SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 2, 1998
GOLF VENTURES, INC.
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(Exact name of registrant as specified in its charter)
Utah 0-21337 87-0403864
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(State or other jurisdiction (Commission File No.) (IRS Employer ID #)
of incorporation)
255 South Orange Avenue, Suite 1515, Orlando, Florida 32801
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(Address and zip code of principal executive offices)
407-245-7557
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Registrant's telephone number
<PAGE>
Item 5. Other Events
On July 2, 1998, the Company entered into several agreements with Credit Suisse
First Boston Mortgage Capital LLC. to provide a $50,950,000 financing facility
for various development projects at the Company's locations, as well as, for the
restructuring of various secured notes payable and for the reduction in accounts
payable of the Company. This borrowing is through a three year note at an annual
interest rate of 4.5 percentage points over the London Interbank Offered Rate
("LIBOR"), as defined in the Promissory Note. Interest on the borrowing will be
paid monthly with minimum principal repayments of $14,050,000 due on or before
July 1, 1999 and $36,550,000 on or before July 1, 2000.
The Company used $29,856,492 of the net proceeds from this loan to pay-off
outstanding principal and accrued interest on its secured debt at July 2, 1998,
and has established certain property tax, insurance, and specific project
development and interest reserve accounts, all of which will be used in
connection with the further development of the Company's properties.
On July 2, 1998 the Company held-back borrowing $6,500,000 of the total loan
until it becomes necessary for these funds to be used for certain development
and improvement projects in order to reduce interest expense. Project
development and improvement funds as of July 2, 1998, as well as, any future
advances are deposited into a Construction Escrow Account and managed in
accordance with the draw provisions of the loan agreement.
On July 2, 1998, the Company entered into a Cash Management Agreement as a
provision of the Loan Agreement whereby the management of the various tax,
insurance, interest and operating accounts is specified.
Also, on July 2, 1998, the Company guaranteed a similar financing facility with
Credit Suisse First Boston Mortgage Capital LLC. For the Company's Pelican
Strand, Ltd. development project ("Pelican Strand"). This financing facility
provides for the borrowing of $35,600,000 for various development projects, as
well as, for the restructuring of the secured notes payable at Pelican Strand.
This borrowing also is through a three year note at an annual interest rate of
4.5 percentage points over LIBOR. Interest on the borrowing is to be paid
monthly with minimum principal repayments of $5,778,765 due on or before July 1,
1999 and $15,033,015 on or before July 1, 2000.
On July 2, 1998, Pelican Strand used $20,712,856 of the net proceeds from the
loan to pay-off the outstanding principal and accrued interest on its secured
note and established certain property tax, insurance, project development and
interest reserve accounts which will be used in connection with the further
development of Pelican Strand's properties.
On July 2, 1998, Pelican Strand held-back borrowing $3,500,000 of the total loan
until it becomes necessary for these funds to be used for certain development
and improvement projects. Project development and improvement funds as of July
2, 1998 as well as any future advances are deposited into a construction escrow
account and managed in accordance with the draw provisions of the Pelican Strand
loan agreement.
Also, on July 2, 1998, Pelican Strand entered into a separate Cash Management
Agreement as a provision of its Loan Agreement whereby the management of the
various tax, insurance, interest and operating funds is specified.
As consideration for structuring and advisory services provided by Credit Suisse
First Boston Mortgage Capital LLC. for these loans, the Company and Pelican
Strand, Ltd. paid fees of $4,327,500 at closing and are obligated for an
additional $5,000,000 payment by November 15, 1998. The Company also issued
13,651,710 shares of its Common Stock to Credit Suisse First Boston Mortgage
Capital LLC., representing 24.9% of the current and committed shares of stock to
be outstanding after the effectiveness of modifications to the Articles of
<PAGE>
Incorporation increasing the amount of common stock authorized. At July 2, 1998
the Company had issued a total of 13,648,182 shares in payment of the common
stock portion of this fee, which represented 55.5% of the then outstanding
shares of the Company.
The following are brief descriptions of sales of securities by the Company for
settlements, services, property or cash to support and advance the Company's
business plan since the first quarterly filing on Form 10Q for the three month
period ended March 31, 1998.
- - On April 8, 1998, the Company issued 218,182 shares to Credit Suisse First
Boston Mortgage Capital LLC., as a due diligence deposit for structuring and
advisory services in connection with securing an adequate financing facility to
further the development of the Company's properties. The Company believes this
transaction was exempt from registration with the Commission under Section 4(2)
of the Securities Act of 1933.
- - On July 6, 1998, the Company issued 862,000 shares of its common stock to
American Resource and Development Company in settlement of certain claims for
compensation for services. The Company believes this transaction was exempt from
registration with the Commission under Section 4(2) of the Securities Act of
1933.
- - On July 1, 1998, the Company issued 250,000 shares of its common stock to Dr.
B. Menne to repay a $312,500 indebtedness. The Company believes this transaction
was exempt from registration with the Commission under Section 4(2) of the
Securities Act of 1933.
- - On July 2, 1998, the Company issued 13,430,000 shares to Credit Suisse First
Boston Mortgage Capital LLC., as further consideration for structuring and
advisory services in connection with securing an adequate financing facility to
further the development of the Company's properties. The Company believes this
transaction was exempt from registration with the Commission under Section 4(2)
of the Securities Act of 1933.
The Company has committed as a condition to close the Credit Suisse First Boston
Loan Agreements to settle certain pre-merger disputed obligations, interest and
loan fees with certain 3rd parties, which will require the Company to issue an
additional 2,045,000 shares of common stock. Additionally, the Company has
agreed to the conversion of approximately $1,845,950 of unsecured debt in
exchange for the issuance of 1,476,761 shares of common stock. These additional
issuance's of common stock are subject to effectiveness of an increase in the
amount of common stock authorized under the Company's Articles of Incorporation.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are filed herewith or are incorporated by reference to
exhibits previously filed with the Securities and Exchange Commission. The
Company shall furnish copies of exhibits for a reasonable fee (covering the
expense of furnishing copies) upon request.
<PAGE>
Exhibit No. Exhibit Name
10.1 Loan Agreement, dated as of July 2, 1998, between Cutter Sound
Development, Ltd., Montverde Property, Ltd., Northshore Golf
Partners, Ltd., Northshore Development, Ltd., U.S. Golf
Pelican Strand, Inc., U.S. Golf Pinehurst Plantation, Ltd.,
FSD Golf Club, Ltd., RH Holdings, Inc., Wedgefield Limited
Partnership and Credit Suisse First Boston Mortgage Capital
LLC.
10.2 Loan Agreement, dated as of July 2, 1998, between Pelican
Strand, Ltd. and Credit Suisse First Boston Mortgage Capital
LLC.
10.3 Cash Management Agreement, dated as of July 2, 1998, between
Cutter Sound Development, Ltd., Montverde Property, Ltd.,
Northshore Golf Partners, Ltd., Northshore Development, Ltd.,
U.S. Golf Pelican Strand, Inc., U.S. Golf Pinehurst
Plantation, Ltd., FSD Golf Club, Ltd., RH Holdings, Inc.,
Wedgefield Limited Partnership and U. S. Golf Management, Inc.
and Credit Suisse First Boston Mortgage Capital LLC.
10.4 Cash Management Agreement, dated as of July 2, 1998, between
Pelican Strand, Ltd. and U. S. Golf Management, Inc. and
Credit Suisse First Boston Mortgage Capital LLC.
10.5 Agreement, dated as of July 2, 1998, between Golf Ventures,
Inc. and Credit Suisse First Boston Mortgage Capital LLC. with
respect to Capital Stock of Golf Ventures, Inc.
10.6 $50,950,000 Promissory Note, dated as of July 2, 1998, between
Cutter Sound Development, Ltd., Montverde Property, Ltd.,
Northshore Golf Partners, Ltd., Northshore Development, Ltd.,
U.S. Golf Pelican Strand, Inc., U.S. Golf Pinehurst
Plantation, Ltd., FSD Golf Club, Ltd., RH Holdings, Inc.,
Wedgefield Limited Partnership and Credit Suisse First Boston
Mortgage Capital LLC.
10.7 $35,600,000 Promissory Note, dated as of July 2, 1998, between
Pelican Strand, Ltd. and Credit Suisse First Boston Mortgage
Capital LLC.
10.8 Guaranty, dated as of July 2, 1998, by Cutter Sound
Development, Ltd., Montverde Property, Ltd., Northshore Golf
Partners, Ltd., Northshore Development, Ltd., U.S. Golf
Pelican Strand, Inc., U.S. Golf Pinehurst Plantation, Ltd.,
FSD Golf Club, Ltd., RH Holdings, Inc., Wedgefield Limited
Partnership and U. S. Golf Management, Inc. for the benefit of
Credit Suisse First Boston Mortgage Capital LLC., for the
$35,600,000 indebtedness of Pelican Strand, Ltd.
10.9 Guaranty, dated as of July 2, 1998, by Golf Ventures, Inc. for
the benefit of Credit Suisse First Boston Mortgage Capital
LLC., for the $35,600,000 indebtedness of Pelican Strand, Ltd.
GOLF VENTURES, INC.
/s/ Warren Stanchina
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Warren Stanchina, President
Dated: July 17, 1998
LOAN AGREEMENT
Dated as of July 2, 1998
Between
CUTTER SOUND DEVELOPMENT, LTD.,
MONTVERDE PROPERTY, LTD.,
NORTHSHORE GOLF PARTNERS, LTD.,
NORTHSHORE DEVELOPMENT, LTD.,
U.S. GOLF PELICAN STRAND, INC.,
U.S. GOLF PINEHURST PLANTATION, LTD.,
FSD GOLF CLUB, LTD.,
RH HOLDINGS, INC.,
WEDGEFIELD LIMITED PARTNERSHIP,
as Borrower
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
as Lender
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions
Section 1.2 Principles of Construction
ARTICLE II. PAYMENTS; ADVANCES
Section 2.1 The Loan
Section 2.2 Disbursements
Section 2.3 Loan Repayment; Exit Fee
Section 2.4 Prepayment
Section 2.5 Making of Payments
Section 2.6 Late Payment Charge
Section 2.7 Release on Payment in Full
Section 2.8 Construction Escrow Account
Section 2.9 Affiliate Payments
ARTICLE III. REQUIRED WORK; SUBSEQUENT ADVANCES
Section 3.1 Required Work
Section 3.2 Subsequent Advances
Section 3.3 Conditions Precedent to Subsequent Advances
Section 3.4 Conditions Precedent to Final Advances
Section 3.5 Reallocation of Budget
Section 3.6 Determinations
ARTICLE IV. RERESENTATIONS AND WARRANTIES
Section 4.1 Organization, Enforceability, Etc.
Section 4.2 No Structural Defects
Section 4.3 Financial Statements
Section 4.4 Litigation
Section 4.5 No Conflict with Law or Agreements
Section 4.6 Personal Property
Section 4.7 Easements
Section 4.8 No Flood Hazard, Etc.
Section 4.9 No Default
Section 4.10 No Offsets
Section 4.11 Valid Liens
Section 4.12 Compliance with Zoning and Legal Requirements
Section 4.13 No Condemnation
Section 4.14 No Casualty
Section 4.15 Purchase Options
Section 4.16 No Encroachments
Section 4.17 No Insolvency
Section 4.18 Fraudulent Conveyance
Section 4.19 Broker
Section 4.20 Environmental
Section 4.21 Borrower Address
Section 4.22 Structure of Borrower
Section 4.23 Leases
Section 4.24 Properties Taxed as a Separate Tax Lot
Section 4.25 Fiscal Year
Section 4.26 No Other Financing
Section 4.27 ERISA
Section 4.28 FIRPTA
Section 4.29 PUHCA
Section 4.30 Insurance
Section 4.31 No Margin Stock
Section 4.32 Investment Company Act
Section 4.33 Taxes
Section 4.34 Full and Accurate Disclosure
Section 4.35 Contracts
Section 4.36 Other Obligations and Liabilities
Section 4.37 Loan to Value Ratio
<PAGE>
ARTICLE V. AFFIRMATIVE COVENANTS
Section 5.1 Transfers
Section 5.2 Liens
Section 5.3 Indebtedness
Section 5.4 Compliance with Easements, Restrictive Covenants and
Permitted Encumbrances
Section 5.5 Leases
Section 5.6 Delivery of Notices
Section 5.7 ERISA
Section 5.8 Agreements with Affiliates
Section 5.9 After Acquired Property
Section 5.10 Books and Records
Section 5.11 Delivery of Estoppel Certificates
Section 5.12 Management, Etc.
Section 5.13 Financial Statements; Audit Rights
Section 5.14 Maintenance of Non-Taxable Status
Section 5.15 Lender's Attorneys' Fees and Expenses Section 5.16 Environmental
Section 5.17 Report Updates Section 5.18 Lender Access to Properties Section
5.19 Delivery of Documents Regarding Ownership Section 5.20 Conduct of Business
ARTICLE VI. EVENTS OF DEFAULT
Section 6.1 Events of Default; Defaults
Section 6.1.1 Non-Payment
Section 6.1.2 Affirmative Covenants
Section 6.1.3 Negative Covenants
Section 6.1.4 Financial Statements
Section 6.1.5 Representations
Section 6.1.6 Other Loan Documents
Section 6.1.7 Demolition or Alterations
Section 6.1.8 Failure to Deliver Estoppel Certificate
Section 6.1.9 Receipts;
Deposits
Section 6.1.10 Cessation of Borrower
Section 6.1.11 Transfer
Section
6.1.12 Liens
Section 6.1.13 Involuntary Bankruptcy, Etc.
Section 6.1.14
Voluntary Bankruptcy
Section 6.1.15 Judgments
Section 6.1.16 Leases
Section
6.1.17 Organizational Documents
Section 6.1.18 Delivery of Financial Statements
Section 6.1.19 ERISA
Section 6.1.20 Termination of Management Agreement
Section 6.1.21 Other Conditions for Acceleration
Section 6.1.22 Material Adverse Change
Section 6.1.23 Denial of Obligation
Section 6.1.24 Misapplication of Receipts
Section 6.1.25 Failure to Provide Further Assurances
Section 6.1.26 Lender Access
Section 6.1.27 Certain Cross Defaults
Section 6.1.28 SEC Action
Section 6.1.29 Disclosed Violations
Section 6.1.30 Red Hawk Property
Section 6.2 Rights upon Event of Default
<PAGE>
ARTICLE VII. GENERAL PROVISIONS
Section 7.1 Rights Cumulative; Waivers
Section 7.2 Lender's Action for its Own Protection Only
Section 7.3 No Third Party Beneficiaries
Section 7.4 Payment of Expenses
Section 7.5 Indemnification
Section 7.6 Notices
Section 7.7 No Oral Modification
Section 7.8 Assignment by Lender
Section 7.8.1 Assignment
Section 7.8.2 Participations
Section 7.8.3 Assignment and Acceptance
Section 7.8.4 Other Business
Section 7.8.5 Privity of Contract
Section 7.8.6 Availability of Records
Section 7.9 Severability
Section 7.10 No Assignment by Borrower
Section 7.11 Governing Law
Section 7.12 Successors and/or Assigns
Section 7.13 Entire Contract
Section 7.14 Joint and Several Liability
Section 7.15 Counterparts; Headings
Section 7.16 Time of the Essence
Section 7.17 Consents
Section 7.18 No Partnership
Section 7.19 Waiver Of Jury Trial
Section 7.20 Limited Recourse
Section 7.21 Limitation on Liability
Section 7.22 Jurisdiction, Venue, Service of Process
Section 7.23 Appointment of Agent for Service of Process
Section 7.24 Rule of Construction
Section 7.25 Further Assurances
Section 7.26 Placement of Loan
Section 7.27 Servicer
ARTICLE VIII. SPECIAL PROVISIONS
Section 8.1 Deposits for Tax and Insurance Premiums
Section 8.2 Replacement Reserve Fund
Section 8.3 Interest Reserve
Section 8.4 Approved Budget
Section 8.5 Working Capital Reserve
Section 8.6 Right of First Refusal to Provide Permanent Financing
Section 8.7 Release Provisions
Section 8.8 Subdivision Provisions
Section 8.9 Cash Management
Section 8.10 Right of First Refusal to Purchase Property
Section 8.11 Sale of Red Hawk Property
Section 8.12 Reserve Reimbursements
Section 8.13 Starwood Settlement
Section 8.14 Northshore Transfers
ARTICLE IX. SINGLE PURPOSE ENTITY/SEPARATENESS
Section 9.1 Representations, Warranties and Covenants
Section 9.2 Notice of Indemnification
Section 9.3 No Oral Agreements
<PAGE>
LIST OF EXHIBITS
Exhibit A - Allocated Loan Amount, Appraised Values and Minimum
Release Prices
Exhibit B - Omitted
Exhibit C - Omitted
Exhibit D - Omitted
Exhibit E - Structure of Borrower
Exhibit F - Required Work
Exhibit G - Omitted
Exhibit H - Omitted
Exhibit I - Red Hawk Property
Exhibit J - Violations
Exhibit K - Reserve Amounts
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 2, 1998 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
"Agreement"), between CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a
Delaware limited liability company having an address at 11 Madison Avenue, New
York, New York 10010 ("Lender") and CUTTER SOUND DEVELOPMENT, LTD., MONTVERDE
PROPERTY, LTD., NORTHSHORE GOLF PARTNERS, LTD., NORTHSHORE DEVELOPMENT, LTD.,
U.S. GOLF PELICAN STRAND, INC., U.S. GOLF PINEHURST PLANTATION, LTD., FSD GOLF
CLUB, LTD., RH HOLDINGS, INC. AND WEDGEFIELD LIMITED PARTNERSHIP, each having an
address at c/o Golf Communities of America, 255 South Orange Avenue, Firstate
Tower, Suite 1515, Orlando, Florida 32801 (collectively, "Borrower"). All
capitalized terms used herein shall have the respective meanings set forth in
Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower,
subject to and in accordance with the terms of this Agreement and the other Loan
Documents;
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereto hereby covenant, agree, represent and
warrant as follows:
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:
"ACM" shall mean any asbestos-containing materials.
"Affiliate" shall mean, with respect to any Person, (x) any
Person controlling, controlled by or under common control with, whether by
virtue of ownership or otherwise, such Person and (y) any spouse, parent or
sibling of any such Person who is a natural person, and any ancestor or lineal
descendent of such spouse, parent or sibling. For purposes of this Agreement and
the other Loan Documents, Affiliates of Borrower shall include, but not be
limited to,
(i) any partners, members or shareholders, as the case may be
(other than in their capacity as shareholders of any company whose
stock is publicly traded, where such shareholders do not control such
company) of Borrower,
(ii) any Guarantor, and any of the shareholders, members or
partners, if any, as the case may be, of such Guarantor (other than in
their capacity as shareholders of any company whose stock is publicly
traded, where such shareholders do not control such company),
(iii) the managing agent of the Property, if any, and any of
the shareholders, members or partners, if any, as the case may be, of
the managing agent (other than in their capacity as shareholders of any
company whose stock is publicly traded, where such shareholders do not
control such company) and
<PAGE>
(iv) any Person which would constitute an Affiliate of any
Person described above pursuant to clause (x) or (y) above.
"Affirmative Covenant" shall mean a promise or covenant by any
Person to perform, act, suffer, permit or consent.
"Agreement" shall mean this Loan Agreement, as the same may be
amended, restated, replaced, supplemented, or otherwise modified from time to
time.
"Allocated Loan Amount" shall mean, for an Individual
Property, the amount set forth on Exhibit A hereto as the Allocated Loan Amount
for such Individual Property.
"Applicable Interest Rate" shall mean the rate of interest,
adjusted from time to time, applicable to the outstanding principal balance of
the Loan from time to time, calculated in accordance with the terms of the Note.
"Appraised Value" shall mean, for each Release Parcel, the
amount set forth on Exhibit A hereto as the appraised value of such Release
Parcel or such other amount as shall be determined by an Approved Appraisal of
such Release Parcel after the date hereof.
"Approved Accountant" shall mean one of the so-called "Big
Six" accounting firms or such other independent certified public accountant of
nationally recognized standing selected by the Person required to deliver the
applicable Financial Statements and other reports specified herein, which
Approved Accountant shall be approved by Lender, which approval shall not be
unreasonably withheld, delayed or conditioned.
"Approved Appraisal" shall mean, with respect to an Individual
Property, an appraisal of such Individual Property (a) executed and delivered to
Lender by a qualified MAI appraiser having no direct or indirect interest in
such Individual Property or any loan secured in whole or in part thereby and
whose compensation is not affected by the approval or disapproval of such
appraisal by Lender; (b) addressed to Lender and its successors and assigns; (c)
satisfying the requirements of the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation and Title XI of the Federal Institutions
Reform, Recovery and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date of such calculation, with respect to
the appraisal and the appraiser preparing same; and (d) otherwise satisfactory
to Lender in all respects in Lender's reasonable discretion.
"Approved Budget" shall have the meaning set forth in Section
8.4.1 hereof.
"Architect" shall mean, with respect to an Individual
Property, the architect preparing the Plans for such Individual Property in
accordance with Section 3.1.2 hereof.
"Assignees" shall have the meaning set forth in Section 7.8.1
hereof.
<PAGE>
"Assignment of Leases" shall mean, collectively, those certain
first priority Assignments of Leases and Rents executed by an Individual
Borrower, as assignor, to Lender, as assignee, assigning to Lender all of such
Individual Borrower's interest in and to the Leases and Rents of the Individual
Property encumbered thereby as security for the Loan, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"Assignment of Management Agreement" shall mean, with respect
to each Individual Property, as applicable, that certain Assignment of
Management Agreement and Subordination of Management Fees among an Individual
Borrower, as assignor, Manager, as manager, and Lender, as assignee, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.
"best knowledge" or "knowledge" shall mean for the purpose of
this Agreement and the other Loan Documents the actual knowledge of the Person
in question, after having made due inquiry. If any entity with respect to which
this term would be applicable is a corporation, knowledge of such entity shall
refer to actual knowledge of its officers or directors after having made due
inquiry. If any such entity is a partnership, knowledge of such entity shall
refer to actual knowledge of each of its partners who participates in the
management of such partnership (directly or indirectly), after having made due
inquiry. If any such entity is a limited liability company, knowledge of such
entity shall refer to actual knowledge of its managing members after having made
due inquiry. The knowledge of Borrower for purposes of this definition shall
also include the knowledge of the Manager of the Individual Property in
question.
"Borrower" shall mean, collectively, the Persons identified as
Borrower in the first paragraph of this Agreement and each of their respective
successors and assigns.
"Borrower Information" shall have the meaning ascribed thereto
in Section 7.8.6.
"Broker" shall mean Curt Newman.
"Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which commercial banks in New York, New York are
required or permitted by law to close.
"Cash Collateral Account" shall have the meaning ascribed to
such term in the Cash Management Agreement.
"Cash Management Agreement" shall mean that certain Cash
Management Agreement, dated as of the date hereof, between Borrower, Lender and
Manager, as the same may be amended or modified from time to time.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. **9601, et seq.), as the same may be
amended from time to time.
"Claim" shall have the meaning set forth in Section 7.5.2
hereof.
"Clearing Account" shall have the meaning ascribed to such
term in the Cash Management Agreement.
<PAGE>
"Closing Date" shall mean the date of the funding of the
Initial Advance.
"Closing Period" shall have the meaning set forth in Section
8.6.2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Collection Period" shall have the meaning ascribed to such
term in the Cash Management Agreement.
"Construction Draw" shall have the meaning ascribed to such
term in Section 3.2.1 hereof.
"Construction Escrow Account" shall have the meaning ascribed
to such term in Section 2.8.1 hereof.
"Construction Funds" shall mean the sum of (i) the amount
deposited in the Construction Escrow Account on the Closing Date and (ii) the
amount by which the Loan Amount shall exceed the Initial Advance.
"Contract" shall mean (i) any management, brokerage or leasing
agreement or (ii) any cleaning, maintenance, service or other contract or
agreement of any kind (other than Leases) of a material nature (materiality for
these purposes to include contracts providing for aggregate payments in excess
of $50,000 or which extend beyond one year (unless cancelable on thirty (30)
days' or less notice)), in the case of each of clause (i) or (ii) relating to
the ownership, leasing, management, use, operation, maintenance, repair or
restoration of the Property.
"Contribution Agreement" shall mean that certain Contribution
Agreement by and among the Individual Borrowers dated as of the date hereof, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"control" (and the correlative terms "controlled by" and
"controlling") shall mean the power to direct the business and affairs of the
entity in question by reason of the ownership of beneficial interests, by
contract or otherwise.
"Corrective Work" shall mean have the meaning ascribed to such
term in the Environmental Indemnification Agreement.
"Debt" shall have the same meaning as the term "Indebtedness".
"Debt Service" shall mean, with respect to any particular
period of time, scheduled principal and/or interest payments under the Note.
"Default" shall have the meaning set forth in Section 6.1
hereof.
"Default Rate" shall have the meaning set forth in the Note.
<PAGE>
"Designated Officer" shall mean if any Individual Borrower is
a corporation, the chief financial officer of such corporation or such other
officer of such corporation as is fully familiar with the financial affairs of
such Individual Borrower and is approved by Lender. If any Individual Borrower
is a partnership, such officer of such Individual Borrower's managing general
partner as satisfies the first sentence of this definition. If any Individual
Borrower is a limited liability company, such officer of such Individual
Borrower's managing member as satisfies the first sentence of this definition.
"Disclosed Contracts" shall mean the Contracts disclosed to
Lender in writing on the date hereof.
"Disclosed Violations" shall have the meaning set forth in
Section 4.12.1 hereof.
"Disclosure Document" shall have the meaning set forth in
Section 7.26.3 hereof.
"Disqualified Person" shall have the meaning set forth in
Section 4.27.1 hereof.
"Easements" shall have the meaning ascribed to such term in
Section 4.7 hereof.
"Engineer's Report" shall mean the engineering report made and
delivered to Lender with respect to an Individual Property.
"Entities" shall have the meaning set forth in Section 7.26.2
hereof.
"Environmental Costs" shall mean "Indemnified Costs" as such
term is defined in the Environmental Indemnification Agreement.
"Environmental Consultant" shall mean an environmental
consultant reasonably satisfactory to Lender.
"Environmental Indemnification Agreement" shall mean that
certain Environmental Indemnification Agreement dated the date hereof in favor
of Lender, as same may hereafter be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"Environmental Laws" shall mean CERCLA; The Resource
Conservation and Recovery Act, 42 U.S.C. *1601, et seq.; The Hazardous
Substances Transportation Act, 49 U.S.C. *1801, et seq.; The Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. *11001, et seq.; The Toxic
Substances Control Act, 15 U.S.C. *2601 et seq.; The Clean Air Act, 42 U.S.C..
*7401 et seq., The Clean Water Act, 33 U.S.C. *1251 et seq.; The Safe Drinking
Water Act, 42 U.S.C. *300 et seq.; as any of the foregoing may be amended from
time to time; and any other federal, state and local laws or regulations, codes,
statutes, orders, decrees, judgments or injunctions, now or hereafter issued,
promulgated, approved or entered thereunder, relating to pollution,
contamination or protection of the environment, including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata, buildings or
facilities) or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances.
<PAGE>
"Environmental Matter" shall mean any matter arising out of,
relating to, or resulting from pollution, contamination or protection of the
environment (including natural resources), and any matters relating to emission,
discharge, release or threatened release, of Hazardous Substances into the air
(indoor and outdoor), surface water, groundwater, soil, land surface or
subsurface, buildings or facilities or otherwise arising out of, relating to, or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, release or threatened release of
Hazardous Substances.
"Environmental Report" shall mean, collectively, the Phase I
and, if applicable, Phase II, environmental reports with respect to the Property
made and delivered to Lender by the Environmental Consultant in connection with
the Loan.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder from time to
time.
"Exchange Act" shall have the meaning set forth in Section
7.26.3 hereof.
"Event of Default" shall have the meaning set forth in Section
6.1 hereof.
"Financial Statements" shall mean (a) with respect to
Borrower, the financial statements and other documentation required to be
delivered pursuant to Section 5.13 hereof and, (b) with respect to Guarantors,
such financial statements as are required by the terms of the Guaranty, the
Environmental Indemnification Agreement or any of the other Loan Documents, to
the extent applicable to such Guarantor.
"Fiscal Year" shall mean each twelve (12) month period
commencing on January 1 and ending on December 31 during each year of the Term.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the effective date of the applicable
financial report.
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"Gross Income from Operations" shall mean the aggregate of all
income, computed in accordance with GAAP, derived from the ownership and
operation of the Properties from whatever source, including, but not limited to,
Receipts, utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent
concessions or credits, but excluding sales, use and occupancy or other taxes on
receipts required to be accounted for by Borrower to any government or
governmental agency, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, proceeds of casualty insurance and condemnation awards
(other than business interruption or other loss of income insurance), and any
disbursements to the Borrower from the applicable Tax and Insurance Escrow Fund,
the applicable Replacement Reserve Fund or any other escrow fund or reserves
established pursuant to the Loan Documents.
<PAGE>
"Guarantor" shall mean any guarantor or indemnitor under any
Guaranty including, without limitation, Golf Ventures, Inc., U.S. Golf
Communities, Inc. and Warren Stanchina.
"Guaranty" shall mean any guaranty or indemnity executed and
delivered in connection with the Loan as of the date hereof or as of any date
hereafter.
"Hazardous Substances" shall mean asbestos, ACM, PCBs,
urea-formaldehyde and urea-formaldehyde foam insulation, nuclear fuel or waste,
petroleum products and any hazardous waste, toxic substance, related components,
related constituents, pollutant or contaminant, including, without limitation,
any substance defined or treated as a "hazardous substance", "extremely
hazardous substance" or "toxic substance" (or comparable term) in any applicable
Environmental Law and any other material which may give rise to Environmental
Costs.
"Improvements" shall have the meaning set forth in the
granting clause of the related Mortgage with respect to each Individual
Property.
"Indebtedness" shall mean the outstanding principal amount set
forth in and evidenced by the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the Note,
this Agreement, each Mortgage or any other Loan Document.
"Indemnified Parties" shall mean each of Lender, the
Affiliates of Lender and the Participants and their respective successors,
partners, members, shareholders, officers, directors, attorneys, agents and
employees.
"Independent Director" shall mean a person who is not at the
time of appointment, and has not been at any time in the preceding five years,
(i) a stockholder, director, officer, member, employee or partner of Borrower or
any Affiliate of Borrower; (ii) a customer, supplier or other Person who derives
more than ten percent (10%) of his/her/its purchases or revenues from
his/her/its activities with Borrower or any Affiliate of Borrower; (iii) a
Person controlling or under common control with any such stockholder, director,
officer, member, employee, partner, customer, supplier or other Person or (iv) a
member of the immediate family of any such stockholder, director, officer,
member, employee, partner, customer, supplier or other Person.
"Individual Borrower" shall mean each of the Persons signing
this Agreement as Borrower and their respective successors and assigns.
"Individual Property" shall mean the real property and the
improvements thereon encumbered by a Mortgage executed by an Individual
Borrower, together with all rights pertaining to such Individual Property and
improvements thereon located, as more particularly described in the Granting
Clauses of such Mortgage and referred to therein as the "Premises".
"Initial Advance" shall mean Lender's initial advance of
proceeds of the Loan in the amount set forth on Exhibit K as the Initial
Advance.
<PAGE>
"Insolvent" shall mean the inability of a Person to pay its
debts as they become due and/or if the fair market value of such Person's assets
do not exceed its liabilities, including without limitation, subordinated,
unliquidated, disputed or contingent liabilities.
"Insurance Premiums" shall have the meaning set forth in
Section 8.1 hereof.
"Lease" shall mean any lease, sublease or sub-sublease,
letting, license, concession or other agreement (whether now or hereafter in
effect) entered into by Borrower (or its predecessor-in-interest) pursuant to
which any Person is granted a possessory interest in, or right to use or occupy
all or any portion of any space in any Individual Property, and every
modification, amendment or other agreement relating to such lease, sublease,
sub-sublease, or other agreement entered into in connection with such lease,
sublease, sub-sublease, or other agreement and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"Legal Requirements" shall mean, with respect to each
Individual Property, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting such Individual
Property or any part thereof or the construction, use, alteration or operation
thereof, or any part thereof, whether now or hereafter enacted and in force, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or actually known to Borrower, at any time in
force affecting such Individual Property or any part thereof, including, without
limitation, any which may (i) require repairs, modifications or alterations in
or to such Individual Property or any part thereof, or (ii) in any way limit the
use and enjoyment thereof.
"Lender" shall mean Credit Suisse First Boston Mortgage
Capital LLC, together with its successors and assigns.
"Lender's Consultant" shall mean EMG Consultants, or such
other similarly qualified person reasonably satisfactory to Lender.
"Lender's Counsel" shall mean Cadwalader, Wickersham & Taft,
located in New York, New York, and any other law firm, wherever situated, acting
as counsel to Lender.
"Lender's Counsel Fees" shall mean all reasonable fees and
disbursements of Lender's Counsel.
"LIBOR" shall have the meaning ascribed thereto in the Note.
"Lien" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, or affecting an Individual Property or any portion thereof or
Borrower's interest therein, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic's, materialmen's and other similar liens and
encumbrances.
<PAGE>
"Loan" shall mean the loan in the maximum principal amount of
$50,950,000 which shall be advanced by Lender in accordance with the terms and
conditions of this Agreement and which is evidenced by the Note and is secured
by each Mortgage and all of the other Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the
Note, the Mortgage and the Assignment of Leases encumbering each Individual
Property, the Assignment of Management Agreement for each Individual Property,
the Environmental Indemnification Agreement, the Contribution Agreement and any
other document pertaining to the Individual Properties, the Pledge Agreement
executed by U.S Golf (Pelican Strand), Inc., the Pledge Agreement executed by
U.S. Golf Communities, Inc. and any and all other documents executed and/or
delivered in connection with the Loan.
"Loan Interest" shall have the meaning set forth in Section
7.26.1 hereof.
"Loan Pool" shall have the meaning set forth in Section 7.26.1
hereof.
"Lot" shall mean each portion of an Individual Property
designated as a "lot" on a subdivision map or plat which has been filed with and
approved by all applicable Governmental Authorities with respect to such
Individual Property or, with respect to any Individual Property or part thereof
which shall be subjected to condominium ownership, each unit in such
condominium.
"Management Agreement" shall mean, with respect to any
Individual Property, the agreement pursuant to which Manager is to provide
management and other services with respect to such Individual Property.
"Manager" shall mean U.S. Golf Management, Inc. or such other
manager as shall be approved by Lender in accordance herewith.
"Material Adverse Effect" shall mean any event or condition
that has a material adverse effect on (i) all of the Properties taken as a
whole, (ii) the business, prospects, profits, operations or condition (financial
or otherwise) of Borrower, or (iii) the ability of Borrower to repay the
principal and interest of the Indebtedness as it becomes due and perform its
other obligations under this Agreement or any of the other Loan Documents.
"Maturity Date" shall have the meaning ascribed thereto in the
Note.
"Maximum Management Fee" shall mean with respect to each
Individual Property, an amount not to exceed the management fee which would be
paid to a third-party in an arms length transaction for services similar to the
services to be rendered by Manager under the Management Agreement.
"Minimum Release Price" shall have the meaning set forth in
Section 8.7.1 hereof.
"Mortgage" shall mean, collectively, those eight certain first
priority Mortgages and Security Agreements and Deeds of Trust and Security
Agreements, as the case may be, each executed and delivered by an Individual
Borrower as security for the Loan, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"Negative Covenant" shall mean a promise or covenant by any
Person to not act or perform or to not suffer, permit or consent to an action.
<PAGE>
"Net Operating Income" shall mean the amount obtained by
subtracting Operating Expenses from Gross Income from Operations.
"Note" shall mean that certain note of even date herewith in
the principal amount of $50,950,000, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Notices" shall have the meaning set forth in Section 7.6
hereof.
"Obligated Party" shall have the meaning set forth in Section
6.2 hereof.
"Obligations" shall have the meaning ascribed to such term in
the Mortgage.
"Offer" shall have the meaning set forth in Section 8.6.1.
"Offer Period" shall have the meaning set forth in Section
8.6.2.
"Officer's Certificate" shall mean a certificate delivered to
Lender by Borrower which is signed by an authorized senior officer of the
general partner or managing member of each Individual Borrower.
"Operating Expenses" shall mean the aggregate of all
expenditures, computed in accordance with GAAP, of whatever kind relating to the
operation, maintenance and management of the Property that are incurred on a
regular monthly or other periodic basis, including without limitation,
expenditures for utilities, ordinary repairs and maintenance, insurance, license
fees, property taxes and assessments, advertising, management fees, payroll and
related taxes, computer processing charges, operational equipment or other lease
payments as reasonably approved by Lender, and other similar costs, but
excluding depreciation (and other non-cash charges), Debt Service (or any other
amounts paid by Borrower on account of the Indebtedness), and contributions to
the Replacement Reserve Fund, the Tax and Insurance Escrow Fund, and any other
reserves or escrows required under the Loan Documents.
"Organizational Documents" shall mean, with respect to any
Person who is not a natural person, the certificate or articles of
incorporation, memorandum of association, articles of association, trust
agreement, by-laws, partnership agreement, limited partnership agreement,
certificate of partnership or limited partnership, limited liability company
articles of organization, limited liability company operating agreement or any
other organizational document, and all shareholder agreements, voting trusts and
similar arrangements with respect to its stock, partnership interests,
membership interests or other equity interests.
"Other Charges" shall mean all ground rents, maintenance
charges, impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining any Individual Property, now or hereafter levied or
assessed or imposed against the Property or any part thereof.
<PAGE>
"Outside Funding Date" shall mean the date that is eighteen
(18) months after the date of this Agreement.
"Participants" shall have the meaning set forth in Section
7.8.2 hereof.
"Party In Interest" shall have the meaning set forth Section
4.27.1 hereof.
"Payment Date" shall mean the first (1st) calendar day of each
calendar month commencing with July, 1998.
"PCBs" shall mean polychlorinated biphenyls.
"Permanent Financing" shall mean any financing or loan secured
in whole or in part by the Property, the proceeds of which will be used to pay
the Indebtedness.
"Permit" shall mean all approvals, consents, registrations,
franchises, permits, licenses, variances, certificates of occupancy and other
authorizations with regard to zoning, landmark, ecological, environmental, air
quality, subdivision, planning, building or land use required by any
Governmental Authority for the construction, lawful occupancy and operation of
the Improvements and the actual and contemplated uses thereof.
"Permitted Encumbrances" shall mean, with respect to each
Individual Property, collectively, (a) the Liens and security interests created
by the Loan Documents, (b) the Liens, encumbrances and other matters disclosed
in the Title Insurance Policies relating to such Individual Property, and (c)
Liens, if any, for Taxes imposed by any Governmental Authority not yet due or
delinquent, and (d) such other title and survey exceptions as Lender may
hereafter approve in writing in Lender in accordance herewith.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Placement Party" shall have the meaning set forth in Section
7.26.1 hereof.
"Plans" shall mean the plans and specifications approved by
Lender in accordance with Section 3.2.1, as the same may be amended in
accordance herewith.
"Prohibited Transaction" shall mean a prohibited transaction
as described under Section 406 of ERISA or Section 4975 of the Internal Revenue
Code which is not the subject of a statutory exemption under Section 408(b) of
ERISA or an administrative exemption granted pursuant to Section 408(a) of
ERISA.
"Property" or "Properties" shall mean, collectively, all of
the Individual Properties which are subject to the terms of this Agreement.
"Property Budget" shall mean, with respect to each Individual
Property, a schedule setting forth the proposed use or intended allocation of
the Construction Funds with respect to the Required Work on such Individual
Property.
<PAGE>
"Rating Agencies" shall mean each of Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff &
Phelps Credit Rating Co. and Fitch IBCA, Inc., or any other
nationally-recognized statistical rating agency which has been reasonably
approved by Lender.
"Receipts" shall mean, without duplication, any and all rents,
issues, profits, payments, income, deposits (other than security deposits which
an Individual Borrower is not entitled to retain or apply to defaults),
revenues, proceeds, reimbursements, receipts and similar items in whatever form
(including, without limitation, cash, checks, money orders or other instruments
for the payment of money) derived from, or generated by, the use, ownership,
leasing or operation of any Individual Property, including, without limitation,
(a) real estate tax refunds, (b) proceeds of any insurance, including, without
limitation, business interruption insurance, (c) condemnation awards, (d) all
sums paid with respect to a modification, rejection or termination of any Lease
(including in any bankruptcy case) or otherwise paid in connection with an
Individual Borrower taking any action under any Lease (e.g., granting a consent)
or waiving any provision thereof, (e) damages or other payments in settlement of
claims by Borrower against tenants or other third parties in connection with
each Individual Property, (f) proceeds of any transfer or sale of any items of
the collateral securing the Loan or of any partial interest in such collateral
or the Individual Borrower other than a sale resulting in the satisfaction of
the Loan in full in which event this Agreement will be terminated and (g) all
amounts distributed to U.S. Golf Pelican Strand, Inc. (whether by dividend or
otherwise) by Pelican Strand Development Corporation.
"Related Party" shall have the meaning set forth in Section
7.20 hereof.
"Replacement Reserve Account" shall have the meaning set forth
in Section 8.2.2.
"Replacement Reserve Contribution" shall have the meaning set
forth in Section 8.2.1.
"Replacements" shall have the meaning set forth in Section
8.2.5.
"Request for Advance" shall have the meaning set forth in
Section 3.2.1.
"Required Work" shall have the meaning set forth in Section
3.1.1.
"Retainage" shall have the meaning set forth in Section 3.2.2.
"Securities" shall have the meaning set forth in Section 7.26.1 hereof.
"Securities Act" shall have the meaning set forth in Section
7.26.3 hereof.
"Securitization" shall have the meaning set forth in Section
7.26.1 hereof.
"Securitization Indemnification" shall have the meaning set
forth in Section 7.26.3 hereof.
"Securitization Indemnified Party" shall have the meaning set
forth in Section 7.26.3 hereof.
<PAGE>
"Servicer" shall mean a servicer or account administrator of
the Lender designated by and acting for the benefit of the Lender.
"Significant Party" shall mean Borrower, Guarantor and each
SPE Entity.
"SPE Entity" shall mean either the managing member or general
partner, as the case may be, of any Individual Borrower and any Guarantor.
"Spread Maintenance Premium" shall mean, in connection with
any prepayment of all or any portion of the outstanding principal balance of the
Note, an amount equal to the present value of all future installments of
interest which would have been due under the Note on the portion of the
outstanding principal balance of the Note being prepaid if interest accrued on
such portion of the principal balance being prepaid at an interest rate per
annum equal to four and one-half percent (4.5%).
"State" shall mean, with respect to an Individual Property,
the State or Commonwealth in which such Individual Property or any part thereof
is located.
"Subsequent Advances" shall have the meaning set forth in
Section 2.2 hereof.
"Substantial Completion" or "Substantially Complete" shall
mean the stage in the progress of the Required Work with respect to an
Individual Property at which (a) such Required Work has, in the reasonable
opinion of the Lender's Consultant, been completed in accordance with the Plans
and the Requirements in all material respects, free of defects in construction
or materials, except for minor "punch list" items, (b) the Improvements shall
contain all furniture, fixtures and equipment required for the intended use and
operation of the Improvements, (c) a temporary or permanent certificate of
occupancy, if applicable, and all other certificates, licenses, consents and
approvals required for the intended use and operation of the Improvements shall
have been issued by or obtained from the appropriate Governmental Authorities,
and (d) all costs (other than punchlist items) incurred in connection with the
Required Work shall have been paid in full (subject to Retainage) and there
shall be no liens, claims for liens, encumbrances or security instruments (other
than the Mortgage) for or relating to materials supplied or services performed
in connection therewith (or any such liens shall be bonded to the reasonable
satisfaction of Lender).
"Tax and Insurance Escrow Account" shall have the meaning set
forth in Section 8.1.1.
"Taxes" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents, now or hereafter levied or
assessed or imposed against the Property or any part thereof.
"Title Insurance Policy" shall mean, with respect to each
Individual Property, the title insurance policy in the form (reasonably
acceptable to Lender) issued with respect to such Individual Property and
insuring the lien of the Mortgage encumbering such Individual Property.
<PAGE>
"Title Insurer" shall mean, with respect to each Individual
Property, the issuer of the Title Insurance Policy.
"Transfer" shall have the meaning set forth in Section 5.1.1
hereof.
"UCC" or "Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in the applicable State or Commonwealth in which an
Individual Property is located.
"Working Capital Reserve Account" shall have the meaning set
forth in Section 8.5.1.
"Working Day" shall mean any day on which dealings in foreign
currencies and exchange are carried on in London, England and in New York, New
York.
Section 1.2 Principles of Construction.
All references to sections and schedules are to sections and
schedules in or to this Agreement unless otherwise specified. Unless otherwise
specified, the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined.
ARTICLE II. PAYMENTS; ADVANCES
Section 2.1 The Loan. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make the Loan to Borrower
on the Closing Date in the principal amount not to exceed to Fifty Million Nine
Hundred and Fifty Thousand and No/100 Dollars ($50,950,000).
Section 2.2 Disbursements. Borrower may request and receive
only one borrowing hereunder in respect of the Loan, which borrowing may be
advanced in any number of disbursements in accordance with the terms hereof, and
any amount borrowed and repaid hereunder in respect of the Loan may not be
reborrowed. Lender shall make, and Borrower shall accept, the Initial Advance on
the date hereof and each Individual Borrower shall receive at least $2,500,000
from the Initial Advance. Borrower may request and Lender may make one or more
additional advances of a portion of the proceeds of the Loan not previously
advanced (each a "Subsequent Advance") in accordance with the provisions of
Section 3.2 hereof. Any and all Subsequent Advances shall be deemed advances of
the Loan and shall be evidenced by the Note and secured by the Mortgage.
Section 2.3 Loan Repayment; Exit Fee. Borrower shall pay the
Indebtedness to Lender in accordance with the terms and conditions of the Note.
In addition, upon the Maturity Date or such earlier date as the Loan shall be
paid in full, Borrower shall pay to Lender the sum of $1,298,250 as an exit fee.
All payments to Lender under this Agreement will be paid as provided in the Note
for payments thereunder with interest at the Applicable Interest Rate, Default
Rate or other rate as specified herein.
<PAGE>
Section 2.4 Prepayment. Borrower shall not be permitted to
prepay all or any portion of the Loan except in connection with a release of all
or any portion of the Property under Section 8.7 hereof or as otherwise
expressly provided herein or in the other Loan Documents. If, after the Debt has
been accelerated due to a Default by Borrower, including, without limitation,
any attempt by Borrower to prepay the Debt at a time when prepayment is
prohibited hereunder, Borrower shall tender an amount sufficient to pay the
entire accelerated Debt, such tender shall be deemed a voluntary prepayment and
an attempt to evade the restrictions on prepayment set forth herein, and
Borrower shall, in addition to all other amounts then payable hereunder, be
required to pay Lender a prepayment fee equal to one percent (1%) of the amount
of principal being repaid together with a Spread Maintenance Premium calculated
with respect to the amount of principal being repaid.
Section 2.5 Making of Payments. Each payment by Borrower
hereunder or under the Note shall be made in funds settled through the New York
Clearing House Interbank Payments System or other funds immediately available to
Lender by 12:00 noon, New York City time, on the date such payment is due at
such place as Lender may direct, which place may be changed by Lender from time
to time by written notice to Borrower. Whenever any payment hereunder or under
the Note shall be stated to be due on a day which is not a Working Day, such
payment shall be made on the immediately preceding Working Day. Time is of the
essence as to all payments due under this Agreement.
Section 2.6 Late Payment Charge. If any sum due under this
Agreement or any other Loan Document is not paid by Borrower on the date on
which it is due, Borrower shall pay to Lender upon demand a late charge as
provided in the Note for payments of principal or interest thereunder not paid
when due.
Section 2.7 Release on Payment in Full. Lender shall, upon the
written request and at the expense of Borrower, upon payment in full of all
principal and interest on the Loan and all other amounts due and payable under
the Loan Documents in accordance with the terms and provisions of the Note and
this Loan Agreement, release the liens of each Mortgage not theretofore released
or, at Borrower's direction, this Agreement, the Note, each Mortgage and all
other Loan Documents held by Lender as security for the Loan shall be assigned
by Lender to such Person designated by Borrower for such purpose, provided
however, such assignment shall be without warranty or recourse to Lender.
Section 2.8 Construction Escrow Account.
2.8.1 On the Closing Date, the sum of set forth on Exhibit K
hereto as the Construction Escrow Account shall be deposited from the
Initial Advance and held in an account maintained at a bank designated
by Lender and pledged to Lender as additional collateral for the Loan
(the "Construction Escrow Account"). The Construction Escrow Account
shall be an interest-bearing account and all interest earned thereon
shall become part of the Construction Escrow Account for the benefit of
Borrower.
2.8.2 Any portion of the Loan not theretofore advanced shall
be advanced on the Outside Funding Date and deposited into the
Construction Escrow Account. Upon such deposit, the Loan shall be
deemed fully advanced to Borrower.
<PAGE>
2.8.3 Upon satisfaction of the conditions contained in Section
3.3 and 3.4 hereof for a Construction Draw (other than the condition
contained in Section 3.3.9 hereof), Lender shall disburse the amount of
such Construction Draw from the Construction Escrow Account. Upon and
during the continuance of an Event of Default, any and all amounts in
the Construction Escrow Account may be applied to the Indebtedness in
such order, priority and proportions as Lender in its discretion shall
deem proper. Section 2.9 Affiliate Payments. Each Individual Borrower
represents and warrants that no portion of the Initial Advance is
intended to be paid to any Affiliate of such Individual Borrower (other
than Borrower) and covenants that (a) no portion of any Subsequent
Advance or Construction Draw shall be paid to any Affiliate of such
Individual Borrower, (b) no portion of any disbursement from any
reserve account maintained under this Loan Agreement shall be paid to
any Affiliate of such Individual Borrower and (c) no portion of the
Required Work shall be performed by any Affiliate of such Individual
Borrower, whether or not on competitive terms.
ARTICLE III. REQUIRED WORK; SUBSEQUENT ADVANCES
Section 3.1 Required Work.
3.1.1 Borrower shall promptly commence and diligently and
continuously perform all of the work set forth on Exhibit F hereto (the
"Required Work") and shall complete such Required Work expeditiously
and in any event not later than eighteen (18) months after the date
hereof.
3.1.2 Prior to the commencement of the Required Work
applicable to an Individual Property, Borrower shall prepare and submit
to Lender and applicable Governmental Authorities for approval (a) to
the extent appropriate for such Required Work, a complete set of plans
and specifications for such Required Work (the "Plans") prepared by an
architect reasonably acceptable to Lender (the "Architect") and (b) a
reasonably detailed Property Budget setting forth the estimated costs
of such Required Work. Borrower shall not modify the approved Plans in
any material respect without the consent of Lender in each instance.
Lender's approval of any Plans and consent to any modification thereof
shall not be unreasonably withheld, conditioned or delayed and shall be
deemed given if Lender does not object thereto in writing within twenty
(20) Business Days, with respect to approval of Plans, or ten (10)
Business Days, with respect to a modification of Plans, after receiving
Borrower's request for such approval or consent specifying in
reasonable detail the reasons for such objection, provided that
Borrower's request for such approval or consent shall have stated that
such consent shall be deemed given if Lender does not object to such
approval or modification within such twenty (20) or ten (10) Business
Days, as the case may be.
3.1.3 Borrower shall pay for and obtain or cause to be paid
for and obtained all Permits with regard to the Required Work, whether
necessary for commencement, completion, use or otherwise.
3.1.4 Borrower shall perform or cause to be performed all
Required Work in a good and workmanlike manner in compliance with all
applicable Legal Requirements and the Plans.
3.1.5 Borrower shall pay and discharge (by bonding or
otherwise) all claims for labor done and material and services
furnished in connection with the Required Work and cause the Required
Work to be completed free and clear of any and all liens (including
mechanic's, materialman's or other liens), claims and encumbrances
whatsoever.
<PAGE>
3.1.6 Each contractor or subcontractor performing any portion
of the Required Work shall be licensed by the appropriate state agency,
bonded (if the cost of the work to be performed by such contractor
shall be in excess of $500,000 and such bonds shall be requested by
Lender) and unaffiliated with Borrower. Upon Lender's request, Borrower
shall provide written evidence that each contractor and subcontractor
meets the requirements of this paragraph.
3.1.7 Borrower shall permit Lender and Lender's consultants to
enter upon the Individual Property which is the subject of the Required
Work at all reasonable times to inspect the Required Work and all shop
and related drawings, daily logs and other reports and records used or
maintained in connection with the Required Work and shall furnish to
Lender, upon request, copies of the same.
3.1.8 Borrower shall furnish to Lender from time to time upon
request (i) copies of all contracts and subcontracts and the names and
addresses of all persons with whom Borrower or the general contractor,
if any, has contracted or intends to contract for the furnishing of
labor or materials in connection with the Required Work; (ii) copies of
all contracts, bills of sale, statements, receipts or other documents
under which Borrower claims title to any materials, fixtures or
articles incorporated in the Required Work or subject to the lien of
the Mortgage; (iii) a list of all unpaid bills for labor and materials
with respect to the Required Work and copies of all invoices therefor,
and (iv) such other information relating to the Required Work as shall
be reasonably requested by Lender.
Section 3.2 Construction Draws.
3.2.1 Lender shall disburse funds from the Construction Escrow
Account or, to the extent the amount therein shall be insufficient,
make a Subsequent Advance of the Loan in order to pay or reimburse
Borrower for the all or a portion of the cost of the Required Work
(each such disbursement or Subsequent Advance being a "Construction
Draw") upon (a) submission by Borrower of a request (a "Request for
Advance") setting forth the amount sought and the Required Work to be
paid for and (b) satisfaction of the conditions set forth in Section
3.3 below.
3.2.2 Each Construction Draw shall be equal to the lesser of
(a) the costs actually incurred by Borrower (subject to the limitations
contained in Section 3.2.4) to the extent due and payable and verified
to the reasonable satisfaction of Lender or (b) the value of the work
completed based on the estimated total cost of the Required Work and
the percentage of completion then attained, less (in either case) (x)
10% of such amount (the "Retainage") and (y) amounts theretofore
advanced, provided that no Construction Draw shall be in an amount less
than $500,000 unless the undisbursed portion of the Loan shall be less
than $500,000 in which event the final Construction Draw shall be in
the amount of the undisbursed portion of the Loan.
3.2.3 Borrower shall not request and Lender shall not be
obligated to make more than one Construction Draw in any calendar month
or thirty (30) day period or to make any Construction Draw after the
Outside Funding Date (except as provided in Section 3.2.5 below). All
advances shall be made at the principal office of the Lender or such
other place as the Lender may designate.
<PAGE>
3.2.4 Lender shall not be obligated to advance any proceeds of
the Loan for (a) building materials purchased by Borrower to be
incorporated in or used in the construction of the Required Work until
such materials are so used or incorporated or (b) any labor or
materials not in accordance with the Plans or not included in the
Property Budget or (c) with respect to any item, more than the amount
set forth in the Property Budget for such item (subject to the
provisions of Section 3.5 below).
Section 3.3 Conditions Precedent to Construction Draws.
The obligation of Lender to make each Construction Draw
hereunder is subject to the fulfillment by Borrower or waiver by Lender of the
following conditions precedent:
3.3.1 The representations and warranties contained in this
Agreement and the Loan Documents shall be true and correct in all
material respects as of the date of such advance and, with respect to
any representations made to Borrower's knowledge, no event shall have
occurred or condition or circumstance shall exist which, if known to
Borrower, would render any such representation or warranty incorrect or
misleading in any material respect.
3.3.2 All of the obligations to be performed or complied with
by Borrower under the Loan Documents through the date of such advance
shall have been performed or complied with in all material respects and
no event shall have occurred or condition or circumstance shall exist
which is or, with the passage of time or giving of notice, or both,
would be an Event of Default under this Agreement or any other Loan
Document.
3.3.3 Borrower shall have furnished to Lender, to the extent
requested by Lender and not previously furnished, the following with
respect to the Required Work which is the subject of the Request for
Advance:
(a) The Plans;
(b) The Property Budget;
(c) Copies of all contracts entered into by Borrower,
including agreements with the architect, general contractor
and all sub-contractors;
(d) Letters executed by Borrower's architect, general
contractor and major subcontractors (or, if there is no
general contract, contractors) designated by Lender regarding
such matters as Lender shall reasonably request, including,
without limitation, (i) confirmation that their agreements
with Borrower are in full force and effect and unmodified and
that they have no other agreements with Borrower, (ii)
statements of the amounts owed and previously paid to them,
(iii) consents to the collateral assignment of their
agreements to Lender; (iv) agreements to continue performance
under their agreements for Lender or its designee in the event
of a default by Borrower under the Loan Documents and (v) with
respect to the Architect, consent to Lender's use of the Plans
without additional charge in connection with construction of
the Improvements;
<PAGE>
(e) In connection with contracts for work in excess
of $500,000, payment and performance bonds in form and
substance satisfactory to Lender issued by companies
acceptable to Lender in the amount of one hundred percent
(100%) of the contract sum naming Borrower and Lender as dual
obligees;
(f) If such Required Work shall include new buildings
or structures or additions to existing buildings or
structures, a current soil test report prepared by an engineer
reasonably acceptable to Lender and certified to Lender
indicating a state of facts satisfactory to Lender and such
other geotechnical test reports as Lender shall reasonably
require;
(g) If such Required Work shall include new buildings
or structures or additions to existing buildings or
structures, a site plan prepared by Borrower's architect or
the surveyor and superimposed on a current survey of the
applicable Individual Property to show the proposed location
of the Improvements thereon;
(h) Evidence that all utilities and roads anticipated
to be necessary for the performance of the Required Work and
the operation of the Individual Property upon completion
thereof shall be available when needed;
(i) Copies of all Permits necessary for the
performance of the Required Work and evidence that such
Permits are in full force and effect;
(j) The opinion of the Architect that (i) the Plans
have been approved by it and by each Governmental Authority
whose approval is required, (ii) upon completion of the
Required Work in accordance with the Plans, the affected
Individual Property will comply with all applicable Legal
Requirements, (iii) Borrower has complied in all material
respects with all applicable Legal Requirements for the
Required Work and (iv) such other matters as Lender shall
reasonably request;
(k) The report of Lender's Consultant as to the
feasibility of the Required Work, adequacy of the Plans and
Property Budget and such other matters as Lender shall
reasonably request.
3.3.4 The Improvements on the Individual Property which is the
subject of a Request for Advance shall not have been injured or damaged
by fire or other casualty and shall not be the subject of any pending
or threatened condemnation or adverse zoning proceeding any of which
would materially and adversely affect the Required Work.
3.3.5 No material adverse change shall have occurred in the
financial condition of Borrower or any Guarantor.
<PAGE>
3.3.6 No action, suit, proceeding or investigation, at law or
in equity, except for those disclosed to Lender in writing, shall be
pending against Borrower or with respect to the Property before any
court, arbitration board or Governmental Authority which, if adversely
determined, would materially adversely affect (i) the security for the
Loan, (ii) the ability of Borrower to complete the Required Work
substantially in accordance with the Plans, or (iii) the ability of
Borrower to operate the Property in the manner contemplated by the
Plans.
3.3.7 Lender shall have received (i) a statement from the
Architect that all work to date has been done in accordance with the
Plans and Legal Requirements in all material respects and setting forth
its estimate of the percentage of completion of the Required Work on
such Individual Property and (ii) a statement from the general
contractor (or, if there is no general contractor, the Borrower) that
the amounts sought in the Request for Advance are due and payable for
labor and materials furnished, that all work has been performed in
accordance with the Plans in all material respects, and that all
contractors have been paid in full for all work and materials
theretofore furnished to the extent such payments are due except such
as are intended to be paid out of the advance which is the subject of
the pending Request for Advance. Such statements shall be satisfied by
submitting AIA Document G702.
3.3.8 Lender shall have received advice from Lender's
Consultant that (i) the Required Work theretofore performed at the
Individual Property was performed in accordance with the Plans and
Legal Requirements in all material respects and setting forth its
estimate of the percentage of completion thereof; (ii) the amount
which, in its opinion, is due and payable for labor and materials
furnished; (iii) the amount which, in its opinion, is required to
complete the Required Work on such Individual Property and pay for all
items included in the Property Budget does not exceed the undisbursed
amount of the Loan allocated to such Required Work and the estimated
date of completion of such Required Work shall not be later than the
date required for such completion and (iv) all Permits required for
construction have been obtained and are in full force and effect.
3.3.9 Lender shall have received from the Title Insurer a
notice of title continuation or an endorsement to the title insurance
policy theretofore delivered in accordance with local law, regulation
and practice, indicating that since the last preceding advance, there
has been no change in the state of title and no survey exceptions not
theretofore approved by the Lender, which endorsement shall have the
effect of increasing the coverage of the policy by an amount equal to
the advance then being made if the policy does not by its terms provide
for such an increase and insuring the priority of such advance.
3.3.10 Lender shall have received, upon completion of the
exterior walls of any buildings and improvements, or if required in
connection with the endorsement to be delivered under Section 3.3.9, a
revised or redated survey showing the exterior lines of all buildings
and improvements in the course of construction or completed, or, after
completion of the exterior walls of the buildings and improvements, a
certificate from the surveyor certifying that there has been no change
in any exterior line of the buildings and improvements since the date
of the last advance.
<PAGE>
3.3.11 Lender shall have received, if requested, advice from
the Title Insurer that a search of the public records of the County in
which the Individual Property is located and the County in which the
Individual Borrower owing such Individual Property shall have its
principal place of business discloses no leases of personalty,
financing statements, title retention agreements or other security
interests in favor of parties other than Lender in any of the personal
property intended to be subjected to the lien of the Mortgage.
3.3.12 Lender shall have received executed waivers of lien
from the Architect, general contractor (or, if there is no general
contractor, the major contractors designated by Lender), covering all
work, labor and materials previously performed and delivered in amounts
which aggregate the total payments received through and including the
last payment received.
3.3.13 Lender shall have received such additional documents in
support of the Request for Advance and the satisfaction of the
foregoing conditions as Lender may reasonably require.
Section 3.4 Conditions Precedent to Final Advances.
Upon Substantial Completion of the Required Work for an
Individual Property, Lender shall advance to Borrower an amount equal to the
Retainage less the amount, which in the opinion of Lender's Consultant, is
reasonably required for final completion of such Required Work provided that, in
addition to the conditions to advances set forth in Section 3.3 above, the
following additional conditions shall have been satisfied:
(a) Lender shall have received a certificate of the Architect
and advice from Lender's Consultant, that (i) the Improvements on such
Individual Property have been Substantially Completed in accordance with the
Plans and all Legal Requirements, (ii) all roads and utilities necessary for the
operation of such Improvements are available and operating and (iii) all Permits
necessary for the use and occupancy and operation of such Improvements for their
intended purposes, including a final or temporary certificate of occupancy, if
applicable, have been issued.
(b) Lender shall have received, if applicable, (i) a final,
"as-built" survey showing the completed Improvements and all easements
appurtenant to such Individual Property and (ii) "as-built" plans and
specifications for the completed Improvements and for underground site work and
interior utility and other building systems.
(c) Lender shall have received evidence that Borrower has
filed the notice of completion of the Improvements necessary to establish
commencement of the shortest statutory period for the filing of mechanics' and
materialmen's liens, if any.
Section 3.5 Reallocation of Budget. If any item of Required Work for an
Individual Property shall be completed or satisfied, such that no further
advances shall be required or made with respect thereto, any amount allocated to
such Required Work and not theretofore advanced shall, upon request of Borrower,
be reallocated to, and advanced in accordance herewith for, other items of
Required Work on such Individual Property or, if not necessary to complete the
Required Work on such Individual Property, on any other Individual Property,
provided that any such reallocation and advance (i) is permitted by applicable
law, (ii) shall be secured by a lien of equal priority with all prior advances
and (iii) shall not otherwise adversely affect the lien of the Mortgage or
Lender's security.
<PAGE>
Section 3.6 Determinations. The determination of any fact or facts,
such as the percentage of completion of construction, estimated cost of
construction, estimated date of Substantial Completion and any other matters
relating to the amount of any advance or the satisfaction of the conditions
thereto, shall be made by Lender or at, Lender's option, by Lender's Consultant,
in its sole discretion unless otherwise expressly provided herein.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender:
Section 4.1 Organization, Enforceability, Etc.
4.1.1 Each Individual Borrower is duly formed, validly
existing and in good standing under the laws of the State of its
formation and is duly qualified to do business in the State in which
the Individual Property owned by it is located. Each Individual
Borrower has full power and authority to execute and deliver to Lender
this Agreement and all other Loan Documents to which it is a party and
to own and operate its respective Individual Property and perform the
obligations and carry out the duties imposed upon Borrower by this
Agreement and the other Loan Documents. All Loan Documents to be
executed by each Individual Borrower upon such execution, shall have
been duly authorized, approved, executed and delivered by all necessary
parties and shall constitute the legal, valid and binding obligations
of each Individual Borrower, enforceable against such Individual
Borrower in accordance with their respective terms.
4.1.2 Each SPE Entity is a duly formed corporation, validly
existing or qualified to do business in and in good standing under the
laws of the State in which the Individual Property owned by the
Individual Borrower of which such SPE Entity is a part is located. Each
SPE Entity has full power and authority to execute and deliver to
Lender all Loan Documents to which it is a party. All Loan Documents
executed by the SPE Entity have been duly authorized, approved,
executed and delivered by all necessary parties and constitute the
legal, valid and binding obligations of the SPE Entity, enforceable
against the SPE Entity in accordance with their respective terms.
Section 4.2 No Structural Defects. To the best knowledge of each
Individual Borrower, there are no structural defects in the Improvements
existing on the Individual Property owned by it or material defects to the
building systems thereof except as shown in the Engineer's Report for its
Individual Property.
Section 4.3 Financial Statements. All financial statements of each
Individual Borrower, Guarantor and SPE Entity heretofore or hereafter delivered
to Lender in connection with the Loan are true and correct in all material
respects and fairly present the financial condition of the subjects thereof as
of the respective dates thereof and that no material adverse change has occurred
in the financial condition reflected therein or the operations or business of
such Persons since the respective dates of such financial statements.
<PAGE>
Section 4.4 Litigation. Except as disclosed to Lender in writing, (a)
there are no actions, suits, proceedings, arbitrations, labor disputes or
governmental investigations pending, or, to the best knowledge of Borrower,
threatened in writing against or affecting Borrower or, to the best knowledge of
Borrower, any Individual Property and there is no pending litigation (i) which,
if successful, could have a Material Adverse Effect on Borrower, any other
Significant Party or any Individual Property, or any such Person's ability to
perform its obligations pursuant to and as contemplated by this Agreement and
the other Loan Documents, (ii) which, if successful, might affect the validity
or enforceability of any of the Loan Documents or the priority of the Liens
thereof, or (iii) which, if successful, could materially adversely affect the
use of, operations at or capital improvements being made at any Individual
Property; (b) neither Borrower, nor the SPE Entity, nor any other Significant
Party are operating under or subject to any order, writ, injunction, decree or
demand of any court or any Governmental Authority and (c) no actions, suits,
proceedings or arbitrations are pending or, to the best knowledge of Borrower,
threatened against Borrower, SPE Entity or any other Significant Party which
involve claims, damages or sums of money not covered (including all applicable
deductibles) by insurance.
Section 4.5 No Conflict with Law or Agreements. The execution and
delivery of this Agreement and the other Loan Documents, and the performance and
consummation of the transaction contemplated hereby and thereby, on the part of
Borrower and all other Significant Parties (as applicable) and fulfillment of
the terms of the Loan Documents by Borrower and the other Significant Parties
(as applicable)
(i) do not and will not conflict with, violate, or constitute
a default (or a condition or event which, after notice or lapse of time
or both, would constitute such a default) under any provision of any
Organizational Document or contractual obligation of Borrower or any
Significant Party or any Legal Requirement or any court decree or order
binding on Borrower or any Significant Party, and
(ii) will not result in or require the creation or imposition
of any lien or encumbrance on or conveyance of any Individual Property
pursuant to any contractual obligation and
(iii) do not require the consent or approval of any
Governmental Authority or other person or entity except for consents
and approvals already obtained.
Section 4.6 Personal Property. All equipment and other personal
property necessary for (or otherwise actually used in connection with) the
proper and efficient operation and maintenance of each Individual Property and
the actual and contemplated uses thereof are owned by Borrower and constitute
part of such Individual Property subject to the Mortgage and located thereat,
other than any such equipment which is leased by Borrower or is owned by a
utility company.
Section 4.7 Easements. All easements, cross easements, licenses, air
rights, and rights-of-way or other similar property interests (collectively,
"Easements"), if any, necessary for the full utilization of the Improvements for
their intended purposes have been obtained, and are described in the Title
Insurance Policy, and are in full force and effect without default thereunder.
Each Individual Property has or will, upon Substantial Completion of the
Required Work for such Individual Property, have direct rights of access to
public ways (through public or private roads) and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service such Individual
Property for its intended uses. All public utilities necessary or convenient to
<PAGE>
the full use and enjoyment of such Individual Property are located either in the
public right of way abutting such Individual Property (which are connected so as
to serve such Individual Property without passing over other property) or in
recorded easements serving such Individual Property and described in the Title
Insurance Policy. All roads necessary for the use of such Individual Property
for its current purposes have been or will, upon Substantial Completion of the
Required Work for such Individual Property, be completed and available for
public use.
Section 4.8 No Flood Hazard, Etc. Each Individual Property is either
not situated in a flood hazard area as defined by the Federal Insurance
Administration or is covered by flood insurance in accordance with the Mortgage
encumbering such Individual Property. Portions of the Property consist of
filled-in land.
Section 4.9 No Default. There is no default on the part of Borrower,
under this Agreement, the Note, the Mortgage or any other Loan Document.
Section 4.10 No Offsets. Borrower has no counterclaims, offsets or
defenses with respect to the Loan, the Note or any other Loan Document.
Section 4.11 Valid Liens. Subject to the Permitted Encumbrances, each
Mortgage is a good and valid first mortgage lien on each of the Properties and
first security interest in the personal property described in the Mortgage.
Section 4.12 Compliance with Zoning and Other Legal Requirements.
4.12.1 To the best of the Borrower's knowledge, except as may
be disclosed by the Engineer's Report and on Exhibit J hereto (the
"Disclosed Violations"), the Properties comply in all material respects
with all applicable Legal Requirements. Borrower shall cure, or cause
to be cured, the Disclosed Violations and have them removed of record
on or before December 31, 1998. To the best knowledge of Borrower, any
zoning or subdivision approval is based on no real property, or rights
appurtenant thereto, other than the Properties. The Properties as
improved and used are not in material violation of any recorded and, to
the best knowledge of Borrower, unrecorded covenants, conditions or
restrictions of any kind or nature affecting all or any part of the
Properties or any interest therein of which Borrower has knowledge. To
the best knowledge of Borrower, the Improvements can be fully rebuilt
in the event of casualty or destruction thereof under the Permits
applicable to the Properties, subject, however, to non-discretionary
requirements of any Governmental Authority. No amendment or change in
any Permit and no amendment or change in zoning or any other land use
control is being sought or obtained by Borrower or any Affiliate of
Borrower or will be sought or obtained by Borrower or any Affiliate of
Borrower with respect to any of the Properties or the Improvements,
except as specifically and reasonably approved in writing by Lender.
<PAGE>
4.12.2 To the best knowledge of Borrower, except as may be
disclosed by the Engineer's Report, all Permits required by any
Governmental Authority for the operation of the Improvements and the
actual and contemplated uses thereof or otherwise required to be in
compliance with any Environmental Laws have been obtained. The copy of
the certificate of occupancy for any of the Properties delivered to
Lender is a true and correct copy of the certificate of occupancy for
such Properties and such certificate is in full force and effect and is
not subject to any conditions or limitations other than those of
general applicability to all certificates of occupancy for similar
properties in the applicable jurisdiction.
4.12.3 Borrower has heretofore delivered to Lender true,
correct and complete copies of each material Permit.
4.12.4 There are no pending or, to the best knowledge of
Borrower, threatened actions, suits or proceedings to revoke, attack,
invalidate, rescind or modify the zoning of any Individual Property, or
any material Permits issued with respect to any Individual Property or
any part thereof, or asserting that such Permits or the zoning of any
Individual Property do not permit the use of any Individual Property as
contemplated by the Loan Documents.
Section 4.13 No Condemnation. Borrower has not received any notice of,
and to the best of Borrower's knowledge there does not exist, any actual,
proposed or threatened exercise of the power of eminent domain or other taking
by any governmental or quasi-governmental body or agency of all or any portion
of any Individual Property or any interest therein or any right of access
thereto.
Section 4.14 No Casualty. The Improvements have suffered no casualty or
damage which has not been fully repaired.
Section 4.15 Purchase Options. No Individual Property or part thereof
is subject to any purchase options or other similar rights in favor of third
parties, except as set forth in Exhibit H annexed hereto.
Section 4.16 No Encroachments. To the best of the Borrower's knowledge,
there are no material encroachments on the Land and the Improvements do not
encroach upon any Easement, other interest in real property, any adjoining land
or adjoining street, except as set forth in the survey of each Individual
Property delivered to Lender in connection with the closing of the Loan.
Section 4.17 No Insolvency. Neither Borrower, any SPE Entity nor any
other Significant Party is Insolvent or will be rendered Insolvent by execution
of this Agreement, the Note or any other Loan Documents or consummation of the
transactions contemplated thereby.
Section 4.18 Fraudulent Conveyance. Borrower (a) has not entered into
the transactions contemplated by this Agreement or any other Loan Document with
the actual intent to hinder, delay, or defraud any creditor and (b) has received
reasonably equivalent value in exchange for its obligations under the Note, this
Agreement and the other Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair salable value of Borrower's assets
exceeds, and will immediately following the execution and delivery of the Loan
Documents and the advance of the proceeds thereof, exceed, Borrower's total
probable liabilities, including, without limitation, the maximum amount of its
subordinated, unliquidated, disputed or contingent liabilities. Borrower's
assets do not, and immediately following the execution and delivery of the Loan
Documents and the advance of the proceeds thereof, will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including, without limitation, contingent
liabilities and other commitments) beyond its ability to pay such debts and
liabilities as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Borrower).
<PAGE>
Section 4.19 Broker. No broker or consultant other than Broker has been
retained by Borrower or any Affiliate of Borrower in connection with the Loan or
the Loan Documents. Borrower will pay any and all fees due to Broker in
connection with the Loan and will indemnify, defend and hold the Indemnified
Parties harmless from and against all loss, cost, liability and expense arising
from the claims of all brokers and consultants (including Broker) relating to
the Loan and/or any Individual Property with whom Borrower, any Affiliate of
Borrower or any employee or agent of Borrower has dealt, including, without
limitation, sales, mortgage or leasing brokers or consultants.
Section 4.20 Environmental. Except as may be actually disclosed in the
Environmental Report
(i) no Hazardous Substances are now or, to Borrower's best
knowledge, have ever been located, produced, used, stored, treated,
transported, incorporated, discharged, emitted, released, deposited or
disposed upon, under, over or from any Individual Property in a manner
that may give rise to any actual or potential liability to pay response
costs or other damages, losses or expenses or otherwise violate any
Environmental Laws;
(ii) no Hazardous Substances are currently located, stored or
used at any Individual Property, except with respect to such Hazardous
Substances which are (x) customarily located, stored or used in
properties similar to the Properties or (y) unique and necessary to
Borrower's business located on the Properties, provided that such
Hazardous Substances described in (x) or (y) are at all times stored,
located and used in compliance with all Environmental Laws;
(iii) to Borrower's knowledge, no Hazardous Substances have
been discharged, released or emitted, upon or from any Individual
Property into the environment and no threat exists of a discharge,
release or emission of a Hazardous Substance upon or from any
Individual Property into the environment, which discharge, release or
emission, in either case, would subject the owner of such Individual
Property to any damages, penalties or liabilities under any applicable
Environmental Laws;
(iv) no Property has ever been used as or for a mine, a
landfill, a dump or other disposal facility or a gasoline service
station;
(v) no underground storage tank is now located on or in any
Individual Property or if previously located therein has been removed
therefrom in compliance with all applicable Environmental Laws and any
clean-up of the surrounding soil in connection therewith has been
completed;
(vi) no asbestos, ACM, materials containing urea-formaldehyde,
or transformers, capacitors, ballasts or other equipment containing
PCBs are located on any Individual Property;
<PAGE>
(vii) no Property has been used by Borrower or any Affiliate
or, to the best of Borrower's knowledge, after reasonable
investigation, any other person or entity (including any prior owner of
any Individual Property) as a permanent or temporary treatment, storage
or disposal site for any Hazardous Substance subject to regulation
under Environmental Laws;
(viii) no violation of any Environmental Law now exists or has
ever existed in, upon, under, over or from any Individual Property, no
notice of any such violation or any alleged violation thereof has been
issued or given by any governmental entity or agency, and there is not
now nor has there ever been any investigation or report involving any
Individual Property by any governmental entity or agency which in any
way relates to Hazardous Substances;
(ix) no Person has given any notice of or asserted any claim,
cause of action, penalty, cost or demand for payment or compensation,
whether or not involving any injury or threatened injury to human
health, the environment or natural resources, resulting or allegedly
resulting from any activity or event described in clauses (i)-(viii)
above and to the knowledge of Borrower, no basis for such a claim
exists;
(x) there are not now, nor to Borrower's best knowledge have
there ever been, any actions, suits, proceedings or damage settlements
relating in any way to Hazardous Substances, in, upon, under, over or
from any Property;
(xi) no oral or written notification of a Release (as such
term is defined in 42 U.S.C. * 9601(22)) of any Hazardous Substances
has been filed by or on behalf of Borrower through authorized employees
or agents and no Property is listed in the United States Environmental
Protection Agency's List of Hazardous Waste Sites or any other list of
Hazardous Substance sites maintained by any federal, state or local
governmental agency;
(xii) there are no environmental liens on any Property, and,
to the best knowledge of Borrower, no governmental actions have been
taken or are in process which could subject any Property to such liens;
(xiii) Borrower has not transported or arranged for the
transportation of any Hazardous Substances to any location which is
listed or proposed for listing under CERCLA or on any similar state
list or which is the subject of federal, state or local enforcement
actions or other investigations;
(xiv) no environmental or engineering investigations, studies,
audits, tests, reviews or other analyses have been conducted by or are
in the possession of Borrower or its Affiliates in relation to any
Property other than the Environmental Report; Borrower has delivered a
true, correct and complete copy of the Environmental Report to Lender;
and
(xv) to the best of Borrower's knowledge, the Environmental
Report does not contain any untrue statements of a material fact or
omit to state a material fact necessary to make any statement contained
therein or herein, in light of the circumstances under which such
statements were made, not misleading.
<PAGE>
Section 4.21 Borrower Address. Borrower's principal place of business
is at the address first set forth in the initial paragraph of this Agreement and
shall not be changed during the term of the Loan without giving Lender at least
thirty (30) days' prior notice thereof. No Individual Borrower uses any trade
name and has not and will not do any business under any name other than its
actual name set forth herein except the name of the Individual Property owned by
such Individual Borrower.
Section 4.22 Structure of Borrower. (a) The Persons set forth on
Exhibit E annexed hereto are the sole partners or members of Borrower and have
the legal and beneficial ownership interests in Borrower set forth therein, and
(b) the shareholders of the SPE Entity set forth on Exhibit E annexed hereto are
the sole shareholders of the SPE Entity and have the legal and beneficial
ownership interests in Borrower set forth therein. The ownership structure of
Borrower and the SPE Entity for the term of the Loan shall remain the same as
set forth in Exhibit E annexed hereto.
Section 4.23 Leases. Borrower has not entered into any Lease which
continues in existence and is not bound by any such Lease.
Section 4.24 Properties Taxed as a Separate Tax Lot. Each Individual
Property is taxed as one or more separate and distinct tax lots or parcels, no
part of any Individual Property shares a tax lot with any adjoining lands not
wholly included in such Individual Property and for all purposes each Individual
Property may be mortgaged, conveyed and otherwise dealt with as one or more
independent parcels.
Section 4.25 Fiscal Year. Each Fiscal Year of Borrower commences on
January 1.
Section 4.26 No Other Financing. Borrower has not borrowed any funds
and has no indebtedness except for the Loan and trade payables or accrued
expenses incurred in the ordinary course of business of operating the Properties
not in excess of sixty (60) days past due, which have not heretofore been repaid
in full or which shall be repaid in full from the Initial Advance of the Loan.
Section 4.27 ERISA.
4.27.1 The execution, delivery and performance of this
Agreement, the Mortgage, and the other Loan Documents do not constitute
a Prohibited Transaction, assuming solely for this purpose that Lender
is a party in interest as defined in Section 3(14) of ERISA ("Party In
Interest"), or a disqualified person as defined in Section 4975(e)(2)
of the Internal Revenue Code ("Disqualified Person"), with respect to
an employee benefit plan, if any, which has directly or indirectly
invested in Borrower or in any Partner.
4.27.2 Borrower has made and shall continue to make all
required contributions to all employee benefit plans, if any, within
the time periods required by the applicable provisions of ERISA and any
other federal or state law and Borrower has no knowledge of any
material liability which has been incurred by Borrower which remains
unsatisfied for any taxes or penalties with respect to any employee
benefit plan or any multi-employer plan, and each such plan has been
administered in all material respects in compliance with its terms and
the applicable provisions of ERISA and any other federal or state law.
Section 4.28 FIRPTA. Borrower is not a "foreign person" within the
meaning of Sections 1445 or 7701 of the Internal Revenue Code.
<PAGE>
Section 4.29 PUHCA. Borrower is not a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" as defined in the Public Utility
Holding Company Act of 1935, as amended.
Section 4.30 Insurance. All Insurance Policies (as defined in the
Mortgage) required to be obtained and maintained by each Individual Borrower
pursuant to the Mortgage are in full force and effect, the premiums due thereon
have been paid in full, Individual Borrower and each Property is in compliance
in all material respects with the provisions of such Insurance Policies and the
provisions relating to Insurance Policies in the Mortgage and no notice of
cancellation, termination or default has been received by Borrower with respect
to any such policy.
Section 4.31 No Margin Stock. None of the proceeds of the Loan will be
used by any Individual Borrower for the purpose of purchasing or carrying
"margin stock" within the meaning of Regulation G, T, U or X issued by the Board
of Governors of the Federal Reserve System, as at any time amended, and each
Individual Borrower agrees to execute all instruments which may be necessary
from time to time, if any, to comply with all the requirements of Regulation U
of the Federal Reserve System, as at any time amended.
Section 4.32 Investment Company Act. Each Individual Borrower is not
(a) an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended; or (b)
subject to any other United States federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
Section 4.33 Taxes. Each Individual Borrower has filed all Federal,
state and local tax returns required to be filed prior to the date hereof and
has paid all taxes, charges and assessments shown to be due from each Individual
Borrower on such tax returns. All Taxes due and owing in respect of, and
affecting, each Individual Property have been paid. There are no pending, or to
Borrower's knowledge, proposed special or other assessments for public
improvements or otherwise affecting any Individual Property.
Section 4.34 Full and Accurate Disclosure. No statement of fact made by
Borrower in this Agreement, or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading in any
material respect. There is no material fact presently known to any Individual
Borrower which has not been disclosed to Lender which materially adversely
affects, nor as far as Borrower can reasonably foresee, might materially
adversely affect, any Individual Property or the business, operations or
condition (financial or otherwise) of Borrower.
Section 4.35 Contracts.
4.35.1 Borrower has not entered into and is not bound by any
Contract which continues in existence, except the Disclosed Contracts.
4.35.2 Each of the Contracts is in full force and effect,
there are no monetary or other material defaults by Borrower thereunder
and there are no monetary or other material defaults thereunder by any
other party thereto beyond any applicable grace or cure period except
for defaults which will be cured upon the Initial Advance of the Loan.
Neither Borrower nor Manager nor any other Person acting on Borrower's
behalf has given or received any written notice of an Event of Default
under any of the Contracts that remain uncured or in dispute.
<PAGE>
4.35.3 Borrower has delivered true, correct and complete
copies of the Contracts (including all amendments and supplements
thereto) to Lender.
4.35.4 No Contract has as a party an Affiliate of Borrower
unless such Contract contains market rate terms and conditions
including fees which are no less favorable than would be available to
Borrower by a third party which is not an Affiliate of Borrower. All
fees and other compensation for services previously performed under
each Contract that are due have been paid in full.
Section 4.36 Other Obligations and Liabilities. Each Individual
Borrower has no liabilities or other obligations that arose or accrued prior to
the date hereof that, either individually or in the aggregate, could have a
Material Adverse Effect on Borrower's ability to perform its obligations under
this Agreement, or any of the other Loan Documents or any other obligations that
Borrower may have in connection with the ownership and operation of the
Properties as contemplated by the Loan Documents.
Section 4.37 Loan to Value Ratio. To the best of Borrower's knowledge,
based on Borrower's familiarity with the Properties and the Approved Appraisal
(which Borrower believes to contain a reasonable assessment of the fair market
value of the Properties), the maximum principal amount of the Loan does not
exceed eighty percent (80%) of the fair market value of the Properties. For the
purposes of this Section 4.37, the term "fair market value" shall not include
(i) the amount of any indebtedness secured by a Lien affecting the Properties
that is prior to, or on a parity with, the lien of the Mortgage, and (ii) the
value of any property that is not "real property" within the meaning of Treas.
Reg ** 1.860G-2 and 1.856-3(d).
ARTICLE V. AFFIRMATIVE COVENANTS
From the date hereof and until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of the
Liens of all Mortgages encumbering the Properties (and all related obligations)
in accordance with the terms of this Agreement and the other Loan Documents,
Borrower hereby covenants and agrees with Lender as follows:
Section 5.1 Transfers.
5.1.1 Except as expressly permitted in this Section 5.1 and
Section 8.7, and subject to Section 8.10 hereof, Borrower will not,
directly or indirectly, sell, assign, convey, pledge, hypothecate,
encumber or otherwise transfer (each of the foregoing constituting a
"Transfer") any Individual Property or any part thereof or all of the
Properties, or any interest therein or suffer, consent to or permit the
foregoing without, in each instance, the prior written consent of
Lender. Borrower will not permit any owner of a legal or beneficial
interest in Borrower (including, without limitation, any owner
(directly or indirectly) of a legal or beneficial ownership interest in
the SPE Entity) to Transfer such interest, whether by transfer of
stock, assignment of partnership interest or other transfer of legal or
beneficial interest in Borrower or in any direct or indirect owner
thereof, or otherwise permit any new or additional legal or beneficial
ownership interests in Borrower or any direct or indirect owner, to be
issued, including, without limitation, by admission of new partners or
members, without, in each instance, the prior written consent of
<PAGE>
Lender. The foregoing provisions of this Section 5.1.1 shall not,
however, apply to (a) Transfers of ownership interests in Borrower or
the SPE Entity by or on behalf of an individual owner thereof who is
deceased or declared judicially incompetent, to such owner's heirs,
legatees, devisees, executors, administrators, estate or personal
representatives, but shall continue to apply as to any subsequent
Transfer and (b) sales of publicly owned and traded shares of Golf
Ventures, Inc., provided that Warren Stanchina shall not sell more than
forty percent (40%) of the shares of common stock of Golf Ventures,
Inc. owned by him on the date hereof.
5.1.2 To the extent Lender elects to consent to any Transfer
as to which its consent is required hereunder, Lender shall be entitled
to condition its consent on such matters as Lender may elect, in its
sole reasonable discretion, including, without limitation, execution of
instruments of assignment and assumption with respect to the Loan
Documents and the collateral therefor, payment of reasonable
consideration, delivery of Officer's Certificates and affidavits and
indemnities, including an affidavit and indemnification regarding
Internal Revenue Code Section 1445 and 7701, receipt by Lender of
opinions regarding "non-consolidation" regarding the parties to the
Transfer and their respective Affiliates and the assumptions of
obligations hereunder, receipt of confirmations from the Rating
Agencies that the then current rating for the Securities will not be
withdrawn, qualified or downgraded as a result of the Transfer, the
transferee under the Transfer satisfies the criteria set forth in
Article IX of this Agreement and such other matters or documents as
Lender may request. Within ten (10) days after closing of any Transfer,
whether or not such Transfer required Lender's consent, if any
Individual Property or any part thereof or if any interest therein or
if any direct or indirect ownership interests in Borrower is
transferred, Borrower will provide Lender with a copy of the deed or
other instrument of Transfer to the transferee. Borrower will promptly
after request therefor provide Lender with such other information and
documentation with respect to such Transfer as Lender reasonably
requests, including, without limitation, information as to ownership of
such transferee.
5.1.3 Upon the occurrence of any Transfer, the provisions of
this Section 5.1 shall continue to apply to the transferee as if it
were the transferor hereunder and any consent by Lender permitting a
transaction otherwise prohibited under this Section 5.1 or any right of
Borrower or any other Person to Transfer without such consent, shall
not constitute a consent to or waiver of any right, remedy or power of
Lender to withhold its consent on a subsequent occasion to a
transaction not otherwise permitted by the provisions of this Section
5.1. Notwithstanding the giving of any consent hereunder by Lender,
Borrower shall not engage in any Prohibited Transaction.
5.1.4 Notwithstanding the provisions of Section 5.1.1 above,
Obsolete Collateral (as such term is defined in the Mortgage) may be
sold or otherwise disposed of, provided, that either (x) such Obsolete
Collateral has been or is contemporaneously being replaced by
Collateral (as such term is defined in the Mortgage) of at least equal
value and utility which is subject to the lien of the Mortgage with the
same priority as with respect to the Obsolete Collateral or (y) such
Obsolete Collateral may be removed without adversely affecting the
maintenance, safety and operations at such Individual Property, and
upon the sale of such Obsolete Collateral any net cash proceeds
received from such disposition are deposited as ordinary Receipts in
the Cash Collateral Account and applied as provided in the Cash
Management Agreement.
<PAGE>
Section 5.2 Liens. Borrower shall not create, suffer or permit to exist
any Lien on, of or against, or otherwise affecting, all or any portion of the
Properties (including, without limitation, fixtures and other personal
property), or any other property of Borrower (whether tangible or intangible and
now owned or hereafter acquired) in favor of any Person other than Lender,
without the prior written consent of Lender, other than the Permitted
Encumbrances.
Section 5.3 Indebtedness.
5.3.1 Borrower shall not create, incur or assume any
indebtedness for borrowed money or otherwise evidenced by a note or
notes, whether secured or unsecured except for the Loan. Borrower shall
not create, incur or assume any other indebtedness, if doing so would
cause Borrower to be in violation of Section 9.1(h) hereof, or any
other provision of this Agreement or the other Loan Documents
applicable thereto.
5.3.2 Notwithstanding that any indebtedness incurred with
respect to the Property is otherwise permitted hereunder, Borrower
shall (subject to the terms of the next sentence) pay any portion of
such indebtedness which becomes due and payable within sixty (60) days
following the date on which each such amount is due and payable.
Nothing contained in this Section 5.3 shall be deemed to require
Borrower to pay any amount, so long as Borrower is in good faith, and
by proper legal proceedings, diligently contesting the validity, amount
or application thereof, provided that in each case, at the time of the
commencement of any such action or proceeding, and during the pendency
of such action or proceeding (i) adequate reserves with respect thereto
are maintained on the books of the Borrower in accordance with GAAP (as
determined by the Approved Accountant), (ii) such contest operates to
suspend collection or enforcement, as the case may be, of the contested
amount and such contest is maintained and prosecuted continuously and
with diligence and (iii) Borrower shall deliver to Lender cash in an
amount equal to one hundred twenty-five percent (125%) of the amounts
being contested which exceed One Hundred Thousand and No/100 Dollars
($100,000.00) in the aggregate and any additional interest, charge or
penalty arising from such contest. Any cash delivered shall constitute
additional security for the Loan. Any such cash shall be held and
invested in the same manner and subject to the same general terms as
amounts deposited in the Cash Collateral Account under the Cash
Management Agreement and, upon the occurrence of an Event of Default,
Lender may apply such monies in the same manner as other monies held in
the Cash Collateral Account. Borrower shall execute such instruments as
Lender shall require to evidence Lender's perfected first priority
security interest therein and to effectuate the provisions hereof. If
prior to the occurrence of an Event of Default, Borrower shall provide
evidence satisfactory to Lender, in its reasonable judgment, that
Borrower has paid the disputed amount, or otherwise settled the same
and paid any amount to be paid under such settlement, or that Borrower
has received a final unappealable judgment in its favor that it need
not pay any disputed amount, together with an Officer's Certificate
<PAGE>
confirming the foregoing, then Lender shall return any cash deposited
with Lender with respect to such disputed amount. If Borrower ceases to
pursue continuously and with due diligence any contest described above,
or fails to provide Lender with evidence satisfactory to Lender that it
is doing so within ten (10) days after Lender's request, or if there
shall be a final judgment against Borrower with respect thereto, then
Lender may apply all or any portion of the cash to pay such disputed
amount and Lender shall have no liability to Borrower for any
determination made by Lender, in good faith, that it is entitled to do
so or as to the amount to then be paid with respect to such disputed
amount, whether or not that determination is found to be accurate.
Section 5.4 Compliance with Easements, Restrictive Covenants and
Permitted Encumbrances
5.4.1 Borrower will not modify, waive in any material respect
or release any Easements, restrictive covenants or other Permitted
Encumbrances, or suffer, consent to or permit the foregoing, without
Lender's prior written consent, which consent may be granted or denied
in Lender's sole discretion but shall not be unreasonably withheld,
conditioned or delayed if necessary for the completion of the Required
Work. Borrower will timely comply in all material respects with the
terms of all Easements, restrictive covenants and all other Permitted
Encumbrances.
5.4.2 Borrower shall observe and comply in all material
respects with any conditions and requirements necessary to preserve and
extend any and all rights, privileges, franchises and concessions that
are applicable to each Individual Property, the use and occupancy
thereof or the business conducted thereat.
Section 5.5 Leases.
5.5.1 Borrower will not enter into any Lease without the prior
written consent of Lender, which consent may be granted or withheld in
Lender's sole discretion.
5.5.2 Borrower will not modify, amend, consent to the
cancellation or surrender of (except to the extent such cancellation or
surrender is by the tenant thereunder pursuant to a pre-existing right
to do so under a Lease) or terminate any Lease hereafter approved by
Lender without the prior written consent of Lender, which consent may
be granted or withheld in Lender's sole discretion.
5.5.3 Borrower will timely comply with all material terms and
conditions on its part to be performed under any Lease hereafter
approved by Lender and shall neither neglect to do nor permit to be
done, anything which may cause a termination of any such Lease, other
than due to the default of the tenant(s). Borrower shall not collect
any rent or other payment under any such Lease more than one month in
advance of the due date thereof. Borrower will use commercially
reasonable efforts to require the performance of all of the obligations
of tenants and other Persons bound by such Leases and to enforce such
Leases.
<PAGE>
5.5.4 Any security deposits of tenants, whether held in cash
or any other form, shall not be commingled with any other funds of
Borrower and, if cash, shall be deposited by Borrower at such
commercial or savings bank or banks as may be reasonably satisfactory
to Lender. Any bond or other instrument which Borrower is permitted to
hold in lieu of cash security deposits under any applicable legal
requirements shall be maintained in full force and effect in the full
amount of such deposits unless replaced by cash deposits as hereinabove
described, shall be issued by an institution reasonably satisfactory to
Lender, shall be fully assignable to Lender) and shall, in all
respects, comply with any applicable Legal Requirements and otherwise
be satisfactory to Lender. Borrower shall, upon request, provide Lender
with evidence satisfactory to Lender of Borrower's compliance with the
foregoing. Following the occurrence and during the continuance of any
Event of Default, upon Lender's demand, Borrower shall turn over to
Lender the security deposits (and any interest theretofore earned
thereon) with respect to all or any portion of the applicable Property,
to be held by Lender subject to the terms of the Leases. If Borrower is
entitled to retain a security deposit, then such amount shall be
transferred by Borrower into the Clearing Account.
Section 5.6 Delivery of Notices. Borrower will promptly, but in no
event later than ten (10) days after Borrower becomes aware of any of the
following events, furnish a written notice to Lender (together with the
applicable correspondence and papers relating thereto) specifying the nature and
period of existence of such condition or event and, with respect to events
described in clause (i) below, what action Borrower is taking or proposes to
take with respect thereto (compliance with the provisions of this Section 5.6
shall not be deemed or construed to constitute a waiver of or consent to any
default or Event of Default of which Borrower has given Lender notice pursuant
to this Section 5.6):
(i) any default hereunder or under any of the other Loan
Documents or any Event of Default;
(ii) receipt or delivery by Borrower of a notice of default or
termination, any proposed action with respect to any default or any
failure by any Person to perform any material obligation, maintain any
material representation or warranty or satisfy any material condition
in connection with any Lease, the Management Agreement, any Easement, a
recorded instrument or a Permit;
(iii) the filing of any action, suit or proceeding against or
affecting Borrower or the applicable Individual Property that, if
adversely determined, could (A) impair the validity or enforceability
of this Agreement or any of the other Loan Documents, (B) have a
Material Adverse Effect, or (C) result in a Lien on any portion of the
applicable Individual Property; and
(iv) any notice received from any Governmental Authority
asserting a violation of any material Legal Requirement and any
correspondence to or from Borrower with respect thereto. Without
limiting the generality of the foregoing, Borrower will transmit to
Lender, immediately upon receipt thereof, any communication (addressed
to Borrower or any Affiliate of Borrower) which relates to matters
which could materially adversely affect Lender's security for the Loan
or have a material adverse effect on the financial condition of
Borrower, and/or any other Significant Party, and will promptly respond
fully to any inquiry of Lender made with respect thereto.
<PAGE>
Section 5.7 ERISA.
5.7.1 In addition to the prohibitions set forth in Section 5.1
hereof, and not in limitation thereof, Borrower shall not Transfer or
hypothecate its interest or rights in this Agreement or in the
Properties, or attempt to do any of the foregoing or suffer any of the
foregoing, nor shall any Person owning a direct or indirect interest in
Borrower Transfer any of its rights or interest (direct or indirect) in
Borrower, attempt to do any of the foregoing or suffer any of the
foregoing, nor shall Borrower or any Person owning a direct or indirect
interest in Borrower take, without limitation, any action or fail to
take any action, if, in any such case, doing so would (i) cause the
Loan or the exercise of any of Lender's rights in connection therewith,
to constitute a Prohibited Transaction (unless Borrower furnishes a
legal opinion reasonably satisfactory to Lender that the same is exempt
from the Prohibited Transaction provisions of ERISA and the Internal
Revenue Code or otherwise does not constitute a Prohibited
Transaction), assuming solely for this purpose that Lender is a Party
In Interest or a Disqualified Person with respect to an employee
benefit plan, if any, which has directly or indirectly invested in
Borrower, or (ii) otherwise result in Lender being deemed in violation
of any applicable provisions of ERISA with respect to the Loan.
Borrower shall take such steps as are reasonably necessary to assure
that it (and its shareholders, partners and members) does not commit
any act or fail to commit any act the occurrence of which or the
failure of which to occur would cause the Loan to be a Prohibited
Transaction.
5.7.2 If the provisions of this Section 5.7 are violated,
Borrower agrees, at its own cost and expense, to take such steps as
Lender shall reasonably request to prevent the occurrence of a
Prohibited Transaction or to correct the occurrence of a Prohibited
Transaction. Borrower agrees to indemnify, defend and hold the
Indemnified Parties free and harmless from and against all loss, costs
(including reasonable attorney's fees and expenses), taxes, penalties,
damages and expenses any of the Indemnified Parties may suffer by
reason of the investigation, defense and settlement of claims based
upon a breach of the foregoing provisions. The foregoing
indemnification shall survive repayment of the Note.
Section 5.8 Agreements with Affiliates. Borrower shall not enter into
any contract, agreement or other arrangement with any Affiliate of Borrower
without Lender's prior written consent (which consent may be granted or denied
in Lender's sole and absolute discretion) unless such contract contains terms
and conditions no less favorable than would be available to Borrower from an
unaffiliated third party.
Section 5.9 After Acquired Property. Borrower shall grant Lender a
first lien security interest in and to all equipment and other personal property
owned by Borrower, whether or not used in the construction, maintenance and/or
operation of the Improvements, immediately upon acquisition of same or any part
of same.
<PAGE>
Section 5.10 Books and Records. Borrower shall keep and maintain at all
times at its principal office complete, true and accurate books of account and
records reflecting the results of its operations. Borrower shall permit Lender,
its agents, consultants and representatives, upon reasonable notice and at
reasonable times, to examine and audit the books and records of Borrower and
make copies thereof, at Borrower's expense. Borrower shall cause the Manager to
make all records relating to the Properties available to Lender and shall cause
the Manager to cooperate with any examination, audit or other inquiry (including
causing the personnel responsible for the Properties to be reasonably available
to respond to inquiries).
Section 5.11 Delivery of Estoppel Certificates. (a) Borrower shall,
from time to time, but not more frequently than three (3) times in any calendar
year, within ten (10) days after written request from Lender, furnish to Lender
or such other party (or parties as may be requested by Lender) a written
certificate setting forth the unpaid principal of and interest due on the Note
and any other sums evidenced or secured by the Mortgage, and/or the other Loan
Documents, stating the date through which interest has been paid and stating
whether or not any offsets, defenses or counterclaims exist with respect to the
Loan Documents. If requested, such certificate will also attach true and correct
copies of any Loan Documents and state such other information as Lender shall
reasonably require. Upon request of Lender, Borrower shall cause the Manager
within ten (10) days after such request to furnish Lender or such other party or
parties as Lender may request, a written certificate as to such matters as
Lender may reasonably request.
(b) Borrower shall use all reasonable efforts to deliver to Lender upon
request, which may be made from time to time but not more frequently than three
(3) times in any calendar year, tenant estoppel certificates from each tenant
under a Lease, which tenant estoppel certificates shall be in form and substance
reasonably satisfactory to Lender. Section 5.12 Management, Etc.
5.12.1 Borrower represents, warrants and covenants that (a)
the Management Agreement previously delivered to Lender is a true,
correct and complete copy of the Management Agreement between Manager
and Borrower with respect to the Property, including any amendment or
modification thereof, which Lender hereby approves; (b) the Management
Agreement is in full force and effect and there is no default or
violation by any party thereunder; (c) Borrower shall maintain the
Management Agreement in full force and effect and timely perform all of
its material obligations thereunder and enforce performance of all
material obligations of the Manager thereunder; (d) Borrower shall
simultaneously herewith enter into and cause Manager to enter into an
agreement in form reasonably satisfactory to Lender subordinating the
Manager's fees and other rights to the rights of Lender and (e)
Borrower shall not terminate, cancel, or modify the Management
Agreement, or enter into any agreement relating to the management or
operation of the Property with Manager or any other party (other than
an extension of the existing Management Agreement for compensation
which is no greater, and on terms and conditions no less favorable to
Borrower, than those contained in the existing Management Agreement)
without the express written consent of Lender, which consent shall not
be unreasonably withheld, conditioned or delayed. Any compensation of
Manager with respect to its services performed at or in connection with
the Properties (other than the compensation provided in the existing
Management Agreement) is subject to approval by Lender in its sole and
absolute discretion and shall in no event exceed the Maximum Management
Fee. If at any time there shall be a new manager, such new manager and
Borrower shall, as a condition to Lender's consent, execute an
agreement in the form then customarily used by Lender subordinating the
management fees and other rights of the manager to the rights of
Lender.
<PAGE>
5.12.2 Borrower agrees that at any time after and during the
continuance of an Event of Default, at the request of Lender, Borrower
shall immediately replace the Manager with an independent, third-party
managing agent designated by Lender.
Section 5.13 Financial Statements; Audit Rights.
5.13.1 Until the Loan is repaid in full, Borrower shall cause
the following financial statements and documentation to be delivered at
the time and in the form and manner referenced below:
(a) audited statements of financial position (balance
sheet) of Borrower as of the close of each fiscal year of
Borrower during the term of the Loan, and of income and
retained earnings, changes in financial position and cash
flows for such fiscal year, which statements shall be duly
certified by the Designated Officer to fairly represent the
financial condition of Borrower as of the date thereof and to
have been prepared in accordance with GAAP and accompanied by
an opinion of the Approved Accountant (which opinion shall be
unqualified and shall not contain any "statement of emphasis")
to the effect that such financial statements present fairly,
in all material respects, the financial condition of Borrower
as of the end of the fiscal year being reported on and that
the results of the operations and cash flows for said year are
in conformity with GAAP, consistently applied, and that the
examination of the Approved Accountant in connection with such
financial statements has been conducted in accordance with
GAAP and included such tests of the accounting records and
such other auditing procedures as the Approved Accountant
deemed necessary in the circumstances,
(b) an unaudited quarterly balance sheet of Borrower
and statement of profits and losses, such quarterly financial
statements to be certified by a Designated Officer to fairly
represent the financial condition of Borrower as of the date
thereof and to have been prepared in accordance with GAAP,
(c) unaudited monthly and quarterly operating
statements showing all revenues, expenses and net cash flow
(including a calculation of Net Operating Income) for the
applicable calendar month or quarter and year-to-date results
and variances from any Approved Budget and such other matters
as Lender shall reasonably require, which monthly and
quarterly operating statements shall be certified by a
Designated Officer to be true, correct and complete in all
material respects and shall be prepared on a cash basis,
(d) the statements to be delivered to Lender in
accordance with Section 6(f) of the Cash Management Agreement,
certified as provided therein,
(e) the annual Form 1065 (with accompanying schedules
K-1) (or any substitute therefor) for each Individual Borrower
(other than U.S. Golf Pelican Strand, Inc.) and for Pelican
Strand Ltd.,
<PAGE>
(f) a schedule of all accounts payable at the end of
each month, certified by a Designated Officer to be true,
correct and complete in all material respects,
(g) such other reports and information which Lender
reasonably requires certified by a Designated Officer to be
true, correct and complete in all material respects.
5.13.2 The statements referred to in paragraph (a) of Section
5.13.1 above shall be delivered to Lender within one hundred and twenty
(120) days after the last day of each fiscal year of Borrower. The
quarterly statements referred to in paragraph (b) and referred to in
paragraph (c) of Section 5.13.1 above shall be delivered to Lender
within forty-five (45) days after the last day of each calendar
quarter. The monthly reports referred to in paragraph (c) and paragraph
(f) above shall be delivered to Lender within thirty (30) days after
the last day of each calendar month. All Financial Statements shall be
in form and substance satisfactory to Lender.
5.13.3 Each Financial Statement described in paragraphs
(a)-(c) of Section 5.13.1 above shall be accompanied by an Officer's
Certificate of Borrower certifying that to the best of such officer's
knowledge, Borrower has observed and performed, in all material
respects, all of its covenants and other agreements contained in this
Agreement, and the other Loan Documents, whether there exists any
material default or Event of Default and, if there is, specifying the
nature and period of existence thereof and the action Borrower is
taking or proposing to take with respect thereto. Section 5.14
Maintenance of Non-Taxable Status. Borrower will maintain its status of
being taxed as a partnership for the purposes of federal, state and
local income taxes. Section 5.15 Lender's Attorneys' Fees and Expenses.
Borrower shall appear in and defend any action or proceeding purporting
to affect the security of the Mortgage or the security interests
granted under any of the other Loan Documents or the rights and powers
of Lender under any of the Loan Documents and Borrower (in addition to
Lender's reasonable attorneys' fees and expenses to be paid by Borrower
pursuant to this Agreement or the other Loan Documents) shall pay all
of Lender's reasonable attorneys' fees and expenses in connection with
the enforcement of this Agreement and the other Loan Documents and the
collection of all amounts payable hereunder and thereunder. In case of
any default under this Agreement or any of the other Loan Documents or
if any action or proceeding is commenced in which it becomes necessary
to defend or uphold the Lien or priority of the Mortgage or any of the
other Loan Documents or which adversely affects the interests of Lender
in the Property or any part thereof, including, but not limited to
eminent domain, or proceedings of any nature affecting the Property or
involving the bankruptcy, insolvency, arrangement, reorganization of,
or other form of debtor relief with respect to, Borrower or any other
Significant Party, then Lender may, but without obligation to do so,
and without releasing Borrower or any other Significant Party from any
obligation hereunder or under any other Loan Document, make such
appearances, disburse such reasonable sums and take such action as
Lender deems necessary or appropriate to protect Lender's interest in
the Properties. All reasonable costs incurred by Lender, including
reasonable attorneys' fees and disbursements, in taking any action
described above, shall be paid by Borrower upon demand together with
interest thereon at the Default Rate from the date paid by Lender
through the date of repayment by Borrower and the same shall be deemed
to constitute protective advances evidenced by the Note and secured by
the Mortgage and the other Loan Documents. In addition to, and without
<PAGE>
limiting the generality of, the foregoing, if at any time hereafter,
Lender employs counsel (a) for advice or other representation (whether
or not any suit has been, or shall thereafter be, filed, and whether or
not other legal proceedings have been, or shall thereafter be,
instituted, and whether or not Lender shall be a party thereto) with
respect to the Loan, the Properties or any part thereof, this Agreement
or any of the other Loan Documents, or (b) to protect, collect, lease,
sell, take possession of, foreclose upon or liquidate all or any part
of the Properties, or to attempt to enforce any security interest or
Lien in all or on any part of the Properties, or to enforce any rights
of Lender or any of Borrower's obligations hereunder or under any of
the other Loan Documents, or any obligations of any other Person which
may be obligated to Lender by virtue of this Agreement or any other
agreement, instrument or document heretofore or hereafter delivered to
Lender by or for the benefit of Borrower, then, in any such event, all
of the reasonable attorneys' fees and expenses arising from such
services, and all expenses, costs and charges relating thereto, shall
be paid by Borrower upon demand, together with interest thereon at the
Default Rate from the date paid by Lender through the date of repayment
by Borrower, and the same shall be deemed to constitute protective
advances evidenced by the Note and secured by the Mortgage and other
Loan Documents.
Section 5.16 Environmental.
5.16.1 Borrower shall not (and it shall not permit any tenant,
contractor, agent or manager to) locate, produce, use, store, treat,
transport, incorporate, discharge, emit, release, deposit or dispose of
any Hazardous Substance in, upon, under, at, over or from any
Properties, except that Borrower (and its tenants, contractors or
agents) may store, locate and use on an Individual Property, Hazardous
Substances which are (1) customarily located, stored or used in
properties similar to such Property or (2) unique to Borrower's or a
tenant's business located on such Individual Property, provided that
such Hazardous Substances described in clauses (1) or (2) above are at
all times stored, located and used in compliance with all Environmental
Laws. Borrower shall not grant permission for any Hazardous Substances
to be located, produced, used, stored, treated, transported,
incorporated, discharged, emitted, released, deposited, disposed of or
to escape therein, thereupon, thereunder, thereover or therefrom in
violation of any Environmental Law, and shall comply with all
Environmental Laws which are applicable to the Individual Property.
Borrower shall not engage in any conduct in connection with the
Individual Property (other than Corrective Work) that may subject
Borrower to Environmental Costs, or contribute to or aggravate a
release of Hazardous Substances. In addition to the foregoing
restrictions, Borrower agrees that no asbestos, ACM, materials
containing urea-formaldehyde, or transformers, capacitors, ballasts or
other equipment containing PCBs are, or will at any time be, located
about the Individual Property.
<PAGE>
5.16.2 Borrower shall promptly within the time permitted by
Environmental Laws, initiate and diligently pursue to completion, any
and all remedial action required pursuant to any Environmental Laws in
response to the presence of any Hazardous Substances at, on, under or
about, or emanating from, any Individual Property and shall take such
remedial action as is required to minimize any impairment of Lender's
Lien on, and security interest in, the Individual Property. If Borrower
undertakes any remedial action with respect to any Hazardous Substance
on the Individual Property, Borrower shall conduct and complete such
remedial action in compliance with all applicable Environmental Laws.
If any Hazardous Substance is removed or caused to be removed from the
Individual Property by Borrower, the generator number assigned by the
Environmental Protection Agency to such Hazardous Substance shall not
be in the name of Lender, and as between Lender and Borrower, Borrower
shall assume any and all liability for such removed Hazardous
Substance.
5.16.3 The representations and warranties contained in Section
4.20 and the covenants contained in this Section 5.16 shall be deemed
continuing covenants for the benefit of Lender, and any successors and
assigns of Lender, including but not limited to any purchaser at a
foreclosure sale, any transferee of the title of Lender or any other
purchaser at a foreclosure sale, and any subsequent owner of an
Individual Property, and shall survive the termination of this
Agreement, or the satisfaction or release of the Mortgage, any
foreclosure of the Mortgage and/or any acquisition of title to an
Individual Property or any part thereof by Lender, or anyone claiming
by, through or under Lender, by deed in lieu of foreclosure or
otherwise; provided, however, that such representations and warranties
and covenants shall terminate six (6) years after the Loan shall be
repaid in full. The rights and remedies of Lender under this Agreement
with respect to this Section 5.16 shall not inure to the benefit of (i)
any purchaser of an Individual Property at a foreclosure sale, (ii) any
Person taking title to the Individual Property by deed in lieu of
foreclosure or (iii) any successor or assign of any Person described in
clauses (i) and (ii) above, except that Lender's rights shall inure to
the benefit of the parties described in clauses (i), (ii) and (iii)
hereof if such parties are Lender (including, for these purposes,
Lender's successors and assigns as holder of the Loan Documents), any
beneficiaries of any Loan Pool, any Participant and any of Lender's (or
such successors', assigns', beneficiaries' or Participant's) Affiliates
or nominees.
5.16.4 Borrower shall give prompt written notice to Lender of:
(i) any proceeding or inquiry by any Governmental
Authority with respect to the presence of any Hazardous
Substance on an Individual Property or the migration thereof
from or to other property;
(ii) all claims made or threatened by any third party
against Borrower or the Property relating to any loss or
injury resulting from any Hazardous Substance;
(iii) the storage, production, release, discharge or
disposal of any Hazardous Substances on an Individual Property
other than in accordance with all applicable Environmental
Laws; and
<PAGE>
(iv) Borrower's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of
an Individual Property that could cause an Individual Property
or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of the an
Individual Property under any Environmental Law or to be
otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of an Individual Property
under any Environmental Law.
5.16.5 Borrower shall keep Lender apprised of the status of,
and any material developments in, any governmental investigation
relating to Environmental Matters at or about the Properties, any and
all enforcement, clean-up, removal or other governmental or regulatory
actions instituted, completed or threatened pursuant to any
Environmental Law with respect to the Properties and any other claims,
actions or proceedings with respect the Properties relating to
Environmental Matters. Borrower shall provide Lender with copies of all
communications with all Governmental Authorities relating to Hazardous
Substances Claims. Without Lender's prior written consent, Borrower
shall not enter into any settlement agreement, consent decree or other
compromise with respect to any such governmental investigation or
action, or other claim, action or proceeding relating to Hazardous
Substances which Borrower does not have the funds available to pay or
which may adversely affect Lender's lien on, or the value of, the
Properties.
5.16.6 The foregoing rights and remedies contained in this
Section 5.16 are cumulative with, and in addition to, any rights and
remedies Lender may have against Borrower or any Significant Party
under the other terms and provisions of this Agreement, under any other
Loan Document or under any Environmental Law, including, without
limitation, CERCLA. Section 5.17 Report Updates.
5.17.1 Lender reserves the right at any time during the term
of the Loan to conduct or require Borrower to update any environmental
reports previously delivered to Lender or, in the absence thereof, to
conduct such environmental inspections, audits and tests as Lender
shall deem necessary or advisable from time to time utilizing a company
acceptable to Lender; provided, however, that Borrower shall not be
required to pay for such environmental inspections, audits and tests
more often than once a year so long as:
(i) no Event of Default exists under this Agreement
or any other Loan Document;
(ii) Lender has no cause to believe, in Lender's sole
but good faith judgment, that there has been a release or a
threatened release of Hazardous Substances at the Properties
or that Borrower or the Properties is in violation of any
applicable Environmental Law,
(iii) such inspections, audits and tests are not
being obtained in satisfaction of the provisions of Section
7.26 hereof; and
<PAGE>
(iv) such inspection, audit or test has not been
recommended in any other audit, inspection, test or
consultants report previously conducted with respect to the
Properties. Borrower shall be provided with a copy of any such
report prepared for Lender promptly after such report is
delivered to Lender. In the event that any environmental site
assessment report prepared for the Properties recommends that
an operations and maintenance plan be implemented for any
Hazardous Substance, including, without limitation, asbestos,
Borrower shall cause such operations and maintenance plan to
be prepared and implemented at Borrower's expense upon request
of Lender and in accordance with the recommendation.
5.17.2 Lender shall have the right from time to time
throughout the term of the Loan with respect to any Property to order
additional Engineering Reports with respect to any of the Properties.
Such additional engineering reports shall be paid for by Borrower in
accordance with Section 7.4; provided, that Borrower shall not be
required to pay for such additional Engineering Reports more frequently
than once every calendar year unless (w) an Event of Default has
occurred, (x) any such additional Engineering Report is being obtained
pursuant to Section 7.26 hereof, (y) any such additional Engineering
Report is required by applicable Requirements to be obtained or (z) in
Lender's sole but good faith judgment, a material adverse change in the
condition of an Individual Property has occurred.
5.17.3 Lender shall not be liable for any action or inaction
by Borrower with respect to any remedial or other response activity in
connection with any Hazardous Substance or any repair or replacement
recommended in any engineering report, notwithstanding any review or
approval of Borrower's method of remediation or repair or replacement,
as applicable, or any response by Lender.
Section 5.18 Lender Access to Properties. Borrower will permit Lender,
and its agents, consultants or representatives, to enter upon each Individual
Property on reasonable notice at reasonable times to inspect the Improvements.
Lender or its agents, consultants or representatives as part of any inspection
may take soil, air, water, building material and other samples but shall restore
the Individual Property to its original condition in accordance with applicable
law.
Section 5.19 Delivery of Documents Regarding Ownership. Borrower will
deliver to Lender, on demand made therefor by Lender, copies of all documents
which evidence Borrower's title in or to any materials, fixtures or articles
incorporated in the Improvements or subject to the Lien of any of the Loan
Documents.
Section 5.20 Conduct of Business. Borrower shall at all times conduct
its business so that each of the representations and warranties set forth herein
shall be and at all times shall remain true in all material respects and, to the
extent any legal opinion delivered to Lender contains assumptions of fact based
thereon, all such assumptions of fact are and shall at all times remain true in
all material respects.
ARTICLE VI. EVENTS OF DEFAULT
Section 6.1 Events of Default; Defaults. The term "Default" as used
herein shall mean any one or more of the events set forth below prior to the
expiration of the applicable notice or grace period, if any. The term "Event of
Default" wherever used in this Agreement shall mean any one or more of the
events set forth below after the expiration of the applicable notice or grace
period, if any.
<PAGE>
6.1.1 Non-Payment. Failure by Borrower to pay (a) any periodic
installment of interest or principal when the same shall become due and
payable hereunder or under the Note; or (b) the outstanding principal
balance of the Note, together with the interest accrued thereon and all
other sums which may then be owed by Borrower to Lender, at maturity or
upon prepayment of the Note in full; or (c) any other sums to be paid
by Borrower hereunder or under any other Loan Document within five (5)
days from the date which Lender gives Borrower written notice of such
failure.
6.1.2 Affirmative Covenants. Failure by Borrower or any other
Person to duly keep, perform and observe any Affirmative Covenant or
agreement in this Agreement, the Note, the Mortgage, or in any other
Loan Document (unless same constitutes a default under any other clause
of this Section 6.1 or any other Loan Document, in which case, the
grace or cure period, if any, set forth in such other clause shall
govern) within thirty (30) days after Lender gives Borrower written
notice of such failure; provided, that in the event such failure is not
susceptible of cure within such thirty (30) day period it shall not be
an Event of Default hereunder if such failure is curable and Borrower
commences to cure such default within such thirty (30) day period and
diligently prosecutes such cure to completion within one hundred twenty
(120) days of the expiration of such thirty (30) day period.
6.1.3 Negative Covenants. If Borrower or any other Person
shall breach or otherwise not comply with any Negative Covenant set
forth herein or in any other Loan Document (unless same constitutes a
default under any other clause of this Section 6.1 or any other Loan
Document, in which case, the grace or cure period, if any, set forth in
such other clause shall govern) and such default shall continue for ten
(10) Business Days after written notice thereof by Lender to Borrower;
provided that no such notice and grace shall be required with respect
to a knowing, intentional and willful breach of a Negative Covenant.
6.1.4 Financial Statements. If any material inaccuracy shall
exist in any of the Financial Statements or in any other financial
statement or other information furnished to Lender by Borrower, any
other Significant Party, any officer of Borrower or any other
Significant Party (or their direct or indirect general partners,
managers or managing members), or any other Person on behalf of the
foregoing Persons pursuant to the provisions of this Agreement or any
other Loan Document or furnished to, or to be furnished to, Lender to
induce Lender to make the Loan or any advance thereunder, to extend the
term of the Loan or consent to any matter hereunder or under any other
Loan Document.
6.1.5 Representations. If at any time any representation,
warranty or certification made by Borrower or any other Significant
Party, as applicable, in this Agreement, the Note or any other Loan
Document or in any document delivered pursuant to any Loan Document or
otherwise delivered in connection with the Loan shall be untrue,
incorrect or misleading in any material respect when made.
<PAGE>
6.1.6 Other Loan Documents. If an "Event of Default" shall
occur under the Mortgage or any other Loan Document (or under any
document evidencing or securing or delivered in connection with any
loan (other than the Loan) which Lender may hereafter elect to make to
Borrower) or any other default shall occur and continue beyond the
applicable notice or grace period, if any, under or with respect to any
other Loan Document (or under or with respect to any of the documents
evidencing or securing any such other loan).
6.1.7 Demolition or Alterations. Except as permitted herein or
in the other Loan Documents, the commencement of demolition of or
material alterations (as such term is defined in the Mortgage) to any
Property without the prior written consent of Lender, which consent may
be withheld by Lender in Lender's sole discretion.
6.1.8 Failure to Deliver Estoppel Certificate. If Borrower
shall fail to deliver any estoppel certificate required by Section 5.11
within the time period provided in said Section and within ten (10)
days after receipt of a notice of such failure.
6.1.9 Receipts; Deposits. If Borrower fails to deposit (or
cause to be deposited) any Receipts into the Clearing Account within
the time period provided in the Cash Management Agreement to do so.
6.1.10 Cessation of Borrower. If Borrower or any other
non-natural Person which is a Significant Party ceases to exist.
6.1.11 Transfer. If in violation of Section 5.1 hereof (a) any
Property, or any part thereof, is Transferred or (b) any direct or
indirect legal or beneficial interest in Borrower shall be Transferred.
6.1.12 Liens. If in violation of Section 5.2, any Property or
any part thereof is mortgaged or any other Lien is voluntarily placed
thereon by Borrower.
6.1.13 Involuntary Bankruptcy, Etc. The entry by a court of
(a) a decree or order for relief in respect of any Significant Party in
an involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (b) a
decree or order adjudging any Significant Party a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of any Significant Party under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of any Significant Party or of
any substantial part of the property of, or ordering the winding up or
liquidation of the affairs of, any Significant Party, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of sixty (60) days.
6.1.14 Voluntary Bankruptcy. The commencement by any
Significant Party of a voluntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by any Significant Party to the
entry of a decree or order for relief in respect of such Significant
Party in an involuntary case or proceeding under any applicable Federal
or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against such Significant Party or the filing by any Significant Party
<PAGE>
of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by any Significant
Party to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of any Significant Party or of any
substantial part of any property of any Significant Party or the making
by any Significant Party of an assignment for the benefit of creditors,
or the admission by any Significant Party in writing of its inability
to pay its debts generally as they become due.
6.1.15 Judgments. If, at any time, a judgment shall be
rendered against a Significant Party which could have a Material
Adverse Effect on the ability of a Significant Party to perform any of
its obligations, if any, under this Agreement, the Note, or any other
Loan Document provided, that, if such Significant Party appeals said
judgment and (w) said appeal (i) is timely filed, (ii) is diligently
pursued, (iii) is permitted by law, (iv) has the effect of staying any
action on such judgment, (x) such Significant Party posts any security
required by law or reasonably required by Lender in respect of said
judgment, and (y) said judgment does not subject Lender or any Property
to any civil or criminal penalties and (z) such judgment is not a Lien
on any Property or any other collateral for the Loan, then it shall not
be an Event of Default hereunder until such judgment is final and
non-appealable.
6.1.16 Leases. If any Lease shall be entered into by Borrower
without the prior written consent of Lender in accordance herewith.
6.1.17 Organizational Documents. If (a) at any time any
Organizational Document of Borrower or the SPE Entity is modified in
violation of Article IX hereof or (b) Borrower or the SPE Entity shall
fail to comply with the bankruptcy-remote, single-purpose entity
requirements of its Organizational Documents or (c) Borrower or SPE
Entity shall otherwise violate Article IX of this Agreement.
6.1.18 Delivery of Financial Statements. If Borrower or any
Guarantor fails to deliver (or cause to be delivered) to Lender any
Financial Statement required to be delivered hereunder or under the
Cash Management Agreement or any other Loan Document, and such failure
continues
(i) for fifteen (15) days after the date such
Financial Statement was required to be so delivered with
respect to any Financial Statement required to be delivered to
Lender on a monthly basis,
(ii) for thirty (30) days after the date such
Financial Statement was required to be so delivered with
respect to any Financial Statement required to be delivered to
Lender on a quarterly basis,
<PAGE>
(iii) for sixty (60) days after the date such
Financial Statement was required to be so delivered with
respect to any Financial Statement required to be delivered to
Lender on an annual basis and
(iv) for thirty (30) days after request therefor by
Lender with respect to any other Financial Statement.
6.1.19 ERISA. If Borrower shall breach any of the provisions
of Section 5.7.
6.1.20 Termination of Management Agreement. TC "6.1.20
Termination of Management Agreement.##If without Lender's prior written
consent: (i) the Manager resigns or is removed or any Management
Agreement terminates other than by reason of any default thereunder by
Borrower, unless, in the case of a Management Agreement with a property
manager which is not an Affiliate of Borrower, such Management
Agreement is replaced, within twenty (20) days after notice of such
resignation, removal or termination with a replacement Management
Agreement and Manager satisfying the provisions of Section 5.12 hereof,
(ii) there is any material change in the Management Agreement or
termination thereof by reason of any default thereunder by Borrower, or
(iii) with respect to any Manager that is an Affiliate of Borrower, the
ownership, management or control of such Manager is transferred to a
Person who is not an Affiliate of Borrower.
6.1.21 Other Conditions for Acceleration. The occurrence of
any conditions set forth herein, in the Note, the Mortgage, or any
other Loan Document permitting Lender to accelerate the Indebtedness.
6.1.22 Material Adverse Change. If, in Lender's reasonably
exercised commercial business judgment, there shall occur any event (a)
which has a Material Adverse Effect on the financial condition,
operations, performance, business of all of the Properties, or the
ability of Borrower and the Guarantors to make any payment or otherwise
perform any or all of their respective material obligations under this
Agreement, the Note and/or any other Loan Document to which each is a
party, (b) as a result of which, the legality, validity or
enforceability of this Agreement, the Note and/or any other Loan
Document, or the lien and security interest of Lender pursuant to the
Mortgage or any other Loan Document purporting to grant to Lender a
Lien in any collateral shall be materially adversely effected.
6.1.23 Denial of Obligation. If (a) Borrower or any Guarantor
shall take the position in any written communication with Lender or in
any litigation that any Loan Document is no longer the valid, binding
and enforceable obligation of Borrower or any Guarantor that is a party
thereto or (b) any Guarantor shall revoke, contest, commence any action
or raise any defense against its obligations under the Guaranty or any
other Loan Document.
6.1.24 Misapplication of Receipts. If Borrower shall (a) apply
any monies delivered to Borrower pursuant to Section 6 of the Cash
Management Agreement other than to pay amounts permitted to be paid
with such funds and such breach shall continue for five (5) Business
Days following notice thereof; provided that no such notice and grace
shall be required with respect to an intentional breach of such
provision or (b) fail to pay to Lender any amounts required to be paid
to Lender pursuant to Section 6(f) of the Cash Management Agreement at
the time such payment is to be made to Lender thereunder.
<PAGE>
6.1.25 Failure to Provide Further Assurances. If, after
fifteen (15) days' notice from Lender to Borrower that Borrower has
failed to comply with any of the provisions of Section 7.26 hereof,
Borrower fails to cure such default.
6.1.26 Lender Access. If Lender or its agents, consultants or
representatives are not permitted, at all reasonable times on two (2)
Business Days' notice, to enter upon an Individual Property and to
inspect the Improvements or, if Lender or its representatives are not
permitted to inspect Borrower's books and records or are not furnished,
within five (5) Business Days after requested, copies of any of
Borrower's books and records.
6.1.27 Certain Cross Defaults. If any default shall occur,
beyond any applicable grace or cure period, under (a) that certain Loan
Agreement of even date herewith between Lender and Pelican Strand,
Ltd., (b) that certain Guaranty of Payment of even date herewith by
Golf Ventures, Inc. and U.S. Golf Communities, Inc. in favor of Lender
or under any other Guaranty and (c) under any agreement binding upon
Golf Ventures, Inc. for the sale or issuance of more than fifteen
percent (15%) of the shares of common stock of Golf Ventures, Inc.
6.1.28 SEC Action. If, at any time, an action or proceeding
shall be commenced against Golf Ventures, Inc. or any other Significant
Party by the Securities and Exchange Commission or any shareholders of
Golf Ventures, Inc. or such shareholders.
6.1.29 Disclosed Violations. If Borrower shall fail to cure
the Disclosed Violations in accordance herewith on or before December
31, 1998.
6.1.30 Red Hawk Property. If Borrower shall fail to sell the
Red Hawk Property in accordance herewith on or before March 31, 1999.
Section 6.2 Rights upon Event of Default. Upon the occurrence and
during the continuance of any Event of Default, Lender shall, in addition to all
other remedies conferred upon Lender at law or in equity or by the terms of the
Note, the Mortgage and the other Loan Documents, have the right but not the
obligation, to pursue any one or more of the following remedies, concurrently or
successively, it being the intent hereof that all such remedies shall be
cumulative and that no such remedy shall be to the exclusion of any other:
(a) take any action which, in Lender's sole judgment, is
necessary or appropriate to effect observance and performance of the
covenants, agreements and obligations (under this Agreement and the
other Loan Documents) of Borrower, the Guarantors, or any other person
providing collateral pursuant to or obligated to perform any of the
terms and provisions of this Agreement or the other Loan Documents
(each, an "Obligated Party");
(b) declare the Note to be immediately due and payable;
<PAGE>
(c) use and apply any monies deposited in the Clearing
Account, the Cash Collateral Account or the Tax and Insurance Escrow
Account or any other monies deposited by Borrower with Lender,
regardless of the purpose for which the same were deposited, to cure
any default or Event of Default or to apply on account of any
indebtedness under this Agreement or any of the other Loan Documents
which is due and owing to Lender or to operate the Properties or for
any other purposes described herein or in any other Loan Document;
(d) institute an action, suit or proceeding at law or in
equity for the specific performance of any covenant, condition or
agreement contained herein or in the Mortgage, Note or any other Loan
Document, or in aid of the execution of any power granted hereunder or
for the enforcement of any other appropriate legal or equitable remedy;
and
(e) set-off against the obligations to Lender of Borrower or
any other Obligated Party, any sum owed by Lender or any Affiliate of
Lender in any capacity to Borrower or such other Obligated Party, or
any property of any of them in the possession of Lender or any
Affiliate of Lender.
ARTICLE VII. GENERAL PROVISIONS
Section 7.1 Rights Cumulative; Waivers.
7.1.1. Each right, power and remedy conferred upon Lender
herein or in any of the other Loan Documents is cumulative and in
addition to every other right, power or remedy, express or implied, now
or hereafter provided by law or in equity, and each and every right,
power and remedy herein set forth or otherwise so existing may be
exercised, concurrently or independently, from time to time as often
and in such order as may be deemed expedient to Lender. The exercise of
one right, power or remedy shall not be a waiver of the right to
exercise at the same time or thereafter any other right, power or
remedy; and no delay or omission of Lender in the exercise of any
right, power or remedy accruing hereunder or arising otherwise shall
impair any such right, power or remedy, or be construed to be a waiver
of any default or acquiescence therein. Enumeration of special rights
or powers herein, in the Mortgage or in the other Loan Documents shall
not be construed to limit any grant of general rights or powers herein,
in the Mortgage or in the other Loan Documents or limit Lender's
exercise of any and all rights granted under the laws of the State of
New York or the United States of America. No act of Lender shall be
construed as an election to proceed under any provision herein or in
any other Loan Document to the exclusion of any other provision herein.
Except as otherwise specifically required herein, notice of the
exercise of any right, remedy or power granted to Lender by this
Agreement or any other Loan Document is not required to be given.
Lender shall be entitled to enforce payment of the Loan and any other
amount payable under the Loan Documents and performance of this
Agreement and the other Loan Documents and to exercise all rights and
remedies under this Agreement or the other Loan Documents or otherwise
at law or in equity, notwithstanding that some or all of the
indebtedness secured thereby may now or hereafter be otherwise secured,
whether by mortgage, security agreement, pledge, lien, assignment or
otherwise. Neither the acceptance of this Agreement nor its
<PAGE>
enforcement, shall prejudice or in any manner affect Lender's right to
realize upon or enforce any other security now or hereafter held by
Lender, it being agreed that Lender shall be entitled to enforce this
Agreement, the Mortgage, and any other security now or hereafter held
by Lender hereunder, under any of the other Loan Documents or otherwise
in such order and manner as Lender may determine in its absolute
discretion.
7.1.2. Lender may, by written notice to Borrower, at any time
and from time to time, waive in whole or in part and absolutely or
conditionally any default or Event of Default hereunder. Any such
waiver shall be subject to such conditions or limitations as shall be
specified in any such notice. In the case of any such waiver, the
rights of Borrower shall be otherwise unaffected, and any default or
Event of Default so waived shall be deemed to be cured and not
continuing only to the extent and only on the conditions or limitations
set forth in such waiver, but no such waiver shall extend to any
subsequent or other default or Event of Default, or impair any right,
remedy or power consequent thereupon.
Section 7.2 Lender's Action for its Own Protection Only. The authority
herein conferred upon Lender, and any action taken by Lender, to inspect the
Properties, to review and/or approve all documents and instruments submitted to
Lender, or otherwise, will be exercised and taken by Lender and by Lender's
employees, agents, consultants and representatives for their own protection only
and may not be relied upon by Borrower or any other party for any purposes
whatever; and neither Lender nor Lender's employees, agents, consultants and
representatives shall be deemed to have assumed any responsibility to Borrower
or any other party with respect to any such action herein or under any of the
other Loan Documents authorized to be taken by Lender or Lender's employees,
agents and representatives. Any review, investigation or inspection conducted by
Lender, any architect, engineer or other consultant retained by Lender, or any
agent or representative of Lender in order to verify independently Borrower's
satisfaction of the covenants, agreements and obligations of Borrower under this
Agreement or any of the other Loan Documents, or the validity of any
representations and warranties made by Borrower (regardless of whether or not
the party conducting such review, investigation or inspection should have
discovered that any of such conditions precedent were not satisfied or that any
such covenants, agreements or obligations were not performed or that any such
representations or warranties were not true) shall not affect (or constitute,
except as may specifically be provided in this Agreement or in the other Loan
Documents to the contrary, a waiver by Lender of) (i) any representations and
warranties under this Agreement or the other Loan Documents or Lender's reliance
thereon or (ii) Lender's reliance upon any certifications of Borrower or any
other party in connection with the Loan, or any other facts, information or
reports furnished to Lender by Borrower or any other party in connection with
the Loan. Lender neither undertakes nor assumes any responsibility or duty to
Borrower to select, review, inspect, supervise, pass judgment upon or inform
Borrower of any matter in connection with the Properties, and Borrower shall
rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment or supply of information
to Borrower by Lender in connection with such matters is for the protection of
Lender only and neither Borrower nor any third party is entitled to rely
thereon.
<PAGE>
Section 7.3 No Third Party Beneficiaries. All conditions to the
obligations of Lender hereunder and under the other Loan Documents are imposed
solely and exclusively for the benefit of Lender and its participants, if any,
and assigns and no other Person (other than Servicer) shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will advance proceeds of the Loan or agree or
consent to any matter in the absence of strict compliance with any or all
thereof, and no other Person shall, under any circumstances, be deemed to be the
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender at any time if in its sole discretion it deems it
advisable to do so, it being further understood that Lender and its assigns or
participants, if any, shall have no obligation to see to it that the
Improvements or any other work required or contemplated hereby or by the other
Loan Documents are properly and/or timely completed.
Section 7.4 Payment of Expenses.
7.4.1. Borrower will, at and in connection with the closing of
the Loan and at all times thereafter, pay all reasonable and actual
costs and fees incurred by Lender in connection with the preparation,
negotiation, consummation, execution, administration, repayment,
collection and enforcement of the Loan, the Loan Documents and any
approval, consent, amendment, modification or waiver related thereto.
Without limiting the generality of the foregoing, Borrower will pay:
(a) Lender's Counsel Fees and the reasonable fees of
Lender's Consultant in connection with the foregoing;
(b) all taxes and recording fees and expenses,
including, without limitation, stamp and/or mortgage taxes and
transfer taxes, if any;
(c) all fees and out-of-pocket expenses incurred by
Lender, including all expenses of Lender and its respective
agents and representatives, in connection with any default
hereunder, under the Note, or under any other Loan Document or
the collection or enforcement thereof;
(d) subject to Section 5.17, all fees and expenses of
any environmental, engineering, appraisal, construction,
insurance or other consultants retained by Lender in
connection with the Loan or the administration, enforcement or
collection thereof; and
(e) all brokers' fees and commissions relative to the
Loan, the Properties and any lease or purchase contract
affecting same except to the extent any such claims are made
solely as a result of any dealings between Lender and any
broker, finder or similar person claiming to be entitled to a
commission in connection with the Loan, and with whom Borrower
has had no dealings in connection with the Loan.
7.4.2. All reasonable and actual costs and expenses incurred
and payments made by Lender under this Agreement or any of the other
Loan Documents from time to time, which are to be paid or reimbursed by
Borrower as described herein or in any of the other Loan Documents
shall, as and when advanced or incurred by Lender, constitute
protective advances evidenced by the Note and secured by the Mortgage
and the other Loan Documents to the same extent and with the same
<PAGE>
effect as if the terms and provisions of this Agreement were set forth
therein, whether or not the principal balance of the Note plus such
protective advances shall exceed the face amount of the Note. If
Borrower shall fail to reimburse or pay to Lender the amount of such
protective advances by the applicable due date therefor, interest at
the Default Rate shall accrue on such protective advances from the date
such protective advances were made by Lender to and including the date
that such protective advances are reimbursed or paid to Lender in full
together with all such accrued interest thereon.
Section 7.5 Indemnification.
7.5.1. In addition to any other indemnifications
provided herein or in the other Loan Documents, Borrower shall
protect, defend, indemnify and save harmless the Indemnified
Parties from and against all liabilities, obligations, claims,
demands, damages, penalties, causes of action, losses, fines,
costs, expenses (including, without limitation, reasonable
attorneys' fees and disbursements) and Environmental Costs,
imposed upon or incurred by or asserted against any
Indemnified Party (other than by reason of such Indemnified
Party's gross negligence or willful misconduct, provided such
gross negligence or willful misconduct is determined to have
occurred by a final and unappealable decision of a court of
competent jurisdiction) by reason of (a) any funds deposited
with Lender, (b) receipt and application of any Receipts or an
Indemnified Party's payment or non-payment of costs and
expenses of operating the Properties following an Event of
Default which continues beyond any applicable grace or cure
period; (c) any accident, injury to or death of Persons or
loss of or damage to property occurring on or about the
Properties or any part thereof or on the adjoining sidewalks,
curbs, adjacent property or adjacent parking areas, streets or
ways; (d) any design, construction, alteration, operation,
maintenance, use, nonuse or condition of the Properties or any
part thereof or on adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (e) any
failure on the part of Borrower to perform or comply with any
of the terms of this Agreement or any other Loan Document; (f)
performance of any labor or services or the furnishing of any
materials or other property in respect of the Properties or
any part thereof; (g) any failure of the Properties to comply
with any Requirements; (h) the presence in, at or under the
Properties of any Hazardous Substance, or any release or
discharge on or from the Properties of any Hazardous
Substance; (i) any representation or warranty made in the
Note, the Mortgage, this Agreement or any of the other Loan
Documents being false or misleading in any material respect as
of the date such representation or warranty was made; (j)
except to the extent any such claims are made solely as a
result of any dealings between Lender and any broker, finder
or similar person claiming to be entitled to a commission in
connection with the Loan, and with whom Borrower has had no
dealings with in connection with the Loan, any claim by
brokers, finders or similar Persons claiming to be entitled to
a commission in connection with any Lease or other action
involving the Properties or any part thereof; or (k) the
claims of any lessee of any portion of the Properties or any
<PAGE>
person acting through or out of any lessee or otherwise
arising out of or as a consequence of any Lease. Any amounts
payable to any Indemnified Party by reason of the application
of this Section 7.5 shall become immediately due and payable
and shall bear interest at the Default Rate from the date any
Indemnified Party advances any funds to pay any such loss or
damage until paid. The obligations and liabilities of Borrower
under this Section 7.5 shall survive any termination,
satisfaction, or assignment of this Agreement and the exercise
by Lender of any of its rights or remedies hereunder,
including, but not limited to, the acquisition of the
Properties by foreclosure or a conveyance in lieu of
foreclosure.
7.5.2 In case any claim, action or proceeding (a
"Claim") is brought against any Indemnified Parties in respect
of which indemnification may be sought by such Indemnified
Parties pursuant to Section 7.5.1, such Indemnified Parties
shall give notice thereof to Borrower, provided, however, that
the failure of such Indemnified Parties to so notify Borrower
shall not limit or affect such Indemnified Parties' rights to
be indemnified pursuant to Section 7.5.1, except to the extent
such failure shall materially and adversely prejudice
Borrower's defense of such Claim. Upon receipt of such notice
of Claim, Borrower shall, at its sole cost and expense,
diligently defend any such Claim with counsel reasonably
satisfactory to such Indemnified Parties (it being understood
that counsel selected by Borrower's insurance carrier shall be
deemed to be acceptable to such Indemnified Parties provided
such insurer is an acceptable insurer under this Agreement and
the other Loan Documents or otherwise was accepted by Lender
as an insurer), which counsel may, without limiting the rights
of Indemnified Parties pursuant to the next succeeding
sentence of this Section 7.5.2, also represent Borrower in
such Claim. In the alternative, Indemnified Parties may elect
to conduct their own defense through counsel of their own
choosing, and at the expense of Borrower, if (A) such
Indemnified Parties reasonably determine that the conduct of
its defense by Borrower presents a conflict or potential
conflict between Borrower and Lender that would make separate
representation advisable or otherwise could be prejudicial to
its interests, (B) Borrower refuses to defend or (C) Borrower
(or, if applicable, its insurance carrier) shall have failed,
in Lender's reasonable judgment, to diligently defend the
Claim. Except as provided in the preceding sentence, Borrower
shall not be responsible for the fees of counsel for any
Indemnified Parties incurred in connection with the
indemnification contained in Section 7.5.1. Borrower may
settle any Claim against Indemnified Parties without such
Indemnified Parties' consent, provided (i) such settlement is
without any liability, cost or expense whatsoever to such
Indemnified Parties, (ii) the settlement does not include or
require any admission of liability or culpability by such
Indemnified Parties under any Requirement, whether criminal or
civil in nature, and (iii) Borrower obtains an effective
written release of liability for such Indemnified Parties from
the party to the Claim with whom such settlement is being
made, which release must be reasonably acceptable to such
<PAGE>
Indemnified Parties, and a dismissal with prejudice with
respect to all claims made by the party with whom such
settlement is being made, with respect to any pending legal
action against such Indemnified Parties in connection with
such Claim. If Indemnified Parties are conducting their own
defense as provided above, Borrower shall be responsible for
any good faith settlement of such Claim entered into by such
Indemnified Parties upon Borrower's consent. Nothing contained
herein shall be construed as requiring any Indemnified Parties
to expend funds or incur costs to defend any Claim in
connection with the matters for which such Indemnified Parties
are entitled to indemnification pursuant to Section 7.5.1.
Section 7.6 Notices. Any notice, report, demand or other instrument
authorized or required to be given or furnished ("Notices") shall be in writing
and shall be given as follows: (a) by hand delivery; (b) by deposit in the
United States mail as first class certified mail, return receipt requested,
postage paid; (c) by overnight nationwide commercial courier service; or (d) by
telecopy transmission (other than for notices of default) with a confirmation
copy to be delivered by duplicate notice in accordance with any of clauses
(a)-(c) above, in each case, to the party intended to receive the same at the
following address(es):
Lender: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Edmund Taylor
Re: Golf Communities/Richard Luftig
Telecopier: (212) 325-8162
with copies to: Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Attention: Colleen Graham, Esq.
Re: Golf Communities/Richard Luftig
and: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Richard Luftig
Re: Golf Communities
and: the Servicer
or any successor Servicer of the Loan.
Borrower: c/o Golf Communities of America
255 South Orange Avenue
Firstate Tower, Suite 1515
Orlando, Florida 32801
Attention: Warren J. Stanchina
Telecopier: (407) 245-7585
with a copy to: Haynes and Boone, L.L.P.
<PAGE>
901 Main Street, Suite 3100
Dallas, Texas 75202-3780
Attention: J. Kirk Standly
Telecopier: (214) 651-5940
Any party may change the address to which any such Notice is to be
delivered, by furnishing ten (10) days written notice of such change to the
other parties in accordance with the provisions of this Section 7.6. Notices
shall be deemed to have been given on the date they are actually received;
provided that the inability to deliver Notices because of a changed address of
which no Notice was given, or rejection or refusal to accept any Notice offered
for delivery shall be deemed to be receipt of the Notice as of the date of such
inability to deliver or rejection or refusal to accept delivery. Notice for
either party may be given by its respective counsel. Additionally, notice from
Lender may also be given by the Servicer.
Section 7.7 No Oral Modification. Borrower acknowledges that this
Agreement, the Mortgage, the Note, and the other Loan Documents and all
instruments referred to in any of them can be extended, modified or amended only
in writing executed by Lender and Borrower and that none of the rights or
benefits of Lender can be waived permanently except in a written document
executed by Lender. Borrower further acknowledges Borrower's understanding that
no officer or administrator of Lender has the power or the authority from Lender
to make an oral extension or modification or amendment of any such instrument or
agreement on behalf of Lender.
Section 7.8 Assignment by Lender.
7.8.1 Assignment. Lender may assign (and thereafter, at any
time and from time to time, repurchase) all or a portion of its rights
and obligations under this Agreement and the other Loan Documents to
one or more Persons ("Assignees"; the term "Assignee" or "Assignees"
shall, unless otherwise expressly indicated, include Lender) and, upon
such assignment to any such Assignee, be released from its rights and
obligations as Lender in respect of such portion of the Loan, this
Agreement and the other Loan Documents, except that Lender shall not be
released from the obligation to make Subsequent Advances hereunder, nor
shall such obligation be reduced or diminished, prior to the Outside
Funding Date.
7.8.2 Participations. Lender and each of the other Assignees
may sell participations in the Loan to one or more Persons
(collectively, the "Participants"). Notwithstanding such sale, (i) the
selling party's obligations to Borrower under this Agreement and the
other Loan Documents shall remain unchanged by reason thereof and (ii)
the selling party shall remain solely responsible to Borrower for the
performance of such obligations. In order to assist Lender in any sales
of interests in the Loan, Borrower agrees for itself and agrees to
cause the SPE Entity, each Guarantor and the Manager to reasonably
cooperate with Lender in connection with any efforts by Lender to
obtain one or more Assignees or Participants, to provide additional
information and to execute and deliver such further documents,
instruments or agreements, in each case, as Lender or any Assignee or
Participant may reasonably require.
<PAGE>
7.8.3 Assignment and Acceptance. From and after the effective
date of any assignment to an Assignee (i) the Assignee shall be a party
hereto and to each of the other Loan Documents to the extent of the
applicable percentage or percentages assigned to such Assignee and,
except as otherwise specified herein, shall succeed to the rights and
obligations of Lender hereunder in respect of such applicable
percentage or percentages, and (ii) Lender shall relinquish its rights
and be released from its obligations hereunder and under the Loan
Documents accruing after the date of such assignment to the extent of
such applicable percentage or percentages. The liabilities of Lender
and each of the other Assignees shall be separate and not joint and
several. Neither Lender nor any Assignee shall be responsible for the
obligations of any other Assignee. Notwithstanding the foregoing,
Lender shall not be released from the obligation to make Subsequent
Advances hereunder, nor shall such obligation be reduced or diminished,
prior to the Outside Funding Date.
7.8.4 Other Business. Lender, each Assignee and each
Participant and their respective Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage
in any kind of business with, Borrower, any Affiliate of Borrower, any
of Borrower's subsidiaries and any Person who may do business with or
own interests in or securities of Borrower or any such Affiliate or
subsidiary, without any duty to account therefor to each other.
7.8.5 Privity of Contract. This Agreement is being entered
into by Lender individually and as agent for all present and future
Assignees, and privity of contract is hereby created among Lender, all
present and future Assignees and Borrower.
7.8.6 Availability of Records. Borrower acknowledges and
agrees that Lender may provide to any Assignees or prospective
Assignees, and that Lender and each of the Assignees may provide to any
Participants or prospective Participants, originals or copies of this
Agreement, all other Loan Documents and all other documents,
instruments, certificates, opinions, insurance policies, letters of
credit, reports, requisitions and other materials and information
(collectively, "Borrower Information") of every nature or description,
and may communicate all oral information, at any time submitted by or
on behalf of Borrower, the SPE Entity, the Manager, any Guarantor or
any Affiliate of Borrower, the SPE Entity, any Guarantor or the
Manager.
Section 7.9 Severability. In the event that any of the covenants,
agreements, terms or provisions contained in the Note, this Agreement, the
Mortgage, or in any other Loan Document shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein or in the Note, the Mortgage,
or in any other Loan Document shall be in no way affected or prejudiced thereby.
Section 7.10 No Assignment by Borrower. Except as expressly permitted
herein, Borrower shall not assign or transfer any of its rights hereunder
without the prior written consent of Lender. Any assignment made without
Lender's prior written consent shall be void.
<PAGE>
Section 7.11 Governing Law. THIS AGREEMENT WAS NEGOTIATED IN THE STATE
OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW
OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW
YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE
FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO *
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 7.12 Successors and/or Assigns. Subject to the restrictions on
transfer and assignment contained in this Agreement and the other Loan
Documents, whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the permitted successors and/or
assigns of such party, and this Agreement shall inure to the benefit of and
shall be binding on the parties hereto, the successors and/or assigns of such
party.
Section 7.13 Entire Contract. This Agreement and the other Loan
Documents, including all annexes, schedules and exhibits hereto and all other
documents furnished to Lender in connection with this Agreement, constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
transactions contemplated hereby, including, without limitation, any letter of
intent or loan commitment letter.
Section 7.14 Joint and Several Liability. If Borrower consists of more
than one Person, the obligations and liabilities of each such Person hereunder
and under the other Loan Documents shall be joint and several, subject to the
limitations contained in Section 7.20 hereof.
Section 7.15 Counterparts; Headings. This Agreement may be executed in
counterparts, each of which shall constitute an original, and which, when taken
together, shall constitute but one instrument. The captions and headings of the
various sections of this Agreement are for purposes of reference only and are
not to be construed as confining or limiting in any way the scope or intent of
the provisions hereof. Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular, and the
masculine, feminine and neuter shall be freely interchangeable.
Section 7.16 Time of the Essence. Time is of the essence as to
Borrower's obligations under this Agreement and the other Loan Documents.
Section 7.17 Consents.
<PAGE>
7.17.1. Any consent or approval by Lender in any single
instance shall not be deemed or construed to be Lender's consent or
approval in any like matter arising at a subsequent date. Any consent
or approval requested of and granted by Lender pursuant hereto or any
of the other Loan Documents shall be narrowly construed to be
applicable only to Borrower and the matter identified in such consent
or approval and no third party shall claim any benefit by reason
thereof. Wherever this Agreement, the Mortgage, the Cash Management
Agreement or any other Loan Document refers to the consent or approval
of Lender, or provides that any document or Person will be satisfactory
or acceptable to Lender or words of similar import, (x) such consent or
approval may be given or withheld by Lender, and such document or
Person must be satisfactory or acceptable to Lender, in its sole and
absolute discretion, unless otherwise expressly provided herein or
therein and (y) such consent or approval shall not be effective unless
given in writing. Wherever this Agreement, the Mortgage, the Cash
Management Agreement or any other Loan Document refers to the provision
of documents or other items being as Lender may require, provides for
the selection by Lender of any Person to provide reports or other items
hereunder or thereunder or selection by Lender of any means of
determining any matter or otherwise refers to terms and conditions
hereof being as Lender deems appropriate, any such requirement,
selection or determination of appropriateness shall be made by Lender
in its sole and absolute discretion, unless expressly provided
otherwise herein or therein. The foregoing provisions are intended to
be effective whether or not the applicable provision hereof or of any
other Loan Document specifies that the applicable consent, approval or
other matter is to be determined by Lender in its "sole and absolute
discretion" or words of similar import.
7.17.2. Wherever in this Agreement, the Mortgage, the Cash
Management Agreement or any other Loan Document, reference is made to
any consent or approval not being "unreasonably withheld" or words of
similar import, the same shall be deemed to include within its meaning
(unless expressly provided otherwise) that if such consent or approval
is to be granted, the same will occur within a commercially reasonable
period of time. If Borrower believes that Lender has improperly failed
to grant its consent or approval (or otherwise improperly failed to act
as requested by Borrower as described in Section 7.17.1 (e.g.,
determined that a document is not acceptable to Lender) hereunder or
under the Mortgage, the Cash Management Agreement or any other Loan
Document (including, without limitation, by failing to respond within a
commercially reasonable period of time) where such consent or approval
is required to be given by (or such action which was not taken is in
breach of) the terms of this Agreement or such other Loan Document,
Borrower's sole remedy shall be to obtain declaratory relief in a
final, non-appealable judgment determining such withholding to have
been improper, whereupon such consent or approval shall be deemed given
(or such other action described in Section 7.17.1 shall be deemed
taken), and Borrower hereby waives all claims for damages or set-off
resulting from any withholding of consent or approval (or failure to
take any other action described in Section 7.17.1) by Lender.
Section 7.18 No Partnership. Nothing contained in this Agreement, or
the other Loan Documents shall be deemed to create an equity investment on the
part of Lender, or a joint venture or partnership between Lender and Borrower,
it being the intent of the parties hereto that only the relationship of lender
and borrower shall exist with respect to the Properties. Borrower agrees that it
shall report this transaction for income tax purposes, and file all related tax
returns, in a manner consistent with the form of this transaction as a loan.
<PAGE>
SECTION 7.19 WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AGREEMENT, THE MORTGAGE, THE CASH MANAGEMENT
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF BORROWER, ANY OTHER
SIGNIFICANT PARTY, THE GUARANTORS OR LENDER RELATING TO THE LOAN, AND THE
LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER MAKING THE LOAN AND ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
Section 7.20 Limited Recourse. Notwithstanding anything to the contrary
contained in this Agreement or in any of the other Loan Documents, except as
provided otherwise in this Section, neither Borrower nor any direct or indirect
member, shareholder, partner, principal, any Affiliate of Borrower, any SPE
Entity or any Significant Party, employee, officer, director, agent or
representative or Affiliate of any of them (each, a "Related Party") shall have
any personal liability for (a) the payment of any sum of money which is or may
be payable hereunder or under the Note, or any other Loan Document, including,
but not limited to, the repayment of the Indebtedness, or (b) the performance or
discharge of any covenants, obligations or undertakings of Borrower hereunder or
under any other Loan Document and no monetary or deficiency judgment shall be
sought or enforced against Borrower or any Related Party with respect thereto;
provided, however, that a judgment may be sought against Borrower to enforce the
rights of Lender in, to, or against the Properties, including the Receipts, and
all other collateral granted as security under any Loan Document and Lender
shall have full recourse to and the right to proceed against the Properties and
such other collateral. Notwithstanding the foregoing, nothing contained herein
shall (i) impair the validity of the Indebtedness or in any way affect or impair
the Lien of the Mortgage, or the right of Lender to enforce any and all rights
and remedies under and by virtue of the Note, this Agreement, or any other Loan
Document (limited, however, as expressly provided otherwise above), including,
without limitation, naming Borrower as a party defendant in any foreclosure
action, or (ii) limit Lender from pursuing or seeking to enforce the rights of
Lender against any third parties, including any guarantor, indemnitor or surety
under any guaranty or indemnity delivered in connection with this Agreement, the
Note, or otherwise in connection with the Loan. Additionally, the provisions of
this Section 7.20 shall not relieve Borrower from any personal liability for,
and each Individual Borrower (as well as the Guarantors, to the extent provided
in the Guaranty) shall be fully and personally liable for, any liabilities,
costs, losses (including, without limitation, any reduction in value of the
Property, or any other collateral securing the Loan, or the loss of any such
collateral or Lender's security interest therein), damages, expenses (including,
without limitation, reasonable attorneys' fees and disbursements, and court
costs, if any), or claims suffered or incurred by Lender (or any Indemnified
Party) by reason of or in connection with the following:
(a) fraud or misrepresentation by such Individual Borrower,
any Related Party or any Guarantor in connection with the Loan;
(b) the gross negligence or willful misconduct of such
Individual Borrower;
<PAGE>
(c) physical waste of the Individual Property of such
Individual Borrower;
(d) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnification
Agreement or in this Agreement concerning Environmental Laws or
Hazardous Substances with respect to the Individual Property of such
Individual Borrower;
(e) the removal or disposal of any portion of the Individual
Property of such Individual Borrower in violation of the Loan Documents
or after an Event of Default;
(f) the misapplication or conversion by such Individual
Borrower of (i) any insurance proceeds paid by reason of any loss,
damage or destruction to the Property, (ii) any awards or other amounts
received in connection with the condemnation of all or a portion of the
Property, (iii) any Receipts or (iv) any monies held in or paid out
from any account (including any reserve or escrow) maintained under
this Agreement, the Cash Management Agreement or any of the other Loan
Documents;
(g) failure of such Individual Borrower to pay charges for
labor or materials or taxes or other charges that can create liens on
any portion of the Property to the extent funds are available from the
operation of the Individual Property of such Individual Borrower;
(h) failure of such Individual Borrower to deliver to Lender
any security deposits collected with respect to the Individual Property
of such Individual Borrower upon a foreclosure of the Property or
action in lieu thereof, except to the extent any such security deposits
were applied in accordance with the terms and conditions of any of the
Leases prior to the occurrence of the Event of Default that gave rise
to such foreclosure or action in lieu thereof;
(i) any damage or destruction of the Individual Property of
such Individual Borrower or any part thereof due to fire or other
casualty to the extent not covered by insurance required hereby but
only to the extent the same would have been covered by insurance if
such Individual Borrower had obtained and maintained the insurance
coverage required under this Agreement, and
(j) the cost of enforcement of any of Lender's rights or
remedies hereunder or under any Guaranty or any of the other Loan
Documents or costs incurred in any bankruptcy or similar proceeding
which may be brought by or against Borrower.
Notwithstanding anything to the contrary in any of the Loan Documents
(i) Lender shall not be deemed to have waived any right which Lender may have
under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Indebtedness secured
by the Mortgage or to require that all collateral shall continue to secure all
of the Indebtedness owing to Lender in accordance with the Loan Documents, and
(ii) the Indebtedness shall become fully recourse to Borrower in the event that:
(A) the first full monthly payment of principal and interest under the Note is
not paid when due; (B) any Individual Borrower violates the provisions of
Article 9 of this Agreement or fails to maintain its status as a single purpose
<PAGE>
entity in accordance with the provisions of this Agreement; (C) any violation of
Sections 5.2 or 5.3 of this Agreement or failure to obtain the prior written
consent of Lender to any subordinate financing or other voluntary lien
encumbering all or any portion of the Property as required by this Agreement;
(D) any violation of Sections 5.1 or 5.7 of this Agreement or failure to obtain
the prior written consent of Lender to any assignment, transfer, or conveyance
of all or any portion of the Property or any interest therein as required by
this Agreement; (E) all or any material portion of the Property shall be
forfeited by reason of criminal activity by any Individual Borrower or a Related
Party; (F) a receiver, liquidator or trustee of Borrower or a Guarantor shall be
appointed or if any Individual Borrower or a Guarantor shall be adjudicated a
bankrupt or insolvent, or if any petition for federal bankruptcy, reorganization
or arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by, consented to, or acquiesced in by, any Individual
Borrower or a Guarantor or if any proceeding for the dissolution or liquidation
of any Individual Borrower or the Guarantor shall be instituted by any
Individual Borrower or Guarantor or any Related Party or (G) following an Event
of Default, any Individual Borrower, Guarantor or any Related Party delays,
hinders or interferes in any material respect with Lender's pursuit of any of
its rights or remedies under the Note, this Loan Agreement, the Mortgage or any
of the Loan Documents.
Section 7.21 Limitation on Liability. In no event shall Lender be
liable to Borrower for consequential damages, whatever the nature of a breach by
Lender of its obligations under this Agreement or any of the other Loan
Documents and Borrower for itself and all Related Parties hereby waives all
claims for consequential damages.
Section 7.22 Jurisdiction, Venue, Service of Process. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK, NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK IN WHICH THE PROPERTIES IS LOCATED. BORROWER
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS
ADDRESS FOR NOTICES PURSUANT TO SECTION 7.6 HEREOF. BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, THE MORTGAGE, OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE
COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING CONTAINED
HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY OTHER JURISDICTION.
Section 7.23 Appointment of Agent for Service of Process. Each
Individual Borrower hereby designates the Secretary of State of the State in
which such Individual Borrower was organized as its agent to accept service of
process in any action or proceeding arising under or in connection with this
Agreement, the Mortgage, and the other Loan Documents.
Section 7.24 Rule of Construction. This Agreement and the other Loan
Documents shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that both Lender and
Borrower have contributed substantially and materially to the preparation of
this Agreement and the other Loan Documents.
<PAGE>
Section 7.25 Further Assurances.
7.25.1 Borrower will, at its sole cost and expense, do,
execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, conveyances, notes,
mortgages, assignments, security agreements, financing statements and
assurances as Lender shall from time to time require or deem advisable
(v) to carry into effect the purposes of this Agreement and the other
Loan Documents, (w) for the better assuring, conveying, mortgaging,
assigning and confirming unto Lender of all property and rights
mortgaged, granted, bargained, alienated, confirmed, pledged,
hypothecated, conveyed or assigned by this Agreement, or any of the
other Loan Documents or property intended now or hereafter to be, or
which Borrower may be or may hereafter become bound to convey or assign
to Lender, (x) for facilitating the placement of a Loan Interest in a
Loan Pool as described in Section 7.26 below, (y) for the perfection of
any such lien or security interest granted herein or in the other Loan
Documents and (z) for the better assuring and confirming of all of
Lender's rights, powers and remedies hereunder. Borrower, on demand,
will execute and deliver and hereby authorizes Lender to execute in the
name of Borrower or without the signature of Borrower to the extent
Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the
security interest of Lender in the Properties and the other collateral
under the Loan Documents.
7.25.2 Borrower forthwith upon the execution and delivery of
this Agreement and thereafter, from time to time, will cause the
Mortgage and any security instrument creating a Lien or security
interest or evidencing the Lien of the Mortgage and the other
applicable Loan Documents upon the Properties or other property and
each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any
present or future Legal Requirement in order to publish notice of and
fully to protect the Lien or security interest of, and the priority of,
the Mortgage and the other Loan Documents upon, and the interest of
Lender in, the Properties or other applicable property. Borrower will
pay all filing, registration or recording fees, and all expenses
incident to the foregoing and all taxes, duties, assessments and
charges of any Governmental Authority arising out of or in connection
with the execution and delivery of the Mortgage, any other security
instrument, any instrument of further assurance or any other Loan
Document. Upon Lender's request, Borrower shall, from time to time,
furnish Lender with evidence reasonably satisfactory to Lender that
such property is free of Liens and security interests (except as
permitted hereunder), including searches of applicable public records.
7.25.3 Upon any failure by Borrower to do so, Lender may
make, execute, record, file, re-record or refile any and all such
mortgages, instruments, certificates and documents for and in the name
of Borrower, and Borrower hereby irrevocably appoints (which
appointment is coupled with an interest and with full power of
substitution) Lender the agent and attorney-in-fact of Borrower to do
so; and Borrower shall reimburse Lender, on demand, for all costs and
expenses (including reasonable attorneys' fees) incurred by Lender in
connection therewith. Upon foreclosure, the appointment of a receiver
or any other relevant action, Borrower will, at Borrower's sole cost
<PAGE>
and expense, cooperate fully and completely to effect the assignment or
transfer of any Permit, agreement or any other right necessary or
useful to the operation of the Properties and shall deliver to Lender
all books and records relating to the Properties.
Section 7.26 Placement of Loan.
7.26.1 Borrower acknowledges that Lender, any Assignee or any
Participant (each of Lender, such Assignee or Participant is called a
"Placement Party") may elect to place the Loan, or its participation
interest, as the case may be (whichever of the Loan or such
participation is to be so placed is called the "Loan Interest") in a
pool of loans, participation interests and/or notes secured by or
dependent on the cash flow of mortgage loans, which will constitute
security for a rated securities offering (such pool is called a "Loan
Pool"; such rated securities being the "Securities" and such offering
being a "Securitization").
7.26.2 At the request of Lender, Borrower will use
commercially reasonable efforts to satisfy the market standards to
which Lender customarily adheres or which may be required in the
marketplace or by the Rating Agencies in order to enable a Placement
Party to place a Loan Interest in a Loan Pool, including, without
limitation, to:
(a) structure and maintain its organizational,
operational and financial affairs and those of its Affiliates
(collectively, the "Entities") as special-purpose
bankruptcy-remote entities to enable its counsel to render a
reasoned opinion customarily given in securitization
transactions that upon a petition for bankruptcy under the
bankruptcy code, none of the Entities as a debtor in
possession nor its bankruptcy trustee or creditors could cause
a court to order the substantive consolidation of the assets
and liabilities of any such entities with those of the
Borrower or the SPE Entity, which counsel shall be reasonably
satisfactory to, and which opinions or memoranda shall be
satisfactory to, Lender and the Rating Agencies;
(b) provide such financial and other information with
respect to the Properties, the Manager and the Entities as may
be reasonably requested by Lender or the Rating Agencies or
annual rating reviews for the Properties prepared by a firm of
certified public accountants reasonably acceptable to Lender
and the Rating Agencies (Lender acknowledges that the Approved
Accountant is an accounting firm acceptable to Lender);
(c) prepare and deliver such agreements and
instruments relating to the Note, the Loan Interest, the
Property and the Entities, including (A) agreements to
indemnify the Rating Agencies, Lender and any servicer or
trustee (except to the extent that any requested
indemnification for any loss, claim, damage, cost, expense or
liability results solely from the negligent or willful, or
with respect to Lender, grossly negligent or willful, acts or
omissions by such indemnified party in performing the duties,
functions and activities undertaken by it in connection with
the placement of the Loan Interest in a Loan Pool, including,
without limitation, any failure by such indemnified party or
<PAGE>
parties to comply with all applicable securities laws and
regulations) and (B) amendments of any of the Loan Documents
that are necessary to effect the placement of the Loan
Interest in a Loan Pool, as may be reasonably requested by,
and in form and scope reasonably satisfactory to, Lender and
the Rating Agencies; provided, however, that such amendments
shall not without the consent of the Borrower affect the terms
and conditions of the Note, or any other material business
term of, or material obligation of the Borrower under, the
Loan Documents;
(d) cause to be performed such site inspections,
appraisals, market studies, environmental reviews and reports
(Phase I assessments and, where appropriate, Phase II),
Engineer's Reports and other due diligence investigations of
the Properties customarily and reasonably requested by Lender
or the Rating Agencies in connection with the placement of the
Loan Interest in a Loan Pool and the rating of any securities
issues in connection therewith;
(e) provide business plans, budgets and title
insurance (including surveys) relating to the Properties as
may be reasonably requested by Lender or the Rating Agencies;
(f) cause counsel to render opinions as to "true
sale" and bankruptcy remoteness and other matters customary in
securitization transactions with respect to the Property, the
Entities, the Loan Interest and the Loan Documents, which
counsel shall be reasonably satisfactory to, and which opinion
shall be satisfactory to, Lender and the Rating Agencies;
provided, that Borrower shall not be responsible for providing
a "true sale" opinion that relates solely to the sale by
Lender of the Loan or a Loan Interest into a Loan Pool; and
(g) make the representations and warranties contained
in the Loan Documents as of the date of the closing of the
transfer of the Loan Interest to the extent such
representations and warranties may be truthfully made and make
such other representations with respect to the Property, the
Entities, the Loan Interest and the Loan Documents as are
customarily provided in securitization transactions and as may
be reasonably requested by Lender or the Rating Agencies in
connection with such closing to the extent such
representations and warranties may be truthfully made.
7.26.3 At Lender's request, Borrower shall cooperate with
Lender's preparation of a private placement memorandum or registration
statement and amendments and supplements thereto (the "Disclosure
Document") to privately place or publicly distribute the Note or the
Loan Interest or securities issued in connection therewith in a manner
that satisfies the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities and Exchange Act of
<PAGE>
1934, as amended (the "Exchange Act") and applicable state
Requirements. At the time of Lender's preparation of such Disclosure
Document, Borrower shall execute and deliver to Lender and any
underwriter or placement agent an instrument (a "Securitization
Indemnification") (in form and substance reasonably satisfactory to
Lender)
(i) certifying as to the veracity in all material respects of
all written information that it supplied and was incorporated in such
Disclosure Document and
(ii) indemnifying and holding each of them and any Person who
controls any of them within the meaning of Section 15 of the Securities
Act or Section 70 of the Exchange Act (each, an "Securitization
Indemnified Party") harmless against all costs, expenses and damages
incurred by any Securitization Indemnified Party as a result of any
untrue statement of a material fact made or supplied by Borrower as
contained in such Disclosure Document or the failure by Borrower (after
receipt of a draft of the Disclosure Statement) to specify for
inclusion in the Disclosure Document any material fact regarding
Borrower (or any member or partner thereof), the Property or the Loan
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only to
the extent that such statement of material fact is made in reliance
upon and in conformity with written information Borrower furnished for
use therein or the omission of such a material fact is based upon
Borrower's failure to specify such material fact or upon Borrower's
furnishing inaccurate information that shows that such material fact is
not material. If Lender (or a placement agent or underwriter acting on
behalf of Lender) shall deliver a draft of the Disclosure Document to
Borrower for its review, Borrower shall provide Lender (or the
placement agent or underwriter acting on behalf of Lender) with its
comments, if any, on such Disclosure Document as soon as practicable,
but in all events within fifteen (15) days after receipt thereof, in
the case of the first draft of such Disclosure Document, and within
five (5) Business Days after receipt of any subsequent draft of such
Disclosure Document. If in connection with such review, Borrower
advises Lender of the existence of a fact regarding Borrower (or any
member or partner thereof), the Properties or the Loan and advises
Lender that it deems such fact material, Lender shall include such fact
in the Disclosure Document or shall waive the rights of the Indemnified
Parties with respect to such fact. Upon receipt of the Securitization
Indemnification, Lender shall execute and deliver to Borrower an
instrument (in form and substance reasonably satisfactory to Borrower)
indemnifying and holding Borrower harmless against all costs, expenses
and damages incurred by it as a result of the preparation or
distribution of, and any untrue statement of a material fact contained
in, such Disclosure Document or the failure to include therein any
material fact in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that such indemnification shall not apply if any such costs,
expenses or damages arise out of or are based upon an untrue statement
of a material fact or an omission to state a material fact in such
Disclosure Document made in reliance upon and in conformity with
<PAGE>
written information furnished by Borrower expressly for use therein or
(after receipt of a draft of the Disclosure Statement) the omission of
a material fact concerning Borrower (or any member or partner thereof),
the Properties, the Loan (other than the express terms of the Loan
Documents) necessary to make the statements in the Disclosure Statement
not misleading. Borrower shall notify Lender if, in Borrower's opinion,
it is necessary to amend or supplement such Disclosure Document at any
time in order that such Disclosure Document does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Lender shall
prepare as soon as may be reasonably practicable an amendment or
supplement to such Disclosure Document correcting such statement or
omission. At the request of Lender, in connection with any sale of the
Note or any Loan Interest, Borrower shall confirm, as of the date of
such sale, that such Disclosure Document, as it may be so amended or
supplemented, does not contain any untrue statement of a material fact
concerning Borrower, the Properties or the Loan or omit to state a
material fact concerning Borrower, the Properties or the Loan necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
7.26.4 It is expressly understood hereunder that in connection
with the placement of any Loan Interest in a Loan Pool, Lender intends
to transfer the Loan Interest to a trustee which shall hold such Loan
Interest for the benefit of the holders of the interests in the Loan
Pool. In connection therewith, Borrower shall execute and deliver or
cause to be executed and delivered, all such additional instruments,
and do, or cause to be done, all such additional acts as (i) may be
reasonably necessary or proper to carry out such transfer, including,
without limitation, the delivery of such instruments and documents,
including assignments of mortgage (and similar documents), assignments
of Loan Documents, re-certifications of surveys with respect to the
Properties, and the delivery of such Lender's title insurance
endorsements in favor of the trustee as may be reasonably required to
confirm and/or evidence the transfer to the trustee of the title
insurance issued to Lender in respect of the Properties or, the
Mortgage, including payment of all fees, title insurance premiums and
other insurance premiums in connection therewith or (ii) Lender may
reasonably request.
7.26.5 Lender shall be permitted to share any information
provided by Borrower pursuant to this Section 7.26 in connection with
the placement of a Loan Interest in a Loan Pool with the investment
banking firms, Rating Agencies, accounting firms, law firms and other
third-party advisory firms involved with any transfer of the Loan, the
Loan Documents or the applicable Securitization. It is understood that
the information provided by Borrower to Lender may ultimately be
incorporated into the offering documents for the Securitization and
thus various investors may also see some or all of the information.
7.26.6 Borrower acknowledges that any transfer of the Loan or
the placement of the Loan Interest in a Loan Pool may occur at any time
during the term of this Agreement and the provisions of this Section
7.26 shall be applicable throughout the term of the Loan.
<PAGE>
Section 7.27 Servicer. At the option of Lender, the Loan may be
serviced by a Servicer selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Loan Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement between Lender and
Servicer. Borrower shall pay (a) any set-up fees or other initial costs relating
to or arising under such servicing agreement, (b) a monthly servicing fee due to
the Servicer in an amount not to exceed 0.2% per annum of the outstanding
principal balance of the Loan and (c) the fees of the Servicer in accordance
with the customary fees then charged by the Servicer for services requested by
Borrower, as such fees are established from time to time. Any action taken by
such Servicer or other agent on behalf of Lender hereunder or under any other
Loan Document shall have the same force and effect as if taken by Lender.
ARTICLE VIII. SPECIAL PROVISIONS
Section 8.1 Deposits for Tax and Insurance Premiums. In order to assure
the payment of Taxes and premiums with respect to all insurance coverage
required pursuant to Paragraph 7 of the Mortgage (collectively, "Insurance
Premiums") as and when the same shall become due and payable, the following
provisions shall apply:
8.1.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Tax and Insurance Deposit
to be held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan, all as more
particularly described in the Cash Management Agreement, and referred
to therein as the "Tax and Insurance Impound Fund Account" (the "Tax
and Insurance Escrow Account"). Thereafter, on each Payment Date,
Borrower shall pay to Lender, in immediately available funds for
deposit into the Tax and Insurance Escrow Account an amount equal to
one-twelfth (1/12) of the Taxes and Insurance Premiums to become due
during the period commencing on the first day of the first month
following such Payment Date and ending twelve (12) months following
such first day. In all cases there must be paid hereunder to be
deposited and held in the Tax and Insurance Escrow Account, an amount
sufficient to pay such Taxes and Insurance Premiums, one month prior to
the date when they are due and payable. The amounts of such deposits
with respect to Taxes and Insurance Premiums (herein collectively
called "Tax and Insurance Deposits") shall be based upon Lender's good
faith estimate as to the amount of Taxes and Insurance Premiums.
Borrower shall promptly, upon the demand of Lender, make additional Tax
and Insurance Deposits as Lender may from time to time reasonably
require due to
(i) failure of Borrower to make Tax and Insurance
Deposits in previous months,
(ii) underestimation of the amounts of Taxes and/or
Insurance Premiums,
(iii) the particular due dates and amounts of Taxes
and/or Insurance Premiums, or (iv) application of the Tax and
Insurance Deposits pursuant to this Agreement. All Tax and
Insurance Deposits shall be held by Lender in the Tax and
Insurance Escrow Account and invested and applied as provided
in the Cash Management Agreement.
<PAGE>
8.1.2 Provided no Event of Default has then occurred and is
continuing, Lender will, out of the funds in the Tax and Insurance
Escrow Account (provided such funds are sufficient for such purpose),
upon the presentation to Lender by Borrower of the bills therefor, pay
the Taxes and Insurance Premiums or will, upon the presentation of
official receipted bills therefor, reimburse Borrower for such payments
made by Borrower. If the total of all funds in the Tax and Insurance
Escrow Account shall not be sufficient to pay all of the Taxes and
Insurance Premiums when the same shall become due, then Borrower shall
pay to Lender on demand the amount necessary to make up the deficiency.
Lender shall be entitled, without request of Borrower, but, prior to an
Event of Default upon two (2) Business Days notice to Borrower, to
apply any funds in the Tax and Insurance Escrow Account to the payment
of any Taxes (other than any Taxes which Borrower has notified Lender
that it is contesting and such contest is then permitted under the
Mortgage) and Insurance Premiums which have become due and have not yet
been paid. Borrower and Lender acknowledge and agree that Borrower
shall not be in default under the Mortgage for failure to pay Taxes or
Insurance Premiums, if such failure arises by reason of Lender's
failure to comply with its agreement contained in this Section 8.1.2.
8.1.3 Upon the occurrence and during the continuance of an
Event of Default, Lender may, at its option, without being required to
do so, apply any Tax and Insurance Deposits on hand to pay Taxes,
Insurance Premiums or to pay principal, interest and other amounts
payable to Lender hereunder or under the other Loan Documents, all in
such order and manner as Lender, in its sole discretion, may elect.
When the principal and interest under the Note and all prepayment
premiums, if any, in connection therewith and all other Obligations
have been fully and properly paid, any remaining Tax and Insurance
Deposits shall be returned to Borrower.
8.1.4 Lender shall be absolutely entitled to rely on any
statements of any Governmental Authority with respect to Taxes and any
statement of Borrower's insurance carrier or its agent with respect to
Insurance Premiums.
8.1.5 Borrower and Lender acknowledge that Borrower shall not
be in default hereunder in its obligation to make the Tax and Insurance
Deposit on any Payment Date, to the extent funds are available to make
such deposit from monies deposited in the Cash Collateral Account
during the applicable Collection Period after applying such funds to
any item with a higher priority than such application to the Tax and
Insurance Escrow Account in accordance with the terms of the Cash
Management Agreement. Any transfer of funds from the Cash Collateral
Account to the Tax and Insurance Escrow Account shall satisfy
Borrower's obligation hereunder to make the corresponding Tax and
Insurance Deposit, to the extent of the funds so transferred.
8.1.6 No provision of this Agreement, the Mortgage or any
other Loan Document shall be construed as creating in any party other
than Borrower and Lender (and the Servicer), any rights in and to the
Tax and Insurance Deposits or any rights to have the Tax and Insurance
Deposits applied to payment of Taxes and Insurance Premiums. Lender
shall have no obligation or duty to any third party to collect Tax and
Insurance Deposits.
Section 8.2 Replacement Reserve Fund.
<PAGE>
8.2.1 For purposes hereof, the term "Replacement Revenue
Contribution" shall mean the lesser of (i) the sum set forth on Exhibit
K hereto as the Replacement Reserve Contribution per month and (ii) the
amount, if any, by which the balance in the Replacement Reverse Account
(as hereinafter defined) shall be less than the sum set forth on
Exhibit K hereto as the Replacement Reserve Cap.
8.2.2 Borrower shall pay to Lender on each Payment Date an
amount equal to the Replacement Reserve Contribution for deposit into
an account maintained at a bank designated by Lender and pledged to
Lender as additional collateral for the Loan, all as more particularly
described in the Cash Management Agreement, and referred to therein as
the "Replacement Escrow Fund Subaccount" (the "Replacement Reserve
Account").
8.2.3 Provided that no Event of Default shall exist hereunder
and be continuing, Lender shall disburse funds from the Replacement
Reserve Account to Borrower to pay the costs of Replacements (as
hereinafter defined) which, in the reasonable, good faith opinion of
Lender, are necessary or desirable for the Properties. Such
disbursements shall be made within ten (10) Business Days after receipt
of (i) a request by Borrower describing the costs for which such
disbursement is requested and the amount sought, (ii) invoices,
receipts and/or other evidence reasonably satisfactory to Lender
evidencing that such costs are payable and that the work to which such
costs relate has been completed, (iii) lien waivers or other evidence
reasonably satisfactory to Lender that all materialmen, laborers,
subcontractors or other parties who could claim any statutory or common
law lien against the Property in connection with such Replacement and
who are being paid from such disbursement have been (or will, upon such
disbursement, be) fully paid for all labor or materials furnished to
date and have waived any such lien, (iv) for disbursement requests
relating to a Replacement which shall cost in excess of $75,000 for any
Individual Property, the certification of an architect or other third
party reasonably acceptable to Lender verifying that the portion of the
Replacement for which disbursement is sought has been completed in
accordance with plans approved by Lender, if any, and the cost thereof
and (v) for final disbursement requests relating to a Replacement which
shall cost in excess of $75,000 for any Individual Property, a new
certificate of occupancy for the portion of the Improvements affected
by such Replacement, if such new certificate of occupancy is required,
or a certification by Borrower that no new certificate of occupancy is
required. Lender may retain ten percent (10%) of the amount of any
disbursements requested hereunder and shall disburse such retained
amounts to Borrower in accordance herewith upon completion of the
Replacement to which such retainage relates. Lender shall not be
obligated to make disbursements from the Replacement Reserve Account
more frequently than once in any thirty (30) day period. In addition,
Lender shall not be obligated to disburse any funds from the
Replacement Reserve Account for a Replacement if, in the reasonable,
good faith opinion of Lender, the balance in the Replacement Reserve
Account shall be insufficient to pay for such Replacement.
8.2.4 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Replacement
Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
<PAGE>
8.2.5 For purposes hereof, "Replacement" shall mean repairs,
replacements and improvements to the Properties in the ordinary course
of operating such Properties which would, for federal income tax
purposes, be included in the cost of such Properties, excluding the
Required Work.
8.2.6 Nothing contained in this paragraph shall limit the
obligation of Borrower to perform any work or otherwise to repair and
maintain the Properties in accordance with the Mortgage or any other
Loan Document or shall be deemed approval by Lender of any work
otherwise requiring the approval of Lender under the Mortgage or any
other Loan Document. The Replacement Reserve Account shall not
constitute a trust fund and may not be commingled with other monies
held by Lender. Upon assignment of the Note and the Mortgage by Lender
in their entirety, Lender's security interest in, and all other right,
title and interest of Lender in and to, the funds in the Replacement
Reserve Account shall be transferred and assigned to the assignee and
Lender shall have no further obligation with respect thereto.
Section 8.3 Interest Reserve.
8.3.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Interest Reserve to be
held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan (the "Interest
Reserve Account"). The Interest Reserve Account shall be an
interest-bearing account and all interest earned thereon shall become
part of the Interest Reserve Account for the benefit of Borrower.
8.3.2 Provided that no Event of Default shall then exist and
be continuing, if, on any Payment Date, the amount then on deposit in
the Monthly Debt Service Subaccount (as defined in the Cash Management
Agreement), minus the amount, if any, due under Section 8.7.3 hereof,
shall be less than the amount of interest then due under the Note,
Lender shall disburse the amount of such deficiency from the Interest
Reserve Account to pay such interest. Any such amounts so disbursed
shall be deemed paid by Borrower and Borrower shall not be deemed to
have failed to pay such interest for the purposes of Section 6.1.1 by
reason thereof.
8.3.3 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Interest
Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
8.3.4 Nothing contained in this paragraph shall limit the
obligation of Borrower to pay interest or other amounts due under the
Note or any other Loan Document. The Interest Reserve Account shall not
constitute a trust fund and may not be commingled with other monies
held by Lender. Upon assignment of the Note and Mortgage by Lender in
their entirety, Lender's security interest in, and all other right,
title and interest of Lender in and to, the funds in the Interest
Reserve Account shall be transferred and assigned to the assignee and
Lender shall have no further obligation with respect thereto.
Section 8.4 Approved Budget.
<PAGE>
8.4.1 The term "Approved Budget" shall mean, upon approval by
Lender, which approval shall not be unreasonably withheld, conditioned
or delayed, Borrower's proposed operating budget for the Properties,
which sets forth the estimated Operating Expenses to be incurred in
connection with the Properties for each month of the applicable
calendar year.
8.4.2 Borrower shall deliver to Lender not later than sixty
(60) days prior to the commencement of each calendar year a proposed
operating budget in form satisfactory to Lender setting forth in
reasonable detail budgeted monthly operating income and monthly
operating capital and other expenses for the Properties. Lender shall
have the right to approve such budget, which approval shall not be
unreasonably withheld, conditioned or delayed.
8.4.3 If Lender shall object to the proposed budget submitted
by Borrower, Lender shall advise Borrower of such objections within
fifteen (15) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall
within ten (10) days after receipt of notice of any such objections
revise such budget and resubmit the same to Lender. Lender shall advise
Borrower of any objections to such revised budget within ten (10) days
after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall revise the same in
accordance with the process described in this subparagraph until the
Lender approves a budget, provided, however, that if Lender shall not
advise Borrower of objections to a proposed budget within the time
period set forth in this paragraph, then such proposed budget shall be
deemed approved by Lender.
8.4.4 Borrower shall operate the Properties in accordance with
the Approved Budget and shall not enter into any contracts or other
agreements nor expend any funds not provided for therein, other than
expenditures required to be made by reason of the occurrence of an
emergency (i.e., an unexpected event which threatens imminent harm to
persons or property at the Properties) and with respect to which it
would be impracticable, under the circumstances, to obtain Lender's
prior consent thereto. Notwithstanding the foregoing, Borrower shall
notify Lender as promptly as practicable with respect to any such
emergency expenditures made.
8.4.5 In the event that there shall not be an Approved Budget
with respect to a calendar year prior to the commencement thereof, then
the most recent Approved Budget (subject to any increases required by
reason of increases in non-discretionary expenses such as real estate
taxes and utility costs) shall continue to be the Approved Budget.
Section 8.5 Working Capital Reserve.
8.5.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Working Capital Reserve to
be held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan (the "Working
Capital Reserve Account"). The Working Capital Reserve Account shall be
an interest-bearing account and all interest earned thereon shall
become part of the Working Capital Reserve Account for the benefit of
Borrower.
<PAGE>
8.5.2 Provided that no Event of Default shall then exist and
be continuing, if, on any Payment Date, (a) the amount then on deposit
in the Tax and Insurance Impound Account (as defined in the Cash
Management Agreement) shall be less than the amount required to be
deposited in the Tax and Insurance Escrow Account on such Payment Date
in accordance with Section 8.1 hereof, (b) the amount then on deposit
in the Replacement Escrow Fund Subaccount (as defined in the Cash
Management Agreement) shall be less than the amount required to be
deposited in the Replacement Reserve Account on such Payment Date in
accordance with Section 8.2 hereof, or (c) the amount then on deposit
in the Operating Expense Subaccount (as defined in the Cash Management
Agreement) shall be less than the Budgeted Expenses (as defined in the
Cash Management Agreement) for the month in which such Payment Date
shall occur, Lender shall disburse the amount of any such deficiency
from the Working Capital Reserve Account and deposit such amount on the
Payment Date to the account or accounts in which such deficiency shall
exist in the order set forth above.
8.5.3 In addition, provided that no Event of Default shall
exist hereunder and be continuing, Lender shall disburse funds from the
Working Capital Reserve Account to Borrower to pay the costs of
Operating Expenses incurred by Borrower in any period in excess of the
Budgeted Expenses for such period. Such disbursements shall be made
within ten (10) Business Days after receipt of (i) a request by
Borrower describing the Operating Expenses for which such disbursement
is requested and the amount sought, (ii) the Financial Statements
required hereunder for such period and (iii) invoices, receipts and/or
other evidence reasonably satisfactory to Lender evidencing that such
Operating Expenses are payable. Lender shall not be obligated to make
disbursements from the Working Capital Reserve Account under this
Section 8.5.3 more frequently than once in any calendar month thirty
(30) day period.
8.5.4 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Working
Capital Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
8.5.5 Nothing contained in this paragraph shall limit the
obligation of Borrower to pay interest or other amounts due under the
Note or any other Loan Document. The Working Capital Reserve Account
shall not constitute a trust fund and may not be commingled with other
monies held by Lender. Upon assignment of the Note and Mortgage by
Lender in their entirety, Lender's security interest in, and all other
right, title and interest of Lender in and to, the funds in the Working
Capital Reserve Account shall be transferred and assigned to the
assignee and Lender shall have no further obligation with respect
thereto.
Section 8.6 Right of First Refusal to Provide Permanent Financing.
8.6.1 Offer. In the event that any Individual Borrower obtains
a bona fide commitment from a third party to provide Permanent
Financing to be secured by all or any portion of an Individual
Property, or such third party provides a term sheet to such Individual
Borrower containing all of the material terms of such Permanent
<PAGE>
Financing, or such Individual Borrower otherwise desires to close any
such Permanent Financing (any of the foregoing being hereinafter
referred to as the "Offer"), then, such Individual Borrower shall
deliver to Lender written notice of Individual Borrower's intent to
close such Permanent Financing, together with a copy of the commitment,
term sheet or any other documents and instruments setting forth the
material terms of such Permanent Financing or, if delivery of any such
documents is prohibited by the terms thereof, such other documentation
as Lender shall deem sufficient evidence of such Offer.
8.6.2 Notice from Lender. Lender shall have ten (10) days from
the date of receipt of all of the information required to be delivered
to Lender under Section 8.6.1 above (the "Offer Period"), to notify
such Individual Borrower in writing of Lender's interest in providing
the Permanent Financing on the same material terms and conditions as
are set forth in the Offer and which are no less favorable to such
Individual Borrower than those contained in the Offer. If Lender gives
notice to such Individual Borrower during the Offer Period that Lender
does not desire to provide the Permanent Financing, or if Lender fails
to respond within the Offer Period, such Individual Borrower shall have
one hundred and twenty (120) days from the date of receipt by such
Individual Borrower of such notice from Lender or the expiration of the
Offer Period if Lender fails to respond, as the case may be (the
"Closing Period"), to close the Permanent Financing on the same
material terms as contained in the Offer.
8.6.3 Closing. If Lender notifies such Individual Borrower in
writing during the Offer Period that Lender is interested in providing
the Permanent Financing, Lender and such Individual Borrower shall have
thirty (30) days (or such longer period of time as is necessary under
the circumstances if Individual Borrower is acting in good faith) from
the date of such Individual Borrower's receipt of such written notice
from Lender to agree upon the terms and conditions of and close such
transaction and the documentation thereof, which shall be in all
material respects the same as the terms and conditions of the Offer, to
the extent the same are specified in the Offer, except that any loan
documents to be executed in connection with such Permanent Financing
shall be substantially identical in all material respects to the Loan
Documents, except to the extent inconsistent with the terms of the
Offer.
8.6.4 Failure to Close. If such Individual Borrower fails to
close the Permanent Financing with the third party lender prior to the
expiration of the Closing Period, such Individual Borrower shall be
required to make a new offer to Lender in accordance with the
provisions of this Section 8.6 before such Borrower accepts any
Permanent Financing from any other party.
8.6.5 Compliance with Offer. Any Permanent Financing must be
consummated substantially in accordance with the terms and provisions
of the documents provided to Lender evidencing the Offer, or terms and
provisions which are more favorable to such Individual Borrower than
such terms and provisions provided to Lender, and in compliance with
the requirements of this Section 8.6. In the event that the terms are
modified by such third party prior to such closing to be less favorable
to such Individual Borrower, Individual Borrower shall re-submit such
revised terms to Lender for consideration under Section 8.6.1.
<PAGE>
Section 8.7 Release Provisions.
8.7.1 Certain Definitions. For the purposes hereof:
(a) The term "Bona Fide Contract" shall mean, with
respect to a Release Parcel or Lot, an agreement between an
Individual Borrower and a Person other than an Affiliate of
Borrower for the sale of such Release Parcel or Lot to such
Person on an "all cash" basis in a bona-fide arms length
transaction.
(b) The term "Gross Sales Proceeds" shall mean, with
respect to the sale of a Release Parcel or Lot, the aggregate
amount payable to or for the benefit of the seller thereof
under the Bona Fide Contract for the sale of such Release
Parcel or Lot, including the purchase price set forth in such
Bona Fide Contract and all other amounts paid to discharge
obligations of Seller or otherwise for the account or benefit
of, or at the direction of, seller and not credited to such
purchase price.
(c) The term "Minimum Release Price" shall mean, with
respect to a Release Parcel or Lot, 200% of the amount set
forth on Exhibit A hereto as the Allocated Loan Amount for
such Release Parcel or Lot (which amount, with respect to
Lots, shall be the amount set forth in column 10a of Exhibit
A).
(d) The term "Net Sales Proceeds" shall mean, with
respect to a Release Parcel or Lot, the Gross Sales Proceeds
from the sale of such n Release Parcel or Lot less all
customary and reasonable selling expenses actually incurred by
Borrower in good faith in connection with the sale of such
Release Parcel or Lot, including, without limitation,
reasonable attorney's fees and disbursements, usual and
customary brokerage commissions payable to brokers
unaffiliated with Borrower and, if customarily paid by sellers
in the State in which such Release Parcel or Lot is located,
transfer taxes or documentary stamp taxes, title insurance
premiums and survey costs.
(e) The term "Release Date" shall mean, with respect
to a Release Parcel or Lot to be released from the lien of the
Mortgage, the date of the closing of the sale of such Release
Parcel or Lot pursuant to a Bona Fide Contract.
(f) The term "Release Parcel" shall mean each
Individual Property and the portion of each Individual
Property consisting solely of a golf course.
(g) The term "Release Price" shall mean, with respect
to a Release Parcel or Lot, the greater of (i) the Minimum
Release Price for such Release Parcel or Lot and (ii) eighty
percent (80%) of the Net Sales Proceeds from the sale of such
Release Parcel or Lot.
<PAGE>
(h) The term "Release Proceeds" shall mean, with
respect to a Release Parcel or Lot, the greater of (i) the
Minimum Release Price for such Release Parcel or Lot and (ii)
100% of the Net Sales Proceeds from the sale of such Release
Parcel or Lot.
8.7.2 Releases. Notwithstanding anything to the contrary
contained in the Loan Documents, Borrower may from time to time request
and Lender shall release a Release Parcel or Lot from the lien of the
Mortgage thereon upon satisfaction of the following conditions:
(a) Lender shall have received, not less than fifteen
(15) days prior to the Release Date with respect to a Release
Parcel and ten (10) days prior to the Release Date with
respect to a Lot, notice of the proposed release (a "Release
Notice") identifying the Release Parcel or Lot proposed to be
released and the proposed Release Date, together with (i) a
copy of the Bona Fide Contract for the sale of such Release
Parcel or Lot, (ii) a calculation of the Release Proceeds and
Release Price for such Release Parcel or Lot, (iii) an
accurate legal description of such Release Parcel or Lot, and
(iv) any and all documents and instruments to be executed by
Lender in order to effect the release.
(b) Such release shall occur simultaneously with the
sale of the Release Parcel or Lot pursuant to a Bona Fide
Contract;
(c) Borrower shall obtain the approval or consent of
all Persons having the legal right to approve or consent to
the sale or release of such Release Parcel or Lot, including
the approval or consent of any Persons having an interest in
the Individual Property that would be affected thereby to the
extent such approval is required pursuant to the terms of the
documents evidencing such interest;
(d) The Release Parcel or Lot and the balance of the
Individual Property affected thereby shall, after giving
effect to such release, each conform to and be in compliance
with all Legal Requirements and constitute separately assessed
tax lots;
(e) Lender shall have received such additional
documentation and information as shall be reasonably requested
by Lender in connection with such release not more than three
(3) Business Days after such request; and
(f) No Event of Default, and no event that, with
notice and/or the passage of time would become an Event of
Default, shall have occurred and be continuing under the Loan
Documents on the date Lender shall receive the Release Notice
or on the Release Date;
(g) On the Release Date an amount equal to (i) the
Release Proceeds for such Release Parcel or Lot and (ii) all
costs and expenses (including, but not limited to, recording
charges, taxes and fees and reasonable attorneys' fees and
disbursements) in connection with the such release shall be
deposited by wire transfer into the Cash Collateral Account;
<PAGE>
(h) If the Release Parcel is a portion of an
Individual Property, Lender shall receive promptly after the
Release Date an endorsement to the Title Insurance Policy
insuring the Mortgage (A) extending the effective date of the
policy or policies to the Release Date and (B) confirming no
change in the priority of the Mortgage on the balance of the
Property or in the amount of the insurance or the coverage
under the policy or policies (including coverage provided by
any "zoning" endorsement and "separate tax lot" endorsement,
if applicable); and
(i) Lender shall receive on the Release Date a
certificate of Borrower, dated the Release Date, confirming
that (A) all of the conditions to the release of the Release
Parcel or Lot under this Paragraph have been satisfied and (B)
the Bona Fide Contract for the sale of such Release Parcel or
Lot has not been modified or amended and there are no
agreements, oral or written, relating thereto.
8.7.3 Application of Release Price; Credits.
(a) Upon the release of a Release Parcel or Lot from
the lien of the Mortgage, the Release Proceeds shallbe
deposited in the Cash Collateral Account and an amount equal
to the Release Price for such Release Parcel or Lot shall, at
the option of Lender, either (i) be allocated to the Monthly
Debt Service Subaccount and disbursed to Lender on the Payment
Date next following such release in accordance with the Cash
Management Agreement and, upon receipt of such Release Price,
Lender shall apply such amount to the reduction of the
outstanding principal balance of the Loan without any
prepayment premium or charge or (ii) be applied to the
satisfaction of Borrowers's obligation under Section 8.12.
(b) If insurance proceeds or condemnation awards
shall be paid with respect to any Release Parcel or Lot and
shall not be made available by Lender to Borrower, Lender
shall release such Release Parcel or Lot from the lien of the
Mortgage thereon in accordance herewith except that Lender
shall credit to the Release Price the amount of such insurance
proceeds or condemnation award applied by Lender to the
outstanding principal amount of the Loan.
8.7.4 Special Conditions for Initial Release of Lots. Prior to
the initial release of a Lot from any Mortgage, Lender shall have
received and approved the following, all of which shall be in form and
substance satisfactory to Lender in its sole and absolute discretion:
(a) a copy of a subdivision map or plat with respect
to the Individual Property (the "Subdivision Map") which shall
show such Lot (and, if such Lot is a condominium unit, the
Declaration of Condominium), together with evidence that
(i) such Subdivision Map has been approved
by all applicable Governmental Authorities and is
otherwise in compliance with all applicable Legal
Requirements;
<PAGE>
(ii) each of the Lots has been assigned or
shall, upon filing of such Subdivision Map or
conveyance of such Lots, in accordance with local law
or practice, be assigned a separate tax lot or
similar designation by the appropriate Governmental
Authority and no further action (other than filing of
such Subdivision Map in the Office of the Clerk of
the County in which the Individual Property is
located, if such Subdivision Map has not been
previously filed therein) is required in order to
create the Lots as independent parcels of real
property which are separately assessed for real
estate tax purposes and which may be freely conveyed
by the owner thereof without the approval of any
Governmental Authority and
(iii) each of the Lots may be used for
single family residential use in accordance with the
Plans under the applicable zoning law, if any,
without any variance or other special approval;
(b) a copy of the declaration of covenants,
restrictions, easements, charges and liens with respect to the
regulation and governance of the Individual Property as a
homeowner's association or condominium association, as the
case may be, (the "Declaration"), if any, together with
evidence that such declaration has been properly filed in the
Recording Office applicable to the Individual Property so as
to be binding upon the Individual Property and each of the
Lots;
(c) evidence that the roads, sidewalks and other
common areas and amenities identified in the Subdivision Map
or the Declaration, as applicable, shall have been constructed
to completion and that either the roads have been dedicated to
the public and accepted by the appropriate Governmental
Authority or the owners of the Lots shall have easements over
such roads for ingress and egress to and from a public road;
(d) copies of all materials filed or required to be
filed with Governmental Authorities in order to sell the Lots
to the public (the "Offering Materials"), if any, together
with evidence that such materials have been accepted as
approved to the extent required by Legal Requirements and that
no further action is required to be taken by any Governmental
Authority in order to sell Lots; and
(f) with respect to a condominium unit, unconditional
Bona Fide Contracts with respect to not less than ten percent
(10%) (or such greater amount as may be required by law) of
such Lots providing for the sale of each Lot on commercially
reasonable terms and conditions, together with evidence that
the purchaser under each such Bona Fide Contract has
deposited, on account thereof, and Borrower is holding in
escrow with respect thereto, not less than 10% of the sales
price thereunder, which amounts shall be applied by Borrower
to the purchase price upon the closing of such sale.
<PAGE>
8.7.5 Lender shall have no obligation whatsoever to grant any
release which does not satisfy all of the terms and conditions
precedent thereto set forth in this Section 8.7; provided, however,
that Lender hereby reserves the right to release any Lot or Individual
Property without notice to, or the consent, approval or agreement of
other parties in interest, including, but not limited to junior liens
or, if any, and such releases shall not impair in any manner the
validity or the priority of the Mortgage on any property remaining
subject thereto, nor release Borrower from the obligations and
liabilities set forth therein or in any other Loan Document (but this
provision shall not constitute consent by Lender to the placing of any
such junior liens or other interests or a waiver of the provisions
hereof). Upon the filing of a Subdivision Map for a portion of an
Individual Property not previously covered thereby, the provisions of
Section 8.7.4 shall apply to the initial release of a Lot from such
portion of such Individual Property.
Section 8.8 Subdivision Provisions. Borrower hereby represents, warrant
and covenants as follows:
8.8.1 Borrower will prepare and submit to Lender and all
applicable Governmental Authorities the Subdivision Map, Declaration
and Offering Materials, as applicable, and diligently pursue the
approval and filing thereof to the extent required and will use
commercially reasonable efforts to market and sell each of the Lots.
The Subdivision Map, Declaration, Offering Materials and all
documentation in connection therewith, including, without limitation,
the by-laws and rules and regulations of the homeowner's association,
if any, the management agreement, the form of contract of sale and
deeds, and all other documents used by Borrower in connection with the
subdivision of the Property, the sale of Lots and the operation,
regulation, management and administration thereof shall be submitted to
Lender for review and approval prior to the submission or resubmission
thereof to any Governmental Authority or third parties and no changes
or modifications thereto shall be made without Lender's prior approval,
which shall not be unreasonably withheld, conditioned or delayed.
Borrower shall not sell Lots unless and until the Subdivision Map,
Declaration and Offering Materials, as applicable, shall have been
approved by Lender and applicable Governmental Authorities.
8.8.2 Borrower shall sell Lots in a manner which is in
compliance with all Legal Requirements including, without limitation,
the Interstate Land Sales Act, to the extent applicable, and Borrower
will not accept money or other sums, consideration or compensation in
connection with the sale of a Lot, other than what is expressly set
forth in the Bona Fide Contract as consideration for the purchase.
8.8.3 Borrower shall perform or cause to be performed all
obligations of the developers or sponsors under the Declaration or
Offering Materials, as applicable, and do or cause to be done all
things necessary to operate and maintain the Property in compliance
with all Legal Requirements, and will comply with the regulations of
any relevant Governmental Authority, including securities regulations,
which may apply to the sale of Lots and will furnish such evidence of
compliance therewith as Lender may reasonably request.
<PAGE>
8.8.4 Borrower shall (and hereby does) collaterally assign to
Lender all of Borrower's right, title and interest in the Offering
Materials so that Lender or any subsequent owner of the Mortgaged
Property who acquires title thereto pursuant to a foreclosure hereunder
or by taking a deed in lieu thereof may complete the filings required
in order to sell the Lots to the public. Borrower covenants and agrees
to execute and deliver to Lender or such subsequent owner such
documents, and deliver to Lender or such subsequent owner such
financial information concerning the Mortgaged Property, as Lender or
such subsequent owner may reasonably request in order to complete such
filings. In addition, promptly after a contract of sale is entered into
for the sale of a Lot, such contract and the right to receive any
deposit made thereunder, to the extent not prohibited by applicable
law, shall be collaterally assigned to Lender as security for the
Indebtedness. At Lender's request, each collateral assignment referred
to above shall be further evidenced by an instrument of assignment,
executed and delivered by Borrower, in form and substance reasonably
satisfactory to Lender, which collateral assignment shall be released
upon the termination of the contract of sale on account of which such
deposit was made in accordance with its terms and return of such
deposit to the purchaser thereunder.
8.8.5 The rights granted hereunder to Lender to review,
approve and comment upon the Subdivision Map, Declaration and Offering
Materials are not intended to, nor shall they be deemed to, constitute
Lender as a sponsor or developer for the purposes hereof but is
intended merely to afford Lender the ability (i) to insure correct
disclosure of Lender's involvement with the Mortgaged Property, and
(ii) to protect and preserve the security intended to be granted to
Lender under this Mortgage and the Loan Documents, and Lender shall
have no liability for the performance of any obligations of Borrower or
any such sponsor or developer thereunder. Any approval by Lender of any
such documents shall be evidence solely of Lender's determination that
such document properly discloses such involvement and that the terms
thereof, if implemented, would not have an adverse effect on such
security, and not evidence of Lender's (A) determination that such
document is in compliance with any laws, rules or regulations or (B)
approval of the terms of such documents.
8.8.6 Upon the filing of the Subdivision Map, all references
herein to the Individual Property shall be deemed to refer to such
Individual Property excepting therefrom those Lots which may have been
released from the lien of this Mortgage in accordance with the
provisions hereof.
Section 8.9 Cash Management.
8.9.1 Borrower shall deposit or cause to be deposited into the
Clearing Account (as defined in the Cash Management Agreement) all
Receipts within one Business Day after receipt thereof. 8.9.2
Commencing on the first day of each Collection Period, all amounts
deposited in the Cash Collateral Account shall be allocated in the
order and priority set forth in Section 3(a) of the Cash Management
Agreement.
Section 8.10 Right of First Refusal to Purchase Property.
<PAGE>
8.10.1 Offer. In the event that (a) any Individual Borrower
obtains a bona fide offer from a third party to purchase a (i) the
Individual Property owned by such Individual Borrower, (ii) any portion
of such Individual Property that includes the golf course, if any,
located thereon or (iii) or any portion of such Individual Property
which is used or intended to be used for commercial purposes or (b) any
offer by such Individual Borrower to sell such Individual Property or
part thereof shall be accepted by any third party (any of the foregoing
being hereinafter referred to as an "Offer"), then, such Individual
Borrower shall deliver to Lender written notice of Individual
Borrower's intent to close such sale, together with a copy of the
offer, contract or other documents and instruments setting forth the
material terms of such sale.
8.10.2 Notice from Lender. Lender shall have ten (10) days
from the date of receipt of all of the information required to be
delivered to Lender under Section 8.10.1 above (the "Offer Period"), to
notify such Individual Borrower in writing of Lender's interest in
purchasing such Individual Property or part thereof on the same
material terms and conditions as are set forth in the Offer. If Lender
gives notice to such Individual Borrower during the Offer Period that
Lender does not desire to purchase such Individual Property or part
thereof, or if Lender fails to respond within the Offer Period, such
Individual Borrower shall have one hundred and twenty (120) days from
the date of receipt by such Individual Borrower of such notice from
Lender or the expiration of the Offer Period if Lender fails to
respond, as the case may be (the "Closing Period"), to close such sale
on the same material terms as contained in the Offer.
8.10.3 Closing. If Lender notifies such Individual Borrower in
writing during the Offer Period that Lender is interested in purchasing
such Individual Property or part thereof, Lender and such Individual
Borrower shall have thirty (30) days (or such longer period of time as
is necessary under the circumstances if Individual Borrower is acting
in good faith) from the date of such Individual Borrower's receipt of
such written notice from Lender to agree upon the terms and conditions
of and close such transaction and the documentation thereof, which
shall be in all material respects the same as the terms and conditions
of the Offer, to the extent the same are specified in the Offer.
8.10.4 Failure to Close. If such Individual Borrower fails to
close a sale subject to this provision with the third party purchaser
prior to the expiration of the Closing Period, such Individual Borrower
shall be required to make a new offer to Lender in accordance with the
provisions of this Section 8.10 before such Individual Borrower accepts
any other Offer from any other party.
8.10.5 Compliance with Offer. Any sale must be consummated
substantially in accordance with the terms and provisions of the
documents provided to Lender evidencing the Offer, or terms and
provisions which are more favorable to such Individual Borrower than
such terms and provisions provided to Lender, and in compliance with
the requirements of this Section 8.10. In the event that the terms are
modified by such third party prior to such closing to be less favorable
to such Individual Borrower, Individual Borrower shall re-submit such
revised terms to Lender for consideration under Section 8.10.1. Section
8.11 Sale of Red Hawk Property. RH Holdings, Inc. shall, on or before
March 31, 1999, sell and convey title to the Individual Property known
<PAGE>
as Red Hawk International and more particularly described in Exhibit I
annexed hereto for an amount not less than the sum of the Allocated
Loan Amount for such Individual Property plus the amount of any other
indebtedness secured by such Individual Property (the "Minimum Red Hawk
Price"), which amount shall be payable entirely in cash and may be used
to pay, among other things, such other indebtedness. Such sale shall be
subject to the provisions of Sections 8.7 and 8.10 hereof, except that
if such sale shall be consummated prior to March 31, 1999 and no Event
of Default shall then exist, the Minimum Release Price and the Release
Price for such Individual Property shall be an amount equal to the
Allocated Loan Amount therefor plus the amount by which the Net Sales
Proceeds shall exceed the Minimum Red Hawk Price.
Section 8.12 Reserve Reimbursements. On or before January 1, 2000 (or
such earlier date as shall be set forth on Exhibit K annexed hereto), Borrower
shall pay to Lender for deposit in the accounts set forth on Exhibit K hereto
the amounts, if any, indicated on Exhibit K for such deposit. Failure to make
such deposits on or before January 1, 2000 shall be an Event of Default
hereunder.
Section 8.13 Starwood Settlement. On or before November 15, 1998, Golf
Ventures, Inc. Borrower shall pay to Starwood Capital Group, LLC ("Starwood")
the balance of the settlement amount due Starwood under the settlement agreement
between Starwood and Borrower. In the event Borrower does not make the payment
due Starwood on or before November 15, 1998 then (a) Borrower's failure shall be
an Event of Default hereunder, (b) Lender may make the payment on Borrower's
behalf from any escrow reserve account.
Section 8.14 Northshore Transfers. Within thirty (30) days after the
request by Lender, Northshore Development, Ltd. shall convey the Individual
Property owned by it to Northshore Golf Partners, Ltd. and Northshore
Development, Ltd. shall be released from any further liability under the Loan
Documents.
ARTICLE IX. SINGLE PURPOSE ENTITY/SEPARATENESS
Section 9.1 Representations, Warranties and Covenants. Each Individual
Borrower represents, warrants and covenants as of the date hereof and until such
time as the Loan and all other amounts payable under any of the Loan Documents
are paid in full, that:
(a) neither such Individual Borrower nor its applicable SPE
Entity will dissolve or liquidate (or suffer any liquidation or
dissolution) or amend the terms of their respective Organizational
Documents;
(b) neither such Individual Borrower nor its applicable SPE
Entity are contemplating either the filing of a petition by such
Individual Borrower or SPE Entity under any state or federal bankruptcy
or insolvency laws or the liquidation of all or a major portion of such
Individual Borrower's or SPE Entity's assets or property, and such
Individual Borrower has no knowledge of any Person contemplating the
filing of any such petition against it;
<PAGE>
(c) neither such Individual Borrower nor its applicable SPE
Entity will enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially all the business
or assets of, or any stock or other evidence of beneficial ownership
of, any entity;
(d) except with respect to a Person which is a SPE Entity, in
the ordinary course of such Person acting as such SPE Entity, neither
such Individual Borrower nor SPE Entity has, and neither such Person
will, guarantee or otherwise hold out its credit as being available to
satisfy obligations of any other Person other than in connection with
the Loan;
(e) such Individual Borrower was organized for the sole
purpose of owning, managing and operating its Individual Property and
activities ancillary thereto and its applicable SPE Entity was
organized for the sole purpose of acting as the SPE Entity of such
Individual Borrower;
(f) such Individual Borrower has not and will not engage in
any business unrelated to the ownership, management and operation of
the Properties and activities ancillary thereto and will conduct and
operate its business as presently conducted and operated. Its
applicable SPE Entity has not and will not engage in any business
unrelated to acting as SPE Entity of such Individual Borrower;
(g) neither such Individual Borrower nor its applicable SPE
Entity will enter into any contract or agreement with any member,
partner, principal or Affiliate of Individual Borrower or SPE Entity,
except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an
arms-length basis with unrelated third parties;
(h) in addition to any limitations with respect thereto
contained in Section 5.3 hereof, such Individual Borrower and SPE
Entity have not incurred and will not incur any indebtedness or
material liabilities, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (i) the Loan and
the other obligations of such Individual Borrower to Lender contained
in the Loan Documents and (ii) trade payables or accrued expenses
incurred in the ordinary course of business of operating the Properties
not in excess of sixty (60) days past due; no indebtedness or
liabilities (other than debt described in clause (i) above) may be
secured (senior, subordinate or pari passu) by the Properties or any
interest therein or in Borrower;
(i) such Individual Borrower and SPE Entity have not made and
will not make any loans or advances to any third party (including any
Affiliate of such Individual Borrower) and will not pledge its assets
for the benefits of any third party (including any Affiliate of such
Individual Borrower) other than in connection with the Loan;
(j) each of such Individual Borrower and SPE Entity is and
will be solvent and able to pay its debts and liabilities (including
employment and overhead expenses) from its own assets as the same shall
become due;
<PAGE>
(k) each of such Individual Borrower and SPE Entity will
maintain its own separate books and records and bank accounts in each
case which are separate and apart from those of any other Person;
(l) each of such Individual Borrower and SPE Entity will be,
and at all times will hold itself out to the public as, a legal entity
separate and distinct from any other entity (including any Affiliate
thereof) and shall maintain and utilize separate stationery, invoices
and checks, shall otherwise conduct its business and own its assets in
its own name (or in the name of the Individual Property owned by such
Individual Borrower) and shall correct any known misunderstanding
regarding its separate identity;
(m) each of such Individual Borrower and SPE Entity (i) has
and will maintain separate financial statements and shall not be
included in any consolidated financial statements unless such
statements shall note that such Individual Borrower is included in such
financial statements solely for the purposes of complying with GAAP,
and (ii) will file its own tax returns, except that consolidated tax
returns may be filed with respect to each SPE Entity and Golf Ventures,
Inc. if such filing is required under the Internal Revenue Code and
shall not be waived by the Internal Revenue Service;
(n) each of such Individual Borrower and SPE Entity will
maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations;
(o) neither such Individual Borrower nor SPE Entity will seek
the dissolution or winding up, in whole or in part, of Individual
Borrower or the SPE Entity;
(p) neither such Individual Borrower nor SPE Entity will
commingle its funds and other assets with those of any Affiliate or
other Person;
(q) each of such Individual Borrower and SPE Entity has and
will maintain its assets in such a manner that it is not costly or
difficult to segregate, ascertain or identify its individual assets
from those of any Affiliate or any other Person;
(r) each of such Individual Borrower and SPE Entity has and
will maintain a reasonable number of employees (which may be zero) in
light of its contemplated business operations and will not do any act
which would make it impossible to carry on the ordinary business of
Individual Borrower;
(s) neither such Individual Borrower nor SPE Entity will file
or consent to the filing of a petition for bankruptcy, reorganization,
assignment for the benefit of creditors or similar proceeding under any
federal or state bankruptcy, insolvency, reorganization or other
similar law with respect to such Individual Borrower or the SPE Entity,
if such Individual Borrower shall be a limited liability company,
without the unanimous consent of its members (and to the extent its SPE
Entity is a corporation, the Independent Director of such corporation),
if such Individual Borrower shall be a partnership, the unanimous
consent of its limited partners and SPE Entities (and, to the extent
any SPE Entity is a corporation, the consent of the Independent
Director of such SPE Entity), or if such Individual Borrower or SPE
Entity shall be a corporation, the unanimous consent of its directors,
including its Independent Director, and the consent of a majority of
its shareholders, as the case may be;
<PAGE>
(t) the sole assets of such Individual Borrower are, and for
the term of the Loan shall be (i) the fee or leasehold interest in the
Properties, (ii) such assets as are otherwise acquired in connection
with the use, operation, maintenance, repair or management of the
Properties and (iii) cash and accounts receivable;
(u) each of such Individual Borrower and SPE Entity has and
will observe all partnership formalities, limited liability company
formalities or corporate formalities, as applicable;
(v) such Individual Borrower and SPE Entity have not and will
not acquire the obligations or securities of any of their partners,
members or shareholders, as applicable;
(w) such Individual Borrower and SPE Entity shall each
allocate fairly and reasonably any overhead for any office space which
such entity shares with any other entity; SPE Entity will at all times
comply, with each of the representations, warranties, and covenants
contained in this Article IX;
(x) such Individual Borrower will have, at all times, an
Independent Director (if a corporation), or, if a limited liability
company or limited partnership, all SPE Entities or all SPE Entities,
as applicable, will have at all times an Independent Director, except
if such SPE Entity is itself a limited partnership or a limited
liability company, then only the SPE Entity of such entity, as
applicable, is required to have at all times an Independent Director;
(y) In connection with any Securitization or similar
transaction to be undertaken by Lender (or any assignee or participant)
with respect to the Loan, if Lender (or any such assignee or
participant) shall request that the Independent Director of the SPE
Entity be replaced, such Individual Borrower will cause such
replacement with an Independent Director acceptable to Lender and the
Rating Agencies within ten (10) days following such request; and
(z) no Individual Borrower or SPE Entity shall declare any
dividend or otherwise distribute any funds to the holders of any
interests in such Individual Borrower or SPE Entity.
Section 9.2 Notice of Indemnification. BORROWER ACKNOWLEDGES THAT THIS
AGREEMENT PROVIDES FOR INDEMNIFICATION OF LENDER BY BORROWER PURSUANT TO
SECTIONS 7.5 AND THAT SUCH INDEMNIFICATION IS WITHOUT LIMIT AND WITHOUT REGARD
TO THE CAUSE OR CAUSES THEREOF, INCLUDING PREEXISTING CONDITIONS, STRICT
LIABILITY, OR LENDER'S OWN NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT OR
PASSIVE) EXCEPT AS PROVIDED IN THOSE SECTIONS.
Section 9.3 No Oral Agreements. THIS LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDER-STANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
a Delaware limited liability company
By:______________________________________
Name:
Title:
BORROWER:
CUTTER SOUND DEVELOPMENT, LTD.,
a Florida limited partnership
By: U.S. Golf (Cutter Sound), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
MONTVERDE PROPERTY, LTD.,
a Florida limited partnership
By: U.S. Golf (Montverde), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
NORTHSHORE GOLF PARTNERS, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
NORTHSHORE DEVELOPMENT, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
U.S. GOLF PELICAN STRAND, INC., a Florida corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
U.S. GOLF PINEHURST PLANTATION, LTD.,
a Florida limited partnership
By: U.S. Golf (Plantation), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
<PAGE>
FSD GOLF CLUB, LTD.,
a Florida limited partnership
By: U.S. Golf (FSD), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
RH HOLDINGS, INC., a Utah corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
WEDGEFIELD LIMITED PARTNERSHIP,
a Michigan limited partnership
By: U.S. Golf (Wedgefield), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
LOAN AGREEMENT
Dated as of July 2, 1998
Between
PELICAN STRAND, LTD.,
as Borrower
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
as Lender
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions
Section 1.2 Principles of Construction
ARTICLE II. PAYMENTS; ADVANCES
Section 2.1 The Loan
Section 2.2 Disbursements
Section 2.3 Loan Repayment
Section 2.4 Prepayment
Section 2.5 Making of Payments
Section 2.6 Late Payment Charge
Section 2.7 Release on Payment in Full
Section 2.8 Construction Escrow Account
Section 2.9 Affiliate Payments
ARTICLE III. REQUIRED WORK; SUBSEQUENT ADVANCES
Section 3.1 Required Work
Section 3.2 Subsequent Advances
Section 3.3 Conditions Precedent to Subsequent Advances
Section 3.4 Conditions Precedent to Final Advances
Section 3.5 Reallocation of Budget
Section 3.6 Determinations
ARTICLE IV. RERESENTATIONS AND WARRANTIES
Section 4.1 Organization, Enforceability, Etc.
Section 4.2 No Structural Defects
Section 4.3 Financial Statements
Section 4.4 Litigation
Section 4.5 No Conflict with Law or Agreements
Section 4.6 Personal Property
Section 4.7 Easements
Section 4.8 No Flood Hazard, Etc.
Section 4.9 No Default
Section 4.10 No Offsets
Section 4.11 Valid Liens
Section 4.12 Compliance with Zoning and Legal Requirements
Section 4.13 No Condemnation
Section 4.14 No Casualty
Section 4.15 Purchase Options
Section 4.16 No Encroachments
Section 4.17 No Insolvency
Section 4.18 Fraudulent Conveyance
Section 4.19 Broker
Section 4.20 Environmental
Section 4.21 Borrower Address
Section 4.22 Structure of Borrower
Section 4.23 Leases
Section 4.24 Property Taxed as a Separate Tax Lot
Section 4.25 Fiscal Year
Section 4.26 No Other Financing
Section 4.27 ERISA
Section 4.28 FIRPTA
Section 4.29 PUHCA
Section 4.30 Insurance
Section 4.31 No Margin Stock
Section 4.32 Investment Company Act
Section 4.33 Taxes
Section 4.34 Full and Accurate Disclosure
Section 4.35 Contracts
Section 4.36 Other Obligations and Liabilities
Section 4.37 Loan to Value Ratio
ARTICLE V. AFFIRMATIVE COVENANTS
Section 5.1 Transfers
Section 5.2 Liens
Section 5.3 Indebtedness
Section 5.4 Compliance with Easements, Restrictive Covenants and Permitted
Encumbrances
Section 5.5 Leases
Section 5.6 Delivery of Notices
Section 5.7 ERISA
Section 5.8 Agreements with Affiliates
Section 5.9 After Acquired Property
Section 5.10 Books and Records
Section 5.11 Delivery of Estoppel Certificates
Section 5.12 Management, Etc.
Section 5.13 Financial Statements; Audit Rights
Section 5.14 Maintenance of Non-Taxable Status
Section 5.15 Lender's Attorneys' Fees and Expenses
Section 5.16 Environmental
Section 5.17 Report Updates
Section 5.18 Lender Access to Property
Section 5.19 Delivery of Documents Regarding Ownership
Section 5.20 Conduct of Business
ARTICLE VI. EVENTS OF DEFAULT
Section 6.1 Events of Default; Defaults
6.1.1 Non-Payment
6.1.2 Affirmative Covenants
6.1.3 Negative Covenants
6.1.4 Financial Statements
6.1.5 Representations
6.1.6 Other Loan Documents
6.1.7 Demolition or Alterations
6.1.8 Failure to Deliver Estoppel Certificate
6.1.9 Receipts; Deposits
6.1.10 Cessation of Borrower
6.1.11 Transfer
6.1.12 Liens
6.1.13 Involuntary Bankruptcy, Etc.
6.1.14 Voluntary Bankruptcy
6.1.15 Judgments
6.1.16 Leases
6.1.17 Organizational Documents
6.1.18 Delivery of Financial Statements
6.1.19 ERISA
6.1.20 Termination of Management Agreement
6.1.21 Other Conditions for Acceleration
6.1.22 Material Adverse Change
6.1.23 Denial of Obligation
6.1.24 Misapplication of Receipts
6.1.25 Failure to Provide Further Assurances
6.1.26 Lender Access
Section 6.2 Rights upon Event of Default
ARTICLE VII. GENERAL PROVISIONS
Section 7.1 Rights Cumulative; Waivers
Section 7.2 Lender's Action for its Own Protection Only
Section 7.3 No Third Party Beneficiaries
Section 7.4 Payment of Expenses
Section 7.5 Indemnification
Section 7.6 Notices
Section 7.7 No Oral Modification
Section 7.8 Assignment by Lender
7.8.1 Assignment
7.8.2 Participations
7.8.3 Assignment and Acceptance
7.8.4 Other Business
7.8.5 Privity of Contract
7.8.6 Availability of Records
Section 7.9 Severability
Section 7.10 No Assignment by Borrower
Section 7.11 Governing Law
Section 7.12 Successors and/or Assigns
Section 7.13 Entire Contract
Section 7.15 Counterparts; Headings
Section 7.16 Time of the Essence
Section 7.17 Consents
Section 7.18 No Partnership
Section 7.19 Waiver Of Jury Trial
Section 7.20 Limited Recourse
Section 7.21 Limitation on Liability
Section 7.22 Jurisdiction, Venue, Service of Process
Section 7.23 Appointment of Agent for Service of Process
Section 7.24 Rule of Construction
Section 7.25 Further Assurances
Section 7.26 Placement of Loan
Section 7.27 Servicer
ARTICLE VIII. SPECIAL PROVISIONS
Section 8.1 Deposits for Tax and Insurance Premiums
Section 8.2 Replacement Reserve Fund
Section 8.3 Interest Reserve
Section 8.4 Approved Budget
Section 8.5 Working Capital Reserve
Section 8.6 Right of First Refusal to Provide Permanent Financing
Section 8.7 Release Provisions
Section 8.8 Subdivision Provisions
Section 8.9 Cash Management
Section 8.10 Right of First Refusal to Purchase Property
Section 8.11 Conveyance of Sales Center
Section 8.12 Reserve Reimbursements
Section 8.13 Huntington L/C
ARTICLE IX. SINGLE PURPOSE ENTITY/SEPARATENESS
Section 9.1 Representations, Warranties and Covenants
Section 9.2 Notice of Indemnification
Section 9.3 No Oral Agreements
LIST OF EXHIBITS
Exhibit A - Appraised Values and Minimum Release Prices
Exhibit B - Approved Debt
Exhibit C - Omitted
Exhibit D - Omitted
Exhibit E - Structure of Borrower
Exhibit F - Required Work
Exhibit G - Omitted
Exhibit H - Omitted
Exhibit I - Omitted
Exhibit J - Violations
Exhibit K - Reserve Amounts
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 2, 1998 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
"Agreement"), between CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a
Delaware limited liability company having an address at 11 Madison Avenue, New
York, New York 10010 ("Lender") and PELICAN STRAND, LTD., having an address at
c/o Golf Communities of America, 255 South Orange Avenue, Firstate Tower, Suite
1515, Orlando, Florida 32801 ("Borrower"). All capitalized terms used herein
shall have the respective meanings set forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and
in accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly
required or unless the context clearly indicates a contrary intent:
"ACM" shall mean any asbestos-containing materials.
"Affiliate" shall mean, with respect to any Person, (x) any Person
controlling, controlled by or under common control with, whether by virtue of
ownership or otherwise, such Person and (y) any spouse, parent or sibling of any
such Person who is a natural person, and any ancestor or lineal descendent of
such spouse, parent or sibling. For purposes of this Agreement and the other
Loan Documents, Affiliates of Borrower shall include, but not be limited to, (i)
any partners, members or shareholders, as the case may be (other than in their
capacity as shareholders of any company whose stock is publicly traded, where
such shareholders do not control such company) of Borrower, (ii) any Guarantor,
and any of the shareholders, members or partners, if any, as the case may be, of
such Guarantor (other than in their capacity as shareholders of any company
whose stock is publicly traded, where such shareholders do not control such
company), (iii) the managing agent of the Property, if any, and any of the
shareholders, members or partners, if any, as the case may be, of the managing
agent (other than in their capacity as shareholders of any company whose stock
is publicly traded, where such shareholders do not control such company) and
(iv) any Person which would constitute an Affiliate of any Person described
above pursuant to clause (x) or (y) above.
"Affirmative Covenant" shall mean a promise or covenant by any Person
to perform, act, suffer, permit or consent.
"Agreement" shall mean this Loan Agreement, as the same may be amended,
restated, replaced, supplemented, or otherwise modified from time to time.
"Applicable Interest Rate" shall mean the rate of interest, adjusted
from time to time, applicable to the outstanding principal balance of the Loan
from time to time, calculated in accordance with the terms of the Note.
<PAGE>
"Appraised Value" shall mean, for each Release Parcel, the amount set
forth on Exhibit A hereto as the appraised value of such Release Parcel or such
other amount as shall be determined by an Approved Appraisal of such Release
Parcel after the date hereof.
"Approved Accountant" shall mean one of the so-called "Big Six"
accounting firms or such other independent certified public accountant of
nationally recognized standing selected by the Person required to deliver the
applicable Financial Statements and other reports specified herein, which
Approved Accountant shall be approved by Lender, which approval shall not be
unreasonably withheld, delayed or conditioned.
"Approved Appraisal" shall mean an appraisal of the Property (a)
executed and delivered to Lender by a qualified MAI appraiser having no direct
or indirect interest in the Property or any loan secured in whole or in part
thereby and whose compensation is not affected by the approval or disapproval of
such appraisal by Lender; (b) addressed to Lender and its successors and
assigns; (c) satisfying the requirements of the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation and Title XI of the
Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date of such
calculation, with respect to the appraisal and the appraiser preparing same; and
(d) otherwise satisfactory to Lender in all respects in Lender's reasonable
discretion.
"Approved Budget" shall have the meaning set forth in Section 8.4.1
hereof.
"Architect" shall mean the architect preparing the Plans for the
Property.
"Assignees" shall have the meaning set forth in Section 7.8.1 hereof.
"Assignment of Leases" shall mean that certain first priority
Assignment of Leases and Rents executed by Borrower, as assignor, to Lender, as
assignee, assigning to Lender all of Borrower's interest in and to the Leases
and Rents of the Property encumbered thereby as security for the Loan, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Assignment of Management Agreement" shall mean that certain Assignment
of Management Agreement and Subordination of Management Fees among Borrower, as
assignor, Manager, as manager, and Lender, as assignee, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
<PAGE>
"best knowledge" or "knowledge" shall mean for the purpose of this
Agreement and the other Loan Documents the actual knowledge of the Person in
question, after having made due inquiry. If any entity with respect to which
this term would be applicable is a corporation, knowledge of such entity shall
refer to actual knowledge of its officers or directors after having made due
inquiry. If any such entity is a partnership, knowledge of such entity shall
refer to actual knowledge of each of its partners who participates in the
management of such partnership (directly or indirectly), after having made due
inquiry. If any such entity is a limited liability company, knowledge of such
entity shall refer to actual knowledge of its managing members after having made
due inquiry. The knowledge of Borrower for purposes of this definition shall
also include the knowledge of the Manager of the Property.
"Borrower" shall mean, collectively, the Persons identified as Borrower
in the first paragraph of this Agreement and each of their respective successors
and assigns.
"Borrower Information" shall have the meaning ascribed thereto in
Section 7.8.6.
"Broker" shall mean Curt Newman.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
permitted by law to close.
"Cash Collateral Account" shall have the meaning ascribed to such term
in the Cash Management Agreement.
"Cash Management Agreement" shall mean that certain Cash Management
Agreement, dated as of the date hereof, between Borrower, Lender and Manager, as
the same may be amended or modified from time to time.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. **9601, et seq.), as the same may be
amended from time to time.
"Claim" shall have the meaning set forth in Section 7.5.2 hereof.
"Clearing Account" shall have the meaning ascribed to such term in the
Cash Management Agreement.
"Closing Date" shall mean the date of the funding of the Initial
Advance.
"Closing Period" shall have the meaning set forth in Section 8.6.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and as
it may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"Collection Period" shall have the meaning ascribed to such term in the
Cash Management Agreement.
"Construction Draw" shall have the meaning ascribed to such term in
Section 3.2.1 hereof.
<PAGE>
"Construction Escrow Account" shall have the meaning ascribed to such
term in Section 2.8.1 hereof.
"Construction Funds" shall mean the sum of (i) the amount deposited in
the Construction Escrow Account on the Closing Date and (ii) the amount by which
the Loan Amount shall exceed the Initial Advance.
"Contract" shall mean (i) any management, brokerage or leasing
agreement or (ii) any cleaning, maintenance, service or other contract or
agreement of any kind (other than Leases) of a material nature (materiality for
these purposes to include contracts providing for aggregate payments in excess
of $50,000 or which extend beyond one year (unless cancelable on thirty (30)
days' or less notice)), in the case of each of clause (i) or (ii) relating to
the ownership, leasing, management, use, operation, maintenance, repair or
restoration of the Property.
"control" (and the correlative terms "controlled by" and "controlling")
shall mean the power to direct the business and affairs of the entity in
question by reason of the ownership of beneficial interests, by contract or
otherwise.
"Corrective Work" shall mean have the meaning ascribed to such term in
the Environmental Indemnification Agreement.
"Debt" shall have the same meaning as the term "Indebtedness".
"Debt Service" shall mean, with respect to any particular period of
time, scheduled principal and/or interest payments under the Note.
"Default" shall have the meaning set forth in Section 6.1 hereof.
"Default Rate" shall have the meaning set forth in the Note.
"Designated Officer" shall mean if Borrower is a corporation, the chief
financial officer of such corporation or such other officer of such corporation
as is fully familiar with the financial affairs of Borrower and is approved by
Lender. If Borrower is a partnership, such officer of Borrower's managing
general partner as satisfies the first sentence of this definition. If Borrower
is a limited liability company, such officer of Borrower's managing member as
satisfies the first sentence of this definition.
"Disclosed Contracts" shall mean the Contracts disclosed to Lender in
writing on the date hereof, including the Settlement Agreement of even date
herewith between Maricopa Hardy Development, Inc., Golf Ventures, Inc. and U.S.
Golf Pelican Strand, Inc. and the consent of Stephen Tavilla annexed thereto.
"Disclosed Violations" shall have the meaning set forth in Section
4.12.1 hereof.
"Disclosure Document" shall have the meaning set forth in Section
7.26.3 hereof.
"Disqualified Person" shall have the meaning set forth in Section
4.27.1 hereof.
"Easements" shall have the meaning ascribed to such term in Section 4.7
hereof.
<PAGE>
"Engineer's Report" shall mean the engineering report made and
delivered to Lender with respect to the Property.
"Entities" shall have the meaning set forth in Section 7.26.2 hereof.
"Environmental Costs" shall mean "Indemnified Costs" as such term is
defined in the Environmental Indemnification Agreement.
"Environmental Consultant" shall mean an environmental consultant
reasonably satisfactory to Lender.
"Environmental Indemnification Agreement" shall mean that certain
Environmental Indemnification Agreement dated the date hereof in favor of
Lender, as same may hereafter be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"Environmental Laws" shall mean CERCLA; The Resource Conservation and
Recovery Act, 42 U.S.C. *1601, et seq.; The Hazardous Substances Transportation
Act, 49 U.S.C. *1801, et seq.; The Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. *11001, et seq.; The Toxic Substances
Control Act, 15 U.S.C. *2601 et seq.; The Clean Air Act, 42 U.S.C.. *7401 et
seq., The Clean Water Act, 33 U.S.C. *1251 et seq.; The Safe Drinking Water Act,
42 U.S.C. *300 et seq.; as any of the foregoing may be amended from time to
time; and any other federal, state and local laws or regulations, codes,
statutes, orders, decrees, judgments or injunctions, now or hereafter issued,
promulgated, approved or entered thereunder, relating to pollution,
contamination or protection of the environment, including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata, buildings or
facilities) or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances.
"Environmental Matter" shall mean any matter arising out of, relating
to, or resulting from pollution, contamination or protection of the environment
(including natural resources), and any matters relating to emission, discharge,
release or threatened release, of Hazardous Substances into the air (indoor and
outdoor), surface water, groundwater, soil, land surface or subsurface,
buildings or facilities or otherwise arising out of, relating to, or resulting
from the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, release or threatened release of Hazardous
Substances.
"Environmental Report" shall mean, collectively, the Phase I and, if
applicable, Phase II, environmental reports with respect to the Property made
and delivered to Lender by the Environmental Consultant in connection with the
Loan.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder from time to time.
"Exchange Act" shall have the meaning set forth in Section 7.26.3
hereof.
"Event of Default" shall have the meaning set forth in Section 6.1
hereof.
<PAGE>
"Financial Statements" shall mean (a) with respect to Borrower, the
financial statements and other documentation required to be delivered pursuant
to Section 5.13 hereof and, (b) with respect to Guarantors, such financial
statements as are required by the terms of the Guaranty, the Environmental
Indemnification Agreement or any of the other Loan Documents, to the extent
applicable to such Guarantor.
"Fiscal Year" shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the Term.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as of the effective date of the applicable financial
report.
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"Gross Income from Operations" shall mean the aggregate of all income,
computed in accordance with GAAP, derived from the ownership and operation of
the Property from whatever source, including, but not limited to, Receipts,
utility charges, escalations, forfeited security deposits, interest on credit
accounts, service fees or charges, license fees, parking fees, rent concessions
or credits, but excluding sales, use and occupancy or other taxes on receipts
required to be accounted for by Borrower to any government or governmental
agency, refunds and uncollectible accounts, sales of furniture, fixtures and
equipment, proceeds of casualty insurance and condemnation awards (other than
business interruption or other loss of income insurance), and any disbursements
to the Borrower from the applicable Tax and Insurance Escrow Fund, the
applicable Replacement Reserve Fund or any other escrow fund or reserves
established pursuant to the Loan Documents.
"Guarantor" shall mean any guarantor or indemnitor under any Guaranty
including, without limitation, Golf Ventures, Inc., U.S. Golf Communities, Inc.
and Warren Stanchina.
"Guaranty" shall mean any guaranty or indemnity executed and delivered
in connection with the Loan as of the date hereof or as of any date hereafter.
"Hazardous Substances" shall mean asbestos, ACM, PCBs,
urea-formaldehyde and urea-formaldehyde foam insulation, nuclear fuel or waste,
petroleum products and any hazardous waste, toxic substance, related components,
related constituents, pollutant or contaminant, including, without limitation,
any substance defined or treated as a "hazardous substance", "extremely
hazardous substance" or "toxic substance" (or comparable term) in any applicable
Environmental Law and any other material which may give rise to Environmental
Costs.
"Improvements" shall have the meaning set forth in the granting clause
of the related Mortgage with respect to the Property.
"Indebtedness" shall mean the outstanding principal amount set forth in
and evidenced by the Note together with all interest accrued and unpaid thereon
and all other sums due to Lender in respect of the Loan under the Note, this
Agreement, each Mortgage or any other Loan Document.
<PAGE>
"Indemnified Parties" shall mean each of Lender, the Affiliates of
Lender and the Participants and their respective successors, partners, members,
shareholders, officers, directors, attorneys, agents and employees.
"Independent Director" shall mean a person who is not at the time of
appointment, and has not been at any time in the preceding five years, (i) a
stockholder, director, officer, member, employee or partner of Borrower or any
Affiliate of Borrower; (ii) a customer, supplier or other Person who derives
more than ten percent (10%) of his/her/its purchases or revenues from
his/her/its activities with Borrower or any Affiliate of Borrower; (iii) a
Person controlling or under common control with any such stockholder, director,
officer, member, employee, partner, customer, supplier or other Person or (iv) a
member of the immediate family of any such stockholder, director, officer,
member, employee, partner, customer, supplier or other Person.
"Initial Advance" shall mean Lender's initial advance of proceeds of
the Loan in the amount set forth on Exhibit K as the Initial Advance.
"Insolvent" shall mean the inability of a Person to pay its debts as
they become due and/or if the fair market value of such Person's assets do not
exceed its liabilities, including without limitation, subordinated,
unliquidated, disputed or contingent liabilities.
"Insurance Premiums" shall have the meaning set forth in Section 8.1
hereof.
"Lease" shall mean any lease, sublease or sub-sublease, letting,
license, concession or other agreement (whether now or hereafter in effect)
entered into by Borrower (or its predecessor-in-interest) pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any
portion of any space in the Property, and every modification, amendment or other
agreement relating to such lease, sublease, sub-sublease, or other agreement
entered into in connection with such lease, sublease, sub-sublease, or other
agreement and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other
party thereto.
"Legal Requirements" shall mean, with respect to the Property, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting such Property or any part thereof or the
construction, use, alteration or operation thereof, or any part thereof, whether
now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
actually known to Borrower, at any time in force affecting the Property or any
part thereof, including, without limitation, any which may (i) require repairs,
modifications or alterations in or to the Property or any part thereof, or (ii)
in any way limit the use and enjoyment thereof.
"Lender" shall mean Credit Suisse First Boston Mortgage Capital LLC,
together with its successors and assigns.
"Lender's Consultant" shall mean EMG Consultants, or such other
similarly qualified person reasonably satisfactory to Lender.
<PAGE>
"Lender's Counsel" shall mean Cadwalader, Wickersham & Taft, located in
New York, New York, and any other law firm, wherever situated, acting as counsel
to Lender.
"Lender's Counsel Fees" shall mean all reasonable fees and
disbursements of Lender's Counsel.
"LIBOR" shall have the meaning ascribed thereto in the Note.
"Lien" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, or affecting the Property or any portion thereof or Borrower's
interest therein, including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, the filing of any financing statement,
and mechanic's, materialmen's and other similar liens and encumbrances.
"Loan" shall mean the loan in the maximum principal amount of
$36,500,000 which shall be advanced by Lender in accordance with the terms and
conditions of this Agreement and which is evidenced by the Note and is secured
by each Mortgage and all of the other Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
the Mortgage and the Assignment of Leases encumbering the Property, the
Assignment of Management Agreement for each the Property, the Environmental
Indemnification Agreement and any other document pertaining to the Property as
well as all other documents executed and/or delivered in connection with the
Loan.
"Loan Interest" shall have the meaning set forth in Section 7.26.1
hereof.
"Loan Pool" shall have the meaning set forth in Section 7.26.1 hereof.
"Lot" shall mean each portion of the Property designated as a "lot" on
a subdivision map or plat with respect to the Property which has been filed with
and approved by all applicable Governmental Authorities or, with respect to any
part of the Property which shall be subjected to condominium ownership, each
unit in such condominium.
"Management Agreement" shall mean, with respect to the Property, the
agreement pursuant to which Manager is to provide management and other services
with respect to the Property.
"Manager" shall mean U.S. Golf Management, Inc. or such other manager
as shall be approved by Lender in accordance herewith.
"Material Adverse Effect" shall mean any event or condition that has a
material adverse effect on (i) the Property, (ii) the business, prospects,
profits, operations or condition (financial or otherwise) of Borrower, or (iii)
the ability of Borrower to repay the principal and interest of the Indebtedness
as it becomes due and perform its other obligations under this Agreement or any
of the other Loan Documents.
"Maturity Date" shall have the meaning ascribed thereto in the Note.
"Maximum Management Fee" shall mean with respect to the Property, an
amount not to exceed the management fee which would be paid to a third-party in
an arms length transaction for services similar to the services to be rendered
by Manager under the Management Agreement.
<PAGE>
"Minimum Release Price" shall have the meaning set forth in Section
8.7.1 hereof.
"Mortgage" shall mean that certain first priority Mortgage and Security
Agreement executed and delivered by Borrower as security for the Loan, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Negative Covenant" shall mean a promise or covenant by any Person to
not act or perform or to not suffer, permit or consent to an action.
"Net Operating Income" shall mean the amount obtained by subtracting
Operating Expenses from Gross Income from Operations.
"Note" shall mean that certain note of even date herewith in the
principal amount of $35,600,000, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"Notices" shall have the meaning set forth in Section 7.6 hereof.
"Obligated Party" shall have the meaning set forth in Section 6.2
hereof.
"Obligations" shall have the meaning ascribed to such term in the
Mortgage.
"Offer" shall have the meaning set forth in Section 8.6.1.
"Offer Period" shall have the meaning set forth in Section 8.6.2.
"Officer's Certificate" shall mean a certificate delivered to Lender by
Borrower which is signed by an authorized senior officer of the general partner
or managing member of Borrower.
"Operating Expenses" shall mean the aggregate of all expenditures,
computed in accordance with GAAP, of whatever kind relating to the operation,
maintenance and management of the Property that are incurred on a regular
monthly or other periodic basis, including without limitation, expenditures for
utilities, ordinary repairs and maintenance, insurance, license fees, property
taxes and assessments, advertising, management fees, payroll and related taxes,
computer processing charges, operational equipment or other lease payments as
reasonably approved by Lender, and other similar costs, but excluding
depreciation (and other non-cash charges), Debt Service (or any other amounts
paid by Borrower on account of the Indebtedness), and contributions to the
Replacement Reserve Fund, the Tax and Insurance Escrow Fund, and any other
reserves or escrows required under the Loan Documents.
<PAGE>
"Organizational Documents" shall mean, with respect to any Person who
is not a natural person, the certificate or articles of incorporation,
memorandum of association, articles of association, trust agreement, by-laws,
partnership agreement, limited partnership agreement, certificate of partnership
or limited partnership, limited liability company articles of organization,
limited liability company operating agreement or any other organizational
document, and all shareholder agreements, voting trusts and similar arrangements
with respect to its stock, partnership interests, membership interests or other
equity interests.
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.
"Outside Funding Date" shall mean the date that is eighteen (18) months
after the date of this Agreement.
"Participants" shall have the meaning set forth in Section 7.8.2
hereof.
"Party In Interest" shall have the meaning set forth Section 4.27.1
hereof.
"Payment Date" shall mean the first (1st) calendar day of each calendar
month commencing with July, 1998.
"PCBs" shall mean polychlorinated biphenyls.
"Permanent Financing" shall mean any financing or loan secured in whole
or in part by the Property, the proceeds of which will be used to pay the
Indebtedness.
"Permit" shall mean all approvals, consents, registrations, franchises,
permits, licenses, variances, certificates of occupancy and other authorizations
with regard to zoning, landmark, ecological, environmental, air quality,
subdivision, planning, building or land use required by any Governmental
Authority for the construction, lawful occupancy and operation of the
Improvements and the actual and contemplated uses thereof.
"Permitted Encumbrances" shall mean (a) the Liens and security
interests created by the Loan Documents, (b) the Liens, encumbrances and other
matters disclosed in the Title Insurance Policies relating to the Property, and
(c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due
or delinquent, and (d) such other title and survey exceptions as Lender may
hereafter approve in writing in Lender in accordance herewith.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Placement Party" shall have the meaning set forth in Section 7.26.1
hereof.
<PAGE>
"Plans" shall mean the plans and specifications approved by Lender in
accordance with Section 3.2.1, as the same may be amended in accordance
herewith.
"Prohibited Transaction" shall mean a prohibited transaction as
described under Section 406 of ERISA or Section 4975 of the Internal Revenue
Code which is not the subject of a statutory exemption under Section 408(b) of
ERISA or an administrative exemption granted pursuant to Section 408(a) of
ERISA.
"Property" shall mean the real property and the improvements thereon
encumbered by the Mortgage executed by Borrower, together with all rights
pertaining to such Property and improvements thereon located, as more
particularly described in the Granting Clauses of such Mortgage and referred to
therein as the "Premises".
"Property Budget" shall mean a schedule setting forth the proposed use
or intended allocation of the Construction Funds with respect to the Required
Work on the Property.
"Rating Agencies" shall mean each of Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch IBCA, Inc., or any other nationally-recognized
statistical rating agency which has been reasonably approved by Lender.
"Receipts" shall mean, without duplication, any and all rents, issues,
profits, payments, income, deposits (other than security deposits which Borrower
is not entitled to retain or apply to defaults), revenues, proceeds,
reimbursements, receipts and similar items in whatever form (including, without
limitation, cash, checks, money orders or other instruments for the payment of
money) derived from, or generated by, the use, ownership, leasing or operation
of the Property after the date hereof, including, without limitation, (a) real
estate tax refunds, (b) proceeds of any insurance, including, without
limitation, business interruption insurance, (c) condemnation awards, (d) all
sums paid with respect to a modification, rejection or termination of any Lease
(including in any bankruptcy case) or otherwise paid in connection with Borrower
taking any action under any Lease (e.g., granting a consent) or waiving any
provision thereof, (e) damages or other payments in settlement of claims by
Borrower against tenants or other third parties in connection with the Property,
and (f) proceeds of any transfer or sale of any items of the collateral securing
the Loan or of any partial interest in such collateral or the Borrower other
than a sale resulting in the satisfaction of the Loan in full in which event
this Agreement will be terminated.
"Related Party" shall have the meaning set forth in Section 7.20
hereof.
"Replacement Reserve Account" shall have the meaning set forth in
Section 8.2.2.
"Replacement Reserve Contribution" shall have the meaning set forth in
Section 8.2.1.
"Replacements" shall have the meaning set forth in Section 8.2.5.
"Request for Advance" shall have the meaning set forth in Section
3.2.1.
<PAGE>
"Required Work" shall have the meaning set forth in Section 3.1.1.
"Retainage" shall have the meaning set forth in Section 3.2.2.
"Securities" shall have the meaning set forth in Section 7.26.1 hereof.
"Securities Act" shall have the meaning set forth in Section 7.26.3
hereof.
"Securitization" shall have the meaning set forth in Section 7.26.1
hereof.
"Securitization Indemnification" shall have the meaning set forth in
Section 7.26.3 hereof.
"Securitization Indemnified Party" shall have the meaning set forth in
Section 7.26.3 hereof.
"Servicer" shall mean a servicer or account administrator of the Lender
designated by and acting for the benefit of the Lender.
"Significant Party" shall mean Borrower, Guarantor and each SPE Entity.
"SPE Entity" shall mean either the managing member or general partner,
as the case may be, of Borrower and any Guarantor.
"Spread Maintenance Premium" shall mean, in connection with any
prepayment of all or any portion of the outstanding principal balance of the
Note, an amount equal to the present value of all future installments of
interest which would have been due under the Note on the portion of the
outstanding principal balance of the Note being prepaid if interest accrued on
such portion of the principal balance being prepaid at an interest rate per
annum equal to four and one-half percent (4.5%).
"State" shall mean the State of Florida.
"Subsequent Advances" shall have the meaning set forth in Section 2.2
hereof.
"Substantial Completion" or "Substantially Complete" shall mean the
stage in the progress of the Required Work with respect to the Property at which
(a) such Required Work has, in the reasonable opinion of the Lender's
Consultant, been completed in accordance with the Plans and the Requirements in
all material respects, free of defects in construction or materials, except for
minor "punch list" items, (b) the Improvements shall contain all furniture,
fixtures and equipment required for the intended use and operation of the
Improvements, (c) a temporary or permanent certificate of occupancy, if
applicable, and all other certificates, licenses, consents and approvals
required for the intended use and operation of the Improvements shall have been
issued by or obtained from the appropriate Governmental Authorities, and (d) all
costs (other than punchlist items) incurred in connection with the Required Work
shall have been paid in full (subject to Retainage) and there shall be no liens,
claims for liens, encumbrances or security instruments (other than the Mortgage)
for or relating to materials supplied or services performed in connection
therewith (or any such liens shall be bonded to the reasonable satisfaction of
Lender).
<PAGE>
"Tax and Insurance Escrow Account" shall have the meaning set forth in
Section 8.1.1.
"Taxes" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against the Property or any part thereof.
"Title Insurance Policy" shall mean the title insurance policy issued
with respect to the Property insuring the lien of the Mortgage.
"Title Insurer" shall mean the issuer of the Title Insurance Policy.
"Transfer" shall have the meaning set forth in Section 5.1.1 hereof.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the applicable State or Commonwealth in which the Property
is located.
"Working Capital Reserve Account" shall have the meaning set forth in
Section 8.5.1.
"Working Day" shall mean any day on which dealings in foreign
currencies and exchange are carried on in London, England and in New York, New
York. Section 1.2 Principles of Construction.
All references to sections and schedules are to sections and schedules
in or to this Agreement unless otherwise specified. Unless otherwise specified,
the words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined.
ARTICLE II. PAYMENTS; ADVANCES
Section 2.1 The Loan. Subject to and upon the terms and conditions set
forth herein, Lender hereby agrees to make the Loan to Borrower on the Closing
Date in the principal amount not to exceed Thirty Five Million Six Hundred
Thousand Dollars ($35,600,000).
Section 2.2 Disbursements. Borrower may request and receive only one
borrowing hereunder in respect of the Loan, which borrowing may be advanced in
any number of disbursements in accordance with the terms hereof, and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
Lender shall make, and Borrower shall accept, the Initial Advance on the date
hereof. Borrower may request and Lender may make one or more additional advances
of a portion of the proceeds of the Loan not previously advanced (each a
"Subsequent Advance") in accordance with the provisions of Section 3.2 hereof.
Any and all Subsequent Advances shall be deemed advances of the Loan and shall
be evidenced by the Note and secured by the Mortgage.
Section 2.3 Loan Repayment. Borrower shall pay the Indebtedness to
Lender in accordance with the terms and conditions of the Note. All payments to
Lender under this Agreement will be paid as provided in the Note for payments
thereunder with interest at the Applicable Interest Rate, Default Rate or other
rate as specified herein.
<PAGE>
Section 2.4 Prepayment. Borrower shall not be permitted to prepay all
or any portion of the Loan except (a) in connection with a release of all or any
portion of the Property under Sections 8.7; hereof; (b) as otherwise expressly
provided herein or in the other Loan Documents and (c) for payments of Net
Proceeds required under the Note. In addition, and notwithstanding anything to
the contrary contained herein or in any other Loan Document, if the balance of
the Loan shall at any time be less than $2,800,000, Borrower may prepay such
balance in whole (but not in part) on any date without any premium or penalty,
provided that if such date is not a prepayment date, Borrower shall also pay
interest on such balance through the end of the calendar month in which such
prepayment shall be made. If, after the Debt has been accelerated due to a
Default by Borrower, including, without limitation, any attempt by Borrower to
prepay the Debt at a time when prepayment is prohibited hereunder, Borrower
shall tender an amount sufficient to pay the entire accelerated Debt, such
tender shall be deemed a voluntary prepayment and an attempt to evade the
restrictions on prepayment set forth herein, and Borrower shall, in addition to
all other amounts then payable hereunder, be required to pay Lender a prepayment
fee equal to one percent (1%) of the amount of principal being repaid together
with a Spread Maintenance Premium calculated with respect to the amount of
principal being repaid.
Section 2.5 Making of Payments. Each payment by Borrower hereunder or
under the Note shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 12:00 noon, New York City time, on the date such payment is due at such place
as Lender may direct, which place may be changed by Lender from time to time by
written notice to Borrower. Whenever any payment hereunder or under the Note
shall be stated to be due on a day which is not a Working Day, such payment
shall be made on the immediately preceding Working Day. Time is of the essence
as to all payments due under this Agreement.
Section 2.6 Late Payment Charge. If any sum due under this Agreement or
any other Loan Document is not paid by Borrower on the date on which it is due,
Borrower shall pay to Lender upon demand a late charge as provided in the Note
for payments of principal or interest thereunder not paid when due.
Section 2.7 Release on Payment in Full. Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of all principal
and interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms and provisions of the Note and this Loan
Agreement, release the liens of each Mortgage not theretofore released or, at
Borrower's direction, this Agreement, the Note, each Mortgage and all other Loan
Documents held by Lender as security for the Loan shall be assigned by Lender to
such Person designated by Borrower for such purpose, provided however, such
assignment shall be without warranty or recourse to Lender.
Section 2.8 Construction Escrow Account.
2.8.1 On the Closing Date, the sum of set forth on Exhibit K
hereto as the Construction Escrow Account shall be deposited from the
Initial Advance and held in an account maintained at a bank designated
by Lender and pledged to Lender as additional collateral for the Loan
(the "Construction Escrow Account"). The Construction Escrow Account
shall be an interest-bearing account and all interest earned thereon
shall become part of the Construction Escrow Account for the benefit of
Borrower.
2.8.2 Any portion of the Loan not theretofore advanced shall
be advanced on the Outside Funding Date and deposited into the
Construction Escrow Account. Upon such advance and deposit, the Loan
shall be deemed fully advanced to Borrower.
<PAGE>
2.8.3 Upon satisfaction of the conditions contained in
Sections 3.3 and 3.4 hereof for a Construction Draw (other than the
condition contained in Section 3.3.9 hereof), Lender shall disburse the
amount of such Construction Draw from the Construction Escrow Account.
Upon and during the continuance of an Event of Default, any and all
amounts in the Construction Escrow Account may be applied to the
Indebtedness in such order, priority and proportions as Lender in its
discretion shall deem proper.
Section 2.9 Affiliate Payments. Borrower represents and warrants that
no portion of the Initial Advance is intended to be paid to any Affiliate of
Borrower (other than Borrower) and covenants that (a) no portion of any
Subsequent Advance or Construction Draw shall be paid to any Affiliate of
Borrower, (b) no portion of any disbursement from any reserve account maintained
under this Loan Agreement shall be paid to any Affiliate of Borrower and (c) no
portion of the Required Work shall be performed by any Affiliate of Borrower,
whether or not on competitive terms, except as set forth on Exhibit L annexed
hereto.
ARTICLE III. REQUIRED WORK; SUBSEQUENT ADVANCES
Section 3.1 Required Work.
3.1.1 Borrower shall promptly commence and diligently and
continuously perform all of the work set forth on Exhibit F hereto (the
"Required Work") and shall complete such Required Work expeditiously
and in any event not later than eighteen (18) months after the date
hereof.
3.1.2 Prior to the commencement of the Required Work
applicable to the Property, Borrower shall prepare and submit to Lender
and applicable Governmental Authorities for approval (a) to the extent
appropriate for such Required Work, a complete set of plans and
specifications for such Required Work (the "Plans") prepared by an
architect reasonably acceptable to Lender (the "Architect") and (b) a
reasonably detailed Property Budget setting forth the estimated costs
of such Required Work. Borrower shall not modify the approved Plans in
any material respect without the consent of Lender in each instance.
Lender's approval of any Plans and consent to any modification thereof
shall not be unreasonably withheld, conditioned or delayed and shall be
deemed given if Lender does not object thereto in writing within twenty
(20) Business Days, with respect to approval of Plans, or ten (10)
Business Days, with respect to a modification of Plans, after receiving
Borrower's request for such approval or consent specifying in
reasonable detail the reasons for such objection, provided that
Borrower's request for such approval or consent shall have stated that
such consent shall be deemed given if Lender does not object to such
approval or modification within such twenty (20) or ten (10) Business
Days, as the case may be.
3.1.3 Borrower shall pay for and obtain or cause to be paid
for and obtained all Permits with regard to the Required Work, whether
necessary for commencement, completion, use or otherwise.
3.1.4 Borrower shall perform or cause to be performed all
Required Work in a good and workmanlike manner in compliance with all
applicable Legal Requirements and the Plans.
<PAGE>
3.1.5 Borrower shall pay and discharge (by bonding or
otherwise) all claims for labor done and material and services
furnished in connection with the Required Work and cause the Required
Work to be completed free and clear of any and all liens (including
mechanic's, materialman's or other liens), claims and encumbrances
whatsoever.
3.1.6 Each contractor or subcontractor performing any portion
of the Required Work shall be licensed by the appropriate state agency,
bonded (if the cost of the work to be performed by such contractor
shall be in excess of $500,000 and such bonds shall be requested by
Lender) and unaffiliated with Borrower. Upon Lender's request, Borrower
shall provide written evidence that each contractor and subcontractor
meets the requirements of this paragraph.
3.1.7 Borrower shall permit Lender and Lender's consultants to
enter upon the Property which is the subject of the Required Work at
all reasonable times to inspect the Required Work and all shop and
related drawings, daily logs and other reports and records used or
maintained in connection with the Required Work and shall furnish to
Lender, upon request, copies of the same.
3.1.8 Borrower shall furnish to Lender from time to time upon
request (i) copies of all contracts and subcontracts and the names and
addresses of all persons with whom Borrower or the general contractor,
if any, has contracted or intends to contract for the furnishing of
labor or materials in connection with the Required Work; (ii) copies of
all contracts, bills of sale, statements, receipts or other documents
under which Borrower claims title to any materials, fixtures or
articles incorporated in the Required Work or subject to the lien of
the Mortgage; (iii) a list of all unpaid bills for labor and materials
with respect to the Required Work and copies of all invoices therefor,
and (iv) such other information relating to the Required Work as shall
be reasonably requested by Lender.
Section 3.2 Construction Draws.
3.2.1 Lender shall disburse funds from the Construction Escrow
Account or, to the extent the amount therein shall be insufficient,
make a Subsequent Advance of the Loan in order to pay or reimburse
Borrower for the all or a portion of the cost of the Required Work
(each such disbursement or Subsequent Advance being a "Construction
Draw") upon (a) submission by Borrower of a request (a "Request for
Advance") setting forth the amount sought and the Required Work to be
paid for and (b) satisfaction of the conditions set forth in Section
3.3 below.
3.2.2 Each Construction Draw shall be equal to the lesser of
(a) the costs actually incurred by Borrower (subject to the limitations
contained in Section 3.2.4) to the extent due and payable and verified
to the reasonable satisfaction of Lender or (b) the value of the work
completed based on the estimated total cost of the Required Work and
the percentage of completion then attained, less (in either case) (x)
10% of such amount (the "Retainage") and (y) amounts theretofore
advanced, provided that no Construction Draw shall be in an amount less
than $500,000 unless the undisbursed portion of the Loan shall be less
than $500,000 in which event the final Construction Draw shall be in
the amount of the undisbursed portion of the Loan.
<PAGE>
3.2.3 Borrower shall not request and Lender shall not be
obligated to make more than one Construction Draw in any calendar month
or thirty (30) day period or to make any Construction Draw after the
Outside Funding Date (except as provided in Section 3.2.5 below). All
advances shall be made at the principal office of the Lender or such
other place as the Lender may designate.
3.2.4 Lender shall not be obligated to advance any proceeds of
the Loan for (a) building materials purchased by Borrower to be
incorporated in or used in the construction of the Required Work until
such materials are so used or incorporated or (b) any labor or
materials not in accordance with the Plans or not included in the
Property Budget or (c) with respect to any item, more than the amount
set forth in the Property Budget for such item (subject to the
provisions of Section 3.5 below).
Section 3.3 Conditions Precedent to Construction Draws.
The obligation of Lender to make each Construction Draw hereunder is
subject to the fulfillment by Borrower or waiver by Lender of the following
conditions precedent:
3.3.1 The representations and warranties contained in this
Agreement and the Loan Documents shall be true and correct in all
material respects as of the date of such advance and, with respect to
any representations made to Borrower's knowledge, no event shall have
occurred or condition or circumstance shall exist which, if known to
Borrower, would render any such representation or warranty incorrect or
misleading in any material respect.
3.3.2 All of the obligations to be performed or complied with
by Borrower under the Loan Documents through the date of such advance
shall have been performed or complied with in all material respects and
no event shall have occurred or condition or circumstance shall exist
which is or, with the passage of time or giving of notice, or both,
would be an Event of Default under this Agreement or any other Loan
Document.
3.3.3 Borrower shall have furnished to Lender, to the extent
requested by Lender and not previously furnished, the following with
respect to the Required Work which is the subject of the Request for
Advance:
(a) The Plans;
(b) The Property Budget;
(c) Copies of all contracts entered into by Borrower,
including agreements with the architect, general contractor
and all sub-contractors;
<PAGE>
(d) Letters executed by Borrower's architect, general
contractor and major subcontractors (or, if there is no
general contract, contractors) designated by Lender regarding
such matters as Lender shall reasonably request, including,
without limitation, (i) confirmation that their agreements
with Borrower are in full force and effect and unmodified and
that they have no other agreements with Borrower, (ii)
statements of the amounts owed and previously paid to them,
(iii) consents to the collateral assignment of their
agreements to Lender; (iv) agreements to continue performance
under their agreements for Lender or its designee in the event
of a default by Borrower under the Loan Documents and (v) with
respect to the Architect, consent to Lender's use of the Plans
without additional charge in connection with construction of
the Improvements;
(e) In connection with contracts for work in excess
of $500,000, payment and performance bonds in form and
substance satisfactory to Lender issued by companies
acceptable to Lender in the amount of one hundred percent
(100%) of the contract sum naming Borrower and Lender as dual
obligees;
(f) If such Required Work shall include new buildings
or structures or additions to existing buildings or
structures, a current soil test report prepared by an engineer
reasonably acceptable to Lender and certified to Lender
indicating a state of facts satisfactory to Lender and such
other geotechnical test reports as Lender shall reasonably
require;
(g) If such Required Work shall include new buildings
or structures or additions to existing buildings or
structures, a site plan prepared by Borrower's architect or
the surveyor and superimposed on a current survey of the
Property to show the proposed location of the Improvements
thereon;
(h) Evidence that all utilities and roads anticipated
to be necessary for the performance of the Required Work and
the operation of the Property upon completion thereof shall be
available when needed;
(i) Copies of all Permits necessary for the
performance of the Required Work and evidence that such
Permits are in full force and effect;
(j) The opinion of the Architect that (i) the Plans
have been approved by it and by each Governmental Authority
whose approval is required, (ii) upon completion of the
Required Work in accordance with the Plans, the Property will
comply with all applicable Legal Requirements, (iii) Borrower
has complied in all material respects with all applicable
Legal Requirements for the Required Work and (iv) such other
matters as Lender shall reasonably request;
<PAGE>
(k) The report of Lender's Consultant as to the
feasibility of the Required Work, adequacy of the Plans and
Property Budget and such other matters as Lender shall
reasonably request.
3.3.4 The Improvements on the Property which is the subject of
a Request for Advance shall not have been injured or damaged by fire or
other casualty and shall not be the subject of any pending or
threatened condemnation or adverse zoning proceeding any of which would
materially and adversely affect the Required Work.
3.3.5 No material adverse change shall have occurred in the
financial condition of Borrower or any Guarantor.
3.3.6 No action, suit, proceeding or investigation, at law or
in equity, except for those disclosed to Lender in writing, shall be
pending against Borrower or with respect to the Property before any
court, arbitration board or Governmental Authority which, if adversely
determined, would materially adversely affect (i) the security for the
Loan, (ii) the ability of Borrower to complete the Required Work
substantially in accordance with the Plans, or (iii) the ability of
Borrower to operate the Property in the manner contemplated by the
Plans.
3.3.7 Lender shall have received (i) a statement from the
Architect that all work to date has been done in accordance with the
Plans and Legal Requirements in all material respects and setting forth
its estimate of the percentage of completion of the Required Work on
the Property and (ii) a statement from the general contractor (or, if
there is no general contractor, the Borrower) that the amounts sought
in the Request for Advance are due and payable for labor and materials
furnished, that all work has been performed in accordance with the
Plans in all material respects, and that all contractors have been paid
in full for all work and materials theretofore furnished to the extent
such payments are due except such as are intended to be paid out of the
advance which is the subject of the pending Request for Advance. Such
statements shall be satisfied by submitting AIA Document G702.
3.3.8 Lender shall have received advice from Lender's
Consultant that (i) the Required Work theretofore performed at the
Property was performed in accordance with the Plans and Legal
Requirements in all material respects and setting forth its estimate of
the percentage of completion thereof; (ii) the amount which, in its
opinion, is due and payable for labor and materials furnished; (iii)
the amount which, in its opinion, is required to complete the Required
Work on the Property and pay for all items included in the Property
Budget does not exceed the undisbursed amount of the Loan allocated to
such Required Work and the estimated date of completion of such
Required Work shall not be later than the date required for such
completion and (iv) all Permits required for construction have been
obtained and are in full force and effect.
3.3.9 Lender shall have received from the Title Insurer a
notice of title continuation or an endorsement to the title insurance
policy theretofore delivered in accordance with local law, regulation
and practice, indicating that since the last preceding advance, there
has been no change in the state of title and no survey exceptions not
theretofore approved by the Lender, which endorsement shall have the
effect of increasing the coverage of the policy by an amount equal to
the advance then being made if the policy does not by its terms provide
for such an increase and insuring the priority of such advance.
<PAGE>
3.3.10 Lender shall have received, upon completion of the
exterior walls of any buildings and improvements, or if required in
connection with the endorsement to be delivered under Section 3.3.9, a
revised or redated survey showing the exterior lines of all buildings
and improvements in the course of construction or completed, or, after
completion of the exterior walls of the buildings and improvements, a
certificate from the surveyor certifying that there has been no change
in any exterior line of the buildings and improvements since the date
of the last advance.
3.3.11 Lender shall have received, if requested, advice from
the Title Insurer that a search of the public records of the County in
which the Property is located and the County in which the Borrower has
its principal place of business discloses no leases of personalty,
financing statements, title retention agreements or other security
interests in favor of parties other than Lender in any of the personal
property intended to be subjected to the lien of the Mortgage.
3.3.12 Lender shall have received executed waivers of lien
from the Architect, general contractor (or, if there is no general
contractor, the major contractors designated by Lender), covering all
work, labor and materials previously performed and delivered in amounts
which aggregate the total payments received through and including the
last payment received.
3.3.13 Lender shall have received such additional documents in
support of the Request for Advance and the satisfaction of the
foregoing conditions as Lender may reasonably require.
Section 3.4 Conditions Precedent to Final Advances.
Upon Substantial Completion of the Required Work for the Property,
Lender shall advance to Borrower an amount equal to the Retainage less the
amount, which in the opinion of Lender's Consultant, is reasonably required for
final completion of such Required Work provided that, in addition to the
conditions to advances set forth in Section 3.3 above, the following additional
conditions shall have been satisfied:
(a) Lender shall have received a certificate of the Architect
and advice from Lender's Consultant, that (i) the Improvements to the
Property have been Substantially Completed in accordance with the Plans
and all Legal Requirements, (ii) all roads and utilities necessary for
the operation of such Improvements are available and operating and
(iii) all Permits necessary for the use and occupancy and operation of
such Improvements for their intended purposes, including a final or
temporary certificate of occupancy, if applicable, have been issued.
(b) Lender shall have received, if applicable, (i) a final,
"as-built" survey showing the completed Improvements and all easements
appurtenant to the Property and (ii) "as-built" plans and
specifications for the completed Improvements and for underground site
work and interior utility and other building systems.
(c) Lender shall have received evidence that Borrower has
filed the notice of completion of the Improvements necessary to
establish commencement of the shortest statutory period for the filing
of mechanics' and materialmen's liens, if any.
<PAGE>
Section 3.5 Reallocation of Budget. If any item of Required Work for
the Property shall be completed or satisfied, such that no further advances
shall be required or made with respect thereto, any amount allocated to such
Required Work and not theretofore advanced shall, upon request of Borrower, be
reallocated to, and advanced in accordance herewith for, other items of Required
Work on the Property, provided that any such reallocation and advance (i) is
permitted by applicable law, (ii) shall be secured by a lien of equal priority
with all prior advances and (iii) shall not otherwise adversely affect the lien
of the Mortgage or Lender's security.
Section 3.6 Determinations. The determination of any fact or facts,
such as the percentage of completion of construction, estimated cost of
construction, estimated date of Substantial Completion and any other matters
relating to the amount of any advance or the satisfaction of the conditions
thereto, shall be made by Lender or at, Lender's option, by Lender's Consultant,
in its sole discretion unless otherwise expressly provided herein.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender:
Section 4.1 Organization, Enforceability, Etc.
4.1.1 Borrower is duly formed, validly existing and in good
standing under the laws of the State of its formation and is duly
qualified to do business in the State in which the Property is located.
Borrower has full power and authority to execute and deliver to Lender
this Agreement and all other Loan Documents to which it is a party and
to own and operate the Property and perform the obligations and carry
out the duties imposed upon Borrower by this Agreement and the other
Loan Documents. All Loan Documents to be executed by Borrower upon such
execution, shall have been duly authorized, approved, executed and
delivered by all necessary parties and shall constitute the legal,
valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms.
4.1.2 The SPE Entity is a duly formed corporation, validly
existing or qualified to do business in and in good standing under the
laws of the State in which the Property is located. The SPE Entity has
full power and authority to execute and deliver to Lender all Loan
Documents to which it is a party. All Loan Documents executed by the
SPE Entity have been duly authorized, approved, executed and delivered
by all necessary parties and constitute the legal, valid and binding
obligations of the SPE Entity, enforceable against the SPE Entity in
accordance with their respective terms.
Section 4.2 No Structural Defects. To the best knowledge of Borrower,
there are no structural defects in the Improvements existing on the Property
owned by it or material defects to the building systems thereof except as shown
in the Engineer's Report for the Property.
Section 4.3 Financial Statements. All financial statements of Borrower,
Guarantor and SPE Entity heretofore or hereafter delivered to Lender in
connection with the Loan are true and correct in all material respects and
fairly present the financial condition of the subjects thereof as of the
respective dates thereof and that no material adverse change has occurred in the
financial condition reflected therein or the operations or business of such
Persons since the respective dates of such financial statements.
<PAGE>
Section 4.4 Litigation. Except as disclosed to Lender in writing on the
date hereof, (a) there are no actions, suits, proceedings, arbitrations, labor
disputes or governmental investigations pending, or, to the best knowledge of
Borrower, threatened in writing against or affecting Borrower or, to the best
knowledge of Borrower, the Property and there is no pending litigation (i)
which, if successful, could have a Material Adverse Effect on Borrower, any
other Significant Party or the Property, or any such Person's ability to perform
its obligations pursuant to and as contemplated by this Agreement and the other
Loan Documents, (ii) which, if successful, might affect the validity or
enforceability of any of the Loan Documents or the priority of the Liens
thereof, or (iii) which, if successful, could materially adversely affect the
use of, operations at or capital improvements being made at the Property; (b)
neither Borrower, nor the SPE Entity, nor any other Significant Party are
operating under or subject to any order, writ, injunction, decree or demand of
any court or any Governmental Authority and (c) no actions, suits, proceedings
or arbitrations are pending or, to the best knowledge of Borrower, threatened
against Borrower, SPE Entity or any other Significant Party which involve
claims, damages or sums of money not covered (including all applicable
deductibles) by insurance.
Section 4.5 No Conflict with Law or Agreements. The execution and
delivery of this Agreement and the other Loan Documents, and the performance and
consummation of the transaction contemplated hereby and thereby, on the part of
Borrower and all other Significant Parties (as applicable) and fulfillment of
the terms of the Loan Documents by Borrower and the other Significant Parties
(as applicable) (i) do not and will not conflict with, violate, or constitute a
default (or a condition or event which, after notice or lapse of time or both,
would constitute such a default) under any provision of any Organizational
Document or contractual obligation of Borrower or any Significant Party or any
Legal Requirement or any court decree or order binding on Borrower or any
Significant Party, and (ii) will not result in or require the creation or
imposition of any lien or encumbrance on or conveyance of the Property pursuant
to any contractual obligation and (iii) do not require the consent or approval
of any Governmental Authority or other person or entity except for consents and
approvals already obtained.
Section 4.6 Personal Property. All equipment and other personal
property necessary for (or otherwise actually used in connection with) the
proper and efficient operation and maintenance of the Property and the actual
and contemplated uses thereof are owned by Borrower and constitute part of the
Property subject to the Mortgage and located thereat, other than any such
equipment which is leased by Borrower or is owned by a utility company.
Section 4.7 Easements. All easements, cross easements, licenses, air
rights, and rights-of-way or other similar property interests (collectively,
"Easements"), if any, necessary for the full utilization of the Improvements for
their intended purposes have been obtained, and are described in the Title
Insurance Policy, and are in full force and effect without default thereunder.
The Property has or will, upon Substantial Completion of the Required Work, have
direct rights of access to public ways (through public or private roads) and is
served by water, sewer, sanitary sewer and storm drain facilities adequate to
service the Property for its intended uses. All public utilities necessary or
convenient to the full use and enjoyment of the Property are located either in
the public right of way abutting the Property (which are connected so as to
serve the Property without passing over other property) or in recorded easements
serving the Property and described in the Title Insurance Policy. All roads
necessary for the use of the Property for its current purposes have been or
will, upon Substantial Completion of the Required Work, be completed and
available for public use.
<PAGE>
Section 4.8 No Flood Hazard, Etc. The Property is either not situated
in a flood hazard area as defined by the Federal Insurance Administration or is
covered by flood insurance in accordance with the Mortgage encumbering the
Property. Portions of the Property consist of filled-in land.
Section 4.9 No Default. There is no default on the part of Borrower,
under this Agreement, the Note, the Mortgage or any other Loan Document.
Section 4.10 No Offsets. Borrower has no counterclaims, offsets or
defenses with respect to the Loan, the Note or any other Loan Document.
Section 4.11 Valid Liens. Subject to the Permitted Encumbrances, the
Mortgage is a good and valid first mortgage lien on the Property and first
security interest in the personal property described in the Mortgage.
Section 4.12 Compliance with Zoning and Other Legal Requirements
4.12.1 To the best of the Borrower's knowledge, except as may
be disclosed by the Engineer's Report and on Exhibit J hereto (the
"Disclosed Violations"), the Property complies in all material respects
with all applicable Legal Requirements. Borrower shall cure, or cause
to be cured, the Disclosed Violations and have them removed of record
on or before December 31, 1998. To the best knowledge of Borrower, any
zoning or subdivision approval is based on no real property, or rights
appurtenant thereto, other than the Property. The Property as improved
and used is not in material violation of any recorded and, to the best
knowledge of Borrower, unrecorded covenants, conditions or restrictions
of any kind or nature affecting all or any part of the Property or any
interest therein of which Borrower has knowledge. To the best knowledge
of Borrower, the Improvements can be fully rebuilt in the event of
casualty or destruction thereof under the Permits applicable to the
Property, subject, however, to non-discretionary requirements of any
Governmental Authority. No amendment or change in any Permit and no
amendment or change in zoning or any other land use control is being
sought or obtained by Borrower or any Affiliate of Borrower or will be
sought or obtained by Borrower or any Affiliate of Borrower with
respect to the Property or the Improvements, except as specifically and
reasonably approved in writing by Lender.
4.12.2 To the best knowledge of Borrower, except as may be
disclosed by the Engineer's Report, all Permits required by any
Governmental Authority for the operation of the Improvements and the
actual and contemplated uses thereof or otherwise required to be in
compliance with any Environmental Laws have been obtained. The copy of
the certificate of occupancy for the Property delivered to Lender is a
true and correct copy of the certificate of occupancy for the Property
and such certificate is in full force and effect and is not subject to
any conditions or limitations other than those of general applicability
to all certificates of occupancy for similar properties in the
applicable jurisdiction.
<PAGE>
4.12.3 Borrower has heretofore delivered to Lender true,
correct and complete copies of each material Permit.
4.12.4 There are no pending or, to the best knowledge of
Borrower, threatened actions, suits or proceedings to revoke, attack,
invalidate, rescind or modify the zoning of the Property, or any
material Permits issued with respect to the Property or any part
thereof, or asserting that such Permits or zoning of the Property do
not permit the use of the Property as contemplated by the Loan
Documents.
Section 4.13 No Condemnation. Borrower has not received any notice of,
and to the best of Borrower's knowledge there does not exist, any actual,
proposed or threatened exercise of the power of eminent domain or other taking
by any governmental or quasi-governmental body or agency of all or any portion
of the Property or any interest therein or any right of access thereto.
Section 4.14 No Casualty. The Improvements have suffered no casualty or
damage which has not been fully repaired.
Section 4.15 Purchase Options. Neither the Property nor any part
thereof is not subject to any purchase options or other similar rights in favor
of third parties, except as set forth in Exhibit H annexed hereto.
Section 4.16 No Encroachments. To the best of the Borrower's knowledge,
there are no material encroachments on the Land and the Improvements do not
encroach upon any Easement, other interest in real property, any adjoining land
or adjoining street, except as set forth in the survey of the Property delivered
to Lender in connection with the closing of the Loan.
Section 4.17 No Insolvency. Neither Borrower, any SPE Entity nor any
other Significant Party is Insolvent or will be rendered Insolvent by execution
of this Agreement, the Note or any other Loan Documents or consummation of the
transactions contemplated thereby.
Section 4.18 Fraudulent Conveyance. Borrower (a) has not entered into
the transactions contemplated by this Agreement or any other Loan Document with
the actual intent to hinder, delay, or defraud any creditor and (b) has received
reasonably equivalent value in exchange for its obligations under the Note, this
Agreement and the other Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair salable value of Borrower's assets
exceeds, and will immediately following the execution and delivery of the Loan
Documents and the advance of the proceeds thereof, exceed, Borrower's total
probable liabilities, including, without limitation, the maximum amount of its
subordinated, unliquidated, disputed or contingent liabilities. Borrower's
assets do not, and immediately following the execution and delivery of the Loan
Documents and the advance of the proceeds thereof, will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including, without limitation, contingent
liabilities and other commitments) beyond its ability to pay such debts and
liabilities as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Borrower).
Section 4.19 Broker. No broker or consultant other than Broker has been
retained by Borrower or any Affiliate of Borrower in connection with the Loan or
the Loan Documents. Borrower will pay any and all fees due to Broker in
connection with the Loan and will indemnify, defend and hold the Indemnified
Parties harmless from and against all loss, cost, liability and expense arising
from the claims of all brokers and consultants (including Broker) relating to
the Loan and/or the Property with whom Borrower, any Affiliate of Borrower or
any employee or agent of Borrower has dealt, including, without limitation,
sales, mortgage or leasing brokers or consultants.
<PAGE>
Section 4.20 Environmental. Except as may be actually disclosed in the
Environmental Report(i) no Hazardous Substances are now or, to Borrower's best
knowledge, have ever been located, produced, used, stored, treated, transported,
incorporated, discharged, emitted, released, deposited or disposed upon, under,
over or from the Property in a manner that may give rise to any actual or
potential liability to pay response costs or other damages, losses or expenses
or otherwise violate any Environmental Laws; (ii) no Hazardous Substances are
currently located, stored or used at the Property, except with respect to such
Hazardous Substances which are (x) customarily located, stored or used in
properties similar to the Property or (y) unique and necessary to Borrower's
business located on the Property, provided that such Hazardous Substances
described in (x) or (y) are at all times stored, located and used in compliance
with all Environmental Laws; (iii) to Borrower's knowledge, no Hazardous
Substances have been discharged, released or emitted, upon or from the Property
into the environment and no threat exists of a discharge, release or emission of
a Hazardous Substance upon or from the Property into the environment, which
discharge, release or emission, in either case, would subject the owner of the
Property to any damages, penalties or liabilities under any applicable
Environmental Laws; (iv) the Property has never been used as or for a mine, a
landfill, a dump or other disposal facility or a gasoline service station; (v)
no underground storage tank is now located on or in the Property or if
previously located therein has been removed therefrom in compliance with all
applicable Environmental Laws and any clean-up of the surrounding soil in
connection therewith has been completed; (vi) no asbestos, ACM, materials
containing urea-formaldehyde, or transformers, capacitors, ballasts or other
equipment containing PCBs are located on the Property; (vii) the Property has
not been used by Borrower or any Affiliate or, to the best of Borrower's
knowledge, after reasonable investigation, any other person or entity (including
any prior owner of the Property) as a permanent or temporary treatment, storage
or disposal site for any Hazardous Substance subject to regulation under
Environmental Laws; (viii) no violation of any Environmental Law now exists or
has ever existed in, upon, under, over or from the Property, no notice of any
such violation or any alleged violation thereof has been issued or given by any
governmental entity or agency, and there is not now nor has there ever been any
investigation or report involving the Property by any governmental entity or
agency which in any way relates to Hazardous Substances; (ix) no Person has
given any notice of or asserted any claim, cause of action, penalty, cost or
demand for payment or compensation, whether or not involving any injury or
threatened injury to human health, the environment or natural resources,
resulting or allegedly resulting from any activity or event described in clauses
(i)-(viii) above and to the knowledge of Borrower, no basis for such a claim
exists; (x) there are not now, nor to Borrower's best knowledge have there ever
been, any actions, suits, proceedings or damage settlements relating in any way
to Hazardous Substances, in, upon, under, over or from any Property; (xi) no
oral or written notification of a Release (as such term is defined in 42 U.S.C.
* 9601(22)) of any Hazardous Substances has been filed by or on behalf of
Borrower through authorized employees or agents and no Property is listed in the
United States Environmental Protection Agency's List of Hazardous Waste Sites or
any other list of Hazardous Substance sites maintained by any federal, state or
local governmental agency; (xii) there are no environmental liens on any
Property, and, to the best knowledge of Borrower, no governmental actions have
been taken or are in process which could subject any Property to such liens;
(xiii) Borrower has not transported or arranged for the transportation of any
Hazardous Substances to any location which is listed or proposed for listing
under CERCLA or on any similar state list or which is the subject of federal,
state or local enforcement actions or other investigations; (xiv) no
<PAGE>
environmental or engineering investigations, studies, audits, tests, reviews or
other analyses have been conducted by or are in the possession of Borrower or
its Affiliates in relation to any Property other than the Environmental Report;
Borrower has delivered a true, correct and complete copy of the Environmental
Report to Lender; and (xv) to the best of Borrower's knowledge, the
Environmental Report does not contain any untrue statements of a material fact
or omit to state a material fact necessary to make any statement contained
therein or herein, in light of the circumstances under which such statements
were made, not misleading.
Section 4.21 Borrower Address. Borrower's principal place of business
is at the address first set forth in the initial paragraph of this Agreement and
shall not be changed during the term of the Loan without giving Lender at least
thirty (30) days' prior notice thereof. Borrower uses no trade name and has not
and will not do any business under any name other than its actual name set forth
herein except the name of the Property owned by Borrower.
Section 4.22 Structure of Borrower. (a) The Persons set forth on
Exhibit E annexed hereto are the sole partners or members of Borrower and have
the legal and beneficial ownership interests in Borrower set forth therein, and
(b) the shareholders of the SPE Entity set forth on Exhibit E annexed hereto are
the sole shareholders of the SPE Entity and have the legal and beneficial
ownership interests in Borrower set forth therein. The ownership structure of
Borrower and the SPE Entity for the term of the Loan shall remain the same as
set forth in Exhibit E annexed hereto.
Section 4.23 Leases. Borrower has not entered into any Lease which
continues in existence and is not bound by any such Lease.
Section 4.24 Property Taxed as a Separate Tax Lot. The Property is
taxed as one or more separate and distinct tax lots or parcels, no part of the
Property shares a tax lot with any adjoining lands not wholly included in the
Property and for all purposes the Property may be mortgaged, conveyed and
otherwise dealt with as one or more independent parcels.
Section 4.25 Fiscal Year. Each Fiscal Year of Borrower commences on
January 1.
Section 4.26 No Other Financing. Borrower has not borrowed any funds
and has no indebtedness except for the Loan and trade payables or accrued
expenses incurred in the ordinary course of business of operating the Property
not in excess of sixty (60) days past due, which have not heretofore been repaid
in full or which shall be repaid in full from the Initial Advance of the Loan,
except the indebtedness set forth on Exhibit B hereto.
Section 4.27 ERISA.
4.27.1 The execution, delivery and performance of this
Agreement, the Mortgage, and the other Loan Documents do not constitute
a Prohibited Transaction, assuming solely for this purpose that Lender
is a party in interest as defined in Section 3(14) of ERISA ("Party In
Interest"), or a disqualified person as defined in Section 4975(e)(2)
of the Internal Revenue Code ("Disqualified Person"), with respect to
an employee benefit plan, if any, which has directly or indirectly
invested in Borrower or in any Partner.
<PAGE>
4.27.2 Borrower has made and shall continue to make all
required contributions to all employee benefit plans, if any, within
the time periods required by the applicable provisions of ERISA and any
other federal or state law and Borrower has no knowledge of any
material liability which has been incurred by Borrower which remains
unsatisfied for any taxes or penalties with respect to any employee
benefit plan or any multi-employer plan, and each such plan has been
administered in all material respects in compliance with its terms and
the applicable provisions of ERISA and any other federal or state law.
Section 4.28 FIRPTA. Borrower is not a "foreign person" within the
meaning of Sections 1445 or 7701 of the Internal Revenue Code.
Section 4.29 PUHCA. Borrower is not a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" as defined in the Public Utility
Holding Company Act of 1935, as amended.
Section 4.30 Insurance. All Insurance Policies (as defined in the
Mortgage) required to be obtained and maintained by Borrower pursuant to the
Mortgage are in full force and effect, the premiums due thereon have been paid
in full, Borrower and the Property are in compliance in all material respects
with the provisions of such Insurance Policies and the provisions relating to
Insurance Policies in the Mortgage and no notice of cancellation, termination or
default has been received by Borrower with respect to any such policy.
Section 4.31 No Margin Stock. None of the proceeds of the Loan will be
used by Borrower for the purpose of purchasing or carrying "margin stock" within
the meaning of Regulation G, T, U or X issued by the Board of Governors of the
Federal Reserve System, as at any time amended, and Borrower agrees to execute
all instruments which may be necessary from time to time, if any, to comply with
all the requirements of Regulation U of the Federal Reserve System, as at any
time amended.
Section 4.32 Investment Company Act. Borrower is not (a) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended; or (b) subject to any other
United States federal or state law or regulation which purports to restrict or
regulate its ability to borrow money.
Section 4.33 Taxes. Borrower has filed all Federal, state and local tax
returns required to be filed prior to the date hereof and has paid all taxes,
charges and assessments shown to be due from Borrower on such tax returns. All
Taxes due and owing in respect of, and affecting the Property have been paid.
There are no pending, or to Borrower's knowledge, proposed special or other
assessments for public improvements or otherwise affecting the Property.
Section 4.34 Full and Accurate Disclosure. No statement of fact made by
Borrower in this Agreement, or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading in any
material respect. There is no material fact presently known to Borrower which
has not been disclosed to Lender which materially adversely affects, nor as far
as Borrower can reasonably foresee, might materially adversely affect, the
Property or the business, operations or condition (financial or otherwise) of
Borrower.
Section 4.35 Contracts.
4.35.1 Borrower has not entered into and is not bound by any
Contract which continues in existence, except the Disclosed Contracts.
<PAGE>
4.35.2 Each of the Contracts is in full force and effect,
there are no monetary or other material defaults by Borrower thereunder
and there are no monetary or other material defaults thereunder by any
other party thereto beyond any applicable grace or cure period except
for defaults which will be cured upon the Initial Advance of the Loan.
Neither Borrower nor Manager nor any other Person acting on Borrower's
behalf has given or received any written notice of an Event of Default
under any of the Contracts that remain uncured or in dispute.
4.35.3 Borrower has delivered true, correct and complete
copies of the Contracts (including all amendments and supplements
thereto) to Lender.
4.35.4 No Contract has as a party an Affiliate of Borrower
unless such Contract contains market rate terms and conditions
including fees which are no less favorable than would be available to
Borrower by a third party which is not an Affiliate of Borrower. All
fees and other compensation for services previously performed under
each Contract that are due have been paid in full.
Section 4.36 Other Obligations and Liabilities. Borrower has no
liabilities or other obligations that arose or accrued prior to the date hereof
that, either individually or in the aggregate, could have a Material Adverse
Effect on Borrower's ability to perform its obligations under this Agreement, or
any of the other Loan Documents or any other obligations that Borrower may have
in connection with the ownership and operation of the Property as contemplated
by the Loan Documents.
Section 4.37 Loan to Value Ratio. To the best of Borrower's knowledge,
based on Borrower's familiarity with the Property and the Approved Appraisal
(which Borrower believes to contain a reasonable assessment of the fair market
value of the Property), the maximum principal amount of the Loan does not exceed
eighty percent (80%) of the fair market value of the Property. For the purposes
of this Section 4.37, the term "fair market value" shall not include (i) the
amount of any indebtedness secured by a Lien affecting the Property that is
prior to, or on a parity with, the lien of the Mortgage, and (ii) the value of
any property that is not "real property" within the meaning of Treas. Reg **
1.860G-2 and 1.856-3(d).
Section 4.38 Settlement Agreement. Borrower represents and warrants
that the representations and warranties contained in the Settlement Agreement of
even date herewith between Maricopa Hardy Development, Inc., Golf Ventures, Inc.
and U.S. Golf Pelican Strand, Inc. and the consent of Stephen Tavilla annexed
thereto are true and correct.
ARTICLE V. AFFIRMATIVE COVENANTS
From the date hereof and until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of the
Liens of all Mortgages encumbering the Property (and all related obligations) in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower hereby covenants and agrees with Lender as follows:
<PAGE>
Section 5.1 Transfers.
5.1.1 Except as expressly permitted in this Section 5.1 and
Section 8.7, and subject to Section 8.10 hereof, Borrower will not,
directly or indirectly, sell, assign, convey, pledge, hypothecate,
encumber or otherwise transfer (each of the foregoing constituting a
"Transfer") the Property or any part thereof or any interest therein or
suffer, consent to or permit the foregoing without, in each instance,
the prior written consent of Lender. Borrower will not permit any owner
of a legal or beneficial interest in Borrower (including, without
limitation, any owner (directly or indirectly) of a legal or beneficial
ownership interest in the SPE Entity) to Transfer such interest,
whether by transfer of stock, assignment of partnership interest or
other transfer of legal or beneficial interest in Borrower or in any
direct or indirect owner thereof, or otherwise permit any new or
additional legal or beneficial ownership interests in Borrower or any
direct or indirect owner, to be issued, including, without limitation,
by admission of new partners or members, without, in each instance, the
prior written consent of Lender. The foregoing provisions of this
Section 5.1.1 shall not, however, apply to (a) Transfers of ownership
interests in Borrower or the SPE Entity by or on behalf of an
individual owner thereof who is deceased or declared judicially
incompetent, to such owner's heirs, legatees, devisees, executors,
administrators, estate or personal representatives, but shall continue
to apply as to any subsequent Transfer and (b) sales of publicly owned
and traded shares of Golf Ventures, Inc., provided that Warren
Stanchina shall not sell more than forty percent (40%) of the shares of
common stock of Golf Ventures, Inc. owned by him on the date hereof.
5.1.2 To the extent Lender elects to consent to any Transfer
as to which its consent is required hereunder, Lender shall be entitled
to condition its consent on such matters as Lender may elect, in its
sole reasonable discretion, including, without limitation, execution of
instruments of assignment and assumption with respect to the Loan
Documents and the collateral therefor, payment of reasonable
consideration, delivery of Officer's Certificates and affidavits and
indemnities, including an affidavit and indemnification regarding
Internal Revenue Code Section 1445 and 7701, receipt by Lender of
opinions regarding "non-consolidation" regarding the parties to the
Transfer and their respective Affiliates and the assumptions of
obligations hereunder, receipt of confirmations from the Rating
Agencies that the then current rating for the Securities will not be
withdrawn, qualified or downgraded as a result of the Transfer, the
transferee under the Transfer satisfies the criteria set forth in
Article IX of this Agreement and such other matters or documents as
Lender may request. Within ten (10) days after closing of any Transfer,
whether or not such Transfer required Lender's consent, if the Property
or any part thereof or if any interest therein or if any direct or
indirect ownership interests in Borrower is transferred, Borrower will
provide Lender with a copy of the deed or other instrument of Transfer
to the transferee. Borrower will promptly after request therefor
provide Lender with such other information and documentation with
respect to such Transfer as Lender reasonably requests, including,
without limitation, information as to ownership of such transferee.
5.1.3 Upon the occurrence of any Transfer, the provisions of
this Section 5.1 shall continue to apply to the transferee as if it
were the transferor hereunder and any consent by Lender permitting a
transaction otherwise prohibited under this Section 5.1 or any right of
Borrower or any other Person to Transfer without such consent, shall
not constitute a consent to or waiver of any right, remedy or power of
Lender to withhold its consent on a subsequent occasion to a
transaction not otherwise permitted by the provisions of this Section
5.1. Notwithstanding the giving of any consent hereunder by Lender,
Borrower shall not engage in any Prohibited Transaction.
<PAGE>
5.1.4 Notwithstanding the provisions of Section 5.1.1 above,
Obsolete Collateral (as such term is defined in the Mortgage) may be
sold or otherwise disposed of, provided, that either (x) such Obsolete
Collateral has been or is contemporaneously being replaced by
Collateral (as such term is defined in the Mortgage) of at least equal
value and utility which is subject to the lien of the Mortgage with the
same priority as with respect to the Obsolete Collateral or (y) such
Obsolete Collateral may be removed without adversely affecting the
maintenance, safety and operations at the Property, and upon the sale
of such Obsolete Collateral any net cash proceeds received from such
disposition are deposited as ordinary Receipts in the Cash Collateral
Account and applied as provided in the Cash Management Agreement.
Section 5.2 Liens. Borrower shall not create, suffer or permit to exist
any Lien on, of or against, or otherwise affecting, all or any portion of the
Property (including, without limitation, fixtures and other personal property),
or any other property of Borrower (whether tangible or intangible and now owned
or hereafter acquired) in favor of any Person other than Lender, without the
prior written consent of Lender, other than the Permitted Encumbrances.
Section 5.3 Indebtedness.
5.3.1 Borrower shall not create, incur or assume any
indebtedness for borrowed money or otherwise evidenced by a note or
notes, whether secured or unsecured except for the Loan. Borrower shall
not create, incur or assume any other indebtedness, if doing so would
cause Borrower to be in violation of Section 9.1(h) hereof, or any
other provision of this Agreement or the other Loan Documents
applicable thereto.
5.3.2 Notwithstanding that any indebtedness incurred with
respect to the Property is otherwise permitted hereunder, Borrower
shall (subject to the terms of the next sentence) pay any portion of
such indebtedness which becomes due and payable within sixty (60) days
following the date on which each such amount is due and payable.
Nothing contained in this Section 5.3 shall be deemed to require
Borrower to pay any amount, so long as Borrower is in good faith, and
by proper legal proceedings, diligently contesting the validity, amount
or application thereof, provided that in each case, at the time of the
commencement of any such action or proceeding, and during the pendency
of such action or proceeding (i) adequate reserves with respect thereto
are maintained on the books of the Borrower in accordance with GAAP (as
determined by the Approved Accountant), (ii) such contest operates to
suspend collection or enforcement, as the case may be, of the contested
amount and such contest is maintained and prosecuted continuously and
with diligence and (iii) Borrower shall deliver to Lender cash in an
amount equal to one hundred twenty-five percent (125%) of the amounts
being contested which exceed One Hundred Thousand and No/100 Dollars
($100,000.00) in the aggregate and any additional interest, charge or
penalty arising from such contest. Any cash delivered shall constitute
additional security for the Loan. Any such cash shall be held and
invested in the same manner and subject to the same general terms as
amounts deposited in the Cash Collateral Account under the Cash
Management Agreement and, upon the occurrence of an Event of Default,
Lender may apply such monies in the same manner as other monies held in
the Cash Collateral Account. Borrower shall execute such instruments as
Lender shall require to evidence Lender's perfected first priority
security interest therein and to effectuate the provisions hereof. If
<PAGE>
prior to the occurrence of an Event of Default, Borrower shall provide
evidence satisfactory to Lender, in its reasonable judgment, that
Borrower has paid the disputed amount, or otherwise settled the same
and paid any amount to be paid under such settlement, or that Borrower
has received a final unappealable judgment in its favor that it need
not pay any disputed amount, together with an Officer's Certificate
confirming the foregoing, then Lender shall return any cash deposited
with Lender with respect to such disputed amount. If Borrower ceases to
pursue continuously and with due diligence any contest described above,
or fails to provide Lender with evidence satisfactory to Lender that it
is doing so within ten (10) days after Lender's request, or if there
shall be a final judgment against Borrower with respect thereto, then
Lender may apply all or any portion of the cash to pay such disputed
amount and Lender shall have no liability to Borrower for any
determination made by Lender, in good faith, that it is entitled to do
so or as to the amount to then be paid with respect to such disputed
amount, whether or not that determination is found to be accurate.
Section 5.4 Compliance with Easements, Restrictive Covenants and
Permitted Encumbrances
5.4.1 Borrower will not modify, waive in any material respect
or release any Easements, restrictive covenants or other Permitted
Encumbrances, or suffer, consent to or permit the foregoing, without
Lender's prior written consent, which consent may be granted or denied
in Lender's sole discretion but shall not be unreasonably withheld,
conditioned or delayed if necessary for the completion of the Required
Work. Borrower will timely comply in all material respects with the
terms of all Easements, restrictive covenants and all other Permitted
Encumbrances.
5.4.2 Borrower shall observe and comply in all material
respects with any conditions and requirements necessary to preserve and
extend any and all rights, privileges, franchises and concessions that
are applicable to the Property, the use and occupancy thereof or the
business conducted thereat.
Section 5.5 Leases.
5.5.1 Borrower will not enter into any Lease without the prior
written consent of Lender, which consent may be granted or withheld in
Lender's sole discretion.
5.5.2 Borrower will not modify, amend, consent to the
cancellation or surrender of (except to the extent such cancellation or
surrender is by the tenant thereunder pursuant to a pre-existing right
to do so under a Lease) or terminate any Lease hereafter approved by
Lender without the prior written consent of Lender, which consent may
be granted or withheld in Lender's sole discretion.
5.5.3 Borrower will timely comply with all material terms and
conditions on its part to be performed under any Lease hereafter
approved by Lender and shall neither neglect to do nor permit to be
done, anything which may cause a termination of any such Lease, other
than due to the default of the tenant(s). Borrower shall not collect
any rent or other payment under any such Lease more than one month in
advance of the due date thereof. Borrower will use commercially
reasonable efforts to require the performance of all of the obligations
of tenants and other Persons bound by such Leases and to enforce such
Leases.
<PAGE>
5.5.4 Any security deposits of tenants, whether held in cash
or any other form, shall not be commingled with any other funds of
Borrower and, if cash, shall be deposited by Borrower at such
commercial or savings bank or banks as may be reasonably satisfactory
to Lender. Any bond or other instrument which Borrower is permitted to
hold in lieu of cash security deposits under any applicable legal
requirements shall be maintained in full force and effect in the full
amount of such deposits unless replaced by cash deposits as hereinabove
described, shall be issued by an institution reasonably satisfactory to
Lender, shall be fully assignable to Lender) and shall, in all
respects, comply with any applicable Legal Requirements and otherwise
be satisfactory to Lender. Borrower shall, upon request, provide Lender
with evidence satisfactory to Lender of Borrower's compliance with the
foregoing. Following the occurrence and during the continuance of any
Event of Default, upon Lender's demand, Borrower shall turn over to
Lender the security deposits (and any interest theretofore earned
thereon) with respect to all or any portion of the applicable Property,
to be held by Lender subject to the terms of the Leases. If Borrower is
entitled to retain a security deposit, then such amount shall be
transferred by Borrower into the Clearing Account.
Section 5.6 Delivery of Notices. Borrower will promptly, but in no
event later than ten (10) days after Borrower becomes aware of any of the
following events, furnish a written notice to Lender (together with the
applicable correspondence and papers relating thereto) specifying the nature and
period of existence of such condition or event and, with respect to events
described in clause (i) below, what action Borrower is taking or proposes to
take with respect thereto (compliance with the provisions of this Section 5.6
shall not be deemed or construed to constitute a waiver of or consent to any
default or Event of Default of which Borrower has given Lender notice pursuant
to this Section 5.6):
(i) any default hereunder or under any of the other Loan
Documents or any Event of Default;
(ii) receipt or delivery by Borrower of a notice of default or
termination, any proposed action with respect to any default or any
failure by any Person to perform any material obligation, maintain any
material representation or warranty or satisfy any material condition
in connection with any Lease, the Management Agreement, any Easement, a
recorded instrument or a Permit;
(iii) the filing of any action, suit or proceeding against or
affecting Borrower or the Property that, if adversely determined, could
(A) impair the validity or enforceability of this Agreement or any of
the other Loan Documents, (B) have a Material Adverse Effect, or (C)
result in a Lien on any portion of the Property; and
(iv) any notice received from any Governmental Authority
asserting a violation of any material Legal Requirement and any
correspondence to or from Borrower with respect thereto. Without
limiting the generality of the foregoing, Borrower will transmit to
Lender, immediately upon receipt thereof, any communication (addressed
to Borrower or any Affiliate of Borrower) which relates to matters
which could materially adversely affect Lender's security for the Loan
or have a material adverse effect on the financial condition of
Borrower, and/or any other Significant Party, and will promptly respond
fully to any inquiry of Lender made with respect thereto.
<PAGE>
Section 5.7 ERISA.
5.7.1 In addition to the prohibitions set forth in Section 5.1
hereof, and not in limitation thereof, Borrower shall not Transfer or
hypothecate its interest or rights in this Agreement or in the
Property, or attempt to do any of the foregoing or suffer any of the
foregoing, nor shall any Person owning a direct or indirect interest in
Borrower Transfer any of its rights or interest (direct or indirect) in
Borrower, attempt to do any of the foregoing or suffer any of the
foregoing, nor shall Borrower or any Person owning a direct or indirect
interest in Borrower take, without limitation, any action or fail to
take any action, if, in any such case, doing so would (i) cause the
Loan or the exercise of any of Lender's rights in connection therewith,
to constitute a Prohibited Transaction (unless Borrower furnishes a
legal opinion reasonably satisfactory to Lender that the same is exempt
from the Prohibited Transaction provisions of ERISA and the Internal
Revenue Code or otherwise does not constitute a Prohibited
Transaction), assuming solely for this purpose that Lender is a Party
In Interest or a Disqualified Person with respect to an employee
benefit plan, if any, which has directly or indirectly invested in
Borrower, or (ii) otherwise result in Lender being deemed in violation
of any applicable provisions of ERISA with respect to the Loan.
Borrower shall take such steps as are reasonably necessary to assure
that it (and its shareholders, partners and members) does not commit
any act or fail to commit any act the occurrence of which or the
failure of which to occur would cause the Loan to be a Prohibited
Transaction.
5.7.2 If the provisions of this Section 5.7 are violated,
Borrower agrees, at its own cost and expense, to take such steps as
Lender shall reasonably request to prevent the occurrence of a
Prohibited Transaction or to correct the occurrence of a Prohibited
Transaction. Borrower agrees to indemnify, defend and hold the
Indemnified Parties free and harmless from and against all loss, costs
(including reasonable attorney's fees and expenses), taxes, penalties,
damages and expenses any of the Indemnified Parties may suffer by
reason of the investigation, defense and settlement of claims based
upon a breach of the foregoing provisions. The foregoing
indemnification shall survive repayment of the Note.
Section 5.8 Agreements with Affiliates. Borrower shall not enter into
any contract, agreement or other arrangement with any Affiliate of Borrower
without Lender's prior written consent (which consent may be granted or denied
in Lender's sole and absolute discretion) unless such contract contains terms
and conditions no less favorable than would be available to Borrower from an
unaffiliated third party.
Section 5.9 After Acquired Property. Borrower shall grant Lender a
first lien security interest in and to all equipment and other personal property
owned by Borrower, whether or not used in the construction, maintenance and/or
operation of the Improvements, immediately upon acquisition of same or any part
of same.
Section 5.10 Books and Records. Borrower shall keep and maintain at all
times at its principal office complete, true and accurate books of account and
records reflecting the results of its operations. Borrower shall permit Lender,
its agents, consultants and representatives, upon reasonable notice and at
reasonable times, to examine and audit the books and records of Borrower and
make copies thereof, at Borrower's expense. Borrower shall cause the Manager to
make all records relating to the Property available to Lender and shall cause
the Manager to cooperate with any examination, audit or other inquiry (including
causing the personnel responsible for the Property to be reasonably available to
respond to inquiries).
<PAGE>
Section 5.11 Delivery of Estoppel Certificates.
(a) Borrower shall, from time to time, but not more frequently
than three (3) times in any calendar year, within ten (10) days after
written request from Lender, furnish to Lender or such other party (or
parties as may be requested by Lender) a written certificate setting
forth the unpaid principal of and interest due on the Note and any
other sums evidenced or secured by the Mortgage, and/or the other Loan
Documents, stating the date through which interest has been paid and
stating whether or not any offsets, defenses or counterclaims exist
with respect to the Loan Documents. If requested, such certificate will
also attach true and correct copies of any Loan Documents and state
such other information as Lender shall reasonably require. Upon request
of Lender, Borrower shall cause the Manager within ten (10) days after
such request to furnish Lender or such other party or parties as Lender
may request, a written certificate as to such matters as Lender may
reasonably request.
(b) Borrower shall use all reasonable efforts to deliver to
Lender upon request, which may be made from time to time but not more
frequently than three (3) times in any calendar year, tenant estoppel
certificates from each tenant under a Lease, which tenant estoppel
certificates shall be in form and substance reasonably satisfactory to
Lender.
Section 5.12 Management, Etc.
5.12.1 Borrower represents, warrants and covenants that (a)
the Management Agreement previously delivered to Lender is a true,
correct and complete copy of the Management Agreement between Manager
and Borrower with respect to the Property, including any amendment or
modification thereof, which Lender hereby approves; (b) the Management
Agreement is in full force and effect and there is no default or
violation by any party thereunder; (c) Borrower shall maintain the
Management Agreement in full force and effect and timely perform all of
its material obligations thereunder and enforce performance of all
material obligations of the Manager thereunder; (d) Borrower shall
simultaneously herewith enter into and cause Manager to enter into an
agreement in form reasonably satisfactory to Lender subordinating the
Manager's fees and other rights to the rights of Lender and (e)
Borrower shall not terminate, cancel, or modify the Management
Agreement, or enter into any agreement relating to the management or
operation of the Property with Manager or any other party (other than
an extension of the existing Management Agreement for compensation
which is no greater, and on terms and conditions no less favorable to
Borrower, than those contained in the existing Management Agreement)
without the express written consent of Lender, which consent shall not
be unreasonably withheld, conditioned or delayed. Any compensation of
Manager with respect to its services performed at or in connection with
the Property (other than the compensation provided in the existing
Management Agreement) is subject to approval by Lender in its sole and
absolute discretion and shall in no event exceed the Maximum Management
Fee. If at any time there shall be a new manager, such new manager and
Borrower shall, as a condition to Lender's consent, execute an
<PAGE>
agreement in the form then customarily used by Lender subordinating the
management fees and other rights of the manager to the rights of
Lender.
5.12.2 Borrower agrees that at any time after and during the
continuance of an Event of Default, at the request of Lender, Borrower
shall immediately replace the Manager with an independent, third-party
managing agent designated by Lender.
Section 5.13 Financial Statements; Audit Rights.
5.13.1 Until the Loan is repaid in full, Borrower shall cause
the following financial statements and documentation to be delivered at
the time and in the form and manner referenced below:
(a) audited statements of financial position (balance
sheet) of Borrower as of the close of each fiscal year of
Borrower during the term of the Loan, and of income and
retained earnings, changes in financial position and cash
flows for such fiscal year, which statements shall be duly
certified by the Designated Officer to fairly represent the
financial condition of Borrower as of the date thereof and to
have been prepared in accordance with GAAP and accompanied by
an opinion of the Approved Accountant (which opinion shall be
unqualified and shall not contain any "statement of emphasis")
to the effect that such financial statements present fairly,
in all material respects, the financial condition of Borrower
as of the end of the fiscal year being reported on and that
the results of the operations and cash flows for said year are
in conformity with GAAP, consistently applied, and that the
examination of the Approved Accountant in connection with such
financial statements has been conducted in accordance with
GAAP and included such tests of the accounting records and
such other auditing procedures as the Approved Accountant
deemed necessary in the circumstances,
(b) an unaudited quarterly balance sheet of Borrower
and statement of profits and losses, such quarterly financial
statements to be certified by a Designated Officer to fairly
represent the financial condition of Borrower as of the date
thereof and to have been prepared in accordance with GAAP,
(c) unaudited monthly and quarterly operating
statements showing all revenues, expenses and net cash flow
(including a calculation of Net Operating Income) for the
applicable calendar month or quarter and year-to-date results
and variances from any Approved Budget and such other matters
as Lender shall reasonably require, which monthly and
quarterly operating statements shall be certified by a
Designated Officer to be true, correct and complete in all
material respects and shall be prepared on a cash basis,
(d) the statements to be delivered to Lender in
accordance with Section 6(f) of the Cash Management Agreement,
certified as provided therein,
(e) the annual Form 1065 (with accompanying schedules
K-1) (or any substitute therefor) for Borrower,
<PAGE>
(f) a schedule of all accounts payable at the end of
each month, certified by a Designated Officer to be true,
correct and complete in all material respects,
(g) such other reports and information which Lender
reasonably requires certified by a Designated Officer to be
true, correct and complete in all material respects.
5.13.2 The statements referred to in paragraph (a) of Section
5.13.1 above shall be delivered to Lender within one hundred and twenty
(120) days after the last day of each fiscal year of Borrower. The
quarterly statements referred to in paragraph (b) and referred to in
paragraph (c) of Section 5.13.1 above shall be delivered to Lender
within forty-five (45) days after the last day of each calendar
quarter. The monthly reports referred to in paragraph (c) and paragraph
(f) above shall be delivered to Lender within thirty (30) days after
the last day of each calendar month. All Financial Statements shall be
in form and substance satisfactory to Lender.
5.13.3 Each Financial Statement described in paragraphs
(a)-(c) of Section 5.13.1 above shall be accompanied by an Officer's
Certificate of Borrower certifying that to the best of such officer's
knowledge, Borrower has observed and performed, in all material
respects, all of its covenants and other agreements contained in this
Agreement, and the other Loan Documents, whether there exists any
material default or Event of Default and, if there is, specifying the
nature and period of existence thereof and the action Borrower is
taking or proposing to take with respect thereto.
Section 5.14 Maintenance of Non-Taxable Status. Borrower will maintain
its status of being taxed as a partnership for the purposes of federal, state
and local income taxes.
Section 5.15 Lender's Attorneys' Fees and Expenses. Borrower shall
appear in and defend any action or proceeding purporting to affect the security
of the Mortgage or the security interests granted under any of the other Loan
Documents or the rights and powers of Lender under any of the Loan Documents and
Borrower (in addition to Lender's reasonable attorneys' fees and expenses to be
paid by Borrower pursuant to this Agreement or the other Loan Documents) shall
pay all of Lender's reasonable attorneys' fees and expenses in connection with
the enforcement of this Agreement and the other Loan Documents and the
collection of all amounts payable hereunder and thereunder. In case of any
default under this Agreement or any of the other Loan Documents or if any action
or proceeding is commenced in which it becomes necessary to defend or uphold the
Lien or priority of the Mortgage or any of the other Loan Documents or which
adversely affects the interests of Lender in the Property or any part thereof,
including, but not limited to eminent domain, or proceedings of any nature
affecting the Property or involving the bankruptcy, insolvency, arrangement,
reorganization of, or other form of debtor relief with respect to, Borrower or
any other Significant Party, then Lender may, but without obligation to do so,
and without releasing Borrower or any other Significant Party from any
obligation hereunder or under any other Loan Document, make such appearances,
disburse such reasonable sums and take such action as Lender deems necessary or
appropriate to protect Lender's interest in the Property. All reasonable costs
incurred by Lender, including reasonable attorneys' fees and disbursements, in
<PAGE>
taking any action described above, shall be paid by Borrower upon demand
together with interest thereon at the Default Rate from the date paid by Lender
through the date of repayment by Borrower and the same shall be deemed to
constitute protective advances evidenced by the Note and secured by the Mortgage
and the other Loan Documents. In addition to, and without limiting the
generality of, the foregoing, if at any time hereafter, Lender employs counsel
(a) for advice or other representation (whether or not any suit has been, or
shall thereafter be, filed, and whether or not other legal proceedings have
been, or shall thereafter be, instituted, and whether or not Lender shall be a
party thereto) with respect to the Loan, the Property or any part thereof, this
Agreement or any of the other Loan Documents, or (b) to protect, collect, lease,
sell, take possession of, foreclose upon or liquidate all or any part of the
Property, or to attempt to enforce any security interest or Lien in all or on
any part of the Property, or to enforce any rights of Lender or any of
Borrower's obligations hereunder or under any of the other Loan Documents, or
any obligations of any other Person which may be obligated to Lender by virtue
of this Agreement or any other agreement, instrument or document heretofore or
hereafter delivered to Lender by or for the benefit of Borrower, then, in any
such event, all of the reasonable attorneys' fees and expenses arising from such
services, and all expenses, costs and charges relating thereto, shall be paid by
Borrower upon demand, together with interest thereon at the Default Rate from
the date paid by Lender through the date of repayment by Borrower, and the same
shall be deemed to constitute protective advances evidenced by the Note and
secured by the Mortgage and other Loan Documents.
Section 5.16 Environmental.
5.16.1 Borrower shall not (and it shall not permit any tenant,
contractor, agent or manager to) locate, produce, use, store, treat,
transport, incorporate, discharge, emit, release, deposit or dispose of
any Hazardous Substance in, upon, under, at, over or from the Property,
except that Borrower (and its tenants, contractors or agents) may
store, locate and use on the Property, Hazardous Substances which are
(1) customarily located, stored or used in properties similar to such
Property or (2) unique to Borrower's or a tenant's business located on
the Property, provided that such Hazardous Substances described in
clauses (1) or (2) above are at all times stored, located and used in
compliance with all Environmental Laws. Borrower shall not grant
permission for any Hazardous Substances to be located, produced, used,
stored, treated, transported, incorporated, discharged, emitted,
released, deposited, disposed of or to escape therein, thereupon,
thereunder, thereover or therefrom in violation of any Environmental
Law, and shall comply with all Environmental Laws which are applicable
to the Property. Borrower shall not engage in any conduct in connection
with the Property (other than Corrective Work) that may subject
Borrower to Environmental Costs, or contribute to or aggravate a
release of Hazardous Substances. In addition to the foregoing
restrictions, Borrower agrees that no asbestos, ACM, materials
containing urea-formaldehyde, or transformers, capacitors, ballasts or
other equipment containing PCBs are, or will at any time be, located
about the Property.
5.16.2 Borrower shall promptly within the time permitted by
Environmental Laws, initiate and diligently pursue to completion, any
and all remedial action required pursuant to any Environmental Laws in
response to the presence of any Hazardous Substances at, on, under or
about, or emanating from, the Property and shall take such remedial
action as is required to minimize any impairment of Lender's Lien on,
and security interest in, the Property. If Borrower undertakes any
remedial action with respect to any Hazardous Substance on the
Property, Borrower shall conduct and complete such remedial action in
<PAGE>
compliance with all applicable Environmental Laws. If any Hazardous
Substance is removed or caused to be removed from the Property by
Borrower, the generator number assigned by the Environmental Protection
Agency to such Hazardous Substance shall not be in the name of Lender,
and as between Lender and Borrower, Borrower shall assume any and all
liability for such removed Hazardous Substance.
5.16.3 The representations and warranties contained in Section
4.20 and the covenants contained in this Section 5.16 shall be deemed
continuing covenants for the benefit of Lender, and any successors and
assigns of Lender, including but not limited to any purchaser at a
foreclosure sale, any transferee of the title of Lender or any other
purchaser at a foreclosure sale, and any subsequent owner of the
Property, and shall survive the termination of this Agreement, or the
satisfaction or release of the Mortgage, any foreclosure of the
Mortgage and/or any acquisition of title to the Property or any part
thereof by Lender, or anyone claiming by, through or under Lender, by
deed in lieu of foreclosure or otherwise; provided, however, that such
representations and warranties and covenants shall terminate six (6)
years after the Loan shall be repaid in full. The rights and remedies
of Lender under this Agreement with respect to this Section 5.16 shall
not inure to the benefit of (i) any purchaser of the Property at a
foreclosure sale, (ii) any Person taking title to the Property by deed
in lieu of foreclosure or (iii) any successor or assign of any Person
described in clauses (i) and (ii) above, except that Lender's rights
shall inure to the benefit of the parties described in clauses (i),
(ii) and (iii) hereof if such parties are Lender (including, for these
purposes, Lender's successors and assigns as holder of the Loan
Documents), any beneficiaries of any Loan Pool, any Participant and any
of Lender's (or such successors', assigns', beneficiaries' or
Participant's) Affiliates or nominees.
5.16.4 Borrower shall give prompt written notice to Lender of:
(i) any proceeding or inquiry by any Governmental
Authority with respect to the presence of any Hazardous
Substance on the Property or the migration thereof from or to
other property;
(ii) all claims made or threatened by any third party
against Borrower or the Property relating to any loss or
injury resulting from any Hazardous Substance;
(iii) the storage, production, release, discharge or
disposal of any Hazardous Substances on the Property other
than in accordance with all applicable Environmental Laws; and
(iv) Borrower's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of
the Property that could cause the Property or any part thereof
to be subject to any restrictions on the ownership, occupancy,
transferability or use of the Property under any Environmental
Law or to be otherwise subject to any restrictions on the
ownership, occupancy, transferability or use of the Property
under any Environmental Law.
<PAGE>
5.16.5 Borrower shall keep Lender apprised of the status of,
and any material developments in, any governmental investigation
relating to Environmental Matters at or about the Property, any and all
enforcement, clean-up, removal or other governmental or regulatory
actions instituted, completed or threatened pursuant to any
Environmental Law with respect to the Property and any other claims,
actions or proceedings with respect the Property relating to
Environmental Matters. Borrower shall provide Lender with copies of all
communications with all Governmental Authorities relating to Hazardous
Substances Claims. Without Lender's prior written consent, Borrower
shall not enter into any settlement agreement, consent decree or other
compromise with respect to any such governmental investigation or
action, or other claim, action or proceeding relating to Hazardous
Substances which Borrower does not have the funds available to pay or
which may adversely affect Lender's lien on, or the value of, the
Property.
5.16.6 The foregoing rights and remedies contained in this
Section 5.16 are cumulative with, and in addition to, any rights and
remedies Lender may have against Borrower or any Significant Party
under the other terms and provisions of this Agreement, under any other
Loan Document or under any Environmental Law, including, without
limitation, CERCLA.
Section 5.17 Report Updates.
5.17.1 Lender reserves the right at any time during the term
of the Loan to conduct or require Borrower to update any environmental
reports previously delivered to Lender or, in the absence thereof, to
conduct such environmental inspections, audits and tests as Lender
shall deem necessary or advisable from time to time utilizing a company
acceptable to Lender; provided, however, that Borrower shall not be
required to pay for such environmental inspections, audits and tests
more often than once a year so long as: (i) no Event of Default exists
under this Agreement or any other Loan Document; (ii) Lender has no
cause to believe, in Lender's sole but good faith judgment, that there
has been a release or a threatened release of Hazardous Substances at
the Property or that Borrower or the Property is in violation of any
applicable Environmental Law, (iii) such inspections, audits and tests
are not being obtained in satisfaction of the provisions of Section
7.26 hereof; and (iv) such inspection, audit or test has not been
recommended in any other audit, inspection, test or consultants report
previously conducted with respect to the Property. Borrower shall be
provided with a copy of any such report prepared for Lender promptly
after such report is delivered to Lender. In the event that any
environmental site assessment report prepared for the Property
recommends that an operations and maintenance plan be implemented for
any Hazardous Substance, including, without limitation, asbestos,
Borrower shall cause such operations and maintenance plan to be
prepared and implemented at Borrower's expense upon request of Lender
and in accordance with the recommendation.
5.17.2 Lender shall have the right from time to time
throughout the term of the Loan with respect to any Property to order
additional Engineering Reports with respect to the Property. Such
additional engineering reports shall be paid for by Borrower in
accordance with Section 7.4; provided, that Borrower shall not be
required to pay for such additional Engineering Reports more frequently
<PAGE>
than once every calendar year unless (w) an Event of Default has
occurred, (x) any such additional Engineering Report is being obtained
pursuant to Section 7.26 hereof, (y) any such additional Engineering
Report is required by applicable Requirements to be obtained or (z) in
Lender's sole but good faith judgment, a material adverse change in the
condition of the Property has occurred.
5.17.3 Lender shall not be liable for any action or inaction
by Borrower with respect to any remedial or other response activity in
connection with any Hazardous Substance or any repair or replacement
recommended in any engineering report, notwithstanding any review or
approval of Borrower's method of remediation or repair or replacement,
as applicable, or any response by Lender.
Section 5.18 Lender Access to Property. Borrower will permit Lender,
and its agents, consultants or representatives, to enter upon the Property on
reasonable notice at reasonable times to inspect the Improvements. Lender or its
agents, consultants or representatives as part of any inspection may take soil,
air, water, building material and other samples but shall restore the Property
to its original condition in accordance with applicable law.
Section 5.19 Delivery of Documents Regarding Ownership. Borrower will
deliver to Lender, on demand made therefor by Lender, copies of all documents
which evidence Borrower's title in or to any materials, fixtures or articles
incorporated in the Improvements or subject to the Lien of any of the Loan
Documents.
Section 5.20 Conduct of Business. Borrower shall at all times conduct
its business so that each of the representations and warranties set forth herein
shall be and at all times shall remain true in all material respects and, to the
extent any legal opinion delivered to Lender contains assumptions of fact based
thereon, all such assumptions of fact are and shall at all times remain true in
all material respects.
ARTICLE VI. EVENTS OF DEFAULT
Section 6.1 Events of Default; Defaults. The term "Default" as used
herein shall mean any one or more of the events set forth below prior to the
expiration of the applicable notice or grace period, if any. The term "Event of
Default" wherever used in this Agreement shall mean any one or more of the
events set forth below after the expiration of the applicable notice or grace
period, if any.
6.1.1 Non-Payment. Failure by Borrower to pay (a) any periodic
installment of interest or principal when the same shall become due and
payable hereunder or under the Note; or (b) the outstanding principal
balance of the Note, together with the interest accrued thereon and all
other sums which may then be owed by Borrower to Lender, at maturity or
upon prepayment of the Note in full; or (c) any other sums to be paid
by Borrower hereunder or under any other Loan Document within five (5)
days from the date which Lender gives Borrower written notice of such
failure.
6.1.2 Affirmative Covenants. Failure by Borrower or any other
Person to duly keep, perform and observe any Affirmative Covenant or
agreement in this Agreement, the Note, the Mortgage, or in any other
Loan Document (unless same constitutes a default under any other clause
<PAGE>
of this Section 6.1 or any other Loan Document, in which case, the
grace or cure period, if any, set forth in such other clause shall
govern) within thirty (30) days after Lender gives Borrower written
notice of such failure; provided, that in the event such failure is not
susceptible of cure within such thirty (30) day period it shall not be
an Event of Default hereunder if such failure is curable and Borrower
commences to cure such default within such thirty (30) day period and
diligently prosecutes such cure to completion within one hundred twenty
(120) days of the expiration of such thirty (30) day period.
6.1.3 Negative Covenants. If Borrower or any other Person
shall breach or otherwise not comply with any Negative Covenant set
forth herein or in any other Loan Document (unless same constitutes a
default under any other clause of this Section 6.1 or any other Loan
Document, in which case, the grace or cure period, if any, set forth in
such other clause shall govern) and such default shall continue for ten
(10) Business Days after written notice thereof by Lender to Borrower;
provided that no such notice and grace shall be required with respect
to a knowing, intentional and willful breach of a Negative Covenant.
6.1.4 Financial Statements. If any material inaccuracy shall
exist in any of the Financial Statements or in any other financial
statement or other information furnished to Lender by Borrower, any
other Significant Party, any officer of Borrower or any other
Significant Party (or their direct or indirect general partners,
managers or managing members), or any other Person on behalf of the
foregoing Persons pursuant to the provisions of this Agreement or any
other Loan Document or furnished to, or to be furnished to, Lender to
induce Lender to make the Loan or any advance thereunder, to extend the
term of the Loan or consent to any matter hereunder or under any other
Loan Document.
6.1.5 Representations. If at any time any representation,
warranty or certification made by Borrower or any other Significant
Party, as applicable, in this Agreement, the Note or any other Loan
Document or in any document delivered pursuant to any Loan Document or
otherwise delivered in connection with the Loan shall be untrue,
incorrect or misleading in any material respect when made.
6.1.6 Other Loan Documents. If an "Event of Default" shall
occur under the Mortgage or any other Loan Document or any other
default shall occur and continue beyond the applicable notice or grace
period, if any, under or with respect to any other Loan Document.
6.1.7 Demolition or Alterations. Except as permitted herein or
in the other Loan Documents, the commencement of demolition of or
material alterations (as such term is defined in the Mortgage) to any
Property without the prior written consent of Lender, which consent may
be withheld by Lender in Lender's sole discretion.
6.1.8 Failure to Deliver Estoppel Certificate. If Borrower
shall fail to deliver any estoppel certificate required by Section 5.11
within the time period provided in said Section and within ten (10)
days after receipt of a notice of such failure.
<PAGE>
6.1.9 Receipts; Deposits. If Borrower fails to deposit (or
cause to be deposited) any Receipts into the Clearing Account within
the time period provided in the Cash Management Agreement to do so.
6.1.10 Cessation of Borrower. If Borrower or any other
non-natural Person which is a Significant Party ceases to exist.
6.1.11 Transfer. If in violation of Section 5.1 hereof (a) any
Property, or any part thereof, is Transferred or (b) any direct or
indirect legal or beneficial interest in Borrower shall be Transferred.
6.1.12 Liens. If in violation of Section 5.2, any Property or
any part thereof is mortgaged or any other Lien is voluntarily placed
thereon by Borrower.
6.1.13 Involuntary Bankruptcy, Etc. The entry by a court of
(a) a decree or order for relief in respect of any Significant Party in
an involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (b) a
decree or order adjudging any Significant Party a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of any Significant Party under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of any Significant Party or of
any substantial part of the property of, or ordering the winding up or
liquidation of the affairs of, any Significant Party, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of sixty (60) days.
6.1.14 Voluntary Bankruptcy. The commencement by any
Significant Party of a voluntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by any Significant Party to the
entry of a decree or order for relief in respect of such Significant
Party in an involuntary case or proceeding under any applicable Federal
or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against such Significant Party or the filing by any Significant Party
of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by any Significant
Party to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of any Significant Party or of any
substantial part of any property of any Significant Party or the making
by any Significant Party of an assignment for the benefit of creditors,
or the admission by any Significant Party in writing of its inability
to pay its debts generally as they become due.
6.1.15 Judgments. If, at any time, a judgment shall be
rendered against a Significant Party which could have a Material
Adverse Effect on the ability of a Significant Party to perform any of
its obligations, if any, under this Agreement, the Note, or any other
Loan Document provided, that, if such Significant Party appeals said
judgment and (w) said appeal (i) is timely filed, (ii) is diligently
pursued, (iii) is permitted by law, (iv) has the effect of staying any
<PAGE>
action on such judgment, (x) such Significant Party posts any security
required by law or reasonably required by Lender in respect of said
judgment, and (y) said judgment does not subject Lender or any Property
to any civil or criminal penalties and (z) such judgment is not a Lien
on any Property or any other collateral for the Loan, then it shall not
be an Event of Default hereunder until such judgment is final and
non-appealable.
6.1.16 Leases. If any Lease shall be entered into by Borrower
without the prior written consent of Lender in accordance herewith.
6.1.17 Organizational Documents. If (a) at any time any
Organizational Document of Borrower or the SPE Entity is modified in
violation of Article IX hereof or (b) Borrower or the SPE Entity shall
fail to comply with the bankruptcy-remote, single-purpose entity
requirements of its Organizational Documents or (c) Borrower or SPE
Entity shall otherwise violate Article IX of this Agreement.
6.1.18 Delivery of Financial Statements. If Borrower or any
Guarantor fails to deliver (or cause to be delivered) to Lender any
Financial Statement required to be delivered hereunder or under the
Cash Management Agreement or any other Loan Document, and such failure
continues (i) for fifteen (15) days after the date such Financial
Statement was required to be so delivered with respect to any Financial
Statement required to be delivered to Lender on a monthly basis, (ii)
for thirty (30) days after the date such Financial Statement was
required to be so delivered with respect to any Financial Statement
required to be delivered to Lender on a quarterly basis, (iii) for
sixty (60) days after the date such Financial Statement was required to
be so delivered with respect to any Financial Statement required to be
delivered to Lender on an annual basis and (iv) for thirty (30) days
after request therefor by Lender with respect to any other Financial
Statement.
6.1.19 ERISA. If Borrower shall breach any of the provisions
of Section 5.7.
6.1.20 Termination of Management Agreement TC "6.1.20
Termination of Management Agreement. If without Lender's prior written
consent: (i) the Manager resigns or is removed or any Management
Agreement terminates other than by reason of any default thereunder by
Borrower, unless, in the case of a Management Agreement with a property
manager which is not an Affiliate of Borrower, such Management
Agreement is replaced, within twenty (20) days after notice of such
resignation, removal or termination with a replacement Management
Agreement and Manager satisfying the provisions of Section 5.12 hereof,
(ii) there is any material change in the Management Agreement or
termination thereof by reason of any default thereunder by Borrower, or
(iii) with respect to any Manager that is an Affiliate of Borrower, the
ownership, management or control of such Manager is transferred to a
Person who is not an Affiliate of Borrower.
<PAGE>
6.1.21 Other Conditions for Acceleration. The occurrence of
any conditions set forth herein, in the Note, the Mortgage, or any
other Loan Document permitting Lender to accelerate the Indebtedness.
6.1.22 Material Adverse Change. If, in Lender's reasonably
exercised commercial business judgment, there shall occur any event (a)
which has a Material Adverse Effect on the financial condition,
operations, performance, business of the Property, or the ability of
Borrower and the Guarantors to make any payment or otherwise perform
any or all of their respective material obligations under this
Agreement, the Note and/or any other Loan Document to which each is a
party, (b) , as a result of which, the legality, validity or
enforceability of this Agreement, the Note and/or any other Loan
Document, or the lien and security interest of Lender pursuant to the
Mortgage or any other Loan Document purporting to grant to Lender a
Lien in any collateral shall be materially adversely effected.
6.1.23 Denial of Obligation. If (a) Borrower or any Guarantor
shall take the position in any written communication with Lender or in
any litigation that any Loan Document is no longer the valid, binding
and enforceable obligation of Borrower or any Guarantor that is a party
thereto or (b) any Guarantor shall revoke, contest, commence any action
or raise any defense against its obligations under the Guaranty or any
other Loan Document.
6.1.24 Misapplication of Receipts. If Borrower shall (a) apply
any monies delivered to Borrower pursuant to Section 6 of the Cash
Management Agreement other than to pay amounts permitted to be paid
with such funds and such breach shall continue for five (5) Business
Days following notice thereof; provided that no such notice and grace
shall be required with respect to an intentional breach of such
provision or (b) fail to pay to Lender any amounts required to be paid
to Lender pursuant to Section 6(f) of the Cash Management Agreement at
the time such payment is to be made to Lender thereunder.
6.1.25 Failure to Provide Further Assurances. If, after
fifteen (15) days' notice from Lender to Borrower that Borrower has
failed to comply with any of the provisions of Section 7.26 hereof,
Borrower fails to cure such default.
6.1.26 Lender Access. If Lender or its agents, consultants or
representatives are not permitted, at all reasonable times on two (2)
Business Days' notice, to enter upon the Property and to inspect the
Improvements or, if Lender or its representatives are not permitted to
inspect Borrower's books and records or are not furnished, within five
(5) Business Days after requested, copies of Borrower's books and
records.
Section 6.2 Rights upon Event of Default. Upon the occurrence and
during the continuance of any Event of Default, Lender shall, in addition to all
other remedies conferred upon Lender at law or in equity or by the terms of the
Note, the Mortgage and the other Loan Documents, have the right but not the
obligation, to pursue any one or more of the following remedies, concurrently or
successively, it being the intent hereof that all such remedies shall be
cumulative and that no such remedy shall be to the exclusion of any other:
<PAGE>
(a) take any action which, in Lender's sole judgment, is
necessary or appropriate to effect observance and performance of the covenants,
agreements and obligations (under this Agreement and the other Loan Documents)
of Borrower, the Guarantors, or any other person providing collateral pursuant
to or obligated to perform any of the terms and provisions of this Agreement or
the other Loan Documents (each, an "Obligated Party");
(b) declare the Note to be immediately due and payable;
(c) use and apply any monies deposited in the Clearing
Account, the Cash Collateral Account or the Tax and Insurance Escrow Account or
any other monies deposited by Borrower with Lender, regardless of the purpose
for which the same were deposited, to cure any default or Event of Default or to
apply on account of any indebtedness under this Agreement or any of the other
Loan Documents which is due and owing to Lender or to operate the Property or
for any other purposes described herein or in any other Loan Document;
(d) institute an action, suit or proceeding at law or in
equity for the specific performance of any covenant, condition or agreement
contained herein or in the Mortgage, Note or any other Loan Document, or in aid
of the execution of any power granted hereunder or for the enforcement of any
other appropriate legal or equitable remedy; and
(e) set-off against the obligations to Lender of Borrower or
any other Obligated Party, any sum owed by Lender or any Affiliate of Lender in
any capacity to Borrower or such other Obligated Party, or any property of any
of them in the possession of Lender or any Affiliate of Lender.
ARTICLE VII. GENERAL PROVISIONS
Section 7.1 Rights Cumulative; Waivers.
7.1.1. Each right, power and remedy conferred upon Lender
herein or in any of the other Loan Documents is cumulative and in
addition to every other right, power or remedy, express or implied, now
or hereafter provided by law or in equity, and each and every right,
power and remedy herein set forth or otherwise so existing may be
exercised, concurrently or independently, from time to time as often
and in such order as may be deemed expedient to Lender. The exercise of
one right, power or remedy shall not be a waiver of the right to
exercise at the same time or thereafter any other right, power or
remedy; and no delay or omission of Lender in the exercise of any
right, power or remedy accruing hereunder or arising otherwise shall
impair any such right, power or remedy, or be construed to be a waiver
of any default or acquiescence therein. Enumeration of special rights
or powers herein, in the Mortgage or in the other Loan Documents shall
not be construed to limit any grant of general rights or powers herein,
in the Mortgage or in the other Loan Documents or limit Lender's
exercise of any and all rights granted under the laws of the State of
New York or the United States of America. No act of Lender shall be
construed as an election to proceed under any provision herein or in
any other Loan Document to the exclusion of any other provision herein.
Except as otherwise specifically required herein, notice of the
exercise of any right, remedy or power granted to Lender by this
Agreement or any other Loan Document is not required to be given.
Lender shall be entitled to enforce payment of the Loan and any other
<PAGE>
amount payable under the Loan Documents and performance of this
Agreement and the other Loan Documents and to exercise all rights and
remedies under this Agreement or the other Loan Documents or otherwise
at law or in equity, notwithstanding that some or all of the
indebtedness secured thereby may now or hereafter be otherwise secured,
whether by mortgage, security agreement, pledge, lien, assignment or
otherwise. Neither the acceptance of this Agreement nor its
enforcement, shall prejudice or in any manner affect Lender's right to
realize upon or enforce any other security now or hereafter held by
Lender, it being agreed that Lender shall be entitled to enforce this
Agreement, the Mortgage, and any other security now or hereafter held
by Lender hereunder, under any of the other Loan Documents or otherwise
in such order and manner as Lender may determine in its absolute
discretion.
7.1.2. Lender may, by written notice to Borrower, at any time
and from time to time, waive in whole or in part and absolutely or
conditionally any default or Event of Default hereunder. Any such
waiver shall be subject to such conditions or limitations as shall be
specified in any such notice. In the case of any such waiver, the
rights of Borrower shall be otherwise unaffected, and any default or
Event of Default so waived shall be deemed to be cured and not
continuing only to the extent and only on the conditions or limitations
set forth in such waiver, but no such waiver shall extend to any
subsequent or other default or Event of Default, or impair any right,
remedy or power consequent thereupon.
Section 7.2 Lender's Action for its Own Protection Only. The authority
herein conferred upon Lender, and any action taken by Lender, to inspect the
Property, to review and/or approve all documents and instruments submitted to
Lender, or otherwise, will be exercised and taken by Lender and by Lender's
employees, agents, consultants and representatives for their own protection only
and may not be relied upon by Borrower or any other party for any purposes
whatever; and neither Lender nor Lender's employees, agents, consultants and
representatives shall be deemed to have assumed any responsibility to Borrower
or any other party with respect to any such action herein or under any of the
other Loan Documents authorized to be taken by Lender or Lender's employees,
agents and representatives. Any review, investigation or inspection conducted by
Lender, any architect, engineer or other consultant retained by Lender, or any
agent or representative of Lender in order to verify independently Borrower's
satisfaction of the covenants, agreements and obligations of Borrower under this
Agreement or any of the other Loan Documents, or the validity of any
representations and warranties made by Borrower (regardless of whether or not
the party conducting such review, investigation or inspection should have
discovered that any of such conditions precedent were not satisfied or that any
such covenants, agreements or obligations were not performed or that any such
representations or warranties were not true) shall not affect (or constitute,
except as may specifically be provided in this Agreement or in the other Loan
Documents to the contrary, a waiver by Lender of) (i) any representations and
warranties under this Agreement or the other Loan Documents or Lender's reliance
thereon or (ii) Lender's reliance upon any certifications of Borrower or any
other party in connection with the Loan, or any other facts, information or
reports furnished to Lender by Borrower or any other party in connection with
the Loan. Lender neither undertakes nor assumes any responsibility or duty to
Borrower to select, review, inspect, supervise, pass judgment upon or inform
Borrower of any matter in connection with the Property, and Borrower shall rely
<PAGE>
entirely upon its own judgment with respect to such matters, and any review,
inspection, supervision, exercise of judgment or supply of information to
Borrower by Lender in connection with such matters is for the protection of
Lender only and neither Borrower nor any third party is entitled to rely
thereon.
Section 7.3 No Third Party Beneficiaries. All conditions to the
obligations of Lender hereunder and under the other Loan Documents are imposed
solely and exclusively for the benefit of Lender and its participants, if any,
and assigns and no other Person (other than Servicer) shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will advance proceeds of the Loan or agree or
consent to any matter in the absence of strict compliance with any or all
thereof, and no other Person shall, under any circumstances, be deemed to be the
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender at any time if in its sole discretion it deems it
advisable to do so, it being further understood that Lender and its assigns or
participants, if any, shall have no obligation to see to it that the
Improvements or any other work required or contemplated hereby or by the other
Loan Documents are properly and/or timely completed.
Section 7.4 Payment of Expenses.
7.4.1. Borrower will, at and in connection with the closing of
the Loan and at all times thereafter, pay all reasonable and actual
costs and fees incurred by Lender in connection with the preparation,
negotiation, consummation, execution, administration, repayment,
collection and enforcement of the Loan, the Loan Documents and any
approval, consent, amendment, modification or waiver related thereto.
Without limiting the generality of the foregoing, Borrower will pay:
(a) Lender's Counsel Fees and the reasonable fees of
Lender's Consultant in connection with the foregoing;
(b) all taxes and recording fees and expenses,
including, without limitation, stamp and/or mortgage taxes and
transfer taxes, if any;
(c) all fees and out-of-pocket expenses incurred by
Lender, including all expenses of Lender and its respective
agents and representatives, in connection with any default
hereunder, under the Note, or under any other Loan Document or
the collection or enforcement thereof;
(d) subject to Section 5.17, all fees and expenses of
any environmental, engineering, appraisal, construction,
insurance or other consultants retained by Lender in
connection with the Loan or the administration, enforcement or
collection thereof; and
(e) all brokers' fees and commissions relative to the
Loan, the Property and any lease or purchase contract
affecting same except to the extent any such claims are made
solely as a result of any dealings between Lender and any
broker, finder or similar person claiming to be entitled to a
commission in connection with the Loan, and with whom Borrower
has had no dealings in connection with the Loan.
<PAGE>
7.4.2. All reasonable and actual costs and expenses incurred
and payments made by Lender under this Agreement or any of the other
Loan Documents from time to time, which are to be paid or reimbursed by
Borrower as described herein or in any of the other Loan Documents
shall, as and when advanced or incurred by Lender, constitute
protective advances evidenced by the Note and secured by the Mortgage
and the other Loan Documents to the same extent and with the same
effect as if the terms and provisions of this Agreement were set forth
therein, whether or not the principal balance of the Note plus such
protective advances shall exceed the face amount of the Note. If
Borrower shall fail to reimburse or pay to Lender the amount of such
protective advances by the applicable due date therefor, interest at
the Default Rate shall accrue on such protective advances from the date
such protective advances were made by Lender to and including the date
that such protective advances are reimbursed or paid to Lender in full
together with all such accrued interest thereon.
Section 7.5 Indemnification.
7.5.1. In addition to any other indemnifications provided
herein or in the other Loan Documents, Borrower shall protect, defend,
indemnify and save harmless the Indemnified Parties from and against
all liabilities, obligations, claims, demands, damages, penalties,
causes of action, losses, fines, costs, expenses (including, without
limitation, reasonable attorneys' fees and disbursements) and
Environmental Costs, imposed upon or incurred by or asserted against
any Indemnified Party (other than by reason of such Indemnified Party's
gross negligence or willful misconduct, provided such gross negligence
or willful misconduct is determined to have occurred by a final and
unappealable decision of a court of competent jurisdiction) by reason
of (a) any funds deposited with Lender, (b) receipt and application of
any Receipts or an Indemnified Party's payment or non-payment of costs
and expenses of operating the Property following an Event of Default
which continues beyond any applicable grace or cure period; (c) any
accident, injury to or death of Persons or loss of or damage to
property occurring on or about the Property or any part thereof or on
the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any design, construction, alteration,
operation, maintenance, use, nonuse or condition of the Property or any
part thereof or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any failure on the part of
Borrower to perform or comply with any of the terms of this Agreement
or any other Loan Document; (f) performance of any labor or services or
the furnishing of any materials or other property in respect of the
Property or any part thereof; (g) any failure of the Property to comply
with any Requirements; (h) the presence in, at or under the Property of
any Hazardous Substance, or any release or discharge on or from the
Property of any Hazardous Substance; (i) any representation or warranty
made in the Note, the Mortgage, this Agreement or any of the other Loan
Documents being false or misleading in any material respect as of the
date such representation or warranty was made; (j) except to the extent
any such claims are made solely as a result of any dealings between
Lender and any broker, finder or similar person claiming to be entitled
to a commission in connection with the Loan, and with whom Borrower has
had no dealings with in connection with the Loan, any claim by brokers,
finders or similar Persons claiming to be entitled to a commission in
connection with any Lease or other action involving the Property or any
<PAGE>
part thereof; or (k) the claims of any lessee of any portion of the
Property or any person acting through or out of any lessee or otherwise
arising out of or as a consequence of any Lease. Any amounts payable to
any Indemnified Party by reason of the application of this Section 7.5
shall become immediately due and payable and shall bear interest at the
Default Rate from the date any Indemnified Party advances any funds to
pay any such loss or damage until paid. The obligations and liabilities
of Borrower under this Section 7.5 shall survive any termination,
satisfaction, or assignment of this Agreement and the exercise by
Lender of any of its rights or remedies hereunder, including, but not
limited to, the acquisition of the Property by foreclosure or a
conveyance in lieu of foreclosure.
7.5.2 In case any claim, action or proceeding (a "Claim") is
brought against any Indemnified Parties in respect of which
indemnification may be sought by such Indemnified Parties pursuant to
Section 7.5.1, such Indemnified Parties shall give notice thereof to
Borrower, provided, however, that the failure of such Indemnified
Parties to so notify Borrower shall not limit or affect such
Indemnified Parties' rights to be indemnified pursuant to Section
7.5.1, except to the extent such failure shall materially and adversely
prejudice Borrower's defense of such Claim. Upon receipt of such notice
of Claim, Borrower shall, at its sole cost and expense, diligently
defend any such Claim with counsel reasonably satisfactory to such
Indemnified Parties (it being understood that counsel selected by
Borrower's insurance carrier shall be deemed to be acceptable to such
Indemnified Parties provided such insurer is an acceptable insurer
under this Agreement and the other Loan Documents or otherwise was
accepted by Lender as an insurer), which counsel may, without limiting
the rights of Indemnified Parties pursuant to the next succeeding
sentence of this Section 7.5.2, also represent Borrower in such Claim.
In the alternative, Indemnified Parties may elect to conduct their own
defense through counsel of their own choosing, and at the expense of
Borrower, if (A) such Indemnified Parties reasonably determine that the
conduct of its defense by Borrower presents a conflict or potential
conflict between Borrower and Lender that would make separate
representation advisable or otherwise could be prejudicial to its
interests, (B) Borrower refuses to defend or (C) Borrower (or, if
applicable, its insurance carrier) shall have failed, in Lender's
reasonable judgment, to diligently defend the Claim. Except as provided
in the preceding sentence, Borrower shall not be responsible for the
fees of counsel for any Indemnified Parties incurred in connection with
the indemnification contained in Section 7.5.1. Borrower may settle any
Claim against Indemnified Parties without such Indemnified Parties'
consent, provided (i) such settlement is without any liability, cost or
expense whatsoever to such Indemnified Parties, (ii) the settlement
does not include or require any admission of liability or culpability
by such Indemnified Parties under any Requirement, whether criminal or
civil in nature, and (iii) Borrower obtains an effective written
release of liability for such Indemnified Parties from the party to the
Claim with whom such settlement is being made, which release must be
reasonably acceptable to such Indemnified Parties, and a dismissal with
prejudice with respect to all claims made by the party with whom such
settlement is being made, with respect to any pending legal action
against such Indemnified Parties in connection with such Claim. If
Indemnified Parties are conducting their own defense as provided above,
Borrower shall be responsible for any good faith settlement of such
Claim entered into by such Indemnified Parties upon Borrower's consent.
Nothing contained herein shall be construed as requiring any
Indemnified Parties to expend funds or incur costs to defend any Claim
in connection with the matters for which such Indemnified Parties are
entitled to indemnification pursuant to Section 7.5.1.
<PAGE>
Section 7.6 Notices. Any notice, report, demand or other instrument
authorized or required to be given or furnished ("Notices") shall be in writing
and shall be given as follows: (a) by hand delivery; (b) by deposit in the
United States mail as first class certified mail, return receipt requested,
postage paid; (c) by overnight nationwide commercial courier service; or (d) by
telecopy transmission (other than for notices of default) with a confirmation
copy to be delivered by duplicate notice in accordance with any of clauses
(a)-(c) above, in each case, to the party intended to receive the same at the
following address(es):
Lender: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Edmund Taylor
Re: Golf Communities/Richard Luftig
Telecopier: (212) 325-8162
with copies to: Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Attention: Colleen Graham, Esq.
Re: Golf Communities/Richard Luftig
and: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Richard Luftig
Re: Golf Communities
and: the Servicer
or any successor Servicer of the Loan.
Borrower: c/o Golf Communities of America
255 South Orange Avenue
Firstate Tower, Suite 1515
Orlando, Florida 32801
Attention: Warren J. Stanchina
Telecopier: (407) 245-7585
with copies to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202-3780
Attention: J. Kirk Standly
Telecopier: (214) 651-5940
and Pelican Strand, Ltd
10621 Airport Pulling Road
Naples, Florida 34109
Attention: Robert Paul Hardy or Renee Tolson
Telecopier: (941) 592-7541
and Quarles & Brady
4501 Tamiami Trail North, Suite 300
Naples, Florida 34103
Attention: Leo Salvatori, Esq.
<PAGE>
Any party may change the address to which any such Notice is to be
delivered, by furnishing ten (10) days written notice of such change to the
other parties in accordance with the provisions of this Section 7.6. Notices
shall be deemed to have been given on the date they are actually received;
provided that the inability to deliver Notices because of a changed address of
which no Notice was given, or rejection or refusal to accept any Notice offered
for delivery shall be deemed to be receipt of the Notice as of the date of such
inability to deliver or rejection or refusal to accept delivery. Notice for
either party may be given by its respective counsel. Additionally, notice from
Lender may also be given by the Servicer.
Section 7.7 No Oral Modification. Borrower acknowledges that this
Agreement, the Mortgage, the Note, and the other Loan Documents and all
instruments referred to in any of them can be extended, modified or amended only
in writing executed by Lender and Borrower and that none of the rights or
benefits of Lender can be waived permanently except in a written document
executed by Lender. Borrower further acknowledges Borrower's understanding that
no officer or administrator of Lender has the power or the authority from Lender
to make an oral extension or modification or amendment of any such instrument or
agreement on behalf of Lender.
Section 7.8 Assignment by Lender.
7.8.1 Assignment. Lender may assign (and thereafter, at any
time and from time to time, repurchase) all or a portion of its rights
and obligations under this Agreement and the other Loan Documents to
one or more Persons ("Assignees"; the term "Assignee" or "Assignees"
shall, unless otherwise expressly indicated, include Lender) and, upon
such assignment to any such Assignee, be released from its rights and
obligations as Lender in respect of such portion of the Loan, this
Agreement and the other Loan Documents, except that Lender shall not be
released from the obligation to make Subsequent Advances hereunder, nor
shall such obligation be reduced or diminished, prior to the Outside
Funding Date.
7.8.2 Participations. Lender and each of the other Assignees
may sell participations in the Loan to one or more Persons
(collectively, the "Participants"). Notwithstanding such sale, (i) the
selling party's obligations to Borrower under this Agreement and the
other Loan Documents shall remain unchanged by reason thereof and (ii)
the selling party shall remain solely responsible to Borrower for the
performance of such obligations. In order to assist Lender in any sales
of interests in the Loan, Borrower agrees for itself and agrees to
cause the SPE Entity, each Guarantor and the Manager to reasonably
cooperate with Lender in connection with any efforts by Lender to
obtain one or more Assignees or Participants, to provide additional
information and to execute and deliver such further documents,
instruments or agreements, in each case, as Lender or any Assignee or
Participant may reasonably require.
7.8.3 Assignment and Acceptance. From and after the effective
date of any assignment to an Assignee (i) the Assignee shall be a party
hereto and to each of the other Loan Documents to the extent of the
applicable percentage or percentages assigned to such Assignee and,
except as otherwise specified herein, shall succeed to the rights and
obligations of Lender hereunder in respect of such applicable
percentage or percentages, and (ii) Lender shall relinquish its rights
and be released from its obligations hereunder and under the Loan
Documents accruing after the date of such assignment to the extent of
such applicable percentage or percentages. The liabilities of Lender
and each of the other Assignees shall be separate and not joint and
several. Neither Lender nor any Assignee shall be responsible for the
obligations of any other Assignee. Notwithstanding the foregoing,
Lender shall not be released from the obligation to make Subsequent
Advances hereunder, nor shall such obligation be reduced or diminished,
prior to the Outside Funding Date.
<PAGE>
7.8.4 Other Business. Lender, each Assignee and each
Participant and their respective Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage
in any kind of business with, Borrower, any Affiliate of Borrower, any
of Borrower's subsidiaries and any Person who may do business with or
own interests in or securities of Borrower or any such Affiliate or
subsidiary, without any duty to account therefor to each other.
7.8.5 Privity of Contract. This Agreement is being entered
into by Lender individually and as agent for all present and future
Assignees, and privity of contract is hereby created among Lender, all
present and future Assignees and Borrower.
7.8.6 Availability of Records. Borrower acknowledges and
agrees that Lender may provide to any Assignees or prospective
Assignees, and that Lender and each of the Assignees may provide to any
Participants or prospective Participants, originals or copies of this
Agreement, all other Loan Documents and all other documents,
instruments, certificates, opinions, insurance policies, letters of
credit, reports, requisitions and other materials and information
(collectively, "Borrower Information") of every nature or description,
and may communicate all oral information, at any time submitted by or
on behalf of Borrower, the SPE Entity, the Manager, any Guarantor or
any Affiliate of Borrower, the SPE Entity, any Guarantor or the
Manager.
Section 7.9 Severability. In the event that any of the covenants,
agreements, terms or provisions contained in the Note, this Agreement, the
Mortgage, or in any other Loan Document shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein or in the Note, the Mortgage,
or in any other Loan Document shall be in no way affected or prejudiced thereby.
Section 7.10 No Assignment by Borrower. Except as expressly permitted
herein, Borrower shall not assign or transfer any of its rights hereunder
without the prior written consent of Lender. Any assignment made without
Lender's prior written consent shall be void.
Section 7.11 Governing Law. THIS AGREEMENT WAS NEGOTIATED IN THE STATE
OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW
OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND
THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO * 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.
<PAGE>
Section 7.12 Successors and/or Assigns. Subject to the restrictions on
transfer and assignment contained in this Agreement and the other Loan
Documents, whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the permitted successors and/or
assigns of such party, and this Agreement shall inure to the benefit of and
shall be binding on the parties hereto, the successors and/or assigns of such
party.
Section 7.13 Entire Contract. This Agreement and the other Loan
Documents, including all annexes, schedules and exhibits hereto and all other
documents furnished to Lender in connection with this Agreement, constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
transactions contemplated hereby, including, without limitation, any letter of
intent or loan commitment letter.
Section 7.14 [Omitted].
Section 7.15 Counterparts; Headings. This Agreement may be executed in
counterparts, each of which shall constitute an original, and which, when taken
together, shall constitute but one instrument. The captions and headings of the
various sections of this Agreement are for purposes of reference only and are
not to be construed as confining or limiting in any way the scope or intent of
the provisions hereof. Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular, and the
masculine, feminine and neuter shall be freely interchangeable.
Section 7.16 Time of the Essence. Time is of the essence as to
Borrower's obligations under this Agreement and the other Loan Documents.
Section 7.17 Consents.
7.17.1. Any consent or approval by Lender in any single
instance shall not be deemed or construed to be Lender's consent or
approval in any like matter arising at a subsequent date. Any consent
or approval requested of and granted by Lender pursuant hereto or any
of the other Loan Documents shall be narrowly construed to be
applicable only to Borrower and the matter identified in such consent
or approval and no third party shall claim any benefit by reason
thereof. Wherever this Agreement, the Mortgage, the Cash Management
Agreement or any other Loan Document refers to the consent or approval
of Lender, or provides that any document or Person will be satisfactory
or acceptable to Lender or words of similar import, (x) such consent or
approval may be given or withheld by Lender, and such document or
Person must be satisfactory or acceptable to Lender, in its sole and
absolute discretion, unless otherwise expressly provided herein or
therein and (y) such consent or approval shall not be effective unless
given in writing. Wherever this Agreement, the Mortgage, the Cash
Management Agreement or any other Loan Document refers to the provision
of documents or other items being as Lender may require, provides for
the selection by Lender of any Person to provide reports or other items
<PAGE>
hereunder or thereunder or selection by Lender of any means of
determining any matter or otherwise refers to terms and conditions
hereof being as Lender deems appropriate, any such requirement,
selection or determination of appropriateness shall be made by Lender
in its sole and absolute discretion, unless expressly provided
otherwise herein or therein. The foregoing provisions are intended to
be effective whether or not the applicable provision hereof or of any
other Loan Document specifies that the applicable consent, approval or
other matter is to be determined by Lender in its "sole and absolute
discretion" or words of similar import.
7.17.2. Wherever in this Agreement, the Mortgage, the Cash
Management Agreement or any other Loan Document, reference is made to
any consent or approval not being "unreasonably withheld" or words of
similar import, the same shall be deemed to include within its meaning
(unless expressly provided otherwise) that if such consent or approval
is to be granted, the same will occur within a commercially reasonable
period of time. If Borrower believes that Lender has improperly failed
to grant its consent or approval (or otherwise improperly failed to act
as requested by Borrower as described in Section 7.17.1 (e.g.,
determined that a document is not acceptable to Lender) hereunder or
under the Mortgage, the Cash Management Agreement or any other Loan
Document (including, without limitation, by failing to respond within a
commercially reasonable period of time) where such consent or approval
is required to be given by (or such action which was not taken is in
breach of) the terms of this Agreement or such other Loan Document,
Borrower's sole remedy shall be to obtain declaratory relief in a
final, non-appealable judgment determining such withholding to have
been improper, whereupon such consent or approval shall be deemed given
(or such other action described in Section 7.17.1 shall be deemed
taken), and Borrower hereby waives all claims for damages or set-off
resulting from any withholding of consent or approval (or failure to
take any other action described in Section 7.17.1) by Lender.
Section 7.18 No Partnership. Nothing contained in this Agreement, or
the other Loan Documents shall be deemed to create an equity investment on the
part of Lender, or a joint venture or partnership between Lender and Borrower,
it being the intent of the parties hereto that only the relationship of lender
and borrower shall exist with respect to the Property. Borrower agrees that it
shall report this transaction for income tax purposes, and file all related tax
returns, in a manner consistent with the form of this transaction as a loan.
SECTION 7.19 WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AGREEMENT, THE MORTGAGE, THE CASH MANAGEMENT
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF BORROWER, ANY OTHER
SIGNIFICANT PARTY, THE GUARANTORS OR LENDER RELATING TO THE LOAN, AND THE
LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER MAKING THE LOAN AND ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
Section 7.20 Limited Recourse. Notwithstanding anything to the contrary
contained in this Agreement or in any of the other Loan Documents, except as
provided otherwise in this Section, neither Borrower nor any direct or indirect
member, shareholder, partner, principal, any Affiliate of Borrower, any SPE
Entity or any Significant Party, employee, officer, director, agent or
representative or Affiliate of any of them (each, a "Related Party") shall have
<PAGE>
any personal liability for (a) the payment of any sum of money which is or may
be payable hereunder or under the Note, or any other Loan Document, including,
but not limited to, the repayment of the Indebtedness, or (b) the performance or
discharge of any covenants, obligations or undertakings of Borrower hereunder or
under any other Loan Document and no monetary or deficiency judgment shall be
sought or enforced against Borrower or any Related Party with respect thereto;
provided, however, that a judgment may be sought against Borrower to enforce the
rights of Lender in, to, or against the Property, including the Receipts, and
all other collateral granted as security under any Loan Document and Lender
shall have full recourse to and the right to proceed against the Property and
such other collateral. Notwithstanding the foregoing, nothing contained herein
shall (i) impair the validity of the Indebtedness or in any way affect or impair
the Lien of the Mortgage, or the right of Lender to enforce any and all rights
and remedies under and by virtue of the Note, this Agreement, or any other Loan
Document (limited, however, as expressly provided otherwise above), including,
without limitation, naming Borrower as a party defendant in any foreclosure
action, or (ii) limit Lender from pursuing or seeking to enforce the rights of
Lender against any third parties, including any guarantor, indemnitor or surety
under any guaranty or indemnity delivered in connection with this Agreement, the
Note, or otherwise in connection with the Loan. Additionally, the provisions of
this Section 7.20 shall not relieve Borrower from any personal liability for,
and Borrower (as well as the Guarantors, to the extent provided in the Guaranty)
shall be fully and personally liable for, any liabilities, costs, losses
(including, without limitation, any reduction in value of the Property, or any
other collateral securing the Loan, or the loss of any such collateral or
Lender's security interest therein), damages, expenses (including, without
limitation, reasonable attorneys' fees and disbursements, and court costs, if
any), or claims suffered or incurred by Lender (or any Indemnified Party) by
reason of or in connection with the following:
(a) fraud or misrepresentation by Borrower, any Related Party
or any Guarantor in connection with the Loan;
(b) the gross negligence or willful misconduct of such
Borrower;
(c) physical waste of the Property;
(d) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnification
Agreement or in this Agreement concerning Environmental Laws or
Hazardous Substances with respect to the Property;
(e) the removal or disposal of any portion of the in violation
of the Loan Documents or after an Event of Default;
(f) the misapplication or conversion by Borrower of (i) any
insurance proceeds paid by reason of any loss, damage or destruction to
the Property, (ii) any awards or other amounts received in connection
with the condemnation of all or a portion of the Property, (iii) any
Receipts or (iv) any monies held in or paid out from any account
(including any reserve or escrow) maintained under this Agreement, the
Cash Management Agreement or any of the other Loan Documents;
<PAGE>
(g) failure of Borrower to pay charges for labor or materials
or taxes or other charges that can create liens on any portion of the
Property to the extent funds are available from the operation of the
Property;
(h) failure of Borrower to deliver to Lender any security
deposits collected with respect to the Property upon a foreclosure of
the Property or action in lieu thereof, except to the extent any such
security deposits were applied in accordance with the terms and
conditions of any of the Leases prior to the occurrence of the Event of
Default that gave rise to such foreclosure or action in lieu thereof;
(i) any damage or destruction of the Property or any part
thereof due to fire or other casualty to the extent not covered by
insurance required hereby but only to the extent the same would have
been covered by insurance if Borrower had obtained and maintained the
insurance coverage required under this Agreement, and
(j) the cost of enforcement of any of Lender's rights or
remedies hereunder or under any Guaranty or any of the other Loan
Documents or costs incurred in any bankruptcy or similar proceeding
which may be brought by or against Borrower.
Notwithstanding anything to the contrary in any of the Loan Documents
(i) Lender shall not be deemed to have waived any right which Lender may have
under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Indebtedness secured
by the Mortgage or to require that all collateral shall continue to secure all
of the Indebtedness owing to Lender in accordance with the Loan Documents, and
(ii) the Indebtedness shall become fully recourse to Borrower in the event that:
(A) the first full monthly payment of principal and interest under the Note is
not paid when due; (B) Borrower violates the provisions of Article 9 of this
Agreement or fails to maintain its status as a single purpose entity in
accordance with the provisions of this Agreement; (C) any violation of Sections
5.2 or 5.3 of this Agreement or failure to obtain the prior written consent of
Lender to any subordinate financing or other voluntary lien encumbering all or
any portion of the Property as required by this Agreement; (D) any violation of
Sections 5.1 or 5.7 of this Agreement or failure to obtain the prior written
consent of Lender to any assignment, transfer, or conveyance of all or any
portion of the Property or any interest therein as required by this Agreement;
(E) all or any material portion of the Property shall be forfeited by reason of
criminal activity by Borrower or a Related Party; (F) a receiver, liquidator or
trustee of Borrower or a Guarantor shall be appointed or if Borrower or a
Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
federal bankruptcy, reorganization or arrangement pursuant to federal bankruptcy
law, or any similar federal or state law, shall be filed by, consented to, or
acquiesced in by, any Borrower or a Guarantor or if any proceeding for the
dissolution or liquidation of Borrower or the Guarantor shall be instituted by
Borrower or Guarantor or any Related Party or (G) following an Event of Default,
Borrower, Guarantor or any Related Party delays, hinders or interferes in any
material respect with Lender's pursuit of any of its rights or remedies under
the Note, this Loan Agreement, the Mortgage or any of the Loan Documents.
Section 7.21 Limitation on Liability. In no event shall Lender be
liable to Borrower for consequential damages, whatever the nature of a breach by
Lender of its obligations under this Agreement or any of the other Loan
Documents and Borrower for itself and all Related Parties hereby waives all
claims for consequential damages.
<PAGE>
Section 7.22 Jurisdiction, Venue, Service of Process. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK, NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK IN WHICH THE PROPERTY IS LOCATED. BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS
ADDRESS FOR NOTICES PURSUANT TO SECTION 7.6 HEREOF. BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, THE MORTGAGE, OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE
COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING CONTAINED
HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY OTHER JURISDICTION.
Section 7.23 Appointment of Agent for Service of Process. Borrower
hereby designates the Secretary of State of the State in which Borrower was
organized as its agent to accept service of process in any action or proceeding
arising under or in connection with this Agreement, the Mortgage, and the other
Loan Documents.
Section 7.24 Rule of Construction. This Agreement and the other Loan
Documents shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that both Lender and
Borrower have contributed substantially and materially to the preparation of
this Agreement and the other Loan Documents.
Section 7.25 Further Assurances.
7.25.1 Borrower will, at its sole cost and expense, do,
execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, conveyances, notes,
mortgages, assignments, security agreements, financing statements and
assurances as Lender shall from time to time require or deem advisable
(v) to carry into effect the purposes of this Agreement and the other
Loan Documents, (w) for the better assuring, conveying, mortgaging,
assigning and confirming unto Lender of all property and rights
mortgaged, granted, bargained, alienated, confirmed, pledged,
hypothecated, conveyed or assigned by this Agreement, or any of the
other Loan Documents or property intended now or hereafter to be, or
which Borrower may be or may hereafter become bound to convey or assign
to Lender, (x) for facilitating the placement of a Loan Interest in a
Loan Pool as described in Section 7.26 below, (y) for the perfection of
any such lien or security interest granted herein or in the other Loan
Documents and (z) for the better assuring and confirming of all of
Lender's rights, powers and remedies hereunder. Borrower, on demand,
will execute and deliver and hereby authorizes Lender to execute in the
name of Borrower or without the signature of Borrower to the extent
Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the
security interest of Lender in the Property and the other collateral
under the Loan Documents.
<PAGE>
7.25.2 Borrower forthwith upon the execution and delivery of
this Agreement and thereafter, from time to time, will cause the
Mortgage and any security instrument creating a Lien or security
interest or evidencing the Lien of the Mortgage and the other
applicable Loan Documents upon the Property or other property and each
instrument of further assurance to be filed, registered or recorded in
such manner and in such places as may be required by any present or
future Legal Requirement in order to publish notice of and fully to
protect the Lien or security interest of, and the priority of, the
Mortgage and the other Loan Documents upon, and the interest of Lender
in, the Property or other applicable property. Borrower will pay all
filing, registration or recording fees, and all expenses incident to
the foregoing and all taxes, duties, assessments and charges of any
Governmental Authority arising out of or in connection with the
execution and delivery of the Mortgage, any other security instrument,
any instrument of further assurance or any other Loan Document. Upon
Lender's request, Borrower shall, from time to time, furnish Lender
with evidence reasonably satisfactory to Lender that such property is
free of Liens and security interests (except as permitted hereunder),
including searches of applicable public records.
7.25.3 Upon any failure by Borrower to do so, Lender may make,
execute, record, file, re-record or refile any and all such mortgages,
instruments, certificates and documents for and in the name of
Borrower, and Borrower hereby irrevocably appoints (which appointment
is coupled with an interest and with full power of substitution) Lender
the agent and attorney-in-fact of Borrower to do so; and Borrower shall
reimburse Lender, on demand, for all costs and expenses (including
reasonable attorneys' fees) incurred by Lender in connection therewith.
Upon foreclosure, the appointment of a receiver or any other relevant
action, Borrower will, at Borrower's sole cost and expense, cooperate
fully and completely to effect the assignment or transfer of any
Permit, agreement or any other right necessary or useful to the
operation of the Property and shall deliver to Lender all books and
records relating to the Property.
Section 7.26 Placement of Loan.
7.26.1 Borrower acknowledges that Lender, any Assignee or any
Participant (each of Lender, such Assignee or Participant is called a
"Placement Party") may elect to place the Loan, or its participation
interest, as the case may be (whichever of the Loan or such
participation is to be so placed is called the "Loan Interest") in a
pool of loans, participation interests and/or notes secured by or
dependent on the cash flow of mortgage loans, which will constitute
security for a rated securities offering (such pool is called a "Loan
Pool"; such rated securities being the "Securities" and such offering
being a "Securitization").
7.26.2 At the request of Lender, Borrower will use
commercially reasonable efforts to satisfy the market standards to
which Lender customarily adheres or which may be required in the
marketplace or by the Rating Agencies in order to enable a Placement
Party to place a Loan Interest in a Loan Pool, including, without
limitation, to:
<PAGE>
(a) structure and maintain its organizational,
operational and financial affairs and those of its Affiliates
(collectively, the "Entities") as special-purpose
bankruptcy-remote entities to enable its counsel to render a
reasoned opinion customarily given in securitization
transactions that upon a petition for bankruptcy under the
bankruptcy code, none of the Entities as a debtor in
possession nor its bankruptcy trustee or creditors could cause
a court to order the substantive consolidation of the assets
and liabilities of any such entities with those of the
Borrower or the SPE Entity, which counsel shall be reasonably
satisfactory to, and which opinions or memoranda shall be
satisfactory to, Lender and the Rating Agencies;
(b) provide such financial and other information with
respect to the Property, the Manager and the Entities as may
be reasonably requested by Lender or the Rating Agencies or
annual rating reviews for the Property prepared by a firm of
certified public accountants reasonably acceptable to Lender
and the Rating Agencies (Lender acknowledges that the Approved
Accountant is an accounting firm acceptable to Lender);
(c) prepare and deliver such agreements and
instruments relating to the Note, the Loan Interest, the
Property and the Entities, including (A) agreements to
indemnify the Rating Agencies, Lender and any servicer or
trustee (except to the extent that any requested
indemnification for any loss, claim, damage, cost, expense or
liability results solely from the negligent or willful, or
with respect to Lender, grossly negligent or willful, acts or
omissions by such indemnified party in performing the duties,
functions and activities undertaken by it in connection with
the placement of the Loan Interest in a Loan Pool, including,
without limitation, any failure by such indemnified party or
parties to comply with all applicable securities laws and
regulations) and (B) amendments of any of the Loan Documents
that are necessary to effect the placement of the Loan
Interest in a Loan Pool, as may be reasonably requested by,
and in form and scope reasonably satisfactory to, Lender and
the Rating Agencies; provided, however, that such amendments
shall not without the consent of the Borrower affect the terms
and conditions of the Note, or any other material business
term of, or material obligation of the Borrower under, the
Loan Documents;
(d) cause to be performed such site inspections,
appraisals, market studies, environmental reviews and reports
(Phase I assessments and, where appropriate, Phase II),
Engineer's Reports and other due diligence investigations of
the Property customarily and reasonably requested by Lender or
the Rating Agencies in connection with the placement of the
Loan Interest in a Loan Pool and the rating of any securities
issues in connection therewith;
(e) provide business plans, budgets and title
insurance (including surveys) relating to the Property as may
be reasonably requested by Lender or the Rating Agencies;
<PAGE>
(f) cause counsel to render opinions as to "true
sale" and bankruptcy remoteness and other matters customary in
securitization transactions with respect to the Property, the
Entities, the Loan Interest and the Loan Documents, which
counsel shall be reasonably satisfactory to, and which opinion
shall be satisfactory to, Lender and the Rating Agencies;
provided, that Borrower shall not be responsible for providing
a "true sale" opinion that relates solely to the sale by
Lender of the Loan or a Loan Interest into a Loan Pool; and
(g) make the representations and warranties contained
in the Loan Documents as of the date of the closing of the
transfer of the Loan Interest to the extent such
representations and warranties may be truthfully made and make
such other representations with respect to the Property, the
Entities, the Loan Interest and the Loan Documents as are
customarily provided in securitization transactions and as may
be reasonably requested by Lender or the Rating Agencies in
connection with such closing to the extent such
representations and warranties may be truthfully made.
7.26.3 At Lender's request, Borrower shall cooperate with
Lender's preparation of a private placement memorandum or registration
statement and amendments and supplements thereto (the "Disclosure
Document") to privately place or publicly distribute the Note or the
Loan Interest or securities issued in connection therewith in a manner
that satisfies the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities and Exchange Act of
1934, as amended (the "Exchange Act") and applicable state
Requirements. At the time of Lender's preparation of such Disclosure
Document, Borrower shall execute and deliver to Lender and any
underwriter or placement agent an instrument (a "Securitization
Indemnification") (in form and substance reasonably satisfactory to
Lender) (i) certifying as to the veracity in all material respects of
all written information that it supplied and was incorporated in such
Disclosure Document and (ii) indemnifying and holding each of them and
any Person who controls any of them within the meaning of Section 15 of
the Securities Act or Section 70 of the Exchange Act (each, an
"Securitization Indemnified Party") harmless against all costs,
expenses and damages incurred by any Securitization Indemnified Party
as a result of any untrue statement of a material fact made or supplied
by Borrower as contained in such Disclosure Document or the failure by
Borrower (after receipt of a draft of the Disclosure Statement) to
specify for inclusion in the Disclosure Document any material fact
regarding Borrower (or any member or partner thereof), the Property or
the Loan necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, but only
to the extent that such statement of material fact is made in reliance
upon and in conformity with written information Borrower furnished for
use therein or the omission of such a material fact is based upon
Borrower's failure to specify such material fact or upon Borrower's
furnishing inaccurate information that shows that such material fact is
not material. If Lender (or a placement agent or underwriter acting on
behalf of Lender) shall deliver a draft of the Disclosure Document to
Borrower for its review, Borrower shall provide Lender (or the
placement agent or underwriter acting on behalf of Lender) with its
comments, if any, on such Disclosure Document as soon as practicable,
but in all events within fifteen (15) days after receipt thereof, in
<PAGE>
the case of the first draft of such Disclosure Document, and within
five (5) Business Days after receipt of any subsequent draft of such
Disclosure Document. If in connection with such review, Borrower
advises Lender of the existence of a fact regarding Borrower (or any
member or partner thereof), the Property or the Loan and advises Lender
that it deems such fact material, Lender shall include such fact in the
Disclosure Document or shall waive the rights of the Indemnified
Parties with respect to such fact. Upon receipt of the Securitization
Indemnification, Lender shall execute and deliver to Borrower an
instrument (in form and substance reasonably satisfactory to Borrower)
indemnifying and holding Borrower harmless against all costs, expenses
and damages incurred by it as a result of the preparation or
distribution of, and any untrue statement of a material fact contained
in, such Disclosure Document or the failure to include therein any
material fact in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that such indemnification shall not apply if any such costs,
expenses or damages arise out of or are based upon an untrue statement
of a material fact or an omission to state a material fact in such
Disclosure Document made in reliance upon and in conformity with
written information furnished by Borrower expressly for use therein or
(after receipt of a draft of the Disclosure Statement) the omission of
a material fact concerning Borrower (or any member or partner thereof),
the Property, the Loan (other than the express terms of the Loan
Documents) necessary to make the statements in the Disclosure Statement
not misleading. Borrower shall notify Lender if, in Borrower's opinion,
it is necessary to amend or supplement such Disclosure Document at any
time in order that such Disclosure Document does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Lender shall
prepare as soon as may be reasonably practicable an amendment or
supplement to such Disclosure Document correcting such statement or
omission. At the request of Lender, in connection with any sale of the
Note or any Loan Interest, Borrower shall confirm, as of the date of
such sale, that such Disclosure Document, as it may be so amended or
supplemented, does not contain any untrue statement of a material fact
concerning Borrower, the Property or the Loan or omit to state a
material fact concerning Borrower, the Property or the Loan necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
7.26.4 It is expressly understood hereunder that in connection
with the placement of any Loan Interest in a Loan Pool, Lender intends
to transfer the Loan Interest to a trustee which shall hold such Loan
Interest for the benefit of the holders of the interests in the Loan
Pool. In connection therewith, Borrower shall execute and deliver or
cause to be executed and delivered, all such additional instruments,
and do, or cause to be done, all such additional acts as (i) may be
reasonably necessary or proper to carry out such transfer, including,
without limitation, the delivery of such instruments and documents,
including assignments of mortgage (and similar documents), assignments
of Loan Documents, re-certifications of surveys with respect to the
Property, and the delivery of such Lender's title insurance
<PAGE>
endorsements in favor of the trustee as may be reasonably required to
confirm and/or evidence the transfer to the trustee of the title
insurance issued to Lender in respect of the Property or, the Mortgage,
including payment of all fees, title insurance premiums and other
insurance premiums in connection therewith or (ii) Lender may
reasonably request.
7.26.5 Lender shall be permitted to share any information
provided by Borrower pursuant to this Section 7.26 in connection with
the placement of a Loan Interest in a Loan Pool with the investment
banking firms, Rating Agencies, accounting firms, law firms and other
third-party advisory firms involved with any transfer of the Loan, the
Loan Documents or the applicable Securitization. It is understood that
the information provided by Borrower to Lender may ultimately be
incorporated into the offering documents for the Securitization and
thus various investors may also see some or all of the information.
7.26.6 Borrower acknowledges that any transfer of the Loan or
the placement of the Loan Interest in a Loan Pool may occur at any time
during the term of this Agreement and the provisions of this Section
7.26 shall be applicable throughout the term of the Loan.
Section 7.27 Servicer. At the option of Lender, the Loan may be
serviced by a Servicer selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Loan Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement between Lender and
Servicer. Borrower shall pay (a) any set-up fees or other initial costs relating
to or arising under such servicing agreement, (b) a monthly servicing fee due to
the Servicer in an amount not to exceed 0.2% per annum of the outstanding
principal balance of the Loan and (c) the fees of the Servicer in accordance
with the customary fees then charged by the Servicer for services requested by
Borrower, as such fees are established from time to time. Any action taken by
such Servicer or other agent on behalf of Lender hereunder or under any other
Loan Document shall have the same force and effect as if taken by Lender.
ARTICLE VIII. SPECIAL PROVISIONS
Section 8.1 Deposits for Tax and Insurance Premiums. In order to assure
the payment of Taxes and premiums with respect to all insurance coverage
required pursuant to Paragraph 7 of the Mortgage (collectively, "Insurance
Premiums") as and when the same shall become due and payable, the following
provisions shall apply:
8.1.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Tax and Insurance Deposit
to be held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan, all as more
particularly described in the Cash Management Agreement, and referred
to therein as the "Tax and Insurance Impound Fund Account" (the "Tax
and Insurance Escrow Account"). Thereafter, on each Payment Date,
Borrower shall pay to Lender, in immediately available funds for
deposit into the Tax and Insurance Escrow Account an amount equal to
one-twelfth (1/12) of the Taxes and Insurance Premiums to become due
during the period commencing on the first day of the first month
following such Payment Date and ending twelve (12) months following
such first day. In all cases there must be paid hereunder to be
deposited and held in the Tax and Insurance Escrow Account, an amount
sufficient to pay such Taxes and Insurance Premiums, one month prior to
<PAGE>
the date when they are due and payable. The amounts of such deposits
with respect to Taxes and Insurance Premiums (herein collectively
called "Tax and Insurance Deposits") shall be based upon Lender's good
faith estimate as to the amount of Taxes and Insurance Premiums.
Borrower shall promptly, upon the demand of Lender, make additional Tax
and Insurance Deposits as Lender may from time to time reasonably
require due to (i) failure of Borrower to make Tax and Insurance
Deposits in previous months, (ii) underestimation of the amounts of
Taxes and/or Insurance Premiums, (iii) the particular due dates and
amounts of Taxes and/or Insurance Premiums, or (iv) application of the
Tax and Insurance Deposits pursuant to this Agreement. All Tax and
Insurance Deposits shall be held by Lender in the Tax and Insurance
Escrow Account and invested and applied as provided in the Cash
Management Agreement.
8.1.2 Provided no Event of Default has then occurred and is
continuing, Lender will, out of the funds in the Tax and Insurance
Escrow Account (provided such funds are sufficient for such purpose),
upon the presentation to Lender by Borrower of the bills therefor, pay
the Taxes and Insurance Premiums or will, upon the presentation of
official receipted bills therefor, reimburse Borrower for such payments
made by Borrower. If the total of all funds in the Tax and Insurance
Escrow Account shall not be sufficient to pay all of the Taxes and
Insurance Premiums when the same shall become due, then Borrower shall
pay to Lender on demand the amount necessary to make up the deficiency.
Lender shall be entitled, without request of Borrower, but, prior to an
Event of Default upon two (2) Business Days notice to Borrower, to
apply any funds in the Tax and Insurance Escrow Account to the payment
of any Taxes (other than any Taxes which Borrower has notified Lender
that it is contesting and such contest is then permitted under the
Mortgage) and Insurance Premiums which have become due and have not yet
been paid. Borrower and Lender acknowledge and agree that Borrower
shall not be in default under the Mortgage for failure to pay Taxes or
Insurance Premiums, if such failure arises by reason of Lender's
failure to comply with its agreement contained in this Section 8.1.2.
8.1.3 Upon the occurrence and during the continuance of an
Event of Default, Lender may, at its option, without being required to
do so, apply any Tax and Insurance Deposits on hand to pay Taxes,
Insurance Premiums or to pay principal, interest and other amounts
payable to Lender hereunder or under the other Loan Documents, all in
such order and manner as Lender, in its sole discretion, may elect.
When the principal and interest under the Note and all prepayment
premiums, if any, in connection therewith and all other Obligations
have been fully and properly paid, any remaining Tax and Insurance
Deposits shall be returned to Borrower.
8.1.4 Lender shall be absolutely entitled to rely on any
statements of any Governmental Authority with respect to Taxes and any
statement of Borrower's insurance carrier or its agent with respect to
Insurance Premiums.
<PAGE>
8.1.5 Borrower and Lender acknowledge that Borrower shall not
be in default hereunder in its obligation to make the Tax and Insurance
Deposit on any Payment Date, to the extent funds are available to make
such deposit from monies deposited in the Cash Collateral Account
during the applicable Collection Period after applying such funds to
any item with a higher priority than such application to the Tax and
Insurance Escrow Account in accordance with the terms of the Cash
Management Agreement. Any transfer of funds from the Cash Collateral
Account to the Tax and Insurance Escrow Account shall satisfy
Borrower's obligation hereunder to make the corresponding Tax and
Insurance Deposit, to the extent of the funds so transferred.
8.1.6 No provision of this Agreement, the Mortgage or any
other Loan Document shall be construed as creating in any party other
than Borrower and Lender (and the Servicer), any rights in and to the
Tax and Insurance Deposits or any rights to have the Tax and Insurance
Deposits applied to payment of Taxes and Insurance Premiums. Lender
shall have no obligation or duty to any third party to collect Tax and
Insurance Deposits.
Section 8.2 Replacement Reserve Fund.
8.2.1 For purposes hereof, the term "Replacement Revenue
Contribution" shall mean the lesser of (i) the sum set forth on Exhibit
K hereto as the Replacement Reserve Contribution per month and (ii) the
amount, if any, by which the balance in the Replacement Reverse Account
(as hereinafter defined) shall be less than the sum set forth on
Exhibit K hereto as the Replacement Reserve Cap.
8.2.2 Borrower shall pay to Lender on each Payment Date an
amount equal to the Replacement Reserve Contribution for deposit into
an account maintained at a bank designated by Lender and pledged to
Lender as additional collateral for the Loan, all as more particularly
described in the Cash Management Agreement, and referred to therein as
the "Replacement Escrow Fund Subaccount" (the "Replacement Reserve
Account").
8.2.3 Provided that no Event of Default shall exist hereunder
and be continuing, Lender shall disburse funds from the Replacement
Reserve Account to Borrower to pay the costs of Replacements (as
hereinafter defined) which, in the reasonable, good faith opinion of
Lender, are necessary or desirable for the Property. Such disbursements
shall be made within ten (10) Business Days after receipt of (i) a
request by Borrower describing the costs for which such disbursement is
requested and the amount sought, (ii) invoices, receipts and/or other
evidence reasonably satisfactory to Lender evidencing that such costs
are payable and that the work to which such costs relate has been
completed, (iii) lien waivers or other evidence reasonably satisfactory
to Lender that all materialmen, laborers, subcontractors or other
parties who could claim any statutory or common law lien against the
Property in connection with such Replacement and who are being paid
from such disbursement have been (or will, upon such disbursement, be)
fully paid for all labor or materials furnished to date and have waived
any such lien, (iv) for disbursement requests relating to a Replacement
which shall cost in excess of $75,000 for the Property, the
certification of an architect or other third party reasonably
acceptable to Lender verifying that the portion of the Replacement for
which disbursement is sought has been completed in accordance with
plans approved by Lender, if any, and the cost thereof and (v) for
final disbursement requests relating to a Replacement which shall cost
in excess of $75,000 for the Property, a new certificate of occupancy
for the portion of the Improvements affected by such Replacement, if
such new certificate of occupancy is required, or a certification by
<PAGE>
Borrower that no new certificate of occupancy is required. Lender may
retain ten percent (10%) of the amount of any disbursements requested
hereunder and shall disburse such retained amounts to Borrower in
accordance herewith upon completion of the Replacement to which such
retainage relates. Lender shall not be obligated to make disbursements
from the Replacement Reserve Account more frequently than once in any
thirty (30) day period. In addition, Lender shall not be obligated to
disburse any funds from the Replacement Reserve Account for a
Replacement if, in the reasonable, good faith opinion of Lender, the
balance in the Replacement Reserve Account shall be insufficient to pay
for such Replacement.
8.2.4 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Replacement
Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
8.2.5 For purposes hereof, "Replacement" shall mean repairs,
replacements and improvements to the Property in the ordinary course of
operating the Property which would, for federal income tax purposes, be
included in the cost of such Property, excluding the Required Work.
8.2.6 Nothing contained in this paragraph shall limit the
obligation of Borrower to perform any work or otherwise to repair and
maintain the Property in accordance with the Mortgage or any other Loan
Document or shall be deemed approval by Lender of any work otherwise
requiring the approval of Lender under the Mortgage or any other Loan
Document. The Replacement Reserve Account shall not constitute a trust
fund and may not be commingled with other monies held by Lender. Upon
assignment of the Note and the Mortgage by Lender in their entirety,
Lender's security interest in, and all other right, title and interest
of Lender in and to, the funds in the Replacement Reserve Account shall
be transferred and assigned to the assignee and Lender shall have no
further obligation with respect thereto.
Section 8.3 Interest Reserve.
8.3.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Interest Reserve to be
held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan (the "Interest
Reserve Account"). The Interest Reserve Account shall be an
interest-bearing account and all interest earned thereon shall become
part of the Interest Reserve Account for the benefit of Borrower.
8.3.2 Provided that no Event of Default shall then exist and
be continuing, if, on any Payment Date, the amount then on deposit in
the Monthly Debt Service Subaccount (as defined in the Cash Management
Agreement), minus the amount, if any, due under Section 8.7.3 hereof,
shall be less than the amount of interest then due under the Note,
Lender shall disburse the amount of such deficiency from the Interest
Reserve Account to pay such interest. Any such amounts so disbursed
shall be deemed paid by Borrower and Borrower shall not be deemed to
have failed to pay such interest for the purposes of Section 6.1.1 by
reason thereof.
<PAGE>
8.3.3 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Interest
Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
8.3.4 Nothing contained in this paragraph shall limit the
obligation of Borrower to pay interest or other amounts due under the
Note or any other Loan Document. The Interest Reserve Account shall not
constitute a trust fund and may not be commingled with other monies
held by Lender. Upon assignment of the Note and Mortgage by Lender in
their entirety, Lender's security interest in, and all other right,
title and interest of Lender in and to, the funds in the Interest
Reserve Account shall be transferred and assigned to the assignee and
Lender shall have no further obligation with respect thereto.
Section 8.4 Approved Budget.
8.4.1 The term "Approved Budget" shall mean, upon approval by
Lender, which approval shall not be unreasonably withheld, conditioned
or delayed, Borrower's proposed operating budget for the Property,
which sets forth the estimated Operating Expenses to be incurred in
connection with the Property for each month of the applicable calendar
year.
8.4.2 Borrower shall deliver to Lender not later than sixty
(60) days prior to the commencement of each calendar year a proposed
operating budget in form satisfactory to Lender setting forth in
reasonable detail budgeted monthly operating income and monthly
operating capital and other expenses for the Property. Lender shall
have the right to approve such budget, which approval shall not be
unreasonably withheld, conditioned or delayed.
8.4.3 If Lender shall object to the proposed budget submitted
by Borrower, Lender shall advise Borrower of such objections within
fifteen (15) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall
within ten (10) days after receipt of notice of any such objections
revise such budget and resubmit the same to Lender. Lender shall advise
Borrower of any objections to such revised budget within ten (10) days
after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall revise the same in
accordance with the process described in this subparagraph until the
Lender approves a budget, provided, however, that if Lender shall not
advise Borrower of objections to a proposed budget within the time
period set forth in this paragraph, then such proposed budget shall be
deemed approved by Lender.
8.4.4 Borrower shall operate the Property in accordance with
the Approved Budget and shall not enter into any contracts or other
agreements nor expend any funds not provided for therein, other than
expenditures required to be made by reason of the occurrence of an
emergency (i.e., an unexpected event which threatens imminent harm to
persons or property at the Property) and with respect to which it would
be impracticable, under the circumstances, to obtain Lender's prior
consent thereto. Notwithstanding the foregoing, Borrower shall notify
Lender as promptly as practicable with respect to any such emergency
expenditures made.
<PAGE>
8.4.5 In the event that there shall not be an Approved Budget
with respect to a calendar year prior to the commencement thereof, then
the most recent Approved Budget (subject to any increases required by
reason of increases in non-discretionary expenses such as real estate
taxes and utility costs) shall continue to be the Approved Budget.
Section 8.5 Working Capital Reserve.
8.5.1 On the date hereof, Borrower shall deposit with Lender
the sum set forth on Exhibit K hereto as the Working Capital Reserve to
be held in an account maintained at a bank designated by Lender and
pledged to Lender as additional collateral for the Loan (the "Working
Capital Reserve Account"). The Working Capital Reserve Account shall be
an interest-bearing account and all interest earned thereon shall
become part of the Working Capital Reserve Account for the benefit of
Borrower.
8.5.2 Provided that no Event of Default shall then exist and
be continuing, if, on any Payment Date, (a) the amount then on deposit
in the Tax and Insurance Impound Account (as defined in the Cash
Management Agreement) shall be less than the amount required to be
deposited in the Tax and Insurance Escrow Account on such Payment Date
in accordance with Section 8.1 hereof, (b) the amount then on deposit
in the Replacement Escrow Fund Subaccount (as defined in the Cash
Management Agreement) shall be less than the amount required to be
deposited in the Replacement Reserve Account on such Payment Date in
accordance with Section 8.2 hereof, or (c) the amount then on deposit
in the Operating Expense Subaccount (as defined in the Cash Management
Agreement) shall be less than the Budgeted Expenses (as defined in the
Cash Management Agreement) for the month in which such Payment Date
shall occur, Lender shall disburse the amount of any such deficiency
from the Working Capital Reserve Account and deposit such amount on the
Payment Date to the account or accounts in which such deficiency shall
exist in the order set forth above.
8.5.3 In addition, provided that no Event of Default shall
exist hereunder and be continuing, Lender shall disburse funds from the
Working Capital Reserve Account to Borrower to pay the costs of
Operating Expenses incurred by Borrower in any period in excess of the
Budgeted Expenses for such period. Such disbursements shall be made
within ten (10) Business Days after receipt of (i) a request by
Borrower describing the Operating Expenses for which such disbursement
is requested and the amount sought, (ii) the Financial Statements
required hereunder for such period and (iii) invoices, receipts and/or
other evidence reasonably satisfactory to Lender evidencing that such
Operating Expenses are payable. Lender shall not be obligated to make
disbursements from the Working Capital Reserve Account under this
Section 8.5.3 more frequently than once in any calendar month thirty
(30) day period.
8.5.4 If an Event of Default has occurred and is continuing
hereunder, Lender may apply all amounts on deposit in the Working
Capital Reserve Account to the Indebtedness in such order, priority and
proportions as Lender in its discretion shall deem proper.
8.5.5 Nothing contained in this paragraph shall limit the
obligation of Borrower to pay interest or other amounts due under the
Note or any other Loan Document. The Working Capital Reserve Account
shall not constitute a trust fund and may not be commingled with other
monies held by Lender. Upon assignment of the Note and Mortgage by
Lender in their entirety, Lender's security interest in, and all other
right, title and interest of Lender in and to, the funds in the Working
Capital Reserve Account shall be transferred and assigned to the
assignee and Lender shall have no further obligation with respect
thereto.
<PAGE>
Section 8.6 Right of First Refusal to Provide Permanent Financing.
8.6.1 Offer. In the event that Borrower obtains a bona fide
commitment from a third party to provide Permanent Financing to be
secured by all or any portion of the Property, or such third party
provides a term sheet to Borrower containing all of the material terms
of such Permanent Financing, or Borrower otherwise desires to close any
such Permanent Financing (any of the foregoing being hereinafter
referred to as the "Offer"), then, Borrower shall deliver to Lender
written notice of Borrower's intent to close such Permanent Financing,
together with a copy of the commitment, term sheet or any other
documents and instruments setting forth the material terms of such
Permanent Financing or, if delivery of any such documents is prohibited
by the terms thereof, such other documentation as Lender shall deem
sufficient evidence of such Offer.
8.6.2 Notice from Lender. Lender shall have ten (10) days from
the date of receipt of all of the information required to be delivered
to Lender under Section 8.6.1 above (the "Offer Period"), to notify
Borrower in writing of Lender's interest in providing the Permanent
Financing on the same material terms and conditions as are set forth in
the Offer and which are no less favorable to Borrower than those
contained in the Offer. If Lender gives notice to Borrower during the
Offer Period that Lender does not desire to provide the Permanent
Financing, or if Lender fails to respond within the Offer Period,
Borrower shall have one hundred and twenty (120) days from the date of
receipt by Borrower of such notice from Lender or the expiration of the
Offer Period if Lender fails to respond, as the case may be (the
"Closing Period"), to close the Permanent Financing on the same
material terms as contained in the Offer.
8.6.3 Closing. If Lender notifies Borrower in writing during
the Offer Period that Lender is interested in providing the Permanent
Financing, Lender and Borrower shall have thirty (30) days (or such
longer period of time as is necessary under the circumstances Borrower
is acting in good faith) from the date of Borrower's receipt of such
written notice from Lender to agree upon the terms and conditions of
and close such transaction and the documentation thereof, which shall
be in all material respects the same as the terms and conditions of the
Offer, to the extent the same are specified in the Offer, except that
any loan documents to be executed in connection with such Permanent
Financing shall be substantially identical in all material respects to
the Loan Documents, except to the extent inconsistent with the terms of
the Offer.
8.6.4 Failure to Close. If Borrower fails to close the
Permanent Financing with the third party lender prior to the expiration
of the Closing Period, Borrower shall be required to make a new offer
to Lender in accordance with the provisions of this Section 8.6 before
such Borrower accepts any Permanent Financing from any other party.
<PAGE>
8.6.5 Compliance with Offer. Any Permanent Financing must be
consummated substantially in accordance with the terms and provisions
of the documents provided to Lender evidencing the Offer, or terms and
provisions which are more favorable to Borrower than such terms and
provisions provided to Lender, and in compliance with the requirements
of this Section 8.6. In the event that the terms are modified by such
third party prior to such closing to be less favorable to Borrower,
Borrower shall re-submit such revised terms to Lender for consideration
under Section 8.6.1.
Section 8.7 Release Provisions.
8.7.1 Certain Definitions. For the purposes hereof:
(a) The term "Bona Fide Contract" shall mean, with
respect to a Release Parcel or Lot, an agreement for the sale
of such Release Parcel or Lot to a Person other than an
Affiliate of Borrower on an "all cash" basis in a bona-fide
arms length transaction.
(b) The term "Gross Sales Proceeds" shall mean, with
respect to the sale of a Release Parcel or Lot, the aggregate
amount payable to or for the benefit of the seller thereof
under the Bona Fide Contract for the sale of such Release
Parcel or Lot, including the purchase price set forth in such
Bona Fide Contract and all other amounts paid to discharge
obligations of Seller or otherwise for the account or benefit
of, or at the direction of, seller and not credited to such
purchase price.
(c) The term "Minimum Release Price" shall mean, with
respect to a Release Parcel or Lot, 200% of the amount set
forth on Exhibit A hereto as the Allocated Loan Amount for
such Release Parcel or Lot (which amount, with respect to
Lots, shall be the amount set forth in column 10a of Exhibit
A).
(d) The term "Net Sales Proceeds" shall mean, with
respect to a Release Parcel or Lot, the Gross Sales Proceeds
from the sale of such Release Parcel or Lot less all customary
and reasonable selling expenses actually incurred by Borrower
in good faith in connection with the sale of such Release
Parcel or Lot, including, without limitation, reasonable
attorney's fees and disbursements, usual and customary
brokerage commissions payable to brokers unaffiliated with
Borrower and, if customarily paid by sellers in the State in
which such Release Parcel or Lot is located, transfer taxes or
documentary stamp taxes, title insurance premiums and survey
costs.
<PAGE>
(e) The term "Release Date" shall mean, with respect
to a Release Parcel or Lot to be released from the lien of the
Mortgage, the date of the closing of the sale of such Release
Parcel or Lot pursuant to a Bona Fide Contract.
(f) The term "Release Parcel" shall mean the Property
and the portion of the Property consisting solely of a golf
course.
(g) The term "Release Price" shall mean, with respect
to a Release Parcel or Lot, the greater of (i) the Minimum
Release Price for such Release Parcel or Lot and (ii) eighty
percent (80%) of the Net Sales Proceeds from the sale of such
Lot.
(h) The term "Release Proceeds" shall mean, with
respect to a Release Parcel or Lot, the greater of (i) the
Minimum Release Price for such Release Parcel or Lot and (ii)
100% of the Net Sales Proceeds from the sale of such Release
Parcel or Lot.
8.7.2 Releases. Notwithstanding anything to the contrary
contained in the Loan Documents, Borrower may from time to time request
and Lender shall release a Release Parcel or Lot from the lien of the
Mortgage thereon upon satisfaction of the following conditions:
(a) Lender shall have received, not less than fifteen
(15) days prior to the Release Date with respect to a Release
Parcel and ten (10) days prior to the Release Date with
respect to a Lot, notice of the proposed release (a "Release
Notice") identifying the Release Parcel or Lot proposed to be
released and the proposed Release Date, together with (i) a
copy of the Bona Fide Contract for the sale of such Release
Parcel or Lot, (ii) a calculation of the Release Proceeds and
Release Price for such Release Parcel or Lot, (iii) an
accurate legal description of such Release Parcel or Lot, and
(iv) any and all documents and instruments to be executed by
Lender in order to effect the release.
(b) Such release shall occur simultaneously with the
sale of the Release Parcel or Lot pursuant to a Bona Fide
Contract;
(c) Borrower shall obtain the approval or consent of
all Persons having the legal right to approve or consent to
the sale or release of such Release Parcel or Lot, including
the approval or consent of any Persons having an interest in
the Property that would be affected thereby to the extent such
approval is required pursuant to the terms of the documents
evidencing such interest;
(d) The Release Parcel or Lot and the balance of the
Property shall, after giving effect to such release, each
conform to and be in compliance with all Legal Requirements
and constitute separately assessed tax lots;
<PAGE>
(e) Lender shall have received such additional
documentation and information as shall be reasonably requested
by Lender in connection with such release not more than three
(3) Business Days after such request; and
(f) No Event of Default, and no event that, with
notice and/or the passage of time would become an Event of
Default, shall have occurred and be continuing under the Loan
Documents on the date Lender shall receive the Release Notice
or on the Release Date;
(g) On the Release Date an amount equal to (i) the
Release Proceeds for such Release Parcel or Lot and (ii) all
costs and expenses (including, but not limited to, recording
charges, taxes and fees and reasonable attorneys' fees and
disbursements) in connection with the such release shall be
deposited by wire transfer into the Cash Collateral Account;
(h) If the Release Parcel is a portion of the
Property, Lender shall receive promptly after the Release Date
an endorsement to the Title Insurance Policy insuring the
Mortgage (A) extending the effective date of the policy or
policies to the Release Date and (B) confirming no change in
the priority of the Mortgage on the balance of the Property or
in the amount of the insurance or the coverage under the
policy or policies (including coverage provided by any
"zoning" endorsement and "separate tax lot" endorsement, if
applicable); and
(i) Lender shall receive on the Release Date a
certificate of Borrower, dated the Release Date, confirming
that (A) all of the conditions to the release of the Release
Parcel or Lot under this Paragraph have been satisfied and (B)
the Bona Fide Contract for the sale of such Release Parcel or
Lot has not been modified or amended and there are no
agreements, oral or written, relating thereto.
8.7.3 Application of Release Price; Credits.
(a) Upon the release of a Release Parcel or Lot from
the lien of the Mortgage, the Release Proceeds shallbe
deposited in the Cash Collateral Account and an amount equal
to the Release Price for such Release Parcel or Lot shall, at
the option of Lender, either (i) be allocated to the Monthly
Debt Service Subaccount and disbursed to Lender on the Payment
Date next following such release in accordance with the Cash
Management Agreement and, upon receipt of such Release Price,
Lender shall apply such amount to the reduction of the
outstanding principal balance of the Loan without any
prepayment premium or charge or (ii) be applied to the
satisfaction of Borrowers's obligation under Section 8.12
(b) If insurance proceeds or condemnation awards
shall be paid with respect to any Release Parcel or Lot and
shall not be made available by Lender to Borrower, Lender
shall release such Release Parcel or Lot from the lien of the
Mortgage thereon in accordance herewith except that Lender
shall credit to the Release Price the amount of such insurance
proceeds or condemnation award applied by Lender to the
outstanding principal amount of the Loan.
<PAGE>
8.7.4 Special Conditions for Initial Release of Lots. Prior to
the initial release of a Lot from the Mortgage, Lender shall have
received and approved the following, all of which shall be in form and
substance satisfactory to Lender in its sole and absolute discretion:
(a) a copy of a subdivision map or plat with respect
to the Property (the "Subdivision Map") which shall show such
Lot (and, if such Lot is a condominium unit, the Declaration
of Condominium), together with evidence that
(i) such Subdivision Map has been approved
by all applicable Governmental Authorities and is
otherwise in compliance with all applicable Legal
Requirements;
(ii) each of the Lots has been assigned or
shall, upon filing of such Subdivision Map or
conveyance of such Lots, in accordance with local law
or practice, be assigned a separate tax lot or
similar designation by the appropriate Governmental
Authority and no further action (other than filing of
such Subdivision Map in the Office of the Clerk of
the County in which the Property is located, if such
Subdivision Map has not been previously filed
therein) is required in order to create the Lots as
independent parcels of real property which are
separately assessed for real estate tax purposes and
which may be freely conveyed by the owner thereof
without the approval of any Governmental Authority
and
(iii) each of the Lots may be used for
single family residential use in accordance with the
Plans under the applicable zoning law, if any,
without any variance or other special approval;
(b) a copy of the declaration of covenants,
restrictions, easements, charges and liens with respect to the
regulation and governance of the Property as a homeowner's
association or condominium association, as the case may be,
(the "Declaration"), if any, together with evidence that such
declaration has been properly filed in the Recording Office
applicable to the Property so as to be binding upon the
Property and each of the Lots;
(c) evidence that the roads, sidewalks and other
common areas and amenities identified in the Subdivision Map
or the Declaration, as applicable, shall have been constructed
to completion and that either the roads have been dedicated to
the public and accepted by the appropriate Governmental
Authority or the owners of the Lots shall have easements over
such roads for ingress and egress to and from a public road;
<PAGE>
(d) copies of all materials filed or required to be
filed with Governmental Authorities in order to sell the Lots
to the public (the "Offering Materials"), if any, together
with evidence that such materials have been accepted as
approved to the extent required by Legal Requirements and that
no further action is required to be taken by any Governmental
Authority in order to sell Lots; and
(f) with respect to a condominium unit, unconditional
Bona Fide Contracts with respect to not less than ten (10)
percent (10%) (or such greater amount as may be required by
law) of such Lots providing for the sale of each Lot on
commercially reasonable terms and conditions, together with
evidence that the purchaser under each such Bona Fide Contract
has deposited, on account thereof, and Borrower is holding in
escrow with respect thereto, not less than 10% of the sales
price thereunder, which amounts shall be applied by Borrower
to the purchase price upon the closing of such sale.
8.7.5 Lender shall have no obligation whatsoever to grant any
release which does not satisfy all of the terms and conditions
precedent thereto set forth in this Section 8.7; provided, however,
that Lender hereby reserves the right to release any Lot or without
notice to, or the consent, approval or agreement of other parties in
interest, including, but not limited to junior liens or, if any, and
such releases shall not impair in any manner the validity or the
priority of the Mortgage on any property remaining subject thereto, nor
release Borrower from the obligations and liabilities set forth therein
or in any other Loan Document (but this provision shall not constitute
consent by Lender to the placing of any such junior liens or other
interests or a waiver of the provisions hereof). Upon the filing of a
Subdivision Map for a portion of the Property not previously covered
thereby, the provisions of Section 8.7.4 shall apply to the initial
release of a Lot from such portion of Property.
Section 8.8 Subdivision Provisions. Borrower hereby represents, warrant
and covenants as follows:
8.8.1 Borrower will prepare and submit to Lender and all
applicable Governmental Authorities the Subdivision Map, Declaration
and Offering Materials, as applicable, and diligently pursue the
approval and filing thereof to the extent required and will use
commercially reasonable efforts to market and sell each of the Lots.
The Subdivision Map, Declaration, Offering Materials and all
documentation in connection therewith, including, without limitation,
the by-laws and rules and regulations of the homeowner's association,
if any, the management agreement, the form of contract of sale and
deeds, and all other documents used by Borrower in connection with the
subdivision of the Property, the sale of Lots and the operation,
regulation, management and administration thereof shall be submitted to
Lender for review and approval prior to the submission or resubmission
thereof to any Governmental Authority or third parties and no changes
or modifications thereto shall be made without Lender's prior approval,
which shall not be unreasonably withheld, conditioned or delayed.
Borrower shall not sell Lots unless and until the Subdivision Map,
Declaration and Offering Materials, as applicable, shall have been
approved by Lender and applicable Governmental Authorities.
<PAGE>
8.8.2 Borrower shall sell Lots in a manner which is in
compliance with all Legal Requirements including, without limitation,
the Interstate Land Sales Act, to the extent applicable, and Borrower
will not accept money or other sums, consideration or compensation in
connection with the sale of a Lot, other than what is expressly set
forth in the Bona Fide Contract as consideration for the purchase.
8.8.3 Borrower shall perform or cause to be performed all
obligations of the developers or sponsors under the Declaration or
Offering Materials, as applicable, and do or cause to be done all
things necessary to operate and maintain the Property in compliance
with all Legal Requirements, and will comply with the regulations of
any relevant Governmental Authority, including securities regulations,
which may apply to the sale of Lots and will furnish such evidence of
compliance therewith as Lender may reasonably request.
8.8.4 Borrower shall (and hereby does) collaterally assign to
Lender all of Borrower's right, title and interest in the Offering
Materials so that Lender or any subsequent owner of the Mortgaged
Property who acquires title thereto pursuant to a foreclosure hereunder
or by taking a deed in lieu thereof may complete the filings required
in order to sell the Lots to the public. Borrower covenants and agrees
to execute and deliver to Lender or such subsequent owner such
documents, and deliver to Lender or such subsequent owner such
financial information concerning the Mortgaged Property, as Lender or
such subsequent owner may reasonably request in order to complete such
filings. In addition, promptly after a contract of sale is entered into
for the sale of a Lot, such contract and the right to receive any
deposit made thereunder, to the extent not prohibited by applicable
law, shall be collaterally assigned to Lender as security for the
Indebtedness. At Lender's request, each collateral assignment referred
to above shall be further evidenced by an instrument of assignment,
executed and delivered by Borrower, in form and substance reasonably
satisfactory to Lender, which collateral assignment shall be released
upon the termination of the contract of sale on account of which such
deposit was made in accordance with its terms and return of such
deposit to the purchaser thereunder.
8.8.5 The rights granted hereunder to Lender to review,
approve and comment upon the Subdivision Map, Declaration and Offering
Materials are not intended to, nor shall they be deemed to, constitute
Lender as a sponsor or developer for the purposes hereof but is
intended merely to afford Lender the ability (i) to insure correct
disclosure of Lender's involvement with the Mortgaged Property, and
(ii) to protect and preserve the security intended to be granted to
Lender under this Mortgage and the Loan Documents, and Lender shall
have no liability for the performance of any obligations of Borrower or
any such sponsor or developer thereunder. Any approval by Lender of any
such documents shall be evidence solely of Lender's determination that
such document properly discloses such involvement and that the terms
thereof, if implemented, would not have an adverse effect on such
security, and not evidence of Lender's (A) determination that such
document is in compliance with any laws, rules or regulations or (B)
approval of the terms of such documents.
8.8.6 Upon the filing of the Subdivision Map, all references
herein to the Property shall be deemed to refer to the Property
excepting therefrom those Lots which may have been released from the
lien of this Mortgage in accordance with the provisions hereof.
<PAGE>
Section 8.9 Cash Management.
8.9.1 Borrower shall deposit or cause to be deposited into the
Clearing Account (as defined in the Cash Management Agreement) all
Receipts within one Business Day after receipt thereof.
8.9.2 Commencing on the first day of each Collection Period,
all amounts deposited in the Cash Collateral Account shall be allocated
in the order and priority set forth in Section 3(a) of the Cash
Management Agreement.
Section 8.10 Right of First Refusal to Purchase Property.
8.10.1 Offer. In the event that (a) Borrower obtains a bona
fide offer from a third party to purchase a (i) the Property, (ii) any
portion of the Property which shall include the golf course located
thereon or (iii) or any portion of the Property which is used or
intended to be used for commercial purposes or (b) any offer by
Borrower to sell the Property or any such part thereof shall be
accepted by any third party (any of the foregoing being hereinafter
referred to as an "Offer"), then Borrower shall deliver to Lender
written notice of Borrower's intent to close such sale, together with a
copy of the offer, contract or other documents and instruments setting
forth the material terms of such sale.
8.10.2 Notice from Lender. Lender shall have ten (10) days
from the date of receipt of all of the information required to be
delivered to Lender under Section 8.10.1 above (the "Offer Period"), to
notify Borrower in writing of Lender's interest in purchase the
Property or such part thereof on the same material terms and conditions
as are set forth in the Offer. If Lender gives notice to Borrower
during the Offer Period that Lender does not desire to purchase the
Property or such part thereof, or if Lender fails to respond within the
Offer Period, Borrower shall have one hundred and twenty (120) days
from the date of receipt by Borrower of such notice from Lender or the
expiration of the Offer Period if Lender fails to respond, as the case
may be (the "Closing Period"), to close such sale on the same material
terms as contained in the Offer.
8.10.3 Closing. If Lender notifies Borrower in writing during
the Offer Period that Lender is interested in purchasing the Property
or such part thereof, Lender and Borrower shall have thirty (30) days
(or such longer period of time as is necessary under the circumstances
if Borrower is acting in good faith) from the date of Borrower's
receipt of such written notice from Lender to agree upon the terms and
conditions of and close such transaction and the documentation thereof,
which shall be in all material respects the same as the terms and
conditions of the Offer, to the extent the same are specified in the
Offer.
<PAGE>
8.10.4 Failure to Close. If Borrower fails to close a sale
subject to this provision with the third party purchaser prior to the
expiration of the Closing Period, Borrower shall be required to make a
new offer to Lender in accordance with the provisions of this Section
8.10 before Borrower accepts any other Offer from any other party.
8.10.5 Compliance with Offer. Any sale must be consummated
substantially in accordance with the terms and provisions of the
documents provided to Lender evidencing the Offer, or terms and
provisions which are more favorable to Borrower than such terms and
provisions provided to Lender, and in compliance with the requirements
of this Section 8.10. In the event that the terms are modified by such
third party prior to such closing to be less favorable to Borrower,
Borrower shall re-submit such revised terms to Lender for consideration
under Section 8.10.1.
Section 8.11 Conveyance of Sales Center. Borrower shall, at the request
of Lender, cause the four (4) acre parcel of commercial property adjacent to the
Property on which the Pelican Strand Sales Center is located (the "Sales Center
Parcel"), together with any and all improvements thereon, to be conveyed to
Borrower on or before July 31, 1998, free and clear of all liens for the payment
of a liquidated sum and all encumbrances which may interfere with the present or
proposed use of such property, except that the Sales Center Parcel shall be
subject to a mortgage held by Fifth Third Bank as security for a loan in the
amount of $1,500,000. The Sales Center Parcel shall not be subject to the
Mortgage. Failure to cause such conveyance to be consummated on or before July
31, 1998 shall be an Event of Default hereunder.
Section 8.12 Reserve Reimbursements. On or before January 1, 2000 (or
such earlier date as shall be set forth on Exhibit K annexed hereto), Borrower
shall pay to Lender for deposit in the accounts set forth on Exhibit K hereto
the amounts, if any, indicated on Exhibit K for such deposit. Failure to make
such deposits on or before January 1, 2000 shall be an Event of Default
hereunder.
Section 8.13 Huntington L/C. On or before July 10, 1998, Borrower shall
(a) replace the letter or letters of credit issued by Huntington Bank in favor
of the Governmental Authority requiring same with one or more letters of credit
in form and substance satisfactory to such Governmental Authority, (b) return
the letters of credit issued by Huntington Bank to Huntington Bank and (c)
deposit the sum of $570,000 held by Huntington Bank as security for such letters
of credit in the Construction Escrow Account. Failure to make such deposits on
or before July 10, 1998 shall be an Event of Default hereunder.
ARTICLE IX. SINGLE PURPOSE ENTITY/SEPARATENESS
Section 9.1 Representations, Warranties and Covenants. Borrower
represents, warrants and covenants as of the date hereof and until such time as
the Loan and all other amounts payable under any of the Loan Documents are paid
in full, that:
(a) neither Borrower nor SPE Entity will dissolve or liquidate
(or suffer any liquidation or dissolution) or amend the terms of their
respective Organizational Documents;
(b) neither Borrower nor SPE Entity are contemplating either
the filing of a petition by Borrower or SPE Entity under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of Borrower's or SPE Entity's assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any
such petition against it;
<PAGE>
(c) neither Borrower nor SPE Entity will enter into any
transaction of merger or consolidation, or acquire by purchase or
otherwise all or substantially all the business or assets of, or any
stock or other evidence of beneficial ownership of, any entity;
(d) except with respect to a Person which is a SPE Entity, in
the ordinary course of such Person acting as such SPE Entity, neither
Borrower nor SPE Entity has, and neither such Person will, guarantee or
otherwise hold out its credit as being available to satisfy obligations
of any other Person;
(e) Borrower was organized for the sole purpose of owning,
managing and operating the Property and activities ancillary thereto
and SPE Entity was organized for the sole purpose of acting as the SPE
Entity of Borrower;
(f) Borrower has not and will not engage in any business
unrelated to the ownership, management and operation of the Property
and activities ancillary thereto and will conduct and operate its
business as presently conducted and operated. The SPE Entity has not
and will not engage in any business unrelated to acting as SPE Entity
of Borrower;
(g) neither Borrower nor SPE Entity will enter into any
contract or agreement with any member, partner, principal or Affiliate
of Borrower or SPE Entity, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be
available on an arms-length basis with unrelated third parties;
(h) in addition to any limitations with respect thereto
contained in Section 5.3 hereof, Borrower and SPE Entity have not
incurred and will not incur any indebtedness or material liabilities,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than (i) the Loan and the other obligations of
Borrower to Lender contained in the Loan Documents, (ii) the Approved
Debt and (iii) trade payables or accrued expenses incurred in the
ordinary course of business of operating the Property not in excess of
sixty (60) days past due; no indebtedness or liabilities (other than
debt described in clause (i) above) may be secured (senior, subordinate
or pari passu) by the Property or any interest therein or in Borrower;
(i) Borrower and SPE Entity have not made and will not make
any loans or advances to any third party (including any Affiliate of
Borrower) and will not pledge its assets for the benefits of any third
party (including any Affiliate of Borrower);
(j) Borrower and SPE Entity are and will be solvent and able
to pay its debts and liabilities (including employment and overhead
expenses) from its own assets as the same shall become due;
(k) Borrower and SPE Entity will maintain its own separate
books and records and bank accounts in each case which are separate and
apart from those of any other Person;
<PAGE>
(l) Borrower and SPE Entity will be, and at all times will
hold itself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate thereof) and shall
maintain and utilize separate stationery, invoices and checks, shall
otherwise conduct its business and own its assets in its own name and
shall correct any known misunderstanding regarding its separate
identity;
(m) Borrower and SPE Entity (i) have and will maintain
separate financial statements and shall not be included in any
consolidated financial statements unless such statements shall note
that Borrower is included in such financial statements solely for the
purposes of complying with GAAP, and (ii) will file its own tax
returns;
(n) Borrower and SPE Entity will maintain adequate capital for
the normal obligations reasonably foreseeable in a business of its size
and character and in light of its contemplated business operations;
(o) neither Borrower nor SPE Entity will seek the dissolution
or winding up, in whole or in part, of Borrower or the SPE Entity;
(p) neither Borrower nor SPE Entity will commingle its funds
and other assets with those of any Affiliate or other Person;
(q) Borrower and SPE Entity have and will maintain its assets
in such a manner that it is not costly or difficult to segregate,
ascertain or identify its individual assets from those of any Affiliate
or any other Person;
(r) Borrower and SPE Entity have and will maintain a
reasonable number of employees (which may be zero) in light of its
contemplated business operations and will not do any act which would
make it impossible to carry on the ordinary business of Borrower;
(s) neither Borrower nor SPE Entity will file or consent to
the filing of a petition for bankruptcy, reorganization, assignment for
the benefit of creditors or similar proceeding under any federal or
state bankruptcy, insolvency, reorganization or other similar law with
respect to Borrower or the SPE Entity, if Borrower shall be a limited
liability company, without the unanimous consent of its members (and to
the extent its SPE Entity is a corporation, the Independent Director of
such corporation), if Borrower shall be a partnership, the unanimous
consent of its limited partners and SPE Entities (and, to the extent
any SPE Entity is a corporation, the consent of the Independent
Director of such SPE Entity), or if Borrower shall be a corporation,
the unanimous consent of its directors, including its Independent
Director, as the case may be;
(t) the sole assets of Borrower are, and for the term of the
Loan shall be (i) the fee or leasehold interest in the Property, (ii)
such assets as are otherwise acquired in connection with the use,
operation, maintenance, repair or management of the Property and (iii)
cash and accounts receivable;
<PAGE>
(u) Borrower and SPE Entity have and will observe all
partnership formalities, limited liability company formalities or
corporate formalities, as applicable;
(v) Borrower and SPE Entity have not and will not acquire the
obligations or securities of any of their partners, members or
shareholders, as applicable;
(w) Borrower and SPE Entity shall each allocate fairly and
reasonably any overhead for any office space which such entity shares
with any other entity; SPE Entity will at all times comply, with each
of the representations, warranties, and covenants contained in this
Article IX;
(x) Borrower will have, at all times, an Independent Director
(if a corporation), or, if a limited liability company or limited
partnership, all SPE Entities or all SPE Entities, as applicable, will
have at all times an Independent Director, except if such SPE Entity is
itself a limited partnership or a limited liability company, then only
the SPE Entity of such entity, as applicable, is required to have at
all times an Independent Director;
(y) In connection with any Securitization or similar
transaction to be undertaken by Lender (or any assignee or participant)
with respect to the Loan, if Lender (or any such assignee or
participant) shall request that the Independent Director of the SPE
Entity be replaced, Borrower will cause such replacement with an
Independent Director acceptable to Lender and the Rating Agencies
within ten (10) days following such request; and
(z) neither Borrower nor SPE Entity shall declare any dividend
or otherwise distribute any funds to the holders of any interests in
such Borrower or SPE Entity, provided that nothing contained herein
shall prohibit payments of indebtedness to limited partners set forth
on Exhibit M annexed hereto.
Section 9.2 Notice of Indemnification. BORROWER ACKNOWLEDGES THAT THIS
AGREEMENT PROVIDES FOR INDEMNIFICATION OF LENDER BY BORROWER PURSUANT TO
SECTIONS AND THAT SUCH INDEMNIFICATION IS WITHOUT LIMIT AND WITHOUT REGARD TO
THE CAUSE OR CAUSES THEREOF, INCLUDING PREEXISTING CONDITIONS, STRICT LIABILITY,
OR LENDER'S OWN NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT OR PASSIVE) EXCEPT
AS PROVIDED IN THOSE SECTIONS.
Section 9.3 No Oral Agreements. THIS LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDER-STANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
a Delaware limited liability company
By:______________________________________
Name:
Title:
BORROWER:
PELICAN STRAND, LTD.,
a Florida limited partnership
By: Pelican Strand Development Corporation, its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
CASH MANAGEMENT AGREEMENT (this "Agreement") dated as of July
2, 1998 among CUTTER SOUND DEVELOPMENT, LTD., MONTVERDE PROPERTY, LTD.,
NORTHSHORE GOLF PARTNERS, LTD., NORTHSHORE DEVELOPMENT, LTD., U.S. GOLF
PINEHURST PLANTATION, LTD., FSD GOLF CLUB, LTD., U.S. GOLF PELICAN STRAND, INC.,
RH HOLDINGS, INC. AND WEDGEFIELD LIMITED PARTNERSHIP, each having an address at
c/o Golf Communities of America 255 South Orange Avenue Firstate Tower, Suite
1515 Orlando, Florida 32801 (individually and collectively, the "Borrower"),
U.S. GOLF MANAGEMENT, INC. c/o Golf Communities of America 255 South Orange
Avenue Firstate Tower, Suite 1515 Orlando, Florida 32801 (the "Manager"), and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC 11 Madison Avenue New York, New
York 10010 (the "Lender")
WHEREAS, pursuant to the Loan Agreement of even date herewith
(the "Loan Agreement") by and between the Lender and the Borrower, the Lender
has provided financing (the "Loan") to the Borrower secured by the property or
properties owned by the Borrower and described in the Loan Agreement
(collectively, the "Property");
WHEREAS, in connection therewith, Lender, Borrower and the
banks maintaining the operating account or accounts of each Individual Borrower
(as defined in the Loan Agreement) (each a "Property Account"; each such bank,
as more particularly defined herein, being a "Clearing Bank") are simultaneously
herewith executing a Clearing Bank Instruction Letter in the form attached as
Exhibit A hereto (together with any modifications, amendments or replacements
thereof, the "Instruction Letter"), which provides that all Receipts (as defined
in the Loan Agreement) from the Individual Property (as defined in the Loan
Agreement) owned by such Individual Borrower shall be deposited in the account
named therein (as more particularly defined herein, the "Clearing Account") and
swept periodically into the accounts established hereunder;
NOW THEREFORE, in consideration of the mutual premises
contained herein and for other good and valuable consideration the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Defined Terms.
(a) As used herein the following capitalized terms shall have
the respective meanings set forth below:
"Approved Budget" shall have the meaning ascribed to such term
in the Loan Agreement.
"Budgeted Expenses" shall mean for any period, the Operating
Expenses for the Property to the extent set forth in an Approved Budget and
actually incurred by Borrower minus payments into the Tax and Insurance Escrow
Account and the Replacement Reserve Account. Budgeted Expenses shall not include
any management fees payable to affiliates of Borrower.
"Business Day" shall have the meaning ascribed to such term in
the Loan Agreement.
"Cash Collateral Account" shall have the meaning ascribed to
such term in Section 2(a) hereof. "Clearing Account" shall mean the Eligible
Account designated as the Clearing Account in an Instruction Letter into which
all Receipts shall be deposited in accordance herewith.
<PAGE>
"Clearing Bank" shall mean the Eligible Bank at which the
Clearing Account is maintained pursuant to an Instruction Letter executed by
Lender, Borrower and such Eligible Bank.
"Collateral" shall mean the Cash Collateral Account, the Tax
and Insurance Impound Fund Account, all Permitted Investments and any and all
proceeds and products thereof.
"Collection Period" with respect to any Payment Date, shall
mean the period of days from the first day of the calendar month immediately
preceding the Payment Date to the last day of such calendar month. With respect
to the first Payment Date, the Collection Period shall commence on and include
the date hereof and end on and include the last day of the calendar month
immediately preceding the first Payment Date.
"Deposit Bank" shall mean the bank or banks selected by the
Lender to maintain the Cash Collateral Account.
"Eligible Account": Either (i) an account or accounts
maintained with an Eligible Bank or (ii) a segregated trust account maintained
by a corporate trust department of a federal depository institution or a state
chartered depository institution subject to regulations regarding fiduciary
funds on deposit similar to Title 12 of the Code of Federal Regulations *9.10(B)
which has corporate trust powers and is acting in its fiduciary capacity.
"Eligible Bank" shall mean a bank that (i) satisfies the
Rating Criteria and (ii) insures deposits held by such bank through the Federal
Deposit Insurance Corporation.
"Extraordinary Expense" shall mean an extraordinary operating
expense or capital expense not set forth in the Approved Budget or allotted for
in the Replacement Reserve Account.
"Instruction Letter" shall have the meaning ascribed to such
term in the Recitals.
"Loan" shall have the meaning ascribed to such term in the
Recitals.
"Loan Agreement" shall have the meaning ascribed to such term
in the Recitals.
"Loan Documents" shall have the meaning ascribed to such term
in the Loan Agreement.
"Lockbox" shall mean the post office box address established
by a Clearing Bank pursuant to the Instruction Letter for the receipt of all
revenues in the form of checks, money orders and similar instruments.
"Mortgage Subaccounts" shall have the meaning ascribed to such
term in Section 2(c).
"Note" shall have the meaning ascribed to such term in the
Loan Agreement.
"Obligations" shall mean any and all debt, liabilities and
obligations of the Borrower to the Lender pursuant to or in connection with the
Loan, whether now or hereafter existing, including without limiting the
generality of the foregoing, the indebtedness evidenced by the Note, all
interest accruing thereon, and any and all debt, liabilities and obligations of
the Borrower under the Loan Documents.
<PAGE>
"Operating Account" shall have the meaning ascribed to such
term in Section 3(b)(iv) hereof.
"Payment Date" shall have the meaning ascribed to such term in
the Note.
"Payment Direction Letter" shall mean a letter in the form of
Exhibit B or Exhibit C annexed hereto, as the case may be.
"Permitted Investments" shall mean any investment suitable for
the investment of escrows and reserves established under mortgage loans included
in a Securitization in which some or all of the Securities issued are rated
"AAA" (or the equivalent rating) by the Rating Agencies, as the standards
therefor are established from time to time, or such investments which are
otherwise acceptable to the Lender.
"Person" shall have the meaning ascribed to such term in the
Loan Agreement.
"Property" shall have the meaning ascribed to such term in the
Recitals.
"Property Account" shall have the meaning ascribed to such
term in the Recitals.
"Rating Agencies" shall mean (i) any nationally-recognized
statistical rating organizations that provide a rating on any Securities on the
date of issuance of such Securities or (ii) prior to the issuance of the
Securities, S&P and any other nationally-recognized statistical rating
organizations that have been designated by the Lender in its sole discretion.
"Rating Criteria" with respect to any Person, shall mean that
(i) the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P and, if rated by another Rating Agency, are rated in a
substantially equivalent category by such other Rating Agency, if deposits are
held by such Person for a period of less than 30 days, or (ii) the long-term
unsecured debt obligations of such Person are rated at least "AA-" by S&P and,
if rated by another Rating Agency, are rated in a substantially equivalent
category by such other Rating Agency, if deposits are held by such Person for a
period of 30 days or more.
"Receipts" shall have the meaning ascribed to such term in the
Loan Agreement.
"S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
"Securities" shall have the meaning ascribed to such term in
the Loan Agreement.
"Securitization" shall have the meaning ascribed to such term
in the Loan Agreement.
"Servicer" shall have the meaning ascribed to such term in the
Loan Agreement.
"Tax and Insurance Impound Fund Account" shall have the
meaning ascribed to such term in Section 2(e) hereof.
<PAGE>
(b) The meanings given to capitalized terms defined herein
shall be equally applicable in both singular and plural forms of such terms.
(c) Capitalized terms used and not defined herein shall have
the respective meanings given to such terms in the Loan Agreement.
Section 2. Establishment of the Cash Collateral Account and
Tax and Insurance Impound Fund Account.
(a) The Lender has established and will maintain while the
Loan is outstanding a cash collateral account (which may be a book-entry
sub-account of an Eligible Account) (the "Cash Collateral Account") which shall
be entitled "Credit Suisse First Boston Mortgage Capital LLC as Mortgagee of
Golf Communities Cash Collateral Account". In connection with a Securitization,
the Lender shall have the right to change the title of the Cash Collateral
Account in its reasonable discretion to reflect such Securitization. The Lender
shall, or shall cause the Servicer to, cause the Deposit Bank to deposit into
the Cash Collateral Account, all Receipts and other amounts transferred to the
Deposit Bank by a Clearing Bank from a Clearing Account.
(b) The Cash Collateral Account shall be an interest bearing
account. The interest rate with respect to funds held in the Cash Collateral
Account shall be the rate for such deposits as is customarily paid by the
Deposit Bank or Servicer, as applicable. All interest income or other earnings
on funds, if any, remaining in the Cash Collateral Account (other than the Tax
and Insurance Impound Fund Account, if such account is established as a
sub-account thereof) shall be for the benefit of the Borrower and credited to
the Cash Collateral Account. The Cash Collateral Account (other than the Tax and
Insurance Impound Fund Account, if such account is established as a sub-account
thereof) shall be assigned the federal tax identification number of the
Borrower, which number is set forth on Exhibit D hereto. Borrower shall provide
Lender or the Deposit Bank, at any time upon request of Lender, with a Form W-8
or W-9 to evidence Borrower is not subject to any back-up withholding under the
United States Internal Revenue Code. Prior to application in accordance with the
terms hereof, all amounts in the Cash Collateral Account shall remain an asset
of Borrower, subject to the lien and security interest granted Lender hereunder,
and subject to all of the terms and conditions of this Agreement and the other
Loan Documents.
(c) The following sub-accounts (collectively, the "Mortgage
Subaccounts") of the Cash Collateral Account shall be maintained on a
ledger-entry basis:
(i) "Tax and Insurance Impound Fund Subaccount";
(ii) "Replacement Escrow Fund Subaccount";
(iii) "Operating Expense Subaccount";
(iv) "Monthly Debt Service Subaccount";
(v) "Casualty and Condemnation Proceeds Subaccount";
(vi) "Extraordinary Receipts Subaccount"; and
(vii) "Borrower Remainder Subaccount".
<PAGE>
Amounts allocated to the Mortgage Subaccounts shall be
disbursed in accordance with the terms of this Agreement and the Loan Agreement.
(d) (i) The bank, bank location or account number of the
Property Account shall not be changed without Lender's consent, which
shall not be unreasonably withheld, conditioned or delayed, provided
that Borrower shall have furnished to Lender an executed replacement
Instruction Letter with respect to the new bank, bank location and/or
account. If any Clearing Bank shall request any changes, modifications
or supplements to any Instruction Letter to conform to such Clearing
Bank's customary practice or requirements, as the same may change from
time to time, then if such changes, modifications or supplements are
acceptable to Lender, Borrower shall execute and deliver to Lender such
instruments as the Clearing Bank shall reasonably request to effectuate
such modifications or changes. In the event the Borrower fails to
execute an Instruction Letter as provided above, Borrower hereby
appoints the Lender as its attorney-in-fact with full authority to
enter into replacement Instruction Letter(s) and to execute on behalf
of the Borrower any new modified Instruction Letter acceptable to the
proposed Clearing Bank. All costs and expenses incurred by the Lender
to negotiate and execute any modified Instruction Letter shall be paid
by the Borrower.
(ii) Upon request of Lender from time to time, Borrower shall,
within ten (10) Business Days, establish a new Clearing Account at a
bank selected by the Lender and shall cause all funds in the existing
Clearing Account to be transferred to the new Clearing Account and any
future Receipts to be deposited in such new Clearing Account.
(e) The Lender may establish and maintain while the Loan is
outstanding at the Deposit Bank one or more accounts (which may be a sub-account
of the Cash Collateral Account) (the "Tax and Insurance Impound Fund Account")
which shall be entitled "Credit Suisse First Boston Mortgage Capital LLC as
Mortgagee of Golf Communities Tax and Insurance Impound Fund Account". Amounts
on deposit in the Tax and Insurance Impound Fund Account shall be disbursed at
the direction of the Lender in accordance with the Loan Agreement. The Tax and
Insurance Impound Fund Account shall be assigned the federal tax identification
number of the Lender.
(f) The Lender or the Servicer may (but shall not be obligated
to) direct the Deposit Bank to invest amounts allocated to the Cash Collateral
Account and Tax and Insurance Impound Fund Account in Permitted Investments
selected by the Lender. All earnings on such Permitted Investments (net, to the
extent applicable, of any interest income payable to Borrower as provided
herein) shall be for the benefit of the Servicer as additional servicing
compensation. If the Lender or Servicer elects to invest funds in such accounts
in Permitted Investments, then the Lender or Servicer, as applicable, shall have
liability for any loss in investments of funds that are invested in Permitted
Investments but no such loss or liability shall affect Borrower's obligations to
make all payments and deposits required to be made by Borrower under the Loan
Documents.
(g) It is the intention of the parties hereto that the entire
amounts deposited in the Cash Collateral Account and the Tax and Insurance
Impound Fund Account (or as much thereof as the Lender may reasonably arrange to
invest) may be invested in Permitted Investments, and, in such event, that such
accounts shall be so-called "zero balance" accounts. All funds in such Accounts
that are invested in a Permitted Investment are deemed to be held in such
Accounts for all purposes of the Loan Agreement and the other Loan Documents.
<PAGE>
(h) In order to further secure the performance by the Borrower
of the Obligations and as a material inducement for the Lender to make the Loan
in accordance with the terms of the Loan Documents, the Borrower hereby (i)
requests that the Cash Collateral Account and the Tax and Insurance Impound Fund
Account be established on its behalf at the Deposit Bank in the names set forth
above and (ii) acknowledges that (A) the Cash Collateral Account and the Tax and
Insurance Impound Fund Account will be subject to the sole dominion, control and
discretion of the Lender (which may be exercised through the Servicer), subject
to the terms, covenants and conditions of this Agreement and the Loan Agreement,
(B) the Lender shall have the sole right to make withdrawals or transfers of
funds from the Cash Collateral Account and the Tax and Insurance Impound Fund
Account, (C) neither the Borrower nor any other Person claiming on behalf of or
through the Borrower shall have any right or authority, whether express or
implied, to make use of, or withdraw any funds, investments or other properties
from, the Cash Collateral Account or the Tax and Insurance Impound Fund Account,
or to give any instructions with respect to the Cash Collateral Account or the
Tax and Insurance Impound Fund Account.
Section 3. Allocation and Disbursement of Funds in the Cash
Collateral Account.
(a) Commencing on the first Business Day of each Collection
Period, the Lender or the Servicer shall, provided that no Event of Default
shall exist, allocate amounts deposited in the Cash Collateral Account from time
to time during such Collection Period in the following order and priority:
(A) IF THE BALANCE IN THE INTEREST RESERVE ACCOUNT SHALL BE AT
LEAST EQUAL TO THE INTEREST DUE UNDER THE NOTE ON THE NEXT PAYMENT DATE:
(i) First, to the Tax and Insurance Impound Fund Subaccount
until the amount on deposit therein is equal to the amount required to
be deposited in the Tax and Insurance Escrow Account on the next
Payment Date in accordance with Section 8.1 of the Loan Agreement;
(ii) Second, to the Replacement Escrow Fund Subaccount until
the amount on deposit therein is equal to the amount required to be
deposited in the Replacement Reserve Account on the next Payment Date
in accordance with Section 8.2 of the Loan Agreement;
(iii) Third, to the Operating Expense Subaccount until the
amount on deposit therein is equal to (x) the Budgeted Expenses, other
than management fees payable to affiliates of Borrower, and (y)
Extraordinary Expenses approved by Lender, such approval not to be
unreasonably withheld, conditioned or delayed, for the month in which
such Collection Period ends;
(iv) Fourth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the interest due under the Note
on the next Payment Date;
(v) Fifth, to the Borrower Remainder Subaccount until the
amount on deposit therein is equal to the amount, if any, by which the
Net Sales Proceeds shall exceed the Release Prices for all Lots and
Release Parcels released from the lien of the Mortgage during the month
in which such Collection Period ends pursuant to Section 8.7 of the
Loan Agreement;
(vi) Sixth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the outstanding Indebtedness; and
(vii) Lastly, to the Borrower Remainder Subaccount.
<PAGE>
(B) IF THE BALANCE IN THE INTEREST RESERVE ACCOUNT SHALL BE
LESS THAN THE INTEREST DUE UNDER THE NOTE ON THE NEXT PAYMENT DATE:
(i) First, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the interest due under the Note
on the next Payment Date; and
(ii) Second, to the Tax and Insurance Impound Fund Subaccount
until the amount on deposit therein is equal to the amount required to
be deposited in the Tax and Insurance Escrow Account (as defined in the
Loan Agreement) on the next Payment Date in accordance with Section 8.1
of the Loan Agreement;
(iii) Third, to the Replacement Escrow Fund Subaccount until
the amount on deposit therein is equal to the amount required to be
deposited in the Replacement Reserve Account (as defined in the Loan
Agreement) on the next Payment Date in accordance with Section 8.3 of
the Loan Agreement;
(iv) Fourth, to the Operating Expense Subaccount until the
amount on deposit therein is equal to (x) the Budgeted Expenses, other
than management fees payable to affiliates of Borrower, and (y)
Extraordinary Expenses approved by Lender, such approval not to be
unreasonably withheld, conditioned or delayed, for the month in which
such Collection Period ends;
(v) Fifth, to the Borrower Remainder Subaccount until the
amount on deposit therein is equal to the amount, if any, by which the
Net Sales Proceeds shall exceed the Release Prices for all Lots and
Release Parcels released from the lien of the Mortgage during the month
in which such Collection Period ends pursuant to Section 8.7 of the
Loan Agreement;
(vi) Sixth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the outstanding Indebtedness; and
(vii) Lastly, to the Borrower Remainder Subaccount.
(C) NOTWITHSTANDING THE FOREGOING, PROCEEDS FROM THE SALE OF A
RELEASE PARCEL OR LOT IN AN AMOUNT EQUAL TO THE RELEASE PRICE FOR SUCH RELEASE
PARCEL OR LOT SHALL, UPON DEPOSIT IN THE CASH COLLATERAL ACCOUNT, BE
SPECIFICALLY ALLOCATED TO THE MONTHLY DEBT SERVICE ACCOUNT AND SUCH AMOUNT
SHALL, AT THE OPTION OF LENDER, EITHER, (I) BE APPLIED TO THE INDEBTEDNESS IN
ACCORDANCE WITH SECTION 8.7.3(a) OF THE LOAN AGREEMENT OR (II) BE APPLIED TO THE
SATISFACTION OF BORROWER'S OBLIGATION UNDER SECTION 8.12 OF THE LOAN AGREEMENT.
(b) The Lender or the Servicer shall, provided that no Event
of Default shall exist, disburse:
(i) Amounts allocated to the Tax and Insurance Impound Fund
Subaccount to the Tax and Insurance Escrow Account on each Payment Date
for further disbursement therefrom as set forth in the Loan Agreement;
(ii) Amounts allocated to the Replacement Escrow Fund
Subaccount to the Replacement Reserve Account on each Payment Date for
further disbursement therefrom as set forth in the Loan Agreement;
<PAGE>
(iii) Amounts allocated to the Monthly Debt Service Subaccount
to the Lender on each Payment Date to pay amounts due under the Note
and the Loan Agreement;
(iv) Amounts allocated to the Operating Expense Subaccount on
the last Business Day of each week to the Operating Account set forth
on Exhibit D annexed hereto.
(v) Amounts allocated to the Borrower Remainder Subaccount on
each Payment Date to the account set forth on Exhibit D annexed hereto.
Section 4. Fees.
(a) The Borrower shall pay the fees of the Deposit Bank in
accordance with the customary fees charged by the Deposit Bank for the services
described herein, as such fees are established from time to time.
(b) Upon the request of the Borrower, the Lender shall direct
the Deposit Bank to include their fees in an account analysis statement.
Section 5. Termination.
(a) The Lender may replace the Deposit Bank with a new Deposit
Bank upon ten (10) days' notice to the Borrower. The Borrower hereby agrees that
it shall take all reasonable action necessary to facilitate the transfer of the
respective obligations, duties and rights of the Deposit Bank to the successor
thereof selected by the Lender in its sole discretion.
(b) The Lender shall terminate this Agreement upon the
satisfaction in full of the Obligations and return to Borrower all monies then
held in the Cash Collateral Account and the Tax and Insurance Impound Fund
Account after liquidating all Permitted Investments.
Section 6. Certain Rights and Obligations of Borrower.
(a) Lender may, at its option, require one or more of the
following at any time or from time to time:
(i) Borrower or the Manager shall immediately execute and
deliver to each of the credit card companies with which the Borrower or
the Manager has entered into merchant's or other credit card agreements
with respect to the Property a Payment Direction Letter in the form of
Exhibit B hereto directing that all Receipts payable with respect to
the Property in accordance with such merchant's agreements or otherwise
shall be transferred instead by wire transfer or the Automated
Clearinghouse System to the Clearing Bank for deposit in the Clearing
Account.
(ii) Borrower or the Manager shall immediately instruct all
Persons from whom Borrower shall receive regularly recurring payments
and that presently or hereafter maintain open accounts with Borrower or
the Manager with respect to the Property or with whom the Manager or
the Borrower presently or hereafter do business on an "accounts
receivable" basis with respect to the Property to deliver all such
regularly recurring payments due under such accounts to the Lockbox
established by the Clearing Bank pursuant to the Instruction Letter in
the form of cashier's checks or equivalent instruments for the payment
of money. Neither the Borrower nor the Manager shall direct any such
Person to make payments due under such accounts in any other manner.
<PAGE>
(iii) Borrower or the Manager shall immediately execute and
deliver to any present or future tenant of the Property a Payment
Direction Letter in the form of Exhibit C hereto directing such tenant
to send all payments, whether in the form of checks, cash, drafts,
money orders or any other type of payment whatsoever, and whether of
rent or any other item payable to the Borrower, directly to the
Lockbox. The foregoing requirements need not be satisfied with respect
to any lease executed after the date hereof to the extent the terms and
conditions of the Payment Direction Letter are incorporated in such
lease.
(iv) If notwithstanding the provisions of this Section 6(a),
Borrower or Manager (or any affiliate thereof) receives any Receipts
then (x) Borrower or Manager (or such affiliate) shall be deemed to
hold such Receipts in trust for Lender and (y) the Borrower and the
Manager shall deposit with the Clearing Bank within one Business Day of
receipt all such Receipts received by the Borrower or the Manager (or
such affiliate).
(b) Upon request of Lender, Borrower shall deliver to Lender
such evidence as Lender may reasonably request to evidence that Borrower is
complying with the provisions of this Section 6(a). Without the prior written
consent of the Lender, neither the Borrower nor the Manager shall
(i) terminate, amend, revoke or modify any Payment Direction
Letter in any manner or
(ii) direct or cause any credit card company or any
tenant to pay any amount in any manner other than as provided specifically in
the related Payment Direction Letter, respectively.
(c) The Borrower hereby pledges, transfers and assigns to the
Lender, and grants to the Lender, as additional security for the payment and
performance of the Obligations, a continuing perfected first priority security
interest in and to, and a first lien upon,
(i) the Cash Collateral Account, the Clearing Account, the Tax
and Insurance Impound Fund Account, the Property Account and all of the
Borrower's right, title and interest in and to all cash, property or
rights transferred to or deposited therein from time to time,
(ii) all earnings, investments and securities held in the Cash
Collateral Account and the Tax and Insurance Impound Fund Account in
accordance with this Agreement and
<PAGE>
(iii) any and all proceeds of the foregoing. This Agreement
and the pledge, assignment and grant of security interest made hereby
shall secure payment of all amounts payable by the Borrower to the
Lender under the Note and the other Obligations. The Borrower
acknowledges that the Servicer, Clearing Bank and Deposit Bank are
acting as the agent of, and at the direction of, the Lender in
connection with the subject matter of this Agreement. The Borrower
further agrees to execute, acknowledge, deliver, file or do at its sole
cost and expense, all other acts, assignments, notices, agreements or
other instruments as the Lender may reasonably require in order to
effectuate, assure, secure, assign, transfer and convey unto the Lender
any of the rights granted by this Agreement and to more fully perfect
and protect any lien or security interest granted hereby.
(d) In its sole discretion, the Borrower may, from time to
time deposit amounts into the Cash Collateral Account in respect of any Mortgage
Subaccount from sources of the Borrower other than those received by the
Clearing Bank with respect to the then-current Collection Period; provided, that
if the Borrower deposits such amounts, the amounts deposited shall be subject to
all of the terms hereof as if not separately deposited by the Borrower, and may
not be withdrawn except as otherwise provided for in this Agreement. Nothing
contained herein shall impair or otherwise limit Borrower's obligations to
timely make the payments (including, without limitation, interest and principal)
required by the Note, the Loan Agreement and the other Loan Documents, it being
understood that such payments shall be so timely made in accordance with the
Loan Documents regardless of the amounts on deposit in the Clearing Account,
Cash Collateral Account and/or Tax and Insurance Impound Fund Account.
(e) Borrower shall use amounts allocated to the Operating
Expense Subaccount with respect to the payment of operating expenses or capital
expenditures only for payment of checks made by the Borrower for the payment of
expenses incurred in the ordinary course of business of the ownership and
operation of the Property or for the payment of expenditures approved by the
Lender whether in an Approved Budget or otherwise.
(f) If the actual Operating Expenses paid during any
Collection Period are less than the amount transferred to the Operating Account
during such Collection Period, the amount of such difference shall promptly be
deposited by Borrower back into the Cash Collateral Account, in any event no
later than thirty (30) days after the end of the applicable Collection Period,
such amount to be applied in accordance with Section 3 hereof when such sum is
redeposited into the Cash Collateral Account. Within thirty (30) days after the
end of each Collection Period, Borrower shall prepare and deliver to Lender a
financial statement in form and substance satisfactory to Lender in all material
respects setting forth all amounts expended for Operating Expenses during such
Collection Period, including showing variances from budget and setting forth a
short explanation of any variance in excess of ten percent (10%) of the budget
line item in question and identifying any payment made to an affiliate and the
reasons therefor. Each such financial statement shall be certified by an officer
of Borrower as being true, correct and complete in all material respects and
include a certification that all amounts transferred to the Operating Account
pursuant to this Agreement were expended for Operating Expenses or capital
expenditures in accordance with this Agreement or have been or are being
returned to the Cash Collateral Account as provided above. Borrower shall
promptly deliver to Lender such further documentation (including, without
<PAGE>
limitation, invoices, canceled checks or copies of contracts) and information as
Lender may reasonably request regarding any payments described in Borrower's
financial statements. If Borrower shall fail to deposit any excess funds in the
Cash Collateral Account or provide its required financial statements or, after
written request of Lender, evidence of expenditures, in each case, within the
time periods provided in the preceding sentences and such failure continues for
ten (10) or more days after written notice of such failure, then in addition to
any other remedies which Lender may have with respect thereto, Lender may elect
not to fund the Operating Expense Subaccount from monies in the Cash Collateral
Account or Lender may continue to hold the funds in the Operating Expense
Subaccount until such failure is cured.
Section 7. Certain Rights of Lender.
(a) The parties agree that the Deposit Bank shall pay over to
the Lender all amounts deposited in any account maintained hereunder on demand,
without notice to the Borrower, provided, that in making such demand, the Lender
gives notice to the Deposit Bank, in writing, signed by the Lender or an
authorized agent thereof, that an Event of Default under the Loan Agreement has
occurred and is continuing. Notwithstanding the foregoing, the Borrower shall
not be deemed to have waived any rights the Borrower may have against the Lender
if it is determined that the Lender acted improperly.
(b) Lender may exercise in respect of the Collateral all
rights and remedies available to Lender hereunder or under the other Loan
Documents or otherwise available at law or in equity. Without limiting the
generality of the foregoing or the provisions of paragraph (a) above, upon the
occurrence and during the continuance of an Event of Default, Borrower
acknowledges and agrees that it will have no further right to request or
otherwise require Lender to disburse funds from the Clearing Account, the Cash
Collateral Account or the Tax and Insurance Impound Fund Account in accordance
with the terms of this Agreement, it being agreed that Lender may, at its
option,
(i) direct the Deposit Bank to continue to hold the funds in
the Cash Collateral Account and the Tax and Insurance Impound Fund
Account and/or
(ii) continue from time to time to apply all or any portion of
the funds held in the Cash Collateral Account or Tax and Insurance
Impound Fund Account to any payment(s) which such funds could have been
applied to prior to such Event of Default (or to pay Operating Expenses
directly), to the extent and in such order and manner as Lender in its
sole discretion may determine, and/or
(iii) direct that the Deposit Bank or Clearing Bank from time
to time disburse all or any portion of the funds held in the Cash
Collateral Account or the Tax and Insurance Impound Fund Account or
other Collateral then or thereafter held by the Deposit Bank or
Clearing Bank, as applicable, to Lender, in which event Lender may
apply the funds held in the Cash Collateral Account, the Tax and
Insurance Impound Fund Account or other Collateral to the Obligations
in any order and in such manner as Lender may determine in its sole
discretion.
(c) Upon the occurrence and during the continuance of any
Event of Default, Lender may, at any time or from time to time, collect,
appropriate, redeem, realize upon or otherwise enforce its rights with respect
to the Collateral, without notice to Borrower and without the need to institute
any legal action, make demand, exhaust any other remedies or otherwise proceed
to enforce its rights.
<PAGE>
(d) No failure on the part of Lender to exercise, and no delay
in exercising, any right under this Agreement or the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right under this Agreement or the other Loan Documents. The remedies
provided in this Agreement, the Note, the Loan Agreement and the other Loan
Documents are cumulative and not exclusive of any remedies provided at law or in
equity.
Section 8. Casualty and Condemnation Proceeds Subaccount;
Extraordinary Receipts Subaccount.
Notwithstanding anything to the contrary contained herein, the
following items of Receipts shall be deposited and held in the Mortgage
Subaccounts described below and shall be applied in the order of priority set
forth in this Section 8, and Borrower shall advise Lender at the time of receipt
thereof of the nature of such Receipt so that Lender shall have sufficient time
to instruct the Deposit Bank to deposit and hold such amounts in the appropriate
Mortgage Subaccount:
(a) Proceeds of any insurance, including, without limitation,
business interruption insurance, which amounts shall be deposited in the
Casualty and Condemnation Proceeds Subaccount and shall be applied (by
instructions of Lender or Servicer to the Deposit Bank) in accordance with the
provisions of the Loan Agreement applicable thereto.
(b) Condemnation awards, which amounts shall be deposited in
the Casualty and Condemnation Proceeds Subaccount and shall be applied (by
instructions of Lender or Servicer to the Deposit Bank) in accordance with the
provisions of the Loan Agreement applicable thereto.
(c) Real estate tax refunds (net of any reasonable and
customary fees and disbursements of tax certiorari counsel deducted from such
refund to pay such counsel's fee), which amount shall be deposited in the
Extraordinary Receipts Subaccount and shall thereafter be transferred (by
instructions of Lender to the Deposit Bank) to the Property Account to the
extent required to pay refunds due to any tenants of the Property (based on a
certificate of Borrower as to the tenants entitled to receive such refunds and
the amounts thereof), except Lender reserves the right to pay (or have the
Servicer pay) any such tenant directly using monies so deposited in the
Extraordinary Receipts Subaccount, in lieu of transferring such monies to the
Operating Account for such payment. Lender or Servicer shall apply any excess,
after the aforesaid payment, as if ordinary Receipts deposited in the Cash
Collateral Account. If the fees and disbursements of tax certiorari counsel
described in this paragraph (c) above shall not have been deducted from the real
estate tax refunds by such counsel prior to payment of such refunds to Borrower,
then such fees and disbursements may be paid as part of Budgeted Expenses,
provided such fees and disbursements are commercially reasonable.
(d) Damages or other payments in settlement of claims by
Borrower against third parties in connection with the Property, sums paid with
respect to a modification of any Lease or otherwise paid in connection with
Borrower taking any action under any Lease (e.g., granting a consent) or waiving
any provision thereof, and any other extraordinary event pursuant to which
Borrower receives payments or income (in whatever form) derived from or
generated by the use, ownership or operation of the Property, shall be deposited
in the Extraordinary Receipts Subaccount. With respect to any monies deposited
<PAGE>
in the Extraordinary Receipts Subaccount pursuant to this paragraph (d), Lender
shall direct Deposit Bank to transfer such amounts to the Clearing Account and
to apply the amount so deposited as if ordinary Receipts to be applied in
accordance with the terms of this Agreement, provided that if any such payment
described in this paragraph (d) exceeds $100,000, such amounts shall be
transferred to the Clearing Account and applied as if ordinary Receipts only to
the extent that the funds in the Clearing Account for such month shall be
insufficient to make all payments to be made for such month prior to the
disbursement to the Borrower Remainder Subaccount.
Section 9. Successors and Assigns; Assignments; Agents.
(a) This Agreement shall bind and inure to the benefit of and
be enforceable by the Borrower, the Lender and the Manager and their respective
successors and assigns.
(b) The Lender shall have the right to assign or transfer
rights and obligations under this Agreement without limitation to any assignee
or transferee of the Loan and the Loan Documents. Any assignee or transferee
shall be entitled to all the benefits afforded the Lender under this Agreement;
provided, that such assignee or transferee shall upon written request deliver to
the other parties hereto written confirmation that such assignee or transferee
agrees to be bound by the terms of this Agreement and is also the assignee or
transferee of the Note and the other Loan Documents.
(c) The Borrower shall have the right to assign and transfer
its rights and obligations hereunder only with the prior written consent of the
Lender.
(d) Any duties or actions of the Lender hereunder may be
performed by the Lender or its agent(s), including without limitation, any
Servicer or trustee in a Securitization, which includes the Loan.
Section 10. Amendment.
This Agreement may be amended from time to time in writing by
all parties hereto. All amendments to this Agreement shall be in writing.
Section 11. Notices.
Notices to the parties hereto shall be addressed and delivered
in the manner set forth in the Loan Agreement. Unless otherwise expressly
provided herein, all such notices, to be effective, shall be in writing
(including by facsimile), and shall be deemed to have been duly given or made
(a) when delivered by hand or by nationally recognized
overnight carrier,
(b) upon receipt after being deposited in the mail, certified
mail and postage prepaid or
(c) in the case of facsimile notice, when sent and
electronically confirmed, addressed as set forth above.
<PAGE>
Section 12. Limitation on Liability.
Lender shall not be liable for any acts, omissions, errors in
judgment or mistakes of fact or law, including, without limitation, acts,
omissions, errors or mistakes with respect to the Collateral, except for those
arising as a result of Lender's gross negligence or willful misconduct. Without
limiting the generality of the foregoing, except as otherwise expressly provided
for herein or as required by applicable law, Lender shall have no duty as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any parties or any other right pertaining to any Collateral. Lender is hereby
authorized by Borrower to act on any written instruction believed by Lender in
good faith to have been given or sent by Borrower.
Section 13. Mortgagee-in-Possession.
Borrower hereby confirms and agrees that notwithstanding the
provisions of this Agreement, Borrower retains sole control of the operation and
maintenance of the Property, subject to the obligations of Borrower under the
Loan Agreement, the Assignment of Leases and Rents and the other Loan Documents,
and Lender is not and shall not be deemed to be a mortgagee in possession.
Section 14. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. [SIGNATURES COMMENCE ON THE
FOLLOWING PAGE] IN WITNESS WHEREOF, the parties hereto have executed this CASH
MANAGEMENT AGREEMENT in several counterparts (each of which shall be deemed an
original) as of the date first above written.
LENDER: CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
a Delaware limited liability company
By: /s/_____________________________
Name:
Title:
MANAGER:
U.S. GOLF MANAGEMENT, INC.
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
BORROWER:
CUTTER SOUND DEVELOPMENT, LTD.,
a Florida limited partnership
By: U.S. Golf (Cutter Sound), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
MONTVERDE PROPERTY, LTD.,
a Florida limited partnership
By: U.S. Golf (Montverde), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
<PAGE>
NORTHSHORE GOLF PARTNERS, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
NORTHSHORE DEVELOPMENT, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
U.S. GOLF PINEHURST PLANTATION, LTD.,
a Florida limited partnership
By: U.S. Golf (Plantation), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
FSD GOLF CLUB, LTD.,
a Florida limited partnership
By: U.S. Golf (FSD), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
RH HOLDINGS, INC., a Utah corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
WEDGEFIELD LIMITED PARTNERSHIP,
a Michigan limited partnership
By: U.S. Golf (Wedgefield), Inc., its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
U.S. GOLF PELICAN STRAND, INC., a Florida corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
CASH MANAGEMENT AGREEMENT (this "Agreement") dated as of July
2, 1998 among PELICAN STRAND, LTD., having an address at c/o Golf Communities of
America 255 South Orange Avenue Firstate Tower, Suite 1515 Orlando, Florida
32801 (the "Borrower"), U.S. GOLF MANAGEMENT, INC. c/o Golf Communities of
America 255 South Orange Avenue Firstate Tower, Suite 1515 Orlando, Florida
32801 (the "Manager"), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC 11
Madison Avenue New York, New York 10010 (the "Lender")
WHEREAS, pursuant to the Loan Agreement of even date herewith
(the "Loan Agreement") by and between the Lender and the Borrower, the Lender
has provided financing (the "Loan") to the Borrower secured by the property or
properties owned by the Borrower and described in the Loan Agreement
(collectively, the "Property");
WHEREAS, in connection therewith, Lender, Borrower and the
banks maintaining the operating account or accounts of Borrower (each a
"Property Account"; each such bank, as more particularly defined herein, being a
"Clearing Bank") are simultaneously herewith executing a Clearing Bank
Instruction Letter in the form attached as Exhibit A hereto (together with any
modifications, amendments or replacements thereof, the "Instruction Letter"),
which provides that all Receipts (as defined in the Loan Agreement) from the
Property (as defined in the Loan Agreement) owned by Borrower shall be deposited
in the account named therein (as more particularly defined herein, the "Clearing
Account") and swept periodically into the accounts established hereunder;
NOW THEREFORE, in consideration of the mutual premises
contained herein and for other good and valuable consideration the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Defined Terms.
(a) As used herein the following capitalized terms shall have
the respective meanings set forth below:
"Approved Budget" shall have the meaning ascribed to such term
in the Loan Agreement.
"Budgeted Expenses" shall mean for any period, the Operating
Expenses for the Property to the extent set forth in an Approved Budget and
actually incurred by Borrower minus payments into the Tax and Insurance Escrow
Account and the Replacement Reserve Account. Budgeted Expenses shall not include
any management fees payable to affiliates of Borrower.
"Business Day" shall have the meaning ascribed to such term in
the Loan Agreement.
"Cash Collateral Account" shall have the meaning ascribed to
such term in Section 2(a) hereof.
"Clearing Account" shall mean the Eligible Account designated
as the Clearing Account in an Instruction Letter into which all Receipts shall
be deposited in accordance herewith.
"Clearing Bank" shall mean the Eligible Bank at which the
Clearing Account is maintained pursuant to an Instruction Letter executed by
Lender, Borrower and such Eligible Bank.
<PAGE>
"Collateral" shall mean the Cash Collateral Account, the Tax
and Insurance Impound Fund Account, all Permitted Investments and any and all
proceeds and products thereof.
"Collection Period" with respect to any Payment Date, shall
mean the period of days from the first day of the calendar month immediately
preceding the Payment Date to the last day of such calendar month. With respect
to the first Payment Date, the Collection Period shall commence on and include
the date hereof and end on and include the last day of the calendar month
immediately preceding the first Payment Date.
"Deposit Bank" shall mean the bank or banks selected by the
Lender to maintain the Cash Collateral Account.
"Eligible Account": Either (i) an account or accounts
maintained with an Eligible Bank or (ii) a segregated trust account maintained
by a corporate trust department of a federal depository institution or a state
chartered depository institution subject to regulations regarding fiduciary
funds on deposit similar to Title 12 of the Code of Federal Regulations *9.10(B)
which has corporate trust powers and is acting in its fiduciary capacity.
"Eligible Bank" shall mean a bank that (i) satisfies the
Rating Criteria and (ii) insures deposits held by such bank through the Federal
Deposit Insurance Corporation.
"Extraordinary Expense" shall mean an extraordinary operating
expense or capital expense not set forth in the Approved Budget or allotted for
in the Replacement Reserve Account.
"Instruction Letter" shall have the meaning ascribed to such
term in the Recitals.
"Loan" shall have the meaning ascribed to such term in the
Recitals.
"Loan Agreement" shall have the meaning ascribed to such term
in the Recitals.
"Loan Documents" shall have the meaning ascribed to such term
in the Loan Agreement.
"Lockbox" shall mean the post office box address established
by a Clearing Bank pursuant to the Instruction Letter for the receipt of all
revenues in the form of checks, money orders and similar instruments.
"Mortgage Subaccounts" shall have the meaning ascribed to such
term in Section 2(c).
"Note" shall have the meaning ascribed to such term in the
Loan Agreement.
"Obligations" shall mean any and all debt, liabilities and
obligations of the Borrower to the Lender pursuant to or in connection with the
Loan, whether now or hereafter existing, including without limiting the
generality of the foregoing, the indebtedness evidenced by the Note, all
interest accruing thereon, and any and all debt, liabilities and obligations of
the Borrower under the Loan Documents.
<PAGE>
"Operating Account" shall have the meaning ascribed to such
term in Section 3(b)(iv) hereof.
"Payment Date" shall have the meaning ascribed to such term in
the Note.
"Payment Direction Letter" shall mean a letter in the form of
Exhibit B or Exhibit C annexed hereto, as the case may be.
"Permitted Investments" shall mean any investment suitable for
the investment of escrows and reserves established under mortgage loans included
in a Securitization in which some or all of the Securities issued are rated
"AAA" (or the equivalent rating) by the Rating Agencies, as the standards
therefor are established from time to time, or such investments which are
otherwise acceptable to the Lender.
"Person" shall have the meaning ascribed to such term in the
Loan Agreement.
"Property" shall have the meaning ascribed to such term in the
Recitals.
"Property Account" shall have the meaning ascribed to such
term in the Recitals.
"Rating Agencies" shall mean (i) any nationally-recognized
statistical rating organizations that provide a rating on any Securities on the
date of issuance of such Securities or (ii) prior to the issuance of the
Securities, S&P and any other nationally-recognized statistical rating
organizations that have been designated by the Lender in its sole discretion.
"Rating Criteria" with respect to any Person, shall mean that
(i) the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P and, if rated by another Rating Agency, are rated in a
substantially equivalent category by such other Rating Agency, if deposits are
held by such Person for a period of less than 30 days, or (ii) the long-term
unsecured debt obligations of such Person are rated at least "AA-" by S&P and,
if rated by another Rating Agency, are rated in a substantially equivalent
category by such other Rating Agency, if deposits are held by such Person for a
period of 30 days or more.
"Receipts" shall have the meaning ascribed to such term in the
Loan Agreement.
"S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
"Securities" shall have the meaning ascribed to such term in
the Loan Agreement.
"Securitization" shall have the meaning ascribed to such term
in the Loan Agreement.
"Servicer" shall have the meaning ascribed to such term in the
Loan Agreement.
"Tax and Insurance Impound Fund Account" shall have the
meaning ascribed to such term in Section 2(e) hereof.
(b) The meanings given to capitalized terms defined herein
shall be equally applicable in both singular and plural forms of such terms.
<PAGE>
(c) Capitalized terms used and not defined herein shall have
the respective meanings given to such terms in the Loan Agreement.
Section 2. Establishment of the Cash Collateral Account and
Tax and Insurance Impound Fund Account.
(a) The Lender has established and will maintain while the
Loan is outstanding a cash collateral account (which may be a book-entry
sub-account of an Eligible Account) (the "Cash Collateral Account") which shall
be entitled "Credit Suisse First Boston Mortgage Capital LLC as Mortgagee of
Pelican Strand Cash Collateral Account". In connection with a Securitization,
the Lender shall have the right to change the title of the Cash Collateral
Account in its reasonable discretion to reflect such Securitization. The Lender
shall, or shall cause the Servicer to, cause the Deposit Bank to deposit into
the Cash Collateral Account, all Receipts and other amounts transferred to the
Deposit Bank by a Clearing Bank from a Clearing Account.
(b) The Cash Collateral Account shall be an interest bearing
account. The interest rate with respect to funds held in the Cash Collateral
Account shall be the rate for such deposits as is customarily paid by the
Deposit Bank or Servicer, as applicable. All interest income or other earnings
on funds, if any, remaining in the Cash Collateral Account (other than the Tax
and Insurance Impound Fund Account, if such account is established as a
sub-account thereof) shall be for the benefit of the Borrower and credited to
the Cash Collateral Account. The Cash Collateral Account (other than the Tax and
Insurance Impound Fund Account, if such account is established as a sub-account
thereof) shall be assigned the federal tax identification number of the
Borrower, which number is set forth on Exhibit D hereto. Borrower shall provide
Lender or the Deposit Bank, at any time upon request of Lender, with a Form W-8
or W-9 to evidence Borrower is not subject to any back-up withholding under the
United States Internal Revenue Code. Prior to application in accordance with the
terms hereof, all amounts in the Cash Collateral Account shall remain an asset
of Borrower, subject to the lien and security interest granted Lender hereunder,
and subject to all of the terms and conditions of this Agreement and the other
Loan Documents.
(c) The following sub-accounts (collectively, the "Mortgage
Subaccounts") of the Cash Collateral Account shall be maintained on a
ledger-entry basis:
(i) "Tax and Insurance Impound Fund Subaccount";
(ii) "Replacement Escrow Fund Subaccount";
(iii) "Operating Expense Subaccount";
(iv) "Monthly Debt Service Subaccount";
(v) "Casualty and Condemnation Proceeds Subaccount";
(vi) "Extraordinary Receipts Subaccount"; and
(vii) "Borrower Remainder Subaccount".
<PAGE>
Amounts allocated to the Mortgage Subaccounts shall be
disbursed in accordance with the terms of this Agreement and the Loan Agreement.
(d) (i) The bank, bank location or account number of the
Property Account shall not be changed without Lender's consent, which shall not
be unreasonably withheld, conditioned or delayed, provided that Borrower shall
have furnished to Lender an executed replacement Instruction Letter with respect
to the new bank, bank location and/or account. If any Clearing Bank shall
request any changes, modifications or supplements to any Instruction Letter to
conform to such Clearing Bank's customary practice or requirements, as the same
may change from time to time, then if such changes, modifications or supplements
are acceptable to Lender, Borrower shall execute and deliver to Lender such
instruments as the Clearing Bank shall reasonably request to effectuate such
modifications or changes. In the event the Borrower fails to execute an
Instruction Letter as provided above, Borrower hereby appoints the Lender as its
attorney-in-fact with full authority to enter into replacement Instruction
Letter(s) and to execute on behalf of the Borrower any new modified Instruction
Letter acceptable to the proposed Clearing Bank. All costs and expenses incurred
by the Lender to negotiate and execute any modified Instruction Letter shall be
paid by the Borrower.
(ii) Upon request of Lender from time to time, Borrower shall,
within ten (10) Business Days, establish a new Clearing Account at a
bank selected by the Lender and shall cause all funds in the existing
Clearing Account to be transferred to the new Clearing Account and any
future Receipts to be deposited in such new Clearing Account.
(e) The Lender may establish and maintain while the Loan is
outstanding at the Deposit Bank one or more accounts (which may be a sub-account
of the Cash Collateral Account) (the "Tax and Insurance Impound Fund Account")
which shall be entitled "Credit Suisse First Boston Mortgage Capital LLC as
Mortgagee of Golf Communities Tax and Insurance Impound Fund Account". Amounts
on deposit in the Tax and Insurance Impound Fund Account shall be disbursed at
the direction of the Lender in accordance with the Loan Agreement. The Tax and
Insurance Impound Fund Account shall be assigned the federal tax identification
number of the Lender.
(f) The Lender or the Servicer may (but shall not be obligated
to) direct the Deposit Bank to invest amounts allocated to the Cash Collateral
Account and Tax and Insurance Impound Fund Account in Permitted Investments
selected by the Lender. All earnings on such Permitted Investments (net, to the
extent applicable, of any interest income payable to Borrower as provided
herein) shall be for the benefit of the Servicer as additional servicing
compensation. If the Lender or Servicer elects to invest funds in such accounts
in Permitted Investments, then the Lender or Servicer, as applicable, shall have
liability for any loss in investments of funds that are invested in Permitted
Investments but no such loss or liability shall affect Borrower's obligations to
make all payments and deposits required to be made by Borrower under the Loan
Documents.
(g) It is the intention of the parties hereto that the entire
amounts deposited in the Cash Collateral Account and the Tax and Insurance
Impound Fund Account (or as much thereof as the Lender may reasonably arrange to
invest) may be invested in Permitted Investments, and, in such event, that such
accounts shall be so-called "zero balance" accounts. All funds in such Accounts
that are invested in a Permitted Investment are deemed to be held in such
Accounts for all purposes of the Loan Agreement and the other Loan Documents.
<PAGE>
(h) In order to further secure the performance by the Borrower
of the Obligations and as a material inducement for the Lender to make the Loan
in accordance with the terms of the Loan Documents, the Borrower hereby (i)
requests that the Cash Collateral Account and the Tax and Insurance Impound Fund
Account be established on its behalf at the Deposit Bank in the names set forth
above and (ii) acknowledges that (A) the Cash Collateral Account and the Tax and
Insurance Impound Fund Account will be subject to the sole dominion, control and
discretion of the Lender (which may be exercised through the Servicer), subject
to the terms, covenants and conditions of this Agreement and the Loan Agreement,
(B) the Lender shall have the sole right to make withdrawals or transfers of
funds from the Cash Collateral Account and the Tax and Insurance Impound Fund
Account, (C) neither the Borrower nor any other Person claiming on behalf of or
through the Borrower shall have any right or authority, whether express or
implied, to make use of, or withdraw any funds, investments or other properties
from, the Cash Collateral Account or the Tax and Insurance Impound Fund Account,
or to give any instructions with respect to the Cash Collateral Account or the
Tax and Insurance Impound Fund Account.
Section 3. Allocation and Disbursement of Funds in the Cash
Collateral Account.
(a) Commencing on the first Business Day of each Collection
Period, the Lender or the Servicer shall, provided that no Event of Default
shall exist, allocate amounts deposited in the Cash Collateral Account from time
to time during such Collection Period in the following order and priority:
(A) IF THE BALANCE IN THE INTEREST RESERVE ACCOUNT SHALL BE AT
LEAST EQUAL TO THE INTEREST DUE UNDER THE NOTE ON THE NEXT PAYMENT DATE:
(i) First, to the Tax and Insurance Impound Fund Subaccount
until the amount on deposit therein is equal to the amount required to
be deposited in the Tax and Insurance Escrow Account on the next
Payment Date in accordance with Section 8.1 of the Loan Agreement;
(ii) Second, to the Replacement Escrow Fund Subaccount until
the amount on deposit therein is equal to the amount required to be
deposited in the Replacement Reserve Account on the next Payment Date
in accordance with Section 8.2 of the Loan Agreement;
(iii) Third, to the Operating Expense Subaccount until the
amount on deposit therein is equal to (x) the Budgeted Expenses, other
than management fees payable to affiliates of Borrower, and (y)
Extraordinary Expenses approved by Lender, such approval not to be
unreasonably withheld, conditioned or delayed, for the month in which
such Collection Period ends;
(iv) Fourth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the interest due under the Note
on the next Payment Date;
(v) Fifth, to the Borrower Remainder Subaccount until the
amount on deposit therein is equal to the greater of (x) the amount, if
any, by which the Net Sales Proceeds shall exceed the Release Prices
for all Lots and Release Parcels released from the lien of the Mortgage
during the month in which such Collection Period ends pursuant to
Section 8.7 of the Loan Agreement and (y) the sum of $20,000 plus the
total of all such amounts that were required to be deposited under this
paragraph in any prior Collection Period to the extent that such
amounts were not previously deposited, until the aggregate amount of
such amounts deposited under this clause (y) shall equal $711,000;
<PAGE>
(vi) Sixth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the outstanding Indebtedness; and
(vii) Lastly, to the Borrower Remainder Subaccount.
(B) IF THE BALANCE IN THE INTEREST RESERVE ACCOUNT SHALL BE
LESS THAN THE INTEREST DUE UNDER THE NOTE ON THE NEXT PAYMENT DATE:
(i) First, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the interest due under the Note
on the next Payment Date; and
(ii) Second, to the Tax and Insurance Impound Fund Subaccount
until the amount on deposit therein is equal to the amount required to
be deposited in the Tax and Insurance Escrow Account (as defined in the
Loan Agreement) on the next Payment Date in accordance with Section 8.1
of the Loan Agreement;
(iii) Third, to the Replacement Escrow Fund Subaccount until
the amount on deposit therein is equal to the amount required to be
deposited in the Replacement Reserve Account (as defined in the Loan
Agreement) on the next Payment Date in accordance with Section 8.3 of
the Loan Agreement;
(iv) Fourth, to the Operating Expense Subaccount until the
amount on deposit therein is equal to (x) the Budgeted Expenses, other
than management fees payable to affiliates of Borrower, and (y)
Extraordinary Expenses approved by Lender, such approval not to be
unreasonably withheld, conditioned or delayed, for the month in which
such Collection Period ends;
(v) Fifth, to the Borrower Remainder Subaccount until the
amount on deposit therein is equal to the amount, if any, by which the
Net Sales Proceeds shall exceed the Release Prices for all Lots and
Release Parcels released from the lien of the Mortgage during the month
in which such Collection Period ends pursuant to Section 8.7 of the
Loan Agreement;
(vi) Sixth, to the Monthly Debt Service Subaccount until the
amount on deposit therein is equal to the outstanding Indebtedness; and
(vii) Lastly, to the Borrower Remainder Subaccount.
(C) NOTWITHSTANDING THE FOREGOING, PROCEEDS FROM THE SALE OF A
RELEASE PARCEL OR LOT IN AN AMOUNT EQUAL TO THE RELEASE PRICE FOR SUCH RELEASE
PARCEL OR LOT SHALL, UPON DEPOSIT IN THE CASH COLLATERAL ACCOUNT, BE
SPECIFICALLY ALLOCATED TO THE MONTHLY DEBT SERVICE ACCOUNT AND SUCH AMOUNT
SHALL, AT THE OPTION OF LENDER, EITHER, (I) BE APPLIED TO THE INDEBTEDNESS IN
ACCORDANCE WITH SECTION 8.7.3(a) OF THE LOAN AGREEMENT OR (II) BE APPLIED TO THE
SATISFACTION OF BORROWER'S OBLIGATION UNDER SECTION 8.12 OF THE LOAN AGREEMENT.
(b) The Lender or the Servicer shall, provided that no Event
of Default shall exist, disburse:
(i) Amounts allocated to the Tax and Insurance Impound Fund
Subaccount to the Tax and Insurance Escrow Account on each Payment Date
for further disbursement therefrom as set forth in the Loan Agreement;
<PAGE>
(ii) Amounts allocated to the Replacement Escrow Fund
Subaccount to the Replacement Reserve Account on each Payment Date for
further disbursement therefrom as set forth in the Loan Agreement;
(iii) Amounts allocated to the Monthly Debt Service Subaccount
to the Lender on each Payment Date to pay amounts due under the Note
and the Loan Agreement;
(iv) Amounts allocated to the Operating Expense Subaccount on
the last Business Day of each week to the Operating Account set forth
on Exhibit D annexed hereto.
(v) Amounts allocated to the Borrower Remainder Subaccount on
each Payment Date to the account set forth on Exhibit D annexed hereto.
Section 4. Fees.
(a) The Borrower shall pay the fees of the Deposit Bank in
accordance with the customary fees charged by the Deposit Bank for the services
described herein, as such fees are established from time to time.
(b) Upon the request of the Borrower, the Lender shall direct
the Deposit Bank to include their fees in an account analysis statement.
Section 5. Termination.
(a) The Lender may replace the Deposit Bank with a new Deposit
Bank upon ten (10) days' notice to the Borrower. The Borrower hereby agrees that
it shall take all reasonable action necessary to facilitate the transfer of the
respective obligations, duties and rights of the Deposit Bank to the successor
thereof selected by the Lender in its sole discretion.
(b) The Lender shall terminate this Agreement upon the
satisfaction in full of the Obligations and return to Borrower all monies then
held in the Cash Collateral Account and the Tax and Insurance Impound Fund
Account after liquidating all Permitted Investments.
Section 6. Certain Rights and Obligations of Borrower.
(a) Lender may, at its option, require one or more of the
following at any time or from time to time:
(i) Borrower or the Manager shall immediately execute and
deliver to each of the credit card companies with which the Borrower or
the Manager has entered into merchant's or other credit card agreements
with respect to the Property a Payment Direction Letter in the form of
Exhibit B hereto directing that all Receipts payable with respect to
the Property in accordance with such merchant's agreements or otherwise
shall be transferred instead by wire transfer or the Automated
Clearinghouse System to the Clearing Bank for deposit in the Clearing
Account.
<PAGE>
(ii) Borrower or the Manager shall immediately instruct all
Persons from whom Borrower shall receive regularly recurring payments
and that presently or hereafter maintain open accounts with Borrower or
the Manager with respect to the Property or with whom the Manager or
the Borrower presently or hereafter do business on an "accounts
receivable" basis with respect to the Property to deliver all such
regularly recurring payments due under such accounts to the Lockbox
established by the Clearing Bank pursuant to the Instruction Letter in
the form of cashier's checks or equivalent instruments for the payment
of money. Neither the Borrower nor the Manager shall direct any such
Person to make payments due under such accounts in any other manner.
(iii) Borrower or the Manager shall immediately execute and
deliver to any present or future tenant of the Property a Payment
Direction Letter in the form of Exhibit C hereto directing such tenant
to send all payments, whether in the form of checks, cash, drafts,
money orders or any other type of payment whatsoever, and whether of
rent or any other item payable to the Borrower, directly to the
Lockbox. The foregoing requirements need not be satisfied with respect
to any lease executed after the date hereof to the extent the terms and
conditions of the Payment Direction Letter are incorporated in such
lease.
(iv) If notwithstanding the provisions of this Section 6(a),
Borrower or Manager (or any affiliate thereof) receives any Receipts
then (x) Borrower or Manager (or such affiliate) shall be deemed to
hold such Receipts in trust for Lender and (y) the Borrower and the
Manager shall deposit with the Clearing Bank within one Business Day of
receipt all such Receipts received by the Borrower or the Manager (or
such affiliate).
(b) Upon request of Lender, Borrower shall deliver to Lender
such evidence as Lender may reasonably request to evidence that Borrower is
complying with the provisions of this Section 6(a). Without the prior written
consent of the Lender, neither the Borrower nor the Manager shall (i) terminate,
amend, revoke or modify any Payment Direction Letter in any manner or (ii)
direct or cause any credit card company or any tenant to pay any amount in any
manner other than as provided specifically in the related Payment Direction
Letter, respectively.
<PAGE>
(c) The Borrower hereby pledges, transfers and assigns to the
Lender, and grants to the Lender, as additional security for the payment and
performance of the Obligations, a continuing perfected first priority security
interest in and to, and a first lien upon,
(i) the Cash Collateral Account, the Clearing Account, the Tax
and Insurance Impound Fund Account, the Property Account and all of the
Borrower's right, title and interest in and to all cash, property or
rights transferred to or deposited therein from time to time,
(ii) all earnings, investments and securities held in the Cash
Collateral Account and the Tax and Insurance Impound Fund Account in
accordance with this Agreement and
(iii) any and all proceeds of the foregoing. This Agreement
and the pledge, assignment and grant of security interest made hereby
shall secure payment of all amounts payable by the Borrower to the
Lender under the Note and the other Obligations. The Borrower
acknowledges that the Servicer, Clearing Bank and Deposit Bank are
acting as the agent of, and at the direction of, the Lender in
connection with the subject matter of this Agreement. The Borrower
further agrees to execute, acknowledge, deliver, file or do at its sole
cost and expense, all other acts, assignments, notices, agreements or
other instruments as the Lender may reasonably require in order to
effectuate, assure, secure, assign, transfer and convey unto the Lender
any of the rights granted by this Agreement and to more fully perfect
and protect any lien or security interest granted hereby.
(d) In its sole discretion, the Borrower may, from time to
time deposit amounts into the Cash Collateral Account in respect of any Mortgage
Subaccount from sources of the Borrower other than those received by the
Clearing Bank with respect to the then-current Collection Period; provided, that
if the Borrower deposits such amounts, the amounts deposited shall be subject to
all of the terms hereof as if not separately deposited by the Borrower, and may
not be withdrawn except as otherwise provided for in this Agreement. Nothing
contained herein shall impair or otherwise limit Borrower's obligations to
timely make the payments (including, without limitation, interest and principal)
required by the Note, the Loan Agreement and the other Loan Documents, it being
understood that such payments shall be so timely made in accordance with the
Loan Documents regardless of the amounts on deposit in the Clearing Account,
Cash Collateral Account and/or Tax and Insurance Impound Fund Account.
(e) Borrower shall use amounts allocated to the Operating
Expense Subaccount with respect to the payment of operating expenses or capital
expenditures only for payment of checks made by the Borrower for the payment of
expenses incurred in the ordinary course of business of the ownership and
operation of the Property or for the payment of expenditures approved by the
Lender whether in an Approved Budget or otherwise.
(f) If the actual Operating Expenses paid during any
Collection Period are less than the amount transferred to the Operating Account
during such Collection Period, the amount of such difference shall promptly be
deposited by Borrower back into the Cash Collateral Account, in any event no
later than thirty (30) days after the end of the applicable Collection Period,
such amount to be applied in accordance with Section 3 hereof when such sum is
redeposited into the Cash Collateral Account. Within thirty (30) days after the
end of each Collection Period, Borrower shall prepare and deliver to Lender a
financial statement in form and substance satisfactory to Lender in all material
respects setting forth all amounts expended for Operating Expenses during such
Collection Period, including showing variances from budget and setting forth a
short explanation of any variance in excess of ten percent (10%) of the budget
line item in question and identifying any payment made to an affiliate and the
reasons therefor. Each such financial statement shall be certified by an officer
of Borrower as being true, correct and complete in all material respects and
include a certification that all amounts transferred to the Operating Account
pursuant to this Agreement were expended for Operating Expenses or capital
expenditures in accordance with this Agreement or have been or are being
returned to the Cash Collateral Account as provided above. Borrower shall
promptly deliver to Lender such further documentation (including, without
limitation, invoices, canceled checks or copies of contracts) and information as
Lender may reasonably request regarding any payments described in Borrower's
financial statements. If Borrower shall fail to deposit any excess funds in the
Cash Collateral Account or provide its required financial statements or, after
written request of Lender, evidence of expenditures, in each case, within the
time periods provided in the preceding sentences and such failure continues for
ten (10) or more days after written notice of such failure, then in addition to
any other remedies which Lender may have with respect thereto, Lender may elect
not to fund the Operating Expense Subaccount from monies in the Cash Collateral
Account or Lender may continue to hold the funds in the Operating Expense
Subaccount until such failure is cured.
<PAGE>
Section 7. Certain Rights of Lender.
(a) The parties agree that the Deposit Bank shall pay over to
the Lender all amounts deposited in any account maintained hereunder on demand,
without notice to the Borrower, provided, that in making such demand, the Lender
gives notice to the Deposit Bank, in writing, signed by the Lender or an
authorized agent thereof, that an Event of Default under the Loan Agreement has
occurred and is continuing. Lender shall give to Borrower a copy of any such
notice given to Deposit Bank, provided that failure to give any such copy shall
not affect any such notice to Deposit Bank. Notwithstanding the foregoing, the
Borrower shall not be deemed to have waived any rights the Borrower may have
against the Lender if it is determined that the Lender acted improperly.
(b) Lender may exercise in respect of the Collateral all
rights and remedies available to Lender hereunder or under the other Loan
Documents or otherwise available at law or in equity. Without limiting the
generality of the foregoing or the provisions of paragraph (a) above, upon the
occurrence and during the continuance of an Event of Default, Borrower
acknowledges and agrees that it will have no further right to request or
otherwise require Lender to disburse funds from the Clearing Account, the Cash
Collateral Account or the Tax and Insurance Impound Fund Account in accordance
with the terms of this Agreement, it being agreed that Lender may, at its
option,
(i) direct the Deposit Bank to continue to hold the funds in
the Cash Collateral Account and the Tax and Insurance Impound Fund
Account and/or
(ii) continue from time to time to apply all or any portion of
the funds held in the Cash Collateral Account or Tax and Insurance
Impound Fund Account to any payment(s) which such funds could have been
applied to prior to such Event of Default (or to pay Operating Expenses
directly), to the extent and in such order and manner as Lender in its
sole discretion may determine, and/or
(iii) direct that the Deposit Bank or Clearing Bank from time
to time disburse all or any portion of the funds held in the Cash
Collateral Account or the Tax and Insurance Impound Fund Account or
other Collateral then or thereafter held by the Deposit Bank or
Clearing Bank, as applicable, to Lender, in which event Lender may
apply the funds held in the Cash Collateral Account, the Tax and
Insurance Impound Fund Account or other Collateral to the Obligations
in any order and in such manner as Lender may determine in its sole
discretion.
(c) Upon the occurrence and during the continuance of any
Event of Default, Lender may, at any time or from time to time, collect,
appropriate, redeem, realize upon or otherwise enforce its rights with respect
to the Collateral, without notice to Borrower and without the need to institute
any legal action, make demand, exhaust any other remedies or otherwise proceed
to enforce its rights.
<PAGE>
(d) No failure on the part of Lender to exercise, and no delay
in exercising, any right under this Agreement or the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right under this Agreement or the other Loan Documents. The remedies
provided in this Agreement, the Note, the Loan Agreement and the other Loan
Documents are cumulative and not exclusive of any remedies provided at law or in
equity.
Section 8. Casualty and Condemnation Proceeds Subaccount;
Extraordinary Receipts Subaccount.
Notwithstanding anything to the contrary contained herein, the
following items of Receipts shall be deposited and held in the Mortgage
Subaccounts described below and shall be applied in the order of priority set
forth in this Section 8, and Borrower shall advise Lender at the time of receipt
thereof of the nature of such Receipt so that Lender shall have sufficient time
to instruct the Deposit Bank to deposit and hold such amounts in the appropriate
Mortgage Subaccount:
(a) Proceeds of any insurance, including, without limitation,
business interruption insurance, which amounts shall be deposited in the
Casualty and Condemnation Proceeds Subaccount and shall be applied (by
instructions of Lender or Servicer to the Deposit Bank) in accordance with the
provisions of the Loan Agreement applicable thereto.
(b) Condemnation awards, which amounts shall be deposited in
the Casualty and Condemnation Proceeds Subaccount and shall be applied (by
instructions of Lender or Servicer to the Deposit Bank) in accordance with the
provisions of the Loan Agreement applicable thereto.
(c) Real estate tax refunds (net of any reasonable and
customary fees and disbursements of tax certiorari counsel deducted from such
refund to pay such counsel's fee), which amount shall be deposited in the
Extraordinary Receipts Subaccount and shall thereafter be transferred (by
instructions of Lender to the Deposit Bank) to the Property Account to the
extent required to pay refunds due to any tenants of the Property (based on a
certificate of Borrower as to the tenants entitled to receive such refunds and
the amounts thereof), except Lender reserves the right to pay (or have the
Servicer pay) any such tenant directly using monies so deposited in the
Extraordinary Receipts Subaccount, in lieu of transferring such monies to the
Operating Account for such payment. Lender or Servicer shall apply any excess,
after the aforesaid payment, as if ordinary Receipts deposited in the Cash
Collateral Account. If the fees and disbursements of tax certiorari counsel
described in this paragraph (c) above shall not have been deducted from the real
estate tax refunds by such counsel prior to payment of such refunds to Borrower,
then such fees and disbursements may be paid as part of Budgeted Expenses,
provided such fees and disbursements are commercially reasonable.
(d) Damages or other payments in settlement of claims by
Borrower against third parties in connection with the Property, sums paid with
respect to a modification of any Lease or otherwise paid in connection with
Borrower taking any action under any Lease (e.g., granting a consent) or waiving
any provision thereof, and any other extraordinary event pursuant to which
Borrower receives payments or income (in whatever form) derived from or
generated by the use, ownership or operation of the Property, shall be deposited
in the Extraordinary Receipts Subaccount. With respect to any monies deposited
in the Extraordinary Receipts Subaccount pursuant to this paragraph (d), Lender
shall direct Deposit Bank to transfer such amounts to the Clearing Account and
to apply the amount so deposited as if ordinary Receipts to be applied in
accordance with the terms of this Agreement, provided that if any such payment
<PAGE>
described in this paragraph (d) exceeds $100,000, such amounts shall be
transferred to the Clearing Account and applied as if ordinary Receipts only to
the extent that the funds in the Clearing Account for such month shall be
insufficient to make all payments to be made for such month prior to the
disbursement to the Borrower Remainder Subaccount.
Section 9. Successors and Assigns; Assignments; Agents.
(a) This Agreement shall bind and inure to the benefit of and
be enforceable by the Borrower, the Lender and the Manager and their respective
successors and assigns.
(b) The Lender shall have the right to assign or transfer
rights and obligations under this Agreement without limitation to any assignee
or transferee of the Loan and the Loan Documents. Any assignee or transferee
shall be entitled to all the benefits afforded the Lender under this Agreement;
provided, that such assignee or transferee shall upon written request deliver to
the other parties hereto written confirmation that such assignee or transferee
agrees to be bound by the terms of this Agreement and is also the assignee or
transferee of the Note and the other Loan Documents.
(c) The Borrower shall have the right to assign and transfer
its rights and obligations hereunder only with the prior written consent of the
Lender.
(d) Any duties or actions of the Lender hereunder may be
performed by the Lender or its agent(s), including without limitation, any
Servicer or trustee in a Securitization, which includes the Loan.
Section 10. Amendment.
This Agreement may be amended from time to time in writing by
all parties hereto. All amendments to this Agreement shall be in writing.
Section 11. Notices.
Notices to the parties hereto shall be addressed and delivered
in the manner set forth in the Loan Agreement. Unless otherwise expressly
provided herein, all such notices, to be effective, shall be in writing
(including by facsimile), and shall be deemed to have been duly given or made
(a) when delivered by hand or by nationally recognized overnight carrier, (b)
upon receipt after being deposited in the mail, certified mail and postage
prepaid or (c) in the case of facsimile notice, when sent and electronically
confirmed, addressed as set forth above.
Section 12. Limitation on Liability.
Lender shall not be liable for any acts, omissions, errors in
judgment or mistakes of fact or law, including, without limitation, acts,
omissions, errors or mistakes with respect to the Collateral, except for those
arising as a result of Lender's gross negligence or willful misconduct. Without
limiting the generality of the foregoing, except as otherwise expressly provided
for herein or as required by applicable law, Lender shall have no duty as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any parties or any other right pertaining to any Collateral. Lender is hereby
authorized by Borrower to act on any written instruction believed by Lender in
good faith to have been given or sent by Borrower.
<PAGE>
Section 13. Mortgagee-in-Possession.
Borrower hereby confirms and agrees that notwithstanding the
provisions of this Agreement, Borrower retains sole control of the operation and
maintenance of the Property, subject to the obligations of Borrower under the
Loan Agreement, the Assignment of Leases and Rents and the other Loan Documents,
and Lender is not and shall not be deemed to be a mortgagee in possession.
Section 14. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the
parties hereto have executed this CASH MANAGEMENT AGREEMENT in several
counterparts (each of which shall be deemed an original) as of the date first
above written.
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
a Delaware limited liability company
By:______________________________________
Name:
Title:
MANAGER:
U.S. GOLF MANAGEMENT, INC.
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
BORROWER:
PELICAN STRAND, LTD.,
a Florida limited partnership
By: Pelican Strand Development Corporation, its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
AGREEMENT
BY AND BETWEEN
GOLF VENTURES, INC.
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
WITH RESPECT TO
CAPITAL STOCK OF
GOLF VENTURES, INC.
Dated as of July 2, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms..................................................1
Section 1.2. Principles of Construction.....................................9
ARTICLE II
TRANSFER OF STOCK
ARTICLE III
CLOSING
Section 3.1. Closing.......................................................10
Section 3.2. GVI's Deliveries at the Closing...............................10
Section 3.3. CSFB's Actions at the Closing.................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GVI
Section 4.1. Intentionally Omitted.........................................11
Section 4.2. Organization of GVI...........................................11
Section 4.3. Capital Stock.................................................11
Section 4.4. Subsidiaries..................................................12
Section 4.5. Authorization.................................................13
Section 4.6. No Conflicts or Violation.....................................13
Section 4.7. Financial Statements..........................................13
Section 4.8. Absence of Certain Changes....................................14
Section 4.9. Title to Assets...............................................17
Section 4.10. Real Property................................................17
Section 4.11. Contracts; Compliance with Contracts.........................19
Section 4.12. Intentionally Omitted........................................21
Section 4.13. No Powers of Attorney........................................21
Section 4.14. Accounts Receivable..........................................21
Section 4.15. Consents and Approvals.......................................22
Section 4.16. Litigation...................................................22
Section 4.17. Compliance with Law; Permits and Licenses....................22
Section 4.18. Proprietary Rights...........................................22
Section 4.19. Taxes........................................................23
Section 4.20. Safety and Other Regulations.................................24
Section 4.21. Environmental Matters........................................24
Section 4.22. Labor Matters................................................26
Section 4.23. Insurance....................................................26
Section 4.24. Employee Benefits............................................27
Section 4.25. Interests in Clients, Suppliers, Etc.........................29
Section 4.26. Guaranties...................................................29
Section 4.27. Brokers......................................................29
<PAGE>
Section 4.28. Liabilities..................................................29
Section 4.29. Disclosure...................................................29
Section 4.30. Restructuring................................................29
ARTICLE V
[Intentionally Omitted]
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Payment of Expenses............................................30
Section 6.2. Further Action................................................30
Section 6.3. Restructuring.................................................31
ARTICLE VII
ACTIONS BY GVI AND CSFB AFTER THE CLOSING
Section 7.1. Confidentiality...............................................31
Section 7.2. Reporting Requirements........................................32
Section 7.3. Access to Information.........................................33
Section 7.4. Registration Rights...........................................33
Section 7.5. Conduct of Business...........................................37
Section 7.6. Board of Directors............................................37
Section 7.7. Financings....................................................37
Section 7.8. Equity Transactions...........................................38
Section 7.9. Certain Actions...............................................38
Section 7.10. Issuances of Reserved Equity.................................38
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Survival of Representations and Warranties....................39
10.01 Survival of Representations, Warranties, Covenants and Agreements....39
Section 8.2. Indemnification...............................................39
Section 8.3. Notice of Claims..............................................40
ARTICLE IX
MISCELLANEOUS
Section 9.1. Specific Performance..........................................40
Section 9.2. Assignment....................................................40
Section 9.3. Notices.......................................................41
Section 9.4. Limited Recourse..............................................42
Section 9.5. Limitation on Liability.......................................42
<PAGE>
Section 9.6. Choice of Law.................................................43
Section 9.7. Jurisdiction, Venue, Service of Process.......................43
Section 9.8. Appointment of Agent for Service of Process...................43
Section 9.9. Entire Agreement; Amendments and Waivers......................43
Section 9.10. Counterparts; Headings.......................................44
Section 9.11. Severability.................................................44
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 - Holders of Series A Preferred Stock
Schedule 4.3 - Equity Ownership and Rights in GVI and Subsidiaries
Schedule 4.3(a) - Capitalization Chart
Schedule 4.3(d) - Reserved Equity
Schedule 4.4 - Subsidiaries
Schedule 4.7(b) - Liabilities
Schedule 4.7(b)(i) - Certain Closing Date Liabilities
Schedule 4.7(b)(ii) - Unsecured Debt
Schedule 4.8(b) - Absence of Certain Changes
Schedule 4.9 - Assets
Schedule 4.10(a) - Real Property
Schedule 4.10(b) - Easements
Schedule 4.10(d) - Zoning
Schedule 4.10(e) - Permits
Schedule 4.10(j) - Purchase Options
Schedule 4.10(k) - Encroachments
Schedule 4.10(l) - No Structural Defects
Schedule 4.11(a) - Contracts
Schedule 4.11(c) - Compliance with Contracts
Schedule 4.11(d) - Fees and Compensation
Schedule 4.14 - Accounts Receivable
Schedule 4.15 - Consents and Approvals
Schedule 4.16 - Litigation
Schedule 4.17(a) - Compliance with Law
<PAGE>
Schedule 4.17(b) - Permits and Licenses
Schedule 4.18(a) - Exceptions to Intangible Rights
Schedule 4.18(b) - Infringement
Schedule 4.18(c) - Ownership of Source Code
Schedule 4.19(c) - Tax Returns
Schedule 4.20 - Safety and Other Regulations
Schedule 4.21 - Environmental Matters
Schedule 4.22(a) - Labor Agreements
Schedule 4.22(b) - Labor Laws
Schedule 4.23 - Insurance
Schedule 4.24 - Employee Benefits
Schedule 4.30(a) - Actions Required for Restructuring
Exhibits:
Exhibit 1.1 - Shareholder Consent
Exhibit 1.2 - List of Shareholders and Holdings Required to Effect
Shareholder Consent
Exhibit 2 - Form of Articles of Amendment to the Articles of
Incorporation
Exhibit 3.1 - Consents and Releases
Exhibit 3.2 - List of Shareholders and Holdings of Shareholders Who
Executed and Delivered Consents and Releases
Exhibit 4.7(a) - Financial Statements
Exhibit 4.7(c) - Business Plans
<PAGE>
THIS AGREEMENT, dated as of July 2, 1998 (together with all
schedules and exhibits hereto, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the "Agreement"), is by
and between Golf Ventures, Inc., a corporation organized and existing under the
laws of Utah ("GVI"), and Credit Suisse First Boston Mortgage Capital LLC, a
limited liability company organized and existing under the laws of Delaware
(together with its successors and permitted assigns, "CSFB").
All capitalized terms used herein shall have the respective
meanings set forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, In consideration of services provided pursuant to the
letter agreement regarding Structuring Advisory Fee dated as of July 2, 1998
among Credit Suisse First Boston Mortgage Capital LLC, GVI and the Subsidiaries,
and other good and valuable consideration, receipt of which is hereby
acknowledged, GVI has agreed to transfer to CSFB 13,433,528 shares of Common
Stock of GVI upon the terms and subject to the conditions of this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1........Defined Terms. Capitalized words and
phrases used and not otherwise defined in this Agreement shall have the
following meanings:
"ACM" shall mean any asbestos-containing materials.
"Affiliate" shall mean, with respect to any Person, (x) any
Person controlling, controlled by or under common control with, whether by
virtue of ownership or otherwise, such Person and (y) any spouse, parent or
sibling of any such Person who is a natural person, and any ancestor or lineal
descendent of such spouse, parent or sibling. For purposes of this Agreement,
Affiliates of GVI shall include, but not be limited to, (i) any partners,
members or shareholders, as the case may be (other than in their capacity as
shareholders of GVI or of any company whose stock is publicly traded, where such
shareholders do not control such company) of GVI or any Subsidiary, (ii) the
managing agent of the Owned Real Property, if any, and any of the shareholders,
members or partners, if any, as the case may be, of the managing agent (other
than in their capacity as shareholders of any company whose stock is publicly
traded, where such shareholders do not control such company) and (iii) any
Person which would constitute an Affiliate of any Person described above
pursuant to clause (x) or (y) above.
"Affiliated Group" shall mean any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
"Agreement" is defined in the preamble.
"Amended Articles" shall mean the Articles of Amendment to the
Articles of Incorporation of GVI to be filed with the Department of Commerce of
the State of Utah, substantially in the form set forth as Exhibit 2.
"Approved Accountant" shall mean one of the so-called "Big
Six" accounting firms or such other independent certified public accountant of
nationally recognized standing selected by the Person required to deliver the
applicable Financial Statements and other reports specified herein, which
Approved Accountant shall be approved by CSFB, which approval shall not be
unreasonably withheld, delayed or conditioned.
<PAGE>
"Assets" is defined in Section 4.9.
"Balance Sheet" shall mean the unaudited consolidated balance
sheet of GVI and the Subsidiaries as of March 31, 1998.
"Benefit Plan" shall mean any employment, consulting severance
or other similar contract, arrangement or policy, and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, supplemental unemployment benefits, material vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees beneficiary association"
as defined in Section 501(c)(9) of the Code providing any of such benefits), or
for deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights, stock purchases or awards and any other material form of
incentive compensation or post-retirement insurance compensation or benefits,
including any Employee Benefit Plan which is entered into maintained,
contributed to or required to be contributed to or with respect to which any
liability is borne, as the case may be, by GVI or an ERISA Affiliate, or under
which GVI or any ERISA Affiliate could incur any material liability, and which
covers any employee or former employee of GVI or an ERISA Affiliate whether or
not subject to ERISA.
"Board" is defined in Section 7.6.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are required
or permitted by law to close.
"Business Plans" is defined in Section 4.7.
"CSFB" is defined in the preamble.
"CSFB's Consultant" shall mean EMG Consultants, or such other
similarly qualified person reasonably satisfactory to CSFB.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.ss.9601, et seq.), as the same may be amended from
time to time.
"Closing" is defined in Section 3.1.
"Closing Date" shall mean the date of execution and delivery
of this Agreement.
"Closing Period" is defined in Section 7.7(b).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Common Stock" is defined in Section 4.3(a).
"Company Stock" shall mean the Common Stock and the Preferred
Stock.
"Confidential Information" is defined in Section 7.1.
<PAGE>
"Consents and Releases" shall mean the Consents and Releases
set forth as Exhibit 3.1 hereto.
"Contracts" shall mean all agreements, contracts, commitments,
undertakings, instruments, indentures, Leases, Licenses, authorizations,
concessions and franchises, oral or written, to which GVI or any Subsidiary is a
party, an obligor or a beneficiary.
"Control" (and the correlative terms "controlled by" and
"controlling") shall mean the power to direct the business and affairs of the
entity in question by reason of the ownership of beneficial interests, by
contract or otherwise.
"Default Rate" shall mean a rate per annum equal to nine and
one-half percentage points (9.5%) in excess of the Treasury Rate.
"Demand Registration" is defined in Section 7.4(a).
"Designated Officer" shall mean, in the case of a corporation,
the chief financial officer of such corporation or such other officer of such
corporation as is fully familiar with the financial affairs of such corporation
and is approved by GVI. In the case of a partnership, such officer of such
partnership's managing general partner as satisfies the first sentence of this
definition. In the case of a limited liability company, such officer of such
limited liability company's managing member as satisfies the first sentence of
this definition.
"Designee" is defined in Section 9.8.
"Easements" is defined in Section 4.10(b).
"Employee Benefit Plan" shall mean any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Encumbrance" shall mean any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, restriction (other than legal
restrictions under the Securities Act and corollary state securities laws),
encumbrance or other right of a third party.
"Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, claims, liens, notices of
noncompliance or violations, investigations or proceedings arising under any
Environmental Law or any permit issued under any such Environmental Law
(hereinafter "Designated Claims") including, without limitation, (a) any and all
Designated Claims by Governmental Authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Designated Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
<PAGE>
"Environmental Laws" shall mean CERCLA; The Resource
Conservation and Recovery Act, 42 U.S.C. ss.1601, et seq.; The Hazardous
Substances Transportation Act, 49 U.S.C. ss.1801, et seq.; The Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.11001, et seq.;
The Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.; The Clean Air Act,
42 U.S.C.. ss.7401 et seq., The Clean Water Act, 33 U.S.C. ss.1251 et seq.; The
Safe Drinking Water Act, 42 U.S.C. ss.300 et seq.; as any of the foregoing may
be amended from time to time; and any other federal, state and local laws or
regulations, codes, statutes, orders, decrees, judgments or injunctions, now or
hereafter issued, promulgated, approved or entered thereunder, relating to
pollution, contamination or protection of the environment, including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata, buildings or facilities) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which, together with the GVI or a Subsidiary of the GVI
would be deemed to be a "single employer" within the meaning of Sections 414(b),
(c), (m) or (o) of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" shall mean the documents described in
(i) Section 4.7(a) and attached hereto as Exhibit 4.7 and (ii) Section 7.2.
"Financing" shall mean any financing, underwriting, offering,
capital transaction or similar transaction of, by or in respect of GVI or any
Subsidiary.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the effective date of the applicable
financial report.
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"GVI" is defined in the preamble.
"GVI's Advisors" is defined in Section 4.27.
"Hazardous Substances" shall mean asbestos, ACM, PCBs,
urea-formaldehyde and urea-formaldehyde foam insulation, nuclear fuel or waste,
petroleum products and any hazardous waste, toxic substance, related components,
related constituents, pollutant or contaminant, including, without limitation,
any substance defined or treated as a "hazardous substance", "extremely
hazardous substance" or "toxic substance" (or comparable term) in any applicable
Environmental Law and any other material which may give rise to Environmental
Costs.
<PAGE>
"Improvements" is defined in Section 4.10(a).
"Indemnified Party" is defined in Section 8.2.
"Indemnifying Party" is defined in Section 8.2.
"Independent Director" shall mean a person who is not at the
time of appointment, and has not been at any time in the preceding five years,
(i) a director, officer, member, employee or partner of GVI or any Affiliate of
GVI; (ii) a customer, supplier or other Person who derives more than ten percent
(10%) of his/her/its purchases or revenues from his/her/its activities with GVI
or any Affiliate of GVI; (iii) a Person controlling or under common control with
any such director, officer, member, employee, partner, customer, supplier or
other Person or (iv) a member of the immediate family of any such director,
officer, member, employee, partner, customer, supplier or other Person.
"Intangible Rights" is defined in Section 4.18.
"InterCompany Transaction" has the meaning set forth in
Section 1.1502-13 of the Treasury Regulations promulgated under the Code.
"Issuance" is defined in Section 7.10.
"knowledge" shall mean for the purpose of this Agreement the
actual knowledge of the Person in question, after having made due inquiry. If
any entity with respect to which this term would be applicable is a corporation,
knowledge of such entity shall refer to actual knowledge of its officers or
directors after having made due inquiry. If any such entity is a partnership,
knowledge of such entity shall refer to actual knowledge of each of its partners
(directly or indirectly), after having made due inquiry. If any such entity is a
limited liability company, knowledge of such entity shall refer to actual
knowledge of its managing members after having made due inquiry.
"Lease" shall mean any lease, sublease or sub-sublease,
letting, License, concession or other agreement (whether now or hereafter in
effect) entered into by GVI or any Subsidiary (or its respective
predecessor-in-interest) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in any
real property, and every modification, amendment or other agreement relating to
such lease, sublease, sub-sublease, or other agreement entered into in
connection with such lease, sublease, sub-sublease, or other agreement and every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
"Leased Real Property" is defined in Section 4.10(b).
"Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities,
whether now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
actually known to GVI, at any time in force.
"Licenses" shall mean all licenses (including Licenses for
Intangible Rights), Permits, certificates of public convenience, orders, and
other authorizations of any entity or federal, state, local, territorial and
foreign Governmental Authority, and all agencies thereof possessed by or granted
to the GVI or any Subsidiary.
<PAGE>
"Management Agreement" shall mean, the agreement pursuant to
which Manager is to provide management and other services.
"Manager" shall mean U.S. Golf Management, Inc. or such other
manager as shall be approved by CSFB in accordance herewith.
"Material Adverse Effect" shall mean any event or condition
that has a material adverse effect on (i) the business, assets, prospects,
properties, profits, operations or condition (financial or otherwise) of GVI or
any Subsidiary or (ii) the ability of GVI or any Subsidiary to perform its
obligations under this Agreement.
"Multi-employer Plan" has the meaning set forth in ERISA
Section 3(37).
"Net Operating Income" shall mean the amount obtained by
subtracting Operating Expenses from Gross Income from Operations.
"New Common Stock" is defined in Section 4.3(b).
"New Preferred Stock" is defined in Section 4.3(b).
"New Stock" shall mean the New Common Stock and the New
Preferred Stock, collectively.
"Notice of Redemption" means the Notice of Redemption of
Series A Preferred Stock provided by GVI to the Persons set forth on Schedule 1.
"Offer" is defined in Section 7.7(a).
"Offer Period" is defined in Section 7.7(b).
"Organizational Documents" shall mean, with respect to any
Person who is not a natural person, the certificate or articles of
incorporation, memorandum of association, articles of association, trust
agreement, by-laws, partnership agreement, limited partnership agreement,
certificate of partnership or limited partnership, limited liability company
articles of organization, limited liability company operating agreement or any
other organizational document, and all shareholder agreements, voting trusts and
similar arrangements with respect to its stock, partnership interests,
membership interests or other equity interests.
"Owned Real Property" is defined in Section 4.10(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA.
"PCBs" shall mean polychlorinated biphenyls.
"Permits" shall mean all approvals, consents, registrations,
franchises, permits, Licenses, variances, certificates of occupancy and other
authorizations with regard to zoning, landmark, ecological, environmental, air
quality, subdivision, planning, building or land use required by any
Governmental Authority for the construction, lawful occupancy and operation of
the Improvements and the actual and contemplated uses thereof.
<PAGE>
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Piggyback Registration" is defined in Section 7.4(c).
"Preferred Stock" shall mean the Series A Preferred and Series
D Preferred.
"Prohibited Transaction" shall mean a prohibited transaction
as described under Section 406 of ERISA or Section 4975 of the Internal Revenue
Code which is not the subject of a statutory exemption under Section 408(b) of
ERISA or an administrative exemption granted pursuant to Section 408(a) of
ERISA.
"Provider" is defined in Section 7.1.
"Recipient" is defined in Section 7.1.
"Registrable Securities" shall mean all or any portion of the
Stock and any additional securities of GVI acquired by CSFB.
"Registration Statement" is defined in Section 7.4(a).
"Regulations" is defined in Section 4.17.
"Related Party" shall mean any of the Persons described in
clauses (a)(ii) and (a)(iii) of Section 9.4.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Representative" shall mean any officer, director, principal,
agent, employee, counsel, consultant, independent auditor or actuary or other
representative of a Person.
"Restructuring" shall mean the restructuring of the
capitalization of GVI such that all outstanding shares of Series A Preferred
shall have been redeemed; the Amended Articles shall have been filed with the
Department of Commerce of the State of Utah; and all of the capital stock of GVI
shall be duly and validly authorized and issued and fully paid and
nonassessable.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Interest" shall mean any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
"Series A Preferred" is defined in Section 4.3(a).
"Series D Preferred" is defined in Section 4.3(a).
"Shareholder Consent" shall mean the Action by Written Consent
of Certain Shareholders dated June 9, 1998, a true and correct copy of which is
set forth as Exhibit 1.1 hereto.
<PAGE>
"Stock" shall mean the 13,433,528 shares of Common Stock of
GVI transferred to CSFB pursuant to this Agreement, together with any additional
securities issued in respect thereof (whether as a result of a stock split,
combination, dividend, distribution, or otherwise) or otherwise issued by GVI to
CSFB.
"Subsidiaries" shall mean each corporation or other Person as
to which GVI directly or indirectly (including through one or more Subsidiaries)
owns a majority of the outstanding shares of stock or other ownership interests
having voting power under ordinary circumstances to elect directors of such
corporation or other Persons performing similar functions for such entity, and
"Subsidiary" means any one of the foregoing.
"Tax" or "Taxes" shall mean any federal, state, local, or
foreign income, gross receipts, License, payroll, employment, excise, ad
valorem, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax, impost, duty, assessment, levy or charge of any kind whatsoever, including
any interest, penalty, addition thereto, or additional amount imposed by any
taxing authority with respect thereto, whether disputed or not.
"Tax Return" shall mean any return, filing, questionnaire,
information return or other document required to be filed, including, without
limitation, requests for extensions of time, filings made with estimated tax
payments, claims for refund and amended returns that may be filed, for any
period with any taxing authority (whether domestic or foreign) in connection
with any Tax (whether or not a payment is required to be made with respect to
such filing).
"Treasury Rate" shall mean a rate per annum equal to the
yield, as of the related determination date, calculated by linear interpolation
(rounded to the nearest one-thousandth of one percent (i.e., 0.001%)) of the
yields of noncallable United States Treasury obligations with terms (one longer
and one shorter) most nearly approximating the period from such determination
date to June 1, 2001, as determined in good faith by GVI on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by CSFB.
Section 1.2.......Principles of Construction. All references
to sections and schedules are to sections and schedules in or to this Agreement
unless otherwise specified. Unless otherwise specified, the words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. Unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined.
<PAGE>
ARTICLE II
TRANSFER OF STOCK
Subject to the terms and conditions of this Agreement, GVI
shall transfer, assign and convey to CSFB, and CSFB shall accept from GVI, on
the Closing Date, 13,433,528 shares of the Stock. To the extent that the audited
financial statements of GVI for the quarterly period including the Closing Date
(which audited financial statements shall be delivered to CSFB within one
business day of GVI's receipt thereof, and shall be acceptable to CSFB as to
accuracy and completeness) indicate that at the Closing Date, 24.9% of the
outstanding equity securities of GVI was greater than 13,433,528 shares of
Common Stock, then GVI shall issue to CSFB (or its designee) such additional
number of shares of Stock such that the aggregate number of shares issued to
CSFB or its permitted assigns pursuant to this Agreement shall equal 24.9% of
the outstanding equity securities of GVI as at the Closing Date.
ARTICLE III
CLOSING
Section 3.1.......Closing. Unless the parties otherwise agree
in writing, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at 9:00 a.m. local time on the Closing Date at the
offices of Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York
10038.
Section 3.2.......GVI's Deliveries at the Closing. At the
Closing:
(a) GVI shall deliver to CSFB certificate(s) registered in the
name of CSFB evidencing 13,433,528 shares of the Stock, free and clear of any
Encumbrances of any nature whatsoever, with requisite stock transfer tax stamps,
if any, attached.
(b) GVI shall cause to be delivered to CSFB the legal opinions
of Ray, Quinney & Nebeker, Rubin Baum Levin Constant & Friedman, and Haynes and
Boone, LLP, special counsel to GVI, addressed to CSFB and dated the Closing
Date, in form and substance reasonably satisfactory to CSFB.
(c) GVI shall cause to be delivered to CSFB (x) the
Shareholder Consent, duly executed by the requisite number of shareholders of
capital stock of GVI (a true and complete list of such shareholders is set forth
on Exhibit 1.2), (y) the Consents and Releases, duly executed by each holder set
forth on Exhibit 3.2 and (z) copies of all documentation GVI is required to and
plans to file with any Governmental Authority in order to effectuate the
Restructuring (including, without limitation, the Amended Articles and the
Shareholder Consent).
(d) GVI shall deliver to CSFB such additional documents,
certificates, payments, assignments, transfers and other deliveries as CSFB or
CSFB's counsel may reasonably request and as are customary to effect a closing
of the matters herein contemplated.
<PAGE>
Section 3.3.......CSFB's Actions at the Closing. At the
Closing:
(a) CSFB shall deliver to GVI such documents, certificates,
payments, assignments, transfers and other deliveries as GVI or GVI's counsel
may reasonably request and as are customary to effect a closing of the matters
herein contemplated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GVI
GVI hereby represents and warrants to CSFB as follows:
Section 4.1....... [Intentionally Omitted] .
Section 4.2.......Organization of GVI. GVI is duly organized,
validly existing and in good standing as a corporation under the laws of the
State of Utah and has full corporate power and authority to conduct its business
as it is presently being conducted and to own, lease and operate its properties
and assets. GVI is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where the nature of its business or its
ownership or use of property makes such qualification necessary, except where
the failure so to qualify would not have a Material Adverse Effect. True,
correct and complete copies of the Organizational Documents of GVI, as in effect
on the date hereof, have previously been delivered to CSFB.
Section 4.3.......Capital Stock. (a) GVI has authorized (i)
25,000,000 shares of common stock, par value $0.001 per share ("Common Stock"),
10,068,538 shares of which are issued and outstanding and none of which are
reserved for future issuance; (ii) 10,000,000 shares of preferred stock (A)
350,000 of which have been designated as Series A Preferred Stock, par value
$0.001 per share ("Series A Preferred"), 24,780 shares of which are issued and
outstanding and which are subject to redemption pursuant to the Notice of
Redemption, (B) 350,000 of which have been designated as Series B Preferred
Stock, par value $0.001 per share, none of which are outstanding, (C) 136,093 of
which have been designated as Series C Preferred Stock, par value $0.001 per
share, none of which are outstanding, and (D) 8,000,000 of which have been
designated as Series D Preferred Stock, par value $0.01 per share ("Series D
Preferred"), 6,672,578 shares of which are issued outstanding; and no shares of
any other class or series of capital stock are authorized, issued or
outstanding. The chart attached as Schedule 4.3(a) hereto accurately and
completely sets forth the capitalization of GVI as of the date hereof.
(b) Immediately after the filing of the Amended Articles with
the Department of Commerce of the State of Utah:
(i) GVI shall have authorized (A) 100,000,000 shares
of common stock, par value $0.001 per share ("New Common Stock"),
54,493,237 of which shall be reserved for future issuance and 5,594,235
of which shall be issued and outstanding; and (B) 10,000,000 shares of
preferred stock ("New Preferred Stock"), par value $0.001 per share,
none of which shall be designated, issued or outstanding; and no shares
of any other class or series of capital stock shall be authorized,
issued or outstanding.
<PAGE>
(ii) Each share of New Stock shall have been duly and
validly authorized; and each outstanding share of New Stock shall have
been duly and validly authorized and issued and fully paid and
non-assessable.
(iii) Each share of New Stock shall be free and clear
of all Encumbrances, including, without limitation, any agreement,
understanding or restriction affecting the voting rights or other
incidents of record or beneficial ownership pertaining to the Stock.
(c) Each share of Stock issued to CSFB on the Closing Date is
fully paid and non-assessable and is, and each share of Stock to be issued shall
be, duly and validly authorized and issued. Each share of Stock is free and
clear of all Encumbrances, including, without limitation, any agreement,
understanding or restriction affecting the voting rights or other incidents of
record or beneficial ownership pertaining to the Stock.
(d) Except as set forth on Schedule 4.3(d), there are no
subscriptions, options, warrants, calls, commitments, preemptive rights or other
rights of any kind outstanding for the purchase of, nor any securities
convertible or exchangeable for, nor any plans or agreements of any character
providing for the purchase, issuance or sale of, any equity interests of GVI.
There are no restrictions upon the voting or transfer of any Company Stock
pursuant to GVI's Organizational Documents or any agreement or other instrument
to which GVI is a party or by which GVI is bound.
Section 4.4.......Subsidiaries. Schedule 4.4 sets forth a
complete and accurate list of all of the Subsidiaries. Schedule 4.4 also
contains the jurisdiction of incorporation or formation of each of the
Subsidiaries, each jurisdiction in which each Subsidiary is qualified or
otherwise authorized to do business, the number of shares of capital stock or
other equity interests of each Subsidiary issued and outstanding and the
percentage ownership interest of GVI in each Subsidiary. All outstanding shares
of capital stock and other equity interests of the Subsidiaries have been duly
and validly authorized and issued and are fully paid and non-assessable. Except
as set forth on Schedule 4.4, all such outstanding shares or interests are owned
by GVI free and clear of any Encumbrances, including, without limitation, any
agreement, understanding or restriction affecting the voting rights or other
incidents of record or beneficial ownership pertaining to such shares or
interests. Except as set forth on Schedule 4.4, there are no subscriptions,
options, warrants, calls, commitments, preemptive rights or other rights of any
kind outstanding for the purchase of, nor any securities convertible into or
exchangeable for, nor any plans or agreements of any character providing for the
purchase, issuance or sale of, any equity interests of any Subsidiary. Schedule
4.4 sets forth a complete and accurate list of all agreements and other
instruments pursuant to which GVI or any Subsidiary is obligated or required,
under any circumstance, to make contributions to the capital of any Subsidiary.
Each Subsidiary is a corporation, partnership or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with full corporate, partnership or limited
liability company or other power and authority to conduct its business as it is
presently being conducted and to own, lease and operate its properties and
assets, and is duly qualified to do business and in good standing as a foreign
entity in each of the jurisdictions listed in Schedule 4.4, which are the only
jurisdictions where, by virtue of its businesses carried on or properties owned
or used, it is required to be so qualified, other than those jurisdictions where
the failure to be so qualified would not have a Material Adverse Effect. True,
complete and correct copies of the Organizational Documents of each Subsidiary,
as in effect on the date hereof, have previously been delivered to CSFB.
<PAGE>
Section 4.5.......Authorization. GVI has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder (including, without limitation, effecting the
Restructuring) and has taken all corporate action necessary to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, effecting the Restructuring) and to perform its
obligations hereunder and thereunder (including, without limitation, pursuant to
the Restructuring). This Agreement has been duly executed and delivered by GVI
and, assuming the due execution and delivery thereof by the other parties
thereto, is a legal, valid and binding obligation of GVI, enforceable against
GVI in accordance with its terms.
Section 4.6.......No Conflicts or Violation. Neither the
execution and delivery of this Agreement by GVI, or any other document to be
executed in connection with the transactions contemplated hereby will (a)
violate or conflict with any of the provisions of the respective Organizational
Documents of GVI or any Subsidiary, (b) with or without the giving of notice or
the lapse of time or both, violate or constitute a default under, or result in
the acceleration of or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any obligation under any Contract or other
instrument to which GVI or any Subsidiary is a party or by which either or GVI
or any Subsidiary is bound or to which any of their respective properties or
assets is subject, (c) result in the creation of any Security Interest or the
loss of any License or other contractual right or (d) violate or conflict with
any provision of any Regulations to which GVI or any Subsidiary is subject.
Section 4.7.......Financial Statements. (a) GVI has delivered
to CSFB copies of the following financial statements, attached hereto as Exhibit
4.7(a):
(i) the audited consolidated and consolidating balance sheets
of GVI and the Subsidiaries, as at December 31, 1996 and December 31,
1997 and at March 31, 1995, March 31, 1996 and March 31, 1997 and
related statements of income and retained earnings and changes in
financial position for the fiscal years ended on those dates, together
with supporting schedules and the reports thereon of BDO Seidman LLP
(in the case of those balance sheets and related statements as at
December 31, 1996 and 1997) and Jones, Jenson & Co. (in the case of
those balance sheets and related statements as at March 31, 1995, March
31, 1996 and March 31, 1997), certified public accountants; and
(ii) the unaudited consolidated and consolidating balance
sheets of GVI and the Subsidiaries, as at March 31, 1996, March 31,
1997 and March 31, 1998 and at July 2, 1995, July 2, 1996 and July 2,
1997 and related statements of income and retained earnings and changes
in financial position for the three-month periods ended on those dates,
together with supporting schedules, certified by the chief financial
officer of GVI.
(b) All of such financial statements and notes thereto have
been prepared in accordance with GAAP during the periods involved, and present
fairly the financial condition and results of operations of GVI and each of the
Subsidiaries at such dates and for such periods. Except as disclosed in Schedule
4.7(b), there is no liability or obligation of any kind, whether accrued,
absolute, fixed or contingent, of GVI that is not reflected or reserved against
in the Balance Sheet, other than liabilities incurred in the ordinary course of
<PAGE>
business since December 31, 1997 which in the aggregate do not and could not
have a Material Adverse Effect. Schedule 4.7(b)(i) is a true, correct and
complete list of certain liabilities of GVI and the Subsidiaries as of the
Closing Date. Schedule 4.7(b)(ii) is a true, correct and complete list of all
unsecured debt of GVI as of the Closing Date.
(c) The projections and budgets of GVI attached hereto as
Exhibit 4.7(c) (the "Business Plans") have been prepared in good faith based
upon reasonable assumptions and present fairly GVI's management's best estimates
of the financial condition and results of operations of GVI for the periods
presented.
Section 4.8.......Absence of Certain Changes. (a) Since
December 31, 1997 there has been no Material Adverse Effect or any event or
development involving a prospective Material Adverse Effect of either or GVI or
any Subsidiary.
(b) Except as set forth in Schedule 4.8, since December 31,
1997, each of GVI and each Subsidiary has operated its businesses only in the
ordinary course of business consistent with past practice and the Business Plans
and:
(i) neither GVI nor any Subsidiary has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
other than for fair consideration in the ordinary course of business;
(ii) neither GVI nor any Subsidiary has entered into any
agreement, Contract, Lease, or License (or series of related agreements
or Contracts) either involving more than $100,000 or outside the
ordinary course of business;
(iii) neither GVI nor any Subsidiary has entered into any
Management Agreement other than those set forth on Schedule 4.11(a),
and neither GVI nor any Subsidiary has amended or in any way modified
any existing Management Agreement;
(iv) neither GVI nor any Subsidiary has entered into any
Contract, agreement or other arrangement with any Affiliate of GVI or
any such Subsidiary;
(v) no party (including any of GVI and the Subsidiaries) has
accelerated, terminated, modified, or canceled any agreement or
Contract (or series of related agreements or Contracts) involving more
than $25,000 to which any of GVI and the Subsidiaries is a party or by
which any of them is bound;
(vi) neither GVI nor any Subsidiary has imposed any Security
Interest upon any of its assets, tangible or intangible other than the
Security Interests, except as approved by CSFB;
(vii) neither GVI nor any Subsidiary has made any capital
expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the ordinary course of business;
<PAGE>
(viii) neither GVI nor any Subsidiary has made, recommended or
announced or agreed to any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either
involving more than $10,000 or outside the ordinary course of business
including any merger, consolidation or other business combination;
(ix) neither GVI nor any Subsidiary has issued any note, bond,
or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligations;
(x) neither GVI nor any Subsidiary has delayed or postponed
the payment of accounts payable and other liabilities outside the
ordinary course of business;
(xi) neither GVI nor any Subsidiary has canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims) either involving more than $25,000 or outside the ordinary
course of business;
(xii) neither GVI nor any Subsidiary has granted any License
or sublicense of any rights under or with respect to any Intangible
Rights or has otherwise transferred or granted any rights with respect
thereto;
(xiii) there has been no change made or authorized in the
Organizational Documents of GVI or any Subsidiary;
(xiv) neither GVI nor any Subsidiary has issued, sold, or
otherwise disposed of any of its capital stock or other equity
interests, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise)
any equity interest;
(xv) neither GVI nor any Subsidiary has declared, set aside,
or paid any dividend or made any distribution with respect to its
capital stock or other equity interests (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock or
other equity interests;
(xvi) neither GVI nor any Subsidiary has experienced any
damage, destruction, or loss (whether or not covered by insurance) to
its property which has had or will have a Material Adverse Effect;
(xvii) neither GVI nor any Subsidiary has made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees;
(xviii) neither GVI nor any Subsidiary has entered into any
employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xix) neither GVI nor any Subsidiary has (A) granted any
increase in the base compensation of any of its directors, officers,
and employees or (B) granted or announced any general increase in the
wages, salaries, compensation, bonuses, incentives, commissions,
pension or other benefits payable by GVI or the Subsidiaries to its
employees;
<PAGE>
(xx) neither GVI nor any Subsidiary has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xxi) neither GVI nor any Subsidiary has made any other change
in employment terms for any of its directors, officers, and employees
outside the ordinary course of business;
(xxii) neither GVI nor any Subsidiary has made or pledged to
make any charitable or other capital contribution;
(xxiii) there has been no institution of any litigation,
action or proceeding before any Governmental Authority relating to GVI,
the Subsidiaries or the transactions contemplated hereby;
(xxiv) there has been no increase in any promotional or
advertising expenditures except in the ordinary course of business or
any other change in GVI's or the Subsidiaries' policies or practices
with respect thereto;
(xxv) there has been no change in the annual accounting period
of GVI or the Subsidiaries or any change in any accounting method
thereof;
(xxvi) there has not been any transaction outside the ordinary
course of business involving any of GVI and the Subsidiaries or any
other occurrence, event, incident, action, or failure to act which
could individually, or in the aggregate, have a Material Adverse
Effect;
(xxvii) neither GVI nor any Subsidiary has made any payment or
contribution to any Employee Benefit Plan of GVI, any of the
Subsidiaries or any ERISA Affiliate (as defined in Section 414(b) or
(c) of the Code); and
(xxviii) neither GVI nor any Subsidiary has agreed or
committed to do any of the foregoing.
Section 4.9.......Title to Assets. Except for such defects in
title which individually or in the aggregate would not have a Material Adverse
Effect, each of GVI and each Subsidiary has good and marketable title to or
valid and subsisting leasehold interests to all properties and assets (real and
personal, tangible and intangible) that (i) are reflected on its books and the
Balance Sheet or (ii) have been acquired in the ordinary course of business
since the date of the Balance Sheet and would have been required to be reflected
on the Balance Sheet if acquired on or prior to the date of the Balance Sheet,
excluding in each case assets that have been disposed of in the ordinary course
of business (collectively, the "Assets"). Except as reflected on the Balance
Sheet or as set forth in Schedule 4.9, none of the Assets is subject to any
Encumbrance, other than Encumbrances which would not have a Material Adverse
Effect. The Assets are in the aggregate in good operating condition and repair
(normal wear and tear excepted) and are suitable for the purposes for which such
Assets are presently being used.
<PAGE>
Section 4.10......Real Property. (a) Schedule 4.10(a) attached
hereto contains an accurate and complete list of all real property (x) owned in
whole or in part by GVI or any Subsidiary (the "Owned Real Property") and (y)
subject to a Lease to which GVI or any Subsidiary is a party (the "Leased Real
Property"), and includes the name of the record title holder thereof and a list
of all indebtedness secured by an Encumbrance thereon. Except as set forth on
Schedule 4.10(a), each of GVI and the Subsidiaries has good and marketable title
in fee simple to all the Owned Real Property, and a good and valid leasehold
interest in all Leased Real Property, in each case free and clear of all
Encumbrances. All of the buildings, structures and appurtenances situated on the
Owned Real Property and Leased Real Property (collectively, the "Improvements")
are in good operating condition and, given normal wear and tear, are in a state
of good maintenance and repair, are adequate and suitable for the purposes for
which they are presently being used except where the failure to be in such
condition would not have a Material Adverse Effect. With respect to each
Improvement, GVI or one of the Subsidiaries has adequate rights of ingress and
egress for operation of the business of GVI or such Subsidiary in the ordinary
course. No condemnation proceeding is pending or, to the knowledge of GVI or any
Subsidiary, threatened which would preclude or impair the use of any Owned Real
Property or Leased Real Property by GVI or any of the Subsidiaries, as the case
may be, of the purposes for which it is currently used.
(b) All easements, cross easements, Licenses, air rights, and
rights-of-way or other similar property interests (collectively, "Easements"),
if any, necessary for the full utilization of the Owned Real Property and the
Leased Real Property for their respective intended purposes have been obtained,
and are described on Schedule 4.10(b), and are in full force and effect without
default thereunder. Each Owned Real Property and Leased Real Property has, or
will, have direct rights of access to public ways (through public or private
roads) and is served by water, sewer, sanitary sewer and storm drain facilities
adequate to service such property for its intended uses. All public utilities
necessary or convenient to the full use and enjoyment of each of the Owned Real
Property and Leased Real Property are located either in the public right of way
abutting such property (which are connected so as to serve such property without
passing over other property) or in recorded easements serving such property set
forth on Schedule 4.10(b). All roads necessary for the use of the Owned Real
Property and Leased Real Property for their respective current purposes have
been or will be completed and available for public use.
(c) Each parcel of Owned Real Property and Leased Real
Property is either not situated in a flood hazard area as defined by the Federal
Insurance Administration or is covered by flood insurance in accordance with the
mortgage encumbering such property. Portions of the Owned Real Property and
Leased Real Property consist of filled in land.
(d) To the best knowledge of GVI or any Subsidiary, except as
may be disclosed on Schedule 4.10(d), each parcel of the Owned Real Property and
Leased Real Property complies in all material respects with all applicable Legal
Requirements. To the best knowledge of GVI or any Subsidiary, any zoning or
subdivision approval is based on no real property, or rights appurtenant
thereto, other than the Owned Real Property and the Leased Real Property. The
Owned Real Property and Leased Real Property as improved and used is not in
material violation of any recorded and, to the best knowledge of GVI or any
Subsidiary, unrecorded covenants, conditions or restrictions of any kind or
nature affecting all or any part of the Owned Real Property or the Leased Real
Property or any interest therein of either the Owned Real Property or the Leased
Real Property. To the best knowledge of GVI or any Subsidiary, the Improvements
can be fully rebuilt in the event of casualty or destruction thereof under the
Permits applicable to the Owned Real Property and the Leased Real Property,
subject, however, to non-discretionary requirements of any Governmental
Authority. No amendment or change in any Permit and no amendment or change in
zoning or any other land use control is being sought or obtained by GVI or any
Affiliate of GVI with respect to any of the Owned Real Property, the Leased Real
Property or the Improvements.
<PAGE>
(e) To the best knowledge of GVI or any Subsidiary, except as
may be disclosed on Schedule 4.10(e), all Permits required by any Governmental
Authority for the operation of the Improvements and the actual and contemplated
uses thereof or otherwise required to be in compliance with any Environmental
Laws have been obtained. The copy of the certificate of occupancy for any of the
Owned Real Property and the Leased Real Property delivered to CSFB is a true and
correct copy of the certificate of occupancy for such property, and such
certificate is in full force and effect and is not subject to any conditions or
limitations other than those of general applicability to all certificates of
occupancy for similar properties in the applicable jurisdiction. GVI has
heretofore delivered to CSFB true, correct and complete copies of each material
Permit.
(f) There are no pending or, to the best knowledge of GVI or
any Subsidiary, threatened actions, suits or proceedings to revoke, attack,
invalidate, rescind or modify the zoning of any Owned Real Property or Leased
Real Property, or any material Permits issued with respect to any Owned Real
Property, Leased Real Property, or any part of either thereof, or asserting that
such Permits or the zoning of any Owned Real Property or Leased Real Property
does not permit the use of any such property as currently used.
(g) GVI has not received any notice of, and to the best
knowledge of GVI or any Subsidiary there does not exist, any actual, proposed or
threatened exercise of the power of eminent domain or other taking by any
Governmental Authority of all or any portion of any Owned Real Property, Leased
Real Property, or any interest therein or any right of access thereto.
(h) The Improvements have suffered no casualty or damage which
has not been fully repaired.
(i) No Owned Real Property or part thereof is subject to any
purchase options or other similar rights in favor of third parties except as set
forth on Schedule 4.10(j).
(j) To the best knowledge of GVI or any Subsidiary, there are
no material encroachments on the Owned Real Property or the Leased Real Property
and the Improvements do not encroach upon any Easement, other interest in real
property, any adjoining land or adjoining street, except as set forth on
Schedule 4.10(k).
(k) To the best knowledge of GVI or any Subsidiary, there are
no structural defects in any Improvements existing on the Owned Real Property or
the Leased Real Property or material defects to the building systems thereof
except as set forth on Schedule 4.10(l).
Section 4.11......Contracts; Compliance with Contracts. (a)
Schedule 4.11(a) lists the following Contracts:
(i) any agreement (or group of related agreements) for the
lease of any personal property (whether tangible or intangible) to or
from any Person providing for lease payments in excess of $25,000 per
annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to any of GVI and the Subsidiaries, or involve
consideration in excess of $25,000;
<PAGE>
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which GVI or any Subsidiary has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $25,000 or under which GVI or any
Subsidiary has imposed a Security Interest on any of its respective
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of the current or former directors,
officers, and employees of GVI or any Subsidiary;
(vii) any collective bargaining agreement;
(viii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(ix) any agreement under which GVI or any Subsidiary has
advanced or loaned any amount to any of its directors, officers, and
employees;
(x) any agreement which imposes a right of first refusal,
option or other restriction with respect to any Asset of GVI or the
Subsidiaries;
(xi) any agreement which is a loan or advance to, or
investment in, any Person or an agreement, contract or commitment
relating to the making of any such loan, advance or investment or is an
outstanding commitment for capital expenditure;
(xii) any agreement under which the consequences of a default
or termination could have a Material Adverse Effect;
(xiii) any Lease;
(xiv) any Management Agreement;
(xv) any License; or
(xvi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $100,000.
(b)......GVI has delivered to CSFB a correct and
complete copy of each written agreement listed in Schedule 4.11(a) and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule 4.11(a). With respect to each such agreement: (i) the agreement
is legal, valid, binding, enforceable, and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; and (iii) no party has repudiated any
provision of the agreement.
<PAGE>
(c)......Except as disclosed on Schedule 4.11(c),
each of GVI and the Subsidiaries is in compliance with all terms and provisions
of all Contracts to which it is a party or by which it or any of its Assets or
businesses may be bound or affected and all such Contracts are valid and binding
in accordance with their terms and in full force and effect, and no breach or
default by GVI or the Subsidiaries or event which, with notice or lapse of time
or both, could constitute a monetary or other breach or default by GVI or the
Subsidiaries or which would permit termination, modification, or acceleration
thereunder, exists with respect thereto, and no party thereto has given notice
or asserted to GVI or the Subsidiaries that GVI or the Subsidiaries, as the case
may be, is in default thereunder or that there exists any event which would
permit termination, modification or acceleration thereof and to the best
knowledge of GVI and the Subsidiaries, no other party thereto is in monetary or
other breach or default thereunder, except such Contracts the breach, default or
invalidity of which do not, individually or in the aggregate, amount to $100,000
or more.
(d)......No Contract has as a party an Affiliate of
GVI unless such Contract contains market rate terms and conditions including
fees which are no less favorable than would be available to GVI by a third party
which is not an Affiliate of GVI. Except as set forth on Schedule 4.11(d), all
fees and other compensation for services previously performed under each
Contract have been paid in full.
Section 4.12......[Intentionally Omitted].
Section 4.13. No Powers of Attorney. Neither GVI nor any
Subsidiary has any powers of attorney or comparable delegations of authority
outstanding.
Section 4.14. Accounts Receivable. Except as set forth in
Schedule 4.14, the accounts and notes receivable of GVI and the Subsidiaries
reflected on the Balance Sheet, and all accounts and notes receivable arising
subsequent to the date of the Balance Sheet, (i) arose from bona fide sales
transactions in the ordinary course of business and are payable on ordinary
trade terms, (ii) are legal, valid and binding obligations of the respective
debtors enforceable in accordance with their terms, (iii) to GVI's knowledge,
are not subject to any valid set-off or counterclaim, (iv) are collectible in
the ordinary course of business consistent with past practice in the aggregate
recorded amounts thereof, net of any applicable reserve reflected in the Balance
Sheet, and (v) are not the subject of any actions or proceedings brought by or
on behalf of GVI or any Subsidiary. Schedule 4.14 sets forth a description of
any security arrangements and collateral securing the repayment or other
satisfaction of receivables of GVI and the Subsidiaries. All steps necessary to
render all such security arrangements legal, valid, binding and enforceable, and
to give and maintain for GVI or a Subsidiary, as the case may be, a perfected
Security Interest in the related collateral, have been taken.
Section 4.15......Consents and Approvals. No consent,
approval, authorization or other action by, or filing with or notification to,
any Governmental Authority or other third party is required to be made or
obtained by GVI in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
except (i) such as have been obtained or made, (ii) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not have a Material Adverse Effect and (iii) as expressly
required in connection with the Restructuring and set forth on Schedule 4.15.
<PAGE>
Section 4.16......Litigation. Except as set forth on Schedule
4.16, (i) there are no actions, suits, proceedings, arbitrations, tenant
disputes, labor disputes or governmental investigations pending, or, to the best
knowledge of GVI or any Subsidiary, threatened in writing against or affecting
GVI, any Subsidiary, or, to the best knowledge of GVI or any Subsidiary, any
Owned Real Property or Leased Real Property and there is no litigation (A)
which, if successful, could have a Material Adverse Effect, or (B) which, if
successful, could adversely affect the use of, operations at or capital
improvements being made at any Owned Real Property or Leased Real Property; (ii)
neither GVI nor any Subsidiary are operating under or subject to any order,
writ, injunction, decree or demand of any court or any Governmental Authority
and (iii) no actions, suits, proceedings or arbitrations are pending or, to the
best knowledge of GVI or any Subsidiary, threatened against GVI or any
Subsidiary which involve claims, damages or sums of money not covered (including
all applicable deductibles) by insurance. Certain of the actions, suits,
proceedings, hearings, and investigations set forth in Schedule 4.16 could
result in a Material Adverse Effect, and such actions are so identified on such
Schedule. Except as set forth on Schedule 4.16, none of GVI, any Subsidiary, nor
the directors and officers (and employees with responsibility for litigation
matters) of GVI and the Subsidiaries has any reason to believe that any such
action, suit, proceeding, hearing, or investigation may be brought or threatened
against any of GVI and the Subsidiaries.
Section 4.17......Compliance with Law; Permits and Licenses.
(a) Except as set forth in Schedule 4.17(a), each of GVI and each Subsidiary is
in compliance with all, and has not received notice of any unremedied violation
of any, applicable laws, rules, regulations, orders, writs or decrees of any
court or any Governmental Authority (collectively, "Regulations") except where
such instances of non-compliance or violation would not have a Material Adverse
Effect.
(b) Except as set forth in Schedule 4.17(b), each of GVI and
each Subsidiary holds all governmental or regulatory Licenses, Permits and
authorizations necessary for the ownership and conduct of its business as now
constituted in each of the jurisdictions in which its business is presently
being conducted or operated, and such governmental or regulatory Licenses,
Permits and authorizations are in full force and effect.
Section 4.18......Proprietary Rights. (a) To GVI's knowledge,
except as set forth in Schedule 4.18(a), each of GVI and each Subsidiary owns,
or has valid rights to use the trademarks, trade names, patents, logos, logo
types, type styles, copyrights, trade secrets, proprietary information, Licenses
and computer software programs (including, without limitation, the source codes
and user and system documentation thereto) that are necessary in all material
respects, or are in use, for the conduct of the business of GVI and each
Subsidiary as presently being conducted (collectively, "Intangible Rights").
(b) Except as set forth in Schedule 4.18(b), neither GVI nor
any Subsidiary has received written notice or, to the knowledge of GVI or any
Subsidiary, oral notice, that GVI or any Subsidiary is or may be infringing or
misappropriating any trademark, trade name, copyright, trade secret, proprietary
information, valid patent or other intangible property right, or otherwise lacks
the right to use, in the manner currently used, any of the Intangible Rights,
where such infringement, misappropriation or lack of right to use would have a
Material Adverse Effect.
(c) Except as set forth in Schedule 4.18(c), each of GVI and
each Subsidiary has ownership and possession of the source code and user and
system documentation for all computer programs in which rights are included in
the Intangible Rights.
<PAGE>
Section 4.19......Taxes.
(a) Each of GVI and each Subsidiary has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by any of GVI and the Subsidiaries (whether or not
shown on any Tax Return) have been paid. Neither GVI nor any Subsidiary
currently is the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by an authority in a jurisdiction where
any of GVI and the Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of any of GVI and the Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Each of GVI and each Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(c) No director or officer (or employee responsible for Tax
matters) of any of GVI and the Subsidiaries expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax liability of any of GVI and the
Subsidiaries either (A) claimed or raised by any authority in writing or (B) as
to which any of the directors and officers (and employees responsible for Tax
matters) of GVI and the Subsidiaries has knowledge. Schedule 4.19(c) lists all
federal, state, local, and foreign income Tax Returns filed with respect to any
of GVI and the Subsidiaries for taxable periods ended on or after December 31,
1994, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. GVI has delivered to CSFB
true, correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by any of
GVI and the Subsidiaries since December 31, 1994.
(d) Neither GVI nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) The unpaid Taxes of GVI and the Subsidiaries did not, as
of December 31, 1997, exceed the reserve for Tax liabilities (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Balance Sheet (rather than in
any notes thereto).
(f) Neither GVI nor any Subsidiary has filed a consent under
Code Section 341(f) concerning collapsible corporations. Neither GVI nor any
Subsidiary has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 280G. Each of
GVI and the Subsidiaries has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. Neither GVI nor any
Subsidiary is a party to any Tax allocation or sharing agreement. Neither GVI
nor any Subsidiary (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the GVI) or (B) has any liability for the Taxes of any Person (other
than any of GVI and the Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
<PAGE>
(g) Neither GVI nor any Subsidiary has applied for and not yet
received a ruling or determination from a taxing authority regarding a past or
prospective transaction of GVI or any Subsidiary.
Section 4.20......Safety and Other Regulations. Except as set
forth in Schedule 4.20, GVI and the Subsidiaries are in compliance with all
applicable Regulations relating to equal employment opportunity and employee
safety in all jurisdictions in which GVI or the Subsidiaries are presently
operating their business, except where failure to be in compliance would not
have a Material Adverse Effect.
Section 4.21......Environmental Matters. Except as disclosed
on Schedule 4.21, (i) no Hazardous Substances are now or have ever been located,
produced, used, stored, treated, transported, incorporated, discharged, emitted,
released, deposited or disposed of in, upon, under, over or from any Owned Real
Property or Leased Real Property in a manner that may give rise to any actual or
potential liability to pay response costs or other damages, losses or expenses
or otherwise violate any Environmental Laws; (ii) no Hazardous Substances are
currently located, stored or used at any Owned Real Property or Leased Real
Property; (iii) no Hazardous Substances have been discharged, released or
emitted, upon or from any Owned Real Property or Leased Real Property into the
environment and no threat exists of a discharge, release or emission of a
Hazardous Substance upon or from any Owned Real Property or Leased Real Property
into the environment, which discharge, release or emission, in either case,
would subject the owner of such property to any damages, penalties or
liabilities under any applicable Environmental Laws; (iv) no Owned Real Property
or Leased Real Property has ever been used as or for a mine, a landfill, a dump
or other disposal facility or a gasoline service station; (v) no underground
storage tank is now located on or in any Owned Real Property or Leased Real
Property or if previously located therein has been removed therefrom in
compliance with all applicable Environmental Laws and any clean-up of the
surrounding soil in connection therewith has been completed; (vi) no asbestos,
ACM, materials containing ureaformaldehyde, or transformers, capacitors,
ballasts or other equipment that contain PCBs are located about any Owned Real
Property or Leased Real Property; (vii) no Owned Real Property or Leased Real
Property has been used by GVI or any Affiliate or, to the best knowledge of GVI
or any Subsidiary, after reasonable investigation, any other person or entity
(including any prior owner of any Owned Real Property or Leased Real Property)
as a permanent or temporary treatment, storage or disposal site for any
Hazardous Substance; (viii) no violation of any Environmental Law now exists or
has ever existed in, upon, under, over or from any Owned Real Property or Leased
Real Property, no notice of any such violation or any alleged violation thereof
has been issued or given by any Governmental Authority, and there is not now nor
has there ever been any investigation or report involving any Owned Real
Property or Leased Real Property by any Governmental Authority which in any way
relates to Hazardous Substances; (ix) no Person has given any notice of or
asserted any claim, cause of action, penalty, cost or demand for payment or
compensation, whether or not involving any injury or threatened injury to human
health, the environment or natural resources, resulting or allegedly resulting
from any activity or event described in clauses (i)-(viii) above and to the
knowledge of GVI or any Subsidiary, no basis for such a claim exists; (x) there
are not now, nor to the best knowledge of GVI or any Subsidiary have there ever
been, any actions, suits, proceedings or damage settlements relating in any way
to Hazardous Substances, in, upon, under, over or from any Owned Real Property
or Leased Real Property; (xi) no oral or written notification of a Release (as
such term is defined in 42 U.S.C. ss.9601(22)) of any Hazardous Substances has
been filed by or on behalf of GVI through authorized employees or agents and no
<PAGE>
Owned Real Property or Leased Real Property is listed in the United States
Environmental Protection Agency's List of Hazardous Waste Sites or any other
list of Hazardous Substance sites maintained by any federal, state or local
governmental agency; (xii) there are no environmental liens on any Owned Real
Property or Leased Real Property, and, to the best knowledge of GVI or any
Subsidiary, no governmental actions have been taken or are in process which
could subject any Owned Real Property or Leased Real Property to such liens;
(xiii) GVI has not transported or arranged for the transportation of any
Hazardous Substances to any location which is listed or proposed for listing
under CERCLA or on any similar state list or which is the subject of federal,
state or local enforcement actions or other investigations; (xiv) no
environmental or engineering investigations, studies, audits, tests, reviews or
other analyses have been conducted by or are in the possession of GVI or its
Affiliates in relation to any Owned Real Property or Leased Real Property which
have not been provided to CSFB; and (xv) to the best knowledge of GVI or any
Subsidiary, any such reports do not contain any untrue statements of a material
fact or omit to state a material fact necessary to make any statement contained
therein or herein, in light of the circumstances under which such statements
were made, not misleading. Neither GVI nor any Subsidiary nor, to the knowledge
of GVI or any Subsidiary, any prior owner or lessee of any property now or
previously owned or leased by GVI or any Subsidiary, has handled any Hazardous
Substances on any property now or previously owned or leased by GVI or any
Subsidiary; and, without limiting the foregoing, (i) no PCBs are or have been
present, (ii) no asbestos is or has been present, (iii) there are no underground
storage tanks, active or abandoned, and (iv) no Hazardous Substance has been
released in a quantity reportable under, or in violation of, any Environmental
Law, at, on or under any property now or previously owned or leased by GVI or
any Subsidiary, during any period that GVI or a Subsidiary owned or leased such
property or, to the knowledge of GVI and the Subsidiaries, prior thereto.
Section 4.22......Labor Matters. (a) Except as set forth in
Schedule 4.22(a), neither GVI nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by them.
(c) Except as set forth on Schedule 4.22(b), (i) each of GVI
and each Subsidiary is and has been in compliance with all federal, state and
other applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
and has not been engaged in any unfair labor practice, except where the failure
to so comply would not have a Material Adverse Effect; (ii) no unfair labor
practice complaint against GVI or any Subsidiary is pending before the National
Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving GVI or any
Subsidiary; (iv) no grievance which would have a Material Adverse Effect exists;
(v) no arbitration proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefor has been asserted; (vi) no collective
bargaining agreement is currently being negotiated by GVI or any Subsidiary; and
(vii) neither GVI nor any Subsidiary has experienced any labor difficulty which
could have a Material Adverse Effect. Neither GVI nor any Subsidiary has
committed any unfair labor practice.
(c)......To the knowledge of any of GVI and the Subsidiaries
and the directors and officers (and employees with responsibility for employment
matters) of GVI and the Subsidiaries, no executive, key employee, or group of
employees has any plans to terminate employment with any of GVI and the
Subsidiaries. None of GVI, the Subsidiaries, and the directors and officers (and
employees with responsibility for employment matters) of any of GVI and the
Subsidiaries has any knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
GVI or any Subsidiary.
<PAGE>
Section 4.23......Insurance. GVI has provided CSFB with true,
complete and correct copies of each insurance policy (including, without
limitation, policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which any of GVI and
the Subsidiaries has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past 10 years.
With respect to each such insurance policy: (i) the policy is
legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) none of GVI, the Subsidiaries nor any other party to
the policy is in breach or default thereof (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (iv) no
party to the policy has repudiated any provision thereof, except where the
failure to comply with the foregoing would not be expected to have a Material
Adverse Effect. Each of GVI and the Subsidiaries has been covered during the
past 10 years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Schedule
4.23 describes any self-insurance arrangements affecting any of GVI and the
Subsidiaries.
Section 4.24......Employee Benefits. (a) Schedule 4.24 sets
forth each Benefit Plan that GVI, any Subsidiary or any ERISA Affiliate
maintains, or to which any of GVI, any Subsidiaries or any ERISA Affiliate
contributes or is required to contribute, or under which any employee or former
employee of GVI, a Subsidiary or any ERISA Affiliate receives or is entitled to
receive benefits. Except as set forth on Schedule 4.24:
(i) Each such Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other
applicable laws.
(ii) All required reports and descriptions (including, without
limitation, Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Benefit Plan. The requirements
of Parts 6 and 7 of Subtitle B of Title I of ERISA and of Section 4980B
and Chapter 100 of the Code have been met with respect to each such
Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) All contributions to each such Benefit Plan which is an
Employee Pension Benefit Plan for any period ending on or before the
Closing Date have been paid or accrued in accordance with the past
custom and practice of GVI and the Subsidiaries. All premiums or other
payments with respect to all periods ending on or before the Closing
Date have been paid with respect to each such Benefit Plan which is an
Employee Welfare Benefit Plan.
(iv) Each such Benefit Plan which is an Employee Pension
Benefit Plan and which is intended to be a "qualified plan" under Code
Section 401(a) meets the requirements of such Section and has received
a current favorable determination letter from the Internal Revenue
Service.
<PAGE>
(v) The market value of assets under each Benefit Plan which
is an Employee Pension Benefit Plan subject to Title IV of ERISA (other
than any Multi-employer Plan) equals or exceeds the present value of
all vested and nonvested liabilities thereunder determined in
accordance with methods, factors, and assumptions that would be used by
the PBGC for the purpose of valuing benefits under such Employee
Pension Benefit Plan if it were to terminate on the date of such
determination.
(vi) GVI has delivered to the CSFB correct and complete copies
of the following with respect to each Benefit Plan: all plan documents
and summary plan descriptions; the most recent determination letter (if
any) received from the Internal Revenue Service; the three most recent
Form 5500 Annual Reports (including all schedules and attachments
thereto); the most recent actuarial valuation report (if any); and all
related trust agreements, insurance contracts, and other funding
agreements through which benefits are provided.
(b) Except as set forth on Schedule 4.24, with respect to each
Employee Benefit Plan:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multi-employer Plan) has been completely
or partially terminated and no proceeding by the PBGC to terminate any
such Employee Pension Benefit Plan (other than any Multi-employer Plan)
has been instituted or threatened.
(ii) There have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No Fiduciary has any liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. None of GVI, any Subsidiary and
the directors and officers (and employees with responsibility for
employee benefits matters) of GVI and the Subsidiaries has any
knowledge of any basis for any such action, suit, proceeding, hearing,
or investigation.
(iii) None of GVI and the Subsidiaries has incurred, and none
of GVI, the Subsidiaries and the directors and officers (and employees
with responsibility for employee benefits matters) of GVI and the
Subsidiaries has any reason to expect that any of GVI and the
Subsidiaries will incur, any liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code with respect to any such
Employee Benefit Plan.
(iv) There have been no Reportable Events with respect to any
such Employee Benefit Plan that is subject to Title IV of ERISA, and
the consummation of the transactions contemplated hereby shall not
constitute a Reportable Event.
(c) None of GVI and the Subsidiaries contributes to, ever has
contributed to, or ever has been required to contribute to any Multi-employer
Plan or has any liability (including withdrawal liability) under any
Multi-employer Plan.
<PAGE>
(d) Except to the extent required by Code Section 4980B,
neither GVI nor any Subsidiary maintains or ever has maintained or contributes,
ever has contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents, or has any liability for any such benefits,
other than as set forth on Schedule 4.24.
Section 4.25......Interests in Clients, Suppliers, Etc.
Neither GVI, the Subsidiaries, nor any officer or director of GVI or any
Subsidiary possesses, directly or indirectly, any financial interest in, or is a
director, officer or employee of, any entity which is a client, supplier,
customer, lessor, lessee or competitor or potential competitor of GVI or any
Subsidiary. Ownership of securities of a company whose securities are registered
under the Exchange Act of 10% or less of any class of such securities shall not
be deemed to be a financial interest for purposes of this Section 4.25.
Section 4.26......Guaranties. Neither GVI nor any Subsidiary
is a guarantor for any liability or obligation (including indebtedness) of any
other Person.
Section 4.27......Brokers. Other than Curt Newman and GVI's
counsel Ray, Quinney & Nebeker, Rubin Baum Levin Constant & Friedman, and Haynes
and Boone, LLP (collectively, "GVI's Advisors"), GVI has not employed, and is
not subject to any valid claim of, any broker, finder, investment banker,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who will be entitled to a fee or commission in
connection with such transactions. GVI is solely responsible for any payment,
fee or commission that may be due to GVI's Advisors in connection with the
transactions contemplated hereby.
Section 4.28......Liabilities. Neither GVI nor any Subsidiary
has any liabilities or other obligations that arose or accrued prior to the date
hereof and that are not being discharged that, either individually or in the
aggregate, could have a Material Adverse Effect. GVI has no secured indebtedness
other than (i) unsecured indebtedness of up to $14,000,000, (ii) short-term
unsecured indebtedness incurred in the ordinary course of GVI's business, and
(iii) other indebtedness expressly approved in writing by CSFB in its sole
discretion.
Section 4.29......Disclosure. All material facts relating to
GVI and the Subsidiaries and their respective businesses have been disclosed to
CSFB in this Agreement. No statement of fact made by GVI in this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements contained herein not misleading. There is no
material fact presently known to GVI or any Subsidiary which has not been
disclosed to CSFB which adversely affects, nor as far as GVI or any Subsidiary
can foresee, might adversely affect the business, operations or condition
(financial or otherwise) of GVI and the Subsidiaries.
Section 4.30......Restructuring. (a) The filing of the Amended
Articles with the Department of Commerce of the State of Utah as contemplated by
the Shareholder Consent and the actions set forth on Schedule 4.30(a) are the
only actions necessary to effect the Restructuring.
(b) Exhibit 1.2 is a true, correct and complete list of all
shareholders of GVI, and their respective holdings of Company Stock, who have
executed and delivered the Shareholder Consent, and such shareholders' aggregate
holdings of Company Stock constitutes a sufficient number of shares required
under applicable Regulations to effect the Restructuring. After giving effect to
the actions set forth on Schedule 4.30(a), GVI shall have all necessary power
and authority to file the Amended Articles with the Department of Commerce of
the State of Utah.
<PAGE>
(c) Exhibit 3.2 is a true, correct and complete list of all
shareholders of GVI who have delivered Consents and Releases to GVI. Exhibit 3.1
is a true, correct and complete copy of each Consent and Release delivered to
GVI. Each such Consent and Release (i) was duly executed and delivered and each
Person executing such Consent and Release had all requisite power, authority and
capacity to do so, and (ii) is the legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms.
ARTICLE V
[Intentionally Omitted]
ARTICLE VI
CERTAIN COVENANTS
Section 6.1.......Payment of Expenses. GVI will, at and in
connection with the Closing and at all times thereafter, pay all costs and fees
incurred by CSFB in connection with the preparation, negotiation, consummation,
execution, administration, repayment, collection and enforcement of this
Agreement, and any approval, consent, amendment, modification or waiver related
thereto. Without limiting the generality of the foregoing, GVI will pay:
(a) all fees and expenses of legal counsel to CSFB in
connection with the foregoing;
(b) all fees, expenses and costs of the Restructuring;
(c) all taxes and recording fees and expenses, including,
without limitation, stamp and/or mortgage taxes and transfer taxes, if any; and
(d) all fees and out-of-pocket expenses incurred by CSFB,
including all expenses of CSFB and its respective agents and representatives, in
connection with any default hereunder or the collection or enforcement thereof.
Section 6.2.......Further Action. Each of GVI and CSFB shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the transactions contemplated by
this Agreement (including, without limitation, the Restructuring). Upon the
terms and subject to the conditions of this Agreement, each of the parties shall
use its best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement (including, without limitation, the Restructuring).
Section 6.3.......Restructuring. As promptly as practicable,
GVI shall take or cause to be taken all of the actions set forth on Schedule
4.30(a). Within one business day of the termination of any required waiting
periods under applicable Regulations, GVI shall file or cause to be filed the
Amended Articles with the Department of Commerce of the State of Utah and shall
as promptly as practicable thereafter deliver to CSFB a certified copy thereof.
Notwithstanding Section 6.2 above, GVI covenants to take all such actions as
CSFB may request in order to effect the Restructuring.
<PAGE>
ARTICLE VII
ACTIONS BY GVI AND CSFB AFTER THE CLOSING
Section 7.1.......Confidentiality. (a) Each of GVI, on the one
hand, and CSFB, on the other hand, hereby agrees that (i) all non-public
information supplied to it by the other party hereto or any Affiliate or
Representative of such other party, whether conveyed orally, in written or
automated format, or otherwise, including but not limited to any and all trade
secrets, processes, surveys, technology, information, technical data, marketing
plans and strategies, policy and product information, product attributes,
operating procedures, financial information, financial projections and similar
data, including without limitation such of the foregoing with respect to CSFB,
GVI, the business of CSFB or the business of GVI generally (collectively, the
"Confidential Information"), will not be used by GVI or any Subsidiary, on the
one hand, and CSFB, on the other hand, except in connection with the performance
of their respective obligations under this Agreement or in connection with any
services provided for or on behalf of CSFB (in the case of GVI and the
Subsidiaries) or of GVI (in the case of CSFB) and (ii) it will keep the
Confidential Information strictly confidential other than (1) to the extent
required by statute, rule, regulation or judicial process and (2) to its counsel
and other advisors (who shall also be bound by the confidentiality provisions of
this Section 7.1).
For purposes of this Section 7.1, the term Confidential
Information shall not include information which (w) becomes generally available
to the public other than as a result of disclosure by the recipient of any
Confidential Information (the "Recipient") or its employees, agents or
Representatives, (x) was available to the Recipient prior to its disclosure by
the party which provided such Confidential Information (the "Provider") or its
employees, agents or Representatives, (y) becomes available to the Recipient
from a source other than the Provider or its employees, agents or
Representatives, provided, that such source is not bound by a confidentiality
agreement with, or on behalf of the Provider, or (z) is otherwise required to be
disclosed by law. Each of GVI, on the one hand, and CSFB, on the other hand,
will inform the other party hereto of any efforts to compel disclosure of
Confidential Information and afford such other party the opportunity to defend
such efforts or to obtain appropriate protective orders. Each of GVI and CSFB
shall assist the other party hereto in obtaining assurances that any such
compelled disclosure will receive confidential treatment and will use best
efforts to restrict the disclosure, circulation and publication of Confidential
Information so disclosed. None of CSFB, on the one hand, and GVI or any
Subsidiary, on the other hand, shall, in any manner, use any Confidential
Information with respect to GVI, in the case of CSFB, and CSFB and any of its
Affiliates, in the case of GVI or any Subsidiary, and any of its Affiliates to
obtain any advantage, pecuniary or otherwise, for itself or for any other
Person.
(b) GVI shall cause to be delivered to CSFB, and CSFB shall
cause to be delivered to GVI, promptly upon request, all copies of any
Confidential Information and any other material, whether in written or automated
format, containing or reflecting any Confidential Information to the extent it
is practical to do so, and will not retain any copies, extracts, or other
reproductions in whole or in part of such material.
Section 7.2.......Reporting Requirements.
(a) GVI shall cause the following financial statements and
documentation to be delivered to CSFB at the time and in the form and manner
referenced below:
<PAGE>
(i) audited statements of financial position (balance
sheet) of each Subsidiary as of the close of each fiscal year of such
Subsidiary, and of income and retained earnings, changes in financial
position and cash flows for such fiscal year, which statements shall be
duly certified by the Designated Officer to fairly represent the
financial condition of such Subsidiary as of the date thereof and to
have been prepared in accordance with GAAP and accompanied by an
opinion of the Approved Accountant (which opinion shall be unqualified
and shall not contain any "statement of emphasis") to the effect that
such financial statements present fairly, in all material respects, the
financial condition of such Subsidiary as of the end of the fiscal year
being reported on and that the results of the operations and cash flows
for said year are in conformity with GAAP, consistently applied, and
that the examination of the Approved Accountant in connection with such
financial statements has been conducted in accordance with GAAP and
included such tests of the accounting records and such other auditing
procedures as the Approved Accountant deemed necessary in the
circumstances;
(ii) an unaudited quarterly balance sheet of each
Subsidiary and statement of profits and losses, such quarterly
financial statements to be certified by a Designated Officer to fairly
represent the financial condition of such Subsidiary as of the date
thereof and to have been prepared in accordance with GAAP;
(iii) unaudited monthly and quarterly operating
statements showing all revenues, expenses and net cash flow (including
a calculation of Net Operating Income) for the applicable calendar
month or quarter and such other matters as CSFB shall reasonably
require, which monthly and quarterly operating statements shall be
certified by a Designated Officer to be true, correct and complete in
all material respects and shall be prepared on a cash basis;
(iv) a schedule of all accounts payable at the end of
each month, certified by a Designated Officer to be true, correct and
complete in all material respects; and
(v) such other reports and information which CSFB
reasonably requires certified by a Designated Officer to be true,
correct and complete in all material respects.
(b) The statements referred to in paragraph (i) of Section
7.2(a) above shall be delivered to CSFB within ninety (90) days after the last
day of each fiscal year of GVI. The statements referred to in paragraph (ii) and
paragraph (iv) of Section 7.2(a) above shall be delivered to CSFB within
forty-five (45) days after the last day of each calendar quarter. The reports
referred to in paragraph (iii) above shall be delivered to CSFB within thirty
(30) days after the last day of each calendar month. All Financial Statements
shall be in form and substance reasonably satisfactory to CSFB.
Section 7.3.......Access to Information. (a) After the Closing
Date, GVI shall cause GVI and the Subsidiaries to (i) afford the Representatives
of CSFB access, during normal business hours, to the books and records of GVI
and the Subsidiaries, (ii) furnish to the Representatives of CSFB such
additional financial and other information regarding GVI and the Subsidiaries as
CSFB may from time to time reasonably request and (iii) make available to CSFB
the employees of GVI and the Subsidiaries whose assistance, testimony or
presence is reasonably necessary to assist CSFB in evaluating or defending any
such claims or in discharging such responsibilities or obligations, including
the presence of such persons as witnesses in hearings or trials for such
purposes, provided such assistance does not interfere with the normal operations
of GVI or any Subsidiary or any of their respective Affiliates.
<PAGE>
(b) GVI will provide CSFB with such cooperation and
information as CSFB reasonably may request in filing any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes, preparation for litigation or investigation of claims in
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of all relevant Tax Returns,
documents and records, or portions thereof, relating exclusively to GVI and the
Subsidiaries. GVI shall make its employees available on a mutually convenient
basis to provide explanation of any documents or information provided hereunder.
Any information obtained under this Section 7.3(b) shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
Section 7.4.......Registration Rights.
(a) Demand Registration. CSFB may at any time and from time to
time on an unlimited number of occasions make a written request (a "Demand
Registration") to GVI that GVI file a registration statement or similar document
under the Securities Act (a "Registration Statement") with the SEC with respect
to any amount of Registrable Securities, provided, that CSFB may deliver such
requests to GVI no more frequently than once in any six-month period. After
receipt of each such notice, GVI shall, as soon as practicable but not later
than sixty (60) days after receipt of any such notice, file a Registration
Statement with the SEC to register the Registrable Securities subject to the
Notice. If Registrable Securities are to be transferred pursuant to this Section
7.4(a) in an underwritten public offering, then CSFB in its written request to
GVI shall name the managing underwriter or underwriters.
(b) Shelf Registration. As promptly as practicable, GVI shall
file a registration statement on any appropriate form under the Securities Act
for a public offering on a delayed or continuous basis pursuant to Rule 415
under the Securities Act (or any similar rule that may be adopted by the SEC)
covering up to and including all of the Registrable Securities (a "Shelf
Registration Statement"). GVI shall use its best efforts keep any such Shelf
Registration Statement continuously effective for the period beginning on the
date on which such Shelf Registration Statement is declared effective and ending
on the first date that there are no Registrable Securities. In lieu of filing a
Shelf Registration Statement, the Company may otherwise file a post-effective
amendment and/or supplement to any then-effective Shelf Registration Statement
to allow the sale of such Registrable Securities pursuant to such Shelf
Registration Statement.
(c) Piggyback Registration.
(i) Whenever GVI proposes at any time to register any shares
of Common Stock under the Securities Act (a "Piggyback Registration")
(other than pursuant to Form S-8 or any successor form) and the
registration form to be used may be used for the registration of shares
of Stock, GVI will give prompt written notice to CSFB and any other
holders of the Stock of its intention to effect such a registration,
and will include in such registration all shares of Stock with respect
to which GVI has received written requests for inclusion therein within
30 days after the date GVI's notice is received by such holders.
<PAGE>
(ii) If the underwriter of the registered public offering
shall advise GVI in writing that marketing factors require a limitation
of the amount of securities to be underwritten, securities shall be
included in such offering in the following priority: first, Registrable
Securities subject to a Demand Registration pursuant to Section 7.4(a),
if any; second, the Common Stock proposed to be registered by GVI;
third, the Registrable Securities subject to written requests for
inclusion pursuant to Section 7.4(c)(i), if any; and fourth, other
securities for the account of holders other than holders of Stock,
allocated among such holders in accordance with the priorities then
existing among GVI and such holders. Any securities excluded pursuant
to the provisions of this Section 7.4(c)(ii) shall be withdrawn from
and shall not be included in such Piggyback Registration.
(d) Expenses. GVI shall pay, and shall reimburse CSFB for
paying, any expenses incurred in connection with a Demand Registration or
Piggyback Registration requested pursuant to this Section 7.4, including,
without limitation, all registration, qualification, printing and accounting
fees and all fees and disbursements of counsel for GVI and the reasonable fees
and disbursements of CSFB's counsel.
(f) Registration Procedures. Whenever CSFB has requested that
any Registrable Securities be registered pursuant to this Agreement, GVI will
use its reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto GVI will as expeditiously as possible:
(i) prepare and file with the SEC a Registration
Statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such Registration Statement to become
effective (provided that before filing a Registration Statement or
prospectus or any amendments or supplements thereto, GVI will furnish
to the holders of the shares of Stock covered by such Registration
Statement copies of all such documents proposed to be filed);
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than 180 days and comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of
disposition by the sellers set forth in such Registration Statement;
(iii) furnish such seller of Registrable Securities
such number of copies of such Registration Statement, each amendment
and supplement thereto, the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such seller;
<PAGE>
(v) promptly notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto 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 contains an untrue statement of a material fact or omits any
fact necessary to make the statements therein not misleading, and, at
the request of any such seller, GVI will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading.
(vii) use its best efforts to cause all such
Registrable Securities to be listed on the NASDAQ Stock Market or on
each securities exchange or trading system on which shares of the
Common Stock are then listed;
(viii) provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
registration statement;
(ix) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as CSFB, the holders of a majority of the Registrable
Securities being sold, or the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
(x) subject to obtaining a confidentiality agreement
in reasonably acceptable form, make available for inspection by any
seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of GVI, and cause GVI's officers, directors, employees,
independent accountants and attorneys to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(xi) comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least 12 months beginning with the first day of GVI's first full
calendar quarter after the effective date of the registration
statement, which earnings statement will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(xii) permit any holder of Registrable Securities
which holder, in its sole exclusive judgment, might be deemed to be an
underwriter or a controlling person of GVI, to participate in the
preparation of such registration or comparable statement and to require
the insertion therein of material relating to such holder, furnished to
GVI in writing, which in the reasonable judgment of such holder and its
counsel should be included; and
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any Common Stock included in such
registration statement or sale in any jurisdiction, GVI will use its
reasonable best efforts promptly to obtain the withdrawal of such
order.
<PAGE>
(e) Indemnification. GVI and its successors and assigns shall
indemnify CSFB and its officers, directors and stockholders with respect to the
Registrable Securities to be sold pursuant to any Registration Statement or
prospectus hereunder and each person, if any, who controls CSFB within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
against all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim) to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, arising from
such registration statement or prospectus.
Section 7.5.......Conduct of Business. GVI shall, and shall
cause each Subsidiary to, use its respective best efforts to operate and carry
on its business in compliance with all applicable law.
Section 7.6.......Board of Directors. As promptly as
practicable and in any event no later than sixty days following the Closing, GVI
shall take all actions necessary so that (i) at least two members of the board
of directors of GVI (the "Board") are Independent Directors reasonably
acceptable to CSFB and (ii) the Board establishes audit and compensation
committees, to conduct the business generally conducted by such committees, each
of which shall have at least a majority of Independent Directors as members. At
CSFB's request, GVI shall take all actions necessary so that the number of
members of the Board shall be increased to five, and thereafter CSFB, at its
option, shall have the right, at any time for so long as CSFB holds any shares
of Stock, to designate one director. CSFB shall have the right at any time after
the Closing to attend all meetings of the Board as an observer. GVI shall
provide CSFB with reasonable advance notice of meetings of the Board and with
copies of all documents and materials furnished to the members of the Board in
their capacity as directors.
Section 7.7.......Financings.
(a) In the event that GVI obtains a bona fide commitment from
a third party to provide Financing, or such third party provides a term sheet to
GVI containing all of the material terms of such Financing, or GVI otherwise
desires to close any such Financing (any of the foregoing being hereinafter
referred to as the "Offer"), then, GVI shall deliver to CSFB written notice of
GVI's intent to close such Financing, together with a copy of the commitment,
term sheet or any other documents and instruments setting forth the material
terms of such Financing or, if delivery of any such documents is prohibited by
the terms thereof, such other documentation as CSFB shall deem sufficient
evidence of such Offer.
(b) CSFB shall have ten (10) days from the date of receipt of
all of the information required to be delivered to CSFB under Section 7.7(a)
above (the "Offer Period"), to notify GVI in writing of CSFB's interest in
providing the Financing on the same material terms and conditions as are set
forth in the Offer and which are no less favorable to GVI than those contained
in the Offer. If CSFB gives notice to GVI during the Offer Period that CSFB does
not desire to provide the Financing, or if CSFB fails to respond within the
<PAGE>
Offer Period, GVI shall have one hundred and twenty (120) days from the date of
receipt by GVI of such notice from CSFB or the expiration of the Offer Period if
CSFB fails to respond, as the case may be (the "Closing Period"), to close the
Financing on the same material terms as contained in the Offer.
(c) If CSFB notifies GVI in writing during the Offer Period
that CSFB is interested in providing the Financing, CSFB and GVI shall have
thirty (30) days (or such longer period of time as is necessary under the
circumstances if GVI is acting in good faith) from the date of GVI's receipt of
such written notice from CSFB to agree upon the terms and conditions of and
close such transaction and the documentation thereof.
(d) If GVI fails to close the Financing with the third party
lender prior to the expiration of the Closing Period, GVI shall be required to
make a new offer to CSFB in accordance with the provisions of this Section 7.7
before GVI accepts any Financing from any other party.
(e) Any Financing must be consummated substantially in
accordance with the terms and provisions of the documents provided to CSFB
evidencing the Offer, or terms and provisions which are more favorable to GVI
than such terms and provisions provided to CSFB, and in compliance with the
requirements of this Section 7.7. In the event that the terms are modified by
such third party prior to such closing to be less favorable to GVI, GVI shall
re-submit such revised terms to CSFB for consideration under Section 7.7(a).
Section 7.8.......Equity Transactions. For so long CSFB shall
own shares of GVI, GVI shall provide CSFB with at least thirty days' prior
written notice of any issuance, sale or other disposition of any of the capital
stock or other equity interests of GVI (other than as expressly contemplated by
Schedule 4.3) or any Subsidiary, and the material terms of such issuance, sale
or disposition. CSFB shall have ten Business Days from the date of receipt of
such notice to elect to participate in such issuance, sale or disposition on
substantially the same material terms as set forth in GVI's notice to CSFB.
Section 7.9.......Certain Actions. For so long as CSFB shall
own shares of GVI, GVI shall not, without the prior written consent of CSFB,
take or agree to take any of the following actions:
(i) acquire any real or personal property, or any services of
any kind whatsoever, in exchange for an equity interest in GVI or any
Subsidiary;
(ii) make any issuance, sale or other disposition of any
equity interest in GVI or any Subsidiary to any Affiliates of GVI or of
any Subsidiary; or
(iii) any of the actions contemplated by Section 4.8(b).
Section 7.10......Issuances of Reserved Equity. GVI shall
provide CSFB with written notice of each issuance of equity contemplated by
Schedule 4.3(d) (each, an "Issuance") within ten Business Days after each such
Issuance. Each notice shall set forth the number of shares of Common Stock or
other equity issued in connection with the Issuance, the Person to whom the
equity was issued, and the material terms of the Issuance. CSFB shall have the
option to subscribe, by payment of $0.001 per share, for up to 24.9% of the
number of shares of Common Stock or other securities issued in each Issuance.
CSFB shall exercise such option by (i) within 20 Business Days after CSFB's
receipt of the notice described in the first sentence of this Section 7.10,
giving GVI written notice of CSFB's intent to so subscribe, which notice shall
set forth the number of shares to which CSFB intends to subscribe and the
intended date of such subscription, and (ii) tendering the subscription price
(the number of shares subscribed for multiplied by $0.001) to GVI. Within ten
Business Days after the commencement of each calendar quarter, GVI shall provide
CSFB with a written summary of all Issuances made by GVI in the preceding
calendar quarter.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 8.1.......Survival of Representations and Warranties.
The representations and warranties set forth in Article IV of this Agreement
shall survive the Closing. Notwithstanding any right of CSFB (whether or not
exercised) to investigate the affairs of GVI and the Subsidiaries or any right
of any party (whether or not exercised) and to investigate the accuracy of the
representations and warranties contained in this Agreement, CSFB has the right
to rely fully upon the representations, warranties, covenants and agreements of
GVI contained in this Agreement.
In addition to any other indemnifications provided herein,
each of GVI and CSFB (as applicable, the "Indemnifying Party") shall protect,
defend, indemnify and save harmless the other (and such other party's directors,
officers, employees, agents, Affiliates, successors and assigns) (as applicable,
the "Indemnified Party") from and against, on an after-tax basis, all
liabilities, obligations, claims, demands, damages, penalties, causes of action,
losses, fines, costs and expenses (including, without limitation, attorneys'
fees and disbursements), imposed upon or incurred by or asserted against the
Indemnified Party by reason of (a) any representation or warranty made by the
Indemnifying Party in this Agreement being false or misleading in any material
respect as of the date such representation or warranty was made, (b) any failure
on the part of the Indemnifying Party to perform or comply with any of the terms
of this Agreement or (c) any Environmental Claim.
(b) The Indemnified Party shall give the Indemnifying Party
prompt written notice of any claim, assertion, event or proceeding by or in
respect of a third party of which the Indemnified Party has knowledge concerning
any liability or damage as to which the Indemnified Party may request
indemnification hereunder. The Indemnifying Party shall have the right to
direct, at its own expense and through counsel of its own choosing, the defense
or settlement of any such claim or proceeding; the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Indemnifying Party with access to the Indemnified Party's records
and personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with and aid at the
Indemnifying Party's request the Indemnifying Party in the defense or settlement
thereof, and the Indemnifying Party shall reimburse the Indemnified Party for
all the Indemnified Party's reasonable out-of-pocket expenses in connection
therewith. If the Indemnifying Party elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability unless the
Indemnifying Party consents in writing to such payment or unless the
Indemnifying Party, subject to the last sentence of this subsection (b),
withdraws from the defense of such asserted liability or unless a final judgment
from which no appeal may be taken by or on behalf of the Indemnifying Party is
entered against the Indemnified Party for such liability. If the Indemnifying
Party shall fail to defend, or if, after commencing or undertaking any such
defense, fails to prosecute or withdraws from such defense, the Indemnified
Party shall have the right to undertake the defense or settlement thereof, at
the Indemnifying Party's expense. If the Indemnified Party assumes the defense
of any such claim or proceeding pursuant to this subsection (b) and proposes to
settle such claim or proceeding prior to a final judgment thereon or to forego
appeal with respect thereto, then the Indemnified Party shall give the
Indemnifying Party prompt written notice thereof, and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding.
<PAGE>
(c) Any amounts payable to any Indemnified Party by reason of
the application of this Section 8.2 shall become immediately due and payable and
shall bear interest at the Default Rate from the date loss or damage is
sustained by any Indemnified Party until paid. The obligations and liabilities
of each Indemnifying Party under this Section 8.2 shall survive any termination,
satisfaction, or assignment of this Agreement and the exercise by CSFB of any of
its rights or remedies hereunder.
The Indemnified Party shall promptly give the Indemnifying
Party written notice of any matter which the Indemnified Party has determined
has given or could give rise to a right of indemnification under this Agreement,
stating the amount of the loss, if known (or the maximum good faith estimate of
the loss, if such estimate is possible), and the nature and basis of such claim
or event, provided, however, that failure of an Indemnified Party to give notice
as provided in this Section 8.3 shall not relieve the Indemnifying Party of its
obligations hereunder, except to the extent that the Indemnifying Party is
actually and materially prejudiced by such failure to give notice.
ARTICLE IX
MISCELLANEOUS
Section 9.1.......Specific Performance. It is expressly
understood and agreed that the material breach of any covenant contained in this
Agreement will result in irreparable injury to the other party and that
therefore such other party shall be entitled to specific performance thereof.
Section 9.2.......Assignment. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned by GVI without the prior
written consent of CSFB; provided that CSFB may assign all or a portion of its
rights and obligations under this Agreement (including, without limitation, its
rights and obligations under Section 7.4) to one or more Persons ("Assignees";
the term "Assignee" or "Assignees" shall, unless otherwise expressly indicated,
include CSFB) and, upon such assignment to any such Assignee, be released from
its rights and obligations as CSFB in respect of such portion of the Stock and
this Agreement. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, and no other Person shall have any right, benefit or obligation
hereunder.
Section 9.3.......Notices. Any notice, report, demand or other
instrument authorized or required to be given or furnished ("Notices") shall be
in writing and shall be given as follows: (a) by hand delivery; (b) by deposit
in the United States mail as first class certified mail, return receipt
requested, postage paid; (c) by overnight nationwide commercial courier service;
or (d) by telecopy transmission with a confirmation copy to be delivered by
duplicate notice in accordance with any of clauses (a)-(c) above, in each case,
to the party intended to receive the same at the following address(es):
<PAGE>
If to GVI: Golf Ventures, Inc.
255 South Orange Avenue, Suite 1515
Orlando, FL 32801
Telephone: (407) 245-7557
Facsimile: (407) 245-7585
Attention: Warren Stanchina
With copies to: Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, TX 75202-3789
Telephone: (214) 651-5672
Facsimile: (214) 200-0607
Attention: J. Kirk Standly, Esq.
and to: Ray, Quinney & Nebeker
7th Floor
79 South Main Street
Salt Lake City, UT 84111
Telephone: (801) 323-3359
Facsimile: (801) 323-9543
Attention: A.R. Thorup, Esq.
If to CSFB: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Telephone: (212) 325-2777
Facsimile: (212) 325-8162
Attention: Edmund Taylor
with copies to: Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Telephone: (212) 325-7951
Facsimile: (212) 325-8220
Attention: Colleen Graham, Esq.
and to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Telephone: (212) 504-6000
Facsimile: (212) 504-6666
Attention: Louis J. Bevilacqua, Esq.
Fredric L. Altschuler, Esq.
<PAGE>
Any party may change the address to which any such Notice is to be delivered, by
furnishing ten (10) days written notice of such change to the other parties in
accordance with the provisions of this Section 9.3. Notices shall be deemed to
have been given on the date they are actually received; provided that the
inability to deliver Notices because of a changed address of which no Notice was
given, or rejection or refusal to accept any Notice offered for delivery shall
be deemed to be receipt of the Notice as of the date of such inability to
deliver or rejection or refusal to accept delivery. Notice for either party may
be given by its respective counsel.
GVI shall be fully and personally liable for any
liabilities, costs, losses, damages, expenses (including, without limitation,
reasonable attorneys' fees and disbursements, and court costs, if any), or
claims suffered or incurred by CSFB (or any Indemnified Party) by reason of or
in connection with the following:
(a) fraud or misrepresentation by (i) GVI, (ii) any direct or
indirect member, shareholder, partner, principal, Subsidiary, or Affiliate of
GVI, or (iii) any employee, officer, director, agent or representative or
Affiliate of the Persons described in (i) or (ii);
(b) the gross negligence or willful misconduct of GVI;
(c) the breach of any representation, warranty, covenant or
indemnification provision in this Agreement concerning Environmental Laws or
Hazardous Substances; and
(d) the cost of enforcement of any of CSFB's rights or
remedies hereunder or costs incurred in any bankruptcy or similar proceeding
which may be brought by or against GVI.
Section 9.5 Limitation on Liability. In no event shall CSFB be
liable to GVI for consequential damages, whatever the nature of a breach by CSFB
of its obligations under this Agreement and GVI for itself and all Related
Parties hereby waives all claims for consequential damages.
Section 9.6. Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE.
Section 9.7. Jurisdiction, Venue, Service of Process. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK. GVI HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. GVI IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO GVI AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 9.3 HEREOF. GVI
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENT BROUGHT IN THE
COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING CONTAINED
HEREIN SHALL AFFECT THE RIGHT OF CSFB TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GVI IN ANY OTHER JURISDICTION.
Section 9.8. Appointment of Agent for Service of Process. GVI
hereby generally consents to service of process at the offices of GVI located at
255 South Orange Avenue, Suite 1515, Orlando, Florida 32801, Attention: Warren
Stanchina, or such office of GVI in Orlando, Florida as from time to time may be
designated by GVI in writing to CSFB.
<PAGE>
Section 9.9. Entire Agreement; Amendments and Waivers. This
and all other documents furnished to CSFB in connection with this Agreement,
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof and shall supersede and take the place of any
other instruments purporting to be an agreement of the parties hereto relating
to the transactions contemplated hereby, including without limitation, any
letter of intent or loan commitment letter. No supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
Section 9.10. Counterparts; Headings. This Agreement may be
executed in counterparts, each of which shall constitute an original, and which,
when taken together, shall constitute but one instrument. The captions and
headings of the various sections of this Agreement are for purposes of reference
only and are not to be construed as confining or limiting in any way the scope
or intent of the provisions hereof. Whenever the context requires or permits,
the singular shall include the plural, the plural shall include the singular,
and the masculine, feminine and neuter shall be freely interchangeable.
Section 9.11. Severability. In the event that any of the
covenants, agreements, terms or provisions contained in this Agreement shall be
invalid, illegal or unenforceable in any respect, the validity of the remaining
covenants, agreements, terms or provisions contained herein shall be in no way
affected or prejudiced thereby.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
By: /s/ Michael Gough
Name: Michael Gough
Title: Vice President
GOLF VENTURES, INC.
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
PROMISSORY NOTE
U.S. $50,950,000 July 2, 1998
New York, New York
FOR VALUE RECEIVED, the undersigned, CUTTER SOUND DEVELOPMENT,
LTD., MONTVERDE PROPERTY, LTD., NORTHSHORE GOLF PARTNERS, LTD., NORTHSHORE
DEVELOPMENT, LTD., U.S. GOLF PINEHURST PLANTATION, LTD., FSD GOLF CLUB, LTD., RH
HOLDINGS, INC. AND WEDGEFIELD LIMITED PARTNERSHIP, each having an address at c/o
Golf Communities of America, 255 South Orange Avenue, Firstate Tower, Suite
1515, Orlando, Florida 32801 ("Borrower"), hereby promises and agrees to pay to
the order of CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited
liability company, its successors and assigns ("Lender"), at its office at 11
Madison Avenue, New York, New York 10010, on the Maturity Date (as defined
below) the principal sum of FIFTY MILLION NINE HUNDRED AND FIFTY THOUSAND
DOLLARS ($50,950,000) or so much thereof as shall have been advanced under the
Loan Agreement (as hereinafter defined) and shall be outstanding hereunder
together with interest thereon as hereinafter set forth, such payment to be made
in lawful money of the United States of America in immediately available funds.
1. Definitions. The following terms used in this Note
shall have the following meanings:
"Base Rate"- The rate per annum equal to four and one-half
percentage points (4.5%) in excess of the Treasury
Rate. Any interest rate based on the Base Rate
shall be adjusted as of the date of any change in
the Base Rate. The determination of the Base Rate
shall be made by Lender and shall be conclusive
and binding upon Borrower, absent manifest error.
"Borrower"- Shall have the meaning ascribed to such term in
the initial paragraph hereof. The term "Borrower"
shall include the respective successors and
assigns of Borrower, but the foregoing is not
intended to vary or negate the effect of Section
5.1 of the Loan Agreement.
"Capital Adequacy Events"- Shall have the meaning ascribed
to such term in Section 3(d) hereof.
"Cash Management Agreement"- That certain Cash
Management Agreement, dated as of the date hereof,
made by and between Borrower and Lender, with
respect to the Loan as same may be amended,
modified or extended, from time to time.
<PAGE>
"Default Rate"- Shall have the meaning ascribed to such term in
Section 5(a) hereof.
"Domestic Business Day"- Any day except a Saturday, Sunday
or other day on which commercial banks are
required or permitted by law to close in New York
City.
"Eurodollar Business Day"- Any day on which commercial banks
are open for international business (including
dealings in dollar deposits) in London, England.
"Event of Default"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Excess Interest"- Shall have the meaning ascribed to such term in
Section 9 hereof.
"Funding Losses"- Shall have the meaning ascribed to such term in
Section 3(a) hereof.
"Funding Party"- Any bank or other entity, if any, which is
indirectly or directly funding Lender with respect
to the Loan, in whole or in part, including,
without limitation, any direct or indirect
assignee of, or participant in, the Loan.
"Governmental Authority"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Interest Accrual Period"- With respect to any Payment Date, from the
fifteenth day of the calendar month preceding such
Payment Date until the fourteenth day of current
month, provided, that no Interest Accrual Period
shall end later than the Maturity Date (other than
for purposes of calculating Default Interest), and
the initial Interest Accrual Period shall begin on
the date of this Note.
"Law Change"- Shall have the meaning ascribed to such term in
Section 12(c) hereof.
"Lender"- Shall have the meaning ascribed to such term in
the introductory paragraph hereof.
"LIBOR Interest Rate"- Shall have the meaning ascribed to such term in
Section 2(a) hereof.
<PAGE>
"LIBOR"- With respect to the relevant Interest Accrual
Period, the rate per annum (rounded upwards, if
necessary, to the nearest one-one-thousandth
(1/1000) of one percent 1%) reported, with respect
to the initial Interest Accrual Period, at 11:00
a.m. London time on the date of this Note (or if
such date is not a Eurodollar Business Day, the
immediately preceding Eurodollar Business Day),
and thereafter, at 11:00 a.m. London time on the
date two (2) Eurodollar Business Days prior to the
first day of such Interest Accrual Period, on
Telerate Access Service Page 3750 (British Bankers
Association Settlement Rate) as the non-reserve
adjusted London Interbank Offered Rate for U.S.
dollar deposits having a 30 day term and in an
amount of $1,000,000 or more (or on such other
page as may replace Telerate Page 3750 on that
service or such other service or services as may
be nominated by the British Bankers' Association
for the purpose of displaying such rate all as
determined by Lender in its sole but good faith
discretion). In the event that (i) more than one
such LIBOR is provided, the average of such rates
shall apply or (ii) no such LIBOR is published,
then LIBOR shall be determined from such
comparable financial reporting company as Lender
in its sole but good faith discretion shall
determine. LIBOR for any Interest Accrual Period
shall be adjusted from time to time, by increasing
the rate thereof to compensate Lender and any
Funding Party for any aggregate reserve
requirements (including, without limitation, all
basic, supplemental, marginal and other reserve
requirements and taking into account any
transitional adjustments or other scheduled
changes in reserve requirements during any
Interest Accrual Period) which are required to be
maintained by Lender or such Funding Party with
respect to "Eurocurrency liabilities" (as
presently defined in Regulation D of the Board of
Governors of the Federal Reserve System) of the
same term under Regulation D, or any other
regulations of a Governmental Authority having
jurisdiction over Lender or such Funding Party of
similar effect.
"Loan"- The loan from Lender to Borrower which is
evidenced by this Note.
<PAGE>
"Loan Agreement"- That certain Loan Agreement, dated as
of the date hereof, made by and between Borrower
and Lender, with respect to the Loan as same may
be amended, modified or extended, from time to
time.
"Loan Documents"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Loan Taxes"- Shall have the meaning ascribed to such termin
Section 12(a) hereof.
"Maturity Date"- July 1, 2001.
"Mortgage"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Net Proceeds"- The amount allocated to the Monthly Debt Service
Account under Section 3(a)(A)(vii) or Section
3(a)(B)(vii) of the Cash Management Agreement
during any Collection Period (as defined therein)
plus the amount allocated to the Monthly Debt
Service Account upon the sale of a Release Parcel
or Lot (each as defined in the Loan Agreement)
under Section 3(a)(C) thereof.
"Note"- This Promissory Note.
"Payment Date"- July 11, 1998 and the eleventh day of each
month thereafter during the term of this Note, if
the eleventh day is not a Domestic Business Day
then on the next preceding Domestic Business Day.
"Pelican Strand Note"- The note of even date herewith made by Pelican
Strand, Ltd. to Lender in the amount of
$35,600,000.
"Person"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Treasury Rate"- A rate per annum equal to the yield, as of
the related determination date, calculated by
linear interpolation (rounded to the nearest
one-thousandth of one percent (i.e., 0.001%)) of
the yields of noncallable United States Treasury
obligations with terms (one longer and one
shorter) most nearly approximating the period from
such determination date to the Maturity Date, as
determined in good faith by Lender on the basis of
Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other
recognized source of financial market information
selected by Lender.
"U.S. Person"- Any Person that is (i) a citizen or resident of
the United States, (ii) a corporation, partnership
or other entity created or organized under the
laws of the United States or any State thereof or
(iii) any estate or trust that is subject to U.S.
federal income taxation regardless of the source
of its income.
2. Interest and Principal Payments. (a) Subject to the further
provisions of this Note, including Sections 3 and 5 below, the principal amount
outstanding hereunder shall bear interest at a rate per annum (the "LIBOR
Interest Rate") equal to four and one-half percent (4.5%) in excess of LIBOR for
the relevant Interest Accrual Period.
(b) Prior to the Maturity Date (or the date the unpaid
principal balance otherwise becomes due, whether by acceleration or otherwise),
interest accruing during each Interest Accrual Period shall be payable monthly
in arrears on each Payment Date. In addition, Borrower shall pay, in reduction
of the outstanding principal amount of the Loan,
(i) on each Payment Date an amount equal to the Net
Proceeds for the preceding calendar month,
(ii) on July 1, 1999, the amount (if any) by which
the sum of (x) the aggregate Net Proceeds paid to Lender
during the preceding twelve (12) calendar months, excluding
Net Proceeds attributable to the sale of an Individual
Property or Release Parcel during such period, plus (y) the
aggregate payments to Lender under Sections 2(b)(i), (ii) or
(iii) of the Pelican Strand Note during the preceding twelve
(12) calendar months (including payments on July 1, 1999),
shall be less than $14,050,000 and
(iii) on July 1, 2000, the amount (if any) by which
the sum of (x) the aggregate Net Proceeds paid to Lender
during the preceding twenty-four (24) calendar months,
excluding Net Proceeds attributable to the sale of an
Individual Property or Release Parcel during such period, plus
(y) the aggregate payments to Lender under Sections 2(b)(i),
(ii) or (iii) of the Pelican Strand Note during the preceding
twenty-four (24) calendar months (including payments on July
1, 2000), shall be less than $36,550,000.
<PAGE>
The entire unpaid principal balance of this Note together with
all accrued and unpaid interest, if not sooner paid, shall be payable in full on
the Maturity Date.
(c) All interest payable hereunder shall be computed on the
basis of a 360-day year for the actual number of days elapsed. In computing the
number of days during which interest accrues, the day on which funds are
initially advanced shall be included regardless of the time of day such advance
is made, and the day on which funds are repaid shall, subject to paragraph (d)
below, be excluded. Interest shall accrue on each payment of principal hereunder
through the date on which such payment is credited, as provided below.
(d) All sums payable to Lender hereunder shall be payable,
without setoff, deduction or counterclaim, in immediately available funds, no
later than noon New York time on the date when due by wire transfer to such
account or address as Lender may from time to time designate in a written notice
to Borrower. Payments received by Lender in immediately available funds on any
day after noon New York time shall be treated for all purposes of the Loan as
having been paid and received by Lender on the next Domestic Business Day.
Notwithstanding anything to the contrary contained herein, when any payment is
due hereunder or under any of the other Loan Documents on a day which is not a
Domestic Business Day, such payment shall be made on the next succeeding
Domestic Business Day.
3. Funding Losses; Change in Law, Etc.
(a) Borrower hereby agrees to pay to Lender any amount
necessary to compensate Lender and any Funding Party for any losses or costs
(including, without limitation, the costs of breaking any "LIBOR" contract, if
applicable, or funding losses determined on the basis of Lender's or such
Funding Party's reinvestment rate and the interest rate hereon) (collectively,
"Funding Losses") sustained by Lender or any Funding Party: (i) if this Note, or
any portion hereof, is repaid for any reason whatsoever on any date other than a
Payment Date (including, without limitation, from condemnation or insurance
proceeds, unless due to Lender's election to apply same to this Note on such
date), (ii) upon the conversion of the interest rate on the Loan to the Base
Rate in accordance with subsection (b) below, and/or (iii) as a consequence of
(x) any increased costs (without duplication of any costs used in calculating
LIBOR) that Lender or any Funding Party may sustain in maintaining the borrowing
evidenced hereby or (y) the reduction of any amounts received or receivable from
Borrower, in either case, due to the introduction of, or any change in, law or
applicable regulation or treaty (including the administration or interpretation
thereof), whether or not having the force of law, or due to the compliance by
Lender or the Funding Party, as the case may be, with any directive, whether or
not having the force of law, or request from any central bank or domestic or
foreign governmental authority, agency or instrumentality having jurisdiction.
Payment of Funding Losses hereunder shall be in addition to any obligation to
pay a prepayment premium under Section 4 hereof in circumstances where such
prepayment premium would be due and owing.
(b) If Lender determines (which determination shall be
conclusive and binding upon Borrower, absent manifest error) (i) that Dollar
deposits in an amount approximately equal to the principal balance outstanding
hereunder are not generally available at such time in the London Interbank
Market for deposits in Eurodollars, (ii) that the rate at which such deposits
are being offered will not adequately and fairly reflect the cost to Lender or a
Funding Party of maintaining a LIBOR Interest Rate on the Loan (or the portion
of the Loan being funded by such Funding Party) or of funding the same in such
market for such Interest Accrual Period due to circumstances affecting the
London Interbank Market generally, (iii) that reasonable means do not exist for
<PAGE>
ascertaining LIBOR, or (iv) that a LIBOR Interest Rate would be in excess of the
maximum interest rate which Borrower may by law pay, then, in any such event,
Lender shall immediately notify Borrower of such circumstance and as of the date
of such notification with respect to an event described in clause (ii) or (iv)
above, or as of the expiration of the applicable Interest Accrual Period with
respect to an event described in clause (i) or (iii) above, interest shall
accrue at the Base Rate until such time as the situations described above are no
longer in effect or as otherwise provided in Section 5 hereof; provided,
however, if the situation described in clause (ii) above occurs, (x) Borrower
shall have the option, to be exercised by written notice to Lender, to pay
Lender (in the manner reasonably required by Lender) for such increased cost of
maintaining a LIBOR Interest Rate and (y) if the same only affects a portion of
the Loan, then only such portion shall have interest accrue at the Base Rate
(provided the remaining portion is at least $1,000,000) and interest shall
continue to accrue on the remaining portion at the LIBOR Interest Rate.
Notwithstanding anything to the contrary herein, with respect to an event
described in clauses (i) through (iv) above, provided that no Event of Default
shall then exist, Borrower shall have the right, on thirty (30) days prior
written notice to Lender given within thirty (30) days after Lender gives notice
to Borrower of such event, to pay the entire outstanding principal balance of
the Loan and all accrued and unpaid interest thereon on the next Payment Date
together with the Spread Maintenance Premium (as defined in the Loan Agreement)
thereon.
(c) If the introduction of, or any change in, any law,
regulation or treaty, or in the interpretation thereof by any governmental
authority charged with the administration or interpretation thereof after the
date of this Note, shall make it unlawful for Lender or any Funding Party to
maintain the LIBOR Interest Rate with respect to the Loan, or any portion
thereof, or to fund the Loan, or any portion thereof, in Eurodollars in the
London Interbank Market, then the Loan (or such portion of the Loan) shall
thereafter bear interest at the Base Rate (unless the Default Rate shall be
applicable) and Borrower shall pay to Lender the amount of Funding Losses (if
any) incurred in connection with such conversion. The accrual of interest at the
Base Rate shall continue until such Payment Date, if any, as the situation
described in this subsection (c) is no longer in effect.
(d) If Lender or the Funding Party, as the case may be, shall
have determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption of any other law, rule, regulation or guideline (including but not
limited to any United States law, rule, regulation or guideline) coming into
existence after the date of this Note regarding capital adequacy, or any change
becoming effective after the date of this Note in any of the foregoing or in the
<PAGE>
enforcement or interpretation or administration of any of the foregoing by any
court or any domestic or foreign governmental authority, central bank or
comparable agency charged with the enforcement or interpretation or
administration thereof, or compliance by Lender or its holding company or a
Funding Party or its holding company, as the case may be, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency (excluding, however, any
such laws, rules, regulations, and guidelines giving rise to the reserve
requirement used in calculating LIBOR), has or would have the effect of reducing
the rate of return on the capital of Lender, the Funding Party's or such Funding
Party's holding company, as the case may be, to a level below that which Lender
or its holding company or the Funding Party or its holding company, as the case
may be, could have achieved but for such applicability, adoption, change or
compliance (taking into consideration Lender's or its holding company's or the
Funding Party's or its holding company's, as the case may be, policies with
respect to capital adequacy) (the foregoing being hereinafter referred to as
"Capital Adequacy Events"), then, upon demand by Lender, Borrower shall, pay to
Lender, from time to time, such additional amount or amounts as will compensate
Lender or such Funding Party for any such reduction suffered.
(e) Any amount payable by Borrower under subsection (a) or
subsection (d) of this Section 3 shall be paid to Lender within five (5)
Business Days of receipt by Borrower of a certificate signed by an officer of
Lender setting forth the amount due and the basis for the determination of such
amount, which statement shall be conclusive and binding upon Borrower, absent
manifest error. Failure on the part of Lender to demand payment from Borrower
for any such amount attributable to any particular period shall not constitute a
waiver of Lender's right to demand payment of such amount for any subsequent or
prior period. Lender shall use reasonable efforts to deliver to Borrower prompt
notice of any event described in subsection (a) or (d) above and of the amount
to be paid under this Section 3 as a result thereof; provided, however, any
failure by Lender to so notify Borrower shall not affect Borrower's obligation
to make the payments to be made under this Section 3 as a result thereof. All
amounts which may become due and payable by Borrower in accordance with the
provisions of this Section 3 shall constitute additional interest hereunder and
shall be secured by the Mortgage and the other Loan Documents.
(f) If Lender or any Funding Party requests compensation for
any losses or costs to be reimbursed pursuant to any one or more of the
provisions of subsections (a) (iii) or (iv) or subsection (d) of this Section 4,
or if any event occurs as described in subsections (b) or (c) above which would
cause the Note no longer to bear interest at the LIBOR Interest Rate then, upon
request of Borrower, Lender or such Funding Party shall use reasonable efforts
in a manner consistent with such institution's practice in connection with loans
like the Loan to designate a different lending office for funding or booking the
Transaction Indebtedness or assign its rights and obligations under this Note to
another of its offices, branches or affiliates if such designation or assignment
in Lender's sole but good faith judgment (i) would eliminate, mitigate or reduce
amounts payable by Borrower in connection with Funding Losses or Capital
Adequacy Events or, with respect to an event described in subsection (b) or (c)
above would allow this Note to continue to bear interest at the LIBOR Interest
Rate without additional cost to Lender and (ii) would not be otherwise
prejudicial to Lender; Borrower hereby agreeing to
<PAGE>
pay all reasonably incurred costs and expenses incurred by
Lender or any Funding Party in connection with any such designation or
assignment.
4. Prepayment. Borrower expressly waives any right to prepay
this Note, in whole or in part, except as otherwise expressly provided in the
Loan Documents. Notwithstanding, anything contained in the Loan Documents to the
contrary, no prepayments will be permitted from the twelfth day of any month
through the fifteenth day of any month, unless such prepayment is accompanied by
the payment of any interest due for the next succeeding Interest Accrual Period.
5. Default Interest; Late Charge. (a)If any payment of
principal, interest or other sum payable hereunder or under any of the other
Loan Documents is not paid when due (including by reason of failure to pay all
principal, interest and all other amounts due hereunder and under the other Loan
Documents on the Maturity Date (or such earlier date as the same may become due,
whether by acceleration or otherwise)), such principal amount, interest or other
sum shall bear interest at a rate per annum (the "Default Rate") equal to five
percent (5%) in excess of the interest rate on the Loan determined in accordance
with Section 2(a) above, which Default Rate shall so apply from the date due
until the date such amount is indefeasibly paid to Lender. Without limiting the
foregoing, upon the occurrence of and during the continuance of an Event of
Default hereunder, the entire principal balance of this Note shall bear interest
at the Default Rate. Interest at the Default Rate shall be paid immediately upon
demand, which demand may be made as frequently as Lender shall elect.
(b) If any installment of interest or principal is not paid
when due, Borrower shall pay to Lender a late charge of four percent (4%) of the
amount so overdue in order to defray part of the expense incident to handling
such delinquent payment or payments. Such late charge shall be immediately due
and payable without notice or demand by Lender. Such late charge shall be in
addition to and separate from any increase in interest due hereunder as a result
of calculation of interest due hereunder at the Default Rate. Acceptance by
Lender of any late charge or interest at the Default Rate shall not be deemed a
waiver of any of Lender's rights hereunder or under the other Loan Documents
with respect to such late payment.
6. Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter if any such Event of Default shall then be
continuing, Lender may, without additional notice to Borrower, declare the
principal of, and accrued interest on, this Note to be immediately due,
whereupon the same shall forthwith become immediately due and payable without
presentment, demand, protest or other notice of any kind and Lender may proceed
to exercise any rights and remedies available to Lender under the Mortgage and
the other Loan Documents or which Lender may have at law, in equity or
otherwise.
7. Expenses. Borrower hereby agrees to pay to Lender on demand
all costs and expenses of Lender (including, without limitation, reasonable
attorneys' fees and disbursements) in connection with the enforcement and
collection hereof, whether or not any suit is brought on this Note or any
foreclosure or other proceeding is brought. The provisions of this Section 7 are
<PAGE>
not intended to limit in any manner Borrower's obligations to pay costs and
expenses of Lender as may be elsewhere provided herein, in the Loan Agreement,
in the Mortgage or in any other Loan Document.
8. Security. This Note is secured by the Mortgage, the
Assignment of Leases (as defined in the Loan Agreement) and the other Loan
Documents.
9. Excess Interest. It is agreed that, notwithstanding any
provision to the contrary in this Note, the Mortgage, or any of the other Loan
Documents, no such provision shall require the payment or permit the collection
of any amount ("Excess Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or detention, or the forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is adjudicated to be provided
for, in this Note or any of the other Loan Documents, then in such event:
(a) the provisions of this Section 9 shall
govern and control;
(b) neither Borrower nor any of the other
Persons required to pay any amounts with respect to the Loan shall be obligated
to pay any Excess Interest;
(c) any Excess Interest that Lender may have
received hereunder shall, at the option of Lender, be (i) applied as a credit
against the then outstanding principal balance (without payment of prepayment
premium) due under this Note, accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (ii) refunded to the payor
thereof, or (iii) any combination of the foregoing;
(d) the applicable interest rate or rates shall
be automatically subject to reduction to the maximum lawful rate and this Note,
the Mortgage, and the other Loan Documents shall be deemed to have been, and
shall be, reformed and modified to reflect such reduction in such interest rate
or rates; and
(e) neither Borrower nor any of the other
Persons required to pay any amounts with respect to the Loan shall have any
action or remedy against Lender for any damages whatsoever or any defense to
enforcement of the Note, Mortgage or any of the other Loan Documents arising out
of the payment or collection of any Excess Interest.
10. Waiver. Borrower expressly waives presentment for payment,
demand, notice of demand and of dishonor and nonpayment of this Note, protest
and notice of protest, diligence in collecting, and the bringing of suit against
any other party.
11. Governing Law. THIS NOTE SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IT IS THE INTENT OF THE
PARTIES HERETO THAT THE PROVISIONS OF SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK APPLY TO THIS NOTE.
<PAGE>
12. Loan Taxes. (a) Any and all payments by Borrower to Lender
hereunder and under the other Loan Documents shall, provided that Lender
complies with the requirements of subsection (c) below, be made free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto except for the following for which Borrower shall not be responsible:
(A) taxes imposed on or measured by Lender's net income or net receipts, or (B)
franchise taxes imposed on Lender, by the jurisdiction in which (i) Lender is
organized, (ii) Lender is "doing business" (unless such determination of "doing
business" is made solely as a result of Lender's interest in the Loan and the
security therefor) or (iii) Lender's applicable lending office is located (all
such taxes, levies, imposts, deductions, charges or withholdings and liabilities
(except those described in clauses (A) and (B)) being hereinafter referred to as
"Loan Taxes"). If Borrower shall be required by law to deduct or withhold any
Loan Taxes from or in respect of any sum payable hereunder or under any other
Loan Document, then (x) any such sum payable hereunder or under any other Loan
Document shall be increased as may be necessary so that after making all
required deductions or withholdings (including deductions applicable to
additional sums payable under this Section 12), Lender receives an amount equal
to the sum it would have received had no such deductions or withholdings
(including deductions applicable to additional sums payable under this Section
12) been made, (y) Borrower shall make such deductions or withholdings and (z)
Borrower shall pay the full amount deducted or withheld to the relevant taxing
authority in accordance with applicable law. Borrower will indemnify Lender for
the full amount of any Loan Taxes (including, without limitation, any Loan Taxes
(as well as taxes described in clauses (A) and (B) above) imposed by any
jurisdiction on any amounts payable under this Section 12) paid or payable by
Lender and any liability (including, without limitation, penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Loan
Taxes were correctly or legally asserted. A certificate as to the amount of such
payment or liability delivered to Borrower by Lender shall be conclusive absent
manifest error. The agreements and obligations of Borrower contained in this
Section 12 shall survive the payment in full of principal and interest under
this Note.
(b) Within 30 days after the date of any payment
of Loan Taxes withheld by Borrower in respect of any payment to Lender, Borrower
will furnish to Lender the original or a certified copy of a receipt or other
evidence reasonably satisfactory to the Agent evidencing payment thereof.
(c) If Lender is a U.S. Person (other than the
Lender originally named herein), Lender shall deliver to Borrower upon request a
Form W-9 (unless it establishes to the reasonable satisfaction of Borrower that
it is otherwise eligible for an exemption from backup withholding tax or other
withholding tax). If Lender is not a U.S. Person, Lender shall deliver to
Borrower upon request a Form W-8 and either (i) a Form 1001 which indicates a 0%
rate of tax or (ii) a Form 4224. If Lender is not a U.S. Person, Lender further
undertakes to deliver to Borrower additional Forms W-8, 1001, 4224 (or any
successor forms) or other manner of certification, as the case may be, (i) on or
before the date that any such form expires or becomes obsolete, (ii) after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Borrower, and (iii) such extensions or renewals thereof as
may reasonably be requested by Borrower, certifying that Lender is entitled to
<PAGE>
receive payments hereunder without deduction or withholding of any Loan Taxes.
However, in the event that any change in law, rule, regulation, treaty or
directive, or in the interpretation or application thereof (a "Law Change"), has
occurred after the date hereof and prior to the date on which any delivery
pursuant to the preceding sentence would otherwise be required which renders
such form inapplicable, or which would prevent Lender from duly completing and
delivering any such form or if such Law Change results in Lender being unable to
deliver a Form W-9 (or other satisfactory evidence that it is otherwise eligible
for an exemption from backup withholding tax or other withholding tax), Lender
shall not be obligated to deliver such forms but shall, promptly following such
Law Change, but in any event prior to the time the next payment hereunder is due
following such Law Change, advise Borrower in writing whether it is capable of
receiving payments without any deduction or withholding of Loan Taxes. In the
event of such Law Change, the Borrower shall have the obligation to make the
Lender whole and to "gross-up" under Section 12(a) despite the failure by the
Lender to deliver such forms.
(d) If Lender receives a refund in respect of Loan
Taxes paid by Borrower, it shall promptly pay such refund, together with any
other amounts paid by Borrower pursuant to subsection (a). above in connection
with such refunded Loan Taxes, to Borrower; provided, however, that Borrower
agrees to promptly return such refund to Lender if it receives notice from
Lender that it is required to repay such refund. Nothing contained herein shall
be construed to require Lender to seek any refund and Lender shall have no
obligation to Borrower to do so.
(e) All amounts payable under this Section 12 shall
constitute additional interest hereunder and shall be secured by the Mortgage
and the other Loan Documents. The provisions of this Section 12 shall survive
any payment or prepayment of this Note and any foreclosure or satisfaction of
the Mortgage.
(f) Any reference under this Section 12 to "Lender"
shall be deemed to include any participants and assignees.
13. Modification, etc. This Note can be extended, modified or
amended only in writing by an instrument executed by Lender and Borrower and
none of the rights or benefits of Lender hereunder can be waived except in a
written document executed by Lender.
14. Binding Effect. This Note shall be binding upon and inure
to the benefit of Lender, Borrower and their respective successors and assigns.
15. Notices. All notices and other communications hereunder
shall be delivered as set forth in Section 7.6 of the Loan Agreement.
16. Interpretation. The headings of sections and paragraphs in
this Note are for convenience only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions hereof. As used
in this Note, the singular shall include the plural, and masculine, feminine,
and neuter pronouns shall be fully interchangeable, where the context so
requires. The parties hereto intend and believe that each provision in this Note
comports with all applicable law. However, if any provision in this Note is
<PAGE>
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all parties to the fullest
possible extent that it is legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void or unenforceable
provision were not contained therein, and that the rights, obligations and
interests of Borrower and Lender under the remainder of this Note shall continue
in full force and effect; provided, however, that if any provision of this Note
which is found to be in violation of any applicable law concerning the
imposition of interest hereunder, the rights, obligations and interests of
Borrower and Lender with respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of Section 9 hereof. Time is of the
essence of this Note.
17. Limited Recourse. The provisions of Section 7.20 of the
Loan Agreement shall apply to Borrower's obligations under this Note and are
incorporated herein as if fully set forth herein.
18. No Oral Agreements. THIS NOTE AND THE OTHER LOAN DOCUMENTS
EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY
AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDER-STANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND
MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this
Note as of the day and year first above written.
BORROWER:
CUTTER SOUND DEVELOPMENT, LTD.,
a Florida limited partnership
By: U.S. Golf (Cutter Sound), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
MONTVERDE PROPERTY, LTD.,
a Florida limited partnership
By: U.S. Golf (Montverde), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
NORTHSHORE GOLF PARTNERS, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
<PAGE>
NORTHSHORE DEVELOPMENT, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
U.S. GOLF PINEHURST PLANTATION, LTD.,
a Florida limited partnership
By: U.S. Golf (Plantation), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
FSD GOLF CLUB, LTD.,
a Florida limited partnership
By: U.S. Golf (FSD), Inc., its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
RH HOLDINGS, INC., a Utah corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
<PAGE>
WEDGEFIELD LIMITED PARTNERSHIP,
a Michigan limited partnership
By: U.S. Golf (Wedgefield), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
PROMISSORY NOTE
U.S. $35,600,000 July 2, 1998
New York, New York
FOR VALUE RECEIVED, the undersigned, PELICAN STRAND, LTD., a
Florida limited partnership having its principal office at c/o Golf Communities
of America, 255 South Orange Avenue, Firstate Tower, Suite 1515, Orlando,
Florida 32801 ("Borrower"), hereby promises and agrees to pay to the order of
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability
company, its successors and assigns ("Lender"), at its office at 11 Madison
Avenue, New York, New York 10010, on the Maturity Date (as defined below) the
principal sum of THIRTY FIVE MILLION SIX HUNDRED THOUSAND DOLLARS ($35,600,000)
or so much thereof as shall have been advanced under the Loan Agreement (as
hereinafter defined) and shall be outstanding hereunder together with interest
thereon as hereinafter set forth, such payment to be made in lawful money of the
United States of America in immediately available funds.
1. Definitions. The following terms used in this Note
shall have the following meanings:
"Base Rate"- The rate per annum equal to four and one-half
percentage points (4.5%) in excess of the Treasury
Rate. Any interest rate based on the Base Rate
shall be adjusted as of the date of any change in
the Base Rate. The determination of the Base Rate
shall be made by Lender and shall be conclusive
and binding upon Borrower, absent manifest error.
"Borrower"- Shall have the meaning ascribed to such term in
the initial paragraph hereof. The term "Borrower"
shall include the respective successors and
assigns of Borrower, but the foregoing is not
intended to vary or negate the effect of Section
5.1 of the Loan Agreement.
"Capital Adequacy Events"- Shall have the meaning ascribed
to such term in Section 3(d) hereof.
"Cash Management Agreement"- That certain Cash
Management Agreement, dated as of the date hereof,
made by and between Borrower and Lender, with
respect to the Loan as same may be amended,
modified or extended, from time to time.
<PAGE>
"Default Rate"- Shall have the meaning ascribed to such term in
Section 5(a) hereof.
"Domestic Business Day"- Any day except a Saturday, Sunday
or other day on which commercial banks are
required or permitted by law to close in New York
City.
"Eurodollar Business Day"- Any day on which commercial banks
are open for international business (including
dealings in dollar deposits) in London, England.
"Event of Default"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Excess Interest"- Shall have the meaning ascribed to such term in
Section 9 hereof.
"Funding Losses"- Shall have the meaning ascribed to such term in
Section 3(a) hereof.
"Funding Party"- Any bank or other entity, if any, which is
indirectly or directly funding Lender with respect
to the Loan, in whole or in part, including,
without limitation, any direct or indirect
assignee of, or participant in, the Loan.
"Governmental Authority"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Interest Accrual Period"- With respect to any Payment Date, from the
fifteenth day of the calendar month preceding such
Payment Date until the fourteenth day of current
month, provided, that no Interest Accrual Period
shall end later than the Maturity Date (other than
for purposes of calculating Default Interest), and
the initial Interest Accrual Period shall begin on
the date of this Note.
"Law Change"- Shall have the meaning ascribed to such term in
Section 12(c) hereof.
"Lender"- Shall have the meaning ascribed to such term in
the introductory paragraph hereof.
"LIBOR Interest Rate"- Shall have the meaning ascribed to such term in
Section 2(a) hereof.
<PAGE>
"LIBOR"- With respect to the relevant Interest Accrual
Period, the rate per annum (rounded upwards, if
necessary, to the nearest one-one-thousandth
(1/1000) of one percent 1%) reported, with respect
to the initial Interest Accrual Period, at 11:00
a.m. London time on the date of this Note (or if
such date is not a Eurodollar Business Day, the
immediately preceding Eurodollar Business Day),
and thereafter, at 11:00 a.m. London time on the
date two (2) Eurodollar Business Days prior to the
first day of such Interest Accrual Period, on
Telerate Access Service Page 3750 (British Bankers
Association Settlement Rate) as the non-reserve
adjusted London Interbank Offered Rate for U.S.
dollar deposits having a 30 day term and in an
amount of $1,000,000 or more (or on such other
page as may replace Telerate Page 3750 on that
service or such other service or services as may
be nominated by the British Bankers' Association
for the purpose of displaying such rate all as
determined by Lender in its sole but good faith
discretion). In the event that (i) more than one
such LIBOR is provided, the average of such rates
shall apply or (ii) no such LIBOR is published,
then LIBOR shall be determined from such
comparable financial reporting company as Lender
in its sole but good faith discretion shall
determine. LIBOR for any Interest Accrual Period
shall be adjusted from time to time, by increasing
the rate thereof to compensate Lender and any
Funding Party for any aggregate reserve
requirements (including, without limitation, all
basic, supplemental, marginal and other reserve
requirements and taking into account any
transitional adjustments or other scheduled
changes in reserve requirements during any
Interest Accrual Period) which are required to be
maintained by Lender or such Funding Party with
respect to "Eurocurrency liabilities" (as
presently defined in Regulation D of the Board of
Governors of the Federal Reserve System) of the
same term under Regulation D, or any other
regulations of a Governmental Authority having
jurisdiction over Lender or such Funding Party of
similar effect.
<PAGE>
"Loan"- The loan from Lender to Borrower which is
evidenced by this Note.
"Loan Agreement"- That certain Loan Agreement, dated as
of the date hereof, made by and between Borrower
and Lender, with respect to the Loan as same may
be amended, modified or extended, from time to
time.
"Loan Documents"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Loan Taxes"- Shall have the meaning ascribed to such term in
Section 12(a) hereof.
"Maturity Date"- July 1, 2001.
"Mortgage"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Net Proceeds"- The amount allocated to the Monthly Debt Service
Account under Section 3(a)(A)(vii) or Section
3(a)(B)(vii) of the Cash Management Agreement
during any Collection Period (as defined therein)
plus the amount allocated to the Monthly Debt
Service Account upon the sale of a Release Parcel
or Lot (each as defined in the Loan Agreement)
under Section 3(a)(C) thereof.
"Note"- This Promissory Note.
"Payment Date"- July 11, 1998 and the eleventh day of each
month thereafter during the term of this Note, if
the eleventh day is not a Domestic Business Day
then on the next preceding Domestic Business Day.
"Person"- Shall have the meaning ascribed to such term
in the Loan Agreement.
"Treasury Rate"- A rate per annum equal to the yield, as of the
related determination date, calculated by linear
interpolation (rounded to the nearest
one-thousandth of one percent (i.e., 0.001%)) of
the yields of noncallable United States Treasury
obligations with terms (one longer and one
shorter) most nearly approximating the period from
<PAGE>
such determination date to the Maturity Date, as
determined in good faith by Lender on the basis of
Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other
recognized source of financial market information
selected by Lender.
"U.S. Person"- Any Person that is (i) a citizen or resident of
the United States, (ii) a corporation, partnership
or other entity created or organized under the
laws of the United States or any State thereof or
(iii) any estate or trust that is subject to U.S.
federal income taxation regardless of the source
of its income.
2. Interest and Principal Payments. (a) Subject to the further
provisions of this Note, including Sections 3 and 5 below, the principal amount
outstanding hereunder shall bear interest at a rate per annum (the "LIBOR
Interest Rate") equal to four and one-half percent (4.5%) in excess of LIBOR for
the relevant Interest Accrual Period.
(b) Prior to the Maturity Date (or the date the unpaid
principal balance otherwise becomes due, whether by acceleration or otherwise),
interest accruing during each Interest Accrual Period shall be payable monthly
in arrears on each Payment Date. In addition, Borrower shall pay, in reduction
of the outstanding principal amount of the Loan,
(i) on each Payment Date an amount equal to the Net
Proceeds for the preceding calendar month,
(ii) on July 1, 1999, the amount (if any) by which
the aggregate Net Proceeds paid to Lender during the preceding
twelve (12) calendar months, excluding Net Proceeds
attributable to the sale of the Property or a Release Parcel
during such period, shall be less than $5,778,765 and
(iii) on July 1, 2000, the amount (if any) by which
the aggregate Net Proceeds paid to Lender during the preceding
twenty-four (24) calendar months, excluding Net Proceeds
attributable to the sale of the Property or a Release Parcel
during such period, shall be less than $15,033,015.
The entire unpaid principal balance of this Note together with
all accrued and unpaid interest, if not sooner paid, shall be payable in full on
the Maturity Date.
(c) All interest payable hereunder shall be computed on the
basis of a 360-day year for the actual number of days elapsed. In computing the
number of days during which interest accrues, the day on which funds are
initially advanced shall be included regardless of the time of day such advance
is made, and the day on which funds are repaid shall, subject to paragraph (d)
below, be excluded. Interest shall accrue on each payment of principal hereunder
through the date on which such payment is credited, as provided below.
<PAGE>
(d) All sums payable to Lender hereunder shall be payable,
without setoff, deduction or counterclaim, in immediately available funds, no
later than noon New York time on the date when due by wire transfer to such
account or address as Lender may from time to time designate in a written notice
to Borrower. Payments received by Lender in immediately available funds on any
day after noon New York time shall be treated for all purposes of the Loan as
having been paid and received by Lender on the next Domestic Business Day.
Notwithstanding anything to the contrary contained herein, when any payment is
due hereunder or under any of the other Loan Documents on a day which is not a
Domestic Business Day, such payment shall be made on the next succeeding
Domestic Business Day.
3. Funding Losses; Change in Law, Etc.
(a) Borrower hereby agrees to pay to Lender any amount
necessary to compensate Lender and any Funding Party for any losses or costs
(including, without limitation, the costs of breaking any "LIBOR" contract, if
applicable, or funding losses determined on the basis of Lender's or such
Funding Party's reinvestment rate and the interest rate hereon) (collectively,
"Funding Losses") sustained by Lender or any Funding Party: (i) if this Note, or
any portion hereof, is repaid for any reason whatsoever on any date other than a
Payment Date (including, without limitation, from condemnation or insurance
proceeds, unless due to Lender's election to apply same to this Note on such
date), (ii) upon the conversion of the interest rate on the Loan to the Base
Rate in accordance with subsection (b) below, and/or (iii) as a consequence of
(x) any increased costs (without duplication of any costs used in calculating
LIBOR) that Lender or any Funding Party may sustain in maintaining the borrowing
evidenced hereby or (y) the reduction of any amounts received or receivable from
Borrower, in either case, due to the introduction of, or any change in, law or
applicable regulation or treaty (including the administration or interpretation
thereof), whether or not having the force of law, or due to the compliance by
Lender or the Funding Party, as the case may be, with any directive, whether or
not having the force of law, or request from any central bank or domestic or
foreign governmental authority, agency or instrumentality having jurisdiction.
Payment of Funding Losses hereunder shall be in addition to any obligation to
pay a prepayment premium under Section 4 hereof in circumstances where such
prepayment premium would be due and owing.
(b) If Lender determines (which determination shall be
conclusive and binding upon Borrower, absent manifest error) (i) that Dollar
deposits in an amount approximately equal to the principal balance outstanding
hereunder are not generally available at such time in the London Interbank
Market for deposits in Eurodollars, (ii) that the rate at which such deposits
are being offered will not adequately and fairly reflect the cost to Lender or a
Funding Party of maintaining a LIBOR Interest Rate on the Loan (or the portion
of the Loan being funded by such Funding Party) or of funding the same in such
<PAGE>
market for such Interest Accrual Period due to circumstances affecting the
London Interbank Market generally, (iii) that reasonable means do not exist for
ascertaining LIBOR, or (iv) that a LIBOR Interest Rate would be in excess of the
maximum interest rate which Borrower may by law pay, then, in any such event,
Lender shall immediately notify Borrower of such circumstance and as of the date
of such notification with respect to an event described in clause (ii) or (iv)
above, or as of the expiration of the applicable Interest Accrual Period with
respect to an event described in clause (i) or (iii) above, interest shall
accrue at the Base Rate until such time as the situations described above are no
longer in effect or as otherwise provided in Section 5 hereof; provided,
however, if the situation described in clause (ii) above occurs, (x) Borrower
shall have the option, to be exercised by written notice to Lender, to pay
Lender (in the manner reasonably required by Lender) for such increased cost of
maintaining a LIBOR Interest Rate and (y) if the same only affects a portion of
the Loan, then only such portion shall have interest accrue at the Base Rate
(provided the remaining portion is at least $1,000,000) and interest shall
continue to accrue on the remaining portion at the LIBOR Interest Rate.
Notwithstanding anything to the contrary herein, with respect to an event
described in clauses (i) through (iv) above, provided that no Event of Default
shall then exist, Borrower shall have the right, on thirty (30) days prior
written notice to Lender given within thirty (30) days after Lender gives notice
to Borrower of such event, to pay the entire outstanding principal balance of
the Loan and all accrued and unpaid interest thereon on the next Payment Date
together with the Spread Maintenance Premium (as defined in the Loan Agreement)
thereon.
(c) If the introduction of, or any change in, any law,
regulation or treaty, or in the interpretation thereof by any governmental
authority charged with the administration or interpretation thereof after the
date of this Note, shall make it unlawful for Lender or any Funding Party to
maintain the LIBOR Interest Rate with respect to the Loan, or any portion
thereof, or to fund the Loan, or any portion thereof, in Eurodollars in the
London Interbank Market, then the Loan (or such portion of the Loan) shall
thereafter bear interest at the Base Rate (unless the Default Rate shall be
applicable) and Borrower shall pay to Lender the amount of Funding Losses (if
any) incurred in connection with such conversion. The accrual of interest at the
Base Rate shall continue until such Payment Date, if any, as the situation
described in this subsection (c) is no longer in effect.
(d) If Lender or the Funding Party, as the case may be, shall
have determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption of any other law, rule, regulation or guideline (including but not
limited to any United States law, rule, regulation or guideline) coming into
existence after the date of this Note regarding capital adequacy, or any change
becoming effective after the date of this Note in any of the foregoing or in the
enforcement or interpretation or administration of any of the foregoing by any
court or any domestic or foreign governmental authority, central bank or
comparable agency charged with the enforcement or interpretation or
administration thereof, or compliance by Lender or its holding company or a
Funding Party or its holding company, as the case may be, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency (excluding, however, any
<PAGE>
such laws, rules, regulations, and guidelines giving rise to the reserve
requirement used in calculating LIBOR), has or would have the effect of reducing
the rate of return on the capital of Lender, the Funding Party's or such Funding
Party's holding company, as the case may be, to a level below that which Lender
or its holding company or the Funding Party or its holding company, as the case
may be, could have achieved but for such applicability, adoption, change or
compliance (taking into consideration Lender's or its holding company's or the
Funding Party's or its holding company's, as the case may be, policies with
respect to capital adequacy) (the foregoing being hereinafter referred to as
"Capital Adequacy Events"), then, upon demand by Lender, Borrower shall, pay to
Lender, from time to time, such additional amount or amounts as will compensate
Lender or such Funding Party for any such reduction suffered.
(e) Any amount payable by Borrower under subsection (a) or
subsection (d) of this Section 3 shall be paid to Lender within five (5)
Business Days of receipt by Borrower of a certificate signed by an officer of
Lender setting forth the amount due and the basis for the determination of such
amount, which statement shall be conclusive and binding upon Borrower, absent
manifest error. Failure on the part of Lender to demand payment from Borrower
for any such amount attributable to any particular period shall not constitute a
waiver of Lender's right to demand payment of such amount for any subsequent or
prior period. Lender shall use reasonable efforts to deliver to Borrower prompt
notice of any event described in subsection (a) or (d) above and of the amount
to be paid under this Section 3 as a result thereof; provided, however, any
failure by Lender to so notify Borrower shall not affect Borrower's obligation
to make the payments to be made under this Section 3 as a result thereof. All
amounts which may become due and payable by Borrower in accordance with the
provisions of this Section 3 shall constitute additional interest hereunder and
shall be secured by the Mortgage and the other Loan Documents.
(f) If Lender or any Funding Party requests compensation for
any losses or costs to be reimbursed pursuant to any one or more of the
provisions of subsections (a) (iii) or (iv) or subsection (d) of this Section 4,
or if any event occurs as described in subsections (b) or (c) above which would
cause the Note no longer to bear interest at the LIBOR Interest Rate then, upon
request of Borrower, Lender or such Funding Party shall use reasonable efforts
in a manner consistent with such institution's practice in connection with loans
like the Loan to designate a different lending office for funding or booking the
<PAGE>
Transaction Indebtedness or assign its rights and obligations under this Note to
another of its offices, branches or affiliates if such designation or assignment
in Lender's sole but good faith judgment (i) would eliminate, mitigate or reduce
amounts payable by Borrower in connection with Funding Losses or Capital
Adequacy Events or, with respect to an event described in subsection (b) or (c)
above would allow this Note to continue to bear interest at the LIBOR Interest
Rate without additional cost to Lender and (ii) would not be otherwise
prejudicial to Lender; Borrower hereby agreeing to pay all reasonably incurred
costs and expenses incurred by Lender or any Funding Party in connection with
any such designation or assignment.
4. Prepayment. Borrower expressly waives any right to prepay
this Note, in whole or in part, except as otherwise expressly provided in the
Loan Documents. Notwithstanding, anything contained in the Loan Documents to the
contrary, no prepayments will be permitted from the twelfth day of any month
through the fifteenth day of any month, unless such prepayment is accompanied by
the payment of any interest due for the next succeeding Interest Accrual Period.
5. Default Interest; Late Charge. (a)If any payment of
principal, interest or other sum payable hereunder or under any of the other
Loan Documents is not paid when due (including by reason of failure to pay all
principal, interest and all other amounts due hereunder and under the other Loan
Documents on the Maturity Date (or such earlier date as the same may become due,
whether by acceleration or otherwise)), such principal amount, interest or other
sum shall bear interest at a rate per annum (the "Default Rate") equal to five
percent (5%) in excess of the interest rate on the Loan determined in accordance
with Section 2(a) above, which Default Rate shall so apply from the date due
until the date such amount is indefeasibly paid to Lender. Without limiting the
foregoing, upon the occurrence of and during the continuance of an Event of
Default hereunder, the entire principal balance of this Note shall bear interest
at the Default Rate. Interest at the Default Rate shall be paid immediately upon
demand, which demand may be made as frequently as Lender shall elect.
(b) If any installment of interest or principal is not paid
when due, Borrower shall pay to Lender a late charge of four percent (4%) of the
amount so overdue in order to defray part of the expense incident to handling
such delinquent payment or payments. Such late charge shall be immediately due
and payable without notice or demand by Lender. Such late charge shall be in
addition to and separate from any increase in interest due hereunder as a result
of calculation of interest due hereunder at the Default Rate. Acceptance by
Lender of any late charge or interest at the Default Rate shall not be deemed a
waiver of any of Lender's rights hereunder or under the other Loan Documents
with respect to such late payment.
6. Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter if any such Event of Default shall then be
continuing, Lender may, without additional notice to Borrower, declare the
principal of, and accrued interest on, this Note to be immediately due,
whereupon the same shall forthwith become immediately due and payable without
presentment, demand, protest or other notice of any kind and Lender may proceed
to exercise any rights and remedies available to Lender under the Mortgage and
the other Loan Documents or which Lender may have at law, in equity or
otherwise.
7. Expenses. Borrower hereby agrees to pay to Lender on demand
all costs and expenses of Lender (including, without limitation, reasonable
attorneys' fees and disbursements) in connection with the enforcement and
collection hereof, whether or not any suit is brought on this Note or any
foreclosure or other proceeding is brought. The provisions of this Section 7 are
<PAGE>
not intended to limit in any manner Borrower's obligations to pay costs and
expenses of Lender as may be elsewhere provided herein, in the Loan Agreement,
in the Mortgage or in any other Loan Document.
8. Security. This Note is secured by the Mortgage, the
Assignment of Leases (as defined in the Loan Agreement) and the other Loan
Documents.
9. Excess Interest. It is agreed that, notwithstanding any
provision to the contrary in this Note, the Mortgage, or any of the other Loan
Documents, no such provision shall require the payment or permit the collection
of any amount ("Excess Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or detention, or the forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is adjudicated to be provided
for, in this Note or any of the other Loan Documents, then in such event:
(a) the provisions of this Section 9 shall
govern and control;
(b) neither Borrower nor any of the other
Persons required to pay any amounts with respect to the Loan shall be obligated
to pay any Excess Interest;
(c) any Excess Interest that Lender may have
received hereunder shall, at the option of Lender, be (i) applied as a credit
against the then outstanding principal balance (without payment of prepayment
premium) due under this Note, accrued and unpaid interest thereon not to exceed
the maximum amount permitted by law, or both, (ii) refunded to the payor
thereof, or (iii) any combination of the foregoing;
(d) the applicable interest rate or rates shall
be automatically subject to reduction to the maximum lawful rate and this Note,
the Mortgage, and the other Loan Documents shall be deemed to have been, and
shall be, reformed and modified to reflect such reduction in such interest rate
or rates; and
(e) neither Borrower nor any of the other
Persons required to pay any amounts with respect to the Loan shall have any
action or remedy against Lender for any damages whatsoever or any defense to
enforcement of the Note, Mortgage or any of the other Loan Documents arising out
of the payment or collection of any Excess Interest.
10. Waiver. Borrower expressly waives presentment for payment,
demand, notice of demand and of dishonor and nonpayment of this Note, protest
and notice of protest, diligence in collecting, and the bringing of suit against
any other party.
11. Governing Law. THIS NOTE SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IT IS THE INTENT OF THE
PARTIES HERETO THAT THE PROVISIONS OF SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK APPLY TO THIS NOTE.
12. Loan Taxes. (a) Any and all payments by Borrower to Lender
hereunder and under the other Loan Documents shall, provided that Lender
complies with the requirements of subsection (c) below, be made free and clear
<PAGE>
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto except for the following for which Borrower shall not be responsible:
(A) taxes imposed on or measured by Lender's net income or net receipts, or (B)
franchise taxes imposed on Lender, by the jurisdiction in which (i) Lender is
organized, (ii) Lender is "doing business" (unless such determination of "doing
business" is made solely as a result of Lender's interest in the Loan and the
security therefor) or (iii) Lender's applicable lending office is located (all
such taxes, levies, imposts, deductions, charges or withholdings and liabilities
(except those described in clauses (A) and (B)) being hereinafter referred to as
"Loan Taxes"). If Borrower shall be required by law to deduct or withhold any
Loan Taxes from or in respect of any sum payable hereunder or under any other
Loan Document, then (x) any such sum payable hereunder or under any other Loan
Document shall be increased as may be necessary so that after making all
required deductions or withholdings (including deductions applicable to
additional sums payable under this Section 12), Lender receives an amount equal
to the sum it would have received had no such deductions or withholdings
(including deductions applicable to additional sums payable under this Section
12) been made, (y) Borrower shall make such deductions or withholdings and (z)
Borrower shall pay the full amount deducted or withheld to the relevant taxing
authority in accordance with applicable law. Borrower will indemnify Lender for
the full amount of any Loan Taxes (including, without limitation, any Loan Taxes
(as well as taxes described in clauses (A) and (B) above) imposed by any
jurisdiction on any amounts payable under this Section 12) paid or payable by
Lender and any liability (including, without limitation, penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Loan
Taxes were correctly or legally asserted. A certificate as to the amount of such
payment or liability delivered to Borrower by Lender shall be conclusive absent
manifest error. The agreements and obligations of Borrower contained in this
Section 12 shall survive the payment in full of principal and interest under
this Note.
(b) Within 30 days after the date of any payment
of Loan Taxes withheld by Borrower in respect of any payment to Lender, Borrower
will furnish to Lender the original or a certified copy of a receipt or other
evidence reasonably satisfactory to the Agent evidencing payment thereof.
(c) If Lender is a U.S. Person (other than the Lender
originally named herein), Lender shall deliver to Borrower upon request a Form
W-9 (unless it establishes to the reasonable satisfaction of Borrower that it is
otherwise eligible for an exemption from backup withholding tax or other
withholding tax). If Lender is not a U.S. Person, Lender shall deliver to
Borrower upon request a Form W-8 and either (i) a Form 1001 which indicates a 0%
rate of tax or (ii) a Form 4224. If Lender is not a U.S. Person, Lender further
undertakes to deliver to Borrower additional Forms W-8, 1001, 4224 (or any
successor forms) or other manner of certification, as the case may be, (i) on or
before the date that any such form expires or becomes obsolete, (ii) after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Borrower, and (iii) such extensions or renewals thereof as
<PAGE>
may reasonably be requested by Borrower, certifying that Lender is entitled to
receive payments hereunder without deduction or withholding of any Loan Taxes.
However, in the event that any change in law, rule, regulation, treaty or
directive, or in the interpretation or application thereof (a "Law Change"), has
occurred after the date hereof and prior to the date on which any delivery
pursuant to the preceding sentence would otherwise be required which renders
such form inapplicable, or which would prevent Lender from duly completing and
delivering any such form or if such Law Change results in Lender being unable to
deliver a Form W-9 (or other satisfactory evidence that it is otherwise eligible
for an exemption from backup withholding tax or other withholding tax), Lender
shall not be obligated to deliver such forms but shall, promptly following such
Law Change, but in any event prior to the time the next payment hereunder is due
following such Law Change, advise Borrower in writing whether it is capable of
receiving payments without any deduction or withholding of Loan Taxes. In the
event of such Law Change, the Borrower shall have the obligation to make the
Lender whole and to "gross-up" under Section 12(a) despite the failure by the
Lender to deliver such forms.
(d) If Lender receives a refund in respect of Loan
Taxes paid by Borrower, it shall promptly pay such refund, together with any
other amounts paid by Borrower pursuant to subsection (a). above in connection
with such refunded Loan Taxes, to Borrower; provided, however, that Borrower
agrees to promptly return such refund to Lender if it receives notice from
Lender that it is required to repay such refund. Nothing contained herein shall
be construed to require Lender to seek any refund and Lender shall have no
obligation to Borrower to do so.
(e) All amounts payable under this Section 12 shall
constitute additional interest hereunder and shall be secured by the Mortgage
and the other Loan Documents. The provisions of this Section 12 shall survive
any payment or prepayment of this Note and any foreclosure or satisfaction of
the Mortgage.
(f) Any reference under this Section 12 to "Lender"
shall be deemed to include any participants and assignees.
13. Modification, etc. This Note can be extended, modified or
amended only in writing by an instrument executed by Lender and Borrower and
none of the rights or benefits of Lender hereunder can be waived except in a
written document executed by Lender.
14. Binding Effect. This Note shall be binding upon and inure
to the benefit of Lender, Borrower and their respective successors and assigns.
15. Notices. All notices and other communications hereunder
shall be delivered as set forth in Section 7.6 of the Loan Agreement.
16. Interpretation. The headings of sections and paragraphs in
this Note are for convenience only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions hereof. As used
in this Note, the singular shall include the plural, and masculine, feminine,
and neuter pronouns shall be fully interchangeable, where the context so
requires. The parties hereto intend and believe that each provision in this Note
comports with all applicable law. However, if any provision in this Note is
<PAGE>
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all parties to the fullest
possible extent that it is legal, valid and enforceable, that the remainder of
this Note shall be construed as if such unlawful, void or unenforceable
provision were not contained therein, and that the rights, obligations and
interests of Borrower and Lender under the remainder of this Note shall continue
in full force and effect; provided, however, that if any provision of this Note
which is found to be in violation of any applicable law concerning the
imposition of interest hereunder, the rights, obligations and interests of
Borrower and Lender with respect to the imposition of interest hereunder shall
be governed and controlled by the provisions of Section 9 hereof. Time is of the
essence of this Note.
17. Limited Recourse. The provisions of Section 7.20 of the
Loan Agreement shall apply to Borrower's obligations under this Note and are
incorporated herein as if fully set forth herein.
18. No Oral Agreements. THIS NOTE AND THE OTHER LOAN DOCUMENTS
EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY
AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDER-STANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND
MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO.
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this
Note as of the day and year first above written.
BORROWER:
PELICAN STRAND, LTD.,
a Florida limited partnership
By: Pelican Strand Development Corporation,
its General Partner
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
GUARANTY
This GUARANTY (this "Guaranty") is executed as of July 2, 1998
by CUTTER SOUND DEVELOPMENT, LTD., MONTVERDE PROPERTY, LTD., NORTHSHORE GOLF
PARTNERS, LTD., NORTHSHORE DEVELOPMENT, LTD., U.S. GOLF PINEHURST PLANTATION,
LTD., FSD GOLF CLUB, LTD., RH HOLDINGS, INC. AND WEDGEFIELD LIMITED PARTNERSHIP,
each having an address at c/o Golf Communities of America, 255 South Orange
Avenue, Firstate Tower, Suite 1515, Orlando, Florida 32801 (whether one or more
collectively referred to as "Guarantor"), for the benefit of CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company ("Lender").
W I T N E S S E T H:
WHEREAS, Pelican Strand, Ltd. ("Borrower") is indebted to
Lender for the aggregate sum of $35,600,000 (the "Debt") payable in accordance
with that certain Promissory Note dated of even date herewith made by Borrower
to Lender (together with all renewals, modifications, increases and extensions
thereof, the "Note"), which Note evidences a loan made by Lender to Borrower
pursuant to a Loan Agreement of even date herewith between Borrower and Lender
(the "Loan Agreement") and is secured by the liens and security interests of
certain Mortgages and Security Agreements and Deeds of Trust, and Security
Agreements, each of even date herewith (collectively, the "Mortgage"), and
further evidenced, secured or governed by other instruments and documents
executed in connection with the Debt (together with the Loan Agreement, Note and
Mortgage, the "Loan Documents"); and
WHEREAS, Lender is not willing to accept the Note or otherwise
extend credit to Borrower unless Guarantor unconditionally guarantees payment of
the Debt and performance of the Guaranteed Obligations (as herein defined); and
WHEREAS, Guarantor is an affiliate of Borrower and the
principals of Guarantor will directly benefit from Lender's extension of credit
to Borrower.
NOW, THEREFORE, as an inducement to Lender to so extend credit
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I
NATURE AND SCOPE OF GUARANTY
1.1 Guaranty of Obligation. Guarantor hereby irrevocably and
unconditionally guarantees to Lender and its successors and assigns the payment
and performance of the Guaranteed Obligations as and when the same shall be due
<PAGE>
and payable, whether by lapse of time, by acceleration of maturity or otherwise.
Guarantor hereby irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Obligations as a primary obligor.
1.2 Definition of Guaranteed Obligations. As used herein, the
term "Guaranteed Obligations" means the (a) full and prompt payment, whether at
maturity or by acceleration or otherwise, of all of Borrower's obligations under
the Note and the other Loan Documents, together with interest on such
obligations to the extent provided for in the Loan Documents and (b) the full
and prompt performance of any and all other obligations of Borrower under the
Loan Documents.
1.3 Nature of Guaranty. This Guaranty is an irrevocable,
absolute, continuing guaranty of payment and performance and not a guaranty of
collection. This Guaranty may not be revoked by Guarantor and shall continue to
be effective with respect to any Guaranteed Obligations arising or created after
any attempted revocation by Guarantor and after (if Guarantor is a natural
person) Guarantor's death (in which event this Guaranty shall be binding upon
Guarantor's estate and Guarantor's legal representatives and heirs). The fact
that at any time or from time to time the Guaranteed Obligations may be
increased or reduced shall not release or discharge the obligation of Guarantor
to Lender with respect to the Guaranteed Obligations. This Guaranty may be
enforced by Lender and any subsequent holder of the Note and shall not be
discharged by the assignment or negotiation of all or part of the Note.
1.4 Guaranteed Obligations Not Reduced by Offset. The
Guaranteed Obligations and the liabilities and obligations of Guarantor to
Lender hereunder, shall not be reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of Borrower, or any
other party, against Lender or against payment of the Guaranteed Obligations,
whether such offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or
otherwise.
1.5 Payment By Guarantor. If all or any part of the Guaranteed
Obligations shall not be punctually paid when due, whether at demand, maturity,
acceleration or otherwise, Guarantor shall, immediately upon demand by Lender,
and without presentment, protest, notice of protest, notice of non-payment,
notice of intention to accelerate the maturity, notice of acceleration of the
maturity, or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due on the Guaranteed Obligations to Lender at
Lender's address as set forth herein. Such demand(s) may be made at any time
coincident with or after the time for payment of all or part of the Guaranteed
Obligations, and may be made from time to time with respect to the same or
different items of Guaranteed Obligations. Such demand shall be deemed made,
given and received in accordance with the notice provisions hereof.
1.6 No Duty To Pursue Others. It shall not be necessary
for Lender (and Guarantor hereby waives any rights which Guarantor may have to
require Lender), in order to enforce the obligations of Guarantor hereunder,
<PAGE>
first to (i) institute suit or exhaust its remedies against Borrower or others
liable on the Debt or the Guaranteed Obligations or any other person, (ii)
enforce Lender's rights against any collateral which shall ever have been given
to secure the Debt, (iii) enforce Lender's rights against any other guarantors
of the Guaranteed Obligations, (iv) join Borrower or any others liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty, or (v)
resort to any other means of obtaining payment of the Guaranteed Obligations.
Lender shall not be required to mitigate damages or take any other action to
reduce, collect or enforce the Guaranteed Obligations.
1.7 Waivers. Guarantor agrees to the provisions of the Loan
Documents, and hereby waives notice of (i) any loans or advances made by Lender
to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension
of the Note, the Mortgage or of any other Loan Documents, (iv) the execution and
delivery by Borrower and Lender of any other loan or credit agreement or of
Borrower's execution and delivery of any promissory notes or other documents
arising under the Loan Documents or in connection with the Property (as defined
in the Loan Agreement), (v) the occurrence of any breach by Borrower or an Event
of Default, (vi) Lender's transfer or disposition of the Guaranteed Obligations,
or any part thereof, (vii) sale or foreclosure (or posting or advertising for
sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii)
protest, proof of non-payment or default by Borrower, or (ix) any other action
at any time taken or omitted by Lender, and, generally, all demands and notices
of every kind in connection with this Guaranty, the Loan Documents, any
documents or agreements evidencing, securing or relating to any of the
Guaranteed Obligations and the obligations hereby guaranteed.
1.8 Payment of Expenses. In the event that Guarantor should
breach or fail to timely perform any provisions of this Guaranty, Guarantor
shall, immediately upon demand by Lender, pay Lender all costs and expenses
(including court costs and reasonable attorneys' fees) incurred by Lender in the
enforcement hereof or the preservation of Lender's rights hereunder. The
covenant contained in this Section shall survive the payment and performance of
the Guaranteed Obligations.
1.9 Effect of Bankruptcy. In the event that, pursuant to any
insolvency, bankruptcy, reorganization, receivership or other debtor relief law,
or any judgment, order or decision thereunder, Lender must rescind or restore
any payment, or any part thereof, received by Lender in satisfaction of the
Guaranteed Obligations, as set forth herein, any prior release or discharge from
the terms of this Guaranty given to Guarantor by Lender shall be without effect,
and this Guaranty shall remain in full force and effect. It is the intention of
Borrower and Guarantor that Guarantor's obligations hereunder shall not be
discharged except by Guarantor's performance of such obligations and then only
to the extent of such performance.
1.10 Waiver of Subrogation, Reimbursement and Contribution.
Notwithstanding anything to the contrary contained in this Guaranty, Guarantor
hereby unconditionally and irrevocably agrees not to exercise any and all rights
<PAGE>
it may now or hereafter have under any agreement, at law or in equity
(including, without limitation, any law subrogating the Guarantor to the rights
of Lender), to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from Borrower or any other party liable for
payment of any or all of the Guaranteed Obligations for any payment made by
Guarantor under or in connection with this Guaranty until the Guaranteed
Obligations shall have been paid in full.
1.11 Borrower. The term "Borrower" as used herein shall
include any new or successor corporation, association, partnership (general or
limited), limited liability company, joint venture, trust or other individual or
organization formed as a result of any merger, reorganization, sale, transfer,
devise, gift or bequest of Borrower or any interest in Borrower.
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Guarantor hereby consents and agrees to each of the following,
and agrees that Guarantor's obligations under this Guaranty shall not be
released, diminished, impaired, reduced or adversely affected by any of the
following, and waives any common law, equitable, statutory or other rights
(including, without limitation, rights to notice) which Guarantor might
otherwise have as a result of or in connection with any of the following:
2.1 Modifications. Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligations, the Note, the Mortgage, the other Loan Documents, or any other
document, instrument, contract or understanding between Borrower and Lender, or
any other parties, pertaining to the Guaranteed Obligations or any failure of
Lender to notify Guarantor of any such action.
2.2 Adjustment. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to Borrower or any
Guarantor.
2.3 Condition of Borrower or Guarantor. The insolvency,
bankruptcy, arrangement, adjustment, composition, liquidation, disability,
dissolution or lack of power of Borrower, Guarantor or any other party at any
time liable for the payment of all or part of the Guaranteed Obligations; or any
dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or
all of the assets of Borrower or Guarantor, or any changes in the shareholders,
partners or members of Borrower or Guarantor; or any reorganization of Borrower
or Guarantor.
2.4 Invalidity of Guaranteed Obligations. The invalidity,
illegality or unenforceability of all or any part of the Guaranteed Obligations,
or any document or agreement executed in connection with the Guaranteed
<PAGE>
Obligations, for any reason whatsoever, including, without limitation, the fact
that (i) the Guaranteed Obligations, or any part thereof, exceeds the amount
permitted by law, (ii) the act of creating the Guaranteed Obligations or any
part thereof is ultra vires, (iii) the officers or representatives executing the
Note, the Mortgage or the other Loan Documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed
Obligations violate applicable usury laws, (v) the Borrower has valid defenses,
claims or offsets (whether at law, in equity or by agreement) which render the
Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the
creation, performance or repayment of the Guaranteed Obligations (or the
execution, delivery and performance of any document or instrument representing
part of the Guaranteed Obligations or executed in connection with the Guaranteed
Obligations, or given to secure the repayment of the Guaranteed Obligations) is
illegal, uncollectible or unenforceable, or (vii) the Note, the Mortgage or any
of the other Loan Documents have been forged or otherwise are irregular or not
genuine or authentic, it being agreed that Guarantor shall remain liable hereon
regardless of whether Borrower or any other person be found not liable on the
Guaranteed Obligations or any part thereof for any reason.
2.5 Release of Obligors. Any full or partial release of the
liability of Borrower of the Guaranteed Obligations, or any part thereof, or of
any co-guarantors, or any other person or entity now or hereafter liable,
whether directly or indirectly, jointly, severally, or jointly and severally, to
pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or
any part thereof, it being recognized, acknowledged and agreed by Guarantor that
Guarantor may be required to pay the Guaranteed Obligations in full without
assistance or support of any other party, and Guarantor has not been induced to
enter into this Guaranty on the basis of a contemplation, belief, understanding
or agreement that other parties will be liable to pay or perform the Guaranteed
Obligations, or that Lender will look to other parties to pay or perform the
Guaranteed Obligations.
2.6 Other Collateral. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for all or any
part of the Guaranteed Obligations.
2.7 Release of Collateral. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including, without
limitation, negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations.
2.8 Care and Diligence. The failure of Lender or any other
party to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, property or security, including but not limited to any neglect,
delay, omission, failure or refusal of Lender (i) to take or prosecute any
action for the collection of any of the Guaranteed Obligations or (ii) to
<PAGE>
foreclose, or initiate any action to foreclose, or, once commenced, prosecute to
completion any action to foreclose upon any security therefor, or (iii) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Guaranteed Obligations.
2.9 Unenforceability. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligations, or any part
thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being
recognized and agreed by Guarantor that Guarantor is not entering into this
Guaranty in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibility or value of any of the collateral for the
Guaranteed Obligations.
2.10 Offset. Any existing or future right of offset, claim or
defense of Borrower against Lender, or any other party, or against payment of
the Guaranteed Obligations, whether such right of offset, claim or defense
arises in connection with the Guaranteed Obligations (or the transactions
creating the Guaranteed Obligations) or otherwise.
2.11 Merger. The reorganization, merger or consolidation of
Borrower into or with any other corporation or entity.
2.12 Preference. Any payment by Borrower to Lender held to
constitute a preference under bankruptcy laws, or if for any reason Lender is
required to refund such payment or pay such amount to Borrower or someone else.
2.13 Other Actions Taken or Omitted. Any other action taken or
omitted to be taken with respect to the Loan Documents, the Guaranteed
Obligations, or the security and collateral therefor, whether or not such action
or omission prejudices Guarantor or increases the likelihood that Guarantor will
be required to pay the Guaranteed Obligations pursuant to the terms hereof, it
is the unambiguous and unequivocal intention of Guarantor that Guarantor shall
be obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether
contemplated or uncontemplated, and whether or not otherwise or particularly
described herein, which obligation shall be deemed satisfied only upon the full
and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into the Loan Documents and extend
credit to Borrower, Guarantor represents and warrants to Lender as follows:
<PAGE>
3.1 Benefit. Guarantor is an affiliate of Borrower, is the
owner of a direct or indirect interest in Borrower, and has received, or will
receive, direct or indirect benefit from the making of this Guaranty with
respect to the Guaranteed Obligations.
3.2 Familiarity and Reliance. Guarantor is familiar with, and
has independently reviewed books and records regarding, the financial condition
of the Borrower and is familiar with the value of any and all collateral
intended to be created as security for the payment of the Note or Guaranteed
Obligations; however, Guarantor is not relying on such financial condition or
the collateral as an inducement to enter into this Guaranty.
3.3 No Representation By Lender. Neither Lender nor any other
party has made any representation, warranty or statement to Guarantor in order
to induce the Guarantor to execute this Guaranty.
3.4 Guarantor's Financial Condition. As of the date hereof,
and after giving effect to this Guaranty and the contingent obligation evidenced
hereby, Guarantor is, and will be, solvent, and has and will have assets which,
fairly valued, exceed its obligations, liabilities (including contingent
liabilities) and debts, and has and will have property and assets sufficient to
satisfy and repay its obligations and liabilities.
3.5 Legality. The execution, delivery and performance by
Guarantor of this Guaranty and the consummation of the transactions contemplated
hereunder do not, and will not, contravene or conflict with any law, statute or
regulation whatsoever to which Guarantor is subject or constitute a default (or
an event which with notice or lapse of time or both would constitute a default)
under, or result in the breach of, any indenture, mortgage, charge, lien, or any
contract, agreement or other instrument to which Guarantor is a party or which
may be applicable to Guarantor. This Guaranty is a legal and binding obligation
of Guarantor and is enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights.
3.6 Survival. All representations and warranties made by
Guarantor herein shall survive the execution hereof.
ARTICLE IV
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1 Subordination of All Guarantor Claims. As used herein, the
term "Guarantor Claims" shall mean all debts and liabilities of Borrower to
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by Guarantor. The Guarantor Claims shall include, without
<PAGE>
limitation, all rights and claims of Guarantor against Borrower (arising as a
result of subrogation or otherwise) as a result of Guarantor's payment of all or
a portion of the Guaranteed Obligations. Upon the occurrence and during the
continuation of an Event of Default or the occurrence and during the
continuation of an event which would, with the giving of notice or the passage
of time, or both, constitute an Event of Default, Guarantor shall not receive or
collect, directly or indirectly, from Borrower or any other party any amount
upon the Guarantor Claims.
4.2 Claims in Bankruptcy. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving Guarantor as debtor, Lender shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims. Guarantor
hereby assigns such dividends and payments to Lender. Should Lender receive, for
application upon the Guaranteed Obligations, any such dividend or payment which
is otherwise payable to Guarantor, and which, as between Borrower and Guarantor,
shall constitute a credit upon the Guarantor Claims, then upon payment to Lender
in full of the Guaranteed Obligations, Guarantor shall become subrogated to the
rights of Lender to the extent that such payments to Lender on the Guarantor
Claims have contributed toward the liquidation of the Guaranteed Obligations,
and such subrogation shall be with respect to that proportion of the Guaranteed
Obligations which would have been unpaid if Lender had not received dividends or
payments upon the Guarantor Claims.
4.3 Payments Held in Trust. In the event that, notwithstanding
anything to the contrary in this Guaranty, Guarantor should receive any funds,
payment, claim or distribution which is prohibited by this Guaranty, Guarantor
agrees to hold in trust for Lender an amount equal to the amount of all funds,
payments, claims or distributions so received, and agrees that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions so received except to pay them promptly to Lender, and Guarantor
covenants promptly to pay the same to Lender.
4.4 Liens Subordinate. Guarantor agrees that any liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower's assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of
Guarantor or Lender presently exist or are hereafter created or attach. Without
the prior written consent of Lender, Guarantor shall not (i) exercise or enforce
any creditor's right it may have against Borrower, or (ii) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceedings
(judicial or otherwise, including, without limitation, the commencement of, or
joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security
interests, collateral rights, judgments or other encumbrances on assets of
Borrower held by Guarantor.
<PAGE>
ARTICLE V
MISCELLANEOUS
5.1 Waiver. No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Lender hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.
5.2 Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and shall be given to Lender or Guarantor, as
the case may be, in accordance with Section 7.6 of the Loan Agreement, except
that the address of Guarantor shall be as follows:
Guarantor:
c/o Golf Communities of America
255 South Orange Avenue
Firstate Tower, Suite 1515
Orlando, Florida 32801
Attention: Warren J. Stanchina
Orlando, Florida 32801
Telecopier: (407) 245-7585
with a copy to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202-3780
Attention: J. Kirk Standly
Telecopier: (214) 651-5940
Guarantor may change the address to which any such notice is to be delivered in
accordance with Section 7.6 of the Loan Agreement.
5.3 Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America. It is the intent of the parties
hereto that the provisions of Section 5-1401 of the General Obligations Law of
the State of New York apply to this Guaranty.
5.4 Invalid Provisions. If any provision of this Guaranty is
held to be illegal, invalid, or unenforceable under present or future laws
<PAGE>
effective during the term of this Guaranty, such provision shall be fully
severable and this Guaranty shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Guaranty,
and the remaining provisions of this Guaranty shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Guaranty, unless such continued
effectiveness of this Guaranty, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.
5.5 Amendments. This Guaranty may be amended only by an
instrument in writing executed by the party or an authorized representative of
the party against whom such amendment is sought to be enforced.
5.6 Parties Bound; Assignment; Joint and Several. This
Guaranty shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns and legal representatives; provided,
however, that Guarantor may not, without the prior written consent of Lender,
assign any of its rights, powers, duties or obligations hereunder. If Guarantor
consists of more than one person or party, the obligations and liabilities of
each such person or party shall be joint and several.
5.7 Headings. Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty.
5.8 Recitals. The recital and introductory paragraphs hereof
are a part hereof, form a basis for this Guaranty and shall be considered prima
facie evidence of the facts and documents referred to therein.
5.9 Counterparts. To facilitate execution, this Guaranty may
be executed in as many counterparts as may be convenient or required. It shall
not be necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts shall collectively constitute a single instrument. It shall not
be necessary in making proof of this Guaranty to produce or account for more
than a single counterpart containing the respective signatures of, or on behalf
of, each of the parties hereto. Any signature page to any counterpart may be
detached from such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another counterpart identical
thereto except having attached to it additional signature pages.
5.10 Rights and Remedies. If Guarantor becomes liable for any
indebtedness owing by Borrower to Lender, by endorsement or otherwise, other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may ever have against Guarantor. The exercise
by Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.
<PAGE>
5.11 Other Defined Terms. Any capitalized term utilized herein
shall have the meaning as specified in the Loan Agreement, unless such term is
otherwise specifically defined herein.
5.12 Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE
AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A
FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF
DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY
AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
5.13 Waiver of Right To Trial By Jury. GUARANTOR HEREBY AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, OR THE
OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.
5.15 Reinstatement in Certain Circumstances. If at any time
any payment of the principal of or interest under the Note or any other amount
payable by the Borrower under the Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Borrower or otherwise, the Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment has been due but not
made at such time.
<PAGE>
EXECUTED as of the day and year first above written.
GUARANTOR:
CUTTER SOUND DEVELOPMENT, LTD.,
a Florida limited partnership
By: U.S. Golf (Cutter Sound), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
MONTVERDE PROPERTY, LTD.,
a Florida limited partnership
By: U.S. Golf (Montverde), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
NORTHSHORE GOLF PARTNERS, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
<PAGE>
NORTHSHORE DEVELOPMENT, LTD.,
a Texas limited partnership
By: Northshore U.S. Golf, Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
U.S. GOLF PINEHURST PLANTATION, LTD.,
a Florida limited partnership
By: U.S. Golf (Plantation), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
FSD GOLF CLUB, LTD.,
a Florida limited partnership
By: U.S. Golf (FSD), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
RH HOLDINGS, INC., a Utah corporation
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
<PAGE>
WEDGEFIELD LIMITED PARTNERSHIP,
a Michigan limited partnership
By: U.S. Golf (Wedgefield), Inc.,
its General Partner
By: /s/ Warren Stanchina
Name:Warren Stanchina
Title: President
GUARANTY
(Pelican Loan)
This GUARANTY (this "Guaranty") is executed as of July 2, 1998
by GOLF VENTURES, INC., a Utah corporation and U.S. GOLF COMMUNITIES, INC., a
Delaware corporation (whether one or more collectively referred to as
"Guarantor"), for the benefit of CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL
LLC, a Delaware limited liability company ("Lender").
W I T N E S S E T H:
WHEREAS, Pelican Strand, Ltd. ("Borrower") is indebted to
Lender for the aggregate sum of $35,600,000 (the "Debt") payable in accordance
with that certain Promissory Note dated of even date herewith made by Borrower
to Lender (together with all renewals, modifications, increases and extensions
thereof, the "Note"), which Note evidences a loan made by Lender to Borrower
pursuant to a Loan Agreement of even date herewith between Borrower and Lender
(the "Loan Agreement") and is secured by a certain Mortgage and Security
Agreement of even date herewith made by Borrower to Lender (the "Mortgage"), and
further evidenced, secured or governed by other instruments and documents
executed in connection with the Debt (together with the Loan Agreement, Note and
Mortgage, the "Loan Documents"); and
WHEREAS, Lender is not willing to accept the Note or otherwise
extend credit to Borrower unless Guarantor unconditionally guarantees payment of
the Debt and performance of the Guaranteed Obligations (as herein defined); and
WHEREAS, Guarantor is an affiliate of Borrower and the
principals of Guarantor will directly benefit from Lender's extension of credit
to Borrower.
NOW, THEREFORE, as an inducement to Lender to so extend credit
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I
NATURE AND SCOPE OF GUARANTY
1.1 Guaranty of Obligation. Guarantor hereby irrevocably and
unconditionally guarantees to Lender and its successors and assigns the payment
and performance of the Guaranteed Obligations as and when the same shall be due
and payable, whether by lapse of time, by acceleration of maturity or otherwise.
Guarantor hereby irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Obligations as a primary obligor.
1.2 Definition of Guaranteed Obligations. As used herein, the
term "Guaranteed Obligations" means the (a) full and prompt payment, whether at
<PAGE>
maturity or by acceleration or otherwise, of all of Borrower's obligations under
the Note and the other Loan Documents, together with interest on such
obligations to the extent provided for in the Loan Documents and (b) the full
and prompt performance of any and all other obligations of Borrower under the
Loan Documents.
1.3 Nature of Guaranty. This Guaranty is an irrevocable,
absolute, continuing guaranty of payment and performance and not a guaranty of
collection. This Guaranty may not be revoked by Guarantor and shall continue to
be effective with respect to any Guaranteed Obligations arising or created after
any attempted revocation by Guarantor and after (if Guarantor is a natural
person) Guarantor's death (in which event this Guaranty shall be binding upon
Guarantor's estate and Guarantor's legal representatives and heirs). The fact
that at any time or from time to time the Guaranteed Obligations may be
increased or reduced shall not release or discharge the obligation of Guarantor
to Lender with respect to the Guaranteed Obligations. This Guaranty may be
enforced by Lender and any subsequent holder of the Note and shall not be
discharged by the assignment or negotiation of all or part of the Note.
1.4 Guaranteed Obligations Not Reduced by Offset. The
Guaranteed Obligations and the liabilities and obligations of Guarantor to
Lender hereunder, shall not be reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of Borrower, or any
other party, against Lender or against payment of the Guaranteed Obligations,
whether such offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or
otherwise.
1.5 Payment By Guarantor. If all or any part of the Guaranteed
Obligations shall not be punctually paid when due, whether at demand, maturity,
acceleration or otherwise, Guarantor shall, immediately upon demand by Lender,
and without presentment, protest, notice of protest, notice of non-payment,
notice of intention to accelerate the maturity, notice of acceleration of the
maturity, or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due on the Guaranteed Obligations to Lender at
Lender's address as set forth herein. Such demand(s) may be made at any time
coincident with or after the time for payment of all or part of the Guaranteed
Obligations, and may be made from time to time with respect to the same or
different items of Guaranteed Obligations. Such demand shall be deemed made,
given and received in accordance with the notice provisions hereof.
1.6 No Duty To Pursue Others. It shall not be necessary for
Lender (and Guarantor hereby waives any rights which Guarantor may have to
require Lender), in order to enforce the obligations of Guarantor hereunder,
first to (i) institute suit or exhaust its remedies against Borrower or others
liable on the Debt or the Guaranteed Obligations or any other person, (ii)
enforce Lender's rights against any collateral which shall ever have been given
to secure the Debt, (iii) enforce Lender's rights against any other guarantors
of the Guaranteed Obligations, (iv) join Borrower or any others liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty, or (v)
resort to any other means of obtaining payment of the Guaranteed Obligations.
Lender shall not be required to mitigate damages or take any other action to
reduce, collect or enforce the Guaranteed Obligations.
<PAGE>
1.7 Waivers. Guarantor agrees to the provisions of the Loan
Documents, and hereby waives notice of (i) any loans or advances made by Lender
to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension
of the Note, the Mortgage or of any other Loan Documents, (iv) the execution and
delivery by Borrower and Lender of any other loan or credit agreement or of
Borrower's execution and delivery of any promissory notes or other documents
arising under the Loan Documents or in connection with the Property (as defined
in the Loan Agreement), (v) the occurrence of any breach by Borrower or an Event
of Default, (vi) Lender's transfer or disposition of the Guaranteed Obligations,
or any part thereof, (vii) sale or foreclosure (or posting or advertising for
sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii)
protest, proof of non-payment or default by Borrower, or (ix) any other action
at any time taken or omitted by Lender, and, generally, all demands and notices
of every kind in connection with this Guaranty, the Loan Documents, any
documents or agreements evidencing, securing or relating to any of the
Guaranteed Obligations and the obligations hereby guaranteed.
1.8 Payment of Expenses. In the event that Guarantor should
breach or fail to timely perform any provisions of this Guaranty, Guarantor
shall, immediately upon demand by Lender, pay Lender all costs and expenses
(including court costs and reasonable attorneys' fees) incurred by Lender in the
enforcement hereof or the preservation of Lender's rights hereunder. The
covenant contained in this Section shall survive the payment and performance of
the Guaranteed Obligations.
1.9 Effect of Bankruptcy. In the event that, pursuant to any
insolvency, bankruptcy, reorganization, receivership or other debtor relief law,
or any judgment, order or decision thereunder, Lender must rescind or restore
any payment, or any part thereof, received by Lender in satisfaction of the
Guaranteed Obligations, as set forth herein, any prior release or discharge from
the terms of this Guaranty given to Guarantor by Lender shall be without effect,
and this Guaranty shall remain in full force and effect. It is the intention of
Borrower and Guarantor that Guarantor's obligations hereunder shall not be
discharged except by Guarantor's performance of such obligations and then only
to the extent of such performance.
1.10 Waiver of Subrogation, Reimbursement and Contribution.
Notwithstanding anything to the contrary contained in this Guaranty, Guarantor
hereby unconditionally and irrevocably agrees not to exercise any and all rights
it may now or hereafter have under any agreement, at law or in equity
(including, without limitation, any law subrogating the Guarantor to the rights
of Lender), to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from Borrower or any other party liable for
payment of any or all of the Guaranteed Obligations for any payment made by
Guarantor under or in connection with this Guaranty until the Guaranteed
Obligations shall have been paid in full.
1.11 Borrower. The term "Borrower" as used herein shall
include any new or successor corporation, association, partnership (general or
limited), limited liability company, joint venture, trust or other individual or
<PAGE>
organization formed as a result of any merger, reorganization, sale, transfer,
devise, gift or bequest of Borrower or any interest in Borrower.
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Guarantor hereby consents and agrees to each of the following,
and agrees that Guarantor's obligations under this Guaranty shall not be
released, diminished, impaired, reduced or adversely affected by any of the
following, and waives any common law, equitable, statutory or other rights
(including, without limitation, rights to notice) which Guarantor might
otherwise have as a result of or in connection with any of the following:
2.1 Modifications. Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligations, the Note, the Mortgage, the other Loan Documents, or any other
document, instrument, contract or understanding between Borrower and Lender, or
any other parties, pertaining to the Guaranteed Obligations or any failure of
Lender to notify Guarantor of any such action.
2.2 Adjustment. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to Borrower or any
Guarantor.
2.3 Condition of Borrower or Guarantor. The insolvency,
bankruptcy, arrangement, adjustment, composition, liquidation, disability,
dissolution or lack of power of Borrower, Guarantor or any other party at any
time liable for the payment of all or part of the Guaranteed Obligations; or any
dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or
all of the assets of Borrower or Guarantor, or any changes in the shareholders,
partners or members of Borrower or Guarantor; or any reorganization of Borrower
or Guarantor.
2.4 Invalidity of Guaranteed Obligations. The invalidity,
illegality or unenforceability of all or any part of the Guaranteed Obligations,
or any document or agreement executed in connection with the Guaranteed
Obligations, for any reason whatsoever, including, without limitation, the fact
that (i) the Guaranteed Obligations, or any part thereof, exceeds the amount
permitted by law, (ii) the act of creating the Guaranteed Obligations or any
part thereof is ultra vires, (iii) the officers or representatives executing the
Note, the Mortgage or the other Loan Documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed
Obligations violate applicable usury laws, (v) the Borrower has valid defenses,
claims or offsets (whether at law, in equity or by agreement) which render the
Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the
creation, performance or repayment of the Guaranteed Obligations (or the
execution, delivery and performance of any document or instrument representing
part of the Guaranteed Obligations or executed in connection with the Guaranteed
Obligations, or given to secure the repayment of the Guaranteed Obligations) is
illegal, uncollectible or unenforceable, or (vii) the Note, the Mortgage or any
<PAGE>
of the other Loan Documents have been forged or otherwise are irregular or not
genuine or authentic, it being agreed that Guarantor shall remain liable hereon
regardless of whether Borrower or any other person be found not liable on the
Guaranteed Obligations or any part thereof for any reason.
2.5 Release of Obligors. Any full or partial release of the
liability of Borrower of the Guaranteed Obligations, or any part thereof, or of
any co-guarantors, or any other person or entity now or hereafter liable,
whether directly or indirectly, jointly, severally, or jointly and severally, to
pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or
any part thereof, it being recognized, acknowledged and agreed by Guarantor that
Guarantor may be required to pay the Guaranteed Obligations in full without
assistance or support of any other party, and Guarantor has not been induced to
enter into this Guaranty on the basis of a contemplation, belief, understanding
or agreement that other parties will be liable to pay or perform the Guaranteed
Obligations, or that Lender will look to other parties to pay or perform the
Guaranteed Obligations.
2.6 Other Collateral. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for all or any
part of the Guaranteed Obligations.
2.7 Release of Collateral. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including, without
limitation, negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations.
2.8 Care and Diligence. The failure of Lender or any other
party to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, property or security, including but not limited to any neglect,
delay, omission, failure or refusal of Lender (i) to take or prosecute any
action for the collection of any of the Guaranteed Obligations or (ii) to
foreclose, or initiate any action to foreclose, or, once commenced, prosecute to
completion any action to foreclose upon any security therefor, or (iii) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Guaranteed Obligations.
2.9 Unenforceability. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligations, or any part
thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being
recognized and agreed by Guarantor that Guarantor is not entering into this
Guaranty in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibility or value of any of the collateral for the
Guaranteed Obligations.
2.10 Offset. Any existing or future right of offset, claim or
defense of Borrower against Lender, or any other party, or against payment of
the Guaranteed Obligations, whether such right of offset, claim or defense
arises in connection with the Guaranteed Obligations (or the transactions
creating the Guaranteed Obligations) or otherwise.
<PAGE>
2.11 Merger. The reorganization, merger or consolidation of
Borrower into or with any other corporation or entity.
2.12 Preference. Any payment by Borrower to Lender held to
constitute a preference under bankruptcy laws, or if for any reason Lender is
required to refund such payment or pay such amount to Borrower or someone else.
2.13 Other Actions Taken or Omitted. Any other action taken or
omitted to be taken with respect to the Loan Documents, the Guaranteed
Obligations, or the security and collateral therefor, whether or not such action
or omission prejudices Guarantor or increases the likelihood that Guarantor will
be required to pay the Guaranteed Obligations pursuant to the terms hereof, it
is the unambiguous and unequivocal intention of Guarantor that Guarantor shall
be obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether
contemplated or uncontemplated, and whether or not otherwise or particularly
described herein, which obligation shall be deemed satisfied only upon the full
and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into the Loan Documents and extend
credit to Borrower, Guarantor represents and warrants to Lender as follows:
3.1 Benefit. Guarantor is an affiliate of Borrower, is the
owner of a direct or indirect interest in Borrower, and has received, or will
receive, direct or indirect benefit from the making of this Guaranty with
respect to the Guaranteed Obligations.
3.2 Familiarity and Reliance. Guarantor is familiar with, and
has independently reviewed books and records regarding, the financial condition
of the Borrower and is familiar with the value of any and all collateral
intended to be created as security for the payment of the Note or Guaranteed
Obligations; however, Guarantor is not relying on such financial condition or
the collateral as an inducement to enter into this Guaranty.
3.3 No Representation By Lender. Neither Lender nor any other
party has made any representation, warranty or statement to Guarantor in order
to induce the Guarantor to execute this Guaranty.
3.4 Guarantor's Financial Condition. As of the date hereof,
and after giving effect to this Guaranty and the contingent obligation evidenced
hereby, Guarantor is, and will be, solvent, and has and will have assets which,
<PAGE>
fairly valued, exceed its obligations, liabilities (including contingent
liabilities) and debts, and has and will have property and assets sufficient to
satisfy and repay its obligations and liabilities.
3.5 Legality. The execution, delivery and performance by
Guarantor of this Guaranty and the consummation of the transactions contemplated
hereunder do not, and will not, contravene or conflict with any law, statute or
regulation whatsoever to which Guarantor is subject or constitute a default (or
an event which with notice or lapse of time or both would constitute a default)
under, or result in the breach of, any indenture, mortgage, charge, lien, or any
contract, agreement or other instrument to which Guarantor is a party or which
may be applicable to Guarantor. This Guaranty is a legal and binding obligation
of Guarantor and is enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights.
3.6 Survival. All representations and warranties made by
Guarantor herein shall survive the execution hereof.
ARTICLE IV
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1 Subordination of All Guarantor Claims. As used herein, the
term "Guarantor Claims" shall mean all debts and liabilities of Borrower to
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by Guarantor. The Guarantor Claims shall include, without
limitation, all rights and claims of Guarantor against Borrower (arising as a
result of subrogation or otherwise) as a result of Guarantor's payment of all or
a portion of the Guaranteed Obligations. Upon the occurrence and during the
continuation of an Event of Default or the occurrence and during the
continuation of an event which would, with the giving of notice or the passage
of time, or both, constitute an Event of Default, Guarantor shall not receive or
collect, directly or indirectly, from Borrower or any other party any amount
upon the Guarantor Claims.
4.2 Claims in Bankruptcy. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving Guarantor as debtor, Lender shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims. Guarantor
hereby assigns such dividends and payments to Lender. Should Lender receive, for
application upon the Guaranteed Obligations, any such dividend or payment which
is otherwise payable to Guarantor, and which, as between Borrower and Guarantor,
shall constitute a credit upon the Guarantor Claims, then upon payment to Lender
in full of the Guaranteed Obligations, Guarantor shall become subrogated to the
<PAGE>
rights of Lender to the extent that such payments to Lender on the Guarantor
Claims have contributed toward the liquidation of the Guaranteed Obligations,
and such subrogation shall be with respect to that proportion of the Guaranteed
Obligations which would have been unpaid if Lender had not received dividends or
payments upon the Guarantor Claims.
4.3 Payments Held in Trust. In the event that, notwithstanding
anything to the contrary in this Guaranty, Guarantor should receive any funds,
payment, claim or distribution which is prohibited by this Guaranty, Guarantor
agrees to hold in trust for Lender an amount equal to the amount of all funds,
payments, claims or distributions so received, and agrees that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions so received except to pay them promptly to Lender, and Guarantor
covenants promptly to pay the same to Lender.
4.4 Liens Subordinate. Guarantor agrees that any liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower's assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of
Guarantor or Lender presently exist or are hereafter created or attach. Without
the prior written consent of Lender, Guarantor shall not (i) exercise or enforce
any creditor's right it may have against Borrower, or (ii) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceedings
(judicial or otherwise, including, without limitation, the commencement of, or
joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security
interests, collateral rights, judgments or other encumbrances on assets of
Borrower held by Guarantor.
ARTICLE V
MISCELLANEOUS
5.1 Waiver. No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Lender hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.
5.2 Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and shall be given to Lender or Guarantor, as
the case may be, in accordance with Section 7.6 of the Loan Agreement, except
that the address of Guarantor shall be as follows:
<PAGE>
Guarantor:
c/o Golf Communities of America
255 South Orange Avenue
Firstate Tower, Suite 1515
Orlando, Florida 32801
Attention: Warren J. Stanchina
Orlando, Florida 32801
Telecopier: (407) 245-7585
with a copy to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202-3780
Attention: J. Kirk Standly
Telecopier: (214) 651-5940
Guarantor may change the address to which any such notice is to be delivered in
accordance with Section 7.6 of the Loan Agreement.
5.3 Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America. It is the intent of the parties
hereto that the provisions of Section 5-1401 of the General Obligations Law of
the State of New York apply to this Guaranty.
5.4 Invalid Provisions. If any provision of this Guaranty is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty, such provision shall be fully
severable and this Guaranty shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Guaranty,
and the remaining provisions of this Guaranty shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Guaranty, unless such continued
effectiveness of this Guaranty, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.
5.5 Amendments. This Guaranty may be amended only by an
instrument in writing executed by the party or an authorized representative of
the party against whom such amendment is sought to be enforced.
5.6 Parties Bound; Assignment; Joint and Several. This
Guaranty shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns and legal representatives; provided,
however, that Guarantor may not, without the prior written consent of Lender,
assign any of its rights, powers, duties or obligations hereunder. If Guarantor
consists of more than one person or party, the obligations and liabilities of
each such person or party shall be joint and several.
5.7 Headings. Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty.
<PAGE>
5.8 Recitals. The recital and introductory paragraphs hereof
are a part hereof, form a basis for this Guaranty and shall be considered prima
facie evidence of the facts and documents referred to therein.
5.9 Counterparts. To facilitate execution, this Guaranty may
be executed in as many counterparts as may be convenient or required. It shall
not be necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts shall collectively constitute a single instrument. It shall not
be necessary in making proof of this Guaranty to produce or account for more
than a single counterpart containing the respective signatures of, or on behalf
of, each of the parties hereto. Any signature page to any counterpart may be
detached from such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another counterpart identical
thereto except having attached to it additional signature pages.
5.10 Rights and Remedies. If Guarantor becomes liable for any
indebtedness owing by Borrower to Lender, by endorsement or otherwise, other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may ever have against Guarantor. The exercise
by Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.
5.11 Other Defined Terms. Any capitalized term utilized herein
shall have the meaning as specified in the Loan Agreement, unless such term is
otherwise specifically defined herein.
5.12 Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE
AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A
FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF
DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY
AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
5.13 Waiver of Right To Trial By Jury. GUARANTOR HEREBY AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
<PAGE>
NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, OR
THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.
5.15 Reinstatement in Certain Circumstances. If at any time
any payment of the principal of or interest under the Note or any other amount
payable by the Borrower under the Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Borrower or otherwise, the Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment has been due but not
made at such time.
5.16 Guarantor Covenants.
(a) Until such time as the Debt shall be repaid in full,
Guarantor shall not, without the consent of Lender:
(i) dissolve or liquidate (or suffer any liquidation
or dissolution) or amend the terms of their respective
organizational documents;
(ii) enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or
substantially all the business or assets of, or any stock or
other evidence of beneficial ownership of, any entity;
(iii) guarantee or otherwise hold out its credit as
being available to satisfy obligations of any other Person (as
defined in the Loan Agreement) (other than under the
Guaranty);
(iv) own, manage or operate any property other than
its direct or indirect ownership interests in the Borrower or
engage in any business or activities not related thereto;
(v) conduct and operate its business other than as
presently conducted and operated;
(vi) enter into any material contract or agreement
with any Person;
(vii) incur any indebtedness or material liabilities,
secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the obligations
of Guarantor hereunder or in the other Loan Documents, (ii)
<PAGE>
any indebtedness of Guarantor existing on the date hereof and
(iii) trade payables or accrued expenses incurred in the
ordinary course of business not in excess of sixty (60) days
past due; no indebtedness or liabilities (other than debt
described in clause (i) above and debt described in clause
(ii) above which is secured on the date hereof) may be secured
(senior, subordinate or pari passu);
(viii) make any loans or advances to any third party
(including any Affiliate (as defined in the Loan Agreement) of
Borrower) and will not pledge its assets for the benefits of
any third party (including any Affiliate of Borrower) other
than in connection with the Debt;
(ix) commingle its funds and other assets with those
of any Affiliate or other Person;
(x) file or consent to the filing of a petition for
bankruptcy, reorganization, assignment for the benefit of
creditors or similar proceeding under any federal or state
bankruptcy, insolvency, reorganization or other similar law
with respect to Guarantor or any Borrower, without the
unanimous consent of its directors and the approval of a
majority of it shareholders; and
(xi) declare a dividend or otherwise distribute any
funds to shareholders of Guarantor.
(b) Until such time as the Debt shall be repaid in full,
Guarantor shall:
(i) remain solvent and able to pay its debts and
liabilities (including employment and overhead expenses) from
its own assets as the same shall become due;
(ii) maintain its own separate books and records and
bank accounts in each case which are separate and apart from
those of any other Person;
(iii) hold itself out to the public as, a legal
entity separate and distinct from any other entity (including
any Affiliate thereof) and shall maintain and utilize separate
stationery, invoices and checks, shall otherwise conduct its
business and own its assets in its own name and shall correct
any known misunderstanding regarding its separate identity;
(iv) maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size
and character and in light of its contemplated business
operations;
(v) maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify
its individual assets from those of any Affiliate or any other
Person;
<PAGE>
(vi) maintain a reasonable number of employees (which
may be zero) in light of its contemplated business operations
and will not do any act which would make it impossible to
carry on its ordinary business;
(vii) observe all corporate formalities; and
(viii) allocate fairly and reasonably any overhead
for any office space which Guarantor shares with any Affiliate
or other Person.
<PAGE>
EXECUTED as of the day and year first above written.
GUARANTOR:
GOLF VENTURES, INC.
By:/s/ Warren Stanchina
Name: Warren Stanchina
Title: President
U.S. GOLF COMMUNITIES, INC.
By: /s/ Warren Stanchina
Name: Warren Stanchina
Title: President
