any Applicable
Underlying Borrower, or any Applicable Underlying Guarantor.
5.6 Title to Properties; Prior Liens. To the best of Borrower's knowledge
after good faith diligent inquiry, the Applicable Underlying Borrowers have good
and marketable title to all of the Applicable Underlying Loan Collateral,
together with all rights, properties, and benefits appurtenant or related
thereto. Other than the Liens granted in favor of Lender, there are no Liens or
encumbrances against all or any portion of the Collateral or the Applicable
Underlying Loan Collateral, except for the Permitted Liens and Encumbrances.
<PAGE>
5.7 Subsidiaries, Affiliates, and Capital Structure. Guarantor is involved
in the business operations of and derives financial benefit from Borrower. For
so long as Borrower is obligated to Lender under any of the Loan Documents,
there shall be no change of ownership of the shares of stock in Borrower. None
of the Affiliates of Borrower or Guarantor are parties to any proxies, voting
trusts, shareholder agreements, or similar arrangements, pursuant to which
voting authority, rights, or discretion with respect to Borrower or Guarantor is
vested in any other Person.
5.8 Litigation, Proceedings, Etc. There are no actions, suits,
proceedings, orders, or injunctions pending or, to the best of Borrower's
knowledge after good faith diligent inquiry, threatened against or affecting
Borrower, Guarantor, their respective Affiliates, or any Applicable Resort,
Applicable Underlying Borrower, or Applicable Underlying Guarantor, at law or in
equity, or before or by any governmental authority or other tribunal, that (a)
could have a material adverse effect on Borrower, Guarantor, any Affiliate of
Borrower or Guarantor, any Applicable Resort, any Applicable Underlying
Borrower, or any Applicable Underlying Guarantor; or (b) could have a material
adverse effect on all or any portion of the Collateral or any Applicable
Underlying Loan Collateral. Exhibit "N," attached hereto and incorporated herein
by this reference, describes all currently pending litigation against Borrower
or Guarantor.
5.9 Environmental Matters. To the best of Borrower's knowledge after good
faith diligent inquiry and as pertains to each Applicable Resort: (a) none of
the Applicable Resorts contain any Hazardous Materials, and no Hazardous
Materials are used or stored at or transported to or from any Applicable Resort,
except for commercially reasonable amounts thereof commonly found at residential
and resort properties in the Applicable Jurisdiction; (b) no Applicable
Underlying Borrower has received notice from any governmental agency or other
Person with regard to Hazardous Materials on, under, or affecting all or any
portion of the Applicable Underlying Loan Collateral; and (c) neither any
Applicable Underlying Borrower, any Applicable Resort, nor any Applicable
Underlying Loan Collateral are in violation of any Environmental Laws.
5.10 Full Disclosure. No information, exhibit, or written report or the
content of any schedule furnished by or on behalf of Borrower or Guarantor to
Lender in connection with the Loan, the Applicable Resorts, the Applicable
Underlying Borrowers, the Applicable Underlying Guarantors, the Applicable
Underlying Collateral, or the Collateral, and no representation or statement
made by Borrower or Guarantor in any Loan Document, contains any material
misstatement of fact or omits the statement of a material fact necessary to make
the statement contained herein or therein not misleading. To the extent that any
such information, exhibit, report, or statement furnished or made to Lender was
obtained by Borrower from an Applicable Underlying Borrower or an Applicable
Underlying Guarantor, the representation and warranty made in this Section 5.10
<PAGE>
is so made to the best of Borrower's knowledge after good faith diligent
inquiry. Neither Borrower nor Guarantor knows of any fact or condition that
could adversely affect the construction of the Financed Improvements or the
operation of all Applicable Resorts in accordance with all Applicable Laws, or
impede or preclude Borrower's or Guarantor's performance of its Obligations
pursuant to the Loan Documents.
5.11 Use of Proceeds/Margin Stock. None of the proceeds of the Loan will
be used to purchase or carry any "margin stock" (as defined under Regulation U
of the Board of Governors of the Federal Reserve System, as in effect from time
to time), and no portion of the proceeds of the Loan will be extended to others
for the purpose of purchasing or carrying margin stock. None of the transactions
contemplated in this Agreement (including, without limitation, the use of the
proceeds from the Loan) will violate or result in the violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 11. The
proceeds of the Loan will be disbursed only for the purposes set forth in
Section 2.1 hereof.
5.12 No Defaults. No Default or Event of Default exists, and there is no
breach or violation in any material respect of any term of any document,
contract, agreement, charter instrument, bylaws, or other instrument to which
Borrower or any Affiliate thereof is a party or by which it may be bound.
5.13 Restrictions of Borrower or Guarantors. Neither Borrower, Guarantor,
nor any Affiliate thereof is a party to any contract or agreement, or subject to
any Lien, charge, or restriction, that materially and adversely affects its
business. Neither Borrower nor Guarantor will be, on or after the Closing Date,
a party to any contract or agreement that restricts its right or ability to
incur indebtedness or prohibits Borrower's or Guarantor's execution and delivery
of, or compliance with the terms of, this Agreement or the other Loan Documents.
Borrower has not agreed or consented to cause or permit in the future (upon the
happening of any contingency or otherwise) any of the Collateral, whether now
owned or hereafter acquired, to be subject to a Lien except in favor of Lender
as provided hereunder.
5.14 Broker's Fees. Lender and Borrower represent to each other that
neither of them has made any commitment or taken any action that could result in
a claim for any broker's, finder's, or other similar fees or commissions with
respect to any of the transactions contemplated by this Agreement. Borrower
agrees to indemnify Lender and save and hold Lender harmless from and against
all claims of any Person for any broker's or finder's fee, commission, or
similar amount, and this indemnity shall include reasonable attorneys' fees and
legal expenses.
<PAGE>
5.15 Tax Identification/Social Security Numbers. Borrower's and
Guarantor's respective federal taxpayer identification numbers are as follows:
Borrower: 16-1399129
Guarantor: 59-2346270
5.16 Legal Compliance. Borrower has, in all material respects, complied
fully with all Applicable Laws in connection with the Applicable Underlying
Loans. To the best of Borrower's knowledge after good faith diligent inquiry,
each Applicable Underlying Borrower has, in all material respects, similarly
complied with all Applicable Laws in connection with Applicable Resort and
Applicable Underlying Loan Collateral. In particular, Borrower is not aware of
any violation by an Applicable Underlying Borrower in connection with an
Applicable Resort of: (i) the Interstate Land Sales Full Disclosure Act; (ii)
any applicable state condominium and timeshare statutes, rules, and regulations,
including but not limited to those governing the administration and operation of
owners' associations and those requiring registration of any of the Encumbered
Intervals; (iii) Regulation Z of the Federal Reserve Board; (iv) the Equal
Credit Opportunity Act; (v) Regulation B of the Federal Reserve Board; (vi)
Section 5 of the Federal Trade Commission Act; (vii) all applicable state and
federal securities laws; (viii) all applicable usury laws; (ix) all applicable
trade practices, home and telephone solicitation, sweepstakes, lottery, and
other consumer credit and protection laws; (x) all applicable real estate sales
licensing, disclosure, reporting, and escrow laws; (xi) the Americans with
Disabilities Act; (xii) the Real Estate Settlement Procedures Act; and (xiii)
all amendments to and rules and regulations promulgated under the foregoing.
5.17 Applicable Resorts. To the best of Borrower's knowledge after good
faith diligent inquiry, all representations and warranties made by the
Applicable Underlying Borrower in the Applicable Underlying Loan Documents,
including but not limited to those set forth in Section 6.9 of the Hypothecation
Loan Agreement attached as Exhibit "A" hereto, are true and correct in all
material respects. In the event that Lender approves the use as an Applicable
Underlying Loan Document in connection with a particular Applicable Underlying
Loan of a loan agreement that is not in the form of Exhibit "A" hereto, then
Borrower shall nevertheless be deemed to have represented and warranted that to
the best of Borrower's knowledge after good faith diligent inquiry, all of the
representations and warranties set forth in Section 6.9 of Exhibit "A" hereto
are true and correct in all material respects in connection with the Applicable
Underlying Loan and the Applicable Resort.
5.18 Applicable Timeshare Documents and Reports. Each Applicable
Underlying Borrower has furnished to Borrower and Borrower shall furnish to
Lender, upon request, true and correct copies of the Applicable Timeshare
<PAGE>
Documents which consist of all those placed on file by the Applicable Underlying
Borrower with the applicable regulatory authorities or any other appropriate
federal, state, or local regulatory or recording agencies, offices, or
departments, if required.
5.19 Continuation and Investigation. Each request by Borrower for an
Advance of the Loan shall constitute an affirmation that all representations and
warranties contained herein remain true and correct as of the date thereof. All
representations, warranties, covenants, and agreements made herein or in any
certificate or other document delivered to Lender by or on behalf of Borrower,
pursuant to or in connection with this Agreement, shall be deemed to have been
relied upon by Lender, notwithstanding any investigation heretofore or hereafter
conducted by or on behalf of Lender, and shall survive the making of any or all
Advances and payments contemplated hereby.
For purposes of this Section 5, to the extent applicable, Borrower shall
be presumed to have engaged in good faith diligent inquiry if it has acted
strictly in accordance with the Qualified Borrower Underwriting Guidelines, the
Qualified Loan Underwriting Guidelines, and/or the Qualified Resort Underwriting
Guidelines, as appropriate.
SECTION 6. COVENANTS
6.1 Affirmative Covenants. For so long as any of Borrower's Obligations
remain unsatisfied, Borrower hereby covenants and agrees with Lender as follows:
(a) Payment and Performance of Obligations. Borrower shall repay all
of the Loan and all related amounts when and as the same become due and payable,
and Borrower shall strictly observe and perform all of the Obligations,
including, without limitation, all covenants, agreements, terms, conditions, and
limitations contained in the Loan Documents, and will do all things necessary
that are not prohibited by law to prevent the occurrence of any Default or Event
of Default hereunder; and Borrower will maintain an office or agency in the
State of New York where notices, presentations, and demands in respect of the
Loan Documents may be made upon Borrower.
(b) Maintenance of Existence, Qualification and Assets. Borrower
shall at all times (i) maintain its legal existence; (ii) maintain its
qualification, where required, to transact business and good standing in the
State of New York and in any other jurisdiction in which it conducts business;
and (iii) comply or cause its compliance with all Applicable Laws.
(c) Maintenance of Insurance. Borrower shall ensure that the
Applicable Underlying Loan Documents require that until all of Borrower's
<PAGE>
Obligations have been fully satisfied, policies of insurance with premiums
therefor being paid when due, are maintained and, promptly upon receipt thereof
from each Applicable Underlying Borrower, shall deliver to Lender and Servicing
Agent originals of insurance policies issued by insurance companies (together
with paid premium invoices in respect thereof), in amounts, in form, and in
substance, and with expiration dates, all acceptable to Lender and containing
waivers of subrogation rights by the insuring company, non-contributory standard
mortgagee benefit clauses or their equivalents, and mortgagee loss payable
endorsements in favor of and satisfactory to Lender and breach of warranty
coverage, providing the following types of insurance on and with respect to each
Applicable Underlying Borrower and each Applicable Resort:
(i) As to all improvements that have already been completed as
of the date hereof, "All Risk Special Form" insurance coverage (including fire,
lightning, hurricane, tornado, wind and water damage, earthquake, vandalism and
malicious mischief coverage) covering all real and personal property that
comprises the Applicable Resort, in an amount not less than the full replacement
value of such improvements and personal property, and said policy of insurance
shall provide for a deductible acceptable to Lender, breach of warranty
coverage, and replacement cost endorsements satisfactory to Lender, and shall
not permit co-insurance.
(ii) Public liability and property damage insurance covering
the Applicable Resort in amounts and on terms satisfactory to Lender; and
(iii) Such other insurance on the Applicable Resort or any
replacements or substitutions therefor, including, without limitation, rent
loss, business interruption, flood insurance (if the Applicable Resort is or
becomes located in an area that is considered a flood risk by the U.S. Emergency
Management Agency or pursuant to the National Flood Insurance program), in such
amounts and upon such terms as may from time to time reasonably be required by
Lender.
Lender shall expressly be named an insured and loss payee in each
insurance policy described in this Section 6.1(c). To the extent any
"institutional mortgagee," "institutional lender" or "mortgagee" (as defined or
used in an Applicable Declaration) other than Lender has any rights to approve
the form of insurance policies with respect to the Applicable Resort, the
amounts of coverage thereunder, the insurers under such policies, or the
designation of an attorney-in-fact for purposes of dealing with damage to any
part of the Applicable Resort or insurance claims or matters related thereto or
any successor to such attorney-in-fact or any changes with respect to any of the
foregoing, Borrower shall take all reasonable steps as may be necessary or
appropriate, in Lender's sole discretion, to ensure that Lender shall at all
times have a co-equal right with such other "institutional mortgagee,"
"institutional lender," or other "mortgagee"
<PAGE>
(including, without limitation, Borrower or any third-party lender), to approve
all such matters and any proposed changes in respect thereof; and Borrower shall
not cause and shall use its best efforts to prohibit any changes with respect to
any insurance policies, insurers, coverage, attorney-in-fact or insurance
trustee, if any, without Lender's prior written approval.
In the event of any insured loss or claim in respect of all or any
portion of an Applicable Resort, Borrower shall use its good faith commercially
reasonable efforts (within the scope of its role as lender) to cause all
proceeds of such insurance policies to be applied in a manner consistent with
the Applicable Timeshare Documents and all Applicable Laws.
All insurance policies required pursuant to this Agreement (or the
Applicable Timeshare Documents) shall provide that the coverage afforded thereby
shall not expire or be amended, canceled, modified, or terminated without at
least thirty (30) days' prior written notice to Lender and contain a provision
affirming Lender's rights and benefits thereunder, despite any violation of the
applicable policy terms by the Applicable Underlying Borrower or any other
Person. At least thirty (30) days prior to the expiration date of each policy
maintained pursuant to this Section 6.1(c), a certified copy of a renewal or
replacement thereof satisfactory to Lender shall be delivered to Lender, along
with evidence satisfactory to Lender that the premium therefor has been paid in
full. The delivery of any insurance policies hereunder shall constitute an
assignment of all unearned premiums as further security for the Obligations. In
the event that all required premium payments for all such insurance policies are
not paid at least thirty (30) days prior to the expiration date of each policy
maintained pursuant to this Section 6.1(c), Borrower shall immediately upon
receiving notice thereof notify Lender in writing of such failure to timely pay
the required insurance premiums. Borrower shall make a good faith inquiry on a
regular basis to each Applicable Underlying Borrower to determine whether the
required insurance premiums covering the Applicable Underlying Loan Collateral
have been paid. If Borrower determines upon such inquiry or otherwise that the
required insurance premiums have not been paid, Borrower shall immediately
notify Lender of such failure to timely pay the required insurance premium, and
Borrower shall have thirty (30) days from receipt of a written request from
Lender to cause the required insurance premiums to be paid. If the required
insurance premiums are not paid within such thirty (30) day period, Lender may,
in its sole discretion, without any obligation to do so, choose to pay such
required insurance premiums, in which case Borrower shall pay Lender interest at
the Default Rate for any amounts so advanced. Lender may also, in its sole
discretion, in the event the required insurance premiums are not paid when due,
establish an insurance escrow account from which Lender may make insurance
payments when insurance premiums shall become due. If the required insurance
premiums are not paid as required and Lender elects not to pay such insurance
premiums or establish an escrow account for payment thereof, such failure shall
constitute an Event of Default hereunder.
<PAGE>
In the event of any fire or other casualty to or with respect to all
or any portion of the Applicable Resort, Borrower covenants that it shall use
its good faith commercially reasonable efforts (within the scope of its role as
lender) to cause the prompt restoration, repair, or replacement of the damaged
portion(s) or the Applicable Resort and the repair or replacement of any other
personal property to the same condition as immediately prior to such fire or
other casualty and, with respect to the real and personal property comprising
the Applicable Resort, in accordance with the terms of the Applicable Timeshare
Documents and all Applicable Laws. The insufficiency of any net insurance
proceeds shall in no way relieve Borrower or the Applicable Underlying Borrower
from their respective obligations as set forth herein. In Lender's sole
discretion, any and all insurance proceeds payable to or received by Lender
pursuant to the Applicable Declaration or the applicable insurance policies may
be applied to the payment of the Obligations, whether or not due and in whatever
order Lender elects, consistent with the terms of the applicable insurance
policy and the Applicable Declaration.
Borrower shall in good faith cooperate with Lender in obtaining for
Lender the benefits of any insurance or other proceeds lawfully or equitably
payable to any Applicable Underlying Borrower, Borrower, or Lender in connection
with the transactions contemplated hereby and in paying any Obligation
(including the payment by Borrower of the expense of an independent appraisal on
behalf of Lender in case of a fire or other casualty affecting the Applicable
Resort).
Borrower shall not waive any material insurance provision in any
Applicable Underlying Loan Document without Lender's prior written consent.
(d) Maintenance of Security. Borrower shall execute and deliver (or
cause to be executed and delivered) to Lender all security agreements, financing
statements, assignments, and such other agreements, documents, instruments, and
certificates, and all supplements and amendments thereto, and take all such
other actions, as Lender deems necessary or appropriate in order to maintain as
valid, enforceable, and perfected first priority Liens and security interests,
all Liens and security interests in the Collateral and Applicable Underlying
Loan Collateral granted to Lender to secure the Obligations. Borrower shall not
grant extensions of time for the payment of, or compromise for less than the
full face value or release in whole or in part, any Applicable Underlying
Borrower, Applicable Underlying Guarantor, or other Person liable for the
payment of, or allow any credit whatsoever except for the amount of cash to be
paid upon, any Collateral or any instrument, chattel paper, or document
representing the Collateral.
(e) Payment of Taxes and Claims. Borrower agrees to use its best
efforts to cause to be paid, when due, all taxes and assessments of any
<PAGE>
kind imposed on or with respect to the Loan or any of the Loan Documents, or the
Collateral, including but not limited to the Encumbered Intervals. Borrower
shall make good faith inquiry on a regular basis to determine whether all such
taxes and assessments have been paid. Borrower shall immediately notify Lender
in writing of any failure to timely pay all taxes and assessments due. In the
event that Lender determines (through notice from Borrower or otherwise) that
any such taxes or assessments have not been paid when due, Borrower shall have
thirty (30) days from receipt of a written request for payment from Lender to
cause the required taxes to be paid. If such required taxes (and any applicable
late charges, etc.) are not paid within such thirty (30) day period, Lender may,
in its sole discretion, without any obligation to do so, choose to pay such
taxes on behalf of Borrower or the Applicable Underlying Borrower, in which case
Borrower shall pay Lender interest at the Default Rate on any amounts so
advanced. In the event Lender elects not to pay the required taxes and the
required taxes are not paid as set forth above, such failure shall constitute an
Event of Default hereunder. Borrower shall pay, where applicable, or shall use
its best efforts to cause the Applicable Underlying Borrower or Applicable
Underlying Guarantor to pay all other charges and assessments levied against
such Applicable Underlying Borrower, the Applicable Underlying Loan Collateral,
or the Applicable Resort before any claim (including, without limitation, claims
for labor, services, materials, or supplies) arises for amounts that have become
due and payable.
(f) Inspections. Borrower shall, at any time and from time to time,
upon reasonable notice and at the expense of Borrower, including but not limited
to the travel expenses of Lender's agents, ensure that the Applicable Underlying
Loan documents permit, and use its good faith commercially reasonable efforts to
arrange for, Lender or its agents or representatives to inspect any Applicable
Resort, any Applicable Underlying Loan Collateral, or any of Borrower's or
Guarantor's assets, including but not limited to all documents, bank statements,
and other records within Borrower's possession, custody, or control, and to
examine and make copies and abstracts thereof; and to discuss its affairs,
finances and accounts with any of its officers, employees, Affiliates,
contractors or independent certified public accountants (and by this provision,
Borrower authorizes said accountants to discuss with Lender, its agents or
representatives, the affairs, finances, and accounts of Borrower).
Notwithstanding the foregoing provisions of this Section 6.1(f) to the contrary,
Lender will make no more than two (2) such inspections per year in connection
with any particular Applicable Underlying Loan unless an Event of Default
hereunder has occurred. Lender agrees to use reasonable efforts not to interfere
unreasonably with the Applicable Underlying Borrower's business operations in
connection with any such inspections. Without limiting the foregoing, Lender
shall have the right to make such credit investigations as Lender may deem
appropriate, in its sole discretion, in connection with its review of any
Applicable Underlying Loan Documents. Borrower shall make available to Lender
all such credit and other information in Borrower's possession or under its
<PAGE>
control or to which it may have access with respect to Applicable Underlying
Borrowers and Applicable Underlying Guarantors as Lender may request.
(g) Reporting Requirements. For so long as any of the Obligations
remain unsatisfied, Borrower shall furnish (or cause to be furnished, as the
case may be) to Lender, in each case certified in writing by Borrower and
Guarantor as true and correct, the following:
(i) Monthly Financial Reports. As soon as available and in any
event within fifteen (15) days after the end of each calendar month: (i) a
report detailing all amounts of every possible description received by or on
behalf of Borrower with respect to each Applicable Underlying Loan during the
preceding calendar month and how such amounts were allocated between principal,
interest, and other categories; (ii) a current aging report on the Pledged
Consumer Notes Receivable; (iii) a report detailing collections on each of the
Pledged Notes Receivable (trial balance); (iv) a delinquency report on all
Pledged Notes Receivable and Pledged Consumer Notes Receivable; (v) a Borrowing
Base report substantially in the form of Exhibit "O," attached hereto and
incorporated herein by this reference; and (vi) monthly reports from Lockbox
Agent as required pursuant to the Lockbox Agreement;
(ii) Quarterly Financial Reports. As soon as available and in
any event within forty-five (45) days following the end of each calendar
quarter, unaudited statements of income and expense of Borrower and Guarantor
for the quarterly period in question and balance sheets of Borrower and
Guarantor as of the last day of such calendar quarter, all in such detail and
scope as may be reasonably required by Lender, prepared in accordance with GAAP
and on a basis consistent with prior accounting periods and certified as true
and correct by Borrower's and Guarantor's respective chief financial officers,
as appropriate;
(iii) Annual Audited Financial Reports. As soon as available
and in any event within one hundred twenty (120) days after the end of each of
calendar year or other fiscal year as may be applicable with respect to Borrower
and Guarantor (a "Fiscal Year"), statements of income and expense of Borrower
and Guarantor for the annual period ended as of the end of such Fiscal Year, and
balance sheets of Borrower and Guarantor as of the end of such Fiscal Year, all
in such detail and scope as may be reasonably required by Lender and prepared
and audited by an independent certified public accounting firm acceptable to
Lender in accordance with GAAP and on a basis consistent with prior accounting
periods. Each annual financial statement of Borrower and Guarantor shall be
certified by Borrower and Guarantor to be true, correct, and complete, and shall
otherwise be in form acceptable to Lender;
(iv) Officer's Certificate. Each set of annual Financial
Statements or reports delivered to the Lender pursuant to Sections 6.1(g)(i),
(ii),
<PAGE>
(iii) and (iv) hereof shall be accompanied by a certificate of the President or
the Treasurer of Borrower or Guarantor, as appropriate, setting forth that the
signers have reviewed the relevant terms of this Agreement (and all other
agreements and exhibits between the relevant parties), have made, or caused to
be made, under their supervision, a review of the transactions and conditions of
Borrower and Guarantor from the beginning of the period covered by the Financial
Statements or reports being delivered therewith to the date of the certificate,
and that such review has not disclosed the existence during such period of any
condition or event that constitutes a Default or Event of Default or, if any
such condition or event existed or exists or will exist, specifying the nature
and period of existence thereof and what action Borrower or Guarantor has taken
or proposes to take with respect thereto;
(v) Audit Reports. Promptly upon receipt thereof, one (1) copy
of each other report submitted to Borrower or Guarantor by independent public
accountants or other Persons in connection with any annual, interim, or special
audit made by them of the books of Borrower or Guarantor;
(vi) Notice of Default or Event of Default. Promptly upon
becoming aware of the existence of any condition or event that constitutes a
Default or an Event of Default hereunder or any of the other Loan Documents, or
a default or event of default pursuant to any of the Applicable Underlying Loan
Documents, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking or proposes to take with respect
thereto;
(vii) Notice of Claimed Default. Promptly upon becoming aware
that the holder of any material obligation or of any evidence of material
indebtedness of Borrower, Guarantor, or any Applicable Underlying Borrower or
Applicable Underlying Guarantor has given notice or taken any other action with
respect to a claimed default or event of default with respect thereto, a written
notice specifying the notice given or action taken by such holder and the nature
of the claimed default or event of default and what action Borrower or Guarantor
is taking or proposes to take with respect thereto;
(viii) Material Adverse Developments. Promptly upon becoming
aware of any pending or threatened claim, action, proceeding, litigation,
development, or any other information, whether of the type referenced in Section
5.8 hereof or otherwise, that could materially and adversely affect Borrower,
Guarantor, any Applicable Underlying Borrower, any Applicable Underlying
Guarantor, any Applicable Resort, any Applicable Underlying Loan Collateral, or
all or any portion of the Collateral, including but not limited to the ability
of Borrower to perform its Obligations hereunder, Borrower shall provide Lender
with telephonic notice thereof, immediately followed by telecopied and mailed
written confirmation, specifying the nature of such development or information
and the anticipated effect thereof; and
<PAGE>
(ix) Other Information. Borrower shall promptly deliver to
Lender any other available information related to the Loan, the Collateral, the
Applicable Underlying Loan Collateral, Borrower, Guarantor, the Applicable
Resorts, the Applicable Underlying Borrowers, or the Applicable Underlying
Guarantors as Lender may in good faith request.
(h) Records. Borrower shall keep detailed accurate books and records
of account in accordance with GAAP reflecting all financial transactions of
Borrower with respect to the Applicable Underlying Loans.
(i) Guarantor. Absent the prior written consent of Lender, which may
be granted or withheld in Lender's sole and absolute discretion, Guarantor shall
remain the owner and holder of one hundred percent (100%) of the authorized,
issued, and outstanding shares of stock of Borrower. Borrower shall not enter
into any proxies, voting trusts, shareholder agreements, or similar arrangements
for the purpose of vesting voting rights, authority, or discretion in any other
Person.
(j) Notices. Borrower shall notify Lender within five (5) Business
Days of the occurrence of any event (i) as a result of which any representation
or warranty of Borrower contained in any Loan Document would be incorrect or
materially misleading if made at that time; (ii) as a result of which Borrower
is not in full compliance with all of its covenants and agreements contained in
this Agreement or any other Loan Document; or (iii) which constitutes or, with
the passage of time, notice, or a determination by Lender would constitute, a
Default or an Event of Default.
(k) Other Documents. Borrower shall maintain to the satisfaction of
Lender, and make available to Lender, accurate and complete files relating to
the Pledged Notes Receivable, Pledged Consumer Notes Receivable and all of the
other Collateral, and such files shall contain true copies of each Pledged Note
Receivable and each Pledged Consumer Note Receivable, as amended from time to
time, copies of all relevant credit memoranda relating to such Pledged Notes
Receivable and Pledged Consumer Notes Receivable, and all collection information
and correspondence relating thereto.
(l) Further Assurances. Borrower shall execute and deliver, or cause
to be executed and delivered, such other and further agreements, documents,
instruments, certificates, and assurances as, in the judgment of Lender
exercised in good faith, may be necessary or appropriate in order more
effectively to evidence or secure, and to ensure the performance of, the
Obligations. In addition, Borrower shall deliver to Lender from time to time,
upon request by Lender, such documents, instruments, and other materials or
items
<PAGE>
as Lender may reasonably require to evidence Borrower's compliance with the
covenants set forth in this Section 6.1.
(m) Expenses and Closing Fees. Whether or not the transactions
contemplated hereunder are consummated, Borrower shall pay all reasonable
expenses of Lender relating to negotiating, preparing, documenting, closing, and
enforcing this Agreement and the other Loan Documents, including but not limited
to:
(i) The cost of preparing, reproducing, and binding this
Agreement, the other Loan Documents, and all exhibits and schedules thereto;
(ii) The fees and disbursements of Lender's and Borrower's
counsel;
(iii) Lender's out-of-pocket expenses;
(iv) All fees and expenses (including fees and expenses of
Lender's counsel) relating to any amendments, waivers, consents, or subsequent
closings or other transactions pursuant to the provisions hereof;
(v) All costs, outlays, legal fees, and expenses of every kind
and character had or incurred in: (A) the interpretation or enforcement of any
of the provisions of, or the creation, preservation, or exercise of rights and
remedies under, any of the Loan Documents, including the costs of appeal; (B)
the preparation for, negotiations regarding, consultations concerning, or the
defense or prosecution of legal proceedings involving any claim or claims made
or threatened against Lender arising out of this transaction or the preservation
or protection of the Collateral securing the Loan or Advances made hereunder,
expressly including, without limitation, the defense by Lender of any legal
proceedings instituted or threatened by any Applicable Underlying Borrower,
Applicable Underlying Guarantor, or other Person to seek to recover or set aside
any payment or set off theretofore received or applied by the Lender with
respect to the Obligations, and any and all appeals thereof; and (C) the
advancement of any expenses provided for under any of the Loan Documents;
(vi) All fees and expenses of Servicing Agent, Backup Servicer
(if applicable), and Custodian;
(vii) All costs and expenses incurred by Lender under the
Note, and all late charges payable under the Note; and
(viii) To the extent the same are not paid by an Applicable
Underlying Borrower, all real and personal property taxes and assessments,
documentary stamp and intangible taxes, sales taxes, recording fees, title
insurance premiums and other title charges, document copying, transmittal and
binding costs, lien and judgment search costs, brokers fees, escrow fees, wire
<PAGE>
transfer fees, and all travel and out-of-pocket expenses of Lender to conduct
inspections or audits. Without limiting any of the foregoing, Borrower shall pay
the costs of Code and other searches, Code and other Loan Document recording and
filing fees, and applicable taxes and premiums on each mortgagee policy of title
insurance delivered to Lender pursuant to this Agreement, to the extent the same
are not paid by an Applicable Underlying Borrower.
(n) Indemnification of Lender. In addition to (and not in lieu of)
any other provisions hereof or of any other Loan Document providing for
indemnification in favor of Lender, Borrower hereby defends, indemnifies, and
holds harmless Lender, its subsidiaries, other Affiliates, officers, directors,
agents, employees, representatives, consultants, contractors, servants, and
attorneys, as well as the respective heirs, personal representatives,
successors, and assigns of any or all of them (hereinafter collectively referred
to as the "Indemnified Lender Parties"), from and against, and agrees promptly
to pay on demand or reimburse each of them with respect to, any and all
liabilities, claims, demands, losses, damages, costs, and expenses (including,
without limitation, reasonable attorneys' and paralegals' fees and costs),
actions or causes of action of any and every kind or nature whatsoever asserted
against or incurred by any of them by reason of or arising out of or in any way,
directly or indirectly, related or attributable to: (i) this Agreement, the
other Loan Documents, the Commitment, the Collateral, the Applicable Underlying
Loan Documents, or the Applicable Underlying Loan Collateral; (ii) the
transactions contemplated under any of the Loan Documents or the Applicable
Underlying Loan Documents, including, without limitation, those in any way
relating to or arising out of the violation of any Applicable Laws; (iii) any
breach of any covenant or agreement or the incorrectness or inaccuracy of any
representation or warranty of Borrower contained in this Agreement or any of the
other Loan Documents (including, without limitation, any certification of
Borrower delivered to Lender; (iv) any and all taxes, including real estate,
personal property, sales, mortgage, excise, intangible, or transfer taxes, and
any and all fees or charges that may at any time arise or become due prior to
the payment, performance, and discharge in full of the Obligations; (v) the
breach of any representation or warranty as set forth herein regarding any
Environmental Laws; (vi) the failure of Borrower or an Applicable Underlying
Borrower to perform any obligation or covenant herein required to be performed
pursuant to any Environmental Laws; (vii) the use, generation, storage, release,
threatened release, discharge, disposal, or presence on, under, or about any
Applicable Resort of any Hazardous Materials (except to the extent that
liability of the Indemnified Lender Party with respect to such matter would not
exist but for the acts or omissions of such Indemnified Lender Party as
determined in a final, non-appealable adjudication by a court of competent
jurisdiction); (viii) the removal or remediation of any Hazardous Materials from
an Applicable Resort required to be performed pursuant to any Environmental Laws
or as a result of recommendations of any environmental consultant or as required
by Lender; (ix) claims asserted by any Person (including, without limitation,
any governmental or quasi-governmental agency,
<PAGE>
commission, department, instrumentality or body, court, arbitrator, or
administrative board in connection with or any in any way arising out of the
presence, use, storage, disposal, generation, transportation, release, or
treatment of any Hazardous Materials on, in, under, or affecting any Applicable
Resort; (x) the violation or claimed violation of any Environmental Laws in
regard to an Applicable Resort; (xi) the preparation of an environmental audit
or report on an Applicable Resort not to exceed one (1) per calendar year and
premised upon the Lender's reasonable belief of the existence of a violation of
Environmental Laws, whether conducted by Lender, Borrower, an Applicable
Underlying Borrower, or another Person; (xii) the exercise by Borrower of any
rights or remedies under the Applicable Underlying Loan Documents or any
Applicable Laws; or (xiii) the exercise by Lender of any rights or remedies
under this Agreement or any of the other Loan Documents. Such indemnification
shall not give Borrower or Guarantor any right to participate in the selection
of counsel for Lender or the conduct or settlement of any dispute or proceeding
for which indemnification may be claimed. The provisions of this Section shall
survive the full payment, performance, and discharge of the Obligations and the
termination of this Agreement, and shall continue thereafter in full force and
effect.
(o) Loan Servicing. The Servicing Agreement shall be in form and
content satisfactory to Lender, in its sole discretion. Borrower may not
terminate the Servicing Agreement without's Lender's prior written approval. The
Servicing Agreement shall be cancelable by Lender immediately following the
occurrence of an Event of Default. If the Servicing Agent is Borrower or an
Affiliate of Borrower, no servicing fees shall be paid during or with respect to
any period of time in which a Default or Event of Default hereunder exists.
(p) Use of Borrower's Name. Borrower shall at all times during the
term of the Loan permit Lender to use the name of Borrower, any of its
Affiliates, and Guarantor in any press release, advertisement, or other
promotional material disseminated regarding the Loan.
6.2 Negative Covenants. For so long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) Limitation on Other Debt/Further Encumbrances. Without the prior
written consent of Lender, which may be granted, withheld, or conditioned, in
Lender's sole and absolute discretion, Borrower shall not obtain financing or
grant Liens with respect to all or any portion of the Collateral (whether now
existing or created hereafter) other than those in favor of Lender.
(b) Restrictions on Transfers. Neither Borrower nor Guarantor shall,
without obtaining the prior written consent of Lender (which consent may be
given, withheld, or conditioned by Lender, in Lender's sole and absolute
discretion), whether voluntarily or involuntarily, by operation of law or
otherwise:
<PAGE>
(i) transfer, sell, pledge, convey, hypothecate, factor, or assign all or any
portion of the Collateral; (ii) lease or license any portion of the Collateral,
or change the legal or actual possession or use thereof; or (iii) permit the
dilution, transfer, pledge, hypothecation, or encumbrance of any of the stock of
Borrower or Guarantor. Without limiting the generality of the preceding
sentence, and subject to the terms of this Agreement, the prior written consent
of Lender shall be required for (A) any transfer of the Collateral or any part
thereof to a subsidiary or other Affiliate of Borrower or otherwise; (B) any
corporate merger or consolidation, disposition, or other reorganization of
Borrower or Guarantor, or the reclassification of any of the capital stock of
Borrower or Guarantor; (C) any change in the ownership of Borrower or Guarantor;
and (D) any transfer of or change in Guarantor's status as the sole shareholder
of Borrower; provided, however, that notwithstanding the foregoing provisions of
this Section 6.2(b) to the contrary, Lender shall not unreasonably withhold its
consent to any of the actions specified in (A) through (D) above in the event
that the applicable successor to Borrower or Guarantor, as the case may be, is
an investment grade company with a minimum tangible net worth of not less than
$10,000,000 as determined in accordance with GAAP. In the event that Lender, in
Lender's sole discretion, is willing to consent to a transfer that would
otherwise be prohibited by this Section 6.2(b), Lender may condition its consent
on such terms as it desires, including, without limitation, an increase in the
Interest Rate and the requirement that Borrower pay a transfer fee, together
with any expenses incurred by Lender in connection with the granting of such
consent (including, without limitation, attorneys' fees and expenses). If
Borrower violates the terms of this Section 6.2(b), in addition to any other
rights or remedies which Lender may have hereunder, pursuant to any other Loan
Document, or at law or in equity, Lender may, upon written notice to Borrower,
increase, effective immediately as of the date of such violation, the Interest
Rate to the Default Rate.
(c) Use of Lender's Name. Without the prior written consent of
Lender, Borrower will not, and will not permit any Affiliate to, use the name of
Lender, of Credit Suisse First Boston Corporation, or of any other affiliate of
Lender in any press release, advertising, or other promotional materials of any
kind.
(d) Transactions with Affiliates. Without the prior written consent
of Lender, Borrower shall not enter into any transaction with any Affiliate
thereof in connection with the Collateral, including, without limitation,
relating to the purchase, sale, or exchange any assets or properties or the
rendering of any service.
(e) Name Change. Borrower shall not change its name, its chief
executive office, or the locations at which it does business without providing
Lender at least thirty (30) days' prior written notice thereof and executing, at
Borrower's sole expense, such UCC-3 amendments and all other documents and
instruments as Lender, in its sole discretion, deems reasonably necessary or
<PAGE>
appropriate in order to continue the perfection of its Lien in and to all of the
Collateral; provided, however, that under no circumstances shall the name of
Borrower ever include the word "Bennett" in it.
(f) Collateral. Neither Borrower nor Guarantor shall take any action
(or permit or consent to the taking of any action) that might materially impair
the value of all or any portion of the Collateral or any of the rights of Lender
with respect to the Collateral, nor shall Borrower or Guarantor cause or permit
any material amendment to or modification of the form or terms of any of the
Pledged Notes Receivable, Applicable Mortgages, other Applicable Underlying Loan
Documents, or any Applicable Timeshare Documents, including but not limited to
the Applicable Declarations.
6.3 Minimum Net Worth Requirement. Borrower agrees to satisfy the Minimum
Net Worth Requirement at all times during the term of this Agreement.
SECTION 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following occurs:
7.1 The Loan.
(a) Payment Default. If Borrower fails to make, as and when due,
whether by acceleration or otherwise, any payment or mandatory prepayment of
principal, interest, or other fees or amounts of any and every kind hereunder or
pursuant to any of the other Loan Documents. Notwithstanding the foregoing
sentence to the contrary, a payment by Borrower hereunder or pursuant to any of
the other Loan Documents shall not be deemed delinquent hereunder as long as the
entire requisite amount is actually received by Lender, without notice or demand
of any kind by Lender, within fifteen (15) days following the date upon which
such payment is due.
(b) Covenant Defaults. If Borrower fails fully and timely to perform
or observe any non-monetary covenant, agreement, or warranty contained in this
Agreement or in any of the other Loan Documents and such failure continues for a
period of thirty (30) days after notice of such failure is furnished by Lender;
provided, however, that if Borrower commences to cure such failure within such
thirty (30) day period but, because of the nature of such failure, cure cannot
be completed within thirty (30) days, notwithstanding Borrower's good faith best
efforts to do so, then, provided that Borrower diligently seeks to complete such
cure, an Event of Default shall not be deemed to have occurred unless such
failure continues for a total of ninety (90) days after notice of such failure
has been given by Lender, provided that such failure does not (i) result in
substantial financial hardship to Lender; or (ii) materially impair the value of
all or any portion of the Collateral, as determined in the reasonable judgment
of Lender.
<PAGE>
(c) Warranties or Representations. If any statement or
representation made by or on behalf of Borrower or Guarantor in this Agreement,
in any of the other Loan Documents, or in any document, instrument, certificate,
opinion, or other item furnished pursuant to the Loan Documents, is false,
misleading, or incorrect in any material respect as of the date made or
reaffirmed; provided, however, that no Event of Default shall exist hereunder if
such false, misleading, or incorrect statement or representation was made by or
on behalf of Borrower or Guarantor in good faith reliance following diligent
inquiry upon a document, instrument, certificate, opinion, or other item
furnished to Borrower or Guarantor by or on behalf of an Applicable Underlying
Borrower or an Applicable Underlying Guarantor.
(d) Enforceability of Liens. If any Lien granted by Borrower to
Lender in connection with the Loan is or becomes invalid or unenforceable or is
not, or ceases to be, a perfected first priority Lien in favor of Lender
encumbering the asset which it is intended to encumber, and Borrower fails to
cause such Lien to become a valid, enforceable, first and prior Lien in a manner
satisfactory to Lender, in its sole discretion, within ten (10) days after
Lender delivers written notice thereof to Borrower.
(e) Involuntary Proceedings. If a case is commenced or a petition is
filed against Borrower or Guarantor under any Debtor Relief Law, a receiver,
conservator, liquidator, or trustee of Borrower or Guarantor or of any material
asset of Borrower or Guarantor is appointed by court order and such order
remains in effect for more than forty-five (45) days, or if any material asset
of Borrower or Guarantor is sequestered by court order and such order remains in
effect for more than forty-five (45) days.
(f) Voluntary Proceedings. If either Borrower or Guarantor
voluntarily seeks, consents to, or acquiesces in the benefit of any provision of
any Debtor Relief Law, whether now or hereafter in effect, consents to the
filing of any petition against it under such law, makes an assignment for the
benefit of its creditors, admits in writing its inability to pay its debts
generally as they become due, or consents to or suffers the appointment of a
receiver, trustee, liquidator, or conservator for it or any part of its assets.
(g) Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against all or any portion of the Collateral or any assets of Borrower
or Guarantor, of one (1) or more attachments, injunctions, executions, tax
liens, or judgments for the payment of money cumulatively in excess of $10,000,
that is not discharged in full or stayed within thirty (30) days after such
issuance, filing, levy, or seizure.
(h) Going Concern Reference. If either Borrower's or Guarantor's
annual audited financial statements required to be furnished to
<PAGE>
Lender, pursuant to Section 6.1(g) hereof, make a "going concern" reference or
otherwise question Borrower's or Guarantor's continuing viability as a going
concern.
(i) Failure to Deposit Proceeds. If Borrower fails to deliver any
payments made under the Pledged Notes Receivable directly to Lender or Lockbox
Agent as required by Section 2.5 hereof (other than inadvertent failures that
are corrected immediately upon discovery), or if Borrower takes any other action
which Lender shall deem to be a conversion of all or any portion of the
Collateral or fraudulent with respect to Lender.
(j) Removal of Collateral. If Borrower conceals, removes, transfers,
conveys, assigns, or permits to be concealed, removed, transferred, conveyed, or
assigned, any of the Collateral in violation of the terms of any of the Loan
Documents or with the intent to hinder, delay, or defraud its creditors or any
of them, including, without limitation, Lender.
(k) Other Defaults. If a material default or event of default occurs
in connection with any other loans or financing arrangements that Borrower,
Guarantor, or any of their respective Affiliates may have with Lender, including
but not limited to the Timeshare Receivables Credit Facility.
(l) Material Adverse Change. If there occurs any material adverse
change in the financial condition of Borrower or Guarantor.
(m) Minimum Net Worth Requirement. Borrower's failure for any reason
to satisfy the Minimum Net Worth Requirement.
(n) Default by Borrower in Other Agreements. Any default by Borrower
(i) in the payment of any indebtedness to Lender; (ii) in the payment or
performance of other indebtedness for borrowed money or obligations in excess of
$50,000 secured by all or any portion of the Collateral; or (iii) in the payment
or performance of any other material indebtedness or obligations.
(o) Violation of Negative Covenants. If either Borrower or Guarantor
violates any negative covenant set forth in Section 6.2 hereof.
(p) Insolvency. If either Borrower or Guarantor becomes insolvent or
otherwise generally unable to pay its respective debts as and when they become
due or payable.
7.2 Applicable Underlying Loans.
(a) Payment Defaults. If any Applicable Underlying Borrower fails to
make, as and when due, whether by acceleration or otherwise, any
<PAGE>
payment or mandatory prepayment of principal, interest, or other fees or amounts
of any and every kind, pursuant to the Applicable Underlying Loan Documents, and
such failure continues for a period of thirty (30) days after notice of such
failure is furnished by Borrower to the Applicable Underlying Borrower, which
notice shall be given by Borrower immediately upon the Applicable Underlying
Borrower's failure to make the required payment.
(b) Loss of Eligibility. A Pledged Note Receivable ceases being an
Eligible Note Receivable for any reason, pursuant to Section 1.39 hereof.
(c) Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against any Applicable Resort of one or more attachments, injunctions,
executions, tax liens, or judgments for the payment of money cumulatively in
excess of $25,000, that is not discharged in full or stayed within sixty (60)
days after such issuance, filing, levy, or seizure.
(d) Applicable Timeshare Documents. If any Applicable Declaration or
a timeshare regime created thereby at an Applicable Resort is amended, restated,
or terminated (other than amendments which add a phase or are non-material)
without Lender's prior written consent.
(e) Insolvency. If any Applicable Underlying Borrower or Applicable
Underlying Guarantor becomes insolvent or otherwise generally unable to pay its
respective debts as and when they become due or payable.
(f) Involuntary Proceedings. If a case is commenced or a petition is
filed against and Applicable Underlying Borrower or Applicable Underlying
Guarantor under any Debtor Relief Law, a receiver, conservator, liquidator, or
trustee of such Applicable Underlying Borrower or Applicable Underlying
Guarantor or of any material asset thereof is appointed by court order and such
order remains in effect for more than forty-five (45) days, or if any material
asset of an Applicable Underlying Borrower or and Applicable Underlying
Guarantor is sequestered by court order and such order remains in effect for
more than forty-five (45) days.
(g) Voluntary Proceedings. If an Applicable Underlying Borrower or
an Applicable Underlying Guarantor voluntarily seeks, consents to, or acquiesces
in the benefit of any provision of any Debtor Relief Law, whether now or
hereafter in effect, consents to the filing of any petition against it under
such law, makes an assignment for the benefit of its creditors, admits in
writing its inability to pay its debts generally as they become due, or consents
to or suffers the appointment of a receiver, trustee, liquidator, or conservator
for it or any part of its assets.
<PAGE>
(h) Material Adverse Change. If there occurs any material adverse
change in the financial condition of any Applicable Underlying Borrower or
Applicable Underlying Guarantor.
(i) Enforceability. If any material term, provision, or condition of
an Applicable Underlying Loan Document becomes invalid or legally unenforceable
by Borrower and its successors and assigns, including Lender.
(j) Transfer of Property. Except for the sale of Encumbered
Intervals in the ordinary course of an Applicable Underlying Borrower's business
in accordance with the terms of the Applicable Underlying Loan Documents, and
except for transfers due to involuntary condemnation which do not render an
Applicable Resort useless for its intended purpose, if an Applicable Underlying
Borrower, without Borrower's and Lender's prior written consent, sells, conveys,
or further encumbers all or any part of its interest in the Applicable Resort or
in any of the personalty located thereon or used or intended to be used in
connection therewith except for phase amendments and any other non-material
amendments. For purposes of this paragraph, an assignment, sale, or transfer
shall also include the transfer of any stock of the Applicable Underlying
Borrower other than to an existing shareholder thereof.
(k) Lien Against Applicable Resort. Except for the Permitted Liens
and Encumbrances or as otherwise specifically provided herein to the contrary,
if Borrower or an Applicable Underlying Borrower grants any mortgage, Lien, or
other encumbrance upon all or any portion of an Applicable Resort or any
Applicable Underlying Loan Collateral other than in favor of Lender in
connection with the Loan, provided that such mortgage, Lien, or other
encumbrance has a material adverse effect upon the value of such Applicable
Underlying Loan Collateral or all or any portion of the Collateral, unless
approved by Lender in writing, in its sole and absolute discretion.
(l) Title. If any violation or breach shall occur in any agreement,
covenant, or restriction affecting title to all or any portion of an Applicable
Resort or any Encumbered Intervals, including but not limited to any Permitted
Liens and Encumbrances, and such violation or breach is not cured within any
time frame allowed under the Applicable Underlying Loan Documents.
(m) Maximum Aggregate Advance Percentage. If the Maximum Aggregate
Advance Percentage has been exceeded.
(n) Loss of License. The suspension, loss, revocation or failure to
renew or file for renewal of any legally required registration, approval,
license, permit, or franchise now held or hereafter acquired by an Applicable
Underlying Borrower or with respect to the unsold Intervals or the Encumbered
Intervals at an Applicable Resort, or the failure to pay any amount which is
necessary for the continued operation of the unsold Intervals or Encumbered
Intervals or any
<PAGE>
Applicable Underlying Borrower's business in connection with an Applicable
Resort in the same manner as it is being conducted at the time of such loss,
revocation, failure to renew, or failure to pay, which loss, revocation, failure
to renew, or failure to pay is not cured within thirty (30) days following such
occurrence.
(o) Suspension of Sales. The issuance of any stay order, cease and
desist order, injunction, temporary restraining order, or other judicial or
nonjudicial sanction limiting or materially affecting any Interval marketing or
sales activities at an Applicable Resort or the enforcement of Lender's
remedies, which order or sanction is not terminated or dissolved within thirty
(30) days after issuance.
Notwithstanding the foregoing provisions of this Section 7.2 to the
contrary, an Event of Default hereunder shall not be deemed to exist if within
thirty (30) days following the occurrence of any of the Defaults set forth in
this Section 7.2, Borrower pays Lender the total amount of all Advances made by
Lender in respect of the Applicable Underlying Loan as to which such occurrence
pertained, together with any accrued but unpaid interest thereon and any other
amounts advanced by or otherwise owed to Lender in connection with such
Applicable Underlying Loan. Promptly following its receipt of all such amounts,
and provided that no Default or Event of Default then exists hereunder, Lender
shall release its Lien against all Applicable Underlying Loan Collateral that
secures the Applicable Underlying Loan in question. Furthermore, an Event of
Default pursuant to Section 7.2(m) hereof shall not be deemed to exist if within
thirty (30) days following the date as of which Lender notifies Borrower that
the Maximum Aggregate Advance Percentage has been exceeded, Borrower pays Lender
a sufficient amount to be applied against the outstanding principal balance of
the Note such that the Maximum Aggregate Advance Percentage is no longer
exceeded.
SECTION 8. REMEDIES
8.1 Remedies Upon Default. Should an Event of Default occur, Lender may
immediately take any one (1) or more of the actions described in this Section 8,
all without notice to Borrower or Guarantor:
(a) Acceleration. Declare the unpaid balance of the Loan, or any
part thereof, immediately due and payable, whereupon the same shall be due and
payable to Lender.
(b) Termination of Obligation to Advance. Terminate any commitment
or obligation of Lender to make Advances under this Agreement in its entirety,
or any portion of any such commitment, and/or terminate Lender's further
performance under this Agreement and/or any other document or instrument to
which Lender and Borrower or Guarantor (or any other Affiliate of
<PAGE>
Borrower) are parties, without further liability or obligation to Borrower or
Guarantor, to the extent Lender shall deem appropriate, in its sole discretion,
all without notice to Borrower or any Guarantor.
(c) Termination of Obligation to Grant Partial Releases. Cease
granting or authorizing any Applicable Underlying Borrower partial releases from
the Lien of an Applicable Mortgage.
(d) Judgment. Reduce Lender's claim to judgment, foreclose, or
other-wise enforce each and every assignment of an Applicable Mortgage, Interval
Mortgage, and/or any other Lien or security interest in all or any part of the
Collateral by any available judicial or other procedure under law. Lender's
right to sue and recover a judgment, either before, after, or during the
pendency of any proceeding for the enforcement of the collateral assignment of
the Applicable Mortgage or Interval Mortgage and the right of Lender to recover
such judgment shall not be affected by any taking, possession, or foreclosure
sale hereunder or by the exercise of any other right, power, or remedy for the
enforcement of the collateral assignment of the Applicable Mortgage or Interval
Mortgage or the foreclosure of the Lien thereof.
(e) Sale of Collateral. Exercise all the rights and remedies of a
secured party under the Code (whether or not the Code applies to the affected
Collateral), including (i) require Borrower to, and Borrower hereby agrees that
it will, at its expense and upon request of Lender forthwith, assemble all or
part of the Collateral as directed by Lender and make it available to Lender at
a place to be designated by Lender that is reasonably convenient to both
parties; (ii) enter upon any premises of Borrower and take possession of the
Collateral; and (iii) sell the Collateral or any part thereof in one (1) or more
parcels at public or private sale, at any of Lender's offices or elsewhere, at
such time or times, for cash, on credit, or for future delivery, and at such
price or prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be required
by law, ten (10) days notice of the time and place of any sale shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Lender. Borrower shall remain liable for any
deficiency. Lender shall not be required to proceed against any Collateral but
may proceed against Borrower directly. To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption, stay, or appraisal that it
has or may have under any law now existing or hereafter enacted.
(f) Retention of Collateral. At its discretion, retain such portion
of the Collateral as shall aggregate in value to an amount equal to the total
amount owed by the Borrower pursuant to the Loan Documents, in satisfaction
<PAGE>
of the Obligations, whenever the circumstances are such that Lender is entitled
and elects to do so under applicable law.
(g) Purchase of Collateral. Buy all or any part of the Collateral at
any public or private sale.
(h) Exercise of Other Rights. Lender shall have all the rights and
remedies of a secured party under the Code and other legal and equitable rights
to which it may be entitled, including, without limitation, and without notice
to Borrower or Guarantor, the right to continue to collect all payments made on
the Pledged Notes Receivable and/or the Pledged Consumer Notes Receivable and to
apply such payments to the Obligations, and to sue in its own name an Applicable
Underlying Borrower or other maker of any defaulted Pledged Note Receivable or
the maker of any defaulted Pledged Consumer Notes Receivable. Lender may also
exercise any and all other rights or remedies afforded by any other Applicable
Laws or by the Loan Documents or, in the name and stead of Borrower, the
Applicable Underlying Loan Documents, as Lender shall deem appropriate, at law,
in equity, or otherwise, including but not limited to the right to bring suit or
other proceeding, either for specific performance of any covenant or condition
contained in the Loan Documents or the Applicable Underlying Loan Documents or
in aid of the exercise of any right or remedy granted to Lender in the Loan
Documents. Lender shall also have the right to require Borrower to assemble any
of the Collateral not in Lender's possession, at Borrower's expense, and make it
available to Lender at a place to be determined by Lender that is reasonably
convenient to both parties, and Lender shall have the right to take immediate
possession of all or any portion of the Collateral or Applicable Underlying Loan
Collateral and may enter any Applicable Resort or any of the premises of
Borrower or an Applicable Underlying Borrower or wherever the Collateral or
Applicable Underlying Loan Collateral shall be located, with or without process
of law wherever the Collateral or Applicable Underlying Loan Collateral may be,
and, to the extent such premises are not the property of Lender, to keep and
store the same on said premises until sold (and if said premises be the property
of Borrower, Borrower agrees not to charge Lender for use and occupancy, rent,
or storage of the Collateral, for a period of at least sixty (60) days after
sale or disposition of the Collateral or Applicable Underlying Loan Collateral).
8.2 Notice of Sale. Reasonable notification of the time and place of any
public sale of the Collateral or reasonable notification of the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be sent to Borrower and to any other Person entitled under the Code to
notice; provided, however, that if the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender may
sell or otherwise dispose of the Collateral without advertisement or other
notice of any kind. It is agreed that notice sent not less than ten (10)
calendar days prior to the taking of the action to which such notice relates is
reasonable notification
<PAGE>
and notice for the purposes of this Section 8.2. Lender shall have the right to
bid at any public or private sale on its own behalf. Out of money arising from
any such sale, Lender shall retain an amount equal to all costs and charges,
including attorneys' fees, that it has incurred or may incur for advice,
counsel, or other legal services or for pursuing, reclaiming, seeking to
reclaim, taking, keeping, removing, storing, and advertising such Collateral for
sale, selling same, and any and all other charges and expenses in connection
therewith and in satisfying any prior Liens thereon. Any balance shall be
applied against the Obligations, and in the event of deficiency, Borrower shall
remain liable to Lender. In the event of any surplus, such surplus shall be paid
to Borrower or to such other Persons as may be legally entitled to such surplus.
If, by reason of any suit or proceeding of any kind, nature, or description
against Borrower, or by Borrower or any other party against Lender, which in
Lender's sole discretion makes it advisable for Lender to seek counsel for the
protection and preservation of its Liens and security interests, or to defend
its own interest, such expenses and counsel fees shall be allowed to Lender, and
the same shall be made a further charge and Lien upon the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the methods by which a sale of certain Collateral may be
effected after an Event of Default, Borrower agrees that upon the occurrence or
existence of an Event of Default, Lender may, from time to time, attempt to sell
all or any part of such Collateral by means of a private placement restricting
the bidding and prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for, or with a view to,
distribution. In so doing, Lender may solicit offers to buy such Collateral, or
any part of it for cash, from a limited number of investors deemed by Lender, in
its reasonable judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if Lender solicits such offers from not less than
two (2) such investors, then the acceptance by Lender of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
8.3 Application of Collateral; Termination of Agreements. Upon the
occurrence of any Event of Default, Lender may, with or without proceeding with
such sale or foreclosure or demanding payment or performance of the Obligations,
without notice, terminate Lender's further performance under this Agreement or
any other agreement or agreements between Lender and Borrower, Guarantor, or any
Affiliate of Borrower, without further liability or obligation by Lender, and
may also, at any time, appropriate and apply on any Obligations any and all
Collateral in its, Custodian's, or Lockbox Agent's possession, custody, or
control any and all balances, credits, deposits, accounts, reserves,
indebtedness, or other monies due or owing to Borrower held by Lender hereunder
or under any other financing agreement or otherwise, whether accrued or not.
Neither such termination, nor the termination of this Agreement by lapse of
time, the giving of notice, or otherwise, shall absolve, release, or
<PAGE>
otherwise affect the liability of Borrower in respect of transactions prior to
such termination, or affect any of the Liens, security interests, rights,
powers, and remedies of Lender, but they shall, in all events, continue until
all of the Obligations have been satisfied in full.
8.4 Rights of Lender Regarding Collateral. In addition to all other rights
possessed by Lender, Lender, at its option, may from time to time after there
shall have occurred an Event of Default, and for so long as such Event of
Default remains uncured, in its sole discretion, take the following actions:
(a) Transfer all or any part of the Collateral into the name of
Lender or its nominee;
(b) Take control of the proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises, or
indulgences with respect to the Obligations, any portion thereof, any extension,
or renewal thereof, or any security therefor, to any obligor hereunder or
thereunder; and
(d) Exchange certificates or instruments representing or evidencing
the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
8.5 Delegation of Duties and Rights. Lender may perform any of its duties
and/or exercise any of its rights or remedies under the Loan Documents by or
through its officers, directors, employees, attorneys, agents, or other
representatives, including but not limited to Backup Servicer. To the maximum
extent practicable in light of all relevant facts and circumstances, Lender will
attempt to avoid any duplication of effort and cost to Borrower in connection
with any such delegation on Lender's part.
8.6 Lender Not in Control. None of the covenants or other provisions
contained in this Agreement or in any other Loan Document shall give or be
interpreted as giving Lender the right or power to exercise control over the
affairs and/or management of Borrower or Guarantor.
8.7 Waivers. The acceptance by Lender at any time and from time to time of
partial payments of the Loan or performance of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by Lender
of any Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default. No delay or omission by Lender in exercising any
right or remedy under the Loan Documents shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, nor shall any single
or partial exercise of any such right or remedy preclude other or further
exercises thereof, or the exercise of any other right or remedy under the Loan
<PAGE>
Documents or otherwise. Further, except as otherwise expressly provided in this
Agreement or by applicable law, Borrower and each and every surety, endorser,
guarantor, and other party liable for the payment or performance of all or any
portion of the Obligations, severally waive notice of the occurrence of any
Default, Event of Default, presentment, and demand for payment, protest, and
notice of protest, notice of intention to accelerate, acceleration, and
nonpayment, and agree that their liability shall not be affected by any renewal
or extension in the time of payment of the Loan, or by any release or change in
any security for the payment or performance of the Loan, regardless of the
number of such renewals, extensions, releases, or changes.
8.8 Cumulative Rights. All rights and remedies available to Lender under
the Loan Documents shall be cumulative of and in addition to all other rights
and remedies granted to Lender under any of the Loan Documents, at law, or in
equity, whether or not the Loan is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
or pursuant to the Loan Documents.
8.9 Expenditures by Lender. Any amounts expended by or on behalf of Lender
pursuant to the exercise of any right or remedy provided herein or available at
law or in equity shall become part of the Obligations and shall bear interest at
the Default Rate from the date of such expenditure until the date repaid.
8.10 Diminution in Value of Collateral. Lender shall not have any
liability or responsibility whatsoever for any diminution or loss in value of
any of the Collateral or Applicable Underlying Loan Collateral, specifically
including that which may arise from Lender's negligence or inadvertence, whether
such negligence or inadvertence is the sole or contributing cause of any damage.
SECTION 9. CERTAIN RIGHTS OF LENDER
9.1 Protection of Collateral. Lender may, at any time and from time to
time, take such actions as Lender deems necessary or appropriate to protect
Lender's Liens and security interests in and to preserve the Collateral, and to
establish, maintain, and protect the enforceability of Lender's rights with
respect thereto, all at the expense of Borrower. Borrower agrees to cooperate
fully with all of Lender's efforts to preserve the Collateral and Lender's
Liens, security interests, and rights and will take such actions to preserve the
Collateral and Lender's Liens, security interests, and rights as Lender may
direct, including, without limitation, by promptly paying, upon Lender's demand
therefor, all documentary stamp taxes or other taxes that may be or may become
due in respect of any of the Collateral. All of Lender's expenses of preserving
the Collateral and its Liens and security interests and rights therein shall be
added to the principal amount of the Loan and secured by the Collateral.
<PAGE>
9.2 Performance by Lender. If Borrower fails to perform any agreement
contained herein, Lender may itself perform, or cause the performance of, such
agreement, and the expenses of Lender incurred in connection therewith shall be
payable by Borrower under Section 9.5 below. In no event, however, shall Lender
have any obligation or duty whatsoever to perform any covenant or agreement of
Borrower or any Applicable Underlying Borrower contained herein or in any of the
other Loan Documents, any Applicable Underlying Loan Documents, or any
Applicable Timeshare Documents, and any such performance by Lender shall be
wholly discretionary with Lender. The performance by Lender of any agreement or
covenant of Borrower or any Applicable Underlying Borrower on any occasion shall
not give rise to any duty on the part of Lender to perform any such agreements
or covenants on any other occasion or at any time. In addition, Borrower
acknowledges that Lender shall not at any time or under any circumstances
whatsoever have any duty to Borrower or to any other Person to exercise any of
Lender's rights or remedies hereunder.
9.3 No Liability of Lender. Lender is obligated to perform all covenants
and obligations of Lender hereunder, including but not limited to making
Advances to Borrower, subject to all of the terms, provisions, and conditions
hereof and of the other Loan Documents. However, neither the acceptance of this
Agreement by Lender nor the exercise of any rights hereunder by Lender shall be
construed in any way as an assumption by Lender of any obligations,
responsibilities, or duties of Borrower or any Applicable Underlying Borrower
arising in connection with any Applicable Resort, all or any portion of the
Collateral or Applicable Underlying Loan Collateral, under any Applicable
Timeshare Documents, or under any Applicable Laws, or in connection with any
other business of Borrower or the Collateral, nor shall it otherwise bind Lender
to the performance of any obligations with respect to an Applicable Resort, the
Collateral, or any Applicable Underlying Loan Collateral, it being expressly
understood that Lender shall not be obligated to perform, observe, or discharge
any obligation, responsibility, duty, or liability of Borrower or any Applicable
Underlying Borrower with respect to any Applicable Resort, any of the
Collateral, any of the Applicable Underlying Loan Collateral, under any of the
Applicable Timeshare Documents, or under any Applicable Laws, including but not
limited to appearing in or defending any action, expending any money, or
incurring any expense in connection therewith. Without limiting the foregoing,
neither this Agreement, any action or actions on the part of Lender taken
hereunder nor the acquisition of the Pledged Notes Receivable and/or the other
Collateral by Lender prior to or following the occurrence of an Event of Default
shall constitute an assumption by Lender of any obligations of Borrower with
respect to an Applicable Resort or such Collateral, or any documents or
instruments executed in connection therewith, including but not limited to the
Applicable Underlying Loan Documents, and Borrower shall continue to be liable
for all of its obligations thereunder or with respect thereto. Borrower and
Guarantor, jointly and severally, hereby agree to indemnify, protect, defend,
and hold Lender harmless
<PAGE>
from and against any and all claims, demands, causes of action, losses, damages,
liabilities, suits, costs, and expenses, including, without limitation,
attorneys' fees and court costs, asserted against or incurred by Lender by
reason of, arising out of, or connected in any way with (i) any failure or
alleged failure of Borrower to perform any of its covenants or obligations with
respect to an Applicable Resort or all or any portion of the Collateral or
Applicable Underlying Loan Collateral; (ii) a breach of any certification,
representation, warranty, or covenant of Borrower set forth in any of the Loan
Documents; (iii) the ownership of the Pledged Notes Receivable, the Pledged
Consumer Notes Receivable, the other Collateral, and the rights, titles, and
interests assigned hereby, or intended so to be; (iv) the debtor-creditor
relationships between Borrower, on the one hand, and the Applicable Underlying
Borrowers or Lender, as the case may be, on the other; or (v) the Pledged Notes
Receivable, the Applicable Mortgages, the Pledged Consumer Notes Receivable, the
Interval Mortgages, or the management or operation of the Applicable Resorts.
The obligations of Borrower to indemnify, protect, defend, and hold Lender
harmless as provided in this Agreement are absolute, unconditional, present, and
continuing, and shall not be dependent upon or affected by the genuineness,
validity, regularity, or enforceability of any claim, demand, or suit from which
Lender is indemnified. The indemnity provisions in this Section 9.3 shall
survive the complete satisfaction of the Obligations and the termination of this
Agreement and remain binding and enforceable against Borrower, together with its
successors and assigns. Borrower hereby waives all notices with respect to any
losses, damages, liabilities, suits, costs, and expenses, and all other demands
whatsoever hereby indemnified, and agrees that its obligations under this
Agreement shall not be affected by any circumstances, whether or not referred to
above, that might otherwise constitute legal or equitable discharges of its
obligations hereunder. If a court of competent jurisdiction should determine
that Borrower is entitled to recover damages from Lender for any reason or upon
any cause, claim, or counterclaim, in connection with the Loan or the
transactions provided for or contemplated pursuant to this Agreement or the
other Loan Documents, Borrower stipulates and agrees that any such damages or
awards shall be limited to the amount of interest theretofore paid to Lender
pursuant to the Note as of the date of such determination.
9.4 Right to Defend Action Affecting Security. Lender may, at Borrower's
expense, appear in and defend any action or proceeding, at law or in equity,
that Lender in good faith believes may affect the Liens or security interests
granted under this Agreement, including, without limitation, with respect to the
Pledged Notes Receivable, the Applicable Mortgages, the Pledged Consumer Notes
Receivable, the Interval Mortgages, the value of the Collateral, or Lender's
rights under any of the Loan Documents.
9.5 Expenses. All expenses payable by Borrower under any provision of this
Agreement shall be Obligations of Borrower, and if paid by Lender, shall be
repaid by Borrower to Lender, upon demand, and shall bear interest at the
<PAGE>
Default Rate from the date of payment of such expense(s) by Lender until repaid
by Borrower.
9.6 Lender's Right of Set-Off. Lender shall have the right to set-off
against any or all of the Collateral any Obligations then due and unpaid by
Borrower.
9.7 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. Without affecting the liability of any Person or entity,
including, without limitation, any Applicable Underlying Borrower, for the
payment of any of the Obligations and without affecting or impairing Lender's
Lien and other rights in and to the Collateral, or the remainder thereof, as
security for the full amount of the Loan unpaid and the Obligations, Lender may
from time to time, without notice: (a) release any Person liable for the payment
of the Loan; (b) extend the time or otherwise alter the terms of payment of the
Loan; (c) accept additional security for the Obligations of any kind, including
deeds of trust or mortgages and security agreements; (d) alter, substitute, or
release any property securing the Obligations in accordance with the Loan
Documents; (e) realize upon any Collateral for the payment of all or any portion
of the Loan in such order and manner as it may deem fit; and/or (f) join in any
subordination or other agreement affecting this Agreement or the lien or charge
thereof.
9.8 Assignment of Lender's Interest. Lender shall have the right to assign
the Loan and all or any portion of its rights in or pursuant to this Agreement
or any of the other Loan Documents to any subsequent holder or holders of the
Note or the Obligations that assumes Lender's obligations hereunder and is a
bank, pension fund, insurance company, or other institutional investor.
9.9 Notice to Purchaser. Borrower authorizes either Lender or Backup
Servicer (but neither Lender, Servicing Agent, Lockbox Agent, nor Backup
Servicer shall be obligated) to communicate at any time and from time to time
with any Applicable Underlying Borrower or any other Person primarily or
secondarily liable under a Pledged Note Receivable with regard to the Lien of
the Lender thereon and any other matter relating thereto, and by no later than
the Closing Date, Borrower shall deliver to Lender notifications to the
Applicable Underlying Borrowers executed in blank by Borrower and in form
acceptable to Lender, pursuant to which the Applicable Underlying Borrowers (or
other obligors) are directed to remit all payments in respect of the Collateral
to Lockbox Agent or as Lender may otherwise require.
9.10 Collection of the Notes. Borrower hereby directs and authorizes each
Applicable Underlying Borrower and other Person liable for the payment of any
Pledged Note Receivable or Pledged Consumer Note Receivable, and promptly after
the Closing Date, shall direct in writing each such Person, to pay each
installment thereon to Lockbox Agent, pursuant to the Lockbox Agreement,
<PAGE>
unless and until directed otherwise by written notice from Lender or, at
Lender's direction, from Borrower, after which such parties are and shall be
directed to make all further payments on the Pledged Notes Receivable or the
Pledged Consumer Notes Receivable in accordance with the directions of Lender.
Following the occurrence of an Event of Default, Lender shall have the right to
require that all payments becoming due under the Pledged Notes Receivable or the
Pledged Consumer Notes Receivable be paid directly to Lender, and Lender is
hereby authorized to receive, collect, hold, and apply the same in accordance
with the provisions of this Agreement but shall provide Borrower with
accountings of all such activity on at least as frequent a basis as Lockbox
Agent was obligated to provide accountings to Lender and Borrower, pursuant to
the Lockbox Agreement. In the event that following the occurrence of an Event of
Default, Lender or Lockbox Agent does not receive any installment of principal
or interest due and payable under any of the Pledged Notes Receivable or the
Pledged Consumer Notes Receivable on or prior to the date upon which such
installment becomes due, Lender may, at its election (but without any obligation
to do so), give or cause Lockbox Agent to give notice of such event of default
to the defaulting party or parties, and Lender shall have the right (but not the
obligation), subject to the terms of such Notes, to accelerate payment of the
unpaid balance of any of the Pledged Notes Receivable or Pledged Consumer Notes
Receivable in default and to foreclose each of the Applicable Mortgages and/or
Interval Mortgages securing the payment thereof, and to enforce any other
remedies available to the holder of such Pledged Notes Receivable or Pledged
Consumer Notes Receivable with respect to such event of default. Borrower hereby
further authorizes, directs, and empowers Lender (and Lockbox Agent or any other
Person as may be designated by Lender in writing) to collect and receive all
checks and drafts evidencing such payments and to endorse such checks or drafts
in the name of Borrower and, upon such endorsements, to collect and receive the
money therefor. The right to endorse checks and drafts granted pursuant to the
preceding sentence is irrevocable by Borrower, and the banks or banks paying
such checks or drafts upon such endorsements, as well as the signers of the
same, shall be as fully protected as though the checks or drafts had been
endorsed by Borrower.
9.11 Power of Attorney. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place, and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender as provided in Section 9.10 above;
(b) to demand and receive from time to time any and all property, rights,
titles, interests, and Liens hereby sold, assigned, and transferred, or intended
so to be, and to give receipts for same; (c) upon an Event of Default, to
collect all rent, revenues, and income, pursuant to the terms of any Applicable
Mortgage or Interval Mortgage; (d) from time to time, to institute and
prosecute, in Lender's own name, any and all proceedings at law, in equity, or
otherwise, that Lender may deem proper in order to collect, assert, or enforce
any claim, right, or title, of
<PAGE>
any kind, in and to the property, rights, titles, interests, and Liens hereby
sold, assigned, or transferred, or intended so to be, and to defend and
compromise any and all actions, suits, or proceedings in respect of any of the
said property, rights, titles, interests, and Liens; (e) upon an Event of
Default, to change Borrower's post office mailing address; and (f) generally to
do all and any such acts and things in relation to the Collateral as Lender
shall in good faith deem advisable. Borrower hereby declares that the
appointment made and the powers granted pursuant to this Section 9.11 are
coupled with an interest and are and shall be irrevocable by Borrower in any
manner, or for any reason, unless and until a release of the same is executed by
Lender and duly recorded in the appropriate public records of Onondaga County,
New York.
9.12 Relief from Automatic Stay, Etc. To the fullest extent permitted by
law, in the event that Borrower or Guarantor shall make application for or seek
relief or protection under the federal bankruptcy code (the "Bankruptcy Code")
or any other Debtor Relief Laws, or in the event that any involuntary petition
is filed against the Borrower or Guarantor under such Code or other Debtor
Relief Laws and not dismissed with prejudice within forty-five (45) days, the
automatic stay provisions of Section 362 of the Bankruptcy Code are hereby
modified as to Lender to the extent necessary to implement the provisions hereof
permitting set-off and the filing of financing statements or other instruments
or documents; and Lender shall automatically and without demand or notice (each
of which is hereby waived by Borrower and Guarantor) be entitled to immediate
relief from any automatic stay imposed by Section 362 of the Bankruptcy Code or
otherwise, on or against the exercise of the rights and remedies otherwise
available to Lender as provided in the Loan Documents. In addition, in the event
that relief is sought by or against Borrower or Guarantor under the Bankruptcy
Code, Borrower and Guarantor agree not to seek, directly or indirectly, in any
ensuing bankruptcy proceeding, any extension of the exclusivity period otherwise
available to a debtor under the Bankruptcy Code, including, without limitation,
the exclusivity period provided for under Section 1121(b) of the Bankruptcy
Code.
9.13 Investigations and Inquiries. Borrower and Guarantor hereby authorize
Lender to conduct such investigations and inquiries concerning Borrower,
Guarantor, the Applicable Resorts, the Applicable Underlying Borrowers, the
Applicable Underlying Guarantors, the Collateral, and the Applicable Underlying
Loan Collateral as Lender shall, in its sole discretion, deems necessary or
desirable in connection with its monitoring of the Loan and the Collateral
therefor, and all such Persons of whom Lender may make such inquiry are
empowered to cooperate with, and to provide all requested information to,
Lender.
9.14 Verification of Use. Lender shall be under no duty or obligation to
ascertain the manner in which Borrower or any Applicable Underlying Borrower has
used or will use the proceeds of the Loan or those of any Applicable Underlying
Loan. Lender's sole obligation shall be to advance the proceeds of
<PAGE>
the Loan subject to, and in strict accordance with, the terms, provisions, and
conditions of this Agreement and the other Loan Documents. At no time shall
Lender be obligated to disburse funds in excess of amounts recommended by
Servicing Agent. Lender's obligation to fund the Loan is limited to the
principal amount set forth herein and in the Note. Borrower is solely
responsible for obtaining any other financing that may be necessary in order to
enable it to fund the Applicable Underlying Loans or to repay the Loan on or
prior to the Maturity Date. It is expressly understood that Lender has no
responsibility or obligation whatsoever to provide to Borrower any further
financing, whether in connection with the Applicable Underlying Loans or
otherwise.
SECTION 10. TERM OF AGREEMENT
This Agreement shall continue in full force and effect, and the Liens and
security interests granted hereby and the duties, covenants, and liabilities of
Borrower hereunder, and all the terms, conditions, and provisions hereof
relating thereto shall continue to be fully operative until all of the
Obligations have been satisfied in full. Borrower expressly agrees that if
either Borrower or Guarantor makes a payment to Lender, which payment or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, or otherwise required to be repaid to a trustee, receiver, or any
other party under any Debtor Relief Laws, state or federal law, common law, or
equitable cause, then to the extent of such repayment, the Obligations or any
part thereof intended to be satisfied and the Liens and security interests
provided for hereunder securing the same shall be revived and continued in full
force and effect as if said payment had not been made.
SECTION 11. MISCELLANEOUS
11.1 Notices. All notices, requests, and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender, Borrower, or Guarantor. Each such
notice, request, or other communication shall be effective (a) if given by mail,
when such notice is deposited in the United States Mail with first class postage
prepaid, and addressed as aforesaid, provided that such mailing is by registered
or certified mail, return receipt requested; (b) if given by overnight delivery,
when deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne, with all fees and charges prepaid, addressed as
provided below; or (c) if given by any other means, when delivered at the
address specified in this Section 11.1:
If to Borrower: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
<PAGE>
Attention: Lisa M. Henson, Vice President
With a copy to: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq.,
General Counsel
If to Guarantor: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq.,
General Counsel
If to Lender: Credit Suisse First Boston
Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: David Arzi, Director
11.2 Survival. All representations, warranties, covenants, and agreements
made by Borrower herein, in the other Loan Documents, or in any other agreement,
document, instrument, or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents (and
each part thereof), regardless of any investigation made by or on behalf of
Lender.
11.3 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS
MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ITS
CHOICE OF LAWS PRINCIPLES. BORROWER AND GUARANTOR HEREBY AGREE TO ACCEPT THE
STATE COURTS LOCATED IN ONONDAGA COUNTY, NEW YORK, AS HAVING PROPER JURISDICTION
AND BEING THE PROPER VENUE FOR ANY LEGAL PROCEEDINGS ARISING OUT OF THE LOAN
DOCUMENTS.
11.4 Limitation on Interest. Lender and Borrower intend to comply at all
times with all applicable usury laws. All agreements between Lender and
Borrower, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the interest
contracted for, charged, received, paid, or agreed to be paid to Lender exceed
the highest lawful rate permissible under applicable usury laws. If, from any
circumstance
<PAGE>
whatsoever, fulfillment of any provision hereof, of the Note, or of any other
Loan Documents shall involve transcending the limit of such validity prescribed
by any law which a court of competent jurisdiction may deem applicable hereto,
then ipso facto, the obligation to be fulfilled shall be reduced to the limit of
such validity; and if from any circumstance Lender shall ever receive anything
of value deemed interest by applicable law that would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal of the Loan and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of the Loan,
such excess shall be refunded to Borrower. All interest paid or agreed to be
paid to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in full
of the principal so that the interest on the Loan for such full period shall not
exceed the highest lawful rate. Borrower agrees that in determining whether or
not any interest payment under the Loan Documents exceeds the highest lawful
rate, any non-principal payment (except payments specifically described in the
Loan Documents as "interest"), including without limitation, prepayment fees and
late charges, shall, to the maximum extent not prohibited by law, be deemed an
expense, fee, premium, or penalty rather than interest. Lender hereby expressly
disclaims any intent to contract for, charge, or receive interest in an amount
that exceeds the highest lawful rate. The provisions of the Note, this
Agreement, and all other Loan Documents are hereby modified to the extent
necessary to conform with the limitations and provisions of this Section, and
this Section shall govern over all other provisions in any document or agreement
now or hereafter existing. This Section shall never be superseded or waived
unless there is a written document executed by Lender and Borrower expressly
declaring the usury limitation of this Agreement to be null and void, and no
other method or language shall be effective to supersede or waive this
paragraph.
11.5 Invalid Provisions. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Any provision of this Agreement or any other Loan Document that is
held to be illegal, invalid, or unenforceable in a particular Applicable
Jurisdiction shall remain valid and enforceable in all other Applicable
Jurisdictions. Furthermore, in lieu of any such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement and/or the other Loan Documents (as the case may be) a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
<PAGE>
11.6 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower, Guarantor, and
Lender and their respective successors and assigns; provided, however, that
neither Borrower nor Guarantor may transfer or assign any of its rights or
obligations under this Agreement, the Commitment, or the other Loan Documents
without the prior written consent of Lender, which consent may be granted or
withheld in Lender's sole and absolute discretion. This Agreement and the
transactions provided for or contemplated hereunder or under any of the other
Loan Documents are intended solely for the benefit of the parties hereto. No
third party shall have any rights or derive any benefits under or with respect
to this Agreement, the Commitment, or the other Loan Documents except as
specifically set forth herein or otherwise provided in a written document signed
by Borrower and Lender. No Person other than Borrower shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make Advances in the absence of
strict compliance with any or all thereof, and no other Person, other than
Borrower, under any circumstances whatsoever, shall be deemed to be a
beneficiary of such conditions, any or all of which Lender freely may waive, in
whole or in part, at any time if, in its sole discretion, it deems it desirable
to do so.
Lender may, in the ordinary course of its business and in accordance
with applicable law, at any time assign to one (1) or more financial
institutions or other entities ("Assignees") all or any portion of its rights
hereunder or pursuant to the Note or any or all of the other Loan Documents. Any
such assignment shall be effected by Lender's execution of an assignment in
substantially the form of Exhibit "P," attached hereto and incorporated herein
by this reference, or in such other form as may be agreed to by the parties
thereto. The consent of Borrower shall not be required prior to any such
assignment's becoming effective. In the event of any such assignment by Lender
to an Assignee, Lender's obligations under the Loan Documents shall remain
unchanged, and Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations. The foregoing notwithstanding,
Borrower shall be directly obligated to each Assignee with respect to the
Obligations assigned to such Assignee and shall have no rights of setoff or
other remedies against the Assignee as a consequence of Lender's acts or
omissions under this Agreement subsequent to such assignment.
Upon the consummation of any assignment to an Assignee pursuant to this
Section, Lender and Borrower shall, if Lender or Assignee desires that the
assignment be evidenced in part by a new promissory note, make appropriate
arrangements for a new promissory note or, as appropriate, a replacement
promissory note to be issued to Lender and for a new promissory note or, as
appropriate, a replacement promissory note, to be issued to Assignee, in each
case in principal amounts reflecting their respective rights to payment.
<PAGE>
11.7 Amendment. This Agreement (including all exhibits and schedules
hereto) may not be amended or modified, and no term, provision, or condition
hereof may be waived, except by a written instrument that is signed by all of
the parties hereto.
11.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one (1) or more
counterparts hereof signed by Borrower, Guarantor, and Lender.
11.9 Lender Not a Fiduciary. The relationship between Borrower and Lender
is solely that of debtor and creditor, and Lender has no fiduciary or other
special relationship with Borrower or Guarantor, and no term or provision of any
of the Loan Documents shall be construed so as to deem the relationship between
Borrower, Guarantor, and Lender to be other than that of debtor and creditor.
11.10 Release and Return of Notes Receivable. In the event that all
Obligations in connection with an Applicable Underlying Loan hereunder are fully
satisfied, then within a reasonable time thereafter not to exceed thirty (30)
days, Lender shall endorse the applicable Pledged Note Receivable and the
related Pledged Consumer Notes Receivable using the words "Pay to the order of
Resort Funding, Inc., without recourse, except to the extent provided in that
certain Loan and Security Agreement dated February 11, 1998, by and among Resort
Funding, Inc., Equivest Finance, Inc., and Credit Suisse First Boston Mortgage
Capital LLC," and deliver such Pledged Notes Receivable and Pledged Consumer
Notes Receivable, together with any other nonrecourse Collateral reassignment
documents requested and prepared by Borrower, at Borrower's sole cost and
expense, free and clear of any Liens or encumbrances by any Person claiming by,
through, or under Lender. In the event that all Obligations in connection with
the Loan are satisfied, Lender shall release all Collateral for the Loan as set
forth in this Section.
11.11 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined or made in accordance
with GAAP consistently applied at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
including the exhibits and schedules to them, comprise the entire agreement
between the parties relating to the subject matter hereof and
<PAGE>
supersede all prior agreements and understandings, both oral and written,
between the parties hereto relating to the subject matter hereof (including but
not limited to the Commitment, except as otherwise expressly provided herein),
may not be changed or terminated orally or by course of conduct, and shall be
deemed effective as of the Closing Date.
11.13 Litigation. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF BORROWER, GUARANTOR, AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY
ANY RIGHT, POWER, REMEDY, OR DEFENSE ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
OR ACTIONS OF ANY PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. EACH OF BORROWER,
GUARANTOR, AND LENDER FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH
LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN
WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, BORROWER AND
GUARANTOR HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING
LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
The waiver and stipulations of Borrower, Guarantor, and Lender in this
Section 11.13 shall survive the final payment or performance of all of the
Obligations and the resulting termination of this Agreement.
11.14 Incorporation of Exhibits and Schedules. This Agreement, together
with all exhibits and schedules hereto, constitute one (1) document and
agreement that is referred to herein by the use of the defined term "Agreement."
Such exhibits and schedules are incorporated herein as though fully set out in
this Agreement. The definitions contained in any part of this Agreement shall
apply to all parts of this Agreement.
<PAGE>
11.15 Consent to Advertising and Publicity of Applicable Timeshare
Documents. Borrower hereby consents that Lender may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, consisting of the name and address of Borrower, the Loan's
amount, and the Collateral therefor.
11.16 Directly or Indirectly. Where any provision in the Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provisions shall be applicable, whether such action is taken
directly or indirectly by such Person.
11.17 Captions. Section captions have been included in this Agreement for
convenience of reference only and should not be relied upon or used in
interpreting the meaning or intent of any provision hereof.
11.18 Gender. Words of any gender in this Agreement shall include each
other gender, where appropriate.
11.19 No Duty. All attorneys, accountants, appraisers, consultants,
custodians, and other professionals retained by Lender in connection with the
Loan shall have the right to act exclusively in the interest of Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any kind or nature whatsoever to Borrower, Guarantor, or any other
Person.
11.20 Reimbursement for Taxes. Borrower will promptly, upon written demand
from Lender, reimburse Lender for any taxes assessed against Lender by the State
of New York or any subdivision thereof that is on account of or measured by the
interest income received by Lender under the Pledged Notes Receivable and the
Applicable Mortgages assigned to Lender pursuant to this Agreement or in any way
imposed upon Lender in connection with the transactions contemplated hereunder,
including, without limitation, any general intangible tax or documentary tax;
provided, however, that Borrower shall not be responsible for paying any income
or profit-based tax assessed against Lender.
11.21 Submissions.
(a) All documents, agreements, reports, surveys, appraisals,
insurance policies, references, financial information, and other submissions
required to be furnished by Borrower or Guarantor to Lender hereunder or
pursuant to any of the other Loan Documents (collectively "Submissions") shall
be in form and content satisfactory to Lender, in its sole discretion, and
prepared at Borrower's or an Applicable Underlying Borrower's expense.
(b) Lender shall have the prior right of approval of any Person
responsible for preparing a Submission (a "Preparer") and may reject any
<PAGE>
Submission if Lender, in its sole discretion, believes that the experience,
skill, or reputation of the applicable Preparer is unsatisfactory in any respect
whatsoever.
(c) All reports and appraisals required to be furnished by Borrower
or Guarantor to Lender hereunder or pursuant to any of the other Loan Documents
shall specifically be addressed to Lender and include the following statement:
THE UNDERSIGNED ACKNOWLEDGES THAT CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC IS RELYING ON THE WITHIN INFORMATION IN CONNECTION WITH ITS
ADVANCES TO BORROWER ON THE SUBJECT PROPERTY.
(d) Whether or not expressly stated herein, all consents and
approvals granted by Lender hereunder shall be valid and effective only if
contained in a written document or instrument that has been signed by a duly
authorized representative of Lender; provided, however, that for those
categories of consents and approvals set forth in Exhibit "Q," attached hereto
and incorporated herein by this reference, if such consent, approval, or a
denial thereof is not communicated by Lender within the time frames set forth in
said Exhibit "Q," then Lender's consent or approval of the matter in question
shall be deemed to have been granted. Notwithstanding the foregoing sentence,
absolutely no deemed consents or approvals of any matters not expressly set
forth in Exhibit "Q" shall occur.
11.22 Confidentiality. Each party hereto acknowledges and agrees that the
material terms hereof and of the other Loan Documents are and shall remain
strictly confidential. No party hereto shall ever disclose the material terms
and provisions hereof without the express prior written consent of the other
parties; provided, however, that the disclosure of the material terms and
provisions of this Agreement to a party's shareholders, officers, directors,
principals, attorneys, accountants, or lenders, or if required by law or
subpoena, shall not constitute a breach of this Section 11.22. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
<PAGE>
[THE BALANCE OF THIS PAGE IS INTENTIONALLY OMITTED]
<PAGE>
IN WITNESS WHEREOF, Borrower, Lender, and Guarantor have caused this
Agreement to be duly executed and delivered effective as of the date first above
written.
BORROWER:
RESORT FUNDING, INC., a Delaware corporation
By: _______________________
Its: ______________________
Printed Name:______________
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited
liability company
___________________________
By:________________________
Its: ______________________
Printed Name_______________
GUARANTOR:
EQUIVEST FINANCE, INC, a Florida
corporation
By:________________________
Its________________________
LOAN AND SECURITY AGREEMENT
$30,000,000 Credit Facility
provided by CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
to
RESORT FUNDING, INC.
As of November 14, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITION OF TERMS ............................................ 1
1.1 Advance ........................................................ 1
1.2 Affiliate ...................................................... 1
1.3 Agreement ...................................................... 2
1.4 Applicable Approved Construction Budget ........................ 2
1.5 Applicable Approved Construction Schedule ...................... 2
1.6 Applicable Borrowing Base Percentage ........................... 2
1.7 Applicable Declaration.......................................... 2
1.8 Applicable Jurisdiction ........................................ 2
1.9 Applicable Laws ................................................ 2
1.10 Applicable Mortgage ............................................ 2
1.11 Applicable Resort .............................................. 2
1.12 Applicable Timeshare Documents ................................. 2
1.13 Applicable Underlying Borrower ................................. 3
1.14 Applicable Underlying Guarantor ................................ 3
1.15 Applicable Underlying Loan ..................................... 3
1.16 Applicable Underlying Loan Collateral .......................... 3
1.17 Applicable Underlying Loan Documents ........................... 3
1.18 Approved Costs ................................................. 3
1.19 Architect ...................................................... 3
1.20 Base Rate ...................................................... 3
1.21 Borrower ....................................................... 4
1.22 Borrowing Base ................................................. 4
1.23 Borrowing Term ................................................. 4
1.24 Business Day ................................................... 4
1.25 Closing Date ................................................... 4
1.26 Code............................................................ 4
1.27 Collateral...................................................... 4
1.28 Commitment...................................................... 6
1.29 Common Elements ................................................ 6
1.30 Common Furnishings ............................................. 6
1.31 Construction Contract .......................................... 6
1.32 Construction Mortgage .......................................... 6
1.33 Custodial Agreement ............................................ 7
1.34 Custodian. Banker's Trust Company .............................. 7
1.35 Debtor Relief Laws ............................................. 7
1.36 Default ........................................................ 7
1.37 Default Rate ................................................... 7
1.38 Draw Request ................................................... 7
1.39 Eligible Note Receivable ....................................... 7
1.40 Encumbered Interval ............................................ 9
1.41 Encumbered Personal Property ................................... 9
1.42 Environmental Laws ............................................. 9
1.43 Event of Default................................................ 9
<PAGE>
1.44 Financed Improvements .......................................... 10
1.45 Financial Statements ........................................... 10
1.46 GAAP............................................................ 10
1.47 Guarantor ...................................................... 10
1.48 Guaranty ....................................................... 10
1.49 Hazardous Materials ............................................ 10
1.50 Holdback Amount ................................................ 10
1.51 Holdback Balance................................................ 11
1.52 Initial Advance ................................................ 11
1.53 Initial Underlying Loan Advance ................................ 11
1.54 Interest Rate .................................................. 11
1.55 Interval ....................................................... 11
1.56 Inventory Mortgage ............................................. 11
1.57 Land............................................................ 11
1.58 Lien............................................................ 11
1.59 Loan............................................................ 12
1.60 Loan Documents ................................................. 12
1.61 Loan-to-Value Ratio ............................................ 12
1.62 Lockbox Agent .................................................. 13
1.63 Lockbox Agreement .............................................. 13
1.64 Mandatory Prepayment ........................................... 13
1.65 Maturity Date .................................................. 13
1.66 Minimum Monthly Interest Payment ............................... 13
1.67 Minimum Net Worth Requirement .................................. 13
1.68 Mortgaged Real Property ........................................ 13
1.69 Note............................................................ 14
1.70 Note Receivable ................................................ 14
1.71 Obligations .................................................... 14
1.72 Permitted Liens and Encumbrances ............................... 14
1.73 Person ......................................................... 14
1.74 Phase I Environmental Inspection ............................... 14
1.75 Plans .......................................................... 15
1.76 Pledged Note Receivable ........................................ 15
1.77 Prime Rate...................................................... 15
1.78 Qualified Borrower ............................................. 15
1.79 Qualified Borrower Underwriting Guidelines ..................... 15
1.80 Qualified Loan ................................................. 15
1.81 Qualified Loan Underwriting Guidelines ......................... 16
1.82 Qualified Resort................................................ 16
1.83 Qualified Resort Underwriting Guidelines........................ 16
1.84 Release Fee .................................................... 16
1.85 Servicing Agent ................................................ 16
1.86 Servicing Agreement ............................................ 17
1.87 Structuring Advisory Fee ....................................... 17
1.88 Subordination Agreement ........................................ 17
1.89 Survey ......................................................... 17
<PAGE>
1.90 Timeshare Receivables Credit Facility .......................... 17
1.91 Underlying Guaranty ............................................ 17
1.92 Unit............................................................ 18
1.93 Verification Agent ............................................. 18
1.94 Verification Agent's Agreement ................................. 18
1.95 Warrants ....................................................... 18
SECTION 2. THE LOAN ....................................................... 18
2.1 Purposes ....................................................... 18
2.2 Qualified Loans ................................................ 18
2.3 Advances ....................................................... 19
2.4 Interest Rate .................................................. 20
2.5 Payments ....................................................... 20
2.6 Prepayments .................................................... 23
2.7 Guaranty ....................................................... 24
SECTION 3. COLLATERAL ..................................................... 24
3.1 Grant of Security Interest ..................................... 24
3.2 Security Interest in All Pledged Notes Receivable .............. 24
3.3 Financing Statements ........................................... 24
3.4 Location of Collateral.......................................... 24
3.5 Protection of Collateral; Reimbursement ........................ 24
3.6 Cross-Collateralization and Default ............................ 25
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES.......... 26
4.1 The Loan ....................................................... 26
4.2 Applicable Underlying Loans .................................... 27
4.3 Funding Procedures ............................................. 37
4.4 Advances Do Not Constitute a Waiver ............................ 44
SECTION 5 GENERAL REPRESENTATIONS AND WARRANTIES ......................... 44
5.1 Organization, Standing, Qualification .......................... 44
5.2 Organization, Standing, Qualification .......................... 44
5.3 Authorization, Enforceability, Etc.............................. 45
5.4 Financial Statements and Business Condition .................... 46
5.5 Taxes .......................................................... 47
5.6 Title to Properties; Prior Liens ............................... 47
5.7 Subsidiaries, Affiliates, and Capital Structure ................ 47
5.8 Litigation, Proceedings, Etc.................................... 48
5.9 Environmental Matters .......................................... 48
5.10 Full Disclosure ................................................ 48
5.11 Use of Proceeds/Margin Stock ................................... 48
5.12 No Defaults .................................................... 49
5.13 Restrictions of Borrower ....................................... 49
<PAGE>
5.14 Broker's Fees .................................................. 49
5.15 Tax Identification/Social Security Numbers ..................... 49
5.16 Legal Compliance................................................ 49
5.17 Continuation and Investigation ................................. 50
SECTION 6. COVENANTS ...................................................... 50
6.1 Affirmative Covenants .......................................... 50
6.2 Construction Covenants. ........................................ 61
6.3 Negative Covenants ............................................. 64
6.4 Minimum Net Worth Requirement .................................. 66
SECTION 7. EVENTS OF DEFAULT .............................................. 66
7.1 The Loan ....................................................... 67
7.2 Applicable Underlying Loans .................................... 69
SECTION 8. REMEDIES ....................................................... 72
8.1 Remedies Upon Default .......................................... 72
8.2 Notice of Sale ................................................. 74
8.3 Application of Collateral; Termination of Agreements ........... 74
8.4 Rights of Lender Regarding Collateral .......................... 75
8.5 Delegation of Duties and Rights ................................ 75
8.6 Lender Not in Control .......................................... 75
8.7 Waivers ........................................................ 76
8.8 Cumulative Rights .............................................. 76
8.9 Expenditures by Lender ......................................... 76
8.10 Diminution in Value of Collateral .............................. 76
SECTION 9. CERTAIN RIGHTS OF LENDER ....................................... 76
9.1 Protection of Collateral ....................................... 76
9.2 Performance by Lender .......................................... 77
9.3 No Liability of Lender ......................................... 77
9.4 Right to Defend Action Affecting Security ...................... 78
9.5 Expenses ....................................................... 79
9.6 Lender's Right of Set-Off ...................................... 79
9.7 Right of Lender to Extend Time of Payment, Substitute,
Release Security, Etc .......................................... 79
9.8 Assignment of Lender's Interest ................................ 79
9.9 Notice to Purchaser ............................................ 79
9.10 Collection of the Notes ........................................ 79
9.11 Power of Attorney .............................................. 80
9.12 Relief from Automatic Stay, Etc ................................ 81
9.13 Investigations and Inquiries ................................... 81
9.14 Verification of Use ............................................ 81
SECTION 10. TERM OF AGREEMENT .............................................. 82
<PAGE>
SECTION 11. MISCELLANEOUS .................................................. 82
11.1 Notices ........................................................ 82
11.2 Survival ....................................................... 83
11.3 Governing Law .................................................. 83
11.4 Limitation on Interest ......................................... 83
11.5 Invalid Provisions ............................................. 84
11.6 Successors and Assigns ......................................... 85
11.7 Amendment ...................................................... 85
11.8 Counterparts; Effectiveness .................................... 85
11.9 Lender Not a Fiduciary ......................................... 85
11.10 Release and Return of Notes Receivable ......................... 86
11.11 Accounting Principles .......................................... 86
11.12 Entire Agreement ............................................... 86
11.13 Litigation ..................................................... 86
11.14 Incorporation of Exhibits and Schedules ........................ 87
11.15 Consent to Advertising and Publicity of Applicable
Timeshare Documents ............................................ 87
11.16 Directly or Indirectly ......................................... 87
11.17 Captions ....................................................... 87
11.18 Gender ......................................................... 87
11.19 No Duty ........................................................ 87
11.20 Reimbursement for Taxes ........................................ 87
11.21 Submissions .................................................... 88
11.22 Confidentiality................................................. 88
<PAGE>
LIST OF EXHIBITS
EXHIBIT "A" - Custodial Agreement
EXHIBIT "B" - Form of Lockbox Agreement
EXHIBIT "C" - Permitted Liens and Encumbrances
EXHIBIT "D" - Qualified Borrower Underwriting Guidelines
EXHIBIT "E" - Qualified Loan Underwriting Guidelines
EXHIBIT "F" - Qualified Resort Underwriting Guidelines
EXHIBIT "G" - Form of Servicing Agreement
EXHIBIT "H" - Form of Subordination Agreement
EXHIBIT "I" - Form of Verification Agent's Agreement
EXHIBIT "J" - Form of Warrant to Purchase Shares of Common Stock of
Equivest Finance, Inc.
EXHIBIT "K" - Form of Draw Request
EXHIBIT "L" - Pending Litigation
EXHIBIT "M" - Form of Borrowing Base Report
EXHIBIT "N" - Approval Time Frames
EXHIBIT "O" - Form of Pledge and Assignment of Note Receivable and
Applicable Mortgage
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made and entered into as of November
14, 1997, by and among RESORT FUNDING, INC., a Delaware corporation
("Borrower"), EQUIVEST FINANCE, INC., a Florida corporation ("Guarantor"), and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability
company ("Lender").
In consideration of the mutual covenants and agreements contained herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Agreement, intending to be legally
bound, hereby agree as follows:
SECTION 1. DEFINITION OF TERMS
The capitalized terms used in this Agreement are defined in this Section
1. The definitions include the singular and plural forms of the terms defined.
1.1 Advance. A portion of the proceeds of the Loan advanced from time to
time by Lender to Borrower in accordance with the terms of this Agreement.
1.2 Affiliate.
(a) Any shareholder, officer, director, general partner, or member
of Borrower; and
(b) Any Person that, directly or indirectly, through one (1) or more
intermediaries, controls, is controlled by, or is under common control with
Borrower or for which any other Affiliate of Borrower is an officer, director,
shareholder, general partner, or member. For purposes of the definition of
"Affiliate:" (i) a Person that, either alone or pursuant to an arrangement or
understanding with one (1) or more other Persons, (A) owns, controls, or has the
power to vote (including by proxy) greater than fifty percent (50%) of any class
of voting securities of a corporation or that determines in any manner the
election or appointment of a majority of the directors thereof; or (B) has the
power or practical ability to exercise a controlling influence over the
management or policies of such corporation, shall be presumed to be in control
of said corporation; and (ii) a Person shall be deemed to be in control of a
Person other than a corporation if he or it, either alone or pursuant to an
arrangement or understanding with one (1) or more other Persons, (A) owns,
controls, or has the power to vote (including by proxy) greater than fifty
percent (50%) of the equity or beneficial interest of such Person; or (B) has
the power or practical ability to exercise a controlling influence over the
management or policies of such Person.
<PAGE>
1.3 Agreement. This Loan and Security Agreement by and among Borrower,
Guarantor, and Lender (including the exhibits and schedules hereto), as it may
be amended and/or restated from time to time.
1.4 Applicable Approved Construction Budget. The budget relating to the
cost of the Financed Improvements at a particular Applicable Resort in form and
substance acceptable to Lender, in its sole discretion.
1.5 Applicable Approved Construction Schedule. The schedule relating to
the time frame for construction of the Financed Improvements at a particular
Applicable Resort in form and substance acceptable to Lender, in its sole
discretion.
1.6 Applicable Borrowing Base Percentage. The lesser of (a) seventy-six
and one half percent (76.5%); and (b) eighty-five percent (85%) of an Applicable
Underlying Loan's Loan-to-Value Ratio.
1.7 Applicable Declaration. With respect to an Applicable Resort, the
declaration of condominium, declaration of covenants, conditions, and
restrictions, master deed, or similar document, together with any amendments or
restatements thereof, that establishes the underlying form of ownership of such
Applicable Resort and is recorded in the appropriate public records of the
Applicable Jurisdiction.
1.8 Applicable Jurisdiction. With respect to an Applicable Resort, the
state, county, municipality, and/or other governmental jurisdiction in which
such Applicable Resort is located.
1.9 Applicable Laws. With respect to an Applicable Resort, any and all
federal, state, and local statutes, ordinances, rules, regulations, court orders
and decrees, administrative orders and decrees, and other legal requirements of
any and every conceivable type to which Borrower, Guarantor, such Applicable
Resort or any portion thereof, or all or any portion of the Collateral or any
Applicable Underlying Loan Collateral is or becomes subject from time to time.
1.10 Applicable Mortgage. An Inventory Mortgage or a Construction
Mortgage.
1.11 Applicable Resort. A Qualified Resort in connection with which
Borrower has made a Qualified Loan to a Qualified Borrower.
1.12 Applicable Timeshare Documents. All Applicable Declarations and other
documents and instruments relating to an Applicable Resort and/or the Units,
Common Elements, Common Furnishings, and Intervals thereat, including but not
limited to the marketing, sale, and financing of such Intervals. Each
<PAGE>
Applicable Timeshare Document shall be in form and content acceptable to Lender,
in its sole discretion. Lender shall have received and approved true, correct,
and complete copies of all Applicable Timeshare Documents as a condition
precedent to any Advances hereunder in respect of the Applicable Resort to which
such Applicable Timeshare Documents pertain.
1.13 Applicable Underlying Borrower. A Qualified Borrower that is the
maker of a Pledged Note Receivable.
1.14 Applicable Underlying Guarantor. Any Person that has executed and
delivered an Underlying Guaranty in favor of Borrower in connection with an
Applicable Underlying Loan.
1.15 Applicable Underlying Loan. A Qualified Loan as to which Lender has
agreed, in its sole and absolute discretion, to make certain Advances hereunder.
1.16 Applicable Underlying Loan Collateral. Any and all collateral granted
or available to Borrower to secure the payment by an Applicable Underlying
Borrower of all principal, interest, and other amounts owed to Borrower by such
Applicable Underlying Borrower in connection with an Applicable Underlying Loan.
1.17 Applicable Underlying Loan Documents. All documents and instruments
that evidence or secure an Applicable Underlying Loan, including but not limited
to any Notes Receivable, Underlying Guarantees, and Applicable Mortgages
executed and delivered to Borrower in connection therewith, together with the
Applicable Approved Construction Schedule and Applicable Approved Construction
Budget. The form and content of each Applicable Underlying Loan Document shall
be satisfactory to Lender, in its sole and absolute discretion, and approved by
Lender in writing prior to any Advances hereunder in respect of the Applicable
Underlying Loan to which such Applicable Underlying Loan Document pertains.
Borrower agrees not to amend, restate, or otherwise modify any Applicable
Underlying Documents in a material manner without Lender's prior written
consent, which consent may be granted or withheld, in Lender's sole and absolute
discretion. Copies of any such amended, restated, or otherwise modified
Applicable Underlying Loan Document, as so approved by Lender, shall be provided
to Lender and Verification Agent promptly following the effective date thereof.
1.18 Approved Costs. Defined in Section 4.2(m) of this Agreement.
1.19 Architect. A licensed architect in an Applicable Jurisdiction who is
acceptable to Lender, in its sole discretion.
<PAGE>
1.20 Base Rate. On any given date, a fluctuating rate of interest equal to
the interest rate per annum offered for one (1) month deposits in U.S. dollars
in the London interbank market that appears on Telerate Page 3750 or such other
page as may replace Page 3750 on that service or such other service or services
as may be nominated by the British Bankers Association for the purpose of
displaying such rate (collectively, "Telerate Page 3750") as of 9:00 a.m. New
York time on the date in question (the "Libor Rate"); provided, however, that in
the event that (i) more than one (1) such Libor Rate is published, then the
average of such rates shall apply; or (ii) no such Libor Rate is published, then
the Libor Rate shall be determined from such comparable financial reporting
company as Lender, in its sole discretion, shall select.
1.21 Borrower. Resort Funding, Inc., a Delaware corporation, together with
its successors and assigns.
1.22 Borrowing Base. As to a particular Pledged Note Receivable, the
lesser of (a) eighty-five percent (85%) of the outstanding principal balance
thereof as of the date of any Advance by Lender in respect thereof; and (b)
seventy-six and one half percent (76.5%) of the fair market value of the
Applicable Underlying Loan Collateral that secures such Pledged Note Receivable
as determined by the appraisal referenced in Section 4.2(k) hereof, the form and
substance of which shall be satisfactory to Lender, in its sole discretion, as
such appraisal may be updated from time to time, at Borrower's sole cost and
expense, upon the reasonable request of Lender in the event that a Default,
pursuant to Section 7.2 hereof, has occurred or if Lender, in good faith,
believes that such a Default is likely to occur. Notwithstanding the foregoing
or any other term, provision, or condition hereof to the contrary, under no
circumstances shall the weighted average of the Loan-to-Value Ratios of all
Applicable Underlying Loans ever exceed eighty-five percent (85%) (the "Maximum
Weighted Average").
1.23 Borrowing Term. A period of twenty-four (24) calendar months
following the date of the Initial Advance.
1.24 Business Day. Each day that is not a Saturday, Sunday, or a legal
holiday under the laws of the State of New York or the United States.
1.25 Closing Date. The date of this Agreement.
1.26 Code. The version of the Uniform Commercial Code in effect from time
to time in an Applicable Jurisdiction, as amended from time to time.
1.27 Collateral. Collectively, the Pledged Notes Receivable, together with
all accounts, chattel paper, and general intangibles related thereto and the
cash and non-cash proceeds thereof, and all now owned or hereafter acquired
right, title, and interest of Borrower in and to all Applicable Underlying Loan
<PAGE>
Collateral for any and all of the Pledged Notes Receivable, including but not
limited to the following (to the extent applicable):
(a) The Applicable Mortgages;
(b) First priority Liens in and to any and all Encumbered Personal
Property, together with the cash and non-cash proceeds thereof, with appropriate
non-disturbance language relating to common area furniture, furnishings,
equipment, and fixtures;
(c) Absolute and unconditional first assignments of any and all
leases, subleases, licenses, concessions, entry fees, and other agreements that
grant a possessory interest in and to, or the right to use, any Mortgaged Real
Property, Encumbered Intervals, Encumbered Personal Property, or any portion
thereof (collectively, the "Resort Leases");
(d) Absolute and unconditional first assignments of all of the
rents, revenues, income, proceeds, royalties, profits, and other amounts payable
for using, leasing, licensing, possessing, operating from or in, or otherwise
enjoying all or any portion of any Mortgaged Real Property, Encumbered Personal
Property, or Encumbered Intervals, including, without limitation, damages
received upon the occurrence of a default under any of the Resort Leases and all
proceeds payable under any policy of insurance covering loss of rents with
respect thereto (collectively, the "Resort Income");
(e) Absolute and unconditional first assignments of all other
agreements to which any Applicable Underlying Borrower is or becomes a party or
holds any interest and which in any way relate to the use, occupancy,
maintenance, or enjoyment of any Mortgaged Real Property, Encumbered Personal
Property, or Encumbered Intervals, including but not limited to utility
contracts, maintenance agreements, management agreements, service contracts, and
any agreement guaranteeing the performance of the obligations contained in any
of the foregoing agreements;
(f) First priority assignments of all of Borrower's rights in and to
all Plans, all agreements for the furnishing of architectural, engineering,
and/or design services, and all construction contracts and other agreements for
the furnishing of labor and/or materials in connection with the development and
construction of the Financed Improvements;
(g) First priority assignments of all of Borrower's rights in and to
any and all easements, contracts, leasehold interests (whether as lessor or
lessee), permits, licenses, and approvals in respect of all or any portion of an
Applicable Resort;
(h) First priority Liens in all inventory, supplies, accounts,
chattel paper, and general intangibles owned or hereafter acquired by Borrower
or any
<PAGE>
Underlying Borrower, used or useful in connection with, and placed or to be
placed on or under any of the Mortgaged Real Property, including but not limited
to the Units contained therein, and the Encumbered Intervals, together with the
cash and non-cash proceeds thereof;
(i) First priority Liens in and to all documents, instruments,
accounts, chattel paper, and general intangibles relating to the Pledged Notes
Receivable and the other Collateral, including the cash and non-cash proceeds
thereof;
(j) First priority Liens in and to all books, records, reports,
computer tapes, computer disks, and software relating to all or any portion of
the Collateral;
(k) Extensions, additions, improvements, betterments, renewals,
substitutions, and replacements of, for, or to any of the Collateral, wherever
located, together with the products, proceeds, issues, rents, and profits
thereof and any replacements, additions, or accessions thereto or substitutions
thereof, and all rights in or under insurance policies and to the proceeds of
any insurance policies covering any of the other Collateral, all rights to
unearned or refunded insurance premiums, and the proceeds of any condemnation
awards or any claims regarding any of the other Collateral; and
(l) All now owned or hereafter acquired right, title, and interest
of Lender in and to any and all of the collateral for the Timeshare Receivables
Credit Facility and any other timeshare-related loan or credit facility between
Lender and Borrower or an Affiliate of Borrower.
1.28 Commitment. The term sheet issued by Lender to Borrower, dated July
29, 1997, and subsequently accepted by Borrower on behalf of itself and
Guarantor.
1.29 Common Elements. The common areas and facilities as shown on the
Plans for each Applicable Resort, as defined or provided for in the Applicable
Declaration or other Applicable Timeshare Documents, including, without
limitation, the Land and all improvements thereto except for the Units that have
been dedicated to the condominium or comparable form of ownership, as well as
any limited common elements, as those terms are defined and used in the
Applicable Declaration.
1.30 Common Furnishings. All furniture, furnishings, fixtures, appliances,
carpeting, and equipment located in a Unit or elsewhere within an Applicable
Resort.
1.31 Construction Contract. Defined in Section 4.2(l) of this Agreement.
<PAGE>
1.32 Construction Mortgage. A mortgage or deed of trust that creates a
valid and enforceable first priority Lien against the Mortgaged Real Property
identified therein (which Mortgaged Real Property shall be situated within an
Applicable Resort) and secures in part the payment of all principal, interest,
and other amounts owed by an Applicable Underlying Borrower to Borrower,
pursuant to a Pledged Note Receivable and all related Applicable Underlying Loan
Documents.
1.33 Custodial Agreement. That certain Amended and Restated Custodial
Agreement dated as of August 1, 1997, by and between Lender and Custodian, a
copy of which is attached as Exhibit "A" hereto and incorporated herein by this
reference, pursuant to which Custodian will maintain custody of all original
Applicable Underlying Loan Documents and take certain actions in connection
therewith.
1.34 Custodian. Banker's Trust Company or such other Person as Lender, in
its sole discretion, engages from time to time, at Borrower's sole cost and
expense, to maintain custody of all original Applicable Underlying Loan
Documents and take certain actions in connection therewith.
1.35 Debtor Relief Laws. Any applicable liquidation, conservatorship,
receivership, bankruptcy, moratorium, rearrangement, insolvency, reorganization,
or similar law, proceeding, or device providing for the relief of debtors from
time to time in effect and generally affecting the rights of creditors.
1.36 Default. An event or condition, the occurrence of which immediately
is or, with the lapse of time or the giving or notice or both, would become, an
Event of Default hereunder.
1.37 Default Rate. The Interest Rate plus four percent (4%) per annum;
provided, however, that the Default Rate shall in no event exceed the highest
interest rate permitted to be charged under any applicable usury laws.
1.38 Draw Request. Defined in Section 4.3 of this Agreement.
1.39 Eligible Note Receivable. A Pledged Note Receivable that satisfies
each of the following criteria:
(a) The Applicable Underlying Loan that it evidences was originated
by Borrower in the ordinary course of its business;
(b) Advances by Borrower under such Note Receivable may be used by
the Applicable Underlying Borrower solely for purposes of acquiring, developing,
constructing, improving, or providing working capital in connection with, a
Qualified Resort;
<PAGE>
(c) The Applicable Underlying Loan Documents have been approved in
writing by Lender;
(d) Borrower is the sole payee;
(e) It is secured by an Inventory Mortgage and/or a Construction
Mortgage;
(f) Principal and interest payments on it are payable to Borrower in
legal tender of the United States;
(g) It provides for the payment to Borrower of interest at the
minimum floating rate of (i) the Libor Rate plus 3.5% per annum; or (ii) the
Prime Rate plus 1.0% per annum, in each case redetermined no less frequently
than quarterly;
(h) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, is an Affiliate of Borrower or Guarantor;
(i) The Applicable Underlying Loan Documents provide for accelerated
partial releases from the Lien of the Applicable Mortgage that are no less than
one hundred ten percent (110%) of the Applicable Underlying Borrower's cost
basis in the Unit or Interval being released;
(j) It requires such minimum amortization of principal as Lender, in
its sole discretion, shall deem sufficient and approve in writing;
(k) No monthly installment or other amount due with respect to the
Note Receivable is more than thirty (30) days' contractually past due at the
time of its pledge to Lender hereunder, and no such monthly installment becomes
more than sixty (60) days' contractually past due thereafter;
(l) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, has any claim against Borrower, Guarantor, or any
Affiliate thereof, and no defense, set-off, or counterclaim exists with respect
to the Note Receivable at the time of any Advance in respect thereof; and
(m) The original of the Note Receivable and all related documents
and instruments, the terms of each of which shall comply fully with all
Applicable Laws, have been endorsed in the manner prescribed by Lender and
delivered to Custodian.
Notwithstanding a particular Note Receivable's satisfaction of all
of the foregoing criteria or any terms, provisions, or conditions hereof to the
contrary:
<PAGE>
(i) Lender's Advances in connection with any one (1)
particular Applicable Underlying Loan shall in no event exceed $5,000,000
without Lender's prior written consent, which consent may be granted or withheld
in Lender's sole and absolute discretion; and
(ii) In no event shall Lender be required to make Advances
hereunder of more than $15,000,000 against or with respect to Units and/or other
Financed Improvements for which no certificate of occupancy or its legal
equivalent in the Applicable Jurisdiction has been issued, nor shall Lender be
required to designate a particular loan as a Qualified Loan hereunder if
Advances in connection therewith, when added to all other Advances made by
Lender hereunder, would likely cause the foregoing $15,000,000 threshold to be
exceeded, in Lender's sole discretion.
1.40 Encumbered Interval. Any Interval that is encumbered by the Lien of
an Inventory Mortgage, whether or not the applicable mortgagee has executed a
non-disturbance or subordination agreement in connection therewith.
1.41 Encumbered Personal Property. All furniture, furnishings, fixtures,
appliances, equipment, inventory, supplies, accounts, chattel paper, and general
intangibles at any time located at, arising out of the use of, and/or used or
useful in connection with the management or operation of any Mortgaged Real
Property or Encumbered Interval, whether now owned or hereafter acquired by
Borrower or an Applicable Underlying Borrower, together with all improvements
and accessions thereto and replacements thereof and the cash and non-cash
proceeds thereof, a Lien against which constitutes Applicable Underlying Loan
Collateral for a Pledged Note Receivable.
1.42 Environmental Laws. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act of 1976, as amended from time to time
("RCRA"), the Superfund Amendments and Reauthorization Act of 1986, as amended,
the federal Clean Air Act, the federal Clean Water Act, the federal Safe
Drinking Water Act, the federal Toxic Substances Control Act, the federal
Hazardous Materials Transportation Act, the federal Emergency Planning and
Community Right to Know Act of 1986, the federal Endangered Species Act, the
federal Occupational Safety and Health Act of 1970, the federal Water Pollution
Control Act, and any and all comparable statutes or ordinances enacted in an
Applicable Jurisdiction, as all of the foregoing laws may be amended from time
to time, and any rules or regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal statutes, ordinances, rules,
or regulations, either in existence as of the date hereof or enacted or
promulgated after the date of this Agreement, that concern the management,
control, storage, discharge, treatment, containment, removal, and/or transport
of Hazardous Materials or other substances that are or
<PAGE>
may become a threat to public health or the environment; together with any
common law theory involving Hazardous Materials or substances that are (or
alleged to be) hazardous to human health or the environment, based on nuisance,
trespass, negligence, strict liability, or other tortious conduct, or any other
federal, state, or local statute, ordinance, regulation, rule, policy, or
determination pertaining to health, hygiene, the environment, or environmental
conditions.
1.43 Event of Default. Defined in Section 7 of this Agreement.
1.44 Financed Improvements. All Units, Common Elements, and other
buildings, structures, recreational facilities, and appurtenances thereto now
located on, or to be constructed on, any Mortgaged Real Property with the
proceeds of any Advances hereunder.
1.45 Financial Statements. The tax returns, balance sheets, and statements
of income and expense of Borrower and Guarantor and the related notes and
schedules delivered by Borrower prior to the Closing Date, together with the
financial statements and reports of Guarantor delivered to Lender prior to the
Closing Date; and the monthly and annual financial statements and reports
required to be provided to Lender pursuant to Section 6.1(h) hereof.
1.46 GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board which are applicable under the
circumstances as of the date in question.
1.47 Guarantor. Equivest Finance, Inc., a Florida corporation, together
with its successors and assigns.
1.48 Guaranty. That certain Guaranty executed by Guarantor and delivered
to Lender concurrently with Borrower's and Guarantor's execution and delivery of
this Agreement. The Guaranty shall be the absolute and unconditional guaranty of
payment and performance of the Loan and all amounts secured by or under the Loan
Documents.
1.49 Hazardous Materials. "Hazardous substances," "hazardous waste,"
"hazardous constituents," "toxic substances," or "solid waste," as defined in
the Environmental Laws, and any other contaminant or any material, waste, or
substance that is petroleum or petroleum based, asbestos, polychlorinated
biphenyls, flammable explosives, or radioactive materials.
1.50 Holdback Amount. An amount equal to a minimum of ten percent (10%) of
(a) the amounts due a General Contractor under a Construction Contract; and/or
(b) the amounts due to any subcontractor, materialman, or other
<PAGE>
Person under any and all subcontracts or other agreements entered into in
connection with the construction of any Financed Improvements, which amount
shall be retained by Lender and Borrower as a holdback until such time as such
Financed Improvements have been one hundred percent (100%) completed in
accordance with the applicable Plans and all Applicable Laws, as certified in
the manner provided in Section 4.3(f) hereof, and all other conditions set forth
in Section 4.3(f) hereof have been fully satisfied. Notwithstanding the
foregoing provisions of this Section 1.50, the Holdback Amount in connection
with a particular Applicable Underlying Loan may be reduced to a minimum of five
percent (5%) of the amounts specified in Sections 1.50(a) and (b) above once the
Financed Improvements in question have been fifty percent (50%) completed in
accordance with the applicable Plans and all Applicable Laws, based upon a
certification from the Architect or other evidence satisfactory to Borrower and
Lender.
1.51 Holdback Balance. The balance of any Holdback Amount retained by
Lender and Borrower and not paid to an Applicable Underlying Borrower, a General
Contractor, or a subcontractor, materialman, or other Person in connection with
the construction of any Financed Improvements, all in accordance with the
Applicable Underlying Loan Documents.
1.52 Initial Advance. The first Advance by Lender hereunder.
1.53 Initial Underlying Loan Advance. As to a particular Applicable
Underlying Loan, the first Advance by Lender hereunder in connection therewith.
1.54 Interest Rate. The Base Rate plus 2.90% per annum. The Interest Rate
charged for each calendar month shall be fixed based upon the Base Rate
published or otherwise determined prior to and in effect as of the first
Business Day of such calendar month. The Interest Rate shall be calculated based
on a 360 day year and charged for the actual number of days elapsed.
1.55 Interval. An undivided fee simple timeshare interest in a particular
Unit or in an entire Applicable Resort as a whole, as a tenant in common with
other owners of undivided interests in such Unit or Applicable Resort, or a
lease, license, or other form of "right-to-use" timeshare interest, together
with all rights, benefits, privileges, and interests appurtenant thereto,
including but not limited to the right to use and occupy a Unit within the
Applicable Resort and the Common Elements and Common Furnishings appurtenant to
such Unit and/or the Applicable Resort during a reserved or assigned use period,
all as more specifically described in the Applicable Declaration.
1.56 Inventory Mortgage. A mortgage or deed of trust that creates a valid
and enforceable first priority Lien against the Encumbered Intervals identified
therein (which Encumbered Intervals relate to an Applicable Resort)
<PAGE>
and secures in part the payment of all principal, interest, and other amounts
owed by an Applicable Underlying Borrower to Borrower, pursuant to a Pledged
Note Receivable and all related Applicable Underlying Loan Documents.
1.57 Land. The real property upon which any of the Financed Improvements
or other portions of an Applicable Resort are situated.
1.58 Lien. Any mortgage, security interest, or other interest in property
securing an obligation owed to, or valid claim by, a Person other than the owner
of such property, whether such interest arises in equity or is based on common
law, statute, or contract.
1.59 Loan. The subject revolving credit facility in the maximum principal
amount of $30,000,000 as described in this Agreement and evidenced and secured
by the Loan Documents.
1.60 Loan Documents. Collectively, the following documents and
instruments, as each may be amended, renewed, extended, restated, or
supplemented from time to time:
(a) This Agreement;
(b) The Note;
(c) The Guaranty;
(d) Pledges and Assignments of Notes Receivable and Applicable
Mortgages (in the form of Exhibit "O," attached hereto and incorporated herein
by this reference;
(e) Assignments of the Underlying Guarantees;
(f) The Subordination Agreement;
(g) The Custodial Agreement;
(h) The Verification Agent's Agreement;
(i) The Lockbox Agreement;
(j) The Warrant to Purchase Shares of Common Stock of Equivest
Finance, Inc.;
(k) UCC-1 and UCC-3 financing statements covering the Collateral, to
be recorded in the appropriate public records of each Applicable
<PAGE>
Jurisdiction and filed in the office of the Secretary of State of each
Applicable Jurisdiction in which any of the Collateral is located; and
(l) All such other assignments, agreements, documents, instruments,
certificates, and materials as Lender may require in order to evidence or secure
the Obligations, to evidence and perfect the rights, Liens, and security
interests of Lender contemplated by the Loan Documents, and otherwise to
effectuate the transactions contemplated hereby.
1.61 Loan-to-Value Ratio. As to each Applicable Underlying Loan, the
percentage determined by dividing the outstanding principal balance of the
Pledged Note Receivable evidencing such Applicable Underlying Loan by the then
current fair market value of all Applicable Underlying Loan Collateral that
secures such Pledged Note Receivable as determined by the appraisal referenced
in Section 4.2(k) hereof, the form and substance of which shall be satisfactory
to Lender, in its sole discretion, as such appraisal may be updated from time to
time, at Borrower's sole cost and expense, upon the reasonable request of Lender
in the event that a Default, pursuant to Section 7.2 hereof, has occurred or if
Lender, in good faith, believes that such a Default is likely to occur.
1.62 Lockbox Agent. OnBank & Trust Company or such other Person as Lender
engages, in its sole discretion, at Borrower's sole cost and expense, to
receive, deposit, and disburse all amounts paid by or on behalf of each
Applicable Underlying Borrower and each Applicable Underlying Guarantor in
accordance with the terms, provisions, and conditions hereof, of the Lockbox
Agreement, and of the Applicable Underlying Loan Documents.
1.63 Lockbox Agreement. That certain agreement by and among Lender,
Borrower, and Lockbox Agent in substantially the form of Exhibit "B," attached
hereto and incorporated herein by this reference, pursuant to which Lockbox
Agent is engaged, at Borrower's sole cost and expense, to receive, deposit, and
disburse all amounts paid by or on behalf of each Applicable Underlying Borrower
and each Applicable Underlying Guarantor in accordance with the terms,
provisions, and conditions hereof, of the Lockbox Agreement, and of the
Applicable Underlying Loan Documents.
1.64 Mandatory Prepayment. Any prepayment of the Loan required by Section
2.6(b) of this Agreement.
1.65 Maturity Date. The date that is twelve (12) calendar months following
the expiration of the Borrowing Term.
1.66 Minimum Monthly Interest Payment. The total amount of interest
computed at the Interest Rate that has accrued on the outstanding principal
balance of the Loan during the immediately preceding calendar month.
<PAGE>
1.67 Minimum Net Worth Requirement. A tangible net worth as determined in
accordance with GAAP, without taking into consideration any amounts due Borrower
from Guarantor or any other Affiliate of Borrower, of $3,400,000; provided,
however, that said amount shall be increased to $20,000,000 upon the conversion
of the Subordinated Debt to common stock in Guarantor, as referenced in Section
6.3(e) hereof.
1.68 Mortgaged Real Property. All of Borrower's right, title, and interest
in and to any Land, Unit, Common Element, Interval, and other real property of
any and every type, together with all easements and other appurtenances thereto,
that is encumbered by the Lien of a Construction Mortgage or an Inventory
Mortgage and located within an Applicable Resort.
1.69 Note. That certain Promissory Note that evidences the Loan, dated as
of the Closing Date, made and executed by Borrower to the order of Lender and
delivered to Lender concurrently with Borrower's and Guarantor's execution of
this Agreement.
1.70 Note Receivable. A promissory note that is now or hereafter made and
executed by an Applicable Underlying Borrower to the order of Borrower,
evidences an Applicable Underlying Loan, and is secured in part by an Inventory
Mortgage and/or a Construction Mortgage.
1.71 Obligations. All present and future indebtedness, liabilities,
obligations, and responsibilities, both financial and otherwise, to which
Borrower is subject under any of the Loan Documents, whether direct or indirect,
absolute or contingent, including but not limited to all amounts due or becoming
due to Lender in respect of the Loan or any of the Loan Documents, including
principal, interest, prepayment premiums, contributions, taxes, insurance
premiums, loan charges, custodial fees, attorneys' and paralegals' fees and
expenses and other fees or expenses incurred by Lender or advanced to or on
behalf of Borrower by Lender, pursuant to any of the Loan Documents or in
connection with Lender's enforcement of the prompt and complete payment and
performance by Borrower and Guarantor of all indebtedness, liabilities,
obligations, and responsibilities owed by Borrower, pursuant to this Agreement,
any of the other Loan Documents, or otherwise.
1.72 Permitted Liens and Encumbrances. Those liens and encumbrances
affecting all or a portion of the Collateral or any Applicable Underlying Loan
Collateral to which Lender consents in writing, as set forth on Exhibit "C,"
attached hereto and incorporated herein by this reference, as amended or
restated from time to time.
1.73 Person. A natural person, corporation, partnership, limited liability
company, joint venture, association, estate, trust, government, governmental
subdivision or agency, other legal entity, or any combination thereof.
<PAGE>
1.74 Phase I Environmental Inspection. A Phase I environmental assessment
of an Applicable Resort, including, without limitation, the relevant Land and
all improvements thereto. In the event that any Phase I Environmental Assessment
of an Applicable Resort is unacceptable to Lender for any reason or is not
available, Borrower shall provide Lender with a written report or reports
covering such Applicable Resort, prepared by one (1) or more appropriate
licensed professionals acceptable to Lender, which confirm(s):
(a) The absence of any Hazardous Materials of any kind or nature at
the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction; and
(b) That the applicable engineering firm has obtained, reviewed, and
included within its report a CERCLIS printout from the Environmental Protection
Agency (the "EPA"), statements from the EPA and other applicable state and local
authorities, and such other information as Lender may reasonably require, all of
which information shall confirm that there is no known or suspected hazardous or
toxic waste located at the Applicable Resort or in such proximity thereto as to
create a material risk of contamination of all or any portion of the Collateral
or any Applicable Underlying Loan Collateral.
1.75 Plans. Plans for the development and construction of any Financed
Improvements, together with all specifications and drawings in respect thereof
and all modifications, amendments, additions, and supplements thereto. Said
Plans, which shall be prepared by an Architect, shall indicate the location of
the Financed Improvements, the configuration and dimensions of the Applicable
Resort, the means of access thereto, street lines, easements, the Common
Elements, and other relevant details.
1.76 Pledged Note Receivable. A Note Receivable that has been and remains
pledged to Lender by Borrower, pursuant to this Agreement or any of the other
Loan Documents.
1.77 Prime Rate. The prime or reference rate of interest as announced or
published from time to time by Chase Manhattan Bank, N.A. If such bank shall,
for any period, cease to announce or publish its prime or reference rate, then
Lender shall, during such period, determine the Prime Rate based upon the prime
rates announced or published by such other bank as is reasonably acceptable to
Borrower.
1.78 Qualified Borrower. The developer of an interval ownership,
condominium, timeshare, or vacation ownership project, the creditworthiness for
an acquisition, development, and/or construction loan and other qualifications
of which are satisfactory to Lender, in its reasonable discretion, based upon
the
<PAGE>
Qualified Borrower Underwriting Guidelines, Borrower's recommendations, and any
other factors that Lender deems relevant. No Person shall be deemed a Qualified
Borrower hereunder unless and until Lender has so designated such Person in
writing.
1.79 Qualified Borrower Underwriting Guidelines. Those general
underwriting criteria and guidelines set forth or to be set forth in Exhibit
"D," attached hereto and incorporated herein by this reference, upon which
Lender will rely in part in determining whether a particular Person shall be
deemed a Qualified Borrower hereunder.
1.80 Qualified Loan. An acquisition, development, construction, inventory,
or working capital loan made by Borrower to a Qualified Borrower in connection
with a Qualified Resort. Each Qualified Loan must satisfy the Qualified Loan
Underwriting Guidelines and be designated as such by Lender in writing.
1.81 Qualified Loan Underwriting Guidelines. Those general criteria and
guidelines set forth or to be set forth in Exhibit "E," attached hereto and
incorporated herein by this reference, upon which Lender will rely in part in
determining whether a particular loan shall be deemed a Qualified Loan
hereunder.
1.82 Qualified Resort. An interval ownership, condominium, timeshare
project, and/or vacation ownership project that satisfies the Qualified Resort
Underwriting Guidelines consisting of, among other things, certain Land, Units,
Common Elements, and Intervals, whether now existing or hereafter added, in one
(1) or more buildings or phases, and all related Common Furnishings, easements,
licenses, rights, interests, and other appurtenances, as more fully described in
the Applicable Declaration and the other Applicable Timeshare Documents, as the
same may be amended from time to time. Without the prior written approval of
Lender, which approval may be granted or withheld by Lender, in its sole and
absolute discretion, every Qualified Resort shall be located in the United
States, countries that are under the legal jurisdiction of the United States,
Canada, Caribbean islands that are under the legal jurisdiction of Great Britain
or the Netherlands, the Bahamas, or Ireland.
1.83 Qualified Resort Underwriting Guidelines. Those general underwriting
criteria and guidelines set forth or to be set forth in Exhibit "F," attached
hereto and incorporated herein by this reference, upon which Lender will rely in
part in determining whether a particular interval ownership, condominium,
timeshare project, and/or vacation ownership project shall be deemed a Qualified
Resort hereunder.
1.84 Release Fee. Any fee or amount required to be paid by an Applicable
Underlying Borrower to Borrower in consideration for the release of all
<PAGE>
or a portion of any Applicable Underlying Loan Collateral from the Lien of a
Construction Mortgage or an Inventory Mortgage or any other Lien in favor of
Borrower. For purposes of this Agreement, the term "Release Fee" shall include
any other payments, however denominated, required to be made by an Applicable
Underlying Borrower to Borrower upon the sale of an Interval at an Applicable
Resort, pursuant to the Applicable Underlying Loan Documents.
1.85 Servicing Agent. For so long as no Event of Default has occurred
hereunder, Borrower or an Affiliate of Borrower; thereafter, such other Person
as Lender engages, in its sole discretion, at Borrower's sole cost and expense.
Servicing Agent shall service each Applicable Underlying Loan, which shall
include but not be limited to the collection of Release Fees and all other
amounts owed Borrower by the Applicable Underlying Borrower, pursuant to the
Applicable Underlying Loan Documents, subject to the terms, provisions, and
conditions of Section 2 hereof and of the Servicing Agreement and the Lockbox
Agreement.
1.86 Servicing Agreement. An agreement by and among Lender, Borrower, and
Servicing Agent (if different from Borrower) in substantially the form of
Exhibit "G," attached hereto and incorporated herein by this reference, that
provides for the servicing of each Applicable Underlying Loan.
1.87 Structuring Advisory Fee. An amount equal to $300,000 that is due and
payable in immediately available U.S. funds by Borrower to Lender in two (2)
installments as follows:
(a) $150,000 on the Closing Date; and
(b) $150,000 on or prior to December 20, 1997.
The Structuring Advisory Fee is non-refundable to Borrower and payable to
Lender in consideration for the provision by Lender of certain advisory services
in connection with the structuring of the Loan, the underwriting thereof, and
Lender's due diligence analysis, which Structuring Advisory Fee shall be deemed
to have been fully earned by Lender as of the Closing Date.
1.88 Subordination Agreement. That certain agreement of even date herewith
by and among Borrower, Guarantor, Lender, and The Bennett Funding Group, Inc.,
pursuant to which, subject to the provisions hereof and thereof, Borrower,
Guarantor, and such other parties have agreed that until certain Senior Debt has
been paid and otherwise satisfied in full, Borrower will not make any payments
to a Subordinated Party in respect of any of the Subordinated Debt, as all such
capitalized terms are defined in said Subordination Agreement.
1.89 Survey. An as-built survey of an Applicable Resort prepared in
accordance with the ALTA/ACSM 1988 Minimum Survey Requirements by a
<PAGE>
licensed surveyor and certified by the applicable surveyor to the Applicable
Underlying Borrower.
1.90 Timeshare Receivables Credit Facility. The $75,000,000 timeshare
receivables credit facility as evidenced in part by that certain Assignment,
Release and Custodial Agreement dated on or about November 13, 1997, by and
among Lender, Borrower, BFICP Corporation, ING (U.S.) Capital Corporation, ING
(U.S.) Capital Markets, Inc., Holland Limited Securitization, Inc., First Trust
of New York, N.A., and Concord Servicing Corporation, together with any and all
related contemporaneous or subsequent transactions involving Lender and
Borrower, among other parties.
1.91 Underlying Guaranty. A document or instrument executed by an
Applicable Underlying Guarantor and delivered to Borrower, pursuant to which one
(1) or more Persons guarantees the absolute and unconditional payment and
performance of the Applicable Underlying Loan and all amounts secured by or
under the Applicable Underlying Loan Documents. The term "Underlying Guaranty"
shall further include any document or instrument executed by an Applicable
Underlying Guarantor and delivered to Borrower, pursuant to which the completion
of construction of certain Improvements in accordance with the relevant Plans
and all Applicable Laws is guaranteed.
1.92 Unit. An apartment, condominium unit, or other structure that is
affixed to real property and designed and available, pursuant to applicable law,
for use and occupancy as a vacation residence by one (1) or more individuals,
together with all related Common Elements, Common Furnishings, easements, and
other appurtenances thereto.
1.93 Verification Agent. Midland Loan Services, L.P. or such other Person
as Lender, in its sole discretion, engages from time to time, at Lender's cost
and expense (subject to Section 2.3(c) hereof), to exercise certain rights and
perform certain duties and responsibilities of Lender hereunder, including but
not limited to verifying Borrower's compliance with all of the terms,
provisions, and conditions hereof and of the other Loan Documents.
1.94 Verification Agent's Agreement. That certain Interim Servicing
Agreement dated as of June 30, 1995, by and between Lender and Verification
Agent, as amended by that certain Addendum to Interim Servicing Agreement of
even date herewith by and between Lender and Verification Agent, both of which
are attached as Exhibit "I" hereto and incorporated herein by this reference,
pursuant to which Verification Agent is engaged to perform the duties and
responsibilities delegated to it by Lender hereunder and thereunder.
1.95 Warrants. The warrants in Guarantor granted to Lender, pursuant to
that certain Warrant to Purchase Shares of Common Stock of Equivest Finance,
Inc. in substantially the form of Exhibit "J," attached hereto and incorporated
herein by this reference.
<PAGE>
SECTION 2. THE LOAN
Lender hereby agrees to make the Loan, including Advances thereunder, in
accordance with all of the terms, provisions, and conditions hereof and of the
other Loan Documents.
2.1 Purposes. The proceeds of the Loan shall be used exclusively to enable
Borrower to make acquisition, development, construction, inventory, and working
capital Qualified Loans to Qualified Borrowers in connection with Qualified
Resorts.
2.2 Qualified Loans. Pending the amendment hereof to include the Qualified
Borrower Underwriting Guidelines, the Qualified Loan Underwriting Guidelines,
and the Qualified Resort Underwriting Guidelines, Exhibits "D," "E," and "F"
hereto, respectively (if not already attached hereto as of the Closing Date),
Lender shall have the right, in its sole and absolute discretion, to determine
whether a particular loan constitutes a Qualified Loan hereunder. Thereafter,
Lender shall make such determinations in its reasonable discretion, based
generally upon the Qualified Loan Underwriting Guidelines, the Qualified
Borrower Underwriting Guidelines, the Qualified Resort Underwriting Guidelines,
and upon the analysis and recommendations of Borrower. However, Lender shall
have the absolute and unconditional right to conduct its own due diligence with
respect to each loan that Borrower proposes be deemed a Qualified Loan
hereunder, the reasonable costs of which shall be borne by Borrower. As part of
such due diligence, Lender may, in its sole discretion, make or cause to be
made, at Borrower's sole cost and expense, Lender's own physical inspection of
the Applicable Resort and all contemplated Applicable Underlying Loan
Collateral. No loan shall be deemed a Qualified Loan hereunder unless and until
Lender has so designated it in writing.
2.3 Advances.
(a) Borrowing Term. No Advances of the Loan will be made by Lender
hereunder after the last day of the Borrowing Term.
(b) Maximum Amount of Loan. Upon the terms and provisions and
subject to the conditions set forth in this Agreement, including but not limited
to Section 1.39 hereof, and provided that no Event of Default then exists,
Lender shall advance to Borrower, and Borrower may borrow, repay, and reborrow,
principal under the Loan in an amount not to exceed at any time the lesser of
the aggregate amount of the Borrowing Base or $30,000,000; provided, however,
that for purposes of this Section, the Borrowing Base of any Applicable
Underlying Loan in connection with which (i) a monthly payment is more than
sixty (60) days' contractually past due; or (ii) an Event of Default listed in
Section 7.2 hereof has occurred, shall be deemed zero. Lender shall have no
obligation
<PAGE>
whatsoever to make any Advance that would cause the aggregate outstanding
principal balance of the Loan to exceed $30,000,000. In the event that the
proceeds of the Loan and any other amounts required to be paid by Borrower
hereunder are insufficient to pay all costs to which it is contemplated
hereunder that such proceeds will be applied, or if the use of the Loan proceeds
varies materially (as determined reasonably and in good faith by Lender) from
the uses described herein, then Lender shall have no obligation to fund (or
continue funding) the Loan or any portion thereof. The proceeds of the Loan will
be disbursed by Lender solely for the purposes set forth in Section 2.1 hereof.
(c) Minimum Advance Amounts; Frequency of Advances. Without the
prior written consent of Lender, Advances of the Loan shall (i) be in respect of
Eligible Notes Receivable only; (ii) be in amounts of not less than $500,000
each; and (iii) occur no more frequently than three (3) times per month;
provided, however, that Borrower shall pay Verification Agent a fee of $250.00
for each Advance of the Loan in excess of five (5) in any particular calendar
month in consideration of the performance by Verification Agent of its duties
and responsibilities with respect to such additional Advance, pursuant to the
Verification Agent's Agreement.
(d) Maximum Applicable Underlying Loan Advance Percentage. Under no
circumstance shall Lender be obligated to make any Advance hereunder in respect
of a funding request submitted to Borrower by or on behalf of an Applicable
Underlying Borrower that exceeds the Applicable Borrowing Base Percentage of (i)
the cost of labor, materials, and services actually incorporated into the
Financed Improvements at the Applicable Resort in a manner acceptable to Lender;
plus (ii) the purchase price actually paid for any uninstalled materials to be
utilized in the construction of such Financed Improvements and to be stored upon
the Mortgaged Real Property; plus (iii) any Holdback Balance then due to the
applicable General Contractor and/or any subcontractor, materialman, or other
Person, provided that all conditions for the release of any such Holdback
Balance as set forth in Section 1.50 hereof and the Applicable Underlying Loan
Documents have been fully satisfied, less (A) the applicable Holdback Amount
required to be retained from the Applicable Underlying Borrower's draw request,
pursuant to Section 1.50 hereof and the terms of the Applicable Underlying Loan
Documents; and (B) all prior Advances made by Lender for the payment of the
costs of labor, materials, and services actually incorporated into the
Applicable Resort's Financed Improvements, it being the intent of the parties
hereto that Borrower will advance its own funds in the amount of any portion of
an Applicable Underlying Borrower's funding request not Advanced by Lender
hereunder.
2.4 Interest Rate. The aggregate principal amount of all Advances of the
Loan that are outstanding from time to time shall bear interest at a rate equal
to the Interest Rate. The average monthly outstanding principal balance of the
Loan shall bear interest in arrears as of Lender's wiring of funds through its
<PAGE>
actual receipt of repayment of the Loan (if received by Lender later than 12
noon, E.S.T., then interest accrual shall be through the next Business Day
following such receipt). Immediately upon the occurrence of an Event of Default,
any and all principal and other amounts owed Lender hereunder or pursuant to the
Note or any of the other Loan Documents may, in Lender's sole discretion, bear
interest at the Default Rate.
2.5 Payments. Borrower agrees punctually to pay or cause to be paid to
Lender, via wire transfer, all principal and interest due under the Note or
otherwise in respect of the Loan. Borrower shall make the following payments on
the Loan:
(a) Weekly.
(i) Upon the closing of each Applicable Underlying Loan,
Borrower shall direct the Applicable Underlying Borrower and Applicable
Underlying Guarantor, if any, in writing, to pay Lockbox Agent all interest,
principal, Release Fees, prepayments (both voluntary and mandatory), and other
amounts of any and every description payable to Borrower by or on behalf of such
Applicable Underlying Borrower or Applicable Underlying Guarantor, if any,
pursuant to the applicable Note Receivable or any other Applicable Underlying
Loan Documents (hereinafter collectively referred to as the "Aggregate Weekly
Collections"). The Aggregate Weekly Collections shall be deposited by Lockbox
Agent into the lockbox account established and maintained by Lockbox Agent in
accordance with the provisions of the Lockbox Agreement (the "Lockbox Account").
Immediately following any advance by Borrower of an Applicable Underlying Loan
or any receivables loan from Borrower to the Applicable Underlying Borrower from
which any Release Fees and/or other amounts due Borrower from the Applicable
Underlying Borrower under the Applicable Underlying Loan Documents have been
subtracted, Borrower shall pay all such subtracted amounts, together with any
additional amounts paid to or otherwise received from time to time by Borrower
in connection with an Applicable Underlying Loan, including but not limited to
any amounts received by Borrower upon its realization upon any Applicable
Underlying Loan Collateral, to Lockbox Agent, as and when such amounts are
received by Borrower (and in the form so received, properly endorsed to Lockbox
Agent, if appropriate), to be included within the Aggregate Weekly Collections
deposited into the Lockbox Account. On each Business Day, Lockbox Agent shall
remit, via wire transfer, all amounts then deposited in the Lockbox Account to
Verification Agent, to be held in a collection account (the "Collection
Account") and disbursed by Verification Agent in accordance with the terms,
provisions, and conditions hereof and of the Verification Agent's Agreement.
(ii) On each Monday prior to the Maturity Date, provided that
no Event of Default exists hereunder and Verification Agent has been provided
with each and every document, instrument, certificate, and other item
<PAGE>
required to be furnished to Verification Agent pursuant hereto and the
Verification Agent's Agreement, including but not limited to the written report
referenced in the last paragraph of this Section 2.5(a)(ii), Verification Agent
will:
(A) First, pay Lender, via wire transfer, by 5:00 p.m.
Syracuse, New York time, one hundred percent (100%) of the portion of the
Aggregrate Weekly Collections received by Lockbox Agent with respect to each
Applicable Underlying Loan during the seven (7) days ending at 5:00 p.m.
Syracuse, New York time on the immediately preceding Friday and subsequently
transferred to the Collection Account that is allocated to interest owed
Borrower pursuant to the Applicable Underlying Loan Documents as reflected on
the applicable week's Weekly Allocation Report; provided, however, that in any
particular calendar month, once Lender has received the Minimum Monthly Interest
Payment due Lender with respect to the immediately preceding calendar month, the
balance of all Aggregate Weekly Collections received by Lockbox Agent with
respect to each Applicable Underlying Loan during the preceding seven (7) days
and subsequently transferred to the Collection Account that are allocated to
interest owed Borrower, pursuant to the Applicable Underlying Loan Documents as
reflected on the applicable week's Weekly Allocation Report (the "Excess
Interest"), shall be paid to Borrower; and
(B) Then, pay Lender, via wire transfer, by 5:00 p.m.
Syracuse, New York time, the Applicable Borrowing Base Percentage of the portion
of the Aggregate Weekly Collections received by Lockbox Agent with respect to
each Applicable Underlying Loan during the seven (7) days ending at 5:00 p.m.
Syracuse, New York time on the immediately preceding Friday and subsequently
transferred to the Collection Account that is allocated to principal and other
amounts owed Borrower (other than interest) pursuant to the Applicable
Underlying Loan Documents as reflected on the applicable week's Weekly
Allocation Report, and pay Borrower the remaining Aggregate Weekly Collections
for the seven (7) days in question; provided, however, that if the sum of (1)
the Aggregate Weekly Collections available for disbursement by Verification
Agent on a particular Monday with respect to all Applicable Underlying Loans,
pursuant to this Sub-paragraph 2.5(a)(ii)(B); and (2) the amount of Excess
Interest for the preceding week, is less than $50,000, such sum shall not be
disbursed in the foregoing manner but shall instead be added to and be deemed a
portion of the immediately succeeding week's Aggregate Weekly Collections that
are allocated to principal and other amounts (other than interest) and disbursed
to Lender and Borrower with respect to such succeeding week, notwithstanding the
total amount thereof.
Each disbursement by Verification Agent from the Collection
Account shall be based upon the Weekly Allocation Report described in Section
6.1(g)(i) hereof and a detailed written report prepared by Borrower and
delivered to Verification Agent that shows all relevant calculations and other
methodologies to be used by Verification Agent in properly allocating Aggregate
<PAGE>
Weekly Collections between Lender and Borrower with respect to each Applicable
Underlying Loan. Both such reports shall be sent to Verification Agent by no
later than 10:00 a.m. Syracuse, New York time each Monday prior to the Maturity
Date. Verification Agent shall be responsible for reviewing such calculations
and methodologies and notifying Lender that the same are consistent with the
terms, provisions, and conditions hereof.
(iii) Notwithstanding the foregoing provisions of this Section
2.5(a) to the contrary, upon the occurrence of a Default or Event of Default
hereunder, Verification Agent will immediately pay to Lender one hundred percent
(100%) of the Aggregate Weekly Collections received by Lockbox Agent and
subsequently transferred to Verification Agent and deposited into the Collection
Account with respect to all Applicable Underlying Loans during the preceding
seven (7) days. In the event that such Default is subsequently cured in
accordance with the terms, provisions, and conditions of Section 7 hereof and no
other Default or Event of Default hereunder exists, said Aggregate Weekly
Collections shall thenceforth be allocated between Lender and Borrower in the
manner provided for in Section 2.5(a)(ii) above.
(iv) All amounts received by Lender pursuant to this Section
2.5(a) shall be applied by Lender in the following order of priority (i) first,
to reimburse Lender for all costs, expenses, and other amounts due Lender
hereunder or pursuant to the other Loan Documents other than principal and
interest, including but not limited to Verification Agent's fee as set forth in
Section 2.3(c) hereof for any Advances hereunder in excess of five (5) per
calendar month; (ii) second, to pay Lender all accrued but unpaid interest due
under the Note; and (iii) third, to reduce the outstanding principal balance of
the Loan.
(b) Monthly. Notwithstanding any provision of Section 2.5(a) above
or any other term, provision, or condition hereof or of any other Loan Document
to the contrary, on or before the fifteenth (15th) day of each calendar month,
Borrower shall pay Lender via wire transfer, in arrears, the Minimum Monthly
Interest Payment due with respect to the immediately preceding calendar month,
commencing with the month immediately succeeding the month in which the Closing
Date occurs, to the extent that said Minimum Monthly Interest Payment exceeds
the sum of all amounts received by Lender from Verification Agent with respect
to such immediately preceding calendar month, pursuant to Section 2.5(a) hereof.
(c) Partial Releases. Under no circumstances shall Borrower execute
and deliver any partial releases from the Lien of an Applicable Mortgage unless
and until the Release Fee that corresponds to the Unit or Interval in question,
pursuant to the Applicable Underlying Loan Documents, has been paid to and
received by Lockbox Agent or if a default or event of default has occurred under
such Applicable Underlying Loan Documents. Lender shall not be
<PAGE>
responsible for any of the costs incident to the preparation and recording of
partial releases.
(d) Final Payment. Notwithstanding any term, provision, or condition
hereof to the contrary, the entire outstanding principal balance of the Loan,
together with any and all accrued but unpaid interest thereon and all other
Obligations, shall immediately be paid via wire transfer by Borrower to Lender
and otherwise be satisfied in full on or before the earlier to occur of (i) the
occurrence of an Event of Default hereunder; or (ii) the Maturity Date.
2.6 Prepayments.
(a) Voluntary. Borrower may prepay the Loan, in whole or in part,
without premium or penalty, at any time, in its sole discretion.
(b) Mandatory. If at any time and for any reason, the outstanding
unpaid principal balance of the Note exceeds the aggregate amount of the
Borrowing Base, then, within five (5) days following Borrower's receipt of
telecopied notice from Lender of the occurrence of such excess over Borrowing
Base or, absent such telecopied notice, within fifteen (15) days after the end
of the calendar month in which such excess first occurred, Borrower shall prepay
the outstanding principal balance of the Note in an amount equal to the
difference between the outstanding principal balance of the Note and the
aggregate amount of the Borrowing Base.
No prepayment premium or penalty shall be due Lender in connection with
any voluntary or mandatory prepayment of the Loan.
2.7 Guaranty. Payment and performance by Borrower of one hundred percent
(100%) of all of the Obligations shall be unconditionally guaranteed, jointly
and severally, by Guarantor.
SECTION 3. COLLATERAL
3.1 Grant of Security Interest. To secure the prompt and complete payment
and performance when due of all of the Obligations, for value received, Borrower
hereby unconditionally and irrevocably assigns, pledges, and grants to Lender a
continuing first priority Lien and security interest in and to the Collateral.
3.2 Security Interest in All Pledged Notes Receivable. Notwithstanding
that Lender is obligated, subject to the terms and conditions set forth herein
and in the other Loan Documents, to make Advances only in respect of Eligible
Notes Receivable, Lender shall have a continuing first priority Lien and
security interest in and to all of the Pledged Notes Receivable and may collect
and shall receive all payments made under or in respect of all Pledged Notes
Receivable,
<PAGE>
including Eligible Notes Receivable that may become ineligible, until any of the
same are released by Lender, if at all, pursuant to Section 11.10 below.
3.3 Financing Statements. Borrower agrees, at its own expense, to execute
the UCC-1 and UCC-3 financing statements provided for by the Code, together with
any and all other appropriate instruments and documents, and to take such other
action as may be required to perfect and to continue the perfection of Lender's
first priority Liens and security interests in the Collateral. In addition,
unless prohibited by law, Borrower hereby authorizes Lender to execute and file
any such financing statements on Borrower's behalf.
3.4 Location of Collateral. Except for Encumbered Personal Property that
is replaced in the ordinary course of business, all tangible Collateral (other
than Collateral delivered to Lender or Custodian) shall remain, at all times,
within the Applicable Resort at which it is located on the Closing Date, and
Borrower may not transfer or cause the transfer of any such Collateral from such
premises without the prior written approval of Lender.
3.5 Protection of Collateral; Reimbursement. The portion of the Collateral
consisting of (a) the original Pledged Notes Receivable; (b) the original
Applicable Mortgages; and (c) all other original Loan Documents shall be
delivered, at Borrower's expense, to Lender at its address as set forth in
Section 11.1 hereof and, except as otherwise expressly provided herein to the
contrary, held in Lender's possession, custody, and control until all of the
Obligations have been fully satisfied. Alternatively, Lender, in its sole
discretion, may elect for Custodian to maintain possession, custody, and control
of all such documents and instruments during such period of time. Each original
Pledged Note Receivable delivered to Lender shall be duly endorsed with the
words: "Pay to the order of Credit Suisse First Boston Mortgage Capital LLC,
with recourse to the Maker of the promissory note to which this allonge is
attached but without recourse to Resort Funding, Inc., except to the extent
provided in that certain Loan and Security Agreement dated November 14, 1997, by
and among Credit Suisse First Boston Mortgage Capital LLC, Resort Funding, Inc.,
and Equivest Finance, Inc." The portion of the Collateral delivered to Lender or
Custodian as described above shall be segregated by Lender or Custodian, as the
case may be, and stored in a secure, fire-resistant filing cabinet, access to
which is limited in a commercially reasonable manner. Borrower and Guarantor
agree that such storage is and shall be deemed to constitute reasonable care by
Lender with respect to such Collateral. Except to the extent expressly included
in the Custodian's fee as set forth in the Custodial Agreement, all insurance
and other expenses of protecting the Collateral, including, without limitation,
storing, warehousing, insuring, handling, maintaining, and shipping the
Collateral, and any and all excise, property, intangible, sales, and use taxes
imposed by any state, federal, or local governmental authority on any of the
Collateral or in respect of the sale thereof shall be paid by Borrower. Any and
all other amounts for which Borrower may become liable hereunder and all costs
and expenses
<PAGE>
(including attorneys' and paralegals' fees, legal expenses, and court costs)
that Lender may incur in enforcing or protecting its Lien on, or rights and
interest in, the Collateral or any of its rights or remedies under this
Agreement or any other Loan Document or in respect to any of the transactions to
be had hereunder or thereunder, until paid by Borrower to Lender with interest
at the Default Rate, shall be included among the Obligations and, as such, shall
be secured by all of the Collateral. Provided that Lender or Custodian retains
the original Pledged Notes Receivable and Applicable Mortgages delivered to it
in a secure, fire-resistant filing cabinet as provided above, Lender shall not
be liable or responsible in any way for the safekeeping of any of the Collateral
or for any loss or damage thereto or for any diminution in the value thereof, or
for any act or default of any warehouseman, carrier, forwarding agency, Lockbox
Agent, Verification Agent, Custodian, or any other Person whomsoever, excluding
damages or losses that occur as a result of Lender's gross negligence or willful
misconduct.
3.6 Cross-Collateralization and Default. The Collateral shall secure all
of the Obligations as well as Borrower's obligations pursuant to the Timeshare
Receivables Credit Facility, and all Liens, pledges, assignments, mortgages,
security interests, and collateral granted to or for the benefit of Lender
pursuant thereto or any other related documents or instruments shall also secure
the Obligations. In addition, the Loan and the Timeshare Receivables Credit
Facility shall be cross-defaulted such that any event of default with respect to
the Timeshare Receivables Credit Facility shall constitute an Event of Default
hereunder, and vice versa.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES
The obligation of Lender to enter into this Agreement and to make any
Advances of the Loan shall be subject to the complete satisfaction of each of
the conditions precedent set forth in the Commitment, in addition to all of the
conditions precedent set forth below and elsewhere in the Loan Documents:
4.1 The Loan. On or prior to the Closing Date:
(a) Execution and Delivery. Borrower and Guarantor shall execute and
cause to be notarized, witnessed, and attested, as appropriate, and delivered to
Lender the Loan Documents, together with such additional documents and
certifications as Lender and its counsel may reasonably require in order to
ensure that all conditions precedent to the closing of the Loan and the making
of Advances hereunder have been satisfied in all respects.
(b) Opinion of Borrower's Counsel. Lender shall have received from
duly licensed counsel for Borrower and Guarantor acceptable to Lender
<PAGE>
such legal opinions in form and substance satisfactory to Lender, dated as of
the Closing Date, as may be required by Lender, in its reasonable discretion.
(c) Representations, Warranties, Covenants, and Agreements. The
representations and warranties contained in the Loan Documents and in any
certificates delivered to Lender in connection with the closing shall be true
and correct in all material respects, and all covenants and agreements required
to have been complied with and performed by Borrower shall have been fully
complied with and performed to the satisfaction of Lender.
(d) No Prohibitions. Neither Borrower nor Guarantor shall have taken
any action or permitted any condition to exist that would have been prohibited
by any provision of this Agreement or the Commitment.
(e) Borrower's and Guarantor's Background Documents. Borrower shall
have delivered to Lender, and Lender shall have approved each of the following:
(i) Borrower's and Guarantor's Organizational Documents.
Copies of Borrower's and Guarantor's organizational documents, including but not
limited to their respective articles of incorporation and bylaws, together with
any amendments thereto, certified to be true and complete by Borrower's and
Guarantor's Secretaries, respectively.
(ii) Good Standing Certificates. Current good standing
certificates issued by the Delaware and Florida Secretaries of State for
Borrower and Guarantor, respectively.
(iii) Resolutions. Certified resolutions of Borrower's and
Guarantor's boards of directors authorizing the execution of all Loan Documents
and the performance of all Obligations thereunder.
(f) Financial Statements. Lender shall have received and approved
the Financial Statements required pursuant hereto to be delivered to Lender, or
otherwise required by Lender, for Borrower and Guarantor, all in form and
substance satisfactory to Lender.
(g) Proceedings Satisfactory. All actions taken in connection with
the execution and delivery of the Loan Documents, and all documents and papers
related thereto, shall be completely satisfactory to Lender and its counsel.
Lender and its counsel shall have received copies of all such documents and
papers as Lender or its counsel may reasonably request in connection therewith,
all in form and substance satisfactory to Lender and its counsel, in their sole
discretion.
<PAGE>
(h) Expenses. Borrower shall have paid all fees, expenses, and other
amounts required to be paid prior to or on the Closing Date, pursuant to this
Agreement, including but not limited to the initial installment of the
Structuring Advisory Fee, pursuant to Section 1.87 hereof.
4.2 Applicable Underlying Loans. At least ten (10) Business Days prior to
the date of each Initial Underlying Loan Advance, Borrower shall deliver to
Lender and Verification Agent a sworn written certificate, in form and content
satisfactory to Lender, in its sole discretion, confirming, to the extent
applicable, that:
(a) Applicable Underlying Loan Documents. The Applicable Underlying
Borrower and the Applicable Underlying Guarantor have executed and delivered to
Borrower the Applicable Underlying Loan Documents.
(b) Title Policies. The Applicable Underlying Borrower has delivered
to Borrower a commitment to issue an ALTA extended coverage lender's policy of
title insurance insuring in favor of Borrower, together with its successors and
assigns, including but not limited to Lender, the first priority of the Lien of
the Applicable Mortgage upon the subject Mortgaged Real Property and/or
Encumbered Intervals, without exception for filed or unfiled mechanics' liens or
claims or for matters that an accurate survey would disclose, subject only to
such exceptions and conditions to title as Borrower and Lender shall have
approved in writing and such affirmative coverage as Borrower or Lender deems
reasonably necessary (the "Title Policy"). Such policy shall be in an amount not
less than the original principal amount of the applicable Note Receivable and be
issued by a title insurance company satisfactory to Borrower and Lender in all
respects (the "Title Insurance Company"). Final title insurance policies
delivered at the time of each advance of the Applicable Underlying Loan must
insure that the Applicable Mortgage creates a first priority Lien in and to the
subject Mortgaged Real Property and/or Encumbered Intervals in favor of
Borrower, together with its successors and assigns, with such exceptions and
conditions to title as Borrower and Lender shall have approved in writing.
All such Title Policies shall contain such affirmative coverage as
Lender deems reasonably necessary, including but not limited to an affirmative
statement that the Title Policy insures Borrower, together with its successors
and assigns, including but not limited to Lender, against all mechanics' and
materialmen's liens arising from or out of construction of the Financed
Improvements and, to the extent available and commonly required by lenders in
the Applicable Jurisdiction, shall contain endorsements in form and content
acceptable to Lender: (A) insuring against matters that would be disclosed on an
accurate survey of the Land; (B) insuring that no building restriction or
similar exception to title disclosed on the Title Policy has been violated and
that any violation thereof would not create or result in any reversion,
reverter, or forfeiture of title; (C) a zoning endorsement in the form typically
issued in the Applicable
<PAGE>
Jurisdiction; and (D) insuring over any environmental superlien or similar lien
upon all or any portion of the Applicable Resort. Such Title Policy shall
provide that Borrower shall receive an endorsement to the Title Policy on the
date of each advance of the Applicable Underlying Loan: (i) indicating that
since the date of the immediately preceding advance, there has been no change in
the state of title and no mechanics' or materialmen's lien, claim, or lien or
similar notice has been filed against any of the Applicable Underlying Loan
Collateral; (ii) updating the Title Policy to the date of such advance; and
(iii) increasing the coverage of the Title Policy by an amount equal to the
amount of such advance if the Title Policy does not by its own terms provide for
such an increase. The condition of title to all Applicable Underlying Loan
Collateral must be satisfactory to Lender in all respects, in its sole
discretion, as a condition precedent to Lender's obligation to make any Advances
hereunder in respect of the Applicable Underlying Loan that is secured by
Borrower's Lien in and to such Applicable Underlying Loan Collateral.
(c) Opinions of Applicable Underlying Borrower's Counsel. Borrower
has received from counsel for the Applicable Underlying Borrower and the
Applicable Underlying Guarantor, licensed in the Applicable Jurisdiction and
acceptable to Borrower and Lender, legal opinions in form and substance
satisfactory to Borrower and Lender, dated as of the date of closing of the
Applicable Underlying Loan, covering such items as may be required by Borrower
and Lender, including, without limitation, that the Applicable Underlying Loan
Documents are valid, binding, and enforceable in accordance with their terms and
that they do not violate any applicable usury or other Applicable Laws.
(d) Applicable Underlying Borrower's Background Documents. The
Applicable Underlying Borrower has delivered to Borrower and Borrower has
approved each of the following:
(i) Applicable Underlying Borrower's Organizational Documents.
Copies of the Applicable Underlying Borrower's organizational documents,
including but not limited to its articles of incorporation, bylaws, partnership
agreement, and other relevant documents, as applicable, together with any
amendments thereto, certified to be true and complete by the Applicable
Underlying Borrower's Secretary or other authorized representative.
(ii) Good Standing Certificates. Current good standing
certificates issued by the appropriate Secretaries of State for the Applicable
Underlying Borrower and the Applicable Underlying Guarantor.
(iii) Resolutions. Certified resolutions of the Applicable
Underlying Borrower's and Applicable Underlying Guarantor's boards of directors
or general partners, as applicable, or such other evidence of authority as is
appropriate for the Applicable Underlying Borrower's and Applicable Underlying
Guarantor's form of business organization, authorizing the execution of all
<PAGE>
Applicable Underlying Loan Documents and the performance of all obligations of
the Applicable Underlying Borrower and Applicable Underlying Guarantor
thereunder.
(iv) Survey. A survey, dated within ninety (90) days prior to
the date of closing of the Applicable Underlying Loan, satisfactory to Borrower
and Lender and prepared by a licensed surveyor satisfactory to Borrower, Lender,
and the Title Insurance Company in accordance with Borrower's requirements, of
the Applicable Resort's Land, showing the location and dimensions of all Units,
Common Elements, and other improvements thereto and indicating the routes of
ingress and egress for public access to the Applicable Resort, all utility
lines, walks, drives, recorded or visible easements and rights-of-way on such
Land, and showing that there are no encroachments, improvements, projections, or
easements (recorded or unrecorded) on the property lines. Foundation perimeters
are to be added to the survey by the surveyor as soon as they are in place for
all buildings. The survey shall certify the acreage of the Land and shall
indicate whether the Land is located within any flood hazard area. The survey
must be prepared in accordance with the standards set forth by ALTA/ACSM and
those of any and all surveyors' bureaus or associations of the Applicable
Jurisdiction as well as any and all Applicable Laws and must be certified to
Borrower and the Title Insurance Company. The surveyor's certificate placed on
the survey shall include a statement that said survey locates any and all such
items set forth as exceptions in the Title Policy as Borrower may require, shall
include a legal description of the Mortgaged Real Property, and otherwise
satisfy all of Borrower's and Lender's survey requirements, and shall include
any other information required by Lender, Borrower, or the Title Insurance
Company.
(v) Environmental Report. An environmental report or reports
covering the Applicable Resort, including all Mortgaged Real Property,
confirming (to the extent relevant, in Lender's reasonable discretion):
(A) The absence of Hazardous Materials on, under, or
affecting the Land or any other real property or personal property comprising
the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction;
(B) That the engineering or environmental consulting
firm has obtained, reviewed, and included within its report a CERCLIS printout
from the Environmental Protection Agency (the "EPA"), statements from the EPA
and other applicable state and local authorities, and such other information as
Borrower or Lender may reasonably require, including, without limitation, a
Phase I Environmental Inspection, all of which information shall confirm that
there are no known or suspected Hazardous Materials located at, used or stored
on, or transported to or from the Applicable Resort or in such
<PAGE>
proximity thereto as to create a material risk of contamination of any the
Applicable Underlying Loan Collateral, except for commercially reasonable
amounts thereof commonly found at residential and resort properties in the
Applicable Jurisdiction;
(C) The absence of radon gas at the Applicable Resort,
including all of the Units, or, if radon gas is found to be present in any part
of the Applicable Resort or the Units, that such presence is of a nature or
magnitude so as to be fully in compliance with applicable standards under the
Environmental Laws and all other applicable laws or standards; and
(D) The absence of friable asbestos within the Units,
Common Elements, or elsewhere at the Applicable Resort or, if asbestos is found
to be present in any part of the Applicable Resort, that such presence is of a
nature or magnitude that is able to be removed by a licensed removal contractor
for a guaranteed maximum sum satisfactory to Borrower and Lender and included in
the Applicable Approved Construction Budget.
(vi) Soil Tests. A report as to soil and compaction condition
and analysis made at the Land by a soil testing firm satisfactory to Borrower
and Lender. The number and location of such borings shall be in accordance with
the recommendations of the soil testing firm and must also be satisfactory to
Lender and also shall include a sinkhole analysis of the Applicable Resort. The
report shall include the recommendations of the soil testing firm as to the
preparation of the soil needed in order to adequately support the Financed
Improvements. During the course of construction, the Applicable Underlying
Borrower shall also provide such reports as to concrete tests and such
additional soil tests as are required by Borrower or Lender.
(e) Evidence of Insurance. Borrower has received certified copies of
all insurance policies and endorsements thereto or other evidence satisfactory
to Borrower and Lender, in the sole discretion of each, relating to the
Applicable Resort, including but not limited to the Financed Improvements and
the Encumbered Intervals. In addition, Borrower has received written evidence
that the Applicable Underlying Borrower has obtained and is maintaining all
policies of insurance required by and in accordance with Section 6.1(c) hereof,
including but not limited to copies of the most current paid insurance premium
invoices for such policies.
(f) Applicable Laws. Borrower has received evidence satisfactory to
Borrower and Lender that all existing and contemplated Financed Improvements at
the Applicable Resort are and will be in compliance with all applicable zoning,
building, and other Applicable Laws in connection with the construction,
development, establishment, and operation of the Applicable Resort and the sale,
use, marketing, and occupancy of Units and Intervals thereat.
<PAGE>
(g) Litigation. Borrower has received evidence satisfactory to
Borrower and Lender that there exists no pending or threatened bankruptcy,
foreclosure, or other material litigation or judgments outstanding against or
with respect to the Applicable Resort, all or any portion of the Applicable
Underlying Loan Collateral, the Applicable Underlying Borrower, or the
Applicable Underlying Guarantor (each a "Material Party"). The term "other
material litigation" as used herein shall not include matters in which (i) a
Material Party is a plaintiff and no counterclaim is pending; or (ii) Borrower
and Lender determine, in their sole discretion, that such litigation is
immaterial due to settlement, insurance coverage, frivolity, or amount or nature
of claim. Borrower shall have obtained an independent search, at Borrower's or
the Applicable Underlying Borrower's expense, confirming that no such
bankruptcy, foreclosure action, or other material litigation or judgment exists.
(h) Code/Other Searches. Borrower has obtained such searches of the
applicable public records as it deems necessary under all Applicable Laws to
verify that it has a first and prior perfected Lien and security interest
covering all of the Applicable Underlying Loan Collateral.
(i) Taxes and Assessments. Borrower has received copies of the most
current tax bills related to the Applicable Resort, together with evidence
satisfactory to it that all taxes and assessments owed by or for which the
Applicable Underlying Borrower or an owners' association is responsible for
collection have been paid, which taxes and assessments include, without
limitation, sales taxes, room occupancy taxes, payroll taxes, personal property
taxes, excise taxes, intangible taxes, real property taxes, income taxes, and
any assessments related to the Applicable Resort and/or the Units or Intervals
thereat. Borrower shall also have received information satisfactory to Borrower
and Lender disclosing the tax identification numbers, tax rates, estimated tax
values, assessment ratios, and estimated assessment values or amounts with
respect to the Applicable Resort and the Land and the identities of the taxing
authorities having jurisdiction over the Land and the Applicable Resort as well
as the instrumentalities and entities having the power and jurisdiction to
impose assessments against the Land or the Applicable Resort.
(j) Financial Statements. Borrower has received the financial
statements required by the Applicable Underlying Loan Documents to be delivered
to Borrower, or otherwise required by Borrower, for the Applicable Underlying
Borrower and the Applicable Underlying Guarantor, all in form and substance
satisfactory to Borrower and Lender.
(k) Appraisal. Borrower has furnished Lender with an MAI appraisal
of the Applicable Resort, including but not limited to all real and personal
property contemplated to become Mortgaged Real Property, Encumbered Intervals,
or Encumbered Personal Property hereunder, prepared
<PAGE>
by a nationally recognized appraisal firm and in form and content acceptable to
Borrower and Lender, in the sole discretion of each.
(l) Construction Contract. To the extent applicable, a general
construction contract (the "Construction Contract"), in form and content
acceptable to Borrower and Lender, has been executed by and between the
Applicable Underlying Borrower and a general contractor acceptable to Borrower
and Lender (the "General Contractor"), to construct the Financed Improvements in
accordance with the Plans therefor and all Applicable Laws. The Construction
Contract shall contain, in addition to any other provisions relating to
construction of the Financed Improvements that Borrower or Lender may reasonably
require, the following provisions:
(i) An agreement to supply and/or furnish all labor,
supervision, materials, supplies, and equipment necessary to complete the
construction of the Financed Improvements, on or before the date which is
eighteen (18) months following the date of the Initial Underlying Loan Advance
(the "Completion Date"), for not more than a guaranteed maximum fixed price
acceptable to Borrower and Lender;
(ii) A provision that the General Contractor and each
subcontractor and materialman shall, as a precondition to the filing of a claim
of mechanics' lien or the assertion of any related rights, provide Borrower and
Lender with thirty (30) days' prior written notice thereof;
(iii) A provision for such Holdback Amount as Borrower and
Lender consider appropriate under the circumstances, which Holdback Amount shall
be released in the manner set forth in the Applicable Underlying Loan Documents,
the form and content of which are approved by Lender in writing;
(iv) A provision that prior to final payment under the
Construction Contract, the General Contractor shall deliver to the Applicable
Underlying Borrower, Borrower, and Lender (A) a final and complete release of
Liens signed by the General Contractor and all subcontractors and materialmen
performing work or supplying materials; and (B) a certificate of substantial
completion or its legal equivalent with a punch list executed by the Applicable
Underlying Borrower, the General Contractor, and the Architect;
(v) A provision that the Construction Contract may not be
terminated by the General Contractor until thirty (30) days after delivery of a
written notice of the Applicable Underlying Borrower's default to Borrower and
Lender (or such longer period after said delivery as may be reasonably necessary
to cure a default thereunder) and may not be terminated by the General
Contractor by reason of the bankruptcy or insolvency of the Applicable
Underlying Borrower;
<PAGE>
(vi) A provision that, upon the occurrence of a default or an
event of default under the Construction Contract, the General Contractor will,
at the request of Borrower or Lender, continue to perform thereunder until
construction of the Financed Improvements has been completed; and
(vii) Such other commercially reasonable provisions as
Borrower or Lender shall require.
(m) Applicable Approved Construction Budget. Borrower has received
and approved the Applicable Approved Construction Budget consisting of a
breakdown certified by the Applicable Underlying Borrower and the General
Contractor, in form, scope, and content acceptable to Borrower and Lender,
setting forth all acquisition, construction, and other costs of developing the
Financed Improvements, including, without limitation, financing costs, costs of
acquisition of the Land, costs of construction of the Financed Improvements, and
other hard and soft costs incidental to the construction of the Financed
Improvements and the development of the Applicable Resort and specifying which
items are to be funded from sources other than the proceeds of the Applicable
Underlying Loan. The Applicable Approved Construction Budget shall serve as the
basis upon which advances of the Applicable Underlying Loan are made on account
of each of the categories set forth therein (the costs disclosed on the
Applicable Approved Construction Budget and approved in writing by Lender shall
hereinafter be referred to as the "Approved Costs"). Subject to Section 6.2(c)
hereof, if, in the judgment of Borrower, Lender, or Verification Agent, the
total estimated costs of constructing the Financed Improvements exceed the
maximum principal amount of the Applicable Underlying Loan, then the Applicable
Underlying Loan Documents shall require the Applicable Underlying Borrower to
invest immediately the amount of the difference in accordance with the
requirements of the Applicable Underlying Loan Documents. The Applicable
Underlying Loan Documents shall further require that if any specific amount set
forth in the Applicable Approved Construction Budget is insufficient for its
intended purpose, then the Applicable Underlying Borrower shall immediately cure
such monetary deficiency by paying the amount thereof to Borrower or providing
Borrower with other financial assurances deemed adequate by Borrower, in its
sole discretion, that such monetary deficiency will be satisfied. The Applicable
Approved Construction Budget shall be accompanied by the Applicable Approved
Construction Schedule, in form and content acceptable to Borrower and Lender,
setting forth the dates on which the Applicable Underlying Borrower expects to
request advances of the Applicable Underlying Loan and specifying the work,
materials, and other costs to be paid with the proceeds of each such advance.
The Applicable Underlying Loan Documents shall require that upon any change in
the Applicable Approved Construction Budget or the Applicable Approved
Construction Schedule, the Applicable Underlying Borrower shall immediately
deliver to Borrower a copy of such revised Applicable Approved Construction
Budget or Applicable Approved
<PAGE>
Construction Schedule, both of which must be acceptable to Borrower and Lender,
in the sole discretion of each.
(n) Architect's Contract. Borrower has received and approved a copy
of the contract by and between the Applicable Underlying Borrower and the
Architect, which contract includes the services of an engineer retained by the
Architect in connection with and as part of Architect's work under such
contract, which shall be in form and content acceptable to Borrower and Lender
and which provides that the Architect shall submit to Borrower all certificates,
as-built plans, specifications, and other information as a prerequisite to
Borrower's advances of Applicable Underlying Loan proceeds, including the final
advance thereof. Among other provisions, said Architect's contract shall
prohibit the Applicable Underlying Borrower from agreeing to or permitting any
material amendment, modification, waiver, or other material change to or of any
of the foregoing without the prior written consent of Borrower. Borrower shall
also have received from the Applicable Underlying Borrower a written certificate
from the Architect covering such matters as may be required by Borrower or
Lender and stating that the proposed Financed Improvements, when completed in
accordance with the Plans, will comply with all Applicable Laws, together with
an agreement by the Architect, in form and content acceptable to Borrower and
Lender, that upon the occurrence of an event of default under the Applicable
Underlying Loan Documents, the Architect will, at Borrower's request: (A) assign
to Borrower all of the Architect's right, title, and interest in any engineering
contract in respect of the Financed Improvements; (B) continue performance
pursuant to its agreement with the Applicable Underlying Borrower until the
completion of construction of the Financed Improvements, provided that Borrower
shall compensate the Architect from the date of Borrower's assumption of such
agreement in accordance with said agreement for all such services rendered; and
(C) permit Borrower to use the Plans and any materials obtained by the Architect
from any engineer retained by the Architect at no cost to Borrower. All costs of
the Architect shall be paid by the Applicable Underlying Borrower or Borrower.
(o) Subcontracts. Every contract, in form and content acceptable to
Borrower and Lender, that has been executed by and between the General
Contractor and a construction manager, subcontractor, materialman, or supplier
that is to provide labor and/or materials in connection with the development and
construction of the Financed Improvements in accordance with the Plans with a
value of $5,000 or more (a "Material Subcontractor") contains the agreement of
the Subcontractor to perform its respective contract for Borrower following the
occurrence of an event of default pursuant to the Applicable Underlying Loan
Documents. Furthermore, Borrower has received from the Applicable Underlying
Borrower a list of all Material Subcontractors working on the Financed
Improvements, together with copies of their respective contracts, and showing
the name, address, and telephone number of each Material Subcontractor, the work
or material performed or supplied thereby, and
<PAGE>
the total amount of each relevant contract and subcontract and amounts paid
through the date upon which such list was completed.
(p) Plan and Cost Review. Borrower has completed a written plan and
cost review covering such matters as may be required by Lender and confirming
that the proposed Financed Improvements can feasibly be constructed within the
cost limitations set forth in the Applicable Approved Construction Budget and
that the proposed Financed Improvements, when completed in accordance with the
Plans, will comply with all applicable zoning and other Applicable Laws.
(q) Permits and Approvals. Borrower has received copies of building
permit(s) and other satisfactory evidence that the Land and the Financed
Improvements and the intended uses of the Applicable Resort are in compliance
with all Applicable Laws, including, without limitation: (i) Environmental Laws;
(ii) erosion control ordinances; (iii) doing-business and/or licensing laws;
(iv) laws protecting disabled or handicapped persons; and (v) zoning laws. All
permits and approvals granted to the Applicable Underlying Borrower shall
continue to be legally valid and shall remain in full force and effect for so
long as the Applicable Underlying Loan is outstanding.
(r) Plans. Borrower has received and approved complete and detailed
Plans which shall be satisfactory to Borrower and Lender, in the sole discretion
of each, and Verification Agent, including any changes or modifications thereto
and including Plans for architectural, structural, mechanical, plumbing,
electrical, and site development (including storm drainage, utility lines,
erosion control, and landscaping) work. All Plans must be stamped with all
required approvals from all applicable governmental authorities, certified under
seal by the Architect, and signed by the Applicable Underlying Borrower and the
General Contractor to be true copies of the Plans architecturally and
structurally approved by all authorities and agencies having jurisdiction
thereover. No change shall be made thereafter in the Plans without the prior
written consent of Borrower and Lender, except as otherwise provided in the
Applicable Underlying Loan Documents as approved by Lender.
(s) Certificate of Architect. Borrower has received a Certificate of
Architect from the Architect who prepared the Plans addressed to Borrower and
stating that (i) any necessary soil testing has been performed, and soil
conditions are satisfactory for the structural support of the Financed
Improvements; (ii) that there is adequate ingress and egress to the Applicable
Resort and the Financed Improvements; (iii) that the Plans have been approved by
all applicable governmental authorities, meet all state construction, energy
conservation, and Environmental Laws, and comply with all federal laws and
regulations adopted pursuant to the Fair Housing Act of 1968 (as amended), the
Americans with Disabilities Act of 1990, and all other Applicable Laws; (iv)
that provisions have been made for the handicapped in accordance with all state
and
<PAGE>
local ordinances, rules, and regulations; (v) that the zoning is proper; (vi)
that all utilities necessary to service the Financed Improvements and the
Applicable Resort are available with adequate capacity; and (vii) that all
required governmental permits and approvals have been obtained; and such
additional items as may reasonably be required by Borrower or Lender.
(t) Lien Waivers. Borrower has received a certificate or affidavit
of the Applicable Underlying Borrower certifying that within the past ninety
(90) days, no work has been performed on the Applicable Resort for which payment
has not been made in full and for which a Lien could be filed, together with
such indemnity as the Title Insurance Company may require to issue affirmative
mortgagee's title insurance against mechanics' and materialmen's Liens,
including, without limitation, waivers of Lien from each and every contractor,
subcontractor, laborer, or material supplier performing services or supplying
material to the Applicable Resort within the past ninety (90) days and an
affidavit listing all of said entities and certifying that no work has been
performed and no materials have been supplied for which the costs remain unpaid
prior to the date of closing of the Applicable Underlying Loan or the date of
the applicable advance; provided, however, that no such lien waiver need be
delivered by any subcontractor, laborer, or material supplier performing
services or supplying material with a value of less than $5,000 until such time
as the aggregate value of labor or materials supplied or services performed by
such subcontractors, laborers, or suppliers exceeds $50,000.
(u) Interval Sales. To the extent applicable, Borrower has received
written evidence to the effect that the Applicable Underlying Borrower has
complied in all respects with all Applicable Laws relating to the marketing and
sale of Intervals, including but not limited to any Encumbered Intervals, at the
Applicable Resort, including but not limited to timeshare registration statutes,
rules, and regulations.
(v) Management and Property Contract. Borrower has received a copy
of the management contract for the Applicable Resort (the "Management Contract")
and determined to its satisfaction that the Applicable Resort is being managed
by a professional management company acceptable to Borrower and Lender.
(w) Miscellaneous. Such other matters as Lender shall reasonably
require.
True copies or, to the extent required hereby, originals of all of the
above-referenced documents, instruments, forms, opinions, and other materials
shall be delivered to Verification Agent either prior to or contemporaneously
with Borrower's execution and delivery to Lender of the sworn written
certificate required by this Section 4.2. Verification Agent's written
acknowledgment of receipt and recommendation of approval of each such item is an
absolute
<PAGE>
condition precedent to Lender's obligation to make any Advances hereunder in
respect of the Applicable Underlying Loan(s) to which Borrower's Initial
Underlying Loan Request and any subsequent Draw Requests (as such term is
defined in Section 4.3 below) pertain; provided, however, that in the event that
Verification Agent fails to provide Lender with such written acknowledgment of
receipt and recommendation of approval or, alternatively, notification that
Verification Agent does not recommend Lender's approval of each such item,
within ten (10) Business Days following Verification Agent's actual receipt of
all applicable documents, instruments, forms, opinions, and other materials,
then, for purposes of this Section 4.2, Verification Agent shall be deemed to
have provided Lender with its recommendation of approval of each such item in
connection with the relevant Advance.
4.3 Funding Procedures. Subject to Section 2.3 hereof, from time to time
during the Borrowing Term, Borrower may submit to Lender a written request for
an Advance hereunder (hereinafter sometimes called a "Draw Request") in
substantially the form of Exhibit "K," attached hereto and incorporated herein
by this reference. Provided that no Event of Default hereunder then exists, each
Advance approved by Lender and Verification Agent shall be made within ten (10)
Business Days following the last to occur of (a) Lender's receipt of the
applicable Draw Request and all items required to be submitted to Lender
hereunder, including but not limited to those items referenced in this Section
4.3 (to the extent applicable); and (b) Verification Agent's written
notification to Lender that all items submitted to Verification Agent for its
review pursuant hereto and the Verification Agent's Agreement are acceptable;
provided, however, that in the event that Verification Agent fails to provide
Lender with such written notification or, alternatively, notification that
Verification Agent has not determined each such item to be acceptable, within
ten (10) Business Days following Verification Agent's actual receipt of all
applicable documents, instruments, forms, opinions, and other materials required
to be furnished thereto by Borrower hereunder, then, for purposes of this
Section 4.3, Verification Agent shall be deemed to have provided Lender with
written notification that all items submitted to Verification Agent for its
review, pursuant hereto and the Verification Agent's Agreement, are acceptable.
In particular, the obligation of Lender to make any Advance hereunder
shall be subject to the satisfaction of all of the following conditions
precedent:
(a) Requests for Advances. Each Draw Request shall:
(i) Be in writing;
(ii) Be accompanied by a sworn written certificate containing
all of the certifications required to be included in the certificate described
in Section 4.2 above and dated as of the date of such Draw Request;
<PAGE>
(iii) Specify the principal amount of the Advance requested,
and designate the Applicable Underlying Loan(s) to which the proceeds of such
Advance pertain;
(iv) Certify the amount of the then current Borrowing Base of
the Applicable Underlying Loan(s) in question;
(v) Confirm that all representations and warranties of
Borrower contained in this Agreement are true and correct as of the date of the
Draw Request and, after giving effect to the making of the requested Advance,
will be true and correct as of the date on which the requested Advance is to be
made;
(vi) State that no Default or Event of Default exists as of
the date of the Draw Request and, after giving effect to the making of such
requested Advance, no Default or Event of Default would exist as of the date on
which the requested Advance is to be made;
(vii) Be delivered to the office of Lender as set forth in
Section 11.1 hereof and to Verification Agent at its address as set forth in the
Verification Agent's Agreement at least ten (10) Business Days prior to the date
of the requested Advance;
(viii) Be signed by a duly authorized officer of Borrower;
(ix) As to each Applicable Underlying Loan in respect of which
the requested Advance is sought, contain Borrower's sworn written certificate to
the effect that, to the extent applicable:
(A) It has received the Applicable Underlying Borrower's
advance request on a completed AIA requisition form that describes the total
cost budget in detail by line item categories of the Applicable Approved
Construction Budget, the percentage of work completed, the total dollar amount
required to complete construction of the Financed Improvements, and such other
information as Borrower or Lender may reasonably require;
(B) It has verified the appropriateness of all advance
requests theretofore made by the Applicable Underlying Borrower in connection
with the Applicable Underlying Loan, including but not limited to the items set
forth in Section 4.2 above, together with all other information deemed
reasonably necessary by Borrower or Lender relating to the progress of
construction of the Financed Improvements within the Applicable Resort;
(C) It has verified that the progress of construction is
in accordance with the Plans, the Applicable Approved Construction Budget, and
all Applicable Laws, that the aggregate amount of advances of the
<PAGE>
Applicable Underlying Loan does not exceed the cost of work already completed,
that the balance of Applicable Underlying Loan proceeds remaining to be
disbursed by Borrower are sufficient to complete all Financed Improvements in
accordance with the Plans and all Applicable Laws, and that the Financed
Improvements will be completed on or before the Completion Date;
(D) With respect to Advances that relate to the
construction of any new building or of exterior structural improvements,
promptly upon the completion of construction of the foundations of the Financed
Improvements, it has received a foundation survey that shows the locations of
such foundations, accompanied by a certification of the surveyor as to the
absence of encroachments from or onto the Land and compliance of the Financed
Improvements, as then constructed, with all setback requirements and other
relevant restrictions;
(E) It has obtained an endorsement to the Title Policy
insuring that, or, if no such endorsement is available, then a certificate of
the Architect certifying that, no building location is in violation of any
easement of record, and no building location is in violation of any setback
restriction;
(F) It has received (or Borrower has delivered or caused
to be delivered to the Title Insurance Company, in escrow) a fully executed
release of Lien from the General Contractor and from each Material Subcontractor
to be paid with the proceeds of such Advance, pursuant to which the General
Contractor and each such Material Subcontractor relinquishes its right to file a
mechanics' Lien against the Land or the Financed Improvements in exchange for
payment for work completed to date;
(G) It has received a current endorsement to the Title
Policy that indicates that since the effective date of the Title Policy (or the
effective date of the last such update, if any), there has been no change in the
status of title to the Applicable Resort as set out in the Title Policy, that
the Lien of the Applicable Mortgage remains a first priority mortgage Lien on
the subject Mortgaged Real Property and Encumbered Intervals (if applicable) and
is free and clear of any mechanics' Liens or any other encumbrances not
permitted by Borrower and Lender, and which has the effect of increasing the
coverage of the Title Policy by an amount equal to the advance being made,
unless the Title Policy expressly provides automatically and unconditionally for
such increase in coverage upon each such disbursement;
(H) It has received written documentation that
satisfactorily accounts to Borrower for the expenditure of funds allocated to
the payment of the soft costs set forth in the Applicable Approved Construction
Budget;
<PAGE>
(I) It has no knowledge of any asserted or threatened
defense, offset, counterclaim, discount, or allowance in respect of any Pledged
Note Receivable; and
(J) It has received such additional items as Lender
shall reasonably require.
(b) Review and Approval by Verification Agent. Each and every item
listed in Section 4.3(a) above, together with true copies of all documents,
instruments, forms, certificates, opinions, and other materials received by
Borrower from an Applicable Underlying Borrower in connection with a request for
an advance under an Applicable Underlying Loan has been delivered to
Verification Agent by Borrower, and Verification Agent has reviewed same and
provided Lender with its written acknowledgment of receipt, its recommendation
of approval of each such item, and its opinion concerning the complete
satisfaction of any and all requirements and conditions precedent to Advances
hereunder in respect of the Applicable Underlying Loan.
(c) Other Conditions. In addition to the other conditions set forth
in this Agreement, the making of each Advance under the Loan shall be subject to
the satisfaction of all of the following conditions as of the date of such
Advance:
(i) All of the conditions set forth in the Commitment, this
Agreement, and the other Loan Documents have been fully satisfied by Borrower,
including but not limited to the proper recordation of the Pledges and
Assignments of Notes Receivable and Applicable Mortgages and other Loan
Documents in the Applicable Jurisdictions and the filing of all appropriate
UCC-1 and UCC-3 financing statements in accordance with the provisions of the
Code, this Agreement, and the other Loan Documents (or the deposit of all such
documents and instruments in escrow with the Title Insurance Company, if
appropriate);
(ii) No Default or Event of Default exists immediately prior
to the making of such requested Advance or, after giving effect thereto,
immediately after the making of such requested Advance;
(iii) Each document, instrument, contract, and agreement
required to have been executed and delivered in connection with any prior
Advance is consistent with the terms of this Agreement and remains in full force
and effect;
(iv) The date on which such requested Advance is to be made is
a Business Day;
<PAGE>
(v) Not more than two (2) Advances under the Loan have
previously been made in the same calendar month in which such requested Advance
is to be made, unless Lender, in its sole discretion, agrees to make an
additional such Advance during such calendar month;
(vi) Lender has determined that the requested Advance, when
added to the aggregate outstanding principal balance of all previous Advances,
if any, under the Loan, does not exceed $30,000,000, that each Pledged Note
Receivable as to which such Advance is sought remains an Eligible Note
Receivable hereunder, and that the Maximum Weighted Average has not been
exceeded;
(vii) All representations and warranties contained herein, in
the other Loan Documents, and in any certificates delivered to Lender in
connection with the Loan are true and correct in all material respects; and
(viii) Lender has received evidence satisfactory to Lender, in
its sole but reasonable discretion, that the Applicable Resort, the Applicable
Underlying Loan Collateral, and the Applicable Underlying Borrower are in
compliance with all Applicable Laws.
(d) Payments by Lender. Lender may, at any time and without a
request therefor having been submitted by Borrower, advance Loan proceeds for
the purpose of paying interest on the Loan, real estate taxes, insurance
premiums, fees and expenses of Lender's counsel, or to cure an Event of Default.
After the occurrence of an Event of Default or of an event or the existence of a
condition which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder, Lender may, as to an Applicable
Underlying Loan, make payments directly to the General Contractor, any
subcontractor, or any other party that has supplied labor, material, or services
in connection with or incidental to the construction of any of the Financed
Improvements, or for the payment of other costs set forth in the Applicable
Approved Construction Budget or the cost of any of Borrower's undertakings
pursuant to the Loan Documents. Notwithstanding the foregoing provisions of this
Section 4.3(d) and except as otherwise provided herein to the contrary, Lender
shall furnish Borrower with written notice of Lender's intent to take any of the
foregoing actions and afford Borrower ten (10) days in which to take such
actions itself prior to Lender's doing so.
(e) Miscellaneous Conditions. In connection with any Applicable
Underlying Loan, Lender shall not make any disbursement for construction of any
of the Financed Improvements unless (i) such Financed Improvements have
satisfactory access to dedicated and completed streets unencumbered by Liens;
(ii) the Applicable Mortgage constitutes a first priority Lien on the Mortgaged
Real Property, the Encumbered Intervals (if applicable), and such Financed
Improvements; and (iii) except as otherwise specifically provided herein to the
<PAGE>
contrary, there exists no Lien of any sort, whether prior or inferior, other
than the Lien of the Applicable Mortgage with respect to the Mortgaged Real
Property, Encumbered Intervals, and such Financed Improvements, except for Liens
with respect to which an appropriate bond or other financial assurance that
totally protects Lender's first priority Lien and right, title, and interest in
and to such Mortgaged Real Property, Encumbered Intervals, and Financed
Improvements has been issued, the inchoate Liens for property taxes not yet due
and the exceptions permitted by Lender in the Title Policy. Lender shall also be
under no obligation to make an Advance in respect of the Applicable Underlying
Loan (i) if Lender reasonably determines that construction of the Financed
Improvements cannot be completed in accordance with the Applicable Approved
Construction Schedule; (ii) if Lender is not reasonably satisfied that the
proceeds of the Applicable Underlying Loan remaining undisbursed will be
sufficient to complete all of the Financed Improvements according to the Plans
and to pay for all labor, material, and costs and all other costs and
disbursements required to complete the Financed Improvements, including interest
and other non-construction costs; (iii) if the Applicable Resort has been
materially damaged by fire or other casualty; or (iv) after the Completion Date.
(f) Conditions Precedent to Final Disbursements. The final Advance
of the Loan in connection with an Applicable Underlying Loan shall be disbursed
by Lender only upon Borrower's fulfillment of all of the following conditions
(to the extent applicable):
(i) Evidence of Completion. Receipt by Lender of a certificate
of completion from the Architect or other satisfactory evidence confirming the
completion of the Financed Improvements substantially in accordance with the
Plans and all Applicable Laws and the approval of such completion by the
applicable local governmental authorities. Such certificate or other evidence
shall be duly executed by the General Contractor and the Applicable Underlying
Borrower. In addition, Borrower shall furnish Lender with copies of all
occupancy permits or other permits, the issuance of which by the appropriate
governmental authority is required for the lawful use, occupancy, and operation
of the completed Financed Improvements;
(ii) As-Built Survey. As to the final Advance with respect to
a particular Applicable Underlying Loan, receipt by Lender of three (3) copies
of a satisfactory "as-built" survey prepared by a licensed surveyor satisfactory
to Lender and the Title Insurance Company, in accordance with the Plans and
showing all of the Units and other improvements in place, including, without
limitation, striping of parking areas, a statement as to the number of parking
spaces, and such other matters as Lender shall require. The survey shall be
prepared in accordance with the standards set forth by ALTA/ACSM 1988 Minimum
Survey Requirements, shall be certified to Borrower and the Title Insurance
Company, and shall include a narrative metes and bounds or platted description
of the boundaries of the Land, the area of the Land, and of the
<PAGE>
Financed Improvements and the location and dimensions of all easements and
Financed Improvements. The surveyor must include on the survey a signed
statement certifying the existence or a narrative statement certifying the
existence or nonexistence of any encroachment from or onto the Land and must
include the date of the survey and the surveyor's registration number and seal
and such other matters as the Title Insurance Company may require, in form and
substance satisfactory to Borrower, Lender, and the Title Insurance Company;
(iii) Final Release of Lien; General Contractor's Affidavit.
Receipt by Lender (or by the Title Insurance Company, in escrow) of final and
complete releases of Lien executed by the General Contractor and all Material
Subcontractors performing work or supplying materials and paid for by such final
Advance, in form and content acceptable to Lender, together with any and all
additional affidavits of all such parties, sufficient in the opinion of Lender
and Lender's counsel to remove or insure over any and all mechanics' and
materialmen's Liens (inchoate or otherwise) affecting the title to any of the
Mortgaged Real Property, the Encumbered Intervals, or the Financed Improvements,
except for Liens with respect to which an appropriate bond or other financial
assurance that totally protects Lender's first priority Lien and right, title,
and interest in and to such Mortgaged Real Property, Encumbered Intervals, and
Financed Improvements has been issued.
(iv) Certificates Regarding Non-Unit Improvements.
Certificates from the Architect, General Contractor, and Applicable Underlying
Borrower that all Financed Improvements required to be constructed as identified
on the Plans or as set forth in the Applicable Timeshare Documents have been
completed substantially in accordance with the Plans and all Applicable Laws;
(v) As-Built Plans. Two (2) sets of detailed as-built Plans
must be submitted to Lender as soon as they are completed but in no event later
than one (1) month following the issuance of the certificate(s) of occupancy (or
the legal equivalent) with respect to the Financed Improvements by the
applicable governmental authority, which Plans must be approved and identified
as such in writing by the Applicable Underlying Borrower, the Architect, and the
General Contractor and must include Plans for architectural, structural,
mechanical, plumbing, electrical, and all site development (including storm
drainage, utility lines, and landscaping) work;
(vi) Other Evidence. Such other evidence as Lender may
reasonably require in order to establish that the Financed Improvements and
their intended use comply with all applicable zoning and other Applicable Laws;
(vii) Insurance. Insurance coverage has been expanded to
include all forms of insurance reasonably required by Lender in form
satisfactory to Lender; and
<PAGE>
(viii) Retainage. All conditions precedent to the release of
any Holdback Balance or retainage in connection with the Construction Contract,
pursuant to the Applicable Underlying Loan Documents, have been fully satisfied.
(ix) Review and Recommendation of Approval by Verification
Agent. Each and every item listed in this Section 4.3(f) has been timely
delivered to Verification Agent by Borrower, and Verification Agent has reviewed
same and provided Lender with its written acknowledgement of receipt, its
recommendation of approval of each such item, and its opinion concerning the
complete satisfaction of any and all requirements and conditions precedent to
the final Advance hereunder in respect of the Applicable Underlying Loan.
4.4 Advances Do Not Constitute a Waiver. No Advance hereunder shall
constitute a waiver of any condition to Lender's obligation to make further
Advances hereunder.
SECTION 5 GENERAL REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor, jointly and severally, hereby represent and
warrant to Lender as follows:
5.1 Organization, Standing, Qualification. Borrower (a) is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires licensing and qualification; and (b) has
all requisite power, corporate or otherwise, to conduct its business and to
execute, deliver, and perform its obligations under the Loan Documents.
5.2 Organization, Standing, Qualification. Guarantor is (a) a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires licensing and qualification; and (b) has
all requisite power, corporate or otherwise, to conduct its business and to
execute, deliver, and perform its obligations under the Loan Documents.
<PAGE>
5.3 Authorization, Enforceability, Etc.
(a) The execution, delivery and performance by Borrower and
Guarantor of the Loan Documents has been duly authorized by all necessary
corporate actions by Borrower and Guarantor and does not and will not (i)
violate any provision of Borrower's or Guarantor's articles of incorporation,
bylaws, or any agreement, law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award presently in effect to which
Borrower or Guarantor is a party or is subject; (ii) result in, or require the
creation or imposition of, any Lien upon or with respect to any asset of
Borrower or Guarantor other than Liens in favor of Lender; or (iii) result in a
breach of, or constitute a default by Borrower or Guarantor under, any
indenture, loan, or credit agreement or any other agreement, document,
instrument, or certificate to which Borrower or Guarantor is a party or by which
it or any of its assets are bound or affected, including but not limited to any
loan from or agreement of any type with a third party lender.
(b) No approval, authorization, order, license, permit, franchise,
or consent of, or registration, declaration, qualification, or filing with, any
governmental authority or other Person is required in connection with the
execution, delivery, and performance by Borrower or Guarantor of any of the Loan
Documents.
(c) The Loan Documents constitute legal, valid, and binding
obligations of Borrower and Guarantor, enforceable against Borrower and
Guarantor in accordance with their respective terms. To the best of Borrower's
knowledge after good faith diligent inquiry, the Applicable Underlying Loan
Documents constitute legal, valid, and binding obligations of the relevant
Applicable Underlying Borrowers and Applicable Underlying Guarantors,
enforceable against each of them in accordance with the respective terms of such
Applicable Underlying Loan Documents.
(d) Borrower has good and marketable title to all of the Collateral,
free and clear of any Lien, security interest, charge, or encumbrance except for
the Liens or security interests created by this Agreement or any Loan Document
or otherwise created in favor of Lender or those Permitted Liens and
Encumbrances as set forth on Exhibit "C" hereto. No financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
Lender.
(e) The execution and delivery of the Loan Documents, the delivery
and endorsement to Lender of the Pledged Notes Receivable, the filing and
recordation of UCC-1 and UCC-3 financing statements in each Applicable
Jurisdiction, and the recordation of the Pledges and Assignments of Notes
Receivable and Applicable Mortgages and other Loan Documents create in favor of
Lender valid and perfected continuing first priority Liens and security
interests
<PAGE>
in and to all of the Collateral. The Collateral secures the full payment and
performance of the Obligations.
(f) To the best of Borrower's knowledge after good faith diligent
inquiry, none of the Pledged Notes Receivable is forged or has affixed thereto
any unauthorized signatures or has been entered into by any Person without the
required legal capacity, and during the term of this Agreement, none will be
forged, or will have affixed thereto any unauthorized signatures.
(g) There have been no material modifications or amendments
whatsoever to the Pledged Notes Receivable or the Applicable Mortgages, other
than those expressly approved by Lender in writing, the originals of which have
been delivered to Custodian.
(h) To the best of Borrower's knowledge after good faith diligent
inquiry, the makers of the Pledged Notes Receivable have no defenses, offsets,
claims, or counterclaims, relating to the Pledged Notes Receivable or any of the
other Applicable Underlying Loan Documents.
(i) The Applicable Mortgages constitute and will continue to
constitute valid and enforceable first and exclusive Liens and security
interests on the Mortgaged Real Property and the Encumbered Intervals.
(j) The Pledged Notes Receivable and the Applicable Mortgages are
and shall remain in full force and effect as valid and binding obligations of
the respective Applicable Underlying Borrowers in favor of Lender, as holder.
(k) The grant of the Liens and security interests described herein
by Borrower in favor of Lender has not adversely affected and will not adversely
affect the validity or enforceability of the obligations of the respective
Applicable Underlying Borrowers under any of the Applicable Underlying Loan
Documents.
(l) Lender is not and shall not be required to take, and Borrower
has taken, any and all required steps to protect Lender's Liens and security
interests in the Collateral (other than maintaining or causing Custodian to
maintain possession, custody, and control of the portion of the Collateral
constituting instruments and timely filing continuation statements for UCC
financing statements); and Lender is not and shall not be required to collect or
realize upon the Collateral or any distribution of interest or principal, nor
shall loss of, or damage to, any Collateral release Borrower or Guarantor from
any of the Obligations.
5.4 Financial Statements and Business Condition. The Financial Statements
fairly present the respective financial conditions and results of operations of
Borrower and Guarantor as of the date or dates thereof and for the
<PAGE>
periods covered thereby. There are no material liabilities, direct or indirect,
fixed or contingent, of Borrower or Guarantor as of the dates of such Financial
Statements that are not reflected therein or in the notes thereto that have not
otherwise been disclosed to Lender in writing. Except for any such changes
heretofore expressly disclosed in writing to Lender, there have been no material
adverse changes in the respective financial conditions of Borrower or Guarantor
from the financial conditions shown in their respective Financial Statements,
nor have Borrower or Guarantor incurred any material liabilities, direct or
indirect, fixed or contingent, that are not shown in their respective Financial
Statements. Borrower and Guarantor are able to pay all of their respective debts
as they become due, and Borrower and Guarantor, as the case may be, will
maintain such solvent financial condition, giving effect to the Obligations, as
long as Borrower or Guarantor are obligated to Lender under this Agreement or
any of the other Loan Documents. Neither Borrower's nor Guarantor's Obligations
under this Agreement and the other Loan Documents will render Borrower or
Guarantor unable to pay their respective debts as they become due.
5.5 Taxes. Borrower represents and warrants that to the best of Borrower's
knowledge after good faith diligent inquiry, each Applicable Underlying
Borrower: (a) has paid in full all ad valorem taxes and other taxes and
assessments levied against the Applicable Underlying Loan Collateral, and
Borrower knows of no basis for any additional taxes or assessments against any
Applicable Resort or Applicable Underlying Loan Collateral; and (b) has filed
all tax returns required to have been filed by it and has paid or will pay,
prior to delinquency, all taxes shown to be due and payable on such returns,
including interest and penalties, and all other taxes that are payable by it. To
the best of Borrower's knowledge after good faith diligent inquiry, no tax audit
is pending or threatened with respect to Borrower, Guarantor, any Applicable
Underlying Borrower, or any Applicable Underlying Guarantor.
5.6 Title to Properties; Prior Liens. To the best of Borrower's knowledge
after good faith diligent inquiry, the Applicable Underlying Borrowers have good
and marketable title to all of the Applicable Underlying Loan Collateral,
including but not limited to all Mortgaged Real Property and Encumbered
Intervals, together with all rights, properties, and benefits appurtenant or
related thereto. Other than the Liens granted in favor of Lender, there are no
Liens or encumbrances against all or any portion of the Collateral or the
Applicable Underlying Loan Collateral, except for the Permitted Liens and
Encumbrances.
5.7 Subsidiaries, Affiliates, and Capital Structure. Guarantor is involved
in the business operations of and derives financial benefit from Borrower. For
so long as Borrower is obligated to Lender under any of the Loan Documents,
there shall be no change of ownership of the shares of stock in Borrower. None
of the Affiliates of Borrower or Guarantor are parties to any proxies, voting
trusts, shareholder agreements, or similar arrangements,
<PAGE>
pursuant to which voting authority, rights, or discretion with respect to
Borrower or Guarantor is vested in any other Person.
5.8 Litigation, Proceedings, Etc. There are no actions, suits,
proceedings, orders, or injunctions pending or, to the best of Borrower's
knowledge after good faith diligent inquiry, threatened against or affecting
Borrower, Guarantor, their respective Affiliates, or any Applicable Resort,
Applicable Underlying Borrower, or Applicable Underlying Guarantor, at law or in
equity, or before or by any governmental authority or other tribunal, that (a)
could have a material adverse effect on Borrower, Guarantor, any Affiliate of
Borrower or Guarantor, any Applicable Resort, any Applicable Underlying
Borrower, or any Applicable Underlying Guarantor; or (b) could have a material
adverse effect on all or any portion of the Collateral or any Applicable
Underlying Loan Collateral. Exhibit "L," attached hereto and incorporated herein
by this reference, describes all currently pending litigation against Borrower
or Guarantor.
5.9 Environmental Matters. To the best of Borrower's knowledge after good
faith diligent inquiry: (a) none of the Applicable Resorts contain any Hazardous
Materials, and no Hazardous Materials are used or stored at or transported to or
from any Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction; (b) no Applicable Underlying Borrower has received notice from any
governmental agency or other Person with regard to Hazardous Materials on,
under, or affecting all or any portion of the Applicable Underlying Loan
Collateral; and (c) neither any Applicable Underlying Borrower, any Applicable
Resort, nor any Applicable Underlying Loan Collateral are in violation of any
Environmental Laws.
5.10 Full Disclosure. No information, exhibit, or written report or the
content of any schedule furnished by or on behalf of Borrower or Guarantor to
Lender in connection with the Loan, the Applicable Resorts, the Applicable
Underlying Borrowers, the Applicable Underlying Guarantors, the Applicable
Underlying Collateral, or the Collateral, and no representation or statement
made by Borrower or Guarantor in any Loan Document, contains any material
misstatement of fact or omits the statement of a material fact necessary to make
the statement contained herein or therein not misleading. To the extent that any
such information, exhibit, report, or statement furnished or made to Lender was
obtained by Borrower from an Applicable Underlying Borrower, the representation
and warranty made in this Section 5.10 is so made to the best of Borrower's
knowledge after good faith diligent inquiry. Neither Borrower nor Guarantor
knows of any fact or condition that could adversely affect the construction of
the Financed Improvements or the operation of all Applicable Resorts in
accordance with all Applicable Laws, or impede or preclude Borrower's or
Guarantor's performance of its Obligations pursuant to the Loan Documents.
<PAGE>
5.11 Use of Proceeds/Margin Stock. None of the proceeds of the Loan will
be used to purchase or carry any "margin stock" (as defined under Regulation U
of the Board of Governors of the Federal Reserve System, as in effect from time
to time), and no portion of the proceeds of the Loan will be extended to others
for the purpose of purchasing or carrying margin stock. None of the transactions
contemplated in this Agreement (including, without limitation, the use of the
proceeds from the Loan) will violate or result in the violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 11. The
proceeds of the Loan will be disbursed only for the purposes set forth in
Section 2.1 hereof.
5.12 No Defaults. No Default or Event of Default exists, and there is no
breach or violation in any material respect of any term of any document,
contract, agreement, charter instrument, bylaws, or other instrument to which
Borrower or any Affiliate thereof is a party or by which it may be bound.
5.13 Restrictions of Borrower or Guarantors. Neither Borrower, Guarantor,
nor any Affiliate thereof is a party to any contract or agreement, or subject to
any Lien, charge, or restriction, that materially and adversely affects its
business. Neither Borrower nor Guarantor will be, on or after the Closing Date,
a party to any contract or agreement that restricts its right or ability to
incur indebtedness or prohibits Borrower's or Guarantor's execution and delivery
of, or compliance with the terms of, this Agreement or the other Loan Documents.
Borrower has not agreed or consented to cause or permit in the future (upon the
happening of any contingency or otherwise) any of the Collateral, whether now
owned or hereafter acquired, to be subject to a Lien except in favor of Lender
as provided hereunder.
5.14 Broker's Fees. Lender and Borrower represent to each other that
neither of them has made any commitment or taken any action that could result in
a claim for any broker's, finder's, or other similar fees or commissions with
respect to any of the transactions contemplated by this Agreement. Borrower
agrees to indemnify Lender and save and hold Lender harmless from and against
all claims of any Person for any broker's or finder's fee, commission, or
similar amount, and this indemnity shall include reasonable attorneys' fees and
legal expenses.
5.15 Tax Identification/Social Security Numbers. Borrower's and
Guarantor's respective federal taxpayer identification numbers are as follows:
Borrower: 16-1399129
Guarantor: 59-23462702
<PAGE>
5.16 Legal Compliance. Borrower has, in all material respects, complied
fully with all Applicable Laws in connection with the Applicable Underlying
Loans. To the best of Borrower's knowledge after good faith diligent inquiry,
each Applicable Underlying Borrower has, in all material respects, similarly
complied with all Applicable Laws in connection with Applicable Resort and
Applicable Underlying Loan Collateral. In particular, Borrower is not aware of
any violation by an Applicable Underlying Borrower of: (i) the Interstate Land
Sales Full Disclosure Act; (ii) any applicable state condominium and timeshare
statutes, rules, and regulations, including but not limited to those governing
the administration and operation of owners' associations and those requiring
registration of any of the Encumbered Intervals; (iii) Regulation Z of the
Federal Reserve Board; (iv) the Equal Credit Opportunity Act; (v) Regulation B
of the Federal Reserve Board; (vi) Section 5 of the Federal Trade Commission
Act; (vii) all applicable state and federal securities laws; (viii) all
applicable usury laws; (ix) all applicable trade practices, home and telephone
solicitation, sweepstakes, lottery, and other consumer credit and protection
laws; (x) all applicable real estate sales licensing, disclosure, reporting, and
escrow laws; (xi) the Americans with Disabilities Act; (xii) the Real Estate
Settlement Procedures Act; and (xiii) all amendments to and rules and
regulations promulgated under the foregoing. Furthermore, to the best of
Borrower's knowledge after good faith diligent inquiry, all Applicable Resorts
and the improvements (including the Financed Improvements) thereat have been and
will continue to be constructed and operated in compliance with all applicable
zoning requirements, building codes, subdivision ordinances, licensing
requirements, all covenants, conditions, and restrictions of record, and all
other Applicable Laws. Borrower is not aware of any reasons (other than the
completion of all requisite applications therefor in the ordinary course of
business) why all Applicable Underlying Borrowers cannot obtain all necessary
permits, licenses, certificates, franchises, consents, exemptions, orders, and
approvals to develop and operate the Applicable Resorts and construct the
Financed Improvements thereat.
5.17 Continuation and Investigation. Each request by Borrower for an
Advance of the Loan shall constitute an affirmation that all representations and
warranties contained herein remain true and correct as of the date thereof. All
representations, warranties, covenants, and agreements made herein or in any
certificate or other document delivered to Lender by or on behalf of Borrower,
pursuant to or in connection with this Agreement, shall be deemed to have been
relied upon by Lender, notwithstanding any investigation heretofore or hereafter
conducted by or on behalf of Lender, and shall survive the making of any or all
Advances and payments contemplated hereby.
For purposes of this Section 5, to the extent applicable, Borrower shall
be presumed to have engaged in good faith diligent inquiry if it has acted
strictly in accordance with the Qualified Borrower Underwriting Guidelines, the
Qualified Loan Underwriting Guidelines, and/or the Qualified Resort Underwriting
Guidelines, as appropriate.
<PAGE>
SECTION 6. COVENANTS
6.1 Affirmative Covenants. For so long as any of Borrower's Obligations
remain unsatisfied, Borrower hereby covenants and agrees with Lender as follows:
(a) Payment and Performance of Obligations. Borrower shall repay all
of the Loan and all related amounts when and as the same become due and payable,
and Borrower shall strictly observe and perform all of the Obligations,
including, without limitation, all covenants, agreements, terms, conditions, and
limitations contained in the Loan Documents, and will do all things necessary
that are not prohibited by law to prevent the occurrence of any Default or Event
of Default hereunder; and Borrower will maintain an office or agency in the
State of New York where notices, presentations, and demands in respect of the
Loan Documents may be made upon Borrower.
(b) Maintenance of Existence, Qualification and Assets. Borrower
shall at all times (i) maintain its legal existence; (ii) maintain its
qualification, where required, to transact business and good standing in the
State of New York and in any other jurisdiction in which it conducts business;
and (iii) comply or cause its compliance with all Applicable Laws.
(c) Maintenance of Insurance. Borrower shall ensure that the
Applicable Underlying Loan Documents require that until all of Borrower's
Obligations have been fully satisfied, policies of insurance with premiums
therefor being paid when due, are maintained and, promptly upon receipt thereof
from each Applicable Underlying Borrower, shall deliver to Lender and
Verification Agent originals of insurance policies issued by insurance companies
(together with paid premium invoices in respect thereof), in amounts, in form,
and in substance, and with expiration dates, all acceptable to Lender and
containing waivers of subrogation rights by the insuring company,
non-contributory standard mortgagee benefit clauses or their equivalents, and
mortgagee loss payable endorsements in favor of and satisfactory to Lender and
breach of warranty coverage, providing the following types of insurance on and
with respect to each Applicable Underlying Borrower and each Applicable Resort:
(i) As to all improvements that have already been completed as
of the date hereof, "All Risk Special Form" insurance coverage (including fire,
lightning, hurricane, tornado, wind and water damage, earthquake, vandalism and
malicious mischief coverage) covering all real and personal property that
comprises the Applicable Resort, in an amount not less than the full replacement
value of such improvements and personal property, and said policy of insurance
shall provide for a deductible acceptable to Lender, breach of warranty
coverage, and replacement cost endorsements satisfactory to
<PAGE>
Lender, and shall not permit co-insurance. As to the Financed Improvements,
builder's risk insurance with extended coverage (with standard mortgagee clause
in favor of Lender), in an amount and with a company reasonably satisfactory to
Lender, and containing a provision allowing the insured to complete the work
provided for hereunder and covering the building materials on the Financed
Improvements during construction. Upon completion of all construction
activities, such insurance shall convert to, or shall be replaced with, the
above-described fire and extended coverage insurance covering the improvements,
all other property of any nature used for the construction of the Financed
Improvements and any personal property located in or on the Applicable Resort,
in an amount not less than the full replacement value of such Financed
Improvements and personal property, and said policy of insurance shall provide
for a deductible acceptable to Lender, breach of warranty coverage, and
replacement cost endorsements satisfactory to Lender, shall not permit
co-insurance. All insurance shall specifically cover architect and engineering
fees necessary to repair or replace any insured portion of the Applicable Resort
and shall cover debris removal;
(ii) Public liability and property damage insurance covering
the Applicable Resort in amounts and on terms satisfactory to Lender;
(iii) Such other insurance on the Applicable Resort or any
replacements or substitutions therefor, including, without limitation, rent
loss, business interruption, flood insurance (if the Applicable Resort is or
becomes located in an area that is considered a flood risk by the U.S. Emergency
Management Agency or pursuant to the National Flood Insurance program), in such
amounts and upon such terms as may from time to time reasonably be required by
Lender; and
(iv) Borrower shall ensure that the Applicable Underlying Loan
Documents require the General Contractor to obtain and keep in full force and
effect insurance policies covering workmen's compensation, contingent liability,
and public liability, naming Lender as an additional insured thereunder and
protecting Borrower, Lender, the Applicable Underlying Borrower, and the General
Contractor against any liability for loss or damage to persons (including death)
or property in any way occurring during the process of the construction of the
Financed Improvements or in any way arising therefrom. The workmen's
compensation insurance shall cover the General Contractor's full statutory
liability as employer without limit, and the contingent liability and public
liability insurance shall be for amounts and with a company satisfactory to
Lender.
Lender shall expressly be named an insured and loss payee in each
insurance policy described in this Section 6.1(c). To the extent any
"institutional mortgagee," "institutional lender" or "mortgagee" (as defined or
used in an Applicable Declaration) other than Lender has any rights to approve
the form of insurance policies with respect to the Applicable Resort, the
amounts of
<PAGE>
coverage thereunder, the insurers under such policies, or the designation of an
attorney-in-fact for purposes of dealing with damage to any part of the
Applicable Resort or insurance claims or matters related thereto or any
successor to such attorney-in-fact or any changes with respect to any of the
foregoing, Borrower shall take all steps as may be necessary to ensure that
Lender shall at all times have a co-equal right with such other "institutional
mortgagee," "institutional lender," or other "mortgagee" (including, without
limitation, Borrower or any third-party lender), to approve all such matters and
any proposed changes in respect thereof; and Borrower shall not cause and shall
use its best efforts to prohibit any changes with respect to any insurance
policies, insurers, coverage, attorney-in-fact or insurance trustee, if any,
without Lender's prior written approval.
In the event of any insured loss or claim in respect of all or any
portion of an Applicable Resort, Borrower shall use its good faith commercially
reasonable efforts (within the scope of its role as lender) to cause all
proceeds of such insurance policies to be applied in a manner consistent with
the Applicable Timeshare Documents and all Applicable Laws.
All insurance policies required pursuant to this Agreement (or the
Applicable Timeshare Documents) shall provide that the coverage afforded thereby
shall not expire or be amended, canceled, modified, or terminated without at
least thirty (30) days' prior written notice to Lender and contain a provision
affirming Lender's rights and benefits thereunder, despite any violation of the
applicable policy terms by the Applicable Underlying Borrower or any other
Person. At least thirty (30) days prior to the expiration date of each policy
maintained pursuant to this Section 6.1(c), a certified copy of a renewal or
replacement thereof satisfactory to Lender shall be delivered to Lender, along
with evidence satisfactory to Lender that the premium therefor has been paid in
full. The delivery of any insurance policies hereunder shall constitute an
assignment of all unearned premiums as further security for the Obligations. In
the event that all required premium payments for all such insurance policies are
not paid at least thirty (30) days prior to the expiration date of each policy
maintained pursuant to this Section 6.1(c), Borrower shall immediately upon
receiving notice thereof notify Lender in writing of such failure to timely pay
the required insurance premiums. Borrower shall make a good faith inquiry on a
regular basis to each Applicable Underlying Borrower to determine whether the
required insurance premiums covering the Applicable Underlying Loan Collateral
have been paid. If Borrower determines upon such inquiry or otherwise that the
required insurance premiums have not been paid, Borrower shall immediately
notify Lender of such failure to timely pay the required insurance premium, and
Borrower shall have thirty (30) days from receipt of a written request from
Lender to cause the required insurance premiums to be paid. If the required
insurance premiums are not paid within such thirty (30) day period, Lender may,
in its sole discretion, without any obligation to do so, choose to pay such
required insurance premiums, in which case Borrower shall pay Lender interest at
the Default Rate for any amounts so advanced. Lender may also, in its sole
<PAGE>
discretion, in the event the required insurance premiums are not paid when due,
establish an insurance escrow account from which Lender may make insurance
payments when insurance premiums shall become due. If the required insurance
premiums are not paid as required and Lender elects not to pay such insurance
premiums or establish an escrow account for payment thereof, such failure shall
constitute an Event of Default hereunder.
In the event of any fire or other casualty to or with respect to all
or any portion of the Applicable Resort, Borrower covenants that it shall use
its good faith commercially reasonable efforts (within the scope of its role as
lender) to cause the prompt restoration, repair, or replacement of the damaged
portion(s) or the Applicable Resort and the repair or replacement of any other
personal property to the same condition as immediately prior to such fire or
other casualty and, with respect to the real and personal property comprising
the Applicable Resort, in accordance with the terms of the Applicable Timeshare
Documents and all Applicable Laws. The insufficiency of any net insurance
proceeds shall in no way relieve Borrower or the Applicable Underlying Borrower
from their respective obligations as set forth herein. In Lender's sole
discretion, any and all insurance proceeds payable to or received by Lender
pursuant to the Applicable Declaration or the applicable insurance policies may
be applied to the payment of the Obligations, whether or not due and in whatever
order Lender elects, consistent with the terms of the applicable insurance
policy and the Applicable Declaration. Borrower shall in good faith cooperate
with Lender in obtaining for Lender the benefits of any insurance or other
proceeds lawfully or equitably payable to any Applicable Underlying Borrower,
Borrower, or Lender in connection with the transactions contemplated hereby and
in paying any Obligation (including the payment by Borrower of the expense of an
independent appraisal on behalf of Lender in case of a fire or other casualty
affecting the Applicable Resort).
Borrower shall not waive any material insurance provision in any
Applicable Underlying Loan Document without Lender's prior written consent.
(d) Maintenance of Security. Borrower shall execute and deliver (or
cause to be executed and delivered) to Lender all security agreements, financing
statements, assignments, and such other agreements, documents, instruments, and
certificates, and all supplements and amendments thereto, and take all such
other actions, as Lender deems necessary or appropriate in order to maintain as
valid, enforceable, and perfected first priority Liens and security interests,
all Liens and security interests in the Collateral and Applicable Underlying
Loan Collateral granted to Lender to secure the Obligations. Borrower shall not
grant extensions of time for the payment of, or compromise for less than the
full face value or release in whole or in part, any Applicable Underlying
Borrower, Applicable Underlying Guarantor, or other Person liable for the
payment of, or allow any credit whatsoever except for the amount of cash to
<PAGE>
be paid upon, any Collateral or any instrument, chattel paper, or document
representing the Collateral.
(e) Payment of Taxes and Claims. Borrower agrees to use its best
efforts to cause to be paid, when due, all taxes and assessments of any kind
imposed on or with respect to the Loan or any of the Loan Documents, or the
Collateral, including but not limited to the Mortgaged Real Property and the
Encumbered Intervals. Borrower shall make good faith inquiry on a regular basis
to determine whether all such taxes and assessments have been paid. Borrower
shall immediately notify Lender in writing of any failure to timely pay all
taxes and assessments due. In the event that Lender determines (through notice
from Borrower or otherwise) that any such taxes or assessments have not been
paid when due, Borrower shall have thirty (30) days from receipt of a written
request for payment from Lender to cause the required taxes to be paid. If such
required taxes (and any applicable late charges, etc.) are not paid within such
thirty (30) day period, Lender may, in its sole discretion, without any
obligation to do so, choose to pay such taxes on behalf of Borrower or the
Applicable Underlying Borrower, in which case Borrower shall pay Lender interest
at the Default Rate on any amounts so advanced. In the event Lender elects not
to pay the required taxes and the required taxes are not paid as set forth
above, such failure shall constitute an Event of Default hereunder. Borrower
shall pay, where applicable, or shall use its best efforts to cause the
Applicable Underlying Borrower or Applicable Underlying Guarantor to pay all
other charges and assessments levied against such Applicable Underlying
Borrower, the Applicable Underlying Loan Collateral, or the Applicable Resort
before any claim (including, without limitation, claims for labor, services,
materials, or supplies) arises for amounts that have become due and payable.
(f) Inspections. Borrower shall, at any time and from time to time,
upon reasonable notice and at the expense of Borrower, including but not limited
to the travel expenses of Lender's agents, ensure that the Applicable Underlying
Loan documents permit, and use its good faith commercially reasonable efforts to
arrange for, Lender or its agents or representatives to inspect any Applicable
Resort, any Applicable Underlying Loan Collateral, or any of Borrower's or
Guarantor's assets, including but not limited to all documents, bank statements,
and other records within Borrower's possession, custody, or control, and to
examine and make copies and abstracts thereof; and to discuss its affairs,
finances and accounts with any of its officers, employees, Affiliates,
contractors or independent certified public accountants (and by this provision,
Borrower authorizes said accountants to discuss with Lender, its agents or
representatives, the affairs, finances, and accounts of Borrower).
Notwithstanding the foregoing provisions of this Section 6.1(f) to the contrary,
Lender will make no more than two (2) such inspections per year in connection
with any particular Applicable Underlying Loan unless an Event of Default
hereunder has occurred. Lender agrees to use reasonable efforts not to interfere
unreasonably with the Applicable Underlying Borrower's business operations in
connection with any such inspections. Without limiting the
<PAGE>
foregoing, Lender shall have the right to make such credit investigations as
Lender may deem appropriate, in its sole discretion, in connection with its
review of any Applicable Underlying Loan Documents. Borrower shall make
available to Lender all such credit and other information in Borrower's
possession or under its control or to which it may have access with respect to
Applicable Underlying Borrowers and Applicable Underlying Guarantors as Lender
may request.
(g) Reporting Requirements. For so long as any of the Obligations
remain unsatisfied, Borrower shall furnish (or cause to be furnished, as the
case may be) to Lender and, in the case of Weekly Allocation Reports, to
Verification Agent, in each case certified in writing by Borrower and Guarantor
as true and correct, the following:
(i) Weekly Allocation Reports. By no later than 10:00 a.m.
Syracuse, New York time each Monday, a report detailing all amounts of every
possible description received by or on behalf of Borrower with respect to each
Applicable Underlying Loan as of 5:00 p.m. Syracuse, New York time on the
immediately preceding Friday during the seven (7) calendar days ending on such
Friday, together with how such amounts were allocated between principal,
interest, and other categories.
(ii) Monthly Financial Reports. As soon as available and in
any event within fifteen (15) days after the end of each calendar month: (i) a
report detailing all amounts of every possible description received by or on
behalf of Borrower with respect to each Applicable Underlying Loan during the
preceding calendar month and how such amounts were allocated between principal,
interest, and other categories; (ii) a delinquency report on all Pledged Notes
Receivable; (iii) a Borrowing Base report substantially in the form of Exhibit
"M," attached hereto and incorporated herein by this reference; and (iv) monthly
reports from Lockbox Agent as required pursuant to the Lockbox Agreement;
(iii) Quarterly Financial Reports. As soon as available and in
any event within forty-five (45) days following the end of each calendar
quarter, unaudited statements of income and expense of Borrower and Guarantor
for the quarterly period in question and balance sheets of Borrower and
Guarantor as of the last day of such calendar quarter, all in such detail and
scope as may be reasonably required by Lender, prepared in accordance with GAAP
and on a basis consistent with prior accounting periods and certified as true
and correct by Borrower's and Guarantor's respective chief financial officers,
as appropriate;
(iv) Annual Audited Financial Reports. As soon as available
and in any event within one hundred twenty (120) days after the end of each of
calendar year or other fiscal year as may be applicable with respect to Borrower
and Guarantor (a "Fiscal Year"), statements of income and expense of
<PAGE>
Borrower and Guarantor for the annual period ended as of the end of such Fiscal
Year, and balance sheets of Borrower and Guarantor as of the end of such Fiscal
Year, all in such detail and scope as may be reasonably required by Lender and
prepared and audited by an independent certified public accounting firm
acceptable to Lender in accordance with GAAP and on a basis consistent with
prior accounting periods. Each annual financial statement of Borrower and
Guarantor shall be certified by Borrower and Guarantor to be true, correct, and
complete, and shall otherwise be in form acceptable to Lender;
(v) Officer's Certificate. Each set of annual Financial
Statements or reports delivered to the Lender pursuant to Sections 6.1(g)(i),
(ii), (iii) and (iv) hereof shall be accompanied by a certificate of the
President or the Treasurer of Borrower or Guarantor, as appropriate, setting
forth that the signers have reviewed the relevant terms of this Agreement (and
all other agreements and exhibits between the relevant parties), have made, or
caused to be made, under their supervision, a review of the transactions and
conditions of Borrower and Guarantor from the beginning of the period covered by
the Financial Statements or reports being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event that constitutes a Default or Event of Default
or, if any such condition or event existed or exists or will exist, specifying
the nature and period of existence thereof and what action Borrower or Guarantor
has taken or proposes to take with respect thereto;
(vi) Sales Reports. In connection with any Applicable
Underlying Loan that is secured in part by an Inventory Mortgage, within ten
(10) days after the end of each month and within ninety (90) days after the end
of each Fiscal Year, Borrower shall deliver to Lender, monthly and annually, as
appropriate, a monthly or annual sales report from the Applicable Underlying
Borrower detailing the sales of all Encumbered Intervals for the period covered
thereby, together with all Encumbered Interval sales made by the Applicable
Underlying Borrower that have been canceled during such period. Such reports
shall also indicate the number of Encumbered Intervals that remain subject to
the Inventory Mortgage and the number of Intervals for which partial releases
from the Inventory Mortgage have been recorded during such period and during the
term of the Loan. Such reports shall be certified by the Applicable Underlying
Borrower to be true, correct, and complete and otherwise in a form approved by
Lender;
(vii) Audit Reports. Promptly upon receipt thereof, one (1)
copy of each other report submitted to Borrower or Guarantor by independent
public accountants or other Persons in connection with any annual, interim, or
special audit made by them of the books of Borrower or Guarantor;
(viii) Notice of Default or Event of Default. Promptly upon
becoming aware of the existence of any condition or event that constitutes a
<PAGE>
Default or an Event of Default hereunder or any of the other Loan Documents, or
a default or event of default pursuant to any of the Applicable Underlying Loan
Documents, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking or proposes to take with respect
thereto;
(ix) Notice of Claimed Default. Promptly upon becoming aware
that the holder of any material obligation or of any evidence of material
indebtedness of Borrower, Guarantor, or any Applicable Underlying Borrower or
Applicable Underlying Guarantor has given notice or taken any other action with
respect to a claimed default or event of default with respect thereto, a written
notice specifying the notice given or action taken by such holder and the nature
of the claimed default or event of default and what action Borrower or Guarantor
is taking or proposes to take with respect thereto;
(x) Material Adverse Developments. Promptly upon becoming
aware of any pending or threatened claim, action, proceeding, litigation,
development, or any other information, whether of the type referenced in Section
5.8 hereof or otherwise, that could materially and adversely affect Borrower,
Guarantor, any Applicable Underlying Borrower, any Applicable Underlying
Guarantor, any Applicable Resort, any Applicable Underlying Loan Collateral, or
all or any portion of the Collateral, including but not limited to the ability
of Borrower to perform its Obligations hereunder, Borrower shall provide Lender
with telephonic notice thereof, immediately followed by telecopied and mailed
written confirmation, specifying the nature of such development or information
and the anticipated effect thereof; and
(xi) Other Information. Borrower shall promptly deliver to
Lender any other available information related to the Loan, the Collateral, the
Applicable Underlying Loan Collateral, Borrower, Guarantor, the Applicable
Resorts, the Applicable Underlying Borrowers, or the Applicable Underlying
Guarantors as Lender may in good faith request.
(h) Records. Borrower shall keep detailed accurate books and records
of account in accordance with GAAP reflecting all financial transactions of
Borrower with respect to the Applicable Underlying Loans.
(i) Guarantor. Absent the prior written consent of Lender, which may
be granted or withheld in Lender's sole and absolute discretion, Guarantor shall
remain the owner and holder of one hundred percent (100%) of the authorized,
issued, and outstanding shares of stock of Borrower. Borrower shall not enter
into any proxies, voting trusts, shareholder agreements, or similar arrangements
for the purpose of vesting voting rights, authority, or discretion in any other
Person.
<PAGE>
(j) Notices. Borrower shall notify Lender within five (5) Business
Days of the occurrence of any event (i) as a result of which any representation
or warranty of Borrower contained in any Loan Document would be incorrect or
materially misleading if made at that time; (ii) as a result of which Borrower
is not in full compliance with all of its covenants and agreements contained in
this Agreement or any other Loan Document; or (iii) which constitutes or, with
the passage of time, notice, or a determination by Lender would constitute, a
Default or an Event of Default.
(k) Other Documents. Borrower shall maintain to the satisfaction of
Lender, and make available to Lender, accurate and complete files relating to
the Pledged Notes Receivable and all of the other Collateral, and such files
shall contain true copies of each Pledged Note Receivable, as amended from time
to time, copies of all relevant credit memoranda relating to such Pledged Notes
Receivable, and all collection information and correspondence relating thereto.
(l) Further Assurances. Borrower shall execute and deliver, or cause
to be executed and delivered, such other and further agreements, documents,
instruments, certificates, and assurances as, in the judgment of Lender
exercised in good faith, may be necessary or appropriate in order more
effectively to evidence or secure, and to ensure the performance of, the
Obligations. In addition, Borrower shall deliver to Lender from time to time,
upon request by Lender, such documents, instruments, and other materials or
items as Lender may reasonably require to evidence Borrower's compliance with
the covenants set forth in this Section 6.1.
(m) Expenses and Closing Fees. Whether or not the transactions
contemplated hereunder are consummated, Borrower shall pay all reasonable
expenses of Lender relating to negotiating, preparing, documenting, closing, and
enforcing this Agreement and the other Loan Documents, including but not limited
to:
(i) The cost of preparing, reproducing, and binding this
Agreement, the other Loan Documents, and all exhibits and schedules thereto;
(ii) The fees and disbursements of Lender's and Borrower's
counsel;
(iii) Lender's out-of-pocket expenses;
(iv) All fees and expenses (including fees and expenses of
Lender's counsel) relating to any amendments, waivers, consents, or subsequent
closings or other transactions pursuant to the provisions hereof;
<PAGE>
(v) All costs, outlays, legal fees, and expenses of every kind
and character had or incurred in: (A) the interpretation or enforcement of any
of the provisions of, or the creation, preservation, or exercise of rights and
remedies under, any of the Loan Documents, including the costs of appeal; (B)
the preparation for, negotiations regarding, consultations concerning, or the
defense or prosecution of legal proceedings involving any claim or claims made
or threatened against Lender arising out of this transaction or the preservation
or protection of the Collateral securing the Loan or Advances made hereunder,
expressly including, without limitation, the defense by Lender of any legal
proceedings instituted or threatened by any Applicable Underlying Borrower,
Applicable Underlying Guarantor, or other Person to seek to recover or set aside
any payment or set off theretofore received or applied by the Lender with
respect to the Obligations, and any and all appeals thereof; and (C) the
advancement of any expenses provided for under any of the Loan Documents;
(vi) All fees and expenses of Servicing Agent and Custodian
(subject to Section 2.3(c) hereof with respect to Verification Agent);
(vii) All costs and expenses incurred by Lender under the
Note, and all late charges payable under the Note; and
(viii) To the extent the same are not paid by an Applicable
Underlying Borrower, all real and personal property taxes and assessments,
documentary stamp and intangible taxes, sales taxes, recording fees, title
insurance premiums and other title charges, document copying, transmittal and
binding costs, appraisal fees, lien and judgment search costs, fees of
architects, engineers, environmental consultants, surveyors and any special
consultants, construction inspection fees, brokers fees, escrow fees, wire
transfer fees, and all travel and out-of-pocket expenses of Lender to conduct
inspections or audits. Without limiting any of the foregoing, Borrower shall pay
the costs of Code and other searches, Code and other Loan Document recording and
filing fees, and applicable taxes and premiums on each mortgagee policy of title
insurance delivered to Lender pursuant to this Agreement, to the extent the same
are not paid by an Applicable Underlying Borrower.
(n) Indemnification of Lender. In addition to (and not in lieu of)
any other provisions hereof or of any other Loan Document providing for
indemnification in favor of Lender, Borrower hereby defends, indemnifies, and
holds harmless Lender, its subsidiaries, other Affiliates, officers, directors,
agents, employees, representatives, consultants, contractors, servants, and
attorneys, as well as the respective heirs, personal representatives,
successors, and assigns of any or all of them (hereinafter collectively referred
to as the "Indemnified Lender Parties"), from and against, and agrees promptly
to pay on demand or reimburse each of them with respect to, any and all
liabilities, claims, demands, losses, damages, costs, and expenses (including,
without limitation, reasonable attorneys' and paralegals' fees and costs),
actions or causes of
<PAGE>
action of any and every kind or nature whatsoever asserted against or incurred
by any of them by reason of or arising out of or in any way, directly or
indirectly, related or attributable to: (i) this Agreement, the other Loan
Documents, the Commitment, the Collateral, the Applicable Underlying Loan
Documents, or the Applicable Underlying Loan Collateral; (ii) the transactions
contemplated under any of the Loan Documents or the Applicable Underlying Loan
Documents, including, without limitation, those in any way relating to or
arising out of the violation of any Applicable Laws; (iii) any breach of any
covenant or agreement or the incorrectness or inaccuracy of any representation
or warranty of Borrower contained in this Agreement or any of the other Loan
Documents (including, without limitation, any certification of Borrower
delivered to Lender; (iv) any and all taxes, including real estate, personal
property, sales, mortgage, excise, intangible, or transfer taxes, and any and
all fees or charges that may at any time arise or become due prior to the
payment, performance, and discharge in full of the Obligations; (v) the breach
of any representation or warranty as set forth herein regarding any
Environmental Laws; (vi) the failure of Borrower or an Applicable Underlying
Borrower to perform any obligation or covenant herein required to be performed
pursuant to any Environmental Laws; (vii) the use, generation, storage, release,
threatened release, discharge, disposal, or presence on, under, or about any
Applicable Resort of any Hazardous Materials (except to the extent that
liability of the Indemnified Lender Party with respect to such matter would not
exist but for the acts or omissions of such Indemnified Lender Party as
determined in a final, non-appealable adjudication by a court of competent
jurisdiction) ; (viii) the removal or remediation of any Hazardous Materials
from an Applicable Resort required to be performed pursuant to any Environmental
Laws or as a result of recommendations of any environmental consultant or as
required by Lender; (ix) claims asserted by any Person (including, without
limitation, any governmental or quasi-governmental agency, commission,
department, instrumentality or body, court, arbitrator, or administrative board
in connection with or any in any way arising out of the presence, use, storage,
disposal, generation, transportation, release, or treatment of any Hazardous
Materials on, in, under, or affecting any Applicable Resort; (x) the violation
or claimed violation of any Environmental Laws in regard to an Applicable
Resort; (xi) the preparation of an environmental audit or report on an
Applicable Resort not to exceed one (1) per calendar year and premised upon the
Lender's reasonable belief of the existence of a violation of Environmental
Laws, whether conducted by Lender, Borrower, an Applicable Underlying Borrower,
or another Person; (xii) the exercise by Borrower of any rights or remedies
under the Applicable Underlying Loan Documents or any Applicable Laws; or (xiii)
the exercise by Lender of any rights or remedies under this Agreement or any of
the other Loan Documents. Such indemnification shall not give Borrower or
Guarantor any right to participate in the selection of counsel for Lender or the
conduct or settlement of any dispute or proceeding for which indemnification may
be claimed. The provisions of this Section shall survive the full payment,
performance, and discharge of the Obligations and the termination of this
Agreement, and shall continue thereafter in full force and effect.
<PAGE>
(o) Loan Servicing. The Servicing Agreement shall be in form and
content satisfactory to Lender, in its sole discretion. Borrower may not
terminate the Servicing Agreement without's Lender's prior written approval. The
Servicing Agreement shall be cancelable by Lender immediately following the
occurrence of an Event of Default. If the Servicing Agent is Borrower or an
Affiliate of Borrower, no servicing fees shall be paid during or with respect to
any period of time in which a Default or Event of Default hereunder exists.
(p) Use of Borrower's Name. Borrower shall at all times during the
term of the Loan permit Lender to use the name of Borrower, any of its
Affiliates, and Guarantor in any press release, advertisement, or other
promotional material disseminated regarding the Loan.
6.2 Construction Covenants. Borrower and Guarantor hereby covenant and
agree with Lender as follows:
(a) Construction Contract and Subcontracts. With respect to each
Construction Contract, Borrower shall not: (i) take any action that could result
in a default under the terms of the Construction Contract; (ii) waive any of the
General Contractor's obligations thereunder; (iii) take any action that could
relieve the General Contractor from its obligations to construct the Financed
Improvements according to the Plans; or (iv) consent to any amendment, other
than change orders as may be permitted hereunder and under the Construction
Contract, without Lender's prior written approval. With respect to any
applicable subcontracts, Borrower agrees not to: (1) take any action that could
result in any material default under the terms of the Subcontracts; (2) waive
any subcontractor's material obligations thereunder; (3) take any action that
could relieve any subcontractor of its obligations to construct the Financed
Improvements according to the Plans; or (4) consent to any material amendments,
other than change orders permitted by this Agreement or as Lender may approve in
writing, to any of the subcontracts without Lender's prior written consent.
(b) Application of Applicable Underlying Loan Proceeds. Borrower
shall use its best efforts to ensure that the proceeds of each Applicable
Underlying Loan are used solely for the purposes set forth in the respective
Applicable Underlying Loan Documents and for no other purposes.
(c) Additional Equity. Lender reserves the right to require, at any
time and from time to time, at Borrower's or an Applicable Underlying Borrower's
expense, a construction cost analysis by an expert in the construction cost
field designated by Borrower and approved by Lender (unless an Event of Default
exists hereunder, in which case Lender shall designate such expert and cause
such construction cost analysis to be performed, at Borrower's expense). Any
such construction cost analysis shall be delivered to Lender and Verification
<PAGE>
Agent promptly upon its completion. If Lender or Borrower reasonably estimates,
at any time and from time to time, that the amount necessary to assure final
completion of construction of any of the Financed Improvements in accordance
with the Plans and all Applicable Laws, including but not limited to interest
and other soft or non-construction budget items during the term of the Loan,
exceeds the amount of the undisbursed proceeds of the Applicable Underlying Loan
in question plus the total amount of all equity investments made or scheduled to
be made by the Applicable Underlying Borrower with respect to such Financed
Improvements, then the party making such determination shall so notify the other
parties hereto in writing, whereupon Lender shall have the option of requiring
Borrower to direct the Applicable Underlying Borrower (i) to immediately deposit
with Verification Agent, to be held by Verification Agent in a non-interest
bearing, non-escrow account, the amount of any such difference, in cash, which
amount shall be disbursed and applied toward the costs set forth in the
Applicable Approved Construction Budget prior to any further Advance by Lender
in respect of such Applicable Underlying Loan; or (ii) to expend the amount of
any such difference for items included in the Applicable Approved Construction
Budget, with satisfactory evidence of such expenditure being provided to Lender
prior to any Advance by Lender in respect of such Applicable Underlying Loan.
Lender shall be assured at all times, to its complete satisfaction, that the
undisbursed proceeds of each Applicable Underlying Loan are sufficient to
complete the Financed Improvements in accordance with the Plans and all
Applicable Laws, the Applicable Underlying Loan Documents, and all Applicable
Laws. Lender reserves the right of continual verification of adequate equity
investments made by each Applicable Underlying Borrower, to the extent required
hereby. Each such deposit shall be expended before any or any other Applicable
Underlying Loan disbursements or Loan Advances in respect thereof shall be made,
and it shall be advanced as construction progresses.
(d) Commencement and Completion of Construction. Borrower shall take
all reasonable steps to ensure that each Applicable Underlying Borrower
diligently pursues the construction of the Financed Improvements to completion
utilizing good workmanship and quality materials. Quality of construction is of
the essence, and each construction draw shall be subject to verification by
Verification Agent of the satisfactory quality and completion of work in place.
In particular, Borrower shall take all reasonable steps to ensure that each
Applicable Underlying Borrower supplies such sums of money and performs such
duties as may be necessary to complete the construction of the Financed
Improvements pursuant to the Plans and in full compliance with all terms and
conditions of the Applicable Underlying Loan Documents and all Applicable Laws,
all of which shall be accomplished prior to the applicable Completion Date, and
without any Lien, claim, or assessment (actual or contingent) asserted against
all or any portion of the Applicable Resort for any material, labor, or other
items furnished in connection therewith, and all in full compliance with all
applicable construction, use, building, zoning, and other
<PAGE>
Applicable Laws. Borrower shall provide to Lender evidence of satisfactory
compliance with all of such requirements upon request therefor by Lender and
shall provide Lender with true and correct copies of all certificates of
occupancy issued by the Applicable Jurisdictions and all other governmental
entities and individuals immediately upon the issuance thereof. Completion of
construction shall include but not be limited to grading, landscaping, adequate
sewer, water, electrical, gas, telephone and other utility facilities, completed
streets, sidewalks, drainage and curbs, both on-site and off-site, public and
private. The construction and development of any building comprising the
Financed Improvements described herein shall be completed in accordance with the
Applicable Approved Construction Schedule. "Substantial Completion" shall be
deemed to have occurred when the Applicable Underlying Borrower has obtained a
certificate of completion issued by the Architect and approved by Lender and
Verification Agent stating that the Financed Improvements are substantially
complete, subject only to a "punch list" designating any minor incomplete work
or other performance remaining to be done under the Construction Contract to
accomplish Completion of the Financed Improvements (hereinafter defined) and
stating the amounts necessary to accomplish Completion of the Financed
Improvements. As used herein, "Completion of the Financed Improvements" shall
mean one hundred percent (100%) finished construction of the Financed
Improvements (not Substantial Completion as defined above) in accordance with
the Plans and all Applicable Laws, certified in writing to Lender by Borrower
and the Architect.
(e) Right of Lender to Inspect Property and Review Plans. Lender and
Verification Agent, at any reasonable time and from time to time, shall be
entitled to enter upon each Applicable Resort and to inspect the Financed
Improvements and all materials to be used in the construction thereof, and
Borrower shall cooperate and use its good faith commercially reasonable efforts
to cause each Applicable Underlying Borrower and each General Contractor to
cooperate with Lender and Verification Agent during such inspections (including
making available to Lender and Verification Agent working copies of the Plans,
together with all related supplementary materials); provided, however, that this
provision shall not be deemed to impose upon Lender any obligation to undertake
such inspections, and further provided that if no Event of Default exists
hereunder, such inspections shall be limited to two (2) times per year in
connection with each Applicable Resort. A licensed architect or engineer
satisfactory to Lender (the "Inspecting Engineer") shall be retained by
Borrower, at Borrower's or each Applicable Underlying Borrower's sole cost and
expense, for the purpose of performing inspections as work progresses,
certifying that each Applicable Underlying Loan draw request is not in excess of
the work completed, less retainage, certifying that the committed and
undisbursed Applicable Underlying Loan proceeds are sufficient to complete the
Financed Improvements, and covering such other matters as Lender shall
reasonably require. Any such inspections shall be for Lender's and Borrower's
sole benefit and shall not be relied upon by Borrower or any other Person. In
accordance
<PAGE>
with the provisions hereof, the services to be performed by Verification Agent
shall include but not be limited to (i) a review of the Plans, any and all
construction contracts, any and all other documents in the possession or control
of an Applicable Underlying Borrower or a General Contractor relating to the
construction of Financed Improvements and all proposed changes to them; (ii) a
review of the Inspecting Engineer's written report to Borrower as described
above; (iii) an analysis of the foregoing to ensure conformity of the Financed
Improvements with the approved Plans and all Applicable Laws; and (iv) approval
of requests for Loan Advances in respect of each Applicable Underlying Loan.
(f) Notification of Claims by Subcontractors and Materialmen.
Borrower shall advise Lender promptly in writing if Borrower receives any
notice, written or oral, of any claim filed or asserted by any laborer,
subcontractor, or materialman in connection with any labor or materials
furnished in the construction of the Financed Improvements.
6.3 Negative Covenants. For so long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) Limitation on Other Debt/Further Encumbrances. Without the prior
written consent of Lender, which may be granted, withheld, or conditioned, in
Lender's sole and absolute discretion, Borrower shall not obtain financing or
grant Liens with respect to all or any portion of the Collateral (whether now
existing or created hereafter) other than those in favor of Lender.
(b) Restrictions on Transfers. Neither Borrower nor Guarantor shall,
without obtaining the prior written consent of Lender (which consent may be
given, withheld, or conditioned by Lender, in Lender's sole and absolute
discretion), whether voluntarily or involuntarily, by operation of law or
otherwise: (i) transfer, sell, pledge, convey, hypothecate, factor, or assign
all or any portion of the Collateral; (ii) lease or license any portion of the
Collateral, or change the legal or actual possession or use thereof; or (iii)
permit the dilution, transfer, pledge, hypothecation, or encumbrance of any of
the stock of Borrower or Guarantor. Without limiting the generality of the
preceding sentence, and subject to the terms of this Agreement, the prior
written consent of Lender shall be required for (A) any transfer of the
Collateral or any part thereof to a subsidiary or other Affiliate of Borrower or
otherwise; (B) any corporate merger or consolidation, disposition, or other
reorganization of Borrower or Guarantor, or the reclassification of any of the
capital stock of Borrower or Guarantor; (C) any change in the ownership of
Borrower or Guarantor; and (D) any transfer of or change in Guarantor's status
as the sole shareholder of Borrower; provided, however, that notwithstanding the
foregoing provisions of this Section 6.3(b) to the contrary, Lender shall not
unreasonably withhold its consent to any of the actions specified in (A) through
(D) above in the event that the applicable successor to Borrower or Guarantor,
as the case may be, is an investment grade
<PAGE>
company with a minimum tangible net worth of not less than $10,000,000 as
determined in accordance with GAAP. In the event that Lender, in Lender's sole
discretion, is willing to consent to a transfer that would otherwise be
prohibited by this Section 6.3(b), Lender may condition its consent on such
terms as it desires, including, without limitation, an increase in the Interest
Rate and the requirement that Borrower pay a transfer fee, together with any
expenses incurred by Lender in connection with the granting of such consent
(including, without limitation, attorneys' fees and expenses). If Borrower
violates the terms of this Section 6.3(b), in addition to any other rights or
remedies which Lender may have hereunder, pursuant to any other Loan Document,
or at law or in equity, Lender may, upon written notice to Borrower, increase,
effective immediately as of the date of such violation, the Interest Rate to the
Default Rate.
(c) Use of Lender's Name. Without the prior written consent of
Lender, Borrower will not, and will not permit any Affiliate to, use the name of
Lender, of Credit Suisse First Boston Corporation, or of any other affiliate of
Lender in any press release, advertising, or other promotional materials of any
kind.
(d) Transactions with Affiliates. Without the prior written consent
of Lender, Borrower shall not enter into any transaction with any Affiliate
thereof in connection with the Collateral, including, without limitation,
relating to the purchase, sale, or exchange any assets or properties or the
rendering of any service.
(e) Subordinated Obligations. Pursuant to the Subordination
Agreement, neither Borrower nor Guarantor shall, directly or indirectly: (i)
make or permit any payment to be made in respect of any indebtedness, claims,
rights, liabilities, or obligations, direct or contingent, including, without
limitation, the Subordinated Debt (as defined in the Subordination Agreement) to
any of its shareholders or other Affiliates or their respective successors and
assigns; provided, however, that for so long as no Default or Event of Default
exists with respect to the Senior Obligations (as defined in the Subordination
Agreement) and payment of any such Subordinated Debt would not render either
Borrower or Guarantor insolvent, such Subordinated Debt may be repaid under such
regularly scheduled payment terms as are approved in writing by Lender; (ii)
breach any other term, provision, or condition of the Subordination Agreement.
Notwithstanding the foregoing provisions of this Section 6.3(e) to the contrary
and as provided in the Subordination Agreement, during any period of time in
which Borrower has a minimum of $7,000,000 in liquid assets as reflected in its
most recent financial statements furnished to Lender in accordance with the
provisions hereof, the requisite minimum Subordinated Debt of $23,800,000 may be
reduced by $1.00 for every $2.00 increase in Borrower's net worth (as determined
in accordance with GAAP, without taking into consideration any amounts due
Borrower from Guarantor or any other Affiliate of Borrower) in excess of the
Minimum Net Worth Requirement. Notwithstanding the foregoing
<PAGE>
provisions of this Section 6.3(e) to the contrary, the Subordination Agreement
shall terminate and be of no further legal force or effect upon the entry of a
final, non-appealable order by the United States Bankruptcy Court for the
Northern District of New York in the case styled In Re: The Bennett Funding
Group, Inc., et al., Case Nos. 96-61376, 96-61377, 96-61378, and 96-61379,
approving the conversion of all of the Subordinated Debt to common stock in
Guarantor.
(f) Name Change. Borrower shall not change its name, its chief
executive office, or the locations at which it does business without providing
Lender at least thirty (30) days' prior written notice thereof and executing, at
Borrower's sole expense, such UCC-3 amendments and all other documents and
instruments as Lender, in its sole discretion, deems reasonably necessary or
appropriate in order to continue the perfection of its Lien in and to all of the
Collateral; provided, however, that under no circumstances shall the name of
Borrower ever include the word "Bennett" in it.
(g) Collateral. Neither Borrower nor Guarantor shall take any action
(or permit or consent to the taking of any action) that might materially impair
the value of all or any portion of the Collateral or any of the rights of Lender
with respect to the Collateral, nor shall Borrower or Guarantor cause or permit
any material amendment to or modification of the form or terms of any of the
Pledged Notes Receivable, Applicable Mortgages, other Applicable Underlying Loan
Documents, or any Applicable Timeshare Documents, including but not limited to
the Applicable Declarations.
6.4 Minimum Net Worth Requirement. Borrower agrees to maintain the Minimum
Net Worth Requirement at all times during the term of this Agreement.
SECTION 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following occurs:
7.1 The Loan.
(a) Payment Default. If Borrower fails to make, as and when due,
whether by acceleration or otherwise, any payment or mandatory prepayment of
principal, interest, or other fees or amounts of any and every kind hereunder or
pursuant to any of the other Loan Documents. Notwithstanding the foregoing
sentence to the contrary, a payment by Borrower hereunder or pursuant to any of
the other Loan Documents shall not be deemed delinquent hereunder as long as the
entire requisite amount is actually received by Lender, without notice or demand
of any kind by Lender, within fifteen (15) days following the date upon which
such payment is due.
(b) Covenant Defaults. If Borrower fails fully and timely to perform
or observe any non-monetary covenant, agreement, or warranty
<PAGE>
contained in this Agreement or in any of the other Loan Documents and such
failure continues for a period of thirty (30) days after notice of such failure
is furnished by Lender; provided, however, that if Borrower commences to cure
such failure within such thirty (30) day period but, because of the nature of
such failure, cure cannot be completed within thirty (30) days, notwithstanding
Borrower's good faith best efforts to do so, then, provided that Borrower
diligently seeks to complete such cure, an Event of Default shall not be deemed
to have occurred unless such failure continues for a total of ninety (90) days
after notice of such failure has been given by Lender, provided that such
failure does not (i) result in substantial financial hardship to Lender; or (ii)
materially impair the value of all or any portion of the Collateral, as
determined in the reasonable judgment of Lender.
(c) Warranties or Representations. If any statement or
representation made by or on behalf of Borrower or Guarantor in this Agreement,
in any of the other Loan Documents, or in any document, instrument, certificate,
opinion, or other item furnished pursuant to the Loan Documents, is false,
misleading, or incorrect in any material respect as of the date made or
reaffirmed; provided, however, that no Event of Default shall exist hereunder if
such false, misleading, or incorrect statement or representation was made by or
on behalf of Borrower or Guarantor in good faith reliance following diligent
inquiry upon a document, instrument, certificate, opinion, or other item
furnished to Borrower or Guarantor by or on behalf of an Applicable Underlying
Borrower or an Applicable Underlying Guarantor.
(d) Enforceability of Liens. If any Lien granted by Borrower to
Lender in connection with the Loan is or becomes invalid or unenforceable or is
not, or ceases to be, a perfected first priority Lien in favor of Lender
encumbering the asset which it is intended to encumber, and Borrower fails to
cause such Lien to become a valid, enforceable, first and prior Lien in a manner
satisfactory to Lender, in its sole discretion, within ten (10) days after
Lender delivers written notice thereof to Borrower.
(e) Involuntary Proceedings. If a case is commenced or a petition is
filed against Borrower or Guarantor under any Debtor Relief Law, a receiver,
conservator, liquidator, or trustee of Borrower or Guarantor or of any material
asset of Borrower or Guarantor is appointed by court order and such order
remains in effect for more than forty-five (45) days, or if any material asset
of Borrower or Guarantor is sequestered by court order and such order remains in
effect for more than forty-five (45) days.
(f) Voluntary Proceedings. If either Borrower or Guarantor
voluntarily seeks, consents to, or acquiesces in the benefit of any provision of
any Debtor Relief Law, whether now or hereafter in effect, consents to the
filing of any petition against it under such law, makes an assignment for the
benefit of its creditors, admits in writing its inability to pay its debts
generally as they
<PAGE>
become due, or consents to or suffers the appointment of a receiver, trustee,
liquidator, or conservator for it or any part of its assets.
(g) Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against all or any portion of the Collateral or any assets of Borrower
or Guarantor, of one (1) or more attachments, injunctions, executions, tax
liens, or judgments for the payment of money cumulatively in excess of $10,000,
that is not discharged in full or stayed within thirty (30) days after such
issuance, filing, levy, or seizure.
(h) Going Concern Reference. If either Borrower's or Guarantor's
annual audited financial statements required to be furnished to Lender, pursuant
to Section 6.1(g) hereof, make a "going concern" reference or otherwise question
Borrower's or Guarantor's continuing viability as a going concern.
(i) Failure to Deposit Proceeds. If Borrower fails to deliver any
payments made under the Pledged Notes Receivable directly to Lender or Lockbox
Agent as required by Section 2.5 hereof (other than inadvertent failures that
are corrected immediately upon discovery), or if Borrower takes any other action
which Lender shall deem to be a conversion of all or any portion of the
Collateral or fraudulent with respect to Lender.
(j) Removal of Collateral. If Borrower conceals, removes, transfers,
conveys, assigns, or permits to be concealed, removed, transferred, conveyed, or
assigned, any of the Collateral in violation of the terms of any of the Loan
Documents or with the intent to hinder, delay, or defraud its creditors or any
of them, including, without limitation, Lender.
(k) Other Defaults. If a material default or event of default occurs
in connection with any other loans or financing arrangements that Borrower,
Guarantor, or any of their respective Affiliates may have with Lender, including
but not limited to the Timeshare Receivables Credit Facility.
(l) Material Adverse Change. If there occurs any material adverse
change in the financial condition of Borrower or Guarantor.
(m) Minimum Net Worth Requirement. Borrower's failure for any reason
to satisfy the Minimum Net Worth Requirement.
(n) Default by Borrower in Other Agreements. Any default by Borrower
(i) in the payment of any indebtedness to Lender; (ii) in the payment or
performance of other indebtedness for borrowed money or obligations in excess of
$50,000 secured by all or any portion of the Collateral; or (iii) in the payment
or performance of any other material indebtedness or obligations.
<PAGE>
(o) Violation of Negative Covenants. If either Borrower or Guarantor
violates any negative covenant set forth in Section 6.3 hereof.
(p) Insolvency. If either Borrower or Guarantor becomes insolvent or
otherwise generally unable to pay its respective debts as and when they become
due or payable.
7.2 Applicable Underlying Loans.
(a) Payment Defaults. If any Applicable Underlying Borrower fails to
make, as and when due, whether by acceleration or otherwise, any payment or
mandatory prepayment of principal, interest, or other fees or amounts of any and
every kind, pursuant to the Applicable Underlying Loan Documents, and such
failure continues for a period of thirty (30) days after notice of such failure
is furnished by Borrower to the Applicable Underlying Borrower, which notice
shall be given by Borrower immediately upon the Applicable Underlying Borrower's
failure to make the required payment.
(b) Loss of Eligibility. A Pledged Note Receivable ceases being an
Eligible Note Receivable for any reason, pursuant to Section 1.39 hereof.
(c) Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against any Applicable Resort of one or more attachments, injunctions,
executions, tax liens, or judgments for the payment of money cumulatively in
excess of $25,000, that is not discharged in full or stayed within sixty (60)
days after such issuance, filing, levy, or seizure.
(d) Applicable Timeshare Documents. If any Applicable Declaration or
a timeshare regime created thereby at an Applicable Resort is amended, restated,
or terminated without Lender's prior written consent.
(e) Insolvency. If any Applicable Underlying Borrower or Applicable
Underlying Guarantor becomes insolvent or otherwise generally unable to pay its
respective debts as and when they become due or payable.
(f) Involuntary Proceedings. If a case is commenced or a petition is
filed against and Applicable Underlying Borrower or Applicable Underlying
Guarantor under any Debtor Relief Law, a receiver, conservator, liquidator, or
trustee of such Applicable Underlying Borrower or Applicable Underlying
Guarantor or of any material asset thereof is appointed by court order and such
order remains in effect for more than forty-five (45) days, or if any material
asset of an Applicable Underlying Borrower or and Applicable Underlying
Guarantor is sequestered by court order and such order remains in effect for
more than forty-five (45) days.
<PAGE>
(g) Voluntary Proceedings. If an Applicable Underlying Borrower or
an Applicable Underlying Guarantor voluntarily seeks, consents to, or acquiesces
in the benefit of any provision of any Debtor Relief Law, whether now or
hereafter in effect, consents to the filing of any petition against it under
such law, makes an assignment for the benefit of its creditors, admits in
writing its inability to pay its debts generally as they become due, or consents
to or suffers the appointment of a receiver, trustee, liquidator, or conservator
for it or any part of its assets.
(h) Material Adverse Change. If there occurs any material adverse
change in the financial condition of any Applicable Underlying Borrower or
Applicable Underlying Guarantor.
(i) Enforceability. If any material term, provision, or condition of
an Applicable Underlying Loan Document becomes invalid or legally unenforceable
by Borrower and its successors and assigns, including Lender.
(j) Deficiency. If, in Lender's reasonable opinion, the cost of
completing any of the Financed Improvements in accordance with the applicable
Plans exceeds the total amount set forth in the Applicable Approved Construction
Budget and the Applicable Underlying Borrower has failed to make arrangements
satisfactory to Lender, in its sole discretion, for the payment of such
additional costs.
(k) Transfer of Property. Except for the sale of Encumbered
Intervals in the ordinary course of an Applicable Underlying Borrower's business
in accordance with the terms of the Applicable Underlying Loan Documents, and
except for transfers due to involuntary condemnation which do not render an
Applicable Resort useless for its intended purpose, if an Applicable Underlying
Borrower, without Borrower's and Lender's prior written consent, sells, conveys,
or further encumbers all or any part of its interest in the Applicable Resort or
in any of the personalty located thereon or used or intended to be used in
connection therewith. For purposes of this paragraph, an assignment, sale, or
transfer shall also include the transfer of any stock of the Applicable
Underlying Borrower other than to an existing shareholder thereof.
(l) Abandonment or Cessation of Construction. If construction of the
Financed Improvements at any Applicable Resort, once started, is abandoned or
shall, for any reason, cease and not be resumed within fifteen (15) days
thereafter, unless such cessation is due to any force majeure events, provided
that such force majeure events do not delay construction for so long that the
Financed Improvements reasonably cannot be completed within the time allocated
for the completion thereof as set forth in the Applicable Approved Construction
Schedule.
<PAGE>
(m) Lien Against Applicable Resort. Except for the Permitted Liens
and Encumbrances or as otherwise specifically provided herein to the contrary,
if Borrower or an Applicable Underlying Borrower grants any mortgage, Lien, or
other encumbrance upon all or any portion of an Applicable Resort or any
Applicable Underlying Loan Collateral other than in favor of Lender in
connection with the Loan, provided that such mortgage, Lien, or other
encumbrance has a material adverse effect upon the value of such Applicable
Underlying Loan Collateral or all or any portion of the Collateral, unless
approved by Lender in writing, in its sole and absolute discretion.
(n) Title. If any violation or breach shall occur in any agreement,
covenant, or restriction affecting title to all or any portion of an Applicable
Resort, any Mortgaged Real Property, or any Encumbered Intervals, including but
not limited to any Permitted Liens and Encumbrances, and such violation or
breach is not cured within any time frame allowed under the Applicable
Underlying Loan Documents.
(o) Maximum Weighted Average. If the Maximum Weighted Average has
been exceeded.
Notwithstanding the foregoing provisions of this Section 7.2 to the
contrary, an Event of Default hereunder shall not be deemed to exist if within
thirty (30) days following the occurrence of any of the Defaults set forth in
this Section 7.2, Borrower pays Lender the total amount of all Advances made by
Lender in respect of the Applicable Underlying Loan as to which such occurrence
pertained, together with any accrued but unpaid interest thereon and any other
amounts advanced by or otherwise owed to Lender in connection with such
Applicable Underlying Loan. Promptly following its receipt of all such amounts,
and provided that no Default or Event of Default then exists hereunder, Lender
shall release its Lien against all Applicable Underlying Loan Collateral that
secures the Applicable Underlying Loan in question. Furthermore, an Event of
Default pursuant to Section 7.2(o) hereof shall not be deemed to exist if within
thirty (30) days following the date as of which Lender notifies Borrower that
the Maximum Weighted Average has been exceeded, one (1) or more Applicable
Underlying Borrowers pay Lockbox Agent, via wire transfer, a sufficient amount
to be applied against the outstanding principal balance of the Applicable
Underlying Loan(s) such that the Maximum Weighted Average is no longer exceeded.
SECTION 8. REMEDIES
8.1 Remedies Upon Default. Should an Event of Default occur, Lender may
immediately take any one (1) or more of the actions described in this Section 8,
all without notice to Borrower or Guarantor:
<PAGE>
(a) Acceleration. Declare the unpaid balance of the Loan, or any
part thereof, immediately due and payable, whereupon the same shall be due and
payable to Lender.
(b) Termination of Obligation to Advance. Terminate any commitment
or obligation of Lender to make Advances under this Agreement in its entirety,
or any portion of any such commitment, and/or terminate Lender's further
performance under this Agreement and/or any other document or instrument to
which Lender and Borrower or Guarantor (or any other Affiliate of Borrower) are
parties, without further liability or obligation to Borrower or Guarantor, to
the extent Lender shall deem appropriate, in its sole discretion, all without
notice to Borrower or any Guarantor.
(c) Termination of Obligation to Grant Partial Releases. Cease
granting or authorizing any Applicable Underlying Borrower partial releases from
the Lien of an Applicable Mortgage.
(d) Judgment. Reduce Lender's claim to judgment, foreclose, or
other-wise enforce each an every assignment of an Applicable Mortgage and/or any
other Lien or security interest in all or any part of the Collateral by any
available judicial or other procedure under law. Lender's right to sue and
recover a judgment, either before, after, or during the pendency of any
proceeding for the enforcement of the Applicable Mortgage, and the right of
Lender to recover such judgment shall not be affected by any taking, possession,
or foreclosure sale hereunder or by the exercise of any other right, power, or
remedy for the enforcement of the terms of the Applicable Mortgage or the
foreclosure of the Lien thereof.
(e) Sale of Collateral. Exercise all the rights and remedies of a
secured party under the Code (whether or not the Code applies to the affected
Collateral), including (i) require Borrower to, and Borrower hereby agrees that
it will, at its expense and upon request of Lender forthwith, assemble all or
part of the Collateral as directed by Lender and make it available to Lender at
a place to be designated by Lender that is reasonably convenient to both
parties; (ii) enter upon any premises of Borrower and take possession of the
Collateral; and (iii) sell the Collateral or any part thereof in one (1) or more
parcels at public or private sale, at any of Lender's offices or elsewhere, at
such time or times, for cash, on credit, or for future delivery, and at such
price or prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be required
by law, ten (10) days notice of the time and place of any sale shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Lender. Borrower shall remain liable for any
deficiency. Lender shall not be required to proceed against any Collateral but
may proceed against Borrower directly. To the extent
<PAGE>
permitted by law, Borrower hereby specifically waives all rights of redemption,
stay, or appraisal that it has or may have under any law now existing or
hereafter enacted.
(f) Retention of Collateral. At its discretion, retain such portion
of the Collateral as shall aggregate in value to an amount equal to the total
amount owed by the Borrower pursuant to the Loan Documents, in satisfaction of
the Obligations, whenever the circumstances are such that Lender is entitled and
elects to do so under applicable law.
(g) Purchase of Collateral. Buy all or any part of the Collateral at
any public or private sale.
(h) Exercise of Other Rights. Lender shall have all the rights and
remedies of a secured party under the Code and other legal and equitable rights
to which it may be entitled, including, without limitation, and without notice
to Borrower or Guarantor, the right to continue to collect all payments made on
the Pledged Notes Receivable and to apply such payments to the Obligations, and
to sue in its own name an Applicable Underlying Borrower or other maker of any
defaulted Pledged Note Receivable. Lender may also exercise any and all other
rights or remedies afforded by any other Applicable Laws or by the Loan
Documents or, in the name and stead of Borrower, the Applicable Underlying Loan
Documents, as Lender shall deem appropriate, at law, in equity, or otherwise,
including but not limited to the right to bring suit or other proceeding, either
for specific performance of any covenant or condition contained in the Loan
Documents or the Applicable Underlying Loan Documents or in aid of the exercise
of any right or remedy granted to Lender in the Loan Documents. Lender shall
also have the right to require Borrower to assemble any of the Collateral not in
Lender's possession, at Borrower's expense, and make it available to Lender at a
place to be determined by Lender that is reasonably convenient to both parties,
and Lender shall have the right to take immediate possession of all or any
portion of the Collateral or Applicable Underlying Loan Collateral and may enter
any Applicable Resort or any of the premises of Borrower or an Applicable
Underlying Borrower or wherever the Collateral or Applicable Underlying Loan
Collateral shall be located, with or without process of law wherever the
Collateral or Applicable Underlying Loan Collateral may be, and, to the extent
such premises are not the property of Lender, to keep and store the same on said
premises until sold (and if said premises be the property of Borrower, Borrower
agrees not to charge Lender for use and occupancy, rent, or storage of the
Collateral, for a period of at least sixty (60) days after sale or disposition
of the Collateral or Applicable Underlying Loan Collateral).
8.2 Notice of Sale. Reasonable notification of the time and place of any
public sale of the Collateral or reasonable notification of the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be sent to Borrower and to any other Person entitled under the Code to
notice;
<PAGE>
provided, however, that if the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender may sell or
otherwise dispose of the Collateral without advertisement or other notice of any
kind. It is agreed that notice sent not less than ten (10) calendar days prior
to the taking of the action to which such notice relates is reasonable
notification and notice for the purposes of this Section 8.2. Lender shall have
the right to bid at any public or private sale on its own behalf. Out of money
arising from any such sale, Lender shall retain an amount equal to all costs and
charges, including attorneys' fees, that it has incurred or may incur for
advice, counsel, or other legal services or for pursuing, reclaiming, seeking to
reclaim, taking, keeping, removing, storing, and advertising such Collateral for
sale, selling same, and any and all other charges and expenses in connection
therewith and in satisfying any prior Liens thereon. Any balance shall be
applied against the Obligations, and in the event of deficiency, Borrower shall
remain liable to Lender. In the event of any surplus, such surplus shall be paid
to Borrower or to such other Persons as may be legally entitled to such surplus.
If, by reason of any suit or proceeding of any kind, nature, or description
against Borrower, or by Borrower or any other party against Lender, which in
Lender's sole discretion makes it advisable for Lender to seek counsel for the
protection and preservation of its Liens and security interests, or to defend
its own interest, such expenses and counsel fees shall be allowed to Lender, and
the same shall be made a further charge and Lien upon the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the methods by which a sale of certain Collateral may be
effected after an Event of Default, Borrower agrees that upon the occurrence or
existence of an Event of Default, Lender may, from time to time, attempt to sell
all or any part of such Collateral by means of a private placement restricting
the bidding and prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for, or with a view to,
distribution. In so doing, Lender may solicit offers to buy such Collateral, or
any part of it for cash, from a limited number of investors deemed by Lender, in
its reasonable judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if Lender solicits such offers from not less than
two (2) such investors, then the acceptance by Lender of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
8.3 Application of Collateral; Termination of Agreements. Upon the
occurrence of any Event of Default, Lender may, with or without proceeding with
such sale or foreclosure or demanding payment or performance of the Obligations,
without notice, terminate Lender's further performance under this Agreement or
any other agreement or agreements between Lender and Borrower, Guarantor, or any
Affiliate of Borrower, without further liability or obligation by Lender, and
may also, at any time, appropriate and apply on any Obligations any and all
Collateral in its, Custodian's, or Lockbox Agent's
<PAGE>
possession, custodian, or control any and all balances, credits, deposits,
accounts, reserves, indebtedness, or other monies due or owing to Borrower held
by Lender hereunder or under any other financing agreement or otherwise, whether
accrued or not. Neither such termination, nor the termination of this Agreement
by lapse of time, the giving of notice, or otherwise, shall absolve, release, or
otherwise affect the liability of Borrower in respect of transactions prior to
such termination, or affect any of the Liens, security interests, rights,
powers, and remedies of Lender, but they shall, in all events, continue until
all of the Obligations have been satisfied in full.
8.4 Rights of Lender Regarding Collateral. In addition to all other rights
possessed by Lender, Lender, at its option, may from time to time after there
shall have occurred an Event of Default, and for so long as such Event of
Default remains uncured, in its sole discretion, take the following actions:
(a) Transfer all or any part of the Collateral into the name of
Lender or its nominee;
(b) Take control of the proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises, or
indulgences with respect to the Obligations, any portion thereof, any extension,
or renewal thereof, or any security therefor, to any obligor hereunder or
thereunder; and
(d) Exchange certificates or instruments representing or evidencing
the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
8.5 Delegation of Duties and Rights. Lender may perform any of its duties
and/or exercise any of its rights or remedies under the Loan Documents by or
through its officers, directors, employees, attorneys, agents, or other
representatives, including but not limited to Verification Agent. To the maximum
extent practicable in light of all relevant facts and circumstances, Lender will
attempt to avoid any duplication of effort and cost to Borrower in connection
with any such delegation on Lender's part.
8.6 Lender Not in Control. None of the covenants or other provisions
contained in this Agreement or in any other Loan Document shall give or be
interpreted as giving Lender the right or power to exercise control over the
affairs and/or management of Borrower or Guarantor.
8.7 Waivers. The acceptance by Lender at any time and from time to time of
partial payments of the Loan or performance of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by Lender
of any Event of Default shall be deemed to be a waiver of any other or
<PAGE>
subsequent Event of Default. No delay or omission by Lender in exercising any
right or remedy under the Loan Documents shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, nor shall any single
or partial exercise of any such right or remedy preclude other or further
exercises thereof, or the exercise of any other right or remedy under the Loan
Documents or otherwise. Further, except as otherwise expressly provided in this
Agreement or by applicable law, Borrower and each and every surety, endorser,
guarantor, and other party liable for the payment or performance of all or any
portion of the Obligations, severally waive notice of the occurrence of any
Default, Event of Default, presentment, and demand for payment, protest, and
notice of protest, notice of intention to accelerate, acceleration, and
nonpayment, and agree that their liability shall not be affected by any renewal
or extension in the time of payment of the Loan, or by any release or change in
any security for the payment or performance of the Loan, regardless of the
number of such renewals, extensions, releases, or changes.
8.8 Cumulative Rights. All rights and remedies available to Lender under
the Loan Documents shall be cumulative of and in addition to all other rights
and remedies granted to Lender under any of the Loan Documents, at law, or in
equity, whether or not the Loan is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
or pursuant to the Loan Documents.
8.9 Expenditures by Lender. Any amounts expended by or on behalf of Lender
pursuant to the exercise of any right or remedy provided herein or available at
law or in equity shall become part of the Obligations and shall bear interest at
the Default Rate from the date of such expenditure until the date repaid.
8.10 Diminution in Value of Collateral. Lender shall not have any
liability or responsibility whatsoever for any diminution or loss in value of
any of the Collateral or Applicable Underlying Loan Collateral, specifically
including that which may arise from Lender's negligence or inadvertence, whether
such negligence or inadvertence is the sole or contributing cause of any damage.
<PAGE>
SECTION 9. CERTAIN RIGHTS OF LENDER
9.1 Protection of Collateral. Lender may, at any time and from time to
time, take such actions as Lender deems necessary or appropriate to protect
Lender's Liens and security interests in and to preserve the Collateral, and to
establish, maintain, and protect the enforceability of Lender's rights with
respect thereto, all at the expense of Borrower. Borrower agrees to cooperate
fully with all of Lender's efforts to preserve the Collateral and Lender's
Liens, security interests, and rights and will take such actions to preserve the
Collateral and Lender's Liens, security interests, and rights as Lender may
direct, including, without limitation, by promptly paying, upon Lender's demand
therefor, all documentary stamp taxes or other taxes that may be or may become
due in respect of any of the Collateral. All of Lender's expenses of preserving
the Collateral and its Liens and security interests and rights therein shall be
added to the principal amount of the Loan and secured by the Collateral..
9.2 Performance by Lender. If Borrower fails to perform any agreement
contained herein, Lender may itself perform, or cause the performance of, such
agreement, and the expenses of Lender incurred in connection therewith shall be
payable by Borrower under Section 9.5 below. In no event, however, shall Lender
have any obligation or duty whatsoever to perform any covenant or agreement of
Borrower or any Applicable Underlying Borrower contained herein or in any of the
other Loan Documents, any Applicable Underlying Loan Documents, or any
Applicable Timeshare Documents, and any such performance by Lender shall be
wholly discretionary with Lender. The performance by Lender of any agreement or
covenant of Borrower or any Applicable Underlying Borrower on any occasion shall
not give rise to any duty on the part of Lender to perform any such agreements
or covenants on any other occasion or at any time. In addition, Borrower
acknowledges that Lender shall not at any time or under any circumstances
whatsoever have any duty to Borrower or to any other Person to exercise any of
Lender's rights or remedies hereunder.
9.3 No Liability of Lender. Lender is obligated to perform all covenants
and obligations of Lender hereunder, including but not limited to making
Advances to Borrower, subject to all of the terms, provisions, and conditions
hereof and of the other Loan Documents. However, neither the acceptance of this
Agreement by Lender nor the exercise of any rights hereunder by Lender shall be
construed in any way as an assumption by Lender of any obligations,
responsibilities, or duties of Borrower or any Applicable Underlying Borrower
arising in connection with any Applicable Resort, all or any portion of the
Collateral or Applicable Underlying Loan Collateral, under any Applicable
Timeshare Documents, or under any Applicable Laws, or in connection with any
other business of Borrower or the Collateral, nor shall it otherwise bind Lender
to the performance of any obligations with respect to an Applicable Resort, the
<PAGE>
Collateral, or any Applicable Underlying Loan Collateral, it being expressly
understood that Lender shall not be obligated to perform, observe, or discharge
any obligation, responsibility, duty, or liability of Borrower or any Applicable
Underlying Borrower with respect to any Applicable Resort, any of the
Collateral, any of the Applicable Underlying Loan Collateral, under any of the
Applicable Timeshare Documents, or under any Applicable Laws, including but not
limited to appearing in or defending any action, expending any money, or
incurring any expense in connection therewith. Without limiting the foregoing,
neither this Agreement, any action or actions on the part of Lender taken
hereunder nor the acquisition of the Pledged Notes Receivable and/or the other
Collateral by Lender prior to or following the occurrence of an Event of Default
shall constitute an assumption by Lender of any obligations of Borrower with
respect to an Applicable Resort or such Collateral, or any documents or
instruments executed in connection therewith, including but not limited to the
Applicable Underlying Loan Documents, and Borrower shall continue to be liable
for all of its obligations thereunder or with respect thereto. Borrower and
Guarantor, jointly and severally, hereby agree to indemnify, protect, defend,
and hold Lender harmless from and against any and all claims, demands, causes of
action, losses, damages, liabilities, suits, costs, and expenses, including,
without limitation, attorneys' fees and court costs, asserted against or
incurred by Lender by reason of, arising out of, or connected in any way with
(i) any failure or alleged failure of Borrower to perform any of its covenants
or obligations with respect to an Applicable Resort or all or any portion of the
Collateral or Applicable Underlying Loan Collateral; (ii) a breach of any
certification, representation, warranty, or covenant of Borrower set forth in
any of the Loan Documents; (iii) the ownership of the Pledged Notes Receivable,
the other Collateral, and the rights, titles, and interests assigned hereby, or
intended so to be; (iv) the debtor-creditor relationships between Borrower, on
the one hand, and the Applicable Underlying Borrowers or Lender, as the case may
be, on the other; or (v) the Pledged Notes Receivable, the Applicable Mortgages,
or the management or operation of the Applicable Resorts. The obligations of
Borrower to indemnify, protect, defend, and hold Lender harmless as provided in
this Agreement are absolute, unconditional, present, and continuing, and shall
not be dependent upon or affected by the genuineness, validity, regularity, or
enforceability of any claim, demand, or suit from which Lender is indemnified.
The indemnity provisions in this Section 9.3 shall survive the complete
satisfaction of the Obligations and the termination of this Agreement and remain
binding and enforceable against Borrower, together with its successors and
assigns. Borrower hereby waives all notices with respect to any losses, damages,
liabilities, suits, costs, and expenses, and all other demands whatsoever hereby
indemnified, and agrees that its obligations under this Agreement shall not be
affected by any circumstances, whether or not referred to above, that might
otherwise constitute legal or equitable discharges of its obligations hereunder.
If a court of competent jurisdiction should determine that Borrower is entitled
to recover damages from Lender for any reason or upon any cause, claim, or
counterclaim, in connection with the Loan or the transactions provided for or
<PAGE>
contemplated pursuant to this Agreement or the other Loan Documents, Borrower
stipulates and agrees that any such damages or awards shall be limited to the
amount of the Structuring Advisory Fee or any portion thereof actually paid by
Borrower to Lender.
9.4 Right to Defend Action Affecting Security. Lender may, at Borrower's
expense, appear in and defend any action or proceeding, at law or in equity,
that Lender in good faith believes may affect the Liens or security interests
granted under this Agreement, including, without limitation, with respect to the
Pledged Notes Receivable, the Applicable Mortgages, the value of the Collateral,
or Lender's rights under any of the Loan Documents.
9.5 Expenses. All expenses payable by Borrower under any provision of this
Agreement shall be Obligations of Borrower, and if paid by Lender, shall be
repaid by Borrower to Lender, upon demand, and shall bear interest at the
Default Rate from the date of payment of such expense(s) by Lender until repaid
by Borrower.
9.6 Lender's Right of Set-Off. Lender shall have the right to set-off
against any or all of the Collateral any Obligations then due and unpaid by
Borrower.
9.7 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. Without affecting the liability of any Person or entity,
including, without limitation, any Applicable Underlying Borrower, for the
payment of any of the Obligations and without affecting or impairing Lender's
Lien and other rights in and to the Collateral, or the remainder thereof, as
security for the full amount of the Loan unpaid and the Obligations, Lender may
from time to time, without notice: (a) release any Person liable for the payment
of the Loan; (b) extend the time or otherwise alter the terms of payment of the
Loan; (c) accept additional security for the Obligations of any kind, including
deeds of trust or mortgages and security agreements; (d) alter, substitute, or
release any property securing the Obligations; (e) realize upon any Collateral
for the payment of all or any portion of the Loan in such order and manner as it
may deem fit; and/or (f) join in any subordination or other agreement affecting
this Agreement or the lien or charge thereof.
9.8 Assignment of Lender's Interest. Lender shall have the right to assign
the Loan and all or any portion of its rights in or pursuant to this Agreement
or any of the other Loan Documents to any subsequent holder or holders of the
Note or the Obligations that assumes Lender's obligations hereunder and is a
bank, pension fund, insurance company, or other institutional investor.
9.9 Notice to Purchaser. Borrower authorizes either Lender or Verification
Agent (but neither Lender, Servicing Agent, Lockbox Agent, nor
<PAGE>
Verification Agent shall be obligated) to communicate at any time and from time
to time with any Applicable Underlying Borrower or any other Person primarily or
secondarily liable under a Pledged Note Receivable with regard to the Lien of
the Lender thereon and any other matter relating thereto, and by no later than
the Closing Date, Borrower shall deliver to Lender notifications to the
Applicable Underlying Borrowers executed in blank by Borrower and in form
acceptable to Lender, pursuant to which the Applicable Underlying Borrowers (or
other obligors) are directed to remit all payments in respect of the Collateral
to Lockbox Agent or as Lender may otherwise require.
9.10 Collection of the Notes. Borrower hereby directs and authorizes each
Applicable Underlying Borrower and other Person liable for the payment of any
Pledged Note Receivable, and promptly after the Closing Date, shall direct in
writing each such Person, to pay each installment thereon to Lockbox Agent,
pursuant to the Lockbox Agreement, unless and until directed otherwise by
written notice from Lender or, at Lender's direction, from Borrower, after which
such parties are and shall be directed to make all further payments on the
Pledged Notes Receivable in accordance with the directions of Lender. Following
the occurrence of an Event of Default, Lender shall have the right to require
that all payments becoming due under the Pledged Notes Receivable be paid
directly to Lender, and Lender is hereby authorized to receive, collect, hold,
and apply the same in accordance with the provisions of this Agreement but shall
provide Borrower with accountings of all such activity on at least as frequent a
basis as Lockbox Agent was obligated to provide accountings to Lender and
Borrower, pursuant to the Lockbox Agreement. In the event that following the
occurrence of an Event of Default, Lender or Lockbox Agent does not receive any
installment of principal or interest due and payable under any of the Pledged
Notes Receivable on or prior to the date upon which such installment becomes
due, Lender may, at its election (but without any obligation to do so), give or
cause Lockbox Agent to give notice of such event of default to the defaulting
party or parties, and Lender shall have the right (but not the obligation),
subject to the terms of such Notes, to accelerate payment of the unpaid balance
of any of the Pledged Notes Receivable in default and to foreclose each of the
Applicable Mortgages securing the payment thereof, and to enforce any other
remedies available to the holder of such Pledged Notes Receivable with respect
to such event of default. Borrower hereby further authorizes, directs, and
empowers Lender (and Lockbox Agent or any other Person as may be designated by
Lender in writing) to collect and receive all checks and drafts evidencing such
payments and to endorse such checks or drafts in the name of Borrower and, upon
such endorsements, to collect and receive the money therefor. The right to
endorse checks and drafts granted pursuant to the preceding sentence is
irrevocable by Borrower, and the banks or banks paying such checks or drafts
upon such endorsements, as well as the signers of the same, shall be as fully
protected as though the checks or drafts had been endorsed by Borrower.
<PAGE>
9.11 Power of Attorney. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place, and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender as provided in Section 9.10 above;
(b) to demand and receive from time to time any and all property, rights,
titles, interests, and Liens hereby sold, assigned, and transferred, or intended
so to be, and to give receipts for same; (c) upon an Event of Default, to
collect all rent, revenues, and income, pursuant to the terms of any Applicable
Mortgage; (d) from time to time, to institute and prosecute, in Lender's own
name, any and all proceedings at law, in equity, or otherwise, that Lender may
deem proper in order to collect, assert, or enforce any claim, right, or title,
of any kind, in and to the property, rights, titles, interests, and Liens hereby
sold, assigned, or transferred, or intended so to be, and to defend and
compromise any and all actions, suits, or proceedings in respect of any of the
said property, rights, titles, interests, and Liens; (e) upon an Event of
Default, to change Borrower's post office mailing address; and (f) generally to
do all and any such acts and things in relation to the Collateral as Lender
shall in good faith deem advisable. Borrower hereby declares that the
appointment made and the powers granted pursuant to this Section 9.11 are
coupled with an interest and are and shall be irrevocable by Borrower in any
manner, or for any reason, unless and until a release of the same is executed by
Lender and duly recorded in the appropriate public records of Onondaga County,
New York.
9.12 Relief from Automatic Stay, Etc. To the fullest extent permitted by
law, in the event that Borrower or Guarantor shall make application for or seek
relief or protection under the federal bankruptcy code (the "Bankruptcy Code")
or any other Debtor Relief Laws, or in the event that any involuntary petition
is filed against the Borrower or Guarantor under such Code or other Debtor
Relief Laws and not dismissed with prejudice within forty-five (45) days, the
automatic stay provisions of Section 362 of the Bankruptcy Code are hereby
modified as to Lender to the extent necessary to implement the provisions hereof
permitting set-off and the filing of financing statements or other instruments
or documents; and Lender shall automatically and without demand or notice (each
of which is hereby waived by Borrower and Guarantor) be entitled to immediate
relief from any automatic stay imposed by Section 362 of the Bankruptcy Code or
otherwise, on or against the exercise of the rights and remedies otherwise
available to Lender as provided in the Loan Documents. In addition, in the event
that relief is sought by or against Borrower or Guarantor under the Bankruptcy
Code, Borrower and Guarantor agree not to seek, directly or indirectly, in any
ensuing bankruptcy proceeding, any extension of the exclusivity period otherwise
available to a debtor under the Bankruptcy Code, including, without limitation,
the exclusivity period provided for under Section 1121(b) of the Bankruptcy
Code.
<PAGE>
9.13 Investigations and Inquiries. Borrower and Guarantor hereby authorize
Lender to conduct such investigations and inquiries concerning Borrower,
Guarantor, the Applicable Resorts, the Applicable Underlying Borrowers, the
Applicable Underlying Guarantors, the Collateral, and the Applicable Underlying
Loan Collateral as Lender shall, in its sole discretion, deems necessary or
desirable in connection with its monitoring of the Loan and the Collateral
therefor, and all such Persons of whom Lender may make such inquiry are
empowered to cooperate with, and to provide all requested information to,
Lender.
9.14 Verification of Use. Lender shall be under no duty or obligation to
ascertain the manner in which Borrower or any Applicable Underlying Borrower has
used or will use the proceeds of the Loan or those of any Applicable Underlying
Loan. Lender's sole obligation shall be to advance the proceeds of the Loan
subject to, and in strict accordance with, the terms, provisions, and conditions
of this Agreement and the other Loan Documents. At no time shall Lender be
obligated to disburse funds in excess of amounts recommended by Verification
Agent. Lender's obligation to fund the Loan is limited to the principal amount
set forth herein and in the Note. Borrower is solely responsible for obtaining
any other financing that may be necessary in order to enable it to fund the
Applicable Underlying Loans or to repay the Loan on or prior to the Maturity
Date. It is expressly understood that Lender has no responsibility or obligation
whatsoever to provide to Borrower any further financing, whether in connection
with the Applicable Underlying Loans or otherwise.
SECTION 10. TERM OF AGREEMENT
This Agreement shall continue in full force and effect, and the Liens and
security interests granted hereby and the duties, covenants, and liabilities of
Borrower hereunder, and all the terms, conditions, and provisions hereof
relating thereto shall continue to be fully operative until all of the
Obligations have been satisfied in full. Borrower expressly agrees that if
either Borrower or Guarantor makes a payment to Lender, which payment or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, or otherwise required to be repaid to a trustee, receiver, or any
other party under any Debtor Relief Laws, state or federal law, common law, or
equitable cause, then to the extent of such repayment, the Obligations or any
part thereof intended to be satisfied and the Liens and security interests
provided for hereunder securing the same shall be revived and continued in full
force and effect as if said payment had not been made.
SECTION 11. MISCELLANEOUS
11.1 Notices. All notices, requests, and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for
<PAGE>
the purpose of notice to Lender, Borrower, or Guarantor. Each such notice,
request, or other communication shall be effective (a) if given by mail, when
such notice is deposited in the United States Mail with first class postage
prepaid, and addressed as aforesaid, provided that such mailing is by registered
or certified mail, return receipt requested; (b) if given by overnight delivery,
when deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne, with all fees and charges prepaid, addressed as
provided below; or (c) if given by any other means, when delivered at the
address specified in this Section 11.1:
If to Borrower: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson, Vice President
With a copy to: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq.,
General Counsel
If to Guarantor: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq.,
General Counsel
If to Lender: Credit Suisse First Boston
Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: David Arzi, Director
With a copy to: Midland Loan Services, L.P.
2001 Shawnee Mission Parkway
Shawnee Mission, Kansas 66205
Attention: Jan Sternin
11.2 Survival. All representations, warranties, covenants, and agreements
made by Borrower herein, in the other Loan Documents, or in any other agreement,
document, instrument, or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents (and
each part thereof), regardless of any investigation made by or on behalf of
Lender.
<PAGE>
11.3 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS
MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ITS
CHOICE OF LAWS PRINCIPLES. BORROWER AND GUARANTOR HEREBY AGREE TO ACCEPT THE
STATE COURTS LOCATED IN ONONDAGA COUNTY, NEW YORK, AS HAVING PROPER JURISDICTION
AND BEING THE PROPER VENUE FOR ANY LEGAL PROCEEDINGS ARISING OUT OF THE LOAN
DOCUMENTS.
11.4 Limitation on Interest. Lender and Borrower intend to comply at all
times with all applicable usury laws. All agreements between Lender and
Borrower, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the interest
contracted for, charged, received, paid, or agreed to be paid to Lender exceed
the highest lawful rate permissible under applicable usury laws. If, from any
circumstance whatsoever, fulfillment of any provision hereof, of the Note, or of
any other Loan Documents shall involve transcending the limit of such validity
prescribed by any law which a court of competent jurisdiction may deem
applicable hereto, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if from any circumstance Lender shall
ever receive anything of value deemed interest by applicable law that would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal of the Loan and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal of the Loan, such excess shall be refunded to Borrower. All interest
paid or agreed to be paid to Lender shall, to the extent permitted by applicable
law, be amortized, prorated, allocated, and spread throughout the full period
until payment in full of the principal so that the interest on the Loan for such
full period shall not exceed the highest lawful rate. Borrower agrees that in
determining whether or not any interest payment under the Loan Documents exceeds
the highest lawful rate, any non-principal payment (except payments specifically
described in the Loan Documents as "interest"), including without limitation,
prepayment fees and late charges, shall, to the maximum extent not prohibited by
law, be deemed an expense, fee, premium, or penalty rather than interest. Lender
hereby expressly disclaims any intent to contract for, charge, or receive
interest in an amount that exceeds the highest lawful rate. The provisions of
the Note, this Agreement, and all other Loan Documents are hereby modified to
the extent necessary to conform with the limitations and provisions of this
Section, and this Section shall govern over all other provisions in any document
or agreement now or hereafter existing. This Section shall never be superseded
or waived unless there is a written document executed by Lender and Borrower
expressly declaring the usury limitation of this Agreement to be null and void,
and no other method or language shall be effective to supersede or waive this
paragraph.
<PAGE>
11.5 Invalid Provisions. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Any provision of this Agreement or any other Loan Document that is
held to be illegal, invalid, or unenforceable in a particular Applicable
Jurisdiction shall remain valid and enforceable in all other Applicable
Jurisdictions. Furthermore, in lieu of any such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement and/or the other Loan Documents (as the case may be) a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
11.6 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower, Guarantor, and
Lender and their respective successors and assigns; provided, however, that
neither Borrower nor Guarantor may transfer or assign any of its rights or
obligations under this Agreement, the Commitment, or the other Loan Documents
without the prior written consent of Lender, which consent may be granted or
withheld in Lender's sole and absolute discretion. This Agreement and the
transactions provided for or contemplated hereunder or under any of the other
Loan Documents are intended solely for the benefit of the parties hereto. No
third party shall have any rights or derive any benefits under or with respect
to this Agreement, the Commitment, or the other Loan Documents except as
specifically set forth herein or otherwise provided in a written document signed
by Borrower and Lender. No Person other than Borrower shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make Advances in the absence of
strict compliance with any or all thereof, and no other Person, other than
Borrower, under any circumstances whatsoever, shall be deemed to be a
beneficiary of such conditions, any or all of which Lender freely may waive, in
whole or in part, at any time if, in its sole discretion, it deems it desirable
to do so. In particular, Lender makes no representation and assumes no
obligation as to third parties concerning the quality of the construction of the
Financed Improvements by any Applicable Underlying Borrower or the absence
therefrom of defects. In this connection, Borrower agrees to and shall indemnify
Lender from any liability, claim, or loss, together with attorneys' fees and
costs, resulting from the disbursement of Loan proceeds or from the condition of
the Financed Improvements, whether related to the quality of construction or
otherwise, and whether arising during or after the term of the Loan. This
provision shall survive the repayment of the Loan and continue in full force and
effect so long as the possibility of such liability or claim exists.
<PAGE>
11.7 Amendment. This Agreement (including all exhibits and schedules
hereto) may not be amended or modified, and no term, provision, or condition
hereof may be waived, except by a written instrument that is signed by all of
the parties hereto.
11.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one (1) or more
counterparts hereof signed by Borrower, Guarantor, and Lender.
11.9 Lender Not a Fiduciary. The relationship between Borrower and Lender
is solely that of debtor and creditor, and Lender has no fiduciary or other
special relationship with Borrower or Guarantor, and no term or provision of any
of the Loan Documents shall be construed so as to deem the relationship between
Borrower, Guarantor, and Lender to be other than that of debtor and creditor.
11.10 Release and Return of Notes Receivable. In the event that all
Obligations hereunder are fully satisfied, then within a reasonable time
thereafter not to exceed thirty (30) days, Lender shall endorse the Pledged
Notes Receivable using the words "Pay to the order of Resort Funding, Inc.,
without recourse, except to the extent provided in that certain Loan and
Security Agreement dated November 14, 1997, by and among Resort Funding, Inc.,
Equivest Finance, Inc., and Credit Suisse First Boston Mortgage Capital LLC,"
and deliver such Pledged Notes Receivable, together with any other nonrecourse
Collateral reassignment documents requested and prepared by Borrower, at
Borrower's sole cost and expense, free and clear of any Liens or encumbrances by
any Person claiming by, through, or under Lender.
11.11 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined or made in accordance
with GAAP consistently applied at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
including the exhibits and schedules to them, comprise the entire agreement
between the parties relating to the subject matter hereof and supersede all
prior agreements and understandings, both oral and written, between the parties
hereto relating to the subject matter hereof (including but not limited to the
Commitment, except as otherwise expressly provided herein), may
<PAGE>
not be changed or terminated orally or by course of conduct, and shall be deemed
effective as of the Closing Date.
11.13 Litigation. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF BORROWER, GUARANTOR, AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY
ANY RIGHT, POWER, REMEDY, OR DEFENSE ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
OR ACTIONS OF ANY PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. EACH OF BORROWER,
GUARANTOR, AND LENDER FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH
LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN
WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, BORROWER AND
GUARANTOR HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING
LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
The waiver and stipulations of Borrower, Guarantor, and Lender in this
Section 11.13 shall survive the final payment or performance of all of the
Obligations and the resulting termination of this Agreement.
11.14 Incorporation of Exhibits and Schedules. This Agreement, together
with all exhibits and schedules hereto, constitute one (1) document and
agreement that is referred to herein by the use of the defined term "Agreement."
Such exhibits and schedules are incorporated herein as though fully set out in
this Agreement. The definitions contained in any part of this Agreement shall
apply to all parts of this Agreement.
11.15 Consent to Advertising and Publicity of Applicable Timeshare
Documents. Borrower hereby consents that Lender may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, consisting of the name and address of Borrower, the Loan's
amount, and the Collateral therefor.
<PAGE>
11.16 Directly or Indirectly. Where any provision in the Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provisions shall be applicable, whether such action is taken
directly or indirectly by such Person.
11.17 Captions. Section captions have been included in this Agreement for
convenience of reference only and should not be relied upon or used in
interpreting the meaning or intent of any provision hereof.
11.18 Gender. Words of any gender in this Agreement shall include each
other gender, where appropriate.
11.19 No Duty. All attorneys, accountants, appraisers, consultants,
custodians, and other professionals retained by Lender in connection with the
Loan shall have the right to act exclusively in the interest of Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any kind or nature whatsoever to Borrower, Guarantor, or any other
Person.
11.20 Reimbursement for Taxes. Borrower will promptly, upon written demand
from Lender, reimburse Lender for any taxes assessed against Lender by the State
of New York or any subdivision thereof that is on account of or measured by the
interest income received by Lender under the Pledged Notes Receivable and the
Applicable Mortgages assigned to Lender pursuant to this Agreement or in any way
imposed upon Lender in connection with the transactions contemplated hereunder,
including, without limitation, any general intangible tax or documentary tax.
11.21 Submissions.
(a) All documents, agreements, reports, surveys, appraisals,
insurance policies, references, financial information, and other submissions
required to be furnished by Borrower or Guarantor to Lender hereunder or
pursuant to any of the other Loan Documents (collectively "Submissions") shall
be in form and content satisfactory to Lender, in its sole discretion, and
prepared at Borrower's or an Applicable Underlying Borrower's expense.
(b) Lender shall have the prior right of approval of any Person
responsible for preparing a Submission (a "Preparer") and may reject any
Submission if Lender, in its sole discretion, believes that the experience,
skill, or reputation of the applicable Preparer is unsatisfactory in any respect
whatsoever.
(c) All reports and appraisals required to be furnished by Borrower
or Guarantor to Lender hereunder or pursuant to any of the other Loan
<PAGE>
Documents shall specifically be addressed to Lender and include the following
statement:
THE UNDERSIGNED ACKNOWLEDGES THAT CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC IS RELYING ON THE WITHIN INFORMATION IN CONNECTION WITH ITS
ADVANCES TO BORROWER ON THE SUBJECT PROPERTY.
(d) Whether or not expressly stated herein, all consents and
approvals granted by Lender hereunder shall be valid and effective only if
contained in a written document or instrument that has been signed by a duly
authorized representative of Lender; provided, however, that for those
categories of consents and approvals set forth in Exhibit "K," attached hereto
and incorporated herein by this reference, if such consent, approval, or a
denial thereof is not communicated by Lender within the time frames set forth in
said Exhibit "N," then Lender's consent or approval of the matter in question
shall be deemed to have been granted. Notwithstanding the foregoing sentence,
absolutely no deemed consents or approvals of any matters not expressly set
forth in Exhibit "K" shall occur.
11.22 Confidentiality. Each party hereto acknowledges and agrees that the
material terms hereof and of the other Loan Documents are and shall remain
strictly confidential. No party hereto shall ever disclose the material terms
and provisions hereof without the express prior written consent of the other
parties; provided, however, that the disclosure of the material terms and
provisions of this Agreement to a party's shareholders, officers, directors,
principals, attorneys, accountants, or lenders, or if required by law or
subpoena, shall not constitute a breach of this Section 11.22. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
<PAGE>
IN WITNESS WHEREOF, Borrower, Lender, and Guarantor have caused this
Agreement to be duly executed and delivered effective as of the date first above
written.
BORROWER:
WITNESS: RESORT FUNDING, INC., a
Delaware corporation
- ------------------------------------
By:
- ------------------------------------ Its:
Printed Name
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited
WITNESS: liability company
- ------------------------------------
By:
- ------------------------------------ Its:
Printed Name
GUARANTOR:
EQUIVEST FINANCE, INC, a
WITNESS: Florida corporation
- ------------------------------------
By:
- ------------------------------------ Its:
Printed Name
RECEIVED
UNITED STATES BANKRUPTCY COURT NOV 20 1997
NORTHERN DISTRICT OF NEW YORK
............................................x OFFICIAL BANKRUPTCY JUDGE
UTICA, NEW YORK
In Re
THE BENNETT FUNDING GROUP, INC. CASE NO. 96-61376
Debtor Chapter 11
Substantively Consolidated
............................................x
ORDER
FILED
NOV 24, 1997
OFFICE OF THE
BANKRUPTCY CLERK
UTICA, NY
Upon the Trustee's Motion, dated November 4, 1997 (the "Motion"),
for an Order authorizing the Trustee: (a) to exchange all the debt due to the
Estate by Resort Funding, Inc. ("RFI") under certain notes in return for (i)
issuance to the Estate Of Equivest Finance, Inc. ("Equivest") common stock, and
(ii) cancellation of all debt claims of RFI and Equivest against the Estate; (b)
to amend the terms of the existing right of offset between RFI and the Estate
relating to the Option B settlement loans; and (c) to vote the Estate's current
common shares in favor of (i) an increase the number of authorized but unissued
shares of Equivest common stock and (ii) the adoption of a stock incentive plan;
and upon the Affidavit of Richard C. Breeden, Trustee, sworn to November 3,
1997; and upon the Affidavit of Gerald L. Klaben, Jr., sworn to November 5,
1997; and upon an objection having been filed by the United States Trustee; and
upon the objection dated having been filed by Harter, Secrest & Emery on behalf
of certain banks; and upon the Trustee's Reply, dated November 18, 1997, to the
United States Trustee's
<PAGE>
objection; and upon the hearing having been held an November 18, 1997 on the
Motion; and upon the appearance at the hearing of Simpson Thacher & Bartlett,
counsel to the Trustee (M.0. Sigal, Jr., Esq.), the United States Trustee (Guy
A. Van Baalen, Esq.), Wasserman, Jurista & Stolz (Harry N. Gutfleish, Esq.) on
behalf of the Creditors' Committee, Harter, Secrest and Emery (Debra SuDock,
Esq.) on behalf of certain banks, Hancock & Estabrook (Stephen A. Donato, Esq.)
on behalf of certain banks, and Costello, Cooney & Fearon (Michael J. Balanoff,
Esq.) on behalf of certain banks and upon arguments of counsel and after due
deliberation and sufficient cause existing therefor; it is hereby
ORDERED that the Motion is granted, except as to the portion of the
Motion that sought authority to vote the Estate's shares of Equivest Common
Stock (as defined in the Motion) in favor of the Incentive Plan (as defined in
the Motion) which is adjourned to December 2, 1997; and it is further
ORDERED that the Trustee is authorized to exchange all the debt due
to the Estate by RFI under the Notes (as defined in the Motion) in return for
(i) issuance to the Estate by Equivest of the New Shares (as defined in the
Motion), and (ii) the cancellation of debt claims of RFI and Equivest against
the Estate in the amount of $308,786.79; and it is further
ORDERED that the Trustee is authorized to amend the terms of the
existing right of offset relating to the Option B settlement loans to allow RFI
to offset losses on BFG lease collections against the 3% settlement referral fee
due on any Option B loan to the estate from RFI; and it is further
-2-
<PAGE>
ORDERED that the Trustee is authorized to vote the Estate's shares
of Equivest Common Stock in favor of an admendment of the articles, of
incorporation of Equivest adopted by the board of directors of Equivest to
increase the number of authorized but unissued shares of Common stock to
50,000,000.
/s/ Stephen D. Gerling
------------------------------
Honorable Stephen D. Gerling
Chief U.S. Bankruptcy Judge
Dated: November 24th, 1997
Utica, New York
-3-
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
EQUIVEST FINANCE, INC.
Filed
98 FEB 20 PM 4:15
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
Pursuant to the requirements of Section 607.1006, Florida Statutes, the
undersigned does hereby make, swear to, adopt and file this Certificate of
Amendment to the Articles of Incorporation of EQUIVEST FINANCE, INC.
("Corporation") which Corporation was incorporated under the laws of the State
of Florida on August 31, 1983, under Charter No. G62115;
1. The Board of Directors has proposed to the shareholders of the
Corporation to increase the number of authorized shares of Common Stock of the
Corporation from 10,000,000, par value of $.05, to 50,000,000, par value $05,
and the Board of Directors has consented to such amendment.
2. The voting groups entitled to vote on the amendment are as follows: (i)
the holders of the Common Stock, and (ii) the holders of the Common Stock,
Convertible Preferred Stock and Series 2 Preferred Stock, voting as a group. No
other groups of shareholders are entitled to vote as a group with respect to the
amendment.
3. A majority of the shareholders in each voting group have consented to
such amendment. Therefore, Article III.A. of the Corporation's Articles of
Incorporation shall be deleted in its entirety and the following inserted in its
place:
"A. 50,000,000 common shares at a par value of $.05 per share and"
4. All other provisions of the Corporation's Articles of Incorporation
shall remain in full force and effect, unaltered except as expressly provided
above.
5. The foregoing amendment to the Articles of Incorporation was adopted by
the Corporation's Board of Directors and a majority of the shareholders
entitled to vote thereon on the 29th day of October, 1997. The number of votes
cast were sufficient for approval.
DATED this 19th day of February, 1998.
EQUIVEST FINANCE, INC.
***CORPORATE SEAL***
By:/s/ Gerald L. Klaben Jr.
---------------------------
Gerald L. Klaben Jr.
Executive Vice President
<PAGE>
STATE OF NEW YORK )
:ss
COUNTY OF ONODAGA )
The foregoing was acknowledged before me this 19th day of February, 1998,
by Gerald L. Klaben, Jr., to me personally known, and he acknowledged before me
that he executed the foregoing Certificate of Amendment, under oath, for the
purposes therein set forth with full authority in the premises.
***NOTARIAL SEAL**** /s/ Jacqueline A. Dacey
--------------------------------
NOTARY PUBLIC, State of New York
JAQUELINE A. DACEY
Notary Public in the State of New York
Qualified in Onondaga County No. 4042359
My Commission Expires Sept, 19, 1998
Plan #001
STANDARDIZED
ADOPTION AGREEMENT
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING
PLAN AND TRUST/CUSTODIAL ACCOUNT
Sponsored by
OnBank & Trust Co.
The Employer named below hereby establishes a Cash or Deferred Profit-Sharing
Plan for eligible Employees as provided in this Adoption Agreement and the
accompanying Basic Prototype Plan and Trust/Custodial Account Basic Plan
Document #04.
1. EMPLOYER INFORMATION
NOTE: If multiple Employers are adopting the Plan, complete this section
based on the lead Employer. Additional Employers may adopt this Plan
by attaching executed signature pages to the back of the Employer's
Adoption Agreement.
(a) NAME AND ADDRESS:
Resort Funding, Inc.
Two Clinton Square
Syracuse, NY 13202
(b) TELEPHONE NUMBER: (315)422-9088
(c) TAX ID NUMBER: 16-1399129
(4) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[x] (iii) Corporation
[ ] (iv) "S" Corporation (formerly known as Subchapter S)
[ ] (v) Other:
1
<PAGE>
Prototype Cash or
Deferred Profit-
Sharing Plan #001
(e) NAME OF INDIVIDUAL AUTHORIZED TO ISSUE INSTRUCTIONS TO THE
TRUSTEE/CUSTODIAN:
Gerald Klaben, James Petrie & Retirement Committee
(f) NAME OF PLAN: Resort Funding, Inc. Profit Sharing & 401k Plan
(g) THREE DIGIT PLAN NUMBER
FOR ANNUAL RETURN/REPORT: 001
2. EFFECTIVE DATE
(a) This is a new Plan having an effective date of January 1, 1997.
(b) This is an amended Plan.
The effective date of the original Plan was ______.
The effective date of the amended Plan is _______________.
(c) If different from above, the Effective Date for the Plan's Elective
Deferral provisions shall be ______________.
3. DEFINITIONS
(a) "Collective or Commingled Funds" (Applicable to Institutional
Trustees only.) Investment in collective or commingled funds as
permitted at paragraph 13.3 (b) of the Basic Plan Document #04 shall
only be made to the following specifically named fund(s):
Funds made available after the execution of this Adoption Agreement
will be listed on schedules attached to the end of this Adoption
Agreement.
(b) "Compensation" Compensation shall be determined on the basis of the:
[ ] (i) Plan Year.
[ ] (ii) Employer's Taxable Year.
2
<PAGE>
Prototype Cash or
Deferred Profit-
Sharing Plan #001
[x] (iii) Calendar Year.
Compensation shall be determined on the basis of the following
safe-harbor definition of Compensation in IRS Regulation Section
1.414(s)-l(c):
[ ] (iv) Code Section 6041 and 6051 Compensation,
[ ] (v) Code Section 3401(a) Compensation, or
[x] (vi) Code Section 415 Compensation.
Compensation [x] shall [ ] shall not include Employer contributions
made pursuant to a Salary Savings Agreement which are not includable
in the gross income of the Employee for the reasons indicated in the
definition of Compensation at 1.12 of the Basic Plan Document #04.
For purposes of the Plan, Compensation shall be limited to
$________, the maximum amount which will be considered for Plan
purposes. [If an amount is specified, it will limit the amount of
contributions allowed on behalf of higher compensated Employees.
Completion of this section is not intended to coordinate with the
$200,000 of Code Section 415(d), thus the amount should be less than
$200,000 as adjusted for cost-of-living increases.]
(c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date on
which an Employee meets the eligibility requirements.
[x] (ii) The earlier of the first day of the Plan Year or the
first day of the seventh month of the Plan Year
coinciding with or following the date on which an
Employee meets the eligibility requirements.
[ ] (iii) The first day of the Plan Year following the date on
which the Employee meets the eligibility requirements.
If this election is made, the Service requirement at
4(a)(ii) may not exceed 1/2 year and the age requirement
at 4(b)(ii) may not exceed 20-1/2.
[ ] (iv) The first day of the month coinciding with or following
the date on which an Employee meets the eligibility
requirements.
[ ] (v) The first day of the Plan Year, or the first day of the
fourth month, or the first day of the seventh month or
the first day of the tenth month,
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of the Plan Year coinciding with or following the date
on which an Employee meets the eligibility requirements.
(d) "Hours of Service" Shall be determined on the basis of the method
selected below. Only one method may be selected. The method selected
shall be applied to all Employees covered under the Plan as follows:
[x] (i) On the basis of actual hours for which an Employee is
paid or entitled to payment.
[ ] (ii) On the basis of days worked.
An Employee shall be credited with ten (10) Hours of
Service if under paragraph 1.42 of the Basic Plan
Document #04 such Employee would be credited with at
least one (1) Hour of Service during the day.
[ ] (iii) On the basis of weeks worked.
An Employee shall be credited with forty-five (45) Hours
of Service if under paragraph 1.42 of the Basic Plan
Document #04 such Employee would be credited with at
least one (1) Hour of Service during the week.
[ ] (iv) On the basis of semi-monthly payroll periods.
An Employee shall be credited with ninety-five (95)
Hours of Service if under paragraph 1.42 of the Basic
Plan Document #04 such Employee would be credited with
at least one (1) Hour of Service during the semi-monthly
payroll period.
[ ] (v) On the basis of months worked.
An Employee shall be credited with one-hundred-ninety
(190) Hours of Service if under paragraph 1.42 of the
Basic Plan Document #04 such Employee would be credited
with at least one (1) Hour of Service during the month.
(e) "Limitation Year" The 12-consecutive month period commencing on
January 1 and ending on December 31.
If applicable, the Limitation Year will be a short Limitation Year
commencing on _____________ and ending on _______________.
Thereafter, the Limitation Year shall end on the date last specified
above.
(f) "Net Profit"
[x] (i) Not applicable (profits will not be required for any
contributions to the Plan).
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[ ] (ii) As defined in paragraph 1.49 of the Basic Plan Document
#04.
[ ] (iii) Shall be defined as:
-------------------------------------------
(Only use if definition in paragraph 1.49 of the Basic
Plan Document #04 is to be superseded.)
(g) "Plan Year" The 12-consecutive month period commencing on January 1
and ending on December 31.
If applicable, the Plan Year will be a short Plan Year commencing on
____ and ending on __________. Thereafter, the Plan Year shall end
on the date last specified above.
(h) "Qualified Early Retirement Age" For purposes of making
distributions under the provisions of a Qualified Domestic Relations
Order, the Plan's Qualified Early Retirement Age with regard to the
Participant against whom the order is entered [ ] shall [x] shall
not be the date the order is determined to be qualified. If "shall"
is elected, this will only allow payout to the alternate payee(s).
(i) "Qualified Joint and Survivor Annuity" The safe-harbor provisions of
paragraph 8.7 of the Basic Plan Document #04 [x] are [ ] are not
applicable. If not applicable, the survivor annuity shall be ___%
(50%, 66-2/3%, 75% or 100%) of the annuity payable during the lives
of the Participant and Spouse. If no answer is specified, 50% will
be used.
(j) "Taxable Wage Base" [paragraph 1.79]
[x] (i) Not Applicable - Plan is not integrated with Social
Security.
[ ] (ii) The maximum earnings considered wages for such Plan Year
under Code Section 3121(a).
[ ] (iii) _______% (not more than 100%) of the amount considered
wages for such Plan Year under Code Section 3121(a).
[ ] (iv) $______, provided that such amount is not in excess of
the amount determined under paragraph 3(j)(ii) above.
[ ] (v) For the 1989 Plan Year $10,000. For all subsequent Plan
Years, 20% of the maximum earnings considered wages for
such Plan Year under Code Section 3121(a).
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NOTE: Using less than the maximum at (ii) may result in a change in the
allocation formula in Section 7.
(k) "Valuation Date(s)" Allocations to Participant Accounts will be done
in accordance with Article V of the Basic Plan Document #04:
(i) Daily (v) Quarterly
(ii) Weekly (vi) Semi-Annually
(iii)Monthly (vii) Annually
(iv) Bi-Monthly
Indicate Valuation Date(s) to be used by specifying option from list
above:
Type of Contribution(s) Valuation Date(s)
----------------------- -----------------
After-Tax Voluntary Contributions [Section 6]
---
Elective Deferrals [Section 7(b)] v
---
Matching Contributions [Section 7(c)] v
---
Qualified Non-Elective Contributions [Section 7(d)] v
---
Non-Elective Contributions [Section 7(e), (f) and (g)] v
---
Minimum Top-Heavy Contributions [Section 7(i)] v
---
(l) "Year of Service"
(i) For Eligibility Purposes: The 12-consecutive month period
during which an Employee is credited with 1000 (not more than
1,000) Hours of Service.
(ii) For Allocation Accrual Purposes: The 12-consecutive month
period during which an Employee is credited with 501 (not more
than 1,000) Hours of Service. (For Plan Years beginning in
1990 and thereafter, if a number greater than 501 is
specified, it will be deemed to be 501.)
(iii) For Vesting Purposes: The 12-consecutive month period during
which an Employee is credited with 1000 (not more than 1,000)
Hours of Service.
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4. ELIGIBILITY REQUIREMENTS
(a) Service:
[ ] (i) The Plan shall have no service requirement.
[x] (ii) The Plan shall cover only Employees having completed at
least one [not more than three (3)] Years of Service. If
more than one (1) is specified, for Plan Years beginning
in 1989 and later, the answer will be deemed to be one
(1).
NOTE: If the eligibility period selected is less than one
year, an Employee will not be required to complete any
specified number of Hours of Service to receive credit
for such period.
(b) Age:
[ ] (i) The Plan shall have no minimum age requirement.
[x] (ii) The Plan shall cover only Employees having attained age
21 (not more than age 21).
(c) Classification:
The Plan shall cover all Employees who have met the age and service
requirements with the following exceptions:
[ ] (i) No exceptions.
[x] (ii) The Plan shall exclude Employees included in a unit of
Employees covered by a collective bargaining agreement
between the Employer and Employee Representatives, if
retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee
Representative" does not include any organization more
than half of whose members are Employees who are owners,
officers, or executives of the Employer.
[ ] (iii) The Plan shall exclude Employees who are nonresident
aliens and who receive no earned income from the
Employer which constitutes income from sources within
the United States.
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(d) Employees on Effective Date:
[ ] (i) Not Applicable. All Employees will be required to
satisfy both the age and Service requirements specified
above.
[x] (ii) Employees employed on the Plan's Effective Date do not
have to satisfy the Service requirements specified
above.
[ ] (iii) Employees employed on the Plan's Effective Date do not
have to satisfy the age requirements specified above.
5. RETIREMENT AGES
(a) Normal Retirement Age:
If the Employer imposes a requirement that Employees retire upon
reaching a specified age, the Normal Retirement Age selected below
may not exceed the Employer imposed mandatory retirement age.
[ ] (i) Normal Retirement Age shall be ____ (not to exceed age
65)
[x] (ii) Normal Retirement Age shall be the later of attaining
age 65 (not to exceed age 65) or the 5 (not to exceed
the 5th) anniversary of the first day of the first Plan
Year in which the Participant commenced participation in
the Plan.
(b) Early Retirement Age:
[ ] (i) Not Applicable.
[x] (ii) The Plan shall have an Early Retirement Age of 55 (not
less than 55) and completion of______ Years of Service.
6. EMPLOYEE CONTRIBUTIONS
[x] (a) Participants shall be permitted to make Elective
Deferrals in any amount from 1 % up to 15 % of their
Compensation.
If (a) is applicable, Participants shall be permitted to
amend their Salary Savings Agreements to change the
contribution percentage as provided below:
[ ] (i) On the Anniversary Date of the Plan,
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|_| (ii) On the Anniversary Date of the Plan and on the first
day of the seventh month of the Plan Year,
|X| (iii) On the Anniversary Date of the Plan and on the first
day following any Valuation Date, or
|_| (iv) Upon 30 days notice to the Employer.
|_| (b) Participants shall be permitted to make after tax Voluntary
Contributions.
|_| (c) Participants shall be required to make after tax Voluntary
Contributions as follows (Thrift Savings Plan):
|_| (i) _______% of Compensation.
|_| (ii) A percentage determined by the Employee on his or her
enrollment form.
|_| (d) If necessary to pass the Average Deferral Percentage Test,
Participants |_| may |_| may not have Elective Deferrals
recharacterized as Voluntary Contributions.
NOTE: The Average Deferral Percentage Test will apply to
contributions under (a) above. The Average Contribution
Percentage Test will apply to contributions under (b) and
(c) above, and may apply to (a).
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
NOTE: The Employer shall make contributions to the Plan in
accordance with the formula or formulas selected below. The
Employer's contribution shall be subject to the limitations
contained in Articles III and X. For this purpose, a
contribution for a Plan Year shall be limited for the
Limitation Year which ends with or within such Plan Year.
Also, the integrated allocation formulas below are for Plan
Years beginning in 1989 and later. The Employer's
allocation for earlier years shall be as specified in its
Plan prior to amendment for the Tax Reform Act of 1986.
(a) Profits Requirement:
(i) Current or Accumulated Net Profits are required for:
|_| (A) Matching Contributions.
|_| (B) Qualified Non-Elective Contributions.
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|X| (C) discretionary contributions.
(ii) No Net Profits are required for:
|X| (A) Matching Contributions.
|_| (B) Qualified Non-Elective Contributions.
|_| (C) discretionary contributions.
NOTE: Elective Deferrals can always be contributed regardless
of profits.
|X| (b) Salary Savings Agreement:
The Employer shall contribute and allocate to each
Participant's account an amount equal to the amount withheld
from the Compensation of such Participant pursuant to his or
her Salary Savings Agreement. If applicable, the maximum
percentage is specified in Section 6 above.
An Employee who has terminated his or her election under the
Salary Savings Agreement other than for hardship reasons may
not make another Elective Deferral:
|_| (i) until the first day of the next Plan Year.
|X| (ii) until the first day of the next valuation period.
|_| (iii) for a period of ____ month(s) (not to exceed 12
months).
|_| (c) Matching Employer Contribution [See paragraphs (h) and (i)]:
|_| (i) Percentage Match: The Employer shall contribute
and allocate to each eligible Participant's
account an amount equal to _____% of the amount
contributed and allocated in accordance with
paragraph 7(b) above and (if checked) __% of |_|
the amount of Voluntary Contributions made in
accordance with paragraph 4.1 of the Basic Plan
Document #04. The Employer shall not match
Participant Elective Deferrals as provided above
in excess of $______ or in excess of ______% of
the Participant's Compensation or if applicable,
Voluntary Contributions in excess of $_____ or in
excess of _______% of the Participant's
Compensation. In no event will the match on both
Elective Deferrals and Voluntary Contributions
exceed a combined amount of $____ or _____%.
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|X| (ii) Discretionary Match: The Employer shall contribute and
allocate to each eligible Participant's account a
percentage of the Participant's Elective Deferral
contributed and allocated in accordance with paragraph
7(b) above. The Employer shall set such percentage prior
to the end of the Plan Year. The Employer shall not
match Participant Elective Deferrals in excess of
$_______ or in excess of _____% of the Participant's
Compensation.
|_| (iii) Tiered Match: The Employer shall contribute and allocate
to each Participant's account an amount equal to ____%
of the first ___% of the Participant's Compensation, to
the extent deferred.
_______% of the next ____% of the Participant's
Compensation, to the extent deferred.
_______% of the next ____% of the Participant's
Compensation, to the extent deferred.
NOTE: Percentages specified in (iii) above may not increase as the
percentage of Participant's contribution increases.
|_| (iv) Flat Dollar Match: The Employer shall contribute and
allocate to each Participant's account $_____ if the
Participant defers at least 1% of Compensation.
|_| (v) Percentage of Compensation Match: The Employer shall
contribute and allocate to each Participant's account
_____% of Compensation if the Participant defers at
least 1% of Compensation.
|_| (vi) Proportionate Compensation Match: The Employer shall
contribute and allocate to each Participant who defers
at least 1% of Compensation, an amount determined by
multiplying such Employer Matching Contribution by a
fraction the numerator of which is the Participant's
Compensation and the denominator of which is the
Compensation of all Participants eligible to receive
such an allocation. The Employer shall set such
discretionary contribution prior to the end of the Plan
Year.
|_| (vii) Qualified Match: Employer Matching Contributions will be
treated as Qualified Matching Contributions to the
extent specified below:
|_| (A) All Matching Contributions.
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|_| (B) None.
|_| (C) ____% of the Employer's Matching Contribution.
|_| (D) up to _____% of each Participant's
Compensation.
|_| (E) The amount necessary to meet the |_| Average
Deferral Percentage (ADP) test, |_| Average
Contribution Percentage (ACP) test, |_| Both
the ADP and ACP tests.
(viii) Matching Contribution Computation Period: The
time period upon which matching contributions
will be based shall be
|_| (A) weekly
|_| (B) bi-weekly
|_| (C) semi-monthly
|X| (D) monthly
|_| (E) quarterly
|_| (F) semi-annually
|_| (0) annually
(ix) Eligibility for Match: Employer Matching Contributions,
whether or not Qualified, will only be made on Employee
Contributions not withdrawn prior to the end of the |X|
valuation period |_|Plan Year.
|X| (d) Qualified Non-Elective Employer Contribution [See paragraphs
(h) and (i)] These contributions are fully vested when
contributed.
The Employer shall have the right to make an additional
discretionary contribution which shall be allocated to each
eligible Employee in proportion to his or her Compensation as
a percentage of the Compensation of all eligible Employees.
This part of the Employer's contribution and the allocation
thereof shall be unrelated to any
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Prototype Cash or
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Employee contributions made hereunder. The amount of Qualified
non-Elective Contributions taken into account for purposes of
meeting the ADP or ACP test requirements is:
|_| (i) All such Qualified non-Elective Contributions.
|X| (ii) The amount necessary to meet |_| the ADP test, |_|
the ACP test. |X| Both the ADP and ACP tests.
Qualified non-Elective Contributions will be made to:
|X| (iii) All Employees eligible to participate.
|_| (iv) Only non-Highly Compensated Employees eligible to
participate.
|X| (e) Additional Employer Contribution Other Than Qualified
Non-Elective Contributions - Non-Integrated [See paragraphs
(h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution which shall be allocated to each
eligible Employee in proportion to his or her Compensation as
a percentage of the Compensation of all eligible Employees.
This part of the Employer's contribution and the allocation
thereof shall be unrelated to any Employee contributions made
hereunder.
|_| (f) Additional Employer Contribution - Integrated Allocation
Formula [See paragraphs (h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution. The Employer's contribution for
the Plan Year plus any forfeitures shall be allocated to the
accounts of eligible Participants as follows:
(i) First, to the extent contributions and forfeitures are
sufficient, all Participants will receive an allocation
equal to 3% of their Compensation.
(ii) Next, any remaining Employer Contributions and
forfeitures will be allocated to Participants who have
Compensation in excess of the Taxable Wage Base (excess
Compensation). Each such Participant will receive an
allocation in the ratio that his or her excess
compensation bears to the excess Compensation of all
Participants. Participants may only receive an
allocation of 3% of excess Compensation.
(iii) Next, any remaining Employer contributions and
forfeitures will be allocated to all Participants in the
ratio that their Compensation plus excess Compensation
bears to the total Compensation plus excess Compensation
of all Participants.
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Prototype Cash or
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Participants may only receive an allocation of up to
2.7% of their Compensation plus excess Compensation,
under this allocation method. If the Taxable Wage Base
defined at Section 3(j) is less than or equal to the
greater of $10,000 or 20% of the maximum, the 2.7% need
not be reduced. If the amount specified is greater than
the greater of $10,000 or 20% of the maximum Taxable
Wage Base, but not more than 80%, 2.7% must be reduced
to 1.3%. If the amount specified is greater than 80% but
less than 100% of the maximum Taxable Wage Base, the
2.7% must be reduced to 2.4%.
NOTE: If the Plan is not Top-Heavy or if the Top-Heavy
minimum contribution or benefit is provided under
another Plan [see Section 11(c)(ii)] covering the
same Employees, sub-paragraphs (i) and (ii) above
may be disregarded and 5.7%. 4.3% or 5.4% may be
substituted for 2.7%, 1.3% or 2.4% where it
appears in (iii) above.
(iv) Next, any remaining Employer contributions and
forfeitures will be allocated to all Participants
(whether or not they received an allocation under the
preceding paragraphs) in the ratio that each
Participant's Compensation bears to all Participants'
Compensation.
|_| (g) Additional Employer Contribution - Alternative Integrated
Allocation Formula [See paragraph (h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution. To the extent that such
contributions are sufficient, they shall be allocated as
follows:
____% of each eligible Participant's Compensation plus ___% of
Compensation in excess of the Taxable Wage Base defined at
Section 3(j) hereof. The percentage on excess compensation may
not exceed the lesser of (i) the amount first specified in
this paragraph or (ii) the greater of 5.7% or the percentage
rate of tax under Code Section 3111(a) as in effect on the
first day of the Plan Year attributable to the Old Age (OA)
portion of the OASDI provisions of the Social Security Act. If
the Employer specifies a Taxable Wage Base in Section 3(j)
which is lower than the Taxable Wage Base for Social Security
purposes (SSTWB) in effect as of the first day of the Plan
Year, the percentage contributed with respect to excess
Compensation must be adjusted. If the Plan's Taxable Wage Base
is greater than the larger of $10,000 or 20% of the SSTWB but
not more than 80% of the SSTWB, the excess percentage is 4.3%.
If the Plan's Taxable Wage Base is greater than 80% of the
SSTWB but less than 100% of the SSTWB, the excess percentage
is 5.4%.
NOTE: Only one plan maintained by the Employer may be integrated
with Social Security.
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Prototype Cash or
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(h) Allocation of Excess Amounts (Annual Additions)
In the event that the allocation formula above results in an
Excess Amount, such excess shall be:
|_| (i) placed in a suspense account accruing no gains or
losses for the benefit of the Participant.
|_| (ii) reallocated as additional Employer contributions
to all other Participants to the extent that they
do not have any Excess Amount.
(i) Minimum Employer Contribution Under Top-Heavy Plans:
For any Plan Year during which the Plan is Top-Heavy, the sum
of the contributions and forfeitures as allocated to eligible
Employees under paragraphs 7(d), 7(e), 7(f), 7(g) and 9 of
this Adoption Agreement shall not be less than the amount
required under paragraph 14.2 of the Basic Plan Document #04.
Top-Heavy minimums will be allocated to:
|X| (i) all eligible Participants.
|_| (ii) only eligible non-Key Employees who are
Participants.
(j) Return of Excess Contributions and/or Excess Aggregate
Contributions:
In the event that one or more Highly Compensated Employees is
subject to both the ADP and ACP tests and the sum of such
tests exceeds the Aggregate Limit, the limit will be satisfied
by reducing the:
|_| (i) the ADP of the affected Highly Compensated
Employees.
|_| (ii) the ACP of the affected Highly Compensated
Employees.
|X| (iii) a combination of the ALP and ACP of the affected
Highly Compensated Employees.
8. ALLOCATIONS TO TERMINATED EMPLOYEES
(a) For Plan Years beginning prior to 1990:
|_| (i) For Plan Years beginning prior to 1990, the
Employer will not allocate Employer related
contributions to any Participant who terminates
employment during the Plan Year.
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|_| (ii) The Employer will allocate Employer related
contributions to Employees who terminate during
the Plan Year as a result of:
|_| (1) Retirement.
|_| (2) Disability.
|_| (3) Death.
|_| (4) Other termination provided that the
Participant has completed a Year of
Service.
|_| (5) Other termination.
(b) For Plan Years beginning in 1990 and thereafter, the Employer will
allocate Employer related contributions to any Participant who is
credited with more than 500 Hours of Service or is employed on the
last day of the Plan Year without regard to the number of Hours of
Service.
The Employer will also allocate Employer related contributions to
any Participant who terminates during the Plan Year without accruing
the necessary Hours of Service if they terminate as a result of:
|X| (i) Retirement.
|X| (ii) Disability.
|X| (iii) Death.
9. ALLOCATION OF FORFEITURES
NOTE: Subsections (a), (b) and (c) below apply to forfeitures of amounts
other than Excess Aggregate Contributions.
(a) Allocation Alternatives:
If forfeitures are allocated to Participants, such allocations shall
be done in the same manner as the Employer's contribution.
|_| (i) Not Applicable. All contributions are always fully
vested.
|X| (ii) Forfeitures shall be allocated to Participants in the
same manner as the Employer's contribution.
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If allocation to other Participants is selected, the
allocation shall be as follows:
|1| Amount attributable to Employer discretionary
contributions and Top-Heavy minimums will be
allocated to:
|_| all eligible Participants under the Plan.
|_| only those Participants eligible for an allocation
of matching contributions in the current year.
|2| Amounts attributable to Employer Matching
contributions will be allocated to:
|X| all eligible Participants.
|_| only those Participants eligible for allocations
of matching contributions in the current year.
|_| (iii) Forfeitures shall be applied to reduce the Employer's
contribution for such Plan Year.
|_| (iv) Forfeitures shall be applied to offset administrative
expenses of the Plan. If forfeitures exceed these
expenses, (iii) above shall apply.
(b) Date for Reallocation:
NOTE: If no distribution has been made to a former Participant,
sub-section (i) below will apply to such Participant even if
the Employer elects (ii), (iii) or (iv) below as its normal
administrative policy.
|_| (i) Forfeitures shall be reallocated at the end of the Plan
Year during which the former Participant incurs his or
her fifth consecutive one year Break In Service.
|_| (ii) Forfeitures will be reallocated immediately (as of the
next Valuation Date).
|_| (iii) Forfeitures shall be reallocated at the end of the Plan
Year during which the former Employee incurs his or her
__ (1st, 2nd, 3rd, or 4th) consecutive one year Break In
Service.
|X| (iv) Forfeitures will be reallocated immediately (as of the
Plan Year end).
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Prototype Cash or
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(c) Restoration of Forfeitures:
If amounts are forfeited prior to five consecutive 1-year Breaks in
Service, the Funds for restoration of account balances will be
obtained from the following resources in the order indicated (fill
in the appropriate number):
[1] (i) Current year's forfeitures.
[3] (ii) Additional Employer contribution.
[2] (iii) Income or gain to the Plan.
(d) Forfeitures of Excess Aggregate Contributions shall be:
|_| (i) Applied to reduce Employer contributions.
|_| (ii) Allocated, after all other forfeitures under the Plan,
to the Matching Contribution account of each non-Highly
Compensated Participant who made Elective Deferrals or
Voluntary Contributions in the ratio which each such
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for such Plan
Year. Such forfeitures cannot be allocated to the
account of any Highly Compensated Employee.
Forfeitures of Excess Aggregate Contributions will be so applied at
the end of the Plan Year in which they occur.
10. CASH OPTION
|_| (a) The Employer may permit a Participant to elect to defer
to the Plan, an amount not to exceed ______% of any
Employer paid cash bonus made for such Participant for
any year. A Participant must file an election to defer
such contribution at least fifteen (15) days prior to
the end of the Plan Year. If the Employee fails to make
such an election, the entire Employer paid cash bonus to
which the Participant would be entitled shall be paid as
cash and not to the Plan. Amounts deferred under this
section shall be treated for all purposes as Elective
Deferrals. Notwithstanding the above, the election to
defer must be made before the bonus is made available to
the Participants.
|_| (b) Not Applicable.
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Prototype Cash or
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11. LIMITATIONS ON ALLOCATIONS
|X| This is the only Plan the Employer maintains or ever maintained;
therefore, this section is not applicable.
|_| The Employer does maintain or has maintained another Plan (including
a Welfare Benefit Fund or an individual medical account [as defined
in Code Section 415(1)(2)], under which amounts are treated as
Annual Additions) and has completed the proper sections below.
Complete (a), (b) and (c) only if the Employer maintains or ever
maintained another qualified plan, including a Welfare Benefit Fund
or an individual medical account [as defined in Code Section
415(1)(2)], in which any Participant in this Plan is (or was) a
participant or could possibly become a participant.
(a) If the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a Master or
Prototype Plan:
|_| (i) the provisions of Article X of the Basic Plan Document
#04 will apply, as if the other plan were a Master or
Prototype Plan.
|_| (ii) Attach provisions stating the method under which the
plans will limit total Annual Additions to the Maximum
Permissible Amount, and will properly reduce any Excess
Amounts, in a manner that precludes Employer discretion.
(b) If a Participant is or ever has been a participant in a Defined
Benefit Plan maintained by the Employer:
Attach provisions which will satisfy the 1.0 limitation of Code
Section 415(e). Such language must preclude Employer discretion.
The Employer must also specify the interest and mortality
assumptions used in determining Present Value in the Defined Benefit
Plan.
(c) The minimum contribution or benefit required under Code Section 416
relating to Top-Heavy Plans shall be satisfied by:
|X| (i) this Plan.
|_| (ii) ________________________________________________
(Name of other qualified plan of the Employer).
19
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Prototype Cash or
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|_| (iii) Attach provisions stating the method under which the
minimum contribution and benefit provisions of Code
Section 416 will be satisfied. If a Defined Benefit Plan
is or was maintained, an attachment must be provided
showing interest and mortality assumptions used in the
Top-Heavy Ratio.
12. VESTING
Employees shall have a fully vested and nonforfeitable interest in any
Employer contribution and the investment earnings thereon made in
accordance with paragraphs (select one or more options) |_| 7(c), |_|
7(e), |_| 7(f), |_| 7(g) and |_| 7(i) hereof. Contributions under
paragraph 7(b), 7(c)(vii) and 7(d) are always fully vested. If one or more
of the foregoing options are not selected, such Employer contributions
shall be subject to the vesting table selected by the Employer.
Each Participant shall acquire a vested and nonforfeitable percentage in
his or her account balance attributable to Employer contributions and the
earnings thereon under the procedures selected below except with respect
to any Plan Year during which the Plan is Top-Heavy, in which case the
Two-twenty vesting schedule [Option (b)(iv)] shall automatically apply
unless the Employer has already elected a faster vesting schedule. If the
Plan is switched to option (b)(iv), because of its Top-Heavy status, that
vesting schedule will remain in effect even if the Plan later becomes
non-Top-Heavy until the Employer executes an amendment of this Adoption
Agreement indicating otherwise.
(a) Computation Period:
The computation period for purposes of determining Years of Service
and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from
Employer contributions:
|_| (i) shall not be applicable since Participants are always
fully vested,
|_| (ii) shall commence on the date on which an Employee first
performs an Hour of Service for the Employer and each
subsequent 12-consecutive month period shall commence on
the anniversary thereof, or
|X| (iii) shall commence on the first day of the Plan Year during
which an Employee first performs an Hour of Service for
the Employer and each subsequent 12-consecutive month
period shall commence on the anniversary thereof.
A Participant shall receive credit for a Year of Service if he or
she completes at least 1,000 Hours of Service [or if lesser, the
number of hours specified at 3(1)(iii) of this
20
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Prototype Cash or
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Adoption Agreement] at any time during the 12-consecutive month
computation period. Consequently, a Year of Service may be earned
prior to the end of the 12-consecutive month computation period and
the Participant need not be employed at the end of the
12-consecutive month computation period to receive credit for a Year
of Service.
(b) Vesting Schedules:
NOTE: The vesting schedules below only apply to a Participant who
has at least one Hour of Service during or after the 1989 Plan
Year. If applicable, Participants who separated from Service
prior to the 1989 Plan Year will remain under the vesting
schedule as in effect in the Plan prior to amendment for the
Tax Reform Act of 1986.
(i) Full and immediate vesting.
Years of Service
----------------
1 2 3 4 5 6 7
- - - - - - -
(ii) ____% 100%
(iii) ____% ___% 100%
(iv) ____% 20% 40% 60% 80% 100%
(v) ____% ___% 20% 40% 60% 80% 100%
(vi) 10% 20% 30% 40% 60% 80% 100%
(vii) ____% ___% ___% ____% 100%
(viii) 25% 50% 75% 100% 100% 100% 100%
---- --- --- ---- ---- ----
NOTE: The percentages selected for schedule (viii) may not be less
for any year than the percentages shown at schedule (v).
|X| All contributions other than those which are fully vested
when contributed will vest under schedule viii above.
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|_| Contributions other than those which are fully vested when
contributed will vest as provided below:
Vesting
Option Selected Type Of Employer Contribution
--------------- -----------------------------
---- 7(c) Employer Match on Salary Savings
---- 7(c) Employer Match on
Employee Voluntary
---- 7(e) Employer Discretionary
---- 7(f) & (g) Employer
Discretionary - Integrated
(c) Service disregarded for Vesting:
|_| (i) Not Applicable. All Service shall be considered.
|X| (ii) Service prior to the Effective Date of this Plan or a
predecessor plan shall be disregarded when computing a
Participant's vested and nonforfeitable interest.
|_| (iii) Service prior to a Participant having attained age 18
shall be disregarded when computing a Participant's
vested and nonforfeitable interest.
13. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility, Hours
of Service shall include Service with the following predecessor
organization(s): (These hours will also be used for vesting purposes.)
Bennett Funding Group, Inc.; it's subsidiaries and affiliates
14. ROLLOVER/TRANSFER CONTRIBUTIONS
(a) Rollover Contributions, as described at paragraph 4.3 of the Basic
Plan Document #04, |X| shall |_| shall not be permitted. If
permitted, Employees |X| may |_| may not make Rollover
Contributions prior to meeting the eligibility requirements for
participation in the Plan.
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(b) Transfer Contributions, as described at paragraph 4.4 of the Basic
Plan Document #04 |X| shall |_| shall not be permitted. If
permitted, Employees |X| may |_| may not Transfer Contributions
prior to meeting the eligibility requirements for participation in
the Plan.
NOTE: Even if available, the Employer may refuse to accept such
contributions if its Plan meets the safe-harbor rules of paragraph
8.7 of the Basic Plan Document #04.
15. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in paragraph 6.9 of the Basic Plan
Document #04, |X| are |_| are not permitted.
16. PARTICIPANT LOANS
Participant loans, as provided for in paragraph 13.5 of the Basic Plan
Document #04, |X| are |_| are not permitted. If permitted, repayments of
principal and interest shall be repaid to |X| the Participant's segregated
account or |_| the general Fund.
17. INSURANCE POLICIES
The insurance provisions of paragraph 13.6 of the Basic Plan Document #04
[ ] shall |X| shall not be applicable.
18. EMPLOYER INVESTMENT DIRECTION
The Employer investment direction provisions, as set forth in paragraph
13.7 of the Basic Plan Document #04, |X| shall |_| shall not be
applicable.
19. EMPLOYEE INVESTMENT DIRECTION
(a) The Employee investment direction provisions, as set forth in
paragraph 13.8 of the Basic Plan Document #04, |X| shall |_| shall not
be applicable.
If applicable, Participants may direct their investments:
|_| (i) among funds offered by the Trustee.
|X| (ii) among any allowable investments.
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(b) Participants may direct the following kinds of contributions and the
earnings thereon (check all applicable):
|X| (i) All Contributions.
|_| (ii) Elective Deferrals.
|_| (iii) Employee Voluntary Contributions (after-tax).
|_| (iv) Employee Mandatory Contributions (after-tax).
|_| (v) Employer Qualified Matching Contributions.
|_| (vi) Other Employer Matching Contributions.
|_| (vii) Employer Qualified Non-Elective Contributions.
|_| (viii) Employer Discretionary Contributions.
|_| (ix) Rollover Contributions.
|_| (x) Transfer Contributions.
|_| (xi) All of above which are checked, but only to the extent
that the Participant is vested in those contributions.
NOTE: To the extent Employee investment direction was previously allowed,
the Trustee shall have the right to either make the assets part of
the general Trust, or leave them as separately invested subject to
the rights of paragraph 13.8.
20. EARLY PAYMENT OPTION
(a) A Participant who separates from Service prior to retirement, death
or Disability |X| may |_| may not make application to the Employer
requesting an early payment of his or her vested account balance.
(b) A Participant who has attained age 59-1/2 and who has not separated
from Service |X| may |_| may not obtain a distribution of his or her
vested Employer contributions. Distribution can only be made if the
Participant is 100% vested.
24
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Prototype Cash or
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(c) A Participant who has attained the Plan's Normal Retirement Age and
who has not separated from Service |X| may |_| may not receive a
distribution of his or her vested account balance.
NOTE: If the Participant has had the right to withdraw his or her
account balance in the past, this right may not be taken away.
Notwithstanding the above, to the contrary, required minimum
distributions will be paid. For timing of distributions, see
item 21(a) below.
21. DISTRIBUTION OPTIONS
(a) Timing of Distributions:
In cases of termination for other than death, Disability or
retirement, benefits shall be paid:
|X| (i) As soon as administratively feasible, following the
close of the valuation period during which a
distribution is requested or is otherwise payable.
|_| (ii) As soon as administratively feasible following the close
of the Plan Year during which a distribution is
requested or is otherwise payable.
|_| (iii) As soon as administratively feasible, following the date
on which a distribution is requested or is otherwise
payable.
|_| (iv) As soon as administratively feasible, after the close of
the Plan Year during which the Participant incurs ____
consecutive one-year Breaks in Service.
|_| (v) Only after the Participant has achieved the Plan's
Normal Retirement Age, or Early Retirement Age, if
applicable.
In cases of death, Disability or retirement, benefits shall be paid:
|X| (vi) As soon as administratively feasible, following the
close of the valuation period during which a
distribution is requested or is otherwise payable.
|_| (vii) As soon as administratively feasible following the close
of the Plan Year during which a distribution is
requested or is otherwise payable.
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|_| (viii) As soon as administratively feasible, following the
date on which a distribution is requested or is
otherwise payable.
(b) Optional Forms of Payment:
|X| (i) Lump Sum.
|X| (ii) Installment Payments.
|_| (iii) Life Annuity*.
|_| (iv) Life Annuity Term Certain*.
Life Annuity with payments guaranteed for __________
years (not to exceed 20 years, specify all applicable).
|_| (v) Joint and |_| 50%, |_| 66-2/3%, |_| 75% or |_| 100%
survivor annuity* (specify all applicable).
|_| (vi) Other form(s) specified:____________________
*Not available in Plan meeting provisions of paragraph 8.7 of Basic
Plan Document #04.
(c) Recalculation of Life Expectancy:
In determining required distributions under the Plan, Participants
and/or their Spouse (Surviving Spouse) |X| shall |_| shall not have
the right to have their life expectancy recalculated annually.
If "shall",
|_| only the Participant shall be recalculated.
|X| both the Participant and Spouse shall be recalculated.
|_| who is recalculated shall be determined by the Participant.
26
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Prototype Cash or
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22. SPONSOR CONTACT
Employers should direct questions concerning the language contained in and
qualification of the Prototype to:
Alfonse Meccariello
(Job Title) Trust Officer
(Phone Number) 315-442-1824
In the event that the Sponsor amends, discontinues or abandons this
Prototype Plan, notification will be provided to the Employer's address
provided on the first page of this Agreement.
27
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Prototype Cash or
Deferred Profit-
Sharing Plan #001
23. SIGNATURES
Due to the significant tax ramifications, the Sponsor recommends that
before you execute this Adoption Agreement, you contact your attorney or
tax advisor, if any.
(a) EMPLOYER:
Name and address of Employer if different than specified in Section 1
above.
This agreement and the corresponding provisions of the Plan and
Trust/Custodial Account Basic Plan Document #04 were adopted by the
Employer the 14th day of January, 1997.
Signed for the Employer by: Gerald Klaben
Title: Executive Vice President & CFO
Signature: /s/ [ILLEGIBLE]
--------------------------
The Employer understands that its failure to properly complete the
Adoption Agreement may result in disqualification of its Plan.
Employer's Reliance: An Employer who maintains or has ever maintained
or who later adopts any Plan [including, after December 31, 1985, a
Welfare Benefit Fund, as defined in Section 419(e) of the Code, which
provides post-retirement medical benefits allocated to separate
accounts for Key Employees, as defined in Section 419A(d)(3)] or an
individual medical account, as defined in Code Section 415(1)(2) in
addition to this Plan may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer who
adopts or maintains multiple Plans wishes to obtain reliance that such
Plan(s) are qualified, application for a determination letter should
be made to the appropriate Key District Director of Internal Revenue.
The Employer understands that its failure to properly complete the
Adoption Agreement may result in disqualification of its plan.
This Adoption Agreement may only be used in conjunction with Basic
Plan Document #04.
28
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Prototype Cash or
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|X| (b) TRUSTEE:
Name of Trustee:
OnBank & Trust Co.
The assets of the Fund shall be invested in accordance with
paragraph 13.3 of the Basic Plan Document #04 as a Trust. As
such, the Employer's Plan as contained herein was accepted by
the Trustee the 14th day of January, 1997.
Signed for the Trustee by: Alfonso Meccariello
Title: Trust Officer
Signature: /s/ Alfonso Meccariello
-----------------------
|_| (c) CUSTODIAN:
Name of Custodian:
The assets of the Fund shall be invested in accordance with
paragraph 13.4 of the Basic Plan Document #04 as a Custodial
Account. As such, the Employer's Plan as contained herein was
accepted by the Custodian the ____ day of ________, 19__.
Signed for the Custodian by:
Title:
Signature:
--------------------- --------------------
(d) SPONSOR
The Employer's Agreement and the corresponding provisions of the Plan
and Trust/Custodial Account Basic Plan Document #04 were accepted by
the Sponsor the 14th day of January 1997.
Signed for the Trustee by: Alfonso Meccariello
Title: Trust Officer
Signature: /s/ Alfonso Meccariello
-----------------------
29
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Prototype Cash or
Deferred Profit-
Sharing Plan #001
|X| (b) TRUSTEE:
Name of Trustee:
OnBank & Trust Co.
The assets of the Fund shall be invested in accordance with
paragraph 13.3 of the Basic Plan Document #04 as a Trust. As
such, the Employer's Plan as contained herein was accepted by
the Trustee the 14th day of January, 1997.
Signed for the Trustee by: Alfonso Meccariello
Title: Trust Officer
Signature: /s/ Alfonso Meccariello
-----------------------
|_| (c) CUSTODIAN:
Name of Custodian:
The assets of the Fund shall be invested in accordance with
paragraph 13.4 of the Basic Plan Document #04 as a Custodial
Account. As such, the Employer's Plan as contained herein was
accepted by the Custodian the ____ day of ________, 19__.
Signed for the Custodian by:
Title:
Signature:
--------------------- --------------------
(d) SPONSOR
The Employer's Agreement and the corresponding provisions of the Plan
and Trust/Custodial Account Basic Plan Document #04 were accepted by
the Sponsor the 14th day of January 1997.
Signed for the Trustee by: Alfonso Meccariello
Title: Trust Officer
Signature: /s/ Alfonso Meccariello
-----------------------
29
SCHEDULE A
EQUIVEST FINANCE, INC.
1997 LONG TERM INCENTIVE PLAN
1. Purpose of the Plan
The purpose of the Plan is to attract, retain and motivate
selected employees and directors who are in a position to have an impact on
the results of the operations of the business of the Company or one or more
of its Subsidiaries. The Company expects that it will benefit from the
additional incentive which such employees and directors will have to increase
the value of the Company's Shares as a result of the Plan.
2. Definitions
The following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as
amended, or any successor thereto.
(b) Award: An Option, Stock Appreciation Right, or Other
Stock-Based Award granted pursuant to the Plan.
(c) Board: The Board of Directors of the Company.
(d) Code: The Internal Revenue Code of 1986, as amended,
or any successor thereto.
(e) Committee: The Compensation Committee of the Board.
(f) Company: Equivest Finance, Inc.
(g) Disability: Except as otherwise provided by the
Committee, the inability to engage in any
substantial gainful activity by reason of a
medically determinable physical or mental impairment
which constitutes a permanent and total disability,
as defined in Section 22(e)(3) of the Code (or any
successor section thereto). The determination
whether a Participant has suffered a Disability
shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A
Participant shall not be considered disabled unless
he or she furnishes such medical or other evidence
of the existence of the Disability as the Committee,
in its sole discretion, may require.
(h) Effective Date: September 1, 1997.
(i) Fair Market Value: On a given date, the arithmetic
mean of the high and low prices of the Shares as
reported on such date on the Composite Tape of the
principal national securities exchange on which such
Shares are listed or admitted to trading, or, if no
<PAGE>
Composite Tape exists for such national securities
exchange on such date, then on the principal
national securities exchange on which such Shares
are listed or admitted to trading, or, if the Shares
are not listed or admitted on a national securities
exchange, the arithmetic mean of the per Share
closing bid price and per Share closing asked price
on such date as quoted on the National Association
of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly
quoted), or, if there is no market on which the
Shares are regularly quoted, the Fair Market Value
shall be the value established by the Committee in
good faith. If no sale of Shares shall have been
reported on such Composite Tape or such national
securities exchange on such date or quoted on the
National Association of Securities Dealers Automated
Quotation System on such date, then the immediately
preceding date on which sales of the Shares have
been so reported or quoted shall be used.
(j) ISO: An Option that is also an incentive stock
option granted pursuant to Section 6(d) of the Plan.
(k) LSAR: A limited stock appreciation right granted
pursuant to Section 7(d) of the Plan.
(l) Option: A stock option granted pursuant to Section 6
of the Plan.
(m) Option Price: The purchase price per Share of an
Option, as determined pursuant to Section 6(a) of
the Plan.
(n) Other Stock-Based Awards: Awards granted pursuant to
Section 8 of the Plan.
(o) Participant: An individual who is selected by the
Committee to participate in the Plan pursuant to
Section 5 of the Plan.
(p) Performance-Based Awards: Certain Other Stock-Based
Awards granted pursuant to Section 8(b) of the Plan.
(q) Plan: The Equivest Finance, Inc. 1997 Stock Option
Plan.
(r) Shares: shares of common stock, par value $0.05 per
share, of the Company.
(s) Stock Appreciation Right: A stock appreciation right
granted pursuant to Section 7 of the Plan.
(t) Subsidiary: A subsidiary corporation of the
Corporation, as defined in Section 424(f) of the
Code (or any successor section thereto).
<PAGE>
3. Shares Subject to the Plan
The total number of Shares that may be issued under the Plan
is 1,600,000 shares. The maximum number of Shares for which Awards may be
granted during a calendar year to any one Participant shall be 400,000. The
Shares may consist, in whole or in part, of unissued Shares or treasury
Shares. The issuance of Shares or the payment of cash upon the exercise of
an Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may
be granted again under the Plan.
4. Administration
The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are each (a) "non-
employee directors" within the meaning of Rule 16b-3 under the Act (or any
successor rule thereto) and (b) "outside directors" within the meaning of
Section 162(m) of the Code (or any successor section thereto). The Committee
shall have the authority to select the Participants to be granted Awards
under the Plan, to determine the size and terms of an Award and to determine
the time when grants of Awards will be made. The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan. Any decision of
the Committee shall lie within its sole and absolute discretion and shall be
final, conclusive and binding on all parties concerned.
5. Eligibility
The Committee may, in its sole discretion, designate those
person(s) who shall be Participant(s) in the Plan. Participants shall be
selected from among the employees and directors of the Company and any of its
Subsidiaries who are in a position to have an impact on the results of the
operations of the Company or one or more of its Subsidiaries; provided that
ISOs may only be granted to employees of the Company or its Subsidiaries.
6. Terms and Conditions of Options
Options granted under the Plan shall be, as determined by
the Committee, non-qualified, incentive or other stock options for federal
income tax purposes, as evidenced by the related Option agreements. Options
granted under the Plan shall be subject to the following terms and
conditions:
(a) Option Price. The Option Price per Share shall be
determined by the Committee.
(b) Exercisability of Options. Options granted under the
Plan shall be exercisable at such time and upon such terms and conditions as
may be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
(c) Method of Exercise. Except as otherwise provided in
the Plan or in an Award agreement, an Option may be exercised for all, or
from time to time any part, of the Shares for which it is then exercisable.
For purposes of this Section 6 of the Plan, the exercise date of an Option
<PAGE>
shall be the later of the date a notice of exercise is received by the
Company and, if applicable, the date payment is received by the Company
pursuant to clauses (i), (ii) or (iii) in the following sentence. The
purchase price for the Shares as to which an Option is exercised shall be
paid to the Company in full at the time of exercise at the election of the
Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to
the aggregate Option Price for the Shares being purchased and satisfying such
other requirements as may be imposed by the Committee, (iii) partly in cash
and partly in such Shares, (iv) through the withholding of Shares (which
would otherwise be delivered to the Participant) with an aggregate Fair
Market Value on the exercise date equal to the aggregate Option Price or (v)
through the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the aggregate Option Price for the
Shares being purchased. No Participant shall have any rights to dividends or
other rights of a stockholder with respect to Shares subject to an Option
until the Shares have been issued to the Participant. A Participant may, if
and to the extent permitted by the Committee, elect to defer payment of an
Award.
(d) ISOs. The Committee may grant Options under the Plan
that are intended to be ISOs. Such ISOs shall comply with the requirements
of Section 422 of the Code (or any successor section thereto). No ISO may be
granted to any Participant who at the time of such grant, owns more than ten
percent of the total combined voting power of all classes of stock of the
Company or of any Subsidiary, unless (i) the Option Price for such ISO is at
least 110% of the Fair Market Value of a Share on the date the ISO is granted
and (ii) the date on which such ISO terminates is a date not later than the
day preceding the fifth anniversary of the date on which the ISO is granted.
Any Participant who disposes of Shares acquired upon the exercise of an ISO
either (i) within two years after the date of grant of such ISO or (ii)
within one year after the transfer of such Shares to the Participant, shall
notify the Company of such disposition and of the amount realized upon such
disposition.
(e) Deferral. The Committee may develop procedures for a
Participant to defer receipt of Shares otherwise subject to Options granted
hereunder.
7. Terms and Conditions of Stock Appreciation Rights
(a) Grants. The Committee also may grant (i) a Stock
Appreciation Right independent of an Option or (ii) a Stock Appreciation
Right in connection with an Option, or a portion thereof. A Stock
Appreciation Right granted pursuant to clause (ii) of the preceding sentence
(A) may be granted at the time the related Option is granted or at any time
prior to the exercise or cancellation of the related Option, (B) shall cover
the same Shares covered by an Option (or such lesser number of Shares as the
Committee may determine) and (C) shall be subject to the same terms and
conditions as such Option except for such additional limitations as are
contemplated by this Section 7 (or such additional limitations as may be
included in an Award agreement).
(b) Terms. The exercise price per Share of a Stock
Appreciation Right shall be an amount determined by the Committee but in no
event shall such amount be less than the greater of (i) the Fair Market Value
of a Share on the date the Stock Appreciation Right is granted or, in the
<PAGE>
case of a Stock Appreciation Right granted in conjunction with an Option, or
a portion thereof, the Option Price of the related Option and (ii) an amount
permitted by applicable laws, rules, by-laws or policies of regulatory
authorities or stock exchanges. Each Stock Appreciation Right granted
independent of an Option shall entitle a Participant upon exercise to an
amount equal to (i) the excess of (A) the Fair Market Value on the exercise
date of one Share over (B) the exercise price per Share, times (ii) the
number of Shares covered by the Stock Appreciation Right. Each Stock
Appreciation Right granted in conjunction with an Option, or a portion
thereof, shall entitle a Participant to surrender to the Company the
unexercised Option, or any portion thereof, and to receive from the Company
in exchange therefor an amount equal to (i) the excess of (A) the Fair Market
Value on the exercise date of one Share over (B) the Option Price per Share,
times (ii) the number of Shares covered by the Option, or portion thereof,
which is surrendered. The date a notice of exercise is received by the
Company shall be the exercise date. Payment shall be made in Shares or in
cash, or partly in Shares and partly in cash, valued at such Fair Market
Value, all as shall be determined by the Committee. Stock Appreciation
Rights may be exercised from time to time upon actual receipt by the Company
of written notice of exercise stating the number of Shares subject to an
exercisable Option with respect to which the Stock Appreciation Right is
being exercised. No fractional Shares will be issued in payment for Stock
Appreciation Rights, but instead cash will be paid for a fraction or, if the
Committee should so determine, the number of Shares will be rounded downward
to the next whole Share.
(c) Limitations. The Committee may impose, in its
discretion, such conditions upon the exercisability or transferability of
Stock Appreciation Rights as it may deem fit.
(d) Limited Stock Appreciation Rights. The Committee may
grant LSARs that are exercisable upon the occurrence of specified contingent
events. Such LSARs may provide for a different method of determining
appreciation, may specify that payment will be made only in cash and may
provide that any related Awards are not exercisable while such LSARs are
exercisable. Unless the context otherwise requires, whenever the term "Stock
Appreciation Right" is used in the Plan, such term shall include LSARs.
8. Other Stock-Based Awards
(a) Generally. The Committee, in its sole discretion, may
grant Awards of Shares, Awards of restricted Shares and Awards that are
valued in whole or in part by reference to, or are otherwise based on the
Fair Market Value of, Shares ("Other Stock-Based Awards"). Such Other Stock-
Based Awards shall be in such form, and dependent on such conditions, as the
Committee shall determine, including, without limitation, the right to
receive one or more Shares (or the equivalent cash value of such Shares) upon
the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Other Stock-Based Awards
may be granted alone or in addition to any other Awards granted under the
Plan. Subject to the provisions of the Plan, the Committee shall determine
to whom and when Other Stock-Based Awards will be made, the number of Shares
to be awarded under (or otherwise related to) such Other Stock-Based Awards;
whether such Other Stock-Based Awards shall be settled in cash, Shares or a
combination of cash and Shares; and all other terms and conditions of such
Awards (including, without limitation, the vesting provisions thereof).
<PAGE>
(b) Performance-Based Awards. Notwithstanding anything to
the contrary herein, certain Other Stock-Based Awards granted under this
Section 8 may be granted in a manner which is deductible by the Company under
Section 162(m) of the Code (or any successor section thereto) ("Performance-
Based Awards"). A Participant's Performance-Based Award shall be determined
based on the attainment of written performance goals approved by the
Committee for a performance period established by the Committee (i) while the
outcome for that performance period is substantially uncertain and (ii) no
more than 90 days after the commencement of the performance period to which
the performance goal relates or, if less, the number of days which is equal
to 25 percent of the relevant performance period. The performance goals,
which must be objective, shall be based upon one or more of the following
criteria: (i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net income;
(iii) operating income; (iv) earnings per Share; (v) book value per Share;
(vi) return on stockholders' equity; (vii) expense management; (viii) return
on investment; (ix) improvements in capital structure; (x) profitability of
an identifiable business unit or product; (xi) maintenance or improvement of
profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or
sales; (xv) costs; (xvi) cash flow; (xvii) working capital and (xviii) return
on assets. The foregoing criteria may relate to the Company, one or more of
its Subsidiaries or one or more of its divisions or units, or any combination
of the foregoing, and may be applied on an absolute basis and/or be relative
to one or more peer group companies or indices, or any combination thereof,
all as the Committee shall determine. In addition, to the degree consistent
with Section 162(m) of the Code (or any successor section thereto), the
performance goals may be calculated without regard to extraordinary items.
The maximum amount of a Performance-Based Award to any Participant with
respect to a fiscal year of the Company shall be 400,000 Shares. The
Committee shall determine whether, with respect to a performance period, the
applicable performance goals have been met with respect to a given
Participant and, if they have, to so certify and ascertain the amount of the
applicable Performance-Based Award. No Performance-Based Awards will be paid
for such performance period until such certification is made by the
Committee. The amount of the Performance-Based Award actually paid to a
given Participant may be less than the amount determined by the applicable
performance goal formula, at the discretion of the Committee. The amount of
the Performance-Based Award determined by the Committee for a performance
period shall be paid to the Participant at such time as determined by the
Committee in its sole discretion after the end of such performance period;
provided, however, that a Participant may, if and to the extent permitted by
the Committee and consistent with the provisions of Section 162(m) of the
Code, elect to defer payment of a Performance-Based Award.
9. Tax Withholding
The Committee shall have the right to require payment of any
federal, state, local or foreign income or other taxes required to be
withheld with respect to the exercise or payment of an Award. Unless the
Committee specifies otherwise, the Participant may elect to pay a portion or
all of such withholding taxes by (a) delivery in Shares or (b) having Shares
withheld by the Company from any Shares that would have otherwise been
received by the Participant. The number of Shares so delivered or withheld
shall have an aggregate Fair Market Value sufficient to satisfy the
applicable withholding taxes.
<PAGE>
10. Amendments or Termination
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which, (a) without the
approval of the stockholders of the Company, would (except as is provided in
Section 11 of the Plan), (i) increase the total number of Shares reserved for
the purposes of the Plan, (ii) change the maximum number of Shares for which
Awards may be granted to any Participant, (iii) materially increase the
benefits accruing to Participants under the Plan or (iv) materially modify
the eligibility requirements for participation in the Plan, or (b) without
the consent of a Participant, would impair any of the rights or obligations
under any Award theretofore granted to such Participant under the Plan;
provided, however, that the Committee may amend the Plan in such manner as it
deems necessary to permit the granting of Awards meeting the requirements of
the Code or other applicable (United States or foreign) laws.
11. No Right to Employment
The granting of an Award under the Plan shall impose no
obligation on the Company or any Subsidiary to continue the employment of a
Participant or to make any additional Awards to the Participant and shall not
lessen or affect the Company's or Subsidiary's right to terminate the
employment of such Participant.
12. Successors and Assigns
The Plan shall be binding on all successors and assigns of
the Company and a Participant, including, without limitation, the estate of
such Participant and the executor, administrator or trustee of such estate,
or any receiver or trustee in bankruptcy or representative of the
Participant's creditors.
13. Nontransferability of Awards
Unless otherwise so provided by the Committee, an Award
shall not be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect.
14. Adjustments Upon Certain Events
Notwithstanding any provision in the Plan to the contrary,
in the event of any change in the outstanding Shares by reason of any Share
dividend or split, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of Shares or other corporate exchange, or
any distribution to stockholders of Shares other than regular cash dividends,
the Committee in its sole discretion and without liability to any person may
make such substitution or adjustment, if any, as it deems to be equitable, as
to (i) the number or kind of Shares or other securities issued or reserved
for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the
Option Price and/or (iii) any other affected terms of such Awards.
<PAGE>
15. Choice of Law
The Plan shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the choice of law
provisions thereof.
16. Term of the Plan
The Plan shall be effective as of the Effective Date. No
Award may be granted under the Plan after the tenth anniversary of the date
the Plan is adopted by the Board, but Awards theretofore granted may extend
beyond that date.
EMPLOYMENT AGREEMENT
AGREEMENT, made as of May 29, 1997, by and between Resort Funding,
Inc., a corporation organized under the laws of the State of Delaware (the
"Company"), Thomas J. Hamel ("Executive"), and, solely for the purposes of
Section 3.4, Richard C. Breeden, Trustee of the Bennett Funding Group, Inc.
("BFG") and Bennett Management & Development Corporation ("BMDC") (the
"Trustee").
RECITALS
In order to induce Executive to continue to serve as a senior
executive officer of the Company and its affiliates, the Company desires to
provide Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
The Company recognizes that the possibility of a change of control
of the Company exists and that such possibility creates an uncertainty on the
part of Executive whether to continue employment or to accept other offers of
employment.
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to induce
Executive to accept employment and to ensure Executive's continued availability
to the Company in the event of a change of control; and Executive is willing to
perform services for the Company on the terms and conditions set forth in this
Agreement.
Executive acknowledges that this Agreement is the sole existing
employment agreement between Executive and the Company, and that it nullifies
and supersedes all previous contracts,
<PAGE>
2
agreements and understandings governing the terms of Executive's employment with
the Company.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
Subject to the terms and conditions of this Agreement:
1.1 The Company agrees to employ Executive during the term hereof
as President and Chief Operating Officer ("COO") of the Company. Executive does
hereby accept such employment and agrees to perform the duties of such office.
Executive's duties will include all of those generally associated with such
position, subject to the direction and assignment of the Board of Directors of
the Company and its Chief Executive Officer ("CEO"). However, under no
circumstances shall the duties assigned to Executive be such as to require
relocation of his residence or a diminution of his executive status.
Specifically, Executive shall have the customary powers, responsibilities and
authority of other persons having similar positions at corporations of the size,
type and nature of the Company, as they exist from time to time and such other
duties and authority as shall be determined from time to time by the CEO or the
Board, consistent with the aforementioned status.
1.2 Executive hereby accepts employment by the Company in the
position specified in Section 1.1 hereof and agrees to devote his full working
time and efforts, to the best of his ability, experience and talent, to the
performance of services, duties and responsibilities in connection therewith.
Nothing in
<PAGE>
3
this Agreement shall preclude Executive from engaging, consistent with his
duties and responsibilities hereunder, in charitable and community affairs, from
managing his personal investments, or from serving, subject to approval of the
Board, as a member of a board of directors or as a trustee of other companies,
associations or entities.
1.3 In addition to those duties previously enumerated, Executive
shall be responsible for the supervision of any sales representatives that the
Company may hire from time to time and shall be responsible for the recruitment
and retention of such representatives, subject to the approval of the Company's
chief executive officer.
2. Term of Employment.
Executive's term of employment under this Agreement shall commence
on the date hereof and, subject to the terms hereof, shall terminate on the
earlier of (i) the third anniversary of the date hereof (the "Termination
Date"); (ii) the date Executive's employment pursuant to this Agreement
terminates; or (iii) the date Executive dies or becomes totally disabled.
Executive shall be considered totally disabled if he is unable to perform in all
material respects his duties and responsibilities to the Company, by reason of a
physical or mental disability or infirmity which is reasonably expected to be
permanent. On the Termination Date and each anniversary thereof, the Termination
Date shall be extended for a period of one (1) additional year unless either
party shall have given written notice to the other party not less than ninety
(90) days prior to
<PAGE>
4
such date that the Termination Date shall not be so extended. Upon any such
extension, references to the Termination Date shall be deemed to be references
to the Termination Date as so extended.
3. Salary and Other Compensation.
3.1 The Company shall pay Executive a base salary at an annual rate
of $220,000, said sum to be paid in equal weekly installments or otherwise
according to the Company's normal practices in paying its employees.
3.2 Executive's base salary shall be computed and paid on the basis
of a calendar year, and shall be prorated for any portion thereof. Such base
salary shall be reviewed by the Board at least once in every twelve-month period
during this Agreement's term and may be increased (but not decreased) in their
discretion, but in any case shall be increased by an amount, if any, which, when
expressed as a percentage of current base salary, is equal to any percentage
increase in the urban consumer price index over the preceding twelve-month
period as published by the United States government. As increased, such
increased amount shall constitute Executive's base salary.
3.3 In addition to the base salary provided in Section 3.1, Executive
shall receive a bonus, which for 1997 shall be paid in the following manner: two
lump sum payments of $40,000 each to be made on May 1 and November 1, 1997. For
years after 1997, Executive's bonus shall equal at least $80,000, and shall be
based on performance measures agreed to by the parties. Such bonuses shall be
paid in lieu of any commissions that Executive
<PAGE>
5
previously earned on the amounts of consumer timeshare interval financing
contracts submitted by developers pursuant to agreements entered into between
the Company and developers resulting from the Executive's sales and marketing
efforts.
3.4 (a) Subject to any approvals of the Bankruptcy Court for the
Northern District of New York that may be appropriate, the Trustee hereby agrees
(i) to execute a written consent of shareholder in favor of (A) the adoption of
a stock option plan (the "Plan") for employees of sufficient size to provide for
the issuance, at a minimum, of the Options and (B) an amendment of the
Certificate of Incorporation (the "Amendment") that would provide sufficient
shares to be available for issuance pursuant to a stock option plan, (ii) to
recommend to the Board the issuance of stock options (the "Options") covering
300,000 shares of the Company's common stock (the "Option Shares") to Executive,
and to use his best efforts to gain the approval of the Board, and (iii) to any
corporate action necessary to the grant of the Option Shares. The Options shall
have an exercise price of $1.00 per share, which the parties believe is the
appropriate fair market value of such stock at the time of the negotiation of
this Agreement, and shall expire to the extent not previously exercised, on the
fifth anniversary of the date of the grant. The Options shall vest in Executive
as to 150,000 Option Shares on the date which shall be 18 months from the date
hereof if Executive is still employed by the Company 18 months after the date
hereof, and as to 150,000 Option Shares on the date which shall be the third
anniversary of the date hereof if Executive is
<PAGE>
6
still employed by the Company on such anniversary. If Executive's employment
with the Company shall terminate for any reason after the vesting of any Options
but before the exercise thereof, such Options shall expire 60 days after the
date Executive's employment terminates unless previously exercised. The Options
may be exercised by Executive at any time after vesting and before expiration by
delivery of notice to the Company on such reasonable notice as the Company may
require, and upon tender of the exercise price thereof. The number of Options
shall be adjusted in the event of any subsequent issuances of stock at below the
then-current market price in a manner that the Board shall determine to provide
a fair and appropriate offset for the dilution caused by any such issuance of
stock.
(b) Upon reconstitution of the Board with not less than two duly
elected members other than Executive at the initial meeting of such
reconstituted Board following shareholder approval of the Plan and the
Amendment, the Trustee shall recommend to the Board the grant of the Options and
shall seek the opinion of the Board as to the level and nature of stock
incentives that should be provided thereafter to Executive and other persons. If
an award of Options in an amount not less than the number of Option Shares
provided herein, on the terms provided herein, is not approved by the Board
within 90 days after the initial meeting thereof, Executive shall be released at
his sole discretion from the obligations under this Agreement, which shall have
no further force and effect.
<PAGE>
7
(c) The Company and Executive agree that for years after 1997,
Executive's total compensation should include an incentive component, such as
stock options, bonuses, etc. Both parties agree to revisit this issue one year
from the date hereof and to negotiate a mutually agreeable incentive
compensation structure.
4. Employee Benefits.
The Company shall provide Executive during the term of his
employment hereunder coverage (commensurate with his position in the Company)
under any employee benefit programs, plans and practices, subject to the terms
thereof, which the Company makes available to its senior executive officers.
Executive shall also be entitled to a vacation with pay for four weeks during
each year of this Agreement, of which not more than two weeks shall be taken at
any one time. Any vacations shall be taken at such times as are mutually
convenient for the Company and Executive. Unused vacation time will accrue from
year to year per Company policy, which currently permits employees to carry over
up to one week of unused vacation into the first quarter of the succeeding year.
Executive shall receive family medical coverage from the Company, at
a cost as provided to all other employees. The Executive, at his sole option and
expense, may elect to enroll in the Company's provided dental coverage.
The Company shall pay for and provide Life Insurance for the
Executive. The amount of Life Insurance coverage shall
<PAGE>
8
be the greater of $600,000 or the greatest amount of coverage provided to any of
the Company's officers or directors.
5. Expenses.
Executive is authorized to incur reasonable expenses in carrying out
his duties and responsibilities under this Agreement, including, without
limitation, expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures in accordance with Company policy.
6. Termination of Employment.
6.1 (a) The Company may terminate Executive's employment at any time
for any reason, and Executive may terminate his employment for any reason at any
time upon 90 days' prior written notice to the Company.
(b) If prior to the Termination Date, as then in effect, Executive
resigns for Good Reason arising following a Change of Control or is terminated
by the Company for any reason other than for Cause, then Executive, provided he
executes a release in the form attached hereto as Exhibit A, shall be entitled
to receive a cash lump sum severance amount equal to 100% of the remaining
then-current base salary under Sections 3.1 and 3.2 and bonus under Section 3.3
due through the end of the term of the Agreement, plus the immediate vesting of
all outstanding Options remaining in effect at that time; provided, however, if
such termination or resignation occurs after the third anniversary of the date
hereof, then Executive shall
<PAGE>
9
instead be entitled to receive a cash lump sum severance amount equal to 100% of
the remaining outstanding base salary under Sections 3.1 and 3.2 and bonus under
Section 3.3 due for the year of termination, plus the immediate vesting of all
outstanding Options remaining in effect at that time.
(c) Executive understands and agrees that he shall not be entitled
to any further notice, compensation or indemnity upon the termination of this
Agreement other than the amounts specified in this paragraph. Executive shall
not have any obligation to seek comparable employment following such termination
or resignation. In no event shall Executive be entitled to any payment hereunder
if he resigns on account of retirement, or if his employment terminates as a
result of death or total disability (as defined in Section 2), other than
benefits normally due to the Company's employees.
(d) "Cause" shall mean:
(i) gross neglect of or willful and continuing refusal to perform
substantially Executive's duties (other than due to
disability);
(ii) a breach of the non-competition or confidentiality provisions
contained in Section 11 or 12 of this Agreement;
(iii) willful engaging in conduct which is demonstrably injurious to
the Company or the Company's subsidiaries or affiliates; or
(iv) a conviction or plea of guilty or nolo contendere to a felony
or a misdemeanor involving moral turpitude.
(e) "Good Reason" shall mean the resignation of Executive from
employment by the Company as a result of a reduction in his aggregate
compensation, or a diminution in his
<PAGE>
10
duties or responsibilities with, or reporting responsibility within, the Company
(whether in its current structure or as part of a larger organization), unless
due to a promotion, without his express prior written consent.
(f) A "Change of Control" shall mean any of the following events:
(i) the acquisition by any "person" or "group" (as such terms are
used in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), other than the
Company, its current stockholders, a majority-owned subsidiary
of either, the Trustee, or existing creditors of BFG, BMDC, or
any of their respective subsidiaries or affiliates, of the
"beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 50% or more of the
combined voting power of the Company's or its parent's
then-outstanding securities;
(ii) any consolidation or merger of the Company or its parent in
which either the Company or its parent is not the continuing
or surviving corporation or pursuant to which shares of the
stock of the Company or its parent (the "Stock") are converted
into cash, securities or other property, other than a merger
in which the holders of the Stock immediately prior to such
merger have ownership of at least 50% of the stock of the
surviving corporation immediately after such merger;
(iii) any sale, exchange or other transfer in one transaction or a
series of related transactions of all or substantially all the
assets of the Company or its parent other than a transfer of
assets to a majority-owned subsidiary of the Company or its
parent, other than a distribution by the parent of all the
Stock of the Company;
(iv) approval by the holders of the Stock or the Company's parent
of any plan or proposal for the liquidation or dissolution of
the Company; or
(v) the filing by the Company of a case under the Bankruptcy Code,
other than a pre-packaged bankruptcy, filed on the motion of
Richard C. Breeden, in which it is proposed that this
Agreement be continued, and the appointment of a bankruptcy
trustee for the Company. In any such
<PAGE>
11
case, prior to the filing of such case, the Company agrees to
confess judgment in Executive's favor in an amount equal to
the outstanding compensation then due under this Agreement.
Notwithstanding the foregoing, however, a Change of Control shall not be deemed
to occur merely by reason of an acquisition of Company securities by, or any
consolidation, merger, or exchange of securities with, any entity that,
immediately prior to such acquisition, consolidation, merger or exchange of
securities, was a corporation of which the Company or its parent owned directly
or indirectly at least 80% of the capital stock or was an unincorporated entity
with respect to which the Company or its parent has, directly or indirectly, an
equivalent degree of ownership, or a distribution of stock to holders of stock
or indebtedness of the Company or its parent.
(g) The Company acknowledges that Executive is a key member of the
management team of the Company and therefore agrees that if the Company should
entertain a formal offer for the acquisition of a controlling stake of its
voting shares or all or substantially all of its assets, then it will inform
Executive of such an offer and to invite him to submit a competing offer.
(h) If, prior to the third anniversary of the date hereof but
subsequent to the reconstitution of the Board, the Trustee ceases to be a member
of the Board other than by reason of death, disability or voluntary resignation,
then Executive may terminate his employment upon 90 days' prior written notice
to the Company. In such event, if Executive terminates his employment, then
Executive shall not be entitled to any severance
<PAGE>
12
payments under Section 6.1(b) or subject to the provisions of Section 12.
6.2 In the event the Company determines that Cause exists, it shall
notify Executive. Executive may be terminated for Cause upon 45 days prior
notice. Prior to the effectiveness of any such termination, Executive shall be
provided an opportunity (along with his counsel) to make a presentation as to
why such termination is inappropriate, unless within thirty (30) days after
receiving such notice, Executive shall have cured Cause to the reasonable
satisfaction of the Company. If notice is not given within 45 days after event
giving rise to cause, such cause shall be deemed waived.
6.3 Notice of Good Reason shall be given at least 30 days prior to
the intended termination date during which the Company shall have the
opportunity to cure the Good Reason during the first 30 days of such notice
period. If notice is not given within 45 days after the event giving rise to
Good Reason, such Good Reason shall be deemed waived.
6.4 In no event shall Executive be entitled to any severance if he
resigns without Good Reason or is terminated by the Company for Cause.
7. Notices.
All notices or communications hereunder shall be in writing,
addressed as follows:
To the Company:
Resort Funding, Inc.
2 Clinton Square
Syracuse, New York 13202
Attention: Edward J. Gaudino, Esq., General Counsel
<PAGE>
13
with a copy to:
The Honorable Richard C. Breeden, Trustee
Bennett Funding Group, Inc.
2 Clinton Square
Syracuse, New York 13202
To Executive:
227 Brattle Road
Syracuse, New York 13203
with a copy to:
Charles R. McCarthy. Jr.
O'Connor & Hannan, L.L.P.
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Any such notice or communication shall be sent certified or registered mail,
return receipt requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered as described
above), and the actual date of mailing shall constitute the time at which
notice was given.
8. Separability; Legal Fees.
If any provision of this Agreement shall be declared to be invalid
or unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof, which shall remain in full force and
effect. In addition, the Company shall bear, or reimburse Executive for, all
reasonable legal fees incurred in connection with entering into this Agreement,
up to $12,500.
9. Assignment.
This Agreement shall be binding upon and inure to the benefit of
the heirs and representatives of Executive and the
<PAGE>
14
assigns and successors of the Company, but neither this Agreement nor any rights
or obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the laws of
intestate succession) or by the Company, except that the Company, with the
written consent of Executive, may assign this Agreement to any successor
(whether by merger, purchase or otherwise) to all or substantially all of the
stock, assets or businesses of the Company.
10. Amendment.
This Agreement may only be amended by written agreement of the
parties hereto.
11. Nondisclosure of Confidential Information.
During the period commencing on the date hereof and following the
date Executive's employment with the Company terminates, Executive shall not,
unless and to the extent that the Company (and their successors and assigns)
otherwise have consented in writing, divulge, disclose or make accessible to any
other person, firm, partnership, corporation, association or other entity any
Confidential Information pertaining to the Company's business (including that of
its subsidiaries), except (a) while employed by the Company, in the business of
and for the benefit of the Company, or (b) when required to do so by a court of
competent jurisdiction or an individual duly appointed thereby, by any
administrative body or legislative body (including a committee thereof) having
supervisory authority over such business, or by any administrative body or
legislative body (including a committee thereof) with jurisdiction to order
<PAGE>
15
Executive to divulge, disclose or make accessible such information.
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company and its affiliates that
is not otherwise available to the public. Confidential Information shall also
include any such information which has become publicly available through any
breach of fiduciary duty. Executive agrees that upon termination of his
employment with the Company, for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters, and other
data and all copies thereof or therefrom, in any way relating to the business of
the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries.
12. Non-Competition.
During the period commencing on the date hereof and ending on the
date of the later of (a) the third anniversary of the date hereof, or (b) the
date Executive's employment terminates, or one year following such later date if
Executive terminates his employment without Good Reason following the second
anniversary of the date hereof, Executive covenants and agrees that, unless and
to the extent that the Company and its parent (and their successors and assigns)
otherwise have consented in writing, he shall not, directly or indirectly, be
employed by, consult with or otherwise perform services for, own,
<PAGE>
16
manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected with, in any manner, or become a
director, trustee, partner of or adviser to, any Prohibited Entity (as defined
herein). For purposes hereof, a "Prohibited Entity" means any person, firm,
corporation, partnership, association or other entity: engaged in any business
in which any of the Company (and its subsidiaries, successors and assigns)
compete or have plans to compete as of the date Executive's employment
terminates; or, which engages in, or owns, invests in, operates, manages or
controls any venture, enterprise or entity that directly or indirectly engages
or proposes to engage in, any business or activity that relates in any way
whatsoever to timeshare lending, the timeshare lending industry. However,
ownership or acquisition by Executive of an aggregate of less than 5% of the
outstanding stock of any publicly traded company shall not, considered alone,
constitute a violation of this Section.
Executive further covenants and agrees that during such period,
Executive will not, either directly or indirectly or in concert with others,
employ any employee, agent or representative of the Company or its affiliates
(including successors and assigns) who served in such capacity at any time
between the date hereof and the date Executive's employment terminates, or seek
to influence (including by soliciting their employment by other persons, or
otherwise) any such individual to terminate their relationship with such entity.
<PAGE>
17
13. Remedies For Violations of Section 11 or 12.
(a) Executive and the Company agree that the covenants in Sections
11 and 12 are reasonable covenants under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction such restraints
are not reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of such covenants as
to the court shall appear not reasonable and to enforce the remainder of the
covenants as so amended.
(b) Executive agrees that any breach of the covenants contained in
Section 11 or 12 would irreparably injure the Company or its affiliates.
Accordingly, the Company (or its affiliates or their successors and assigns)
may, in addition to pursuing any other remedies it or they may have in law or in
equity, obtain an injunction against Executive from any court having
jurisdiction over the matter, restraining any further violation of this
Agreement by Executive.
14. Limitation on Trustee's Liabilities.
The Trustee is a party to this Agreement solely as the Trustee of
BFG and BMDC, and shall not have any personal responsibilities or liabilities
under this Agreement. The Trustee's obligations under this Agreement are as the
Trustee of BFG and BMDC, and those obligations are expressly set forth in
Section 3.4.
15. Survivorship.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the
<PAGE>
18
extent necessary to the intended preservation of such rights and obligations.
The provisions of this Section 14 are in addition to the survivorship provisions
of any other section of this Agreement.
16. Governing Law and Dispute Resolution.
This Agreement shall be construed, interpreted and governed in
accordance with the laws of the State of New York without reference to rules
relating to conflicts of law. Parties consent to personal jurisdiction and venue
in the Supreme Court of the State of New York, County of Onondaga to resolve any
dispute arising out of or relating to this Agreement or its breach,
interpretation, termination or validity. In addition, Company shall reimburse
Executive for all reasonable attorney's fees incurred in the enforcement of the
rights under this Agreement if Executive shall prevail in such disputes with
respect to the Agreement.
17. Indemnification.
The Company will indemnify Executive (and his legal representative
or other successors) to the fullest extent permitted (including a payment of
expenses in advance of final disposition of a proceeding) by the laws of the
State of Delaware, as in effect at the time of the subject act or omission, or
by the Certificate of Incorporation and By-Laws of the Company, as in effect at
such time or on the effective date of this Agreement, or by the terms of any
indemnification agreement between the Company and Executive, whichever affords
or afforded greatest protection to Executive, and Executive shall be
<PAGE>
19
entitled to the protection of any insurance policies the Company may elect to
maintain generally for the benefit of its directors and officers (and to the
extent the Company maintains such an insurance policy or policies, Executive
shall be covered by such policy or policies, in accordance with its or their
terms to the maximum extent of the coverage available for any Company officer or
director) against all costs, charges, and expenses whatsoever incurred or
sustained by him or his legal representatives (including, but not limited to,
any judgment entered by a court of law) at the time such costs, charges, and
expenses are incurred or sustained, in connection with any action, suit or
proceeding to which Executive (or his legal representatives or other successors)
may be made a party by reason of his having accepted employment with the Company
or by reason of his being or having been an officer or employee of the Company,
or any subsidiary of the Company, or his serving or having served any other
enterprise as a director, officer, or employee at the request of the Company;
provided, however, that the Company shall not indemnify Executive with respect
to any act or acts (or failure to take action) which constitute grounds for
termination for Cause. Executive's rights under this Section 16 shall continue
without time limit for so long as he may be subject to any such liability,
whether or not his term of employment may have ended.
<PAGE>
20
18. Withholding.
The Company shall be entitled to withhold from any payment Executive
is entitled to any amount of withholding required by law.
19. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.
RESORT FUNDING, INC.
By: /s/ Gerald L. Klaben, Jr.
------------------------------
Name: Gerald L. Klaben, Jr.
---------------------
Title: E.V.P.
---------------------
/s/ Thomas J. Hamel
- -------------------
THOMAS J. HAMEL
<PAGE>
EXHIBIT A
RELEASE
In exchange for the payments and other benefits described in the
attached Employment Agreement dated May 29, 1997 (the "Agreement"), I hereby
release Resort Funding, Inc. (the "Company"), Bennett Funding Group, Inc.,
Bennett Management & Development Corporation, and each of their respective
divisions, affiliates, subsidiaries, parents, predecessors, successors, assigns,
officers, directors, trustees, employees, agents, stockholders, administrators,
representatives, attorneys, insurers and fiduciaries, past, present and future,
and Richard C. Breeden (collectively, the "Released Parties") from any and all
claims of any kind which I now have or may have against the Released Parties,
whether known or unknown to me, by reason of facts which have occurred on or
prior to the date that I have signed this Release (except a claim for the
payments described in the Agreement). Such released claims include, without
limitation, any and all claims under federal, state or local laws pertaining to
employment, including the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq., the Fair
Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq., the Americans
with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq., the
Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq.,
the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq., the
Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq., the New
York State Human Rights Law, N.Y. Exec. Law, Section 296
<PAGE>
et seq., and any and all state or local laws regarding employment discrimination
and/or federal, state or local laws of any type or description regarding
employment, including but not limited to any claims arising from or derivative
of my employment with the Company, as well as any and all claims under state
contract or tort law.
I have read this Release carefully, acknowledge that I have been
given at least 21 days to consider all of its terms, and have been advised to
consult with an attorney and any other advisors of my choice prior to executing
this Release, and I fully understand that by signing below I am voluntarily
giving up any right which I may have to sue or bring any other claims against
the Released Parties, including any rights and claims under the Age
Discrimination in Employment Act. I also understand that I have a period of 7
days after signing this Release within which to revoke my agreement, and that
neither the Company nor any other person is obligated to make any payments or
provide any other benefits to me pursuant to the attached Agreement until 8 days
have passed since my signing of this Release without my signature having been
revoked. Finally, I have not been forced or pressured in any manner whatsoever
to sign this Release, and I agree to all of its terms voluntarily.
<PAGE>
This Release, and the attached Agreement, are final and binding and
may not be changed or modified except in a writing signed by both parties
5/29/97 /s/ Thomas J Hamel
------- ------------------
Date Thomas J. Hamel
AGREEMENT
AGREEMENT made this fifteenth day of July 1996, between Gerald L.
Klaben, Jr. ("Executive") and Resort Funding, Inc. (the "Company").
RECITALS
WHEREAS, the Company desires to employ Executive and to enter into
an agreement embodying the terms of such agreement;
WHEREAS, the Company recognizes that the possibility of a change in
control of the Company exists and that such possibility creates an uncertainty
on the part of Executive whether to accept employment;
WHEREAS, the Board of the Company has determined that it is in the
best interest of the Company and its stockholder to induce Executive to accept
employment and to ensure Executive's continued availability to the Company in
the event of a change of control; and
WHEREAS, Executive is willing to be employed by the Company on the
terms, covenants and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
convenants contained herein and for other good and valuable consideration, the
parties agree as follows:
Section I
EMPLOYMENT
The Company hereby employs, engages and hires Executive as Chief
Financial Officer, and Executive hereby accepts and agrees to such hiring,
engagement, and employment subject to the general supervision and pursuant to
the orders and direction of the President of the Company. In such capacity,
Executive shall have the customary powers, responsibilities and authority of
other persons having similar positions at companies of the same size, type and
nature of the Company as they exist from time to time, and such other duties and
authority as shall be determined from time to time by the Board of Directors of
the Company or its designee.
<PAGE>
Section II
TERM OF EMPLOYMENT
The term of this Agreement shall be for a period commencing July 15,
1996 through July 16, 1999, subject, however, to prior termination as
hereinafter provided. The term of this Agreement shall renew automatically for
one (1) year periods unless either party elects not to renew the Agreement, in
writing, ninety (90) days prior to the expiration of the term or any renewal
term.
Section III
BEST EFFORTS OF EMPLOYEE
Executive agrees to devote his full working time and efforts, to the
best of his ability, experience and talent, to the performance of services,
duties and responsibilities in connection therewith and that he will at all
times faithfully, industriously, and to the best of his ability, experience and
talents perform all of the duties that may be required of and from him pursuant
to the terms hereof, and to the reasonable satisfaction of the Company. Nothing
in this Agreement shall preclude Executive from engaging, consistent with his
duties and responsibilities hereunder, in charitable and community affairs, from
managing his personal investments, or from serving, subject to approval of the
Board of the Company, as a member of a board of directors or as a trustee of
other companies, associations or entities.
Section IV
COMPENSATION OF EMPLOYEE
Company shall pay Executive and Executive shall accept from Company
in full payment of Executive's services hereunder, compensation at the initial
annual base salary rate of One Hundred Twenty-Five Thousand ($125,000) dollars,
increased on each July 15 by the urban consumer price index for the preceding
twelve-month period as published by the United States government (such amount,
as adjusted, the "Base Salary"). In addition, Executive will receive additional
annual compensation of One Thousand Five Hundred ($1,500) dollars for coverage
of medical premiums, which sum shall be increased only in the event of an
increase in medical premiums by the amount of the medical premium increase.
2
<PAGE>
In addition to the Base Salary, Executive will be eligible to
receive, subject to discretion of the Board of Directors, additional bonuses,
incentive compensation, and equity participation based on the overall
performance and contribution to the Company. As of the date hereof, Executive
shall have the right to participate in the Company's pension, profit-sharing,
and retirement plans (including a Section 401(k) plan) in accordance with
applicable law and Company policy on the same basis as those benefits are
generally made available to senior executives of the Company.
Section V
OTHER EMPLOYMENT
Executive shall devote sufficient amount of his time, attention,
knowledge, and skills to the business and interest of Company and Company shall
be entitled to all of the benefits, profits or other issues arising from or
incident to all work, services, and advice of Executive. Executive may not,
during the term hereof, have a financial interest directly or indirectly in any
manner as partner, officer, director, stockholder, advisor, employee, or in any
other capacity or in any other business that is similar to Company's business or
any allied trade.
Section VI
RECOMMENDATION FOR IMPROVING OPERATIONS
Executive shall make available to Company all information of which
Executive shall have any knowledge and shall make all suggestions and
recommendations that will be of mutual benefit to Company and himself.
Section VII
CONFIDENTIAL INFORMATION
During the period commencing on the date hereof and following the
date Executive's employment with the Company terminates, Executive shall not,
unless and to the extent that the Company (and their successors and assigns)
otherwise have consented in writing, divulge, disclose or make accessible to any
other person, firm, partnership, corporation, association or other entity any
Confidential Information pertaining to the Company's business
3
<PAGE>
(including that of its subsidiaries), except (i) while employed by the Company,
in the business of and for the benefit of the Company, or (ii) when required to
do so by a court of competent jurisdiction or an individual duly appointed
thereby, by any administrative body or legislative body (including a committee
thereof) having supervisory authority over such business, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or make accessible such
information. "Confidential Information" shall mean non-public information
concerning the financial data, strategic business plans, product development (or
other proprietary product data), customer lists, marketing plans and other
non-public, proprietary and confidential information of the Company and its
subsidiaries that is not otherwise available to the public. Confidential
Information shall also include any such information which has become publicly
available through any breach of fiduciary duty. Executive agrees that upon
termination of his employment with the Company, for any reason, he will return
to the Company immediately all memoranda, books, papers, plans, information,
letters, and other data and all copies thereof or therefrom, in any way relating
to the business of the Company and its affiliates, except that he may retain
personal notes, notebooks and diaries.
Section VIII
BUSINESS EXPENSES
Company shall reimburse Executive for all reasonable business
expenses pertaining to Executive's duties provided that Executive submits to
Company an expense report in which Executive has recorded at or near the time of
the expenditure:
1. the amount of the expenditure;
2. the time, place and nature of the travel or entertainment expense or
the date and description of the gift;
3. the business reason for the expense and the business benefit derived
or expected to be derived therefrom;
4. the names, occupations, and other data concerning individuals
entertained or given gifts sufficient to establish their business
relationship to Company, and,
5. that all such expenses shall be in such form and in such manner to
be deductible expense acceptable to the Internal Revenue Service.
4
<PAGE>
Company supporting documents such as receipts or paid bills
sufficient to establish the amount, date, place and essential character of any
expenditure.
Section IX
VACATION, MEDICAL, AND LIFE INSURANCE
Executive shall receive three (3) weeks vacation with pay each year
during the term of the Agreement until the Executive has worked for the company
for a period of five (5) years after which time he shall receive four (4) weeks
paid vacation. Executive will be entitled to the annual vacation time on the
first day of each contract year, beginning with the first day of employment.
Upon termination of this Agreement, as provided in Section XII or Section XIII,
Executive shall be paid any accrued vacation time within thirty (30) days of the
effective date of Executive's termination. Executive shall be prohibited from
taking all vacation at once without the prior permission of Company. Unused
vacation time will accrue from year to year as per Company policy, which
currently permits employees to carry over up to one week of unused vacation into
the first quarter of the succeeding year. During the Executive's second year of
employment, he shall be permitted to use up to two weeks of vacation time, if
any, that he may not have used during his first year of employment.
Executive shall receive family medical coverage from the Company, at
a cost as provided to all other employees. This coverage will begin on the first
day of employment and shall not include any "waiting" period. The Executive, at
his sole option and expense, may elect to enroll in the Company's provided
dental coverage.
The Company shall pay for and provide Life Insurance for the
Executive. The amount of Life Insurance coverage shall be the greater of
$350,000 dollars or the greatest amount of coverage provided to any of the
company's Officers or Directors.
Section X
OFFICE
Company shall furnish Executive with an office, personal computer
and secretarial services commensurate with Executive's title and position with
the Company at its headquarters, presently at Two Clinton Square, Syracuse, New
York.
5
<PAGE>
Section XI
INDEMNIFICATION
The Company will indemnify Executive (and his legal representative
or other successors) to the fullest extent permitted (including a payment of
expenses in advance of final disposition of a proceeding) by the laws of the
State of Delaware, as in effect at the time of the subject act or omission, or
by the Certificate of Incorporation and By-Laws of the Company, as in effect at
such time or on the effective date of this Agreement, or by the terms of any
indemnification agreement between the Company and Executive, whichever affords
or afforded greatest protection to Executive, and Executive shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
company maintains such an insurance policy or policies, Executive shall be
covered by such policy or policies, in accordance with its or their terms to the
maximum extent of the coverage available for any Company officer or director),
against all costs, charges, and expenses whatsoever incurred or sustained by him
or his legal representatives (including, but not limited to, any judgement
entered by a court of law) at the time such costs, charges, and expenses are
incurred or sustained, in connection with any action, suit or proceeding to
which Executive (or his legal representatives or other successors) may be made a
party by reason of his having accepted employment with the Company or by reason
of his being or having been an officer or employee of the Company, or any
subsidiary of the Company, or his serving or having served any other enterprise
as a director, officer, or employee at the request of the Company; provided,
however, that the Company shall not indemnify Executive with respect to any act
or acts (or failure to take action) which constitute grounds for termination for
Cause under Section XIII hereof. Executive's rights under this Section XI shall
continue without time limit for so long as he may be subject to any such
liability, whether or not his term of employment may have ended.
6
<PAGE>
Section XII
TERMINATION
Anything in this Agreement to the contrary notwithstanding,
Executive may have the unconditional right to terminate this Agreement by giving
thirty (30) days' written notice to Company at the office of the place of
Employment. If Executive shall terminate this Agreement pursuant to the
provisions of this Section, Company's liability and obligations under this
Agreement shall cease and terminate on the effective date of Executive's
termination. Such date of termination of employment, whether voluntarily by the
Executive or for Cause pursuant to Section XIII, shall be known as the
"Termination Date."
Section XIII
TERMINATION AND DISCHARGE FOR CAUSE ONLY
Company may discharge Executive and thereby terminate this Agreement
for "Cause," which for purposes of this Agreement shall mean (i) gross
insubordination or malfeasance of employee, (ii) Executive's willful and
continued failure substantially to perform his duties hereunder (other than as a
result of total or partial incapacity due to physical or mental illness), (iii)
a breach of the non-competition or confidentiality provisions contained in this
Agreement; (iv) dishonesty in the performance of Executive's duties hereunder,
or (v) an act or acts by Executive that would constitute a misdemeanor involving
moral turpitude or a felony under the laws of the United States or any State
thereof. If Executive is terminated for Cause, he shall be entitled to receive
his Base Salary through the Termination Date. All other benefits due Executive
following the Termination Date pursuant to this Section XIII shall be determined
in accordance with the plans, policies and practices of the Company. The
confidentiality obligations under Section VII shall continue in full force and
effect following the Termination Date pursuant to this Section XIII.
7
<PAGE>
Section XIV
TERMINATION WITHOUT CAUSE
If prior to 16 July 1998 Executive resigns for Good Reason or is
terminated by the Company for any reason other than for Cause, then Executive
shall be entitled to receive a cash lump sum severance amount equal to (i) the
remaining Base Salary due through the end of the term of the Agreement,
excluding any cost of living adjustments, and any other accrued monies due
pursuant to this Agreement or (ii) 150% multiplied by Executive's then-current
Base Salary, if such amount is greater than the lump sum payment under (i)
above. If such resignation or termination occurs on or after 16 July 1998 but
before 16 July 1999, Executive shall be entitled to receive a cash lump sum
severance amount equal to the remaining Base Salary payable under this Agreement
to 16 July 1999 plus 50% multiplied by Executive's then-current Base Salary.
Following the third anniversary hereof, Executive shall receive a cash lump sum
severance of 50% multiplied by Executive's then-current Base Salary as full
settlement of the Company's obligations to him.
Executive understands and agrees that he shall not be entitled to
any further notice or compensation upon the termination of this Agreement other
than the amounts specified in this paragraph. Executive shall not have any
obligation to seek comparable employment following such termination or
resignation, and any payment hereunder shall not be offset by compensation
Executive earns with a new employer or from self-employment. However, in no
event shall Executive be entitled to any payment hereunder if he resigns on
account of retirement, or if his employment terminates as a result of death or
total disability.
"Good Reason" shall mean the resignation of Executive from
employment by the Company as a result of a reduction in his Base Salary, a
"Change of Control," or a substantial diminution in his duties, responsibilities
or reporting responsibility (unless due to a promotion), without his express
prior written consent.
A "Change of Control" shall be deemed to occur if (i) any "person"
or "group" (as such terms are used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than Richard C.
Breeden as Trustee in bankruptcy of the Bennett Companies, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
8
<PAGE>
Exchange Act as in effect on the date hereof, except that a person shall be
deemed to be the "beneficial owner" of all shares that any such person has the
right to acquire pursuant to any agreement or arrangement or upon exercise of
conversion rights, warrants, options or otherwise, without regard to the 60-day
period provided in such Rule), directly or indirectly, of securities
representing 50% or more of the combined voting power of the Company's or its
parent's then-outstanding securities or (ii) the Company shall consolidate,
merge or exchange securities with any other entity. Notwithstanding the
foregoing, however, a Change of Control shall not be deemed to occur merely by
reason of an acquisition of Company securities by, or any consolidation, merger,
or exchange of securities with, any entity that, immediately prior to such
acquisition, consolidation, merger or exchange of securities, was a corporation
of which the Company owned directly or indirectly 95% of the capital stock or
was an unincorporated entity with respect to which the Company has, directly or
indirectly, an equivalent degree of ownership.
Section XV
NOTICE AND PAYMENT DUE UPON TERMINATION
In the event the Company determines that Cause exists, it shall
notify Executive, who may be terminated for Cause upon thirty (30) days prior
notice. Termination shall be effected by a majority vote or the Board (excluding
Executive) at a meeting at which Executive shall have had the opportunity (along
with his counsel) to be heard, unless within fifteen (15) days after receiving
such notice, Executive shall have cured Cause to the reasonable satisfaction of
the Board. Executive shall cooperate to cause any valid Board meetings to occur.
Notice of Good Reason shall be given at least 45 days prior to the
intended Termination Date during which the Company shall have the opportunity to
cure the Good Reason during the first thirty (30) days of such notice period. If
notice is not given within 45 days after the event giving rise to Good Reason,
such Good Reason shall be deemed waived.
If this Agreement is terminated for any reason, Company shall only
be liable to pay Executive his salary earned to the Termination Date and any
accrued vacation pay as defined in Section X. Any bonus payment or additional
payment that has been accrued and unpaid shall
9
<PAGE>
be paid on the effective date of Executive's termination. In no event shall
Executive be entitled to any severance if he resigns without Good Reason or is
terminated by the Company for Cause.
Section XVI
LIQUIDATION, COMPANY RELOCATION
If the company is liquidated through Chapter 7 bankruptcy or for any
other reason, the Executive will be paid in full 60 days following bankruptcy
filing or notice of liquidation. The Executive will be paid the remaining
compensation due through the end of the term, including any annual increases not
yet invoked, and any other accrued monies due pursuant to Section XIV or any
other sections within this Agreement. In addition, if the Company is liquidated
for any reason, the Executive's obligations hereunder will cease and terminate.
If the company relocates its offices outside of Onondaga County in
the State of New York, the Executive, at his option, may terminate this
Agreement pursuant to the notification clause contained within Section XII and
will be paid the remaining compensation due through the end of the term,
including any annual increases not yet invoked, and any other accrued monies due
pursuant to Section XIV or any other sections within this Agreement.
Section XVI
MODIFICATION & INTEGRATION
No waiver or modification of this Agreement or of any covenant
condition or limitation herein contained shall be valid unless in writing and
duly executed by both parties herein. This Agreement contains the complete
agreement concerning the Employment arrangement between the parties and shall as
of the effective date hereof, supersede all other agreements between the
parties.
Section XVII
SEVERABILITY & SURVIVORSHIP
All terms and conditions herein are severable and in the event any
of them shall be held to be invalid by any competent court, this Agreement shall
be interpreted as if such invalid agreement or covenant were not contained
herein. In addition, the Company shall bear,
10
<PAGE>
or reimburse Executive for, all reasonable legal fees incurred in the
enforcement of the rights under this Agreement. The respective rights and
obligations of the parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
Section XVIII
LEGAL
In any action hereunder, the parties consent to personal
jurisdiction and venue in the Supreme Court of the State of New York, County of
Onondaga.
IN WITNESS WHEREOF, the parties executed this Agreement on the date
first above written.
RESORT FUNDING, INC.
By /s/ Paul S. Atkins
--------------------------------------
Paul S. Atkins
President
/s/ Gerald L. Klaben Jr.
---------------------------------
Gerald L. Klaben, Jr.
Approved and ratified by Thomas J. Hamel, sole director of Resort Funding, Inc.,
as of the date first hereinabove written.
/s/ Thomas J. Hamel
---------------------------------
Thomas J. Hamel
11
Mahoney Cohen Rashba & Pohart, CPA, PC
March 29, 1996
Via Telecopier
Mr. Michael Bennett
Mr. Patrick Bennett
Mr. Dick Kelley
Mr. William Lester
The Bennett Funding Group, Inc.
Two Clinton Square
Syracuse, NY 13202
Re: The Bennett Funding Group, Inc.
Dear Sirs:
It has come to our attention that on Thursday, March 28, 1996 the United
States Securities and Exchange Commission (the "SEC") commenced an action
against, among others, Bennett Funding Group, Inc. ("BFG"), Bennett Management &
Development Corporation ("BMDC") and Patrick Bennett ("Bennett").
Our attorneys have asked your counsel for a copy of the SEC's Complaint
and accompanying affidavits but have been told that the same is under seal and
cannot be reviewed by us, your auditors, or by our counsel, Herrick, Feinstein
LLP. We have also learned that the SEC has alleged that Bennett and BFG sold
$55,000,000 of fictitious New York City Transit Authority leases and that BFG on
numerous occasions sold the same lease(s) more than once. We further understand
from your counsel that the SEC's Complaint alleges that BFG and Bennett lied to
its auditors. Finally, we have learned that Patrick Bennett has resigned from
BFG and that he was arraigned yesterday on charges of perjury.
In light of the serious nature of the foregoing, effective immediately we
are withdrawing as your auditors and we withdraw all financial statements and
the reports thereon issued by us relating to BFG and its related entities. The
audits of those financial statements were based upon, among other things,
information given to us by Patrick Bennett and in light of his resignation and
the allegations of financial impropriety and our present inability to review the
SEC's Complaint and accompanying affidavits, we have no choice but to withdraw
our reports on those financial statements. Therefore, you may not use those
financial statements for any purpose whatsoever. Please immediately advise
Certified Public Accountants, 111 West 40th Street, New York, NY 10018
<PAGE>
Mr. Michael Bennett
Mr. Patrick Bennett
Mr. Dick Kelley
Mr. William Lester
The Bennett Funding Group, Inc.
March 29, 1997
your lenders, brokerage firms and others to whom you have previously sent the
financial statements of our resignation and the withdrawal of our reports.
Very truly yours,
MAHONEY COHEN RASHBA &
POKART, CPA, PC
cc: Arthur G. Jakoby, Esq.
Barry Rashkover, Esq.
Richard Marshall, Esq.
[LETTERHEAD OF PURITZ & WEINTRAUB]
April 5, 1996
Michael Bennett
Equivest Finance, Inc.
2 Clinton Square
Syracuse, New York 13202
Dear Mr. Bennett:
Since we have been informed that Equivest Finance, Inc. is no longer in the
premium finance business, we are hereby resigning effective immediately our
position as the auditors of Equivest.
We have also notified the Office of the Chief Accountant of the Securities and
Exchange Commission by separate letter (copy enclosed).
Very truly yours,
/s/ Puritz & Weintraub
PURITZ & WEINTRAUB
Certified Public Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from EQUIVEST
FINANCE, INC. AND SUBSIDIARIES and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,620,479
<SECURITIES> 0
<RECEIVABLES> 124,671,609
<ALLOWANCES> (2,442,244)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 133,483,967
<CURRENT-LIABILITIES> 964,416
<BONDS> 99,961,357
30,000
0
<COMMON> 1,091,723
<OTHER-SE> 31,406,726
<TOTAL-LIABILITY-AND-EQUITY> 133,483,967
<SALES> 0
<TOTAL-REVENUES> 15,964,486
<CGS> 0
<TOTAL-COSTS> 12,540,063
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,424,423
<INCOME-TAX> 193,000
<INCOME-CONTINUING> 3,321,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,321,423
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.15
</TABLE>
