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, 1999
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)
Delaware 59-2346270
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
100 Northfield Street, Greenwich, Connecticut 06830
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 618-0065
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock. $.01 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 |X|.
The Company's revenues for the most recent fiscal year were $94,380,233.
The aggregate market value of the approximate 1,803,000 shares of Common Stock
of the Company outstanding as of December 31, 1999 held by non-affiliates of the
Company was approximately $10,818,000 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, 1999, was 28,089,722.
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1999
INDEX
PART I
Items 1 and 2. Business and Properties
Item 3. Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters & Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV
Item 13. Exhibits, Reports on Form 8-K
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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Certain statements in this
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999 (the
"10-KSB") that are not historical fact constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Discussions containing such forward-looking statements may be found in the
material set forth under "Business and Properties," as well as within this
10-KSB generally. In addition, when used in this 10-KSB the words "believes,"
"anticipates," "expects," "intends" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number of
risks and uncertainties, including the unpredictable nature of the Company's
sales and marketing costs, the availability of capital, the strength or weakness
of real estate and general economic conditions in several regional market areas,
and numerous other unpredictable business variables. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth below and the matters set forth in this 10-KSB
generally. The Company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
PART I
Unless the context otherwise indicates, the "Company" refers to Equivest
Finance, Inc. and includes its wholly owned subsidiaries and affiliates.
Subsidiaries include: the Company's specialty finance subsidiary Resort Funding,
Inc. and its subsidiary ("Resort Funding"); Eastern Resorts Corporation
("Eastern Resorts") and its subsidiaries, which were acquired in August 1998
(the "ERC Acquisition"); various resort projects and corporate entities acquired
from Kosmas Group International, Inc. ("KGI") in March, 1999 (the "KGI
Acquisition") and Peppertree Resorts, Ltd. ("Peppertree") and its subsidiaries,
which were acquired by the Company in November, 1999 (the "Peppertree
Acquisition", and together with the KGI Acquisition, collectively the "1999
Acquisitions").
Certain portions of the Registrant's Definitive Proxy Statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's 1999 fiscal year, are
incorporated by reference in part III of this Form 10-KSB.
Items 1 and 2. Business and Properties
THE COMPANY
The Company is an integrated timeshare vacation services company that
markets and sells to consumers vacation services and vacation ownership
interests ("VOI's") in a network of 29 resort projects located primarily on the
eastern seaboard of the United States and in the U.S. Virgin Islands. The
Company also operates as a full service specialty finance company serving third
party developers of timeshare resorts and their customers nationwide, as well as
the Company's own customers. More than 75,000 owner families now vacation
annually in one or more of the Company's own resorts, or exchange their vacation
time for use within the Company's network or throughout the world using an
external exchange organization. Approximately 23,000 additional families are
borrowers from the Company in connection with their purchases of VOI's in
unaffiliated resorts.
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The Company's resort locations are set forth below and include:
o Atlantic Beach, NC o Ocean City, MD
o Blue Ridge Mountains, NC o Outer Banks, NC
o Berkshire MA o St. Augustine, FL
o Branson, MO o St. Thomas, USVI
o Gatlinburg, TN o Washington, D.C.
o Myrtle Beach, SC o Williamsburg, VA
o New Orleans, LA o Wisconsin Dells, WI
o Newport, RI
On a proforma basis, giving effect to a full year of operations of both
the 1999 Acquisitions, the Company would have had revenues of approximately $164
million and timeshare sales of just under $90 million. The Company currently
operates 17 sales centers at its resort locations.
The Company's operations consist of: (i) marketing and selling VOI's at
its resorts, which either entitle the buyer to utilize a fully-furnished
vacation residence, generally for a one-week period each year in perpetuity
("Vacation Weeks"), or entitle the buyer to the use of Vacation Points, which
may be redeemed for occupancy rights for varying lengths of stay at
participating resort locations in a membership format known as a "Vacation
Club"; (ii) acquiring, developing, and operating vacation ownership resorts;
(iii) providing consumer financing to individual purchasers for the purchase of
VOI's; (iv) providing resort rental, management, and maintenance services for
which it receives fees paid by the resorts' homeowners' associations; and (v)
providing loan financing to its own customers and to third party borrowers
through its lending subsidiaries. The Company's Vacation Club is operated by its
Peppertree subsidiary.
The Company provides mortgage financing for approximately 80% of its VOI
sales. In addition to enhancing sales revenues, the financing of customer
receivables generates income from the spread between interest rates charged by
the Company on its loan receivables and the Company's cost of capital. The
Company's finance operations also include billing and collection services for
both loan payments and home owner association dues and assessments.
BUSINESS STRATEGY
The Company believes that the American public generally includes an
increasing number of families seeking quality leisure and vacation
opportunities. VOI's represent a leisure product that can provide a large
segment of the public with a high quality vacation experience at an affordable
price. The Company believes that the development of its timeshare resorts,
coupled with its timeshare finance operations, will provide the Company with
significant growth capabilities. The fragmented nature of the timeshare
development business should also continue to lead to resort acquisition
opportunities and continuing opportunities to further expand the Company's owner
base. Likewise, acquisitions may potentially contribute significantly to the
growth of the Company's loan portfolio.
The Company's goal is to increase shareholder value through growth and
diversification in the timeshare industry, and eventually in broader leisure and
finance markets. The Company intends to seek opportunities in the future to
increase the range of goods and services that it can market and sell to its
owner base and to new customers. As part of that objective, the Company
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anticipates expanding its range of services to include trading in resale
interests for VOI's and entering the market for external VOI exchange services
directly or in partnership with others. Though it does not presently have any
specific timetable for expanding into such services, the Company's objective is
to provide interval exchange services to its owners and non-affiliated VOI
owners as soon as it is able to do so consistent with its contractual
obligations. The Company believes that interval exchange services represent one
of the most significant segments of revenue from the timeshare business, and the
current high level of prices in exchange services represents a significant
opportunity for new competitors entering this segment of the business.
The Company believes that it will create a superior product by providing
customers with variety and flexibility in their vacation experiences through
both the Vacation Club format and a broad program of internal exchanges within
its resort system. The Vacation Club and an internal exchange program create
stronger affinity relationships between the Company and its owners and provide
the platform for cross marketing opportunities for leisure time products and
services, and for recurring fee-based services relating to the owners' VOI
usage.
The Company also hopes to capitalize on its origins and experience as a
finance company by expanding the range of financial products and services its
offers to its owner base. The Company has recently concluded its first strategic
marketing alliance with Claritybank.com, an internet bank. The Claritybank.com
venture will provide the Company with a full spectrum of financial products to
offer its customers by telephone, internet or wireless connections. In the
future, the Company anticipates building on the Claritybank.com model for other
internet-based services, including VOI resales and interval exchanges direct to
consumers. However, such plans are preliminary in nature, and there is no
assurance the Company will succeed in plans to offer any or all of such
electronic services.
GROWTH STRATEGY
o Develop and acquire Resorts. The Company has historically sought to
develop and acquire desirable resorts at attractive prices, which the Company
believes will allow it to achieve above average returns. Management believes
that its acquisition and development record, its integrated financing
capability, and public company status give the Company a competitive advantage
in acquiring assets, businesses and operations in the fragmented vacation
ownership industry. The Company intends to continue to seek additional resort
locations as attractive opportunities arise consistent with its overall goals,
including maintaining integrated systems and financial controls. The Company
believes that its experience in resort development, billing and collecting
financial receivables, knowledge of the timeshare industry, and its market
presence will help it to accomplish this strategy.
o Decrease sales and marketing costs. Relatively high cost of sales and
marketing activities is a major impediment to achieving attractive shareholder
returns. Controlling and reducing such costs requires sustained efforts to
utilize new technologies and to build brand identity.
o Explore potential opportunities in broader leisure and finance markets.
The Company is continually reviewing potential opportunities to expand into
related leisure and finance markets, or to add entertainment services to its
products. For example, the Company is now installing Ethernet in all new unit
construction, and will be making in-room internet services an amenity at all new
resorts. The Company plans to add dedicated movie screening rooms and internet
rooms to its existing resorts wherever feasible. The Company recently entered
into its first strategic marketing alliance with Claritybank.com, a newly-formed
internet bank to market electronic financial services to its owner base.
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o Improve operating efficiencies and controls. The Company intends to
improve operating efficiencies and profitability by consolidating and
centralizing several key operating functions, including mortgage and maintenance
fee receivables processing and call center and reservations services, as well as
through sustained efforts to reduce sales and marketing and other costs.
Additionally, the Company focuses significant effort on seeking to reduce the
operating costs of acquired businesses and to improve the reliability of
financial and operating controls.
o Expand rental services. The Company intends to expand its rental
services operations. The Company intends to pursue these opportunities by
utilizing its traditional sales channels and reservations systems, as well as by
expanding rental services at Peppertree.
o Increase consumer financing portfolio. The Company intends to increase
its consumer financing business by increasing its originations of loans to its
own customers and third party borrowers to the extent funds are available. The
Company expects that the volume of its Acquisition and Development lending
business to third parties will continue to shrink as a proportion of its overall
portfolio, as well as in absolute dollars, and that the Company's volume of
loans to purchasers of VOI's in its own resorts will continue to expand as the
Company increases the financing of its internal operations. To support growth in
its portfolio, the Company is seeking to expand its capital base through
increased borrowings from financial institutions and the issuance of debt,
equity or asset-backed securities in the capital markets.
THE VACATION OWNERSHIP INDUSTRY
The resort component of the leisure industry primarily is serviced by two
separate alternatives for overnight accommodations: commercial lodging
establishments and vacation ownership resorts. Commercial lodging consists of
hotels and motels in which a room is rented on a nightly, weekly or monthly
basis for the duration of the visit and is supplemented by rentals of privately
owned condominium units or homes. For many vacationers, particularly those with
families, the space provided to the guest relative to the cost (without renting
multiple rooms) is not as economical or as comfortable as the typically larger
timeshare accommodations. Vacation ownership presents an economical, but
typically more comfortable, alternative to commercial lodging for vacationers,
and the vacation ownership industry appears to be one of the fastest growing
segments of the lodging industry. The Company believes that, overall, the
vacation ownership industry offers many vacationers a superior economic value
compared to traditional commercial lodging accommodations.
Increased government regulation, higher standards of quality and service,
increased flexibility and the entry of a number of well-organized lodging and
entertainment companies, including Marriott Ownership Resorts, The Walt Disney
Company, Four Seasons Hotel & Resorts, and others have enhanced the level of
ethical standards in the industry and increased the product's credibility with
consumers to some degree. However, the Company believes that the industry in
general continues to suffer from reputational issues resulting from, among other
things, sales and marketing abuses, including misleading or untruthful
information provided to consumers. The level of compliance resources in many
companies is not great, government regulation is extremely weak, and consumer
protection standards remain, in general, inadequate. In addition, companies in
the industry that are poorly capitalized or that have inadequate liquidity may
prove unable to deliver the long-term or perpetual services promised to
consumers, creating further reputational issues and potentially discouraging
consumer willingness to purchase VOI's. The Company seeks to provide high levels
of disclosure to potential and existing owners concerning its financial
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condition and the nature of the Company's products, and believes that holding
itself to higher standards of ethical practices and sales standards will
ultimately result in a stronger business.
The Company believes it has opportunities to capitalize on positive
industry dynamics including continued worldwide industry growth and favorable
trends in consumer demographics. The large Baby Boomer market segment is
projected to reach its greatest ever concentration in this decade, with an
estimated 40 million people turning 50 years old over this period. Demographic
trends favor continuing growth in overall demand for vacation ownership
products, as the population of individuals aged 45 to 60 is expected to increase
by more than 50% in the United States within this decade. Historically,
individuals age 45 to 60 represent a market with significant discretionary
income and have been the vacation ownership industry's primary target market.
DESCRIPTION OF THE COMPANY'S RESORTS
Currently the Company has 29 resort locations, including its planned
resort in Washington, D.C. The Company conducts sales activities at 17 of these
resorts, including 9 resort locations selling Vacation Points. The following
table sets forth certain information regarding each of the Company's resorts at
December 31, 1999.
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Overview of Resorts as of December 31, 1999
<TABLE>
<CAPTION>
Initial Total Total VOI's VOI's
Completion Units VOI's Sold For Sale
Date
<S> <C> <C> <C> <C> <C>
Resorts in Operation
Inn on the Harbor, Newport, RI 1983 58 3,016 2,930 86
Newport Overlook, Newport, RI 1985 19 988 936 52
Inn on Long Wharf, Newport, RI 1985 40 2,080 2,077 3
Bay Voyage Inn, Jamestown, RI 1988 32 1,664 1,493 171
Newport Onshore, Newport, RI 1985 62 3,162 3,137 25
Long Wharf Resort, Newport, RI (1) Ph. 1 1996 82 4,264 2,508 1,756
Ph. 2 1998
Bentley Brook Mountain Club, Hancock, MA Ph. 1 1997 32 1,664 1,218 446
Ph. 2 1998
Bluebeard's Castle Hotel, St. Thomas, VI (6) 1981 160 8,320 6,720 1,600
Bluebeard's Beach Club, St. Thomas, VI (6) 1998 84 4,368 1,033 3,335
Elysian Beach Resort, St. Thomas, VI (6) 1991 67 3,484 732 2,752
Avenue Plaza Hotel, New Orleans, LA 1996 265 13,780 5,410 8,370
Ocean City Coconut Malorie Resort, Ocean City, MD 1988 85 4,420 305 4,115
Ocean Gate Condominiums - Bldg G, St. Augustine, FL 1999 12 624 95 529
Ocean Gate Condominiums - Bldg I, St. Augustine, FL 1999 12 624 0 624
Vacation Club Villas, Asheville, NC 1997 28 1,456 1,014 442
Outer Banks Beach Club I, Kill Devil Hills, NC (1) 1981 80 4,160 4,144 16
Outer Banks Beach Club II, Kill Devil Hills, NC (1) 1981 104 5,408 5,381 27
Atlantic Beach, Beaufort, NC (6) 1983 209 10,868 10,224 644
Maggie Valley I, Maggie Valley, NC (6) 1983 24 1,248 1,248 0
Maggie Valley II, Maggie Valley, NC (6) 1986 16 832 830 2
Peppertree By The Sea, N. Myrtle Beach, SC 1984 86 4,472 4,447 25
Sandpebble Beach Club, Surfside Beach, SC 1983 13 676 608 68
Laurel Point, Gatlinburg, TN (1) 1986 50 2,600 2,556 44
Mirror Lake I, Wisconsin Dells, WI (1) 1998 115 5,980 5,823 157
Mirror Lake II, Wisconsin Dells, WI (1) 1999 15 780 171 609
Blue Ridge Village I, Banner Elk, NC (1) 1986 54 2,808 2,791 17
Blue Ridge Village II, Banner Elk, NC (1) 1999 74 3,848 3,058 790
Sea Mystique, Garden City, SC 1984 11 572 565 7
Sands, N. Myrtle Beach, SC 1990 12 624 615 9
Ocean Club, N. Myrtle Beach, SC 1997 122 6,344 6,002 342
Thousand Hills, Branson, MO (7) 1998 22 1,144 520 624
Wild Wing, Conway, SC (7) 2000 26 1,352 1,352 0
Total in Operation 2,071 107,630 79,943 27,687
===== ======= ====== ======
</TABLE>
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Resorts Under Construction or Planned For Future Development
Total
Total Units Intervals
Bentley Brook,
Phase III, IV (2) (3), V(2)(3) 120 6,240
Long Wharf Resort, Phase III (4) 12 624
Capital City Suites 60 3,120
Wild Wing (Bldgs. D, E) 48 2,496
Atlantic Beach (Bldg. 32) 8 416
Thousand Hills (Bldgs. 4, 5, 6) 60 3,120
Sunset Bay (Bldg. 1) (4) 48 2,496
Mirror Lake 39 2,028
Williamsburg (Bldg. 1) 12 624
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Total 407 21,164
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(1) Designated a "Gold Crown Resort" by RCI.
(2) Capable of being constructed without additional permits other than
customary building permits.
(3) Currently under contract for purchase.
(4) Subject to permit approvals.
(5) No VOI's have yet been sold at these resorts. All construction is subject
to attaining applicable permits and inspections.
(6) Date timeshare sales began. Construction of Bluebeard's Castle was
completed in 1932 through 1935. Elysian was completed in 1991.
(7) Designated a Five Star Award by Interval International.
SALES AND MARKETING
The Company's marketing activities are intended to attract potential
qualified customers to visit and to tour a resort or to attend a sales
presentation in order to sell VOI's. One of the most important challenges facing
the Company is to attract potential owners to tour its facilities in sufficient
numbers, and at a cost that will enable the Company to operate at attractive
profit margins. Excessive sales and marketing costs are one of the principal
characteristics of the entire vacation ownership industry.
Marketing. A variety of marketing programs are employed to generate
prospects for these sales efforts, which include targeted mailings, overnight
mini-vacation packages, gift certificates, and various destination-specific
local marketing efforts. The Company primarily focuses its marketing activities
on potential purchasers of VOI's who live within driving distance of one of the
Company's resorts.
To market its resorts to prospective purchasers, the Company generates its
prospects through a combination of internal marketing, off-premise contacts
("OPC") and telemarketing services and contracts with third-party lead
generation companies. The Company also purchases
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tours from other providers. The Company has recently stepped-up its efforts on a
resort vacation "entry" program that is now being offered to prospects who do
not buy a VOI on the date they tour one of the Company's resorts. The entry
product is sold at a significantly reduced cost, in return for which the
purchaser is entitled to two vacation weeks at one of the Company's resorts.
Within a specified time period the purchaser may also be able to offset the
amount paid for the "entry" purchase against the cost of a VOI. As the room
nights utilized under the "entry" program are already available for rental, the
Company has not made any significant expenditures for the implementation of this
program.
Sales. The Company sells VOI's primarily to sales prospects who visit
Company's resort facilities. Upon arrival for a scheduled tour, the prospect is
met by a member of the Company's on-site sales force who conducts a one to two
hour tour of the resort. At the conclusion of the tour, the sales representative
explains the benefits and costs of owning a VOI at one of the Company's resorts.
The presentation also includes a description of the financing alternatives
offered by the Company. The transaction documents are reviewed between the
prospect and either a representative of the sales division or verification
personnel who close the sale with the purchaser. No sale becomes final until any
applicable statutory waiting period has passed.
At December 31, 1999, the Company employed approximately 400 salespeople.
The Company seeks to attract, train and retain a dedicated sales force. Sales
representatives are either licensed independent sales agents or employees of the
Company. All salespersons receive some employment benefits.
PREVIOUS ACQUISITIONS
The Company entered the resort development business in August 1998 when it
acquired Eastern Resorts. Eastern Resorts, either on its own or through its
predecessor, has been in the resort development business since 1981. It operates
six resorts in and around Newport, Rhode Island and one resort in the Berkshire
Mountains of western Massachusetts. As of December 31, 1999, Eastern Resorts
operated resorts containing 325 units, representing 16,838 VOI's, of which 2,539
remained unsold. Eastern Resorts currently has under development 48 additional
units, representing 2,496 intervals
In 1999, the Company made two major acquisitions, strengthening its
presence in the timeshare industry. During 1999, the Company completed the KGI
Acquisition and the Peppertree Acquisition, thereby adding an additional 21
resorts and a development site to the Company. The KGI Acquisition was completed
in March 1999, and included more than 20,000 vacation ownership intervals in
current inventory with a total gross sales value at current prices of more than
$180 million, and more than $16 million in consumer notes receivable. The
Company's subsidiary Resort Funding had previously financed approximately $4
million of these consumer notes. On November 17, 1999, the Company completed its
third resort development acquisition when it merged with Peppertree. Peppertree
had approximately $111 million in assets and approximately $16 million in net
worth as of September 30, 1999, compared with the Company's assets of $286
million and net worth of $63 million at that date. In addition to Peppertree's
15 resorts, the Company acquired approximately $70 million in performing
consumer receivables relating to the purchase of intervals in Peppertree resorts
or Vacation Points in the Peppertree Vacation Club. Following the Peppertree
Acquisition, the Company now has a combined owner and finance customer base of
approximately 100,000 families.
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RESORT MANAGEMENT
The management of resort operations at each resort is typically conducted
through a non-profit homeowners association ("HOA"), which may be incorporated.
The HOA is governed by a board of directors typically consisting of
representatives of the developer and owners of VOI's at the resort. The board
hires the Company to provide management services, delegating many of the
responsibilities of the homeowner's association, such as grounds landscaping,
security, engineering, housekeeping, supply, procurement, garbage collection,
utilities, insurance, laundry, repairs and maintenance. The Company's management
staff each monitor the Company's operation and quality standards and provide
support, training and assistance to each resort. The Company generally receives
a fee of budgeted operating expenses (typically approximately 10%) for each
resort it manages. At each resort, the fee is paid pursuant to a management
agreement between the Company and a homeowner's association to which all VOI
owners must contribute annual dues. The Company generally controls the
homeowner's association until its control period has expired, unless otherwise
provided under applicable law.
The Company conducts preventative maintenance at each of its properties
and conducts or oversees major renovations as the need arises. The Company is in
the process of creating centralized purchasing systems to further reduce costs
and maximize its purchasing power.
The Company has management contracts with practically all of its resorts.
These contracts generally have a term of one to two years, though occasionally
longer, and are typically subject to automatic renewal. Historically, the
Company's management contracts have been renewed or continued by the relevant
HOA. The contracts soon to expire are expected to be extended beyond their term.
If the applicable associations do not renew the contracts, the Company would
lose a valuable source of revenue upon expiration of the existing contracts.
Reservations Services. The Company has reservation departments located in
Newport, Rhode Island, Asheville, North Carolina, New Orleans, Louisiana and St.
Thomas, U.S. Virgin Islands. Combined, this staff books more than 100,000
reservations per year for both VOI owners and individuals seeking rental
accommodations.
Rental of Unoccupied Units. The Company seeks to increase revenues on its
inventory of unused or unsold VOI's by renting unoccupied units as hotel rooms
on an overnight basis. The Company offers these unoccupied units through direct
consumer sales, travel agents and package vacation wholesalers. In addition to
providing the Company with supplemental revenues, the Company's room rental
operations provide it with a source of lead generation for the sale of VOI's. As
part of the management services provided by the Company, the Company generally
will rent owners' VOI's at their request when the owners are unable to use or
exchange their VOI's.
PARTICIPATION IN VOI EXCHANGE NETWORKS
The Company believes that its VOI sales are made more attractive by the
Company's participation in VOI exchange networks operated by Resort Condominiums
International LLC ("RCI") and Interval International, Inc. ("II"), the two
largest VOI exchange companies in the world. The exchange opportunity is
frequently cited by purchasers of VOI's as one of the most significant factors
in determining whether to purchase a VOI. Participation in RCI and II allows the
Company's customers to exchange their VOI for an occupancy right at the same
time or a different time in another participating resort, based upon
availability. Owners must generally pay
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both an annual membership fee and also a transaction fee. At the present time
Peppertree Vacation Club members participate in the II exchange network, while
the Company's other resorts have exchange affiliations with either RCI or II.
Both RCI and II operate through long term affiliation agreements that
generally seek to prohibit the Company or other developers from directly or
indirectly competing in the exchange business. In recent years, fees charged by
the exchange companies have risen significantly, while these contractual
restrictions against competition limit entry into the business by would-be
competitors, including the Company. RCI, in particular, increasingly competes
against the Company in providing travel related services to the Company's
owners, and neither RCI nor II generally share transaction revenue generated
from the Company's owners notwithstanding the enormous cost to the Company, like
all developers, in identifying and selling such owners. The Company recently
gave notice to RCI of its intent to cancel several agreements when such
agreements come up for renewal.
POINTS-BASED VACATION OWNERSHIP
In general, under a points-based vacation ownership system, owners
(usually referred to as members) purchase Vacation Points which act as an annual
currency entitlement for occupancy rights at any of the Vacation Club's
participating resorts, depending upon applicable law or resort occupancy
availability. To ensure occupancy rights of all members of the Vacation Club,
resort units are deeded or assigned to a Trustee, which holds the units in trust
for the use and benefit of all participating members. In traditional Vacation
Week ownership, owners can either use their interval for a one-week stay in a
specified unit type at a specific resort or exchange the interval through RCI
or II. Because Vacation Points function as currency under a points-based
vacation ownership system, owners can, subject to availability, choose the
location, season, duration and unit size of their vacation, based on their
annual Vacation Points allocations. Additionally, in a points-based vacation
ownership system, owners can redeem their points for a stay in any one of the
resorts included in the Vacation Club without having to exchange through an
external exchange company such as RCI or II.
Each Vacation Points owner is required to pay the homeowners' association
a share of all costs of maintaining the properties in the Vacation Club network,
as well as the costs of administering the Vacation Club. These charges,
depending upon the number of intervals purchased, consist of an annual fee plus
applicable real estate taxes and special assessments, assessed on an as needed
basis. If the member does not pay such charges, their use rights may be
suspended and the homeowners' association may foreclose on the owner's Vacation
Points. Due to the multiple exchange and use opportunities that are afforded to
Vacation Club members, there are no guarantees that desired resort locations,
unit sizes or time periods will be available when requested by a member. Resort
availability is further impacted by the limited number of VOI's in a
participating resort that may be deeded or assigned to the Vacation Club Trustee
by the Company or Vacation Week owners who elect to participate in the Vacation
Club.
12
<PAGE>
EMPLOYEES
As of December 31, 1999, the Company had approximately 2,300 employees.
All of the Company's 400 timeshare sales persons are licensed real estate sales
agents or employees, each of whom are paid on a commission basis, and receive
certain health and other benefits. Most of the Company's management level
employees are salaried with additional incentive-based compensation. The Company
believes that its employee relations are good. Bluebeard's Castle Hotel,
Bluebeard's Beach Club and Villas and the Elysian Beach Resort each have a
Collective Bargaining Agreement with the United Steelworkers of America,
AFL-CIO-CLC, which agreements expire in February 2002, November 2001 and April
2001, respectively. All the full-time employees of the Company who have at least
12 months of service are awarded stock options in the Company. The Company
believes that all employees should participate in equity ownership.
FINANCING OPERATIONS
Lending Business. Historically, and prior to the ERC acquisition, the KGI
acquisition and the Peppertree acquisition, the Company concentrated on funding
small to midsize timeshare projects (involving loans ranging from $1 million to
$10 million). Since 1991, the Company provided approximately $480 million in
financing to approximately 75 projects in the United States and the Caribbean,
one project in Canada and two in Ireland. Acquisition and development loans to
small developers tend to be extremely high-risk loans, which may lead to both
default and litigation.
Consumer Loans. The Company offers consumer financing to the purchasers of
VOI's in its own resorts, as well as from third party developers. Purchasers
make a down payment generally equal to at least 10% of the purchase price. This
financing generally bears interest at a fixed rate of approximately 16.9% over
seven years, and can be prepaid without penalty by the consumer at any time. The
consumer loans are collateralized by a first mortgage on the VOI, or in the case
of a right-to-use project, the loan is secured by a pledge of the consumer's use
rights along with a promissory note for the balance owed on the purchase. The
Company bears the risk of default on these promissory notes as to purchasers in
its own resorts, while the developer is ultimately responsible for defaults on
third party loans. The Company has historically provided financing for
approximately 80% of its customers.
Consumer financing is the most important aspect of the Company's financing
business. The Company's finance division purchases Consumer Loans generated by
its subsidiaries, and it will either fund third party developers by purchasing
Consumer Loans ("Purchased Receivables") or extend loans to developers secured
by their Consumer Loans ("Hypothecation Loans"). The cost and tax benefits of
Hypothecation Loans are generally more advantageous to developers, although
Purchased Receivables result in greater upfront cash to the developer.
In the case of Hypothecation Loans and Purchased Receivables, the Company
has direct recourse against the developer and the consumers whose obligations
underlie these loans. In addition, on all of its Consumer Loans, the Company has
recourse against each of the consumers, and has the right to either foreclose on
or take possession of each of the VOI's associated with each Consumer Loan,
which interval can be re-sold by the Company. The Company has no obligation to
foreclose on or take possession of the VOI associated with the defaulting
consumer loan, and historically has not done so. On third party loans, the
Company charges back defaulted
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<PAGE>
receivables to the developer, who must replace them with cash or new performing
contracts. The Company has full recourse to the developer to enforce these
commitments.
At December 31, 1999, the Company's Consumer Financing portfolio totaled
$228.8 million with a weighted average interest rate of 14.1%. The portfolio
included $91.0 million (40%) of Purchased Receivables with third-party
developers, $16.9 million (7%) of Hypothecation Loans with third-party
developers and $120.9 million (53%) of Consumer Loans associated with the
companies owned resorts.
Purchased Receivables. The Company purchases Consumer Loans from its own
resorts through two subsidiaries, Resort Funding, Inc. and EFI Development
Company, Inc. All third party generated Consumer Loans are purchased by the
Company through Resort Funding. Resort Funding also provides loan servicing for
all loans it makes directly to third party developers and all the notes it
finances, as well as all loans funded by EFI Development Company, Inc. When
Consumer Loans are purchased, the consumers' obligations are assigned to the
Company and the consumers become obligated directly to the Company. The Company
then has recourse directly against the consumers and has the VOI itself as
security if the consumers fail to pay. The Company also has the right to require
the developer to repurchase a particular Consumer Loan if the consumer's payment
is 60 days past due. To date the Company has not needed to take direct action
against consumers other than to foreclose on VOI interests.
Timeshare loans by developers to consumers typically have a seven-year
maturity and are payable monthly. In a Purchased Receivables transaction, the
Company negotiates an interest rate with the developer, which includes servicing
fees, and then calculates the present value of the monthly payments that the
developer is receiving from the consumer at that interest rate. The Company then
advances to the developer an amount that is typically between 85% and 90% of
this present value (the remainder of the value being called the holdback). As
the principal balance of a Purchased Receivable decreases, the holdback
increases as a percentage of the principal balance outstanding. The holdback is
not paid to the developer until the developer's obligation to the Company is
paid in full.
Hypothecation Loans. As an alternative to purchasing Consumer Loans, the
Company, through Resort Funding , may furnish a third party developer with a
loan, collateralized by a pool of the developer's Consumer Loans with respect to
a particular resort. The Company negotiates an interest rate, which excludes
servicing and commitment fees. The developer assigns Consumer Loans with respect
to a particular resort to the Company as collateral and, by virtue of such
assignment, the Company has the right to service these Consumer Loans in its own
name. Thus, the Company collects payments from consumers on their obligations,
and these payments are applied towards the developer's obligations under the
Hypothecation Loan. The developer typically may borrow an amount up to 85% to
90% of the value of the pool of Consumer Loans pledged as collateral. If a
Consumer Loan becomes 60 days past due, it becomes ineligible as collateral. In
this case, the developer may be required either to replace that Consumer Loan
with a Consumer Loan on which payments are current, or refund to the Company the
amount owed on that particular Consumer Loan or do nothing if the Hypothecation
Loan has sufficient overcollateralization. The Company has full recourse against
the developer with respect to a Hypothecation Loan, and has the VOI as security.
Acquisition and Development Loans. The Company provides loans to timeshare
resort developers to acquire land and construct a resort, or to acquire a hotel,
club or other previously developed property for conversion into a timeshare
resort ("A&D Loans"). The first loan that developers typically require in the
process of developing a timeshare resort is an A&D Loan. Since 1991, the Company
has financed approximately $115 million of A&D Loans on over 30 projects.
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<PAGE>
A&D Loans are generally collateralized by a first mortgage on the property with
full recourse to the developer. In addition, the Company typically obtains
personal or corporate guarantees from the developer. The Company does not
normally make an A&D Loan without obtaining the exclusive right to provide
financing for all of the Consumer Loans resulting from the resort project. As a
developer makes sales of VOI's, a portion of the proceeds from each sale is paid
to the Company and applied to the A&D Loan ("release payment"). The A&D Loans
are high-risk credit extensions, and loans to borrowers unable to satisfy their
obligations may result in write-offs, protracted litigation or both.
In the case of an A&D Loan, the Company has recourse against the developer
and the project, and it can foreclose on an uncompleted resort, which may
require a substantial capital infusion in order to realize a recovery. The
Company believes its Consumer Financing portfolio offers better risk-adjusted
returns than its A&D Loan portfolio. After being adjusted for defaults, the
yield on the Company's Consumer Financing portfolio is significantly higher than
that on its A&D Loan portfolio. However, on third party projects it is typically
necessary to advance the A&D Loan in order to be able to acquire the receivables
financing business.
Underwriting Criteria and Funding Approval Process. In reviewing potential
loans to developers, excluding Company owned subsidiaries, the Company typically
evaluates the following:
o Developer experience. The Company reviews the developer's general
business experience as well as its performance with other resort
projects.
o Financial condition. The Company examines the developer's financial
condition in order to assess its ability to meet its commitments.
o Resort location. The Company believes that location can mean the
success or failure of a resort, and therefore considers such factors
as demographic characteristics, area attractions and the success or
failure of other timeshare resorts in the market.
o Sales and marketing. The Company evaluates the competitive
environment in order to determine the feasibility of the financial
projections of the project, including the cost and availability of
tour flow.
o Resort property. The Company believes that the quality and amenities
of the resort and the condition of the property are critical to the
success of the developer's sales efforts.
In addition to the criteria discussed above, the Company also conducts a
site visit of the property. The Company's decision to provide funding to a
developer is typically conditioned upon the satisfactory completion of due
diligence.
Loan Servicing, Collections and Delinquencies. Servicing Consumer Loans,
including collection activities, is an important part of the Company's finance
business and subsidiary resort operations. The Company services nearly all of
the Consumer Loans in its Consumer Financing portfolio. Servicing Consumer Loans
internally provides the Company with direct access to consumers and prompt
feedback from those consumers regarding resort conditions and developer
performance. Also, in the event of a consumer default, it provides the Company
the ability to exercise expeditiously its remedies against the developer.
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<PAGE>
Client Base. Historically, the Company has targeted its lending business
for third party developers with small to midsize resort projects. Third party
loans in this size range sometimes produce relationships that can lead to
acquisitions. Since such projects require modest initial financing, the Company
believes that no individual loan is critical to the Company's success. Since the
Company entered the timeshare resort development business in 1998, its own
portfolio has grown rapidly in proportion to the loans of third party
developers. As of December 31, 1999, the Company's own Consumer Loans represent
about 46.5% of the entire $260.1 million loan portfolio, while the next two
largest developers represent 8.7% and 7.6%, respectively.
The following tables provide detailed loan portfolio information
relating to both third party A&D Loans and consumer loans, and also loans to the
Company's own customers. As this data shows, the Company's total loan portfolio
more than 60 days past due was $6.3 million at December 31, 1999, while total
reserves and overcollateralization were $32.9 million. Thus, considering its
receivables portfolio as a whole, the Company had total reserves equal to
approximately 5.2 times total 60 day past due loans. During 1999, the Company
increased its provision for doubtful receivables to $10.1 million, up 163% from
its level at year-end 1998. The Company believes that it follows a conservative
approach in establishing strong provisions for potential problem loans, and
providing detailed information to investors regarding performance of its
receivables portfolio.
PORTFOLIO DATA
A&D Loan Portfolio Distribution
As of December 31, 1999(1)
(Dollars in thousands)
Aggregate Average Percentage of
Number of Principal Principal Total A&D Loan
Loans (2) Amount Amount Loan Portfolio
--------- ------ ------ --------------
Less than $1 million 4 $ 1,935 $ 484 6.9%
$1-$2 million 5 6,947 1,390 24.9%
$2-$3 million 0 0 0 0.0%
$3-$4 million 2 6,486 3,243 23.2%
$5 million or more 2 12,577 6,288 45.0%
------- ------- ------- -------
Total A&D Loans 13 $27,945 $ 2,150 100.0%
- ----------
(1) Does not include loans between Resort Funding and affiliated resorts.
(2) In general, the Company makes one A&D Loan for each resort being financed.
As of December 31, 1999, the Company's total loan portfolio had an
outstanding balance of $260.1 million, which included $27.9 million (11%) of A&D
Loans, $228.8 million (88%) of Consumer Financing, and $3.3 million (1%) of
other loans.
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<PAGE>
Loan Portfolio Composition
(Dollars in thousands)
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------
1995 1996 1997 1998(1) 1999(1)
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
A&D Loans $ 32,838 $ 31,475 $ 39,390 $ 33,434 $ 27,945
Purchased Receivables 51,820 66,201 91,102 95,289 91,028
Hypothecation Loans -- 1,570 5,275 11,904 16,925
Consumer Loans -- -- -- 18,012 120,895
Other Loans 6,605 3,447 763 2,313 3,297
-------- -------- -------- -------- --------
Total Loans Outstanding $ 91,263 $102,693 $136,530 $160,952 $260,090
</TABLE>
- ----------
(1) Does not include loans between Resort Funding and affiliated resorts
eliminated in consolidation.
17
<PAGE>
The following table sets forth certain key characteristics of the Company's loan
portfolio as of December 31, 1999.
Characteristics of the Loan Portfolio
As of December 31, 1999(1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Total Weighted Weighted
Principal Average Average Number of Number Number
Amount Remaining Interest Developers of Of
Outstanding Maturity Rate Financed Resorts Loans
----------- -------- ---- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
A&D Loans $ 27,945 1.8 11.0% 11 12 13
Purchased Receivables 91,028 5.0 12.8% 36 49 17,120
Hypothecation Loans 16,925 3.5 10.8% 10 10 11(2)
Consumer Loans 120,895 5.4 15.6% -- 29 21,388
Other Loans 3,297 1.2 11.6% 6 6 6
-------- ----
Total Outstanding Loans $260,090 13.8%
</TABLE>
- ----------
(1) Does not include loans between Resort Funding and affiliate resorts
eliminated in consolidation.
(2) Includes 3,613 underlying Consumer Loans.
Note: Weighted average remaining maturity in years.
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<PAGE>
The following table sets forth the current and historic composition of
reserves and over collateralization, reserves as a proportion of total loans,
and the levels of past due loans and chargebacks:
<TABLE>
<CAPTION>
Loan Reserves Coverage
(Dollars in thousands)
As of December 31, 1999
--------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
A&D Loans past due -- $ 5,315 $ 9,485 $ 3,435 $ 3,821
Consumer Financing past due $ 1,524 3,286 1,458 1,790 2,708
-------- -------- -------- -------- --------
Total past due loans $ 1,524 $ 8,601 $ 10,943 $ 5,225 $ 6,529
Total loans $ 91,263 $102,693 $136,530 $160,952 $260,090
Total past due loans as % of
total loans 1.7% 8.4% 8.0% 3.2% 2.5%
General reserves $ 1,800 $ 1,979 $ 2,442 $ 3,835 $ 10,073
Specific reserves 9,126 12,386 17,320 18,392 18,507
Overcollateralization -- 199 1,006 3,588 4,308
-------- -------- -------- -------- --------
Total reserves and
overcollateralization(1) $ 10,926 $ 14,564 $ 20,768 $ 25,815 $ 32,888
Total reserves and
overcollateralization as % of
total loans 12.0% 14.2% 15.2% 16.0% 12.6%
Chargebacks 3,389 6,066 6,376 5,875 5,542
Chargebacks as % of
Consumer Financing(2) 6.5% 9.0% 6.6% 5.5% 5.1%
</TABLE>
- ----------
(1) Specific reserves and the overcollateralized contracts relate to specific
developers, and any application of these reserves or overcollateralized
contracts to defaulted loans would be done on a developer by developer
basis.
(2) Chargeback percentage is based on Consumer Financing, because only these
loans can be charged back.
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<PAGE>
The following table sets forth the portfolio performance of the consumer
receivable portfolio at December 31, 1999:
Consumer Receivable Loan Portfolio
As of December 31, 1999
(In Thousands)
Current 30 - 59 days 60 - 89 days 90+ days Total
------- ------------ ------------ -------- -----
Owned Resorts $ 114,666 $ 3,365 $ 1,520 $ 1,344 $120,895
94.8% 2.8% 1.3% 1.1% 100.0%
Third Party (1) $ 115,421 $ 3,424 $ 2,062 $ 1,364 $122,271
94.4% 2.8% 1.7% 1.1% 100.0%
Total $ 230,087 $ 6,789 $ 3,582 $ 2,708 $243,166
94.6% 2.8% 1.5% 1.1% 100.0%
(1) Includes the consumer receivables that collateralize the hypothecation
loans.
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<PAGE>
The following two tables show current and historic levels of 90 day past
due loans and changes in the Company's allowance for doubtful accounts:
<TABLE>
<CAPTION>
90 Day Past Due Loans
(Dollars in thousands)
As of December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total loan portfolio balance $ 91,263 $102,693 $136,530 $160,952 $260,090
Principal amount of past due loans:
A&D Loans -- 5,315 $ 9,485 $ 3,435 $ 3,821
Purchased Receivables 1,524 3,286 1,458 1,253 1,364
Hypothecation Loans -- -- -- -- --
Consumer Loans -- -- -- 537 1,344
Other Loans -- -- -- -- --
-------- -------- -------- -------- --------
Total principal amount of past due
loans $ 1,524 $ 8,601 $ 10,943 $ 5,225 $ 6,529
Past due loans as a percentage of
total principal amount of loans
outstanding 1.7% 8.4% 8.0% 3.2% 2.5%
</TABLE>
<TABLE>
<CAPTION>
Consolidated
Changes in Allowance for Doubtful Accounts
(Dollars in thousands)
Year Ended December 31,
----------------------------------------------------------
1995(2) 1996(2) 1997 1998 1999
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
beginning of year $ 1,006 $ 1,800 $ 1,979 $ 2,442 $ 3,835
Allowance related to acquisitions -- -- -- 793 6,639
Provision for loan losses 794 179 925 791 2,192
Charges to allowance for doubtful
accounts -- -- (601) (424) (2,593)
Charges applied against specific
developer holdbacks (1) -- -- 139 233 --
-------- -------- -------- -------- --------
Allowance for doubtful accounts, end
of year $ 1,800 $ 1,979 $ 2,442 $ 3,835 $ 10,073
</TABLE>
- ----------
(1) In accordance with the terms of certain agreements with developers, the
Company charges certain bad debts directly against developer holdbacks,
rather than against the general allowance for doubtful accounts.
(2) Does not include the Company's allowance for doubtful accounts which had a
beginning balance in 1995 of $290,000, provision of loan losses of
$602,000 and $0 for 1995 and 1996, respectively, and loan losses of
$842,000 and $50,000 for 1995 and 1996, respectively. These amounts
pertain to the insurance premium finance business discontinued in 1995.
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<PAGE>
INSURANCE
The Company carries comprehensive liability, fire, windstorm and business
interruption insurance with respect to its properties and interests in its
resorts (i.e., its inventory of unsold VOI's), with policy specifications,
insured limits and deductibles customarily carried for similar properties which
the Company believes are adequate. There are certain types of losses (such as
losses arising from flooding) that are either uninsurable or not economically
insurable or for which the Company or its borrowers have limited insurance
coverage. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could be required to repair damages at its expense, or lose its
capital invested in an owned resort or face loan default in the case of a
financed resort to the extent that the relevant homeowners' association does not
and cannot cover such losses. Any such loss could materially adversely affect
the Company's financial condition, results of operations, or liquidity. A large
number of the Company's resorts are at beach front locations within areas
exposed to potential hurricanes, magnifying the importance of adequate insurance
coverage.
COMPETITION
Resort Development Operations. The timeshare resort industry is highly
fragmented and includes a large number of local and regional resort developers
and operators. However, some of the world's most recognized lodging, hospitality
and entertainment companies, such as Marriott International, The Walt Disney
Company, Hilton Hotels, Hyatt Corporation, and Four Seasons Resorts, have
entered the industry. Other companies in the timeshare industry, including
Sunterra Corporation, Fairfield Communities, Vistana, Bluegreen Corporation,
Silverleaf Resorts and TrendWest Resorts, are, or are subsidiaries of, public
companies with enhanced access to capital and other resources. Many of these
companies are actively engaging in the timeshare business in the same geographic
region as the Company. In the future, competitors may seek to develop, or
increase their development of, resorts in those regions in which the Company
presently does business. Such increased development may impact the Company's
ability to generate sales prospects and might otherwise materially and adversely
affect the Company's financial condition, resorts, operation or liquidity.
While the principal competitors of the Company's resort development
business are other developers of timeshare resorts, the Company is also subject
to competition from (i) service providers in the commercial lodging business,
including condominiums, hotels and motels, (ii) service providers in the leisure
business and (iii) to a lesser extent, from campgrounds, recreational vehicles,
tour packages and second home sales. A reduction in the product costs associated
with any of these competitors, or an increase in the Company's costs relative to
such competitors' costs, could materially adversely affect the Company's
financial condition, results of operations, or liquidity.
Numerous businesses, individuals and other entities compete with the
Company in seeking properties for development and acquisition of resorts. Many
of these competitors are larger and have greater financial and other resources
than the Company. Such competition may result in a higher cost for properties
the Company may wish to acquire or may cause the Company to be unable to acquire
suitable properties for the development of new resorts
Financing Operations. The Company's finance business is highly
competitive. Most of the Company's competitors are much larger and have
significantly more money to lend, including Finova Capital Corporation
("Finova"), Textron Financial Corporation ("Textron"), Heller
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<PAGE>
Financial, various banks and others. Conduit facilities are now being offered to
other funding companies, such as those extended to the Company by DG Bank
Deutche Genossenschaftsbank AG ("DG Bank"). The Company views its target market
as developers of midsize and smaller resorts. Recently, some of the Company's
larger competitors have also targeted this segment, thereby increasing pressures
on price and terms.
The availability of financing for new timeshare projects through capital
markets transactions, as well as generous terms offered by other lenders, could
result in overbuilding and an oversupply of intervals in the timeshare market.
This could lead to 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 the Company offers may
negatively affect its ability to provide additional financing to certain of its
existing customers, as well as its ability to attract new customers. The Company
generally intends to reduce the volume of future A&D Loans due to numerous
factors, including high credit risks, inadequate returns and the availability of
internally-generated notes to finance. However, the Company will continue to
seek out selected A&D Loans, particularly with potential strategic venture
partners, though there is no assurance that it will find A&D Loans that satisfy
its lending criteria.
GOVERNMENTAL REGULATION
General. The Company's marketing and sales of VOI's are subject to
extensive regulations by the federal government and the states and foreign
jurisdictions in which its resort properties are located and in which VOI's are
marketed and sold. On a federal level, the Federal Trade Commission has taken
the most active regulatory role through the Federal Trade Commission Act, which
prohibits unfair or deceptive acts or competition in interstate commerce. Other
federal legislation to which the Company is or may be subject includes the
Truth-In-Lending Act and Regulation Z, the Equal Credit Opportunity Act and
Regulation B, the Interstate Land Sales Full Disclosure Act, Telephone Consumer
Protection Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, Fair
Housing Act and the Civil Rights Act of 1964 and 1968. In addition, many states
have adopted specific laws and regulations regarding the sale of VOI ownership
programs. The laws of most states require the Company to register with a
designated state agency by filing a detailed offering statement describing the
Company and all material aspects of the project and sale of VOI's. Laws in most
states where the Company sells VOI's generally grant the purchaser of a VOI the
right to cancel a contract of purchase at any time within a period ranging from
3 to 15 business days following the earlier of the date the contract was signed
or the date the purchaser received the last of the documents required to be
provided by the Company. Most states have other laws that regulate the Company's
activities such as real estate salesperson licensure; exchange program
registration; sellers of travel licensure; anti-fraud laws; telemarketing laws;
price gift and sweepstakes laws; and labor laws. The Company believes that it is
in material compliance with all federal, state, local and foreign laws and
regulations to which it is currently or may be subject. However, no assurance
can be given that the Company will not incur significant costs in qualifying
under VOI ownership regulations in all jurisdictions in which the Company
desires to conduct sales. Any failure to comply with applicable laws or
regulations could have material adverse effect on the Company.
Certain state and local laws may also impose liability on property
developers with respect to construction defects discovered or repairs made by
future owners of such property. Pursuant to such laws, future owners may recover
from the Company amounts in connection with the repairs made to the developed
property. In addition, from time to time, potential buyers of VOI's may assert
claims with applicable regulatory agencies against VOI salespersons for unlawful
or improper sales practices. Such claims could have adverse implications for the
Company in
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<PAGE>
negative public relations and potential litigation and regulatory sanctions.
However, the Company does not believe that such claims will have a material
adverse effect on the Company or its business.
The Company believes that its interests are best served by rigorous
internal and external efforts to assure the highest possible level of integrity
in dealing with customers, including more effective and well-informed
regulation. Where individual sales personnel violate the Company's standards for
disclosure and truthfulness in all dealings with customers, it is the Company's
policy to take prompt and effective action to redress customer problems and to
discipline or separate sales personnel where appropriate to safeguard the
Company's standards of ethical conduct.
A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act (the "ADA"), impose requirements related to
access and use by disabled persons on a variety of public accommodations and
facilities. These requirements did not become effective until after January 1,
1991. Although the Company believes that its resorts are substantially in
compliance with laws governing the accessibility of its facilities to disabled
persons, a determination that the Company is not in compliance with the ADA
could result in a judicial order requiring compliance, imposition of fines or an
award of damages to private litigants. The Company is likely to incur additional
costs of complying with the ADA; however, such costs are not expected to have a
material adverse effect on the Company's results of operations or financial
condition. Additional legislation may impose further burdens or restrictions on
property owners with respect to access by disabled persons. If a homeowners'
association at a resort was required to make significant improvements as a
result of non-compliance with the ADA, VOI's owners may default on their
mortgages and/or cease making required homeowners' association assessment
payments. The Company is not aware of any non-compliance with the ADA, the Fair
Housing Act or similar laws that management believes would have a material
adverse effect on the Company's business, assets or results of operations.
The Company sells VOI's at certain of its resort locations through
licensed real estate sales agents. Such sales agents provide services to the
Company under contract and, the Company believes, are not employees of the
Company. Accordingly, the Company does not withhold payroll taxes from the
amounts paid to such persons. In the event the Internal Revenue Service or any
state or local taxing authority were to classify successfully such independent
sales agents as employees of the Company, and hold the Company liable for back
payroll taxes, such reclassification may have a material adverse effect on the
Company.
Environmental Matters. Under various federal, state, local and foreign
environmental, health, safety and land use laws, ordinances, regulations and
similar requirements (collectively, "Environmental Laws"), a current or previous
owner or operator of real property may be required to investigate and clean up
hazardous or toxic substances or wastes or releases of petroleum products or
wastes at such property, and may be held liable to a governmental entity or to
third parties for associated damages and for investigation and clean-up costs
incurred by such parties in connection with the contamination. Such laws may
impose clean-up responsibility and liability without regard to whether the owner
knew of or caused the presence of the contaminants, and the liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. The cost of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate the
contamination on such property, may adversely affect the owner's ability to sell
or rent such property or to borrow funds under a loan that is secured by such
property. In addition, persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility may also be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances or wastes at such disposal or
24
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treatment facility, whether or not such facility is owned or operated by such
person. In addition, some Environmental Laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner of a site may be subject to statutory
or common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with its
ownership and operation of its properties, the Company potentially may be liable
for such costs. In addition, as a result of the consummation of the
acquisitions, the Company could be held liable for the pre-existing
environmental and other liabilities of the acquired companies, if any.
Certain Environmental Laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs") when such materials are in
poor condition or in the event of construction, remodeling, renovation or
demolition of a building. Such laws may impose liability for release of ACMs and
may provide for third parties to seek recovery from owners and operators of real
properties for personal injury associated with ACMs. In connection with its
ownership and operation of its properties, the Company potentially may be liable
for such costs.
In addition, recent studies have linked radon, a naturally occurring
substance, to increased risks of lung cancer. While there are currently no state
or federal requirements regarding the monitoring for, presence of, or exposure
to, radon in indoor air, the EPA and the Surgeon General recommend testing
residences for the presence of radon in indoor air, and the EPA further
recommends that concentrations of radon in indoor air be limited to less than 4
picocuries per liter of air (pCI/L) (the "Recommended Action Level"). The
presence of radon in concentrations equal to or greater than the Recommended
Action Level in one or more of the Company's resorts may adversely affect the
Company's ability to sell VOI's at such resorts and the market value of such
resort. In addition, the Company is required to disclose to potential purchasers
and owners of VOI's at the Company's resorts that were constructed prior to
1978, any known lead-paint hazards and failure to so notify could impose damages
on the Company. Certain Environmental laws govern the use, removal and care of
lead-based paint when stored or present on building surfaces. Certain of the
Company's resort projects and buildings, constructed prior to 1978 including its
Peppertree corporate offices in Asheville, North Carolina, may have lead-based
paint present on the surfaces of certain structures. The laws relative to
lead-based paid may impose liability associated with exposure to airborne
particles and may provide for third parties to seek recovery from owners and
operators of real properties for personal injury associated with lead paint
exposure.
The Company has conducted Phase I environmental assessments (which
typically involve inspection without soil sampling or groundwater analysis)
performed by independent environmental consultants at each of the resort
locations at which it has sold or owns a material amount of inventory in order
to identify potential environmental concerns. These Phase I assessments have
been carried out in accordance with accepted industry practices, and generally
have included a preliminary investigation of the sites and identification of
publicly known conditions concerning properties in the vicinity of the sites,
physical site inspections, review of aerial photographs and relevant
governmental records where readily available, interviews with knowledgeable
parties, investigation for the presence of above ground and underground storage
tanks presently or formerly at the sites, a visual inspection of potential
lead-based paint and suspect friable ACMs where appropriate, and the preparation
and issuance of written reports.
Certain of the environmental site assessments identified recognized
environmental conditions at some of the Company's properties. These conditions
include historic uses of the property such as manufacturing or automotive
related facilities. Certain of the Company's resorts in the Long Wharf area of
Newport, Rhode Island have been constructed on sites which have been placed on
the Comprehensive Environmental Response Computation and Liability Information
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System ("CERCLIS") and listed as a "State Site" due to the presence of lead in
this area. The source of the lead contaminated soil is not known but is
suspected to be fill dating back many years or possibly other prior uses. As
part of its development of the Long Wharf Resort, Eastern Resorts entered into
an agreement with the Department of Environmental Management of Rhode Island
("DEM") to remediate voluntarily lead contamination in exchange for a release of
liability for the cleanup. After Eastern Resorts successfully completed its
remediation project, DEM issued a letter on March 26, 1998 declaring the site in
compliance with respect to this agreement. Subsequent to the completion of the
Long Wharf Resort project, the Company purchased land with improvements that are
within the Long Wharf area. Site remediation on this land has been undertaken
and completed in accordance with Department of Environmental Management ("DEM")
guidelines. Any further development of this land will require further compliance
with DEM site remediation standards.
A 2,000-gallon heating oil underground storage tank (UST) is present at
the corporate offices of Peppertree located in Asheville, North Carolina.
Records indicate that the UST was installed in 1971, has no cathodic protection,
and has not been monitored or tested for tightness. One soil sample form the
vicinity of the UST indicated concentrations of total petroleum hydrocarbons of
10 mg/kg (parts per million). The levels of concentration may require
remediation in accordance with applicable law. This UST is covered under a
validly issued state permit, but there is no assurance that the remediation, if
ordered, will be successful or that the Company will not be held liable or held
liable for the pre-existing environmental and other liabilities associated with
the UST.
There is also an on-site wastewater treatment plant servicing sanitary
sewage from all the condominium units for the Peppertree Atlantic Beach resort
in Beaufort, North Carolina. The wastewater treatment plant was transferred from
Peppertree Atlantic Beach Associates to Peppertree Atlantic Beach Association,
Inc., Peppertree Atlantic Beach II Association, Inc. and Peppertree Atlantic
Beach Villas III Association, Inc. on May 1, 1999. The North Carolina Department
of Environment, Health and Natural Resources ("DEHNR") issued Peppertree
Atlantic Beach Associates a permit for the facility on December 16, 1996, and
the permit is still in full force and effect. DEHNR has previously issued a
Notice of Violation to Peppertree Atlantic Beach Associates for exceeding
permitted limits. The violations have since been corrected; however, there are
no guaranties or assurances that there will not be a re-occurrence of events
that will contribute to future violations, or that the Company will not be held
liable for any liabilities associated with the wastewater treatment plant.
There is a UST located on-site to store liquefied petroleum gas used to
fuel the dryers in the Atlantic Beach resort laundry facility in Beaufort, North
Carolina. No soil samples around the surrounding area have been taken, and if
petroleum product concentration levels exceed governmental standards,
remediation may be required in accordance with applicable law. There is no
assurance that the remediation, if ordered, will be successful or that the
Company will not be held liable for any pre-existing environmental or other
liabilities associated with the UST.
The environmental site assessments have not revealed any other recognized
ongoing environmental liability that the Company believes would have a
materially adverse effect on its financial condition, results of operations, or
liquidity. There can be no assurance, however, that all environmental conditions
and risks have been identified in these environmental assessments and that the
Company is aware of all existing material environmental liabilities. Moreover,
it is possible that (i) future laws, ordinances or regulations could impose
material environmental liabilities; or (ii) the current environmental condition
of the Company's resort properties could be adversely affected by third parties,
or by the condition of land or operations in the vicinity of the resort
properties. The Company is not aware of environmental liability that would have
a material
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adverse effect on the Company's business, assets or results of operations, nor
has the Company been notified by any governmental authority or any third party,
and is not otherwise aware, of any material noncompliance, liability or other
claim relating to hazardous or toxic substance or petroleum products in
connection with any of its present or former properties. The Company believes
that it is in compliance in all material respects with all Environmental Laws.
No assurance, however, can be given that the Company will remain in compliance
with all Environmental Laws or that it is aware of all environmental liabilities
that relate to all of its present and former properties.
Real property pledged as security may be subject to unforeseen
environmental liabilities. Such environmental liabilities may give rise to (i) a
diminution in value of the property, (ii) the borrower's inability to repay its
obligations, (iii) limitations on the ability to foreclose against such
property, or (iv) liability for cleanup costs or other remedial actions which
could be material.
TRADEMARKS
While the Company owns and controls a number of trade secrets,
confidential information, trademarks, trade names, copyrights and other
intellectual property rights, including the "Peppertree Resorts Ltd." and
"Equivest Sunlogo" service marks which, in the aggregate, are of material
importance to its business, it is believed that the Company's business, as a
whole, is not materially dependent upon any one intellectual property or related
group of such properties. The Company is licensed to use certain technology and
other intellectual property rights owned and controlled by others, and,
similarly, other companies are licensed to use certain technology and other
intellectual property rights owned and controlled by the Company.
RISK FACTORS
RISK OF INCREASING LEVERAGE; LIQUIDITY
1997 Credit Facility. In November 1997, the Company entered into a credit
facility (the "1997 Credit Facility") with Credit Suisse First Boston Mortgage
Capital LLC ("CSFB"), which provided up to $75.0 million to finance Purchased
Receivables and to make Hypothecation Loans (the "CSFB Consumer Receivables
Line") and $30.0 million to fund A&D Loans (the "A&D Line"). The 1997 Consumer
Receivable Line had a $74.4 million balance as of December 31, 1999. As of
December 31, 1999, $29.1 million was outstanding under the A&D Line. All unpaid
amounts under the A&D Line are due and payable in November 2000. The Company is
planning to replace the A&D Line in 2000.
1999 Finova Loan Agreement. On September 20, 1999, the Company entered
into a $20 million ADC Loan and Receivables Warehouse Facility Agreement with
Finova Capital Corporation (the "Finova Loan"). The two-year facility can
finance third party loans, including A&D loans, Consumer Loans (both
Hypothecation Loans and Purchase Receivables), and pre-sale loans. The
outstanding balance as of December 31, 1999, was $5.1 million. The Finova Loan
matures on October 31, 2001.
DG Credit Facility. In January 2000, the Company, through its subsidiary
EFI Funding Company, Inc., entered into a $150 million consumer loan credit
facility with DG Bank Deutche Genossenschaftsbank AG ("DG Bank") as Agent for
Autobahan Funding Company LLC ("DG Credit Facility"). The term of the new
facility is five years and the interest rate is based on lender's commercial
paper rate plus 1.35%. The facility currently acts as the main facility for all
consumer receivable loans. This credit facility affords the Company the ability
to fund VOI receivables at all
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of its resorts as well as the ability to fund VOI sales generated by the Company
through its borrowing relationships with third parties. Under the terms of the
DG Credit Facility, Resort Funding will be responsible for all loan servicing,
administration and processing. The $75 million CSFB Consumer Receivable Line was
paid off by the Company in February 2000, in connection with the establishment
of the DG Credit Facility.
Short-Term Indebtedness. In August 1998, the Company entered into a loan
with CSFB in connection with the acquisition of Eastern Resorts. The loan was a
$15 million bridge loan (the "CSFB Bridge Loan"), of which $2.1 million was
outstanding at December 31, 1999. Certain assets of the Company secure this
loan, and in connection with the voluntary prepayment by the Company of the CSFB
Consumer Receivable Line, CSFB agreed to extend the maturity of the CSFB Bridge
Loan and modify it so that both the maturity date and interest rate coincide
with those of the A&D Line. The consolidated loan will mature in November 2000.
Bank of America Loan. In November 1999, the Company entered into a $20.7
million bridge loan with Bank of America, N.A. ("BofA Bridge Loan") in
association with the acquisition of Peppertree. The loan had an outstanding
balance of $16.6 million as of December 31, 1999. The loan matures August 17,
2000, and can be extended for up to an additional nine months. In order to
extend the loan, the Company will need to meet certain covenants, pay extension
fees and allocate certain cash flow to loan amortization.
Other Indebtedness. In March 1999, the Company assumed a loan from CSFB to
KGI, for a property located in Washington, D.C. This loan had an outstanding
balance of $3.0 million at December 31, 1999. The maturity of this loan has also
been extended to September 30, 2000.
In addition, the Company assumed another CSFB loan from CSFB to KGI for
the Avenue Plaza Hotel and Pro Spa, a fully operational hotel and timeshare and
facility located in New Orleans, Louisiana. The loan had a balance of $15.9
million at December 31, 1999. The maturity of this loan is December 31, 2000.
If the Company is unable to pay off, extend or consolidate some of these
loans as they mature, or find additional financing sources, the Company could be
placed in default. If the Company is placed in default, the Company's major
lines of financing could also be placed into default. To the extent the Company
cannot raise additional funds, the lack of liquidity and the unwillingness of
financing sources to continue to lend money could materially and adversely
affect the Company's financial condition and results of operations, or cause the
Company to seek protection under the Bankruptcy laws.
The indentures for the Company's Promissory Notes and subsidiary loan
agreements contain certain covenants that may, among other things, limit and/or
condition the ability of the Company and its subsidiaries to (i) incur
additional indebtedness, (ii) pay dividends or make other distributions with
respect to capital stock of the Company and its restricted subsidiaries, (iii)
create certain liens, (iv) sell certain assets of the Company or its
subsidiaries and (v) enter into certain mergers and consolidations.
Certain of the Company's and its subsidiary's Notes may also require
certain financial ratios, including interest coverage, leverage and fixed charge
ratios, to be maintained. There can be no assurance that these requirements will
be met in the future. If they are not, the holders of the indebtedness under
certain of these Notes may be entitled to declare such indebtedness immediately
due and payable.
Liquidity. At December 31, 1999, the Company's debt to equity ratio was
3.8:1. While finance companies traditionally operate with greater leverage than
timeshare developers, the
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Company has high overall levels of debt, and substantially all of the Company's
assets have been pledged as collateral on its loans. The Company is seeking to
obtain additional financing to support its current operations and planned
growth. The level of indebtedness could have important consequences to investors
including:
o increasing the Company's vulnerability to general adverse economic
or industry conditions;
o limiting its ability to obtain additional financing to fund future
lending, resort acquisition and development and general corporate
requirements; and
o requiring it to dedicate a substantial portion of its cash flow from
operations to the payment of indebtedness, thereby reducing
operating flexibility and opportunities for growth.
The Company requires continuous financing to conduct its finance and
resort acquisition and development businesses. The Company needs sources of
liquidity to make new loans to consumers for the purchase of timeshare VOI's, to
replace existing facilities that are maturing, to acquire land and develop new
timeshare resorts, and to lend to third party developers. To meet its capital
needs, the Company plans to expand its equity base, and to increase it's
borrowing availability under warehouse lines like the DG Credit Facility.
Currently, substantially all of the Company's assets are pledged as collateral
for existing loans. In addition, the Company is exploring the possibility of
entering into securitization transactions in which it either sells or borrows
against the collateral in its loan portfolio, or issuing other debt securities
in the capital markets as operations and market conditions permit.
In addition to the above, the Company is working with a number of
additional lenders on possible new facilities. The Company recently received a
preliminary $30 million commitment from Finova Capital Corporation that would
finance the Company's owned resorts, complementing the $20 million facility the
Company already has with Finova to finance third-party developers. However,
there can be no assurance that this new credit facility will close. The Company
has also received a preliminary $50 million consumer receivable facility
proposal and a preliminary $40 million consumer receivable and construction
facility proposal from two different commercial banks. The Company is also
talking with a number of local banks in areas where the Company has active
construction projects in order to finance the ongoing construction of additional
resorts, sales centers or other facilities. There is no assurance that the
Company will finalize any of these additional credit facilities.
In recent periods, some specialty lenders and also timeshare developers
have been unable to obtain additional financing from their customary or other
sources, including from warehouse lenders and through securitization
transactions. In times of credit constriction, the Company may find it harder to
borrow money and may have to pay more for any loans than do larger borrowers. In
the future, the Company may not be able to obtain financing or to raise capital
on satisfactory terms, or at all. To the extent the Company cannot raise
additional funds, lack of liquidity could materially and adversely affect its
financial condition and results of operations.
RISKS ASSOCIATED WITH CUSTOMER FINANCING
Credit and Concentration Risks. Both the Company's developer borrowers and
its consumer borrowers may repay late or not pay back their loans. The risk of
delinquency and default, and of consequent loss to the Company, increases during
economic downturns. The
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Company bears the risk of defaults by buyers who financed the purchase of their
VOI's through the Company directly, and it is indirectly exposed to the risk of
loss on consumer notes in third party resorts if developers become unable to
honor their chargeback obligations.
If a buyer of a VOI defaults on a mortgage receivable, the Company may
foreclose and recover the underlying VOI. However, in some jurisdictions the
Company will incur relatively substantial costs in foreclosing on the VOI,
returning it to inventory and reselling it. Although private mortgage insurance
or its equivalent is available to cover VOI's, the Company has never purchased
such insurance and has no present intention of doing so. In addition, although
the Company in many cases may have recourse against VOI purchasers and sales
agents for the purchase price paid and for commissions paid, respectively, no
assurance can be given that the VOI purchase price or any commissions will be
fully or partially recovered in the event of a buyer default under a mortgage
receivable. The Company is subject to the costs and delays associated with the
foreclosure process and the costs of sales and marketing for the resale of the
VOI to a new purchaser. Although the resale takes place as a normal VOI at a
normal price, there is no assurance that the proceeds generated by the resale
will cover the costs involved and the amount of the defaulted note.
A&D Loans are considerably larger than individual Consumer Loans that make
up the Consumer Financing portfolio and are made to considerably fewer
borrowers. Further, these loans normally are significantly more risky than
Consumer Loans because the resorts which serve as collateral may not be
completed on time, within budget, or at all, and the projected sales of VOI's
from which the A&D Loan is repaid may not occur as projected or at all. If the
borrower is unable to generate a sufficient volume of tours of sales prospects
at an acceptable cost, or is unsuccessful in converting those tours into sales,
the projects will most likely fail. Even if the Company is able to obtain
ownership of a resort from a defaulting developer, in most circumstances the
property can only be sold as a timeshare resort due to developer sales of the
resort prior to default. Thus, the number of potential buyers for the project
may be limited to companies capable of completing timeshare sales at the resort,
and in some cases that is not feasible. However, because the Company has an
internal marketing and resort management capability, it has the option of
assuming operations at the failed resort itself, as well as selling the project
to another buyer. Since January 1, 1996 three A&D Loans have become the subject
of legal proceedings by the Company to seek to foreclose on outstanding
mortgages. One such loan of approximately $6.7 million was repaid in full from
the proceeds of a sale to a new purchaser. The second and third loans, involving
approximately $3.5 million, and $4.6 million respectively, are the subject of
pending litigation.
The Company believes that its Consumer Financing portfolio has less risk
than the A&D Loan portfolio. In addition to the obligation of the consumer
purchasers of the VOI, Purchased Receivables and Hypothecation Loans are backed
by an obligation of the developer to replace any non-performing loan with a new
performing loan. In addition, for Purchased Receivables the Company holds back
from each developer a reserve against which non-performing loans can be applied,
and for Hypothecation Loans the Company maintains a mandatory
overcollateralization for the same purpose. Thus, while the Consumer Financing
portfolio experiences more frequent defaults than the A&D Loan portfolio, the
Company believes that its aggregate exposure after reserves is lower, and on
third party loans the Company has the credit of the developer to supplement that
of the consumer and the reserve.
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The Company adheres to underwriting criteria in evaluating a developer and
the particular project's viability, and performs credit checks on consumers.
Consumer defaults occur regularly, particularly in the early months of a note.
Though historically this has happened only rarely, developers are sometimes
unable to repay or repurchase non-performing Consumer Loans. While the borrowers
promise to make payments under their notes regardless of any defect in, damage
to, or change in condition of the resort property, the existence of problems in
these areas is likely to adversely affect the time, cost and amount of
collections.
Reserve Coverage Ratios and Target Reserves. At December 31, 1999, the
Company had total reserves, including over collateralization on the
Hypothecation Loans, for its loan portfolio equal to $32.9 million or 12.6% of
total loans. The Company's "Reserve Coverage Ratio" or "RCR" on third party
consumer receivables 60 days or more past due was 6.7 times coverage. The RCR
for third party loans that at December 31, 1999 were 90 days or more past due
was 16.6 times coverage. This Reserve Coverage Ratio at December 31, 1999 was
derived by comparing the Company's total reserves and overcollateralization of
$22.7 million on third party consumer receivables with the $3.4 million of such
receivables that were 60 or more days past due, thereby yielding a Reserve
Coverage Ratio of 6.7 times. The aggregate allowance for doubtful receivables of
$10.1 million represented a Reserve Coverage Ratio of 3.5 times the $2.9 million
in consumer receivables from owned resorts that were 60 days past due as of that
date. The Company's overall RCR for its entire portfolio at December 31, 1999
was 5.2 times total 60 day past due loans. The Company evaluates the adequacy
of the allowance for doubtful receivables on a monthly basis and adds to the
allowance by charging the amount of the projected loss as an expense.
For the Company's owned Consumer Loans, the Company has established a
"Minimum Target Reserve" based on the principal aging of the Consumer Loans. For
an account that is current on its billing, the Company targets a reserve for bad
debts equal to 5% of the outstanding principal balance. Once an account is 30
days past due, the Company targets a reserve of 10% of outstanding principal. As
an account reaches 60 days past due, the Company targets a reserve of 50% of the
outstanding principal balance. And finally, once a contract reaches 90+ days
past due, the Company targets a 95% reserve. The targeted reserve level is based
on the outstanding principal balance of the Consumer Loan, less an inventory
recapture amount.
On a quarterly basis the Company reviews the level of allowance on
doubtful receivables against the amounts suggested by the targeted reserve
methodology and increases the allowance as necessary to maintain an allowance in
excess of the target reserves. When the Company believes that collectibility of
a receivable is unlikely, that amount is charged against its allowance for
doubtful receivables. This generally occurs when a receivable is between 90 and
120 days past due, depending on the history of payments on the particular note.
As with other lenders, there is a risk that reserves may not be sufficient to
absorb credit losses, which may be substantial during a recession or economic
slowdown, with attendant adverse effects on the Company's financial condition,
results of operation and liquidity. However, under its Minimum Target Reserve
methodology, the Company maintains minimum reserves against fully current
receivables that are approximately equal to historic default rates, while
maintaining sharply higher reserves against any individual note whose payments
are behind schedule.
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Interest Rate and Duration Risks. The Company derives its finance
operations' revenues from interest and fees on loans and consumer receivables.
The Company principally borrows from the sources described above to fund
additional loans and purchase additional Consumer Loans.
At December 31, 1999, the Company's A&D Loan portfolio had a principal
amount of $27.9 million, with a weighted average variable interest rate of
11.0%. At that date, the Company had Purchased Receivables in a carrying amount
of $91.0 million, with a weighted average interest rate of 12.8% and a weighted
average life to maturity of 5.0 years, Hypothecation Loans of $16.9 million,
with a weighted average variable rate of 10.9% and a weighted average life to
maturity of approximately 3.5 years and Consumer Loans of $120.9 million, with a
weighted average interest rate of 15.6% and a weighted average life to maturity
of 5.4 years. At December 31, 1999, these loans were financed principally with
borrowings under the 1997 Credit Facility. The A&D Line has a variable rate of
LIBOR plus 2.9%, and the Consumer Receivables Line had a variable rate of LIBOR
plus 1.9%. At December 31, 1999, the rate under the A&D Line was 8.72%, and the
rate under the Consumer Receivables Line was 7.72%.
Historically, the Company has derived net interest income from its
financing activities because the interest rates that it charges to borrowers
have exceeded the interest rates the Company pays to its lenders. The Company
typically borrows at variable interest rates. Accordingly, if the Company lends
at fixed rates or at variable rates that do not increase as rapidly as the rates
on its own borrowings, an increase in interest rates could reduce or eliminate
the spread which the Company earns on its A&D Loan portfolio and its Consumer
Financing portfolio. Moreover, an increase in interest rates generally would
decrease the value of assets with interest rates that do not rise
commensurately. The Company does not currently hedge its interest rate risks.
However, under the new DG Credit Facility, the facility does force the Company
to hedge on the Credit Facility once the interest rate spread has been reduced
to approximately 600 basis points. This is currently the largest financing
facility that the Company maintains.
If interest rates were to decrease generally on loans available to
customers or the purchasers of VOI's, borrowers could prepay their loans and
reduce the Company's interest revenues. The Company generally seeks protection
from prepayment risk on developer loans (other than Consumer Loans) by making
loans that are not prepayable in some circumstances and requiring prepayment
fees in certain other circumstances.
The Company typically makes loans and acquires Purchased Receivables with
borrowings whose maturities do not match those of the related Consumer Loans,
and which generally mature earlier than the related Consumer Loans. As a result,
the Company must ordinarily refinance its borrowings. As noted above, all
amounts under the A&D Line are due in November 2000. The average maturity of the
Company's portfolio holdings extends well beyond this date and the rate of
repayment on A&D Loans by developers is variable based on the volume of sales in
such projects. Although the Company has historically been able to secure
financing sufficient to fund its operations, it does not presently have
agreements with its lenders to extend the term of existing funding commitments
upon their expiration. While the Company recently successfully obtained a 5
year, $150 million committed line from DG Bank to allow prepayment of CSFB's
Consumer Receivables Line, approximately nine months prior to its maturity,
there is no assurance that in the future it will be able to obtain financing for
the A&D Line or for other maturing indebtedness, which could cause the Company
to seek protection under the Bankruptcy laws.
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RISKS RELATED TO THE DEVELOPMENT AND INTEGRATION OF A POINTS-BASED VACATION
OWNERSHIP SYSTEM
The Company currently plans to expand the Vacation Club or create an
internal exchange system throughout its resort network, but no assurance can be
given as to the Company's ability to develop or operate such a company-wide
system efficiently. There can be no assurance that such system will be placed
into operation by any specific time. Risks associated with the operation of the
Vacation Club or an expanded internal exchange system include the risks that:
the Company cannot effectively develop or acquire the computer software
necessary to operate an expanded Vacation Club or internal exchange system; the
Company will be unable to renegotiate existing contractual obligations to
efficiently combine the existing Vacation Club with an expanded version;
Vacation Points may be or become subject to extensive regulation by federal,
state and local jurisdictions, possibly making points-based vacation ownership
systems uneconomical or unprofitable; and the Company's sales force may not be
able to sell points as effectively as traditional vacation weeks, resulting in
declining levels of income or, potentially, losses.
VARIABILITY OF QUARTERLY RESULTS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its gross revenues and net income from the
sale of VOI's. This variability may cause significant variations in quarterly
operating results. During peak demand periods, revenues from renting unoccupied
timeshare units on a transient basis increase significantly. Seasonal variation
is also influenced by resort locations and their popularity as destination
resorts. The Company's cash flow and earnings may be impacted by the timing of
development and the completion of future resorts, as well as the potential
effect of severe weather or other seasonal conditions in the regions where it
operates, all of which may cause significant variations in quarterly results. If
sales of VOI's are below seasonal normality during a particular period, the
Company's annual operating results could be materially adversely affected.
Numerous factors, including announcements of fluctuations in the Company's
or its competitors' operating results and market conditions for hospitality and
vacation ownership industry securities in general, could have a significant
impact on the future price of the Common Stock. In addition, the securities
market in recent years has experienced significant price and volume fluctuations
that often have been unrelated or disproportionate to the operating performance
of companies. These broad fluctuations may adversely affect the market price of
the Common Stock.
RISK OF DEVELOPMENT, CONSTRUCTION AND ACQUISITION ACTIVITIES
The Company generally has significant levels of finished timeshare
inventory available for sale. However, because inventory may not exist in all
locations when it is needed for ongoing sales, the Company must continue
construction at existing resort locations, or acquire new resort locations.
Risks associated with the Company's development, construction, acquisition and
expansion activities may include the risks that: acquisition and/or development
opportunities may be abandoned; construction costs of a resort may exceed
original estimates, possibly making the resort uneconomical or unprofitable;
sales of VOI's at a newly completed or acquired resort may not be sufficient to
make the resort profitable; financing may not be available for development,
construction or acquisition of, or the continued sales of VOI's at a resort or
the terms of such financing may make profitable operations difficult; and
construction may not be completed on schedule, resulting in decreased revenues
and increased interest expense. The failure of the
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Company to successfully complete its development, construction, redevelopment,
conversion, acquisition and expansion activities may have a material adverse
effect on the Company's results of operations.
Risks of Expansion Strategy. The Company intends to continue the expansion
of its existing resorts and to acquire, convert or develop other resorts.
Acquiring, converting or developing resorts places substantial demands on the
Company's liquidity and capital resources, as well as on its personnel and
administrative capabilities. Construction costs or delays at a property may
exceed original estimates, possibly making the expansion or development
uneconomical or unprofitable. Further, sales and marketing costs of VOI's at a
newly completed property may be sufficiently large as to make the project
unprofitable. In addition, rapid expansion creates risks that the Company's
internal control structure and its management team may not be able to keep up
with the pace of change. Breakdowns in controls can lead to cost overruns, bad
debts, ethical problems or widespread inefficiency. Finally, the Company may
expand into new geographic areas in which it has no operating history. The
Company may not be successful in such locations or, if it is successful, it may
require more time or a greater investment in research, marketing and personnel
before the Company becomes successful in such locations. There is no assurance
that such opportunities will be identified or, if the Company finds them, that
they will be successfully undertaken. The Company does not presently have the
financing available to complete all of its planned expansion. There is also no
assurance that the Company will be able to increase its financial resources, in
which event sales and loan portfolio growth cannot be maintained.
Regulatory and Environmental Risks. The Company's development and
construction activities, as well as its ownership and management of real estate,
are subject to comprehensive federal, state and local laws regulating such
matters as environmental and health concerns, protection of endangered species,
water supplies, zoning, and land development, land use, building design and
construction, marketing and sales, and other matters. Such laws, as well as any
difficulties in obtaining the requisite licenses, permits, allocations,
authorizations and other entitlements pursuant to such laws, could impact the
development, completion, and sale of the Company's projects and VOI's.
Third-Party Contractors. Although the Company's construction activities
for its Peppertree resorts are performed internally, other construction
activities are typically performed by third-party contractors whose performance
the Company cannot assure. Construction claims may be asserted against the
Company for construction defects arising out of the performance of these
companies. These claims may give rise to liabilities. Certain state and local
laws may impose liability on property developers with respect to construction
defects or repairs made by future owners of such property.
Concentration on Acquisition and Development Activities. There is
substantial concentration of Resort Funding's $27 million acquisition and
development loan portfolio in a small number of borrowers. A default by any of
these developers could materially affect The Company. All of such developers
could reasonably be viewed as high risk borrowers.
GENERAL ECONOMIC CONDITIONS; CONCENTRATION AND COMPETITION IN THE VACATION
OWNERSHIP INDUSTRY
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Any downturn in economic conditions or any price increases (e.g.,
airfares) related to the travel and tourism industry could depress discretionary
consumer spending and have a material adverse effect on the Company's business.
Any such economic conditions, including recession, may also adversely affect the
future availability of attractive financing rates for the Company or its
customers and may materially adversely affect the Company's business by
increasing defaults on consumer notes or through other mechanisms. Periods of
recession or economic slowdown increase the risks associated with the Company's
business. During such periods, the demand for vacation real estate and real
estate values typically decline, timeshare development slows or ceases, loan
demand lessens, and loan delinquencies and defaults rise. The Company's
timeshare development operations could suffer losses if it experiences a
decrease in sales of VOI's or if the Company is forced to sell its VOI's at
lower prices. While the Company believes that its reserve for loan losses is
currently adequate, it may not be sufficient during an economic downturn.
Furthermore, changes in general economic conditions may adversely affect
the Company's ability to collect its loans to VOI buyers. Because the Company's
present operations are conducted solely within the vacation ownership industry,
any adverse changes affecting the industry (such as an oversupply of vacation
ownership units, a reduction in demand for such units, changes in travel and
vacation patterns, changes in governmental regulations of the industry and
increases in construction costs or taxes, as well as negative publicity for the
industry) could have a material adverse effect on the Company's operations.
The Company is subject to significant competition at each of its resorts
from other entities engaged in the business of resort development, sales and
operation, including VOI ownership, condominiums, hotels and motels. Many of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell VOI's in resort properties. Virtually all of these
entities possess significantly greater financial, marketing, personnel and other
resources than those of the Company and may be able to grow at a more rapid rate
or more profitably as a result. The Company also competes with other established
vacation ownership companies.
Based on the Company's experience at its existing resorts, the Company
believes that the market for resale of VOI's by the owners of such intervals is
very limited and that resale prices are substantially below their original
purchase price. Attempts by buyers to resell their VOI's may compete with the
Company's sales of VOI's. While VOI resale clearing houses or brokers do not
currently have a material impact on the Company's business, if the secondary
market for VOI's were to become better organized and more liquid, the
availability of resale intervals at lower prices could adversely affect the
Company's prices and number of sales of new VOI's in the short term, although
such a development could increase the desirability of the VOI product in the
long term. Internet technology is enabling interested customers to shop for
resale intervals to an increasing degree, and the Company is not able to predict
the eventual effect, if any, of this trend on business.
DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORKS
The attractiveness of VOI ownership is enhanced significantly by the
availability of exchange networks that allow VOI owners to exchange their
occupancy right in their VOI for an occupancy right in another participating
network resort. The ability to exchange VOI's is frequently cited by buyers as
a primary reason for purchasing a VOI. RCI and II provide broad based VOI
exchange services, and the Company's resort locations are currently qualified
for participation in either the RCI or II exchange networks.
If such exchange networks cease to function effectively, or if the
Company's resorts are no longer included in such exchange networks, the
Company's sales of VOI's could be materially adversely affected. See
"Participation in VOI Exchange Networks." This risk may be reduced as
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the Company completes the roll-out of a company-wide Vacation Club if owners
have the ability to vacation at any of the Company's resort locations.
Nevertheless, in recent years, the price of exchange services has risen
substantially, possibly due to concentration of the market in only two
providers. At least one of the two exchange companies appears to be moving to
compete directly with developers such as the Company, while seeking to bar new
entrants into the exchange business with restrictive contracts as a condition of
providing exchange services. Continuation of price increases and direct
competition from either or both exchange companies could materially and
adversely affect the Company and its VOI owners.
APPLICABILITY OF FEDERAL SECURITIES LAWS TO THE SALE OF VOI'S
While the Company has been advised that such may not be the case, it is
possible that VOI's may be deemed to be a security as defined in Section 2(1) of
the Securities Act of 1933. If VOI's were determined to be a security for such
purpose, their sale would require registration under the Securities Act. The
Company has not registered the sale of the VOI's under the Securities Act and
does not intend to do so in the future. If the sale of the VOI's were found to
have violated the registration provisions of the Securities Act, purchasers of
the VOI's would have the right to rescind their purchases of VOI's. If a
substantial number of purchasers sought rescission and were successful, the
Company's business, results of operations and financial condition could be
materially adversely affected.
REGULATION OF MARKETING AND SALES OF VOI'S; OTHER LAWS
The Company's marketing, telemarketing and sales of VOI's and other
operations are subject to regulation by the federal government and the states
and foreign jurisdictions in which its resorts are located and in which VOI's
are marketed and sold. The Company believes that it is in material compliance
with all federal, state, local and foreign laws and regulations to which it is
currently subject. However, no assurance can be given that the cost of
qualifying under vacation ownership regulations in all jurisdictions in which
the Company desires to conduct sales will not be significant or that the Company
is in fact in compliance with all applicable federal, state, local and foreign
laws and regulations; or that statutory enactments will not severely limit the
telemarketing efforts that can be utilized by the Company to solicit VOI tour
prospects. Any failure to comply with applicable laws or regulations, or
material negative change to existing laws, could have a material adverse effect
on the Company. Prior to its acquisition by the Company, Peppertree was the
subject of enforcement proceedings by a consumer agency in the State of
Wisconsin. Although Peppertree entered into a consent decree with the agency
involved, such proceedings can lead to later private civil actions, as well as
generating adverse publicity that may reduce tour flows and increase costs, both
of which have occurred in the Wisconsin case.
POSSIBLE ENVIRONMENTAL LIABILITIES; UNINSURED LOSSES
Under various Environmental Laws, the owner or operator of real property
may be liable for the costs of removal or remediation of certain hazardous or
toxic substances or wastes located on or in, or emanating from, such property,
as well as related costs of investigation and associated damages. The Company is
not aware of environmental liability that would have a material adverse effect
on the Company's business, assets or results of operations, nor has the Company
been notified by any governmental authority or any third party, and is not
otherwise aware, of any material noncompliance, liability or other claim
relating to hazardous or toxic substance or petroleum products in connection
with any of its present or former properties. The Company
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believes that it is in compliance in all material respects with all
Environmental Laws. No assurance, however, can be given that the Company will
remain in compliance with all Environmental Laws or that it is aware of all
environmental liabilities that relate to all of its present and former
properties.
The Company's resorts may be subject to hurricanes and damaged as a result
thereof. The Company currently maintains insurance coverage that, in
management's opinion, is at least as comprehensive as the coverage maintained by
other prudent entities in the Company's line of business. However, there are
certain types of losses (such as losses arising from acts of war and civil
unrest) that are not generally insured because they are either uninsurable or
not economically insurable and for which the Company does not have insurance
coverage. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort and would continue to be obligated
on any mortgage indebtedness or other obligations related to the property. Any
such loss could have a material adverse effect on the Company.
VULNERABILITY TO REGIONAL CONDITIONS
As of December 31, 1999, the Company's resorts were located in in
Massachusetts, Rhode Island, Louisiana, Florida, Maryland, Washington, D.C.,
North Carolina, South Carolina, Virginia, Florida, Louisiana, Tennessee,
Wisconsin, Missouri, Virginia, and the U.S. Virgin Islands. The Company's
performance and the value of its properties will be affected by regional
factors, including local economic conditions (which may be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and the local regulatory climate. The Company's current
geographic concentration could make it more susceptible to adverse events or
conditions, which affect this region, more particularly including severe weather
conditions such as major hurricanes, tornadoes and major snowstorms.
REAL ESTATE RISKS
The Company's business depends in part on the value and operating
characteristics of real property investments. Real estate values are often
uncertain and tend to fluctuate. Desirability of real estate is affected by
numerous and mostly variable factors, including government policies, general
economic conditions, property condition, location, neighborhood quality, and
alternative properties available to consumers. If the Company's resorts or those
of the developers it finances are not attractive to consumers, VOI sales will
decline. There will also not be as many receivables to finance and the Company
may not be able to collect on the loans it has made.
Real estate investments are relatively illiquid. Such illiquidity will
tend to limit the Company's ability to vary its portfolio promptly in response
to changes in economic conditions. If developers default on their loans and the
Company acquires the collateral properties, the Company may not be able to sell
the properties at prices acceptable to it except over a lengthy period or not at
all.
DEPENDENCE ON OUTSIDE VENDORS
The Company's sale of VOI's is dependent upon its ability to generate
prospects to tour its resort projects. Although the Company continues to both
expand its own in-house tour generation capabilities, and add additional
vendors, there are no guarantees that such efforts will be
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successful. There are also no guarantees that outside vendors will continue to
meet the Company's marketing needs, or that the price for potential tours will
be acceptable.
KEY PERSONNEL ISSUES
As the Company's operations develop and expand, it will require additional
management and employees and will need to implement enhanced operational and
financial systems. The Company may not be able to successfully hire, retain,
integrate and use management and employees and implement and maintain such
operational and financial systems. Failure to do so could materially adversely
affect the Company's financial condition, results of operations or liquidity.
Due to the Company's recent Peppertree Acquisition, the Company may not realize
the consolidation of department and function benefits it expects to at the
anticipated levels or within the anticipated time periods.
EFFECTIVE VOTING CONTROL BY BENNETT ESTATE
The Bennett Estate currently holds beneficial ownership of 73.7% of the
Company's Common Stock, and 78.9% of total voting rights. The Trustee of the
Estate exercises voting authority, subject to Bankruptcy Court review, over all
such shares. Therefore, where it chooses to do so the Estate may control the
election of directors and the management and affairs of the Company, and the
outcome of various matters submitted to the stockholders for approval, including
mergers, consolidations and the sale of substantially all of the Company's
assets. The Estate's primary goal is to sell the shares of the Company owned by
the Estate at an attractive cash price, enabling the Estate to make a
significant cash distribution to its creditors.
BANKRUPTCY OF RELATED ENTITIES
In 1996, Bennett Management & Development Corp. ("BMDC") acquired control
of the Company, holding beneficial ownership of approximately 86% of the
Company's voting shares at that time.
On March 29, 1996, The Bennett Funding Group, Inc. ("BFG"), BMDC and
several of their affiliates 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"). The Petitions were precipitated when 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)). The United States Attorney for the
Southern District of New York also filed a criminal complaint (the "Criminal
Complaint") against Patrick Bennett alleging perjury and criminal violations of
the anti-fraud provisions of the federal securities laws. Patrick Bennett was
ultimately convicted of numerous federal felony counts.
Also in 1996, the U.S. Department of Justice appointed, and the Bankruptcy
Court approved, Richard C. Breeden as trustee in bankruptcy (the "Trustee") for
BFG and BMDC, as well as for certain other related debtors (collectively, the
"Estate"). In June 1996, the Trustee filed an adversary proceeding seeking more
than $1 billion in damages from, among others, prior controlling stockholders of
BFG and its affiliates and certain of their business associates,
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BFG's previous auditing firm and others. The Trustee has not filed any legal
action against the Company, or implicated the Company or any of its subsidiaries
in the alleged fraudulent schemes. Nonetheless, certain creditors' lawsuits
claimed that the Company and Resort Funding participated in the alleged fraud
and the Company and Resort Funding were named as defendants in several federal
and state class actions. The federal class actions were subsequently
consolidated (the "Consolidated Class Actions") in the United States District
Court for the Southern District of New York (the "District Court").
In November 1997, the Company repaid approximately $25 million of debt to
the Estate, through the issuance of 4,645,596 shares of Common Stock to the
Estate. In September 1998, the Bankruptcy Court authorized the Trustee to
exchange its remaining indebtedness of $361,000 to the Estate for 67,113
additional shares of Common Stock. No party in interest in the bankruptcy has
sought to set aside the sale of Resort Funding to the Company or to consolidate
any of its assets in the proceeding, and the Company does not believe that any
such action, if attempted, would be successful. The Company therefore believes
that its future should not be directly influenced by BFG's affairs.
In October 1998, the Trustee and counsel for the plaintiffs in the
Consolidated Class Actions entered into a Settlement Agreement to settle certain
major litigation between the Estate and an insurance carrier for its leases. The
Settlement Agreement has since been approved by both the U.S. District Court and
the Bankruptcy Court, and on February 17, 2000, the Company was dismissed from
the Consolidated Class Actions and the state class actions.
The Trustee does not vote shares of the Company owned by the bankrupt
Bennett entities without consultation with the Committee of Unsecured Creditors,
and obtaining Bankruptcy Court approval. 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.
DEPENDENCE ON SENIOR MANAGEMENT AND DIRECTORS
Senior Management and Directors. The Company's success depends upon the
continued contributions of its board of directors and the its senior management
teams, including sales and marketing and finance and accounting personnel at
Eastern Resorts, Bluebeard's Castle, Avenue Plaza, and Peppertree. Operations
are directed by a small senior management team led by the Company's Chief
Executive Officer. Mr. Breeden serves concurrently as the Trustee of the Estate.
In his capacity as Chairman of the Board, President and Chief Executive
Officer of the Company, Mr. Breeden currently does not have an employment
contract and does not receive any compensation from, or hold any equity interest
in, the Company. However, since January 1, 2000 the Company has paid a monthly
fee to the Estate in order to defer partially the Estate's costs for providing
Mr. Breeden's ongoing compensation. Mr. Breeden serves as a director of the
Company solely as a representative of the Estate, and his principal duty is to
the creditors of the Estate. In 1998, Mr. Breeden indicated a willingness to
continue serving in his current capacity upon the sale of the shares of stock
owned by the Estate, pursuant to a proposed three-year employment agreement that
would have provided both annual compensation and a significant equity interest
in the Company. There is, however, no assurance that the Estate's shares will be
sold as planned through a public offering or other offering, or that Mr. Breeden
will continue to serve at the Company under the current conditions. If he does
remain at the Company, he will serve concurrently as Trustee of the Estate
pending the consummation of the Estate's plan of reorganization. Resort
Funding's President, Thomas J. Hamel, has directed Resort Funding's
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timeshare operations since 1991, developing an extensive network of clients. R.
Perry Harris is the President of Eastern Resorts and an Executive Vice President
of the Company. He has been with Eastern Resorts and its predecessors for 18
years, and has an employment agreement with Eastern Resorts that runs until
2003.
C. Wayne Kinser, founder and the former President and owner of Peppertree
Resorts is a member of the Company's Board of Directors. Mr. Kinser has over 22
years of experience in the timeshare industry. The expertise and experience of
Mr. Harris and Mr. Kinser in the development of timeshare resorts are extremely
important to the Company. The Company also has several senior executives with
significant timeshare experience in the sales, marketing, operations, regulatory
and accounting fields. The loss of the services of any one of these individuals,
or of any of the Company's other key officers, could materially and adversely
affect the Company's business.
Dual Role of Trustee as Chairman and CEO of the Company. The Estate
currently intends to sell all of its Common Stock in the Company in a public
offering or other transaction. If the Estate is successful in selling or
spinning off or otherwise disposing of all its shares of stock, the Estate would
not own any shares in the Company and thus should have no right to influence the
Company's management directly. If less than all of the Estate's shares are sold,
the Estate would continue to hold an interest in the Company. In that event, the
Trustee would continue to have to consult with the Creditors' Committee and
obtain approval of the Bankruptcy Court prior to voting the shares of the Estate
or taking actions outside the ordinary course of business with respect to the
Estate's shares.
The bankruptcy proceedings involving the Estate will continue through 2001
and to a lesser extent possibly beyond. Mr. Breeden does not expect that his
responsibilities as Trustee will interfere with his duties at the Company. He
will, however, be called upon from time to time to devote attention and energies
to the ongoing bankruptcy proceedings, which could distract him from important
activities of the Company for temporary periods.
PREFERRED STOCK DIVIDENDS
As of December 31, 1999 the Company had cumulative undeclared and unpaid
dividends on its preferred stock of $900,000. No Common Stock dividends can be
paid until all preferred stock dividends are paid. At the Company's option, such
dividends may be paid in common stock, which has been the Company's practice. No
dividends on the Company's Common Stock can be paid until such Series 2 Class A
Preferred Stock dividends are paid in full. The holder of Series 2 Class A
Redeemable Preferred Stock is entitled to the number of votes, which represents
20% of the total number of votes of the Company. The Company may at its option
any time after February 16, 2003, redeem the Series 2 Class A Redeemable
Preferred Stock in whole or in part at the $10.0 million liquidation value plus
accrued and unpaid dividends. The Trustee has obtained approval to convert the
Series A Redeemable Preferred stock into Common Stock, or to sell such shares
for a price equal to an equivalent number of shares of Common Stock at the net
price of any offering of the Estate's shares of Common Stock.
MARKET FOR THE COMPANY'S COMMON AND PREFERRED STOCK
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ Stock Market") under the
symbol "EQUI". The Company was delisted from NASDAQ Stock Market in February
1996. The Company's
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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. As of December 31, 1999, the Estate beneficially owned approximately
73.7% of the Common Stock and 10,000 shares of Series 2 Class A Redeemable
Preferred Stock, which represents approximately 78.9% of the voting rights.
On December 31, 1998, the Company filed a Form S-1 Registration Statement
covering a proposed sale of all of the shares of Common Stock held by the
Estate, as well as certain primary shares to be issued by the Company to raise
additional equity capital (the "Offering"). The Estate has received approval
from the Bankruptcy Court to sell all of its Common Stock in the Company in the
Offering. Due to market conditions, the Offering has been postponed, though the
Estate still intends to conduct this or a similar transaction in the future. Due
to the facts that, among other things, the Estate has largely liquidated its
other assets and its creditors have a need for the case to be completed and all
distributions of cash, stock or other property completed, the Estate and the
Company intend to pursue the sale of the shares of Common Stock held by the
Estate on a continuous basis. Upon the completion of an offering or similar
transaction, the Estate's ownership interest in the Company should be eliminated
in its entirety. If the Company abandons its efforts to sell the shares of
Common Stock held by the Estate, the $1.5 million in offering costs now accrued
on the Company's balance sheet will be written off as a loss on the company's
books.
The Trustee intends to sell all of the Common Stock in the Offering, and
to sell all the Preferred Stock to the Company at the conclusion of the
Offering. However, it is possible that less than all of such capital stock will
be sold, in which case the Estate would continue to be a stockholder and would
likely seek other means to liquidate its holdings in the Company. Bankruptcy
Court approval would be required for a partial sale. The sale of a large block
of Common Stock, or the expectation that such a sale might occur, could
materially adversely affect the share price of the Common Stock. The amount of
Common Stock available for trading, as well as trading volume, is currently
small, while spreads between high and low closing prices are large.
Item 3. Legal Proceedings
The Company is currently subject to litigation and claims respecting
employment, tort, contract, negligence and construction, among others, arising
in the ordinary course of business. Management expects none of these lawsuits or
claims, even if adversely decided, to have a material adverse effect on the
Company or its business. The Company is, however, required to disclose any
material proceeding to which any director or officer has a material interest
adverse to the Company, and any material bankruptcy, receivership or similar
proceeding with respect the Company. These suits are described below.
In January 1996, Mr. Joseph Mooney 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 upon his resignation in
May 1995 as Senior Executive Vice President and Director. Mr. Mooney alleged
that the Company tortuously interfered with certain business opportunities that
were rightfully his and sought damages in excess of $1.1 million. The Company in
turn filed certain counterclaims against Mr. Mooney alleging that Mr. Mooney
wrongfully retained certain Company property and wrongfully interfered with the
Company's conduct of its business, in violation of the terms the termination
agreement. On June 15, 1999, the court dismissed with prejudice Counts I, II,
and III of Mr. Mooney's Third Amended Complaint against the Company indicating
that the letter of
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intent was not a binding enforceable agreement. The court also denied the
tortuous interference claim. Mr. Mooney appealed the dismissal to the Fourth
District Court of Appeals, by filing an Initial Brief on December 17, 1999. Mr.
Mooney also moved to bifurcate the Company's counterclaim from the main claims
against the remaining defendants. The court agreed to bifurcate the claims, but
has required the Company to participate in discovery. The Company continues to
vigorously pursue its counterclaims against Mr. Mooney.
In September 1997, in the Common Pleas Court for Beaufort County, South
Carolina, Resort Funding commenced foreclosure proceedings against the Main
Street Development Company, and others operating resort property located in
Hilton Head, South Carolina due to approximately four months delinquency in
payment of their obligations to Resort Funding under a previously executed
acquisition and development loan agreement. On November 3, 1997, Resort Funding
reached an agreement with the developer to settle the arrearage. 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 were to become
due.
However, in January 1998, the developer refused to deliver the deed in
lieu of foreclosure and terminated the November 3, 1997, agreement. On March 17,
1998, the developer filed an answer and counterclaim in the foreclosure action
alleging, among other things, that it was not in default of its loan agreements.
On September 30, 1998, the developer agreed to deposit all past-due interest
amounts into an escrow account accessible only by order of the court.
Additionally, the developer agreed to pay into the escrow account all future
interest payments as they become due, pending the outcome of the foreclosure
action and the defendant's counterclaim. In the event that any such payments are
not timely received, Resort Funding shall have the right to have a receiver
appointed to operate the resort. As of December 31, 1999, the principal balance
owed to Resort Funding under the referenced loan was approximately $3.4 million
and the escrow account had a balance of $793,265. The promissory note matured on
February 28, 1999. 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, 1999, 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. Resort Funding intends to pursue vigorously its claim and to
defend against the counterclaims filed by the defendants.
On December 15, 1999, M.J. Boyle, Contractor, ("M.J. Boyle") instituted an
action in the District Court of Bexar County, Texas for $1.9 million allegedly
owed to him by Resort Funding, as lender to an unaffiliated developer, for work
performed in connection with the construction of a resort known as Riverside
Suites) in San Antonio, Texas (the "San Antonio Project"). On or about March 12,
1998, Resort Funding provided two loans to the Project Developer, Riverside
Suites Ltd. ("Riverside"), consisting of an Acquisition and Development loan in
the amount of $6.3 million and a hypothecation loan for $15 million. These loans
were for Riverside to develop a time-share condominium project to be constructed
in part and renovated in part out of an existing building along the San Antonio
Riverwalk. M.J. Boyle is the contractor Riverside hired to develop the Project,
but has failed to complete the terms of the construction contract. Causes of
action under the complaint against Resort Funding include Promissory Estoppel,
Breach of Contract, and Declaratory Judgment as a result of an alleged defect in
Resort Funding's Deed of Trust. On or about February 14, 2000, Resort Funding
declared Riverside in default of its loans and set the property for sale on
March 7, 2000 under the Texas foreclosure laws. On March 1, 2000, M.J. filed an
Amended Petition and Application For Temporary Restraining Order and
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Application for Temporary and Permanent Mandatory Injunction, which the Court
granted on March 2, 2000. Resort Funding is currently in the process of
appealing to the Court of Appeals of Texas for the Fourth Judicial District to
dissolve the injunction granted against it. The Company intends to vigorously
proceed with the foreclosure and to defend itself against the claims by M. J.
Boyle. There can be no assurances, however, that it will be successful in its
appeal or that it will be successful in its defense of the claims asserted
against it by M.J. Boyle.
John Cavanaugh and William Reighley, individually or through their
company, Castle Holdings, Inc. (collectively, "Castle"), have instituted a total
of four actions against the Company and/or KGI. The principals of Castle sold
certain properties owned or managed by themselves to KGI in 1998. KGI
subsequently sold those properties, among others, to the Company as part of the
KGI Acquisition. Both Messrs. Cavanaugh and Reighley became employees of KGI
following the sale of Castle's properties to KGI in 1998. The first suit was
filed by Castle against the Company and KGI in March 1999, in the District Court
of the U.S. Virgin Islands seeking an injunction against transfer of the KGI
properties in St. Thomas to the Company as part of the KGI Acquisition. This
suit also seeks the rescission of the Stock Purchase Agreement entered into
between Castle and KGI in 1998, and the return to Castle of the properties that
were sold to KGI under that Agreement. Castle's motion for a preliminary
injunction was summarily dismissed by the Court prior to the closing of the KGI
Acquisition. The Company has filed a counterclaim against Plaintiffs for an
amount in excess of $1.1 million dollars, plus punitive damages, attorneys fees
and costs.
The second suit was filed against the Company and KGI in the District
Court of the U.S. Virgin Islands for restitution of an alleged wrongful
termination by KGI of the employment of Messrs. Cavanaugh and Reighley, and the
Company's wrongful procurement of that termination in connection with the KGI
Acquisition. The third case is against Bluebeard's Castle Inc. ("BCI"), a
subsidiary of the Company. In that case, Plaintiffs have requested money damages
in excess of $830,000, plus interest, for Defendant's failure to pay alleged
demand promissory notes supposedly executed by BCI in favor of Castle's
principals. Such notes were allegedly issued by BCI to the principals of Castle
at a time when such persons were in control of BCI, and were hence directing
payments to themselves in a manner that the Company believes was not authorized,
and which violated such persons' fiduciary duties. In addition, plaintiffs
allege that BCI owes approximately $27,000 as a balance due on payments made by
Plaintiffs on behalf of BCI, and approximately $140,000 for credit card payments
received by BCI but allegedly due to Plaintiffs. The Company is seeking to have
Castle and its principals explain the disappearance of substantial volumes of
notes receivable belonging to the Company during the period immediately prior to
closing of the KGI Acquisition, and also believes that the alleged indebtedness
in question has already been satisfied. The U.S. Virgin Island cases have all
been consolidated for discovery purposes.
The fourth case was filed in May 1999, in Volutia County, Florida by
Messrs. Cavanaugh and Reighley against KGI for payment on promissory notes
allegedly executed by KGI before the KGI Acquisition. Plaintiffs allege each is
a demand note and are seeking payment totaling approximately $1.3 million. Under
the terms of the KGI Acquisition, as previously announced, the Company has
established a reserve on its balance sheet for possible payments to KGI under a
partial indemnity. While the Company does not anticipate making any payments
under this partial indemnity due to its causes of actions against Castle and its
principals, the full amount of the partial indemnity is reserved, and therefore
the Company does not expect any income statement effect with respect to such
litigation. The Company intends to pursue vigorously its defense of all claims
made against it or its subsidiaries by the Plaintiffs, as well as making
possible additional counterclaims for fraud and other corporate misconduct it
believes may have taken place in connection- with the acts of Castle and or its
principals.
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's equity holders during 1999.
44
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
On June 25, 1991, 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
------- -------- -------
1999 1st 7 1/2 2
1999 2nd 7 1/16 2 3/4
1999 3rd 6 3/4 4 1/2
1999 4th 6 1/4 5 1/4
1998 1st 6 5/8 4 7/8
1998 2nd 6 1/2 4 5/8
1998 3rd 8 5/8 4 3/4
1998 4th 6 7/8 3 1/2
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.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors.
The following discussion is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and our financial statements and
the notes thereto appearing elsewhere in this filing.
Overview
Prior to August 28, 1998, the Company's only operating entity was Resort
Funding. At that time, Resort Funding was a small specialty finance company
which financed developers in the timeshare industry throughout the United States
and in selected foreign markets. On August 28, 1998, the Company completed the
first of its three acquisitions that opened a new line of business --developing,
operating, and managing timeshare resorts. The following provides a brief
summary of the three significant acquisitions that have occurred since August
28, 1998.
Acquired Company Acquisition Date # of Resort Locations
---------------- ---------------- ---------------------
Eastern Resorts (1) August 28, 1998 7
KGI Properties (2) March 26, 1999 7
Peppertree Resorts (3) November 17, 1999 15
(1) Includes seven timeshare resorts located in Newport, Rhode Island and the
western Massachusetts. Equivest acquired all of the outstanding ownership
in Eastern Resorts for approximately $15 million in cash and 3,200,000
shares of Equivest common stock.
(2) Includes six timeshare vacation resorts located Maryland, Louisiana,
Florida and in St. Thomas, U.S. Virgin Islands; one resort development
site in Washington, D.C.; management contracts and consumer notes
receivable. Equivest acquired all of the outstanding ownership interests
and assets for approximately $2 million in cash.
(3) Includes fifteen- vacation ownership resorts located in Virginia, North
Carolina, South Carolina, Tennessee, Missouri and Wisconsin. Equivest
acquired all of the outstanding ownership interests and assets for
approximately $14 million in cash and approximately 2,900,000 shares of
Equivest common stock.
Each of the three transactions was accounted for as a purchase. Consequently,
the operating results for 1998 and 1999 transactions were included in the
Company's consolidated financial statements since the date of their respective
acquisition.
Operations of the Company
The Company's primary sources of revenues are its (i) timeshare operations
and (ii) finance operations. Revenues from its timeshare operations are
principally from VOI sales and resort operations, and revenues from its finance
operations are principally from interest and fees on loans.
Finance Operations
In its finance operations, the Company recognizes interest income on its
outstanding loan receivables when earned, using the interest method. The accrual
of interest on a loan is discontinued when unpaid interest, together with the
loan principal outstanding, exceeds the loan's projected cash flow or the loan's
collateral value.
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<PAGE>
The Company reduces gross receivables by the amount of hold backs from
developers ("specific reserves"). In addition, the Company establishes an
allowance for doubtful receivables ("general reserves"). Management evaluates
the adequacy of the allowance on a quarterly basis by examining past loss
experience, current delinquencies, known and inherent risks in the portfolio,
adverse conditions that may affect the borrower's ability to repay, the
estimated value of the underlying collateral, and current economic conditions.
The Company's allowance for doubtful accounts is based upon management's
estimate of the amount that will be necessary to cover future write-offs of
accounts receivable in the event (i) a developer defaults on its obligation to
replace or take back a non-performing Consumer Loan and (ii) specific reserves
on such developer's loan are exhausted. A receivable is charged against the
allowance when management believes that collection is unlikely. If management's
estimates differ from actual results, reported income for the earlier period in
which a provision for doubtful receivables was taken will be too high or too
low, and an adjustment will be made.
In the case of Purchased Receivables, the Company generally holds back
from developers 10% to 15% of the purchase price ("hold back") as a specific
reserve against potential default by the developer on its liability for any
defaulted Consumer Loan. The Company does not pay this amount to the developer
until the Consumer Loan has been paid in full. As a result, the special reserve
as a percent of the unpaid principal begins at 10% to 15% and increases as the
principal of the loan is paid down. In the event a consumer defaults on an
obligation, the Company has the right to require the developer to repurchase the
defaulted consumer loan at an amount equal to the present value of the unpaid
principal and interest on the note, net of the reserve ("chargeback").
Generally, the developer has the option to replace the defaulted consumer
receivable with another of equal or greater value. Specific reserves are charged
only if the developer defaults on its chargeback obligations. General reserves
are charged only if the developer defaults on its obligations and there are no
remaining specific reserves.
In the case of Hypothecation Loans, the Company typically advances to the
developer, at any given time, only 85% to 90% (the "Advance Rate") of the amount
of the receivables pledged as collateral for the loan. As consumers make
payments on their obligations, a portion of the Hypothecation Loan is repaid.
Once the Hypothecation Loan is repaid in full, the remaining collateral is
released to the developer.
For the Company's owned Consumer Loans, the Company established a minimum
reserve target based on the principal aging of the Consumer Loans. The following
list sets forth the target reserve level based on the aging of the contract:
o Current - 29 days past due 5%
o 30 - 59 days past due 10%
o 60 - 89 days past due 50%
o 90+ days past due 95%
The targeted reserve level is based on the outstanding principal balance
of the Consumer Loan less an inventory recapture amount. When the Company
believes that collectibility of a receivable is unlikely, that amount is charged
against the allowance for doubtful receivables.
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<PAGE>
Timeshare Operations
The Company's timeshare development operations generate revenue primarily
through selling and financing VOI's and operating its resort properties. The
Company recognizes VOI sales revenue on the accrual basis. A sale is recognized
after a binding sales contract has been executed, the buyer has made a down
payment of at least 10%, and a statutory recission period has expired. If all
other criteria are met, but construction of the unit to which the VOI relates is
not substantially complete, revenue is recognized according to the percentage of
completion method. The Company recognizes interest income on its outstanding
Consumer Loans when earned, using the interest method. For tax purposes, sales
of VOI's are recognized using the installment sale method of accounting, which
recognizes income as cash is received.
Revenues from resort operations primarily consist of fees earned for
management of timeshare resorts, income from the rental of unoccupied timeshare
units on an overnight basis, and food and beverage sales from the Company's
restaurants. Revenues are recognized at the time services are rendered.
In its timeshare operations, the Company accounts for uncollectible notes
by recording a provision for doubtful accounts at the time VOI sales revenue is
recognized. Historically, this provision approximated 5% of the outstanding
receivable balance. If a customer defaults, any unpaid balance on the note is
charged against the previously established allowance for doubtful accounts, net
of the amount that is restored to inventory. VOI's returned to inventory are
recorded in inventory at the lower of their original cost or market value. The
Company ceases to recognize interest income when a note becomes past due.
Costs associated with the acquisition and development of a timeshare
resort include the costs of land, construction, furniture, interest and taxes.
These costs are capitalized and recorded as part of inventory cost, and
inventory is depleted and expensed based on the relative sales method: a fixed
amount is expensed as a depletion of inventory each time a VOI is sold. If no
sales were to be made with respect to a particular development project, no
expense would be recorded unless and until the property is sold or abandoned, or
if management determines the market value of the inventory is less than its
recorded cost.
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<PAGE>
Selected Financial Data
Year Ended
December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
$ % $ % $ %
- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Revenues:
As a percentage of total revenues:
Timeshare interval sales (VOI) $ -- --% $ 4,553 15.4% $40,910 43.3%
Interest 15,511 97.2% 20,399 68.8% 25,962 27.5%
Resort operations -- --% 3,646 12.3% 25,858 27.4%
Other income 453 2.8% 1,039 3.5% 1,650 1.8%
------- ------- ------- ------- ------- -------
Total revenues 15,964 100.0% 29,637 100.0% 94,380 100.0%
Expenses:
As a percentage of VOI sales:
Cost of timeshare intervals sold -- --% 1,145 25.1% 9,667 23.6%
Sales and marketing -- --% 2,173 47.7% 19,464 47.6%
Provision for doubtful accounts (1) -- --% 206 4.5% 2,042 5.0%
As a percentage of interest income:
Interest 8,077 52.1% 7,458 36.6% 13,389 51.6%
As a percentage of resort operations:
Resort management -- --% 3,252 89.2% 21,743 84.1%
As a percentage of total revenues:
Provision for doubtful accounts (2) 925 5.8% 585 2.0% 150 0.2%
Depreciation and amortization 1,048 6.7% 2,194 7.4% 3,512 3.7%
General and administrative 2,490 15.5% 4,110 13.8% 9,217 9.8%
------- ------- ------- ------- ------- -------
Total expenses 12,540 78.6% 21,123 71.3% 79,184 83.9%
------- ------- ------- ------- ------- -------
Income before taxes 3,424 21.4% 8,514 28.7% 15,196 16.1%
Provision for income taxes 193 1.2% 3,270 11.0% 6,500 6.9%
------- ------- ------- ------- ------- -------
Net income $ 3,231 20.2% $ 5,244 17.7% $ 8,696 9.2%
</TABLE>
(1) Based on provision for doubtful receivables recorded on timeshare
development.
(2) Based on provision for doubtful receivables recorded on timeshare
financing.
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<PAGE>
DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998
Net Income
Income before provision for income taxes increased 78% to $15.2 million
for the year ended December 31, 1999, as compared to $8.5 million for the same
period in 1998. Net income increased 66% to $8.7 million for the year ended
December 31, 1999 from $5.2 million for the same period in 1998. Diluted
earnings per share rose 55% to $0.31 in 1999 from $0.20 in 1998. The increase in
net income is primarily attributable to the addition of the timeshare operating
results for acquisition-related properties, and the resulting growth in total
revenue.
Total revenue rose 218% to $94.4 million for the year ended December 31,
1999 as compared to $29.6 million for the same time period in 1998. Revenue
growth is largely due to the addition of revenue associated with
acquisition-related properties. Revenue and income relating to Eastern Resorts
includes the entire year, while the comparable figures from the former KGI
Properties and the Peppertree Properties relate only to the period after March
26, 1999 and November 17, 1999, respectively.
While earnings per share jumped substantially, the Company's pretax income
as a percent of revenues fell from 28.7% to 16.1%. This decrease is due to
several factors. First, the development business in general has much higher
revenues than the Company's finance business, but also substantially lower gross
profit margins. Thus, as development revenues in 1999 were more than twice as
large as finance revenues, the aggregate profit margin was reduced to a blend of
traditional finance company and developer profit margins. Second, the KGI
Acquisition involved a purchase of assets that at the time of purchase were
losing money at a substantial rate due to a very significant uncontrolled costs.
During 1999 the Company has cut costs significantly at the former KGI
properties, and the aggregate profit margin of the former KGI resorts has
correspondingly increased from a loss to a positive margin now approaching that
of the Company's Eastern Resorts operation. The Peppertree Acquisition also
involved absorption of a group of properties which, while not as troubled as the
former KGI properties, at the time of closing had sales and marketing costs very
significantly in excess of such costs within Equivest, and consequently a very
low pretax profit margin. Between the date of closing and December 31, 1999 the
Company's cost cutting efforts did not have time to take effect, and the Company
expects this cost cutting process to continue throughout 2000.
Interest Income
Interest income includes interest earned from the Company's consumer
receivable portfolio and interest earned from the Company's third party loan
portfolio. Interest income increased 27% to $26.0 million for the year ended
December 31, 1999 from $20.4 million for the year ended December 31, 1998,
primarily due to higher average outstanding balances on the loan portfolio of
approximately $32 million for the entire year. In addition, the weighted average
interest rate on the loan portfolio increased approximately 50 basis points. The
increase in the portfolio was due principally to the addition of acquired
resorts' existing portfolios and continued growth of the owned consumer loan
portfolio. Third party hypothecation loans also increased in size and the
weighted average interest rate increased.
Interest income related to the owned consumer loan portfolio increased to
28% of total interest income, compared to 5% of interest income for 1998.
Interest income earned from the Company's third party loans decreased from $19.4
million for the year-ended 1998 to $18.6
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<PAGE>
million for the year-ended 1999, mainly due to the elimination of interest
during consolidation totaling $2.0 million. The Company previously extended
loans to certain of the acquisition properties, which are now eliminated during
consolidation. However, some growth in the third party consumer loan portfolio
contributed to the increase in interest income, which was partially offset by a
decline in interest rates. Interest income on third party consumer receivables
increased to $14.0 million for the year-ended 1999 from $13.5 million for the
year-ended 1998, and is attributable to growth in the third party consumer loan
portfolio, specifically hypothecation loans. Interest on acquisition,
development, and construction loans ("A&D Loans") decreased 18.6% to $4.4
million for the twelve months ended December 31, 1999 from $5.4 million for the
same time period in 1998, mainly due to a lower average outstanding balance due
to the elimination of loans in consolidation. A&D Loan originations declined
30.8% from $24.3 million in 1998 to $16.8 million in 1999, while third party
consumer loan receivables originations remained relatively constant at $70
million. The decline in A&D loan originations is attributable to a shift in the
Company's growth strategy from third party A&D loans to the owned timeshare and
consumer financing segments, which the Company believes involve less risk than
third party A&D loans. The company expects its third party A&D loan portfolio to
continue to decline both as a percentage of the total portfolio and also in
absolute dollars due to more stringent risk underwriting standards and
prioritization of available funds.
VOI Sales
VOI revenues increased to $40.9 million for the year ended December 31,
1999, from $4.6 million for the prior year. The increase was due to the full
year impact of the ERC Acquisition that the Company completed in August of 1998
and due to the 1999 Acquisitions. During 1999, the Company sold approximately
3,920 vacation ownership intervals at an average price of approximately $10,400.
On a proforma basis for the 1999 Acquisitions, VOI revenues for the full year
would have been approximately $90 million. Vacation ownership revenue increased
to 43% of total revenue for year ended 1999 as compared to 15% for the year
ended 1998 due to the inclusion of operating results for the acquired
properties. The Company has 29 timeshare resort locations with a completed
vacation ownership interval inventory of approximately 28,000 intervals, and
currently operates 17 sales centers.
Resort Operations
Resort operation revenue totaled $25.9 million for the year ended 1999, as
compared to $3.6 million for 1998. The increase in resort operations was due to
the full year impact of the ERC Acquisition that the Company completed in August
of 1998 and due to the 1999 Acquisitions. Resort management expenses as a
percentage of resort operation revenue dropped to 84.1% in 1999 compared with
89.2% for 1998. The decline in resort management expense as a percentage of
resort operation revenue is the result of the addition of resort properties with
greater resort operation profit margins from overnight rentals, the inclusion of
high summer season in 1999 at Newport properties compared with 1998, when most
of this time period occurred prior to the date of the ERC Acquisition, and
efforts to enhance ERC resort operations gross margins.
Other Income
Other income increased 59% to $1.6 million for the year ended December 31,
1999 as compared to $1.0 million for the year ended December 31, 1998. The
increase in other income is primarily due to an increase in service income
associated with consumer receivables, increased fee
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<PAGE>
income, and other income associated with acquisition properties. Other income
associated with acquisition properties represented 9% of the increase in other
income.
Provision For Doubtful Receivables
The provision for doubtful receivables increased 177% to $2.2 million for
the year ended December 31, 1999 from $0.8 million for the prior year ending
December 31, 1998. The increase in the provision for doubtful receivables is
primarily due to an increase in consumer receivables generated from the
acquisition-related properties, together with application of the Company's
target reserve methodology to the entire portfolio, including newly acquired
receivables.
At December 31, 1999, the Company had total reserves (including
collateralization on the Hypothecation Loans) for its loan portfolio equal to
$32.9 million or 12.6% of total loans. Included in this amount were total
reserves and over collateralization of $22.8 million on third party consumer
receivables or approximately 21.1% of the outstanding consumer receivables
portfolio attributable to third party resorts. This represented a reserve
coverage ratio of 6.7 times the $3.4 million of such receivables that were 60 or
more days past due at December 31, 1999. At December 31, 1999 the Company also,
maintained an aggregate allowance for doubtful receivables of $10.1 million, or
8.3% of the outstanding consumer receivable portfolio from owned resorts. This
represented a reserve coverage ratio of 3.5 times the approximate $2.9 million
in consumer receivables from owned resorts that were 60 days past due as of that
date. The $10.1 aggregate allowance for doubtful receivables represented an
increase of 163% compared with $3.8 million at December 31, 1998. This largely
reflects the significant increases in reserves required by the Company's target
reserve methodology compared with reserving policies previously in effect at
ERC, KGI or Peppertree.
The following table sets forth the portfolio performance of the consumer
receivable portfolio at December 31, 1999:
Consumer Receivable Loan Portfolio
(In Thousands)
<TABLE>
<CAPTION>
Current 30 - 59 days 60 - 89 days 90+ days Total
------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C>
Owned Resorts $ 114,666 $ 3,365 $ 1,520 $ 1,344 $120,895
94.8% 2.8% 1.3% 1.1% 100.0%
Third Party (1) $ 115,421 $ 3,424 $ 2,062 $ 1,364 $122,271(2)
94.4% 2.8% 1.7% 1.1% 100.0%
Total $ 230,087 $ 6,789 $ 3,582 $ 2,708 $243,166
94.6% 2.8% 1.5% 1.1% 100.0%
</TABLE>
(1) Includes the consumer receivables that collateralize the
hypothecation loans.
(2) The remaining principal outstanding owed to the Company is only $108
million. The balance of the $122.3 million represents receivables
included in overcollateralization.
At December 31, 1999, 94.6% of the aggregate consumer receivable portfolio
was current, and there were 508 notes with a principal balance of $2.7 million
that were over 90 days past due. Of this amount, $1.3 million were notes
relating to the consumer receivables in the Company's resorts. During 1999, the
company wrote off 548 consumer notes with an outstanding principal
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<PAGE>
balance of $2.6 million. With limited exceptions, the Company serviced the loans
in its portfolio internally, using its own personnel and facilities. Total
reserves and overcollateralization of approximately $32.8 million at December
31, 1999, compared with $6.3 million in total consumer receivables that were 60
days or more past due represented an overall reserve coverage ratio of 5.2 times
the volume of 60 day past due notes.
Interest Expense
Interest expense, net of capitalized amounts, increased 80% to $13.4
million for the year ended December 31, 1999 as compared to $7.5 million for the
year ended 1998. The increase in interest expense is a result of the increased
borrowings associated with the increased loan portfolio, increased borrowings
associated with the 1999 Acquisitions, and an increase in the weighted average
outstanding interest rate. The average outstanding balance increased
approximately $75 million, while the weighted average interest rate on
outstanding debt increased from 6.7% for the year ended December 31, 1998 to
7.1% for the year-ended December 31, 1999.
The Company has not traditionally hedged against its interest rate risk
due to the wide spread on its receivables and the speed with which new
originations occur, and the relatively stable interest rate environment.
However, under the new $150 million DG Credit Facility, the facility requires
the Company to hedge within the facility once the interest rate spread has been
reduced to approximately 600 basis points. This is currently the largest
financing facility that the Company maintains.
Cost Of Timeshare Intervals Sold
The cost of timeshare intervals sold for the year ended December 31, 1999
totaled $9.7 million or 23.6% of VOI revenue, compared to $1.1 million for the
year-ended 1998, or 25.1% of VOI revenue. The decrease in the cost of timeshare
intervals sold as a percentage of VOI revenue is primarily due to lower product
costs at certain acquisition sites, while the increase in dollar volume is a
result the inclusion of operating results for acquisition properties.
Depreciation And Amortization
Depreciation and amortization increased 60% to $3.5 million for the
year-ended 1999 from $2.2 million for the same period in 1998. The increase is
primarily due to $0.6 million associated with depreciation expense, $0.6 million
associated with goodwill amortization and $0.1 million associated with financing
costs. These increases are a result of the full year impact of the Eastern
Resorts acquisition and the two acquisitions the Company completed in 1999.
Goodwill amortization increased 229% to $0.8 million in 1999 from $0.2
million for the same period in 1998 and represented 41% of the increase.
Goodwill associated with the Peppertree acquisition is approximately $15 million
and is being amortized over 20 years. Depreciation and amortization of the
properties totaled $0.6 million and accounts for 44% of the increase.
Sales And Marketing
Sales and marketing expense increased to $19.5 million for the year-ended
December 31, 1999 from $2.2 million for the year-end December 31, 1998. However,
sales and marketing expense decreased slightly to 47.6% as a percentage of VOI
revenue for 1999, compared to 47.7% for 1998. The increase in total sales and
marketing dollar expense is due to the inclusion of
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<PAGE>
operating results from acquired properties, and the decrease in such costs as a
percent of VOI revenue was principally due to the acquisition of certain resorts
with lower sales and marketing costs than the Company's Newport properties that
were included in the 1998 totals.
Results in the fourth quarter of 1999 were adversely affected by an
increase in sales and marketing expense to 57.5% of timeshare sales, compared
with 46.6% in the fourth quarter of 1998. As a note, the Company's sales and
marketing cost as a percentage of timeshare sales was 43.1% through the nine
months ending September 30, 1999. The Company believes that the fourth quarter
increase was attributable in significant part to reduced occupancy and reduced
number of travelers in the majority of the Company's markets due to unusually
severe weather conditions, especially Hurricanes Floyd and Lenny, as well as
travel safety concerns relating to potential Year 2000 computer issues. The
resulting lower levels of tours at the Company's resort properties led to a
corresponding increase in the sales and marketing expense as a percentage of VOI
sales.
Management anticipates that the sales and marketing expense experienced in
the fourth quarter was largely a one time event. However, since the Peppertree
Acquisition the Peppertree sales centers have operated at a cost level
significantly greater than the Company's other sales centers. The Company
believes this is in part a result of the long term effects of the severe
hurricane-related flooding experienced throughout many of Peppertree's marketing
areas in the fall of 1999, but also reflects a higher cost structure and cost
per tour than is allowed to exist at the Company's other sales centers. The
Company anticipates that the Peppertree sales and marketing expenses as a
percent of VOI revenue will decline during 2000 as the Company introduces
various cost-reducing measures designed to achieve total sales and marketing
expense on a par with such cost levels elsewhere within the Company. There is no
assurance that the Company will succeed in reducing such cost levels or of the
timing of any resulting increase in Peppertree gross profit margins. The Company
anticipates that the Peppertree sales and marketing costs will remain above the
Company's non-Peppertree average cost during the first year following completion
of the transaction, though the magnitude of such cost differential should
decline during this period.
Resort Management
Resort management expense for the year ended December 31, 1999 totaled
$21.7 million or 84.1% of resort operation revenue as compared $3.3 million or
89.2% of resort operation revenue for the comparable period in 1998. The decline
in resort management expenses as a percentage of resort operation revenue is
primarily due to the addition of a number of resort properties that derive
significant room revenue from unsold timeshare inventory.
General And Administrative
General and administrative expense increased 124% to $9.2 million for the
year ended December 31, 1999 from $4.1 million for the same period in 1998. The
increased costs are attributable to the inclusion of general and administrative
costs associated with the 1999 Acquisitions, which represented 78% of the total
increase in general and administrative costs. The following items also
contributed to the increase in general and administrative expense: payroll
costs, travel costs, office related costs, outside service costs, and servicing
fees due to growth of the Company.
Although general and administrative expense increased in nominal dollars,
general and administrative expense as a percentage of total revenue declined to
9.8% of total revenue for 1999,
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compared with 13.8% of total revenue in 1998. The decrease in general and
administrative expense as a percentage of total revenue is generally the result
of spreading costs across increased revenue, as well as control of expenditures.
In both 1998 and 1999, the Company's expense for compensation was reduced from
what it would otherwise have been because the Company did not incur any cost
whatsoever to compensate its Chief Executive, who was compensated entirely by
the Bennett Estate. While Mr. Breeden continues to receive his entire
compensation directly from the Estate, and does not receive any remuneration
directly from the Company, beginning January 1, 2000 the Company began to
reimburse the Estate for a portion of the compensation paid to Mr. Breeden.
Provision For Income Taxes
The provision for income taxes for the year-ended December 31, 1999 increased
99% to $6.5 million from $3.3 million for the same period in 1998. The increase
is attributable to the increase in pretax income during 1999 as compared to the
same period in 1998. The provision for income taxes represents approximately 43%
and 38% of pretax income for 1999 and 1998, respectively. During the first
quarter of 1998, the Company's federal income tax liability was reduced by the
availability of net operating loss carryforwards, which were fully utilized at
that time. No such benefit was available in 1999.
Liquidity and Capital Resources
The Company's business requires continuous access to short and long-term
sources of debt financing. The Company's principal cash requirements arise from
its timeshare operations (including sales and marketing costs), both internal
and third party lending activities, the funding of timeshare construction, debt
service payments and operating expenses. The Company's primary sources of
liquidity are borrowings under secured lines of credit and cash flow from
operations. In the future, the Company expects to raise additional capital
through increasing its borrowing from financial institutions and issuing debt,
equity or asset-backed securities in the capital markets.
The Company's main credit facility is the $150 million DG Credit Facility,
which closed in January of 2000, replacing the $75 million CSFB Consumer
Receivable Line. The new facility has a committed term of five years, and the
interest rate is based on lender's commercial paper rate plus 1.35%. As of
December 31, 1999, the CSFB Consumer Receivable Line had an outstanding balance
of $74.4 million, all of which was subsequently paid with the proceeds from the
DG Credit Facility.
The Company also closed on a $20 million credit facility with Finova
Capital Corporation in September 1999. The two-year facility can finance third
party loans, including A&D loans, consumer loans (both hypothecation loans and
purchases), and pre-sale loans. The outstanding balance as of the end of 1999
was $5.1 million.
In November 1999, the Company closed on a $20.7 million facility with Bank
of America, N.A. for the acquisition of Peppertree Resorts. The loan had an
outstanding balance of $16.6 million as of December 31, 1999. The loan matures
August 17, 2000, and can be extended for up to an additional nine months. In
order to extend the loan, the Company will need to meet certain covenants, pay
extension fees and be subject to certain amortization provisions tied to net
cash flow. The loan is collateralized by the stock of the businesses acquired
and certain unencumbered assets of the Company.
55
<PAGE>
The Company has some additional facilities that are left over from
agreements previously in place with the acquired companies. These facilities
include some of the traditional lenders in the timeshare industry such as
Liberty Bank, Textron, and Finova. The balances of these lines as of December
31, 1999 were approximately $64.8 million. While there is approximately $44.0
million of availability under these credit facilities, the Company plans on
using its other facilities, which have more favorable terms, and replacing
outstanding balances with lower cost financing as soon as possible under the
terms of such indebtedness.
The Company has a $30.0 million A&D Line with CSFB that matures November
2000, and is currently in an amortization period where no additional draws can
be made. As of December 31, 1999, $29.1 million was outstanding under A&D Line.
The Company is planning to replace this credit facility in 2000.
In addition to the above, the Company is working with a number of
additional lenders for additional facilities. The Company recently received a
preliminary $30 million commitment from Finova Capital Corporation that would
finance the Company's owned resorts, complementing the $20 million facility the
Company already has with Finova to finance third-party developers. However,
there can be no assurance that this new credit facility will close. The Company
has also received a preliminary $50 million consumer receivable facility
proposal and a preliminary $40 million A&D and consumer receivable proposal from
two different commercial banks. The Company is also talking with a number of
local banks in areas where the Company has active construction projects in order
to finance the ongoing construction of additional resorts. There is no assurance
that the Company will finalize any of these additional credit facilities.
On August 25, 1998, the Company borrowed approximately $15 million under a
CSFB Bridge Loan in order to finance the cash portion of the purchase price for
Eastern Resorts. As of December 31, 1999, the unpaid balance of the Bridge Loan
was approximately $2.1 million. The maturity of the remaining outstanding
principal has been extended to November, 2000.
In March 1999, the Company assumed a loan from CSFB to KGI for a property
located in Washington, D.C. This loan had an outstanding balance of $3.0 million
at December 31, 1999. The maturity of this loan has been extended to September
30, 2000.
The Company also has a number of additional term loans, mostly associated
with first mortgages on the resort properties. These loans include a $15.9
million loan on the Avenue Plaza Hotel and Pro Spa in New Orleans, Louisiana, a
$14.3 million loan on the properties in St. Thomas, USVI, and several loans on
various Peppertree resorts totaling over $22 million. The majority of these
loans mature after the year 2000, and are repaid out of release fees on sales of
VOI's.
Beginning September 1996, the Trustee reached settlements of the claims of
certain lenders (the "Banks") against the Bennett Estate relating to claims of
such Banks to certain lease collateral of the Estate. These settlements required
the settling banks to make new non-callable term loans to Resort Funding at
concessionary interest rates of 0.5% to 4.0% (the "Settlement Loans"). Resort
Funding is also obligated to pay the Estate an annual arrangement fee of 3% of
the unpaid principal balance of the Settlement Loans. The Settlement Loans have
a weighted average interest rate of 2.0% as of December 31, 1999. As of December
31, 1999, Resort Funding's total outstanding balance on the Settlement Loans was
approximately $19.9 million and the weighted average remaining maturity was 47
months. The Settlement Loans are collateralized in part by notes receivable of
the Company.
56
<PAGE>
The Series 2 Class A Redeemable Preferred Stock of the Company is held
entirely by the Bennett Estate. Dividends are cumulative and payable quarterly
when declared by the Company at the rate of $60.00 per annum per share. As of
December 31, 1999, the undeclared and unpaid dividends amounted to $900,000. At
the Company's option, such dividends may be paid in common stock, which has been
the Company's practice. No dividends on the Company's Common Stock can be paid
until such Series 2 Class A Preferred Stock dividends are paid in full. The
holder of Series 2 Class A Redeemable Preferred Stock is entitled to the number
of votes which represents 20% of the total number of votes of the Company. The
Company may at its option any time after February 16, 2003, redeem the Series 2
Class A Redeemable Preferred Stock in whole or in part at the $10.0 million
liquidation value plus accrued and unpaid dividends. The Trustee has obtained
approval to convert the Series A Redeemable Preferred Stock into Common Stock,
or to sell such shares to the Company for a price equal to an equivalent number
of shares of Common Stock at the net price of any offering of the Estate's
shares of Common Stock.
Inflation
Inflation has not had a material impact on the Company's revenues,
operating income and net income during any of the Company's three most recent
years. However, to the extent inflationary pressures affect short-term interest
rates, a significant portion of the Company's debt service costs may be
affected, as may be the interest rates the Company charges to its customers
(both customers and developers).
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
Not applicable.
57
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters & Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The information required by this Item will be set forth under "Directors
and Executive Officers" and "Proxy Statement -- Compliance with Section 16(a)
Under the Securities Exchange Act of 1934" in the Company's Definitive Proxy
Statement and reference is expressly made thereto for the specific information
incorporated herein by reference.
Item 10. Executive Compensation
The information required by this Item will be set forth under "Executive
Compensation" in the Company's Definitive Proxy Statement and reference is
expressly made thereto for the specific information incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item will be set forth under "Proxy
Statement -- Share Ownership of Directors and Executive Officers," "Other
Information -- Certain Stockholders" and "Proposal No. 1: Election of Directors
- -- Compensation of Directors" in the Company's Definitive Proxy Statement and
reference is expressly made thereto for the specific information incorporated
herein by reference.
Item 12. Certain Relationships and Related Transactions
The information required by this Item will be set forth under "Certain
Transactions" in the Company's Definitive Proxy Statement and reference is
expressly made thereto for the specific information incorporated herein by
reference.
58
<PAGE>
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
----------
Independent Auditor's Report on Consolidated Financial
Statements 1
Consolidated Balance Sheets as of December 31, 1998
and 1999 2
Consolidated Statements of Income for the years ended
December 31, 1997, December 31, 1998, and December
31, 1999 3
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1997, December 31, 1998, and
December 31, 1999 4 - 5
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, December 31, 1998, and
December 31, 1999 6
Notes to Consolidated Financial Statements 7 - 36
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 12, 1999 Form 8-K announcing net income increases
b. November 18, 1999 Form 8-K announcing completion of the
Peppertree Acquisition
c. December 1, 1999 Form 8K/A announcing completion of the
Peppertree Acquisition and filing of the Agreement and Plan of
Reorganization and the Registration Rights Agreement in
connection with the Peppertree Acquisition
4. The exhibits filed as part of this report will be set forth under
the Index of Exhibits, and reference is expressly made thereto for
the specific information incorporated herein by reference.
59
<PAGE>
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: [S] Gerald L. Klaben, Jr.
-------------------------------------
(Gerald L. Klaben, Jr., Chief Financial
Officer)
60
<PAGE>
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: [S] Richard C. Breeden
--------------------------------
(Richard C. Breeden Chief Executive
Officer, President and Chairman of
the Board of Directors)
By: [S] Gerald L. Klaben, Jr.
--------------------------------
(Gerald L. Klaben, Jr. Chief Financial
Officer and Senior Vice President)
By: [S] Thomas J. Hamel
--------------------------------
(Thomas J. Hamel, Executive Vice
President and Director)
By: [S] R. Perry Harris
--------------------------------
(R. Perry Harris, Executive Vice
President and Director)
By: [S] James R. Petrie
--------------------------------
(James R. Petrie, Controller)
By: [S] Richard G. Winkler
--------------------------------
(Richard G. Winkler, Senior Vice
President, Secretary and General Counsel)
By: [S] Herbert H. Patrick, Jr.
--------------------------------
(Herbert H. Patrick, Jr., Treasurer)
By: [S] James A. Mecurio
--------------------------------
(James A. Mercurio, Senior Vice
President)
By: [S] C. Wayne Kinser
--------------------------------
(C. Wayne Kinser, Director)
By: [S] Olof Nelson
--------------------------------
(Olof Nelson, Director)
61
<PAGE>
INDEX TO EXHIBITS
Exhibit No.: Exhibit
- ------------ -------
2.1 Agreement and Plan of Reorganization by and among Equivest Finance,
Inc., Peppertree Acquisition Corp., Peppertree Acquisition II Corp.,
Peppertree Resorts, LTD., Pioneer Hotel Corporation, C. Wayne Kinser
and the Stockholders Named Herein, dated as of November 17, 1999
(incorporated by reference to the Company's Form 8-KA filed December
1, 1999).
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference to the Company's 1998 Form 10KSB).
3.2 By-laws (incorporated by reference to the Company's 1998 Form
10KSB).
4.1 Registration Rights Agreement by and among Equivest Finance, Inc.
and C. Wayne Kinser, the Sharon Kay Williamson Charitable Remainder
Unitrust, the David Wayne Kinser Charitable Remainder Unitrust,
Donald Clayton, John McFarland and Herbert J. Patrick, Jr., dated as
of November 16, 1999 (incorporated by reference to the Company's
Form 8-KA filed December 1, 1999).
10.1 Resort Funding, Inc Profit Sharing & 401k Plan (incorporated by
reference to the Company's 1997 Form 10KSB).
*10.2 Nonstandarized Adoption Agreement Prototype Cash or Deferred
Profit-Sharing Plan and Trust/Custodial Account sponsored by
Manufacturers & Traders Trust Company for Resort Funding, Inc. dated
December 30, 1999.
10.3 Eastern Resorts Company LLC Profit Sharing & 401k Plan (incorporated
by reference to the Company's 1998 Form 10KSB).
*10.4 Flexible Nonstandardized Safe Harbor 401(k) Profit Sharing Plan
Adoption Agreement for Eastern Resorts Company, LLC., dated January
4, 2000.
10.5 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 (incorporated by reference to the Company's 1997 Form
10-KSB).
10.6 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 (incorporated by
reference to the Company's 1997 Form 10-KSB).
10.7 $75,000,000 Receivables Financing Facility extended by Credit Suisse
First Boston Mortgage Capital LLC to Resort Funding, Inc., dated
February 11, 1998 (incorporated by reference to the Company's 1997
Form 10-KSB).
62
<PAGE>
10.8 $30,000,000 Acquisition and Development Financing Facility extended
by Credit Suisse First Boston Mortgage Capital LLC to Resort
Funding, Inc., dated November 14, 1997 (incorporated by reference to
the Company's 1997 Form 10-KSB).
10.9 Employment Agreement by and between Thomas J. Hamel and Richard C.
Breeden, as Trustee, dated May 29, 1997 (incorporated by reference
to the Company's 1997 Form 10-KSB).
10.10 Employment Agreement by and between Gerald L. Klaben, Jr. and
Richard C. Breeden, as Trustee, dated July 26, 1996 (incorporated by
reference to the Company's 1997 Form 10-KSB).
10.11 Employment Agreement by and between ERC and R. Perry Harris, dated
as of August 24, 1998 (incorporated by reference to the Company's
Form 8-K filed September 11, 1998).
10.12 Purchase Agreement among Equivest Finance, Inc. and Kosmas Group
International, Inc., Avenue Plaza, LLC, Ocean City Coconut Malorie
Resort, Inc., Capital City Suites, Inc., Kosmas Caribbean Holding
Corporation, Steven Kosmas, Paul Kosmas, Nicholas Kosmas and Chip
Gordy, dated as of February 16, 1999 (incorporated by reference to
the Company's Form 8-K filed February 23, 1999).
*10.13 Indemnification Agreement by and between Kosmas Group
International, Inc., the undersigned subsidiaries and shareholders
and Equivest Finance, Inc., dated March 30, 1999.
*10.14 Settlement Agreement and Mutual Releases by and between Christian
Kjaer, Kosmas Group International, Inc. and Equivest Finance, Inc.,
dated March 30, 1999.
*10.15 Registration Rights Agreement by and among Equivest Finance, Inc.
and Christian Kjaer, entered into and effective as of March 30,
1999.
*10.16 Stock Purchase Warrant granted by Equivest Finance, Inc. to
Christian Kjaer, dated March 30, 1999.
*10.17 Loan and Security Agreement (Receivables Transactions Warehouse
Facility) by and between Resort Funding, Inc. and FINOVA Capital
Corporation entered into as of September 30, 1999.
*10.18 Loan and Security Agreement (ADC Loans Warehouse Facility) by and
between Resort Funding, Inc. and FINOVA Capital Corporation entered
into as of September 30, 1999.
*10.19 Guaranty and Subordination (Receivables Transactions Warehouse
Facility) by Equivest Finance, Inc., in favor of FINOVA Capital
Corporation entered into as of September 30, 1999.
63
<PAGE>
*10.20 Guaranty and Subordination (ADC Loans Warehouse Facility) by
Equivest Finance, Inc. in favor of FINOVA Capital Corporation
entered into as of September 30, 1999.
*10.21 Servicing Agreement by and between Resort Funding, Inc. and FINOVA
Capital Corporation entered into as of September 30, 1999.
*10.22 Pledge and Assignment of Put and Reserve Agreement and Interval
Mortgages by Resort Funding, Inc., to and in favor of FINOVA Capital
Corporation entered into as of September 30, 1999.
*10.23 Credit Agreement by and among Equivest Finance, Inc., Peppertree
Acquisition Corp., Peppertree Acquisition II Corp. and Bank of
America, N.A., dated as of November 17, 1999.
*10.24 Form of Security Agreement by and among Equivest Finance, Inc.,
each Subsidiary of the Borrower, the Subsidiary Guarantors and Bank
of America, N.A., dated as of November 17, 1999.
*10.25 Form of Pledge Agreement by and among Equivest Finance, Inc.,
Peppertree Resorts, LTD., Peppertree Acquisition II Corp. and Bank
of America, N.A., dated as of November 17, 1999.
*10.26 Sublease Agreement by and between Equivest Finance, Inc. and
Richard C. Breeden & Co., dated December 21, 1999.
*10.27 Club Affiliation Agreement between Interval International, Inc. and
Peppertree Resorts Vacation Club, Inc. dated September 17, 1997.
*10.28 First Addendum to Club Affiliation Agreement between Interval
International, Inc. and Peppertree Resorts Vacation Club, Inc. dated
July 15, 1999.
11. Computation of earnings per share. See Notes to Consolidated
Financial Statements.
*21. Subsidiaries of the Company.
*23.1 Independent Auditors Consent
- --------------------------------------------------------------------------------
* Filed herewith
65
<PAGE>
Audited Consolidated Financial Statements
EQUIVEST FINANCE, INC.
AND SUBSIDIARIES
<PAGE>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
Independent Auditor's Report .................................................1
Consolidated Balance Sheets--December 31, 1998 and 1999 ......................2
Consolidated Statements of Income--Years Ended December 31, 1997,
1998 and 1999 ..............................................................3
Consolidated Statements of Stockholders' Equity--Years Ended
December 31, 1997, 1998 and 1999 ...........................................4
Consolidated Statements of Cash Flows--Years Ended December 31,
1997, 1998 and 1999 ........................................................6
Notes to Consolidated Financial Statements ...................................7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Equivest Finance, Inc.
Greenwich, Connecticut
We have audited the accompanying consolidated balance sheets of Equivest
Finance, Inc. and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. 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, 1998 and 1999, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
FIRLEY, MORAN, FREER & EASSA, P.C.
Syracuse, New York
March 17, 2000
-1-
<PAGE>
CONSOLIDATED BALANCE SHEETS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1998 1999
----------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,486,720 $ 8,010,888
Receivables, net 142,326,363 247,081,791
Investment in real estate joint venture 2,971,207 4,415,780
Inventory 10,361,151 87,925,117
Property and equipment, net 3,048,252 18,122,843
Goodwill, net 27,247,483 41,374,002
Other assets 7,943,287 10,055,233
----------------- --------------
TOTAL ASSETS $ 197,384,463 $ 416,985,654
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 2,212,975 $ 6,288,195
Accrued expenses and other liabilities 3,985,402 20,832,657
Taxes payable 1,994,381 5,608,907
Deferred taxes 2,568,465 19,535,794
Notes payable 133,116,985 289,357,773
----------------- --------------
TOTAL LIABILITIES 143,878,208 341,623,326
SUBSEQUENT EVENT, CONTINGENCIES
AND COMMITMENTS
STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series
2 Class A, $3 par value; 15,000 shares authorized,
10,000 shares outstanding; $10,000,000 liquidation value 30,000 30,000
Common Stock, $.01 par value; 50,000,000
shares authorized, 25,198,351 shares outstanding--1998
and 28,089,722 shares outstanding--1999 251,984 280,897
Additional paid in capital 49,115,466 62,246,553
Retained earnings 4,108,805 12,804,878
----------------- --------------
TOTAL STOCKHOLDERS' EQUITY 53,506,255 75,362,328
----------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 197,384,463 $ 416,985,654
================= ==============
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
-------------- --------------- --------------
<S> <C> <C> <C>
REVENUE
Timeshare interval revenue $ -- $ 4,552,891 $ 40,910,463
Interest 15,511,387 20,398,624 25,961,931
Resort operations -- 3,645,649 25,858,163
Other income 453,099 1,039,384 1,649,676
-------------- --------------- --------------
15,964,486 29,636,548 94,380,233
COSTS AND EXPENSES
Interest 8,076,569 7,457,618 13,389,034
Provision for doubtful receivables 925,000 791,349 2,191,990
Cost of timeshare intervals sold -- 1,144,488 9,666,493
Sales and marketing -- 2,172,937 19,464,443
Resort management -- 3,251,730 21,742,799
Depreciation and amortization 1,048,534 2,194,397 3,512,190
General and administrative 2,489,960 4,110,077 9,217,211
-------------- --------------- --------------
12,540,063 21,122,596 79,184,160
-------------- --------------- --------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3,424,423 8,513,952 15,196,073
PROVISION FOR INCOME TAXES
Current 510,000 2,360,000 3,777,000
Deferred (credit) (317,000) 910,000 2,723,000
-------------- --------------- --------------
193,000 3,270,000 6,500,000
-------------- --------------- --------------
NET INCOME $ 3,231,423 $ 5,243,952 $ 8,696,073
============== =============== ==============
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 2,500,205 $ 4,643,498 $ 8,096,073
============== =============== ==============
EARNINGS PER COMMON SHARE
Basic $ .22 $ .20 $ .31
====== ===== =====
Diluted $ .15 $ .20 $ .31
====== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
Years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Redeemable
Preferred Convertible Additional
Stock-- Preferred Common Stock Paid Retained
Series 2 Stock-- ------------------------- In Earnings
Total Class A Series 2 Shares Amount Capital (Deficit)
------------ --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- (9,000) 7,500,000 375,000 (366,000)
Dividends on Series 2
Preferred Stock paid in
Common Stock shares -- 23,721 1,186 126,314 (127,500)
Dividends on Series 2 Class A
Preferred Stock paid in
Common Stock shares -- 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, 32,528,449 30,000 -- 21,834,443 1,091,723 32,078,721 (671,995)
1997
Dividends on 12.5%
Redeemable Convertible
Preferred Stock (8,819) (8,819)
Conversion of 12.5%
Redeemable Convertible
Preferred Stock to
Common Stock 21,930 20,541 1,027 20,903
Dividends on Series 2
Class A Preferred Stock
paid in Common Stock
shares -- 76,254 3,813 450,520 (454,333)
Common Stock issued 15,360,000 3,200,000 160,000 15,200,000
Conversion of debt owed to
related party 360,743 67,113 3,366 357,377
Reduction in par value from
$.05 per share to $.01
per share -- (1,007,945) 1,007,945
Net income 5,243,952 5,243,952
------------ --------- --------- ---------- ----------- ----------- -----------
Balances, December 31,
1998 $ 53,506,255 $ 30,000 $ -- 25,198,351 $ 251,984 $49,115,466 $ 4,108,805
</TABLE>
-4-
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
Years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Redeemable
Preferred Additional
Stock-- Common Stock Paid
Series 2 ---------------------------- In Retained
Total Class A Shares Amount Capital Earnings
------------- ----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, $ 53,506,255 $ 30,000 25,198,351 $ 251,984 $ 49,115,466 $ 4,108,805
1998
Common Stock issued to
satisfy liabilities related to
acquired businesses 2,928,889 697,738 6,976 2,921,913
Common Stock issued as
part consideration for
the purchase of Peppertree 10,231,111 2,193,633 21,937 10,209,174
Resorts, Ltd.
Net income 8,696,073 8,696,073
------------- ----------- ---------- ------------ ------------ -----------
Balances, December 31,
1999 $ 75,362,328 $ 30,000 28,089,722 $ 280,897 $ 62,246,553 $12,804,878
============= =========== ========== ============ ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,231,423 $ 5,243,952 $ 8,696,073
Adjustments to reconcile net income to net
cash from operating activities:
Amortization and depreciation 1,048,534 2,194,397 3,512,190
Provision for doubtful receivables 925,000 791,349 2,191,990
Deferred income taxes (317,000) 910,000 2,723,000
Gains on sales of contracts (29,689) -- --
Changes in assets and liabilities, net of
effects from purchases of businesses:
Other assets (781,984) (2,270,822) (1,141,043)
Inventory -- (1,218,966) (1,983,511)
Accounts payable and accrued expenses 1,107,924 2,483,051 (1,565,952)
Taxes payable -- 1,960,000 2,755,243
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,184,208 10,092,961 15,187,990
CASH FLOWS USED IN INVESTING ACTIVITIES
Increase in receivables, net (25,745,306) (19,616,378) (23,047,846)
Proceeds from sales of contracts 1,206,870 -- --
Purchase of equipment (26,230) (76,528) (1,459,262)
Investment in joint venture -- (2,971,207) (1,444,573)
Purchases of businesses, net of cash acquired
of $908,031 in 1998 and $609,058 in 1999 -- (15,885,445) (17,810,328)
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (24,564,666) (38,549,558) (43,762,009)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock registration costs, less unpaid amounts -- (229,681) (469,832)
Proceeds from notes payable 44,863,941 92,299,255 132,139,020
Payments on notes payable (28,314,741) (68,014,154) (99,310,381)
Loans to related party (6,545,967) (355,976) --
Repayments on loans receivable--related party 9,960,503 3,640,028 739,380
Payments on redemption of preferred stock -- (7,815) --
Preferred stock dividends paid -- (8,819) --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,963,736 27,322,838 33,098,187
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 583,278 (1,133,759) 4,524,168
Cash and cash equivalents at beginning of year 4,037,201 4,620,479 3,486,720
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,620,479 $ 3,486,720 $ 8,010,888
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business: Equivest Finance, Inc. (Equivest) and its
subsidiaries (collectively the Company) is a developer, operator and lender in
the timeshare industry. The Company owns 29 timeshare resort properties
primarily in the Eastern United States and St. Thomas, USVI. It sells fixed and
flexible week timeshare intervals, including rights to use at certain locations;
sells a vacation club product that operates on a points based system; and
manages timeshare homeowners' associations at these properties. The Company
provides financing to purchasers of its timeshare products; and to independent
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 entered the timeshare resort development business in 1998 and made
substantial additional business acquisitions in 1999 (see Note Q). As a result,
there has been a substantial change in the relative operating results of the
Company's two business segments (see Note R).
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 79% of the Company's voting shares.
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Equivest Finance, Inc. and its subsidiaries, all of
which are wholly owned. All significant intercompany balances and transactions
were eliminated in consolidation.
The financial statements include the results of operations and cash flows of
purchased businesses from the date of their respective acquisition.
Use of Estimates: The preparation of these 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 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 and Restricted Cash: The Company considers all highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.
Restricted cash, included in other assets, primarily consists of: (1) amounts on
deposit at financial institutions as security under lending agreements, and (2)
deposits in accounts to be applied to its financing facilities, and (3) down
payments on purchases.
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
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 less the collateral value are charged against the allowance when
management believes that collectibility is unlikely.
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.
Loan Accounted For As Investment In Real Estate Joint Venture: The Company has
an acquisition and development loan which (1) provides for the receipt of
additional interest equal to an amount or percentage from each timeshare sold by
the developer; and (2) does not economically transfer a substantial portion of
ownership risk and reward to the borrower. Accordingly, the Company has
classified, and is accounting for, this loan as if it is an investment in a real
estate joint venture. As such, the Company defers net interest earned and will
recognize it, and the additional interest as income when the timeshare intervals
are sold.
Inventory: Inventory is stated at the lower of cost or market and consists of
unsold timeshare intervals available for sale, the cost of timeshare resorts
under construction, and land for future timeshare construction. Upon a sale of a
timeshare interval, inventory is charged to cost of sales using the specific
cost allocated to the interval. Timeshare intervals reacquired through
repossession are placed back into inventory at the lower of their original
historical cost basis or market value.
Deferred Financing Costs: Deferred financing costs, included in other assets,
represent unamortized expenses associated with issuing certain debt.
Amortization of these costs are 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 in 1997, and $1,778,183 in 1998 and
$2,089,706 in 1999.
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Property and Equipment: Property and equipment is stated at cost, less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets which follow:
Buildings and improvements 5-40 years
Furniture and equipment 3-7 years
Goodwill: This asset represents the excess of costs over net assets of
businesses acquired in 1998 and 1999. The 1998 goodwill of $27,485,408 is being
amortized over 40 years and the 1999 goodwill of $14,908,265 is being amortized
over 20 years on a straight line basis. Amortization of $237,925 and $781,746
was charged to operations in 1998 and 1999, respectively.
Timeshare Interval Revenues: The Company earns these revenues from fully
furnished vacation homes sold in either specific fixed week ownership intervals,
individual fee simple ownership interests, or the sales of vacation club points
which entitle the owners to use properties transferred to an independent
membership corporation.
The Company recognizes its sales on an accrual basis when a binding sales
contract has been executed, a 10% minimum down payment has been received, the
statutory rescission period has expired and construction is substantially
complete. If all criteria are met except that construction is not substantially
complete, revenues are recognized on the percentage-of-completion basis.
Interest Income: The Company recognizes interest income on its outstanding loans
receivable when earned using the interest method. The interest method recognizes
income at a constant rate of interest when applied to the principal outstanding.
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.
Resort Operations: Revenues from resort operations primarily consist of (1) fees
received for management services provided to homeowners' associations, (2)
revenues from renting unoccupied units on a transient basis, and (3) revenues
from restaurant operations.
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.
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Advertising: All costs associated with advertising and promoting the sale of
timeshare intervals are expensed in the year incurred. Advertising expense was
$124,925 and $468,339 for 1998 and 1999. Prior to entering the timeshare resort
development business in 1998, advertising expense was minimal.
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: Earnings per share is based on the weighted average number
of common shares outstanding and includes both basic and diluted earnings per
share computations. The computation of basic earnings per share excludes any
dilutive effects of options and warrants. The computation of diluted earnings
per share includes the dilutive effects of the Company's outstanding options and
warrants.
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).
Segment Information: The Company became subject to segment information reporting
in August 1998 when it acquired its first timeshare development company. Segment
information, as disclosed in Note R, is presented in accordance with Statement
of Financial Accounting Standards No. 131 "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the way that public companies report information about operating segments in
annual financial statements and interim financial reports. It also establishes
standards for disclosures about products and services, geographic areas, and
major customers. The adoption of SFAS 131 did not affect the financial position,
results of operations or cash flows of the Company.
Restatement: Certain amounts in the 1998 consolidated balance sheet and the 1997
and 1998 consolidated statements of income have been reclassified to conform to
the 1999 presentation.
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE B--CONCENTRATIONS OF RISK
Credit Risk: The Company is exposed to on-balance sheet credit risk related to
its notes receivable.
The Company offers financing to the buyers of timeshare intervals and vacation
club points at the Company's resorts. These buyers generally make down payments
of at least 10 percent of the purchase price and deliver promissory notes to the
Company for the balance which generally bear interest at a fixed rate, are
payable over a seven year period and are secured by a first mortgage on a
timeshare interval or by an assignment of rights under the vacation club
member's purchase agreement. The Company generally does not verify the credit
history of its customers and will provide financing if the customer is employed
and meets certain household income criteria. If a buyer of a timeshare interval
defaults, the Company must foreclose on the timeshare interval and reincur the
associated marketing, selling, and administrative costs to resell the interval.
Although the Company in many cases may have recourse against a timeshare
interval buyer for the unpaid price, certain states have laws which limit the
Company's ability to recover personal judgments against customers who have
defaulted on their loans. Accordingly, the Company has generally not pursued
this remedy.
The Company has concentrations of credit risk in its timeshare resort
receivables and timeshare consumer receivables purchased from independent resort
developers. At December 31, 1999 the Company had agreements for resort
development financing with 11 developers covering 16 timeshare resort complexes.
These concentrations are believed to be substantially mitigated by credit and
evaluation procedures including credit evaluation of individual consumers before
the purchase of their notes. The Company requires collateral, including an
overcollateralization requirement and holdbacks on certain receivables. In
addition to outstanding loans from these developers, at December 31, 1999 the
Company was committed to lend approximately $17.6 million for resort
construction or renovation. The Company has also agreed to make hypothecation
loans to, or purchase timeshare interval contracts from 58 resorts subject to
satisfactory underwriting approval of each consumer.
Interest Rate Risk: The Company derives net interest income from its financing
activities which results from the spread between the interest rates it charges
its customers and the interest rates it pays to its lenders. Because the
Company's indebtedness bears interest at variable rates and a substantial amount
of the Company's receivables portfolio bears interest at fixed rates, increases
in interest rates will erode the net rates that the Company has historically
obtained. The Company has not engaged in interest rate hedging transactions.
Therefore, a significant increase in interest rates, particularly if sustained,
would negatively affect the Company's results of operations, cash flows, and
financial position.
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE B--CONCENTRATIONS OF RISK--Continued
Availability of Funding Sources: The Company funds a substantial portion of its
notes receivable and timeshare inventory with borrowings under its financing
facilities. These borrowings are in turn repaid with the proceeds received by
the Company from repayments of such notes receivable and timeshare sales. To the
extent that the Company is not successful in maintaining or replacing existing
financing, it would have to curtail its operations or sell assets, thereby
having a material adverse effect on the Company's results of operations, cash
flows, and financial condition.
Cash: The Company maintains cash balances at various financial institutions in
several states with balances in excess of $100,000 at December 31, 1999.
Accounts at these institutions are insured by the Federal Deposit Insurance
Corporation up to $100,000 per institution.
NOTE C--RECEIVABLES
Receivables consist of the following:
December 31,
1998 1999
------------- -------------
Accounts receivable $ 2,260,906 $ 8,092,693
Notes receivable 142,560,825 241,583,914
Less allowance for doubtful receivables (3,834,748) (10,072,859)
------------- -------------
140,986,983 239,603,748
Promissory note receivable 600,000 450,000
Notes receivable--related party 739,380 7,028,043
------------- -------------
$ 142,326,363 $ 247,081,791
============= =============
Accounts receivable primarily consist of: (1) amounts due from timeshare
interval owners for maintenance and service charges including amounts which the
Company remits to the Resorts upon receipt, (2) the principal amount of
delinquent timeshare interval contracts which are receivable from Resorts under
the recourse provisions of applicable financing agreements, (3) amounts due from
homeowners' associations for management services rendered and (4) amounts due
from renting unoccupied units on a transient basis. Receivables are stated at
their unpaid principal balances. Amounts due Resorts for maintenance and service
charges are included in accrued expenses and other liabilities.
-12-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE C--RECEIVABLES--Continued
Notes receivable includes: (1) amounts receivable from timeshare interval owners
for their purchase of timeshares, (2) amounts receivable from timeshare interval
owners resulting from the purchase of timeshare consumer receivables from third
parties, less holdbacks on funds to be advanced under those contracts, (3) loans
to Resorts for acquisition and development of resort properties, and (4)
hypothecation loans to Resorts secured by the Resorts' loans from timeshare
interval owners. Interest rates on these receivables generally range from 9% to
18% per annum.
The promissory note receivable is due as a result of a rescission and
termination of an agreement with a corporation. Interest is paid monthly at a
rate equal to the lesser of LIBOR plus 1.5% or prime rate. Principal is to be
paid in three remaining equal annual installments of $150,000 and will mature in
February 2002.
Notes receivable--related party at December 31, 1998 were fully paid in 1999.
They were due from the bankruptcy Trustee, with interest at 10% per annum. These
notes arose in connection with financing transactions negotiated by the Trustee
which are described in Note H.
Notes receivable--related party at December 31, 1999 arose in connection with
the purchase of Peppertree Resorts, Ltd. The notes are due at various dates
through March 2001 and bear interest at rates ranging from 0% to LIBOR plus 4%.
The following are the components of notes receivable as of:
December 31,
1998 1999
------------- -------------
Timeshare consumer receivables $ 113,301,280 $ 211,923,426
Less holdbacks (18,391,579) (18,506,784)
------------- -------------
94,909,701 193,416,642
Timeshare resort receivables:
Acquisition and development loans 33,433,609 27,944,974
Hypothecation loans 11,904,059 16,925,192
Other loans 2,313,456 3,297,106
------------- -------------
47,651,124 48,167,272
------------- -------------
$ 142,560,825 $ 241,583,914
============= =============
Substantially all timeshare consumer receivables and hypothecation loans are
collateralized by security interests in timeshare intervals. Those consumer
receivables purchased by the Company are also with full recourse to the Resort
developers and it is the Company's practice to withhold approximately fifteen
percent of the purchase price of each timeshare contract until the loan has been
fully collected. The acquisition and development loans to Resorts are
collateralized by security interests in the Resort properties and generally have
the personal and/or corporate guarantees of the Resort owners.
-13-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE C--RECEIVABLES--Continued
The Company has classified certain Resort loans as impaired under SFAS 114 at
December 31, 1998 and 1999. This determination was made because the debtors had
not made principal payments in accordance with their contractual agreements. The
outstanding balance of impaired loans amounted to $3,435,001 and $3,821,251 at
December 31, 1998 and 1999, respectively. The average outstanding amounts on
these loans during 1998 and 1999 were $3,435,001 and $3,823,201, respectively.
The Company has no allowance for losses specifically related to these loans
because it believes the market value of the collateral exceeds its loan
investment. The company is foreclosing on the largest loan ($3,435,001
outstanding); however, the owners have filed counterclaims which management
believes are without merit.
During 1998 and 1999, the Company recorded interest income on these loans of
$452,753, and $380,314, respectively including interest on one loan of $452,753
in 1998 and $328,664 in 1999. With respect to the large loan, the debtor
deposits the interest into an escrow account with a balance of $793,265 at
December 31, 1999.
The activity in the allowance for doubtful receivables for the years ended
December 31, 1997, 1998 and 1999 follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,979,182 $ 2,442,244 $ 3,834,748
Allowances related to acquisitions -- 792,631 6,638,573
Provision for doubtful receivables 925,000 791,349 2,191,990
Charge-offs and recoveries, net (461,938) (191,476) (2,592,452)
------------ ------------ ------------
Balance at end of year $ 2,442,244 $ 3,834,748 $ 10,072,859
============ ============ ============
</TABLE>
Based on their maturity dates as of December 31, 1999, the notes receivable are
due during the years ending December 31 as follows: 2000--$43,683,448;
2001--$46,403,788; 2002--$44,039,649; 2003--$35,885,754; 2004--$29,434,450 and
thereafter--$42,136,825.
-14-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE D--LOAN ACCOUNTED FOR AS INVESTMENT IN REAL ESTATE JOINT VENTURE
Beginning in 1998 the Company has been advancing funds under a loan agreement
which is being accounted for as a real estate joint venture. Information on this
agreement follows:
1998 1999
----------- -----------
Amounts advanced and outstanding $ 3,032,652 $ 4,224,464
Closing fee and net interest deferred (192,549) (409,351)
Earnings based on timeshare intervals sold 131,104 600,667
----------- -----------
Net balance at December 31 $ 2,971,207 $ 4,415,780
=========== ===========
The Company has determined this asset to be impaired at December 31, 1999 and
has begun foreclosure proceedings. Management intends to complete construction,
incur additional capitalized costs estimated at $3,500,000, and operate the
facility as part of its timeshare business. Subsequent to December 31, 1999 the
project's general contractor sued the developer and the Company for payment of
construction overrun costs of approximately $2,000,000 and received an
injunction to stop the Company's foreclosure action. The Company has appealed
the latter decision and intends to defend itself against the suit unless a
settlement can be reached on the fair value of the additional costs. Management
believes that the fair value of the property approximates the carrying value of
the investment at December 31, 1999. Fair value has been based on the property's
estimated collateral value after completion and allowing for a fair settlement
with the contractor.
The Company also has a hypothecation loan due from the developer of $3,236,592
at December 31, 1999. This loan is collateralized by pledged timeshare notes
receivable which arose from the sale of completed timeshare intervals at this
project. To date the loan has been performing in accordance with its terms and
no allowance for credit loss is considered necessary; however, successful
completion of the project will be required to help assure normal collection of
this loan.
NOTE E--RELATED PARTY TRANSACTIONS
Recapitalization: In October 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 indebtedness to BFG
of $24,970,079.
-15-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE E--RELATED PARTY TRANSACTIONS--Continued
Recapitalization--Continued: 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.
The $24,970,079 net liability was subsequently increased by $360,743 which had
been recorded as an accrued liability as of December 31, 1997. The Company
issued an additional 67,113 shares of its Common Stock to BFG in payment of this
liability in 1998.
Income and Expense: Interest income earned on the notes receivable from the
bankruptcy Trustee amounted to $625,511 in 1997, $219,276 in 1998, and $29,251
in 1999.
Interest expense incurred on the related party debt amounted to $1,475,609 in
1997.
Other: The Company leases an office facility from BFG. Rent is paid on a
month-to-month basis ($6,782 per month). Rent expense for the office facility
amounted to $146,399 in 1997, $74,117 in 1998 and $74,605 in 1999.
The Company's Chief Executive Officer is the bankruptcy Trustee for BFG and BMDC
(see Note J). He has not received any compensation from the Company or the
bankrupt Estate for his duties at the Company.
The Company receives administrative services from BFG relating to billing
consumer amounts due under timeshare interval contracts. This expense amounted
to $63,500 in 1997, $184,686 in 1998 and $275,997 in 1999. In December 1999, the
Company purchased the computer processing equipment and software from BFG for
$41,413 and will perform this processing hereafter.
NOTE F--PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998 and 1999:
1998 1999
----------- -----------
Land $ 81,489 $ 398,489
Buildings and improvements 2,672,575 14,173,602
Furniture and equipment 365,757 4,246,271
----------- -----------
3,119,821 18,818,362
Less accumulated depreciation 71,569 695,519
----------- -----------
Property and equipment, net $ 3,048,252 $18,122,843
=========== ===========
The buildings and improvements consist primarily of facilities at timeshare
properties including common areas, retail rental space, and restaurants.
Depreciation expense amounted to $1,535 in 1997, $69,664 in 1998 and $623,950 in
1999.
-16-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE G--OTHER ASSETS
Other assets consist of the following at December 31, 1998 and 1999:
1998 1999
----------- -----------
Deferred financing costs, net $ 3,755,600 $ 2,526,854
Cash--restricted 1,422,459 1,615,411
Accrued interest receivable 971,026 1,762,975
Stock registration costs 1,479,681 1,649,513
Other assets 314,521 2,500,480
----------- -----------
$ 7,943,287 $10,055,233
=========== ===========
NOTE H--NOTES PAYABLE AND SUBSEQUENT FINANCING
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
1998 1999
------------ ------------
<S> <C> <C>
Revolving line of credit facilities:
$75,000,000 line for receivables financing; refinanced on
January 31, 2000 $ 54,178,431 $ 74,374,070
Other lines totaling $88,283,520 at December 31, 1999 for
financing receivables resulting from Company timeshare
sales; collateralized by timeshare notes receivable; variable
interest ranging from prime plus 5/8% to prime plus 2 1/4%
per annum; paid with collections of pledged receivables
with payment in full at maturity 3,796,810 56,295,281
$20,000,000 line at December 31, 1999 for financing
developers receivables and acquisition/development loans;
collateralized by resort properties including unsold
timeshares, pledged timeshare receivables and acquisition
and development loans; interest at prime plus1/2% per
annum; paid with proceeds of developers' timeshare sales
with final payment at maturity -- 5,139,610
------------ ------------
Subtotal $ 57,975,241 $135,808,961
</TABLE>
-17-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE H--NOTES PAYABLE AND SUBSEQUENT FINANCING--Continued
<TABLE>
<CAPTION>
December 31,
1998 1999
------------ ------------
<S> <C> <C>
Balances forward $ 57,975,241 $135,808,961
Loan to acquire Peppertree Resorts Ltd.; collateralized by stock of
businesses acquired and unencumbered assets of the Company; interest at
LIBOR plus 3% per annum; due on August 17, 2000 with options to extend -- 16,579,050
Term notes payable; collateralized by real estate mortgages or timeshare
notes receivable; interest at fixed and variable rates; periodic payments
due per agreements including payments from pledged receivables, with final
payments at maturity; includes revolving facilities in repayment phase 48,445,987 106,160,733
Notes payable to banks and others in monthly installments through 2006;
interest ranging from1/2% to 4% per annum 23,252,749 19,936,187
Amounts due related parties 3,443,008 7,574,265
Demand notes -- 2,551,360
Capital lease obligations on equipment with a cost of
$1,771,068 and accumulated amortization of $1,252,185 -- 747,217
------------ ------------
$133,116,985 $289,357,773
============ ============
</TABLE>
$75,000,000 Receivables Financing Facility, Refinanced January 31, 2000: This
credit facility with a bank bears interest at a floating rate (7.723% at
December 31, 1999). The revolving credit period ended in November 1999 with full
payment due in November 2000. On January 31, 2000 the Company replaced this
facility with a $150 million facility from another bank. The term of the new
facility is 5 years at which time all outstanding loans shall mature and be paid
in full. Financing is through a special purpose entity wholly owned by the
Company which purchases receivables from the Company for use as pledged
collateral to the bank loans. As such, any purchased receivables will not be
deemed to be available to pay other Company creditors. Interest under the
agreement is to be at the lender's commercial paper rate plus 1.35%.
-18-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE H--NOTES PAYABLE AND SUBSEQUENT FINANCING--Continued
1/2% to 4% Collateralized Notes Payable: The Company obtained financing at
favorable interest rates from banks and others who were creditors of affiliates
which had filed for bankruptcy protection (see Note J). The loans are
collateralized with timeshare receivables. 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. As consideration for the
financing, the Company pays a fee to the bankrupt estate based on an annual rate
of approximately 3% of the unpaid principal balance of the loans. The Company is
recognizing this fee as expense over the various loan terms. At December 31,
1998 and 1999 the unpaid fee amounted to $3,443,008 and $3,441,267,
respectively, which is included in amounts due related parties above. The fee is
payable over the loan terms beginning after loans receivable from the estate
have been paid.
Covenants: Several of the facilities and other loans contain both specific and
general covenants including maintenance of collateralization and default rates
with respect to pledged receivables, tangible and overall net worth requirements
and debt to capital and interest coverage rates.
Subsequent maturities of notes payable for the years ending December 31, are:
2000--$176,530,382; 2001--$40,005,018; 2002--$25,928,702; 2003--$15,944,902;
2004--$9,880,964 and thereafter $21,067,805.
NOTE I--INCOME TAXES
The consolidated provisions for income taxes included in the accompanying
statements of income consist of the following for the years ended December 31,
1997, 1998 and 1999:
1997 1998 1999
----------- ----------- -----------
Current provision:
Federal $ 72,000 $ 1,650,000 $ 3,000,000
State 438,000 710,000 777,000
----------- ----------- -----------
510,000 2,360,000 3,777,000
Deferred provision (credit):
Federal (280,000) 830,000 1,700,000
Foreign -- -- 500,000
State (37,000) 80,000 523,000
----------- ----------- -----------
(317,000) 910,000 2,723,000
----------- ----------- -----------
$ 193,000 $ 3,270,000 $ 6,500,000
=========== =========== ===========
-19-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE I--INCOME TAXES--Continued
The provisions for income taxes are less than amounts computed by applying the
statutory rate (34%) to income before income taxes for the following reasons:
Year ended December 31,
-------------------------------------------
1997 1998 1999
----------- ----------- -----------
Income taxes at statutory
rates $ 1,164,000 $ 2,895,000 $ 5,200,000
State income taxes, net of
federal income tax benefit 264,000 521,000 924,000
Goodwill amortization -- -- 271,000
Reduction of valuation
allowance (1,307,000) (233,000) --
Alternative minimum tax 72,000 --
Other items -- 87,000 105,000
----------- ----------- -----------
Provision for income taxes $ 193,000 $ 3,270,000 $ 6,500,000
=========== =========== ===========
The Company had valuation allowances in prior years for net operating loss
carryforwards because there was no assurance that the Company would generate
sufficient taxable earnings to benefit from using unrestricted loss
carryforwards before they expired. The reductions of the valuation allowance in
1997 and 1998 reflect the use of the loss carryforwards.
Net deferred tax liabilities included in the accompanying balance sheets result
from the following:
December 31,
1998 1999
----------- -----------
Deferred tax assets:
Allowance for doubtful receivables $ 1,290,594 $ 3,169,000
Net operating loss carryforwards -- 7,402,000
Alternative minimum tax credit carryovers -- 2,377,000
Other 86,233 491,000
----------- -----------
1,376,827 13,439,000
Deferred tax liabilities:
Installment sale receivables 3,589,160 26,614,000
Timeshare inventories, primarily book cost
in excess of tax cost -- 3,511,000
State income taxes, net of federal benefit 225,508 1,863,000
Other 130,624 986,794
----------- -----------
3,945,292 32,974,794
----------- -----------
$ 2,568,465 $19,535,794
=========== ===========
-20-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE I--INCOME TAXES--Continued
The net deferred tax liability of $19,535,794 at December 31, 1999 includes a
deferred tax liability of $3,474,485 relating to the U.S. Virgin Islands.
As further described in Note Q, Equivest purchased several businesses in 1998
and 1999. In connection with those purchases the Company acquired certain
deferred tax assets and assumed certain deferred tax liabilities. The net
deferred tax liabilities assumed amounted to $2,800,000 in 1998 and $14,244,000
in 1999.
The Company has tax net operating loss carryforwards at December 31, 1999 of
approximately $17,600,000 (federal), $3,800,000 (U.S. Virgin Islands), and
$7,400,000 (various state jurisdictions). The Company acquired these
carryforwards in connection with the 1999 business purchases. They are available
to reduce future taxable income in those amounts for the respective tax
jurisdictions. The federal carryforwards expire in the year 2016; the U.S.
Virgin Islands carryforwards expire in the year 2010; and the state
carryforwards expire in various years through 2019. The Company's alternative
minimum tax credit carryforwards are also available to reduce future federal
income tax in the amount of the credit and they have no expiration date. The
operating losses and credits arise because gross profits on timeshare interval
sales have been deferred for tax reporting purposes at the election of the
taxpayer.
As described in Note Q, Equivest acquired Eastern Resorts as of August 28, 1998.
Prior to that time Eastern Resorts was a Subchapter S corporation which
classification ended as a result of the merger. As part of the purchase
accounting Equivest recorded a $2,800,000 deferred tax liability to reflect the
difference between the tax basis and book basis of acquired installment
receivables.
-21-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE J--CONTINGENCIES AND COMMITMENTS
Since March 1996, the Company's majority owners (BFG and BMDC) and several other
affiliates have been in bankruptcy 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. As a result of the bankruptcies and
investor fraud at those companies various legal suits have been ongoing. Two
state class action claims initiated in 1996 against BFG and affiliates also name
the Company. The plaintiffs in a federal class action previously agreed to
discharge similar claims against the Company. Counsel is in process of moving
for dismissal of one state claim as a result of the Federal discharge. With
respect to the other state action, there has been no activity to date. The
ultimate impact of these events on the Company's business and operations is not
presently determinable.
The Company is a defendant in a legal action filed by a former Company officer
and director against the Company and other parties. The suit contains numerous
allegations and claims including compensatory damages in excess of $1,000,000,
interest and costs. The claims against the Company have been dismissed; however,
the dismissal is on appeal. Also, another defendant has filed a cross-claim
against the Company for indemnification by the Company. The Company believes
that it has meritorious defenses to the allegations and intends to defend
against these actions vigorously.
In its purchase of resort properties in March 1999 the Company recorded certain
liabilities which it agreed to assume from the seller in the amount of $5.975
million. The amounts represent part of amounts payable by the seller to former
owners of three of the properties acquired. Prior to the purchase or as a result
of the purchase, the former owners brought suit against the seller and/or the
Company for payment of amounts due them, breach of contract, interference by the
Company in contractual relations, and misapplication of funds. Counterclaims
have been made by the sellers. The suits are in the early discovery stage and no
assessment of the potential outcomes can be made at this time.
The Company is also involved with several other suits brought by (1) former
employees alleging wrongful discharge and discrimination and (2) individuals
using the resort facilities who allege personal assault, injury, or loss of
property while on resort premises. In each case it is too early to assess the
likelihood of success by the plaintiff and amount of loss, if any. The Company
assumed substantially all of these claims with the business purchased in March
1999.
-22-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE J--CONTINGENCIES AND COMMITMENTS--Continued
With respect to the suits assumed or resulting from the March 1999 purchase as
described in the preceding two paragraphs, the Company has an accrued liability
of $745,000 at December 31, 1999 for defense and damage costs, if any.
Management estimated this amount as part of its purchase price determinations;
however, any future changes in this amount resulting from the development of
these matters will be reflected as a charge or credit to income.
The Company has employment agreements with three 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 approximately $1,394,000 at
December 31, 1999.
The Company has management agreements with homeowners' associations at several
of its timeshare resorts. Under these agreements the Company is required to
provide administrative, accounting, maintenance, security, utilities and
professional services; maintain insurance coverage; and pay real estate and
personal property taxes. In exchange for these services the Company is
reimbursed for costs incurred and receives a management fee for the services
provided. These contracts expire at various dates through December 2002.
At December 31, 1999 the Company had several timeshare units under construction
with remaining contracted costs to complete of $6,095,000.
NOTE K--STOCKHOLDERS' EQUITY
Preferred Stock and Cumulative Redeemable Preferred Stock Series 2 Class A: The
Company has authorized 1,000,000 shares of Preferred Stock with a $3 par value
and has authorized 15,000 shares of this amount as Series 2 Class A Preferred
Stock. The 10,000 shares of Series 2 Class A Preferred Stock outstanding is held
by BFG. BFG is entitled to the number of votes which equals 20% of the total
number of voting shares of the Company's 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. The Company may, at its option any time
after February 16, 2003, 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.
-23-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE K--STOCKHOLDERS' EQUITY--Continued
Preferred Stock and Cumulative Redeemable Preferred Stock Series 2 Class
A--Continued: In 1998, the Company paid cumulative dividends of $454,333 by
issuing 76,254 shares of its Common Stock to BFG. At December 31, 1999, the
cumulative undeclared and unpaid dividends amount to $900,000.
Common Stock: At the annual meeting held on December 8, 1998, the stockholders
approved an amendment to the Certificate of Incorporation reducing the par value
of the Common Stock from $.05 per share to $.01 per share.
NOTE L--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.
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 judgment 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 taxes, 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.
-24-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE L--FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued
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 and Investment in Real Estate Joint Venture: The
estimated fair value of accounts and notes receivable was 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 estimated fair value of the real estate joint venture is
based on estimated collateral value which approximates its carrying amount. The
Company's carrying amount and fair value of these amounts are summarized as
follows:
December 31,
1998 1999
------------ -------------
Carrying amount $143,958,190 $ 244,019,528
Fair Value $146,099,036 $ 244,476,889
The carrying value of the Company's commitments to lend as disclosed in Note B
approximates their fair value. The carrying amount of the promissory note
receivable outstanding at December 31, 1999 is its estimated fair value based on
current market rates.
It was not practicable to estimate the fair values of the notes
receivable--related party because of the nature of the indebtedness and
resultant excessive cost to estimate their fair values.
Notes Payable: The fair value of notes payable were estimated using rates
available to the Company at December 31, 1998 and 1999 for similar debt and
remaining maturities. The carrying amount and fair value of notes payable were
summarized as follows:
December 31,
1998 1999
------------ ------------
Carrying amount $133,116,985 $289,357,773
Fair Value $130,053,594 $285,959,099
-25-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE M--STOCK OPTIONS, GRANTS, AND WARRANTS
Stock Options: At December 31, 1999, the Company has a stock-based compensation
plan which is described in greater detail below. The Company applies APB Opinion
No. 25 and related interpretations in accounting for the plan. Using these
criteria, no compensation cost has been recognized for the stock option portion
of the plan. Had compensation cost been determined for the Company's stock
option portion of the plan, based on the fair value at the grant dates for
awards under the plan 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:
Year ended
December 31,
1997 1998 1999
------------- ------------- -------------
Net income:
As reported $ 3,231,423 $ 5,243,952 $ 8,696,073
Pro forma 3,213,423 5,058,680 8,557,265
Net income per common share:
As reported--basic .22 .20 .31
Pro forma--basic .21 .19 .31
As reported--diluted .15 .20 .31
Pro forma--diluted .15 .19 .30
Weighted average fair value of
options granted under the 1997
Incentive Long-Term Plan .68 .67 .81
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, 1998 and 1999:
1997 1998 1999
------- ------- -------
Dividend yield 0% 0% 0%
Expected volatility 2.96% 0.90% 0.79%
Risk free interest rates 6.26% 3.92% 5.81%
Expected life 4 years 4 years 4 years
1997 Long-Term Incentive Plan: Under the Plan, non qualified 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. At December 31, 1999 the maximum number of shares of
Common Stock which may be issued under the 1997 Plan is 3,500,000. The term of
the Plan is ten years; however, the Board of Directors may discontinue the plan
at its discretion.
-26-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE M--STOCK OPTIONS, GRANTS, AND WARRANTS--Continued
The following table summarizes information concerning outstanding and
exercisable options:
<TABLE>
<CAPTION>
Shares Weighted average price
per share
1997 1998 1999 1997 1998 1999
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year -- 858,100 1,024,400
Granted 858,100 166,300 466,050 $ 3.28 $ 4.31 $ 5.50
Exercised -- -- -- -- -- --
Forfeited -- -- (33,500) -- -- 5.04
------- --------- ---------
Outstanding at end of year 858,100 1,024,400 1,456,950 3.28 3.45 4.07
======= ========= =========
Exercisable at end of year -- 308,275 643,500
Reserved for future issuance 741,900 2,475,600 2,043,050
</TABLE>
The following table summarizes information concerning outstanding stock options
as of December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
- ------------------------------------------------------------- ----------------------------
Weighted
average Weighted Number Weighted
Number remaining average Number average
Exercis of shares contractual exercise of shares exercise
prices outstanding life in years price exercisable price
------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 1.00 375,000 2.4 $ 1.00 375,000 $ 1.00
5.05 458,100 8.0 5.05 229,050 5.05
4.31 157,800 8.8 4.31 39,450 4.31
5.50 466,050 9.8 5.50 -- --
</TABLE>
An August 24,1998 employment agreement with an officer provides for annual
option grants if the Company reaches certain pretax income as defined in the
agreement. The agreement has a five-year term with successive one-year renewals
at the election of the parties as set forth in the agreement. It provides for
the issuance of options covering (1) 30,000 common shares if the Company reaches
at least 100%, but less than 125%, of the pretax income target, and (2) 60,000
common shares if the Company reaches 125% of the target, for any fiscal year
under the agreement. Options granted will have an exercise price of the fair
market value of the common shares on the date of grant and will expire ten years
from the date granted. They will vest at a rate of 20% per year. There were no
options granted under this agreement during 1998 or 1999.
-27-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE M--STOCK OPTIONS, GRANTS, AND WARRANTS--Continued
In December 1998, the Company and its chief executive officer reached agreement
on his employment terms which will be effective on the date of the proposed sale
of common shares described in Note P. The terms are subject to (1) entering into
a written contract prior to the proposed sale and (2) the sale of the common
shares now held by the bankrupt Estate (BFG and BMDC). The terms include a stock
option grant, on the date of the offering, for the purchase of 1,000,000 common
shares at an exercise price equal to the share price of the offering.
Additionally, the terms provide for a grant of either 125,000 or 250,000
restricted common shares provided that certain stock appreciation targets are
met during each of the first and second twelve month periods after the offering.
Common Stock Warrants: In November 1997, the Company issued warrants to purchase
250,000 shares of Common Stock to a bank in connection with a credit facility.
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. Neither of these warrants were exercised in
1998 or 1999.
In August 1998 the Company issued a warrant to purchase 180,000 shares of Common
Stock to a bank in connection with the financing of the 1998 business
acquisition described in Note Q. The warrant may be exercised at any time prior
to July 18, 2003, in whole or in part, and in any order at an exercise price of
$8.00 per share. This warrant was outstanding at December 31, 1998 and 1999.
On March 30, 1999 the Company issued a warrant to purchase 250,000 shares of
Common Stock to an individual in connection with the 1999 purchase described in
Note Q. The warrant can be exercised any time prior to March 30, 2002 at an
exercise price of $9.00 per share. The warrant contains a mandatory exercise
provision once the market value of the Common Stock equals or exceeds $12.00.
The warrant remains outstanding at December 31, 1999.
-28-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE N--EARNINGS PER COMMON SHARE
Pursuant to SFAS 128, a reconciliation of the numerators and the denominators of
the basic and diluted per-share computations follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ----------- ---------
<S> <C> <C> <C>
For the Year Ended December 31, 1997:
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
=========== =========== =========
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ----------- ---------
<S> <C> <C> <C>
For the Year Ended December 31, 1998:
Net Income $ 5,243,952
Less: preferred stock dividends (600,454)
-----------
Basic earnings per share:
Income available to common stockholders 4,643,498 23,010,104 $ .20
=========
Effect of dilutive securities:
12.5% Redeemable Convertible Preferred
Stock 454 3,359
Warrants -- 82,049
Stock options -- 355,731
----------- -----------
Diluted earnings per share:
Income available to common stockholders
plus assumed conversions $ 4,643,952 23,451,243 $ .20
=========== =========== =========
</TABLE>
-29-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE N--EARNINGS PER COMMON SHARE--Continued
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ----------- ---------
<S> <C> <C> <C>
For the Year Ended December 31, 1999:
Net Income $ 8,696,073
Less: preferred stock dividends (600,000)
-----------
Basic earnings per share:
Income available to common stockholders 8,096,073 25,858,352 $ .31
=========
Effect of dilutive securities:
Warrants -- 88,077
Stock options -- 416,711
----------- -----------
Diluted earnings per share:
Income available to common stock-
holders plus assumed conversions $ 8,096,073 26,363,140 $ .31
=========== ========== =========
</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 1997 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.
The Company has issued warrants to purchase 180,000 and 250,000 shares of Common
Stock during the years ended December 31, 1998 and 1999, respectively. Exercise
prices are $8.00 and $9.00 for the respective warrant. These warrants were not
included in computing the diluted per share data because to do so would have
resulted in increasing earnings per share data as compared to the amounts
reported for the basic per share data.
-30-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE O--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, 1998 and 1999:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid $ 6,779,790 $ 7,381,529 $13,633,034
Income taxes paid 338,000 537,000 4,192,277
Noncash transactions:
Conversion of related party debt to
Common Stock 24,970,079 360,743 --
Common Stock issued as part of
business purchases -- 15,360,000 13,160,000
Change in par value of Common Stock from
$.05 to .01 -- 1,007,945 --
Payment of dividends on Series 2
Preferred Stock with shares of
Common Stock 1,096,500 454,333 --
Issuance of Common Stock warrants in
consideration of credit agreement 289,666 -- --
Conversion of Preferred Stock to
Common Stock 9,000 21,930 --
</TABLE>
NOTE P--PROPOSED SALE OF COMMON STOCK
Shares of Common Stock held by certain stockholders, including the shares held
by BFG and BMDC, and additional shares of previously unissued Common Stock are
in the process of registration for proposed sale to the public. Depending upon
the success of the Company's Offering, the Company intends to use its net
proceeds to repurchase its Series 2 Class A Redeemable Preferred Stock, to repay
certain existing indebtedness, for working capital and other corporate purposes.
-31-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE Q--PURCHASES OF BUSINESSES
During 1998 and 1999 the Company acquired three time share Resort development
businesses. The transactions were accounted for as purchases and, accordingly,
the operating results and cash flows of the acquired businesses have been
included in the Company's consolidated financial statements since the respective
acquisition dates. Set forth below are certain unaudited pro forma amounts which
assume the acquisitions occurred as of the beginning of the year and the
preceding year. These amounts reflect the actual results of operations of the
Company and the acquired business(es) after the elimination of revenues and
costs and expenses between the Company and the acquired business(es). They also
include the effects of the purchase price and acquisition indebtedness on cost
of timeshare intervals sales, goodwill amortization, interest and bad debt
expense. The pro forma amounts do not represent the results that would have
occurred if the acquisitions had actually taken place on the assumed acquisition
dates, nor are they indicative of the results of future consolidated operations.
1998 Purchase: On August 28, 1998 Equivest acquired Eastern Resorts Corporation
(Eastern) which is a developer and operator of seven timeshare resorts in the
New England area. Eastern is the Company's first timeshare resort development
business. The purchase price amounted to $57.6 million including cash and
acquisition costs of $16.4 million, assumption of liabilities of $25.8 million,
and 3.2 million shares of Equivest Common Stock. The purchase price exceeded the
fair value of net assets acquired by approximately $27.5 million which was
recorded as goodwill.
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1997 and 1998 assumes the Eastern acquisition occurred
as of January 1, 1997 and 1998, respectively (in thousands):
1997 1998
-------- --------
Net revenue $ 34,685 $ 46,466
Net income 3,190 5,764
Earnings per share:
Basic $ .17 $ .21
======== ========
Diluted $ .12 $ .20
======== ========
1999 Purchases: On March 26, 1999, the Company acquired seven timeshare resort
properties located in the Eastern United States and St. Thomas, U.S.V.I. The
purchase price amounted to $78.9 million including cash and acquisition costs of
$2.9 million, and assumption of liabilities of $76.0 million. The purchase price
was not in excess of the fair value of net assets acquired.
-32-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE Q--PURCHASES OF BUSINESSES--Continued
On November 17, 1999 the Company acquired 15 timeshare resort properties located
primarily in the Eastern United States. The purchase price amounted to $124.5
million including cash and acquisition costs of $16.1 million, assumption of
liabilities of $94.5 million and 2.9 million shares of Equivest Common Stock.
The cash and shares of stock were reduced by certain escrows and holdbacks for
contingencies totaling $2.9 million. The purchase price exceeded the fair value
of net assets acquired by approximately $14.9 million which was recorded as
goodwill. Additionally, the consideration included $940,000 for the sellers'
noncompete agreement.
The agreement also provided for the Company to purchase by December 31, 1999 a
275 room Holiday Inn property and adjacent 90 acres of land for $4 million if
the parties obtained Holiday Inn's consent. This provision has been extended
until March 31, 2000.
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1998 and 1999 assumes the 1999 purchases occurred as of
January 1, 1998 and 1999, respectively (in thousands):
1998 1999
----------- -----------
Net revenue $ 124,900 $ 164,242
Net income 3,808 9,214
Earnings per share:
Basic $ .12 $ .30
=========== ===========
Diluted $ .12 $ .30
=========== ===========
NOTE R--SEGMENT INFORMATION
As a result of the acquisitions in 1998 and 1999, the Company has two reportable
segments which are strategic business units that offer different products and
services within the timeshare resort industry. Each segment is managed
separately because each business requires different business strategies. The
resort development segment acquires, develops and operates resort properties and
markets and sells timeshare intervals. Through its financing operations, the
Company provides financing to its own resort properties and independent resorts
which includes consumer lending for timeshare intervals, hypothecation loans to
resort developers and resort acquisition and development loans.
The accounting policies applied to determine the segment information are the
same as those described in the summary of significant accounting policies.
Interest expense is based on the specific debt incurred by each segment.
Intersegment interest is based on interest rates which are similar to those with
third parties. Management evaluates the performance of each segment based on
profit or loss from operations before income taxes.
-33-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE R--SEGMENT INFORMATION--Continued
Financial information with respect to each reportable segment for 1998 and 1999
follows (including the Resort Development segment from August 28, 1998) (in
thousands):
<TABLE>
<CAPTION>
Resort
Financing Development Total
------------------- ------------------- -------------------
1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
External $ 21,396 $ 27,461 $ 8,241 $ 66,919 $ 29,637 $ 94,380
Intersegment 216 1,018 -- -- 216 1,018
Interest expense 7,204 9,875 248 4,097 7,452 13,972
Depreciation and
amortization 1,488 1,468 290 1,436 1,778 2,904
Segment profit 8,057 10,820 1,352 5,897 9,409 16,717
Segment assets 167,533 278,693 42,739 162,462 210,272 441,155
Expenditures for
segment assets 53 269 23 1,164 76 1,433
Other non-cash:
Provision for
doubtful receivables 791 2,192 -- -- 791 2,192
</TABLE>
The following is presented to reconcile amounts in the foregoing segment
information to the amounts reported in the Company's consolidated financial
statements (in thousands):
1998 1999
-------- --------
Revenue
Total revenue of reportable segments $ 29,853 $ 95,398
Intersegment revenue (216) (1,018)
-------- --------
Consolidated revenue $ 29,637 94,380
======== ========
Profit
Total profit of reportable segments $ 9,409 16,717
Unallocated corporate expenses (895) (1,521)
-------- --------
Consolidated income before provision
for income taxes $ 8,514 $ 15,196
======== ========
-34-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE R--SEGMENT INFORMATION--Continued
<TABLE>
<CAPTION>
December 31,
1998 1999
--------- ---------
<S> <C> <C>
Assets
Total assets of reportable segments $ 210,272 $ 441,155
Segment accounts receivable eliminated in consolidation (14,868) (26,538)
Other unallocated amounts 1,980 2,369
--------- ---------
Total Assets $ 197,384 $ 416,986
========= =========
</TABLE>
Reconciliation of Other Significant Items
Reportable Reconciling Consolidated
Segments Items Amounts
----------- ----------- ------------
Year ended December 31, 1998:
Interest expense $ 7,452,384 $ 5,234 $ 7,457,618
Depreciation and amortization 1,777,910 419,487 2,194,397
Year ended December 31, 1999:
Interest expense $13,971,698 $ (586,232) $13,389,034
Depreciation and amortization 2,904,091 637,423 3,512,190
Expenditures for assets 1,433,105 26,157 1,459,262
The reconciling items represent unallocated corporate expenses and intersegment
charges eliminated in consolidation.
Substantially all of the Company's revenue is derived from operations within the
continental United States. However in 1999 the Company's U.S. Virgin Islands
operations accounted for $14,691,661 and $1,156,792 of revenues and income
before provision for income taxes, respectively, and $3,786,328 in long-lived
assets and $19,527,892 of timeshare inventory as of December 31, 1999.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
NOTE S--EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution profit sharing and 401(k) plans
covering substantially all employees. These plans permit employee contributions
up to 15% of compensation subject to statutory limitations. The Company makes
matching contributions which are subject to maximum percentages of the
employee's contribution and pay. It may also make discretionary contributions.
Matching contributions amounted to $44,595 in 1997, $41,311 in 1998, and $85,081
in 1999. There were no discretionary contributions in those years.
-35-
Exhibit 10.2
NONSTANDARDIZED
ADOPTION AGREEMENT
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING
PLAN AND TRUST/CUSTODIAL ACCOUNT
Sponsored by
MANUFACTURERS & TRADERS TRUST COMPANY
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: lf 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
<PAGE>
(b) TELEPHONE NUMBER:315-422-9088
(c) TAX ID NUMBER: 16-1399129
(d) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[X] (iii) Corporation
[ ] (iv) "S" Corporation (formerly known as Subchapter 5)
[ ] (v) Other:
(e) NAME(S) OF INDIVIDUAL(S) AUTHORIZED TO ISSUE
INSTRUCTIONS TO THE TRUSTEE/CUSTODIAN:
GERALD KLABEN, JAMES PETRIE & RETIREMENT COMMITTEE
<PAGE>
(f) NAME OF PLAN: RESORT FUNDING, INC. PROFIT SHARING & 401(K) 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
(b) This is an amended Plan.
The effective date of the original Plan was JANUARY 1, 1997 .
----------------
The effective date of the amended Plan is JANUARY 1, 2000 .
----------------
(c) lf 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.
<PAGE>
[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.]
Exclusions From Compensation:
(1) overtime.
(2) bonuses.
(3) commissions.
(4)
<PAGE>
Type of Contribution(s)
- ------- --------------
Exclusion(s)
- -----------
<PAGE>
Elective Deferrals [Section 7(b)] ________
Matching Contributions [Section 7(c)] ___123__
--------
Qualified Non-Elective Contributions [Section 7(d)] ___123__
--------
and Non-Elective Contributions [Section 7(e)]
(c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date on
which an Employee meets the eligibility requirements.
<PAGE>
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.]
Exclusions From Compensation:
(1) overtime.
(2) bonuses.
(3) commissions.
(4)
<PAGE>
Type of Contribution(s)
- ------- --------------
Exclusion(s)
-----------
<PAGE>
Elective Deferrals [Section 7(b)] ___123__
---
Matching Contributions [Section 7(c)] ___123__
---
Qualified Non-Elective Contributions [Section 7(d)] ___123__
---
and Non-Elective Contributions [Section 7(e)]
(c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date on
which an Employee meets the eligibility requirements.
<PAGE>
[ ] (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.
[X] (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, 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 semimonthly
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.
<PAGE>
(e) "Limitation Year" The 12-consecutive month period commencing on JANUARY l
and ending on DECEMBER 31 .
lf applicable, the Limitation Year will be a short Limitation Year
commencing on and ending on ______
(f) "Net Profit" [X] (i) Not applicable (profits will not be required for any
contributions to the Plan).
[ ] (ii) As defined in paragraph l .49 of the Basic Plan Document #04.
[ ] (iii) Shall be defined as:
(Only use if definition in paragraph l .49 of the Basic Plan
Document #04 is to be superseded.)
(g) "Plan Year" The 12-consecutive month period commencing on JANUARY l and
ending on DECEMBER 31 .
<PAGE>
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.
<PAGE>
(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. lf "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).
<PAGE>
[ ] (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).
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(b)] _______
Elective Deferrals [Section 6(a)] ____V__
-
Matching Contributions [Section 7(c)] ____V__
-
Qualified Non-Elective Contributions [Section 7(d)] ____V__
-
Non-Elective Contributions [Section 7(e), (f), (g)] ____V__
-
Minimum Top-Heavy Contributions [Section 7(i)] ____V__
-
(I) "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.
<PAGE>
(ii) For Allocation Accrual Purposes: The 12-consecutive month period during
which an Employee is credited with 1000 (not more than 1,000) Hours of
Service.
(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.
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 sdected 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.
[X] (iv) The Plan shall exclude from participation any nondiscriminatory
classification of Employees determined as follows:
ALL LEASED EMPLOYEES
=========================
(d) Employees on Effective Date: [x] (i) Not Applicable. All Employees
will be required to satisfy both the age and Service requirements
specified above. [ ] (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:
lf 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.
<PAGE>
[ ] (i)Normal Retirement Age shall be ______ (not to exceed age 65).
<PAGE>
[X] (ii) Normal Retirement Age shall be the later of attaining age 65
(not to exceed age 65) or the _______ (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.
<PAGE>
6. EMPLOYEE CONTRIBUTIONS [X] (a) Participants shall be permitted to
make Elective Deferrals in any amount from l % -- up to 15 % of
their Compensation.
lf (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, [ ]
(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) lf
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.
<PAGE>
(a) Profits Requirement:
(i) Current or Accumulated Net Profits are required for:
[ ] (A) Matching Contributions.
[ ] (B) Qualified Non-Elective Contributions.
[X] (C) discretionary contributions.
(ii) No NetProfits are required for:
[X] (A) Matching Contributions.
[X] (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).
<PAGE>
[X] (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_25__ % 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 6 %
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____%. [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.
<PAGE>
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
<PAGE>
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.
[ ] (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 [X] (B)
bi-weekly [ ] (C) semi-monthly [ ] (D) monthly [ ] (E) quarterly [ ]
(F) semi-annually [ ] (G) 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.
<PAGE>
[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
discretionarycontribution 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. 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.
<PAGE>
(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.
Participants may only receive an allocation of up to 2.7% of
their Compensation plus excess Compensation, under this
allocation method. lf 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. lf 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 1] (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. lf 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.
<PAGE>
(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. [X]
(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 ADP and ACP of the affected
Highly Compensated Employees.
8. ALLOCATIONS TO TERMINATED EMPLOYEES
[ ] (a) The Employer will not allocate Employer related contributions
to Employees who terminate during a Plan Year, unless required to
satisfy the requirements of Code Section 401(a)(26) and 410(b).
(These requirements are effective for 1989 and subsequent Plan
Years.)
<PAGE>
[X] (b) The Employer will allocate Employer natching and other related
contributions as indicated below to Employees who terminate during
the Plan Year as a result of:
Other
[X] [X] (i) Retirement.
[X] [X] (ii) Disability.
[X] [X] (iii)Death.
[ ] [ ] (iv) Other termination of employment provided that the
Participant has completed a Year of Service as defined for
Allocation Accrual Purposes.
[ ] (v) Other termination of employment even though the Participant
has not completed a Year of Service.
[ ] (vi) Termination of employment (for any reason) provided that the
Participant had completed a Year of Service for Allocation Accrual
Purposes.
9. ALLOCATION OF FORFEITURES
NOTE: Subsections (a), (b) and (c) below apply to forfeitures of amounts
other than Excess Aggregate Contributions.
(a) Allocation Alternatives:
lf forfeitures are allocated to Participants, such allocation shall be
done in the same manner as the Employer's contribution. [ ] (i) Not
Applicable. All contributions are always fully vested. [ ] (ii)
Forfeitures shall be allocated to Participants in the same manner as
the Employer's contribution.
lf 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 Plan.
<PAGE>
[ ] only those Participants eligible for an allocation of Employer
contributions in the current year.
[ ] 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:
[ ] all eligible Participants.
[ ] only those Participants eligible for allocations of matching
contributions in the current year.
[X] (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).
(c) Restoration of Forfeitures:
lf 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] Current year's forfeitures
<PAGE>
[3] (ii) Additional Employer contribution.
[2] (iii) Income or gain to the Plan.
(d) Forfeitures of Excess Aggregate Contributions shall be: [X] (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 Participant. [X] (b) Not Applicable.
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 41 5(l)(2)), under which amounts are
treated as Annual Additions) and has completed the proper sections
below.
Complete (a), (b) and (c) only if tIne Employer maintains or ever
maintained another qualified plan, including a Welfare Benefit Fund
or an individual medical account [as
<PAGE>
defined in Code Section 415(l)(2)] in which any Participant in this
Plan is (or was) a participant or could possibly become a
participant.
(a) lf the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a Master
or Prototype Plan: [X] (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) lf 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).
[ ] (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
<PAGE>
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. lf the
Plan is switched to option (b)(iv), because of itsTop-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 l 2-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(l)(iii) of this 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.
<PAGE>
(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) 25% 50% 75% 100% 100%
--- --- --- ----
(SCHEDULE VII FOR EMPLOYEES HIRED ON OR BEFORE 12/31/1999)
(viii) 20% 40% 60% 80% 100% 100% 100%
--- --- --- --- ---- ----
(SCHEDULE VIII FOR EMPLOYEES HIRED AFTER 12/31/1999)
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 VII OR VIII (AS NOTED ABOVE
above.
[ ] Contributions other than those which are fully vested when
contributed will vest as provided below:
<PAGE>
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
<PAGE>
(c) Service disregarded for Vesting: [X] (i) Not Applicable. All Service
shall be considered. [ ] (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., ITS SUBSIDIARIES AND AFFILIATES,
PEPPERTREE RESORTS, LTD., EASTERN RESORTS COMPANY, LLC
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.
(b) Transfer Contributions, as described at paragraph 4.4 of the Basic
Plan Document #04 [X] shall [ ] shall not be permitted. lf
permitted, Employees [X] may [ ] may not make 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.
<PAGE>
16. PARTICIPANT LOANS
Participant loans, as provided for in paragraph 13.5 of the Basic Plan
Document #04, [X] are [ ] are not permitted. lf 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.
lf applicable, Participants may direct their investments:
[ ] (i) among funds offered by the Trustee.
[X ](ii) among any allowable investments.
(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
<PAGE>
[ ] (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 that 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.
(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: lf 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.
[ ] (viii) As soon as administratively feasible,
following the date on which a distribution is requested
or is otherwise payable.
<PAGE>
(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).
<PAGE>
[ ] (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
(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.
<PAGE>
lf "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.
<PAGE>
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.
<PAGE>
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
l above.
This agreement and the corresponding provisions of the Plan and
Trust/Custodial Account Basic Plan Document #04 were adopted by the
Employer the day of
<PAGE>
Signed for the Employer by: GERALD KLABEN
Title:
Signature:
<PAGE>
The Employer understands that its failure to properly complete the
Adoption Agreement may result in disqualification of its Plan.
Employer's Reliance: The adopting Employer may not rely on an
opinion letter issued by the National Office of the Internal
Revenue Service as evidence that the Plan is qualified under Code
Section 401. In order to obtain reliance with respect to Plan
qualification, the Employer must apply to the appropriate Key
District Office for a determination letter.
This Adoption Agreement may only be used in conjunction with Basic
Plan Document #04.
<PAGE>
[X] (b) TRUSTEE:
Name of Trustee:
MANUFACTURERS AND TRADERS TRUST COMPANY
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 __30th __day of December 1999
<PAGE>
Signed for the Trustee by: ALFONSE MECCARIELLO
Title: TRUST OFFICER
Signature:
[] (c)
CUSTODIAN:
<PAGE>
Name of Custodian:
The assets of the Fund shall be invested in accordance with
paragraph l 3.4 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 30th day of, December, 1999
<PAGE>
Signed for the Sponsor by: ALFONSE MECCARIELLO
Title: TRUST OFFICER
Signature: ____________________________
<TABLE>
<S> <C>
Exhibit 10.4
Flexible Nonstandardized Safe Harbor 401(k) Profit Sharing Plan
ADOPTION AGREEMENT
SECTION 1. EMPLOYER INFORMATION
Name of Employer Eastern Resorts Company, LLC
Address 115 Long Wharf
City Newport State
------------------------------------------------------
RI Zip ________02840
Telephone 401-845-0100 Employer's Federal Tax Identification Number 05-0480559
--------------------------------------------------------------------------------------------------------------
Type of Business (Check only one) Sole Proprietorship Partnership C
Corporation S Corporation
Other (Specify) Limited Liability Company
- ------------------------------------------------
Check here if Related Employers may participate in this Plan and attach a
Related Employer Participation Agreement for each
Related Employer who will participate in this Plan.
Business Code_____________
Name of Plan Eastern Resorts Company LLC Tax Deferred Savings Plan
Name of Trust (if different from Plan name)
------------------------------
Plan Sequence Number 001 (Enter 001 if this is the first
qualified plan the Employer has ever maintained, enter
002 if it is the
second, etc.)
Trust Identification Number (if
applicable) Account
- ---------------------------------------------------------------------------
Number (Optional)___________________
- --------------------------------------------------------------------------------
SECTION 2. EFFECTIVE DATES
Complete Parts A and B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
General Effective Dates (Check and Complete Option 1 or 2):
Option 1: This is the initial adoption of a profit sharing plan by the
Employer.
The Effective Date of this Plan
is .
----------------------------------------
NOTE: The effective date is usually the first day of
the Plan Year in which this Adoption Agreement
Part A. is signed.
Option 2: This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan).
The Prior Plan was initially effective on
06-01-1995 The Effective Date of this
amendment and restatement
is 01-01-2000 .
------------------
NOTE: The effective date is usually the first day of
the Plan Year in which this Adoption Agreement
is signed.
Part B. Commencement of Elective Deferrals:
Elective Deferrals may commence on 01-01-2000 .
---------------------
NOTE: This date may be no earlier than the date this Adoption Agreement is signed
because Elective Deferrals cannot be made retroactively.
SECTION 3. RELEVANT TIME PERIODS
Complete Parts A through C
- ------------------------------------------------------------------------------------------------
<PAGE>
Part A. Employer's Fiscal Year:
The Employer's fiscal year ends (Specify month and date) 12-31
Part B. Plan Year Means:
Option 1: The 12-consecutive month period which coincides with the
Employer's fiscal year.
Option 2: The calendar year.
Option 3: Other 12-consecutive month period (Specify) NOTE: If no option
is selected, Option 1 will be deemed to he selected. If the initial Plan Year is
less than 12 months (a short Plan Year) specify such Plan Year's beginning and
ending dates
<PAGE>
Exhibit 10.4
Part C. Limitation Year Means:
Option 1: ? The Plan Year.
Option 2: ? The calendar year.
Option 3: ? Other 12-consecutive month period
(Specify)
NOTE: If no option is selected, Option 1 will be deemed to be
selected.
Part D. Measuring Period For Vesting:
Years of Vesting Service shall be measured over the
following 12-consecutive month period:
Option 1: ? The Plan Year.
Option 2: ? The 12-consecutive month period
commencing with the Employee's Employment Commencement Date
and each successive 12-month
period commencing on the anniversaries of the Employee's Employment
Commencement Date.
NOTE: If no option is selected, Option 2 will be deemed to be selected.
- ------------------------------------------------------------------------------------------
SECTION 4. ELIGIBILITY REQUIREMENTS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Complete Parts A through G
- ------------------------------------------------------------------------------------------
Part A. Years of Eligibility Service Requirement:
1. Elective Deferrals.
An Employee will be eligible to become a Contributing Participant
in the Plan (and thus be eligible to make Elective Deferrals) and
receive Matching Contributions (including Qualified Matching
Contributions, if applicable) after completing (enter 0, 1 or any
fraction less than 1) Years of Eligibility Service.
2. Employer Profit Sharing Contributions.
An Employee will be eligible to become a Participant in the Plan
for purposes of receiving an allocation of any Employer Profit
Sharing Contribution made pursuant to Section 10 of the Adoption
Agreement after completing
1 (enter 0, 1, 2 or any fraction less than 2) Years of Eligibility
- ------------------------
Service.
NOTE: If more than 1 year is selected for Item 2, the immediate 100%
vesting schedule of Section 12 will automatically apply for
contributions described in such item. If either item is left blank, the
Years of Eligibility Service required for such item will be deemed to
be 0. If a fraction is selected, an Employee will not be required to
complete any specified number of Hours of Service to receive credit for
a fractional year. If a single Entry Date is selected in Section 4,
Part G for an item, the Years of Eligibility Service required for such
item cannot exceed 1.5 (.5 for Elective Deferrals).
Part B. Age Requirement:
1. Elective Deferrals.
An Employee will be eligible to become a Contributing Participant
(and thus be eligible to make Elective Deferrals) and receive
Matching Contributions (including Qualified Matching Contributions,
if applicable) after attaining age 21 (no more than 21).
2. Employer Profit Sharing Contributions.
An Employee will be eligible to become a Participant in the Plan
for purposes of receiving an allocation of any Employer Profit
Sharing Contribution made pursuant to Section 10 of the Adoption
Agreement after attaining age 21 (no more than 21).
NOTE: If either of the above items in this Section 4, Part B is left
blank, it will be deemed there is no age requirement for such item. If
a single Entry Date is selected in Section 4, Part G for an item, no
age requirement can exceed 20.5 for such item.
Part C. Employees Employed As Of Effective Date:
Will all Employees employed as of the Effective Date of this Plan who have not
otherwise met the requirements of Part A or Part B above be considered to have
met those requirements as of the Effective Date? ? Yes ? No
NOTE: If a box is not checked in this Section 4, Part C, "No" will be deemed
to be selected.
Part D. Exclusion of Certain Classes of Employees:
All Employees will be eligible to become Participants in the Plan except:
a. X Those 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 and if two percent or less of
the Employees who are covered pursuant to that agreement are
professionals as defined in Section 1.410(b)-9 of the
regulations. For this purpose, the term "employee
representatives" does not include any organization more than
half of whose members are Employees who are owners, officers, or
executives of the Employer.
b. X Those Employees who are non-resident aliens (within the
meaning of Section 7701(b)(l)(B) of the Code) and who received
no earned income (within the meaning of Section 91 l(d)(2) of
the Code) from the Employer which constitutes income from
sources within the United States (within the meaning of Section
861(a)(3) of the Code)
c. ? Those Employees of a Related Employer that has not executed a
Related Employer Participation Agreement.
d. X Other (Define) Leased Employers
----------------------
<PAGE>
Part E. Election Not To Participate:
May an Employee or a Participant elect not to participate in this Plan
pursuant to Section 2.08 of the Plan?
Option 1: ? Yes.
Option 2: ? No.
NOTE: If no option is selected, Option 2 will be deemed to be selected.
Part F. Hours Required For Eligibility Purposes:
1. 1000 Hours of Service (no more than 1,000) shall be required to
-----------------
constitute a Year of Eligibility Service.
2. 500 Hours of Service (no more than 500 but less than the
-------------------
number specified in Section 4, Part F, Item 1, above) must be exceeded to
avoid a Break in Eligibility Service.
3. For purposes of determining Years of Eligibility Service, Employees shall be
given credit for Hours of Service with the following predecessor
employer(s): (Complete if applicable)
Part G. Entry Dates:
The Entry Dates for participation shall be (Choose one):
Option 1: ? The first day of the Plan Year and the first day of the
seventh month of the Plan Year.
Option 2: ? Other (Specify) January l, April l, July
------------------------
1, and October 1
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Option 2 can be selected only if the eligibility requirements and Entry
Dates are coordinated such that each Employee will become a Participant
in the Plan no later than the earlier of: (1) the first day of the Plan
Year beginning after the date the Employee satisfies the age and
service requirements of Section 410(a) of the Code; or (2) 6 months
after the date the Employee satisfies such requirements.
- ----------------------------------------------------------------------------------------------
SECTION 5. METHOD OF DETERMINING SERVICE
Complete Part A or B
- ----------------------------------------------------------------------------------------------
<PAGE>
Part A. Hours of Service Equivalencies:
Service will be determined on the basis of the method selected below.
Only one method may be selected. The method selected will be applied to
all Employees covered under the Plan. (Choose one):
Option 1: ? On the basis of actual hours for which an Employee is paid
or entitled to payment.
Option 2: ? On the basis of days worked. An Employee will be credited
with 10 Hours of Service if under Section 1.24 of the Plan
such Employee would be credited with at least l Hour of
Service during the day.
Option 3: ? On the basis of weeks worked. An Employee will be credited
with 45 Hours of Service if under Section 1.24 of the Plan such Employee would
be credited with at least l Hour of Service during the week.
Option 4: ? On the basis of months worked. An Employee will be
credited with 190 Hours of Service if under Section 1.24 of
the Plan such Employee would he credited with at least l
Hour of Service during the month.
NOTE: If no option is selected, Option l will be deemed no be selected.
This Section 5, Part A will not apply if the Elapsed Time Method of
Section 5, Part B is selected.
Part B. Elapsed Time Method:
In lieu of tracking Hours of Service of Employees, will the elapsed time method
described in Section 2.07 of the Plan be used? (Choose one)
Option 1: ? No.
Option 2: ? Yes.
NOTE:If no option is selected, Option l will be deemed no be selected.
<PAGE>
- ------------------------------------------------------------------------------------------
SECTION 6. ELECTIVE DEFERRALS
- ------------------------------------------------------------------------------------------
Part A. Authorization of Elective Deferrals:
Will Elective Deferrals be permitted under this Plan? (Choose one)
Option 1: ? Yes.
Option 2: ? No.
NOTE:If no option is selected, Option l will be deemed to be selected.
Complete the remainder of Section 6 only if Option l is selected.
Part B. Limits on Elective Deferrals:
If Elective Deferrals are permitted under the Plan, a Contributing
Participant may elect under a salary reduction agreement to
have his or her Compensation reduced by an amount as described below (Choose
one):
Option 1: ? An amount equal to a percentage of the Contributing
Participant's Compensation from 1 % to 15% in increments of
1 %. Option 2: ? An amount of the Contributing Participant's
Compensation not less than and not more than__________. The amount of
such reduction shall be contributed to the Plan by the Employer on
behalf of the Contributing Participant. For any taxable year, a
Contributing Participant's Elective Deferrals shall not exceed the
limit contained in Section 402(g) of the Code in effect at the
beginning of such taxable year.
Part C. Elective Deferrals Based on Bonuses:
Instead of or in addition to making Elective Deferrals through payroll
deduction, may a Contributing Participant elect to contribute to the Plan, as an
Elective Deferral, part or all of a bonus rather than receive such bonus in
cash? (Choose one)
Option 1: ? Yes.
Option 2: ? No.
NOTE: lf no option is selected, Option 2 will be deemed to be selected.
Part D. Return As A Contributing Participant After Ceasing Elective Deferrals:
A Participant who ceases Elective Deferrals by revoking a salary
reduction agreement may return as a Contributing Participant as of such
times established by the Plan Administrator in a uniform and
nondiscriminatory manner.
Part E. Changing Elective Deferral Amounts:
A Contributing Participant may modify a salary reduction agreement to
prospectively increase or decrease the amount of his or her Elective
Deferrals as of such times established by the Plan Administrator in a
uniform and nondiscriminatory manner.
Part F. Claiming Excess Elective Deferrals:
Participants who claim Excess Elective Deferrals for the preceding
calendar year must submit their claims in writing to the Plan
Administrator by (Choose one):
Option 1: ? March 1.
Option 2: ? Other (Specify a date not later than April 15) NOTE: If no
option is selected, Option l will be deemed no be selected.
<PAGE>
- ------------------------------------------------------------------------------------------
SECTION 7. MATCHING CONTRIBUTIONS
- ------------------------------------------------------------------------------------------
Part A. Authorization of Matching Contributions:
Will the Employer make Matching Contributions to the Plan on behalf of
Qualifying Contributing Participants? (Choose one)
Option 1: ? Yes, but only with respect to a Contributing
Participant's Elective Deferrals.
Option 2: ? Yes, but only with respect to a Participant's
Nondeductible Employee Contributions.
Option 3: ? Yes, with respect to both Elective Deferrals and
Nondeductible Employee Contributions.
Option 4: ? No.
NOTE: lf no option is selected, Option 4 will be deemed to be selected. Complete
the remainder of Section 7 only if Option 1, 2 or 3 is selected.
Part B. Matching Contribution Formula:
lf the Employer will make Matching Contributions, then the amount of
such Matching Contributions made on behalf of a Qualifying Contributing
Participant each Plan Year shall be (Choose one):
Option 1: ? An amount equal to _______ % of such
---------------------
Contributing Participant's Elective Deferral (and/or Nondeductible
Employee Contribution, if applicable).
<PAGE>
Option 2: ? An amount equal to the sum of _______ % of the portion of such
Contributing Participant's Elective
Deferral (and/or Nondeductible Employee Contribution, if applicable)
which does not exceed _______ % of the Contributing Participant's
Compensation plus_______ % of the portion of such Contributing
Participant's
Elective Deferral (and/or Nondeductible Employee Contribution,
if applicable) which exceeds . % of
-----------
the Contributing Participant's Compensation.
Option 3: ? Such amount, if any, equal to that percentage of each Contributing
Participant's Elective Deferral (and/or
Nondeductible Employee Contribution, if applicable) which the
Employer, in its sole discretion, determines from year to year.
Option 4: ? Other formula. (Specify) 25% up to the first 6% of a
------------------------------
Contributing Participant's Elective
Deferrals
<PAGE>
NOTE: If Option 4 is selected, the formula specified can only allow
Matching Contributions to be made with respect to a Contributing
Participant's Elective Deferrals (and/or Nondeductible Employee
Contribution, if applicable).
Part C. Limit on Matching Contributions:
Notwithstanding the Matching Contribution formula specified above, no
Matching Contribution will be made with respect to a Contributing
Participant's Elective Deferrals (and/or Nondeductible Employee
Contributions, if applicable) in excess of _______________ or 6% of
such Contributing Participant's Compensation.
<PAGE>
Exhibit 10.4
<PAGE>
Part D. Qualifying Contributing Participants:
A Contributing Participant who satisfies the eligibility requirements
described in Section 4 will be a Qualifying Contributing Participant
and thus entitled to share in Matching Contributions for any Plan Year
only if the Participant is a Contributing Participant and satisfies the
following additional conditions (Check one or more Options):
<PAGE>
Option 1: X No Additional Conditions.
Option 2: ? Hours of Service Requirement. The Contributing Participant completes at
least ________ Hours of
- -----------------
Service during the Plan Year. However, this condition will be
waived for the following reasons
(Check at least one):
? The Contributing Participant's Death.
? The Contributing Participant's Termination of
Employment after having incurred a Disability.
? The Contributing Participant's Termination of Employment
after having reached Normal Retirement
Age.
? This condition will not be waived.
Option3: ? Last Day Requirement. The Participant is an Employee of the Employer on
the last day of the Plan Year.
However, this condition will be waived for the following reasons
(Check at least one):
<PAGE>
? The Contributing Participant's Death.
? The Contributing Participant's Termination of
Employment after having incurred a Disability.
? The Contributing Participant's Termination of
Employment after having reached Normal Retirement
Age.
? This condition will not be waived.
NOTE: lf no option is selected, Options l will be deemed to be selected.
SECTION 8. QUALIFIED NONELECTIVE CONTRIBUTIONS
Part A. Authorization of Qualified Nonelective Contributions:
Will the Employer make Qualified Nonelective Contributions to the Plan? (Choose
One)
Option 1: ? Yes.
Option 2: ? No.
lf the Employer elects to make Qualified Nonelective Contributions,
then the amount, if any, of such contribution to the Plan for each Plan
Year shall be an amount determined by the Employer. NOTE: If no option
is selected, Option l will be deemed to be selected. Complete the
remainder of Sections 8 only if Options l is selected.
Part B. Participants Entitled to Qualified Nonelective Contributions:
Allocation of Qualified Nonelective Contributions shall be made to the
Individual Accounts of (Choose one):
Option 1: ? Only Participants who are not Highly Compensated Employees.
Option 2: ? All Participants.
NOTE: If no option is selected, Options l will be deemed to be selected.
Part C. Allocation of Qualified Nonelective Contributions:
Allocation of Qualified Nonelective Contributions to Participants
entitled thereto shall be made (Choose one):
Option 1: ? In the ratio which each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for such Plan Year.
-
Option 2: ? In the ratio which each Participant's Compensation
not in excess of
for the Plan Year
bears to the total Compensation of all Participants not in
excess of for such
----
Plan Year.
NOTE: If no option is selected, Options l will be deemed to be
selected.
<PAGE>
Exhibit 10.4
<PAGE>
SECTION 9. QUALIFIED MATCHING CONTRIBUTIONS
Part A. Authorization of Qualified Matching Contributions:
Will the Employer make Qualified Matching Contributions to the Plan on behalf of
Qualifying Contributing Participants? (Choose One)
Option 1: ? Yes, but only with respect to a Contributing Participant's
Elective Deferrals.
Option 2: ? Yes, but only with respect to a Participant's Nondeductible
Employee Contributions.
Option 3: ? Yes, with respect to both Elective Deferrals and Nondeductible
Employee Contributions.
Option 4: ? No.
NOTE: lf no option is selected, Option 3 will be deemed to be selected.
Complete the remainder of Section 9 only if Option 1, 2 or 3 is selected.
Part B. Qualified Matching Contribution Formula:
lf the Employer will make Qualified Matching Contributions, then the
amount of such Qualified Matching Contributions made on behalf of a
Qualifying Contributing Participant each Plan Year shall be (Choose
one): Option 1: ? An amount equal to _______ % of such Contributing
Participant's Elective Deferral (and/or Nondeductible Employee
Contribution, if applicable).
Option 2: ? An amount equal to the sum, of_______ % of the portion of
such Contributing Participant's Elective Deferral (and/or
Nondeductible Employee Contribution, if applicable) which does not
exceed _______ of the Contributing Participant's
Compensation plus % of the portion of such Contributing Participant's
Elective Deferral (and/or Nondeductible Employee Contribution, if
applicable) which exceeds_______ % of the Contributing Participant's
Compensation.
Option3: ? Such amount, if any, as determined by the Employer in its sole
discretion, equal to that percentage of the Elective
Deferrals (and/or Nondeductible Employee Contribution,
if applicable) of each Contributing Participant
entitled thereto which would be sufficient to cause the Plan to satisfy
the Actual Contribution Percentage tests (described in Section 11.402
of the Plan) for the Plan Year.
<PAGE>
Option 4: ? Other Formula. (Specify)
NOTE: lf no option is selected, Option 3 will be deemed to be selected.
Part C. Participants Entitled to Qualified Matching Contributions:
Qualified Matching Contributions, if made to the Plan, will be made on
behalf of (Choose one): Option 1:? Only Contributing Participants who
make Elective Deferrals who are not Highly Compensated Employees.
Option 2: ? All Contributing Participants who make Elective Deferrals.
NOTE: If no option is selected, Option l will be deemed to be selected.
Part D. Limit On Qualified Matching Contributions:
Notwithstanding the Qualified Matching Contribution formula specified
above, the Employer will not match a Contributing Participant's
Elective Deferrals (and/or Nondeductible Employee Contribution, if
applicable) in excess of _______________ or __% of such Contributing
Participant's Compensation.
<PAGE>
Exhibit 10.4
- ------------------------------------------------------------------------------------------
<PAGE>
SECTION 10. EMPLOYER PROFIT SHARING CONTRIBUTIONS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Complete Parts A. B and C
- ------------------------------------------------------------------------------------------
Part A. Contribution Formula:
For each Plan Year the Employer will contribute an Amount to be
determined from year to year.
Part B. Allocation Formula (Choose one):
Option 1: ? Pro Rata Formula. Employer Profit Sharing Contributions
shall be allocated to the Individual Accounts of Qualifying
Participants in the ratio that each Qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all Qualifying Participants for the Plan Year.
Option 2: ? Integrated Formula. Employer Profit Sharing Contributions shall
be allocated as follows (Start with Step 3 if this Plan is not a
Top-Heavy Plan):
Step 1. Employer Profit Sharing Contributions shall first
be allocated pro rata to Qualifying Participants in
the manner described in Section 10, Part B, Option I.
The percent so allocated shall not exceed 3 % of each
Qualifying Participant's Compensation.
Step 2. Any Employer Profit Sharing Contributions
remaining after the allocation in Step l shall be
allocated to each Qualifying Participant's Individual
Account in the ratio that each Qualifying
Participant's Compensation for the Plan Year in
excess of the integration level bears to all
Qualifying Participants' Compensation in excess of
the integration level, but not in excess of 3%.
Step 3. Any Employer Profit Sharing Contributions
remaining after the allocation in Step 2 shall be
allocated to each Qualifying Participant's Individual
Account in the ratio that the sum of each Qualifying
Participant's total Compensation and Compensation in
excess of the integration level bears to the sum of
all Qualifying Participants' total Compensation and
Compensation in excess of the integration level, but
not in excess of the profit sharing maximum disparity
rate as described in Section 3.0l(B)(3) of the Plan.
Step 4. Any Employer Profit Sharing Contributions
remaining after the allocation in Step 3 shall be
allocated pro rata to Qualifying Participants in the
manner described in Section 10, Part B, Option 1.
The integration level shall be (Choose one):
Suboption (a): 0 The Taxable Wage Base.
Suboption (b): 0 _____________ (a dollar amount less than the
Taxable Wage Base).
Suboption (c): 0_____________% (not more than 100%) of the
Taxable Wage Base.
NOTE: If no option is selected, Suboption (a) will be deemned to be selected.
NOTE: If no option is selected, Option l will be deemed no be selected,
Part C. Qualifying Participants:
A Participant will be a Qualifying Participant and thus entitled to
share in the Employer Profit Sharing Contribution for any Plan Year
only if the Participant is a Participant on at least one day of such
Plan Year and satisfies the following additional conditions (Check one
or more Options): Option 1: X No Additional Conditions.
Option 2: ? Hours of Service Requirement. The Participant
completes at least ______ Hours of Service during the Plan
Year. However, this condition will be waived for the
following reasons (Check at least one):
? The Participant's Death.
? The Participant's Termination of Employment after having
incurred a Disability. ? The Participant's Termination of
Employment after having reached Normal Retirement Age.
? This condition will not be waived.
Option 3: ? Last Day Requirement. The Participant is an Employee of the
Employer on the last day of the Plan Year. However, this condition will
be waived for the following reasons (Check at least one):
? The Participant's Death.
? The Participant's Termination of Employment after having
incurred a Disability. ? The Participant's Termination of
Employment after having reached Normal Retirement Age.
? This condition will not be waived.
Note: If no option is selected, Option 1 will be deemed to be
selected.
<PAGE>
- ------------------------------------------------------------------------------------------
SECTION 11. COMPENSATION
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Complete Parts A through E
- ------------------------------------------------------------------------------------------
Part A. Basic Definition:
Compensation will mean all of each Participant's (Choose one):
Option 1: 0 W-2 wages.
Option 2: 0 Section 3401(a) wages.
Option 3: ? 415 safe-harbor compensation.
NOTE: lf no option is selected, Option l will be deemed to be selected.
Part B. Measuring Period for Compensation:
Compensation shall be determined over the following applicable period (Choose
one):
Option 1: ? The Plan Year.
Option 2: 0 The calendar year ending with or within the Plan Year.
NOTE: lf no option is selected, Option l will be deemed to be selected.
Part C. Inclusion of Elective Deferrals:
Does Compensation include Employer Contributions made pursuant to a
salary reduction agreement which are not includible in the gross income
of the Employee under Sections 125, 402(e)(3), 402(h)(l)(B) and 403(b)
of the Code?
? Yes ONo
NOTE: lf neither box is checked, "Yes" will be deemed to be selected.
Part D. Pre-Entry Date Compensation:
For the Plan Year in which an Employee enters the Plan, the Employee's
Compensation which shall be taken into account for purposes of the Plan
shall be (Choose one):
Option 1: ? The Employee's Compensation only from the time the Employee became
a Participant in the Plan.
Option 2: O The Employee's Compensation for the whole of such Plan Year.
NOTE: lf no option is selected, Option l will be deemed to be selected.
Part E. Exclusions From Compensation:
Compensation shall not include the following (Check any that apply):
? Bonuses ? Commissions
? Overtime ? Other (Specify)
----------------------------------------------
NOTE: No exclusions from Compensation are permitted if the integrated allocation
formula in Section 10, Part B is selected.
- ------------------------------------------------------------------------------------------
SECTION 12. VESTING AND FORFEITURES
- ------------------------------------------------------------------------------------------
Complete Parts A through G
Part A. Vesting Schedule For Employer Profit Sharing Contributions. A
Participant shall become Vested in his or her Individual Account
derived from Profit Sharing Contributions made pursuant to Section 10
of the Adoption Agreement as follows (Choose one):
- -----------------------------------------------------------------------------------------------
YEARS OF VESTED PERCENTAGE
Option (Complete if
VESTING SERVICE l O Option 2 0 Option 3 0 Option 4 0 Option 5 ? Chosen)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
20%
40%
(not less than
60% 20%)
(not less than
1 0% 0% 100% 0% 80% 40%)
2 0% 20% 100% 0% 100 (not less than
3 0% 40% 100% 20% % 60%)
4 0% 60% 100% 40% (not less than
5 100% 80% 100% 60% % 80%)
6 100% 100% 100% 80% (not less than
7 100% 100% 100% 100% % 100%)
NOTE: If no option is selected, Option 3 will be
deemed to be selected.
- -----------------------------------------------------------------------------------------------
<PAGE>
Page
10
Part B. Vesting Schedule For Matching Contributions. A Participant shall
become Vested in his or her Individual Account derived from Matching
Contributions made pursuant to Section 7 of the Adoption Agreement as
follows (Choose one):
- --------------------------------------------------------------------------------------------
YEARS OF VESTED PERCENTAGE
Option Option Option (Complete if
VESTING SERVICE l 0 2 0 3 0 Option 4 0Option 5(R) Chosen)
- --------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
(not less than
20%)
(not less than
1 0% 0% 100% 0% 20% 40%)
2 0% 20% 100% 0% 40% (not less than
3 0% 40% 100% 20% 60 % 60%)
4 0% 60% 100% 40% 80 % (not less than
5 100% 80% 100% 60% 100 % 80%)
6 100% 100% 100% 80% % (not less then
7 100% 100% 100% 100% % 100%)
NOTE: lf no option is selected, Option 3 will be
deemed to be selected.
- ---------------------------------------------------------------------------------------------
<PAGE>
Exhibit 10.4
Part C. Hours Required For Vesting Purposes:
1.1000 Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service.
2. 500 Hours of Service (no more than 500 but less than the number
specified in Section 12, Part C, Item 1, above) must be exceeded to
avoid a Break in Vesting Service.
3. For purposes of determining Years of Vesting Service, Employees shall be given credit for
Hours of Service with the following predecessor employer(s): (Complete if applicable)
--------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Part D. Exclusion of Certain Years of Vesting Service:
All of an Employee's Years of Vesting Service with the Employer are
counted to determine the vesting percentage in the Participant's
Individual Account except (Check any that apply): [] Years of Vesting
Service before the Employee reaches age l 8. [] Years of Vesting
Service before the Employer maintained this Plan or a predecessor plan.
Part E. Allocation of Forfeitures of Employer Profit Sharing Contributions:
Forfeitures of Employer Profit Sharing Contributions shall be (Choose one):
Option 1: Allocated to the Individual Accounts of the Participants specified below in the
manner as described in Section 10, Part B (for Employer
Profit Sharing Contributions) The Participants entitled to
receive allocations of such Forfeitures shall be (Choose
one):
Suboption (a): O Only Qualifying Participants.
Suboption (b): O All Participants.
Option 2: Applied to reduce Employer Profit Sharing Contributions (Choose one):
Suboption (a): O For the Plan Year for which the Forfeiture arises.
Suboption (b): For any Plan Year subsequent to the Plan Year for which the
Forfeiture arises.
Option 3: Applied first to the payment of the Plan's administrative
expenses and any excess applied to reduce Employer Profit
Sharing Cent ribut ions (Choose one):
Suboption (a): O For the Plan Year for which the Forfeiture arises.
Suboption (b): O For any Plan Year subsequent to the Plan Year for which the
Forfeitures arises.
Note: If no option is selected, Option 1 and Suboption (a) will be deemed to be selected.
<PAGE>
Part F. Allocation of Forfeitures of Matching Contributions:
Forfeitures of Matching Contributions shall be (Choose one):
Option 1: O Allocated, after all other Forfeitures under the Plan, to each
Participant's Individual Account in the ratio which each
Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for such Plan Year.
The Participants entitled to receive allocations of such Forfeitures
shall be (Choose one):
Suboption (a): O Only Qualifying Contributing Participants.
Suboption (b) O Only Qualifying Participants.
Suboption (c): O All Participants.
Option 2: O Applied to reduce Matching Contributions (Choose one):
Suboption (a): O For the Plan Year for which the Forfeiture
arises. Suboption (b): O For any Plan Year subsequent to the
Plan Year for which the Forfeiture arises.
Option3: O Applied first to the payment of the Plan's administrative
expenses and any excess applied to reduce Matching
Contributions (Choose one): Suboption (a): O For the Plan Year
for which the Forfeiture arises. Suboption (b): O For any Plan
Year subsequent to the Plan Year for which the Forfeitures
arises.
NOTE: lf no option is selected, Option l and Suboption (a) will be deemed to be
selected.
Part G. Allocation of Forfeitures of Excess Aggregate Contributions:
Forfeitures of Excess Aggregate Contributions shall be (Choose one):
Option 1: O Allocated, after all other Forfeitures under the Plan, to
each Contributing Participant's Matching Contribution account
in the ratio which each Contributing Participant's
Compensation for the Plan Year bears to the total Compensation
of all Contributing Participants for such Plan Year. Such
Forfeitures will not be allocated to the account of any Highly
Compensated Employee.
Option 2: O Applied to reduce Matching Contributions (Choose one):
Suboption (a): 0 For the Plan Year for which the
Forfeiture arises.
Suboption (b): ? For any Plan Year subsequent to the Plan Year
for which the Forfeiture arises.
Option 3: O Applied first to the payment of the Plan's administrative
expenses and any excess applied to reduce Matching
Contributions (Choose one):
Suboption (a): 0 For the Plan Year for which the Forfeiture arises.
Suboption (b): 0 For any Plan Year subsequent to the Plan Year for
which the Forfeitures arises.
NOTE: lf no option is selected, Option 2 and Suboption (a) will be deemed to be
selected.
SECTION 13. NORMAL RETIREMENT AGE AND EARLY RETIREMENT AGE
The Normal Retirement Age under the Plan shall be (Check and complete one
option):
Option 1: Age 65.
Option 2: Age _(not to exceed 65)
------------
Option 3: The later of age____(not to exceed 65) or the________(not to
exceed 5th) anniversary of the first day of
the first Plan Year in which the Participant commenced
participation in the Plan.
NOTE: lf no option is selected, Option l will be deemed to be selected.
Part B. Early Retirement Age (Choose one option):
Option 1: An Early Retirement Age is not applicable under the Plan,
Option 2: Age 55 (not less than 55 nor more than 65).
Option 3: A Participant satisfies the Plan's Early Retirement Age
conditions by attaining age ________ (not less than 55) and
completing _____ Years of Vesting Service.
NOTE: lf no option is selected, Option l will be deemed to be selected.
SECTION 14. DISTRIBUTIONS
Distributable Events. Answer each of the following items.
<PAGE>
A, Termination of Employment Before Normal Retirement Age. May a Participant who
has not reached Normal Retirement Age request a distribution from the Plan?
B. Disability, May a Participant who has incurred a Disability request a distribution
from the Plan?
C. Attainment of Normal Retirement Age. May a Participant who has attained Normal
Retirement Age but has not incurred a Termination of Employment request a distribution
from the Plan?
D. Attainment of Age 59 1/2. Will Participants who have attained age 59 1/2 be permitted
to withdraw Elective Deferrals while still employed by the Employer?
E. Hardship Withdrawals of Elective Deferrals. Will Participants be permitted to withdraw
Elective Deferrals on account of hardship pursuant to Section 11.503 of the Plan?
F. In-Service Withdrawals, Will Participants be permitted to request a distribution
during service pursuant to Section 6.01(A)(3) of the Plan?
G. Hardship Withdrawals. Will Participants be permitted to make hardship withdrawals
pursuant to Section 6.01(A)(4) of the Plan?
H. Withdrawals of Rollover or Transfer Contributions. Will Employees be permitted to
withdraw their Rollover or Transfer Contributions at any time?
O Yes O No
O Yes O No
O Yes O No
O Yes O No
O Yes O No
O Yes O No
O Yes O No
O Yes O No
<PAGE>
NOTE: lf a box is not checked for an item, Yes" will be deemed to be selected
for that item. Section 411(d)(6) of the Code prohibits the elimination of
protected benefits. In general, protected benefits include the forms and timing
of payout options. lf the Plan is being adopted to amend and replace a Prior
Plan that permitted a distribution option described above, you must answer "Yes
" to that item.
SECTION 15. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan apply? (Choose
only one option)
Option 1: O Yes.
Option 2: O No.
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the joint
and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in Section IS,
Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity shall be
a percentage equal to _____ % (at least 50% but no more than 100%) of
the amount paid to the Participant prior to his or her death.
<PAGE>
Page 13
SECTION 16. OTHER OPTIONS
Answer"Yes " or "No " to each of the following questions by checking the
appropriate box. If a box is not checked for a question, the answer will
be deemed to be "No. "
<PAGE>
A. Loans: Will loans to Participants pursuant to Section 6.08 of the Plan be permitted?
O Yes O No
B. Insurance: Will the Plan allow for the investment in insurance policies pursuant to
Section O Yes O No
5.13 of the Plan?
C. Employer Securities: Will the Plan allow for the investment in qualifying Employer
O Yes O No
securities or qualifying Employer real property?
D. Rollover Contributions: Will Employees be permitted to make rollover contributions to
the O Yes O No
Plan pursuant to Section 3.03 of thw Plan? O
Yes, but only after
becoming a Participant
E. Transfer Contributions: Will Employees be permitted to make transfer contributions to
the O Yes O No
Plan pursuant to Section 3.04 of the Plan? O
Yes, but only after
becoming a Participant
F. Nondeductible Employee Contributions: Will Employees be permitted to make
O Yes O No
Nondeductible Employee Contributions pursuant to Section l l .305 of the Plan?
Check here if such contributions will be mandatory. [ ]
G. Will Participants be permitted to direct the investment of their Plan assets pursuant
to Section O Yes O No
5.14 of the Plan?
- -------------------------------------------------------------------------------------------
SECTION 17. LIMITATION ON ALLOCATIONS
- -------------------------------------------------------------------------------------------
More Than One Plan
- -------------------------------------------------------------------------------------------
<PAGE>
lf you maintain or ever maintained another qualified plan in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this section
if you maintain a welfare benefit fund, as defined in Section 419(e) of the
Code, or an individual medical account, as defined in Section 4 15(l)(2) of the
Code, under which amounts are treated as annual additions with respect to any
Participant in this Plan.
Part A. Individually Designed Defined Contribution Plan:
lf the Participant is covered under another qualified defined contribution plan
maintained by the Employer, other than a master or prototype plan:
1. O The provisions of Section 3.05(B)(1) through 3.05(B)(6) of the Plan will
apply as if the other plan were a master or prototype plan.
2. O Other method. (Provide 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.)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Part B. Defined Benefit Plan:
lf the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. 1.O lf the projected annual addition to this Plan
to the account of a
Participant for any limitation year would cause the 1.0 limitation
of Section 415(e) of the Code to be exceeded, the annual benefit
of the defined benefit plan for such limitation year shall be
reduced so that the l .0 limitation shall be satisfied.
lf it is not possible to reduce the annual benefit of the defined benefit
plan and the projected annual addition to this Plan to the account of a
Participant for a limitation year would cause the 1.0 limitation to be
exceeded, the Employer shall reduce the Employer Contribution which is to
be allocated to this Plan on behalf of such Participant so that the 1.0
limitation will be satisfied. (The
provisions of Section 415(e) of the Code are incorporated herein
by reference under the authority of Section l 106(h) of the Tax
Reform Act of 1986.)
2. O Other method. (Provide language describing another method. Such
language must preclue Employer discretion.)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
<PAGE>
Page
14
SECTION 18. TOP-HEAVY MINIMUM
Complete Parts_A and B
Part A. Minimum Allocation or Benefit:
For any Plan Year with respect to which this Plan is a Top-Heavy
Plan, any minimum allocation required pursuant to Section 3.01(E) of
the Plan shall be made (Choose one):
Option 1: O To this Plan.
Option 2: O To the following other plan maintained by the Employer (Specify
name amid plan number of plan)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Option 3: O In accordance with the method described on an attachment
to this Adoption Agreement. (Attach language describing the
method that will be used to satisfy Section 416 of the Code. Such
method must preclude Employer discretion.)
NOTE: lf no option is selected, Option l will be deemed to be selected.
Part B. Top-Heavy Vesting Schedule:
Pursuant to Section 6.01(C) of the Plan, the vesting schedule that
will apply when this Plan is a Top-Heavy Plan (unless the Plan's
regular vesting schedule provides for more rapid vesting) shall be
(Choose one): Option 1: O 6 Year Graded.
Option 2: O 3 Year Cliff.
NOTE: lf no option is selected, Option l will be deemed to be selected.
- -----------------------------------------------------------------------------------------------
19. PROTOTYPE SPONSOR
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name of Prototype Sponsor Eastern Resorts Company
LLC______________________________________________________________
Address 115 Long Wharf, Newport, RI
02840_________________________________________________________________________
Telephone Number 401 -845-01 00
--------------
- ----------------------------------------------------------------------------------
Permissible Investments
The assets of the Plan shall be invested only in those investments described
below (To be completed by the Prototype Sponsor):
Mutual Funds - Galaxy Funds and other mutual funds offered for use by fleet in
its daily valuation product.
<PAGE>
SECTION 20. TRUSTEE OR CUSTODIAN
Option A:O Financial Organization as Trustee or Custodian
Check One: O Custodian, O Trustee without full trust powers, or O Trustee with full
trust powers
Financial Organization Fleet National
Bank____________________________________________________________________________
Signature________________________________________________________________________________________________________
Type Name John J. Brosnan
- ----------------------------------------------------
Option B:O Individual Trustee(s)
Signature __________________________________________ Signature
- ------------------------------------------
Type Name_________________________________________ Type
Name_________________________________________
Signature __________________________________________ Signature
- ------------------------------------------
Type Name_________________________________________ Type
Name_________________________________________
<PAGE>
Page15
SECTION 21. RELIANCE
The Employer may not rely on an opinion letter issued by the National Office of
the Internal Revenue Service as evidence that the Plan is qualified under
Section 401 of the Internal Revenue Code. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate Key
District office for a determination letter.
This Adoption Agreement may be used only in conjunction with Basic Plan Document No. 04.
SECTION 22. EMPLOYER SIGNATURE
Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
l .I acknowledge that l have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal tax implications of
adopting this Plan.
2. I understand that my failure to properly complete this Adoption Agreement
may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments
made to the Plan and will notify me should it discontinue or abandon the
Plan.
4. I have received a copy of this Adoption Agreement and the corresponding
Basic Plan Document.
5. I have received a copy of the prospectus describing the "Galaxy Fund" and,
based on the prospectus and the information contained m the Basic Plan
Document, l APPROVE THE INVESTMENT AND REINVESTMENT OF PLAN ASSETS IN THE
GALAXY FUNDS.
<PAGE>
Signature for Employer
Eastern Resorts Company, LLC_______ Date Signed January 4, 2000
Type Name Richard G. Winkler___________________________ Title _____________
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.13
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, dated March 30, 1999, is by and between
Kosmas Group International, Inc. ("KGI"), a Florida corporation, and the
undersigned subsidiaries and shareholders (collectively with KGI, the
"Sellers"), and Equivest Finance, Inc., a Delaware corporation ("Purchaser").
WITNESSETH:
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Purchaser is acquiring all of the issued and outstanding common stock of Avenue
Plaza, LLC, a Louisiana limited liability company; Bluebeard's Castle, Inc., a
U.S. Virgin Islands corporation; Castle Acquisition, Inc., a U.S. Virgin Island
corporation; Ocean City Coconut Malorie Resort, Inc., a Maryland corporation;
St. Augustine Resort Development Group, Inc., a Florida corporation, and
substantially all of the assets of Capital City Suites, Inc., a Washington,
D.C., corporation, which are all corporations engaged in the business of
developing, marketing, and managing resort properties that offer timeshare
condominiums, pursuant to the terms and conditions of that certain Purchase
Agreement, dated February 16, 1999 (the "Purchase Agreement"); and
WHEREAS, a condition precedent to Sellers' obligation to close the
transactions contemplated by the Purchase Agreement is the resolution of certain
obligations of Sellers to the Cavanaugh Lenders (as that term is defined in the
Purchase Agreement), Castle Holdings, LLC, ("Castle Holdings" and, collectively
with the Cavanaugh Lenders, the "Obligees"); and
WHEREAS, Purchaser was unable to resolve all obligations of Sellers to the
Cavanaugh Lenders and Castle Holdings prior to the consummation of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, Purchaser and Sellers are presently in litigation with Castle Holdings in
the U.S. District Court for the Virgin Islands;
WHEREAS, Castle Holdings has made a variety of assertions regarding moneys
owed to it by Sellers or their affiliates, but has not provided any supporting
documentation therefor;
WHEREAS, the parties hereto believe that Castle Holdings has been paid on
certain of the aforementioned obligations and therefore that its claims are
substantially below what it has asserted;
WHEREAS, certain of the principals of Castle Holdings are employees and/or
officers of KGI or its subsidiaries and have breached the fiduciary duties they
owe to their employer;
WHEREAS, Purchaser is willing to enter into this Agreement to induce
Sellers to consummate the transactions contemplated by the Purchase Agreement
despite such resolution of obligations, and Sellers are only willing to
consummate such transactions if Purchaser indemnifies Sellers from damages
resulting from claims of Obligees as provided herein;
<PAGE>
NOW THEREFORE, for and in consideration of the foregoing and the mutual
agreements set forth below, the parties agree as follows:
1. Indemnification. Purchaser agrees to indemnify and hold harmless
Sellers and any subsidiaries and the shareholders, directors, officers,
employees, and agents thereof (collectively, the "Indemnified Parties") from and
against any Adverse Consequences (as defined below) any of such Indemnified
Parties may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by any
claim of Obligees or any other party through Obligees as provided herein. For
purposes of this Agreement, the phrase "Adverse Consequences" means all claims,
losses, liabilities, costs, and expenses of any kind without limitation
(including but not limited to reasonable attorneys' fees and court costs) that
are incurred by the Indemnified Parties, including but not limited to all
charges, complaints, actions, suits, proceedings, hearings, investigations,
claims, damages, judgments, orders, decrees, stipulations, injunctions, damages,
dues, penalties, fines, costs, amounts paid in settlement, liabilities (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due), obligations, taxes, liens,
losses, expenses, and fees, including all attorneys' fees and court costs.
Provided however, Adverse Consequence shall not include any monetary award
pursuant to a judicial judgment in favor of Obligees which judgment is
specifically attributable to fraudulent representations of Sellers to the
Obligees in that certain lawsuit styled Castle Holdings, L.L.C., v. Kosmas Group
International, Inc., and Kosmas Caribbean Holdings Corporation but shall
specifically include any attorneys' fees and costs incurred by Sellers defending
such claim.
2. Amount of Indemnification.
(a) Indemnification Threshold. Purchaser's obligations hereunder
shall be limited to Five Million Nine Hundred Seventy-five Thousand Dollars
($5,975,000) (the "Indemnification Threshold"). Attorneys' fees and expenses
incurred by Sellers and/or Purchaser, as provided in paragraph 3 below, shall
not count toward the Indemnification Threshold. Of the Indemnification
Threshold, Purchaser shall not be obligated to deliver to Seller or any Obligee
more than One Million Eight Hundred and Fifty Thousand Dollars ($1,850,000) in
cash, with the remainder to be delivered in the form of Purchaser's common stock
valued at the average of the mid-market price for Purchaser's common stock on
the ten days prior to such payment that such common stock has traded. Purchaser
shall always have the right (but not the obligation) to deliver cash in lieu of
stock.
(b) Settlement of Adverse Consequences. Purchaser may settle any
Adverse Consequence with an Obligee hereunder, without compulsion from legal
decree, upon prior written notice to Sellers and receipt of Sellers' written
consent. Provided however, Sellers are not obligated to contribute or pay any
portion of an Adverse Consequence whether in excess or not of the remaining
outstanding Indemnification Threshold without its prior written consent.
<PAGE>
(c) Applications Against Indemnification Threshold. The
Indemnification Threshold shall be reduced by any sums paid by Purchaser to
Castle Holdings, the Cavanaugh Lenders and /or their affiliates after the
execution of this Agreement that are attributable to Sellers' actual or claimed
obligations to Castle Holdings, the Cavanaugh Lenders and/or their affiliates
including but not limited to the costs of terminating the employment of any
affiliate of Castle Holdings employed by KGI or its subsidiaries or any costs of
replacing receivables owned by or pledged to Castle Holdings, the Cavanaugh
Lenders or their respective affiliates.
(d) Further Reduction. The Indemnification Threshold shall also be
reduced by any amount included in the $9.2 million that Cavanaugh, Castle
Holdings and their affiliates claim are owed which are determined not to be due
or owing. Purchaser shall provide Sellers with prior written notice of the
amount of such payment and the claim of such liability.
3. Indemnification for Attorneys Fees and Costs Incurred Defending or
Prosecuting Adverse Consequences. In addition to the Indemnification Threshold,
Purchaser shall pay the expense and costs of defending and prosecuting any
Adverse Consequence either on behalf of Purchaser or on behalf of Sellers to
legal counsel hired by Sellers pursuant to paragraph 4 below.
<PAGE>
4. Procedure and Notice. If Sellers receive notice with respect to any
matter that may give rise to a claim for indemnification under this Agreement,
then Sellers shall notify Purchaser promptly in writing; provided, however, that
no delay on the part of Sellers in notifying Purchaser shall relieve Purchaser
from any liability or obligation hereunder unless (and then solely to the extent
that) Purchaser thereby is damaged. In the event Purchaser notifies Sellers,
within 15 business days after Sellers have given notice of the matter, that
Purchaser is assuming the defense thereof: (i) Purchaser will defend Sellers
against the matter with counsel of Purchaser's choice reasonably satisfactory to
Sellers; (ii) Sellers will cooperate fully with Purchaser and counsel in
defending any claims made by an Obligee of an affiliate as well as in
prosecuting claims against Obligees; (iii) Sellers may retain separate
co-counsel at its sole cost and expense (except that Purchaser will be
responsible for the fees and expenses of the separate co-counsel to the extent
Sellers reasonably conclude that Purchaser's counsel has a conflict of
interest); (iv) Sellers will not consent to the entry of any judgment or enter
into any settlement with respect to the matter that does not include full
release; and (v) Purchaser will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement that does not include a
provision whereby the Obligee releases Sellers from all liability with respect
thereof, without the written consent of Sellers not to be unreasonably withheld,
conditioned or delayed. If Purchaser assumes the defense of any such matter,
such action shall be deemed to be an admission by Purchaser of its
indemnification obligations hereunder and Sellers shall use all reasonable
efforts to cooperate fully in the defense of any claim, action, or proceeding
covered by this Agreement. In the event Purchaser does not notify Sellers,
within 15 business days after Sellers have given notice of the matter, that
Purchaser is assuming the defense thereof, Sellers may defend against, or enter
into any settlement with respect to, the matter in any manner it may reasonably
deem appropriate; provided, however, that prior to (i) settling any matter
without a complete release of Purchaser or (ii) making any admission of
liability, Sellers shall provide at least 7 days prior written notice of such
proposed settlement or admission. Notwithstanding the foregoing, Purchaser may,
at any time, assume the defense thereof (and thereby be deemed to admit its
indemnification obligations hereunder). Sellers are deemed to have provided
Purchaser with notice of that certain Adverse Consequence in that certain
lawsuit styled Castle Holdings, L.L.C., v. Kosmas Group International, Inc., and
Kosmas Caribbean Holdings Corporation, Purchaser is deemed to have and
Purchaser's shall be responsible for the fees and expenses of Sellers' separate
co-counsel to the extent incurred necessary due to conflicts on or after the
date of this Agreement.
5. Covenant. Purchaser covenants that it will continue to use all
reasonable efforts to settle subject to the Indemnification Threshold set forth
herein all outstanding obligations to Castle Holdings, L.L.C. and the Cavanaugh
Lenders with the intent of settling all outstanding obligations to the Obligees
within two weeks of the date hereof. Sellers covenant that they will, and will
cause their affiliates to: (i) refrain from having any discussions with any of
Castle Holdings, L.L.C., the Cavanaugh Lenders or their affiliates concerning
any claims that Castle Holdings, L.L.C. or the Cavanaugh Lenders have or may
have against Sellers or Purchaser without the express written consent of
Purchaser, and (ii) refer to Purchaser or its counsel all inquiries or contacts
from Castle Holdings, L.L.C. or the Cavanaugh Lenders to Sellers.
6. Sale of Assets. If, prior to the expiration of the statute of
limitations for Obligees to file any claim for relief in any judicial tribunal,
Purchaser sells all or substantially all of its assets or such portion of its
assets which makes Purchaser's compliance with its indemnification obligations
under this Agreement unlikely (and Purchaser fails to provide Seller with
reasonable comfort of its ability to satisfy its obligations hereunder
thereafter), Purchaser shall either (1) require such liability and obligations
hereunder to be expressly assumed by the buyer of such assets without the
release of Purchaser's liability hereunder, or (ii) deposit cash or a cash
equivalents into an escrow account to be held under commercially reasonable
terms and by an entity mutually-agreeable to the parties.
7. General Provisions.
(a) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, transmitted by
facsimile (receipt confirmed), sent by national overnight courier service, or
mailed by registered or certified United States Mail (return receipt requested)
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, provided that notices
of a change of address shall be effective only on receipt of such notice):
To Sellers:
Kosmas Group International, Inc.
920 Third Avenue
New Smyrna Beach, FL 32169
Attn: Steven P. Kosmas
Fax: (904) 428-9536
<PAGE>
With a copy to:
Cobb Cole & Bell
150 Magnolia Avenue
Daytona Beach, FL 32115
Attn: John P. Ferguson, Esquire
Fax: (904) 238-7003
To Purchaser:
Equivest Finance, Inc.
2 Clinton Square
Syracuse, New York 13202
Attn: Eric C. Cotton
Fax: (315) 422-9477
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Eric R. Markus, Esquire
Fax: (202) 663-6363
(b) Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement of the parties
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(c) Severability. The validity or enforceability of any term or
provision of this Agreement shall in no way affect the validity or
enforceability of any other term or provision. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
(d) Headings. The headings contained in this Agreement are solely
for reference purposes and shall not affect the meaning or interpretation of
this Agreement in any way.
(e) Governing Law. The parties agree that the laws of the State of
New York will govern the formation, interpretation and enforcement of this
Agreement without giving effect to principles of conflicts of law. The parties
hereby consents to service of process by registered mail delivered in accordance
with the provisions of paragraph 4 of this Agreement, or service of process in
any other legal manner.
<PAGE>
(f) Jurisdiction, Venue, and Service of Process. The parties consent
to and waive any objection to the jurisdiction of the United States District
Court for the Northern District of New York, or any state court located in
County, Florida, over the person of any party to this Agreement, for purposes of
any action brought (i) to enforce this Agreement, (ii) to recover damages for
breach of this Agreement, or (iii) to enforce rights provided by this Agreement.
The Parties agree that venue of any action brought as provided herein shall be
proper in the courts named above, and each party waives any objection to such
venue.
(g) Attorneys' Fees. Should any party employ an attorney or
attorneys to enforce any of the provisions of this Agreements or to protect its
interests in any manner arising under this Agreement or to recover damages for
the breach of this Agreement, the prevailing party shall be entitled to recover
from the other party all reasonable costs, charges, and expenses, including
reasonable attorneys' fees, expended or incurred in connection therewith.
(h) Right to Injunctive Relief. Each of the parties hereto agrees
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by him, her or it in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that any
harmed party hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any party is
entitled at law or in equity.
(i) No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person other than KGI, Sellers or Purchaser, or their respective
successors and assigns as permitted under this Agreement, to any claim, cause of
action, remedy, or right of any kind. No current or former employee of KGI or
any of its affiliates has any right to enforce this agreement against any party.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PURCHASER
EQUIVEST FINANCE, INC.
By:
Its:
Richard Breeden
SELLERS
KOSMAS GROUP INTERNATIONAL, INC.
By:
Its:
AVENUE PLAZA, LLC
By:
Its:
OCEAN CITY COCONUT MALORIE RESORT, INC.
By:
Its:
CAPITAL CITY SUITES, INC.
By:
<PAGE>
Its:
KOSMAS CARIBBEAN HOLDING CORPORATION
By:
Its:
ST. AUGUSTINE RESORT DEVELOPMENT GROUP, INC.
By:
Its:
Steven Kosmas
Paul Kosmas
Chip Gordy
Nicholas Kosmas
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.14
SETTLEMENT AGREEMENT AND MUTUAL RELEASES
This Settlement Agreement and Mutual Releases ("Agreement") is made this
30th day of March, 1999 by and between Christian Kjaer ("Kjaer"), Kosmas Group
International, Inc. ("KGI") and Equivest Finance, Inc. ("EFI").
WHEREAS, Kjaer and Castle Acquisition, Inc. ("CAI"), a wholly owned
subsidiary of Castle Holdings, L.L.C. ("Holdings") are party to that certain
agreement, dated January 8, 1998 (the "Kjaer Agreement"), pursuant to which CAI
acquired certain property, obligations, rights and interests (the "Interests")
from Kjaer on the terms described therein.
WHEREAS, Kjaer, Holdings and Kosmas Caribbean Holdings Corporation
("KCHC"), a subsidiary of KGI subsequently entered into a further agreement,
dated July 30, 1998 (the "Tri-Partite Agreement"), pursuant to which KCHC agreed
to acquire CAI and other stock and assets from Holdings and, to obtain Kjaer's
consent, agreed to purchase from Kjaer the Interests on the terms described
therein.
WHEREAS, Holdings has never made any payments to Kjaer under the Kjaer
Agreement.
WHEREAS, Holdings has brought an action styled Castle Holdings, L.L.C. v. Kosmas
Group International, Inc. et al., Civ. No. 1999-034 (D.V.I.) (the "Lawsuit"), in which it
asserts among other things that it is entitled to rescind the KGI Stock Purchase
Agreement.
WHEREAS, KGI and EFI denied the allegations contained in Holdings'
complaint.
WHEREAS, KGI and KCHC have never made any payments to Kjaer under the
Tri-Partite Agreement.
WHEREAS, Kjaer has asserted his right to rescind the Tri-Partite Agreement
and the Kjaer Agreement and to reassert his rights under and with respect to the
Interests.
WHEREAS, the parties desire to settle their claims without resort to any
further litigation and without any further expense or delay, but wish that the
terms of this Agreement shall take effect only upon the closing of EFI's
acquisition of the stock of Bluebeards Castle, Inc. ("BCI") and CAI (the
"Effective Date").
NOW, THEREFORE, in consideration of the above recitals and the covenants
contained below, the adequacy and receipt of which are hereby fully
acknowledged, the parties agree as follows:
1. Consideration. EFI shall deliver to Kjaer the following consideration at the
-------------
following times:
<PAGE>
(a) $2.0 million in immediately available funds of which (i) $1.0
million shall be paid no later than May 1, 1999, and (ii) $1.0 million shall be
paid no later than September 1, 1999; provided, however, that the payment date
shall be seven days following the closing date of the EFI Public Offering
(defined below) if earlier than the dates specified in preceding clauses (i) and
(ii) above. The unpaid amount of such obligation shall bear interest from the
Effective Date to the date of payment at 8.0% per annum. On the Effective Date,
EFI will execute a promissory note consistent with the foregoing.
(b) on the Effective Date, 490,000 shares of EFI common stock. The
shares issued to Kjaer shall be subject to certain restrictions on sale and
shall have certain registration rights as more as fully provided in Sections
5(a)(ii) and 6(a).
(c) on the Effective Date, a warrant to purchase 250,000 shares of
EFI common stock at a price equal to $9.00; such warrant shall expire after
three years and shall include a mandatory exercise provision once the market
value of one EFI common share equals or exceeds $12.00. For purposes of this
provision, market value per EFI share shall be the mid-market price for such
shares on the NASDAQ Small Cap market.
2. Confidentiality. From and after the date hereof, each of Kjaer and any
person under his direction or control shall keep confidential all information
regarding the Bluebeards Castle, Inc. ("BCI") and CAI. Neither Kjaer nor any
person under his direction or control shall, without the prior written consent
of EFI, disclose such information except as required by law; provided, however,
that no such disclosure shall be made prior to giving EFI reasonable prior
written notification that explains in reasonable detail the basis for such
disclosure and reasonable opportunity to seek relief from such requirement. This
Section shall not apply to any information that is readily ascertainable from
public or published information that did not become public or published as a
result of a breach of the confidentiality provisions of this Section 2 or
otherwise as a result of any improper disclosure.
3. Non-Competition and Non-Solicitation. Kjaer covenants and agrees that
from and after the date hereof for a period of three years he will not, and will
cause each person under his or its direction or control not to:
(a) Engage in (or own any interests in or in any way have any involvement
with) any timeshare business within the U.S. or British Virgin Islands;
(b) Interfere with, disrupt, or attempt to disrupt any relationship,
contractual or otherwise, between EFI or any affiliates thereof and any
customer, supplier, sales representative, or employee of EFI, or of any
affiliates;
(c) Directly or indirectly solicit for employment, attempt to employ
or employ, or assist any entity in employing or soliciting for employment any
employee or executive who is, at such time, employed by EFI or any of its
affiliates.
<PAGE>
4. [reserved]
5. Representations and Warranties.
------------------------------
(a) Kjaer. Kjaer hereby represents and warrants to KGI and EFI that as of
-----
the date hereof and the Effective Date:
(i) Kjaer has full legal right, capacity, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby; the execution, delivery and performance by Kjaer of this Agreement and
the actions contemplated hereby have been duly and validly authorized by all
necessary action, and this Agreement constitute or will constitute valid and
binding obligations of Kjaer, enforceable against him in accordance with their
terms. The execution, delivery and performance of this Agreement by Kjaer, the
consummation of the transactions contemplated hereby and the compliance with the
provisions of this Agreement by Kjaer will not conflict with, or result in any
violation of, or default under, or give rise to a right of termination,
cancellation or acceleration of any material obligation of or to a loss of a
material benefit under or result in the creation of any lien upon any of the
properties or assets of Kjaer under, (i) any material loan or credit agreement,
note, bond, mortgage, indenture, reciprocal easement agreement, lease or other
agreement, or (ii) any judgment, order, decree, statute, law, ordinance, rule or
regulations applicable to Kjaer or his properties or assets.
(ii) (1) Kjaer understands that (w) the shares of EFI common
stock to be issued to Kjaer pursuant to Section 1(b) will not be registered
under the Securities Act of 1933 (the "Securities Act") on the ground that the
offering and sale of the shares of EFI common stock are exempt from registration
pursuant to Section 4(2) of the Securities Act, (x) the resale or other
disposition of the shares of EFI common stock is restricted pursuant to the
securities laws, (y) there can be no assurance that Kjaer will be able to sell
or dispose of such shares, and (z) EFI presently intends to complete a public
offering of approximately 23 million shares of EFI common stock (the "EFI Public
Offering") and that the offering price of such stock may be substantially lower
than the price of EFI common stock as of the closing of the transaction
contemplated herein.
(2) the shares of EFI common stock to be issued to Kjaer
pursuant to Section 1(b) are being acquired for investment only and not with a
view to any sale or distribution of such shares or any part thereof in violation
of the Securities Act. Kjaer agrees at all times to sell or otherwise dispose of
all or any part of the shares of EFI common stock only pursuant to a
registration, or exemption therefrom, under the Securities Act and in compliance
with applicable state securities laws. Each party disposing of such EFI common
stock shall take any steps necessary to ensure that any purchaser thereof shall
agree not to sell or otherwise dispose of shares of EFI common stock except in
compliance with the requirements contained in the preceding sentence.
<PAGE>
(3) Kjaer is an "accredited investor" within the meaning of
Rule 501 promulgated under the Securities Act and has such knowledge and
experience, or has consulted with persons having knowledge and experience, in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the shares of EFI common stock. Kjaer has received all
the information that such person deems material to his/her/its evaluation of the
business, assets, liabilities, financial condition and results of operations of
EFI and all the information that such person has requested from EFI and
considers necessary or appropriate for deciding whether to acquire the shares of
EFI common stock. Each such person has the ability to bear the economic risks of
such prospective investment and is able, without materially impairing such
financial condition, to hold the shares of EFI common stock for an indefinite
period of time and to suffer complete loss on such investment, in the event such
a loss should occur.
(b) EFI. EFI hereby represents and warrants to Kjaer that as of the date
---
hereof and the Effective Date:
(i) EFI is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, is duly
qualified and in good standing as a foreign corporation in the jurisdictions
where the ownership of its assets or the conduct of its business requires such
qualification (except where the failure to so qualify would not have a Purchaser
Material Adverse Effect (as defined in the EFI Purchase Agreement)), and has
full power and authority to own its properties and assets and to carry on
lawfully its business as currently conducted.
(ii) EFI has full legal right, power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. The
execution, delivery and performance by EFI of this Agreement and the EFI
Purchase Agreement and the actions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and this
Agreement and the EFI Purchase Agreement constitute valid and binding
obligations of EFI enforceable against it in accordance with their terms.
(c) KGI. KGI hereby represents and warrants to Kjaer that as of the date
---
hereof and the Effective Date:
(i) KGI is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, is duly
qualified and in good standing as a foreign corporation in the jurisdictions
where the ownership of its assets or the conduct of its business requires such
qualification (except where the failure to so qualify would not have a Seller
Material Adverse Effect (as defined in the EFI Purchase Agreement)), and has
full power and authority to own its properties and assets and to carry on
lawfully its business as currently conducted.
<PAGE>
(ii) KGI has full legal right, power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. The
execution, delivery and performance by KGI of this Agreement and the EFI
Purchase Agreement and the actions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and this
Agreement and the EFI Purchase Agreement constitute valid and binding
obligations of KGI enforceable against it in accordance with their terms.
(d) Survival. Each of the representations and warranties of Kjaer,
EFI and KGI shall survive until the third anniversary of the date hereof.
6. Registration Rights; Rule 144.
-----------------------------
(a) At the Effective Date, EFI and Kjaer shall enter into a
piggyback registration rights agreement substantially in the form of Exhibit 6A
hereto.
(b) Kjaer acknowledges and agrees that the stock being issued to
Kjaer pursuant to Section 1(b) is not registered under the Securities Act. Kjaer
agrees that such stock will only be resold by him in full compliance with the
Securities Act including, without limitation, Rule 144 thereunder.
7. Covenants of Kjaer.
------------------
(a) Kjaer shall not intentionally perform any act that, if
performed, or omit to perform any act that, if omitted to be performed, would
prevent or excuse the performance of this Agreement or the EFI Purchase
Agreement by any Party hereto or thereto, or which would result in any
representation or warranty herein contained of such Party being untrue in any
material respect.
(b) Kjaer shall, on or before the Effective Date, disclose in
writing to the other Parties hereto any event or condition the occurrence of
which would violate or result in a violation of any of its representations,
warranties, or covenants contained in this Agreement or affect its ability to
perform fully the transactions contemplated by this Agreement or cause any
information contained in the Disclosure Schedule supplied to EFI by KGI to be
inaccurate or incomplete at any time after the date hereof until the Effective
Date.
(c) Kjaer shall each deliver or cause to be delivered to EFI or KGI,
as the case may be, such instruments as the other may reasonably request for the
purpose of carrying out this Agreement.
(d) If requested to do so, Kjaer shall cooperate and use his
reasonable efforts to have his agents and employees cooperate with EFI on and
after the Effective Date in furnishing information, evidence, testimony and
other assistance in connection with any filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Effective Date. Kjaer shall each deliver
or cause to be delivered to EFI or RFI at such times and places as shall be
reasonably agreed to such instruments as EFI or RFI may reasonably request for
the purpose of carrying out this Agreement.
<PAGE>
(e) Kjaer shall not aid, assist, provide information or advice to,
or cooperate with Mr. John Cavanaugh, Castle Holdings, L.L.C. or any other
person or persons acting in conert with them in connection with the Lawsuit or
any other action that any of the foregoing shall bring or threaten against any
of the parties hereto.
8. Kjaer's Release of KGI and EFI. Effective as of the Effective Date,
Kjaer, for himself, his respective successors and assigns, and each person he
owns or controls (all of the foregoing parties collectively referred to
hereinafter as the "Kjaer Releasors"), for and in consideration of the release
of even date provided to the Kjaer Releasors by KGI and EFI pursuant to this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, hereby release and forever discharge
KGI, EFI, RFI, KCHC, BCI, CAI and their respective stockholders, officers,
directors, employees, agents, successors and assigns (collectively, the "KGI/EFI
Releasees"), of and from any and all actions, claims, causes of action, demands
and obligations of all kinds, arising at law or in equity, whether known or
unknown, which any Kjaer Releasor ever had, now has or hereafter can, shall or
may have, directly or indirectly, against any KGI/EFI Releasee for, upon or by
reason of any matter, cause, transaction or thing whatsoever from the beginning
of time to the date hereof. Notwithstanding the foregoing, the Kjaer Releasors
expressly reserve and retain, and do not release or discharge, any rights of
Kjaer Releasors arising under this Agreement and the other documents and
instruments delivered in connection therewith.
9. KGI's and EFI's Release of Kjaer. Effective as of the Effective Date,
each of KGI, RFI, EFI, KCHC, BCI and CAI, for itself, its respective successors
and assigns, and each person it owns or controls (all of the foregoing parties
collectively referred to hereinafter as the "KGI/EFI Releasors"), for and in
consideration of the release of even date provided to KGI and EFI by Kjaer
pursuant to this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, hereby release and forever
discharge each of Kjaer and his respective agents, successors and assigns in
their capacities as such (collectively, the "Kjaer Releasees"), of and from any
and all actions, claims, causes of action, demands and obligations of all kinds,
arising at law or in equity, whether known or unknown, which any KGI/EFI
Releasor ever had, now has or hereafter can, shall or may have, directly or
indirectly, against any Kjaer Releasee for, upon or by reason of any matter,
cause, transaction or thing whatsoever from the beginning of time to the date
hereof. Notwithstanding the foregoing, the KGI/EFI Releasors expressly reserve
and retain, and do not release or discharge, any rights of KGI/EFI Releasors
arising under this Agreement and the other documents and instruments delivered
in connection therewith.
10. No Admission of Liability. It is expressly understood and agreed that
this Agreement does not constitute an admission by any party of any liability or
wrongdoing nor does it constitute any admission by any party of the truth of any
of the allegations raised by any other party in the Lawsuit.
11. Costs and Fees. All costs and fees of all parties shall be borne by the
----------------
party that has incurred the cost or fee.
<PAGE>
12. General Provisions.
------------------
(a) Entire Agreement. This Agreement supersedes all prior agreements
-----------------
between the parties (written or oral) and is intended as a complete and exclusive
statement of the terms of the Parties' agreement.
(b) Severability. The validity or enforceability of any term or
provision of this Agreement shall in no way affect the validity or
enforceability of any other term or provision. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
(c) Amendment and Modification. This Agreement may be modified, amended,
---------------------------
or supplemented only by an instrument in writing signed by each Party.
(d) Arm's Length Agreement. This Agreement has been negotiated at
arm's length and between persons sophisticated and knowledgeable in the matters
dealt with in this Agreement. In addition, each party has been represented by
experienced and knowledgeable legal counsel. Accordingly, any rule of law or
legal decision that would require interpretation of any ambiguities in this
Agreement against the party that has drafted the Agreement is not applicable and
is waived. This Agreement shall be construed without regard to the identity of
the person who drafted it or the party who caused it to be drafted and shall be
construed as if all parties had jointly prepared this Agreement. Each and every
provision of this Agreement shall be construed as though all of the parties
participated equally in its drafting, and any uncertainty or ambiguity shall not
be interpreted against any one party. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the purpose of the parties and of
this Agreement.
(d) Assignment. No party shall assign any of its rights or delegate
any of its obligations under this Agreement without the prior written consent of
the other party.
(e) No Third Party Beneficiaries. Except as otherwise expressly
provided, nothing in this Agreement shall entitle any person other than Kjaer,
KGI or EFI, or their respective successors and assigns as permitted under this
Agreement, to any claim, cause of action, remedy, or right of any kind. No
current or former employee of any party has any right to enforce this agreement
against any party.
(f) Notices. All notices, requests, demands, and other
communications provided in this Agreement shall be in writing and shall be
deemed given if delivered personally, transmitted by facsimile (receipt
confirmed), sent by national overnight courier service, or mailed by registered
or certified United States Mail (return receipt requested) postage prepaid, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only on receipt of such notice):
<PAGE>
(i) To KGI:
Kosmas Group International, Inc.
920 Third Avenue
New Smyrna Beach, FL 32169
Attn: Steven P. Kosmas
Fax: (904) 428-9536
With a copy to:
Cobb Cole & Bell
150 Magnolia Avenue
Daytona Beach, FL 32115
Attn: John P. Ferguson
Fax: (904) 238-7003
(ii) To EFI:
Equivest Finance, Inc.
2 Clinton Square
Syracuse, New York 13202
Attn: Eric C. Cotton
Fax: (315) 422-9477
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Eric R. Markus, Esquire
Fax: (202) 663-6363
(iii) To Kjaer
<PAGE>
With a copy to:
Reed Smith Shaw & McClay LLP
136 Main Street
Suite 250
Princeton, New Jersey 08540-5799
Attn: Kevin F. D'Amour
Fax: (609) 951-0824
All notices, requests, demands, and other communications shall be effective at
the earlier of (a) five (5) business days after deposit of the same in the
United States Mail, certified postage prepaid; (b) twenty-four (24) hours after
delivery to a national overnight courier service; or (c) confirmation of receipt
if transmitted by facsimile or if delivered personally.
(g) Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, without regard to its principles or
rules regarding conflicts of laws.
(h) Jurisdiction, Venue, and Service of Process. The parties consent
to, and waive any objection to, the exclusive jurisdiction of the United States
District Court for the Northern District of New York, or any state court located
in Onondaga County, New York, over the person of any party to this Agreement,
for purposes of any action brought under or as the result of a breach of this
Agreement. The parties agree that venue of any action brought under or as the
result of a breach of this Agreement shall be proper in the courts named above,
and each Party waives any objection to such venue.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(j) Specific Performance; Other Equitable Relief. The parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by them in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
non-breaching party shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which EFI is entitled at
law or in equity. The parties further agree that rescission shall not be relief
for any action relating to this Agreement.
<PAGE>
(k) Jury Trial Waiver. TO THE FULL EXTENT PERMITTED BY LAW, EACH OF
THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY PARTY HERETO.
(l) Termination. This Agreement may be terminated at any time on or before
-----------
the Effective Date:
(i) by the mutual written agreement of the parties thereto;
(ii) by any party hereto if the EFI Purchase Agreement is terminated
for any reason;
(iii) by any party hereto if the Effective Date does not occur
prior to April 15, 1999.
CHRISTIAN KJAER
By:
Its:
EQUIVEST FINANCE, INC.
By:
Its:
KOSMAS GROUP INTERNATIONAL, INC.
By:
Its:
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.15
EQUIVEST FINANCE, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into
effective as of March 30, 1999, by and among Equivest Finance, Inc., a Delaware
corporation ("Company") and Christian Kjaer ("Investor").
RECITALS
WHEREAS, Company, Investor and Kosmas Group International, Inc. have
entered into a settlement agreement of even date herewith ("Settlement
Agreement") whereby Company agreed to grant Investor certain registration rights
with respect to (i) shares of common stock of Company granted to Investor under
the Settlement Agreement and (ii) shares of common stock of the Company that may
be received upon the exercise of the stock purchase warrant granted to Investor
under the Settlement Agreement ("Warrant Shares"); and
WHEREAS, the parties hereto wish to specify the respective rights
and obligations of the parties with respect to the registration of such shares
of such common stock of the Company pursuant to a registration statement filed
with the U.S. Securities and Exchange Commission upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual premises, covenants
and conditions set forth herein, the parties hereby agree as follows:
1. Definitions. For the purposes of this Agreement:
-----------
"Commission" means the U.S. Securities and Exchange Commission
or any other governmental authority from time to time administering the
Securities Act.
"Common Shares" means shares of common stock of the Company.
"CSFB Shares" means those shares of common stock of the
Company defined as "Registrable Securities" pursuant to the Registration Rights
Agreements between the Company and Credit Suisse First Boston Mortgage Capital
LLC dated as of July 17, 1998 and November 14, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended or any similar federal statute and the rules and the regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Harris Shares" means those shares of common stock of the
Company defined as "Registrable Securities" pursuant to the Stockholders'
Agreement between the Company and R. Perry Harris and Karen Harris dated as of
July 16, 1998.
<PAGE>
"Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or similar document.
"Registrable Securities" means (a) the Common Shares received
by Investor pursuant to the Settlement Agreement, (b) the Warrant Shares (if
any), and (c) any common stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
foregoing. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (x) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been transferred in accordance
with such registration statement, (y) such securities shall have been sold to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act or Investor is free to sell all such securities without volume or
manner of sale restrictions pursuant to Rule 144 (or any successor provision)
under the Securities Act, or (z) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 2, including, without
limitation, (a) any allocation of salaries and expenses of Company personnel or
other general overhead expenses of the Company, or other expenses for the
preparation of historical and pro forma financial statements or other data
normally prepared by the Company in the ordinary course of business; (b) all
Registration, application, filing, transfer fees, exchange listing fees, and
register fees; (c) all NASD fees and fees and expenses of Registration or
qualification of Registrable Securities under state securities or blue sky laws;
(d) all word processing, duplicating and printing expenses, messenger and
delivery expenses; (e) the fees and expenses of counsel for the Company and the
fees of the Company's independent accountants, including the expenses of
customary "cold comfort" letters required by or incident to such performance and
compliance; and (f) any fees and disbursements of underwriters and
broker-dealers customarily paid by issuers or sellers of securities; provided,
however, that in all cases in which the Company is required to pay Registration
Expenses hereunder, Registration Expenses shall exclude (x) broker or
underwriting fees, discounts, selling commissions and transfer taxes, if any, in
respect of the Registrable Securities, (y) all out-of-pocket expenses of
Investor's brokers or dealers, and (z) all fees and disbursements of counsel for
Investor or any such brokers or dealers, all of which shall be borne by
Investor.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
<PAGE>
2. Piggyback Registration. If (but without any obligation to do so)
(a) the Company proposes to register (including for this purpose a registration
effected by the Company for any stockholders other than Investor) any of its
Common Shares under the Securities Act in connection with the underwritten
public offering of such securities solely for cash (other than a Registration
relating solely to the sale of securities to participants in a Company stock
plan, or on Form S-4 with respect to any merger, consolidation or acquisition)
and (b) a registration statement covering the sale of all of the Registrable
Securities is not then effective and available for sales thereof by Investor,
the Company will, prior to such filing, give written notice to Investor of its
intention to do so. Investor shall have fifteen (15) days after receiving such
notice to deliver to the Company a written request specifying the amount of
Registrable Securities that Investor intends to sell and its intended method of
disposition of such Registrable Securities. Upon the receipt of such request,
the Company shall use commercially reasonable efforts to cause all Registrable
Securities the Company has been requested by Investor to register to be
registered under the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of distribution
specified in the request of Investor; provided, however, that the Company shall
have the right, prior to the effective date of the registration statement, to
postpone or withdraw any registration effected pursuant to this Section 2
without obligation to Investor.
3. Underwriting Requirements. In connection with any proposed
----------------------------
registration as to which Investor has a right to notice under Section 2 and that involves
an underwriting:
(a) The Company shall not be required to include any
Registrable Securities in such offering unless Investor accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (provided that such terms must be consistent with this Agreement), and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; and
(b) If the underwriter for the offering advises the Company in
writing that the number of Registrable Securities requested to be included will
adversely affect the success of the offering, the Company shall include in such
offering only the quantity of Registrable Securities, if any, as shall be
determined as set forth below:
(i) In the case of the Company's public offering of its Common
Stock or other securities pursuant to a registration statement declared
effective with the Commission after the date of this Agreement, the Company may
exclude some or all of the Registrable Securities from such registration and
underwriting in the Company's sole discretion (provided, however, that the
Company may elect to exclude Registrable Securities pursuant to this Section
3(b)(i) as to only one registration); and
<PAGE>
(ii) In the case of any registered public offering other than
the one to which the Company elects to apply Section 3(b)(i): (A) first, the
Company may include in such underwriting a number of CSFB Shares equal to no
greater than 20% of the total securities to be registered in such offering; (B)
second, the Company may include in such underwriting a number of Harris Shares
equal to no greater than 20% of the total securities to be registered in such
offering; (C) third, the Company shall include in such underwriting all of the
securities the Company proposes to sell; and (D) fourth, the Company shall
include the number of Registrable Securities and Company securities of other
holders (including CSFB Shares and Harris Shares in addition to those included
pursuant to clauses (A) and (B) above) that the underwriter advises will not
adversely affect the success of the offering, allocated, pro rata, among
Investor and the other holders entitled to registration, based upon the number
of Common Shares each such person shall have requested the Company to include in
the offering.
4. Allocation of Expenses. The Company will pay all Registration Expenses
----------------------
of all Registrations under this Agreement. Investor shall be responsible for all other
expensed incurred by it or its agents in connection with the Registrations.
5. Obligations of the Company. Whenever required under this
Agreement to effect the Registration of any Registrable Securities under this
Agreement, the Company shall, as expeditiously as reasonably possible:
(a) File with the Commission a registration statement with
respect to such Registrable Securities and use commercially reasonable efforts
to cause such registration statement to become and remain effective until the
earlier of (i) ninety (90) days, or if such registration statement is related to
an underwritten offering, such longer period as in the reasonable opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with the sales of Registrable Securities by an underwriter or dealer
or (ii) such shorter period as is required to complete the distribution of all
of the securities covered by such registration statement (but in any event not
before the expiration of any longer period required under the Securities Act).
(b) Prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection
with the registration as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
registration statement during such period in accordance with the intended
methods of disposition by Investor set forth in such registration statement,
including at the request of Investor, any amendments or supplements necessary to
reflect any information regarding Investor or its plan of distribution, until
the earlier of (i) such time as the Common Shares cease to be Registrable
Securities or (ii) the date on which Investor is permitted, pursuant to Rule 144
(or any successor provision) under the Securities Act, to dispose of all of the
Registrable Securities without regard to without volume or manner of sale
restrictions;
<PAGE>
(c) Furnish to Investor such reasonable numbers of copies of
the prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as Investor may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by Investor; provided, however, that if the
Company has delivered preliminary or final prospectuses to Investor and after
having done so the prospectus is amended to comply with the requirements of the
Securities Act, the Company shall promptly notify Investor and, if requested,
Investor shall immediately cease making offers of Registrable Securities and
return all prospectuses to the Company. The Company shall promptly provide
Investor with revised prospectuses and, following receipt of the revised
prospectuses, Investor shall be free to resume making offers of the Registrable
Securities;
(d) Use commercially reasonable efforts to register or qualify
the Registrable Securities covered by the registration statement under the
securities or Blue Sky laws of such states as Investor shall reasonably request,
and do any and all other acts and things that may be necessary or desirable to
enable Investor to consummate the public sale or other disposition in such
states of the Registrable Securities owned by Investor; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering; provided,
however, that Investor shall also enter into and perform its obligations under
such agreement; and
(f) Notify Investor at any time when a prospectus relating to
the Registrable Securities is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
6. Certain Obligations of Investor. It shall be a condition precedent to
--------------------------------
the obligations of the Company to take any action under this Agreement with respect to
the Registrable Securities of Investor that Investor meet the following conditions:
(a) Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
Registration of Investor's Registrable Securities;
(b) All information specifically with respect to Investor
furnished to the Company by or on behalf of Investor for use in connection with
the preparation of any registration statement relating to such Registrable
Securities shall be true and correct in all material respects and shall not omit
any material fact necessary to make such information, in light of the
circumstances under which it was disclosed, not misleading;
(c) Investor shall distribute in connection with the offering
and sale of the Registrable Securities the prospectus or other offering material
permitted by the Securities Act and prepared by the Company, and only such
materials;
<PAGE>
(d) Investor will comply with the provisions of the Exchange Act and
the regulations thereunder;
(e) To assist the Company in qualifying the Registrable
Securities for sale under applicable state securities laws, Investor will advise
the Company of each jurisdiction in which it intends to offer or sell any or all
Registrable Securities, and will agree not to offer or sell any Registrable
Securities in any jurisdiction where the Registrable Securities are not
registered or exempt from registration;
(f) Investor will inform the Company in writing of any and all
sales, or other transfers or dispositions of any Registrable Securities within
fifteen (15) calendar days following each such disposition;
(g) In the event of any underwritten public offering of any
Registrable Securities pursuant to Section 2, Investor shall enter into and
perform its obligations under an underwriting agreement, in the form agreed upon
by the Company and the underwriters selected by it that is customary for the
type of transaction contemplated and reasonably acceptable to Investor;
(h) Upon the receipt of notice from the Company of the
happening of any event described in Section 5(f), or upon the issuance of any
stop order or other order suspending the effectiveness of the registration
statement, Investor will immediately discontinue disposition of the Registrable
Securities pursuant to the registration statement until the filing of the
effective post-effective amendment or the supplemented prospectus referred to in
Section 5(f) or until the withdrawal of such stop order or other order, as
applicable, and, if so directed by the Company, Investor will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in Investor's possession, of the prospectus covering such Registrable
Securities current at the time of its receipt of such notice.
7. Indemnification and Contribution. In the event of any Registration of
----------------------------------
any of the Registrable Securities under the Securities Act pursuant to this Agreement:
<PAGE>
(a) The Company will indemnify and hold harmless Investor,
each underwriter of such Registrable Securities, and each other person, if any,
who controls Investor or underwriter within the meaning of the Securities Act or
the Exchange Act (collectively, the "Indemnified Investor Parties"), against any
losses, claims, damages, or liabilities, joint or several, to which the
Indemnified Investor Parties may become subject under the Securities Act, the
Exchange Act, state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon a claim by a third party alleging any of the following
statements, omissions or violations (collectively the "Indemnified Violations"):
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus, or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement; (ii) the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law. The Company will reimburse such Indemnified
Investor Party for any legal (to the extent provided in Section 7(c)) and other
expenses reasonably incurred in connection with defending any such Indemnified
Violation; provided, however, that:
(x) The indemnity agreement contained in this Section 7(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an Indemnified
Violation which occurs in reliance upon and in conformity with written
information furnished by any Indemnified Investor Party expressly for use in
connection with such registration;
(y) The Company will not be required to indemnify any
Indemnified Investor Party to the extent that any loss, claim, damage, liability
or action results from such party selling Registrable Securities (1) to anyone
to whom there was not sent or given, at or prior to the written confirmation of
the sale of such Registrable Securities, a copy of the prospectus, as most
recently amended or supplemented, if the Company has previously furnished or
made available to the sellers of the Registrable Securities copies thereof or
(2) during any period following written notice by the Company to such party of
an event described in Section 5(f) or of the issuance of any stop order or other
order suspending the effectiveness of the registration statement; and
(z) The indemnity provided in this Section 7(a) with respect to
any preliminary prospectus shall not apply, if the untrue statement or alleged
untrue statement or omission or alleged omission was corrected in the final
prospectus.
<PAGE>
(b) Investor will indemnify and hold harmless the Company,
each of its directors and officers and each underwriters (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act (collectively, the
"Indemnified Company Parties"), against any losses, claims, damages, or
liabilities, joint or several, to which the Company, such Indemnified Company
Parties may become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to the registration statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information relating to Investor furnished in writing to the Company by or on
behalf of Investor specifically for use in connection with the preparation of
such registration statement, prospectus, amendment, or supplement. Investor will
reimburse each of the Indemnified Company Parties for any legal and other
expenses reasonably incurred in connection with defending any such claim,
liability, demand, loss or action; provided, however, that the indemnity
agreement contained in this Section 7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Investor (which consent will not
be unreasonably withheld); and provided, further, that the obligations of
Investor hereunder shall be limited to an amount equal to the proceeds to
Investor of Registrable Securities sold in connection with such Registration.
(c) Each party entitled to indemnification under this Section
7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld). The failure by the Indemnified Party to deliver written
notice to the Indemnifying Party within a reasonable time of the commencement of
any such action, to the extent such failure is prejudicial to its ability to
defend such action, shall relieve such Indemnifying Party of any liability to
the Indemnified Party under this Section 7(c), but the omission so to deliver
written notice to the Indemnifying Party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
7(c). The Indemnified Party may participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall pay such expense
if representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party a release from all liability in respect of such claim
or litigations, and no Indemnified Party shall consent to entry of any judgment
or settle such claim or litigation without the prior written consent of the
Indemnifying Party.
<PAGE>
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i)
Investor, or any controlling person of Investor, makes a claim for
indemnification pursuant to this Section 7 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 7 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of Investor or
any such controlling person in circumstances for which indemnification is
provided under this Section 7; then, in each such case, the Company and Investor
will contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from others) in such proportions
so that Investor is responsible for the portion represented by the percentage
that the public offering price of its Registrable Securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; provided, however, that, in any such case, (A) Investor will
not be required to contribute any amount in excess of the proceeds to it of all
Registrable Securities sold by it pursuant to such registration statement, and
(B) no person or entity guilty of fraudulent misrepresentation, within the
meaning of Section 11(f) of the Securities Act, shall be entitled to
contribution from any person or entity who is not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and Investor under this
Section 7 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 7, or otherwise.
8. Amendment of Registration Rights. Any provision of this Agreement
may be amended or the observance thereof may be waived either generally or in a
particular instance and either retroactively or prospectively, only with the
written consent of the Company and the holders of 50.1% of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section 8 shall be binding upon Investor and the Company. Nothing herein
shall prevent a holder of Registrable Securities from waiving its individual
rights. The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of Common Shares outstanding and the number of
Common Shares issuable pursuant to then exercisable or convertible securities,
which are, in each case, Registrable Securities.
9. Miscellaneous.
(a) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties relating to
the subject matter hereof, and supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject matter hereof.
(b) Specific Performance. Investor agrees that irreparable
damage would occur and that the Company would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Company shall be entitled to an injunction or
injunctions to prevent breaches by Investor of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which it is entitled at law or in equity. The Company
agrees that irreparable damage would occur and that Investor would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that Investor shall be entitled to an
injunction or injunctions to prevent breaches by the Company of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which it is entitled at law or in
equity
<PAGE>
(c) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement
except as expressly provided in this Agreement.
(d) Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent by courier service or certified
mail, return receipt requested, charges pre-paid, or by facsimile transmission,
to the address or facsimile number specified below:
If to the Company:
Equivest Finance, Inc.
Attn: Richard Winkler
115 Long Wharf
Newport, Rhode Island 02840
Facsimile: (401) 846-3888
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Eric R. Markus
Fax: (202) 663-6363
If to Investor:
Christian Kjaer c/o Kevin F. D'Amour
Reed Smith Shaw & McClay LLP
136 Main Street, Suite 250
Princeton, New Jersey 08540-5799
Attn: Kevin F. D'Amour
Fax: (609) 951-0824
<PAGE>
or to such other address or facsimile number as the person may specify in a
notice duly given to the sender as provided herein. Notice given hereunder will
operate and be deemed effective and received (a) in the case of facsimile, when
received by recipient in legible form and sender has received an electronic
confirmation of receipt of the transmission (provided, however, that such
transmission and confirmation are received by 5:00 p.m. on a business day;
otherwise, such transmission shall be deemed to have been received on the next
business day); (b) in the case of delivery by courier, upon the date of delivery
indicated in the records of such courier; or (c) in the case of certified mail,
upon signing of the return receipt
(e) Headings; Counterparts. Headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
(f) Further Assurances. Each of the parties hereto agrees to
execute and deliver those writings and documents reasonably required to more
fully carry out the purposes of this Agreement and the transactions contemplated
hereby.
(g) Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, exclusive of any choice of law principles that would result in a
choice of law other than the laws of the State of New York, except to the extent
superseded or preempted by the laws of the United States. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under said laws; provided, however, that if any provision of
this Agreement shall be held to be invalid or unenforceable under applicable
law, such provision shall be ineffective only to the extent of such invalidity
or unenforceability, without invalidating the remainder of such provision or the
remainder of the provisions of this Agreement.
(h) Consent of Jurisdiction. The parties consent to and waive
any objection to the jurisdiction of the United States District Court for the
Northern District of New York, or any state court located in Onondaga County,
New York, over the person of any party to this Agreement, for purposes of any
action brought under or as the result of a breach of this Agreement. The parties
agree that venue of any action brought under or as the result of a breach of
this Agreement shall be proper in the courts named above, and each party waives
any objection to such venue.
[Execution Page to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their respective duly authorized officers as of the day
and year first above written.
EQUIVEST FINANCE, INC.
By:/s/
Name: Richard G. Winkler
Title: General Counsel
CHRISTIAN KJAER
By: /s/
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.16
THIS STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO EQUIVEST FINANCE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
Equivest Finance, Inc.
----------------------------
STOCK PURCHASE WARRANT
----------------------------
March 30, 1999
1. Grant. Equivest Finance, Inc., a Delaware corporation (hereinafter, the
"Company"), for value received hereby grants to Christian Kjaer (collectively
with successors and registered assigns, "Holder") under the terms herein the
right to purchase 250,000 shares of the Company's authorized but unissued $.01
par value common stock (the "Warrant"), with such number of such shares being
subject to adjustment as provided below. Such $.01 par value common shares are
sometimes hereinafter referred to as Common Stock, which shares, upon payment of
the exercise price, shall be fully paid and non-assessable. The Common Stock
shares issuable under this Warrant are hereinafter sometimes referred to as the
Warrant Shares.
2. Settlement Agreement. This Warrant has been issued in connection with
the settlement agreement among the Company, the Holder and Kosmas Group
International, Inc. dated March 30, 1999 (the "Agreement").
3. Term and Price. The right to exercise this Warrant shall expire three
(3) years after the date hereof or earlier pursuant to Section 4 hereof. The
exercise price of this Warrant (the "Exercise Price") shall be $9.00 per share.
<PAGE>
4. Mandatory Exercise. If the Fair Market Value of one share of Common
Stock equals or exceeds $12.00 on any given Trading Day, then the exercise of
this Warrant shall be deemed by the Company to have taken place as if Holder had
exercised the Warrant pursuant to Sections 6 and 7 hereof and the Exercise Date
shall be deemed to be the date of such Trading Day; provided, however, that the
Company shall not issue or deliver any shares of Common Stock to Holder in
exchange for this Warrant until Holder surrenders this Warrant along with
written subscription substantially in the form of Exhibit 7 hereof, which Holder
shall do promptly upon receiving notice from Company that a mandatory exercise
pursuant to this Section 4 has taken place; provided further, however, that such
shares of Common Stock shall be deemed issued for all purposes as of the opening
of business on the Exercise Date notwithstanding any delay in the actual
issuance.
The fair market value ("Fair Market Value") of one share of Common
Stock on any given Trading Day shall be equal to the average of the closing bid
and asked prices of the Common Stock on such Trading Day and the four preceding
Trading Days (a) quoted on the NASDAQ Small Cap Market for such day, or (b) if
the Common Stock is not listed or admitted to trading on the NASDAQ Small Cap
Market, then as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Common Stock is listed or admitted to trading; provided,
however, that if such Common Stock is not listed or admitted to trading on any
national securities exchange, Fair Market Value on any given Trading Day shall
be the average of the high bid and low asked prices in the over-the-counter
market on such Trading Day and the four preceding Trading Days, as reported by
NASDAQ; provided further, however, that if on any such day the Common Stock is
not quoted by any such organization, such day shall be replaced for purposes of
the foregoing calculation by the first Trading Day preceding such day and on
which the Common Stock is so quoted. "Trading Day" shall mean (a) a day on which
the NASDAQ Small Cap Market is open for the transaction of business, or (b) if
the Common Stock is not listed or admitted to trading on the NASDAQ Small Cap
Market, then a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business or (c) if the Common Stock is not listed or admitted to trading on any
national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday
on which banking institutions in the State of New York are not authorized or
obligated by law or executive order to close.
5. Anti-dilution Provisions.
------------------------
<PAGE>
(a) Stock Split or Dividend; Adjustment to Exercise Price and Number
of Warrant Shares. In case the shares of Common Stock at any time outstanding
shall be subdivided into a greater or combined into a lesser number of shares of
Common Stock, by stock-split, reverse split or otherwise, or in case shares of
Common Stock shall be issued as a stock dividend, the Exercise Price shall be
increased or decreased, as applicable, to an amount which shall bear the same
relation to the Exercise Price in effect immediately prior to such subdivision,
combination or stock dividend as the total number of shares of Common Stock
outstanding immediately prior to such subdivision, combination or stock dividend
shall bear to the total number of shares of Common Stock outstanding immediately
after such subdivision, combination or stock dividend; likewise, in case of such
a subdivision, combination or stock dividend, the number of Warrant Shares shall
be increased or decreased as applicable, to the number which shall bear the same
relation to the number of Warrant Shares obtainable hereunder immediately prior
to such event, as the total number of shares of Common Stock outstanding
immediately after such event shall bear to the total number of shares of Common
Stock outstanding immediately prior to such event.
(b) Merger. In case of any capital reorganization, or any
reclassification of the Common Stock of the Company, or in case of any
consolidation of the Company with or the merger of the Company into any other
corporation (other than a consolidation or merger in which the Company is the
continuing corporation) or in case of the sale of the properties and assets of
the Company, as or substantially as, an entirety to any other corporation, this
Warrant shall after such reorganization, reclassification, consolidation, merger
or sale be exercisable upon the terms and conditions specified herein, for the
number of shares of stock or other securities or property of the Company, or of
the corporation resulting from such consolidation or surviving such merger or to
which such sale shall be made, as the case may be, to which the Common Stock
issuable hereunder at the time of such reorganization, reclassification,
consolidation, merger or sale, would have entitled the holder hereof under the
terms of such reorganization, reclassification, consolidation, merger or sale.
In any such case, if necessary, the provision set forth in this Warrant with
respect to the rights and interests thereafter of the Holder shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. The subdivision or combination of shares of Common
Stock at any time outstanding into a greater or lesser number of shares of
Common Stock shall not be deemed to be a reclassification of the Common Stock of
the Company for the purposes of this section. The Company shall not effect any
such consolidation, merger, or sale, unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets to which in accordance with the foregoing provisions, such
Holder may be entitled, as well as any other obligations arising under this
Warrant.
6. Exchange of Shares for Exercise Price. The Holder at its option
may provide the Exercise Price under this Warrant by reducing the number of
shares for which the Warrant is otherwise exercisable by the number of shares
having Fair Market Value on the Exercise Date equal to the Exercise Price.
7. Exercise Procedure. This Warrant may be exercised by presenting
it and tendering the aggregate Exercise Price in legal tender or by bank's,
cashier's or certified check to the Company at its address specified in the
Agreement, along with written subscription substantially in the form of Exhibit
7 hereof. Except as provided in Section 4 hereof, the date on which this Warrant
is thus surrendered, accompanied by tender or payment as herein before or
hereinafter provided, is referred to herein as the Exercise Date. The Company
shall forthwith at its expense (including the payment of issue taxes), issue and
deliver the proper number of shares of Common Stock, and such shares shall be
deemed issued for all purposes as of the opening of business on the Exercise
Date notwithstanding any delay in the actual issuance.
<PAGE>
8. Replacement of Warrant. At the request of the Holder and on
production of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and (in the case of loss,
theft, or destruction) if required by the Company, upon delivery of an indemnity
agreement with surety in such reasonable amount as the Company may determine
thereof, the Company at its expense will issue in lieu thereof a new Warrant of
like tenor.
9. Transfer. This Warrant shall be registered on the books of the
Company which shall be kept at its principal office for that purpose, and shall
be transferable in whole or in part but only on such books by the Holder in
person or by duly authorized attorney with written notice substantially in the
form of Exhibit 9 hereof, and only in compliance with the preceding paragraph.
The Company may issue appropriate stop orders to its transfer agent to prevent a
transfer in violation of the preceding paragraph.
10. Investment Covenant. The Holder by its acceptance hereof covenants
--------------------
that this Warrant is, and any Warrant Shares will be, acquired for investment purposes,
and that the Holder will not distribute the same in violation of any state or federal law
or regulation.
11. Accredited Investor; Experience; Risk. The Holder is an accredited
investor within the definition of Rule 501 promulgated under the Act. The Holder
has such knowledge and experience, or has consulted with persons having
knowledge and experience, in financial and business matters that its capable of
evaluating the merits and risks of purchase of the Warrants and the Warrant
Shares.
12. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Fair Market Value of a share on the Exercise Date.
13. Waiver of Jury Trial. THE COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY
OF ALL CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND DIRECTLY OR
INDIRECTLY ARISING FROM OR RELATING TO THIS WARRANT OR THE DEALINGS OF THE
PARTIES IN RESPECT HERETO. THE COMPANY ACKNOWLEDGES AND AGREES THAT THIS
PROVISION IS A MATERIAL TERM OF THIS WARRANT AND THAT THE HOLDER WOULD NOT
EXTEND ANY FUNDS UNDER THE LOAN DOCUMENTS IF THIS WAIVER OF JURY TRIAL WERE NOT
A PART OF THIS WARRANT. THE COMPANY ACKNOWLEDGES THAT THIS IS A WAIVER OF A
LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER
CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS CHOICE.
THE COMPANY AGREES THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS SHALL
BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION, WITHOUT A JURY.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf by its undersigned officer, and its corporate seal to be hereunto
affixed, as of the date first above written.
- ------------------------------------------------------------------------------
Equivest Finance, Inc.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By: _________________________________
Name:
Title:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
Exhibit 7
IRREVOCABLE SUBSCRIPTION
To: Equivest Finance, Inc.
Gentlemen:
The undersigned hereby elects to exercise its right under the attached Warrant
by purchasing ______________________ shares of the Common Stock of your company,
and hereby irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
- ------------------------------------------------------------------------------
(Taxpayer Number)
and deliver to ________________________________________________________________
(Name)
- ------------------------------------------------------------------------------
(Address)
The exercise price of $_____________ is enclosed .
Date:________________________________________
Signed:______________________________________ (Name of Holder, Please Print)
- ------------------------------------------------------------------------------
(Address)
- ------------------------------------------------------------------------------
(Signature)
<PAGE>
Exhibit 9
ASSIGNMENT
FOR VALUE RECEIVED,_____________________________________________________
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
__________________ the attached Warrant together with all right, title and
interest therein, and does hereby irrevocably appoint
_____________________________________ attorney to transfer said Warrant on the
books of Equivest Finance, Inc., with full power of substitution in the
premises.
Done this ____ day of ___________, _____.
Signed:______________________________________
By:_________________________________________
Its:_________________________________________
<PAGE>
11728.18700.386303-8
LOAN AND SECURITY AGREEMENT
$20,000,000 Receivables Loans Warehouse Credit Facility
provided by
FINOVA CAPITAL CORPORATION
to
RESORT FUNDING, INC.
As of September 17, 1999
<PAGE>
TABLE OF CONTENTS
Page
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.........................2
1.13 Applicable Underlying Borrower...................................2
1.14 Applicable Underlying Consumer Notes Receivable Purchase Portfolio 3
1.15 Applicable Underlying Developer..................................3
1.16 Applicable Underlying Guarantor..................................3
1.17 Applicable Underlying Loan.......................................3
1.18 Applicable Underlying Loan Collateral............................3
1.19 Applicable Underlying Loan Documents.............................3
1.20 Applicable Underlying Purchase...................................3
1.21 Applicable Underlying Purchase Collateral........................3
1.22 Applicable Underlying Purchase Documents.........................4
1.28 Borrower.........................................................4
1.29 Borrowing Base...................................................4
1.30 Borrowing Term...................................................5
1.31 Business Day.....................................................5
1.32 Closing Date.....................................................5
1.33 Code.............................................................5
1.34 Collateral.......................................................5
1.35 Combined Outstanding Commitments.................................7
1.36 Common Elements..................................................7
1.37 Common Furnishings...............................................7
1.38 Consumer Note Receivable.........................................7
1.39 Custodial Agreement..............................................7
1.40 Custodial Fee....................................................8
1.41 Custodian........................................................8
1.42 Debtor Relief Laws...............................................8
1.43 Default..........................................................8
1.44 Default Rate.....................................................8
1.45 Eligible Consumer Note Receivable................................8
1.46 Eligible Note Receivable........................................10
1.47 Eligible Encumbered Interval....................................11
1.48 Encumbered Personal Property....................................11
1.49 Environmental Laws..............................................12
1.50 Event of Default................................................12
1.51 Financial Statements............................................12
1.52 GAAP............................................................12
1.53 Guarantor.......................................................12
1.54 Guaranty........................................................13
1.55 Hazardous Materials.............................................13
1.56 Initial Advance.................................................13
1.57 Initial Underlying Transaction Advance..........................13
1.58 Interest Rate...................................................13
1.59 Interval........................................................13
1.60 Interval Mortgage...............................................13
1.61 Land............................................................13
1.62 Lien............................................................13
1.63 Loan............................................................14
1.64 Loan Documents..................................................14
1.65 Lockbox Agent...................................................15
1.66 Lockbox Agreement...............................................15
1.67 Mandatory Prepayment............................................15
1.68 Maturity Date...................................................15
1.69 Maximum Credit Facilities Amount................................15
1.70 Maximum Loan Amount.............................................15
1.71 Minimum Net Worth Requirement...................................15
1.72 Note............................................................15
1.73 Note Receivable.................................................15
1.74 Obligations.....................................................15
1.75 Outstanding Applicable Underlying Loan Commitment...............16
1.76 Outstanding Applicable Underlying Purchase Commitment...........16
1.77 Outstanding RFI Receivables Credit Facility Commitment..........16
1.78 Payment Authorization Agreement.................................16
1.79 Permitted Liens and Encumbrances................................16
1.80 Person..........................................................16
1.81 Phase I Environmental Inspection................................16
1.82 Pledged Consumer Note Receivable................................17
1.83 Pledged Note Receivable.........................................17
1.84 Pledged Put and Reserve Agreement...............................17
1.85 Pre-Sales Consumer Note Receivable..............................17
1.86 Prime Rate......................................................17
1.87 Purchased Consumer Note Receivable..............................17
1.88 Purchaser.......................................................17
1.89 Put and Reserve Agreement.......................................18
1.90 Qualified Developer. ..........................................18
1.91 Qualified Loan..................................................18
1.92 Qualified Purchase..............................................18
1.93 Qualified Resort................................................18
1.95 Release Fee.....................................................19
1.96 RFI ADC Credit Facility.........................................19
1.97 RFI ADC Credit Facility Agreement...............................19
1.98 RFI Credit Facilities...........................................19
1.99 RFI Credit Facilities Agreements................................19
1.100 Servicing Agent.................................................19
1.101 Servicing Agreement.............................................19
1.102 Survey..........................................................20
1.103 Underlying Guaranty.............................................20
1.104 Unit............................................................20
SECTION 2. THE LOAN........................................................20
2.1 Purposes........................................................20
2.2 Qualified Loans and Qualified Purchases.........................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, Pledged Put and Reserve
Agreements and Purchased Consumer 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.............................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..............................................34
4.4 Advances Do Not Constitute a Waiver.............................38
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES..........................39
5.1 Organization, Standing, Qualification...........................39
5.2 Authorization, Enforceability, Etc..............................39
5.3 Financial Statements and Business Condition.....................41
5.4 Taxes...........................................................41
5.5 Title to Properties; Prior Liens................................42
5.6 Subsidiaries, Affiliates, and Capital Structure.................42
5.7 Litigation, Proceedings, Etc....................................42
5.8 Environmental Matters...........................................42
5.9 Full Disclosure.................................................43
5.10 Use of Proceeds/Margin Stock....................................43
5.11 No Defaults.....................................................43
5.12 Restrictions of Borrower or Guarantors..........................43
5.13 Broker's Fees...................................................44
5.14 Tax Identification/Social Security Numbers......................44
5.15 Legal Compliance................................................44
5.16 Representations and Warranties of Applicable Underlying Borrowers44
5.17 Applicable Timeshare Documents and Reports......................44
5.18 Continuation and Investigation..................................45
SECTION 6. COVENANTS.......................................................45
6.1 Affirmative Covenants...........................................45
6.2 Negative Covenants..............................................58
SECTION 7. EVENTS OF DEFAULT...............................................59
7.1 The Loan........................................................59
7.2 Applicable Underlying Loans.....................................62
SECTION 8. REMEDIES........................................................64
8.1 Remedies Upon Default...........................................64
8.2 Notice of Sale..................................................66
8.3 Application of Collateral; Termination of Agreements............67
8.4 Rights of Lender Regarding Collateral...........................67
8.5 Delegation of Duties and Rights.................................68
8.6 Lender Not in Control...........................................68
8.7 Waivers.........................................................68
8.8 Cumulative Rights...............................................68
8.9 Expenditures by Lender..........................................68
8.10 Diminution in Value of Collateral...............................68
SECTION 9. CERTAIN RIGHTS OF LENDER........................................69
9.1 Protection of Collateral........................................69
9.2 Performance by Lender...........................................69
9.3 No Liability of Lender..........................................69
9.4 Right to Defend Action Affecting Security.......................70
9.5 Expenses........................................................71
9.6 Lender's Right of Set-Off.......................................71
9.7 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc...................................................71
9.8 Assignment of Lender's Interest.................................71
9.9 Notice to Purchaser.............................................71
9.10 Collection of the Notes.........................................72
9.11 Power of Attorney...............................................72
9.12 Relief from Automatic Stay, Etc.................................73
9.13 Investigations and Inquiries....................................73
9.14 Verification of Use.............................................73
SECTION 10. TERM OF AGREEMENT..............................................74
SECTION 11. MISCELLANEOUS..................................................74
11.1 Notices.........................................................74
11.2 Survival........................................................75
11.3 GOVERNING LAW...................................................75
11.4 CHOICE OF JURISDICTION; WAIVER OF VENUE.........................75
11.5 Limitation on Interest..........................................76
11.6 Invalid Provisions..............................................77
11.7 Successors and Assigns..........................................77
11.8 Amendment.......................................................77
11.9 Counterparts; Effectiveness.....................................77
11.10 Lender Not a Fiduciary..........................................77
11.11 Release and Return of Notes Receivable and Collateral...........78
11.12 Accounting Principles...........................................78
11.13 Entire Agreement; Inconsistencies...............................78
11.14 WAIVER OF JURY TRIAL............................................78
11.15 Incorporation of Exhibits and Schedules.........................79
11.16 Consent to Advertising and Publicity of Applicable Timeshare Documents 79
11.17 Directly or Indirectly..........................................79
11.18 Captions........................................................79
11.19 Gender..........................................................79
11.20 No Duty.........................................................79
11.21 Reimbursement for Taxes.........................................80
11.22 Submissions.....................................................80
11.23 Confidentiality.................................................80
11.24 Year 2000 Issues................................................81
11.25 Standards Applied to Lender's Actions...........................81
11.26 Scope of Attorneys Fees.........................................81
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.17
LOAN AND SECURITY AGREEMENT
(RECEIVABLES TRANSACTIONS WAREHOUSE FACILITY)
This LOAN AND SECURITY AGREEMENT (RECEIVABLES TRANSACTIONS WAREHOUSE
FACILITY) is made and entered into as of September 30, 1999, by and among RESORT
FUNDING, INC., a Delaware corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("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 hereof.
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 shall be presumed to be in control of a corporation if
that Person, 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 such 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; and (ii) a Person shall be deemed to be in control
of a Person other than a corporation if that Person, 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 (Receivables Transactions
Warehouse Facility) by and among Borrower 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. Ninety percent (90%).
------------------------------------
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 Transaction 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 Developer of amounts owed to Borrower by
such Applicable Underlying Developer in connection with an Applicable Underlying
Transaction.
1.10 Applicable Resort. A Qualified Resort in connection with which Borrower has
------------------
engaged in a Qualified Transaction with a Qualified Developer.
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, budgets, 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. 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.
1.12 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 Developer that is the maker of a
--------------------------------
Pledged Note Receivable.
<PAGE>
1.14 Applicable Underlying Consumer Notes Receivable Purchase Portfolio.
At any time all Consumer Notes Receivable which have been purchased by Borrower
in a Qualified Purchase and remain owned by Borrower.
1.15 Applicable Underlying Developer. An Applicable Underlying Borrower or an
---------------------------------
Applicable Underlying Seller.
1.16 Applicable Underlying Guarantor. Any Person that has executed and delivered
---------------------------------
an Underlying Guaranty in favor of Borrower in connection with an Applicable Underlying
Transaction.
1.17 Applicable Underlying Loan. A Qualified Loan as to which Lender has agreed
----------------------------
to make certain Advances hereunder.
1.18 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.
1.19 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 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 has approved the forms of Applicable Underlying Loan Documents
identified in a letter from Lender to Borrower dated as of even date herewith.
Borrower agrees not to amend, restate, or otherwise modify any Applicable
Underlying Loan Documents in a material manner without Lender's prior written
consent. 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.
1.20 Applicable Underlying Purchase. A Qualified Purchase in which
Borrower has acquired Eligible Consumer Notes Receivable against which Lender
has agreed to make certain Advances hereunder.
1.21 Applicable Underlying Purchase Collateral. Any and all collateral
granted or available to Borrower to secure the payment by an Applicable
Underlying Seller of all amounts owed to Borrower by such Applicable Underlying
Seller in connection with an Applicable Underlying Purchase.
<PAGE>
1.22 Applicable Underlying Purchase Documents. All documents and
instruments that evidence or secure an Applicable Underlying Purchase, including
but not limited to any Put and Reserve Agreements, Applicable Mortgages, and
Underlying Guarantees executed and delivered to Borrower in connection
therewith. The form and content of each Applicable Underlying Purchase Document
shall be satisfactory to Lender and approved by Lender in writing prior to any
Advances hereunder in respect of the Applicable Underlying Purchase to which
such Applicable Underlying Purchase Document pertains. Lender has approved the
forms of Applicable Underlying Purchase Documents identified in a letter from
Lender to Borrower dated as of even date herewith. Borrower agrees not to amend,
restate, or otherwise modify any Applicable Underlying Purchase Documents in a
material manner without Lender's prior written consent. Copies of any such
amended, restated, or otherwise modified Applicable Underlying Purchase
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 purchase 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.
1.23 Applicable Underlying Purchase Property. All Purchased Consumer Notes
-------------------------------------------
Receivables and other property purchased by Borrower as part of an Applicable Underlying
Purchase.
1.24 Applicable Underlying Seller. A Qualified Developer that is the obligor
------------------------------
under a Pledged Put and Reserve Agreement.
1.25 Applicable Underlying Transaction. A Qualified Loan or a Qualified Purchase.
---------------------------------
1.26 Applicable Underlying Transaction Collateral. Any and all collateral granted
---------------------------------------------
or available to Borrower to secure the payment and performance by an Applicable
Underlying Developer in connection with an Applicable Underlying Transaction.
1.27 Applicable Underlying Transaction Documents. With respect to an Applicable
----------------------------------------------
Underlying Transaction, the Applicable Underlying Loan Documents or the Applicable
Underlying Transaction Documents, as the case may be.
1.28 Borrower. Resort Funding, Inc., a Delaware corporation, together with its
--------
successors and assigns.
<PAGE>
1.29 Borrowing Base. (a) With respect to an Applicable Underlying Loan and
the related Pledged Note Receivable, an amount equal to the lesser of (i) the
unpaid principal balance of the Loan or (ii) the product of (A) the Applicable
Borrowing Base Percentage times (B) the lesser of (1) 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 the Pledged Note Receivable or (2) the present
value of the contractual cash flow of each of such Eligible Consumer Notes
Receivable discounted at the interest rate then applicable under the terms of
the Note; and (b) with respect to an Applicable Underlying Purchase, amount
equal to the least of (i) Borrower's unamortized investment in the Applicable
Underlying Consumer Notes Receivable Purchase Portfolio for the Applicable
Underlying Purchase, (ii) the lowest price at which the Applicable Underlying
Seller either has the right or may be obligated to repurchase the Applicable
Underlying Consumer Notes Receivable Purchase Portfolio for the Applicable
Underlying Purchase or (iii) the product of (A) the Applicable Borrowing Base
Percentage times (B) the lesser of (1) the aggregate outstanding principal
balance of each of the Eligible Consumer Notes Receivable that comprise a
portion of Borrower's Applicable Underlying Consumer Notes Receivable Purchase
Portfolio for the Applicable Underlying Purchase or (2) the present value of the
contractual cash flow of each of such Eligible Consumer Notes Receivable
discounted at the interest rate then applicable under the terms of the Note.
1.30 Borrowing Term. A period of twenty-four (24) calendar months
following the earliest of the date of the initial Advance, the date of the
initial advance under the RFI ADC Credit Facility or October 31, 2001.
1.31 Business Day. Each day that is not a Saturday, a Sunday, or a legal holiday
-------------
under the laws of the State of New York or the United States.
1.32 Closing Date. The date of this Agreement.
------------
1.33 Code. The version of the Uniform Commercial Code in effect from time
to time in an Applicable Jurisdiction, as amended from time to time.
1.34 Collateral. Collectively, the Pledged Notes Receivable, Pledged Put
and Reserve Agreements, Purchased Consumer Notes Receivable and Applicable
Mortgages (if any), together with all accounts, chattel paper, general
intangibles, instruments and investment property 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 Transaction
Collateral for any and all of the Pledged Notes Receivable, Pledged Put and
Reserve Agreements and Applicable Mortgages (if any) and in and to all
Applicable Underlying Purchase Property, 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 or Pledged Put and Reserve
Agreements;
(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, together with all accounts, chattel paper,
general intangibles, instruments and investment property related thereto
and the cash and non-cash proceeds thereof;
<PAGE>
(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 or Purchased
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, 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, general intangibles and
investment property relating to the Pledged Consumer Notes Receivable, the
Purchased Consumer Notes Receivable, the Interval Mortgages, and the other
Applicable Underlying Transaction 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 Developer 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 Developer);
(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;
<PAGE>
(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;
(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 Developer related to easements, leasehold
interests (whether as lessor or lessee), franchises, permits, approvals,
licenses, facilities, and amenities on, affecting, or appurtenant 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 Developer or Borrower pursuant to any designation
of such Applicable Underlying Developer 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 in and to any and all of the collateral for any other
timeshare-related loan or credit facility between Lender and Borrower or
an Affiliate of Borrower.
1.35 Combined Outstanding Commitments. The sum of the Outstanding RFI
Receivables Credit Facility Commitment and the Outstanding RFI ADC Credit
Facility Commitment (as defined in the RFI ADC Credit Facility Agreement).
1.36 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.
1.37 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.
<PAGE>
1.38 Consumer Note Receivable. A promissory note, installment sales
contract, or other evidence of indebtedness made and executed by a Purchaser in
favor of an Applicable Underlying Developer in connection with such Purchaser's
acquisition of an Interval.
1.39 Custodial Agreement. The custodial agreement, if any, from time to
time entered into and in effect between Lender, Borrower and Custodian and in
form and substance satisfactory to Lender, pursuant to which Custodian will
maintain custody of all original Applicable Underlying Transaction Documents
including, without limitation, all Pledged Consumer Notes Receivable, Purchased
Consumer Notes Receivable and related collateral documents and take certain
actions in connection therewith.
1.40 Custodial Fee. Five Dollars ($5) per each Pledged Consumer Note
Receivable and each Purchased Consumer Note Receivable, payable at the time such
Consumer Note Receivable is first delivered to Lender or to Custodian.
1.41 Custodian. FINOVA Portfolio Services, Inc., an Arizona corporation
and a wholly-owned subsidiary of Lender, or such other Person as Lender, in its
discretion, engages from time to time, at Borrower's sole cost and expense, to
maintain custody of all original Applicable Underlying Transaction Documents and
take certain actions in connection therewith.
1.42 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.
1.43 Default. An Event of Default or an event or condition, the occurrence of
-------
which, with the lapse of time or the giving or notice or both, would become, an Event of
Default .
1.44 Default Rate. The Interest Rate plus five percent (5%) 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.
1.45 Eligible Consumer Note Receivable. A Pledged Consumer Note Receivable
or Purchased Consumer Note Receivable that satisfies each of the following
criteria or such other criteria as Lender may approve in writing:
(a) The Applicable Underlying Developer is the sole payee;
(b) It arises from a bona fide sale by an Applicable Underlying
Developer to a Purchaser of one (1) or more Intervals; provided a Consumer
Note Receivable shall not be an eligible Consumer Note Receivable if and
to the extent that the Purchaser has purchased more than six (6) Intervals
in the Applicable Resort;
<PAGE>
(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, the Interval sale has closed except as
otherwise permitted in Exhibit "K" attached hereto and herein incorporated
by this reference, and the Interval sale otherwise complies fully with the
terms, provisions, and conditions of this Agreement, the other Loan
Documents, the Applicable Underlying Transaction Documents, and all
Applicable Laws, and is otherwise legally valid and enforceable against
the Applicable Underlying Developer;
(d) It is encumbered by an Interval Mortgage; and except as
otherwise permitted in this Section 1.45(d) or in Exhibit "K", attached
hereto and incorporated herein by this reference, if the Intervals from
whose sale the Consumer Note Receivable has arisen are coupled with an
estate in real property and the Purchaser is entitled to a deed to the
Interval before the purchase price for the Interval is paid in full, the
Consumer Note Receivable is secured by a recorded Interval Mortgage on the
purchased Interval, which Interval Mortgage has been assigned in a
recorded document to Borrower by the Applicable Underlying Developer and
then assigned in a recorded document by Borrower to Lender; provided,
however, that if the Intervals from whose sale the Consumer Note
Receivable has arisen are coupled with an estate in real property, the
Purchaser is not entitled to a deed to the Intervals before the Purchase
Price is paid in full and the Intervals are not encumbered by a recorded
Interval Mortgage which has been collaterally assigned to Lender, then,
except as otherwise permitted in Exhibit "K", attached hereto and
incorporated herein by this reference, the obligations of the Applicable
Underlying Developer to Borrower under the Applicable Underlying
Transaction Documents shall be secured by an Applicable Mortgage (which
may be the same mortgage or deed of trust which has been given to Borrower
by the Applicable Underlying Borrower and is an "Applicable Mortgage" as
the term is defined in the RFI ADC Credit Facility Agreement) encumbering
legal title to the Intervals, and the mortgagee's or beneficiary's
interest in which shall have been appropriately collaterally assigned to
Lender;
(e) Principal and interest payments on it are payable to the
Applicable Underlying Developer 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;
<PAGE>
(h) A cash down payment and/or other cash payments have been
received by the Applicable Underlying Developer from the Purchaser or the
maker of the Consumer Note Receivable in an amount equal to at least ten
percent (10%) of the original purchase price of the purchased Interval,
and the Purchaser has received no cash or other rebates of any kind;
(i) No monthly installment due with respect to the Consumer Note
Receivable is more than thirty (30) days' contractually past due at the
time of the initial advance against or the purchase of such Consumer Note
Receivable, as the case may be, under the Applicable Underlying
Transaction and thereafter is contractually past due no more than the
lesser of (A) ninety (90) days or (B) the comparable number of days set
forth in the definition of "eligible note receivable" or its equivalent in
the Applicable Underlying Transaction Documents;
(j) The minimum interest rate on the Consumer Note Receivable must
not be less than twelve percent (12%) per annum;
(k) Except as otherwise permitted in Exhibit "K", attached hereto
and by this reference incorporated herein, 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 Developer or Borrower;
(m) Except as otherwise permitted in Exhibit "K", attached hereto
and by this reference incorporated herein, the Purchaser or other obligor
has no claim against the Applicable Underlying Developer, Borrower, or any
Affiliate of the Applicable Underlying Developer or Borrower, or any
defense, set-off, or counterclaim with respect to the Consumer Note
Receivable;
(n) Neither the Consumer Note Receivable nor the Interval Mortgage
which secures it is subject to any prior or other lien, assignment, pledge
or hypothecation;
(o) The Consumer Note Receivable is executed by a U.S. or Canadian
resident; provided, however, that up to ten percent (10%) of the aggregate
outstanding principal balance of all Eligible Consumer Notes Receivable
from any Applicable Resort or Applicable Underlying Developer may from
time to time be comprised of Consumer Notes Receivable executed by
residents of countries other than the United States or Canada;
<PAGE>
(p) The original of the Consumer Note Receivable and all related
documents have been endorsed by the Applicable Underlying Developer 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) Except as otherwise permitted in Exhibit "K", attached hereto
and by this reference incorporated herein, 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 documents and instruments required to be used under
Applicable Laws or otherwise relating to the Interval purchase transaction
giving rise to such Consumer Note Receivable have been approved in advance
by Lender in writing (including, without limitation, the forms of Consumer
Note Receivable, Interval Mortgage (to the extent applicable, and federal
truth-in-lending disclosure statement)).
1.46 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;
(c) The Applicable Underlying Loan Documents have been approved in
writing by Lender;
(d) Borrower is the sole payee;
(e) Principal and interest payments on it are payable to Borrower in
legal tender of the United States;
<PAGE>
(f) It provides for the payment to Borrower of a minimum rate of
interest approved in writing by Lender at the time it has designated the
Applicable Underlying Loan as a Qualified Loan;
(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 assigned and, if applicable, endorsed in the
manner prescribed by Lender and delivered to Lender or, if Lender directs,
Custodian.
1.47 Eligible Purchase Transaction. An Applicable Underlying Purchase that
--------------------------------
satisfies each of the following criteria:
(a) The Applicable Underlying Purchase that it evidences was
originated by Borrower in the ordinary course of its business;
(b) Purchase payments made by Borrower under such Applicable
Underlying Purchase may be used by the Applicable Underlying Seller 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 Seller, to pay down or pay off loans secured by such
Qualified Resort or otherwise in compliance with the Applicable Underlying
Purchase Documents;
(c) The Applicable Underlying Purchase Documents include a Put and
Reserve Agreement and have been approved in writing by Lender;
(d) Borrower is the sole Person to whom the Applicable Underlying
Seller is obligated under the Applicable Underlying Purchase Documents;
(e) Payments due to Borrower under the Applicable Underlying Purchase
Documents are payable to Borrower in legal tender of the United States;
<PAGE>
(f) It provides for the payment to Borrower of a rate of return
approved in writing by Lender at the time it has designated the Applicable
Underlying Purchase as a Qualified Purchase;
(g) Neither the Applicable Underlying Seller nor the Applicable
Underlying Guarantor, if any, is an Affiliate of Borrower or Guarantor;
(h) No amount due to Borrower under the Applicable Underlying
Purchase Documents 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 Seller 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 Applicable Underlying Purchase at the time of any
Advance in respect thereof; and
(j) The original of the Applicable Underlying Purchase Documents 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 Lender or, if Lender directs,
Custodian.
1.48 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 Developer, 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 Transaction Collateral for a Pledged
Note Receivable or a Pledged Put and Reserve Agreement, as the case may be, or
Applicable Underlying Purchase Property.
<PAGE>
1.49 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 are 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.
1.50 Event of Default. Defined in Section 7 hereof.
----------------
1.51 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(g) hereof.
1.52 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.
1.53 Guarantor. Equivest Finance, Inc., a Delaware corporation, together with its
---------
successors and assigns.
1.54 Guaranty. That certain Guaranty and Subordination executed by
Guarantor and delivered to Lender concurrently with Borrower's execution and
delivery of this Agreement, as it may be amended and/or restated from time to
time. 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.
1.55 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.
1.56 Initial Advance. The first Advance by Lender hereunder.
---------------
1.57 Initial Underlying Transaction Advance. As to a particular Applicable
------------------------------------------
Underlying Transaction, the first Advance by Lender hereunder in connection therewith.
1.58 Interest Rate. The Prime Rate plus 0.50% per annum. The Interest Rate
charged for each calendar month shall be fixed based upon the Prime Rate
published or otherwise determined 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.
<PAGE>
1.59 Interval. 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 specifically described in the Applicable Declaration and/or other
Applicable Timeshare Documents. An Interval may be coupled with an estate (such
as a fee simple or leasehold estate) in real property, but is not required to be
coupled with an estate in real property. Without limiting the generality of the
foregoing, an Interval may include "right to use" timeshare interests (which are
not coupled with an estate in real property) such as licenses and points-based
vacation club memberships.
1.60 Interval Mortgage. A mortgage, deed of trust, contract for deed, or
other security agreement acceptable to Lender 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); secures the payment of all principal,
interest, and other amounts owed by a Purchaser to an Applicable Underlying
Developer, pursuant to a Consumer Note Receivable; and, in the case of an
Interval Mortgage which encumbers an Interval which is coupled with an estate
for real property and to which the Purchaser is entitled to a deed before the
purchase price for the Interval is paid in full, has been properly recorded or
registered.
1.61 Land. The real property upon which any portion of an Applicable Resort is
----
situated.
1.62 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.
1.63 Loan. The subject revolving credit facility in a maximum principal
amount not to exceed the Maximum Loan Amount at any time, as described in this
Agreement and evidenced and secured by the Loan Documents.
1.64 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 "A", attached hereto and incorporated
herein by this reference);
(e) The Pledges and Assignments of Put and Reserve Agreements and
Applicable Mortgages (in the form of Exhibit "B", attached hereto and
incorporated herein by this reference);
<PAGE>
(f) The Pledges and Assignments of Consumer Notes Receivable and
Interval Mortgages (in the form of Exhibit "C", attached hereto and
incorporated herein by this reference);
(g) Assignments of the Underlying Guarantees (in the form of
Exhibit "D", attached hereto and incorporated herein by this reference);
(h) The Custodial Agreement;
(i) The Servicing Agreement;
(j) The Lockbox Agreement;
(k) UCC-1 (which Lender may require to be amended from time to time
to specifically describe the Pledged Notes Receivable or the Pledged Put
and Reserve Agreements) 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.
1.65 Lockbox Agent. Manufacturers and Traders Trust Company, a banking
company organized under the laws of the State of New York, or such other Person
as Lender engages, in its discretion, at Borrower's sole cost and expense, to
receive, deposit, and disburse all amounts paid with respect to the Pledged
Consumer Notes Receivable and the Purchased Consumer Notes Receivable and all
other amounts paid by or on behalf of each Applicable Underlying Developer and
each Applicable Underlying Guarantor in accordance with the terms, provisions,
and conditions hereof, of the Lockbox Agreement, and of the Applicable
Underlying Transaction Documents.
1.66 Lockbox Agreement. That certain agreement by and among Lender,
Borrower, and Lockbox Agent in substantially the form of Exhibit "E", 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 with respect to the Pledged Consumer Notes Receivable
and the Purchased Consumer Notes Receivable and all other amounts paid by or on
behalf of each Applicable Underlying Developer and each Applicable Underlying
Guarantor in accordance with the terms, provisions, and conditions hereof, of
the Lockbox Agreement, and of the Applicable Underlying Transaction Documents.
<PAGE>
1.67 Mandatory Prepayment. Any prepayment of the Loan required by Section 2.6(b)
---------------------
hereof.
1.68 Maturity Date. The date that is one hundred twenty (120) calendar months
--------------
following date of the last Advance.
1.69 Maximum Credit Facilities Amount. Twenty Million Dollars ($20,000,000).
--------------------------------
1.70 Maximum Loan Amount. Twenty Million Dollars ($20,000,000).
-------------------
1.71 Minimum Net Worth Requirement. The minimum net worth requirement applicable
------------------------------
to Guarantor under the terms of the Guaranty.
1.72 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 execution of this Agreement.
1.73 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.
1.74 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.
1.75 Outstanding Applicable Underlying Loan Commitment. At any time, the
excess, if any, of the maximum principal amount which may then be outstanding
under an Applicable Underlying Loan (if fully funded) over the unpaid principal
balance of the Applicable Underlying Loan.
1.76 Outstanding Applicable Underlying Purchase Commitment. At any time,
the excess, if any, of the maximum unamortized investment by Borrower which may
be outstanding under an Applicable Underlying Purchase (if fully funded) over
the unamortized investment by Borrower in the Applicable Underlying Purchase.
<PAGE>
1.77 Outstanding RFI Receivables Credit Facility Commitment. The sum of the
-----------------------------------------------------------
Outstanding Applicable Underlying Loan Commitments for all of the Applicable Underlying
Loans and the Outstanding Applicable Underlying Purchase Commitments for all of the
Applicable Underlying Purchases.
1.78 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
Developer.
1.79 Permitted Liens and Encumbrances. Those liens and encumbrances
affecting all or a portion of the Collateral or any Applicable Underlying
Transaction Collateral to which Lender consents in writing, as set forth on
Exhibit "F", attached hereto and incorporated herein by this reference, as
amended or restated from time to time.
1.80 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.
1.81 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.
1.82 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.
<PAGE>
1.83 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.
1.84 Pledged Put and Reserve Agreement. A Put and Reserve Agreement that
has been and remains pledged or collaterally assigned to Lender by Borrower,
pursuant to this Agreement or any of the other Loan Documents.
1.85 Pre-Sales Consumer Note Receivable. Defined in Exhibit "K", attached hereto
and incorporated herein by this reference.
1.86 Prime Rate. The per annum rate of interest publicly announced, from
time to time, by Citibank, N.A., New York, New York ("Citibank") as the base (or
equivalent) rate of interest charged by Citibank to its largest and most
creditworthy commercial borrowers notwithstanding the fact that some borrowers
of Citibank make borrow from Citibank at rates less than the announced base
rate. 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 or base rates announced or published by such other
bank as is reasonably acceptable to Borrower.
1.87 Purchased Consumer Note Receivable. A Consumer Note Receivable that
has been purchased by Borrower from an Applicable Qualified Seller and remains
owned by Borrower pursuant to the Applicable Underlying Purchase 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.
1.88 Purchaser. Any Person who purchases one or more Intervals and is the maker
---------
of a Consumer Note Receivable.
1.89 Put and Reserve Agreement. An agreement or agreements that are now or
hereafter made and executed by an Applicable Underlying Seller for the benefit
of Borrower, evidences the obligations of the Applying Underlying Seller to
repurchase Purchased Consumer Notes Receivable from Borrower in connection with
an Applicable Underlying Purchase or to replace such Consumer Notes Receivable,
evidences the right of Borrower to hold in reserve or defer payment of a portion
of the purchase price for Purchased Consumer Notes Receivable, and may be
secured in part by an Applicable Mortgage.
1.90 Qualified Developer. The developer of an interval ownership,
condominium, timeshare, or vacation ownership project, who is domiciled and has
his principal residence [or, in the case of a Person not a natural person, is
organized and has its principal place of business (or if it has no principal
place of business, its chief executive office)] in the United States, and the
creditworthiness for a receivables hypothecation loan or for a receivables
purchase and other qualifications of which are satisfactory to Lender, based
upon any factors that Lender deems relevant. No Person shall be deemed a
Qualified Developer unless and until Lender has so designated such Person in
writing.
<PAGE>
1.91 Qualified Loan. A receivables/hypothecation loan which is made by
Borrower to a Qualified Developer in connection with a Qualified Resort, permits
the Qualified Developer to borrow not less than Five Million Dollars
($5,000,000) (which the Qualified Developer is reasonably expected to need), is
secured by any Lien on real property which secures any loan made to the
Qualified Developer and hypothecated under the RFI ADC Credit Facility and from
which the Intervals which are the subject of Consumer Notes Receivable being
hypothecated under the receivables/hypothecation loan have been created, and is
otherwise satisfactory to Lender, based upon any factors that Lender deems
relevant. No loan shall be deemed a Qualified Loan unless and until Lender has
so designated such loan in writing. By way of clarification, a Qualified Loan
does not need to at any time have an outstanding principal balance of Five
Million Dollars ($5,000,000) or more.
1.92 Qualified Purchase. A receivables purchase which is made by Borrower
from a Qualified Developer in connection with a Qualified Resort, permits the
Qualified Developer to sell to Borrower Consumer Notes Receivable for a cash
price not less than Five Million Dollars ($5,000,000) (which the Qualified
Developer is reasonably expected to need), is secured by any Lien on real
property which secures any loan made to the Qualified Developer and hypothecated
under the RFI ADC Credit Facility and from which the Intervals which are the
subject of Consumer Notes Receivable being purchased as part of the receivables
purchase transaction have been created, and is otherwise satisfactory to Lender,
based upon any factors that Lender deems relevant. No purchase shall be deemed a
Qualified Purchase unless and until Lender has so designated such purchase in
writing. By way of clarification, a Qualified Purchase does not need to at any
time have an outstanding unamortized investment by Borrower of Five Million
Dollars ($5,000,000) or more.
1.93 Qualified Resort. An interval ownership, condominium, timeshare
project, and/or vacation ownership project which consists 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, located in the United States and is
otherwise satisfactory to Lender, based upon any factors that Lender deems
relevant. No project shall be deemed a Qualified Resort unless and until Lender
has so designated such project in writing.
1.94 Qualified Transaction. A Qualified Loan or a Qualified Purchase.
---------------------
1.95 Release Fee. A fee or amount, if any, required to be paid by an
Applicable Underlying Developer to Borrower in consideration for the release of
all or a portion of any Applicable Underlying Transaction 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
Developer to Borrower upon the sale of an Interval at an Applicable Resort,
pursuant to the Applicable Underlying Transaction Documents.
<PAGE>
1.96 RFI ADC Credit Facility. The revolving credit facility made available
to Borrower, as described in the RFI ADC Credit Facility Agreement and evidenced
and secured by the loan documents from time to time executed in connection
therewith.
1.97 RFI ADC Credit Facility Agreement. That Loan and Security Agreement
(ADC Loans Warehouse Facility) by and among Borrower and Lender (including the
exhibits and schedules hereto), as it may be amended, restated and/or replaced
from time to time.
1.98 RFI Credit Facilities. Collectively, the RFI ADC Credit Facility and the
Loan.
1.99 RFI Credit Facilities Agreements. Collectively, the RFI ADC Credit Facility
Agreement and this Agreement.
1.100 Servicing Agent. For so long as (a) no Event of Default has occurred
and (b) Lender, in its reasonable judgment, has not determined that such
Person's servicing systems and controls are inadequate to protect Lender in any
material way (and based upon an on-site inspection conducted by it prior to the
Closing Date, Lender acknowledges that such an inadequacy did not appear to
exist as of the completion of such inspection), Borrower or an Affiliate of
Borrower; and thereafter, such other Person as Lender engages, in its
discretion, at Borrower's sole cost and expense. Servicing Agent shall service
each Applicable Underlying Transaction, which shall include but not be limited
to the collection of all amounts owed Borrower by the Applicable Underlying
Developer, pursuant to the Applicable Underlying Transaction Documents, subject
to the terms, provisions, and conditions of Section 2 hereof and of the
Servicing Agreement and the Lockbox Agreement.
1.101 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 Transaction.
1.102 Survey. An as-built survey of an Applicable Resort prepared in
accordance with the ALTA/ACSM 1992 Minimum Survey Requirements by a licensed
surveyor and certified by the applicable surveyor to the Applicable Underlying
Developer.
1.103 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 Transaction and all amounts secured by
or under the Applicable Underlying Transaction Documents.
1.104 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.
<PAGE>
SECTION 2. THE LOAN.
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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 or Qualified Purchases from Qualified
Developers in connection with Qualified Resorts or to reimburse Borrower for
advances previously made under Qualified Loans to Qualified Developers in
connection with Qualified Resorts or for purchase payments previously made under
Qualified Purchases to Qualified Developers in connection with Qualified
Resorts.
2.2 Qualified Loans and Qualified Purchases. Lender shall have the right
to determine whether a particular loan constitutes a Qualified Loan or a
Qualified Purchase; and in connection therewith, Lender shall have the absolute
and unconditional right with respect to each loan or purchase that Borrower
proposes be deemed a Qualified Loan or a Qualified Purchase hereunder to conduct
its own due diligence prior to approving that loan or purchase as a Qualified
Loan or Qualified Purchase, as the case may be, the reasonable costs of which
shall be borne by Borrower. As part of such due diligence, Lender may, in its
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 Transaction Collateral. No loan shall be deemed a
Qualified Loan or a Qualified Purchase hereunder unless and until Lender has so
designated it in writing.
2.3 Advances.
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(a) Borrowing Term. No Advances will be made by Lender hereunder after the
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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 Sections 1.46, 1.47 and 2.3(d) 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 (i) the aggregate amount of the Borrowing Base or (ii) the Maximum
Loan Amount; provided, however, that for purposes of this Section, the Borrowing
Base of any Applicable Underlying Transaction in connection with which (i) a
monthly payment (including without limitation, any payment due under a Pledged
Put and Reserve Agreement) 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. 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.
<PAGE>
(c) Minimum Advance Amounts; Frequency of Advances. Without the
prior written consent of Lender, Advances 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 or in respect of Eligible Consumer Notes Receivable which are
Purchased Consumer Notes Receivable; (ii) occur no more frequently than four (4)
times in any calendar month; and (iii) shall be in minimum amounts of Fifty
Thousand Dollars ($50,000). Lender shall receive a fee in the amount of Five
Hundred Dollars ($500) for each funding after the second funding in any calendar
month. For purposes of clarification, if Borrower submits an Advance Request
based upon more than one Eligible Note Receivable, the requested Advance shall
for purposes of this Section 2.3(c) be deemed a single Advance.
(d) Maximum Amount Outstanding Under the Loan and Other Credit
Facilities. Under no circumstances (and irrespective of the aggregate amount of
the Borrowing Base) shall the sum of (i) the aggregate outstanding principal
balance as of a particular date of the Loan, the RFI ADC Credit Facility, any
and all other loans the initial advances of which are hereafter made by Lender
to Guarantor or to an Affiliate of Guarantor, plus (ii) the Combined Outstanding
Commitments, plus (iii) the RFI ADC Credit Facility Uncovered Cost of the Work
(as defined in the RFI ADC Credit Facility Agreement), plus (iv) the sum of the
Uncovered Cost of the Work (as defined in the RFI ADC Credit Facility Agreement)
with respect to any and all other loans the initial advances of which are
hereafter made by Lender to Guarantor or an Affiliate of Guarantor exceeds the
Maximum Credit Facilities Amount.
2.4 Interest Rate. The aggregate principal amount of all Advances that are
outstanding from time to time shall bear interest at a rate equal to the
Interest Rate. The 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 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:
<PAGE>
(a) Daily and Weekly. Upon the closing of each Applicable Underlying
Transaction, Borrower shall direct in writing and cause the Applicable
Underlying Developer and Applicable Underlying Guarantor: (i) to direct or
otherwise cause the Purchasers and makers of all Pledged Consumer Notes
Receivables and Purchased Consumer Notes Receivable to pay all monies due
thereunder to the Lockbox Agent in accordance with the terms of the Applicable
Underlying Transaction Documents; and (ii) 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 Developer or Applicable Underlying Guarantor, if
any, pursuant to the applicable Pledged Note Receivable, the Applicable Pledged
Put and Reserve Agreement or any other Applicable Underlying Transaction
Documents (hereinafter collectively referred to as the "Aggregate Lockbox
Collections"). The Aggregate Lockbox 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 or payment by Borrower under an Applicable Underlying
Transaction to the Applicable Underlying Developer from which any Release Fees
and/or other amounts due Borrower from the Applicable Underlying Developer under
the Applicable Underlying Transaction 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 Transaction, including but not limited to any amounts
received by Borrower upon its realization upon any Applicable Underlying
Transaction Collateral, directly to Lender (in the form so received, properly
endorsed to Lender, if appropriate). On each Business Day, Lockbox Agent shall
deposit into an account in the name of Lender and into which only proceeds of
the Pledged Notes Receivable, the Pledged Put and Reserve Agreements and the
Purchased Consumer Notes Receivable and the other Applicable Underlying Purchase
Property are deposited ("Collection Account") the Aggregate Lockbox Collections
then deposited in the Lockbox Account. On the last Business Day of each week,
Lockbox Agent shall remit, via wire transfer, all amounts then deposited in the
Collection Account directly to Lender in accordance with the terms of the
Lockbox Agreement.
(b) 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.
<PAGE>
(c) Application of Payments. Notwithstanding anything in the Loan
Documents to the contrary, the amount of all payments or amounts received by
Lender with respect to the Loan shall be applied to the extent applicable under
the Loan Documents: (a) first, to accrued interest on the Loan through the date
of such payment, including any default interest; (b) then, to any late fees,
overdue risk assessments, examination fees and expenses, collection fees and
expenses and any other fees and expenses due to Lender under the Loan Documents
in connection with the Loan; and (c) last, the remaining balance, if any, to the
unpaid principal balance of the Loan; provided, however, while a Default exists,
each payment hereunder shall be applied to amounts owed to Lender by Borrower as
Lender in its discretion may determine. In calculating interest and applying
payments as set forth above: (a) interest on the Loan shall be calculated and
collected through the date payment is actually received by Lender; (b) interest
on the outstanding balance of the Loan shall be charged during any grace period
permitted under the Loan Documents; (c) at the end of each month, all past due
interest and other past due charges provided for under the Loan Documents with
respect to the Loan shall be added to the principal balance of the Loan; and (d)
to the extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other person or entity,
then, to such extent, the Obligations in connection with the Loan intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by Lender and Lender may adjust the balance of the Loan as Lender
deems appropriate under the circumstances. For purposes of this Section 2.5(c),
amounts held in the Lockbox Account and/or the Collection Account shall not be
deemed to have been received by Lender.
2.6 Prepayments.
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(a) Voluntary. Borrower may prepay the Loan, in whole or in part, without
---------
premium or penalty, at any time.
(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 of (i) all Applicable Underlying Loans and Pledged Notes
Receivable and (ii) all Applicable Underlying Purchases, then, within ten (10)
days following Borrower's receipt of telecopied notice from Lender of the
occurrence of such event 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 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 of (1) all Applicable
Underlying Loans and Pledged Notes Receivable and (2) all Applicable Underlying
Purchases 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 the Pledged Notes Receivable or in substitution for other
Purchased Consumer Notes Receivable, generated from sales of Intervals at the
same Applicable Resort so that the outstanding principal balance of the Note is
equal to or less than the aggregate amount of (i) the Borrowing Base of all
Applicable Underlying Loans and Pledged Notes Receivable and (ii) all Applicable
Underlying Purchases. 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 hereof and shall be
accompanied by Borrower's written certification to the effect that such
additional 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 Note is
equal to or less than the Borrowing Base of (i) all Applicable Underlying Loans
and Pledged Notes Receivable and (ii) all Applicable Underlying Purchases.
(c) Prepayment Premium. No prepayment premium or penalty shall be due
-------------------
Lender in connection with any 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.
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<PAGE>
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, Pledged Put and
Reserve Agreements and Purchased Consumer 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 and Eligible Consumer Notes Receivable which are Purchased Consumer
Notes Receivable, Lender shall have a continuing first priority Lien and
security interest in and to all of the Pledged Notes Receivable, Pledged
Consumer Notes Receivable (by virtue of a collateral assignment to Lender of all
of Borrower's right, title, and interest thereto), Pledged Put and Reserve
Agreements and Purchased Consumer Notes Receivable and may collect and shall
receive all payments made under or in respect of all Pledged Notes Receivable,
Pledged Put and Reserve Agreements and Purchased Consumer Notes Receivable and
by virtue of a collateral assignment of all of Borrower's right, title, and
interest in and to the Pledged Consumer Notes Receivable and the Purchased
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 11.11 hereof.
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.
<PAGE>
3.5 Protection of Collateral; Reimbursement. The portion of the Collateral
consisting of (a) the original Pledged Notes Receivable; (b) the original
Pledged Put and Reserve Agreements; (c) the original Applicable Mortgages; and
(d) 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 and the original Purchased Consumer Notes Receivable;
(ii) true copies of fully executed Interval Mortgages, originals of which shall
be delivered to Lender 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 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, original Pledged Consumer Note Receivable and original
Purchased Consumer Note Receivable delivered to Lender shall be duly endorsed by
use of an allonge with the words: "Pay to the order of FINOVA Capital
Corporation, 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 as of
September ____, 1999, by and among FINOVA Capital Corporation, and Resort
Funding, Inc." Each original Pledged Consumer Note Receivable and original
Purchased 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 Developer 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 agrees 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, original Pledged Put and Reserve Agreements, Applicable Mortgages,
original Pledged Consumer Notes Receivable and original Purchased 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, Custodian, or any other
Person whomsoever, excluding damages or losses that occur as a result of
Lender's gross negligence or willful misconduct.
<PAGE>
3.6 Cross-Collateralization and Default. The Collateral shall secure all
of the Obligations as well as Borrower's obligations pursuant to the RFI ADC
Credit Facility and the obligations of Guarantor and any and all Affiliates of
Guarantor under any loan(s) made by Lender to such Person(s); 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, the RFI
ADC Credit Facility and any other loan made by Lender to Guarantor or to any
Affiliate of Guarantor shall be cross-defaulted such that (a) any "Default" and
"Event of Default" (as those terms are defined in RFI ADC Credit Facility
Agreement and/or loan documents executed in connection with another loan made by
Lender to Guarantor or any Affiliate of Guarantor) and (b) any act or event
which, under the terms of the RFI ADC Credit Facility and/or loan documents
executed in connection with another loan made by Lender to Guarantor or any
Affiliate of Guarantor, either immediately or with notice and/or the passage of
time permits Lender to cease making advances under such loan and/or to
accelerate repayment of such loan shall constitute a Default or an Event of
Default, respectively, hereunder, and vice versa.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES.
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The obligation of Lender to enter into this Agreement and to make any
Advances shall be subject to the complete satisfaction of each of the conditions
precedent set forth below and elsewhere in the Loan Documents:
4.1 The Loan. On or prior to the Closing Date, but in no event later than
---------
October 31, 1999:
(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.
(e) Borrower's and Guarantor's Background Documents. Borrower shall
-------------------------------------------------
have delivered to Lender, and Lender shall have approved each of the
following:
<PAGE>
(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 Secretary of State and the New
York Secretary of State (or other appropriate state officer) for
Borrower and by the Delaware Secretary of State for Guarantor.
(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 for Borrower and Guarantor for the period ending
June 30, 1999 and the other 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.
(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 Transactions. At least ten (10) Business Days
prior to the date of each Initial Underlying Transaction Advance, Borrower shall
deliver to Lender and Servicing Agent a sworn written certificate, in form and
content satisfactory to Lender, confirming, to the extent applicable, that:
(a) Applicable Underlying Transaction Documents. The Applicable
Underlying Developer and the Applicable Underlying Guarantor have executed
and delivered to Borrower the Applicable Underlying Transaction Documents,
which Lender has reviewed and approved in writing.
<PAGE>
(b) Title Policies. To the extent available and commonly required by
lenders or receivables purchasers in the Applicable Jurisdiction in
connection with transactions similar to the Applicable Underlying
Transaction, the Applicable Underlying Developer 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 Transaction, the first priority of
the Lien of each applicable Interval Mortgage in and to each applicable
Encumbered Interval which is coupled with an estate in real property and
to which the applicable Purchaser is entitled to a deed before its
purchase price is paid in full, 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 Title Policy shall be in an amount not less than the
original principal amount of the applicable Note Receivable or the
original purchase payment made under the Applicable Underlying Purchase,
as the case may be, 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
or payment under the Applicable Underlying Transaction must insure that
each applicable Interval Mortgage creates a first priority Lien in favor
of Lender, to the extent of its interest in the Applicable Underlying
Transaction, and Borrower, together with its successors and assigns, in
and to the applicable Encumbered Interval which is coupled with an estate
in real property and to which the applicable Purchaser is entitled to a
deed before its purchase price is paid in full, with such exceptions and
conditions to title as Borrower and Lender shall have approved in writing.
<PAGE>
Each 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 Transaction, 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 and receivables purchasers 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 in the Applicable Underlying
Transaction, shall receive an endorsement to the Title Policy on the date
of each advance of or payment under the Applicable Underlying Transaction:
(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 property covered by the Title Policy; (ii) updating the
Title Policy to the date of such advance or payment; and (iii) increasing
the coverage of the Title Policy by an amount equal to the amount of such
advance or payment if the Title Policy does not by its own terms provide
for such an increase. The condition of title to all Applicable Underlying
Transaction Collateral must be satisfactory to Lender in all respects, as
a condition precedent to Lender's obligation to make any Advances
hereunder in respect of the Applicable Underlying Transaction that is
secured by Borrower's Lien in and to such Applicable Underlying
Transaction Collateral. In the event that Lender has received an interest
in an Applicable Mortgage pursuant to Section 1.45(d) hereof, the
references in this paragraph to "Interval Mortgage" shall be deemed to
apply instead to such Applicable Mortgage.
In lieu of the Title Policy required by this Section, Lender may
accept a title opinion rendered by a completely independent attorney for
the Applicable Underlying Developer which fully satisfies all of the
general requirements of this Section.
Notwithstanding anything herein to the contrary, Lender may require
that it be named as an insured on each Title Policy of title insurance
insuring Borrower's interest in an Interval Mortgage, even if a Title
Policy is not required with respect to such Interval Mortgage.
(c) Opinions of Applicable Underlying Developer's Counsel. Borrower
has received from counsel for the Applicable Underlying Developer 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 Transaction, covering such items as
may be required by Borrower and Lender, including, without limitation,
that the Applicable Underlying Transaction 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 Transaction Background Documents. The
Applicable Underlying Developer 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
Developer or the Applicable Resort in connection with any other loan under
the RFI ADC Credit Facility Agreement or this Agreement, Lender may waive
delivery in connection with the Applicable Underlying Transaction):
<PAGE>
(i) Applicable Underlying Developer's and Applicable
Underlying Guarantor's Organizational Documents. Copies of the
Applicable Underlying Developer's and the Applicable Underlying
Guarantor's organizational documents, including but not limited to
their respective articles of incorporation, bylaws, partnership
agreement, and other documents relevant to the form of business
organization of such Persons, as applicable, together with any
amendments thereto, certified to be true and complete by the
Applicable Underlying Developer's and the Applicable Underlying
Guarantor's Secretary or other authorized representative.
(ii) Good Standing Certificates. Current good standing
certificates issued by the appropriate Secretaries of State (or
other appropriate state officers) for the Applicable Underlying
Developer and the Applicable Underlying Guarantor.
(iii) Resolutions. Certified resolutions of the Applicable
Underlying Developer'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 Developer's and Applicable Underlying Guarantor's form of
business organization, authorizing the execution of all Applicable
Underlying Transaction Documents and the performance of all
obligations of the Applicable Underlying Developer and Applicable
Underlying Guarantor thereunder.
<PAGE>
(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, 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, a legal description of the Land 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 prepared by a Person satisfactory to Lender and covering
the Applicable Resort confirming (to the extent relevant, in
Lender's reasonable determination):
(A0 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;
(B0 That the Person preparing the report 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 of the
Applicable Resort or any of the Applicable Underlying
Transaction Collateral, except for commercially reasonable
amounts thereof commonly found at residential and resort
properties in the Applicable Jurisdiction;
<PAGE>
(C0 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
(D0 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.
(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 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 Developer 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.
(f 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 (at the applicable
Unit density) and the sale, use for timeshare purposes, marketing, and
occupancy of Units and Intervals thereat.
(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 Transaction Collateral, the Applicable Underlying
Developer, 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
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 Developer's expense, confirming that no such bankruptcy,
foreclosure action, or other material litigation or judgment exists.
<PAGE>
(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 Transaction Collateral
and that Lender has a first and prior perfected lien and security interest
covering the Applicable Underlying Purchase Property.
(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 Developer 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, 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 Transaction Documents to
be delivered to Borrower, or otherwise required by Borrower, for the
Applicable Underlying Developer and the Applicable Underlying Guarantor,
all in form and substance satisfactory to Borrower and Lender.
(k Interval Sales. To the extent applicable, Borrower has received
written evidence to the effect that the Applicable Underlying Developer
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.
(l 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.
(m Site Inspection. Lender shall have conducted a site inspection
----------------
of the Applicable Resort, the results of which shall be satisfactory to it.
(n Miscellaneous. Such other matters as Lender shall reasonably
-------------
require.
<PAGE>
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 Transaction(s) to which Borrower's Initial
Underlying Transaction Request and any subsequent Advance Requests pertain.
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 "H", 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; 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 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 hereof and dated as of the date of such
Advance Request;
(iii Specify the principal amount of the Advance requested,
and designate the Applicable Underlying Transaction(s) to which the
proceeds of such Advance pertain;
(iv Certify the amount of the then current Borrowing Base
of the Applicable Underlying Transaction(s) in question;
<PAGE>
(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 exists as of the date of the Advance
Request and, after giving effect to the making of such requested
Advance, no 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 Transaction in respect of
which the requested Advance is sought, contain Borrower's sworn
written certificate to the effect that, to the extent applicable:
(A0 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 Pledged
Consumer Notes Receivable or Purchased Consumer Notes
Receivable then pledged to Lender through such a collateral
assignment;
(B0 It has received no notice of any asserted or
threatened defense, offset, counterclaim, discount, or
allowance in respect of any Pledged Note Receivable or Pledged
Put and Reserve Agreement; and
<PAGE>
(C0 It has received such additional items as Lender
shall reasonably require, including, without limitation, an
aging report of the Pledged Consumer Notes Receivable and the
Purchased 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.
(b Review and Approval by Servicing Agent. Each and every item
listed in Section 4.3(a) hereof, together with true copies of all
documents, instruments, forms, certificates, opinions, and other materials
received by Borrower from an Applicable Underlying Developer in connection
with a request for an advance or payment under an Applicable Underlying
Transaction 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 Transaction.
(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:
<PAGE>
(i All of the conditions set forth in this Agreement and the
other Loan Documents have been fully satisfied by Borrower,
including but not limited to the proper recordation or registration
in the Applicable Jurisdictions, pursuant to all Applicable Laws, of
the Pledges and Assignments of Notes Receivable and Applicable
Mortgages, assigning to Lender all of Borrower's right, title and
interest in and to each such Pledged Note Receivable, the related
Applicable Mortgage and other Applicable Underlying Loan Documents
and Applicable Underlying Loan Collateral not covered by an
assignment described below; the Pledges and Assignments of Put and
Reserve Agreements and Applicable Mortgages, assigning to Lender all
of Borrower's right, title and interest in and to each such Pledged
Put and Reserve Agreement and the related Applicable Mortgages and
other Underlying Applicable Purchase Documents and Applicable
Underlying Purchase Property not covered by an Assignment described
below; 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; the Pledges and Assignments of Consumer Notes
Receivable and Interval Mortgages for each Applicable Underlying
Purchase, assigning to Lender all of Borrower's right, title and
interest in and to each such Purchased Consumer Note Receivable
within the Applicable Underlying Consumer Notes Receivable Purchase
Portfolio for the Applicable Underlying Purchase and the related
Interval Mortgage; 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 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 four (4) times
any calendar month and not more often than on a weekly basis;
(vi Lender has determined that the requested Advance will be
in compliance with Sections 2.3(b) and (d) hereof, 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 therefor and that each Applicable Underlying Purchase
as to which such Advance is sought remains an Eligible Purchase
Transaction hereunder and is not in excess of the Borrowing Base
therefor;
(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 reasonable discretion, that the Applicable Resort, the
Applicable Underlying Transaction Collateral, the Applicable
Underlying Purchase Property and the Applicable Underlying Developer
are in compliance with all Applicable Laws; and
<PAGE>
(ix The Interval Mortgages which encumber Intervals which are
coupled with an estate in real property and to which the Purchasers
are entitled to the delivery of deeds before the purchase price for
the Interval has been paid in full, the collateral assignments
thereof to Borrower from the Applicable Underlying Developer and to
Lender from Borrower and the UCC financing statements from the
Applicable Underlying Developer to Borrower and from Borrower to
Lender shall each have been duly recorded or registered in the
Applicable Jurisdiction in accordance with all Applicable Laws. In
addition, if there are Interval Mortgages which have been recorded,
registered, filed or indexed but were not required to be recorded or
registered pursuant to the provisions of the preceding sentence, the
collateral assignments thereof to Borrower from the Applicable
Underlying Developer and to Lender from Borrower shall be similarly
recorded, registered, filed or indexed in the Applicable
Jurisdiction in accordance with Applicable Laws. All of Borrower's
right, title, and interest in and to all Interval Mortgages, Pledged
Consumer Notes Receivable and Purchased 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 Insurance 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 a Default, Lender may, as to an
Applicable Underlying Transaction, perform any of Borrower's undertakings
under the Applicable Underlying Transaction 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.
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 hereby represents and warrants to Lender as follows:
<PAGE>
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 Authorization, Enforceability, Etc.
(a The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary corporate actions by
Borrower and does not and will not (i) violate any provision of Borrower'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 is a party or is subject; (ii) result in, or require
the creation or imposition of, any Lien upon or with respect to any asset of
Borrower other than Liens in favor of Lender; or (iii) result in a breach of, or
constitute a default by Borrower under, any indenture, loan, or credit agreement
or any other agreement, document, instrument, or certificate to which Borrower
is a party or by which it or any of its assets are bound or affected, 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 of any of the Loan Documents.
(c The Loan Documents constitute legal, valid, and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms. To the best of Borrower's knowledge after good faith diligent
inquiry, the Applicable Underlying Transaction Documents constitute legal,
valid, and binding obligations of the relevant Applicable Underlying Developers
and Applicable Underlying Guarantors, enforceable against each of them in
accordance with the respective terms of such Applicable Underlying Transaction
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 the Permitted Liens and Encumbrances.
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.
<PAGE>
(e The execution and delivery of the Loan Documents, the delivery
and [if the document is a promissory note or instrument (as defined in the
Code)] endorsement to Lender of the Pledged Notes Receivable, Pledged Put and
Reserve Agreements, Pledged Consumer Notes Receivable and Purchased 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, Pledged Put and Reserve
Agreements, Pledged Consumer Notes Receivable or Purchased 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 There have been no material modifications or amendments
whatsoever to the Pledged Notes Receivable, the Pledged Put and Reserve
Agreements or the Applicable Mortgages, other than those expressly approved by
Lender in writing, the originals of which have been delivered to Custodian.
(h Borrower has received no notice that there have been any material
modifications or amendments to the Pledged Consumer Notes Receivable, the
Purchased Consumer Notes Receivable or the Interval Mortgages.
(i None of the makers of the Pledged Notes Receivable and, to the
best of Borrower's knowledge after good faith diligent inquiry, the Pledged
Consumer Notes Receivable or Purchased Consumer Notes Receivable have any
defenses, offsets, claims, or counterclaims, relating to the Pledged Notes
Receivable, the Pledged Put and Reserve Agreements, any of the other Applicable
Underlying Transaction Documents, the Pledged Consumer Notes Receivable or the
Purchased Consumer Notes Receivable, and Borrower has received no notice that
any such defense, offset, claim or counterclaim is claimed to exist.
(j The Applicable Mortgages, if any, constitute and will continue to
constitute valid and enforceable first and exclusive Liens and security
interests on the real property encumbered thereby.
(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, the Pledged Put and Reserve
Agreements, and the Applicable Mortgages are and shall remain in full force and
effect as valid and binding obligations of the respective Applicable Underlying
Developers in favor of Lender, as holder and/or collateral assignee.
<PAGE>
(m The Pledged Consumer Notes Receivable, the Purchased 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 Developer under any of the Applicable Underlying
Transaction Documents.
(o The grant of the Liens and security interests described herein by
the Applicable Underlying Developers 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
and Purchased Consumer Notes Receivable under such 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
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 from any of the
Obligations.
5.3 Financial Statements and Business Condition. The Financial Statements
fairly present the respective financial conditions and results of operations of
Borrower and Guarantor as of the date or dates thereof and for the periods
covered thereby. There 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, shall
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 the Loan Documents will render Borrower or Guarantor unable to pay their
respective debts as they become due.
<PAGE>
5.4 Taxes. Except with respect to taxes and assessments being contested in
accordance with the terms and conditions of Section 6.1(e) hereof, Borrower
represents and warrants that to the best of Borrower's knowledge after good
faith diligent inquiry, each Applicable Underlying Developer (a) has paid in
full all ad valorem taxes and other taxes and assessments levied against the
Applicable Underlying Transaction Collateral, the Applicable Underlying Purchase
Property, and Borrower knows of no basis for any additional taxes or assessments
against any Applicable Resort, Applicable Underlying Transaction Collateral or
Applicable Underlying Purchase Property; 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 Developer, or any Applicable Underlying Guarantor.
5.5 Title to Properties; Prior Liens. To the best of Borrower's knowledge
after good faith diligent inquiry, each Applicable Underlying Developer has good
and marketable title to all of the Applicable Underlying Transaction Collateral
for each Applicable Underlying Transaction in which it has engaged, 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
Transaction Collateral, except for the Permitted Liens and Encumbrances.
5.6 Subsidiaries, Affiliates, and Capital Structure. Guarantor is the sole
shareholder of and derives financial benefit from 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.
5.7 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 Developer, 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
Developer, 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 "I", attached hereto and incorporated herein
by this reference, describes all currently pending litigation against Borrower
or Guarantor.
5.8 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 Developer has received notice from
any governmental agency or other Person with regard to Hazardous Materials on,
under, or affecting all or any portion of any Applicable Resort, the Applicable
Underlying Transaction Collateral or any Applicable Underlying Purchase
Property; and (c) neither any Applicable Underlying Developer, any Applicable
Resort, nor any Applicable Underlying Transaction Collateral, nor any Applicable
Underlying Purchase Property is in violation of any Environmental Laws.
<PAGE>
5.9 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 Developers, the Applicable Underlying Guarantors, any of the
Applicable Underlying Transaction 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
Developer or an Applicable Underlying Guarantor, the representation and warranty
made in this Section 5.9 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 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.
5.10 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 of 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.
5.11 No Defaults. No 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.
5.12 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.
<PAGE>
5.13 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.
5.14 Tax Identification/Social Security Numbers. Borrower's and Guarantor's
----------------------------------------------
respective federal taxpayer identification numbers are as follows:
Borrower:... 16-1399129
Guarantor:.. 59-2346270
5.15 Legal Compliance. Borrower has, in all material respects, complied
fully with all Applicable Laws in connection with the Applicable Underlying
Transactions. To the best of Borrower's knowledge after good faith diligent
inquiry, each Applicable Underlying Developer has, in all material respects,
similarly complied with all Applicable Laws in connection with each Applicable
Resort, the Applicable Underlying Transaction Collateral and the Applicable
Underlying Purchase Property. In particular, Borrower is not aware of any
violation by an Applicable Underlying Developer 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.
5.16 Representations and Warranties of Applicable Underlying Developers.
To the best of Borrower's knowledge after good faith diligent inquiry, the
representations and warranties made by the Applicable Underlying Developer in
the Applicable Underlying Transaction Documents do not contain any material
misstatements of fact or omit the statement of a material fact necessary to make
such representation or warranty not misleading.
5.17 Applicable Timeshare Documents and Reports. Each Applicable
Underlying Developer has furnished to Borrower and Borrower shall furnish to
Lender, upon request, true and correct copies of the Applicable Timeshare
Documents which consist of all those placed on file by the Applicable Underlying
Developer with the applicable regulatory authorities or any other appropriate
federal, state, or local regulatory or recording agencies, offices, or
departments, if required.
<PAGE>
5.18 Continuation and Investigation. Each request by Borrower for an
Advance 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.
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.
(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 States of Delaware and 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 Transaction 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 Developer, 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 Developer and each Applicable Resort:
<PAGE>
(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 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.
<PAGE>
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' (or a shorter period if such shorter
period is mandated by applicable law) 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 Developer 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 Developer
to determine whether the required insurance premiums covering the
Applicable Underlying Transaction Collateral and Applicable Underlying
Purchase Property 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 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 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) of 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 Developer from their
respective obligations as set forth herein. In Lender's 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 Developer, 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 Transaction 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 Transaction 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 Developer,
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.
<PAGE>
(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 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
and assessments to be paid, except to the extent such taxes and
assessments are being contested in accordance with the terms and
conditions of this Section 6.1(e). If such required taxes and assessments
(and any applicable late charges, etc.) are not paid within such thirty
(30) day period and are not being contested in accordance with the terms
and conditions of this Section 6.1(e), such failure shall constitute an
Event of Default and Lender may, in its discretion, without any obligation
to do so, choose to pay such taxes on behalf of Borrower or the Applicable
Underlying Developer, in which case Borrower shall pay Lender interest at
the Default Rate on any amounts so advanced. Borrower shall pay, where
applicable, or shall use its best efforts to cause the Applicable
Underlying Developer or Applicable Underlying Guarantor to pay, all other
charges and assessments levied against such Applicable Underlying
Developer, the Applicable Underlying Transaction Collateral, the
Applicable Underlying Purchase Property, 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. Borrower may contest the payment of taxes and assessments in good
faith and by appropriate proceedings diligently conducted, which suspend
the collection thereof from the Collateral and do not interfere with the
payment of monies due under the Collateral so long as adequate reserves
have been set aside for such taxes and assessments in accordance with
GAAP, and the non-payment of such taxes and assessments, in the opinion of
Lender, does not place the Collateral in any imminent danger of being
sold, forfeited or lost.
(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 Transaction 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 Transaction Collateral, any Applicable Underlying Purchase
Property 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 Transaction unless
an Event of Default hereunder has occurred. Lender agrees to use
reasonable efforts not to interfere unreasonably with the Applicable
Underlying Developer's business operations in connection with any such
inspections. Without limiting the foregoing, Lender shall have the right
to make such credit investigations as Lender may deem appropriate in
connection with its review of any Applicable Underlying Transaction
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 Developers
and Applicable Underlying Guarantors as Lender may request.
Notwithstanding anything in this Section 6.1(f) to the contrary, without
the prior written consent of Borrower not to be unreasonably withheld,
Lender will not initiate contact with an Applicable Underlying Developer
or its employees, agents or independent contractors concerning an
Applicable Underlying Transaction unless an Event of Default exists.
<PAGE>
(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 Transaction 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 and the Purchased 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, Pledged Consumer Notes Receivable and Purchased
Consumer Notes Receivable; (v) a Borrowing Base report substantially
in the form of Exhibit "J", 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 sixty (60) days following the end of each calendar
quarter, unaudited statements of income and expense and cash flow 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;
<PAGE>
(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 and cash flow 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) and (iii) hereof shall be accompanied by a
certificate of the President or the Chief Financial Officer 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, 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. Promptly upon becoming aware of the
existence of any condition or event that constitutes or would with
the passage of time, notice or a determination by Lender constitute
a Default, or a default or event of default pursuant to any of the
Applicable Underlying Transaction 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 Developer 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;
<PAGE>
(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 5.7 hereof or otherwise, that could
materially and adversely affect Borrower, Guarantor, any Applicable
Underlying Developer, any Applicable Underlying Guarantor, any
Applicable Resort, any Applicable Underlying Transaction 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;
(ix) Applicable Underlying Transaction Financials. Borrower
shall deliver to Lender quarterly unaudited financial statements for
each Applicable Underlying Transaction within sixty (60) days after
each calendar quarter and annual audited financial statements for
each Applicable Underlying Transaction within one hundred twenty
(120) days after each calendar year; and
(x) Other Information. Borrower shall promptly deliver to
Lender any other available information related to the Loan, the
Collateral, any Applicable Underlying Transaction Collateral,
Borrower, Guarantor, the Applicable Resorts, the Applicable
Underlying Developers, or the Applicable Underlying Guarantors as
Lender may in good faith request.
(xi) Applicable Underlying Transaction Financials. Borrower
shall deliver to Lender quarterly unaudited financial statements for
each Applicable Underlying Transaction within sixty (60) days after
each calendar quarter and annual audited financial statements for
each Applicable Underlying Transaction within one hundred twenty
(120) days after each calendar year.
(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 Transactions.
<PAGE>
(i) Notices of Changed Circumstances. 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 or (ii) as a result of which Borrower is not in full compliance
with all of its covenants and agreements contained in this Agreement or
any other Loan Document.
(j) 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, the Pledged Put and Reserve Agreements,
the Pledged Consumer Notes Receivable, the Purchased Consumer Notes
Receivable and all of the other Collateral, and such files shall contain
true copies of each Pledged Note Receivable, each Pledged Consumer Note
Receivable and each Purchased Consumer Note Receivable, as amended from
time to time, copies of all relevant credit memoranda relating to such
Pledged Notes Receivable, Pledged Put and Reserve Agreements, Pledged
Consumer Notes Receivable and Purchased Consumer Notes Receivable, and all
collection information and correspondence relating thereto.
(k) 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.
(l) 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 or the release of any Collateral;
<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 or
Advances made hereunder, expressly including, without limitation,
the defense by Lender of any legal proceedings instituted or
threatened by any Applicable Underlying Developer, 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. Without limiting the generality of the
foregoing, in the event of the commencement of a bankruptcy
proceeding by or against Borrower or otherwise involving the
Collateral, Lender shall be entitled to recover, and Borrower shall
be obligated to pay, Lender's attorneys' fees and costs incurred in
connection with: (a) any determination of the applicability of the
Debtor Relief Laws to the terms of the Loan Documents or Lender's
rights thereunder; (b) any attempt by Lender to enforce or preserve
its rights under the bankruptcy laws or to prevent Borrower or any
other person from seeking to deny Lender its rights thereunder; (c)
any effort by Lender seeking to protect, preserve or enforce its
rights against Collateral, or seeking to engage in such protection,
preservation or enforcement; or (d) any proceeding(s) arising under
the Debtor Relief Laws, or arising in or related to a case under the
Debtor Relief Laws;
(vi) All fees and expenses of Servicing Agent, Custodian
and Lockbox Agent;
(vii) All costs and expenses incurred by Lender under the
Note, and all late charges payable under the Note; and
<PAGE>
(viii) To the extent the same are not paid by an Applicable
Underlying Developer, 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, broker's fees, escrow fees, wire transfer fees,
reasonable expenses (including, without limitation, reasonable fees
and expenses of Lender's counsel) incurred in connection with the
release of any Applicable Underlying Transaction Collateral, 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 Developer.
Notwithstanding anything in this Section 6.1(l) to the contrary,
Borrower's liability to pay closing and recording fees, taxes, due
diligence costs, and documentation fees in connection with the
preparation, negotiation and execution of this Agreement and the RFI ADC
Credit Facility Agreement and the closing of the first to occur of the
initial Advance against the first Applicable Underlying Transaction
collaterally assigned to Lender or the initial advance under the RFI ADC
Credit Facility against a note receivable shall not exceed Fifty Thousand
Dollars ($50,000).
<PAGE>
(m) 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 Collateral, the Applicable
Underlying Transaction Documents, or the Applicable Underlying Transaction
Collateral; (ii) the transactions contemplated under any of the Loan
Documents or the Applicable Underlying Transaction 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 failure of Borrower or an Applicable Underlying
Developer to perform any obligation or covenant herein required to be
performed pursuant to any Environmental Laws; (vi) 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); (vii) 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;
(viii) 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;
(ix) the violation or claimed violation of any Environmental Laws in
regard to an Applicable Resort; (x) 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 Developer, or another Person; (xi) the exercise
by Borrower of any rights or remedies under the Applicable Underlying
Transaction Documents or any Applicable Laws; or (xii) 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 6.1(m)
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.
(n) Loan Servicing. The Servicing Agreement shall be in form and
content satisfactory to Lender. 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 or if Borrower or an Affiliate of
Borrower is the Servicing Agent and Lender, in its reasonable judgment,
has determined that such Person's servicing systems and controls are
inadequate to protect Lender in any material way (and based upon an
on-site inspection conducted by it prior to the Closing Date, Lender
acknowledges that such an inadequacy did not appear to exist as of the
completion of such inspection). If the Servicing Agent is Borrower or an
Affiliate of Borrower, Lender may in its discretion and at Borrower's
expense review the servicing procedures of such Person twice in any twelve
(12) month period or more often if a Default hereunder exists, and no
servicing fees shall be paid during or with respect to any period of time
in which a Default hereunder exists.
<PAGE>
(o) Closing Failure Fee. If on or before October 31, 1999, no
Advance occurs and no advance occurs under the RFI ADC Credit Facility or
under any receivables, acquisition, development or construction loan the
initial advance of which is hereafter made by Lender to Guarantor or to an
Affiliate of Guarantor and such event is not the fault of Lender and does
not result from failure of Lender, its attorneys, agents and independent
contractors to act promptly and in good faith, Borrower shall pay to
Lender a fee in the amount of Two Hundred Thousand Dollars ($200,000) plus
all legal fees, costs and due diligence expenses incurred by Lender in
connection with the Loan and the RFI ADC Credit Facility. This fee shall
not be duplicative of the fee required pursuant to Section 6.1(o) of the
RFI ADC Credit Facility Agreement, and all amounts paid pursuant to such
Section shall reduce the amount remaining payable hereunder.
<PAGE>
(p) Minimum Loan Balance; Non-Utilization Fee. Beginning on (i) the
date ("Average Combined Balance Start Date") which is six (6) months after
the earlier of the initial Advance, the initial advance under the RFI
Receivables Credit Facility, or the initial advance of any other
receivables, acquisition, development or construction loan under which
such initial advance is hereafter made by Lender to Guarantor or to an
Affiliate of Guarantor or (ii) April 30, 2000, and continuing until the
date on which the Borrowing Term expires ("Average Combined Balance Stop
Date"), Borrower shall maintain an average aggregate daily principal
balance on the Loan, the RFI Receivables Credit Facility and any other
receivables, acquisition, development or construction loans under which
the initial advance is hereafter made by Lender to Guarantor or to an
Affiliate of Guarantor ("Average Combined Balance") in an amount not less
than Ten Million Dollars ($10,000,000) ("Minimum Average Combined
Balance"); provided, however, that Borrower's failure to do so shall not
constitute a Default if on the date ten (10) days after the later of (i)
the end of each three (3) month period (or any shorter period ending on
the Average Combined Balance Stop Date) ("Non-Utilization Fee Payment
Period") following the Average Combined Balance Start Date through the
Average Combined Balance Stop Date or (ii) the effective date of notice
from Lender advising Borrower of the amount due for such Non-Utilization
Fee Payment Period, Borrower shall pay to Lender the Non-Utilization Fee
then due, as calculated pursuant to the following sentence. As used in
this Section 6.1(p), the term "Non-Utilization Fee" means an amount equal
to the excess (if any) of (i) the product of (A) the difference (but not
less than zero), during the period ("Elapsed Portion of the Average
Combined Balance Measurement Period") beginning on the Average Combined
Balance Start Date and terminating at the end of the Non-Utilization Fee
Payment Period for which the Non-Utilization Fee is being calculated,
between the Minimum Average Combined Balance and the actual average daily
aggregate principal balance on the Loan, the RFI Receivables Credit
Facility and any other receivables, acquisition, development or
construction loans under which the initial advance is hereafter made by
Lender to Guarantor or any Affiliate of Guarantor times (B) one-half of
one percent (0.50%) times (C) a fraction the numerator of which is the
number of days in the Elapsed Portion of the Average Combined Balance
Measurement Period and the denominator which is three hundred sixty-five
(365) over (ii) the Non-Utilization Fees previously due. This fee shall
not be duplicative of the fee required pursuant to Section 6.1(p) of the
RFI ADC Credit Facility Agreement, and all amounts paid pursuant to such
Section shall reduce the amount remaining payable hereunder. For purposes
of this Section 6.1(p), the daily balance of a loan shall be determined by
Lender in the same manner as it determines the daily balance of a loan for
purposes of computing accrued interest on such loan.
(q) Custodial Fee. At the time Borrower delivers to Lender a
--------------
Consumer Note Receivable it shall pay to Lender the Custodial Fee for such
Consumer Note Receivable.
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, 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.
<PAGE>
(b) Restrictions on Transfers. Borrower shall not, without obtaining
the prior written consent of Lender, 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.
Without limiting the generality of the preceding sentence (and, as the
case may be, in addition to the restrictions contained therein) 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; or (C) any change in the
ownership 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 (C) above in the event that: (X) 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 an amount then approved
Lender and the Minimum Net Worth Requirement, respectively, as determined
in accordance with GAAP; and (Y) in the case of a transfer pursuant to
clause (A), the transferee assumes the obligations of Borrower under the
Loan Documents pursuant to a document satisfactory to Lender without the
release of Borrower or Guarantor and Borrower and Guarantor have executed
a document or documents satisfactory to Lender confirming their respective
obligations under the Loan Documents. In the event that Lender 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 shall not, and shall not permit any Affiliate to, use the
name of Lender or of any 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 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.
(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, Pledged Put and
Reserve Agreements, Applicable Mortgages, other Applicable Underlying
Transaction Documents, or any Applicable Timeshare Documents, including
but not limited to the Applicable Declarations.
SECTION 7. EVENTS OF DEFAULT.
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An "Event of Default" shall exist if any of the following occurs:
<PAGE>
7.1 The Loan.
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(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.
(c) Warranties or Representations. If any statement or
representation made by or on behalf of Borrower or Guarantor in any of the 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 Developer 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 within ten (10) days after Lender delivers written notice
thereof to Borrower.
<PAGE>
(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 $50,000,
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 an Applicable Underlying Transaction 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 an Event of Default has occurred pursuant to
---------------
Section 3.6 hereof.
(l) Material Adverse Change. If there occurs any material adverse change
-------------------------
in the financial condition of Borrower or Guarantor.
(m) Default of Guarantors. If a default has occurred under the Guaranty.
---------------------
<PAGE>
(n) Default by Borrower in Other Agreements. Any default by Borrower
(i) in the payment or performance of other indebtedness for borrowed money or
obligations in excess of $50,000 or (ii) in the payment or performance of any
other material indebtedness or obligations owed to a person other than Lender,
but only if such default is not cured or waived within thirty (30) days after
the occurrence thereof.
(o) Violation of Negative Covenants. If Borrower 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 Transactions.
----------------------------------
(a) Payment Defaults. If any Applicable Underlying Developer 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 Transaction 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 Developer, which
notice shall be given by Borrower immediately upon the Applicable Underlying
Developer'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 1.46 hereof or an
Applicable Underlying Purchase Transaction ceases being an Eligible Purchase
Transaction pursuant to Section 1.47 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 Developer 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 any Applicable Underlying Developer or Applicable Underlying
Guarantor under any Debtor Relief Law, a receiver, conservator, liquidator, or
trustee of such Applicable Underlying Developer 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 any Applicable Underlying Developer or any 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 Developer 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 Developer or Applicable
Underlying Guarantor.
(i) Enforceability. If any material term, provision, or condition of
an Applicable Underlying Transaction 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 Developer's
business in accordance with the terms of the Applicable Underlying Transaction
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 Developer, 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 Developer 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 Developer grants any mortgage, Lien, or
other encumbrance upon all or any portion of an Applicable Resort or any
Applicable Underlying Transaction 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 Transaction Collateral or all or any portion of the Collateral,
unless approved by Lender in writing.
(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 Transaction Documents.
<PAGE>
(m) 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 Developer 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 Applicable Underlying Developer'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.
(n) 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.
(o) Cross-Default. An "Event of Default" [as defined in Section 7.2
of the RFI ADC Credit Facility] occurs in connection with a loan made with
respect to the same Applicable Resort.
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 Transaction 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 Transaction. Promptly following its receipt of all
such amounts, and provided that no Default then exists hereunder, Lender shall
release its Lien against all Applicable Underlying Transaction Collateral that
secures the Applicable Underlying Transaction in question.
SECTION 8. REMEDIES.
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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 Borrower) are parties, without further liability or
obligation to Borrower or Guarantor, to the extent Lender shall deem
appropriate, all without notice to Borrower or any Guarantor.
<PAGE>
(c) Termination of Obligation to Grant Partial Releases. Cease
---------------------------------------------------------
granting or authorizing any Applicable Underlying Developer 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 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.
<PAGE>
(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, the Pledged Put and
Reserve Agreements, the Pledged Consumer Notes Receivable and/or the
Purchased Consumer Notes Receivable and to apply such payments to the
Obligations, and to sue in its own name an Applicable Underlying Developer
or other maker of any defaulted Pledged Note Receivable or Pledged Put and
Reserve Agreement or the maker of any defaulted Pledged Consumer Notes
Receivable or defaulted Purchased 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 Transaction 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 (whether or not an adequate remedy exists at law or
failure to grant specific performance would result in irreparable harm) of
any covenant or condition contained in the Loan Documents or the
Applicable Underlying Transaction 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 Transaction Collateral and may enter any Applicable Resort or
any of the premises of Borrower or an Applicable Underlying Developer or
wherever the Collateral or Applicable Underlying Transaction Collateral
shall be located, with or without process of law wherever the Collateral
or Applicable Underlying Transaction 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
Transaction Collateral).
<PAGE>
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 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 determination 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 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, take the following actions:
<PAGE>
11728.18700.386303-8
(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. 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
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.
<PAGE>
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 Transaction 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.
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 hereof. In no event, however, shall Lender
have any obligation or duty whatsoever to perform any covenant or agreement of
Borrower or any Applicable Underlying Developer contained herein or in any of
the other Loan Documents, any Applicable Underlying Transaction 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 Developer 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.
<PAGE>
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 Developer
arising in connection with any Applicable Resort, all or any portion of the
Collateral or Applicable Underlying Transaction 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 Transaction 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 Developer with respect to any Applicable Resort, any of
the Collateral, any of the Applicable Underlying Transaction 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 Transaction Documents, and Borrower shall continue to be
liable for all of its obligations thereunder or with respect thereto. Borrower
hereby agrees to indemnify, protect, defend, and hold Lender harmless from and
against any and all claims, demands, causes of action, losses, damages,
liabilities, suits, costs, and expenses, including, without limitation,
attorneys' fees and court costs, asserted against or incurred by Lender by
reason of, arising out of, or connected in any way with (i) any failure or
alleged failure of Borrower to perform any of its covenants or obligations with
respect to an Applicable Resort or all or any portion of the Collateral or
Applicable Underlying Transaction 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 Put and Reserve Agreements, the Pledged Consumer Notes Receivable,
the Purchased 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 Developers or Lender, as the case may be, on the other
hand; or (v) the Pledged Notes Receivable, the Pledged Put and Reserve
Agreements, the Applicable Mortgages, the Pledged Consumer Notes Receivable, the
Purchased 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 Pledged Put and Reserve Agreements, the Applicable
Mortgages, the Pledged Consumer Notes Receivable, the Purchased 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
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 Developer, 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 Collateral; (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.
<PAGE>
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. The
consent of Borrower shall not be required prior to any such assignment's
becoming effective. 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 prior to such assignment. Upon the
consummation of any assignment to an assignee pursuant to this Section 9.8,
Lender and Borrower shall, if Lender or its 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 the assignee, in each case in principal amounts
reflecting their respective rights to payment.
9.9 Notice to Purchaser. Borrower authorizes Lender (but Lender shall not
be obligated) to communicate at any time and from time to time with any
Applicable Underlying Developer or any other Person primarily or secondarily
liable under an Applicable Underlying Transaction with regard to the Lien of the
Lender thereon and any other matter relating thereto; provided, however, that
Lender shall not initiate any communication regarding the Applicable Underlying
Transaction with any Applicable Underlying Developer or any other Person
primarily or secondarily liable under an Applicable Underlying Transaction
unless an Event of Default exists, although it may require Borrower or Servicing
Agent to do so. By no later than the Closing Date, Borrower shall deliver to
Lender notifications to the Applicable Underlying Developers executed in blank
by Borrower and in form acceptable to Lender, pursuant to which the Applicable
Underlying Developers (or other obligors) are directed to remit all payments in
respect of the Collateral to Lockbox Agent or as Lender may otherwise require.
<PAGE>
9.10 Collection of the Notes. Borrower hereby directs and authorizes each
Applicable Underlying Developer and other Person liable for the payment and
performance of any Applicable Underlying Transaction, Pledged Consumer Note
Receivable or Purchased 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, 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 Applicable Underlying Transactions, the Pledged Consumer Notes
Receivable or the Purchased Consumer Notes Receivable in accordance with the
directions of Lender; provided, however, that Lender shall not give any such
notice to any Person unless an Event of Default exists, although it may require
Borrower to do so. Following the occurrence of an Event of Default, Lender shall
have the right to require that all payments becoming due under the Applicable
Underlying Transactions, the Pledged Consumer Notes Receivable or the Purchased
Consumer Notes Receivable be paid directly to Lender or as it otherwise may
direct, 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 Applicable Underlying
Transactions, the Pledged Consumer Notes Receivable or Purchased 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 Applicable Underlying Transactions, the Pledged Consumer Notes Receivable or
Purchased 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 Applicable
Underlying Transactions, Pledged Consumer Notes Receivable or Purchased 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 hereof;
(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 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 both Onondaga County, New York, and Maricopa County, Arizona.
<PAGE>
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) 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 under the Bankruptcy Code, Borrower agrees 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 hereby authorizes Lender to
conduct such investigations and inquiries concerning Borrower, Guarantor, the
Applicable Resorts, the Applicable Underlying Developers, the Applicable
Underlying Guarantors, the Collateral, and the Applicable Underlying Transaction
Collateral as Lender shall deem 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 Developer
has used or will use the proceeds of the Loan or those of any Applicable
Underlying Transaction. 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 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 Transactions 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 Transactions 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.
-------------
<PAGE>
11.1 Notices. All notices, requests or demands required or permitted to be
given under the Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, addressed to the address specified
below, or to such other address as the party being notified may have designated
in a notice given to the other party. Written notice may be given by telecopy to
the telecopier number specified below or to such other telecopier number as the
party being notified may have designated in a notice given to the other party,
which notice shall be effective on the day of receipt if received during the
recipient's normal business hours on the day of receipt or otherwise on the next
Business Day; provided that such notice shall not be deemed effective unless not
later than the next Business Day, a copy of such notice is hand delivered or
deposited for delivery via courier or in the United States mails in accordance
with the requirements set forth above.
If to Borrower: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Thomas Hamel, President
Telecopy No.: (315) 422-9477
With a copy to: Resort Funding, Inc.
c/o Eastern Resorts
115 Long Wharf
P.O. Box 2000
Newport, Rhode Island 02840
Attention: Richard Winkler, Esq., General Counsel
Telecopy No.: (401) 846-3888
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President- Resort Finance
Telecopy No.: (480) 874-6444
With a copy to: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President-Associate General Counsel
Telecopy No.: (480) 874-6445
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 ARIZONA, EXCLUSIVE OF ITS
CHOICE OF LAWS PRINCIPLES.
11.4 CHOICE OF JURISDICTION; WAIVER OF VENUE. EACH OF BORROWER AND LENDER:
(A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY DOCUMENT OR THE SUBJECT MATTER THEREOF, OR, IF LENDER INITIATES
SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, AND THE
CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY
ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
Borrower Initials (________)
Lender Initials (________)
<PAGE>
11.5 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 11.5, and this Section 11.5 shall govern over all other provisions in
any document or agreement now or hereafter existing. This Section 11.5 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.
11.6 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.
11.7 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns; provided, however, that Borrower may not
transfer or assign any of its rights or obligations under this Agreement or the
other Loan Documents without the prior written consent of Lender. This Agreement
and the transactions provided for or contemplated hereunder or under any of the
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 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 it deems it desirable to do so.
11.8 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.
<PAGE>
11.9 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 and Lender.
11.10 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 and no term or provision of any of the Loan
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.
11.11 Release and Return of Notes Receivable and Collateral. In the event
that all obligations of an Applicable Underlying Developer under Applicable
Underlying Transaction Documents have been paid and performed in full, then
within a reasonable time thereafter not to exceed thirty (30) days, Lender shall
remove (or authorize Borrower to remove) from any related Pledged Notes
Receivable and the related Pledged Consumer Notes Receivable the allonges
endorsing such instruments to Lender and deliver such Pledged Notes Receivable,
Pledged Consumer Notes Receivable and any Applicable Underlying Transaction
Collateral, 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 are satisfied,
Lender shall release all Collateral for the Loan as set forth in this Section
11.11.
11.12 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.
11.13 Entire Agreement; Inconsistencies. 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 (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. In
the event of any ambiguity or inconsistency between the provisions of the Loan
Documents, the provisions imposing the greatest obligations upon Borrower and
granting the most expansive rights to Lender shall control.
<PAGE>
11.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF BORROWER 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 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 HEREBY CERTIFIES 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
ACKNOWLEDGES 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 AND LENDER IN THIS SECTION 11.14 SHALL SURVIVE THE
FINAL PAYMENT OR PERFORMANCE OF ALL OF THE OBLIGATIONS AND THE RESULTING
TERMINATION OF THIS AGREEMENT.
Borrower Initials (________)
Lender Initials (________)
11.15 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.
11.16 Consent to Advertising and Publicity of Applicable Timeshare
Documents. Lender routinely advertises the transactions to which it is a party
in newspapers, industry periodicals, and other miscellaneous print and
electronic literature. However, Lender will not use the name, logo, insignia,
descriptive art work, trade name, trademark, or other similar material of
Borrower or Guarantor, whether or not protected by copyright (or otherwise), in
any such advertisement, without the consent of the Person whose name or property
right is being used; and Lender will not identify any Applicable Underlying
Transaction in any such advertisement without the consent of Borrower. Any
consent required from a Person pursuant to the preceding provisions of this
Section 11.16 may be given or withheld in such Person's sole and absolute
discretion.
11.17 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.
<PAGE>
11.18 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.
11.19 Gender. Words of any gender in this Agreement shall include each other
------
gender, where appropriate.
11.20 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 or any other Person.
11.21 Reimbursement for Taxes. Borrower will promptly, upon written demand
from Lender, reimburse Lender for any taxes assessed against Lender by the State
of Arizona or any subdivision thereof that is on account of or measured by the
interest or other income received by Lender under the Pledged Notes Receivable,
Applicable Mortgages or other Applicable Underlying Transaction Documents
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.
11.22 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 and prepared at Borrower's or an
Applicable Underlying Developer'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 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 FINOVA CAPITAL CORPORATION IS
RELYING ON THE WITHIN INFORMATION IN CONNECTION WITH ITS ADVANCES TO
BORROWER ON THE SUBJECT PROPERTY.
<PAGE>
(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.
11.23 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 11.23. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
11.24 Year 2000 Issues. Borrower has taken all action necessary to assure
that there will be no material adverse change to Borrower's business by reason
of the advent of the year 2000, including, without limitation, that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process dates after April 1, 1999. Borrower has taken
all actions necessary in Lender's reasonable judgment to assure that there will
be no material adverse change to Borrower's business by reason of the advent of
the year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process all dates. Promptly after Lender's request from time to time, Borrower
shall provide to Lender assurance reasonably acceptable to Lender that
Borrower's computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process all dates.
<PAGE>
11.25 Standards Applied to Lender's Actions. Unless otherwise specifically
stipulated elsewhere in the Loan Documents, if a matter is left in the Loan
Documents to the decision, right, requirement, request, determination, judgment,
opinion, approval, consent, waiver, satisfaction, acceptance, agreement, option,
election or discretion of Lender, its employees, Lender's counsel or any agent
for or independent contractor of Lender, such action shall be deemed to be
exercisable by Lender or such other person in its sole and absolute discretion
and according to standards established in its sole, absolute and unlimited
discretion. Without limiting the generality of the foregoing, "option" and
"discretion" shall be implied by use of the words "if" or "may". However,
whenever the Loan Documents contain the terms "reasonably satisfactory to
Lender," "reasonably determined by Lender," "reasonably acceptable to Lender,"
"reasonable consent of Lender," "Lender shall reasonably elect," "Lender shall
reasonably request," "reasonably approved by Lender" or similar terms wherein
the word reasonable or a derivative thereof is used with regard to an action of
Lender: (a) such terms shall mean satisfactory to, at the election of,
determined by, acceptable to or requested by, as applicable, Lender in its sole
(but reasonably exercised) discretion under standards applicable to commercial
lenders under the laws of the State of Arizona; and (b) it is the intention of
the parties to permit Lender a broad latitude in which to exercise its
discretion, acknowledging that, while such discretion may not be exercised
arbitrarily or capriciously, it may be exercised conservatively for Lender's
protection and benefit. By way of illustration, and not of limitation, it shall
not be unreasonable for Lender, in exercising its discretion, to make
conservative assumptions regarding the possible outcome of future events.
11.26 Scope of Attorneys' Fees. As used in the Loan Documents, the term
"attorneys' fees" includes the reasonable fees of attorneys licensed to practice
law in any jurisdiction, law clerks, paralegals, investigators and others not
admitted to the bar but performing services under the supervision of a licensed
attorney, and the expenses (including, without limitation, normal and customary
charges for telecopy and photocopy services and clerical overtime) incurred by
them in the performance of their services. As used in the Loan Documents,
attorneys' fees incurred by Lender in the enforcement of any remedy or covenant
include, without limitation, attorneys' fees incurred in any foreclosure of
liens or security interests granted under Loan Documents, in protecting or
sustaining the lien or priority of the Collateral, or in any proceeding arising
from or connected with any such matter, including any bankruptcy, receivership,
injunction or other similar proceeding, or any appeal from or petition for
review of any such matter, and with or without litigation.
IN WITNESS WHEREOF, Borrower and Lender 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: /S/
Its: Senior Vice President
Type/Print Name: Gerald L. Klaben, Jr.
<PAGE>
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/
Its: Vice President
Type/Print Name: Gayle R. McKenzie
<PAGE>
LIST OF EXHIBITS
EXHIBIT "A" Form of Pledge and Assignment of Note Receivable and Applicable Mortgage
EXHIBIT "B" Form of Pledge and Assignment of Put and Reserve Agreement and
Applicable Mortgage
EXHIBIT "C" Form of Pledge and Assignment of Consumer Notes Receivable and
Interval Mortgages
EXHIBIT "D" Form of Assignment of Underlying Guarantee
EXHIBIT "E" Form of Lockbox Agreement
EXHIBIT "F" Permitted Liens and Encumbrances
EXHIBIT "G" Form of Servicing Agreement
EXHIBIT "H" Form of Advance Request
EXHIBIT "I" Currently Pending Litigation
EXHIBIT "J" Form of Borrowing Base Report
EXHIBIT "K" Exceptions to Eligible Consumer Note Receivable Standards
<PAGE>
11728.18700.386303-8
EXHIBIT "K"
EXCEPTIONS TO ELIGIBLE CONSUMER NOTE RECEIVABLE STANDARDS
1. Definition of Pre-Sales Consumer Note Receivable. A Pre-Sales Consumer Note
-----------------------------------------------------
Receivable is a Consumer Note Receivable with respect to which a Purchaser may no
longer rescind the Interval sale transaction giving rising to the Consumer Note
Receivable, but also with respect to which the Applicable Underlying Developer is
not entitled to receive and retain payments because one or more of the following
conditions ("Acceptable Executory Conditions") have not been satisfied: (a)
construction of the Unit(s) from which the sold Interval(s) is/are being created
and/or other improvements have not been completed or (b) a specified number of
Interval sales and closings have not occurred.
2. Additional Conditions to the Funding of Pre-Sales Consumer Notes Receivable and
-----------------------------------------------------------------------------------
Exceptions to Standard Criteria for Eligible Consumer Notes Receivable.
----------------------------------------------------------------------
(a) Additional Conditions.
---------------------
(i) Lender may require an Applicable Borrowing Base Percentage
less than 90% with respect to Pre-Sales Consumer Notes
Receivable. The following additional conditions must be
satisfied by Borrower at its expense in order for a Pre-Sales
Consumer Note Receivable to qualify as an Eligible Note
Receivable:
(A) All payments received in respect of the Pre-Sales
Consumer Note Receivable and the Interval Mortgage
executed by the Purchaser in connection with the
Interval sale giving rise to such Pre-Sales Consumer
Note Receivable must be held in escrow ("Applicable
Pre-Sales Escrow") by an escrow agent satisfactory to
Lender ("Applicable Pre-Sales Escrow Agent).
(B) Borrower, the Applicable Underlying Developer and the
Applicable Pre-Sales Escrow Agent shall have entered
into a written agreement satisfactory to Lender
pertaining to the rights and duties of Borrower, the
Applicable Underlying Developer and the Applicable
Escrow Agent with respect to the Applicable Pre-Sales
Escrow.
<PAGE>
11728.18700.386303-8
(C) If any of the Pre-Sales Consumer Notes Receivable held in the
Applicable Pre-Sales Escrow cannot close because there are
improvements in the Applicable Resort which have not been
completed, Lender is satisfied that adequate funds are available
to insure that final, lien free completion of such improvements
will occur and that such funds will be disbursed for such
purpose. If the source of such funds is a loan, Lender may
require that such loan be a loan which has been hypothecated to
Lender under the RFI ADC Credit Facility and is not in default.
Lender may also require that any surety bonds intended as the
assurance of such completion be in form and substance, and issued
by sureties, acceptable to it.
(b) Waived Conditions (Pre-Sales Consumer Notes Receivable). A Pre-Sales
Consumer Note Receivable shall qualify as an Eligible Consumer Note
Receivable notwithstanding the failure of the Pre-Sales Consumer
Note Receivable to meet the following criteria:
(i) closing of the Interval sale transaction giving rise to the
Pre-Sales Consumer Note Receivable and, if the Interval is an
estate in real property and the Purchaser is entitled to a
deed before payment of the purchase price in full for the
Interval, recordation of an Interval Mortgage, but only if due
solely to the Acceptable Executory Conditions not having been
satisfied and the Applicable Underlying Developer is not in
default on account of the non-satisfaction of such conditions;
(ii) access by the Purchaser to a Unit in the Applicable Resort,
but only if due solely to the Unit from which the relevant
Interval will be created not having been completed and the
date by which completion was required to have been done not
having occurred; and
(iii) lack of a claim of the Purchaser of the Interval or other
obligor under the Pre-Sales Consumer Note Receivable against
the Applicable Underlying Developer, but only so long as any
claim is an inchoate or contingent claim and would become
choate or non-contingent only if the Applicable Underlying
Developer fails to close the relevant Interval sale or fails
to complete any improvements which must be completed by the
Applicable Underlying Developer.
<PAGE>
11728.18700.386303-8
(c) Waived Conditions (Consumer Notes Receivable which are not Pre-Sales Consumer
-----------------------------------------------------------------------------
Notes Receivable). A Consumer Note Receivable other than a Pre-Sales
------------------
Consumer Note Receivable shall qualify as an Eligible Consumer Note
Receivable notwithstanding the failure of the Consumer Note Receivable to
meet the following criteria so long as (1) closing of the Interval sale
transaction giving rise to the Consumer Note Receivable has occurred the
Purchaser is obligated to make, and the Applicable Underlying Developer is
entitled to receive and retain, all payments on the Consumer Note Receivable
and (2) Lender is satisfied that adequate funds are available to insure that
final, lien free completion of such improvements will occur and that such
funds will be disbursed for such purpose (If the source of such funds is a
loan, Lender may require that such loan be a loan which has been hypothecated
to Lender under the RFI ADC Credit Facility and is not in default. Lender
may also require that any surety bonds intended as the assurance of such
completion be in form and substance, and issue by sureties, acceptable to
it.):
(i) access by the Purchaser to a Unit in the Applicable Resort,
but only if due solely to the Unit from which the relevant
Interval will be created not having been completed and the
date by which completion was required to have been done not
having occurred; and
(ii) lack of a claim of the Purchaser of the Interval or other
obligor under the Consumer Note Receivable against the
Applicable Underlying Developer, but only so long as any claim
is an inchoate or contingent claim and would become choate or
non-contingent only if the Applicable Underlying Developer
fails to complete improvements not then completed.
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.18
11728.18700.386231-7
LOAN AND SECURITY AGREEMENT
(ADC LOANS WAREHOUSE FACILITY)
This LOAN AND SECURITY AGREEMENT (ADC LOANS WAREHOUSE FACILITY) is made
and entered into as of September 30, 1999, by and among RESORT FUNDING, INC., a
Delaware corporation ("Borrower"), and FINOVA CAPITAL CORPORATION, a Delaware
corporation ("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 shall be presumed to be in control of a corporation if
that Person, 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 such 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; and (ii) a Person shall be deemed to be in control
of a Person other than a corporation if that Person, 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>
-90-
11728.18700.386231-7
1.3 Agreement. This Loan and Security Agreement (ADC Loans Warehouse
Facility) by and among Borrower 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.
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.
1.6 Applicable Borrowing Base Percentage. One hundred percent (100%).
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. A mortgage or deed of trust, if any, that
creates a valid and enforceable first priority lien against the Mortgaged Real
Property identified therein and 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.
1.11 Applicable Resort. A Qualified Resort in connection with which Borrower has
made a Qualified Loan to a Qualified Borrower.
<PAGE>
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 project documents, registrations or other approvals, business
licenses, Interval owners' association agreements and corporate documents,
budgets, 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. 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
----------------------------
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, 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 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 has approved the forms of Applicable
Underlying Loan Documents identified in a letter from Lender to Borrower dated
as of even date herewith. Borrower agrees not to amend, restate, or otherwise
modify any Applicable Underlying Documents in a material manner without Lender's
prior written consent. 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 Verification
Agent promptly following the effective date thereof.
1.18 Approved Costs. Defined in Section 4.2(m) hereof.
--------------
1.19 Architect. A licensed architect in an Applicable Jurisdiction who is
---------
acceptable to Lender.
1.20 Borrower. Resort Funding, Inc., a Delaware corporation, together with its
--------
successors and assigns.
<PAGE>
1.21 Borrowing Base. With respect to an Applicable Underlying Loan and the
related Eligible Note Receivable, an amount equal to the product of the
Applicable Borrowing Base Percentage times the lesser of (a) the outstanding
principal balance thereof as of the date of any Advance by Lender in respect
thereof; and (b) ninety percent (90%) of the fair market value of the Applicable
Underlying Loan Collateral that secures such Eligible 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, 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 ninety percent (90%) (the "Maximum Weighted Average").
1.22 Borrowing Term. A period of twenty-four (24) calendar months
following the earliest of the date of the initial Advance, the date of the
initial advance under the RFI Receivables Credit Facility or October 31, 2001.
1.23 Business Day. Each day that is not a Saturday, a Sunday, or a legal holiday
-------------
under the laws of the State of New York or the United States.
1.24 Closing Date. The date of this Agreement.
------------
1.25 Code. The version of the Uniform Commercial Code in effect from time
to time in an Applicable Jurisdiction, as amended from time to time.
1.26 Collateral. Collectively, the Pledged Notes Receivable, together with
all accounts, chattel paper, general intangibles, instruments and investment
property 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, 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");
<PAGE>
(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 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, general intangibles and investment property 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 Borrower in and to any and all of the collateral for the RFI Receivables
Credit Facility and any other timeshare-related loan or credit facility between
Lender and Borrower or an Affiliate of Borrower.
<PAGE>
1.27 Combined Outstanding Commitments. The sum of the Outstanding RFI Receivables
---------------------------------
Credit Facility Commitment and the Outstanding RFI ADC Credit Facility Commitment (as
defined in the RFI Receivables Credit Facility Agreement).
1.28 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 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.
1.29 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.
1.30 Construction Contract. Defined in Section 4.2(l) hereof.
---------------------
1.31 Custodial Agreement. The custodial agreement, if any, from time to
time entered into and in effect between Lender, Borrower and Custodian and in
form and substance satisfactory to Lender, pursuant to which Custodian will
maintain custody of all original Applicable Underlying Loan Documents and take
certain actions in connection therewith.
1.32 Custodian. Such Person (including, without limitation, FINOVA
Portfolio Services, Inc., an Arizona corporation and a wholly-owned subsidiary
of Lender), if any, as Lender, in its 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.
1.33 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.
1.34 Default. An Event of Default or an event or condition, the occurrence
of which, with the lapse of time or the giving or notice or both, would become,
an Event of Default.
1.35 Default Rate. The Interest Rate plus five percent (5%) 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.
1.36 Draw Request. Defined in Section 4.3 hereof.
------------
1.37 Eligible Note Receivable. A Pledged Note Receivable that satisfies each of
-------------------------
the following criteria:
<PAGE>
(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, or improving a Qualified Resort;
(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 Applicable 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 a minimum
rate of interest approved in writing by Lender at the time it has designated the
Applicable Underlying Loan as a Qualified Loan.
(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 which (i) are no less
than a percentage of the Applicable Underlying Borrower's cost basis in the Unit
or Interval being released approved by Lender at the time it has designated the
Applicable Underlying Loan as a Qualified Loan and (ii) which shall cause the
Applicable Underlying Loan to be repaid in full when no more than ninety percent
(90%) of the Encumbered Intervals have been sold;
(j) It requires such minimum amortization of principal as Lender 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
<PAGE>
(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.
1.38 Encumbered Interval. Any Interval that is encumbered by the Lien of an
--------------------
Applicable Mortgage, whether or not the applicable mortgagee has executed a
non-disturbance or subordination agreement in connection therewith.
1.39 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, 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.
1.40 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 are 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.
1.41 Event of Default. Defined in Section 7 hereof.
----------------
1.42 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.
<PAGE>
1.43 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(g) hereof.
1.44 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.
1.45 Guarantor. Equivest Finance, Inc., a Delaware corporation, together with its
---------
successors and assigns.
1.46 Guaranty. That certain Guaranty and Subordination executed by
Guarantor and delivered to Lender concurrently with Borrower'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.
1.47 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.
1.48 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 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
1.48, 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 1.48(a) and (b) hereof 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.
1.49 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.
1.50 Initial Advance. The first Advance by Lender hereunder.
---------------
<PAGE>
1.51 Initial Underlying Loan Advance. As to a particular Applicable Underlying
---------------------------------
Loan, the first Advance by Lender hereunder in connection therewith.
1.52 Interest Rate. The Prime Rate plus 0.50% per annum. The Interest Rate
charged for each calendar month shall be fixed based upon the Prime Rate
published or otherwise determined 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.
1.53 Interval. 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 specifically described in the Applicable Declaration and/or other
Applicable Timeshare Documents. An Interval may be coupled with an estate (such
as a fee simple or leasehold estate) in real property, but is not required to be
coupled with an estate in real property. Without limiting the generality of the
foregoing, an Interval may include "right to use" timeshare interests (which are
not coupled with an estate in real property) such as licenses and points-based
vacation club memberships.
1.54 Land. The real property upon which any of the Financed Improvements
or other 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 a maximum principal
amount not to exceed the Maximum Loan Amount at any time, 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 "G," attached hereto and incorporated herein
by this reference);
(e) Assignments of the Underlying Guarantees;
(f) The Custodial Agreement;
<PAGE>
(g) The Verification Agent's Agreement;
(h) The Lockbox Agreement;
(i) 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
(j) 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 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, 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.
1.59 Lockbox Agent. Manufacturers and Traders Trust Company, a banking
organization organized under the laws of the State of New York, or such other
Person as Lender engages, in its 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 "A," 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) hereof.
1.62 Maturity Date. The date that is forty-eight (48) calendar months
following the date of the last Advance.
1.63 Maximum Credit Facilities Amount. Twenty Million Dollars
($20,000,000).
<PAGE>
1.64 Maximum Loan Amount. Twenty Million Dollars ($20,000,000).
1.65 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.
1.66 Minimum Net Worth Requirement. The minimum net worth requirement
applicable to Guarantor under the terms of the Guaranty.
1.67 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 an Applicable Mortgage and located within an
Applicable Resort.
1.68 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 execution of this Agreement.
1.69 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 Applicable
Mortgage.
1.70 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.
1.71 Outstanding Applicable Underlying Loan Commitment. At any time, the
excess, if any, of the maximum principal amount which may then be outstanding
under an Applicable Underlying Loan (if fully funded) over the unpaid principal
balance of the Applicable Underlying Loan.
1.72 Outstanding RFI ADC Credit Facility Commitment. The sum of the Outstanding
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Applicable Underlying Loan Commitments for all of the Applicable Underlying Loans.
<PAGE>
1.73 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 "B,"
attached hereto and incorporated herein by this reference, as amended or
restated from time to time.
1.74 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.
1.75 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.
1.76 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.
1.77 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.
1.78 Prime Rate. The per annum rate of interest publicly announced, from
time to time, by Citibank, N.A., New York, New York ("Citibank") as the base (or
equivalent) rate of interest charged by Citibank to its largest and most
creditworthy commercial borrowers notwithstanding the fact that some borrowers
of Citibank make borrow from Citibank at rates less than the announced base
rate. 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 or base rates announced or published by such other
bank as is reasonably acceptable to Borrower.
<PAGE>
1.79 Qualified Borrower. The developer of an interval ownership,
condominium, timeshare, or vacation ownership project, who is domiciled and has
his principal residence [or, in the case of a Person not a natural person, is
organized and has its principal place of business (or if it has no principal
place of business, its chief executive office)] in the United States, and the
creditworthiness for an acquisition, development, and/or construction loan and
other qualifications of which are satisfactory to Lender, based upon any factors
that Lender deems relevant. No Person shall be deemed a Qualified Borrower
unless and until Lender has so designated such Person in writing.
1.80 Qualified Loan. An acquisition, development or construction loan
which is made by Borrower to a Qualified Borrower in connection with a Qualified
Resort, permits the Qualified Borrower to borrow not less than Five Million
Dollars ($5,000,000) (which the Qualified Borrower is reasonably expected to
need), is secured by a Lien on the real property which is the subject of the
loan, and is otherwise satisfactory to Lender, based upon any factors that
Lender deems relevant. No loan shall be deemed a Qualified Loan unless and until
Lender has so designated such loan in writing. By way of clarification, a
Qualified Loan does not need to at any time have an outstanding principal
balance of Five Million Dollars ($5,000,000) or more.
1.81 Qualified Resort. An interval ownership, condominium, timeshare
and/or vacation ownership project which consists 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, located in the United States and is otherwise satisfactory
to Lender, based upon any factors that Lender deems relevant. No project shall
be deemed a Qualified Resort unless and until Lender has so designated such
project in writing.
1.82 Release Fee. Any fee or amount 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.
1.83 RFI ADC Credit Facility Uncovered Cost of the Work. The sum of the
Uncovered Cost of the Work for all Applicable Underlying Loans.
1.84 RFI Credit Facilities. Collectively, the RFI Receivables Credit Facility and
---------------------
the Loan.
1.85 RFI Credit Facilities Agreements. Collectively, the RFI ADC Credit Facility
---------------------------------
Agreement and this Agreement.
<PAGE>
1.86 RFI Receivables Credit Facility. The revolving credit facility made
available to Borrower, as described in the RFI Receivables Credit Facility
Agreement and evidenced and secured by the loan documents from time to time
executed in connection therewith.
1.87 RFI Receivables Credit Facility Agreement. That Loan and Security
Agreement (Receivables Loans Warehouse Facility) by and among Borrower and
Lender (including the exhibits and schedules hereto), as it may be amended,
restated and/or replaced from time to time.
1.88 Servicing Agent. For so long as (a) no Event of Default has occurred
hereunder and (b) Lender, in its reasonable judgment, has not determined that
such Person's servicing systems and controls are inadequate to protect Lender in
any material way (and based upon an on-site inspection conducted by it prior to
the Closing Date, Lender acknowledges that such an inadequacy did not appear to
exist as of the completion of such inspection), Borrower or an Affiliate of
Borrower; and thereafter, such other Person as Lender engages, in its
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.
1.89 Servicing Agreement. An agreement by and among Lender, Borrower, and
Servicing Agent (if different from Borrower) in substantially the form of
Exhibit "C," attached hereto and incorporated herein by this reference, that
provides for the servicing of each Applicable Underlying Loan.
1.90 Survey. An as-built survey of an Applicable Resort prepared in
accordance with the ALTA/ACSM 1992 Minimum Survey Requirements by a licensed
surveyor and certified by the applicable surveyor to the Applicable Underlying
Borrower.
1.91 Timeshare Receivables Credit Facility. The timeshare receivables
credit facility as evidenced in part by that certain Loan and Security Agreement
dated as of even date herewith, by and among Lender, Borrower and Guarantor,
together with any and all related contemporaneous or subsequent transactions
involving Lender and Borrower, among other parties.
1.92 Uncovered Cost of the Work. At any time with respect to any loan, the
excess of (a) the unpaid cost of causing one hundred percent (100%) finished
completion of construction of the improvements being financed in whole or in
part with the proceeds of such loan to occur over (b) the sum of the committed
and undisbursed portion of such loan and any additional equity held pursuant to
Section 6.3(c) hereof or in another manner approved by Lender in writing. For
purposes of the preceding sentence, (x) the improvements financed with the
proceeds of an Applicable Underlying Loan refer to the Financed Improvements for
such loan, and (y) the additional equity required with respect to an Applicable
Underlying Loan must be held by Lender pursuant to Section 6.2(c) hereof.
<PAGE>
1.93 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 Financed Improvements in accordance with the relevant
Plans and all Applicable Laws is guaranteed.
1.94 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.
1.95 Verification Agent. For so long as Lender, in its reasonable
discretion, determines that Verification Agent's systems and controls are
adequate to protect Lender, Midland Loan Services, L.P.; and thereafter or other
such Person as Lender, in its 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.
1.96 Verification Agent's Agreement. At any time, that agreement by and
between Lender and Verification Agent, which shall be in form and substance
satisfactory to Lender and pursuant to which Verification Agent is engaged to
perform the duties and responsibilities delegated to it by Lender hereunder and
thereunder.
SECTION 2. THE LOAN
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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 and construction 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.
<PAGE>
2.2 Qualified Loans. Lender shall have the right to determine whether a
particular loan constitutes a Qualified Loan; and in connection therewith,
Lender shall have the absolute and unconditional right with respect to each loan
that Borrower proposes be deemed a Qualified Loan hereunder to conduct its own
due diligence prior to approving that loan as a Qualified Loan, the reasonable
costs of which shall be borne by Borrower. As part of such due diligence, Lender
may, in its 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.
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(a) Borrowing Term. No Advances 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 Sections 1.37 and 2.3(c) 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 of all Eligible Notes
Receivable or the Maximum Loan Amount; provided, however, that for purposes of
this Section 2.3(b), the Borrowing Base of any Eligible Note Receivable 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. 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 shall (i) be in respect of Eligible
Notes Receivable only; (ii) be in amounts of not less than Fifty Thousand
Dollars ($50,000) each; and (iii) occur no more frequently than two (2) times
per month. For purposes of clarification, if Borrower submits a Draw Request
based upon more than one Eligible Note Receivable, the requested Advance shall
for purposes of this Section 2.3(c) be deemed a single Advance.
<PAGE>
(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.
(e) Maximum Amount Outstanding Under the Loan and Other Credit Facilities.
Under no circumstances (and irrespective of the aggregate amount of the
Borrowing Base) shall the sum of (i) the aggregate outstanding principal balance
as of a particular date of the Loan, the RFI ADC Credit Facility, any and all
other loans the initial advances of which are hereafter made by Lender to
Guarantor or to an Affiliate of Guarantor, plus (ii) the Combined Outstanding
Commitments, plus (iii) the RFI ADC Facility Uncovered Cost of the Work, plus
(iv) the sum of the Uncovered Cost of the Work with respect to any and all other
loans the initial advances of which are hereafter made by Lender to Guarantor or
an Affiliate of Guarantor exceeds the Maximum Credit Facilities Amount.
2.4 Interest Rate. The aggregate principal amount of all Advances that are
outstanding from time to time shall bear interest at a rate equal to the
Interest Rate. The 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 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:
<PAGE>
(a) Daily and Weekly. Upon the closing of each Applicable Underlying
Loan, Borrower shall direct in writing and cause the Applicable Underlying
Borrower and Applicable Underlying Guarantor, if any, except as provided in the
following sentence, 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
Pledged Note Receivable or any other Applicable Underlying Loan Documents
(hereinafter collectively referred to as the "Aggregate Lockbox Collections").
The Aggregate Lockbox 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 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,
directly to Lender (rather than to Lockbox Agent) in the form so received,
properly endorsed to Lender. On each Business Day, Lockbox Agent shall deposit
into an account in the name of Lender and into which only proceeds of the
Pledged Notes Receivable are deposited ("Collection Account") the Aggregate
Lockbox Collections then deposited in the Lockbox Account. On the last Business
Day of each week, Lockbox Agent shall remit, via wire transfer, all amounts then
deposited in the Collection Account directly to Lender in accordance with the
terms of the Lockbox Agreement. Notwithstanding the foregoing provisions of this
Section 2.5(a) to the contrary, unless a Default exists, Borrower may direct
Lockbox Agent to remit to Lender only that portion of the Aggregate Lockbox
Collections which represents principal payments on the Pledged Notes Receivable
and to remit the balance to Borrower.
(b) Monthly. Notwithstanding any provision of Section 2.5(a) hereof
or any other term, provision, or condition hereof or of any other Loan Document
to the contrary, on or before the last Business Day of each calendar month,
Borrower shall pay Lender via wire transfer, in arrears, the Minimum Monthly
Interest Payment due with respect to such month, commencing with the month
immediately succeeding the month in which the Closing Date occurs, to the extent
the Minimum Monthly Interest Payment has not been satisfied pursuant to Section
2.5(e) 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 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.
<PAGE>
(e) Application of Payments. Notwithstanding anything in the Loan
Documents to the contrary, the amount of all payments or amounts received by
Lender with respect to the Loan shall be applied to the extent applicable under
the Loan Documents: (a) first, to any past due payments of interest on the Loan
and to accrued interest on the Loan through the date of such payment, including
any default interest; (b) then, to any interest on delinquent interest, late
fees, overdue risk assessments, examination fees and expenses, collection fees
and expenses and any other fees and expenses due to Lender under the Loan
Documents in connection with the Loan; and (c) last, the remaining balance, if
any, to the unpaid principal balance of the Loan; provided, however, that unless
a Default exists, principal payments on the Pledged Notes Receivable and, to the
extent not identified by Borrower to Lender as non-principal payments before
receipt by Lender, at Lender's option other payments on the Pledged Notes
Receivable shall be applied to the unpaid principal balance of the Loan; and
provided further while a Default exists, each payment hereunder shall be applied
to amounts owed to Lender by Borrower as Lender in its discretion may determine.
In calculating interest and applying payments as set forth above: (a) interest
on the Loan shall be calculated and collected through the date payment is
actually received by Lender; (b) interest on the outstanding balance of the Loan
shall be charged during any grace period permitted under the Loan Documents; (c)
on each annual anniversary of the Closing Date, all past due interest and other
past due charges provided for under the Loan Documents with respect to the Loan
shall be added to the principal balance of the Loan; and (d) to the extent that
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for Borrower's benefit that is subsequently invalidated, set aside or
required to be repaid to any other person or entity, then, to such extent, the
Obligations in connection with the Loan intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Lender and Lender may adjust the balance of the Loan as Lender deems appropriate
under the circumstances. For purposes of this Section 2.5(e), amounts held in
the Lockbox Account and/or the Collection Account shall not be deemed to have
been received by Lender.
2.6 Prepayments.
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(a) Voluntary. Borrower may prepay the Loan, in whole or in part, without
---------
premium or penalty, at any time.
(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 of all Applicable Underlying Loans and Pledged Notes Receivable,
then, within ten (10) days following Borrower's receipt of telecopied notice
from Lender of the occurrence of such event 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 of
all Applicable Underlying Loans and Pledged Notes Receivable.
(c) Prepayment Premium. No prepayment premium or penalty shall be due
-------------------
Lender in connection with any 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.
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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.
<PAGE>
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, including Eligible Notes Receivable that may become ineligible,
until any of the same are released by Lender, if at all, pursuant to Section
11.11 hereof.
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.
<PAGE>
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 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 by use of an allonge with the words:
"Pay to the order of FINOVA Capital Corporation, 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 as of September ____, 1999, by and among FINOVA Capital
Corporation, and Resort Funding, 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 agrees 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 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 RFI
Receivables Credit Facility and the obligations of Guarantor and any and all
Affiliates of Guarantor under any loan(s) made by Lender to such Person(s); 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, the RFI Receivables Credit Facility and any other loan made by Lender to
Guarantor or to any Affiliate of Guarantor shall be cross-defaulted such that
(a) any "Default" and "Event of Default" (as those terms are defined in RFI
Receivables Credit Facility Agreement and/or loan documents executed in
connection with another loan made by Lender to Guarantor or any Affiliate of
Guarantor) and (b) any act or event which, under the terms of the RFI
Receivables Credit Facility and/or loan documents executed in connection with
another loan made by Lender to Guarantor or any Affiliate of Guarantor, either
immediately or with notice and/or the passage of time permits Lender to cease
making advances under such loan and/or to accelerate repayment of such loan
shall constitute a Default or an Event of Default, respectively, hereunder, and
vice versa.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES
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The obligation of Lender to enter into this Agreement and to make any
Advances shall be subject to the complete satisfaction of each of the conditions
precedent set forth below and elsewhere in the Loan Documents:
4.1 The Loan. On or prior to the Closing Date, but in no event later than
---------
October 31, 1999:
(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.
<PAGE>
(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.
(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 Secretary of State and the New York
Secretary of State (or other appropriate state officer) for Borrower and
by the Delaware Secretary of State for Guarantor.
(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 for Borrower and Guarantor for the period ending June
30, 1999 and the other 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.
(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.
<PAGE>
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, 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, which Lender has reviewed and
approved in writing.
(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, to the extent of its interest in
the Applicable Underlying Loan, the first priority of the Lien of the Applicable
Mortgage upon the subject Mortgaged Real Property, 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
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 the Applicable Mortgage creates a
first priority Lien, in favor of Lender, to the extent of its interest in the
Applicable Underlying Loan, and Borrower, together with its successors and
assigns, in and to the subject Mortgaged Real Property, with such exceptions and
conditions to title as Borrower and Lender shall have approved in writing.
<PAGE>
Each 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 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 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 in
the Applicable Underlying Loan, 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 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. 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 Loan 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 any other loan under the RFI Receivables Credit
Facility Agreement or this Agreement, Lender may waive delivery in connection
with the Applicable Underlying Loan):
(i) Applicable Underlying Borrower's and Applicable Underlying
Guarantor's Organizational Documents. Copies of the Applicable Underlying
Borrower's and the Applicable Underlying Guarantor's organizational
documents, including but not limited to their respective articles of
incorporation, bylaws, partnership agreement, and other documents relevant
to the form of business organization of such Persons, as applicable,
together with any amendments thereto, certified to be true and complete by
the Applicable Underlying Borrower's and the Applicable Underlying
Guarantor's Secretary or other authorized representative.
(ii) Good Standing Certificates. Current good standing
certificates issued by the appropriate Secretaries of State (or other
appropriate state officers) 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.
<PAGE>
(iv) Survey. A survey, dated within ninety (90) days prior to
the Closing Date 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 subject Mortgaged Real Property, 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 such Mortgaged Real Property, 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
subject Mortgaged Real Property and shall indicate whether such Mortgaged
Real Property 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, 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
prepared by a Person satisfactory to Lender and covering the Applicable
Resort, including the subject Mortgaged Real Property, confirming (to the
extent relevant, in Lender's reasonable determination):
(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;
<PAGE>
(B) That the Person preparing the report 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 of 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 discretion of each, relating to the Applicable
Resort, including but not limited to the Financed Improvements. 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 (at the
applicable Unit density) and the sale, use for timeshare purposes, 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 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 or Encumbered Personal
Property hereunder, prepared by a nationally recognized appraisal firm and in
form and content acceptable to Borrower and Lender, in the discretion of each.
<PAGE>
(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;
(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.
<PAGE>
(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
discretion, that such monetary deficiency will be satisfied. The Applicable
Approve 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 Construction Schedule, both of which must be
acceptable to Borrower and Lender, in the discretion of each.
<PAGE>
(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 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 aria 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.
<PAGE>
(r) Plans. Borrower has received and approved complete and detailed
Plans which shall be satisfactory to Borrower and Lender, in the 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 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 Five Thousand Dollars
($5,000) until such time as the aggregate value of labor or materials supplied
or services performed by such subcontractors, laborers, or suppliers exceeds
Fifty Thousand Dollars ($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.
<PAGE>
(v) 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.
(w Site Inspection. Lender shall have conducted a site inspection
----------------
of the Mortgaged Real Property, the results of which shall be satisfactory to
it.
(x 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 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 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 "D," 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.
<PAGE>
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 hereof and dated as of the date of such Draw
Request;
(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 exists as of the date of the Draw
Request and, after giving effect to the making of such requested Advance,
no 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:
(A0 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;
<PAGE>
(B0 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 hereof, 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;
(C0 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 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;
(D0 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;
(E0 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;
(F0 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;
<PAGE>
(G0 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;
(H0 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;
(I0 It has no knowledge of any asserted or threatened
defense, offset, counterclaim, discount, or allowance in respect of
any Pledged Note Receivable; and
(J0 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) hereof, 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:
<PAGE>
(i All of the conditions set forth in this Agreement, 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 and other Applicable Underlying Loan Documents and
Applicable Underlying Loan Collateral 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 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 Lender has determined that the requested Advance, will be
in compliance with Sections 2.3(b) and (d) hereof, 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 Weighted Average has not been exceeded;
(vi 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
(vii Lender has received evidence satisfactory to Lender, in
its 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 a Default, 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 Applicable
Underlying 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>
(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
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 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;
<PAGE>
(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 1992 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 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 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;
<PAGE>
(vii Insurance. Insurance coverage has been expanded to include
---------
all forms of insurance reasonably required by Lender in form satisfactory to
Lender; and
(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 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 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 hereby represents and warrants 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 Authorization, Enforceability, Etc.
(a The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary corporate actions by
Borrower and does not and will not (i) violate any provision of Borrower'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 is a party or is subject; (ii) result in, or require
the creation or imposition of, any Lien upon or with respect to any asset of
Borrower other than Liens in favor of Lender; or (iii) result in a breach of, or
constitute a default by Borrower under, any indenture, loan, or credit agreement
or any other agreement, document, instrument, or certificate to which Borrower
is a party or by which it or any of its assets are bound or affected, including
but not limited to any loan from or agreement of any type with a third party
lender.
<PAGE>
(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 of any of the Loan Documents.
(c The Loan Documents constitute legal, valid, and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms. 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 the Permitted Liens and Encumbrances.
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 or registration in the Applicable Jurisdiction
in accordance with all Applicable Laws 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 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 None of the makers of the Pledged Notes Receivable have any
defenses, offsets, claims, or counterclaims, relating to the Pledged Notes
Receivable or any of the other Applicable Underlying Loan Documents, and
Borrower has received no notice that any such defense, offset, claim or
counterclaim is claimed to exist.
(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.
<PAGE>
(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 from any of the
Obligations.
5.3 Financial Statements and Business Condition. The Financial Statements
fairly present the respective financial conditions and results of operations of
Borrower and Guarantor as of the date or dates thereof and for the periods
covered thereby. There 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, shall
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 the Loan Documents will render Borrower or Guarantor unable to pay their
respective debts as they become due.
5.4 Taxes. Except with respect to taxes and assessments being contested in
accordance with the terms and conditions of Section 6.1(e) hereof, 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.
<PAGE>
5.5 Title to Properties; Prior Liens. To the best of Borrower's knowledge
after good faith diligent inquiry, each Applicable Underlying Borrower has good
and marketable title to all of the Applicable Underlying Loan Collateral for
each Applicable Underlying Loan made to it, including but not limited to all
Mortgaged Real Property, 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.
5.6 Subsidiaries, Affiliates, and Capital Structure. Guarantor is the sole
shareholder of and derives financial benefit from 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.
5.7 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 "E" attached hereto and incorporated herein
by this reference, describes all currently pending litigation against Borrower
or Guarantor.
5.8 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 is in violation of any
Environmental Laws.
<PAGE>
5.9 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, any of the
Applicable Underlying Loan 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 5.9 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.
5.10 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 of 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.
5.11 No Defaults. No 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.
5.12 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.
5.13 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.
5.14 Tax Identification/Social Security Numbers. Borrower's and Guarantor's
----------------------------------------------
respective federal taxpayer identification numbers are as follows:
Borrower: .16-1399129
Guarantor:..59-2346270
<PAGE>
5.15 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 each 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.
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; and all representations
and warranties made by the Applicable Underlying Borrower in the Applicable
Underlying Loan Documents do not contain any material misstatements of fact or
omit the statement of a material fact necessary to make such representation or
warranty not misleading. 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.
5.16 Representations and Warranties of Applicable Underlying Borrowers. To
the best of Borrower's knowledge after good faith diligent inquiry, the
representations and warranties made by the Applicable Underlying Borrower in the
Applicable Underlying Loan Documents do not contain any material misstatements
of fact or omit the statement of a material fact necessary to make such
representation or warranty not misleading.
5.17 Continuation and Investigation. Each request by Borrower for an
Advance 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.
<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.
(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
States of Delaware and 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:
<PAGE>
(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. 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 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.
<PAGE>
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' (or a shorter period if such shorter period is mandated
by applicable law) 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 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 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) of 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 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.
<PAGE>
(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. 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 and assessments to be paid, except to the extent such
taxes and assessments are being contested in accordance with the terms and
conditions of this Section 6.1(e). If such required taxes and assessments (and
any applicable late charges, etc.) are not paid within such thirty (30) day
period and are not being contested in accordance with the terms and conditions
of this Section 6.1(e), such failure shall constitute an Event of Default and
Lender may, in its 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. 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.
Borrower may contest the payment of taxes and assessments in good faith and by
appropriate proceedings diligently conducted, which suspend the collection
thereof from the Collateral and do not interfere with the payment of monies due
under the Collateral so long as adequate reserves have been set aside for such
taxes and assessments in accordance with GAAP, and the non-payment of such taxes
and assessments, in the opinion of Lender, does not place the Collateral in any
imminent danger of being sold, forfeited or lost.
(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
Transaction 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 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. Notwithstanding anything in this
Section 6.1(f) to the contrary, without the prior written consent of Borrower
not to be unreasonably withheld, Lender will not initiate contact with an
Applicable Underlying Borrower or its employees, agents or independent
contractors concerning an Applicable Underlying Loan unless an Event of Default
exists.
(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:
<PAGE>
(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
current aging report on the Pledged Notes Receivable; (iii) a Borrowing
Base report substantially in the form of Exhibit "F" 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 sixty (60) days following the end of each calendar
quarter, unaudited statements of income and expense and cash flow 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 and cash flow 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;
<PAGE>
(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 Chief Financial Officer 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, 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 each Applicable
Underlying Loan, 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 Applicable Mortgage and the number of Intervals for which partial
releases from the Applicable 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. Promptly upon becoming aware of the
existence of any condition or event that constitutes or would with the
passage of time, notice or a determination by Lender constitute a Default,
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;
<PAGE>
(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 5.7 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;
(xi) Applicable Underlying Loan Financials. Borrower shall
deliver to Lender quarterly unaudited financial statements for each
Applicable Underlying Loan within sixty (60) days after each calendar
quarter and annual audited financial statements for each Applicable
Underlying Loan within one hundred twenty (120) days after each calendar
year; and
(xii) 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.
(xiii) Applicable Underlying Loan Financials. Borrower shall
deliver to Lender quarterly unaudited financial statements for each
Applicable Underlying Loan within sixty (60) days after each calendar
quarter and annual audited financial statements for each Applicable
Underlying Loan within one hundred twenty (120) days after each calendar
year.
(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) Notices of Changed Circumstances. 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, or (ii) as a
result of which Borrower is not in full compliance with all of its covenants and
agreements contained in this Agreement or any other Loan Document.
(j) 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.
<PAGE>
(k) 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.
(l) 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 or the release of any of the Collateral;
<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 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. Without limiting the generality of
the foregoing, in the event of the commencement of a bankruptcy proceeding
by or against Borrower or otherwise involving the Collateral, Lender shall
be entitled to recover, and Borrower shall be obligated to pay, Lender's
attorneys' fees and costs incurred in connection with: (a) any
determination of the applicability of the Debtor Relief Laws to the terms
of the Loan Documents or Lender's rights thereunder; (b) any attempt by
Lender to enforce or preserve its rights under the bankruptcy laws or to
prevent Borrower or any other person from seeking to deny Lender its
rights thereunder; (c) any effort by Lender seeking to protect, preserve
or enforce its rights against Collateral, or seeking to engage in such
protection, preservation or enforcement; or (d) any proceeding(s) arising
under the Debtor Relief Laws, or arising in or related to a case under the
Debtor Relief Laws;
(vi) All fees and expenses of Servicing Agent, Custodian,
Lockbox Agent and 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, broker's fees, escrow
fees, wire transfer fees, reasonable expenses (including, without
limitation, reasonable fees and expenses of Lender's counsel) incurred in
connection with the release of any Applicable Underlying Loan Collateral,
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.
Notwithstanding anything in this Section 6.1(l) to the contrary, Borrower's
liability to pay closing and recording fees, taxes, due diligence costs, and
documentation fees in connection with the preparation, negotiation and execution
of this Agreement and the RFI Receivables Credit Facility Agreement and the
closing of the first to occur of the initial Advance against the first
Applicable Underlying Loan collaterally assigned to Lender or the initial
advance under the RFI Receivables Credit Facility against a transaction shall
not exceed Fifty Thousand Dollars ($50,000).
<PAGE>
(m) 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 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 failure of
Borrower or an Applicable Underlying Borrower to perform any obligation or
covenant herein required to be performed pursuant to any Environmental Laws;
(vi) 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); (vii) 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; (viii) 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; (ix) the violation or claimed violation of any Environmental
Laws in regard to an Applicable Resort; (x) 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; (xi) the exercise by Borrower of any
rights or remedies under the Applicable Underlying Loan Documents or any
Applicable Laws; or (xii) 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 5.1(m)
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>
(n) Loan Servicing. The Servicing Agreement shall be in form and
content satisfactory to Lender. 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 or if Borrower or an Affiliate of Borrower is the Servicing Agent and
Lender, in its reasonable judgment, has determined that such Person's servicing
systems and controls are inadequate to protect Lender in any material way (and
based upon an on-site inspection conducted by it prior to the Closing Date,
Lender acknowledges that such an inadequacy did not appear to exist as of the
completion of such inspection). If the Servicing Agent is Borrower or an
Affiliate of Borrower, Lender may in its discretion and at Borrower's expense
review the servicing procedures of such Person twice in any twelve (12) month
period or more often if a Default hereunder exists, and no servicing fees shall
be paid during or with respect to any period of time in which a Default
hereunder exists.
(o) Closing Failure Fee. If on or before October 31, 1999, no
Advance occurs and no advance occurs under the RFI Receivables Credit Facility
or under any other receivables, acquisition, development or construction loan
the initial advance of which is hereafter made by Lender to Guarantor or to an
Affiliate of Guarantor and such event is not the fault of Lender and does not
result from failure of Lender, its attorneys, agents and independent contractors
to act promptly and in good faith, Borrower shall pay to Lender a fee in the
amount of Two Hundred Thousand Dollars ($200,000) plus all legal fees, costs and
due diligence expenses incurred by Lender in connection with the Loan and the
RFI Receivables Credit Facility. This fee shall not be duplicative of the fee
required pursuant to Section 6.1(o) of the RFI Receivables Credit Facility
Agreement, and all amounts paid pursuant to such Section shall reduce the amount
remaining payable hereunder.
<PAGE>
(p) Minimum Loan Balance; Non-Utilization Fee. Beginning on (i) the
date ("Average Combined Balance Start Date") which is six (6) months after the
earlier of the initial Advance, the initial advance under the RFI Receivables
Credit Facility, or the initial advance of any other receivables, acquisition,
development or construction loan under which the initial advance is hereafter
made by Lender to Guarantor or to an Affiliate of Guarantor or (ii) April 30,
2000, and continuing until the date on which the Borrowing Term expires
("Average Combined Balance Stop Date"), Borrower shall maintain an average
aggregate daily principal balance on the Loan, the RFI Receivables Credit
Facility and any other receivables, acquisition, development or construction
loans under which the initial advance is hereafter made by Lender to Guarantor
or to an Affiliate of Guarantor ("Average Combined Balance") in an amount not
less than Ten Million Dollars ($10,000,000) ("Minimum Average Combined
Balance"); provided, however, that Borrower's failure to do so shall not
constitute a Default if on the date ten (10) days after the later of (i) the end
of each three (3) month period (or any shorter period ending on the Average
Combined Balance Stop Date) ("Non-Utilization Fee Payment Period") following the
Average Combined Balance Start Date through the Average Combined Balance Stop
Date or (ii) the effective date of notice from Lender advising Borrower of the
amount due for such Non-Utilization Fee Payment Period, Borrower shall pay to
Lender the Non-Utilization Fee then due, as calculated pursuant to the following
sentence. As used in this Section 6.1(p), the term "Non-Utilization Fee" means
an amount equal to the excess (if any) of (i) the product of (A) the difference
(but not less than zero), during the period ("Elapsed Portion of the Average
Combined Balance Measurement Period") beginning on the Average Combined Balance
Start Date and terminating at the end of the Non-Utilization Fee Payment Period
for which the Non-Utilization Fee is being calculated, between the Minimum
Average Combined Balance and the actual average daily aggregate principal
balance on the Loan, the RFI Receivables Credit Facility and any other
receivables, acquisition, development or construction loans under which the
initial advance is hereafter made by Lender to Guarantor or any Affiliate of
Guarantor times (B) one-half percent (0.5%) times (C) a fraction the numerator
of which is the number of days in the Elapsed Portion of the Average Combined
Balance Measurement Period and the denominator which is three hundred sixty-five
(365) over (ii) the Non-Utilization Fees previously due. This fee shall not be
duplicative of the fee required pursuant to Section 6.1(p) of the RFI ADC Credit
Facility Agreement, and all amounts paid pursuant to such Section shall reduce
the amount remaining payable hereunder. For purposes of this Section 6.1(p), the
daily balance of a loan shall be determined by Lender in the same manner as it
determines the daily balance of a loan for purposes of computing accrued
interest on such 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.
<PAGE>
(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 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, 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 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 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.
<PAGE>
(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 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 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, 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.
<PAGE>
(b) Restrictions on Transfers. Borrower shall not, without obtaining
the prior written consent of Lender, 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. Without limiting the generality of
the preceding sentence (and, as the case may be in addition to the restrictions
contained therein), 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; or (C) any change in the ownership 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 (C) above in the event
that: (X) the applicable successor to Borrower or Guarantor, as the case may be,
is an investment grade company with a minimum net worth of not less than an
amount then approved by Lender and the Minimum Net Worth Requirement,
respectively, as determined in accordance with GAAP; and (Y) in the case of a
transfer pursuant to clause (A), the transferee assumes the obligations of
Borrower under the Loan Documents pursuant to a document satisfactory to Lender
without the release of Borrower or Guarantor and Borrower and Guarantor have
executed a document or documents satisfactory to Lender confirming their
respective obligations under the Loan Documents. In the event that Lender 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 shall not, and shall not permit any Affiliate to, use the name
of Lender or of any 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 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.
<PAGE>
(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.
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.
(c) Warranties or Representations. If any statement or
representation made by or on behalf of Borrower or Guarantor in any of the 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.
<PAGE>
(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 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 $50,000,
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 an Event of Default has occurred pursuant to
---------------
Section 3.6 hereof.
<PAGE>
(l) Material Adverse Change. If there occurs any material adverse change
-------------------------
in the financial condition of Borrower or Guarantor.
(m) Default of Guarantors. If a default has occurred under the Guaranty.
----------------------
(n) Default by Borrower in Other Agreements. Any default by Borrower
(i) in the payment or performance of other indebtedness for borrowed money or
obligations in excess of $50,000 or (ii) in the payment or performance of any
other material indebtedness or obligations owed to a person other than Lender,
but only if such default is not cured or waived within thirty (30) days after
the occurrence thereof.
(o) Violation of Negative Covenants. If Borrower 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 1.37 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 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.
<PAGE>
(f) Involuntary Proceedings. If a case is commenced or a petition is
filed against any 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 any Applicable Underlying Borrower or any 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.
(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 and Applicable Laws 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 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 except for 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.
<PAGE>
(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 twenty-five (25) 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.
(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.
(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.
(p) Cross-Default. An "Event of Default" [as defined in Section 7.2
of the RFI Receivables Credit Facility] occurs in connection with a loan made
with respect to the same Applicable Resort.
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 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, 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
otherwise enforce each and 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 collateral assignment 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 collateral
assignment 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 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.
<PAGE>
(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 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 (whether or not an adequate remedy exists at law or
failure to grant specific performance would result in irreparable harm) 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).
<PAGE>
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 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 determination 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 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, 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;
<PAGE>
(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
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.
<PAGE>
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.
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 hereof. 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.
<PAGE>
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 hereby
agrees to indemnify, protect, defend, and hold Lender harmless from and against
any and all claims, demands, causes of action, losses, damages, liabilities,
suits, costs, and expenses, including, without limitation, attorneys' fees and
court costs, asserted against or incurred by Lender by reason of, arising out
of, or connected in any way with (i) any failure or alleged failure of Borrower
to perform any of its covenants or obligations with respect to 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 hand; 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
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.
<PAGE>
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 Collateral; (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. The
consent of Borrower shall not be required prior to any such assignment's
becoming effective. 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 prior to such assignment. Upon the
consummation of any assignment to an assignee pursuant to this Section 9.8,
Lender and Borrower shall, if Lender or its 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 the assignee, in each case in principal amounts
reflecting their respective rights to payment.
<PAGE>
9.9 Notice to Purchaser. Borrower authorizes either Lender or Verification
Agent (but neither Lender nor 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; provided, however, that Lender shall not initiate any
communication regarding the Applicable Underlying Loan with any Applicable
Underlying Borrower or any other Person primarily or secondarily liable under a
Pledged Note Receivable unless an Event of Default exists, although it may
require Borrower or Verification Agent to do so. 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; provided,
however, that Lender shall not give any such notice to any Person unless an
Event of Default exists, although it may require Borrower to do so. 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 or as it may otherwise direct, 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 hereof;
(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 both Onondaga
County, New York, and Maricopa County, Arizona.
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) 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 under the Bankruptcy Code, Borrower agrees 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 hereby authorizes 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 deem 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.
<PAGE>
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 or demands required or permitted to be
given under the Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, addressed to the address specified
below, or to such other address as the party being notified may have designated
in a notice given to the other party. Written notice may be given by telecopy to
the telecopier number specified below or to such other telecopier number as the
party being notified may have designated in a notice given to the other party,
which notice shall be effective on the day of receipt if received during the
recipient's normal business hours on the day of receipt or otherwise on the next
Business Day; provided that such notice shall not be deemed effective unless not
later than the next Business Day, a copy of such notice is hand delivered or
deposited for delivery via courier or in the United States mails in accordance
with the requirements set forth above.
If to Borrower:...Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Thomas Hamel, President
Telecopy No.: (315) 422-9477
<PAGE>
With a copy to: ..Resort Funding, Inc.
c/o Eastern Resorts
115 Long Wharf
P.O. Box 2000
Newport, Rhode Island 02840
Attention: Richard Winkler, Esq., General Counsel
Telecopy No.: (401) 846-3888
If to Lender: .... FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Resort Finance
Telecopy No.: (480) 874-6444
With a copy to: ..FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Associate General Counsel
Telecopy No.: (480) 874-6445
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 ARIZONA, EXCLUSIVE OF ITS
CHOICE OF LAWS PRINCIPLES.
<PAGE>
11.4 CHOICE OF JURISDICTION; WAIVER OF VENUE. EACH OF BORROWER AND LENDER:
(A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY DOCUMENT OR THE SUBJECT MATTER THEREOF, OR, IF LENDER INITIATES
SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, AND THE
CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY
ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
Borrower Initials (________)
Lender Initials (________)
11.5 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 11.5, and this Section 11.5 shall govern over all other provisions in
any document or agreement now or hereafter existing. This Section 11.5 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>
11.6 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.
11.7 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns; provided, however, that Borrower may not
transfer or assign any of its rights or obligations under this Agreement or the
other Loan Documents without the prior written consent of Lender. This Agreement
and the transactions provided for or contemplated hereunder or under any of the
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 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 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.
11.8 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.
11.9 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 and Lender.
11.10 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, and no term or provision of any of the Loan
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.
<PAGE>
11.11 Release and Return of Notes Receivable and Collateral. In the event
that an a Pledged Note Receivable has been repaid in full and all obligations of
the Applicable Underlying Borrower under the Loan Documents and the related
Applicable Underlying Loan Documents have been paid and performed in full, then
within a reasonable time thereafter not to exceed thirty (30) days, Lender shall
remove (or authorize Borrower to remove) from the Pledged Note Receivable the
allonges endorsing such instruments to Lender 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 are satisfied, Lender shall release all Collateral for the
Loan as set forth in this Section 11.11.
11.12 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.
11.13 Entire Agreement; Inconsistencies. 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 (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. In
the event of any ambiguity or inconsistency between the provisions of the Loan
Documents, the provisions imposing the greatest obligations upon Borrower and
granting the most extensive rights to Lender shall control.
<PAGE>
11.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF BORROWER 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 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 HEREBY CERTIFIES 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
ACKNOWLEDGES 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 AND LENDER IN THIS SECTION 11.14 SHALL SURVIVE THE
FINAL PAYMENT OR PERFORMANCE OF ALL OF THE OBLIGATIONS AND THE RESULTING
TERMINATION OF THIS AGREEMENT.
Borrower Initials (________)
Lender Initials (________)
11.15 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.
11.16 Consent to Advertising and Publicity of Applicable Timeshare
Documents. Lender routinely advertises the transactions to which it is a party
in newspapers, industry periodicals, and other miscellaneous print and
electronic literature. However, Lender will not use the name, logo, insignia,
descriptive art work, trade name, trademark, or other similar material of
Borrower or Guarantor in any such advertisement, without the consent of the
Person whose name or property right is being used; and Lender will not identify
any Applicable Underlying Loan in any such advertisement without the consent of
Borrower. Any consent required from a Person pursuant to the preceding
provisions of this Section 11.16 may be given or withheld in such Person's sole
and absolute discretion.
11.17 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.
11.18 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.
11.19 Gender. Words of any gender in this Agreement shall include each
other gender, where appropriate.
11.20 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 or any other Person.
<PAGE>
11.21 Reimbursement for Taxes. Borrower will promptly, upon written demand
from Lender, reimburse Lender for any taxes assessed against Lender by the State
of Arizona 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.
11.22 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 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 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 FINOVA CAPITAL CORPORATION 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.
11.23 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 11.23. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
<PAGE>
11.24 Year 2000 Issues. Borrower has taken all action necessary to assure
that there will be no material adverse change to Borrower's business by reason
of the advent of the year 2000, including, without limitation, that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process dates after April 1, 1999. Borrower has taken
all actions necessary in Lender's reasonable judgment to assure that there will
be no material adverse change to Borrower's business by reason of the advent of
the year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process all dates. Promptly after Lender's request from time to time, Borrower
shall provide to Lender assurance reasonably acceptable to Lender that
Borrower's computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process all dates.
11.25 Standards Applied to Lender's Actions. Unless otherwise specifically
stipulated elsewhere in the Loan Documents, if a matter is left in the Loan
Documents to the decision, right, requirement, request, determination, judgment,
opinion, approval, consent, waiver, satisfaction, acceptance, agreement, option,
election or discretion of Lender, its employees, Lender's counsel or any agent
for or independent contractor of Lender, such action shall be deemed to be
exercisable by Lender or such other person in its sole and absolute discretion
and according to standards established in its sole, absolute and unlimited
discretion. Without limiting the generality of the foregoing, "option" and
"discretion" shall be implied by use of the words "if" or "may". However,
whenever the Loan Documents contain the terms "reasonably satisfactory to
Lender," "reasonably determined by Lender," "reasonably acceptable to Lender,"
"reasonable consent of Lender," "Lender shall reasonably elect," "Lender shall
reasonably request," "reasonably approved by Lender" or similar terms wherein
the word reasonable or a derivative thereof is used with regard to an action of
Lender: (a) such terms shall mean satisfactory to, at the election of,
determined by, acceptable to or requested by, as applicable, Lender in its sole
(but reasonably exercised) discretion under standards applicable to commercial
lenders under the laws of the State of Arizona; and (b) it is the intention of
the parties to permit Lender a broad latitude in which to exercise its
discretion, acknowledging that, while such discretion may not be exercised
arbitrarily or capriciously, it may be exercised conservatively for Lender's
protection and benefit. By way of illustration, and not of limitation, it shall
not be unreasonable for Lender, in exercising its discretion, to make
conservative assumptions regarding the possible outcome of future events.
11.26 Scope of Attorneys' Fees. As used in the Loan Documents, the term
"attorneys' fees" includes the reasonable fees of attorneys licensed to practice
law in any jurisdiction, law clerks, paralegals, investigators and others not
admitted to the bar but performing services under the supervision of a licensed
attorney, and the expenses (including, without limitation, normal and customary
charges for telecopy and photocopy services and clerical overtime) incurred by
them in the performance of their services. As used in the Loan Documents,
attorneys' fees incurred by Lender in the enforcement of any remedy or covenant
include, without limitation, attorneys' fees incurred in any foreclosure of
liens or security interests granted under Loan Documents, in protecting or
sustaining the lien or priority of the Collateral, or in any proceeding arising
from or connected with any such matter, including any bankruptcy, receivership,
injunction or other similar proceeding, or any appeal from or petition for
review of any such matter, and with or without litigation.
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender 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: /s/
Type/Print Name: Gerald L. Klaben
-------------------
Title: Senior Vice President
<PAGE>
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/
Type/Print Name: Gayle R. McKenzie
Title: Vice President
<PAGE>
Exhibit 10.18
-91-
11728.18700.386231-7
LIST OF EXHIBITS
EXHIBIT "A" Lockbox Agreement
EXHIBIT "B" Permitted Liens and Encumbrances
EXHIBIT "C" Servicing Agreement
EXHIBIT "D" Draw Request
EXHIBIT "E" Currently Pending Litigation
EXHIBIT "F" Borrowing Base Report
EXHIBIT "G" Form of Pledges and Assignments of Notes Receivable and
Applicable Mortgages
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.19
GUARANTY AND SUBORDINATION
This GUARANTY AND SUBORDINATION ("Guaranty") is made as of September 30,
1999, by EQUIVEST FINANCE, INC., a Delaware corporation ("Guarantor"), in favor
of FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender").
R E C I T A L S:
---------------
A. Lender desires to extend a line of credit loan in a principal amount
not to exceed Twenty Million Dollars ($20,000,000) ("Loan") to RESORT FUNDING,
ING., a Delaware limited partnership ("Borrower"), pursuant to a Loan and
Security Agreement (Receivables Loans Warehouse Facility) of even date herewith
(as from time to time renewed, amended, restated or replaced, "Credit Facility
Agreement"). The Loan will be evidenced by a promissory note in the original
face amount of Twenty Million Dollars ($20,000,000) (as from time to time
renewed, amended, restated or replaced, "Note").
B. The Credit Facility Agreement, the Note, and all other documents
executed in connection with the Loan are hereinafter referred to as the "Loan
Documents." The obligations, covenants, agreements and conditions to be
performed, paid, observed and fulfilled by Borrower under the Loan Documents are
hereinafter referred to as the "Obligations."
C. In order to induce Lender to make the Loan, Borrower has offered to
procure and deliver this Guaranty executed by Guarantor whose principal place of
business or chief executive office is located at:
Two Clinton Square
Syracuse, New York 13202
and Lender has agreed to make the Loan only if this Guaranty is executed by
Guarantor and delivered to Lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally
covenants and agrees as follows:
ARTICLE 1
GUARANTY
1.1 Guarantor absolutely, unconditionally, irrevocably, jointly and
severally guarantees and becomes surety for the full, prompt, complete and
faithful performance, payment, observance and fulfillment by Borrower of all
Obligations, including, without limitation, repayment of the Loan in accordance
with the terms of the Note.
<PAGE>
-18-
11728.18700.418581-2
1.2 Guarantor hereby covenants and agrees unconditionally that within (a)
five (5) days of the receipt of written notice from or on behalf of Lender to
the effect that there exists a breach or default of the Obligations which
Borrower has failed to pay or perform or (b) such unexpired grace period, if
any, as Borrower may then have under the Loan Documents to cure the breach or
default before it becomes an Event of Default (as defined in the Loan
Documents), whichever period is longer, Guarantor (x) will pay the entire unpaid
amount thereof to Lender at its offices at 7272 East Indian School Road, Suite
410, Scottsdale, Arizona 85251, or such other address as Lender may by notice
direct or (y) will provide Lender with evidence of the performance of the
Obligations which Borrower has failed to perform. If Guarantor fails to pay any
sums properly due Lender hereunder within the period applicable pursuant to the
terms of the preceding sentence, then, as to Guarantor, such sums shall bear
interest at the Default Rate (as defined in the Note) until paid.
ARTICLE 2
SUBORDINATION
2.1 Guarantor subordinates to the Obligations (a) all present and future
indebtedness (including, without limitation, any indebtedness arising from any
right of subrogation, indemnification, reimbursement or contribution) owed to
Guarantor ("Subordinated Indebtedness") and (b) all liens, security interests,
claims and right of any kind that Guarantor may now have or hereafter acquire
against Borrower and/or all other persons, excluding Guarantor, obligated to
Lender as guarantors or sureties for the Obligations (Borrower and all such
other persons, collectively, "Other Obligors") which secure, result from or
otherwise pertain to the Subordinated Indebtedness. Guarantor agrees that all
liens, security interests, claims and rights of any kind that Guarantor may now
have or hereafter acquire against Other Obligors and or the Other Obligors'
property ("Other Obligors' Property") which secure, result from or otherwise
pertain to the Subordinated Indebtedness shall be subordinate, inferior and
subject to the liens, security interests, claims and rights of Lender against
Other Obligors and/or Other Obligors' Property under the terms of any of the
Loan Documents or at law, whether direct or contingent or whether now or
hereafter created. Guarantor agrees that it may accept payments on the
Subordinated Indebtedness, if and only if, at the time of making such payment
and immediately upon giving effect thereto, neither an Event of Default nor an
Incipient Default (as defined in the Loan Documents) exists. Guarantor will not
demand or accept any payment(s) on the Subordinated Indebtedness from Borrower
when there exists an Event of Default or an Incipient Default, even if no
written notice of such an event has been provided. Any payment received by
Guarantor under such circumstances shall be deemed received in trust for Lender
and shall be immediately remitted to Lender. Notwithstanding anything herein to
the contrary, if any portion of the Subordinated Indebtedness becomes due and
payable prior to its stated maturity, Lender shall be entitled to receive full
payment and performance of the Obligations before the holder(s) thereof is/are
entitled to receive any payment of the Subordinated Indebtedness. Guarantor
grants to Lender a security interest in the Subordinated Indebtedness as
security for performance of its obligations under this Guaranty, which shall be
collected, enforced and received by the holder(s) thereof for Lender and be paid
over to Lender on an account of the obligations, but without reducing or
affecting in any manner the liability of Guarantor under any of the other
provisions of this Guaranty; and Guarantor shall remain liable for any
deficiency following any foreclosure of such security interest.
<PAGE>
2.2 Guarantor will not take any action which will either (a) force the
sale of Other Obligors' Property in order to satisfy the Subordinated
Indebtedness or (b) affect in any manner any or all of Lender's liens, security
interests, claims or rights of any kind that Lender may now have or hereafter
acquire against Other Obligors and/or Other Obligors' Property. Guarantor will
refrain from taking any action which is in any way inconsistent with or in
derogation of this subordination or of the rights of Lender hereunder and
covenants to perform such further acts as necessary or appropriate to give
effect to this subordination. Without limiting the generality of the foregoing,
Guarantor will not assign any portion of the Subordinated Indebtedness, except
expressly subject to the terms of this Guaranty; and Guarantor shall cause all
evidence of the Subordinated Indebtedness to set forth the provisions hereof and
shall cause any instrument representing the Subordinated Indebtedness to be
endorsed with the following legend: "The indebtedness evidenced by this
instrument is subordinated, pursuant to a Guaranty and Subordination
("Guaranty") dated as of September __, 1999, by Equivest, Inc., in favor of
FINOVA Capital Corporation, to the prior payment in full of the Obligations (as
defined in the Guaranty)." Lender shall have the right to file, vote and collect
on behalf of Guarantor any proofs of claim Guarantor may have against any Other
Obligor in respect of the Subordinated Indebtedness in the event of any
bankruptcy or insolvency proceeding of such Other Obligor; and Guarantor hereby
appoints Lender as its attorney-in-fact for such purposes and to execute any and
all documents which Lender may consider necessary or desirable for such purpose.
ARTICLE 3
GENERAL COVENANTS AND WAIVERS OF GUARANTOR;
REMEDIES AND RIGHTS OF LENDER
3.1 Neither failure to give, nor defect in, any notice to Borrower or any
Other Obligor concerning a default in the performance of the Obligations (other
than a notice required pursuant to paragraph 1.2 or pursuant to the Credit
Facility Agreement), an Event of Default or any event which might mature into an
Event of Default shall extinguish or in any way affect the obligations of
Guarantor hereunder. Neither demand on, nor the pursuit of any remedies against,
Borrower or any Other Obligor shall be required as a condition precedent to, and
neither the pendency nor the prior termination of any action, suit or proceeding
against Borrower or any Other Obligor (whether for the same or a different
remedy) shall bear on or prejudice the making of a demand on Guarantor by Lender
and commencement against Guarantor after such demand, of any action, suit or
proceeding, at law or in equity, for the specific performance of any covenant or
agreement contained herein or for the enforcement of any other appropriate legal
or equitable remedy.
<PAGE>
3.2 Guarantor's liability hereunder is direct and immediate and primary
and several with that of Borrower and each and every Other Obligor. Neither (a)
the exercise or the failure to exercise by Lender of any rights or remedies
conferred on it under the Loan Documents, hereunder or existing at law or
otherwise, or against any security for performance of the Obligations, (b) the
commencement of an action at law or the recovery of a judgment at law against
any Other Obligor and the enforcement thereof through levy or execution or
otherwise, (c) the taking or institution or any other action or proceeding
against any Other Obligor nor (d) any delay in taking, pursuing or exercising
any of the foregoing actions, rights, powers or remedies (even though requested
by Guarantor) by Lender or anyone acting for Lender, shall extinguish or affect
the obligations of Guarantor hereunder. Guarantor shall be and remain liable for
all the Obligations until fully paid and performed (and without limiting
Guarantor's obligations under paragraph 3.8), notwithstanding the previous
discharge (total or partial and with or without notice to or consent of
Guarantor) from further liability of Borrower or any Other Obligor with respect
thereto.
3.3 Guarantor hereby expressly waives: (a) notice of acceptance by Lender
of this Guaranty; (b) notice of the existence, creation or non-payment of all or
any of the Obligations, except as otherwise provided in paragraph 1.2 or in the
Credit Facility Agreement; (c) presentment, protest, demand, dishonor, notice of
dishonor, protest and all notices whatsoever, except as otherwise expressly
provided in paragraph 1.2 or in the Credit Facility Agreement; (d) all diligence
in collection or protection of or realization on the Obligations or any part
thereof, any obligation hereunder, or any security for or guarantee of any of
the foregoing; (e) any defense based upon an election of remedies by Lender or
marshaling of assets; (f) any defense arising because of Lender's election under
Section 1111(b)(2) of the United States Bankruptcy Code ("Bankruptcy Code") in
any proceeding instituted under the Bankruptcy Code; (g) any defense based on
post-petition borrowing or the grant of a security interest by Borrower under
Section 364 of the Bankruptcy Code; (h) any duty on the part of Lender to
disclose to Guarantor any facts Lender may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume or
has reason to believe that such facts are known to Guarantor or has a reasonable
opportunity to communicate such facts to Guarantor, because Guarantor represents
and warrants that it is fully responsible for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing on the risk of
non-payment of any Obligation; (i) any and all suretyship defenses and defenses
in the nature thereof under Arizona and/or any other applicable law, including,
without limitation, the benefits of the provisions of A.R.S. Sections 12-1641
through 12-1646, A.R.S. Section 33-814, A.R.C.P. Sections 17(f) and 21, and all
other laws and procedural rules of similar import; and (j) all rights and
defenses arising out of an election of remedies by Lender, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for an Obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against the principal. Without limiting the generality of the
foregoing, Guarantor waives all right and defenses that Guarantor may have
because Borrower's debt is at any time secured by real property. This means,
among other things: (a) Lender may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by Borrower; and
(b) if Lender forecloses on any real property collateral pledged by Borrower:
(i) the amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if that collateral is worth
more than the sale price; and (ii) Lender may collect from Guarantor even if
Lender, by foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Borrower's debt is secured by real property. Furthermore, Guarantor waives all
rights and defenses arising out of an election of remedies by Lender, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of the law
or otherwise.
3.4 Without limiting the generality of the foregoing, Guarantor will not
assert against Lender any defense of waiver, release, discharge in bankruptcy,
statute of limitations, res judicata, statute of frauds, anti-deficiency
statute, fraud, usury, illegality or unenforceability which may be available to
Borrower with respect to the Obligations, or any recoupment or set-off available
to Borrower against Lender, whether or not on account of a related transaction.
<PAGE>
3.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which Lender might otherwise be entitled.
3.6 Anything else contained herein to the contrary notwithstanding,
Lender, from time to time, without notice to Guarantor (other than a notice
required pursuant to paragraph 1.2 or the Credit Facility Agreement), may take
all or any of the following actions without in any manner affecting or impairing
the obligations of Guarantor hereunder: (a) obtain a lien on or a security
interest in any property to secure any of the Obligations; (b) retain or obtain
the primary or secondary liability of any party or parties, in addition to
Guarantor, with respect to any of the Obligations; (c) renew, extend or
otherwise change the time for payment or performance of any of the Obligations
for any period; (d) release or compromise any liability of Guarantor hereunder
or any liability of any nature of any other party or parties with respect to the
Obligations; (e) exchange, enforce, waive, release and apply any security for
the performance of the Obligations and direct the order or manner of sale
thereof as Lender may in Lender's discretion determine; (f) resort to Guarantor
for payment of any of the Obligations or otherwise enforce the obligations
hereunder of Guarantor, whether or not Lender shall proceed against any other
party primarily or secondarily liable on any of the Obligations; (g) agree to
any amendment (including, without limitation, any amendment which changes the
amount of interest to be paid under the Loan Documents or extends the period of
time during which Borrower may borrow under the Loan Documents), any alteration
of the Loan Documents or any waiver of any of the provisions of the Loan
Documents and/or exercise Lender's rights to consent to any action or non-action
of Borrower which may violate the covenants and agreements contained in the Loan
Documents with or without consideration, on such terms and conditions as may be
acceptable to Lender in Lender's discretion; or (h) exercise any of Lender's
rights conferred by the Loan Documents or by law.
3.7 No delay on the part of Lender in the exercise of any right or remedy
under this Guaranty shall operate as a waiver thereof, and no single or partial
exercise by Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No action of
Lender permitted hereunder shall in any way affect or impair the rights of
Lender or the obligations of Guarantor under this Guaranty.
3.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Borrower), such Obligation(s), for purposes of
this Guaranty, to the extent that such payment is or must be rescinded or
returned, shall be deemed to have never been performed; and this Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though such application by Lender had not been made.
<PAGE>
3.9 To the extent not prohibited by law, until the Obligations have been
paid and performed in full and Lender has no further obligation to extend credit
to Borrower under the Loan Documents, Guarantor shall have no right of
subrogation with respect to the Obligations or any right of indemnification,
reimbursement or contribution from any Other Obligor with respect to the
Obligations regardless of any payment made by Guarantor or received by Lender
pursuant to the provisions of this Guaranty; and Guarantor hereby
unconditionally waives any such right of subrogation, indemnification,
reimbursement or contribution for such period. To the extent any such right
cannot be waived, such right is subordinated to the Obligations and to the
obligations of Other Obligors to Lender in accordance with the provisions of
Article 2.
3.10 It is not necessary for Lender to inquire into the powers of Borrower
or Borrower's officers, directors, partners or agents purporting to act on its
behalf and the Obligations are hereby guaranteed, and the Subordinated
Indebtedness is hereby subordinated, notwithstanding the lack of power or
authority on the part of Borrower or anyone acting on the Borrower's behalf to
incur the Obligations.
3.11 If Guarantor shall (a) generally not be paying its debts as they
become due, (b) file, or consent by answer or otherwise to the filing against it
of a petition for relief or reorganization, arrangement or any other petition in
bankruptcy or insolvency under the laws of any jurisdiction, (c) make an
assignment for the benefit of its creditors, (d) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers for itself or
any substantial part of its property, (e) be adjudicated insolvent, (f) dissolve
or commence to wind-up its affairs, or (g) take any action for purposes of the
foregoing, at Lender's option, Guarantor will pay to Lender forthwith the whole
then unpaid amount of the Obligations ("Unpaid Amount") as if such Unpaid Amount
were then due and payable; and in any such event Lender, irrespective of whether
any demand shall have been made on Guarantor, Borrower or any Obligor by
intervention in or initiation of judicial proceedings relative to Guarantor, its
creditors or its property, may file and prove a claim or claims for the whole or
any portion of the Unpaid Amount or any portion thereof and file such other
papers or documents as may be necessary or advisable in order to have such claim
allowed in such judicial proceedings and to collect and receive any monies or
other property payable or deliverable on any such claim, and to distribute the
same; and any receiver, assignee or trustee in bankruptcy or reorganization is
hereby authorized to make such payments to Lender.
3.12 If Guarantor shall fail to pay any amount or perform any obligations
due Lender hereunder, Lender may institute and pursue any action or proceeding
to judgment or final decree and may enforce any such judgment or final decree
against Guarantor and collect in the manner provided by law out of its property,
wherever situated, the monies adjudged or decreed to be payable. Guarantor
agrees to maintain a net worth of not less than Forty Million Dollars
($40,000,000), without taking into account any amounts due Guarantor from
Borrower or any Affiliate (as defined in the Loan Agreement) of Guarantor and as
otherwise determined in accordance with generally accepted accounting
principles, applied on a consistent basis, as described in the 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 to circumstances as of the date in question ("Minimum Net
Worth Requirement").
3.13 Guarantor agrees to maintain a net worth of not less than Forty
Million Dollars ($40,000,000), without taking into account any amounts due
Guarantor from Borrower or any Affiliate (as defined in the Loan Agreement) of
Guarantor and as otherwise determined in accordance with generally accepted
accounting principles, applied on a consistent basis, as described in the
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 to circumstances as of the date in question
("Minimum Net Worth Requirement").
<PAGE>
3.14 Guarantor will not, and will not permit or suffer Borrower to,
without obtaining the prior written consent of Lender, whether voluntarily or
involuntarily, by operation of law or otherwise: (a) transfer, sell, pledge,
convey, hypothecate, factor, or assign all or any portion of the Collateral (as
defined in the Loan Agreement); (b) lease or license any portion of the
Collateral, or change the legal or actual possession or use thereof; or (c)
permit the dilution, transfer, pledge, hypothecation, or encumbrance of any of
the stock of Borrower. Without limiting the generality of the preceding
sentence, and subject to the terms of this Guaranty, 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; or (C) any change in the ownership of Borrower or
Guarantor; provided, however, that notwithstanding the foregoing provisions of
this paragraph 3.14 to the contrary, Lender shall not unreasonably withhold its
consent to any of the actions specified in (A) through (C) above in the event
that: (X) the applicable successor to Borrower or Guarantor, as the case may be,
is an investment grade company with a minimum net worth as determined in
accordance with GAAP, of not less than an amount then approved by Lender, and
the Minimum Net Worth Requirement, respectively; and (Y) in the case of a
transfer pursuant to clause (A), the transferee assumes the obligations of
Borrower under the Loan Documents pursuant to a document satisfactory to Lender
without the release of Borrower or Guarantor and Borrower and Guarantor have
executed a document or documents satisfactory to Lender confirming their
respective obligations under the Loan Documents. In the event that Lender is
willing to consent to a transfer that would otherwise be prohibited by this
paragraph 3.14, Lender may condition its consent on such terms as it desires,
including, without limitation, an increase in the Interest Rate (as defined in
the Loan Agreement) 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 paragraph 3.14, 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.
ARTICLE 4
GUARANTOR'S WARRANTIES
4.1 Guarantor represents and warrants to Lender that:
(a) Guarantor is an affiliate of Borrower and will benefit from the
Loan and the execution and delivery of the Loan Documents;
<PAGE>
(b) the execution, delivery and performance by Guarantor of this
Guaranty does not and will not conflict with or contravene any law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Guarantor or its
activities, or conflict with or result in any default under any agreement
or instrument of any kind unto which Guarantor is a party or by which
Guarantor or its properties may be bound or affected, except for those as
to which consents have been obtained by Guarantor and delivered to Lender
and are in full force and effect;
(c) neither the execution and delivery by Guarantor of this Guaranty
nor the performance by Guarantor hereunder requires the consent, approval,
order or authorization of, or registration with, or the giving of notice
to any governmental authority, domestic or foreign, or any other person or
entity, except such consents as have been obtained by Guarantor and
delivered to Lender and are in full force and effect;
(d) this Guaranty has been duly executed and delivered by Guarantor
and constitutes a legal, valid and binding obligation of Guarantor
enforceable against Guarantor in accordance with its terms;
(e) there is no action, litigation or other proceeding pending or
threatened against Guarantor before any court, arbitrator or
administrative agency which in Guarantor's reasonable opinion will have a
materially adverse affect on its assets, business or financial condition
or which would prevent, hinder or jeopardize its performance under this
Guaranty;
(f) Guarantor is fully familiar with all of the covenants, terms and
conditions of the Loan Documents; it has been represented by counsel
chosen by it in connection with this Guaranty and the transaction
contemplated by the Loan Documents; and it has had the opportunity to
consult with such counsel prior to executing this Guaranty and any other
document which it is required to execute pursuant to the Credit Facility
Agreement;
(g) except for the agreement(s) disclosed on financial statements
previously submitted to Lender, Guarantor is not a party to any contract,
agreement, indenture or instrument or subject to any restriction which
individually or in the aggregate might materially adversely affect its
financial condition or businesses or which would in any way jeopardize the
ability of Guarantor to perform hereunder;
(h) all financial information delivered to Lender with respect to
Guarantor fairly and accurately represents the financial condition of
Guarantor;
(i) the execution and delivery of this Guaranty will not (based upon
the reasonable likelihood any contingent obligations shall become actual
obligations) (i) render Guarantor insolvent under generally accepted
accounting principles, (ii) leave Guarantor with remaining assets which
constitute unreasonably small capital given the nature of its business, or
(iii) result in the incurrence of debts (whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent) beyond
Guarantor's ability to pay them when and as they become due; and as used
in this subparagraph, "insolvent" means the present fair saleable value of
assets is less than the probable amount required to be paid on existing
debts when and as they mature;
<PAGE>
(j) there are no oral or written conditions precedent to the
effectiveness of this Guaranty;
(k) except as may be otherwise disclosed in Schedule 1, there is no
existing indebtedness of Borrower to Guarantor, and Guarantor has no
obligation to extend credit to Borrower;
(l) Guarantor is a corporation duly organized and now existing in
good standing under the laws of the State of Delaware and is duly
qualified and in good standing and authorized to do business in all
jurisdictions wherein the location and nature of the properties used or
its business, as the same is presently or proposed to be conducted, makes
such qualification necessary; and will maintain its corporate existence
and right to carry on operations and acquire, maintain and renew all
rights, contracts, powers, privileges, leases, lands, sanctions and
franchises necessary or useful in the conduct of Guarantor's business
operations; Guarantor has the requisite power and authority to carry on
its business as presently conducted; and the execution, delivery and
performance by Guarantor of this Guaranty has been duly authorized by all
necessary corporate action; and
(m) all of its representations and warranties set forth in the Loan
Documents remain true and complete in all material respects, as if made on
the date hereof and made to include this Guaranty.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 All the covenants, stipulations, promises and agreements contained in
this Guaranty by or on behalf of Guarantor are for the benefit of Lender, its
successors or assigns and shall bind Guarantor, and Guarantor's heirs,
executors, personal representatives, successors and assigns. Lender, without
notice of any kind, may sell, assign or transfer the Loan Documents, and in such
event each and every immediate and successive assignee or transferee thereof may
be given the right by Lender to enforce this Guaranty in full, by suit or
otherwise, for its own benefit. Guarantor agrees for the benefit of any such
assignee or transferee that Guarantor's obligations hereunder shall not be
subject to any reduction, abatement, defense, set-off, counterclaim or
recoupment for any reason whatsoever.
<PAGE>
5.2 All notices, requests or demands required or permitted to be given
hereunder shall be in writing, and shall be deemed effective (a) upon hand
delivery, if hand delivered; (b) one (1) Business Day after such are deposited
for delivery via Federal Express or other nationally recognized overnight
courier service; or (c) three (3) Business Days after such are deposited in the
United States mails, certified or registered mail, all with delivery charges
and/or postage prepaid, and addressed as shown below, or to such other address
as the person being noticed may have designated in a notice given to the person
sought to be charged with the effect thereof. Written notice may be given by
telecopy to the telecopier number shown below or to such other telecopier number
as the person being noticed may have designated in a notice given to the person
sought to be charged with the effect thereof, which notice shall be effective on
the day of receipt if received during the recipient's normal business hours on
the day of receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next Business
Day, a copy of such notice is hand-delivered or deposited for delivery via
courier or in the United States mails in accordance with the requirements set
forth above. As used herein the term "Business Day" means a day other than a
Saturday, a Sunday, a national holiday, or a day on which banks in Phoenix,
Arizona are required to be closed. The notice addresses and telecopy numbers for
Guarantor and Lender are:
If to Lender:..... FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to:... FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Associate General Counsel
Telecopy No.: (480) 874-6445
If to Guarantor: . Equivest, Inc.
Two Clinton Square
Syracuse, New York 13202
Attn: Thomas Hamel, President.
Telecopy No: (___) ___-____
5.3 Terms used and not otherwise defined herein shall have the same
meanings given thereto in the Loan Documents. The recitals set forth above are
incorporated herein by this reference.
5.4 CHOICE OF LAW, JURISDICTION AND VENUE; AND WAIVER OF JURY TRIAL.
----------------------------------------------------------------
(a) THIS GUARANTY HAS BEEN DELIVERED IN THE STATE OF ARIZONA. THIS
GUARANTY AND THE RIGHTS, DUTIES AND OBLIGATIONS OF GUARANTOR AND LENDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS)
AND TO THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE
UNITED STATES.
<PAGE>
(b) EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER: (A)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE
OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE
PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE SUBJECT
MATTER HEREOF, OR, IF LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH
LENDER SHALL INITIATE SUCH ACTION AND THE CHOICE OF SUCH VENUE SHALL IN
ALL INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY
OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY
CLAIM THAT SUCH PERSON IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
IS IMPROPER. EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN
ANY OTHER FORUM.
(c) TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) 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 GUARANTY, 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 AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT
BEFORE A JURY. EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) 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, GUARANTOR HEREBY
CERTIFIES 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.
<PAGE>
(d) GUARANTOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A
MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS. THE WAIVER AND STIPULATIONS OF GUARANTOR AND LENDER IN
THIS PARAGRAPH SHALL SURVIVE THE FINAL PAYMENT OR PERFORMANCE OF ALL OF
THE OBLIGATIONS AND THE RESULTING TERMINATION OF THE GUARANTY.
[Guarantor initials _____]
[Lender initials ____]
5.5 If any provision of this Guaranty is held to be illegal, invalid,
unenforceable under present or future laws (all of which invalidating laws are
waived to the fullest extent possible), the legality, validity and
enforceability of the remaining provisions of this Guaranty shall not be
affected thereby. In lieu of each such illegal, invalid or unenforceable
provision, there shall be added to this Guaranty a provision that is legal,
valid and enforceable and as similar in terms to such illegal, invalid and
unenforceable provision as may be possible.
5.6 Time is of the essence in the performance of this Guaranty.
5.7 Guarantor, at its sole cost and expense, agrees to deliver and supply
Lender with a favorable opinion of its independent legal counsel, which counsel
must be acceptable to Lender, with respect to such matters as Lender may require
in its discretion and, to the best of such counsel's knowledge, confirming and
substantiating the truth and accuracy of Guarantor's representations and
warranties set forth in this Agreement.
5.8 If Lender undertakes to enforce this Guaranty against Guarantor,
Guarantor will pay to Lender in addition to any other amounts due hereunder, all
costs and expenses of collection, including, without limitation, attorneys' fees
and legal expenses, together with interest thereon at the Default Rate, whether
or not legal proceedings shall be instituted. If legal proceedings are
instituted by either party to enforce or interpret this Guaranty, to recover
damages for breach of this Guaranty, to obtain declaratory relief in connection
with this Guaranty, or otherwise to obtain judicial relief in connection
herewith, the prevailing party shall be entitled to recover attorneys' fees as
awarded by the court (and not by a jury) and all of the costs and expenses of
that litigation or proceeding, and any and all appeals therefrom, including, but
not limited to, taxable and nontaxable costs and expert witness fees, together
with interest on those attorneys' fees and costs and expenses at the Default
Rate. Without limiting the generality of the foregoing, in the event of the
commencement of a bankruptcy proceeding by or against Guarantor or otherwise
involving any Collateral, Lender shall, to the extent not already provided for
herein, be entitled to recover, and Guarantor shall be obligated to pay,
Lender's attorneys' fees and costs incurred in connection with: (i) any
determination of the applicability of the Bankruptcy Code to the terms of this
Guaranty or Lender's rights hereunder; (ii) any attempt by Lender to enforce or
preserve its rights under the Bankruptcy Code, or to prevent Guarantor from
seeking to deny Lender its rights thereunder; (iii) any effort by Lender to
protect, preserve or enforce its rights against any collateral for the
Obligations, or seeking authority to modify the automatic stay of Section 362 of
the Bankruptcy Code or otherwise seeking to engage in such protection,
preservation or enforcement; or (iv) any proceeding(s) arising under the
Bankruptcy Code, or arising in or related to a case under the Bankruptcy Code.
<PAGE>
5.9 This Guaranty may be executed in counterparts, and any number of such
counterparts which have been executed by Guarantor and Lender shall constitute
one original. The telecopied signature of a person signing this Guaranty shall
be deemed an original signature of and be binding upon that person for all
purposes; provided, however, that if Guarantor delivers this Guaranty to Lender
by telecopy, Guarantor shall deliver to Lender a manually executed copy of this
Guaranty promptly after request therefor by Lender.
5.10 This Guaranty exclusively and completely states the rights and
obligations of Lender and Guarantor with respect to Guarantor's guaranty and
subordination. No modification, variation, termination, discharge, abandonment,
or waiver of any of the provisions or conditions of this Guaranty shall be valid
unless in writing and signed by duly authorized representatives of the party
sought to be bound by such action. This Guaranty supersedes any and all prior
representations, warranties and/or inducements, written or oral, heretofore made
by Lender concerning Guarantor's guaranty and subordination.
5.11 Guarantor has taken all action necessary to assure that there will be
no material adverse change to Guarantor's business by reason of the advent of
the year 2000, including, without limitation, that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process dates after April 1, 1999. Guarantor has taken all actions necessary in
Lender's reasonable judgment to assure that there will be no material adverse
change to Guarantor's business by reason of the advent of the year 2000,
including without limitation that all computer-based systems, embedded
microchips and other processing capabilities effectively recognize and process
all dates. Promptly after Lender's request from time to time, Guarantor shall
provide to Lender assurance reasonably acceptable to Lender that Guarantor's
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process all dates.
5.12 Unless otherwise specifically stipulated elsewhere in this Guaranty,
if a matter is left in the this Guaranty to the decision, right, requirement,
request, determination, opinion, approval, consent, waiver, satisfaction,
acceptance, agreement, option, election, or discretion of Lender, its employees,
Lender's counsel or any agent for or independent contractor of Lender, such
action shall be deemed to be exercisable by Lender or such other person in its
sole and absolute discretion and according to standards established in its sole
and absolute discretion. Without limiting the generality of the foregoing,
"option" and "discretion" shall be implied by use of the words "if" or "may".
However, whenever the Loan Documents contain the terms "reasonably satisfactory
to Lender," "reasonably determined by Lender," "reasonably acceptable to
Lender," "reasonable consent of Lender," "Lender shall reasonably elect,"
"Lender shall reasonably request," "reasonably approved by Lender" or similar
terms wherein the word reasonable or a derivative thereof is used with regard to
an action of Lender: (a) such terms shall mean satisfactory to, at the election
of, determined by, acceptable to or requested by, as applicable, Lender in its
sole (but reasonably exercised) discretion under standards applicable to
commercial lenders under the laws of the State of Arizona; and (b) it is the
intention of the parties to permit Lender a broad latitude in which to exercise
its discretion, acknowledging that, while such discretion may not be exercised
arbitrarily or capriciously, it may be exercised conservatively for Lender's
protection and benefit. By way of illustration, and not of limitation, it shall
not be unreasonable for Lender, in exercising its discretion, to make
conservative assumptions regarding the possible outcome of future events.
<PAGE>
5.13 As used in this Guaranty, the term "attorneys' fees" includes the
reasonable fees of attorneys licensed to practice law in any jurisdiction, law
clerks, paralegals, investigators and others not admitted to the bar but
performing services under the supervision of a licensed attorney, and the
expenses (including, without limitation, normal and customary charges for
telecopy and photocopy services and clerical overtime) incurred by them in the
performance of their services.
IN WITNESS WHEREOF, this Guaranty is executed to be effective as of that
date first appearing above.
GUARANTOR:
EQUIVEST, INC.,
a Delaware corporation
By: /S/
-----
Type/Print Name: Thomas J. Hamel
-----------------
Title: Executive Vice President
<PAGE>
STATE OF _____________..)
) ss.
County of ______________ )
The foregoing instrument was acknowledged before me this ____ day of
_____________, 1999, by _______________________, the ____________________ of
Equivest, Inc., a Delaware corporation, for and on behalf of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public for the State and County aforesaid
My commission expires:
<PAGE>
Lender hereby accepts this Guaranty and Subordination from Equivest, Inc., a
Delaware corporation.
LENDER: ...... FINOVA CAPITAL CORPORATION, a Delaware
corporation
By: /s/
Its: Gayle R.
McKenzie, Vice President
<PAGE>
SCHEDULE 1
INDEBTEDNESS OF BORROWER TO GUARANTOR
None
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.20
GUARANTY AND SUBORDINATION
This GUARANTY AND SUBORDINATION ("Guaranty") is made as of September 30,
1999, by EQUIVEST FINANCE, INC., a Delaware corporation ("Guarantor"), in favor
of FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender").
R E C I T A L S:
---------------
A. Lender desires to extend a line of credit loan in a principal amount
not to exceed Twenty Million Dollars ($20,000,000) ("Loan") to RESORT FUNDING,
ING., a Delaware limited partnership ("Borrower"), pursuant to a Loan and
Security Agreement (ADC Loans Warehouse Facility) of even date herewith (as from
time to time renewed, amended, restated or replaced, "Credit Facility
Agreement"). The Loan will be evidenced by a promissory note in the original
face amount of Twenty Million Dollars ($20,000,000) (as from time to time
renewed, amended, restated or replaced, "Note").
B. The Credit Facility Agreement, the Note, and all other documents
executed in connection with the Loan are hereinafter referred to as the "Loan
Documents." The obligations, covenants, agreements and conditions to be
performed, paid, observed and fulfilled by Borrower under the Loan Documents are
hereinafter referred to as the "Obligations."
C. In order to induce Lender to make the Loan, Borrower has offered to
procure and deliver this Guaranty executed by Guarantor whose principal place of
business or chief executive office is located at:
Two Clinton Square
Syracuse, New York 13202
and Lender has agreed to make the Loan only if this Guaranty is executed by
Guarantor and delivered to Lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally
covenants and agrees as follows:
ARTICLE 1
GUARANTY
1.1 Guarantor absolutely, unconditionally, irrevocably, jointly and
severally guarantees and becomes surety for the full, prompt, complete and
faithful performance, payment, observance and fulfillment by Borrower of all
Obligations, including, without limitation, repayment of the Loan in accordance
with the terms of the Note.
<PAGE>
-19-
11728.18700.416472-2
1.2 Guarantor hereby covenants and agrees unconditionally that within (a)
five (5) days of the receipt of written notice from or on behalf of Lender to
the effect that there exists a breach or default of the Obligations which
Borrower has failed to pay or perform or (b) such unexpired grace period, if
any, as Borrower may then have under the Loan Documents to cure the breach or
default before it becomes an Event of Default (as defined in the Loan
Documents), whichever period is longer, Guarantor (x) will pay the entire unpaid
amount thereof to Lender at its offices at 7272 East Indian School Road, Suite
410, Scottsdale, Arizona 85251, or such other address as Lender may by notice
direct or (y) will provide Lender with evidence of the performance of the
Obligations which Borrower has failed to perform. If Guarantor fails to pay any
sums properly due Lender hereunder within the period applicable pursuant to the
terms of the preceding sentence, then, as to Guarantor, such sums shall bear
interest at the Default Rate (as defined in the Note) until paid.
ARTICLE 2
SUBORDINATION
2.1 Guarantor subordinates to the Obligations (a) all present and future
indebtedness (including, without limitation, any indebtedness arising from any
right of subrogation, indemnification, reimbursement or contribution) owed to
Guarantor ("Subordinated Indebtedness") and (b) all liens, security interests,
claims and right of any kind that Guarantor may now have or hereafter acquire
against Borrower and/or all other persons, excluding Guarantor, obligated to
Lender as guarantors or sureties for the Obligations (Borrower and all such
other persons, collectively, "Other Obligors") which secure, result from or
otherwise pertain to the Subordinated Indebtedness. Guarantor agrees that all
liens, security interests, claims and rights of any kind that Guarantor may now
have or hereafter acquire against Other Obligors and or the Other Obligors'
property ("Other Obligors' Property") which secure, result from or otherwise
pertain to the Subordinated Indebtedness shall be subordinate, inferior and
subject to the liens, security interests, claims and rights of Lender against
Other Obligors and/or Other Obligors' Property under the terms of any of the
Loan Documents or at law, whether direct or contingent or whether now or
hereafter created. Guarantor agrees that it may accept payments on the
Subordinated Indebtedness, if and only if, at the time of making such payment
and immediately upon giving effect thereto, neither an Event of Default nor an
Incipient Default (as defined in the Loan Documents) exists. Guarantor will not
demand or accept any payment(s) on the Subordinated Indebtedness from Borrower
when there exists an Event of Default or an Incipient Default, even if no
written notice of such an event has been provided. Any payment received by
Guarantor under such circumstances shall be deemed received in trust for Lender
and shall be immediately remitted to Lender. Notwithstanding anything herein to
the contrary, if any portion of the Subordinated Indebtedness becomes due and
payable prior to its stated maturity, Lender shall be entitled to receive full
payment and performance of the Obligations before the holder(s) thereof is/are
entitled to receive any payment of the Subordinated Indebtedness. Guarantor
grants to Lender a security interest in the Subordinated Indebtedness as
security for performance of its obligations under this Guaranty, which shall be
collected, enforced and received by the holder(s) thereof for Lender and be paid
over to Lender on an account of the obligations, but without reducing or
affecting in any manner the liability of Guarantor under any of the other
provisions of this Guaranty; and Guarantor shall remain liable for any
deficiency following any foreclosure of such security interest.
<PAGE>
2.2 Guarantor will not take any action which will either (a) force the
sale of Other Obligors' Property in order to satisfy the Subordinated
Indebtedness or (b) affect in any manner any or all of Lender's liens, security
interests, claims or rights of any kind that Lender may now have or hereafter
acquire against Other Obligors and/or Other Obligors' Property. Guarantor will
refrain from taking any action which is in any way inconsistent with or in
derogation of this subordination or of the rights of Lender hereunder and
covenants to perform such further acts as necessary or appropriate to give
effect to this subordination. Without limiting the generality of the foregoing,
Guarantor will not assign any portion of the Subordinated Indebtedness, except
expressly subject to the terms of this Guaranty; and Guarantor shall cause all
evidence of the Subordinated Indebtedness to set forth the provisions hereof and
shall cause any instrument representing the Subordinated Indebtedness to be
endorsed with the following legend: "The indebtedness evidenced by this
instrument is subordinated, pursuant to a Guaranty and Subordination
("Guaranty") dated as of September __, 1999, by Equivest, Inc., in favor of
FINOVA Capital Corporation, to the prior payment in full of the Obligations (as
defined in the Guaranty)." Lender shall have the right to file, vote and collect
on behalf of Guarantor any proofs of claim Guarantor may have against any Other
Obligor in respect of the Subordinated Indebtedness in the event of any
bankruptcy or insolvency proceeding of such Other Obligor; and Guarantor hereby
appoints Lender as its attorney-in-fact for such purposes and to execute any and
all documents which Lender may consider necessary or desirable for such purpose.
ARTICLE 3
GENERAL COVENANTS AND WAIVERS OF GUARANTOR;
REMEDIES AND RIGHTS OF LENDER
3.1 Neither failure to give, nor defect in, any notice to Borrower or any
Other Obligor concerning a default in the performance of the Obligations (other
than a notice required pursuant to paragraph 1.2 or pursuant to the Credit
Facility Agreement), an Event of Default or any event which might mature into an
Event of Default shall extinguish or in any way affect the obligations of
Guarantor hereunder. Neither demand on, nor the pursuit of any remedies against,
Borrower or any Other Obligor shall be required as a condition precedent to, and
neither the pendency nor the prior termination of any action, suit or proceeding
against Borrower or any Other Obligor (whether for the same or a different
remedy) shall bear on or prejudice the making of a demand on Guarantor by Lender
and commencement against Guarantor after such demand, of any action, suit or
proceeding, at law or in equity, for the specific performance of any covenant or
agreement contained herein or for the enforcement of any other appropriate legal
or equitable remedy.
<PAGE>
3.2 Guarantor's liability hereunder is direct and immediate and primary
and several with that of Borrower and each and every Other Obligor. Neither (a)
the exercise or the failure to exercise by Lender of any rights or remedies
conferred on it under the Loan Documents, hereunder or existing at law or
otherwise, or against any security for performance of the Obligations, (b) the
commencement of an action at law or the recovery of a judgment at law against
any Other Obligor and the enforcement thereof through levy or execution or
otherwise, (c) the taking or institution or any other action or proceeding
against any Other Obligor nor (d) any delay in taking, pursuing or exercising
any of the foregoing actions, rights, powers or remedies (even though requested
by Guarantor) by Lender or anyone acting for Lender, shall extinguish or affect
the obligations of Guarantor hereunder. Guarantor shall be and remain liable for
all the Obligations until fully paid and performed (and without limiting
Guarantor's obligations under paragraph 3.8), notwithstanding the previous
discharge (total or partial and with or without notice to or consent of
Guarantor) from further liability of Borrower or any Other Obligor with respect
thereto.
3.3 Guarantor hereby expressly waives: (a) notice of acceptance by Lender
of this Guaranty; (b) notice of the existence, creation or non-payment of all or
any of the Obligations, except as otherwise provided in paragraph 1.2 or in the
Credit Facility Agreement; (c) presentment, protest, demand, dishonor, notice of
dishonor, protest and all notices whatsoever, except as otherwise expressly
provided in paragraph 1.2 or in the Credit Facility Agreement; (d) all diligence
in collection or protection of or realization on the Obligations or any part
thereof, any obligation hereunder, or any security for or guarantee of any of
the foregoing; (e) any defense based upon an election of remedies by Lender or
marshaling of assets; (f) any defense arising because of Lender's election under
Section 1111(b)(2) of the United States Bankruptcy Code ("Bankruptcy Code") in
any proceeding instituted under the Bankruptcy Code; (g) any defense based on
post-petition borrowing or the grant of a security interest by Borrower under
Section 364 of the Bankruptcy Code; (h) any duty on the part of Lender to
disclose to Guarantor any facts Lender may now or hereafter know about Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume or
has reason to believe that such facts are known to Guarantor or has a reasonable
opportunity to communicate such facts to Guarantor, because Guarantor represents
and warrants that it is fully responsible for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing on the risk of
non-payment of any Obligation; (i) any and all suretyship defenses and defenses
in the nature thereof under Arizona and/or any other applicable law, including,
without limitation, the benefits of the provisions of A.R.S. Sections 12-1641
through 12-1646, A.R.S. Section 33-814, A.R.C.P. Sections 17(f) and 21, and all
other laws and procedural rules of similar import; and (j) all rights and
defenses arising out of an election of remedies by Lender, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for an Obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against the principal. Without limiting the generality of the
foregoing, Guarantor waives all right and defenses that Guarantor may have
because Borrower's debt is at any time secured by real property. This means,
among other things: (a) Lender may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by Borrower; and
(b) if Lender forecloses on any real property collateral pledged by Borrower:
(i) the amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if that collateral is worth
more than the sale price; and (ii) Lender may collect from Guarantor even if
Lender, by foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Borrower's debt is secured by real property. Furthermore, Guarantor waives all
rights and defenses arising out of an election of remedies by Lender, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of the law
or otherwise.
3.4 Without limiting the generality of the foregoing, Guarantor will not
assert against Lender any defense of waiver, release, discharge in bankruptcy,
statute of limitations, res judicata, statute of frauds, anti-deficiency
statute, fraud, usury, illegality or unenforceability which may be available to
Borrower with respect to the Obligations, or any recoupment or set-off available
to Borrower against Lender, whether or not on account of a related transaction.
<PAGE>
3.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which Lender might otherwise be entitled.
3.6 Anything else contained herein to the contrary notwithstanding,
Lender, from time to time, without notice to Guarantor (other than a notice
required pursuant to paragraph 1.2 or the Credit Facility Agreement), may take
all or any of the following actions without in any manner affecting or impairing
the obligations of Guarantor hereunder: (a) obtain a lien on or a security
interest in any property to secure any of the Obligations; (b) retain or obtain
the primary or secondary liability of any party or parties, in addition to
Guarantor, with respect to any of the Obligations; (c) renew, extend or
otherwise change the time for payment or performance of any of the Obligations
for any period; (d) release or compromise any liability of Guarantor hereunder
or any liability of any nature of any other party or parties with respect to the
Obligations; (e) exchange, enforce, waive, release and apply any security for
the performance of the Obligations and direct the order or manner of sale
thereof as Lender may in Lender's discretion determine; (f) resort to Guarantor
for payment of any of the Obligations or otherwise enforce the obligations
hereunder of Guarantor, whether or not Lender shall proceed against any other
party primarily or secondarily liable on any of the Obligations; (g) agree to
any amendment (including, without limitation, any amendment which changes the
amount of interest to be paid under the Loan Documents or extends the period of
time during which Borrower may borrow under the Loan Documents), any alteration
of the Loan Documents or any waiver of any of the provisions of the Loan
Documents and/or exercise Lender's rights to consent to any action or non-action
of Borrower which may violate the covenants and agreements contained in the Loan
Documents with or without consideration, on such terms and conditions as may be
acceptable to Lender in Lender's discretion; or (h) exercise any of Lender's
rights conferred by the Loan Documents or by law.
3.7 No delay on the part of Lender in the exercise of any right or remedy
under this Guaranty shall operate as a waiver thereof, and no single or partial
exercise by Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. No action of
Lender permitted hereunder shall in any way affect or impair the rights of
Lender or the obligations of Guarantor under this Guaranty.
3.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Borrower), such Obligation(s), for purposes of
this Guaranty, to the extent that such payment is or must be rescinded or
returned, shall be deemed to have never been performed; and this Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
Obligations, all as though such application by Lender had not been made.
<PAGE>
3.9 To the extent not prohibited by law, until the Obligations have been
paid and performed in full and Lender has no further obligation to extend credit
to Borrower under the Loan Documents, Guarantor shall have no right of
subrogation with respect to the Obligations or any right of indemnification,
reimbursement or contribution from any Other Obligor with respect to the
Obligations regardless of any payment made by Guarantor or received by Lender
pursuant to the provisions of this Guaranty; and Guarantor hereby
unconditionally waives any such right of subrogation, indemnification,
reimbursement or contribution for such period. To the extent any such right
cannot be waived, such right is subordinated to the Obligations and to the
obligations of Other Obligors to Lender in accordance with the provisions of
Article 2.
3.10 It is not necessary for Lender to inquire into the powers of Borrower
or Borrower's officers, directors, partners or agents purporting to act on its
behalf and the Obligations are hereby guaranteed, and the Subordinated
Indebtedness is hereby subordinated, notwithstanding the lack of power or
authority on the part of Borrower or anyone acting on the Borrower's behalf to
incur the Obligations.
3.11 If Guarantor shall (a) generally not be paying its debts as they
become due, (b) file, or consent by answer or otherwise to the filing against it
of a petition for relief or reorganization, arrangement or any other petition in
bankruptcy or insolvency under the laws of any jurisdiction, (c) make an
assignment for the benefit of its creditors, (d) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers for itself or
any substantial part of its property, (e) be adjudicated insolvent, (f) dissolve
or commence to wind-up its affairs, or (g) take any action for purposes of the
foregoing, at Lender's option, Guarantor will pay to Lender forthwith the whole
then unpaid amount of the Obligations ("Unpaid Amount") as if such Unpaid Amount
were then due and payable; and in any such event Lender, irrespective of whether
any demand shall have been made on Guarantor, Borrower or any Obligor by
intervention in or initiation of judicial proceedings relative to Guarantor, its
creditors or its property, may file and prove a claim or claims for the whole or
any portion of the Unpaid Amount or any portion thereof and file such other
papers or documents as may be necessary or advisable in order to have such claim
allowed in such judicial proceedings and to collect and receive any monies or
other property payable or deliverable on any such claim, and to distribute the
same; and any receiver, assignee or trustee in bankruptcy or reorganization is
hereby authorized to make such payments to Lender.
3.12 If Guarantor shall fail to pay any amount or perform any obligations
due Lender hereunder, Lender may institute and pursue any action or proceeding
to judgment or final decree and may enforce any such judgment or final decree
against Guarantor and collect in the manner provided by law out of its property,
wherever situated, the monies adjudged or decreed to be payable. Guarantor
agrees to maintain a net worth of not less than Forty Million Dollars
($40,000,000), without taking into account any amounts due Guarantor from
Borrower or any Affiliate (as defined in the Loan Agreement) of Guarantor and as
otherwise determined in accordance with generally accepted accounting
principles, applied on a consistent basis, as described in the 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 to circumstances as of the date in question ("Minimum Net
Worth Requirement").
3.13 Guarantor agrees to maintain a net worth of not less than Forty
Million Dollars ($40,000,000), without taking into account any amounts due
Guarantor from Borrower or any Affiliate (as defined in the Loan Agreement) of
Guarantor and as otherwise determined in accordance with generally accepted
accounting principles, applied on a consistent basis, as described in the
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 to circumstances as of the date in question
("Minimum Net Worth Requirement").
<PAGE>
3.14 Guarantor will not, and will not permit or suffer Borrower to,
without obtaining the prior written consent of Lender, whether voluntarily or
involuntarily, by operation of law or otherwise: (a) transfer, sell, pledge,
convey, hypothecate, factor, or assign all or any portion of the Collateral (as
defined in the Loan Agreement); (b) lease or license any portion of the
Collateral, or change the legal or actual possession or use thereof; or (c)
permit the dilution, transfer, pledge, hypothecation, or encumbrance of any of
the stock of Borrower. Without limiting the generality of the preceding
sentence, and subject to the terms of this Guaranty, 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; or (C) any change in the ownership of Borrower or
Guarantor; provided, however, that notwithstanding the foregoing provisions of
this paragraph 3.14 to the contrary, Lender shall not unreasonably withhold its
consent to any of the actions specified in (A) through (C) above in the event
that: (X) the applicable successor to Borrower or Guarantor, as the case may be,
is an investment grade company with a minimum net worth as determined in
accordance with GAAP, of not less than an amount then approved by Lender, and
the Minimum Net Worth Requirement, respectively; and (Y) in the case of a
transfer pursuant to clause (A), the transferee assumes the obligations of
Borrower under the Loan Documents pursuant to a document satisfactory to Lender
without the release of Borrower or Guarantor and Borrower and Guarantor have
executed a document or documents satisfactory to Lender confirming their
respective obligations under the Loan Documents. In the event that Lender is
willing to consent to a transfer that would otherwise be prohibited by this
paragraph 3.14, Lender may condition its consent on such terms as it desires,
including, without limitation, an increase in the Interest Rate (as defined in
the Loan Agreement) 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 paragraph 3.14, 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.
ARTICLE 4
GUARANTOR'S WARRANTIES
4.1 Guarantor represents and warrants to Lender that:
(a) Guarantor is an affiliate of Borrower and will benefit from the
Loan and the execution and delivery of the Loan Documents;
<PAGE>
(b) the execution, delivery and performance by Guarantor of this
Guaranty does not and will not conflict with or contravene any law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Guarantor or its
activities, or conflict with or result in any default under any agreement
or instrument of any kind unto which Guarantor is a party or by which
Guarantor or its properties may be bound or affected, except for those as
to which consents have been obtained by Guarantor and delivered to Lender
and are in full force and effect;
(c) neither the execution and delivery by Guarantor of this Guaranty
nor the performance by Guarantor hereunder requires the consent, approval,
order or authorization of, or registration with, or the giving of notice
to any governmental authority, domestic or foreign, or any other person or
entity, except such consents as have been obtained by Guarantor and
delivered to Lender and are in full force and effect;
(d) this Guaranty has been duly executed and delivered by Guarantor
and constitutes a legal, valid and binding obligation of Guarantor
enforceable against Guarantor in accordance with its terms;
(e) there is no action, litigation or other proceeding pending or
threatened against Guarantor before any court, arbitrator or
administrative agency which in Guarantor's reasonable opinion will have a
materially adverse affect on its assets, business or financial condition
or which would prevent, hinder or jeopardize its performance under this
Guaranty;
(f) Guarantor is fully familiar with all of the covenants, terms and
conditions of the Loan Documents; it has been represented by counsel
chosen by it in connection with this Guaranty and the transaction
contemplated by the Loan Documents; and it has had the opportunity to
consult with such counsel prior to executing this Guaranty and any other
document which it is required to execute pursuant to the Credit Facility
Agreement;
(g) except for the agreement(s) disclosed on financial statements
previously submitted to Lender, Guarantor is not a party to any contract,
agreement, indenture or instrument or subject to any restriction which
individually or in the aggregate might materially adversely affect its
financial condition or businesses or which would in any way jeopardize the
ability of Guarantor to perform hereunder;
(h) all financial information delivered to Lender with respect to
Guarantor fairly and accurately represents the financial condition of
Guarantor;
(i) the execution and delivery of this Guaranty will not (based upon
the reasonable likelihood any contingent obligations shall become actual
obligations) (i) render Guarantor insolvent under generally accepted
accounting principles, (ii) leave Guarantor with remaining assets which
constitute unreasonably small capital given the nature of its business, or
(iii) result in the incurrence of debts (whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent) beyond
Guarantor's ability to pay them when and as they become due; and as used
in this subparagraph, "insolvent" means the present fair saleable value of
assets is less than the probable amount required to be paid on existing
debts when and as they mature;
<PAGE>
(j) there are no oral or written conditions precedent to the
effectiveness of this Guaranty;
(k) except as may be otherwise disclosed in Schedule 1, there is no
existing indebtedness of Borrower to Guarantor, and Guarantor has no
obligation to extend credit to Borrower;
(l) Guarantor is a corporation duly organized and now existing in
good standing under the laws of the State of Delaware and is duly
qualified and in good standing and authorized to do business in all
jurisdictions wherein the location and nature of the properties used or
its business, as the same is presently or proposed to be conducted, makes
such qualification necessary; and will maintain its corporate existence
and right to carry on operations and acquire, maintain and renew all
rights, contracts, powers, privileges, leases, lands, sanctions and
franchises necessary or useful in the conduct of Guarantor's business
operations; Guarantor has the requisite power and authority to carry on
its business as presently conducted; and the execution, delivery and
performance by Guarantor of this Guaranty has been duly authorized by all
necessary corporate action; and
(m) all of its representations and warranties set forth in the Loan
Documents remain true and complete in all material respects, as if made on
the date hereof and made to include this Guaranty.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 All the covenants, stipulations, promises and agreements contained in
this Guaranty by or on behalf of Guarantor are for the benefit of Lender, its
successors or assigns and shall bind Guarantor, and Guarantor's heirs,
executors, personal representatives, successors and assigns. Lender, without
notice of any kind, may sell, assign or transfer the Loan Documents, and in such
event each and every immediate and successive assignee or transferee thereof may
be given the right by Lender to enforce this Guaranty in full, by suit or
otherwise, for its own benefit. Guarantor agrees for the benefit of any such
assignee or transferee that Guarantor's obligations hereunder shall not be
subject to any reduction, abatement, defense, set-off, counterclaim or
recoupment for any reason whatsoever.
<PAGE>
5.2 All notices, requests or demands required or permitted to be given
hereunder shall be in writing, and shall be deemed effective (a) upon hand
delivery, if hand delivered; (b) one (1) Business Day after such are deposited
for delivery via Federal Express or other nationally recognized overnight
courier service; or (c) three (3) Business Days after such are deposited in the
United States mails, certified or registered mail, all with delivery charges
and/or postage prepaid, and addressed as shown below, or to such other address
as the person being noticed may have designated in a notice given to the person
sought to be charged with the effect thereof. Written notice may be given by
telecopy to the telecopier number shown below or to such other telecopier number
as the person being noticed may have designated in a notice given to the person
sought to be charged with the effect thereof, which notice shall be effective on
the day of receipt if received during the recipient's normal business hours on
the day of receipt or otherwise on the next Business Day; provided that such
notice shall not be deemed effective unless not later than the next Business
Day, a copy of such notice is hand-delivered or deposited for delivery via
courier or in the United States mails in accordance with the requirements set
forth above. As used herein the term "Business Day" means a day other than a
Saturday, a Sunday, a national holiday, or a day on which banks in Phoenix,
Arizona are required to be closed. The notice addresses and telecopy numbers for
Guarantor and Lender are:
If to Lender:..... FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Resort Finance
Telecopy No.: (602) 874-6444
with a copy to:... FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Associate General Counsel
Telecopy No.: (480) 874-6445
If to Guarantor: . Equivest, Inc.
Two Clinton Square
Syracuse, New York 13202
Attn: Thomas Hamel, President.
Telecopy No: (___) ___-____
5.3 Terms used and not otherwise defined herein shall have the same
meanings given thereto in the Loan Documents. The recitals set forth above are
incorporated herein by this reference.
5.4 CHOICE OF LAW, JURISDICTION AND VENUE; AND WAIVER OF JURY TRIAL.
----------------------------------------------------------------
(a) THIS GUARANTY HAS BEEN DELIVERED IN THE STATE OF ARIZONA. THIS
GUARANTY AND THE RIGHTS, DUTIES AND OBLIGATIONS OF GUARANTOR AND LENDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS)
AND TO THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE
UNITED STATES.
<PAGE>
(b) EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER: (A)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE
OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE
PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE SUBJECT
MATTER HEREOF, OR, IF LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH
LENDER SHALL INITIATE SUCH ACTION AND THE CHOICE OF SUCH VENUE SHALL IN
ALL INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY
OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY
CLAIM THAT SUCH PERSON IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
IS IMPROPER. EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) LENDER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN
ANY OTHER FORUM.
(c) TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) 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 GUARANTY, 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 AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT
BEFORE A JURY. EACH OF GUARANTOR AND (BY ITS ACCEPTANCE HEREOF) 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, GUARANTOR HEREBY
CERTIFIES 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.
<PAGE>
(d) GUARANTOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A
MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS. THE WAIVER AND STIPULATIONS OF GUARANTOR AND LENDER IN
THIS PARAGRAPH SHALL SURVIVE THE FINAL PAYMENT OR PERFORMANCE OF ALL OF
THE OBLIGATIONS AND THE RESULTING TERMINATION OF THE GUARANTY.
[Guarantor initials _____]
[Lender initials ____]
5.5 If any provision of this Guaranty is held to be illegal, invalid,
unenforceable under present or future laws (all of which invalidating laws are
waived to the fullest extent possible), the legality, validity and
enforceability of the remaining provisions of this Guaranty shall not be
affected thereby. In lieu of each such illegal, invalid or unenforceable
provision, there shall be added to this Guaranty a provision that is legal,
valid and enforceable and as similar in terms to such illegal, invalid and
unenforceable provision as may be possible.
5.6 Time is of the essence in the performance of this Guaranty.
5.7 Guarantor, at its sole cost and expense, agrees to deliver and supply
Lender with a favorable opinion of its independent legal counsel, which counsel
must be acceptable to Lender, with respect to such matters as Lender may require
in its discretion and, to the best of such counsel's knowledge, confirming and
substantiating the truth and accuracy of Guarantor's representations and
warranties set forth in this Agreement.
5.8 If Lender undertakes to enforce this Guaranty against Guarantor,
Guarantor will pay to Lender in addition to any other amounts due hereunder, all
costs and expenses of collection, including, without limitation, attorneys' fees
and legal expenses, together with interest thereon at the Default Rate, whether
or not legal proceedings shall be instituted. If legal proceedings are
instituted by either party to enforce or interpret this Guaranty, to recover
damages for breach of this Guaranty, to obtain declaratory relief in connection
with this Guaranty, or otherwise to obtain judicial relief in connection
herewith, the prevailing party shall be entitled to recover attorneys' fees as
awarded by the court (and not by a jury) and all of the costs and expenses of
that litigation or proceeding, and any and all appeals therefrom, including, but
not limited to, taxable and nontaxable costs and expert witness fees, together
with interest on those attorneys' fees and costs and expenses at the Default
Rate. Without limiting the generality of the foregoing, in the event of the
commencement of a bankruptcy proceeding by or against Guarantor or otherwise
involving any Collateral, Lender shall, to the extent not already provided for
herein, be entitled to recover, and Guarantor shall be obligated to pay,
Lender's attorneys' fees and costs incurred in connection with: (i) any
determination of the applicability of the Bankruptcy Code to the terms of this
Guaranty or Lender's rights hereunder; (ii) any attempt by Lender to enforce or
preserve its rights under the Bankruptcy Code, or to prevent Guarantor from
seeking to deny Lender its rights thereunder; (iii) any effort by Lender to
protect, preserve or enforce its rights against any collateral for the
Obligations, or seeking authority to modify the automatic stay of Section 362 of
the Bankruptcy Code or otherwise seeking to engage in such protection,
preservation or enforcement; or (iv) any proceeding(s) arising under the
Bankruptcy Code, or arising in or related to a case under the Bankruptcy Code.
<PAGE>
5.9 This Guaranty may be executed in counterparts, and any number of such
counterparts which have been executed by Guarantor and Lender shall constitute
one original. The telecopied signature of a person signing this Guaranty shall
be deemed an original signature of and be binding upon that person for all
purposes; provided, however, that if Guarantor delivers this Guaranty to Lender
by telecopy, Guarantor shall deliver to Lender a manually executed copy of this
Guaranty promptly after request therefor by Lender.
5.10 This Guaranty exclusively and completely states the rights and
obligations of Lender and Guarantor with respect to Guarantor's guaranty and
subordination. No modification, variation, termination, discharge, abandonment,
or waiver of any of the provisions or conditions of this Guaranty shall be valid
unless in writing and signed by duly authorized representatives of the party
sought to be bound by such action. This Guaranty supersedes any and all prior
representations, warranties and/or inducements, written or oral, heretofore made
by Lender concerning Guarantor's guaranty and subordination.
5.11 Guarantor has taken all action necessary to assure that there will be
no material adverse change to Guarantor's business by reason of the advent of
the year 2000, including, without limitation, that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process dates after April 1, 1999. Guarantor has taken all actions necessary in
Lender's reasonable judgment to assure that there will be no material adverse
change to Guarantor's business by reason of the advent of the year 2000,
including without limitation that all computer-based systems, embedded
microchips and other processing capabilities effectively recognize and process
all dates. Promptly after Lender's request from time to time, Guarantor shall
provide to Lender assurance reasonably acceptable to Lender that Guarantor's
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process all dates.
5.12 Unless otherwise specifically stipulated elsewhere in this Guaranty,
if a matter is left in the this Guaranty to the decision, right, requirement,
request, determination, opinion, approval, consent, waiver, satisfaction,
acceptance, agreement, option, election, or discretion of Lender, its employees,
Lender's counsel or any agent for or independent contractor of Lender, such
action shall be deemed to be exercisable by Lender or such other person in its
sole and absolute discretion and according to standards established in its sole
and absolute discretion. Without limiting the generality of the foregoing,
"option" and "discretion" shall be implied by use of the words "if" or "may".
However, whenever the Loan Documents contain the terms "reasonably satisfactory
to Lender," "reasonably determined by Lender," "reasonably acceptable to
Lender," "reasonable consent of Lender," "Lender shall reasonably elect,"
"Lender shall reasonably request," "reasonably approved by Lender" or similar
terms wherein the word reasonable or a derivative thereof is used with regard to
an action of Lender: (a) such terms shall mean satisfactory to, at the election
of, determined by, acceptable to or requested by, as applicable, Lender in its
sole (but reasonably exercised) discretion under standards applicable to
commercial lenders under the laws of the State of Arizona; and (b) it is the
intention of the parties to permit Lender a broad latitude in which to exercise
its discretion, acknowledging that, while such discretion may not be exercised
arbitrarily or capriciously, it may be exercised conservatively for Lender's
protection and benefit. By way of illustration, and not of limitation, it shall
not be unreasonable for Lender, in exercising its discretion, to make
conservative assumptions regarding the possible outcome of future events.
<PAGE>
5.13 As used in this Guaranty, the term "attorneys' fees" includes the
reasonable fees of attorneys licensed to practice law in any jurisdiction, law
clerks, paralegals, investigators and others not admitted to the bar but
performing services under the supervision of a licensed attorney, and the
expenses (including, without limitation, normal and customary charges for
telecopy and photocopy services and clerical overtime) incurred by them in the
performance of their services.
IN WITNESS WHEREOF, this Guaranty is executed to be effective as of that
date first appearing above.
GUARANTOR:
EQUIVEST, INC.,
a Delaware corporation
By: /S/
-----
Type/Print Name: Thomas H. Hamel
-----------------
Title: Executive Vice President
STATE OF _____________..)
) ss.
County of ______________ )
The foregoing instrument was acknowledged before me this ____ day of
_____________, 1999, by _______________________, the ____________________ of
Equivest, Inc., a Delaware corporation, for and on behalf of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public for the State and County aforesaid
My commission expires:
<PAGE>
Lender hereby accepts this Guaranty and Subordination from Equivest, Inc., a
Delaware corporation.
LENDER: ...... FINOVA CAPITAL CORPORATION, a Delaware
corporation
By /s/
Its: Gayle R.
--------------
McKenzie, Vice President
<PAGE>
SCHEDULE 1
INDEBTEDNESS OF BORROWER TO GUARANTOR
None
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.21
SERVICING AGREEMENT
This SERVICING AGREEMENT (the "Agreement") is made and entered into as of
September 30, 1999, by and between RESORT FUNDING, INC., a Delaware corporation
(hereinafter referred to as "Borrower" in its capacity as borrower hereunder and
hereinafter referred to as "Servicer" in its capacity as servicing agent
hereunder), and FINOVA Capital Corporation, a Delaware corporation ("Lender").
WITNESSETH:
----------
WHEREAS, Borrower and Lender are parties to that certain Loan and Security
Agreement of even date herewith (the "Loan Agreement"), pursuant to which Lender
has agreed to make a loan to Borrower in the maximum principal amount of TWENTY
MILLION DOLLARS ($20,000,000) in accordance with the terms, provisions, and
conditions of the Loan Agreement and the other Loan Documents; and
WHEREAS, Borrower has agreed to secure the Loan and the other Obligations
by, among other things, granting to Lender a continuing first priority Lien and
security interest in and to all of Borrower's right, title, and interest in and
to certain Pledged Notes Receivable, Applicable Mortgages (if any), Pledged
Consumer Notes Receivable, and Interval Mortgages, together with the proceeds
thereof, all in connection with certain Applicable Underlying Loans.
NOW, THEREFORE, 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, intending to be legally
bound, hereby agree as follows:
1. TERMS AND DEFINITIONS. Except as otherwise expressly provided herein to the
---------------------
contrary, all capitalized terms used herein shall have the meanings ascribed to such
terms in the Loan Agreement. In addition:
1.1 "Loan File" shall mean, for each Applicable Underlying Loan, a
file containing true copies of the Pledged Note Receivable, Pledged Put and
Reserve Agreements, the Applicable Mortgage (if any), and all other Applicable
Underlying Loan Documents, together with any other information reasonably
requested by Servicer or Lender. For each loan evidenced by a Pledged Consumer
Note Receivable (an "Applicable Consumer Loan"), the Loan File shall contain a
credit report on the Purchaser or other obligor and true copies of the Pledged
Consumer Note Receivable, the Interval Mortgage, and all related documents and
instruments, together with any other information reasonably requested by
Servicer or Lender. At the request of Lender, Servicer shall provide Lender with
written acknowledgment of Servicer's receipt of each Loan File.
<PAGE>
10
1.1.415280-3
1.2 "Loan Servicing" shall mean the servicing of the Pledged Notes
Receivable, Pledged Consumer Notes Receivable, and, if applicable, the Pledged
Put and Reserve Agreements conducted by Servicer under this Agreement.
1.3 "Pool of Loans" shall mean all those Applicable Underlying Loans
and Applicable Consumer Loans at any time being serviced by Servicer under this
Agreement.
2. APPOINTMENT OF SERVICER. Servicer is an independent contractor that has
been retained for the sole purpose of performing the Loan Servicing under this
Agreement, and Servicer hereby agrees to perform the Loan Servicing pursuant to
the terms and conditions set forth below.
3. TERM OF AGREEMENT.
-----------------
3.1 Term. The parties agree that the term of this Agreement shall
expire on the date as of which all of Borrowers Obligations under the Loan
Documents have been satisfied in full, unless earlier terminated in accordance
with Section 3.2 below.
3.2 Termination Rights. Either Servicer or Borrower (with Lenders
written consent) may terminate this Agreement at any time upon thirty (30) days'
prior written notice to each of the other parties hereto. In addition, upon any
breach by Servicer of any of its obligations hereunder, or any Default or Event
of Default pursuant to the Loan Documents, Lender shall have the right to
terminate this Agreement immediately upon delivery of written notice thereof to
Servicer. Within five (5) Business Days of the termination of this Agreement,
Servicer shall deliver all Loan Files and other documents in its possession,
custody, or control relating to the Applicable Underlying Loans, the Applicable
Consumer Loans, and/or any Collateral therefor to Lender or such other Person as
Lender may designate in writing. This Section shall survive the termination of
this Agreement.
4. PERFORMANCE AND DUTIES OF SERVICER.
----------------------------------
<PAGE>
4.1 General Requirements of Servicer. Servicer shall maintain a loan
processing database and shall service each Applicable Underlying Transaction and
Applicable Consumer Loan in accordance with generally accepted Loan Servicing
standards and practices for the type(s) of loans in question. In the performance
of its duties for Lender and Borrower, unless otherwise specifically provided
herein, Servicer shall comply fully with the terms of all Pledged Notes
Receivable, Pledged Put and Reserve Agreements, Pledged Consumer Notes
Receivable, Applicable Mortgages (if any), Interval Mortgages, and other
Applicable Underlying Loan Documents. Servicer shall send monthly billing
statements to all Applicable Underlying Borrowers within five (5) days after the
end of the calendar month with respect to which payments of interest, principal,
and/or other amounts are due and shall collect and process all principal and
interest payments, including, without limitation, Release Fees (if any), and
other amounts due Borrower or an Applicable Underlying Borrower. Servicer shall
at all times during the term hereof perform all activities deemed reasonably
necessary or appropriate to collect all amounts due and owing under the Pledged
Notes Receivable, Pledged Consumer Notes Receivable, Pledged Put and Reserve
Agreements, Applicable Mortgages (if any), Interval Mortgages, and other
Applicable Underlying Transaction Documents. Servicer shall also provide Lender
and Borrower with monthly reports of all cash flow (including any delinquencies
or checks returned for insufficient funds), together with such other information
as may reasonably be requested by Lender or Borrower.
4.2 Servicer as Independent Contractor. Servicer shall have the
status of an independent contractor, and nothing herein contained shall be
considered to create a partnership or joint venture between Lender and Servicer.
Servicer is not to be considered an agent or employee of Lender for any purpose,
and the employees of Servicer are not entitled to any of the benefits that
Lender provides to its employees.
4.3 Standard of Performances. Servicer shall at all times act in
good faith and in the best interests of Borrower and Lender, act as a fiduciary
with respect to the Applicable Underlying Loans and the proceeds thereof, and
use its best efforts and exercise sound business judgment in performing its
duties under this Agreement.
4.4 Lockbox. All payments received from Applicable Underlying
Borrowers, Applicable Underlying Guarantors, and Purchasers and other obligors
under the Pledged Consumer Notes Receivable and/or the Pledged Put and Reserve
Agreements shall be paid to Lockbox Agent and deposited into the Lockbox Account
in the name of Lender, all pursuant to the terms, provisions, and conditions of
the Loan Agreement and the Lockbox Agreement. Servicer shall receive evidence of
all deposits made to the Lockbox Account and shall post them, on a daily basis,
to the appropriate Applicable Underlying Loans and Applicable Consumer Loans
upon receipt.
4.5 Receipt of Payments by Servicer. Any payments received by
Servicer directly shall be held in trust for Lender and delivered to Lockbox
Agent for deposit into the Lockbox Account within two (2) Business Days of
Servicer's receipt thereof. Servicer shall receive and account for all Release
Fees (if any) remitted by the Applicable Underlying Borrowers or, if applicable,
escrow agents, resulting from the sale of Intervals at Applicable Resorts.
4.6 Description of Reports. For each calendar month (unless
requested by Lender on a more frequent basis) during the term of this Agreement,
Servicer shall prepare the following standard industry reports and submit them
to Lender and Borrower by no later than the fifteenth (15th) day of the
succeeding calendar month:
(a)...Title: Trial/Aging Balance Report
--------------------------
<PAGE>
Purpose: Numerical listings of all Applicable
Underlying Transaction and Applicable
Consumer Loans indicating the outstanding
principal balance thereof and the aggregate
outstanding principal balance of all
Applicable Underlying Transaction and
Applicable Consumer Loans.
(b)...Title: New Loans Report
----------------
Purpose: Numerical listings of all Applicable Underlying
Transactions and Applicable Consumer Loans added to
the Pool of Loans during such month.
(c)...Title: Cash Receipts Report
--------------------
Purpose: Numerical listings of all Applicable Underlying
Transactions and Applicable Consumer Loans showing
the following with respect to each and totals with
respect to all Applicable Underlying Transactions and
Applicable Consumer Transactions: (i) payments
received, including a breakdown of principal,
interest, and other amounts received; and (ii)
payments returned for non-sufficient funds.
(d)...Title: Delinquency Report
------------------
Purpose: Numerical listings of all Applicable
Underlying Transactions and Applicable
Consumer Loans showing delinquencies, broken
down into columns indicating the length of
such delinquencies at thirty (30) days,
sixty (60) days, and ninety (90) or more
days.
(e)...Title: Cancellation, Prepayment, and Payoff Report
-------------------------------------------
Purpose: Numerical listings of all Applicable Underlying
Transactions and Applicable Consumer Loans that were
canceled, paid off in their entirety, or the subject
of a prepayment.
Lender may, from time to time, in its reasonable discretion, modify the
foregoing reporting requirements and add reports required to be prepared on a
weekly, monthly, or such other periodic basis as Lender shall reasonably
request, which Servicer shall complete in a timely fashion, at Borrower's sole
cost and expense. All reports sent to Lender shall remain confidential in
nature.
<PAGE>
4.7 Notification to Obligors. Pursuant to the terms and provisions of the
Lockbox Agreement, by no later than the date of closing of each Applicable
Underlying Transactions, Borrower shall have (a) directed or otherwise caused
the Applicable Underlying Borrower, the Applicable Underlying Guarantor(s), and
all Purchasers and other obligors in respect of each Pledged Consumer Note
Receivable to remit directly to Lockbox Account all interest, principal, Release
Fees (if any), prepayments (both voluntary and mandatory), and other amounts of
any and every description payable to Borrower, the Applicable Underlying
Borrower, or their respective assignees by or on behalf of such Applicable
Underlying Borrower, Purchasers, or other obligors, pursuant to the Applicable
Underlying Transactions Documents, the Pledged Consumer Notes Receivable, and
the Interval Mortgages; and (b) provided Lender with written evidence of such
notification in form and content reasonably acceptable to Lender.
5. BOOKS AND RECORDS.
-----------------
5.1 General. At all times during the term of this Agreement,
Servicer shall maintain complete and accurate files and records pertaining to
each Applicable Underlying Loan and Applicable Consumer Loan and of all business
activities and operations conducted by Servicer in connection with its
performance under this Agreement, including, without limitation, all payments
received, costs incurred, and other information reasonably necessary or
appropriate to give accurate and complete accountings of the Applicable
Underlying Transactions, Applicable Consumer Loans, and all amounts paid or to
be paid thereunder. All such files and records that pertain to an Applicable
Underlying Transaction or an Applicable Consumer Loan that has not been repaid
in full shall be delivered to Lender or Lender's designee upon termination of
this Agreement.
5.2 Right to Examine Books and Records. At all times during the term
of this Agreement, Lender and Borrower and their duly authorized agents and
representatives may, during normal business hours, inspect, audit, and make
copies (at Borrower's expense) of any of Servicer's records, files, reports, and
related materials pertaining to the Applicable Underlying Loans, the Applicable
Consumer Loans, and to Servicer's performance hereunder.
5.3 Facilities and Staff. Servicer agrees to maintain adequate
facilities and staff for the proper performance of all services required of
Servicer hereunder.
6. INDEMNIFICATION.
---------------
6.1 Servicer's Indemnity. Servicer agrees to indemnify and hold
Lender and all of its officers, directors, employees, independent contractors,
and other representatives harmless from and against any and all claims, losses,
penalties, fines, forfeitures, amounts paid in settlement, judgments, reasonable
attorneys' fees and related litigation costs, fees, and expenses that result
from: (a) any action taken by or on behalf of Servicer relating to any
Applicable Underlying Transaction or Applicable Consumer Loan that is not
permitted by or pursuant to the terms of this Agreement, (b) any illegal act or
omission by Servicer; or (c) any act or omission constituting negligence,
willful misconduct, or breach of fiduciary duty by any officer, director,
employee, independent contractor, or other representative of Servicer in
connection with Servicer's performance under this Agreement.
<PAGE>
6.2 Borrower's Indemnity. Borrower agrees to indemnify and hold
harmless Lender and all of its officers, directors, employees, independent
contractors, and other representatives from and against any and all claims,
losses, penalties, fines, forfeitures, amounts paid in settlement, judgments,
reasonable attorneys' fees and related litigation costs, fees, and expenses
incurred in connection with third party claims against Servicer or Lender that
result from:
(a) Any act or omission by or on behalf of Servicer in connection
with Servicer's actions within the scope of its duties under this Agreement,
unless (i) such act or omission constitutes negligence, willful misconduct, or
breach of a fiduciary duty; or (ii) such losses are covered by insurance, in
which event Servicer shall be indemnified only to the extent of any uninsured
losses;
(b) Any act or omission constituting negligence or breach of duty by
an officer, director, employee, independent contractor, or other representative
of Borrower in connection with this Agreement.
7. MISCELLANEOUS
7.1 If any provision of this Servicing Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Servicing
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, and the remaining
provisions of this Servicing Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Servicing Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
7.2 This Servicing 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 Arizona, exclusive of its
choice of laws principles.
7.3 This Servicing Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Servicing Agreement shall not be assignable by Borrower or Servicer without the
prior written consent of Lender. Lender may, without the consent of the other
parties to this Servicing Agreement, assign its interest in this Servicing
Agreement, in whole or in part; and in the event of such an assignment, Lender
shall promptly give notice thereof to Borrower and Servicer.
<PAGE>
7.4 All notices, requests or demands required or permitted to be
given under the Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, addressed to the address specified
below, or to such other address as the party being notified may have designated
in a notice given to the other party. Written notice may be given by telecopy to
the telecopier number specified below or to such other telecopier number as the
party being notified may have designated in a notice given to the other party,
which notice shall be effective on the day of receipt if received during the
recipient's normal business hours on the day of receipt or otherwise on the next
Business Day; provided that such notice shall not be deemed effective unless not
later than the next Business Day, a copy of the such notice is hand delivered or
deposited for delivery via courier or in the United States mails in accordance
with the requirements set forth above.
If to Borrower: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson, Vice President
Telecopy No.: (___) _______________
If to Lender: FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President - Resort Finance
Telecopy No.: (480) 874-6445
If to Servicer: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: James R. Petrie, Comptroller
7.5 This Servicing Agreement may not be modified or amended, and no
term, provision, or condition hereof may be waived, except by a written
instrument signed by all of the parties hereto.
7.6 This Servicing Agreement may be executed in counterparts, each
of which shall be deemed an original document but all of which, collectively,
shall constitute a single document.
7.7 Borrower agrees to pay all costs and expenses reasonably
incurred by Lender in connection with the evaluation, protection, assertion, and
enforcement of Lender's rights hereunder, including, without limitation, court
costs, audit expenses, collection charges, and attorneys' and paralegals' fees
and disbursements.
<PAGE>
7.8 This Servicing Agreement has been duly executed and delivered by
Servicer, Borrower, and Lender and constitutes a legal, valid, and binding
obligation of each such party, enforceable in accordance with its terms.
7.9 EACH OF BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SERVICING AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY. EACH OF
BORROWER, SERVICER, AND LENDER FURTHER WAIVES ANY RIGHT IT MAY HAVE 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 SERVICER 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 ACKNOWLEDGES THAT THE PROVISIONS OF THIS
SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS SERVICING
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
7.10 EACH OF BORROWER AND LENDER: (A) HEREBY IRREVOCABLY SUBMITS
ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF
ARIZONA, MARICOPA COUNTY, AND THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT,
ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO ANY DOCUMENT OF THE
SUBJECT MATTER THEREOF, OR, IF LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH
LENDER SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL IN ALL
INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, HEREBY WAIVES AND AGREES NOT ASSERT BY WAY OF MOTION, DEFENSE OR
OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF
BORROWER, GUARANTOR AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK
ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
7.11 To the extent reasonably practicable, the parties hereto shall
cooperate with and assist each other in carrying out their respective
obligations hereunder and, in connection therewith, shall execute and deliver
such documents and instruments and shall take such action as may be necessary or
appropriate in furtherance thereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Servicing
Agreement to be duly executed on its behalf by persons thereunto duly authorized
as of the day and year first written above.
RESORT FUNDING, INC.
Witness
By: /s/
Gerald L. Klaben
Printed Name Its: Senior Vice President
<PAGE>
FINOVA CAPITAL CORPORATION, a Delaware
corporation
Witness
By: /s/
Gayle R. McKenzie
Printed Name Its: Vice President
----------------------
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.22
PLEDGE AND ASSIGNMENT OF PUT AND
RESERVE AGREEMENT AND INTERVAL MORTGAGES
This PLEDGE AND ASSIGNMENT OF CONSUMER NOTES RECEIVABLE AND INTERVAL
MORTGAGES (the "Collateral Assignment") is made this 30th day of September, by
RESORT FUNDING, INC., a Delaware corporation, the address of which is Two
Clinton Square, Syracuse, New York 13202 ("Assignor"), to and in favor of FINOVA
CAPITAL CORPORATION, a Delaware corporation, the address of which is 7272 East
Indian School Road, Suite 410, Scottsdale, Arizona 85251 ("Assignee").
WITNESSETH:
----------
WHEREAS, Assignor and Assignee are parties to that certain Loan and
Security Agreement dated September 30, 1999 (the "Loan Agreement"), pursuant to
which Assignee agreed to make a loan to Assignor in the maximum principal amount
of Twenty Million and No/100 Dollars ($20,000,000.00) (the "Loan"); and
WHEREAS, as Collateral to secure payment of the Loan, Assignor has agreed
to collaterally pledge and assign unto Assignee all of Assignor's right, title,
and interest in and to certain put and reserve agreements, mortgages, and the
Liens and security interests created thereby; and
WHEREAS, one (1) or more Applicable Underlying Borrowers have delivered to
Assignor certain Put and Reserve Agreements, Purchased Consumer Notes Receivable
and assigned to Assignor, certain Interval Mortgages, all as more particularly
described in Exhibit "A", attached hereto and incorporated herein by this
reference (hereinafter collectively described as the "Assigned Collateral"); and
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged by Assignor, Assignor, intending to be legally bound, hereby
covenants and agrees with Assignee as follows:
1. Unless otherwise expressly provided herein to the contrary or unless
the context otherwise requires, all capitalized terms used herein shall have the
meanings ascribed to them in the Loan Agreement.
<PAGE>
9
11728.18700.420860-2
2. Assignor has collaterally assigned, pledged, and granted and, for value
received, does hereby collaterally assign, pledge, and grant to and in favor of
Assignee a Lien and continuing security interest in and to all of Assignor's
right, title, and interest in and to the Put and Reserve Agreements, Purchased
Consumer Notes Receivable and the Interval Mortgages described in Exhibit "A"
hereto, together with all other Collateral appurtenant thereto, connected
therewith, or substituted or replaced therefor, and all cash and non-cash
proceeds thereof and profits derived therefrom (hereinafter sometimes
collectively referred as the "Assigned Collateral").
3. This Collateral Assignment is executed and delivered by Assignor in
favor of Assignee pursuant to the Loan Agreement. Upon and after an Event of
Default thereunder, Assignee shall have all the rights and remedies provided for
hereunder, pursuant to the Loan Agreement, and by applicable law.
4. Assignor hereby represents and warrants to Assignee, and covenants and agrees
with Assignee, that:
(a) The Borrower holds and, for so long as the Obligations or any
portion thereof remain unsatisfied, shall retain, good and marketable title to
all Assigned Collateral, free and clear of any Lien, security interest, charge,
or encumbrance except for the Permitted Liens and Encumbrances and those Liens
created by this Collateral Assignment or any other Loan Document or Applicable
Underlying Transaction Document or otherwise in favor of Assignee.
(b) The Interval Mortgages described in Exhibit "A" (and any related
collateral for the Pledged Put and Reserve Agreements or Purchased Consumer
Notes Receivable described in Exhibit "A") secure the unpaid principal balances
of said Pledged Put and Reserve Agreements or Purchased Consumer Notes
Receivable, together with all accrued but unpaid interest thereon, and give rise
to valid and perfected continuing first priority Liens and security interests in
favor of the Applicable Underlying Borrower upon the Intervals described in such
Mortgages.
(c) Assignor is, and for so long as the Obligations or any portion
thereof remain unsatisfied, shall be, the assignee of, and the owner and holder
of a continuing, valid, and perfected first priority Lien and security interest
in and to, the subject Pledged Put and Reserve Agreements, Purchased Consumer
Notes Receivable, Interval Mortgages, and other Assigned Collateral, and the
rights hereby conveyed to Assignee by Assignor are not and shall not be subject
or subordinate to the rights of any Person; provided, however, that pursuant to
the Loan Documents, Assignee may, in its sole discretion, assign to any Person
Assignee's right, title, or interest in and to all or any portion of the
Assigned Collateral.
(d) Assignor has full right, power, and authority to assign, pledge,
and grant to Assignee a Lien and continuing security interest in and to the
Assigned Collateral, and the grant, pledge, and assignment thereof does not and
will not violate or result in a breach or default (with the giving of notice,
the passage of time, or otherwise) under the Pledged Put and Reserve Agreements,
Purchased Consumer Notes Receivable, the Interval Mortgages, any Applicable
Underlying Transaction Document, any Applicable Timeshare Document, or any
Applicable Laws.
<PAGE>
(e) Each of the Pledged Put and Reserve Agreements, Purchased
Consumer Notes Receivable and Interval Mortgages described in Exhibit "A" hereto
arises from the bona fide sale by an Applicable Underlying Borrower of an
Interval at a Qualified Resort, consummated in accordance with the Applicable
Timeshare Documents and all Applicable Laws, and each such Pledged Put and
Reserve Agreement is an Eligible Receivable.
(f) To the best of Assignor's knowledge after good faith diligent
inquiry: (i) none of the subject Pledged Put and Reserve Agreements, Purchased
Consumer Notes Receivable nor the Interval Mortgages are forged or have affixed
thereto any unauthorized signatures or have been entered into by any Person who
does not possess the requisite legal capacity; (ii) the subject Pledged Put and
Reserve Agreements, Purchased Consumer Notes Receivable and Interval Mortgages
are in full force and effect and constitute valid and legally enforceable
obligations of the applicable Purchasers or other obligors; (iii) none of the
applicable Purchasers or other obligors have any defense, offset, claim, or
counterclaim relating to the subject Pledged Put and Reserve Agreements,
Purchased Consumer Notes Receivable, Interval Mortgages, or any other Applicable
Underlying Loan Documents; and (iv) there is no default or event which, with the
passage of time or the giving of notice, would give rise to a default thereunder
by any applicable Purchaser or other obligor as of the date hereof.
(g) Assignor has not assigned, pledged, or granted and, for so long
as the Obligations or any portion thereof remain unsatisfied, will not assign,
pledge, or grant any of its right, title, or interest in or to the subject
Pledged Put and Reserve Agreements, Purchased Consumer Notes Receivable,
Interval Mortgages, or any other Assigned Collateral except in favor of
Assignee, and Assignor agrees that any purported assignment, pledge, or grant of
any of such Assigned Collateral shall be null and void and of no legal effect
whatsoever.
(h) Assignor has not and, for so long as the Obligations or any
portion thereof remain unsatisfied, will not, without Assignee's prior written
consent, cause or permit any amendment, modification, extension, or termination
(other than by payment in full) of the subject Pledged Put and Reserve
Agreements, Purchased Consumer Notes Receivable or Interval Mortgages without
the prior written consent of Assignee, nor will Assignor waive, excuse, condone,
forgive, or in any manner release or discharge any material obligations,
covenants, warranties, conditions, or agreements to be performed by the
applicable Purchasers or other obligors under the Pledged Put and Reserve
Agreements, Purchased Consumer Notes Receivable, Interval Mortgages, or any
other Applicable Underlying Loan Document without the prior written consent of
Assignee, and Assignor agrees that any such purported act without such consent
shall be null and void and of no legal effect whatsoever.
(i) This Collateral Assignment has been duly authorized, executed,
and delivered by Assignor and constitutes the legal, valid, and binding
obligation of Assignor, enforceable against Assignor in accordance with its
terms.
(j) To the extent required by the Applicable Underlying Loan
Documents, the Applicable Underlying Borrower and the Applicable Underlying
Guarantor have consented to the
<PAGE>
terms, provisions, and conditions of this Collateral Assignment, including but
not limited to the collateral assignment, pledge, and grant effected hereby.
5. This Collateral Assignment is executed and delivered only for the
purpose of providing collateral security for the Obligations and shall not
constitute or be interpreted as an absolute assignment of Assignor's rights and
obligations under the subject Pledged Put and Reserve Agreements, Purchased
Consumer Notes Receivable and Interval Mortgages. Neither the execution,
delivery, nor recordation of this Collateral Assignment shall render Assignee
liable in any manner whatsoever for any obligations, duties, or liabilities of
Assignor pursuant to the subject Pledged Put and Reserve Agreements, Mortgages,
or any other Applicable Underlying Transaction Document. Assignor hereby
expressly acknowledges that Assignee has not assumed any of the obligations,
duties, or liabilities of Assignor under or with respect to any of the Assigned
Collateral, including but not limited to any obligation to advance funds to the
applicable Purchasers or other obligors under the subject Pledged Put and
Reserve Agreements or any other Applicable Underlying Transaction Document.
Assignee shall not be required to make any inquiry as to the nature or
sufficiency of any payment received by it, to present or file any claim, or to
take any other action to collect or enforce the payment of any amounts that may
have been assigned to it or the performance of any obligations to which it may
be entitled hereunder.
6. Assignor covenants and agrees that it will give Assignee prompt written
notice of any notice that Assignor receives under or in respect of any Pledged
Put and Reserve Agreement, Purchased Consumer Notes Receivable or Interval
Mortgage, including but not limited to any notices of default.
7. Assignor hereby irrevocably authorizes Assignee, at Assignor's sole
cost and expense, to file without Assignor's signature such financing and
continuation statements relating to this Collateral Assignment, and to deliver
notifications or certifications, as Assignee, in its sole discretion, deems
reasonably necessary or appropriate in order to protect its right, title, and
interest in and to the Assigned Collateral; and Assignor hereby appoints
Assignee as Assignor's true and lawful attorney-in-fact to execute any such
statements in Assignor's name and to perform all other acts that Assignee, in
its sole discretion, deems reasonably necessary or appropriate in order to
perfect and continue, and realize upon, the Liens and security interests
conferred pursuant to this Collateral Assignment and the other Transaction
Documents.
8. Assignor agrees that at any time and from time to time, promptly upon
the reasonable request of Assignee or any successor or assign thereof, it will
execute and deliver such further documents and instruments and perform such
further acts as Assignee (or its successor or assign) may reasonably request in
order to effectuate the purposes and intent of this Collateral Assignment.
9. Upon the complete and final discharge and satisfaction of all of the
Obligations, all rights herein assigned to Assignee shall cease and terminate
and Assignee shall, at Assignor's sole cost and expense, execute and deliver to
Assignor such documents, instruments, and
<PAGE>
termination statements as Assignor may reasonably request in order to evidence
the termination of Assignee's rights hereunder.
10. This Collateral Assignment shall be binding on Assignor and its
successors and assigns and inure to the benefit of Assignee and its successors,
assigns, and participants, if any. Assignee shall have the right to assign to
any Person permitted by the Loan Agreement, from time to time, all or any
portion of the Assigned Collateral and its rights and interests hereunder and
thereunder; provided, however, that Assignee shall provide Assignor with prompt
written notice of any such assignment. The terms and provisions of this
Collateral Assignment may not be terminated or modified or amended orally or by
course of conduct or dealing or in any manner except in a writing that is signed
by the party against whom enforcement is sought.
<PAGE>
11. THIS AGREEMENT (EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN TO THE
CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ARIZONA, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES. EACH OF ASSIGNOR
AND ASSIGNEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED
HEREIN OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY PARTY. EACH OF ASSIGNOR AND ASSIGNEE FURTHER WAIVES
ANY RIGHT IT MAY HAVE 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, ASSIGNOR HEREBY CERTIFIES THAT NO REPRESENTATIVE
OR AGENT OF ASSIGNEE, INCLUDING ASSIGNEE'S COUNSEL, HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT ASSIGNEE WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. ASSIGNOR ACKNOWLEDGES THAT
THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO ASSIGNEE'S
ACCEPTANCE OF THIS ASSIGNMENT AND THE OTHER LOAN DOCUMENTS. EACH OF ASSIGNOR AND
ASSIGNEE: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND
VENUE OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY DOCUMENT OF THE SUBJECT MATTER THEREOF, OR, IF ASSIGNEE
INITIATES SUCH ACTION, ANY COURT IN WHICH ASSIGNEE SHALL INITIATE SUCH ACTION,
AND THE CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT ASSIGNEE'S ELECTION;
AND (B) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND
AGREES NOT ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF ASSIGNOR AND ASSIGNEE
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY
OTHER FORUM.
Assignor Initials (__________)
Assignee Initials (__________)
12. In the event that the Assigned Collateral is a recorded mortgage or
security instrument, Assignor hereby acknowledges that this Collateral
Assignment will be recorded in the [identify appropriate real property records]
and agrees to pay any and all recording costs and taxes of whatever type,
including but not limited to documentary stamp and intangible taxes, that may be
payable from time to time with respect to this Collateral Assignment, its
recordation, any amendments to this Collateral Assignment and their recording,
or the other Assigned Collateral, excluding income and profit-based taxes.
13. If any provision of this Collateral Assignment is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable, this Collateral Assignment
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof, and the remaining provisions of
this Collateral Assignment shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom. In any suit, action, or proceeding arising out of or in
connection with this Collateral Assignment, Assignee shall be entitled to
reasonable attorneys' and paralegals' fees and expenses, whether such fees and
expenses arise before such proceedings are commenced or after the entry of a
final judgment and whether suit be brought or not. Any right or remedy granted
herein or in any other Loan Document is separate, distinct, and cumulative and
not exclusive of any other right or remedy granted herein, therein, or provided
by law or in equity; and all of the same may be exercised concurrently,
independently, or successively by Assignee, in its sole discretion. Any
forbearance on the part of Assignee in exercising any right or remedy hereunder
shall not constitute a waiver of or preclude the exercise of such right or
remedy in the future. Assignee shall not be deemed by any act or omission to
have waived any right or remedy or any Default or Event of Default unless such
waiver is in writing and signed by Assignee, and then only to the extent
specifically set forth in such writing.
14. Assignee may take or release other security for the payment and
performance of the Obligations, may release any party primarily or secondarily
liable therefor, including but not limited to Guarantor, and may apply any other
security held by it to the satisfaction of such Obligations, without prejudice
to any of its rights under this Collateral Assignment. Nothing contained in this
Collateral Assignment and no act done or omitted by Assignee pursuant to the
powers and rights granted to it hereunder shall be deemed to constitute a waiver
by Assignee of its rights and remedies pursuant to this Collateral Assignment or
the other Loan Documents, and this Collateral Assignment is made and accepted
without prejudice to any of the rights and remedies possessed by Assignee
pursuant to the terms, provisions, and conditions hereof and of the other Loan
Documents.
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this Collateral Assignment to be
duly executed as of the date first written above.
ASSIGNOR:
RESORT FUNDING, INC.
By: /s/
-----
Its: Lisa M. Henson, Vice President
<PAGE>
STATE OF ___________________ )
) ss:
COUNTY OF _________________ )
On this _____ day of __________________, 19___, before me personally
appeared _____________________________ who, being by me duly sworn, did say that
he/she is the ____________________ of RESORT FUNDING, INC. and that the
foregoing instrument was signed and delivered on behalf of said corporation by
authority of its board of directors, and he/she acknowledged said instrument to
be the free act and deed of said corporation.
Notary Public
My Commission Expires:
- ---------------------------
<PAGE>
9
11728.18700.420860-2
EXHIBIT "A"
PURCHASED CONSUMER NOTES RECEIVABLE
AND ASSIGNED INTERVAL MORTGAGES
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.23
================================================================================
UP TO $20,700,000
CREDIT AGREEMENT
AMONG
EQUIVEST FINANCE, INC.,
PEPPERTREE ACQUISITION CORP.,
PEPPERTREE ACQUISITION II CORP.
AND
BANK OF AMERICA, N.A.
as of November 17, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions........................................................1
Section 1.1...............................................Defined Terms.1
Section 1.2.............................................Amendments, Etc.20
Section 1.3................................................Construction.21
ARTICLE 2 THE TERM LOAN.....................................................21
Section 2.1...............................................The Term Loan.21
Section 2.2........................Manner of Borrowing and Disbursement.21
Section 2.3....................................................Interest.23
Section 2.4........................................................Fees.24
Section 2.5.................................................Prepayments.24
Section 2.6...................................................[Reserved]25
Section 2.7...................................................[Reserved]25
Section 2.8................Payment of Principal of Term Note/Extensions.25
Section 2.9...............................................Reimbursement.25
Section 2.10..........................................Manner of Payment.26
Section 2.11......................................LIBOR Lending Offices.26
Section 2.12..................................................[Reserved]27
Section 2.13..................................................[Reserved]27
Section 2.14......................................................Taxes.27
ARTICLE 3 CONDITIONS PRECEDENT..............................................28
Section 3.1.......................Conditions Precedent to the Term Loan.28
Section 3.2.Conditions Precedent to All Drawings of the Term Loan,
Conversions and Continuations. 31
Section 3.3...........Conditions Precedent to the Great Smokies Drawing.32
Section 3.4........Conditions Precedent to the Deferred Payment Drawing.33
ARTICLE 4 Representations and Warranties....................................33
Section 4.1..............................Representations and Warranties.33
Section 4.2.............Survival of Representations and Warranties, etc.46
ARTICLE 5 General Covenants.................................................46
Section 5.1...............Preservation of Existence and Similar Matters.46
Section 5.2....................Business; Compliance with Applicable Law.46
Section 5.3...................................Maintenance of Properties.47
Section 5.4....................Accounting Methods and Financial Records.47
Section 5.5...................................................Insurance.47
Section 5.6.................................Payment of Taxes and Claims.47
Section 5.7......................................Visits and Inspections.47
Section 5.8.............................................Use of Proceeds.48
Section 5.9...................................................INDEMNITY.48
Section 5.10...............................Environmental Law Compliance.49
Section 5.11.........................................Further Assurances.50
Section 5.12................................Management of Projects, Etc.50
Section 5.13.................................................[Reserved].50
Section 5.14........................................Owners Associations.50
Section 5.15................................Note Receivable Information.51
Section 5.16.................................................[Reserved].51
Section 5.17..................................................[Reserved]51
Section 5.18....................Subsidiary Guaranty; Security Agreement.51
ARTICLE 6 Information Covenants.............................................52
Section 6.1..................................................[Reserved].52
Section 6.2..................................................[Reserved].52
Section 6.3..............Quarterly Financial Statements and Information.52
Section 6.4.Annual Financial Statements and Information;
Certificate of No Default. 52
Section 6.5......................................Compliance Certificate.53
Section 6.6.........................Copies of Other Reports and Notices.53
Section 6.7.............Notice of Litigation, Default and Other Matters.54
Section 6.8................................ERISA Reporting Requirements.54
ARTICLE 7 Negative Covenants................................................55
Section 7.1................................................Indebtedness.55
Section 7.2.......................................................Liens.55
Section 7.3.................................................Investments.55
Section 7.4.........................................Liquidation, Merger.56
Section 7.5.............................................Sales of Assets.56
Section 7.6................................................Acquisitions.57
Section 7.7....................................Equivest Note; GSHA Note.57
Section 7.8...................................................Dividends.57
Section 7.9......................................Affiliate Transactions.57
Section 7.10......................................Compliance with ERISA.57
Section 7.11....................................Interest Coverage Ratio.58
Section 7.12..................................................Net Worth.58
Section 7.13...................................................Reserved.58
Section 7.14................................Total Debt to Total Capital.58
Section 7.15..........................Average Quarterly Charge-Off Rate.58
Section 7.16.............................Average Quarterly Default Rate.58
Section 7.17.........................Average Quarterly Delinquency Rate.58
Section 7.18.........................................Sale and Leaseback.59
Section 7.19...................................................Business.59
Section 7.20................................................Fiscal Year.59
Section 7.21......................Amendment of Organizational Documents.59
Section 7.22...................................................Reserved.59
Section 7.23.......................................Use of Lender's Name.59
ARTICLE 8 Default...........................................................59
Section 8.1...........................................Events of Default.59
Section 8.2....................................................Remedies.62
ARTICLE 9 Changes in Circumstances..........................................63
Section 9.1..........................Inability to Determine LIBOR Basis.63
Section 9.2..................................................Illegality.63
Section 9.3.............................................Increased Costs.63
Section 9.4...........................Effect On Reference Rate Advances.64
Section 9.5............................................Capital Adequacy.64
ARTICLE 10 Miscellaneous....................................................65
Section 10.1....................................................Notices.65
Section 10.2...................................................Expenses.65
Section 10.3....................................................Waivers.66
Section 10.4...........Calculation by the Lender Conclusive and Binding.66
Section 10.5....................................................Set-Off.66
Section 10.6.................................................Assignment.67
Section 10.7...............................................Counterparts.67
Section 10.8...............................................Severability.67
Section 10.9.......................................Interest and Charges.67
Section 10.10..................................................Headings.67
Section 10.11......................................Amendment and Waiver.68
Section 10.12....................................Exception to Covenants.68
Section 10.13................................................[Reserved].68
Section 10.14................................................[Reserved].68
Section 10.15.............................................GOVERNING LAW.68
Section 10.16......................................WAIVER OF JURY TRIAL.68
Section 10.17..........................................ENTIRE AGREEMENT.68
<PAGE>
Schedules and Exhibits
Schedule 1:.LIBOR Lending Office Addresses for Notices
Schedule 2:.Required Consents
Schedule 3:.Existing Litigation and Material Liabilities
Schedule 4:.Subsidiaries and Affiliates
Schedule 5:.Existing Investments
Schedule 6:.Existing Indebtedness: Secured and Unsecured
Schedule 7:.Qualification and Good Standing
Schedule 8:.Environmental Matters
Schedule 9:.Labor Relations
Schedule 10: Guarantors
Schedule 11: Assumed Indebtedness
Schedule 12: Material Contracts
Schedule 13: Insurance
Schedule 14: Licenses, Permits; Etc.
Schedule 15: Indebtedness to Officers; Etc.
Schedule 16: Real Property
Schedule 17: Operating Condition; Etc.
Exhibit A:..Form of Term Note Exhibit B:..Form of Compliance Certificate Exhibit
C:..Form of Subsidiary Guaranty Exhibit D:..Form of Borrowing
Request/Designation Exhibit E:..Form of Security Agreement Exhibit F:..Form of
Pledge Agreement Exhibit G:..Form of Opinion of Counsel
<PAGE>
1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of November 17, 1999, among
EQUIVEST FINANCE, INC., a Delaware corporation (the "Borrower"),
PEPPERTREE ACQUISITION CORP. ("Newco I"), a Delaware corporation and a
newly-formed, wholly-owned subsidiary of the Borrower, PEPPERTREE
ACQUISITION II CORP. ("Newco II"), a Delaware corporation and a
newly-formed, wholly-owned subsidiary of the Borrower and BANK OF AMERICA,
N.A., a national banking association (the "Lender").
PRELIMINARY STATEMENTS
Pursuant to the terms of the Acquisition Agreement (such term and
each other capitalized term used but not defined herein having the meaning
given it in Article I), Newco I and Newco II intend to acquire the
Transferred Assets (the "Peppertree Acquisition").
The Borrower desires to obtain certain financial accommodations from
the Lender and the Lender is willing to extend such credit to the Borrower
on the terms and subject to the conditions set forth herein. Accordingly,
the parties hereto agree as follows:
Definitions
Defined Terms. For purposes of this Agreement.
"A&D Loans Receivable" means a loan made by the Borrower or its
Subsidiaries or Affiliates to finance the acquisition and development of
time-share residential real estate projects.
"Acquisition" means any transaction pursuant to which the Borrower
or a Subsidiary or Affiliate of the Borrower, (a) whether by means of a
capital contribution or purchase or other acquisition of Capital Stock,
(i) acquires more than 50% of the Capital Stock in any Person pursuant to
a solicitation by the Borrower or such Subsidiary or Affiliate, or (ii)
makes any corporation a Subsidiary or Affiliate of the Borrower or such
Subsidiary or Affiliate, or (iii) causes any corporation to be merged into
the Borrower or such Subsidiary or Affiliate (other than a merger with
another Subsidiary or Affiliate of the Borrower), or (b) purchases all or
substantially all of the business or assets of any Person or of any
operating division of any Person.
"Acquisition Agreement" means the Agreement and Plan of
Reorganization dated as of November 17, 1999, by and among the Borrower,
Newco I, Newco II, Peppertree, C. Wayne Kinser, Pioneer Hotel Corporation
and the stockholder named therein.
"Affiliate" means, as applied to any Person, any other Person that,
directly or indirectly, through one or more Persons, Controls or is
Controlled By or Under Common Control with, that Person.
"Aggregated Notes Receivable" means, collectively, the face amount
of all Notes Receivable generated by the Borrower and/or any of the
Subsidiaries or Affiliates of the Borrower whether or not held by the
Borrower or a Subsidiary or Affiliate of the Borrower, provided that data
is available to the Borrower or a Subsidiary or Affiliate of the Borrower
with respect to whether any such Note Receivable (a) has been charged-off,
(b) any scheduled payment is more than 60 days but no more than 180 days
past due, or (c) any scheduled payment is more than 180 days past due.
"Agreement" means this Credit Agreement, as amended, modified,
supplemented or restated from time to time.
"Agreement Date" means the date of this Agreement.
"Applicable Environmental Laws" means applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended from time to time, "CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980,
the Solid Waste Disposal Act amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended from time to time, "RCRA").
"Applicable Law" means in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental
bodies or regulatory agencies applicable to such Person and its
properties, including, without limiting the foregoing, all orders and
decrees of all courts and arbitrators in proceedings or actions to which
the Person in question is a party.
"Asset Sale" means the sale, transfer or other disposition by the
Borrower or any of its Subsidiaries to any Person other than the Borrower
or any of its Subsidiaries of (a) any Equity of any of its Subsidiaries or
(b) any other assets of the Borrower or any of its Subsidiaries (other
than inventory in the ordinary course of business, Securitizations,
damaged or worn out assets, Cash and Cash Equivalents, or dispositions
that result in casualty or condemnation proceeds).
"Authorized Signatory" means such senior personnel of the Borrower
as may be duly authorized and designated in writing by the Borrower to
execute documents, agreements and instruments on behalf of the Borrower,
and to request a borrowing hereunder.
"Average Quarterly Charge-Off Rate" means the ratio (expressed as a
percentage), calculated as of the last day of each calendar quarter, of
(a) the aggregate outstanding principal balance of the Aggregated Notes
Receivable that have been charged-off during the twelve consecutive
calendar months ending on the date of calculation (net of any recoveries
with respect thereto during such period), to (b) the average monthly
aggregate outstanding principal balance of all of the Aggregated Notes
Receivable during the twelve consecutive calendar months ending on the
date of such calculation (determined by averaging the aggregate
outstanding principal balances of all of the Aggregated Notes Receivable
as of the beginning and as of the end of each such calendar month during
such period and then averaging such average monthly aggregate outstanding
principal balances for the twelve calendar months included in such
period).
"Average Quarterly Default Rate" means the ratio (expressed as a
percentage), calculated as of the last day of each calendar quarter with
respect to the calendar quarter ending on the date of calculation, of (a)
the aggregate outstanding principal balance, as of the effective date of
such calculation, of the Aggregated Notes Receivable with respect to which
any scheduled payment is more than 180 days past due, to (b) the aggregate
outstanding principal balance of all of the Aggregated Notes Receivable as
of the effective date of such calculation.
"Average Quarterly Delinquency Rate" means the ratio (expressed as a
percentage), calculated on a quarterly basis as of the last day of each
calendar quarter with respect to the calendar quarter ending on the date
of calculation, of (a) the aggregate outstanding principal balance, as of
the effective date of such calculation, of the Aggregated Notes Receivable
with respect to which any scheduled payment is more than 60 days past due
but not more than 180 days past due, to (b) the aggregate outstanding
principal balance of all of the Aggregated Notes Receivable as of the
effective date of such calculation.
"Borrower" has the meaning specified in the caption to this
Agreement.
"Borrowing Request/Designation" has the meaning specified in Section
2.2(a) hereof.
"Business Day" means a day on which commercial banks are open (a)
for the transaction of business in Los Angeles, California and, (b) with
respect to any LIBOR Advance, for the transaction of international
business (including dealings in U.S. dollar deposits) in London, England.
"Capital Stock" means, as to any Person, the equity interests in
such Person, including, without limitation, the shares of each class of
capital stock in any Person that is a corporation, each class of
partnership interest (including, without limitation, general, limited and
preference units) in any Person that is a partnership and each class of
limited liability company interests in any Person that is a limited
liability company.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person that should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital
assets (including expenditures for maintenance and repairs that should be
capitalized in accordance with GAAP) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capitalized Lease Obligations" means that portion of any obligation
of the Borrower or any Subsidiary or Affiliate of the Borrower as lessee
under a lease which at the time are recorded as capitalized lease
obligations on the balance sheet of the Borrower or such Subsidiary or
Affiliate of the Borrower prepared in accordance with GAAP.
"Cash and Cash Equivalents" means with respect to the Borrower and
each Subsidiary and Affiliate of the Borrower (a) cash, (b) securities
issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (c) certificates of
deposit and Eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months from the date of acquisition and overnight bank
deposits, in each case with the Lender or with any domestic commercial
bank having capital and surplus in excess of $500,000,000, (d) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (b) and (c) entered into with
any financial institution meeting the qualifications specified in clause
(c) above, (e) commercial paper issued by the Lender or the parent
corporation of the Lender, and commercial paper rated A-1 or the
equivalent thereof by Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc., a New York corporation, or P-1 or the equivalent
thereof by Moody's Investors Service, Inc., and in each case maturing
within six months after the date of acquisition, and (f) a readily
redeemable "money market mutual fund" advised by a bank described in
clause (c) hereof, or an investment advisor registered under Section 203
of the Investment Advisors Act of 1940, that has and maintains an
investment policy limiting its investments primarily to instruments of the
types described in clauses (a) through (e) hereof and having on the date
of such Investment total assets of at least One Hundred Million Dollars
($100,000,000.00).
"Change of Control" means the occurrence of any of the following
events after the Agreement Date: (a) any Person or any Persons acting
together which would constitute a "group" (a "Group") for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor provision thereto, other than the Group
whose nominees constituted a majority of the board of directors of the
Borrower as of the close of business on the Agreement Date, together with
any Affiliates or Related Persons thereof, shall beneficially own (as
defined in Rule 13d-3 of the Securities and Exchange Commission under the
Exchange Act or any successor provision thereto) at least 30% of the
aggregate voting power of all classes of Capital Stock of the Borrower
entitled to vote generally in the election of directors of the Borrower;
(b) any Person or Group, other than any Person or Group whose nominees
constituted a majority of the board of directors of the Borrower as of the
close of business on the Agreement Date, together with any Affiliates or
Related Persons thereof, shall succeed in having sufficient of its or
their nominees elected to the Board of Directors of the Borrower, such
that such nominees, when added to any existing director remaining on the
Board of Directors of the Borrower after such election who is an Affiliate
or Related Person of such Group, shall constitute a majority of the Board
of Directors of the Borrower; or (c) Richard C. Breeden shall cease to be
either the Chief Executive Officer or the Chief Operating Officer of the
Borrower and ceases to be involved in the daily operations of the
Borrower; provided, however, that any Offering by the Estate shall not be
deemed to be a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means any collateral granted at any time by any Person
to the Lender to secure the Obligations, including without limitation, the
following collateral subject to the Pledge Agreement and the Security
Agreement (a) all outstanding shares of the capital stock of the
Peppertree Entities, Newco I and Newco II; (b) all general and limited
partnership interests in Great Smokies (after the making of the Great
Smokies Drawing) and (c) all "Collateral" as such term is defined in the
Security Agreement.
"Collateral Document" means the Pledge Agreement, the Security
Agreement and any other agreement pursuant to which a lien, pledge or
security interest in property is granted to the Lender and all documents
related thereto.
"Commitment" means an amount equal to (a) 60% of the sum of (i) the
Purchase Price plus (ii) the Transaction Costs plus (b) the lesser of the
cash portion of the Deferred Payment and $600,000; provided, however, that
the Commitment shall not exceed $20,700,000.
"Commitment Letter" means the letter agreement entered into between
the Lender and the Borrower setting forth the terms of the Commitment.
"Compliance Certificate" means a certificate, signed by an
Authorized Signatory, in substantially the form of Exhibit B,
appropriately completed.
"Confidential Memorandum" means the Confidential Memorandum dated
July 1999 prepared by McDonald Investments.
"Control" or "Controlled By" or "Under Common Control" means
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of voting
securities, by contract or otherwise); provided, however, that in any
event any Person which beneficially owns, directly or indirectly, 10% or
more (in number of votes) of the securities having ordinary voting power
for the election of directors of a corporation shall be conclusively
presumed to control such corporation.
"Controlled Group" means as of the applicable date, as to any Person
not an individual, all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) which are under
common control with such Person and which, together with such Person, are
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code.
"Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief Laws affecting the rights of
creditors generally from time to time in effect.
"Default" means any of the events specified in Section 8.1, whether
or not any requirement for the giving of notice or the lapse of time, or
both, or any other condition, has been satisfied.
"Default Rate" means a simple per annum interest rate equal to (a)
with respect to Reference Rate Advances the lesser of (i) the Highest
Lawful Rate or (ii) the Reference Rate plus 3.00% or (b) with respect to
LIBOR Advances, the lesser of (i) the Highest Lawful Rate or (ii) the
LIBOR Basis plus 3.00%.
"Deferred Payment" means a payment to be made to Kinser on June 30,
2000 pursuant to Section 2.04 of the Acquisition Agreement constituting
the deferred purchase price due to Kinser in connection with the
Transactions.
"Deferred Payment Drawing" means a drawing to be made on June 30,
2000, the proceeds of which are to be used solely to pay a portion of the
Deferred Payment; provided, however, that the amount of such Drawing shall
not exceed 100% of the cash portion of the Deferred Payment; provided,
further, that such amount shall not exceed $600,000.
"Dividend" means, as to any Person, (a) any declaration or payment
of any dividend on, or the making of any distribution on account of, any
shares of Capital Stock of, or other similar interest in, such Person and
(b) any purchase, redemption, or other acquisition or retirement for value
of any shares of Capital Stock of, or similar interest in, such Person.
"Dollar" or "$" means the lawful currency of the United States of
America.
"EBITDA" means, for any period, determined in accordance with GAAP
on a consolidated basis for the Borrower and its Subsidiaries and
Affiliates, the sum of (a) Pretax Net Income (excluding therefrom, to the
extent included in determining Pretax Net Income, any items of
extraordinary gain, including net gains on the sale of assets other than
asset sales in the ordinary course of business, and adding thereto, to the
extent included in determining Pretax Net Income, any items of
extraordinary loss, including net losses on the sale of assets; provided,
however, that, for purposes hereof, gains or losses from the sale of Notes
Receivable shall not be considered to be extraordinary), plus (b) interest
expense, plus (c) capitalized interest included in costs of goods sold,
plus (d) non-recurring charges incurred as a result of business
combinations utilizing the pooling accounting method to the extent that
such charges would be permitted to be capitalized utilizing the purchase
accounting method plus (e) depreciation, amortization and other non-cash
charges (to the extent included in determining (a) through (d) above).
"Equity" means Capital Stock or a member interest, or options,
warrants or any other right to subscribe for or otherwise acquire Capital
Stock or a member interest, of the Borrower or any Subsidiary or Affiliate
of the Borrower.
"Equivest Note" means the promissory note or notes in the aggregate
amount of up to $4,133,008 made by Borrower to Kinser in connection with
the Transactions.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower and its Controlled
Group, (a) a Reportable Event (other than a Reportable Event not subject
to the provision for 30-day notice to the PBGC pursuant to regulations
issued under Section 4043 of ERISA) with respect to any Plan, (b) the
withdrawal of any such Person or any member of its Controlled Group from a
Plan subject to Title IV of ERISA during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate under Section 4041(c) of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC, (e)
the failure to make required contributions that is likely to result in the
imposition of a lien under Section 412 of the Code or Section 302 of
ERISA, or (f) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
the imposition of any liability under Title IV of ERISA other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Estate" means, collectively, Bennett Funding Group, Inc., Bennett Management
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and Development Corp., and certain of their Affiliates which have filed petitions
for bankruptcy with the United States Bankruptcy Court.
"Eurodollar Reserve Percentage" means, for any day during any
Interest Period, the reserve percentage (expressed as a decimal, rounded
upward to the next 1/100th of 1%) in effect on such day, whether or not
applicable to the Lender, under regulations issued from time to time by
the Board of Governors of the Federal Reserve System for determining the
maximum reserve requirement (including any emergency, supplemental or
other marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"). The LIBOR Base Rate
for each outstanding LIBOR Advance shall be adjusted automatically as of
the effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the events specified in Section 8.l,
provided that any condition set forth therein has been satisfied.
"Excess Cash Flow" means, for any period of determination for the
Borrower and its consolidated Subsidiaries, determined in accordance with
GAAP, the amount by which (a) the sum, without duplication, of (i) EBITDA
for such period of determination, plus (ii) extraordinary cash receipts of
the Borrower and its consolidated Subsidiaries, if any, during such period
of determination and not included in EBITDA (including any amounts
received by the Borrower or any of its Subsidiaries by way of a purchase
price adjustment pursuant to the Acquisition Agreement), plus (iii) Net
Notes Receivable Proceeds for such period plus (iv) Net A&D Loans
Receivables Proceeds plus (v) Net Cash Proceeds of Asset Sales exceeds (b)
the sum, without duplication, of (i) the amount of any cash income taxes
payable by the Borrower and its consolidated Subsidiaries with respect to
such period of determination, plus (ii) cash interest paid (net of cash
interest received) by the Borrower and its consolidated Subsidiaries
during such period of determination, plus (iii) Capital Expenditures made
in cash during such period of determination, except to the extent financed
with the proceeds of Indebtedness, casualty or condemnation proceeds, plus
(iv) repayments of the principal of Indebtedness by the Borrower and its
consolidated Subsidiaries during such period of determination, whether
scheduled, optional or mandatory, but only to the extent that such
repayments by their terms cannot be reborrowed or redrawn and do not occur
in connection with a refinancing of all or any portion of such
Indebtedness plus (v) extraordinary cash expenses and cash restructuring
charges paid by the Borrower and its consolidated Subsidiaries, if any,
during such period of determination and not included in EBITDA.
"Extension Fee" means a fee equal to (a) 1.375% in the case of the
First Extension Period, or (b) 0.875% in the case of the Second Extension
Period, in each case of the amount of the Term Loan outstanding on the
effective date of the notice given by the Borrower pursuant to Section 2.8
hereof.
"First Extension Period" shall have the meaning assigned thereto in
Section 2.8(a).
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, or their
successors which are applicable in the circumstances as of the date in
question. The requirement that such principles be applied on a consistent
basis shall mean that the accounting principles applied in a current
period are comparable in all material respects to those applied in a
preceding period.
"GSHA Note" has the meaning set forth in the Acquisition Agreement.
"Great Smokies" means Great Smokies Hotel Associates, a North
Carolina limited partnership.
"Great Smokies Acquisition" means the acquisition by (a) Newco II of
100% of the general partnership interest and 99% of the limited
partnership interest in Great Smokies from Kinser and Pioneer Hotel
Corporation and (b) the Borrower of a 1% limited partnership interest in
Great Smokies from Kinser.
"Great Smokies Drawing" means a drawing made on any date subsequent
to the Agreement Date, but in no event later than January 31, 2000, the
proceeds of which are used solely for the Great Smokies Acquisition;
provided, however, that the amount of such Drawing shall not exceed
$3,300,000.
"Guarantor" means each direct and indirect Subsidiary or Affiliate
of the Borrower which (a) as of the Agreement Date is set forth on
Schedule 10 attached hereto and (b) after the Agreement Date becomes a
party to the Subsidiary Guaranty.
"Guaranty" or "Guaranteed", means (a) as applied to an obligation of
another Person, (i) a guaranty, direct or indirect, in any manner, of any
part or all of such obligation, and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any
way the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation, including, without
limiting the foregoing, any reimbursement obligations with respect to
amounts which may be drawn by beneficiaries of outstanding letters of
credit and (b) an agreement, direct or indirect, contingent or otherwise,
to maintain the net worth, working capital, earnings or other financial
performance of another Person; provided, however, that the term "Guaranty"
does not include (y) the endorsement of instruments for collection or
deposit in the ordinary course of business and (z) customary indemnities
given in connection with asset sales in the ordinary course of business.
"Hedge Agreements" means any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from
the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including, but not limited to, dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange agreements,
interest rate cap, swap or collar protection agreements, and forward rate
currency or interest rate options, and any and all cancellations, buy
backs, reversals, terminations or assignments of any of the foregoing.
"Highest Lawful Amount" means at the particular time in question the
maximum amount of interest which, under Applicable Law, the Lender is then
permitted to charge on the Obligations at the Highest Lawful Rate.
"Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lender is then
permitted to charge on the Obligations. If the maximum rate of interest
which, under Applicable Law, the Lender is permitted to charge on the
Obligations shall change after the date hereof, the Highest Lawful Rate
shall be automatically increased or decreased, as the case may be, from
time to time as of the effective time of each change in the Highest Lawful
Rate without notice to the Borrower.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations under conditional sale or other title retention agreements
relating to property or assets purchased by such Person, (d) all
obligations issued or assumed as the deferred purchase price of property
or services (other than trade payables incurred in the ordinary course of
business), (e) all obligations secured by any Lien on any property or
asset owned by such Person (other than accounts payable arising in the
ordinary course of business), (f) the principal portion of all obligations
of such Person under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered indebtedness for borrowed money for
tax purposes but is classified as an Operating Lease in accordance with
GAAP, (g) to the extent not otherwise included, all Capitalized Lease
Obligations of such Person, all obligations of any general partnership,
joint venture or other Person to the extent that such Person is liable,
whether contractually, as a matter of applicable law or otherwise, for
such obligations, all obligations in respect of letters of credit,
bankers' acceptances and similar instruments, all obligations under Hedge
Agreements, and all obligations in respect of payment, performance and
similar bonds, (h) any Guaranty of such Person of any obligation or
another Person constituting obligations of a type set forth above and (i)
the obligations of the Borrower to pay the 1999 Earnout and the 2000
Earnout (as such terms are defined in the Acquisition Agreement).
"Indemnified Matters" has the meaning specified in Section 5.9(a)
hereof.
"Indemnitees" has the meaning specified in Section 5.9(a) hereof.
"Initial Term" means the period from the date on which the
Commitment is made available to the Borrower to the initial Maturity Date.
"Interest Coverage Ratio" means, on any date of calculation, the
ratio of EBITDA to Interest Expense, calculated for the four consecutive
fiscal quarters ending on such date.
"Interest Differential" means an amount, if any, as of the date of
any prepayment of a LIBOR Advance by which (a) the amount of interest that
would have accrued on such LIBOR Advance from the date of prepayment for
the remainder of the applicable Interest Period exceeds (b) the amount of
interest that would have accrued on such LIBOR Advance for the period from
the date of prepayment of such LIBOR Advance to the last day of the
applicable Interest Period for such LIBOR Advance if the LIBOR Base Rate
applicable to such LIBOR Advance (the "Applicable Rate") were determined
two (2) Business Days prior to the date of prepayment of such LIBOR
Advance. The period commencing on the date of such prepayment and ending
on the last day of the applicable Interest Period shall be deemed to be
the "Interest Period" for the determination of such Applicable Rate. The
calculation of the Interest Differential by the Lender shall be conclusive
in the absence of manifest or demonstrable error. The following example is
intended to facilitate the calculation of "Interest Deferential" and is
not intended to contravene or in any way alter the text of this
definition.
Example:
If "(a)" is less than "(b)" the Interest Differential will be a
credit and a prepayment penalty shall not be incurred.
If "(a)" is greater than "(b)" the Interest Differential shall be
due to the Lender.
Where,
"(a)" is an amount equal to the product of the prepayment
portion of the LIBOR Advance and the number of days remaining in the
applicable Interest Period divided by the LIBOR Basis; and
"(b)" is an amount equal to the product of the prepayment
portion of the LIBOR Advance and the number of days remaining in the
applicable Interest Period divided by the Applicable Rate determined two
Business Days prior to the actual payment date.
"Interest Expense" means, collectively but without duplication, for
any period, determined in accordance with GAAP on a consolidated basis for
the Borrower and the Subsidiaries of the Borrower, (a) interest expense,
as presented on the Borrower's and its Subsidiaries' income statement,
including accrued but unpaid interest and interest expense pursuant to
Capitalized Lease Obligations, plus (b) capitalized interest to the extent
that such capitalized interest reduces interest expense as presented on
the Borrower's and its Subsidiaries' income statement.
"Interest Period" means the period beginning on the day any LIBOR
Advance is made and ending one, two, three or six months thereafter (as
the Borrower shall select); provided, however, that all of the foregoing
provisions are subject to the following:
if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless, with respect to a LIBOR Advance, the
result of such extension would be to extend such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day;
any Interest Period with respect to a LIBOR Advance that begins on
the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month;
and
the Borrower may not select any Interest Period which ends after the Maturity
Date.
"Investment" means any acquisition of all or substantially all
assets of any Person, or any direct or indirect purchase or other
acquisition of, or beneficial interest in, capital stock or other
securities of any other Person, or any direct or indirect loan, advance
(other than loans or advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution to, or investment in any other Person,
including without limitation the purchase of accounts receivable of any
other Person.
"Kinser" means C. Wayne Kinser, an individual.
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"Law" means any statute, law, ordinance, regulation, rule, order,
writ, injunction, or decree of any Tribunal.
"LIBOR" means the offered rate for a period of time comparable to
the number of days in the applicable Interest Period for deposits in
United States Dollars, as shown on Telerate Page 3750 as of 11:00 a.m.
London time two (2) Business Days prior to the first day of the applicable
Interest Period, or if Telerate Page 3750 is unavailable, the rate for
such deposits determined by the Lender at such time based on such other
published service of general application as shall be selected by the
Lender for such purpose. The determination of LIBOR by the Lender shall be
conclusive in the absence of manifest error. "Telerate Page 3750" means
the display designated as such on Teleratesystem Incorporated (or such
other page as may replace page 3750 on that service for the purpose of
displaying London interbank offered rates of major banks for United States
Dollar deposits.
"LIBOR Advance" means the Term Loan or any portion thereof at such
time as it bears interest at the LIBOR Basis.
"LIBOR Base Rate" means, for any LIBOR Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/1000 of 1%, if available on Telerate and 1/100 of 1% if not so
available) determined pursuant to the following formula:
LIBOR
Base Rate = LIBOR
1.00 -
Eurodollar Reserve
Percentage
"LIBOR Basis" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate and (b) (i) during the Initial Term
the sum of the LIBOR Base Rate plus 3.00%; (ii) during the First Extension
Period the sum of the LIBOR Base Rate plus 3.50%; or (iii) during the
Second Extension Period the sum of the LIBOR Base Rate plus 4.25%.
"LIBOR Lending Office" means, with respect to the Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and
such other office of the Lender or any of its Affiliates hereafter
designated by notice to the Borrower.
"Lien" means, with respect to any property, any mortgage, lien,
pledge, collateral assignment, hypothecation, charge, security interest,
title retention agreement, levy, execution, seizure, attachment,
garnishment or other similar encumbrance of any kind in respect of such
property, whether or not vested or perfected.
"Litigation" means any proceeding, claim, lawsuit, arbitration,
and/or investigation by or before any Tribunal, including, without
limitation, proceedings, claims, lawsuits, and/or investigations under or
pursuant to any environmental, occupational, safety and health, antitrust,
unfair competition, securities, Tax or other Law, or under or pursuant to
any contract, agreement or other instrument.
"Loan Documents" means this Agreement, the Term Note, the Pledge
Agreement, the Security Agreement, any other Collateral Document, the
Subsidiary Guaranty, any Hedge Agreements entered into with the Lender and
any other document or agreement executed or delivered from time to time by
the Borrower, any Guarantor or any other Subsidiary or Affiliate of the
Borrower or any other Person in connection herewith or as security for the
Obligations.
"Material Adverse Effect" means any act or circumstance or event
that (a) could reasonably be expected to be material and adverse to the
business condition (financial or otherwise), operations, properties,
business prospects or ability to repay the Obligations in accordance with
the terms of the Loan Documents of the Borrower and its Subsidiaries and
Affiliates taken as a whole, or (b) in any manner whatsoever does or could
reasonably be expected to materially and adversely affect the validity or
enforceability of any Loan Document.
"Maturity Date" means (a) initially August 17, 2000 and (b) if any
extension option is exercised, the related dates set forth in Section 2.8;
or the earlier date of termination in whole of the Commitment pursuant to
Section 8.2 hereof.
"Multiemployer Plan" means, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which such Person or any member of its Controlled Group is making, or
is obligated to make contributions or has made, or been obligated to make,
contributions within the past five (5) years.
"Necessary Authorization" means any license, permit, consent,
approval or authorization from, or any filing or registration with, any
Tribunal necessary or appropriate to enable the Borrower or any Subsidiary
or Affiliate of the Borrower to maintain and operate its business and
properties or to execute, deliver and perform the Loan Documents.
"Net A&D Loans Receivable Proceeds" means, for any period of
determination for the Borrower and its consolidated Subsidiaries,
determined in accordance with GAAP, to the extent not already included in
EBITDA for such period, the amount by which (a) the sum, without
duplication, of (i) Net Cash Proceeds from sales of A&D Loans Receivable
plus (ii) total proceeds received from loans to the Borrower and its
consolidated Subsidiaries that are secured by A&D Loans Receivable minus
total repayments made of such loans exceeds (b) net advances made under
A&D Loans Receivable.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset by any Person (including Capital Stock),
the amount of cash received by such Person in connection with such
transaction (including cash proceeds of any property received in
consideration of any such sale, lease, transfer or other disposition)
after deducting therefrom the aggregate, without duplication, of the
following amounts to the extent properly attributable to such transaction
or to the asset that is the subject thereof: (a) reasonable brokerage
commissions, legal fees, finder's fees, financial advisory fees,
accounting fees, underwriting fees, investment banking fees and other
similar commissions and fees, in each case, to the extent paid or payable
by such Person; (b) filing, recording or registration fees or charges or
similar fees or charges paid by such Person; (c) taxes paid or payable by
such Person or any shareholder, partner or member of such Person to
governmental taxing authorities as a result of such sale or other
disposition; and (d) payment of the outstanding principal amount of,
premium or penalty, if any, and interest on any Indebtedness that is
secured by a Lien on the asset in question and that is required to be
repaid under the terms thereof as a result of such asset sale.
"Net Exposure Under Securitization" means, for any date of
calculation, the sum of (a) any and all obligations and liabilities of the
Borrower or any Subsidiary or Affiliate of the Borrower under, or in
connection with, any Securitization, as of such date of calculation, to
the extent that same constitute recourse liabilities of the Borrower or of
such Subsidiary or Affiliate and (b) the fair market value of any and all
property of the Borrower or of any Subsidiary or Affiliate of the Borrower
that is pledged or encumbered, or as to which the interest(s) of the
Borrower or any such Subsidiary or Affiliate are subordinated or otherwise
impaired, as security for or as a credit enhancement or otherwise in
connection with, any Securitization.
"Net Income" means, with respect to any Person for any period, the
net income (loss) (including any net income from the sale or
Securitization of any Notes Receivable) of such Person, after provisions
for taxes and extraordinary items, determined in accordance with GAAP.
"Net Notes Receivable Proceeds" means, for any period of
determination for the Borrower and its consolidated Subsidiaries,
determined in accordance with GAAP, to the extent not already included in
EBITDA for such period, the amount by which (a) the sum, without
duplication, of (i) Net Cash Proceeds from sales of Notes Receivable and
(ii) total proceeds received from loans to the Borrower and its
consolidated Subsidiaries that are secured either (A) by Notes Receivable
owned by the Borrower and its consolidated Subsidiaries minus total
repayments made of such loans or (B) by Notes Receivable Loans, exceeds
(b) the sum, without duplication, of (i) payments made by the Borrower and
its consolidated Subsidiaries to purchase Notes Receivable and (ii) net
advances made under Notes Receivable Loans.
"Net Worth" means, as of any date of calculation, for the Borrower
and its Subsidiaries, on a consolidated basis, determined in accordance
with GAAP, the consolidated total stockholders' equity of the Borrower and
its Subsidiaries.
"New Material Affiliate" means any Affiliate of the Borrower formed
or acquired by the Borrower at any time subsequent to the Agreement Date,
having equity in excess of $2,500,000, including, without limitation,
Great Smokies, but not including any Affiliate that is a special-purpose
bankruptcy remote corporation formed exclusively to operate as a conduit
in Securitizations.
"New Material Subsidiary" means any Subsidiary of the Borrower
formed or acquired by the Borrower at any time subsequent to the Agreement
Date, having equity in excess of $2,500,000, including, without
limitation, Great Smokies, but not including any Subsidiary that is a
special-purpose bankruptcy remote corporation formed exclusively to
operate as a conduit in Securitizations .
"Newco I" means Peppertree Acquisition Corp., a Delaware corporation and a
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wholly-owned subsidiary of the Borrower.
"Newco II" means Peppertree Acquisition II Corp., a Delaware corporation and
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a wholly-owned subsidiary of the Borrower.
"Note Receivable" means the interest of the Borrower or a Subsidiary
or Affiliate of the Borrower in a promissory note, or other written
agreement arising out of the sale and purchase of a Time-Share Interest
and containing a legally binding obligation on the part of a Purchaser to
pay a sum certain, executed and delivered by a Purchaser and as to which
there exist no unsatisfied conditions precedent to the validity and
enforceability thereof under the terms of the applicable Purchase
Documents, at law or otherwise.
"Notes Receivable Loans" means loans made by the Borrower or any of
its consolidated Subsidiaries to borrowers that are not Affiliates of the
Borrower and that are secured by the borrower's interest in promissory
notes or other written agreements evidencing indebtedness arising out of
the sale and purchase of the right to utilize residential units in
time-share residential real estate projects.
"Obligations" means (a) all obligations of any nature (whether
matured or unmatured, fixed or contingent) of the Borrower or any other
Obligor to the Lender under any of the Loan Documents and (b) all
obligations of the Borrower or any other Obligor for losses, damages,
expenses or any other liabilities of any kind that the Lender may suffer
by reason of a breach by the Borrower or any other Obligor of any
obligation, covenant or undertaking with respect to any Loan Document
payable by the Borrower or any other Obligor under any Loan Document.
"Obligor" means the Borrower and each Guarantor.
"Offering" means any transaction to raise capital through the
private placement or public issuance of debt or equity securities of the
Borrower or any of its Subsidiaries or Affiliates.
"Operating Lease" means any operating lease, as defined in the
Financial Accounting Standard Board Statement of Financial Accounting
Standards No. 13, dated November, 1976 or otherwise in accordance with
GAAP, of the Borrower and/or any of its Subsidiaries and Affiliates.
"Payment Date" means the first Business Day of each calendar month.
"Partnership Interests" means all the general and limited
partnership interests in Great Smokies.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Peppertree" means Peppertree Resorts, Ltd., a North Carolina corporation.
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"Peppertree Acquisition" has the meaning specified in the
Preliminary Statements hereto.
"Peppertree Entities" means Peppertree, Great Smokies (in the event
of the Great Smokies Drawing), PRVI and each other Subsidiary of
Peppertree, collectively.
"Peppertree Interests" means the Pledged Stock and the Partnership Interests.
--------------------
"Person" means an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Permitted Equity Offering" means one private placement of equity
securities of the Borrower or any of its Subsidiaries or Affiliates
effected during the first six months following the Agreement Date.
"Permitted Liens" means, as applied to any Person:
Any Lien in favor of the Lender;
(i) Liens on real estate for ad valorem taxes not yet delinquent,
and (ii) Liens for taxes, assessments, governmental charges, levies,
homeowners' association dues or other claims that are not yet delinquent
or that are being diligently contested in good faith by appropriate
proceedings in accordance with Section 5.6 hereof and for which adequate
reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
Liens of carriers, landlords, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business for sums not yet
due or being contested in good faith, if adequate reserves or other
appropriate provision, if any, as shall be required by GAAP shall have
been made therefor;
Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
Easements, right-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere in any material respect
with the ordinary conduct of the business of such Person;
Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay
of execution upon any such appeal or proceeding for review shall have been
secured, provided that (i) such Person shall have established adequate
reserves for such judgments or awards, (ii) such judgments or awards shall
be fully insured (subject to customary deductibles) and the insurer shall
not have denied coverage, or (iii) such judgments or awards shall have
been bonded to the satisfaction of the Lender;
Any Liens which secure Indebtedness that is permitted by Section 7.1 hereof;
-----------
Liens arising from filing Uniform Commercial Code financing
statements for precautionary purposes relating solely to true leases of
personal property permitted by this Agreement under which the Borrower or
any of its Subsidiaries or Affiliates is a lessee;
Any zoning or similar law or right reserved to or vested in any Tribunal to
control or regulate the use of any real property;
Any Lien in favor of the Lender to secure any obligations owed to the Lender
in respect of any Hedge Agreement; and
Liens incurred or deposits made to secure the performance of bids,
trade contracts (other than for Indebtedness) statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business.
"Plan" means an employee benefit plan as defined in Section 3(3) of
ERISA (including a Multiemployer Plan) pursuant to which any employees of
the Borrower or any member of its Controlled Group participate.
"Pledge Agreement" means, the Pledge Agreement, dated as of the date
hereof, substantially in the form of Exhibit F hereto, made by the
Borrower, Peppertree and Newco II for the benefit of the Lender.
"Pledged Stock" means all of the issued and outstanding shares of
Capital Stock of Newco II, Peppertree, Great Smokies (in the event of the
Great Smokies Drawing), PRVI and each of their respective Subsidiaries.
"Pretax Net Income" means net profit (or loss) before taxes of the
Borrower and the Subsidiaries and Affiliates of the Borrower, on a
consolidated basis, determined in accordance with GAAP.
"PRVI" means Peppertree Resorts Villas, Inc., a North Carolina corporation.
----
"Projects" means time-share residential real estate projects in
which the Borrower or any of its Subsidiaries or Affiliates sells
Time-Share Interests.
"Purchase Documents" means any purchase agreement, lease and related
sale and escrow documents executed and delivered by a Purchaser to the
Borrower or any of its Subsidiaries or Affiliates with respect to the
purchase of a Time-Share Interest.
"Purchase Price" means an amount not to exceed $31,000,000 payable
to Kinser in cash and stock pursuant to the Acquisition Agreement, of
which no more than $17,000,000 shall be payable in cash.
"Purchaser" means a Person who purchases a Time-Share Interest in a
Project from the Borrower or any of its Subsidiaries or Affiliates or any
other obligor in respect of the Note Receivable executed in connection
therewith.
"Reference Rate" means, for any day, a per annum interest rate equal
to the sum of (a)(i) 0.50%, (ii) 1.00% or (iii) 1.75% during the Initial
Term, the First Extension Period or the Second Extension Period,
respectively, plus (b) the prime rate of the Lender, which rate is the
floating rate of interest most recently announced by the Lender at its
principal office in Charlotte, North Carolina as its "prime rate",
provided that any change in the prime rate announced by the Lender shall
take effect at the opening of business on the day specified in the public
announcement of such change.
"Reference Rate Advance" means any the Term Loan or any portion
thereof at such time as it bears interest at the Reference Rate.
"Related Person" means (a) any Affiliate of the Borrower, (b) any
individual or entity who directly or indirectly holds 10% or more of any
class of Capital Stock of the Borrower, (c) any relative of such
individual by blood, marriage or adoption not more remote than first
cousin and (d) any officer or director of the Borrower.
"Release Date" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and
the Commitment has been terminated.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA.
"Rights" means rights, remedies, powers and privileges.
"Second Extension Period" shall have the meaning assigned thereto in
Section 2.8(b).
"Security Agreement" means a Security Agreement, substantially in
the form of Exhibit E hereto, made by the Borrower and each Guarantor for
the benefit of the Lender.
"Securitization" means a sale or hypothecation of Notes Receivable
or A&D Loans Receivable by the Borrower or any Subsidiary or Affiliate of
the Borrower.
"Securitization Subsidiary" means any Subsidiary of the Borrower
which is organized for the sole purpose of facilitating a Securitization
and which performs no business and has no other assets outside of those
necessary to consummate a Securitization.
"Solvent" means, with respect to any Person, that the fair value of
the assets of such Person (both at fair valuation and at present fair
saleable value) is, on the date of determination, greater than the total
amount of liabilities (including contingent and unliquidated liabilities)
of such Person as of such date and that, as of such date, such Person is
able to pay all liabilities of such Person as such liabilities mature and
such Person does not have unreasonably small capital with which to carry
on its business. In computing the amount of contingent or unliquidated
liabilities at any time, such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability discounted to present value at rates believed to be
reasonable by such Person.
"Special Counsel" means the law firm of Dechert Price & Rhoads, or
such other legal counsel as the Lender may select.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate or other Person of which (or in which) more than
50% of:
the outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency),
the interest in the capital or profits of such partnership or joint venture,
the beneficial interest of such trust or estate, or
the equity interest of such other Person,
is at the time directly or indirectly owned by such Person, by such
Person and one or more of its Subsidiaries or by one or more of such
Person's Subsidiaries; provided, however, that (i) no Person shall be
deemed to be a Subsidiary of the Borrower solely by virtue of the fact
that certain shares of the stock of such Person have been pledged to the
Borrower and (ii) the Securitization Subsidiary shall not be deemed to be
a Subsidiary for purposes of this Agreement.
"Subsidiary Guaranty" means a guaranty, substantially in the form of
Exhibit C hereto, executed and delivered by each Guarantor for the benefit
of the Lender.
"Taxes" has the meaning specified in Section 2.14 hereof.
"Term Loan" has the meaning specified in Section 2.1 hereof.
"Term Note" means a promissory note, substantially in the form of
Exhibit A hereto evidencing the obligation of the Borrower to repay the
Term Loan (together with any extensions, renewals or amendments thereof or
thereto, and any substitutions therefor).
"Time-Share Interest" means the property, rights and interests
acquired by a Purchaser which entitles such Purchaser either (a) to
utilize a specific Unit, or a type or class of Unit, for a specified
period of time on a recurring basis or (b) in the case of a "points-based"
system, to utilize a variety of different Units and different periods of
time on a non-recurring basis.
"Total Capital" means, as of any date of determination, the sum of
(a) Total Debt plus (b) Net Worth.
"Total Debt" means, as of any date of determination, determined for
the Borrower and its Subsidiaries on a consolidated basis in accordance
with GAAP, without duplication, (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services other than trade payables incurred in the ordinary
course of business, (iv) obligations in respect of letters of credit,
banker's acceptances and similar instruments, (v) obligations under Hedge
Agreements, (vi) Capitalized Lease Obligations, (vii) obligations in
respect of payment, performance and similar bonds, (viii) Net Exposure
Under Securitization and (ix) other contingent obligations.
"Total Debt to Total Capital Ratio" means the ratio of Total Debt to
Total Capital, calculated at the end of each fiscal quarter.
"Transaction Costs" means legal, accounting, consulting and other
fees and expenses actually incurred by the Borrower and its Subsidiaries
and Affiliates directly related to the Transactions (including, without
limitation, fees and expenses payable to Banc of America Securities LLC
and to the Lender), not to exceed $2,500,000.
"Transactions Costs Drawing" shall mean a drawing made on any date
subsequent to the Agreement Date, but in no event later than January 31,
2000, the proceeds of which are used solely for Transaction Costs, the
amount of which shall not exceed 60% of the Transaction Costs (excluding
Transaction Costs paid with the proceeds of the initial drawing hereunder)
set forth in a schedule delivered in connection with such Drawing.
"Transaction Documents" shall mean the Acquisition Agreement and all
other documents entered into or delivered in connection with the
Acquisition Agreement.
"Transactions" shall mean, collectively, the transactions to occur
on or prior to the Agreement Date pursuant to the Loan Documents and the
Transaction Documents, including (a) the consummation of the Peppertree
Acquisition, (b) the execution and delivery of the Loan Documents and the
initial borrowing hereunder and (c) the payment of all fees and expenses
to be paid on or prior to the Agreement Date and owing in connection with
the foregoing.
"Transferred Assets" means the Acquired Business (as such term is
defined in the Acquisition Agreement).
"Tribunal" means any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision, agency,
department, commission, board, bureau, or instrumentality of a
governmental or other regulatory or public body or authority.
"Unit" means a residential unit in a Project as shown on the
recorded condominium plat therefor or other evidence thereof, as required
or permitted under applicable Law.
"United States" means the United States of America.
-------------
Amendments, Etc.
Each definition of an agreement in this Article 1 shall
include such agreement as amended, modified, supplemented or restated to
date, and as amended, modified, supplemented or restated from time to time
in accordance with its terms, but only with the prior written consent of
the Lender as required pursuant to Section 10.11 hereof.
Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall
have the meanings set forth in Section 1.1 hereof, and the singular shall
include the plural, and vice versa, unless otherwise specifically required
by the context. All accounting terms used in this Agreement which are not
otherwise defined herein shall be construed in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, unless otherwise
expressly stated herein.
THE TERM LOAN
The Term Loan.
Commitment. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, the Lender
agrees to make a term loan (the "Term Loan") to the Borrower in a
principal amount not to exceed the Commitment which shall be available in
up to four drawings, the first of which shall occur on the Agreement Date,
and the remainder of which shall consist of the Transaction Costs Drawing,
the Great Smokies Drawing and the Deferred Payment Drawing, provided that
the Great Smokies Drawing and the Transaction Costs Drawing may be
combined. Amounts paid or prepaid on the Term Loan prior to the Maturity
Date may not be reborrowed. The Term Loan or any portion thereof shall, at
the option of the Borrower as provided in Section 2.2 hereof (and, in the
case of LIBOR Advances, subject to the provisions of Article 9 hereof), be
made as one or more Reference Rate Advances and/or LIBOR Advances.
Manner of Borrowing and Disbursement.
In the case of Reference Rate Advances, the Borrower, through
an Authorized Signatory, shall give the Lender at least one Business Day's
irrevocable written notice, in substantially the form of Exhibit D hereto
(a "Borrowing Request/Designation") of its intention to borrow a Reference
Rate Advance hereunder. Notice shall be given to the Lender prior to 9:00
a.m., Los Angeles, California time, in order for such Business Day to
count toward the minimum number of Business Days required. Such Borrowing
Request/Designation shall specify the requested funding date, which shall
be a Business Day, and the amount of the Reference Rate Advance to be made
by the Lender.
In the case of LIBOR Advances, the Borrower, through an
Authorized Signatory, shall give the Lender at least three Business Days'
irrevocable written notice pursuant to a Borrowing Request/Designation, of
its intention to borrow LIBOR Advances hereunder. Notice shall be given to
the Lender prior to 9:00 a.m., Los Angeles, California time, in order for
such Business Day to count toward the minimum number of Business Days
required. LIBOR Advances shall in all cases be subject to Article 9
hereof. For LIBOR Advances, the Borrowing Request/Designation shall
specify the requested funding date, which shall be a Business Day, the
amount of each proposed LIBOR Advance to be made by the Lender and the
Interest Period selected by the Borrower for each such LIBOR Advance.
Prior to 9:30 a.m., Los Angeles, California time, two Business Days' prior
to the date of the requested LIBOR Advances, the Lender shall determine
the LIBOR Basis with respect to each such requested LIBOR Advance (which
determination shall be conclusive in the absence of manifest error), and
the Lender shall promptly give notice of same to the Borrower by telephone
(confirmed in writing), telecopier or telex.
Subject to Sections 2.1 and 2.9 hereof, the Borrower shall
have the option (i) to convert at any time all or any part (subject to the
requirements contained herein as to the minimum amounts of LIBOR Advances)
of the outstanding Reference Rate Advances to LIBOR Advances and all or
any part of the outstanding LIBOR Advances to Reference Rate Advances or
(ii) upon expiration of any Interest Period applicable to a LIBOR Advance,
to continue all or any portion of such LIBOR Advance as a LIBOR Advance
and the succeeding Interest Period of each such continued LIBOR Advance
shall commence on the last day of the Interest Period of such LIBOR
Advance to be continued; provided, however, that (A) LIBOR Advances may
only be converted into Reference Rate Advances on the last day of the
Interest Period applicable thereto and (B) notwithstanding anything in
this Agreement to the contrary, no portion of the Term Loan may be
continued as, or converted into, a LIBOR Advance when any Default or Event
of Default has occurred and is continuing. At least three Business Days
prior to a proposed conversion/continuation date, the Borrower, through an
Authorized Signatory, shall give the Lender irrevocable written notice
stating (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount of the Term Loan to be converted/continued,
(iii) in the case of a conversion to, or a continuation of, a LIBOR
Advance, the requested Interest Period, and (iv) in the case of a
conversion of a Reference Rate Advance to a LIBOR Advance or continuation
of a LIBOR Advance, stating that no Default or Event of Default has
occurred and is continuing. If the Borrower shall fail to give any notice
in accordance with this Section 2.2(c), the Borrower shall be deemed
irrevocably to have requested that such LIBOR Advance be converted to a
Reference Rate Advance in the same principal amount. Notice shall be given
to the Lender prior to 9:00 a.m., Los Angeles, California time, in order
for such Business Day to count toward the minimum number of Business Days
required. Prior to 9:30 a.m., Los Angeles, California time, two Business
Days' prior to the date of the requested conversion/continuation of a
LIBOR Advance, the Lender shall determine the LIBOR Basis with respect to
such requested conversion/continuation of such LIBOR Advance (which
determination shall be conclusive in the absence of manifest error), and
the Lender shall promptly give notice of same to the Borrower by telephone
(confirmed in writing), telecopier or telex.
Each drawing under the Term Loan, if such drawing is to be
made as a Reference Rate Advance, shall be in a principal amount of at
least $250,000 and integral multiples of $100,000 in excess of that
amount, unless the remaining amount of the Commitment is less than such
minimums. Each drawing under the Term Loan, if such drawing is to be made
as one or more LIBOR Advances, shall be in a principal amount of at least
$1,000,000 and integral multiples of $100,000 in excess of that amount,
unless the remaining amount of the Commitment is less than such minimums.
No more than three different Interest Periods for LIBOR Advances shall be
outstanding at any one time. The limits sets forth in this clause shall
also govern conversions and continuations.
The Lender shall, subject to satisfaction of the conditions
set forth in Article 3, disburse the amounts of the Term Loan by (i)
transferring such amounts by wire transfer pursuant to the Borrower's
instructions, or (ii) in the absence of such instructions, crediting such
amounts to the account of the Borrower maintained with the Lender.
Interest.
On Reference Rate Advances.
--------------------------
The Borrower shall pay interest on the unpaid principal amount
of the Reference Rate Advances outstanding from time to time, until such
Reference Rate Advances are due (whether at the Maturity Date, by reason
of acceleration or otherwise) and repaid at a simple interest rate per
annum equal to the Reference Rate for the Reference Rate Advances as in
effect from time to time. If at any time the Reference Rate would exceed
the Highest Lawful Rate, interest payable on the Reference Rate Advances
shall be limited to the Highest Lawful Rate, but the Reference Rate shall
not thereafter be reduced below the Highest Lawful Rate until the total
amount of interest accrued on the Reference Rate Advances equals the
amount of interest that would have accrued if the Reference Rate had been
in effect at all times.
Interest on the Reference Rate Advances shall be computed on
the basis of a 360-day year for the actual number of days elapsed, and
shall be payable monthly in arrears on each Payment Date and on the
Maturity Date.
On LIBOR Advances.
-----------------
The Borrower shall pay interest on the unpaid principal amount
of each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction,
or otherwise) and repaid, at a rate per annum equal to the LIBOR Basis for
such LIBOR Advance. The Lender, whose determination shall be controlling
in the absence of manifest error, shall determine the LIBOR Basis on the
second Business Day prior to the applicable funding date and shall notify
the Borrower of such LIBOR Basis.
Subject to Section 10.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on each Payment Date and on
the Maturity Date.
Interest After an Event of Default. After an Event of Default
and during any continuance thereof, the Obligations shall bear interest at
a rate per annum equal to the Default Rate. Such interest shall be payable
on the earlier of demand or the Maturity Date, and shall accrue until the
earlier of (i) waiver of such Event of Default, or (ii) payment in full of
the Obligations. The Lender shall not be required to accelerate the
maturity of the Term Note, to exercise any other rights or remedies under
the Loan Documents, or to give notice to the Borrower of the decision to
charge interest at the Default Rate.
Interest After an Offering. In the event during the Initial
Term, the Borrower or any of its Subsidiaries or Affiliates engages in any
Offering other than the Permitted Equity Offering, and the Net Cash
Proceeds resulting from such Offering are insufficient to repay the
outstanding Term Note in full, the Term Loan shall bear interest at a rate
per annum equal to the rates applicable during the Second Extension
Period.
Fees. The Borrower agrees to pay to the Lender, on the
Agreement Date (a) a commitment fee equal to 0.75% of the full amount of
the Commitment whether or not drawn, (b) a funding fee equal to 0.75% of
$17,400,000, and (c) the fees set forth in a fee letter dated as of the
date hereof between the Borrower and the Lender. The Borrower agrees to
pay a funding fee equal to 0.75% of $3,300,000 on the date on which the
Great Smokies Drawing occurs.
Prepayments.
Voluntary Prepayments. Subject to Section 2.4, upon three
Business Days' prior written notice by an Authorized Signatory to the
Lender, the Borrower may prepay the Term Loan in whole or in part, but
only so long as the Borrower concurrently reimburses the Lender in
accordance with Section 2.4(c) and 2.9 hereof. Any notice of prepayment
shall be irrevocable.
Mandatory Prepayments.
---------------------
On or before the effective date of any merger, consolidation
or sale of all or substantially all of the Borrower's assets or any
acquisition of the Borrower by any other means, the Borrower shall prepay
the Term Note in full.
On the date of any (A) Asset Sale the Net Cash Proceeds of
which exceed $250,000 (provided that the aggregate amount excluded shall
not exceed $1,000,000) or (B) Offering, the Borrower shall prepay the Term
Note in an amount equal to the Net Cash Proceeds of (A) or (B) above. The
Borrower shall first prepay all Reference Rate Advances and shall
thereafter prepay LIBOR Advances.
On the earlier of (A) September 30, 2000 and provided the
First Extension Period shall have been exercised pursuant to Section 2.8
hereof, and (B) the last day of the calendar month in which an Offering is
effected (other than the Permitted Equity Offering), if Net Cash Proceeds
of such Offering are less than the amount needed to prepay the Term Note
in full, the Borrower shall, on each Payment Date thereafter, apply an
amount equal to 80% of Excess Cash Flow for the preceding calendar month
to the prepayment of the Term Note, provided, however, in the event the
Borrower has prepaid the Net Cash Proceeds of any Asset Sale pursuant to
Section 2.5(b)(ii) above, such Net Cash Proceeds shall be excluded from
the definition of Excess Cash Flow.
Payments, Generally. Any prepayment of any LIBOR Advance shall
be accompanied by interest accrued on the principal amount being prepaid.
Any voluntary partial payment of a Reference Rate Advance shall be in a
principal amount which is at least $250,000 and integral multiples of
$100,000 in excess thereof (unless constituting a payment of all
outstanding Reference Rate Advances). Any voluntary partial payment of a
LIBOR Advance shall be in a principal amount which is at least $1,000,000
and integral multiples of $100,000 in excess thereof (unless constituting
a payment of all outstanding LIBOR Advances). The Borrower shall reimburse
the Lender in connection with any such payment in accordance with Section
2.9 hereof to the extent applicable.
[Reserved]
[Reserved]
Payment of Principal of Term Note/Extensions.
To the extent not otherwise required to be paid earlier as
provided herein, the principal amount of the Term Note, all accrued
interest and fees thereon, and all other Obligations related thereto,
shall be due and payable in full on the Maturity Date, unless at least 30
days (but no more than 60 days) prior to such date, the Borrower shall
have delivered to the Lender:
a written notice stating that the Borrower desires to extend
the Maturity Date until February 17, 2001, and certifying to the effect
that no Default or Event of Default exists under any of the Loan
Documents, and
payment of the Extension Fee on the date notice is given, in
which case the Term Note shall, subject to written notice that such
certification is true and correct on the current Maturity Date, and unless
further extended, mature on February 17, 2001 (the "First Extension
Period").
If the Maturity Date of the Term Note shall have been extended
for the First Extension Period, pursuant to Section 2.8(a) hereof, the
unpaid principal balance of the Term Note shall mature on such date,
unless 30 days (but no more than 60 days) prior to such date, the Borrower
shall have delivered to the Lender:
a written notice stating that the Borrower desires to extend
the Maturity Date of the Term Note until May 17, 2001, and certifying to
the effect that no Default or Event of Default exists under any of the
Loan Documents, and
payment of the Extension Fee on the date notice is given, in
which case the Term Note shall, subject to written notice that such
certification is true and correct on the current Maturity Date, mature on
May 17, 2001 (the "Second Extension Period").
Reimbursement. Whenever the Lender shall sustain or incur any
amount of Interest Differential, related charges imposed by one department
of the Lender on another department of the Lender ("intra-Lender charges")
or reasonable out-of-pocket expenses actually incurred in connection with
(a) failure by the Borrower to borrow (including any failure to continue
or convert into) any LIBOR Advance after having given notice of its
intention to borrow (or to continue or convert) in accordance with Section
2.2 hereof (whether by reason of the Borrower's election not to proceed or
the non-fulfillment of any of the conditions set forth in Article 3
hereof) or (b) any prepayment for any reason of any LIBOR Advance in whole
or in part (including a prepayment pursuant to Section 9.3(b) hereof) on
other than the last day of an Interest Period applicable to such LIBOR
Advance, the Borrower agrees to pay to the Lender, within five Business
Days after demand by the Lender, an amount sufficient to compensate the
Lender for all such Interest Differential and out-of-pocket expenses,
subject to Section 10.9 hereof. Such expenses shall include, without
limiting the generality of the foregoing, intra-Lender charges and
reasonable out-of-pocket expenses incurred by the Lender in connection
with the re-employment of funds prepaid, repaid, converted or not
borrowed, converted or paid, as the case may be. A certificate as to any
amounts payable to the Lender under this Section 2.9 submitted to the
Borrower by the Lender shall be conclusive absent manifest or demonstrable
error.
Manner of Payment.
Each payment (including prepayments) by the Borrower of the
principal of or interest on the Term Note, fees, and any other amount owed
under this Agreement or any other Loan Document shall be made not later
than 1:00 p.m., Los Angeles, California time, on the date specified for
payment under this Agreement to the Lender at the Lender's office, in
lawful money of the United States of America and in immediately available
funds.
If any payment under this Agreement or any other Loan Document
shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day, unless,
with respect to a payment due in respect of a LIBOR Advance, such Business
Day falls in another calendar month, in which case payment shall be made
on the preceding Business Day. Any extension of time shall in such case be
included in computing interest and fees, if any, in connection with such
payment.
The Borrower agrees to pay principal, interest, fees and all
other amounts due under the Loan Documents without deduction, set-off or
counterclaim.
If some but less than all amounts due from the Borrower are
received by the Lender, the Lender shall apply such amounts in the
following order of priority: (i) to the payment of all fees and expenses
of the Lender then due and payable; (ii) to the payment of interest then
due and payable on the Term Note; (iii) to the payment of all other
amounts not otherwise referred to in this clause (d) then due and payable
under the Loan Documents; and (v) to the payment of principal then due and
payable on the Term Note.
LIBOR Lending Offices. The Lender's initial LIBOR Lending
Office is set forth opposite its name in Schedule 1 attached hereto. The
Lender shall have the right at any time and from time to time to designate
a different office of the Lender or of any Affiliate of the Lender as the
Lender's LIBOR Lending Office, and to transfer any outstanding LIBOR
Advance to such LIBOR Lending Office.
[Reserved]
[Reserved]
Taxes.
Any and all payments by the Borrower hereunder shall be made,
in accordance with Section 2.10, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions,
charges and withholdings, and all liabilities with respect thereto,
excluding, in the case of the Lender, (i) taxes imposed on, based upon or
measured by its overall net income and franchise taxes, doing business
taxes or minimum taxes imposed on it, (A) by the jurisdiction under the
laws of which the Lender is organized or in which it has its applicable
lending office or any political subdivision thereof; or (B) by any other
jurisdiction, or any political subdivision thereof, other than those
imposed solely by reason of (1) an asserted relation of such jurisdiction
to the transactions contemplated by this Agreement, (2) the activities of
the Borrower in such jurisdiction or (3) the activities in connection with
the transactions contemplated by this Agreement of the Lender and (ii) any
Taxes in the nature of transfer, stamp, recording or documentary taxes
resulting from a transfer (other than as a result of foreclosure) by the
Lender of all or any portion of its interest in this Agreement, the Term
Note or any other Loan Documents (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by
Law to deduct or withhold any Taxes from or in respect of any sum payable
hereunder to the Lender (x) the sum payable shall be increased as may be
necessary so that after making all required deductions for Taxes
(including deductions applicable to additional sums payable under this
Section 2.14 the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (y) the Borrower shall make
such deductions and (z) the Borrower shall pay the full amount of Taxes
deducted to the relevant taxation authority or other authority in
accordance with Applicable Law.
In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges
and similar levies (other than Taxes described in clause (ii) of the first
sentence of Section 2.14(a) that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any other Loan Document (hereinafter referred to as
"Other Taxes").
The Borrower will indemnify the Lender for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section
2.14) paid by the Lender and all liabilities (including penalties,
additions to tax, interest and reasonable expenses) arising therefrom or
with respect thereto whether or not such Taxes or Other Taxes were
correctly or legally asserted, other than penalties, additions to tax,
interest and expenses arising as a result of gross negligence or willful
misconduct on the part of the Lender, provided, however, that the Borrower
shall have no obligation to indemnify the Lender unless and until the
Lender shall have delivered to the Borrower a certificate certifying that
such Taxes or Other Taxes (and/or penalties, additions to tax, interest
and reasonable expenses) were actually incurred by the Lender, which
certificate shall be conclusive absent manifest or demonstrable error.
Nothing in this Section 2.14 shall provide the Borrower or any Subsidiary
or Affiliate of the Borrower the right to inspect the records, files or
books of Lender. This indemnification shall be made upon written demand
therefor by the Lender.
As soon as practicable after the date of any payment of Taxes,
the Borrower will furnish to the Lender the original or a certified copy
of a receipt evidencing payment thereof. For purposes of this Section 2.14
the terms "United States" and "United States Person" shall have the
meanings set forth in Section 7701 of the Code.
[Reserved]
Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.14 shall survive the payment in full of
principal and interest hereunder.
CONDITIONS PRECEDENT
Conditions Precedent to the Term Loan. The obligation of the
Lender to permit the initial drawing of the Term Loan is subject to (i)
receipt by the Lender of the following items which are to be delivered, in
form and substance satisfactory to the Lender and (ii) satisfaction of the
following conditions which are to be satisfied:
A loan certificate of each Obligor certifying as to the
accuracy of its representations and warranties in the Loan Documents with
respect to such Obligor, and including a certificate of incumbency with
respect to each authorized signatory, and including (i) a copy of the
articles or certificate of incorporation or similar organizational
documents of such Obligor, certified to be true, complete and correct by
the secretary of state of its state of organization, (ii) a copy of the
Bylaws or similar governance documents of such Obligor, certified to be
true, complete and correct, (iii) a copy of a certificate of good standing
and a certificate of existence for its state of organization and each
state in which the nature of its business requires it to be qualified and
(iv) a copy of the resolutions of such Obligor authorizing the
transactions set forth in the Loan Documents;
a duly executed Term Note payable to the order of the Lender;
(i) opinions of counsel to each Obligor addressed to the
Lender in the form of Exhibit G hereto and (ii) reliance letters addressed
to the Lender from all counsel giving opinions related to the
Transactions.
payment of the Special Counsel's fees and expenses rendered through the
date hereof, to the extent invoiced;
any fees or expenses required to be paid on or before the Agreement
Date pursuant to Section 2.4 hereof;
-----------
a duly executed Commitment Letter;
certified copies of requests for information (Form UCC-11) (or
a similar search reports certified by parties acceptable to the Lender)
dated a date reasonably near the date of the initial drawing of the Term
Loan listing all effective financing statements which name the Borrower or
a Subsidiary or Affiliate of the Borrower (under its present name and any
previous names) as debtor together with copies of such financing
statements;
[Reserved.]
acknowledgment copies of proper financing statements (Form
UCC-1) naming the Borrower or its Subsidiaries or Affiliates, as
applicable, as debtor in favor of the Lender, as secured party or other
similar instruments or documents as may be necessary or in the reasonable
opinion of the Lender desirable under the Uniform Commercial Code of all
appropriate jurisdictions or any comparable law to perfect the Lender's
security interest in all Collateral.
the Subsidiary Guaranty, duly executed by each Guarantor set forth on
Schedule 10 hereto;
[Reserved]
a Pledge Agreement duly executed by the Borrower, Peppertree
and Newco II, pursuant to which the Borrower, Peppertree and Newco II
shall pledge the Peppertree Interests and the GSHA Note to the Lender,
together with:
stock certificates representing all of the issued and
outstanding shares of Pledged Stock, together with undated stock powers
endorsed in blank;
such other instruments and documents in respect of the Pledged Stock as
the Lender may reasonably request;
the Security Agreement, duly executed by the Borrower and each
Guarantor set forth on Schedule 10 hereto;
an organization chart and management chart, giving effect to the
Transactions as if they had occurred.
the Borrower shall have delivered to the Lender a complete and
correct copy of the most recent (as of the Agreement Date) projections of
the consolidated net income and cash flow of (i) the Peppertree Entities
(excluding Great Smokies) and (ii) the Borrower and all of its
Subsidiaries and Affiliates (assuming completion of the Transactions
excluding Great Smokies) for each of the two fiscal years following the
Agreement Date;
the Borrower shall have delivered a complete and correct
statement of the estimated sources and uses of all funds to be received or
expended by the Borrower, Newco I and Newco II in connection with the
Transactions excluding Great Smokies, including without limitation, all
costs and expenses expected to be incurred in connection with the
Transactions excluding Great Smokies;
the Borrower shall have delivered a pro forma Compliance
Certificate covering the five fiscal quarters from December 31, 1999 to
December 31, 2000, giving effect to the Transactions as if they had
occurred; and
the Borrower shall have delivered to the Lender a complete and
correct copy of the most recent projections of the consolidated net income
and cash flow of (i) the Peppertree Entities and (ii) the Borrower and all
of its Subsidiaries and Affiliates (in each case after giving effect to
the Great Smokies Acquisition) for each of the two fiscal years following
the Agreement Date;
the Borrower shall have delivered a complete and correct
statement of the estimated sources and uses of all funds to be received or
expended by the Borrower and Newco II in connection with the Great Smokies
Acquisition, including without limitation, all costs and expenses expected
to be incurred in connection with the Great Smokies Acquisition;
the Borrower shall have delivered a pro forma Compliance
Certificate covering the five fiscal quarters from December 31, 1999 to
December 31, 2000, giving effect to the Great Smokies Acquisition; and
the Lender shall have received copies of each of the
Transaction Documents, all of the terms, conditions provisions of which
shall be reasonably satisfactory in form and substance to the Lender; no
term, condition or provision thereof shall have been amended, modified or
waived without the prior written consent of the Lender; the Transactions
shall have been consummated or shall be consummated simultaneously with
the making of the Term Loan, in each case in all material respects in
accordance with the terms hereof, the terms of the Transaction Documents
and applicable law (and without the waiver of any such terms not approved
by the Lender); the Lender shall have received such certificates and other
evidence with respect to the foregoing as it shall reasonably request and
all of the representations and warranties set forth in the Loan Documents
would be, immediately after giving effect to the Transactions, true and
correct in all material respects.
all of the representations and warranties set forth in the
Loan Documents shall be complete and correct in all material respects
after giving effect to the Transactions.
there shall be no litigation or administrative proceedings,
governmental investigations or other legal or regulatory developments,
actual or threatened, that, singly or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, or could materially
and adversely affect the Borrower, Newco I or Newco II to fully and timely
perform its obligations under the Transaction Documents, or the ability of
the parties to consummate the Transactions.
all requisite governmental authorities and third parties shall
have approved or consented to the Transactions to the extent any such
approvals or consents are required and the other transactions contemplated
hereby and there shall be no governmental or judicial action, actual or
threatened, that has or would have, singly or in the aggregate, a
reasonable likelihood of restraining, preventing or imposing burdensome
conditions on the Transactions or the other transaction contemplated
hereby.
Conditions Precedent to All Drawings of the Term Loan,
Conversions and Continuations. The obligation of the Lender to permit any
drawing (including the initial drawing) of the Term Loan hereunder, to
convert any existing Reference Rate Advance into a LIBOR Advance or to
continue any existing LIBOR Advance is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each
such drawing, conversion or continuation:
All of the representations and warranties of each Obligor
under the Loan Documents shall be true and correct at such time in all
material respects, both before and after giving effect to the application
of the proceeds of the Term Loan;
The incumbency of the Authorized Signatories shall be as
stated in the certificate of incumbency delivered in each Obligor's loan
certificate pursuant to Section 3.1(a) or as subsequently modified and
reflected in a certificate of incumbency delivered to the Lender. The
Lender may, without waiving this condition, consider it fulfilled and a
representation by the Borrower made to such effect if no written notice to
the contrary, dated or before the date of such drawing, conversion, or
continuation, is received by the Lender from the Borrower prior to the
making of such drawing, conversion or continuation;
There shall not exist a Default or Event of Default hereunder
that has not been waived or cured to the satisfaction of the Lender;
No order, judgment, injunction or decree of any Tribunal shall
purport to enjoin or restrain any such drawing, conversion or
continuation;
The Borrower shall have delivered to the Lender a schedule
identifying the application of the proceeds of each drawing of the Term
Loan;
In form and substance reasonably satisfactory to the Lender
and Special Counsel, such other documents, instruments, certificates and
as the Lender may reasonably require in connection with the transactions
contemplated hereby, including without limitation, evidence of the status,
organization or authority of the Borrower or any Subsidiary or Affiliate
of the Borrower, and the enforceability of the Obligations and the
perfection of the Lender's security interest in the Collateral;
the Borrower shall have delivered to the Lender a Borrowing
Request/Designation with respect to each drawing of the Term Loan; and
All legal matters incident to this Agreement, the Term Loan
and extensions of credit hereunder and the other Loan Documents shall be
reasonably satisfactory to the Lender.
The acceptance of the benefits of each drawing of the Term Loan or
conversion or continuation with respect to a LIBOR Advance shall
constitute a representation and warranty by the Borrower that no Default
or Event of Default shall have occurred and be continuing or would result
from such drawing, conversion or continuation.
Conditions Precedent to the Great Smokies Drawing. The
obligation of the Lender to permit the Great Smokies Drawing is subject to
(i) receipt by the Lender of the following items which are to be
delivered, in form and substance satisfactory to the Lender and (ii)
satisfaction of the following conditions:
a Pledge Agreement duly executed by the Borrower and Newco II,
pursuant to which the Borrower and Newco II shall pledge the Partnership
Interests to the Lender, together with:
certificates representing all of the Partnership Interests, together
with undated powers endorsed in blank; and
such other instruments and documents in respect of the
Partnership Interests as the Lender may reasonably request.
no term, condition or provision of the Transaction Documents
shall have been amended, modified or waived without the prior written
consent of the Lender; the Great Smokies Acquisition shall have been
consummated or shall be consummated simultaneously with the making of the
Great Smokies Drawing, in each case in all material respects in accordance
with the terms hereof, the terms of the Transaction Documents and
applicable law (and without the waiver of any such terms not approved by
the Lender); the Lender shall have received such certificates and other
evidence with respect to the foregoing as it shall reasonably request and
all of the representations and warranties set forth in the Loan Documents
would be, immediately after giving effect to the Great Smokies
Acquisition, true and correct in all material respects.
there shall be no litigation or administrative proceedings,
governmental investigations or other legal or regulatory developments,
actual or threatened, that, singly or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, or could materially
and adversely affect the ability of the Borrower or Newco II to fully and
timely perform its obligations under the Transaction Documents, or the
ability of the parties to consummate the Great Smokies Acquisition.
all requisite governmental authorities and third parties shall
have approved or consented to the Great Smokies Acquisition to the extent
any such approvals or consents are required and there shall be no
governmental or judicial action, actual or threatened, that has or would
have, singly or in the aggregate, a reasonable likelihood of restraining,
preventing or imposing burdensome conditions on the Great Smokies
Acquisition or the transactions contemplated hereby.
Conditions Precedent to the Deferred Payment Drawing. The
obligation of the Lender to permit the Deferred Payment Drawing is subject
to (i) receipt by the Lender of the following items which are to be
delivered, in form and substance satisfactory to the Lender and (ii)
satisfaction of the following conditions:
no term, condition or provision of the Transaction Documents
shall have been amended, modified or waived without the prior written
consent of the Lender; the Deferred Payment shall be consummated
simultaneously with the making of the Deferred Payment Drawing, in each
case in all material respects in accordance with the terms hereof, the
terms of the Transaction Documents and applicable law (and without the
waiver of any such terms not approved by the Lender); the Lender shall
have received such certificates and other evidence with respect to the
foregoing as it shall reasonably request and all of the representations
and warranties set forth in the Loan Documents would be, immediately after
giving effect to the Deferred Payment, true and correct in all material
respects.
there shall be no litigation or administrative proceedings,
governmental investigations or other legal or regulatory developments,
actual or threatened, that, singly or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, or could materially
and adversely affect the ability of the Borrower or Newco II to fully and
timely perform its obligations under the Transaction Documents.
Representations and Warranties
Representations and Warranties. Each of the Borrower, Newco I
and Newco II hereby represents and warrants to the Lender as follows (it
being understood that such representations and warranties are made as if
the Transactions had been consummated but, as to the Peppertree Entities,
are made to the best of the knowledge of the Borrower, Newco I and Newco
II):
Organization; Power; Qualification. The respective
jurisdiction of organization or incorporation and percentage ownership by
the Borrower of the Subsidiaries and Affiliates listed on Schedule 4 are
true and correct as of the Agreement Date and immediately after giving
effect to the Transactions. Schedule 4 is a complete and accurate listing
as of the Agreement Date, showing with respect to the Borrower and each
Subsidiary and Affiliate of the Borrower (a) its mailing address, which is
its principal place of business, (b) the classes of its Capital Stock and
the number and amount of its Capital Stock authorized and outstanding and
(c) each record and beneficial owner of 5% or more of the outstanding
Capital Stock of each Subsidiary and Affiliate. All of the outstanding
Capital Stock of the Borrower and each Subsidiary and Affiliate of the
Borrower is validly issued, fully paid and non-assessable. Each of the
Borrower and its Subsidiaries and Affiliates is a corporation or other
legal Person duly organized, validly existing and in good standing under
the laws of its state of incorporation or organization. Each of the
Borrower and its Subsidiaries and Affiliates has the legal power and
authority to own its properties and to carry on its business as now being
and hereafter proposed to be conducted. Each of the Borrower and its
Subsidiaries and Affiliates is authorized to do business, duly qualified
and in good standing as set forth in Schedule 7 and no qualification or
authorization is necessary in any other jurisdictions in which the
character of its properties or the nature of its business requires such
qualification or authorization, except where the failure to be so
qualified or authorized could not reasonably be expected to have a
Material Adverse Effect.
Authorization. The Borrower has legal power and has taken all
necessary legal action to authorize it to borrow hereunder. Each of the
Borrower and its Subsidiaries and Affiliates has legal power and has taken
all necessary legal action to execute, deliver and perform the Loan
Documents and the Transaction Documents to which it is party in accordance
with the terms thereof, and to consummate the transactions contemplated
thereby. Each Loan Document and Transaction Document has been duly
executed and delivered by the Borrower or the Subsidiary or Affiliate of
the Borrower executing it. Each of the Loan Documents and the Transaction
Documents to which the Borrower or any of its Subsidiaries or Affiliates
is a party is a legal, valid and binding obligation of the Borrower or
such Subsidiary or Affiliate, as applicable, enforceable in accordance
with its terms, subject, as to enforcement of remedies, to the following
qualifications: (i) equitable principles generally, and (ii) Debtor Relief
Laws (insofar as any such law relates to the bankruptcy, insolvency or
similar event of the Borrower or any Subsidiary or Affiliate of the
Borrower).
Necessary Authorizations; Compliance with Other Loan
Documents. The execution, delivery and performance by the Borrower and
each of its Subsidiaries and Affiliates of the Loan Documents and the
Transaction Documents to which it is a party, and the consummation of the
transactions contemplated thereby, do not and will not (i) require any
consent or approval under any indenture, agreement or other instrument, to
which the Borrower or any Subsidiary or Affiliate of the Borrower is a
party or by which it or its properties may be bound relating to
Indebtedness for borrowed money, except for consents set forth in Schedule
2, which have been obtained (except as set forth in such Schedule 2) and
copies of which shall have been delivered to the Lender, (ii) violate any
Applicable Law, (iii) conflict with, result in a breach of, or constitute
a default under the certificate of incorporation, by-laws or other similar
organizational or governance document of the Borrower or any Subsidiary or
Affiliate of the Borrower, (iv) conflict with, result in a breach of, or
constitute a default under any Necessary Authorization, the result of
which could reasonably be expected to have a Material Adverse Effect, or
(v) result in or require the creation or imposition of any Lien (other
than Liens in favor of the Lender to secure the Obligations hereunder)
upon or with respect to any property now owned or hereafter acquired by
the Borrower or any Subsidiary or Affiliate of the Borrower.
Business. The Borrower and its Subsidiaries and Affiliates are
engaged primarily in the business of acquiring, developing and operating
time share resorts and other time-share activities, providing financing
for the purchase of Units or other interests in its time-share resorts and
other leisure activities (exclusive of gaming), making acquisition and
development loans to third party developers and activities directly
related to the foregoing.
Licenses, etc. All Necessary Authorizations have been duly
obtained, and are in full force and effect without any known conflict with
the rights of others and free from any unduly burdensome restrictions,
unless the failure to obtain or have in effect such Necessary
Authorizations could not reasonably be expected to result in a Material
Adverse Effect. The Borrower and its Subsidiaries and Affiliates are and
will continue to be in compliance in all material respects with all
provisions thereof. No circumstance exists which could reasonably be
expected to impair the utility of the Necessary Authorization or the right
to renew such Necessary Authorization the effect of which could reasonably
be expected to have a Material Adverse Effect. No Necessary Authorization
is the subject of any pending or, to the best of the Borrower's knowledge,
threatened challenge, suspension, cancellation or revocation, the effect
of which could reasonably be expected to have a Material Adverse Effect.
Compliance with Law. The Borrower and its Subsidiaries and
Affiliates are in compliance in all respects with all Applicable Laws,
except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect.
Title to Properties. To the best of the knowledge of the
Borrower, Newco I and Newco II, the Borrower and its Subsidiaries and
Affiliates have good and indefeasible title to, or a valid leasehold
interest in, all of their material assets. None of their assets is subject
to any Liens, except Permitted Liens. No financing statement or other Lien
filing (except relating to Permitted Liens) is on file in any state or
jurisdiction that names the Borrower or any of its Subsidiaries or
Affiliates as debtor or covers (or purports to cover) any assets of the
Borrower or any of its Subsidiaries or Affiliates. The Borrower and its
Subsidiaries and Affiliates have not signed any such financing statement
or filing, nor any security agreement authorizing any Person to file any
such financing statement or filing (except relating to Permitted Liens).
Litigation. Except as reflected on Schedule 3 hereto, as of
the Agreement Date there is no Litigation pending against, or, to the
Borrower's current actual knowledge, threatened against the Borrower, or
in any other manner relating directly and adversely to the Borrower or any
of its Subsidiaries or Affiliates, or any of their respective properties,
in any court or before any arbitrator of any kind or before or by any
governmental body in which the amount claimed (in excess of applicable
insurance) exceeds $1,000,000.
Taxes. All material federal, state and other tax returns of
the Borrower and its Subsidiaries and Affiliates required by law to be
filed have been duly filed or extensions have been timely filed, and all
material federal, state and other Taxes upon the Borrower, its
Subsidiaries and Affiliates or any of their properties, income, profits
and assets, which are due and payable, have been paid, unless the same are
being diligently contested in accordance with Section 5.6 hereof. The
charges, accruals and reserves on the books of the Borrower and its
Subsidiaries and Affiliates in respect of their Taxes are, in the
reasonable judgment of the Borrower, adequate.
Financial Statements; Material Liabilities.
------------------------------------------
The Borrower has heretofore delivered to the Lender (a) the
audited consolidated balance sheets of (1) the Borrower and its
Subsidiaries and (2) each of the Peppertree Entities as at December 31,
1998, and the related statements of earnings and changes in investment and
statement of cash flows for the twelve-month period then ended, and (b)
unaudited consolidated balance sheets of (1) the Borrower and its
Subsidiaries and (2) each of the Peppertree Entities as at September 30,
1999, and the related statements of earnings and statement of cash flows
for the nine-month period then ended. Such financial statements were
prepared in conformity with GAAP (except for the absence of footnotes) and
fairly present, in all material respects, the financial position of the
Borrower and its Subsidiaries as at the date thereof and the combined
results of operations and cash flows for the period covered thereby.
The projected financial statements of the Borrower and its
Subsidiaries delivered to the Lender prior to or on the Agreement Date
were prepared in good faith and management of the Borrower believes them
to be based on reasonable assumptions (which assumptions have been
included in the most recent projections furnished to the Lender prior to
the Agreement Date) and to fairly present in all material respects the
projected financial condition of the Borrower and its Subsidiaries and the
projected results of operations as of the dates and for the periods shown
for the Borrower and its Subsidiaries, it being recognized by the Lender
that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results.
The financial statements of the Borrower and its Subsidiaries
delivered to the Lender (pursuant to Sections 6.3 and 6.4 hereof fairly
present in all material respects their respective financial condition and
their respective results of operations as of the dates and for the periods
shown, all in accordance with GAAP, subject to normal year-end
adjustments. The latest of such financial statements reflects all material
liabilities, direct and contingent, of the Borrower and each Subsidiary of
the Borrower that are required to be disclosed in accordance with GAAP. As
of the date of the latest of such financial statements, there were no
Guaranties, liabilities for Taxes, forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are
substantial in amount that are required to be reflected but that are not
reflected on such financial statements or the footnotes thereto.
The Borrower has heretofore delivered to the Lender its
unaudited pro forma consolidated balance sheet and related statement of
income as of the end of and for the fourth fiscal quarter of 1999 and each
fiscal quarter in 2000, prepared as if the Transactions had occurred on
such date and during such period. Such pro forma financial statements have
been prepared in good faith by the Borrower, based on the assumptions used
to prepare the pro forma financial information contained in the
Confidential Memorandum (which assumptions are believed by the Borrower on
the date hereof and on the Agreement Date to be reasonable), are based on
the best information available to the Borrower as of the date of delivery
thereof, accurately reflect all adjustments required to be made to give
effect to the Transactions and present fairly on a pro forma basis the
estimated consolidated financial position of the Borrower and its
consolidated Subsidiaries and Affiliates as of such dates, assuming that
the Transactions had actually occurred at such dates.
Representations and Warranties in Transaction Documents. All
representations and warranties set forth in the Transaction Documents were
true and correct in all material respects at the time as of which such
representations and warranties were made (or deemed made), provided that
to the extent the representations and warranties in the Transaction
Documents are made by persons other than the Borrower, its Subsidiaries or
Affiliates, then the representation and warranties so made by such persons
shall be deemed to be true and correct in all material respects for
purposes of this Section 4.1(k) unless the aggregate effect of all
misrepresentations made by such other person in the Transaction Documents
are such as would evidence a Material Adverse Effect.
No Adverse Change. Since December 31, 1998, no event or
circumstance has occurred or arisen which is reasonably likely to have a
Material Adverse Effect.
ERISA. None of the Borrower or its Controlled Group maintains
or contributes to any Plan subject to Title IV of ERISA other than those
disclosed to the Lender in writing. Each such Plan (other than any
Multiemployer Plan) is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and any other applicable Law,
except to the extent that failure to so comply would not reasonably be
expected to have a Material Adverse Effect. With respect to each Plan
(other than any Multiemployer Plan) of the Borrower and each member of its
Controlled Group, all reports required under ERISA or any other Applicable
Law to be filed with any Tribunal, the failure of which to file or to be
true and correct in all material respects could reasonably be expected to
result in liability of the Borrower or any member of its Controlled Group
in excess of $500,000, have been duly filed. No Plan of the Borrower or
any member of its Controlled Group has been terminated under Section
4041(c) of ERISA nor has any accumulated funding deficiency (as defined in
Section 412(a) of the Code) been incurred (without regard to any waiver
granted under Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested the result of
which termination, incurrence or waiver could reasonably be expected to
have a Material Adverse Effect. None of the Borrower or any member of its
Controlled Group has failed to make any contribution or pay any amount due
or owing as required under the terms of any such Plan, or by Section 412
of the Code or Section 302 of ERISA by the due date under Section 412 of
the Code and Section 302 of ERISA, the result of which could reasonably be
expected to have a Material Adverse Effect. There has been no ERISA Event
or any event requiring disclosure under Section 4041(c)(3)(C) or 4063(a)
of ERISA with respect to any Plan (other than any Multiemployer Plan) or
its related trust of the Borrower or any member of its Controlled Group
that is likely to have a Material Adverse Effect. The present value of the
benefit liabilities, as defined in Title IV of ERISA, of each Plan subject
to Title IV of ERISA (other than a Multiemployer Plan) of the Borrower and
each member of its Controlled Group does not exceed by more than $500,000
the present value of the assets of each such Plan as of the most recent
valuation date using each such Plan's actuarial assumptions at such date.
There are no pending, or to the Borrower's knowledge threatened, claims,
lawsuits or actions (other than routine claims for benefits) asserted or
instituted against the assets of any Plan or its related trust or against
any fiduciary of a Plan with respect to the operation of such Plan, the
result of which could reasonably be expected to have a Material Adverse
Effect. None of the Borrower or, to the Borrower's knowledge, any member
of its Controlled Group has engaged in any non-exempt prohibited
transactions, within the meaning of Section 406 of ERISA or Section 4975
of the Code, in connection with any Plan the result of which could
reasonably be expected to have a Material Adverse Effect. None of the
Borrower or any member of its Controlled Group has incurred or reasonably
expects to incur (A) any liability under Title IV of ERISA (other than
premiums due under Section 4007 of ERISA to the PBGC), (B) any withdrawal
liability (and no event has occurred which with the giving of notice under
Section 4219 of ERISA would result in such liability) under Section 4201
of ERISA as a result of a complete or partial withdrawal (within the
meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan, as
defined in Section 1.1 of this Agreement but without regard to the
five-year limitation provided therein or (C) any liability under Section
4062 of ERISA to the PBGC or to a trustee appointed under Section 4042 of
ERISA in excess of $500,000 in the aggregate. None of the Borrower, any
member of its Controlled Group, or any organization to which the Borrower
or any member of its Controlled Group is a successor or parent corporation
within the meaning of ERISA Section 4069(b), has engaged in a transaction
within the meaning of ERISA Section 4069, the result of which could
reasonably be expected to have a Material Adverse Effect. None of the
Borrower or any member of its Controlled Group maintains or has
established any Plan, which is a welfare benefit plan within the meaning
of Section 3(1) of ERISA and which provides for continuing benefits or
coverage for any participant or any beneficiary of any participant after
such participant's termination of employment, except as may be required by
any Applicable Law, the result of which could reasonably be expected to
have a Material Adverse Effect. Each of the Borrower and its Controlled
Group which maintains a Plan which is a welfare benefit plan within the
meaning of Section 3(1) of ERISA has complied in all material respects
with any applicable notice and continuation requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
the regulations thereunder. None of the Borrower or any member of its
Controlled Group maintains, has established, or has ever participated in a
multiemployer welfare benefit arrangement within the meaning of Section
3(40)(A) of ERISA.
Compliance with Regulations T, U and X. The Borrower is not
engaged principally or as one of its important activities in the business
of extending credit for the purpose of purchasing or carrying any margin
stock within the meaning of Regulations T, U and X of the Board of
Governors of the Federal Reserve System, and no part of the proceeds of
the Term Loan will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any
margin stock. No more than 25% of the assets of the Borrower and its
Subsidiaries or Affiliates are margin stock. None of the Borrower or its
Subsidiaries or Affiliates nor any agent acting on their behalf, has taken
or will knowingly take any action which would cause this Agreement or any
other Loan Documents to violate any regulation of the Board of Governors
of the Federal Reserve System or to violate the Securities Exchange Act of
1934, in each case as in effect now or as the same may hereafter be in
effect.
Authorization of Tribunals. The Borrower and its Subsidiaries
and Affiliates are not required to obtain any Necessary Authorization on
or prior to the Agreement Date that has not already been obtained from, or
effect any material filing or registration that has not already been
effected with, any Tribunal in connection with the execution and delivery
of this Agreement, any other Loan Document, or the Transaction Documents
or the performance thereof, in accordance with their respective terms,
including any borrowings hereunder, except for the filing of financing
statements (and other similar notices) containing a description of the
Collateral with certain Tribunals.
Absence of Default. The Borrower and its Subsidiaries and
Affiliates are in compliance in all material respects with all of the
provisions of their certificate of incorporation and by-laws (or similar
organizational and governance documents), and no event has occurred or
failed to occur, which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or which with the passage of time or
giving of notice or both would constitute, (i) an Event of Default or (ii)
a default by the Borrower or any of its Subsidiaries or Affiliates under
any indenture, agreement or other instrument, or any judgment, decree or
order to which the Borrower or any of its Subsidiaries or Affiliates or by
which they or any of their respective properties is bound relating to
Indebtedness for borrowed money, except to the extent that such default
could not reasonably be expected to have a Material Adverse Effect.
Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries or Affiliates is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or the Investment Company Act of 1940. Neither the entering
into or performance by the Borrower of the Loan Documents, the Transaction
Documents nor the issuance of the Term Note violates any provision of such
act or requires any consent, approval, or authorization of, or
registration with, the Securities and Exchange Commission or any other
Tribunal pursuant to any provisions of such act.
Environmental Matters. Except as reflected on Schedule 8,
neither the Borrower nor any Subsidiary or Affiliate of the Borrower has
any current actual knowledge that any substance deemed hazardous by any
Applicable Environmental Law, has been installed (i) on any real property
fee title to which is now owned by the Borrower or any of its Subsidiaries
or Affiliates or (ii) by Borrower or any of its Subsidiaries or Affiliates
on any real property leased by the Borrower or any of its Subsidiaries or
Affiliates, in either case in a manner which does not comply with
Applicable Environmental Laws, except to the extent that the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 8, the Borrower and its Subsidiaries are
not in violation of or subject to any existing, pending or, to the best of
the Borrower's knowledge, threatened investigation or inquiry by any
Tribunal or to any remedial obligations under any Applicable Environmental
Laws, the effect of which could reasonably be expected to have a Material
Adverse Effect. The Borrower and its Subsidiaries and Affiliates have not
obtained and are not required to obtain any permits, licenses or similar
authorizations other than certificates of occupancy and building permits
and other authorizations that have been obtained to construct, occupy,
operate or use any buildings, improvements, fixtures, and equipment
forming a part of any real property owned or leased by the Borrower or any
Subsidiary or Affiliate of the Borrower by reason of any Applicable
Environmental Laws, except to the extent that the failure to so obtain
could not reasonably be expected to have a Material Adverse Effect. The
Borrower and its Subsidiaries and Affiliates undertook, at the time of
acquisition of fee title to any real property, reasonable inquiry into the
previous ownership and uses of such real property consistent with good
commercial or customary practice. The Borrower and its Subsidiaries and
Affiliates have taken reasonable steps to determine, and, except as set
forth on Schedule 8, the Borrower and its Subsidiaries and Affiliates have
no current actual knowledge, that any hazardous substances or solid wastes
have been disposed of or otherwise released (i) on or to the real property
fee title to which is owned by the Borrower or any of its Subsidiaries or
Affiliates or (ii) by Borrower or any of its Subsidiaries or Affiliates on
or to any real property leased by Borrower or any of its Subsidiaries or
Affiliates, all within the meaning of the Applicable Environmental Laws,
the effect of which could reasonably be expected to have a Material
Adverse Effect. To the extent required to do so by any Applicable
Environmental Laws, the Borrower and its Subsidiaries and Affiliates have
disposed of all hazardous substances and solid wastes (if any), all within
the meaning of the Applicable Environmental Laws, generated in their
respective businesses in compliance with all Applicable Environmental
Laws, except to the extent that the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
Certain Fees. No broker's, finder's or other fee or commission
will be payable by the Borrower (other than to the Lender hereunder) with
respect to the making of the Commitment or the Term Loan hereunder. The
Borrower agrees to indemnify and hold harmless the Lender from and against
any claims, demand, liability, proceedings, costs or expenses asserted
with respect to or arising in connection with any such fees or commissions
payable by the Borrower.
Patents, Etc. The Borrower and its Subsidiaries and Affiliates
have collectively obtained or applied for all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from
burdensome restrictions, that are necessary for the operation of their
business as presently conducted and as proposed to be conducted, except to
the extent that the failure to so obtain or apply could not reasonably be
expected to have a Material Adverse Effect. Nothing has come to the
current actual knowledge of the Borrower or any of its Subsidiaries or
Affiliates to the effect that (i) any process, method, part or other
material presently contemplated to be employed by the Borrower or any
Subsidiary or Affiliate of the Borrower may infringe any patent,
trademark, service mark, trade name, copyright, license or other right
owned by any other Person, or (ii) there is pending or overtly threatened
any claim or litigation against or affecting the Borrower or any
Subsidiary or Affiliate of the Borrower contesting its right to sell or
use any such process, method, part or other material, which could
reasonably be expected to have a Material Adverse Effect.
Disclosure. All factual information furnished by the Borrower
or any of its Subsidiaries or Affiliates in writing to the Lender in
connection with this Agreement, the other Loan Documents or the
Transaction Documents or any transaction contemplated herein or therein
is, and all other factual information hereafter furnished by or on behalf
of the Borrower or any of its Subsidiaries or Affiliates in writing to the
Lender will be, true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circumstances under
which such information was provided. There is no fact known to the
Borrower or any of its Subsidiaries or Affiliates and not known to the
public generally that could reasonably be expected to have a Material
Adverse Effect, which has not been set forth in this Agreement or in the
documents, certificates and statements furnished to the Lender by or on
behalf of the Borrower prior to the date hereof in connection with the
transactions contemplated hereby.
Solvency. The Borrower is, and the Borrower and its Subsidiaries and
--------
Affiliates on a consolidated basis are, Solvent.
Labor Relations. Except as provided on Schedule 9, neither the
Borrower nor any Subsidiary or Affiliate of the Borrower is a party to a
collective bargaining agreement or similar agreement, and the Borrower and
each Subsidiary and Affiliate is in compliance in all material respects
with all Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and other laws related to the
employment of its employees, except where the failure to comply could not
reasonably be expected to result in a Material Adverse Effect, and there
are no arrears in the payment of wages, withholding or social security
taxes, unemployment insurance premiums or other similar obligations of the
Borrower or any Subsidiary or Affiliate of the Borrower or for which the
Borrower or any Subsidiary or Affiliate may be responsible other than in
the ordinary course of business, except for such unpaid or unwithheld
arrears which could not reasonably be expected to result in a Material
Adverse Effect. There is no strike, work stoppage or labor dispute with
any union or group of employees pending or overtly threatened involving
Borrower or any Subsidiary or Affiliate that could reasonably be expected
to have a Material Adverse Effect.
Consolidated Business Entity. The Borrower and its
Subsidiaries and Affiliates are engaged in the business of developing,
financing and operating time-share resorts and other leisure activities
(exclusive of gaming). These operations require financing on a basis such
that the credit supplied can be made available from time to time to the
Borrower and various of its Subsidiaries and Affiliates, as required for
the continued successful operation by the Borrower and its Subsidiaries
and Affiliates as a whole. The Borrower and its Subsidiaries and
Affiliates expect to derive benefit (and the board of directors of the
Borrower and its Subsidiaries and Affiliates have determined that the
Borrower and its Subsidiaries and Affiliates may reasonably be expected to
derive benefit), directly or indirectly, from the credit extended by the
Lender hereunder, both in their separate capacities and as members of the
group of companies, since the successful operation and condition of the
Borrower and its Subsidiaries and Affiliates is dependent on the continued
successful performance of the functions of the group as a whole.
Time-Share Interest Exchange Network. All of the Projects are
members and participants, pursuant to validly executed and enforceable
written agreements, in Resort Condominiums International, L.L.C. and/or
Interval International. The Borrower and its Subsidiaries and Affiliates
have paid all fees and other amounts due and owing under such agreements
and are not otherwise in default in any material respect thereunder.
Time-Share Interests. The sale, offering of sale, and
financing of Time-Share Interests in the Projects (i) do not constitute
the sale, or the offering of sale, of securities subject to registration
requirements of the Securities Act of 1933, as amended, or any state or
foreign securities Law, (ii) except to the extent that any such
violation(s), either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, do not violate
any time-sharing or other Law of any state or foreign country in which
sales or solicitation of Time-Share Interests occur, and (iii) except to
the extent that any such violation(s), either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect, do not violate any consumer credit or usury Laws of any state or
foreign country in which sales or solicitation of Time-Share Interests
occur. Except to the extent that any such failure(s), either individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect, the Borrower and its Subsidiaries and Affiliates have not
failed to make or cause to be made any registrations or declarations with
any Tribunal necessary to the ownership of the Projects or to the conduct
of its business, including, without limitation, the operation of the
Projects and the sale, or offering for sale, of Time-Share Interests
therein. Except to the extent that any such noncompliance(s), either
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect, the Borrower and its Subsidiaries and
Affiliates have, to the extent required by its activities and businesses,
fully complied with all of the applicable provisions of (A) the Consumer
Credit Protection Act, as amended, (B) the Federal Trade Commission Act,
as amended, (C) the Federal Interstate Land Sales Full Disclosure Act, as
amended, (D) any other Laws of any Tribunal otherwise applicable, and (E)
all rules and regulations promulgated under any of the foregoing. Complete
and correct copies of documents requested by the Lender which have been
and are being used by the Borrower and its Subsidiaries in connection with
the Projects and the sale or offering for sale of Time-Share Interests
therein have been delivered to the Lender. The Time-Share Interests in the
Projects constitute undivided interests in real property under the Laws of
the jurisdictions in which the applicable Units are located.
Common Areas. To the extent that the Borrower or any of its
Subsidiaries or Affiliates are legally obligated to construct same, the
common areas and amenities appurtenant to sold Time-Share Interests, and
the streets and other off-site improvements contained within the Projects
have been completed or a bond insuring the completion thereof has been
obtained and such interests in such common areas are free and clear of all
Liens except Permitted Liens.
Reserved.
Year 2000 Compliance. Each of the Borrower and each Subsidiary
and Affiliate of the Borrower has conducted a comprehensive review and
assessment of its computer applications and made inquiry of its key
supplier, vendors and customers with respect to the "year 2000 problem"
(that is, the risk that computer applications may not be able to properly
perform date-sensitive functions after December 31, 1999) and, based on
that review and inquiry, it does not believe the year 2000 problem will
result in a material adverse change in its business condition (financial
or otherwise), operations, properties or prospects, or ability to repay
the credit.
Reserved.
Assumed Indebtedness. Except as set forth on Schedule 11, no
--------------------
Indebtedness was assumed in connection with the Transactions.
Projections. The projections delivered to the Lender pursuant
to Sections 3.1 and 4.1(j) hereof have been prepared by management of the
Borrower on the basis of assumptions acceptable to Lender, which such
management reasonably believes are fair and reasonable in light of the
historical financial performance of the Peppertree Entities and of current
and reasonably foreseeable business conditions.
Indebtedness. Schedule 6 sets forth a complete and correct
list and brief description as of the Agreement Date of all Indebtedness
for borrowed money of the Borrower, and its Subsidiaries and Affiliates
and all Liens securing such Indebtedness (excluding any Indebtedness
evidenced by the Term Note and any Liens created by any Collateral
Document) existing on the Agreement Date after giving effect to the
Transactions.
No Default. On the Agreement Date after giving effect to the
Transactions, (A) to the knowledge of the Borrower, no Default or Event of
Default has occurred and is continuing, and (B) no Default or Event of
Default has occurred and is continuing under the terms of any of the
documents pursuant to or in connection with which any Indebtedness of the
Borrower, or any of its Subsidiaries or Affiliates was incurred.
Material Contracts. Schedule 12 contains a list of all
contracts (other than (A) contracts for Indebtedness for borrowed money
and (B) labor contracts which are set forth in Schedule 9) which would
require over the full term thereof payments by or to the Borrower or any
of its Subsidiaries or Affiliates of more than $2,000,000 or is otherwise
material to the business of the Borrower, its Subsidiaries or Affiliates
("Material Contracts") to which the Borrower or any of its Subsidiaries or
Affiliates is a party as of the Agreement Date after giving effect to the
Transactions contemplated to occur on the Agreement Date. As of the
Agreement Date, each of the Material Contracts on Schedule 12 is in full
force and effect. None of the Borrower and any of its Subsidiaries or
Affiliates is in material breach or violation of any of the terms,
conditions or provisions thereof. None of the Borrower and any of its
Subsidiaries or Affiliates has transferred or subordinated any of its
rights or interests in any of the Material Contracts, and such rights and
interests are subject to no Liens except Permitted Liens. None of the
Borrower and any of its Subsidiaries or Affiliates is subject to any
restriction contained in its charter or by-laws which is reasonably likely
to have a Material Adverse Effect.
Insurance. Except as set forth in Schedule 13, (i) all
insurance policies to which the Borrower or any Subsidiary or Affiliate of
the Borrower is a party or that provide coverage to any director or
officer of the Borrower or any Subsidiary or Affiliate of the Borrower or
to any Transferred Asset (A) are valid, outstanding, and enforceable, (B)
are issued by an insurer that is financially sound and reputable, (C)
taken together provide adequate insurance for the properties, assets and
business of the Borrower and its Subsidiaries and Affiliates and the
Transferred Assets for all risks normally insured against by a Person
carrying on the same or similar business or businesses, (D) comply with
the insurance requirements of all laws and contracts to which the Borrower
or any of its Subsidiaries or Affiliates is a party or by which it is
bound, except where such failures to so comply would not, in the
aggregate, have a Material Adverse Effect, and (E) do not provide for any
retrospective premium adjustment or other experience-based liability on
the part of any of the Borrower or any of its Subsidiaries or Affiliates;
(ii) neither the Borrower nor any of its Subsidiaries or Affiliates has
received any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or any notice of cancellation or any
other indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder, except where such
refusals, failures to renew or cancellations would not, in the aggregate,
have a Material Adverse Effect; (iii) each of the Borrower and its
Subsidiaries and Affiliates has paid all premiums due with respect to all
periods up to and including the date hereof and has otherwise performed
all of its obligations under each policy to which it is a party or that
provides coverage to the Borrower or any Subsidiary or Affiliate of the
Borrower or any officers or directors thereof, except where the failure to
do so would not have a Material Adverse Effect; and (iv) each of the
Borrower and each Subsidiary and Affiliate of the Borrower has given
notice to the insurer of all material claims that may be insured thereby.
Licenses, Permits, Etc. Except as set forth on Schedule 14,
Borrower, and its Subsidiaries and Affiliates possess all franchises,
certificates, licenses, permits, registrations, and other authorizations
from governmental bodies (including, without limitation, any such
franchises, certificates, licenses, permits, registrations, and other
authorizations required under the provisions of any applicable laws), free
from burdensome restrictions, that are necessary for the ownership,
maintenance and operation of their respective properties and assets, and
for the conduct of their respective businesses as now conducted after
giving effect to the Transactions, except where the failure to possess any
of the foregoing is not likely to have a Material Adverse Effect, and none
of Borrower and its Subsidiaries or Affiliates is in violation of any
thereof in any material respect.
Indebtedness to Officers, Etc. Except as set forth on Schedule
15 hereto, as of the Agreement Date, none of the Borrower or its
Subsidiaries or Affiliates is indebted, directly or indirectly, to any of
their respective officers, directors or stockholders or to any of the
respective spouses or children of any of such Persons, except with respect
to salaries and related employee compensation and expense reimbursement
and management fees accrued in the ordinary course of business, except for
the Equivest Note and except, for any period after the Agreement Date, for
any amounts not exceeding in the aggregate $250,000.
Real Property. Schedule 16 sets forth a complete and correct
list and brief description, as of the Agreement Date after giving effect
to the Transactions, of all real property owned by the Borrower and all of
its Subsidiaries and Affiliates on the date hereof, including the type of
interests in, and location or use of such real property, together with a
complete and correct list of all leases of real property to which any of
such Persons is a party, identifying the parties to each such lease and
the property to which it relates, as of the Agreement Date after giving
effect to the Transactions.
Good Title. As of the Agreement Date after giving effect to
the Transactions, each of the Borrower and its Subsidiaries and Affiliates
has good and marketable title to all of its respective properties (other
than properties leased from others), subject to no Lien of any kind except
Permitted Liens.
Operating Condition; Etc. As of the Agreement Date after
giving effect to the Transactions, the properties owned by the Borrower
and its Subsidiaries and Affiliates are in good operating condition and
repair, ordinary wear and tear excepted, are free and clear of any known
defects except such defects as do not materially interfere with the
continued use thereof in the conduct of normal operations of the Borrower
and its Subsidiaries and Affiliates, and the properties owned by, leased
to or used by the Borrower and its Subsidiaries and Affiliates, are able
to serve the function for which they are currently being used in all
material respects, in each case except as disclosed in Schedule 17. As of
the Agreement Date after giving effect to the Transactions, the assets
owned by, leased to or used by the Borrower and its Subsidiaries and
Affiliates constitute all of the material assets used in the conduct of
the business of the Borrower and its Subsidiaries and Affiliates as
presently conducted, and, except as disclosed on Schedule 17 neither this
Agreement nor the Term Note nor any other document, nor any transaction
contemplated under any such agreement or document, will materially
adversely affect any right, title or interest of the Borrower or its
Subsidiaries or Affiliates in and to any of such assets (except for
Permitted Liens).
Quiet Enjoyment. As of the Agreement Date after giving effect
to the Transactions, each of the Borrower and its Subsidiaries and
Affiliates enjoys peaceful and undisturbed possession under all leases,
whether of realty or personality, to which it is respectively a party, and
all such leases are in full force and effect; and none of the Borrower or
its Subsidiaries or Affiliates is in default under any of the terms of any
such lease, and neither the Borrower nor its Subsidiaries or Affiliates
knows of any default under any such leases by any third party; except in
each case for matters that would not have a Material Adverse Effect.
Security Documents. (i) The Pledge Agreement is effective to
create in favor of the Lender, a legal, valid and enforceable security
interest in the Collateral covered by the Pledge Agreement and, when the
Collateral is delivered to the Lender, together with undated powers
executed in blank, the Lender shall have a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the
pledgors thereunder in such Collateral, in each case prior and superior in
right to any other Person.
The Security Agreement is effective to create in favor of the
Lender, a legal, valid and enforceable security interest in the Collateral
covered by the Security Agreement and, when financing statements in
appropriate form are filed in the offices specified in the Security
Agreement, the Lender shall have a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in
such Collateral, in each case prior and superior in right to any other
Person, other than with respect to Liens expressly permitted by Section
7.2 hereof.
Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other
Loan Documents shall be deemed to be made at and as of the Agreement Date
and at and as of the date of each drawing of the Term Loan and each
conversion and continuation of a LIBOR Advance. All such representations
and warranties shall survive, and not be waived by, the execution hereof
by the Lender, any investigation or inquiry by the Lender, or by the
making of any drawing of the Term Loan and each conversion and
continuation of a LIBOR Advance under this Agreement.
General Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled):
Preservation of Existence and Similar Matters. The Borrower shall, and
shall cause each Subsidiary and Affiliate of the Borrower to:
except as otherwise permitted pursuant to Section 7.4 hereof,
preserve and maintain or timely obtain and thereafter preserve and
maintain, its existence, rights, franchises, licenses, authorizations,
consents, privileges and all other Necessary Authorizations from any
Tribunal, the loss of which could reasonably be expected to have a
Material Adverse Effect; and
except as otherwise permitted pursuant to Section 7.4 hereof,
qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure
to do so could not reasonably be expected to have a Material Adverse
Effect.
Business; Compliance with Applicable Law. The Borrower and its
Subsidiaries and Affiliates shall (a) engage primarily in the businesses
set forth in Section 4.1(d) hereof, and (b) comply in all respects with
the requirements of all Applicable Law, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
Maintenance of Properties. To the maximum extent that the
Borrower or any Subsidiary or Affiliate of the Borrower has the right,
power or authority (whether as a matter of contract, at law or otherwise)
to do so, the Borrower shall, and shall cause each Subsidiary and
Affiliate of the Borrower to, maintain or cause to be maintained all its
properties (whether owned or held under lease) in reasonably good repair,
working order and condition, taken as a whole, and from time to time make
or cause to be made all appropriate (in the reasonable judgment of the
Borrower) repairs, renewals, replacements, additions, betterments and
improvements thereto, except where the failure to so maintain, repair,
renew, replace or improve could not reasonably be expected to have a
Material Adverse Effect.
Accounting Methods and Financial Records. The Borrower shall,
and shall cause each Subsidiary and Affiliate of the Borrower to, maintain
a system of accounting established and administered in accordance with
GAAP, keep accurate records and books of account in which complete entries
will be made and all transactions reflected in accordance with GAAP, and
keep accurate and complete records of its respective assets. The Borrower
and each of its Subsidiaries and Affiliates shall maintain its fiscal year
in the manner in existence on the Agreement Date.
Insurance. The Borrower shall, and shall cause each Subsidiary
and Affiliate of the Borrower to, maintain insurance from responsible
companies in such amounts and against such risks as shall be customary and
usual in the industry for companies of similar size and capability. Each
insurance policy shall (a) provide for at least 30 days' prior notice to
the Lender of any proposed termination or cancellation of such policy,
whether on account of default or otherwise and (b) otherwise contain the
requirements for insurance set forth in the Security Agreement.
Payment of Taxes and Claims. The Borrower shall, and shall
cause each Subsidiary and Affiliate of the Borrower to, pay and discharge
all material Taxes to which they are subject prior to the date on which
penalties attach thereto, and all lawful material claims for labor,
materials and supplies which, if unpaid, might become a Lien upon any of
its properties; except that no such Tax or claim need be paid which is
being diligently contested in good faith by appropriate proceedings and
for which adequate reserves shall have been set aside on the appropriate
books, but only so long as no Lien shall attach with respect thereto and
no foreclosure, distraint, sale or similar proceedings shall have been
commenced. The Borrower shall, and shall cause each Subsidiary and
Affiliate of the Borrower to, timely file all information returns (or
extensions of such filing deadlines) required by federal, state or local
tax authorities.
Visits and Inspections. The Borrower shall, and shall cause
each Subsidiary and Affiliate of the Borrower to, promptly permit
representatives of Lender (and third party consultants and auditors
retained by the Lender) from time to time after reasonable notice and
during business hours by the Lender to (a) visit and inspect the
properties of the Borrower, the Subsidiaries and Affiliates of the
Borrower, as often as the Lender shall reasonably deem advisable, (b)
audit, inspect and make extracts from and copies of the books and records
of the Borrower, and each Subsidiary and Affiliate of the Borrower, and
(c) discuss with the appropriate directors, officers, employees and
auditors of the Borrower and each Subsidiary and Affiliate of the
Borrower, the business, assets, liabilities, financial positions, results
of operations and business prospects of the Borrower and each Subsidiary
of the Borrower. The Borrower shall pay the reasonable fees, costs and
expenses related to up to three (3) such inspections and audits performed
by, or on behalf of, the Lender. Prior to the occurrence of an Event of
Default, all such visits and inspections shall be conducted during normal
business hours. Following the occurrence and during the continuance of an
Event of Default, such visits, inspections and audits shall be conducted
at any time requested by the Lender without any requirement for reasonable
notice and at the expense of the Borrower.
Use of Proceeds. The proceeds of the Term Loan shall be used
by the Borrower, Newco I and Newco II to finance a portion of the cash
consideration for the Transaction.
INDEMNITY.
THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE LENDER, ITS AFFILIATES, AND ITS (INCLUDING SUCH AFFILIATES') OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS
(INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE
SATISFACTION OR ATTEMPTED SATISFACTION OF ANY OF THE CONDITIONS SET FORTH
HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY, "INDEMNITEES") FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, PROCEEDINGS (WHETHER CIVIL OR CRIMINAL), JUDGMENTS, SUITS,
CLAIMS, REASONABLE COSTS, REASONABLE EXPENSES AND REASONABLE DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES IN
CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING,
WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO),
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER
DIRECT OR INDIRECT AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS
AND REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT,
TORT OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR
FUTURE OPERATIONS OF THE BORROWER, ITS SUBSIDIARIES OR AFFILIATES, OR
THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ITS SUBSIDIARIES OR
AFFILIATES), RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, THE TRANSACTION DOCUMENTS OR ANY ACT, EVENT OR TRANSACTION OR
ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO, THE
MANAGEMENT OF THE TERM LOAN, INCLUDING IN CONNECTION WITH, OR AS A RESULT,
IN WHOLE OR IN PART, OF ANY ORDINARY OR MERE NEGLIGENCE OF THE LENDER OR
THE USE OR INTENDED USE OF THE PROCEEDS OF THE TERM LOAN HEREUNDER, OR IN
CONNECTION WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY,
OR THE PROJECTS, OR ANY ACT OR OMISSION BY THE BORROWER, OR ANY OF ITS
SUBSIDIARIES OR AFFILIATES, OR THE EMPLOYEES OR AGENTS OF ANY OF THEM, OR
ANY ACT OR OMISSION BY ALL BROKERS, AGENTS OR OTHER SALESMEN OF TIME-SHARE
INTERESTS, BUT EXCLUDING ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT
OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNITEE, AS
FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED
MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE
SAME LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION
DETERMINES THAT CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH
REPRESENTATION.
WITHOUT DUPLICATION, THE BORROWER SHALL PERIODICALLY, UPON
REQUEST, REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER
ACTUAL REASONABLE EXPENSES (INCLUDING THE REASONABLE COST OF ANY
INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED
MATTER. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER
THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY
OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH
INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY
SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE BORROWER,
THE LENDER AND ALL OTHER INDEMNITEES. THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS.
Environmental Law Compliance. The use which the Borrower or
any Subsidiary or Affiliate of the Borrower intends to make of any real
property which is owned or leased by it will not result in the disposal or
other release of any hazardous substance or solid waste on or to such real
property which is in violation of Applicable Environmental Laws, the
effect of which could reasonably be expected to have a Material Adverse
Effect. As used herein, the terms "hazardous substance" and "release" as
used in this Section shall have the meanings specified in CERCLA (as
defined in the definition of Applicable Environmental Laws), and the terms
"solid waste" and "disposal" shall have the meanings specified in RCRA (as
defined in the definition of Applicable Environmental Laws); provided,
however, that if CERCLA or RCRA is amended so as to broaden or lessen the
meaning, of any term defined thereby, such broader or lesser meaning shall
apply subsequent to the effective date of such amendment; and provided
further, to the extent that any other law applicable to the Borrower, any
Subsidiary or Affiliate or any of their respective properties establishes
(to the exclusion of the applicability of CERCLA and RCRA) a meaning for
"hazardous substance," "release," "solid waste," or "disposal" which is
broader or lesser than that specified in either CERCLA or RCRA, such
broader or lesser meaning shall apply. Each of the Borrower, Newco I and
Newco II agrees to indemnify and hold the Lender harmless from and
against, and to reimburse the Lender with respect to, any and all claims,
demands, causes of action, loss, damage, liabilities, reasonable costs and
reasonable expenses (including reasonable attorneys' fees and courts
costs) of any kind or character, known or unknown, fixed or contingent,
asserted against or incurred by any of them at any time and from time to
time by reason of or arising out of (a) the failure of the Borrower or any
Subsidiary or Affiliate to perform any of their obligations hereunder
regarding asbestos or Applicable Environmental Laws, (b) any violation on
or before the Release Date of any Applicable Environmental Law in effect
on or before the Release Date, and (c) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date
(including without limitation the presence on such real property or
release from such real property of hazardous substances or solid wastes
disposed of or otherwise released on or prior to the Release Date),
resulting from or in connection with the ownership of the real property,
regardless of whether the act, omission, event or circumstance constituted
a violation of any Applicable Environmental Law at the time of its
existence or occurrence, provided that, the Borrower shall not be under
any obligation to indemnify the Lender to the extent that any such
liability arises as the result of the gross negligence or willful
misconduct of the Lender, as finally judicially determined by a court of
competent jurisdiction. The provisions of this paragraph shall survive the
Release Date and shall continue thereafter in full force and effect.
Further Assurances. At any time or from time to time upon
request by the Lender, the Borrower or any Subsidiary or Affiliate of the
Borrower shall execute and deliver such further documents and do such
other acts and things as the Lender may reasonably request in order to
effect fully the purposes of this Agreement and the other Loan Documents
and to provide for payment of the Obligations in accordance with the terms
of this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, the Borrower agrees to (a) update and deliver
to the Lender supplements to Schedules 3 and 4 hereto at the time of
delivery of the financial statements set forth in Sections 6.3 and 6.4
hereof if the information provided therein is not complete and correct,
and (b) update and deliver to the Lender, modifications to any other
exhibits and schedules to any Loan Document, promptly upon discovery that
the information provided therein is not complete and correct.
Management of Projects, Etc. To the maximum extent that the
Borrower or any Subsidiary or Affiliate of the Borrower, as applicable,
has the right, power or authority (whether as a matter of contract, at law
or otherwise) to do so, the Borrower shall, or shall cause the applicable
Subsidiary or Affiliate, to be a party to and maintain management
contracts with respect to each Project and with Holiday Inn SunSpree.
[Reserved].
Owners Associations. The Borrower shall, or shall cause the
applicable Subsidiary or Affiliate to, cause each Purchaser to
automatically be a member of each Project's owners association or
associations, if any, and to be entitled to vote on the affairs thereof
(subject, however, to any preferential voting rights in favor of the
Borrower or any of its Subsidiaries or Affiliates, as applicable, as
permitted under applicable time-share Laws). Each such owners association
shall have the authority to fix and levy pro rata upon each Purchaser
annual assessments to cover the costs of maintaining and operating such
Project (including, without limitation, taxes and assessments not levied
by the appropriate taxing authority directly against owners of Time-Share
Interests) and to establish a reasonable reserve for improvements, the
replacement of property and furnishings, and contingencies. If the
Borrower or any of its Subsidiaries or Affiliates controls an owners
association, the Borrower or such Subsidiaries or Affiliates will while it
controls such association: (i) cause such owners association to discharge
timely and completely its obligations under such Project's governing
documents and maintain the reserve described above and (ii) to the extent
requested to do so by the Lender, pay or loan to such owners association,
not less often than is necessary to provide sufficient funding for such
owners association in order to maintain, preserve and maximize the
ownership, quality, safety, marketability, value and appearance of the
applicable Project, the difference between (A) the cumulative total amount
of the maintenance and operating expenses incurred by such association,
together with the amount of any installment of real property taxes
currently due and payable with respect to such Project not directly levied
against owners of Time-Share Interests, through the end of the calendar
month preceding the month in which such payment or loan is made and (B)
the cumulative total amount of assessments (less amounts thereof allocated
to reserve expenses) payable to the association by Time-Share Interest
owners other than the Borrower or its Subsidiaries or Affiliates, as
appropriate, through the end of the calendar month preceding the month in
which such payment or loan is made.
Note Receivable Information. The Borrower shall, and shall
cause each of its Subsidiaries and Affiliates to, maintain accurate and
complete files relating to the Notes Receivable and the A&D Loans
Receivable, and such files will contain copies of each Note Receivable and
each note evidencing each A&D Loan Receivable, copies of all relevant
credit memoranda relating to such Notes Receivable and A&D Loan
Receivables and all collection information and correspondence related
thereto.
[Reserved].
Time-Share Interest Exchange Network. Each of the Projects
shall continue to be members and participants, pursuant to validly
executed and enforceable written agreements, in Resort Condominiums
International, L.L.C. and/or Interval International. Borrower and its
Subsidiaries and Affiliates shall pay, in a timely manner, all fees and
other amounts due and owing under such agreements and shall not otherwise
take any action, or fail to take any action, the result of which would be
to create any default in any material respect thereunder.
[Reserved]
Subsidiary Guaranty; Security Agreement. Within 30 days of the
date on which any entity becomes a New Material Subsidiary or a New
Material Affiliate of the Borrower, the Borrower shall cause each such New
Material Subsidiary and New Material Affiliate to enter into a guaranty
and a security agreement substantially in the form of the Subsidiary
Guaranty and the Security Agreement respectively, together with such other
documents as shall be determined by the Lender.
Information Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled), the Borrower shall furnish or cause to be
furnished to the Lender or shall notify the Lender of the following
events:
[Reserved].
[Reserved].
Quarterly Financial Statements and Information. (a) Within 45
days after the end of each of the first three fiscal quarters of each
fiscal year, the consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal quarter and the related
consolidated statements of income for such fiscal quarter and for the
elapsed portion of the year ended with the last day of such fiscal
quarter, and consolidated statements of cash flow for the elapsed portion
of the year ended with the last day of such fiscal quarter, certified by
the president, chief financial officer or treasurer of the Borrower, to
the effect that such statements present fairly in accordance with GAAP
(except for the absence of footnotes), the financial position and results
of operations of the Borrower and its Subsidiaries as at the end of and
for such fiscal quarter, and for the elapsed portion of the year ended
with the last day of such fiscal quarter, subject only to normal year-end
adjustments.
Within 45 days after the end of each fiscal quarter of each
fiscal year of the Borrower, a statement of aging of Notes Receivable of
the Borrower and its Subsidiaries and Affiliates, in a form satisfactory
to the Lender.
Annual Financial Statements and Information; Certificate of No Default.
Within 90 days after the end of each fiscal year, a copy of
(i) the consolidated balance sheets of the Borrower and its Subsidiaries,
as of the end of the current and prior fiscal years and (ii) the
consolidated statements of earnings and consolidated statements of changes
in shareholders' equity, and statements of cash flow as of and through the
end of such fiscal year, prepared in accordance with GAAP and certified by
independent certified public accountants reasonably acceptable to the
Lender (provided, however, any former big six public accounting firm and
Firley Moran Freer & Eassa, P.C. shall be acceptable to the Lender), which
opinion shall be in scope and substance in accordance with generally
accepted auditing standards and shall be unqualified as to scope of audit
and going concern.
As soon as available, but in any event within 30 days after
December 31, 1999 and within 30 days after the end of each fiscal year
thereafter, a copy of the annual consolidated financial projections
(containing such information as may be requested by the Lender, including,
but not limited to, pro forma income statements, balance sheets and
statements of cash flow) of the Borrower and the Subsidiaries and
Affiliates of the Borrower for the succeeding fiscal year.
Compliance Certificate. At the time financial statements are
furnished pursuant to Sections 6.3 and 6.4 hereof, the Compliance
Certificate, completed as provided therein, executed by the president, the
chief financial officer, or treasurer of the Borrower.
Copies of Other Reports and Notices.
Promptly upon their becoming available, a copy of (i) all
material final reports or letters submitted to the Borrower or any
Subsidiary or Affiliate of the Borrower by accountants in connection with
any annual, interim or special audit, including without limitation any
final report prepared in connection with the annual audit referred to in
Section 6.4 hereof, and, if requested by the Lender, any other comment
letter submitted to management in connection with any such audit, (ii)
each financial statement, report, notice or proxy statement sent by the
Borrower to stockholders generally, (iii) each regular, periodic or other
report and any registration statement (other than statements on Form S-8)
or prospectus (or material written communication in respect of any
thereof) filed by the Borrower or any Subsidiary or Affiliate of the
Borrower with any securities exchange, with the Securities and Exchange
Commission or any successor agency, (iv) all press releases concerning
material financial aspects of the Borrower or any Subsidiary of the
Borrower, and (v) to the extent requested by the Lender, forms of
documents being used in connection with the Projects to the extent
different from those previously furnished to the Lender;
Promptly upon becoming aware (i) that the holder(s) of any
note(s) or other evidence of indebtedness or other security of the
Borrower or any Subsidiary or Affiliate of the Borrower in excess of
$500,000 in the aggregate has given notice or taken any action with
respect to a breach, failure to perform, claimed default or event of
default thereunder, (ii) of the occurrence or non-occurrence of any event
which constitutes or which with the passage of time or giving of notice or
both could constitute a material breach by the Borrower or any Subsidiary
or Affiliate of the Borrower under any material agreement or instrument
other than this Agreement to which the Borrower or any Subsidiary or
Affiliate of the Borrower is a party or by which any of their respective
properties may be bound, or (iii) of any event, circumstance or condition
which could reasonably be expected to be classified as a Material Adverse
Effect, a written notice specifying the details thereof (or the nature of
any claimed default or event of default) and what action is being taken or
is proposed to be taken with respect thereto;
Promptly upon becoming aware that any party to any Capitalized
Lease Obligations or Operating Lease, in each case, in excess of $500,000,
has given notice or taken any action with respect to a breach, failure to
perform, claimed default or event of default thereunder, a written notice
specifying the details thereof (or the nature of any claimed default or
event of default) and what action is being taken or is proposed to be
taken with respect thereto;
Promptly upon receipt thereof, information with respect to and
copies of any notices received from any Tribunal relating to any order,
ruling, law, information or policy that relates to a breach of or
noncompliance with any Law, or could reasonably be expected to result in
the payment of money by the Borrower or any Subsidiary or Affiliate of the
Borrower in an amount of $500,000 or more in the aggregate, or otherwise
have a Material Adverse Effect, or result in the loss or suspension of any
Necessary Authorization where such loss could reasonably be expected to
have a Material Adverse Effect; and
From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information
regarding the assets, business, liabilities, financial position,
projections, results of operations or business prospects of the Borrower
and its Subsidiaries and Affiliates, as the Lender may reasonably request.
Notice of Litigation, Default and Other Matters. Prompt notice of the
following events after the Borrower has knowledge or notice thereof:
The commencement of all Litigation and investigations by or
before any Tribunal, and all actions and proceedings in any court or
before any arbitrator involving claims (i) for damages (including punitive
damages) in excess of $1,000,000 (after deducting the amount with respect
to which the Borrower or any Subsidiary or Affiliate of the Borrower is
insured), against or in any other way relating directly to the Borrower,
any Subsidiary or Affiliate of the Borrower, or any of their respective
properties or businesses or (ii) which otherwise could affect any
Collateral and which could reasonably be expected to have a Material
Adverse Effect; and
Promptly upon the happening of any Event of Default or
Default, a written notice specifying the nature and period of existence
thereof and what action is being taken or is proposed to be taken with
respect thereto.
ERISA Reporting Requirements.
Promptly and in any event (i) within 30 days after the
occurrence of any ERISA Event with respect to any Plan of the Borrower or
any member of its Controlled Group, and (ii) within ten days after the
Borrower or any member of its Controlled Group receives a request for a
minimum funding waiver under Section 412 of the Code, a written notice
describing such event and describing what action is being taken or is
proposed to be taken with respect thereto, together with a copy of any
notice of such event that is given to the PBGC;
Promptly and in any event within ten Business Days after
receipt thereof by the Borrower or any member of its Controlled Group from
the PBGC, copies of each notice received by the Borrower or any member of
its Controlled Group of the PBGC's intention to terminate any Plan or to
have a trustee appointed to administer any Plan;
Notification within ten Business Days after the Borrower or
any member of its Controlled Group knows that the Borrower or any such
member of its Controlled Group has filed or intends to file a notice of
intent to terminate any Plan under a distress termination within the
meaning of Section 4041(c) of ERISA and a copy of such notice; and
Negative Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have
been or can be fulfilled):
Indebtedness. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, create, assume, incur or
otherwise become or remain obligated in respect of, or permit to be
outstanding, or suffer to exist any Indebtedness, except:
Indebtedness under the Loan Documents and other Indebtedness to the
Lender;
existing Indebtedness set forth on Schedule 6 hereto;
unsecured Indebtedness under lines of credit in the aggregate
not in excess of $3,000,000 at any one time outstanding, provided that
unsecured Indebtedness under any one line of credit shall not exceed
$1,000,000 at any one time outstanding. (For purposes of calculating the
limitations set forth in this clause (c), to the extent that Indebtedness
of the Borrower or any of its Subsidiaries or Affiliates is guaranteed by
another such party, such guaranty shall be disregarded);
Indebtedness secured by Liens (including Liens on Notes
Receivable and A&D Loans Receivable) on property other than Collateral;
purchase money security interests (including the lien or
retained title of a conditional vendor) covering personal property
hereafter acquired; and
Indebtedness of the Borrower and of any Subsidiaries or
Affiliates of the Borrower to each other.
Liens. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, create, assume, incur, permit
or suffer to exist, directly or indirectly, any Lien on any of its assets,
whether now owned or hereafter acquired, except Permitted Liens.
Investments. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, make any Investment, except
that the Borrower and any such Subsidiary or Affiliate may purchase or
otherwise acquire and own:
Cash and Cash Equivalents;
Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
Investments in existence on the Agreement Date which are described on
Schedule 5 hereto;
----------
Investments which are Acquisitions permitted pursuant to Section 7.6
-----------
hereof;
Investments in the form of Hedge Agreements entered into with the
Lender;
Investments in Subsidiaries or Affiliates of the Borrower;
provided, however, that each such Subsidiary or Affiliate shall have
executed a Subsidiary Guaranty and a Security Agreement;
A&D Loans Receivable;
Investments in the form of loans secured by Notes Receivable;
Investments in, or with respect to, any Person other than the
Borrower or a Subsidiary or Affiliate of the Borrower to the extent that
(a) the aggregate amount of such Investments by the Borrower and the
Subsidiaries and Affiliates of the Borrower does not at any time exceed
ten percent (15%) of the combined total assets of the Borrower and the
Subsidiaries and Affiliates of the Borrower, and (b) immediately prior to
and after giving effect to any such proposed Investment there shall not
exist a Default or Event of Default.
Liquidation, Merger. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, at any time:
liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, except that a Subsidiary or Affiliate
of the Borrower may liquidate or dissolve into the Borrower or another
Subsidiary or Affiliate of the Borrower; or
enter into any merger or consolidation unless (i) with respect
to a merger or consolidation involving the Borrower, the Borrower shall be
the surviving corporation, or if the merger or consolidation involves a
Subsidiary or Affiliate of the Borrower and not the Borrower, such
Subsidiary or Affiliate shall be the surviving corporation, (ii) such
transaction shall not be utilized to circumvent compliance with any term
or provision herein and (iii) no Default or Event of Default shall then be
in existence or occur as a result of such transaction.
Sales of Assets. The Borrower shall not, and shall not permit
any Subsidiary or Affiliate to, sell, lease, transfer or otherwise dispose
of, any of its assets except (a) inventory and Time-Share Interests in the
ordinary course of business, (b) obsolete or worn-out assets, (c) sales of
tangible assets in which the Net Cash Proceeds from the disposition
thereof are reinvested, within 90 days before or after such disposition,
in productive tangible assets of a similar nature, (d) asset sales between
Obligors provided that no assets of any Peppertree Entity in excess of
$50,000 at any one time or $250,000 in the aggregate may be sold to any
other Obligor without the prior written consent of the Lender, (e) Asset
Sales the proceeds of which are applied in accordance with Section 2.5 and
(f) transfers of Notes Receivable or A&D Loans Receivable to third parties
for full and fair consideration, or in order to consummate a
Securitization.
Acquisitions. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, make any Acquisitions
provided, however, that, if immediately prior to and after giving effect
to the proposed Acquisition there shall not exist a Default or Event of
Default, the Borrower or any Subsidiary or Affiliate of the Borrower may
make Acquisitions so long as (a) such Acquisition shall not be opposed by
the board of the directors of the Person being acquired, (b) the assets,
property or business acquired shall be in the business described in
Section 4.1(d) hereof, and (c) if the Person(s) acquired in any single
Acquisition owns or has property with, or if the asset(s), business(es) or
other property acquired in any single Acquisition has, an aggregate fair
market value in excess of $3,000,000, the Borrower shall, not later than
ten Business Days after the date of such Acquisition, deliver to the
Lender a Compliance Certificate setting forth the covenant calculations,
both immediately prior to and after giving effect to such Acquisition.
Equivest Note; GSHA Note. The Borrower shall not make any
prepayments of the Equivest Note, and shall not agree to alter, amend or
modify the terms of the Equivest Note or the GSHA Note as in effect on the
date hereof.
Dividends. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, directly or indirectly
declare, pay or make any Dividends except Dividends payable on preferred
stock and Dividends payable by a Subsidiary to or for the benefit of the
Borrower.
Affiliate Transactions. The Borrower shall not, and shall not
permit any Subsidiary or Affiliate of the Borrower to, at any time engage
in any transaction with an Affiliate other than in the ordinary course of
business and on terms no less advantageous to the Borrower or such
Subsidiary or Affiliate than would be the case if such transaction had
been effected with a non-Affiliate.
Compliance with ERISA. The Borrower shall not, and shall not
permit any Subsidiary or Affiliate to, directly or indirectly, or permit
any member of its Controlled Group to directly or indirectly, (a)
terminate any Plan, which termination would be likely to result in a
Material Adverse Effect, (b) permit to exist any ERISA Event, or any other
event or condition with respect to a Plan which could reasonably be
expected to have a Material Adverse Effect, (c) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan which withdrawal would be to result in any material
liability to the Borrower or any member of its Controlled Group, (d) enter
into any new Plan or modify any existing Plan so as to increase its
obligations thereunder which could reasonably be expected to have a
Material Adverse Effect, or (e) permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, under any Plan (other than a
Multiemployer Plan) of the Borrower or any member of its Controlled Group
that is subject to Title IV of ERISA (using the actuarial assumptions
utilized by each such Plan) to exceed the fair market value of Plan assets
allocable to such benefits by more than $500,000, all determined as of the
most recent valuation date for such Plan.
Interest Coverage Ratio. The Borrower shall not permit the
Interest Coverage Ratio to be less than 2.10:1:00 at the end of each
fiscal quarter through and including March 31, 2000 or 2.25:1.00 at the
end of each fiscal quarter thereafter.
Net Worth. The Borrower shall not permit Net Worth, calculated
at the end of each fiscal quarter, to be less than an amount equal to the
sum of (a) $59,800,000, plus (b) 75% of cumulative Net Income of the
Borrower and its Subsidiaries for the period from but not including, July
1, 1999 through the date of calculation (but excluding from the
calculation of such cumulative Net Income the effect, if any, of the
fiscal quarter of the Borrower or any such Subsidiary for which Net Income
was a negative number), plus (c) 75% of the Net Cash Proceeds received by
the Borrower from but not including July 1, 1999 through the date of
calculation as a result of any offering of Equity or pursuant to any
conversion or exchange of convertible Indebtedness or preferred Capital
Stock into common Capital Stock of the Borrower, plus (d) an amount equal
to 100% of any increase in the Borrower's Net Worth, calculated with
respect to any Person that becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or any Subsidiary of the
Borrower on or after July 1, 1999 or substantially all of the assets of
which are acquired by the Borrower or any Subsidiary of the Borrower on or
after July 1, 1999 (in each case determined as of the date that such
Person becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or a Subsidiary of the Borrower or that
such assets are so acquired).
Reserved.
Total Debt to Total Capital. The Borrower shall not permit
Total Debt to Total Capital to exceed 0.85:1.00 at the end of each fiscal
quarter through and including March 31, 2000 or 0.80:1.00 at the end of
any fiscal quarter thereafter.
Average Quarterly Charge-Off Rate. The Borrower shall not
permit the Average Quarterly Charge-Off Rate to exceed 3.0% at the end of
any calendar quarter based on the most recent four calendar quarters.
Average Quarterly Default Rate. The Borrower shall not permit the
Average Quarterly Default Rate to exceed 4.5% at the end of any calendar quarter.
Average Quarterly Delinquency Rate. The Borrower shall not permit the
Average Quarterly Delinquency Rate to exceed 7.5% at the end of any calendar
quarter.
Sale and Leaseback. The Borrower shall not, and shall not
permit any Subsidiary or Affiliate of the Borrower to, enter into any
arrangement whereby it sells or transfers any of its assets, and
thereafter rents or leases such assets, except to the extent that the fair
market value of the asset(s) covered by all such arrangements entered into
during the any period of four consecutive calendar quarters does not, in
the aggregate, exceed $2,000,000.
Business. Neither the Borrower nor any Subsidiary or Affiliate of the
Borrower shall conduct any business other than the business described in Section
4.1(d) hereof.
Fiscal Year. The Borrower shall not, and shall not permit any
Subsidiary or Affiliate of the Borrower to, change its fiscal year except
to a fiscal year ending December 31.
Amendment of Organizational Documents. The Borrower shall not,
and shall not permit any Subsidiary or Affiliate of the Borrower to, amend
its articles of incorporation or bylaws (or similar organizational or
governance documents) in any manner that could reasonably be expected to
(a) result in a Material Adverse Effect or (b) impair or affect the Rights
of the Lender under any Loan Documents or in respect of any Collateral.
Reserved.
Use of Lender's Name. The Borrower shall not, and shall not
permit any Subsidiary or Affiliate to, use the name of the Lender or any
Affiliate of the Lender in connection with any of their respective
businesses or activities, except in connection with internal business
matters, administration of the Term Loan and as required in dealings with
any Tribunal.
Default
Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether
voluntary, involuntary, or effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
Any representation or warranty made under any Loan Document
shall prove to have been incorrect or misleading in any material respect
when made;
The Borrower shall fail to pay any (i) principal under the
Term Note when due or (ii) interest under the Term Note or any fees
payable hereunder or any other costs, fees, expenses or other amounts
payable hereunder or under any other Loan Document within two Business
Days after the date due;
The Borrower or any Subsidiary or Affiliate of the Borrower
shall default in the performance or observance of any agreement or
covenant contained in Section 2.5(b), Sections 5.1, 5.18 or Article 7;
The Borrower or any Subsidiary or Affiliate of the Borrower
shall default in the performance or observance of any other agreement or
covenant contained in this Agreement not specifically referred to
elsewhere in this Section 8.1, and such default shall not be cured within
a period of fifteen days after the earlier of notice from the Lender
thereof or actual notice thereof by the Borrower or such Subsidiary or
Affiliate;
There shall occur any default or breach in the performance or
observance of any agreement or covenant in any of the Loan Documents
(other than this Agreement) or the Transaction Documents and such default
shall not be cured within a period of thirty days after the earlier of
notice from the Lender thereof or actual notice thereof the related
Obligor;
There shall be commenced an involuntary proceeding or an
involuntary petition shall be filed in a court having competent
jurisdiction seeking (i) relief in respect of the Borrower or any
Subsidiary or Affiliate of the Borrower, or a substantial part of the
property or the assets of the Borrower or Subsidiary or Affiliate of the
Borrower, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal, state or foreign
bankruptcy law or other similar law, (ii) the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar official
of the Borrower or any Subsidiary or Affiliate of the Borrower, or of any
substantial part of their respective properties, or (iii) the winding-up
or liquidation of the affairs of the Borrower or any Subsidiary or
Affiliate of the Borrower, and any such proceeding or petition shall
continue unstayed and in effect for a period of forty-five days;
The Borrower or any Subsidiary or Affiliate of the Borrower
shall (i) file a petition, answer or consent seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other applicable Federal, state or foreign bankruptcy law or other similar
law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking of possession
of a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Borrower or any Subsidiary or Affiliate of
the Borrower or of substantially all of its properties, (iii) file an
answer admitting the material allegations filed against it in any such
proceeding, (iv) make a general assignment for the benefit of creditors,
(v) become unable, admit in writing its ability or fail generally to pay
its debts as they become due, or (vi) the Borrower or any Subsidiary or
Affiliate of the Borrower shall take any corporate action in furtherance
of any of the actions described in this Section 8.1(g);
A final judgment or judgments shall be entered by any court
against the Borrower for the payment of money which exceeds $1,000,000 in
the aggregate for the Borrower and such Subsidiaries and Affiliates of the
Borrower, or a warrant of attachment or execution or similar process shall
be issued or levied against property of the Borrower or any Subsidiary or
Affiliate of the Borrower which, together with all other such property of
the Borrower and its Subsidiaries and Affiliates subject to any such
process, exceeds in value $1,000,000 in the aggregate, and if such
judgment or award is not insured or, within 30 days after the entry, issue
or levy thereof, such judgment, warrant or process shall not have been
paid or discharged or stayed pending appeal, or if, after the expiration
of any such stay, such judgment, warrant or process shall not have been
paid or discharged;
With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person (other than the Lender) shall
engage in transactions that in the aggregate result in a direct or
indirect liability to the Borrower or any member of its Controlled Group
under Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the
Borrower or any member of its Controlled Group shall incur any accumulated
funding deficiency, as defined in Section 412 of the Code, or request a
funding waiver from the Internal Revenue Service for contributions; (iii)
the Borrower or any member of its Controlled Group shall incur any
withdrawal liability as a result of a complete or partial withdrawal
within the meaning of Section 4203 or 4205 of ERISA, or incur any other
liability with respect to a Plan, unless the amount of such liability has
been funded within the Plan or pursuant to one or more insurance
contracts; (iv) a termination of a Multiemployer Plan, as defined in
Section 1.1 hereof but without regard to the five-year limitation set
forth therein, shall occur pursuant to Section 4041A of ERISA; (v) the
Borrower or any member of its Controlled Group shall fail to make a
required contribution by the due date under Section 412 of the Code or
Section 302 of ERISA that results in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA; (vi) the Borrower, any
member of its Controlled Group or any Plan sponsor shall notify the PBGC
of an intent to terminate under Section 4041(c) of ERISA, or the PBGC
shall institute proceedings to terminate, any Plan (other than a
Multiemployer Plan) subject to Title IV of ERISA; (vii) a Reportable Event
shall occur with respect to a Plan (other than a Multiemployer Plan)
subject to Title IV of ERISA, and within 15 days after the reporting of
such Reportable Event to the Lender, the Lender shall have notified the
Borrower in writing that the Lender has made a determination that, such
Reportable Event will likely result in the termination of such Plan by the
PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Plan and as a result thereof an
Event of Default shall have occurred hereunder; (viii) a trustee shall be
appointed by a court of competent jurisdiction to administer any Plan
(other than a Multiemployer Plan) or the assets thereof, or (ix) any ERISA
Event with respect to a Plan (other than a Multiemployer Plan) subject to
Title IV of ERISA shall have occurred, and 30 days thereafter (A) such
ERISA Event, other than such event described in clause (f) of the
definition of ERISA Event herein, (if correctable) shall not have been
corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then
current value of assets accumulated in such Plan; provided, however, that
the events listed in subsections (i) - (ix) above shall constitute Events
of Default only if the maximum aggregate liability which the Borrower or
any member of its Controlled Group would incur is likely to result in a
Material Adverse Effect.
The Borrower or any Subsidiary or Affiliate of the Borrower
shall (i) default in the payment of any Indebtedness or any lease
obligations in an aggregate amount of $500,000 or more beyond any grace
period provided with respect thereto, or (ii) any other event or condition
shall exist under any agreement or instrument under which any such
Indebtedness or lease obligation is created or evidenced beyond any
applicable grace period, if the effect of such event or condition is to
permit or cause the holder of such Indebtedness or lease obligation (or a
trustee on behalf of any such holder) to (x) cause any such Indebtedness
or lease obligation to be prepaid or to become due prior to its date of
maturity or (y) require the Borrower or any Subsidiary or Affiliate of the
Borrower to purchase, prepay or redeem any such Indebtedness or lease
obligation;
Reserved.
Reserved.
Any provision of any Loan Document shall for any reason cease
to be valid and binding on or enforceable against any party to it (other
than the Lender) other than in accordance with its terms, or any such
party (other than the Lender) shall so assert in writing;
Any Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and perfected first
priority Lien in any Collateral subject thereto; or
A Change of Control shall occur; or
A material adverse change occurs, or is reasonably likely to
occur, in Borrower's or any Obligor's business condition (financial or
otherwise), operations, properties or prospects, or ability to repay the
Term Loan as a result of the "year 2000 problem," (defined as the
inability of computers, as well as embedded microchips in non-computing
devices to properly perform date-sensitive functions with respect to
certain dates prior to and after December 31, 1999), including risks
resulting from the failure of key customers and suppliers of Borrower or
any Obligors to address successfully the year 2000 problem.
Remedies. If an Event of Default shall have occurred and shall be
continuing:
With the exception of an Event of Default specified in Section
8.1(f) or (g) hereof, the Lender may terminate the Commitment and/or
declare the principal of and interest on the Term Note and all Obligations
and other amounts owed under the Loan Documents to be forthwith due and
payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything in the Loan Documents to the
contrary notwithstanding.
Upon the occurrence of an Event of Default specified in
Section 8.1(f) or (g) hereof, the principal of and interest on the Term
Note and all Obligations and other amounts owed under the Loan Documents
shall thereupon and concurrently therewith become due and payable and the
Commitment shall forthwith terminate, all without any action by the Lender
and without presentment, demand, protest or other notice of any kind, all
of which are expressly waived, anything in the Loan Documents to the
contrary notwithstanding.
The Lender may exercise all of the Rights granted to it under
the Loan Documents or under Applicable Law.
The Rights of the Lender hereunder shall be cumulative, and
not exclusive.
Changes in Circumstances
Inability to Determine LIBOR Basis. If the Lender determines
that for any reason adequate and reasonable means do not exist for
determining LIBOR for any requested Interest Period for any LIBOR Advance,
or that LIBOR for any requested Interest Period for any LIBOR Advance does
not adequately and fairly reflect the cost to the Lender of funding such
LIBOR Advance, the Lender will promptly so notify the Borrower.
Thereafter, the obligation of the Lender to make or maintain the LIBOR
Advances hereunder shall be suspended until the Lender revokes such notice
in writing. Upon receipt of such notice, the Borrower may revoke any
Borrowing Request/Designation then submitted by it. If the Borrower does
not revoke such Borrowing Request/Designation, the Lender shall make,
convert or continue the Term Loan or any portion thereof, as proposed by
the Borrower in the amount specified in the applicable notice submitted by
the Borrower, but such Term Loan or any portion thereof shall be made,
converted or continued as a Reference Rate Advance instead of a LIBOR
Advance.
Illegality. If any change in applicable law, rule or
regulation, or adoption thereof, or any change in any interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by the Lender (or its LIBOR Lending Office) with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency, shall make it unlawful
or impossible for Lender (or its LIBOR Lending Office) to make, maintain
or fund its LIBOR Advances, the Lender shall so notify the Borrower. Upon
receipt of such notice, notwithstanding anything contained in Article 2
hereof, the Borrower shall convert each outstanding LIBOR Advance to a
Reference Rate Advance, on either (a) the last day of the Interest Period
applicable to such LIBOR Advance, if the Lender may lawfully continue to
maintain and fund such LIBOR Advance to such day, or (b) immediately, if
the Lender may not lawfully continue to fund and maintain such LIBOR
Advance to such day or if the Borrower so elects.
Increased Costs.
If after the Agreement Date any change in or adoption of any
law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof or compliance by the Lender (or its LIBOR Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or compatible agency:
shall subject the Lender (or its LIBOR Lending Office) to any
Tax (net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the
basis of taxation of payments to the Lender (or to its LIBOR Lending
Office) of the principal of or interest on its LIBOR Advances or in
respect of any other amounts due under this Agreement, as the case may be,
or its obligation to make such Advances (except for changes in the rate of
tax on the overall net income, net worth or capital of the Lender and
franchise taxes, doing business taxes or minimum taxes imposed upon the
Lender); or
shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, the Lender's LIBOR Lending Office or shall impose on the Lender (or
its LIBOR Lending Office) or on the London interbank market any other
condition affecting its LIBOR Advances or its obligation to make such
Advances (but excluding any reserves or deposits that are included in the
calculation of LIBOR Basis);
and the result of any of the foregoing is to increase the cost to
the Lender (or its LIBOR Lending Office) of making or maintaining any
LIBOR Advances, or to reduce the amount of any sum received or receivable
by the Lender (or its LIBOR Lending Office) with respect thereto, by an
amount deemed by the Lender to be material, then, within five Business
Days after demand by the Lender, the Borrower agrees to pay to the Lender
such additional amount as will compensate the Lender for such increased
costs or reduced amounts, subject to Section 10.9 hereof.
A certificate of the Lender claiming compensation under this
Section and setting forth the additional amounts to be paid to it
hereunder shall be conclusive absent manifest or demonstrable error. In
determining such amount, the Lender may use any reasonable averaging and
attribution methods.
Effect On Reference Rate Advances. If notice has been given
pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of
the Lender to make LIBOR Advances, or requiring LIBOR Advances of the
Lender to be repaid or prepaid, then, unless and until the Lender notifies
the Borrower that the circumstances giving rise to such repayment no
longer apply all drawings under the Term Loan or continuations or
conversions which would otherwise be made by the Lender as LIBOR Advances
shall be made instead as Reference Rate Advances.
Capital Adequacy. If after the Agreement Date, (a) the
introduction of or any change in or in the interpretation of any law, rule
or regulation or (b) compliance by the Lender with any law, rule or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) adopted or
promulgated after the Agreement Date affects or would affect the amount of
capital required or expected to be maintained by the Lender or any
corporation controlling the Lender, and the Lender determines that the
amount of such capital is increased by or based upon the existence of the
Lender's Commitment or the Term Loan hereunder and other commitments or
advances of the Lender of this type, then, within five Business Days after
demand by the Lender, subject to Section 10.9, the Borrower shall
immediately pay to the Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender with
respect to such circumstances. A certificate as to any additional amounts
payable to the Lender under this Section 9.5 submitted to the Borrower by
such Lender shall be conclusive absent manifest or demonstrable error. In
determining such amount, the Lender or a corporation controlling the
Lender may use any reasonable averaging and attribution methods.
Miscellaneous
Notices.
All notices and other communications under this Agreement
shall be in writing (except in those cases where giving notice by
telephone is expressly permitted) and shall be deemed to have been given
on the date personally delivered or sent by telecopy (answerback received)
or by facsimile transmission, or three days after deposit in the mail,
designated as certified mail, return receipt requested, postage-prepaid,
or one day after being entrusted to a reputable commercial overnight
delivery service, addressed to the party to which such notice is directed
at its address determined as provided in this Section. All notices and
other communications under this Agreement shall be given to the parties
hereto at the respective address(es) set forth in Schedule 1 attached
hereto.
Any party hereto may change the address to which notices shall
be directed by giving ten days' written notice of such change to the other
parties.
Expenses. The Borrower shall promptly pay:
all reasonable out-of-pocket expenses of the Lender in
connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents, the transactions contemplated
hereunder and thereunder, and the making of Advances hereunder, including
without limitation the reasonable fees and disbursements of Special
Counsel;
all reasonable out-of-pocket expenses and reasonable
attorneys' fees of the Lender in connection with the administration of the
transactions contemplated in this Agreement and the other Loan Documents
and the preparation, negotiation, execution and delivery of any waiver,
amendment or consent by the Lender relating to this Agreement or the other
Loan Documents; and
all reasonable costs, out-of-pocket expenses and reasonable
attorneys' fees of the Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in
obtaining performance under the Loan Documents, which in each case shall
include without limitation fees and expenses of consultants and counsel
for the Lender, and administrative fees of the Lender.
Waivers. The rights and remedies of the Lender under this
Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which they would otherwise have. No
failure or delay by the Lender in exercising any right shall operate as a
waiver of such right. The Lender expressly reserves the right to require
strict compliance with the terms of this Agreement in connection with any
funding of the Term Loan or any continuation or conversion of any LIBOR
Advance. In the event that the Lender decides to fund the Term Loan or any
continuation or conversion of any LIBOR Advance at a time when the
Borrower is not in strict compliance with the terms of this Agreement,
such decision by the Lender shall not be deemed to constitute an
undertaking by the Lender to fund any further funding of the Term Loan or
any continuation or conversion of any LIBOR Advance or preclude the Lender
from exercising any rights available under the Loan Documents or at law or
equity. Any waiver or indulgence granted by the Lender shall not
constitute a modification of this Agreement, except to the extent
expressly provided in such waiver or indulgence, or constitute a course of
dealing by the Lender at variance with the terms of the Agreement such as
to require further notice by the Lender of the Lender's intent to require
strict adherence to the terms of the Agreement in the future. Any such
actions shall not in any way affect the ability of the Lender in its
discretion, to exercise any rights available to it under this Agreement or
under any other agreement, whether or not the Lender is a party thereto,
relating to the Borrower.
Calculation by the Lender Conclusive and Binding. Any
mathematical calculation required or expressly permitted to be made by the
Lender under this Agreement shall be made in its reasonable judgment and
in good faith, and shall be controlling, absent manifest error.
Set-Off. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon
the occurrence and during the continuation of an Event of Default, the
Lender and any subsequent holder or assignee of the Term Note is hereby
authorized by the Borrower at any time or from time to time, without
notice to the Borrower or any other Person, any such notice being hereby
expressly waived, to set-off, appropriate and apply any deposits (general
or special, (except trust and escrow accounts), time or demand, including
without limitation Indebtedness evidenced by certificates of deposit, in
each case whether matured or unmatured) and any other Indebtedness at any
time held or owing by the Lender or holder to or for the credit or the
account of the Borrower, against and on account of the Obligations and
other liabilities of the Borrower to the Lender or holder, irrespective of
whether or not (a) the Lender or holder shall have made any demand
hereunder, or (b) the Lender or holder shall have declared the principal
of and interest on the Term Note and other amounts due hereunder to be due
and payable as permitted by Section 8.2. Any sums obtained by the Lender
or by any assignee or subsequent holder of the Term Note shall be subject
to pro rata treatment of all Obligations and other liabilities hereunder.
Assignment. The Borrower may not assign or transfer any of its
rights or obligations hereunder or under the Loan Documents without the
prior written consent of the Lender. The Lender shall be entitled to
assign or grant a participation in its interest in this Agreement, the
Term Note and the other Loan Documents without the consent of the
Borrower.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
Severability. Any provision of this Agreement which is for any
reason prohibited or found or held invalid or unenforceable by any court
or governmental agency shall be ineffective to the extent of such
prohibition or invalidity or unenforceability without invalidating the
remaining provisions hereof in such jurisdiction or affecting the validity
or enforceability of such provision in any other jurisdiction.
Interest and Charges. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in
any Loan Documents, the Lender shall not be entitled to receive, collect
or apply, as interest on the Obligations, any amount in excess of the
Highest Lawful Amount. If the Lender ever receives, collects or applies,
as interest, any such excess, such amount which would excessive interest
shall be deemed a partial repayment of principal and treated hereunder as
such; and if principal is paid in full, any remaining excess shall be paid
to the Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful
Amount, the Borrower and the Lender shall, to the maximum extent permitted
under Applicable Law, (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) amortize, prorate, allocate
and spread in equal parts, the total amount of interest throughout the
entire contemplated term of the Obligations so that the interest rate is
uniform throughout the entire term of the Obligations; provided, however,
that if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and the interest received for the
actual period of existence thereof exceeds the Highest Lawful Amount, the
Lender shall refund to the Borrower the amount of such excess or credit
the amount of such excess against the total principal amount of the
Obligations owing, and, in such event, the Lender shall not be subject to
any penalties provided by any laws for contracting for, charging or
receiving interest in excess of the Highest Lawful Amount or the Highest
Lawful Rate. This Section shall control every other provision of all
agreements pertaining to the transactions contemplated by or contained in
the Loan Documents.
Headings. Headings used in this Agreement are for convenience only and
shall not be used in connection with the interpretation of any provision hereof.
Amendment and Waiver. The provisions of this Agreement may not
be amended, modified or waived except by the written agreement of the
Borrower and the Lender. Neither this Agreement nor any term hereof may be
amended orally, nor may any provision hereof be waived orally but only by
an instrument in writing signed by the Lender and, in the case of an
amendment, by the Borrower.
Exception to Covenants. Neither the Borrower nor any
Subsidiary or Affiliate of the Borrower shall be deemed to be permitted to
take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action
or omission would result in the breach of any other covenant contained
herein.
[Reserved].
[Reserved].
GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS)
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER, NEWCO I, NEWCO II
AND THE LENDER EACH AGREES THAT THE STATE AND FEDERAL COURTS LOCATED IN
NEW YORK, NEW YORK, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND HEREBY SUBMITS WITH
RESPECT TO ITSELF AND ITS PROPERTY TO THE JURISDICTION OF ANY SUCH COURT
FOR THE PURPOSE OF ANY SUIT, ACTION, PROCEEDING OR JUDGMENT RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
WAIVER OF JURY TRIAL. EACH OF THE BORROWER, NEWCO I, NEWCO II
AND THE LENDER HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLE AND INTENTIONALLY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS
A MATERIAL INDUCEMENT TO THE LENDER ENTERING INTO THIS AGREEMENT AND
MAKING THE TERM LOAN HEREUNDER.
ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENTS BETWEEN THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date
first set forth above.
BORROWER: EQUIVEST FINANCE, INC.
By:
Name:
Title:
NEWCO I: PEPPERTREE ACQUISITION CORP.
By:
Name:
Title:
NEWCO II: PEPPERTREE ACQUISITION II CORP.
By:
Name:
Title:
LENDER: BANK OF AMERICA, N.A.
By:
Robert N. Allen
Vice President
<PAGE>
Exhibit 10.23
SCHEDULE 1
LIBOR LENDING OFFICES, ADDRESSES FOR NOTICES
(i) BORROWER:
Equivest Finance, Inc.
2 Clinton Square
Syracuse, NY 13202
Attention: Gerald L. Klaben, Jr.
(ii) BANK OF AMERICA, N.A., as a Lender:
Credit Notices and Communications:
Bank of America, N.A.
555 South Flower Street, 6th floor
Los Angeles, CA 90071-2385
Attention: Robert N. Allen
LIBOR Lending Office:
Bank of America, N.A.
5 Park Plaza, Suite 500
Irvine, CA 92614-8525
Attention: Phyllis Sakamoto
Administrative, Operational, Funding, Conversion and Other Notices and
Communications
Bank of America N.A.
5 Park Plaza, Suite 500
Irvine, CA 92614-8525
Attention: Phyllis Sakamoto
<PAGE>
SCHEDULE 2
REQUIRED CONSENTS
<PAGE>
SCHEDULE 3
EXISTING LITIGATION
AND MATERIAL LIABILITIES
<PAGE>
SCHEDULE 4
SUBSIDIARIES AND AFFILIATES
State of
Incorporation Percentage
Name or Organization of Ownership Owner
<PAGE>
SCHEDULE 5
EXISTING INVESTMENTS
<PAGE>
SCHEDULE 6
EXISTING INDEBTEDNESS
Secured and Unsecured
Amount of Debt Collateral Lender Maturity Date
<PAGE>
SCHEDULE 7
AUTHORIZATION, QUALIFICATION AND GOOD STANDING
<PAGE>
SCHEDULE 8
ENVIRONMENTAL MATTERS
<PAGE>
SCHEDULE 9
LABOR RELATIONS
<PAGE>
SCHEDULE 10
GUARANTORS
Peppertree Resorts, Ltd.
Peppertree Acquisition II Corp.
Peppertree Resorts Vacation Club
Peppertree Resort Villas, Inc.
Peppertree Resorts Management, Inc.
Peppertree Realty Inc.
Resort Funding, Inc.
Eastern Resorts Corporation
Long Wharf Marina Restaurant, Inc.
Bluebeard's Castle, Inc.
Castle Acquisition, Inc.
Avenue Plaza LLC
Ocean City Coconut Malorie Resort, Inc.
St. Augustine Resort Development Group, Inc.
EFI D.C. Acquisition, Inc.
EFI St. Thomas Acquisition, Inc.
EFI Louisiana Acquisition, Inc.
EFI Maryland Acquisition, Inc.
EFI Florida Acquisition, Inc.
<PAGE>
SCHEDULE 11
ASSUMED INDEBTEDNESS
<PAGE>
SCHEDULE 12
MATERIAL CONTRACTS
<PAGE>
SCHEDULE 13
INSURANCE
<PAGE>
SCHEDULE 14
LICENSES, PERMITS, ETC.
<PAGE>
SCHEDULE 15
INDEBTEDNESS TO OFFICERS, ETC.
<PAGE>
SCHEDULE 16
REAL PROPERTY
<PAGE>
SCHEDULE 17
OPERATING CONDITION; ETC.
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.24
Execution Copy
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT dated as of November 17, 1999, among EQUIVEST
FINANCE, INC., a Delaware corporation (the "Borrower"), each Subsidiary of
the Borrower listed on Schedule I hereto (each such subsidiary
individually a "Subsidiary Guarantor" and collectively, the "Subsidiary
Guarantors"; the Subsidiary Guarantors and the Borrower are referred to
collectively herein as the "Grantors") and BANK OF AMERICA, N.A. (the
"Lender").
Reference is made to the Credit Agreement dated as of November 17,
1999 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among the Borrower, Peppertree Acquisition Corp.,
a Delaware corporation, Peppertree Acquisition II Corp., a Delaware
corporation, and the Lender.
The Lender has agreed to make a Term Loan to the Borrower pursuant
to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Subsidiary Guarantors has agreed to
guarantee, among other things, all the obligations of the Borrower under
the Credit Agreement. The obligations of the Lender to make the Term Loan
is conditioned upon, among other things, the execution and delivery by the
Grantors of an agreement in the form hereof to secure the due and punctual
payment and performance of the Obligations.
Accordingly, the Grantors and the Lender hereby agree as follows:
Definitions Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein
shall have the meanings set forth in the Credit Agreement and all
references to the Uniform Commercial Code shall mean the Uniform
Commercial Code in effect in the State of New York on the date hereof.
Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become
obligated to any Grantor under, with respect to or on account of an
Account.
"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any
such right evidenced by chattel paper, whether due or to become due,
whether or not it has been earned by performance, and whether now or
hereafter acquired or arising in the future, including accounts receivable
from Affiliates of the Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title
and interest in any returned goods, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to
stoppage in transit, replevin, reclamation and resales, and all related
security interests, liens and pledges, whether voluntary or involuntary,
in each case whether now existing or owned or hereafter arising or
acquired.
"Chattel Paper" shall mean (a) a writing or writings which evidence
both a monetary obligation and a security interest in or a lease of
specific Equipment and (b) all other property now or hereafter
constituting "chattel paper" under the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other jurisdictions,
in each case that are now or hereafter owned by any Grantor.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents,
(c) Chattel Paper, (d) Equipment, (e) General Intangibles, (f) cash and
cash accounts, (g) Investment Property, (h) Proceeds, and (i) Intellectual
Property; provided, however, that any property which is subject to a (x)
Permitted Lien or (y) a Lien as of the date of this Agreement (including
by virtue of an after-acquired property clause in a security agreement in
existence on the date hereof) shall not be deemed to be Collateral
hereunder, it being the intention of the parties that the Collateral
include only property which is unencumbered by Liens as of the date
hereof; provided, further, that Notes Receivable, A&D Loans Receivable and
loans secured by Notes Receivable shall not be deemed to be Collateral
hereunder.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an
option on a commodity futures contract, a commodity option or any other
contract that, in each case, is (a) traded on or subject to the rules of a
board of trade that has been designated as a contract market for such a
contract pursuant to the federal commodities laws or (b) traded on a
foreign commodity board of trade, exchange or market, and is carried on
the books of a Commodity Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a person who is registered
as a futures commission merchant under the federal commodities laws or (b)
a person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a
contract market pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any
Copyright now or hereafter owned by any Grantor or which such Grantor
otherwise has the right to license, or granting any right to such Grantor
under any copyright now or hereafter owned by any third party, and all
rights of such Grantor under any such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to
the copyright laws of the United States or any other country, whether as
author, assignee, transferee or otherwise, and (b) all registrations and
applications for registration of any such copyright in the United States
or any other country, including registrations, recordings, supplemental
registrations and pending applications for registration in the United
States Copyright Office, including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in
the preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger
sheets and documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a person identified in the records
of a Securities Intermediary as the person having a Security Entitlement
against the Securities Intermediary. If a person acquires a Security
Entitlement by virtue of Section 8-501(b)(2) or (3) of the Uniform
Commercial Code, such person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and
all tangible personal property similar to any of the foregoing, including
tools, parts and supplies of every kind and description, and all
improvements, accessions or appurtenances thereto, that are now or
hereafter owned by any Grantor.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
person or a share, participation or other interest in a person or in
property or an enterprise of a person, which is, or is of a type, dealt
with in or traded on financial markets, or which is recognized in any area
in which it is issued or dealt in as a medium for investment or (c) any
property that is held by a Securities Intermediary for another person in a
Securities Account if the Securities Intermediary has expressly agreed
with the other person that the property is to be treated as a Financial
Asset under Article 8 of the Uniform Commercial Code. As the context
requires, the term Financial Asset shall mean either the interest itself
or the means by which a person's claim to it is evidenced, including a
certificated or uncertificated Security, a certificate representing a
Security or a Security Entitlement.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any
Grantor of every kind and nature (other than Accounts Receivable) now
owned or hereafter acquired by any Grantor, including all rights and
interests in partnerships, limited partnerships, limited liability
companies and other unincorporated entities, corporate or other business
records, indemnification claims, contract rights (including rights under
leases, whether entered into as lessor or lessee, Hedge Agreements, all of
the rights of any Grantor under the Transaction Documents and other
agreements), Intellectual Property, goodwill, registrations, franchises,
tax refund claims and any letter of credit, guarantee, claim, security
interest or other security held by or granted to any Grantor to secure
payment by an Account Debtor of any of the Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents,
Copyrights, Licenses, Trademarks, trade secrets, confidential or
proprietary technical and business information, know-how, show-how or
other data or information, software and databases and all embodiments or
fixations thereof and related documentation, registrations and franchises,
and all additions, improvements and accessions to, and books and records
describing or used in connection with, any of the foregoing.
"Investment Property" shall mean all Securities (other than
Securities representing the Capital Stock of the Borrower or any of its
Affiliates or Subsidiaries) (whether certificated or uncertificated),
Security Entitlements, Securities Accounts, Commodity Contracts and
Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"License" shall mean any Patent License, Trademark License,
Copyright License or other license or sublicense to which any Grantor is a
party, including those listed on Schedule III (other than those (i)
license agreements in existence on the date hereof which are subject to a
prior lien of a creditor listed on Schedule III and (ii) those license
agreements entered into after the date hereof, which, in either case, by
their terms prohibit assignment or a grant of a security interest by such
Grantor as licensee thereunder).
"Patent License" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to make, use or sell any
invention on which a Patent, now or hereafter owned by any Grantor or
which any Grantor otherwise has the right to license, is in existence, or
granting to any Grantor any right to make, use or sell any invention on
which a patent, now or hereafter owned by any third party, is in
existence, and all rights of any Grantor under any such agreement.
"Patents" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and pending applications in the United
States Patent and Trademark Office or any similar offices in any other
country, including those listed on Schedule IV, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the
right to make, use and/or sell the inventions disclosed or claimed
therein.
"Perfection Certificate" shall mean a certificate substantially in
the form of Annex 1 hereto, completed and supplemented with the schedules
and attachments contemplated thereby, and duly executed by a Authorized
Signatory and the chief legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of the
possession of any Collateral and any payment received from any insurer or
other person or entity as a result of the destruction, loss, theft, damage
or other involuntary conversion of whatever nature of any asset or
property which constitutes Collateral, and shall include , (a) any claim
of any Grantor against any third party for (and the right to sue and
recover for and the rights to damages or profits due or accrued arising
out of or in connection with) (i) past, present or future infringement of
any Patent now or hereafter owned by any Grantor, or licensed under a
Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized
by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or
licensed under a Copyright License and (b) any and all other amounts from
time to time paid or payable under or in connection with any of the
Collateral.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an
enterprise of an issuer which (a) are represented by a certificate
representing a security in bearer or registered form, or the transfer of
which may be registered upon books maintained for that purpose by or on
behalf of the issuer, (b) are one of a class or series or by its terms is
divisible into a class or series of shares, participations, interests or
obligations and (c) (i) are, or are of a type, dealt with or traded on
securities exchanges or securities markets or (ii) are a medium for
investment and by their terms expressly provide that they are a security
governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial
Asset is or may be credited in accordance with an agreement under which
the person maintaining the account undertakes to treat the person for whom
the account is maintained as entitled to exercise rights that comprise the
Financial Asset.
"Securities Intermediary" shall mean (a) a clearing corporation or
(b) a person, including a bank or broker, that in the ordinary course of
its business maintains Securities Accounts for others and is acting in
that capacity.
"Security Entitlements" shall mean the rights and property interests
of an Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any
Trademark now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, or granting to any Grantor any right
to use any trademark now or hereafter owned by any third party, and all
rights of any Grantor under any such agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names,
trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith,
including registrations and registration applications in the United States
Patent and Trademark Office, any State of the United States or any similar
offices in any other country or any political subdivision thereof, and all
extensions or renewals thereof, including those listed on Schedule V, (b)
all goodwill associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such
goodwill.
Rules of Interpretation. The rules of interpretation specified in
Section 1.03 of the Credit Agreement shall be applicable to this Agreement.
Security Interest
Security Interest. As security for the payment or performance,
as the case may be, in full of the Obligations, and any extensions,
renewals, modifications or refinancings of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Lender, its successors and assigns, and
hereby grants to the Lender, its successors and assigns, a security
interest in, all of such Grantor's right, title and interest in, to and
under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Lender is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, filings
with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any
other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest
granted by each Grantor, without the signature of any Grantor, and naming
any Grantor or the Grantors as debtors and the Lender as secured party.
No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Lender to, or in any way alter
or modify, any obligation or liability of any Grantor with respect to or
arising out of the Collateral.
Representations and Warranties
The Grantors jointly and severally represent and warrant to the
Lender and the Secured Parties that:
Title and Authority. Each Grantor has good and valid rights in
and title to the Collateral, subject only to Liens expressly permitted
pursuant to the Credit Agreement, with respect to which it has purported
to grant a Security Interest hereunder and has full power and authority to
grant to the Lender the Security Interest in such Collateral pursuant
hereto and to execute, deliver and perform its obligations in accordance
with the terms of this Agreement, without the consent or approval of any
other person other than any consent or approval which has been obtained.
Filings. a) The Perfection Certificate has been duly prepared,
completed and executed and the information set forth therein is correct
and complete as of the date hereof. Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description
of the Collateral have been delivered to the Lender for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and
registrations (other than filings required to be made in the United States
Patent and Trademark Office and the United States Copyright Office in
order to perfect the Security Interest in Collateral consisting of United
States Patents, Trademarks and Copyrights) that are necessary to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Lender in respect of all
Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further
or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided
under applicable law with respect to the filing of continuation statements
or with respect to the filing of amendments or new filings to reflect the
change of any Grantor's name, location, identity or corporate structure.
Each Grantor shall ensure that fully executed security
agreements in the form hereof and containing a description of all
Collateral consisting of Intellectual Property shall have been received
and recorded within one month after the execution of this Agreement with
respect to United States Patents and United States registered Trademarks
(and Trademarks for which United States registration applications are
pending) and United Sates registered Copyrights by the United States
Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and
the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to
protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Lender in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security
interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories
and possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to
perfect the Security Interest with respect to any Collateral consisting of
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to
the filings described in Section 3.02 above, a perfected security interest
in all Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in
the United States (or any political subdivision thereof) and its
territories and possessions pursuant to the Uniform Commercial Code or
other applicable law in such jurisdictions and (c) a security interest
that shall be perfected in all Collateral in which a security interest may
be perfected upon the receipt and recording of this Agreement with the
United States Patent and Trademark Office and the United States Copyright
Office, as applicable, within the one month period (commencing as of the
date hereof) pursuant to 35 U.S.C. ss. 261 or 15 U.S.C. ss. 1060 or 17
U.S.C. ss. 205 and otherwise as may be required pursuant to the laws of
any other necessary jurisdiction. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Permitted
Liens.
Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to the Credit Agreement. The Grantor has not filed or consented
to the filing of (a) any financing statement or analogous document under
the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral
or any security agreement or similar instrument covering any Collateral
with the United States Patent and Trademark Office or the United States
Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement
or similar instrument is still in effect, except, in each case, for Liens
expressly permitted pursuant to the Credit Agreement.
Covenants
Change of Name; Location of Collateral; Records; Place of
Business. b) Each Grantor agrees promptly to notify the Lender in writing
of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its
principal place of business, any office in which it maintains books or
records relating to Collateral owned by it or any office or facility at
which Collateral owned by it is located (including the establishment of
any such new office or facility), (iii) in its identity or corporate
structure or (iv) in its Federal Taxpayer Identification Number. Each
Grantor agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Lender to
continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral. Each
Grantor agrees promptly to notify the Lender if any material portion of
the Collateral owned or held by such Grantor is damaged or destroyed.
Each Grantor agrees to maintain, at its own cost and expense,
such complete and accurate records with respect to the Collateral owned by
it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged, but in any event to
include complete accounting records indicating all payments and proceeds
received with respect to any part of the Collateral, and, at such time or
times as the Lender may reasonably request, promptly to prepare and
deliver to the Lender a duly certified schedule or schedules in form and
detail reasonably satisfactory to the Lender showing the identity, amount
and location of any and all Collateral.
Periodic Certification. Each year, at the time of delivery of
annual financial statements with respect to the preceding fiscal year
pursuant to the Credit Agreement, the Borrower shall deliver to the Lender
a certificate executed by a Authorized Signatory and the chief legal
officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that
there has been no change in such information since the date of such
certificate or the date of the most recent certificate delivered pursuant
to Section 4.02 and (b) certifying that all Uniform Commercial Code
financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations, including all refilings,
rerecordings and reregistrations, containing a description of the
Collateral have been filed of record in each governmental, municipal or
other appropriate office in each jurisdiction identified pursuant to
clause (a) above to the extent necessary to protect and perfect the
Security Interest for a period through the Maturity Date (except as noted
therein with respect to any continuation statements to be filed within
such period). Each certificate delivered pursuant to this Section 4.02
shall identify in the format of Schedule II, III, IV or V, as applicable,
all Intellectual Property of any Grantor in existence on the date thereof
and not then listed on such Schedules or previously so identified to the
Lender.
Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Lender in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to the Credit Agreement.
Further Assurances. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Lender
may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting
of the Security Interest and the filing of any financing statements
(including fixture filings) or other documents in connection herewith or
therewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and
delivered to the Lender, duly endorsed in a manner satisfactory to the
Lender.
Without limiting the generality of the foregoing, each Grantor
hereby authorizes the Lender, with prompt notice thereof to the Grantors,
to supplement this Agreement by supplementing Schedule II, III, IV or V
hereto or adding additional schedules hereto to specifically identify any
asset or item that may constitute Copyrights, Licenses, Patents or
Trademarks; provided, however, that any Grantor shall have the right,
exercisable within 10 days after it has been notified by the Lender of the
specific identification of such Collateral, to advise the Lender in
writing of any inaccuracy of the representations and warranties made by
such Grantor hereunder with respect to such Collateral. Each Grantor
agrees that it will use its best efforts to take such action as shall be
necessary in order that all representations and warranties hereunder shall
be true and correct with respect to such Collateral within 30 days after
the date it has been notified by the Lender of the specific identification
of such Collateral.
Inspection and Verification. The Lender and such persons as
the Lender may reasonably designate shall at reasonable intervals during
normal business hours and upon reasonable prior notice have the right, at
the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantors' affairs with the officers of the Grantors and their independent
accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other
matter relating to, the Collateral, including, in the case of Accounts or
Collateral in the possession of any third person, by contacting Account
Debtors or the third person possessing such Collateral for the purpose of
making such a verification.
Taxes; Encumbrances. At its option, upon prior written notice
to the applicable Grantor, the Lender may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other
encumbrances at any time levied or placed on the Collateral and not
permitted pursuant to the Credit Agreement, and may pay for the
maintenance and preservation of the Collateral to the extent any Grantor
fails to do so as required by the Credit Agreement or this Agreement, and
each Grantor jointly and severally agrees to reimburse the Lender on
demand for any payment made or any expense incurred by the Lender pursuant
to the foregoing authorization; provided, however, that nothing in this
Section 4.06 shall be interpreted as excusing any Grantor from the
performance of, or imposing any obligation on the Lender to cure or
perform, any covenants or other promises of any Grantor with respect to
taxes, assessments, charges, fees, liens, security interests or other
encumbrances and maintenance as set forth herein or in the other Loan
Documents.
Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any
other person to secure payment and performance of an Account, such
interest shall become part of the Collateral without further action by any
party. Such assignment need not be filed of public record unless necessary
to continue the perfected status of the security interest against
creditors of and transferees from the Account Debtor or other person
granting the security interest.
Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to
be observed and performed by it under each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms
and conditions thereof, and each Grantor jointly and severally agrees to
indemnify and hold harmless the Lender from and against any and all
liability for Grantor's performance.
Use and Disposition of Collateral. None of the Grantors shall
make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral,
except as expressly permitted by the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Collateral
and each Grantor shall remain at all times in possession (which possession
shall include in the case of Investment Property, possession through one
or more Securities Intermediaries) of the Collateral owned by it, except
that unless and until the Lender shall notify the Grantors that an Event
of Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease, assign,
transfer or otherwise dispose of any Collateral (which notice may be given
by telephone if promptly confirmed in writing), the Grantors may use and
dispose of the Collateral in the ordinary course of business in or in any
lawful manner not inconsistent with the provisions of this Agreement, the
Credit Agreement or any other Loan Document.
Limitation on Modification of Accounts. None of the Grantors
will, without the Lender's prior written consent, grant any extension of
the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof or
allow any credit or discount whatsoever thereon, other than extensions,
credits, discounts, compromises or settlements granted or made in the
ordinary course of business and consistent with its current practices and
in accordance with such prudent and standard practices used in industries
that are the same as or similar to those in which such Grantor is engaged.
Insurance. The Grantors, at their own expense, shall maintain
or cause to be maintained insurance covering physical loss or damage to
the Equipment in accordance with the Credit Agreement. Each Grantor
irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender) as such Grantor's true and
lawful agent (and attorney-in-fact) for the purpose, during the
continuance of an Event of Default, of making, settling and adjusting
claims in respect of Collateral under policies of insurance, endorsing the
name of such Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that any
Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or
part relating thereto, the Lender may, following written notice to the
Grantors, without waiving or releasing any obligation or liability of the
Grantors hereunder or any Event of Default, in its sole discretion, obtain
and maintain such policies of insurance and pay such premium and take any
other actions with respect thereto as the Lender deems advisable. All sums
disbursed by the Lender in connection with this Section 4.11, including
reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, upon demand, by the Grantors to the
Lender and shall be additional Obligations secured hereby.
Covenants Regarding Patent, Trademark and Copyright
Collateral. c) Each Grantor agrees that it will not, nor will it permit
any of its licensees to, do any act, or omit to do any act, whereby any
Patent which is material to the conduct of such Grantor's business may
become invalidated or dedicated to the public, and agrees that it shall
continue to mark any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum
rights under applicable patent laws.
Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the
quality of products and services offered under such Trademark, (iii)
display such Trademark with notice of Federal or foreign registration to
the extent necessary and sufficient to establish and preserve its maximum
rights under applicable law and (iv) not knowingly use or knowingly permit
the use of such Trademark in violation of any third party rights.
Each Grantor (either itself or through licensees) will, for
each work covered by a material Copyright, continue to publish, reproduce,
display, adopt and distribute the work with appropriate copyright notice
as necessary and sufficient to establish and preserve its maximum rights
under applicable copyright laws.
Each Grantor shall notify the Lender immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country) regarding
such Grantor's ownership of any Patent, Trademark or Copyright, its right
to register the same, or to keep and maintain the same.
Each Grantor shall, within ten days after the end of each
calendar month, inform the Lender of each application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or
Copyright) with the United States Patent and Trademark Office, United
States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof filed during such calendar month by such Grantor,
either itself or through any agent, employee, licensee or designee and,
upon request of the Lender, each Grantor shall execute and deliver any and
all agreements, instruments, documents and papers as the Lender may
request to evidence the Lender's security interest in such Patent,
Trademark or Copyright, and each Grantor hereby appoints the Lender as its
attorney-in-fact to execute and file such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed;
such power, being coupled with an interest, is irrevocable.
Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency
in any political subdivision of the United States or in any other country
or any political subdivision thereof, to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to
obtain the relevant grant or registration) and to maintain each issued
Patent and each registration of the Trademarks and Copyrights that is
material to the conduct of any Grantor's business, including timely
filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with
good business judgment, to initiate opposition, interference and
cancellation proceedings against third parties.
In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall
notify the Lender and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover
any and all damages for such infringement, misappropriation or dilution,
and take such other actions as are appropriate under the circumstances to
protect such Collateral.
Upon and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or
Trademark License to effect the assignment of all of such Grantor's right,
title and interest thereunder to the Lender or its designee.
Power of Attorney
Each Grantor irrevocably makes, constitutes and appoints the Lender
(and all officers, employees or agents designated by the Lender) as such
Grantor's true and lawful agent and attorney-in-fact, and in such capacity
the Lender shall have the right, with power of substitution for each
Grantor and in each Grantor's name or otherwise, for the use and benefit
of the Lender, upon the occurrence and during the continuance of an Event
of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral or any part thereof; (b) to demand,
collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any
Grantor on any invoice or bill of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any
Account Debtor; (e) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction
to collect or otherwise realize on all or any of the Collateral or to
enforce any rights in respect of any Collateral; (f) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require any
Grantor to notify, Account Debtors to make payment directly to the Lender;
and (h) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do
all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Lender were the absolute
owner of the Collateral for all purposes; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Lender
to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Lender, or to present or file
any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof
or any property covered thereby, and no action taken or omitted to be
taken by the Lender with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any
Grantor or to any claim or action against the Lender. It is understood and
agreed that the appointment of the Lender as the agent and
attorney-in-fact of the Grantors for the purposes set forth above is
coupled with an interest and is irrevocable. The provisions of this
Section shall in no event relieve any Grantor of any of its obligations
hereunder or under any other Loan Document with respect to the Collateral
or any part thereof or impose any obligation on the Lender to proceed in
any particular manner with respect to the Collateral or any part thereof,
or in any way limit the exercise by the Lender of any other or further
right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise.
Remedies
Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each
item of Collateral to the Lender on demand, and it is agreed that the
Lender shall have the right to take any of or all the following actions at
the same or different times: (a) with respect to any Collateral consisting
of Intellectual Property, on demand, to cause the Security Interest to
become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Lender, or to license or
sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any such Collateral throughout the world
on such terms and conditions and in such manner as the Lender shall
determine (other than in violation of any then-existing licensing
arrangements to the extent that waivers cannot be obtained), and (b) with
or without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability
for trespass to enter any premises where the Collateral may be located for
the purpose of taking possession of or removing the Collateral, exercise
any Grantor's right to bill and receive payment for completed work and,
generally, to exercise any and all rights afforded to a secured party
under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Lender shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Lender shall deem appropriate. The Lender shall be authorized at any such
sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they
are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of
any such sale the Lender shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of any Grantor, and
each Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Lender shall give the Grantors 10 days' written notice (which
each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Lender's intention
to make any sale of Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such
board or exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Lender may fix and state in the notice (if any) of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Lender may (in its sole
and absolute discretion) determine. The Lender shall not be obligated to
make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have
been given. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by the Lender until the sale price is paid by the purchaser or
purchasers thereof, but the Lender shall not incur any liability in case
any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, the Lender may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all
said rights being also hereby waived and released to the extent permitted
by law), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to the
Lender from any Grantor as a credit against the purchase price, and the
Lender may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to any Grantor
therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the
Lender shall be free to carry out such sale pursuant to such agreement and
no Grantor shall be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the
Lender shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Lender may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction
or pursuant to a proceeding by a court-appointed receiver.
Application of Proceeds. The Lender shall apply the proceeds of any
collection or sale of the Collateral, as well as any Collateral consisting
of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Lender in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all
court costs and the fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Lender hereunder or under any other
Loan Document on behalf of any Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Obligations; and
THIRD, to the Grantors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
Subject to the foregoing, the Lender shall have absolute discretion
as to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Lender (including pursuant to a power of sale granted by statute or under
a judicial proceeding), the receipt of the Lender or of the officer making
the sale shall be a sufficient discharge to the purchaser or purchasers of
the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid
over to the Lender or such officer or be answerable in any way for the
misapplication thereof.
Grant of License to Use Intellectual Property. For the purpose of
enabling the Lender to exercise rights and remedies under this Article at
such time as the Lender shall be lawfully entitled to exercise such rights
and remedies, each Grantor hereby grants to the Lender an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Grantors) to use, license or sub-license any of the
Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, to the extent granting such license or
sub-license would not violate any agreement applicable to such
Intellectual Property, and wherever the same may be located, and including
in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such
license by the Lender may be exercised, at the option of the Lender, upon
the occurrence and during the continuation of an Event of Default;
provided that any license, sub-license or other transaction entered into
by the Lender in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
Miscellaneous
Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided
in the Credit Agreement. All communications and notices hereunder to any
Subsidiary Guarantor shall be given to it at its address or fax number set
forth on Schedule I, with a copy to the Borrower.
Security Interest Absolute. All rights of the Lender hereunder, the
Security Interest and all obligations of the Grantors hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (c) any exchange, release or non-perfection of
any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing
all or any of the Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.
Survival of Agreement. All covenants, agreements, representations
and warranties made by any Grantor herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Lender and
shall survive the making by the Lender of the Term Loan, and the execution
and delivery to the Lender of any note evidencing such Term Loan,
regardless of any investigation made by the Lenders or on their behalf,
and shall continue in full force and effect until this Agreement shall
terminate.
Binding Effect; Several Agreement. This Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Lender and a counterpart
hereof shall have been executed on behalf of the Lender, and thereafter
shall be binding upon such Grantor and the Lender and their respective
successors and assigns, and shall inure to the benefit of such Grantor and
the Lender and their respective successors and assigns, except that no
Grantor shall have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any
such assignment or transfer shall be void) except as expressly
contemplated by this Agreement or the Credit Agreement. This Agreement
shall be construed as a separate agreement with respect to each Grantor
and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and
without affecting the obligations of any other Grantor hereunder.
Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Lender that are contained
in this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
Lender's Fees and Expenses; Indemnification. d) Each Grantor jointly
and severally agrees to pay upon demand to the Lender the amount of any
and all reasonable expenses, including the reasonable fees, disbursements
and other charges of its counsel and of any experts or agents, which the
Lender may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from or other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Lender hereunder or
(iv) the failure of any Grantor to perform or observe any of the
provisions hereof.
Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to
indemnify the Lender and the other Indemnitees against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other
charges of counsel, incurred by or asserted against any of them arising
out of, in any way connected with, or as a result of, the execution,
delivery or performance of this Agreement or any claim, litigation,
investigation or proceeding relating hereto or to the Collateral, whether
or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 7.06 shall
remain operative and in full force and effect regardless of the
termination of this Agreement or any other Loan Document, the consummation
of the transactions contemplated hereby, the repayment of any of the Term
Loan, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on
behalf of the Lender. All amounts due under this Section 7.06 shall be
payable on written demand therefor.
GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT THE LAW OF
THEIR LOCATION SHALL GOVERN WITH RESPECT TO THE CREATION, PERFECTION AND
ENFORCEMENT OF SECURITY INTERESTS IN FIXTURES AND THE EXERCISE OF REMEDIES
WITH RESPECT THERETO (IF APPLICABLE).
Waivers; Amendment. e) No failure or delay of the Lender in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of the Lender hereunder
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor or any other Grantor to any other or further
notice or demand in similar or other circumstances.
Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in
writing entered into by the Lender and the Grantor or Grantors with
respect to which such waiver, amendment or modification is to apply.
WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected
or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section
7.04), and shall become effective as provided in Section 7.04. Delivery of
an executed signature page to this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart hereof.
Headings. Article and Section headings used herein are for the
purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
Jurisdiction; Consent to Service of Process. f) Each Grantor hereby
irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or any Federal
court of the United States of America sitting in New York, and any
appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. Nothing in
this Agreement shall affect any right that the Lender may otherwise have
to bring any action or proceeding relating to this Agreement or the other
Loan Documents against any Grantor or its properties in the courts of any
jurisdiction.
Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court sitting in New York. Each
of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in
this Agreement will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
Termination. This Agreement and the Security Interest shall
terminate when all the Obligations (other than wholly contingent
indemnification obligations) then due and owing have been indefeasibly
paid in full, the Lender has no further commitment to lend under the
Credit Agreement, at which time the Lender shall execute and deliver to
the Grantors, at the Grantors' expense, all Uniform Commercial Code
termination statements and similar documents which the Grantors shall
reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section
7.14 shall be without recourse to or warranty by the Lender. A Subsidiary
Guarantor shall automatically be released from its obligations hereunder
and the Security Interest in the Collateral of such Subsidiary Guarantor
shall be automatically released in the event that all the capital stock of
such Subsidiary Guarantor shall be sold, transferred or otherwise disposed
of to a person that is not an Affiliate of the Borrower in accordance with
the terms of the Credit Agreement.
Additional Grantors. Upon execution and delivery by the Lender and a
Subsidiary of an instrument in the form of Annex 2 hereto, such Subsidiary
shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any
such instrument shall not require the consent of any Grantor hereunder.
The rights and obligations of each Grantor hereunder shall remain in full
force and effect notwithstanding the addition of any new Grantor as a
party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EQUIVEST FINANCE, INC.
By:
Name:
Title:
RESORT FUNDING, INC.
By:
Name:
Title:
EASTERN RESORTS CORPORATION
By:
Name:
Title:
LONG WHARF MARINA RESTAURANT, INC.
By:
Name:
Title:
BLUEBEARD'S CASTLE, INC.
By:
Name:
Title:
CASTLE ACQUISITION INC.
By:
Name:
Title:
AVENUE PLAZA LLC
By:
Name:
Title:
OCEAN CITY COCONUT MALORIE, INC.
By:
Name:
Title:
ST. AUGUSTINE RESORT DEVELOPMENT
GROUP, INC.
By:
Name:
Title:
EFI D.C. ACQUISITION, INC.
By:
Name:
Title:
EFI ST. THOMAS ACQUISITION, INC.
By:
Name:
Title:
EFI LOUISIANA ACQUISITION, INC.
By:
Name:
Title:
EFI MARYLAND ACQUISITION, INC.
By:
Name:
Title:
EFI FLORIDA ACQUISITION, INC.
By:
Name:
Title:
PEPPERTREE ACQUISITION CORP.
By:
Name:
Title:
PEPPERTREE ACQUISITION II CORP.
By:
Name:
Title:
PEPPERTREE RESORTS, LTD.
By:
Name:
Title:
PEPPERTREE REALTY, INC.
By:
Name:
Title:
PEPPERTREE RESORT VILLAS, INC.
By:
Name:
Title:
PEPPERTREE RESORTS MANAGEMENT, INC.
By:
Name:
Title:
BANK OF AMERICA, N.A.
By: _____________________
Name:
Title:
<PAGE>
SCHEDULE I
SUBSIDIARY GUARANTORS
- -------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Resort Funding, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Eastern Resorts Corporation
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Long Wharf Marina Restaurant, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Bluebeard's Castle, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Castle Acquisition Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Avenue Plaza LLC
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Ocean City Coconut Malorie, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
St. Augustine Resort Development
Group, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
EFI D.C. Acquisition, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
EFI St. Thomas Acquisition, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
EFI Louisiana Acquisition, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
EFI Maryland Acquisition, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
EFI Florida Acquisition, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peppertree Acquisition II Corp.
Peppertree Resorts, Ltd.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peppertree Realty, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peppertree Resort Villas, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peppertree Resorts Management, Inc.
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<PAGE>
SCHEDULE II
COPYRIGHTS OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule II for each Grantor, and if no copyrights owned,
so state. List in numerical order by copyright
registration/application no.]
U.S. Copyright Registrations
Title Class Reg. Date Reg. No.
----- ----- --------- --------
Pending U.S. Copyright Applications for Registration
Title Class Date Application Filed
Non-U.S. Copyright Registrations
Country Title Class Reg. Date Reg. No.
------- ----- ----- --------- --------
Non-U.S. Pending Copyright Applications for Registration
Country Title Class Date Application Filed
<PAGE>
Exhibit 10.24
SCHEDULE III
LICENSES
[Make a separate Schedule III for each Grantor, and if not a licensor/licensee
in a license/sublicense so state]
PART I
LICENSES/SUBLICENSES OF [NAME OF GRANTOR] ON DATE HEREOF
A. Copyrights
[List First U.S. copyrights in numerical order by Reg. No., followed by non-U.S.
copyrights by country in alphabetical order, Reg. Nos. in numerical order.]
Licensee Name Date of License/ Title of
and Address Sublicense U.S. Copyrights Class Reg. Date Reg. No.
----------- ---------- --------------- ----- --------- --------
Date of Title of
Licensee Name License/ Non-U.S.
and Address Sublicense Copyrights Country Class Reg. Date Reg. No.
----------- ---------- ---------- ------- ----- --------- --------
B. Patents
[List first in numerical order by U.S. patent nos. followed by U.S. patent application
nos., followed in alphabetical order by country, non-U.S. patent nos. followed by
non-U.S. application nos. in numerical order.]
Application
Date of Date
Licensee Name License/ Title of U.S. Filed/Issue Application/
-------------- ------------
and Address Sublicense Patent Class Date Patent No.
----------- ---------- ------ ----- ---- ----------
<PAGE>
Date of Title of Application
Licensee Name License/ Non- U.S. Date Field/ Application/
-----
and Address Sublicense Patent Country Class Issue Date Patent No.
----------- ---------- ------ ------- ----- ---------- ----------
C. Trademarks
[List first in numerical order by U.S. trademark nos., followed by U.S. trademark
application nos., followed in alphabetical order by country, non-U.S. application nos. in
numerical order.]
Licensee Name Date of License/ Application Date Application/
and Address Sublicense U.S. Mark Class Filed/Reg. Date Reg. No.
----------- ---------- --------- ----- --------------- --------
Date of Application
Licensee Name License/ Title of Date Filed/ Application/
and Address Sublicense Non-U.S. Mark Country Class Reg. Date Reg. No.
----------- ---------- ------------- ------- ----- --------- --------
D. Others
Date of License/
Licensee Name and Address Sublicense Subject Matter
PART 2
LICENSES/SUBLICENSES OF [NAME OF GRANTOR] AS LICENSEE ON DATE HEREOF
--------------------------------------------------------------------
A. Copyrights
[List first U.S. copyrights in numerical order by Reg. No., followed by non-U.S.
copyright by country in alphabetical order, Reg. Nos. in numerical order.]
Licensor Name Date of License/ Title of
and Address Sublicense U.S. Copyright Class Reg. Date Reg. No.
----------- ---------- -------------- ----- --------- --------
Date of Title of
Licensor Name License/ Non-U.S.
--------
and Address Sublicense Copyrights Country Class Reg. Date Reg. No.
----------- ---------- ---------- ------- ----- --------- --------
B. Patents
[List first in numerical order by U.S. Patent nos. followed by U.S. patent application
nos., followed in alphabetical order by country, non-U.S. patent nos. followed by
non-U.S. application nos. in numerical order.]
Date of Application
Licensor Name License/ Title of Date/Filed/ Application/
and Address Sublicense U.S. Patent Class Issue Date Patent No.
----------- ---------- ----------- ----- ---------- ---------
Date of Title of Application
Licensor Name License/ Non-U.S. Date/Filed/ Application/
and Address Sublicense Patent Country Class Issue Date Patent No.
----------- ---------- ------ ------- ----- ---------- ----------
C. Trademarks
[List first in numerical order by U.S. trademark nos., followed by U.S. trademark
application nos., followed in alphabetical order by country, non-U.S. trademark nos.
followed by non-U.S. application nos. in numerical order.]
Date of Application
Licensor Name License/ Date Application
and Address Sublicense U.S. Mark Class Filed/Reg. Date Reg. No.
----------- ---------- --------- ----- --------------- --------
Date of Application
Licensor Name License/ Title of Date Application/
and Address Sublicense Non-U.S. Mark Country Class Filed/Reg. Date Reg. No.
----------- ---------- ------------- ------- ----- --------------- --------
D. Others
Date of License/
Licensor Name and Address Sublicense Subject Matter
<PAGE>
SCHEDULE IV
PATENTS OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule IV for each Grantor and if no patents owned so state.
List in numerical order by Patent No./Patent Application No.]
U.S. Patent Registrations
Patent Name Class Issue Date Patent No.
----------- ----- ---------- ----------
U.S. Patent Applications
Patent Name Class Filing Date Patent Application No.
----------- ----- ----------- ----------------------
Non-U.S. Patent Registrations [List in
alphabetical order by country/numerical order by Patent No.]
Country Patent Name Class Issue Date Patent No.
------- ----------- ----- ---------- ----------
Non-U.S. Patent Applications
Patent Application
Country Patent Name Class Filing Date No.
------- ----------- ----- ----------- ---
<PAGE>
SCHEDULE V
TRADEMARK/TRADE NAMES OWNED BY [NAME OF GRANTOR]
[Make a separate Schedule V for each Grantor
and if no trademarks/trade names owned
so state.
List in numerical order by trademark registration/application no.]
U.S. Trademark Registrations
Mark Class Reg. Date Reg. No.
---- ----- --------- --------
U.S. Trademark Applications
Mark Class Filing Date Application No.
---- ----- ----------- ---------------
State Trademark Registrations
[List in alphabetical order by State/numerical order by trademark no.]
State Mark Class Reg. Date Reg. No.
----- ---- ----- --------- --------
State Trademark Applications [List in
alphabetical order by trademark application no.]
State Mark Class Filing Date Application No.
----- ---- ----- ----------- ---------------
Non-U.S. Trademark Registrations [List in
alphabetical order by Country/numerical order by trademark no.]
Country Mark Class Reg. Date Reg. No.
------- ---- ----- --------- --------
Non-U.S. Trademark Applications
[List in alphabetical order by Country/numerical order by application
no.]
Country Mark Class Filing Date Application No.
------- ---- ----- ----------- ---------------
Trade Names
Country(s) Where Used Trade Names
<PAGE>
Exhibit 10.24
Annex 1 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of November 17, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Equivest Finance, Inc., a Delaware corporation (the
"Borrower"), Peppertree Acquisition Corp., a Delaware corporation, Peppertree
Acquisition II Corp., a Delaware corporation, and Bank of America, N.A. (the
"Lender"). Capitalized terms used but not defined herein have the meanings
assigned in the Credit Agreement or the Security Agreement referred to therein,
as applicable.
The undersigned, a Authorized Signatory and the chief legal officer,
respectively, of the Borrower, hereby certifies to the Lender:
Names.
The exact corporate name of each Grantor, as such name appears in
its respective certificate of incorporation, is as follows:
Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years.
Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature
or jurisdiction of corporate organization. If any such change has
occurred, include in Schedule 1 the information required by Sections 1 and
2 of this certificate as to each acquiree or constituent party to a merger
or consolidation.
The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or
other business units in connection with the conduct of its business or the
ownership of its properties at any time during the past five years:
Set forth below is the Federal Taxpayer Identification Number of
each Grantor:
Current Locations.
The chief executive office of each Grantor is located at the address
set forth opposite its name below:
Grantor Mailing Address County State
Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which instruments or chattel paper, if
any, is kept being indicated by an A*@):
Grantor Mailing Address County State
Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified
above:
Grantor Mailing Address County State
Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a), (b) or (c)
above:
Grantor Mailing Address County State
Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of
any of the Collateral of such Grantor:
Grantor Mailing Address County State
Unusual Transactions. All Accounts Receivable have been originated
by the Grantors in the ordinary course of business.
File Search Reports. The Lender has received true copies of file
search reports and each financing statement or other filing identified in
such file search reports from the Uniform Commercial Code filing offices
where filings described in Section 2 hereof are to be made.
UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing
in the Uniform Commercial Code filing office in each jurisdiction where a
Grantor has Collateral as identified in Section 2 hereof.
Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above,
each filing and the filing office in which such filing is to be made.
Filing Fees. All filing fees and taxes payable in connection with
the filings described in Section 5 above have been paid.
Stock Ownership and other Equity Interests. Attached hereto as
Schedule 8 is a true and correct list of all the duly authorized, issued
and outstanding stock, partnership interests, limited liability company
membership interests or other equity interests of the Borrower and of each
Subsidiary and the record and beneficial owners of such stock, partnership
interests, membership interests or other equity interests. Also set forth
on Schedule 8 is each equity investment of the Borrower and each
Subsidiary that represents 50% or less of the equity of the entity in
which such investment was made.
Debt Instruments. Attached hereto as Schedule 9 is a true and
correct list of all promissory notes and all other evidence of
indebtedness between the Borrower and each Subsidiary of the Borrower and
between each Subsidiary of the Borrower and each other such Subsidiary.
Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by the Borrower to any Subsidiary of the
Borrower or made by any Subsidiary of the Borrower to the Borrower or any
other Subsidiary of the Borrower, and (b) a true and correct list of all
unpaid intercompany transfers of goods sold and delivered by or to the
Borrower or any Subsidiary of the Borrower.
[Reserved].
Intellectual Property. Attached hereto as Schedule 12(A) in proper
form for filing with the United States Patent and Trademark Office is a
schedule setting forth all of each Grantor's Patents, Patent Licenses,
Trademarks and Trademark Licenses, including the name of the registered
owner, the registration number and the expiration date of each Patent,
Patent License, Trademark and Trademark License owned by any Grantor.
Attached hereto as Schedule 12(B) in proper form for filing with the
United States Copyright Office is a schedule setting forth all of each
Grantor's Copyrights and Copyright Licenses, including the name of the
registered owner, the registration number and the expiration date of each
Copyright or Copyright License owned by any Grantor.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this
[ ] day of [ ], 1999.
EQUIVEST FINANCE, INC.,
by:
Name:
Title:
by:
Name:
Title:
<PAGE>
Exhibit 10.24
Annex 2 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security Agreement dated as
of November __, 1999, among EQUIVEST FINANCE, INC., a Delaware corporation
(the "Borrower"), each subsidiary of the Borrower listed on Schedule I
thereto (each such subsidiary individually a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors and
the Borrower are referred to collectively herein as the "Grantors") and
BANK OF AMERICA, N.A. (the "Lender").
A. Reference is made to (a) the Credit Agreement dated as of
November __, 1999 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, Peppertree
Acquisition Corp., a Delaware corporation, Peppertree Acquisition II
Corp., a Delaware corporation, and the Lender.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement
and the Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lender to make the Term Loan. Section 7.15 of the Security
Agreement provides that additional Subsidiaries of the Borrower may become
Grantors under the Security Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary (the
"New Grantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Grantor under the
Security Agreement as consideration for the Term Loan.
Accordingly, the Lender and the New Grantor agree as follows:
In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as
a Grantor and the New Grantor hereby (a) agrees to all the terms and
provisions of the Security Agreement applicable to it as a Grantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Grantor thereunder are true and correct on and
as of the date hereof. In furtherance of the foregoing, the New Grantor,
as security for the payment and performance in full of the Obligations (as
defined in the Security Agreement), does hereby create and grant to the
Lender, its successors and assigns, a security interest in and lien on all
of the New Grantor's right, title and interest in and to the Collateral
(as defined in the Security Agreement) of the New Grantor. Each reference
to a "Grantor" in the Security Agreement shall be deemed to include the
New Grantor. The Security Agreement is hereby incorporated herein by
reference.
The New Grantor represents and warrants to the Lender that
this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms.
This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when
the Lender shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Grantor and the Lender.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.
The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth
under its signature hereto, is the true and correct location of the chief
executive office of the New Grantor.
Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT THE LAW OF
THEIR LOCATION SHALL GOVERN WITH RESPECT TO THE CREATION, PERFECTION AND
ENFORCEMENT OF SECURITY INTERESTS IN FIXTURES AND THE EXERCISE OF REMEDIES
WITH RESPECT THERETO (IF APPLICABLE).
In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Security Agreement shall not in any
way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to
it at the address set forth under its signature below.
The New Grantor agrees to reimburse the Lender for its
reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel
for the Lender.
<PAGE>
IN WITNESS WHEREOF, the New Grantor and the Lender have duly
executed this Supplement to the Security Agreement as of the day and year
first above written.
[Name Of New Grantor],
by:
Name:
Title:
Address:
BANK OF AMERICA, N.A.,
as Lender,
By:
Name:
Title:
<PAGE>
Exhibit 10.24
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
Description Location
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.25
Execution Copy
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of November 17, 1999 among EQUIVEST
FINANCE, INC., a Delaware corporation (the "Borrower"), Peppertree
Resorts, Ltd., a North Carolina corporation ("Peppertree") PEPPERTREE
ACQUISITION II CORP., a Delaware corporation ("Newco II"), (the Borrower,
Peppertree and Newco II referred to herein as the "Pledgors"), and Bank of
America, N.A. (the "Lender").
Reference is made to the Credit Agreement, dated as of November 17,
1999 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among the Borrower, Peppertree Acquisition Corp.,
Peppertree Acquisition II Corp. and the Lender. Capitalized terms used
herein and not defined herein shall have meanings assigned to such terms
in the Credit Agreement.
The Lender has agreed to make a Term Loan to the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The obligation of the Lender to make the Term Loan is
conditioned upon, among other things, the execution and delivery by the
Pledgors of a Pledge Agreement in the form hereof to secure the due and
punctual payment and performance by each Obliger of the Obligations.
Accordingly, the Pledgors hereby agree as follows:
Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby transfers,
grants, bargains, sells, conveys, hypothecates, pledges, sets over,
assigns as security and delivers unto the Lender, its successors and
assigns, and hereby grants to the Lender, its successors and assigns, a
security interest in all of the Pledgor's right, title and interest in, to
and under (a) the Capital Stock owned by it and listed on Schedule I
hereto and the certificates representing all such Capital Stock (the
"Pledged Stock"); (b) (i) the debt securities listed opposite the name of
the Pledgor on Schedule II hereto, and (ii) the promissory notes and other
instruments evidencing such debt securities (the "Pledged Debt
Securities"); (c) all other property that may be delivered to and held by
the Lender pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed,
in respect of, in exchange for or upon the conversion of the securities
referred to in clauses (a) and (b) above; (e) subject to Section 5, all
rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above; and (f)
all proceeds of any of the foregoing (the items referred to in clauses (a)
through (f) above being collectively referred to as the "Collateral").
Upon delivery to the Lender, (a) any stock certificates, notes or other
securities now or hereafter included in the Collateral (the "Pledged
Securities") shall be accompanied by stock powers duly executed in blank
or other instruments of transfer satisfactory to the Lender and by such
other endorsements, instruments and documents as the Lender may reasonably
request and (b) all other property comprising part of the Collateral shall
be accompanied by proper instruments of assignment duly executed by the
applicable Pledgor and such other endorsements, instruments or documents
as the Lender may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities theretofore
and then being pledged hereunder, which schedule shall be attached hereto
as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
Delivery of the Collateral. g) Each Pledgor agrees promptly to
deliver or cause to be delivered to the Lender any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
Each Pledgor will cause any Indebtedness for borrowed money
owed to the Pledgor by any person to be evidenced by a duly executed
promissory note that is pledged and delivered to the Lender pursuant to
the term thereof.
Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral
pledged by it hereunder, to and with the Lender that:
the Pledged Stock represents that percentage as set forth on
Schedule I of the issued and outstanding Capital Stock of the issuer with
respect thereto;
except for the security interest granted hereunder, the
Pledgor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule I, (ii) holds the same free and clear of all Liens except those
permitted by the Credit Agreement or any other Loan Document, (iii) will
make no assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the Collateral,
other than pursuant hereto, or as permitted by the Credit Agreement or any
other Loan Document and (iv) subject to Section 5, will cause any and all
Collateral, whether for value paid by the Pledgor or otherwise, to be
forthwith deposited with the Lender and pledged or assigned hereunder;
the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Liens created by this Agreement or permitted by the Credit
Agreement or any other Loan Document), however arising, of all persons
whomsoever;
no consent of any other person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Tribunal or
any securities exchange was or is necessary to the validity of the pledge
effected hereby;
by virtue of the execution and delivery by the Pledgors of
this Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to the
Lender in accordance with this Agreement or, if a security interest in any
of such Collateral may not under applicable law be perfected by
possession, then upon the filing of appropriate financing statements, the
Lender will obtain a valid and perfected first lien upon and security
interest in such Pledged Securities as security for the payment and
performance of the Obligations;
the pledge effected hereby is effective to vest in the Lender the
rights of the Lender in the Collateral as set forth herein;
all of the Pledged Stock has been duly authorized and validly issued
and is fully paid and nonassessable and is in certificated form;
all information set forth herein relating to the Pledged Stock
and the Pledged Debt Securities is accurate and complete in all material
respects as of the date hereof;
the pledge of the Pledged Stock pursuant to this Agreement
does not violate Regulation T, U or X of the Federal Reserve Board or any
successor thereto as of the date hereof;
the Collateral shall not be represented by any certificates,
notes, securities, documents or other instruments other than those
delivered hereunder; and
the terms of the governing documentation for the capital stock
or interests of each partnership or limited liability company whose
capital stock or interests are pledged under Section 1 above will at all
times expressly provide that the capital stock or interests of such
partnership or limited liability company are securities governed by of the
Uniform Commercial Code as in effect in New York and that such capital
stock or interests will at all times be represented by a certificate or
certificates duly delivered to the Lender under Section 1 above.
Registration in Nominee Name; Denominations. The Lender shall
have the right (in its sole and absolute discretion) following an Event of
Default which is continuing to hold the Pledged Securities in its own name
as pledgee, the name of its nominee (as pledgee or as sub-agent) or the
name of the Pledgors, endorsed or assigned in blank or in favor of the
Lender. Each Pledgor will promptly give to the Lender copies of any
notices or other communications received by it with respect to Pledged
Securities registered in the name of such Pledgor. The Lender at all times
following an Event of Default which is continuing have the right to
exchange the certificates representing Pledged Securities for certificates
of smaller or larger denominations for any purpose consistent with this
Agreement.
Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose not inconsistent with the
terms of this Agreement, the Credit Agreement and the other Loan
Documents; provided, however, that such Pledgor will not be entitled to
exercise any such right if the result thereof could reasonably be expected
to materially and adversely affect the rights inuring to a holder of the
Pledged Securities or the rights and remedies of the Lender under this
Agreement or the Credit Agreement or any other Loan Document or the
ability of the Lender to exercise the same.
The Lender shall execute and deliver to each Pledgor, or cause
to be executed and delivered to each Pledgor, all such proxies, powers of
attorney and other endorsement instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant to
subparagraph (i) above and to receive the cash dividends it is entitled to
receive pursuant to subparagraph (iii) below.
Each Pledgor shall be entitled to receive and retain any and
all cash dividends, distributions, interest and principal paid on the
Pledged Securities to the extent and only to the extent that such cash
dividends, distributions, interest and principal are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws. All noncash
dividends, distributions, interest and principal, and all dividends,
distributions, interest and principal paid or payable in cash or otherwise
in connection with a partial or total liquidation or dissolution, return
of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding
sentence) made on or in respect of the Pledged Securities, whether paid or
payable in cash or otherwise, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of the
issuer of any Pledged Securities or received in exchange for Pledged
Securities or any part thereof, or in redemption thereof, or as a result
of any merger, consolidation, acquisition or other exchange of assets to
which such issuer may be a party or otherwise, shall be and become part of
the Collateral, and, if received by any Pledgor, shall not be commingled
by such Pledgor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of
the Lender and shall be forthwith delivered to the Lender in the same form
as so received (with any necessary endorsement).
Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to receive dividends, distributions,
interest or principal pursuant to paragraph (a)(iii) above shall cease,
and all such rights shall thereupon become vested in the Lender, which
shall have the sole and exclusive right and authority to receive and
retain such dividends, distributions, interest or principal as part of the
Collateral. All dividends, distributions, interest or principal received
by the Pledgor contrary to the provisions of this Section 5 shall be held
in trust for the benefit of the Lender, shall be segregated from other
property or funds of such Pledgor and shall be forthwith delivered to the
Lender upon demand in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or
received by the Lender pursuant to the provisions of this paragraph (b)
shall be retained by the Lender in an account to be established by the
Lender for receipt of such money or other property and shall be applied in
accordance with the provisions of Section 7. After all Events of Default
have been cured or waived, the Lender shall, within five Business Days
after all such Events of Default have been cured or waived, repay to each
Pledgor all cash dividends, distributions, interest or principal (without
interest), that such Pledgor would otherwise be permitted to retain
pursuant to the terms of paragraph (a)(iii) above and which remain in such
account.
Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and consensual
rights and powers it is entitled to exercise pursuant to paragraph (a)(i)
of this Section 5, and the obligations of the Lender under paragraph
(a)(ii) of this Section 5, shall cease, and all such rights shall
thereupon become vested in the Lender, which shall have the sole and
exclusive right and authority to exercise such voting and consensual
rights and powers, provided that, the Lender shall have the right from
time to time following and during the continuance of an Event of Default
to permit the Pledgors to exercise such rights. After all Events of
Default have been cured or waived, such Pledgor will have the right to
exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph
(a)(i) above.
Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and
legal requirements, the Lender may sell the Collateral, or any part
thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Lender shall deem appropriate. The Lender shall be authorized at any such
sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they
are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof or to impose other
restrictions necessary in its reasonable judgment to ensure compliance
with applicable securities laws, as more fully set forth in Section 11,
and upon consummation of any such sale the Lender shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and, to the extent permitted by applicable law, the Pledgors
hereby waive all rights of redemption, stay, valuation and appraisal any
Pledgor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Lender shall give a Pledgor 10 days' prior written notice (which
each Pledgor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Lender's intention
to make any sale of such Pledgor's Collateral. Such notice, in the case of
a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall
state the board or exchange at which such sale is to be made and the day
on which the Collateral, or portion thereof, will first be offered for
sale at such board or exchange. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places
as the Lender may fix and state in the notice of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Lender may (in its sole
and absolute discretion) determine. The Lender shall not be obligated to
make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have
been given. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by the Lender until the sale price is paid in full by the
purchaser or purchasers thereof, but the Lender shall not incur any
liability in case any such purchaser or purchasers shall fail to take up
and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the
extent permitted by applicable law, private) sale made pursuant to this
Section 6, the Lender may bid for or purchase, free from any right of
redemption, stay or appraisal on the part of any Pledgor (all said rights
being also hereby waived and released), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any
claim then due and payable to it from such Pledgor as a credit against the
purchase price, and it may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to such
Pledgor therefor. For purposes hereof, (a) a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof,
(b) the Lender shall be free to carry out such sale pursuant to such
agreement and (c) such Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the
fact that after the Lender shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in
full. As an alternative to exercising the power of sale herein conferred
upon it, the Lender may proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale in accordance with the provisions of this Section 6
shall be deemed to conform to the commercially reasonable standards as
provided in Section 9-504(3) of the Uniform Commercial Code as in effect
in the State of New York or its equivalent in other jurisdictions.
Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of
cash, shall be applied by the Lender as follows:
FIRST, to the payment of all costs and expenses incurred by the
Lender in connection with such sale or otherwise in connection with this
Agreement, any other Loan Document or any of the Obligations, including
all court costs and the reasonable fees and expenses of its agents and
legal counsel, the repayment of all advances made by the Lender hereunder
or under any other Loan Document on behalf of any Pledgor and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations; and
THIRD, to the Pledgors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
Subject to the foregoing, the Lender shall have absolute discretion
as to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Lender (including pursuant to a power of sale granted by statute or under
a judicial proceeding), the receipt of the purchase money by the Lender or
of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the application of any part of
the purchase money paid over to the Lender or such officer or be
answerable in any way for the misapplication thereof.
Reimbursement of Lender. h) Each Pledgor agrees to pay upon
demand to the Lender the amount of any and all reasonable expenses,
including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Lender may incur in
connection with (i) the administration of this Agreement, (ii) the custody
or preservation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any of
the rights of the Lender hereunder or (iv) the failure by such Pledgor to
perform or observe any of the provisions hereof.
Without limitation of its indemnification obligations under
the other Loan Documents, each Pledgor agrees to indemnify the Lender and
the Indemnitees against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, other charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the execution or delivery of this Agreement or any
other Loan Document or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto of their respective
obligations thereunder or the consummation of the Transactions and the
other transactions contemplated thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or
not any Indemnitee is a party thereto, provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court
of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such
Indemnitee.
Any amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 8 shall remain
operative and in full force and effect regardless of the termination of
this Agreement or any other Loan Document, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document or any investigation made by or on
behalf of the Lender. All amounts due under this Section 8 shall be
payable on written demand therefor and shall bear interest at the Default
Rate.
Lender Appointed Attorney-in-Fact. Each Pledgor hereby
appoints the Lender the attorney-in-fact of such Pledgor following an
Event of Default which is continuing for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any
instrument that the Lender may deem necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the Lender
shall have the right, upon the occurrence and during the continuance of an
Event of Default, with full power of substitution either in the Lender's
name or in the name of such Pledgor, to ask for, demand, sue for, collect,
receive and give acquittance for any and all moneys due or to become due
under and by virtue of any Collateral, to endorse checks, drafts, orders
and other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and to
give full discharge for the same, to settle, compromise, prosecute or
defend any action, claim or proceeding with respect thereto, and to sell,
assign, endorse, pledge, transfer and to make any agreement respecting, or
otherwise deal with, the same; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Lender to make
any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Lender, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any
property covered thereby. The Lender shall be accountable only for amounts
actually received as a result of the exercise of the powers granted to
them herein, and neither they nor their officers, directors, employees or
agents shall be responsible to any Pledgor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
Waivers; Amendment. i) No failure or delay of the Lender in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of the Lender hereunder
are cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provisions of this Agreement or
consent to any departure by any Pledgor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and
then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Pledgor in any case shall entitle such Pledgor to any other or further
notice or demand in similar or other circumstances.
Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into
between the Lender and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply.
Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of
1933, as now or hereafter in effect, or any similar statute hereafter
enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being called the "Federal
Securities Laws") with respect to any disposition of the Pledged
Securities permitted hereunder. Each Pledgor understands that compliance
with the Federal Securities Laws might very strictly limit the course of
conduct of the Lender if the Lender were to attempt to dispose of all or
any part of the Pledged Securities, and might also limit the extent to
which or the manner in which any subsequent transferee of any Pledged
Securities could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose
of all or part of the Pledged Securities under applicable Blue Sky or
other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Lender may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Securities for their own account, for
investment, and not with a view to the distribution or resale thereof.
Each Pledgor acknowledges and agrees that in light of such restrictions
and limitations, the Lender, in its sole and absolute discretion, (a) may
proceed to make such a sale whether or not a registration statement for
the purpose of registering such Pledged Securities or part thereof shall
have been filed under the Federal Securities Laws and (b) may approach and
negotiate with a single potential purchaser to effect such sale. Each
Pledgor acknowledges and agrees that any such sale might result in prices
and other terms less favorable to the seller than if such sale were a
public sale without such restrictions. In the event of any such sale, the
Lender shall incur no responsibility or liability for selling all or any
part of the Pledged Securities at a price that the Lender may in good
faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if
the sale were deferred until after registration as aforesaid or if more
than a single purchaser were approached. The provisions of this Section 11
will apply notwithstanding the existence of a public or private market
upon which the quotations or sales prices may exceed substantially the
price at which the Lender sells.
Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if
for any reason the Lender desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time,
upon the written request of the Lender, use its reasonable best efforts to
take or to cause the issuer of such Pledged Securities to take such action
and prepare, distribute and/or file such documents, as are required or
advisable in the reasonable opinion of counsel for the Lender to permit
the public sale of such Pledged Securities. Each Pledgor further agrees to
indemnify, defend and hold harmless the Lender any underwriter and their
respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including,
without limitation, reasonable fees and expenses to the Lender of legal
counsel), and claims (including the costs of investigation) that they may
incur insofar as such loss, liability, expense or claim arises out of or
is based upon any alleged untrue statement of a material fact contained in
any prospectus (or any amendment or supplement thereto) or in any
notification or offering circular, or arises out of or is based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements in any thereof not misleading, except
insofar as the same may have been caused by any untrue statement or
omission based upon information furnished in writing to such Pledgor or
the issuer of such Pledged Securities by the Lender expressly for use
therein. Each Pledgor further agrees, upon such written request referred
to above, to use its reasonable best efforts to qualify, file or register,
or cause the issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities under the Blue Sky or other
securities laws of such states as may be requested by the Lender and keep
effective, or cause to be kept effective, all such qualifications, filings
or registrations. Each Pledgor will bear all costs and expenses of
carrying out its obligations under this Section 12. Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section 12 and that such failure would
not be adequately compensable in damages, and therefore agrees that its
agreements contained in this Section 12 may be specifically enforced.
Security Interest Absolute. All rights of the Lender
hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of
the Obligations or any other agreement or instrument relating to any of
the foregoing, (b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the foregoing, (c) any exchange, release or
nonperfection of any other collateral, or any release or amendment or
waiver of or consent to or departure from any guaranty, for all or any of
the Obligations or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
Termination or Release. j) This Agreement and the security
interests granted hereby shall terminate when all the Obligations (other
than wholly contingent indemnification obligations) then due and owing
have been indefeasibly paid in full and the Lender has no further
commitment to lend under the Credit Agreement.
Upon any sale or other transfer by any Pledgor of any
Collateral that is permitted under the Credit Agreement to any person that
is not a Pledgor, or, upon the effectiveness of any written consent to the
release of the security interest granted hereby in any Collateral, the
security interest in such Collateral shall be automatically released.
In connection with any termination or release pursuant to
paragraph (a) or (b), the Lender shall execute and deliver to any Pledgor,
at such Pledgor's expense, all documents that such Pledgor shall
reasonably request to evidence such termination or release. Any execution
and delivery of documents pursuant to this Section 14 shall be without
recourse to or warranty by the Lender.
Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement. All communications
and notices hereunder to any Pledgor other than the Borrower shall be
given to it in care of the Borrower.
Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements, endorsement and instruments, as the Lender may at
any time reasonably request in connection with the administration and
enforcement of this Agreement or with respect to the Collateral or any
part thereof or in order better to assure and confirm unto the Lender its
rights and remedies hereunder.
Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party; and
all covenants, promises and agreements by or on behalf of any Pledgor that
are contained in this Agreement shall bind and inure to the benefit of its
successors and assigns. This Agreement shall become effective as to any
Pledgor when a counterpart hereof executed on behalf of such Pledgor shall
have been delivered to the Lender and a counterpart hereof shall have been
executed on behalf of the Lender, and thereafter shall be binding upon
such Pledgor and the Lender and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Lender and their
respective successors and assigns, except that no Pledgor shall have the
right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void), except as
expressly contemplated by this Agreement or the other Loan Documents. If
all the Capital Stock of a Pledgor is sold, transferred or otherwise
disposed of to a person that is not an Affiliate of the Borrower pursuant
to a transaction permitted by the Credit Agreement, such Pledgor shall be
released from its obligations under this Agreement without further action.
This Agreement shall be construed as a separate agreement with respect to
each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other
Pledgor and without affecting the obligations of any other Pledgor
hereunder.
Survival of Agreement; Severability. k) All covenants,
agreements, representations and warranties made by each Pledgor herein and
in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document
shall be considered to have been relied upon by the Lender and shall
survive the making by the Lender of the Term Loan, regardless of any
investigation made by the Lender and shall continue in full force and
effect as long as the principal of or any accrued interest on the Term
Loan or any other fee or amount payable under this Agreement or other Loan
Document is outstanding and unpaid and as long as the Commitment has not
been terminated.
In the event any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby (it being understood that the invalidity of a particular provision
in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute a single contract, and shall
become effective as provided in Section 17. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
Rules of Interpretation. The rules of interpretation specified
in Section 1.3 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference
only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting this
Agreement.
Jurisdiction; Consent to Service of Process. l) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
any Federal court of the United States of America sitting in New York, and
any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent
permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that the Lender may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan
Documents against any Pledgor or its properties in the courts of any
jurisdiction.
Each Pledgor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection
that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the
other Loan Documents in any New York State or Federal court sitting in New
York. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 15. Nothing in
this Agreement will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
Waiver Of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
[Reserved]
Execution of Financing Statements. To the extent permitted by
applicable law, pursuant to Section 9-402 of the Uniform Commercial Code
as in effect in the State of New York or its equivalent in other
jurisdictions, each Pledgor authorizes the Lender to file financing
statements with respect to the Collateral owned by it without the
signature of such Pledgor in such form and in such filing offices as the
Lender reasonably determines appropriate to perfect the security interests
of the Lender under this Agreement. To the extent permitted by applicable
law, a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EQUIVEST FINANCE, INC.
By:
Name:
Title:
PEPPERTREE RESORTS, LTD.
By:
Name:
Title:
PEPPERTREE ACQUISITION II CORP.
By:
Name:
Title:
BANK OF AMERICA, N.A., as Lender
By:
Name:
Title:
<PAGE>
2
Exhibit 10.25
Schedule I to the
Pledge Agreement
CAPITAL STOCK
umber and
umber of Nlass ercentage
NertificatRegistered Cf Shares Pf Shares
--------- --------- ------
Issuer C Owner o o
- ------ - ----- -
I. Peppertree quivest Finance, Inc 00%
Acquisition Corp. E . 1
II. Peppertree Peppertree Resorts, 00%
Vacation Club Ltd. 1
III. Peppertree Peppertree Resorts, 00%
Resorts Villas Ltd. 1
IV. Peppertree eppertree Acquisition II 00%
Realty,
Inc. P Corp. 1
V. Peppertree eppertree Resorts, 00%
Resorts Ptd.
Management L 1
VI. Peppertree quivest Finance, Inc 00%
Acquisition
II Corp. E . 1
<PAGE>
DEBT SECURITIES
Holder Issuer Principal Amount Date of Note Maturity Date
------ ------ ---------------- ------------ -------------
Equivest Great Smokies November 17, December 31,
Finance, Inc. Hotel Association $3,600,000 1999 1999
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<TABLE>
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Exhibit 10.27
CLUB AFFILIATION AGREEMENT
AGREEMENT made and entered into the 17th day of September, 1997, by and between
INTERVAL INTERNATIONAL, INC., a Florida corporation ("INTERVAL"), with its
principal place of business at 6262 Sunset Drive, Penthouse One, Miami, Florida
33143, USA; and Peppertree Resorts Vacation Club, Inc., a North Carolina
corporation ("AFFILIATE"), with its principal place of business at 1 Vance Gap
Road, Asheville, North Carolina 28806, for the multi-site vacation club
membership program known as PEPPERTREE VACATION CLUB (the "CLUB"). INTERVAL and
AFFILIATE are sometimes referred to as a "Party" or jointly referred to as the
"Parties."
WHEREAS, INTERVAL is engaged in the business of providing and operating an
exchange service to facilitate the exchange of accommodations between owners of
Vacation Interests (as defined herein) at participating resorts (the "INTERVAL
NETWORK");
WHEREAS, AFFILIATE is in the business of developing, managing and/or marketing
the CLUB which is a multi-site vacation club membership program which allows
owners of Vacation Interests in the CLUB to reserve accommodations at one of
several locations included within the CLUB's operations;
WHEREAS, AFFILIATE desires to include all Club Resorts (as defined below) as participants
in the INTERVAL NETWORK; and
WHEREAS, AFFILIATE and INTERVAL contemplate that the operation of the CLUB will
extend to additional locations in the future and they both wish to provide for
the terms and conditions pursuant to which these additional locations will
participate in the INTERVAL NETWORK.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
A. DEFINITIONS.
For purposes of this Agreement, the following are defined terms:
1. "Approved Club Resorts" means: (a) those resorts (or Units therein)
set forth on Exhibit "A" hereto; and (b) such other resorts (or
Units therein) which are developed, acquired or leased in the future
by AFFILIATE, or otherwise assigned to AFFILIATE, for use in
connection with the CLUB and which are accepted by INTERVAL in
accordance with Section E, Paragraph 1 hereof.
2. "Club Resort" means all resorts (or Units therein) developed,
acquired, leased or assigned for use in connection with the CLUB.
3. "Confirmation" or "Confirmed Exchange" means a written or oral
acknowledgment that an exchange request has been fulfilled by
INTERVAL.
4. "Effective Date" means April 11, 1997.
5. "Exchange Guest" means the individual or individuals who have been
issued a Confirmed Exchange to an Approved Club Resort by INTERVAL.
6. "Individual Member" means any purchaser/owner of a Vacation Interest in the
CLUB properly enrolled in the INTERVAL NETWORK (whether by AFFILIATE,
transfer of membership, acceptance of a membership offer from INTERVAL, or
otherwise). Such individuals shall be described as holding Individual
Membership in INTERVAL. An Individual Member who is current in the payment
of membership fees prescribed by INTERVAL and who is in compliance with all
terms and conditions then in effect is referred to as an Individual Member in
good standing.
7. "Individual Membership Application" means the form or agreement
prescribed by INTERVAL, from time to time, for the enrollment of
Individual Members.
8. "Interval Marks" mean the following, registered or unregistered,
trademarks, service marks or trade names: "Five Star Logo,"
"Flexchange," "GoldCard," "interval," "Interval International,"
"Interval International and Logo," "Interval International Five Star
Award Program," "Interval International Traveler," "Worldex,"
"WorldCard," "WorldCard Preferred" and such other trademarks,
service marks and/or trade names as may at any time be owned or
claimed by INTERVAL, or its associated or related companies.
9. "Member Resort" means any resort which has entered into a written
agreement with INTERVAL to participate in the INTERVAL NETWORK.
10. "Resort Membership Application" means the form or forms completed by
AFFILIATE, or on behalf of AFFILIATE, for application to the
INTERVAL NETWORK, and includes all documents and exhibits and any
and all representations or undertakings, whether written or oral,
given or provided by AFFILIATE, or on AFFILIATE's behalf, to
INTERVAL in connection with this Club Affiliation Agreement, whether
before or after the Effective Date.
11. "Unit" means each hotel room, apartment, villa, suite, or other unit
of accommodation designed for occupancy.
12. "Unit Week" means the use and occupancy of a Unit for a one-week
period. Each Unit, therefore, has available for use and occupancy up
to fifty-two (52) unit weeks per year.
13. "Vacation Interest" means the ownership of or the right to use a
Unit and the amenities and facilities of a Vacation Ownership Resort
for a period of time equivalent to at least one week during any
given year, but not necessarily consecutive years, and which
ownership or right to use extends for a period of at least three
years.
14. "Vacation Ownership Resort" means one or more Units subject to the
same time share or other vacation ownership plan, together with any
other property, or rights to property, appurtenant to those Units.
B. TERM AND RENEWALS.
This Agreement commences upon execution by INTERVAL and continues
thereafter for a period of six (6) years from the Effective Date.
Thereafter, this Agreement will renew for additional periods of six (6)
years each only if each Party gives the other written notice, at least
ninety (90) days prior to the expiration of the initial term or any
subsequent six (6) year renewal term, of its intent to renew.
C. AFFILIATION FEE.
INTERVAL agrees that AFFILIATE shall not be obligated to pay an
affiliation fee to INTERVAL for any Approved Club Resorts.
D. INTERVAL NETWORK.
1. INTERVAL'S DUTIES
INTERVAL will provide:
(a) resort membership in the INTERVAL NETWORK, upon such terms and
conditions as are set forth in this Agreement, for the CLUB
and all Approved Club Resorts;
(b) an exchange program for use by Individual Members in
accordance with the Terms and Conditions of Individual
Membership and Exchange, as amended from time to time by
INTERVAL;
(c) promotional materials for use by AFFILIATE in accordance with
this Agreement, and thereafter, such additional materials as
INTERVAL may make available from time to time at such rates as
INTERVAL may establish for such materials; and
(d) such other benefits, privileges and/or discounts as INTERVAL
may have available from time to time to Individual Members in
good standing.
2. INDIVIDUAL MEMBERSHIP
(a) For all sales of Vacation Interests in the CLUB after the Effective Date of this
Agreement, AFFILIATE agrees to enroll all such purchasers of a Vacation
Interest in the CLUB as Individual Members during the term of this
Agreement. In connection with such enrollment, AFFILIATE agrees to
provide INTERVAL with a completed Individual Membership Application
executed by each purchaser of a Vacation Interest in the CLUB, and the
applicable individual membership fee in the amount and manner as is
mutually agreed upon by the Parties from time to time, subject to the
terms of subparagraph (b) below. Said Individual Membership
Application and individual membership fee shall be forwarded to
INTERVAL no later than thirty (30) days after the execution of a
purchase agreement by said purchaser, regardless of the actual date of
closing or escrow requirements for said purchase.
(b) (i) AFFILIATE agrees to provide INTERVAL with written
notice, on at least a monthly basis, of all purchasers
of Vacation Interests in the CLUB enrolled by AFFILIATE
as Individual Members, pursuant to subparagraph (a)
above, who subsequently rescind their purchase of
Vacation Interests in the CLUB ("Rescinding Members").
(ii) For so long as AFFILIATE is not in breach of this
Agreement, INTERVAL agrees to provide AFFILIATE with a
credit equal to the membership fee paid to INTERVAL less
a ten dollar ($10.00US) processing fee for those
Rescinding Members:
(A) enrolled by AFFILIATE as Individual Members of the
INTERVAL NETWORK within thirty (30) days of their
execution of a purchase agreement for a Vacation
Interest at the Project; and
(B) for whom AFFILATE notified INTERVAL of said
cancellation within sixty (60) days of such Individual
Member's enrollment in the INTERVAL NETWORK.
(iii) Any credit issued by INTERVAL pursuant to this Section
D, Paragraph 2, may be used by AFFILIATE to offset
future individual membership fees owed to INTERVAL with
respect to purchasers of Vacation Interests in the CLUB.
Such credit must be utilized by AFFILIATE within sixty
(60) days of issuance of such credit. Any credit not
utilized within said time period will be forfeited by
AFFILIATE and AFFILIATE acknowledges that in no event
will INTERVAL provide AFFILIATE with a cash refund for
any credit not utilized.
(c) AFFILIATE agrees to provide each purchaser of a Vacation
Interest in the CLUB with a then current version of the
INTERVAL Resort Directory. Such Resort Directory shall be
provided to the purchaser at the time of execution of a
purchase agreement. AFFILIATE agrees to purchase such Resort
Directories from INTERVAL, in minimum quantities of fifty (50)
directories per order, at the price prescribed by INTERVAL,
plus applicable postage charges. Such Resort Directories shall
be shipped to AFFILIATE C.O.D., unless otherwise agreed to by
INTERVAL. Additionally, AFFILIATE shall be entitled to deduct
from the fee payable to INTERVAL pursuant to subparagraph (a)
above the per unit cost paid by AFFILIATE (excluding any
applicable shipping or tax) of a Resort Directory.
3. PRECONSTRUCTION OR RENOVATION
(a) In the event the accommodations or facilities of any Approved Club
Resort are unavailable for occupancy due to construction or renovation,
AFFILIATE will advise each purchaser of a Vacation Interest in the CLUB
prior to enrollment with INTERVAL, that the purchaser will not be
entitled to utilize the INTERVAL NETWORK until his/her Unit Week and
the Approved Club Resort are available for occupancy as reasonably
determined by INTERVAL. An Approved Club Resort shall be deemed
"unavailable for occupancy" until such time as INTERVAL determines in
its good faith judgment that such resort is sufficiently complete to be
desirable for exchange (e.g., Units complete and fully furnished,
amenities available for use, any ongoing construction does not
interfere with the use and enjoyment of completed Units, amenities and
facilities). An Individual Member in good standing who is unable to
use the exchange privilege due to construction and/or renovation at an
Approved Club Resort shall be entitled to use such other benefits,
privileges and discounts as may be afforded to Individual Members from
time to time.
(b) In the event a portion of any Approved Club Resort is under
construction or renovation, AFFILIATE agrees that Exchange
Guests will be accommodated only in completely constructed or
renovated and fully furnished Units, and in Units where use
and enjoyment by the Exchange Guest will not be impaired by
the ongoing construction or renovation at the Approved Club
Resort.
(c) Notwithstanding an Approved Club Resort being unavailable for
occupancy due to construction or renovation, AFFILIATE'S
obligation to enroll all purchasers pursuant to Section D,
Paragraph 2(a) hereof shall not be waived.
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4. TERMS AND CONDITIONS
(a) The terms and conditions of the INTERVAL NETWORK, including
but not limited to, the Terms and Conditions of Individual
Membership and Exchange, may be changed by INTERVAL from time
to time in its sole discretion.
(b) AFFILIATE agrees to comply with all procedures reasonably
established by INTERVAL, from time to time, for the operation
of the INTERVAL NETWORK.
5. EXCHANGE ACTIVITY
(a) AFFILIATE agrees to honor all Confirmations made by INTERVAL utilizing
Unit Weeks provided by AFFILIATE or Individual Members to INTERVAL from
time to time. If an Exchange Guest arrives at an Approved Club Resort
and the Unit confirmed by INTERVAL is not available when the Exchange
Guest arrives, AFFILIATE agrees to provide at AFFILIATE's expense
substitute accommodations (of the same or superior size and quality) at
the Approved Club Resort, or AFFILIATE shall provide such substitute
accommodations( of the same or superior size and quality) at a similar
location of comparable quality with amenities and facilities similar to
that available at the Approved Club Resort, for the same time period as
that originally confirmed. Additionally, AFFILIATE shall be
responsible for all expenses incurred by the Exchange Guest and/or
INTERVAL as a result of the confirmed Unit not being available at the
Approved Club Resort, including, without limitation, relocation
expenses. The provisions of this Paragraph shall survive the
expiration or termination of this Agreement.
(b) In the event it is necessary for AFFILIATE to change the
particular Unit into which an Exchange Guest has been
Confirmed, AFFILIATE agrees that the replacement Unit shall be
comparable or superior in all respects (including, without
limitation, the size of Unit, view from the Unit and amenities
available in the Unit) to the Unit into which INTERVAL issued
the Confirmation.
(c) AFFILIATE agrees not to require an Exchange Guest to attend a
sales presentation regarding the CLUB or any Club Resort.
(d) The Parties agree that certain Units at Approved Club Resorts may have
the ability to be divided into separate portions, capable of being
utilized as separate units (the "Lock-Off Units"). In order to be
considered as a separate unit capable of exchange by an Individual
Member, each portion of a Lock-Off Unit must have the prior written
approval of INTERVAL as meeting its quality standards and
requirements. To obtain such written approval, each portion of a
Lock-Off Unit must include at a minimum the following:
(i) Capability of being locked off privately with a soundproof
door (solid core) from the other portion;
(ii) Separate entrance and separate heating and cooling control;
(iii) One bedroom (minimum) and full bath;
(iv) Separate telephone lines;
(v) Microwave, mini-refrigerator, coffee pot, cookery and cooking
utensils;
(vi) Television;
(vii) Sink (wet bar); and
(viii) Dinnerware and Glassware for the number of
individuals the portion of the Lock-Off Unit will
accommodate.
A portion of a Lock-Off Unit which includes the above items
and which has been approved in writing by INTERVAL shall be
referred to as an "Acceptable Lock-Off Portion." An Individual
Member who secures a written reservation for a Lock-Off Unit
may exchange either the entire Lock-Off Unit or one or both
Acceptable Lock-Off Portions, depending on what the Individual
Members wishes to request in exchange. AFFILIATE acknowledges
and agrees that a Lock-Off Unit may in some instances contain
only one Acceptable Lock-Off Portion (i.e., only one portion
of the Lock-Off Unit meets the prescribed standards).
AFFILIATE further agrees that INTERVAL shall be entitled to
use a Lock-Off Unit as an entire unit or as separate
Acceptable Lock-Off Portions, at INTERVAL's sole discretion,
for exchange purposes.
(e) (i) INTERVAL agrees to accept exchange requests from
Individual Members without such Individual Members
actually relinquishing a Unit Week from an Approved
Club Resort at the time of request.
(ii) When INTERVAL receives an exchange request from such an
Individual Member, INTERVAL, acting through its affiliated
company, Interval Resort & Financial Services, Inc. ("IRFS"),
shall use reasonable efforts to verify, based on information
made available to INTERVAL and/or IRFS by the CLUB, that such
Individual Member is in good standing with the CLUB and
otherwise entitled to utilize the INTERVAL NETWORK prior to
issuing a Confirmation to such Individual Member.
(iii) AFFILIATE agrees to provide INTERVAL with comparable Unit
Weeks (in accordance with mutually agreed upon criteria) at
Approved Club Resorts in return for the Unit Weeks confirmed
to Individual Members through the INTERVAL EXCHANGE NETWORK.
Such Unit Weeks provided by AFFILIATE shall be during such
time periods and in such locations as may be reasonably agreed
upon by INTERVAL. It is further agreed that the number of
Unit Weeks owed by one party to the other pursuant to this
subparagraph should not exceed one hundred (100) Unit Weeks,
without the prior written consent of the party owed such Unit
Weeks.
E. AFFILIATE'S PROGRAM.
1. PHASING AND AMENITIES
AFFILIATE agrees that this Agreement encompasses all of the Units,
Unit Weeks, buildings, phases or resorts/hotels now or hereafter
constructed, acquired or leased for use in connection with the CLUB,
including, without limitation, any additional Units or Unit Weeks at
any Vacation Ownership Resorts set forth on Exhibit "A" as of the
Effective Date, which Units or Unit Weeks are acquired or leased by
AFFILIATE or the Club after the Effective Date; provided, however,
that the inclusion of all such Units, Unit Weeks, buildings, phases
or resorts/hotels shall be subject to: (a) AFFILIATE's submission of
all documentation reasonably required by INTERVAL; (b) adherence to
INTERVAL's affiliation standards and criteria in effect at time of
inclusion; and (c) ultimate approval by INTERVAL, which approval
will not be unreasonably withheld. In that connection, AFFILIATE
agrees to submit in a timely manner all such documentation
reasonably required by INTERVAL (including, but not by way of
limitation, a Resort Membership Application and Opinion Letter) for
the CLUB, and each Club Resort (as applicable). The initial Approved
Club Resorts are set forth on Exhibit "A" attached hereto. Exhibit
"A" shall be amended as new Club Resorts are accepted by INTERVAL as
Approved Club Resorts, or as Approved Club Resorts are suspended or
terminated by either Party.
2. REPRESENTATIONS AND WARRANTIES
(a) AFFILIATE represents and warrants that it or the CLUB owns the real
estate and improvements constituting the Approved Club Resorts or that
it has the right to convey use rights to the accommodations,
facilities and amenities comprising the CLUB and each Approved Club
Resort for the term specified in the sales documents provided to
prospective purchasers of Vacation Interests in the CLUB; that the
legal structure of the CLUB is in compliance with all applicable laws
and that the marketing of the CLUB is in compliance with all applicable
laws; that all monies paid by an individual to purchase a Vacation
Interest in the CLUB are placed in escrow or guaranteed by an
independent third party of standing until such time as the purchaser is
granted actual occupancy rights; that the legal structure of the CLUB
guarantees the purchaser the undisturbed use of the Units, amenities
and facilities comprising the CLUB for the duration of the Vacation
Interest purchased; that there are no proceedings pending or threatened
against or affecting AFFILIATE, the CLUB, the Approved Club Resorts, or
individuals or entities related thereto in any court or before any
governmental authority which involves the possibility of adversely
affecting the business or financial condition of AFFILIATE, the CLUB or
the Approved Club Resorts; that execution of this Agreement with
INTERVAL and its performance hereunder is binding upon AFFILIATE and
will not conflict with or result in a breach of any provision of any
other agreement, charter, by-law or other instrument to which
AFFILIATE, the CLUB or the Approved Club Resorts may be bound; and that
AFFILIATE, the CLUB and all Approved Club Resorts are in compliance
with, and will continue to comply with, all applicable laws and
regulations of any jurisdiction where compliance is required.
(b) AFFILIATE further agrees to provide INTERVAL, upon execution of this
Agreement by AFFILIATE, with an opinion letter from a licensed
independent attorney covering those items set forth in Exhibit "B"
attached hereto and made a part hereof for the CLUB and all existing
Club Resorts (as applicable). AFFILIATE understands and agrees that it
will not be entitled to represent the CLUB's participation in the
INTERVAL NETWORK until INTERVAL has received a satisfactory opinion
letter from such licensed independent attorney and has notified
AFFILIATE of same. Additionally, AFFILIATE agrees to provide INTERVAL
with an opinion letter from a licensed independent attorney covering
those items set forth in Exhibit "B" hereto for any Club Resort
constructed or acquired after the Effective Date of this Agreement.
Failure to provide such opinion letters or any material
misrepresentation of the warranties set forth above or any information
set forth in any Resort Membership Application or any supporting
documents provided in connection with this Agreement shall be grounds
for immediate termination of this Agreement by INTERVAL.
(c) AFFILIATE agrees that it will fully and accurately represent
and describe the use of the INTERVAL NETWORK to all
prospective purchasers of Vacation Interests in the CLUB.
AFFILIATE further acknowledges that full and accurate
representation is directly related to consumer satisfaction
with the exchange program.
(d) The Parties represent and warrant that the individuals
executing this Agreement on behalf of INTERVAL and AFFILIATE,
are officers of their respective organizations and duly
authorized to execute this Agreement on behalf of INTERVAL or
AFFILIATE, as the case may be.
3. DISCLOSURE
(a) AFFILIATE agrees to provide either INTERVAL's most recent disclosure
statement and/or the INTERVAL Resort Directory, or such other
publication which contains the complete and then current Terms and
Conditions of Individual Membership and Exchange, to all prospective
purchasers of Vacation Interests in the CLUB prior to their execution
of any contract for purchase. Notwithstanding the foregoing,
AFFILIATE shall provide INTERVAL's most recent disclosure statement if
required by law to do so.
(b) AFFILIATE further agrees to conspicuously include the
following statement, or a statement substantially similar to
the following, in its sales documents:
"This Club has an agreement with Interval International, Inc.
("Interval") of Miami, Florida, wherein Interval has agreed to
provide its Exchange Program to owners of vacation interests
in this Club. Interval is an independently owned and operated
service company. The developer/marketer of this Club is not an
agent for Interval and no representations or promises made by
such developer/marketer, or their agents, are binding on
Interval. Interval's responsibility for representations
regarding Interval's Exchange Program, as well as Interval's
current or future services, is limited to those made in
written materials furnished by Interval."
4. MAINTENANCE OF STANDARDS
(a) AFFILIATE acknowledges the necessity for and agrees to maintain a
program in order to assure the continued high standards of service,
appearance, cleanliness, quality and management as evidenced by the
Approved Club Resorts at time of execution of this Agreement and/or
acceptance of such Club Resort as an Approved Club Resort. AFFILIATE
further agrees to establish a program for the major renovations of the
Units, amenities, common elements and exteriors of the Approved Club
Resorts.
(b) If it should be deemed necessary by INTERVAL, as a result of
consumer complaints regarding the quality of an Approved Club
Resort, to inspect any Approved Club Resort, AFFILIATE shall
provide, without charge, suitable accommodations at the
Approved Club Resort for such INTERVAL representative, subject
to availability.
(c) It shall be considered prima facie evidence of failure to
maintain standards if INTERVAL receives resort evaluations
from Exchange Guests which rate an Approved Club Resort,
and/or the Units, facilities and/or amenities therein, below
the minimum level acceptable for participation in the INTERVAL
NETWORK, as reasonably determined by INTERVAL. INTERVAL will
advise AFFILIATE in writing of the contents of such
evaluations.
5. SALES REPRESENTATIONS
(a) AFFILIATE agrees to incorporate promotional materials
furnished by INTERVAL into its sales program regarding the
CLUB. Additionally, AFFILIATE agrees to fully and accurately
describe the use of the INTERVAL NETWORK to all prospective
purchasers in the CLUB. AFFILIATE further agrees not to make
any representations regarding the services of INTERVAL which
are not included in written materials either provided by
INTERVAL or which have not been approved by INTERVAL in
writing.
(b) AFFILIATE acknowledges and agrees that it will not rely upon
the INTERVAL NETWORK as the primary motivation for its sales.
Individual Membership in INTERVAL shall be represented as an
adjunct service to purchasers of Vacation Interests in the
CLUB.
(c) AFFILIATE further acknowledges and agrees that membership in
INTERVAL will not be offered as an investment interest or in
conjunction with the sale of a security.
(d) AFFILIATE agrees that all sales and marketing related to the CLUB shall
be the responsibility of AFFILIATE. AFFILIATE shall provide INTERVAL
with thirty (30) days prior written notice if any individual or entity
other than AFFILIATE is marketing the CLUB. INTERVAL may, in the
exercise of reasonable business judgment, prohibit such other
individual or entity from representing membership in INTERVAL in
conjunction with its marketing of the CLUB. Additionally, INTERVAL
reserves the right to suspend, indefinitely, AFFILIATE's authority to
represent the INTERVAL NETWORK to prospective purchasers in the event
that repeated complaints arise regarding sales practices related to the
CLUB.
(e) AFFILIATE agrees to immediately indemnify and hold INTERVAL
harmless against all actions, suits, demands, losses,
expenses, costs and fees, including attorneys' fees, and
liabilities of whatever kind and nature incurred by INTERVAL
arising out of or in connection with the sale or marketing of
Vacation Interests in the CLUB. The provisions of this
subparagraph (e) shall survive the expiration or termination
of this Agreement.
6. COLLATERAL MATERIALS
(a) The Resort Membership Applications, plans, renderings, blueprints,
models, designs, addenda, documents or other exhibits submitted by, or
on behalf of, AFFILIATE to INTERVAL contain representations of the
current or future design, configuration, legal structure and marketing
of the CLUB and/or Club Resorts. Such representations are specifically
incorporated into and made a part of this Agreement. Additionally,
AFFILIATE agrees to provide INTERVAL with plans, renderings, models,
designs, addenda or other documents reasonably requested by INTERVAL
with respect to a Club Resort.
(b) AFFILIATE agrees to provide INTERVAL with immediate notice of any
change in the information set forth in the Resort Membership
Applications, plans, renderings, blueprints, models, designs,
documents, addenda or such other exhibits submitted to INTERVAL with
respect to an Approved Club Resort. INTERVAL shall have the right to
terminate this Agreement upon thirty (30) days prior written notice if
there is any material change in such information and such material
change is not cured or resolved to INTERVAL's satisfaction within such
thirty (30) day period. Additionally, AFFILIATE acknowledges and
agrees that it shall be required to submit a legal opinion from a
licensed independent attorney, in a form satisfactory to INTERVAL, in
the event the CLUB will be marketed in areas not specifically addressed
in the legal opinion letter provided pursuant to Section E, Paragraph
2(b).
7. AUDIT INFORMATION
(a) AFFILIATE shall provide INTERVAL with the names, permanent addresses
and telephone numbers, the type of accommodations, Unit Week and unit
number purchased, if applicable, including the date of sale, for all
owners of Vacation Interests in the CLUB on an annual basis as of
December 31 of each year or as requested by INTERVAL in writing
throughout the term of this Agreement. Such information shall be
provided within twenty (20) days of the above-referenced date or within
twenty (20) days of INTERVAL's written request for said information.
AFFILIATE further agrees to provide, within twenty (20) days of
INTERVAL's written request, a list of all Unit numbers in each Approved
Club Resort, as well as the sleeping capacity for each such Unit and a
yearly calendar for such resort, and such other information about the
resort as may be reasonably requested by INTERVAL.
(b) AFFILIATE further agrees to provide INTERVAL with written
notice of any resale, foreclosure or other transfer of
ownership of any Vacation Interest in the CLUB upon AFFILIATE,
or it agents, becoming aware of same. Additionally, AFFILIATE
agrees to provide INTERVAL with prompt written notice in the
event any Individual Member rescinds his/her purchase of a
Vacation Interest in the CLUB.
(c) INTERVAL shall have the right to inspect the CLUB's sales and
ownership records, upon reasonable notice during normal
business hours, where such records may be kept.
8. CHARGES
(a) AFFILIATE agrees to impose the responsibility to pay any bed
tax, transient occupancy tax, VAT or similar tax levied by any
governmental body on the Individual Member who relinquishes a
Unit Week from an Approved Club Resort which is to be occupied
by an Exchange Guest.
(b) AFFILIATE acknowledges and agrees that the Exchange Guests shall be
responsible for all personal charges (e.g., telephone calls and meals),
as well as for any damage to the accommodations or a Club Resort's
amenities or facilities that they or their guests cause. Consequently,
AFFILIATE agrees that INTERVAL shall not be liable, and AFFILIATE
hereby releases INTERVAL from liability, for any loss incurred or
damage to the accommodations, facilities or amenities at a Club Resort
caused by an Exchange Guest or his invitees.
(c) AFFILIATE agrees to provide all Exchange Guests with the same rights
and privileges as those afforded to owners of Vacation Interests in the
CLUB. Additionally, AFFILIATE agrees that there shall be no fees
charged to Exchange Guests for use of any of the amenities or
facilities of the Approved Club Resorts or for any services relating to
the use and occupancy of the Unit Week including, but not limited to,
surcharges for electricity or air-conditioning or fees for the weekly
cleaning of the Unit or for gratuities, other than as specifically set
forth herein or in a Resort Membership Application for an Approved Club
Resort or as otherwise approved in writing by INTERVAL.
<PAGE>
9. INSURANCE
AFFILIATE shall procure and maintain throughout the term of this
Agreement and any renewals hereof, at its sole cost and expense, a
protection and indemnity liability policy or policies, including
coverage for bodily injury, property damage, personal and
advertising injury occurring in connection with the CLUB, AFFILIATE
or any Club Resort, including all Approved Club Resorts. The policy
or policies shall have a standard thirty (30) day cancellation
clause and be in the minimum amount of One Million Dollars
($1,000,000.00) combined single limit for each occurrence. AFFILIATE
shall cause AFFILIATE, the CLUB, each Club Resort, including
Approved Club Resorts, INTERVAL, and its officers, directors,
employees, representatives and agents to be named insureds under the
policy or policies. AFFILIATE further represents that coverage shall
extend to INTERVAL's Exchange Guests and their invitees. AFFILIATE
shall deliver to INTERVAL a certificate of insurance evidencing the
aforesaid within thirty (30) days of AFFILIATE's execution of this
Agreement and annually upon renewal of the policy or policies. The
certificate and policy or policies shall further provide that no
less than thirty (30) days prior written notice will be given to
INTERVAL in the event of cancellation, material change, alteration
or amendment of the policy or policies.
F. USE OF NAME, LOGOS, SERVICE MARKS AND MATERIALS.
1. USE IN PROMOTIONAL MATERIALS
(a) INTERVAL agrees that AFFILIATE shall have the right to indicate in its
promotional materials that the CLUB and all Approved Club Resorts are
Member Resorts of INTERVAL. Additionally, AFFILIATE shall be entitled
to use in its promotional materials the Interval name and logo, and
such other Interval Marks that INTERVAL has advised AFFILIATE in
writing that it may use. INTERVAL, however, expressly prohibits the
use of any material describing or offering the services of INTERVAL
without first obtaining its prior written approval. INTERVAL further
reserves the right to prohibit the making of representations or the use
of material which, in the judgment of INTERVAL, do not accurately
reflect INTERVAL and the INTERVAL NETWORK.
(b) AFFILIATE acknowledges and agrees that INTERVAL is the owner
or licensee of the Interval Marks and agrees to observe such
reasonable requirements with respect to service mark and
trademark registrations as INTERVAL may require from time to
time, including without limitation, affixing an "(R)" adjacent
to all such registered marks in any and all uses thereof.
(c) Any use of the INTERVAL name and logo or any other Interval
Marks which INTERVAL has authorized AFFILIATE to use in
writing must fully and prominently disclose that AFFILIATE is
an independent organization and not affiliated with INTERVAL,
except as provided by this Agreement. AFFILIATE further
acknowledges and agrees that any goodwill associated with the
use of the INTERVAL name and logo or any other Interval Marks
shall inure directly and exclusively to INTERVAL.
2. RESTRICTIONS ON USE
(a) The rights arising under this Agreement are exclusive to the CLUB.
AFFILIATE shall not use the INTERVAL name and logo or any other
Interval Mark or otherwise make any reference to its participation in
the INTERVAL NETWORK in its promotional material in conjunction with
any other resort other than the Approved Club Resorts. AFFILIATE
further agrees not to use the names or photographs of other resorts
participating in the INTERVAL NETWORK in AFFILIATE's promotional
material without obtaining the prior written consent of INTERVAL and
such other resort. Notwithstanding the foregoing, this subparagraph
shall not be construed to prohibit AFFILIATE from using the names or
photographs of the Approved Club Resorts without INTERVAL's prior
written consent.
(b) AFFILIATE agrees that it will not, directly or indirectly,
register or attempt to register any of the Interval Marks or
any name or mark which is similar or likely to be confused
with the Interval Marks.
G. SALE, LEASE OR ASSIGNMENT.
1. AFFILIATE agrees to provide INTERVAL with sixty (60) days prior
written notice of its intent to sell or lease the CLUB (or a portion
thereof in bulk) or an Approved Club Resort (or a portion thereof in
bulk), or to assign this Agreement, to any third party.
2. Within thirty (30) days after receipt by INTERVAL of such written
notice from AFFILIATE, INTERVAL shall have the option to either:
(a) Consent to the assignment of this Agreement to such third
party if such sale or lease is in fact consummated. Concurrent
with the consummation of such sale or lease, AFFILIATE shall
cause such third party to agree in writing, in form and
substance satisfactory to INTERVAL, to perform under this
Agreement. An executed copy of such assumption agreement shall
be promptly delivered to INTERVAL. Notwithstanding the
foregoing, the sale or lease of the CLUB, or an Approved Club
Resort, or the assignment of this Agreement, and the agreement
of such third party to perform under the terms of this
Agreement, shall not relieve AFFILIATE of its obligation to
perform under the terms of this Agreement as it relates to the
CLUB and such Approved Club Resorts not subject to the sale,
lease or assignment; or
(b) Notify AFFILIATE of its intent to terminate this Agreement, which
notice of termination shall establish the date of termination ninety
(90) days after the date of receipt by INTERVAL of AFFILIATE's original
notice. If AFFILIATE shall not have consummated such sale, lease or
assignment by the established termination date to the third party named
in the original notice to INTERVAL, then the termination notice sent to
AFFILIATE shall be null and void, and this Agreement shall continue in
full force and effect.
3. The voluntary or involuntary sale, assignment, transfer or other
disposition of a controlling interest in AFFILIATE, the CLUB or an
Approved Club Resort (i.e., the possession, directly or indirectly,
of the power to direct the management and sales of the CLUB, whether
through ownership of stock, by contract or otherwise) shall be
deemed a sale or lease and shall be subject to the provisions set
forth in Paragraphs 1 and 2 of this Section G.
4. Subject to the foregoing paragraphs of this Section G, this
Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and assigns.
H. COVENANTS.
1. AFFILIATE agrees that it will at all times refrain from interfering
with or otherwise impairing the relationship between INTERVAL and
its members, including, but not limited to Individual Members and
Member Resorts.
2. (a) So long as INTERVAL continues to provide exchange services to
Individual Members, AFFILIATE agrees not to solicit, directly or
indirectly, nor to assist any third party, directly or indirectly, in
the solicitation of, Individual Members for membership or participation
in any exchange program or system of exchange other than the INTERVAL
NETWORK. Notwithstanding the foregoing, this paragraph shall not be
construed to allow AFFILIATE to solicit Individual Members or to assist
in the solicitation of Individual Members for membership or
participation in any other exchange program or system of exchange in
the event INTERVAL is required to suspend exchange privileges due to
AFFILIATE's failure to comply with the provisions of Section D,
Paragraph 5(a) of this Agreement.
(b) AFFILIATE has represented that it has an existing contractual
relationship with Resort Condominiums International, Inc.
("RCI"), pursuant to which AFFILIATE has agreed to solicit
purchasers of fixed-week intervals for membership or
participation in RCI's exchange program. AFFILIATE has also
represented, however, that it will not be actively offering or
marketing fixed-week and Club-based intervals at the same Club
Resort. Based on such representations, INTERVAL agrees that
AFFILIATE's solicitation of purchasers of fixed-week intervals
for membership or participation in RCI's exchange program
shall not be construed as a breach of this Section H,
Paragraph 2.
3. (a) AFFILIATE agrees that during the term of this Agreement
and for a period of one (1) year after this Agreement expires
or is terminated for any reason, AFFILIATE shall not, directly
or indirectly, without INTERVAL's prior written consent, hire,
employ or pay any person who was employed or paid by INTERVAL
during the term of this Agreement; or directly or indirectly
induce any such person to terminate or alter his/her
relationship with INTERVAL.
(b) INTERVAL agrees that during the term of this Agreement and for
a period of one (1) year after this Agreement expires or is
terminated for any reason, INTERVAL shall not, directly or
indirectly, without AFFILIATE's prior written consent, hire,
employ or pay any person who was employed or paid by AFFILIATE
during the term of this Agreement; or directly or indirectly
induce any such person to terminate or alter his/her
relationship with INTERVAL.
4. The provisions of this Section H shall survive the expiration or termination
of this Agreement.
I. SUSPENSION AND TERMINATION.
1. SUSPENSION
(a) In the event that AFFILIATE is in violation of any provision of this
Agreement, INTERVAL shall have the right, without prejudice to its
right to terminate this Agreement, to: (i) immediately suspend
processing of new memberships, Individual Membership renewals, the
exchange use of the INTERVAL NETWORK by Individual Members, and the
right of AFFILIATE to represent the INTERVAL NETWORK to prospective
purchasers of Vacation Interests in the CLUB; and/or (ii) impose such
other conditions as INTERVAL deems reasonably necessary.
(b) If INTERVAL determines, in the exercise of its reasonable
business judgment, that the continued operation of AFFILIATE,
the CLUB and/or an Approved Club Resort are in jeopardy,
INTERVAL shall have the right to suspend further performance
under this Agreement until such time as INTERVAL receives
satisfactory written assurances that the continued operation
of the CLUB, the Approved Club Resort and/or AFFILIATE are not
in jeopardy.
(c) If bankruptcy proceedings are filed by or against a Party, then
AFFILIATE (in the case bankruptcy proceedings are filed by or against
NTERVAL) or INTERVAL (in the case bankruptcy proceedings are filed by
or against AFFILIATE) may suspend all further performance of this
Agreement until such bankrupt Party assumes or rejects this Agreement
and adequate assurance of future performance by the bankrupt Party is
provided to the non-bankrupt Party. Any such suspension of further
performance by the non-bankrupt Party pending the bankrupt Party's
assumption or rejection will not be a breach of this Agreement and will
not affect the non-bankrupt Party's rights to pursue or enforce any of
its rights under this Agreement or otherwise.
(d) Notwithstanding the foregoing, in the event AFFILIATE and the
CLUB regain active status in the INTERVAL NETWORK, AFFILIATE
shall be obligated to enroll, as members of INTERVAL, all
purchasers of Vacation Interests in the CLUB while it was in a
suspended status.
2. TERMINATION
(a) This Agreement may be terminated by a Party immediately upon notice in
writing if:
(i) the other Party shall become insolvent; or
(ii) the other Party shall make an assignment for the benefit of
creditors.
(b) In the event that either Party defaults in the performance of
any of the provisions of this Agreement and fails to rectify
such default within thirty (30) days after receipt of written
notice specifying such default, or such additional period of
time as may be reasonably required to cure such default, this
Agreement may be terminated upon written notice to the
defaulting Party.
(c) INTERVAL shall have the right to terminate this Agreement upon
thirty (30) days prior written notice to AFFILIATE, in the
event that less than one hundred twenty-five (125) Individual
Members are enrolled within one year of the Effective Date, or
less than two hundred fifty (250) Individual Members are
enrolled within two years of the Effective Date.
(d) A pending merger between INTERVAL's parent company, CUC
International, Inc., and a third party has been announced and
it is acknowledged that said merger may result in the same
corporate entity owning both INTERVAL and RCI. In the event
that the ownership of both INTERVAL and RCI is vested in the
same corporate entity as a result of such merger, then
AFFILIATE may terminate its affiliation with INTERVAL upon
sixty (60) days' written notice to INTERVAL.
3. EFFECT OF TERMINATION
(a) In the event that this Agreement is terminated due to
AFFILIATE's failure to maintain the INTERVAL standards as
required by Section E, Paragraph 4 of this Agreement, INTERVAL
may suspend the exchange privileges of Individual Members, but
shall not be responsible for the reimbursement of any
Individual Membership fees previously paid to INTERVAL by
AFFILIATE.
(b) In the event this Agreement is terminated for any cause which in
INTERVAL's judgment will not impair the desirability or availability of
the Approved Club Resorts, INTERVAL may continue to provide its
exchange services to Individual Members until the expiration of the
current year of each such membership. All such Individual Members in
good standing shall be entitled to full benefits of Individual
Membership during that year. At the expiration of said year, INTERVAL
shall have the option of whether to allow renewals of said Individual
Memberships.
(c) AFFILIATE and INTERVAL agree to continue honoring all Confirmations
into the Approved Club Resorts made prior to termination of this
Agreement, as well as all Confirmations issued to Individual Members
prior to termination. Additionally, AFFILIATE agrees to honor all
Confirmations into Approved Club Resorts (even though such
Confirmations are issued after termination of this Agreement) in
accordance with Section D, Paragraph 5 for so long as Individual
Members elect to renew their membership with INTERVAL and INTERVAL
continues to provide exchange services to same.
(d) AFFILIATE expressly waives any claim or demand it may have for
refund of any affiliation fee or Individual Membership fees
(including any renewal fees) paid to INTERVAL prior to
termination of this Agreement.
(e) Upon termination or expiration of this Agreement, AFFILIATE
shall immediately discontinue: (i) representing the INTERVAL
NETWORK to purchasers; (ii) utilizing all INTERVAL materials
and equipment and shall return same to INTERVAL within thirty
(30) days thereafter; and (iii) utilizing all advertising
materials which contain the INTERVAL name, logos or any other
INTERVAL Marks or otherwise associate the CLUB and Approved
Club Resorts with INTERVAL.
(f) The provisions of this Paragraph 3 shall survive the
expiration or termination of this Agreement and shall continue
to govern the relationship between the Parties.
J. REMEDIES.
1. A Party shall be entitled to damages which it has incurred and injunctive or
other equitable relief for any violation by any other Party of the provisions
of this Agreement. In no event, however, shall either party be liable to the
other party for incidental, special or consequential damages. In addition,
the prevailing Party may recover all costs, including reasonable attorneys'
fees, incurred in such action or any appeal thereto or in otherwise obtaining
compliance with the terms of this Agreement, whether or not such matter
proceeds to the filing of a complaint. The Parties further agree that the
time of entitlement as to such fees and costs shall be the point at which
breach or default by the other occurs. The provisions of this Paragraph
shall survive the expiration or termination of this Agreement, and nothing
herein shall be construed to restrict the right to institute proceedings at
law or equity to obtain injunctive or other relief on account of any default
hereunder, whether or not a Party has exercised its rights to terminate this
Agreement.
2. The remedies set forth in this Agreement are not exclusive, and the
election of one remedy shall not prohibit the pursuit of other
available remedies.
K. INDEMNIFICATION.
1. INTERVAL agrees that it will protect, save, keep harmless and indemnify
AFFILIATE against and from any and all claims, demands, judgments, damages,
suits, losses, penalties, expenses, costs and liabilities of any kind or
nature whatsoever, including, but not limited to, reasonable attorneys' fees,
arising directly or indirectly out of a breach of this Agreement by INTERVAL,
its affiliates, officers, directors, employees, agents and representatives,
or the failure of INTERVAL to provide its exchange program to Individual
Members in accordance with its published terms and conditions.
Notwithstanding the foregoing, AFFILIATE acknowledges and agrees that
INTERVAL's total liability pursuant to this Paragraph shall be limited to the
fees paid to INTERVAL by AFFILIATE pursuant to this Agreement.
2. AFFILIATE agrees that it will protect, save, keep harmless and indemnify
INTERVAL against and from any and all claims, demands, judgments, damages,
suits, losses, penalties, expenses, costs and liabilities of any kind or
nature whatsoever, including, but not limited to, reasonable attorneys' fees,
arising directly or indirectly out of or in connection with: (a) a breach of
this Agreement by AFFILIATE, or its officers, directors, representatives,
agents, brokers, salespersons, associates or employees; (b) the negligence or
intentional misconduct of AFFILIATE, or its officers, directors,
representatives, agents, brokers, salespersons, associates or employees; or
(c) the operation/management of the CLUB and/or Club Resorts, including, but
not limited to, any claims made against INTERVAL for personal or bodily
injury occurring at any Club Resort.
3. The provisions of this Section K shall survive the expiration or termination
of this Agreement.
L. MISCELLANEOUS.
1. All notices provided for by this Agreement shall be deemed given if
in writing and delivered by hand, air express, or by registered or
certified mail, return receipt requested, to the addresses set forth
on page one of this Agreement or to such other address as may be
specified in accordance with this procedure.
2. Time shall be of the essence as to all provisions of this Agreement.
3. Should any part of this Agreement be declared invalid or
unenforceable for any reason, it shall be adjusted rather than
voided, if possible, to achieve the intent of the Parties. Any
invalidity resulting from the length of a period of time shall be
considered reduced to a period of time which would cure such
invalidity. In any event, the invalidity of any provision of this
Agreement, shall not affect any other provision of this Agreement
which shall be deemed valid and enforceable to the greatest extent
possible.
4. This Agreement shall be construed under the laws of the State of
Florida. The Parties acknowledge and agree that the Courts of Dade
County, Florida have proper and exclusive jurisdiction over the
Parties and the subject matter hereof in any legal action brought by
AFFILIATE against INTERVAL and, likewise, the Courts of Buncombe
County, North Carolina shall have proper and exclusive jurisdiction
over the Parties and the subject matter hereof in any legal action
brought by INTERVAL against AFFILIATE.
5. This Agreement is exclusively between and for the benefit of
INTERVAL and AFFILIATE. Nothing herein shall be construed to make
any purchaser, Exchange Guest, Individual Member, participating
resort or other individual or entity, a third party beneficiary to
this Agreement.
6. The failure of either Party to exercise any power given it hereunder or to
insist upon strict compliance with the terms of this Agreement shall not
constitute a waiver of that Party's right to demand exact compliance with the
terms hereof. Waiver by a Party of any particular default by the other shall
not affect or impair its rights with respect to any subsequent defaults of
the same or of a different kind; nor shall any delay or omission by a Party
to exercise any rights arising from any default affect or impair its right as
to such default or any future default. Further, no custom or course of
dealings of the parties at variance with the terms hereof shall constitute a
waiver of that Party's right to demand later compliance.
7. The Parties hereby acknowledge and agree that their relationship is
that of independent contractor, nothing in this Agreement nor the
relationship between the Parties hereto shall be construed to create
a partnership, joint venture or agency relationship. Neither Party
shall have the power or authority to bind or obligate the other or
to incur liability for the other.
8. This Agreement shall be construed without regard to any presumption
or other rule requiring construction against the Party causing this
Agreement to be drafted.
9. The headings and captions in this Agreement are for convenience only and
shall not be referred to in the interpretation of this Agreement.
10. This Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which taken together shall
constitute one and the same Agreement.
11. In the event of doubt or discrepancy between the English text of
this Agreement and the text of this Agreement in other languages,
the English text shall prevail. AFFILIATE, by signing below, hereby
acknowledges receipt of a copy of this Agreement in the English
language.
12. This Agreement contains the entire agreement of the Parties with
respect to the subject matter hereof, and supersedes any oral or
written representation, inducement or promise not contained herein
and may not be modified, except in writing signed by the Party
against whom enforcement is sought.
<PAGE>
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals.
PEPPERTREE RESORTS VACATION CLUB, INC.
By:__/s/____________________________
Authorized Officer
Name: John McFarland
Title: Senior Vice President
Accepted in Miami, Florida this 17th day of September, 1997.
INTERVAL INTERNATIONAL, INC.
By:__/s/____________________________
Craig M. Nash
President and
Chief Executive Officer
g:\legal\wpfiles\pepptree\caa5.doc
<PAGE>
EXHIBIT "A"
APPROVED CLUB RESORTS
Unit
Resort Name Address Configuration
Peppertree Maggie Valley Moody Farm Road 2 Bedroom
Maggie Valley, N.C.
Peppertree Atlantic Beach 715 W. Ft. Macon Road 1-, 2-, and 3-Bedroom
Atlantic Beach, N.C.
Blue Ridge Village Route 1, Box 264, Hwy. 184 1-,2-, and 3-Bedroom
Banner Elk, N.C.
Peppertree By The Sea 305 South Ocean Blvd. 1- and 2-Bedroom
N. Myrtle Beach, S.C.
Peppertree Outer Banks 9 Post Rd., P.O. Box 1190 1-, 2-, and 3-Bedroom
Beach Club Kill Devil Hills, N.C.
Peppertree Laurel Point 805 Ski Mountain Rd. 2-Bedroom
Gatlinburg, TN.
Peppertree Asheville One Holiday Inn Dr. Effy, 1-Bedroom
Vacation Club Asheville, NC
Peppertree Fontana Hwy. NC 28 2-Bedroom
Village Fontana Dam, NC
Peppertree Ocean Club 1908 N. Ocean Blvd. Effy, 1-, 2-, and 3-
N. Myrtle Beach, SC Bedroom
Peppertree Sandpebble 215 Atlantic Ave. 1- and 2-Bedroom
Beach Club Garden City, SC
<PAGE>
EXHIBIT "A" (CONTINUED)
APPROVED CLUB RESORTS (CONTINUED)
Unit
Resort Name Address Configuration
- ----------- ------- -------------
Peppertree Sands 300 South Ocean Blvd. 1- and 2-Bedroom
N. Myrtle Beach, SC
Peppertree Sea 215 Atlantic Avenue 2-Bedroom
Mystique Garden City, SC
Peppertree Tamarack E10037 Xanadu Rd. 1- and 2-Bedroom
Wisconsin Dells, WI
<PAGE>
EXHIBIT "B"
OPINION LETTER REQUIREMENTS
The following must be addressed in an Opinion Letter from an independent
licensed attorney (qualified to render an opinion with respect to the laws and
regulations of the relevant jurisdictions) pursuant to Section E, Paragraph 2(b)
of the Club Affiliation Agreement:
1. The name of the entity (or entities) that owns title to the property which
is the subject of the Club Affiliation Agreement, including what entity
owns the underlying land, the units and the amenities and facilities of
each of the Club Resorts, and the relationship of such entity (or
entities) to AFFILIATE (if other than AFFILIATE).
2. A complete description of AFFILIATE's interest in the real estate (and improvements
thereon) which is the subject of the Club Affiliation Agreement (e.g. leasehold
interest) if AFFILIATE does not hold fee title.
3. A complete description of the type of vacation ownership interests that
will be conveyed to purchasers (e.g., fee title or contractual occupancy
rights for a term of years), and the name of the entity conveying fee
title, or, as the case may be, contractual occupancy rights, to purchasers
in the CLUB and the relationship of such entity to AFFILIATE (if other
than AFFILIATE).
4. Confirmation that the legal structure of the CLUB is in compliance with
all applicable local, state, and federal laws and regulations where Club
Resorts are located.
5. Confirmation that the marketing of the CLUB is in compliance with all
applicable local, state, and federal laws and regulations, where the CLUB
will be marketed, as well as a statement of where the CLUB will be
marketed.
6. Whether or not purchase monies are escrowed or guaranteed by an independent third
party of standing (e.g., a bank, trust company, or attorney) until the purchaser
receives occupancy rights. If so, by whom and when are such monies released.
7. A description of how the legal structure of the CLUB provides purchasers
with the undisturbed use of the units, amenities and facilities comprising
the CLUB for the duration of the vacation ownership interest purchased.
The Opinion Letter should describe, at a minimum, the legal protection
afforded a purchaser in the event of:
(a) AFFILIATE's failure to complete Club Resorts or otherwise perform under its
agreement with a purchaser;
(b) bankruptcy or insolvency of AFFILIATE or the CLUB;
(c) a default under any existing encumbrance on Club Resorts;
(d) recordation of mortgages or liens against Club Resorts subsequent to the
conveyance or transfer of the vacation ownership interest to a purchaser; and
(e) sale of the underlying fee of Club Resorts.
8. Confirmation that the person (including the person's name and title)
executing the Club Affiliation Agreement has the authority to bind
AFFILIATE.
</TABLE>
<TABLE>
<S> <C>
Exhibit 10.28
SUBLEASE AGREEMENT
Agreement made this 21st day of December, A.D., 1999, by
and between EQUIVEST FINANCE, INC., a Delaware corporation with
a principal office at 100 Northfield Street, Greenwich,
Connecticut and Richard C. Breeden & Co., with an address at 23
Meadow Lane, Greenwich, Connecticut, hereinafter referred to as
Lessee. The term Parties shall mean Lessee and Sublessee.
WHEREAS, by Lease Agreement, effective April 1, 1997, (the
"Lease") Barrington Properties, LLC, a Connecticut limited liability
company, demised unto Lessee certain real property situated at 100
Northfield Street in Greenwich, Connecticut consisting of
approximately 2,500 rentable square feet of space (the "Premises");
and
WHEREAS, Richard C. Breeden is the President, Chairman &
CEO of Sublessee and Lessee is also affiliated with Sublessee and
a related entity thereto; and
WHEREAS, Lessee and Sublessee are desirous of entering into a
Lease Agreement whereby Sublessee shall rent the Premises from
Lessee subject to the terms and conditions set forth in the Lease.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Parties heretofore agree as follows:
1. Lessor does hereby lease unto Sublessee and Sublessee does
hereby hire the Premises subject to all of the terms and conditions
set forth in the Lease, a copy of which is attached hereto as
Exhibit "A". To the extent the context permits, the term "Tenant"
under the Lease shall mean and include Sublessee.
2. Sublessee shall perform all the covenants and conditions
contained in the Lease to be performed by Lessee, and Sublessee
shall be and is bound by each and every covenant and condition
contained in the Lease.
3. This Agreement is subject to the terms and conditions of
the Lease and shall automatically terminate on the cancellation or
expiration of the Lease. Sublessee shall be liable to Lessee for any
holding over after expiration of the term hereof.
4. Should Sublessee default in the payment to Lessee of any
sums due and owing under the Lease, Lessee shall be entitled to
institute a cause of action against Sublessee and to pursue all
other available to the "Landlord" under Section 17 of the Lease.
5. Sublessee acknowledges and agrees that all options and
purchase rights under the Lease, specifically including the Right of
First Refusal to Purchase as set forth in Section 24 thereof, shall
remain personal to Lessee and are not assigned or granted to
Sublessee under this Agreement.
IN WITNESS WHEREOF, the Parties have executed this
Sublease Agreement, consisting of two pages, on the date and year
first above-written.
Sublessee
Equivest Finance, Inc.
By: /s/
---
Richard G. Winkler,
Vice President
Lessee
Richard C. Breeden & Co.
By: /s/
---
Richard C. Breeden,
President
<PAGE>
FIRST ADDENDUM TO CLUB AFFILIATION AGREEMENT
THIS ADDENDUM ("Addendum") is attached to and made a part of the Club
Affiliation Agreement (the "Agreement') dated September 17, 1997, by and between
INTERVAL INTERNATIONAL, INC ("INTERVAL"), a Florida corporation, and PEPPERTREE
RESORTS VACATION CLUB, INC., (`AFFILIATE"), a North Carolina corporation, for
the multi-site vacation club membership program known as PEPPERTREE VACATION
CLUB (the "CLUB"), as amended from time to time (the Agreement and any addenda
thereto are sometimes hereinafter referred to, collectively , as the "CAA").
INTERVAL and AFFILIATE are sometime referred to as a "Party" or jointly referred
to as the "Parties."
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. All of the above recitals are true and correct and are incorporated herein by
reference. Except as expressly indicated to the contrary herein, all
capitalized terms used herein shall have the same meanings ascribed to them
in the CAA.
2. Each of the parties acknowledges that PEPPERTREE RESORTS, LTD. , a North
Carolina corporation ("PRL"); and PEPPERTREE VACATION CLUB INC., a North
Carolina non-profit corporation ("PVC") shall each be a contracting party to
the CAA and shall be collectively referred to as "AFFILIATE", together with
PEPPERTREE RESORTS VACATION CLUB, INC. on the CAA and on the Resort
Membership Application in connection with the CLUB. By signature of their
respective officers or agents hereof, PRL and PVC each acknowledge that it
agrees to the terms and conditions, representations and warranties of the CAA
in all respects and without limitation. PEPPERTREE RESORTS VACATION CLUB,
INC. PRL, and PVC each acknowledge that each shall be jointly and severally
liable for each and every obligation of AFFILIATE under the CAA.
3. Section B of the Agreement shall be amended by deleting the second sentence
of said Section and inserting the following language:
Thereafter this Agreement will renew for an additional period of six (6)
years, unless INTERVAL provides AFFILIATE with written notice, not less
than six (6) months prior to the expiration of the initial term of its
intent not to renew ("First Renewal Term")
4. Section E, Paragraph 1 of the Agreement shall be amended by adding the following
new subparagraph:
AFFILIATE agrees that this Agreement encompasses any Vacation Ownership
Resort, as well as all of the Units, buildings, phases or resorts/hotels
now or hereafter owned, constructed, acquired or leased for use in
connection with any vacation ownership program (other than the CLUB)
offered by AFFILIATE, excluding the vacation ownership resorts Peppertree
at Tamarack and Peppertree at Tamarack II; provided, however, that the
inclusion of all such Units, buildings, phases or resorts/hotels shall be
subject to: (a) the submission of all documentation reasonably required by
INTERVAL; (b) adherence to INTERVAL's affiliation standards and criteria
in effect at time of inclusion; and (c) ultimate approval by INTERVAL. In
that connection, AFFILIATE agrees to submit and agrees to cause its
Affiliates, where applicable, to submit, in a timely manner all such
documentation reasonably required by INTERVAL (including, but not by way
of limitation, a Resort Membership Application). It is further expressly
agreed that this Agreement encompasses any vacation club that may be
acquired, operated, marketed or managed by AFFILIATE or its Affiliates,
during the term of this Agreement. Notwithstanding the foregoing, nothing
herein shall require AFFILIATE to affiliate Units at Vacation Ownership
Resorts in which Vacation Interests are not being sold by AFFILIATE.
5. Section G o f the Agreement shall be amended by adding a new Paragraph 5 as follows:
5. AFFILIATE agrees to assist INTERVAL, as may be requested by INTERVAL,
to effect the recordation of such documents, as may be requested by
INTERVAL's counsel, so as to ensure adequate notice to potential
transferees of a controlling interest in AFFILIATE, or any Club Resort of
the exclusive affiliation of AFFILIATE and the Club Resorts with the
INTERVAL NETWORK.
6. The Agreement and all addenda thereto shall be construed without regard to
any presumption or other rule requiring construction against the part causing
the Agreement to be drafted.
7. Unless expressly modified herein, all terms and conditions of the Agreement
and any previous addenda thereto shall remain in full force and effect. Where
there is a conflict between the terms and conditions of the CAA and this
Addendum, the terms and conditions of the Addendum shall prevail.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals.
PEPPERTREE RESORTS VACATION CLUB, INC.
[S] Herbert H. Patrick, Jr.
- ----------------------
By: Herbert H. Patrick, Jr.
Vice President
Date: 7-15-99
PEPPERTREE RESORTS, LTD.
[S] Herbert H. Patrick, Jr.
- ----------------------
By: Herbert H. Patrick, Jr.
Vice President
Date: 7-15-99
PEPPERTREE VACATION CLUB, INC.
[S] Herbert H. Patrick, Jr.
- ----------------------
By: Herbert H. Patrick, Jr.
Vice President
Accepted this 15 day of July 1999.
INTERVAL INTERNATIONAL, INC.
[S] Craig M. Nash
- ----------------------
Craig M. Nash
Chief Executive Officer
<PAGE>
EQUIVEST FINANCE INC. AFFILIATES and SUBSIDIARIES
DELAWARE
- --------
Equivest Finance Inc.
Resort Funding Inc.
Eastern Resorts Corporation
EFI D.C. Acquisition Inc.
EFI Louisiana Acquisition Inc.
EFI Florida Acquisition Inc.
EFI Maryland Acquisition Inc.
BFICP Corporation
EFI Development Funding, Inc.
EFI Funding Company, Inc.
Mirror Lake Development Inc.
Resort Marketing Services, Inc.
Equivest Administrative Services, Inc.
Equivest Management Services, Inc.
Equivest Entertainment Services, Inc.
Resolution Credit Corporation
RHODE ISLAND
Eastern Resorts Company LLC
Long Wharf Marina Restaurant Inc.
MARYLAND
Ocean City Coconut Malorie Inc.
FLORIDA
St. Augustine Resort Development Inc.
LOUISIANA
Avenue Plaza LLC
NORTH CAROLINA
- --------------
Peppertree Resorts Ltd.
Peppertree Resort Villas Inc.
Peppertree Resorts Vacation Club Inc.
Peppertree Resorts Management Inc.
Peppertree Vacation Club Inc.
Peppertree Realty Inc.
Peppertree Acquisition II Corp.
ST. THOMAS VIRGIN ISLANDS
- -------------------------
Bluebeard's Castle Inc.
Castle Acquisition Inc.
EFI St. Thomas Acquisition Inc.
<PAGE>
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Equivest Finance, Inc.
Greenwich, Connecticut
We hereby consent to the incorporation by reference of our report, dated March
17, 2000, included in this Form 10KSB into the previously filed Equivest
Finance, Inc.'s Registration Statement on Form S-8 (No. 333-74357).
/s/ Firley, Moran, Freer & Eassa, P.C.
Syracuse, New York
March 30, 2000
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Equivest Finance, Inc.
Greenwich, Connecticut
We hereby consent to the incorporation by reference of our report, dated March
17, 2000, included in this Form 10KSB into the previously filed Equivest
Finance, Inc.'s Registration Statement on Form S-8 (No. 333-74357).
/s/ Firley, Moran, Freer & Eassa, P.C.
Syracuse, New York
March 30, 2000
</TABLE>
<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
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 8,010,888
<SECURITIES> 0
<RECEIVABLES> 257,157,650
<ALLOWANCES> (10,072,859)
<INVENTORY> 87,925,117
<CURRENT-ASSETS> 0
<PP&E> 18,818,362
<DEPRECIATION> (695,519)
<TOTAL-ASSETS> 416,985,654
<CURRENT-LIABILITIES> 0
<BONDS> 341,623,326
30,000
0
<COMMON> 280,897
<OTHER-SE> 75,051,431
<TOTAL-LIABILITY-AND-EQUITY> 416,985,654
<SALES> 0
<TOTAL-REVENUES> 94,380,233
<CGS> 0
<TOTAL-COSTS> 79,184,160
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,191,990
<INTEREST-EXPENSE> 13,389,034
<INCOME-PRETAX> 15,196,073
<INCOME-TAX> 6,500,000
<INCOME-CONTINUING> 8,696,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,696,073
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
