SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-27270
VACATION BREAK U.S.A., INC.
FLORIDA 59-2581811
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
6400 N. ANDREWS AVENUE
PLAZA SUITE 200
FT. LAUDERDALE, FL 33309
Registrant's telephone number (954) 351-8500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
The number of shares outstanding of registrant's common stock at August 12,
1997 was 8,615,141 shares.
1
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
VACATION BREAK U.S.A., INC.
INDEX
Page
No.
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets as of
June 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Operations for the
three and six months ended June 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 14
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 15
Signatures 16
2
<PAGE>
<TABLE>
<CAPTION>
Vacation Break U.S.A., Inc. and Consolidated Subsidiaries
Consolidated Condensed Balance Sheets
ASSETS
June 30, December 31,
---------------- --------------
1997 1996
---------------- --------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $3,649,324 $6,307,928
Certificates of deposit 124,235 124,235
Restricted cash 1,530,531 1,647,236
Cash in escrow from vacation ownership interests sales 18,332,988 8,055,543
Mortgages receivable on vacation ownership interests sales - net 90,101,757 73,028,510
Receivables - net 2,721,536 3,757,385
Note receivable 1,477,014 1,993,883
Vacation ownership interests held for sale and real estate and
development costs 22,344,854 25,310,450
Prepaid expenses and other assets 5,988,777 5,919,983
Investment in unconsolidated affiliates 1,918,431 1,946,917
Due from unconsolidated affiliates 87,628 54,369
Income tax receivable 58,238 58,238
Property and equipment - net 9,694,731 10,274,870
----------- -----------
TOTAL ASSETS $158,030,044 $138,479,547
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $21,083,113 $13,210,543
Due to unconsolidated affiliates - 5,578
Notes and mortgages payable 63,799,292 53,302,723
Note payable to unconsolidated affiliate 435,000 532,778
Capital lease obligations 1,236,176 1,349,426
Deferred income taxes 9,163,041 6,207,527
Advance deposits 3,486,872 2,948,884
Deferred revenues - vacation packages 12,493,833 16,588,264
Deferred revenues - vacation ownership interests 5,696,440 6,407,050
Due to affiliate of joint ventures 3,822,685 7,517,719
Minority interest in joint ventures 3,766,146 2,582,436
----------- -----------
Total Liabilities
124,982,598 110,652,928
----------- -----------
Commitments and contingencies (Note 6)
Stockholders' Equity:
Preferred stock ($ .01 par value; 25,000,000 shares authorized; no shares
issued and outstanding at June 30, 1997 and December 31, 1996,
respectively) -- --
Common stock ($ .01 par value; 25,000,000 shares authorized; 8,615,141 and
8,593,725 shares issued and outstanding at June 30, 1997 and December 31,
1996, respectively)
86,151 85,937
Additional paid in capital 13,540,949 13,414,457
Retained earnings 19,420,346 14,326,225
----------- ----------
Total Stockholders' Equity 33,047,446 27,826,619
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $158,030,044 $138,479,547
=========== ===========
See accompanying notes to consolidated condensed financial statements
3
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</TABLE>
<TABLE>
Vacation Break U.S.A., Inc. and Consolidated Subsidiaries
Consolidated Condensed Statements of Operations
For the three and six months ended June 30,
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------------------------------
June 30, June 30,
------------------------------------------------------------
1997 1996 1997 1996
-------------- ------------------------------ --------------
Revenues:
<S> <C> <C> <C> <C>
Vacation ownership interests $28,219,636 $32,908,826 $50,979,066 48,825,826
Resort operations and other 2,558,402 3,543,025 5,892,399 7,547,025
Interest earned on mortgages receivable 3,011,920 1,998,721 5,883,757 3,732,720
Commissions earned on marketing agreements - 526,957 - 1,068,957
---------- ---------- ---------- ----------
33,789,958 38,977,529 62,755,222 61,174,528
---------- ---------- ---------- ----------
Costs and operating expenses:
Vacation ownership interests - cost of units sold 7,941,238 9,987,641 14,622,633 13,871,051
Vacation ownership interests - sales & marketing costs 10,747,363 11,717,369 20,717,805 18,748,959
Resort operations and other 2,599,749 3,657,138 5,326,626 7,558,138
Interest expense on financed mortgages receivable 1,275,337 499,557 2,094,674 1,028,557
Commissions and related expenses on marketing agreements - 510,698 - 806,698
Interest expense - other 170,838 119,282 342,052 585,282
General and administrative 3,901,615 3,593,209 7,148,035 6,432,209
Costs related to terminated merger - - 463,933 -
Provision for doubtful accounts 1,154,494 458,208 1,808,049 655,208
Depreciation 549,224 519,680 1,078,070 1,088,680
---------- ---------- ---------- ----------
28,339,858 31,062,782 53,601,877 50,774,782
---------- ---------- ---------- ----------
Income from operations before income taxes, minority interest
and equity in earnings of unconsolidated affiliate
5,450,100 7,914,747 9,153,345 10,399,746
Minority interest in earnings of joint ventures (983,247) (208,964) (1,183,710) (578,964)
Equity in earnings of unconsolidated affiliate 40,000 45,000 80,000 75,000
--------- --------- ---------- ---------
Income before income taxes 4,506,853 7,750,783 8,049,635 9,895,782
Provision for Income taxes (1,698,680) (2,811,833) (2,955,514) (3,468,833)
--------- --------- --------- ----------
Net income $2,808,173 $4,938,950 $5,094,121 $6,426,949
========= ========= ========= =========
Net income per share
Primary $0.33 $0.56 $0.57 $0.73
===== ===== ===== =====
Weighted average common stock and common stock equivalents
outstanding
Primary
8,612,889 8,865,391 8,885,399 8,756,236
========= ========= ========= =========
See accompanying notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
Vacation Break U.S.A., Inc. and Consolidated Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the six months ended June 30,
(Unaudited)
<CAPTION>
1997 1996
---------- ----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 5,094,121 $ 6,426,949
Adjustments to reconcile net income to net cash (provided by) used in
operating activities:
Provision for doubtful accounts 1,808,049 655,208
Depreciation and amortization 1,078,070 1,088,680
Equity in earnings of unconsolidated affiliate (80,000) (75,000)
Write down of investment in unconsolidated affiliate 108,486 --
Provision for deferred income taxes 2,955,514 3,410,595
Minority interest in earnings of joint ventures 1,183,710 578,964
Changes in operating assets and liabilities:
Mortgages receivable on vacation ownership interests sales (18,881,296) (16,781,565)
Receivables 1,035,849 (963,504)
Note receivable 516,869 --
Vacation ownership interests held for sale and real estate and development costs 2,965,596 (2,296,007)
Prepaid expenses and other assets (68,794) (408,934)
Due to/from unconsolidated affiliates - net (38,837) (55,278)
Accounts payable and accrued liabilities 7,872,570 4,379,985
Deferred revenues - vacation ownership interests (710,610) (7,720,213)
Deferred income - vacation packages (4,094,431) 1,433,542
Advance deposits 537,988 (981,092)
------------ ------------
Net cash provided by (used in) operating activities 1,282,854 (11,307,670)
------------ ------------
Cash Flows from Investing Activities:
Purchases of property and equipment (497,931) (1,494,038)
Additions to restricted cash (454,077) (2,478,894)
Releases of restricted cash 570,782 3,535,316
Increase in cash in escrow from vacation ownership interests - net (10,277,445) (4,837,662)
Maturities of certificates of deposit -- 629,507
------------ ------------
Net cash used in investing activities (10,658,671) (4,645,771)
------------ ------------
Cash Flows from Financing Activities:
Borrowings of notes and mortgages payable 30,186,767 23,887,334
Repayments of notes and mortgages payable (19,690,198) (11,252,695)
Borrowings from affiliate of joint ventures -- 897,583
Repayments to affiliate of joint ventures (3,695,034) --
Joint venture partner's capital contributions -- 1,802,159
Repayment of note payable to unconsolidated affiliate (97,778) --
Payments on capital lease obligations (113,250) (186,172)
Stockholder's income tax distributions -- (1,130,793)
Proceeds from the exercise of employee stock options 126,706 --
Proceeds from issuance of common stock -- 1,182,000
------------ ------------
Net cash provided by financing activities 6,717,213 15,199,416
------------ ------------
Net decrease in cash and cash equivalents (2,658,604) (754,025)
Cash and cash equivalents at beginning of period 6,307,928 8,499,386
------------ ------------
Cash and cash equivalents at end of period $ 3,649,324 $ 7,745,361
============ ============
See accompanying notes to consolidated condensed financial statements
</TABLE>
5
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VACATION BREAK U.S.A., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
Vacation Break U.S.A., Inc. and consolidated subsidiaries (the
"Company") is engaged in the sale of vacation packages, hotel operations and the
renovation, construction, sale and financing of resort vacation ownership
interests (VOIs). At June 30, 1997 the consolidated financial statements include
the accounts of Vacation Break U.S.A., Inc. and its subsidiaries.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments and accruals necessary to present fairly the
Company's consolidated financial position at June 30, 1997 and the consolidated
results of its operations for the three and six months ended June 30, 1997 and
1996 and its statement of cash flows for the six month periods ended June 30,
1997 and 1996. The interim results of operations are not necessarily indicative
of the results which may occur for the year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
All significant intercompany accounts and transactions are eliminated in
consolidation. These unaudited consolidated condensed financial statements and
notes thereto should be read in conjunction with the annual consolidated
financial statements and notes thereto contained in the Company's Form 10-K as
filed with the United States Securities and Exchange Commission on March 31,
1997.
2. RECLASSIFICATIONS
Certain amounts in the 1996 financial statements have been reclassified
to conform to the 1997 presentation. Vacation package revenues, less vacation
package costs, have been included as vacation ownership interests - sales &
marketing costs in the statement of operations for the three and six months
ended June 30, 1996. This presentation more closely correlates to the
presentation method of other companies in the vacation ownership industry.
3. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128). SFAS 128 specifies new standards designed to improve the earnings per
share ("EPS") information provided in financial statements by simplifying the
existing computational guidelines. Some of the changes made to simplify EPS
computations include: (a) eliminating the presentation of primary EPS and
replacing it with basic EPS, (b) eliminating the modified treasury stock method
and the three percent materiality provision, and (c) revising the contingent
share provisions and the supplemental EPS data requirements. SFAS 128 also makes
a number of changes to existing disclosure requirements. SFAS 128 is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods. The Company has not yet determined the impact of the
implementation of SFAS 128.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income. The purpose of reporting comprehensive income is to
present a measure of all changes in equity that result from recognized
transactions and other economic events of the period other than transactions
with owners in their capacity as owners. SFAS 130 requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. SFAS 130 is effective for fiscal years beginning
after December 15, 1997, with earlier application permitted. The Company has not
yet determined the impact of the implementation of SFAS 130.
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosure About Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 specifies revised
guidelines for determining an entity's operating segments and the type and level
of financial information to be disclosed. Once operating segments have been
determined, SFAS 131 provides for a two-tier test for determining those
operating segments that would need to be disclosed for external reporting
purposes. In addition to providing the required disclosures for reportable
segments, SFAS 131 also requires disclosure of certain "second level"
information by geographic area and for products/services. SFAS 131 also makes a
number of changes to existing disclosure requirements. SFAS 131 is effective for
fiscal years beginning arter December 15, 1997, with earlier application
encouraged. The Company has not yet determined the impact of the implementation
of SFAS 131.
4. ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Such estimates consist of the allowances for doubtful
accounts on mortgages receivable on VOI sales and receivables, revenue
recognition under the percentage of completion method on VOI sales, depreciation
and amortization of property and equipment, accrued liabilities and deferred
revenues on vacation packages and VOIs. Actual results could differ from those
estimates.
5. NET INCOME PER SHARE
Earnings per share amounts are based upon the weighted average number
of common stock and common stock equivalent shares. Common equivalent shares are
excluded from the computation for periods in which they have an anti-dilutive
effect. The dilutive effect of common stock equivalents for the computation of
earnings per share is less than 3% for the three months ended June 30, 1997 and
the three and six months ended June 30, 1996. The use of Common stock
equivalents for the EPS computation was anti-dilutive to the computation of the
fully diluted EPS for the six months ended June 30, 1997. Accordingly, all
earnings per share computations are reported as primary. During the six months
ended June 30, 1997, approximately 270,000 options were granted to employees,
60,000 options were granted to outside directors and 30,000 warrants were
granted to a financial advisor. An employee of the financial advisor is a member
of the Board of Directors of the Company.
6
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VACATION BREAK U.S.A., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES
The Company is a party to thirteen state actions related to the
Company's marketing program alleging that the Company violated their consumer
protection or telemarketing laws. The Company is and will actively attempt to
settle with each of these states or counties over the next several months and
does not anticipate its legal and settlement costs will have a material impact
on the financial condition of the Company. The Company has settled with the
counties of Napa and Ventura and State of California and the State of Maryland.
On March 28, 1997, a lawsuit was filed against the Company and Kevin M.
Sheehan, its President, in the Circuit Court for Pinellas County, Florida by
Market Response Group and Laser Company, Inc. (MRG&L). The complaint alleges
that the defendants, in concert with other companies, conspired to boycott MRG&L
and to fix prices for mailings in violation of the Florida Antitrust Act, and in
concert with others, engaged in various acts of unfair competition, deceptive
trade practices and common law conspiracy. The complaint also alleges that the
defendants breached various provisions of a Sales and Marketing Agreement with
plaintiff and interfered with and caused other companies to breach Sales and
Marketing Agreements with MRG&L and that the defendants misappropriated
proprietary information. The complaint also demands that the Company indemnify
plaintiff for costs incurred by MRG&L to defend a 1996 Federal Trade Commission
action. MRG&L claims to have suffered substantial damages. The actual aggregate
amount of damages claimed is not calculable but appears to be in excess of $50
million. The Company believes it has meritorious defenses to each and every
claim, intends to defend each and every claim vigorously, and will file
counterclaims if and when appropriate.
Additionally, the Company is currently a defendant in certain
litigation arising in the ordinary course of business. In the opinion of
management, based on the advice of legal counsel, the outcome of these actions
will not have a material effect on the financial statements of the Company.
7. PRIOR MERGER DISCUSSIONS
In November 1996 the Company announced that it had entered into an
Agreement and Plan of Merger (as amended in March 1997) with various companies
owned or controlled by James E. Lambert. On April 23, 1997 the Company announced
that this Agreement and Plan of Merger had been terminated by mutual agreement
of the parties. The Company had incurred legal, accounting and various other
costs in anticipation of and preparation for the proposed merger. These costs,
which amounted to approximately $0.5 million, have been charged to the
operations of the Company as "Costs related to terminated merger" included on
the statement of operations for the six months ended June 30, 1997
8. SUBSEQUENT EVENTS
On August 10, 1997, the Company announced that it has entered into a
definitive agreement to merge with Fairfield Communities, Inc. ("Fairfield")
through a stock exchange anticipated to be completed in the fourth quarter of
1997. The agreement calls for Fairfield Communities to issue 0.6075 shares of
common stock in exchange for each share of the Company's outstanding common
stock. The Company will incur substantial legal, accounting, investment banking
and other expenses in connection with the proposed merger. The completion of the
acquisition is subject to approval by both Fairfield's and the Company's
shareholders, regulatory approvals, as well as the satisfactory receipt of other
conditions to closing.
7
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<TABLE>
The following table presents key statistics representing VOI activities
in properties owned by the Company or under marketing and purchase agreements.:
<CAPTION>
SEA SANTA STAR ROYAL
GARDENS(1) BARBARA PALM AIRE ISLAND VISTA(2) TOTAL
<S> <C> <C> <C> <C> <C> <C>
Number of VOIs available 11,388 4,680 5,564 5,200 5,148 31,980
Net number of VOIs sold through
June 30, 1997 6,954 4,516 3,607 3,622* - 18,699
Percent sold through
June 30, 1997 61% 96% 65% 70%* 0% 58%
Net number of VOIs sold during the
3 months ended June 30, 1997 -14 (3) 634 1,016 596* - 2,232
Net number of VOIs sold during the
6 months ended June 30, 1997 -17 (3) 1,127 1,653 1,175* - 3,938
* Includes units sold at properties where revenue and income recognition were
deferred or partially deferred for financial reporting purposes.
(1) Includes 4,368 unit weeks at the Ocean Palms phase under construction.
(2) Acquired in January 1996 - formerly known as "Ocean Ranch".
(3) Unit/weeks returned to inventory through process of foreclosure - net of
such unit/weeks resold
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Consolidated Condensed Financial Statements, including the notes
thereto, contained elsewhere herein.
INTRODUCTION
Vacation package revenues less vacation package costs have been
included as Vacation ownership interests sales and marketing costs in the
statement of operations for the three and six month periods ended June 30, 1997.
Previous years' amounts have been reclassified to reflect this change in
presentation, which more closely correlates to the presentation of other
companies in the VOI industry.
In 1993, the Company began to develop its own properties and sell VOIs
in these properties while continuing to sell VOIs in properties owned by other
developers, thereby adding a new source of revenues and earnings, including
sales of vacation ownership interests and interest earned on mortgages
receivable. The Company generates additional revenues from resort operations,
which include room rental operations and ancillary resort operations such as
food and beverage sales and from management fees. In the three and six month
periods ended June 30, 1997, the Company realized no commission revenues from
the sale of VOIs in properties owned by other developers.
Generally, VOIs are sold under binding sales contracts executed by the
Company and the purchaser requiring a 10% down payment and monthly installments
for periods of up to 7 years. VOI revenue is recognized when a 10% down payment
has been received and the 10 day rescission period has expired. During the 10
day rescission period, a customer may cancel for any reason and have the down
payment returned. Revenue relating to sales of VOIs in projects under
development is recognized using the percentage of completion method. Under this
method, the portion of revenues applicable to costs incurred, as compared to
total estimated construction and acquisition costs, is recognized in the period
of sale. The remaining revenue is deferred and recognized as the remaining costs
are incurred. As the Company is currently in the development stage of certain
projects, it is anticipated that certain VOI sales in these projects will
generate deferred revenue as the Company completes sales at a more rapid pace
then the completion of the related VOI units. Costs associated with the
acquisition and development of vacation ownership resorts, including carrying
costs such as interest, are generally capitalized and subsequently recorded as a
cost of sales as the related revenues are recognized.
8
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<TABLE>
The following table sets forth certain consolidated operating
information for the entities comprising the Company for the three month periods
ended June 30, 1997 and 1996
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1997 1996
STATEMENT OF OPERATIONS:
AS A PERCENTAGE OF TOTAL REVENUES
<S> <C> <C>
Sales of vacation ownership interests 83.5 84.4
Resort operations and other 7.6 9.1
Interest earned on mortgages receivable 8.9 5.1
Commissions earned on marketing agreements 0.0 1.4
----- -----
Total revenues 100.0 100.0
===== =====
AS A PERCENTAGE OF VACATION OWNERSHIP INTEREST SALES
Vacation ownership interests costs of units sold 28.1 30.3
Sales and marketing 38.1 35.6
Provision for doubtful accounts 4.1 1.4
AS A PERCENTAGE OF REVENUES FROM RESORT OPERATIONS
AND OTHER
Resort operations and other expense 101.6 103.2
AS A PERCENTAGE OF INTEREST EARNED ON MORTGAGES RECEIVABLE
Interest expense on financed mortgages receivable 42.3 25.0
AS A PERCENTAGE OF COMMISSIONS EARNED ON
MARKETING AGREEMENTS
Commission and related expenses on marketing agreements n/a 96.9
AS A PERCENTAGE OF TOTAL REVENUES
General and administrative 11.5 9.2
Depreciation and amortization 1.6 1.3
Interest expense - other 0.5 0.3
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
The Company's total revenues for the three months ended June 30, 1997
were $33.8 million, a decrease of $5.2 million or 13.3% from the three months
ended June 30, 1996. The Company sold 2,232 VOIs in completed and
pre-construction units at Company-owned properties during the three months ended
June 30, 1997, an increase of 28.8% from 1,733 VOIs sold during the three months
ended June 30, 1996. The Company's revenues from the sale of VOIs was $28.5
million during the three months ended June 30, 1997, of which $28.2 million was
recognized as earned revenue and $0.3 million was recorded as additional
deferred revenues - VOIs from $5.4 million recorded on the Company's balance
sheet at March 31, 1997 to $5.7 million at June 30, 1997. The Company recognized
revenues of $32.9 million from the sales of VOIs during the three months ended
June 30, 1996, of which $21.0 million of VOI sales was derived from sales in
completed units and $11.9 million was derived from the sales of VOIs in
pre-construction units which had been recorded as deferred revenue - VOIs on the
Company's balance sheet at March 31, 1996.
Costs of units sold as a percentage of VOI sales decreased from 30.3%
for the three months ended June 30, 1996 to 28.1% for the three months ended
June 30, 1997 reflecting a decreased percentage of VOIs sold and recognized at
the Orlando project in the three months ended June 30, 1997 compared to the
three months ended June 30, 1996. The unit-week cost to the Company for the
Orlando units is currently fixed by contract at 35% of the related VOI sales
price, resulting in a higher cost per unit than at other projects, but providing
protection against volatility in construction and financing costs.
Vacation package revenues less vacation package costs have been
included as Vacation ownership interest sales and marketing costs section in the
statement of operations for the three months ended June 30, 1997. Previous
years' amounts have been reclassified to reflect this change in presentation
which more closely correlates with the presentation of other companies in the
VOI industry. These costs, which include VOI sales commissions, lead generation
marketing and vacation fulfillment costs and the administrative costs of
processing VOI sales contracts, were $10.7 million, or 38.1% of related VOI
revenues (a reduction of 5.7% from the three months ended March 31, 1997 due to
improved control of vacation fulfillment costs), for the three months ended June
30, 1997 compared to $11.7 million,
9
<PAGE>
or 35.6% of related VOI revenues, for the three months ended June 30, 1996. This
increase reflects the Company's increased emphasis on diversification of lead
generation programs to include the fulfillment of third party certificate
programs, mini-vacations, referrals and in-house sales programs as well as other
moderate cost traditional lead procurement programs which have the primary goal
of producing a high quality, low to moderate cost tour at a resort property and
increase VOI sales. The costs of sales commissions and administrative costs have
remained relatively constant, as a percentage of recognized sales volume for the
three months ended June 30, 1997 compared to the three months ended June 30,
1996.
The Company's revenues from resort and other operations decreased to
$2.6 million for the three months ended June 30, 1997 from $3.5 million for the
three months ended June 30, 1996, primarily as a result of having fewer units
available for resort occupancy during the 1997 period, including the last phase
of Palm Aire which underwent renovations for VOI sales during the second quarter
of 1997. Cost of resort operations decreased to $2.6 million for the three
months ended June 30, 1997 from $3.7 million for the three months ended June 30,
1996 as a direct result of the reduction of related revenues due to a reduction
in available rooms. Such costs as a percentage of revenues from resort and other
operations decreased to 101.6% for the three months ended June 30, 1997 from
103.2% for the three months ended June 30, 1996.
At both June 30, 1997 and 1996, the Company's weighted average interest
rate on its entire loan portfolio was 16.3%, compared to a weighted average
interest rate on borrowings against loans hypothecated by the Company to
unaffiliated lenders of 10.2% at June 30, 1997 compared to 10.5% at June 30,
1996. As a result of the continued increase in sales of VOIs and the
proportionate increase of VOIs sold in Company-owned properties from 1993
through June 30, 1997, the Company's interest income from financing activities
increased to $3.0 million for the three months ended June 30, 1997 from $2.0
million for the three months ended June 30, 1996. This increase was partially
offset by interest paid on increased borrowings against loans hypothecated by
the Company to unaffiliated lenders of $1.3 million during the three months
ended June 30, 1997 compared to $0.5 million during the three months ended June
30, 1996.
The Company's continued development of Company-owned resort properties
and sale of VOIs in such properties resulted in the discontinuance of
commissions received in connection with the sale of VOIs for other developers.
During 1996, the Company terminated its sales and marketing arrangement with a
developer in the Bahamas and curtailed the sales of VOIs in the Bahamas. The
Company derived no revenues from such commissions for the three months ended
June 30, 1997 and $0.5 million for the three months ended June 30, 1996 with
related costs in the 1996 period of $0.5 million or 96.9% of related commission
revenues.
General and administrative expenses, consisting primarily of expenses
relating to corporate overhead, increased to $3.9 million for the three months
ended June 30, 1997 compared to $3.6 million for the three months ended June 30,
1996, and amounted to approximately 11.5% of the Company's total revenues during
the three months ended June 30, 1997 as compared to 9.2% during the three months
ended June 30, 1996. The increase for the three months ended June 30, 1997
includes an increase in reserves for various legal and regulatory matters.
The provision for doubtful accounts increased to $1.2 million for the
three months ended June 30, 1997 from $0.5 million for the three months ended
June 30, 1996. This represents 4.1% of VOI sales revenues for the three months
ended June 30, 1997 compared to 1.4% for the three months ended June 30, 1996.
The Company monitors its provision for doubtful accounts on a quarterly basis to
provide for future losses associated with defaults on customer mortgages
receivable. This increase was due to the increased provision against mortgages
receivable resulting from the increased mortgage receivable portfolio balance
and to reflect current trends.
Depreciation and amortization expense remained constant at $0.5 million
for the three months ended June 30, 1997 and June 30, 1996.
As a result of the foregoing, the Company's net income was $2.8 million
for the three months ended June 30, 1997, a decrease of $2.1 million or 43.1%
from $4.9 million for the three months ended June 30, 1996. Net income for the
three months ended June 30, 1996 included approximately $3.4 million (net of
income taxes) relating to the recognition of deferred revenues (net of related
costs) that had been deferred at March 31, 1996 under the percentage of
completion method of accounting.
10
<PAGE>
<TABLE>
The following table sets forth certain consolidated operating
information for the entities comprising the Company for the six month periods
ended June 30, 1997 and 1996
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
---- ----
STATEMENT OF OPERATIONS:
AS A PERCENTAGE OF TOTAL REVENUES
<S> <C> <C>
Sales of vacation ownership interests 81.2 79.8
Resort operations and other 9.4 12.3
Interest earned on mortgages receivable 9.4 6.1
Commissions earned on marketing agreements .0 1.8
----- -----
Total revenues 100.0 100.0
===== =====
AS A PERCENTAGE OF VACATION OWNERSHIP INTEREST SALES
Vacation ownership interests costs of units sold 28.7 28.4
Sales and marketing 40.6 38.4
Provision for doubtful accounts 3.6 1.3
AS A PERCENTAGE OF REVENUES FROM RESORT OPERATIONS
AND OTHER
Resort operations and other expense 90.4 100.1
AS A PERCENTAGE OF INTEREST EARNED ON MORTGAGES RECEIVABLE
Interest expense on financed mortgages receivable 35.6 27.6
AS A PERCENTAGE OF COMMISSIONS EARNED ON
MARKETING AGREEMENTS
Commission and related expenses on marketing agreements n/a 75.5
AS A PERCENTAGE OF TOTAL REVENUES
General and administrative 11.4 10.5
Depreciation and amortization 1.7 1.8
Interest expense - other 0.6 0.9
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
The Company's total revenues for the six months ended June 30, 1997
were $62.8 million, an increase of $1.6 million or 2.6% from the six months
ended June 30, 1996. The Company sold 3,938 VOIs in completed and
pre-construction units at Company-owned properties during the six months ended
June 30, 1997, an increase of 15.0% from 3,423 VOIs sold during the six months
ended June 30, 1996. The Company derived revenues of $51.3 million from the
sales of VOIs during the six months ended June 30, 1997, of which $51.0 million
was recognized from the sale of VOIs in completed units and was recorded as
earned revenue and $0.3 million from sales of VOIs in pre-construction units was
recorded as additional deferred revenue - VOIs on the Company's balance sheet at
December 31, 1996. The Company recognized revenues of $48.8 million from the
sales of VOIs during the six months ended June 30, 1996, of which $41.1 million
was recognized from the sale of VOIs in completed units and was recorded as
earned revenue and $7.7 million was recognized from the sales of VOIs in
pre-construction units which was recorded as deferred revenue - VOIs on the
Company's balance sheet at December 31, 1996.
Costs of units sold as a percentage of VOI sales increased slightly
from 28.4% for the six months ended June 30, 1996 to 28.7% for the six months
ended June 30, 1997 reflecting an increased percentage of VOIs sold at the
Orlando project in the six months ended June 30, 1997 compared to the six months
ended June 30, 1996. The unit-week cost to the Company for the Orlando units is
fixed by contract at 35% of the related VOI sales price, resulting in a higher
cost per unit than at other projects, but providing protection against
volatility in construction and financing costs.
Vacation package revenues less vacation package costs have been
included as Vacation ownership interest sales and marketing costs section in the
statement of operations for the six months ended June 30, 1997. Previous years'
amounts have been reclassified to reflect this change in presentation which more
closely correlates with the presentation
11
<PAGE>
of other companies in the VOI industry. These costs, which include VOI sales
commissions, lead generation marketing and vacation fulfillment costs and the
administrative costs of processing VOI sales contracts, were $ 20.7 million, or
40.6% of related VOI revenues, for the six months ended June 30, 1997 compared
to $18.7 million, or 38.4% of related VOI revenues, for the six months ended
June 30, 1996. This increase reflects the Company's increased emphasis on
diversification of lead generation programs to include the fulfillment of third
party certificate programs, mini-vacations, referral and in-house sales programs
as well as other moderate cost traditional lead procurement programs which have
the primary goal of producing a high quality, low to moderate cost tour at a
resort property and increase VOI sales. The costs of sales commissions and
administrative costs have remained relatively constant, as a percentage of
recognized sales volume for the six months ended June 30, 1997 compared to the
six months ended June 30, 1996.
The Company's revenues from resort and other operations decreased to
$5.9 million for the six months ended June 30, 1997 from $7.5 million for the
six months ended June 30, 1996, primarily as a result of having fewer units
available for resort occupancy during the 1997 period, including the last phase
of Palm Aire which underwent renovations for VOI sales during the second quarter
of 1997. Cost of resort operations decreased to $5.3 million for the six months
ended June 30, 1997 from $7.6 million for the six months ended June 30, 1996 as
a direct result of the reduction of related revenues due to a reduction in
available rooms. Such costs as a percentage of revenues from resort and other
operations decreased to 90.4% for the six months ended June 30, 1997 from 100.1%
for the six months ended June 30, 1996.
At both June 30, 1997 and 1996, the Company's weighted average interest
rate on its entire loan portfolio was 16.3%, compared to a weighted average
interest rate on borrowings against loans hypothecated by the Company to
unaffiliated lenders of 10.2% at June 30, 1997 compared to 10.5% at June 30,
1996. As a result of the continued increase in sales of VOIs and the
proportionate increase of VOIs sold in Company-owned properties from 1993
through June 30, 1997, the Company's interest income from financing activities
increased to $5.9 million for the six months ended June 30, 1997 from $3.7
million for the six months ended June 30, 1996. This increase was partially
offset by interest paid on increased borrowings against loans hypothecated by
the Company to unaffiliated lenders of $2.1 million during the six months ended
June 30, 1997 compared to $1.0 million during the six months ended June 30,
1996.
The Company's continued development of Company-owned resort properties
and sale of VOIs in such properties resulted in the discontinuance of
commissions received in connection with the sale of VOIs for other developers.
During late 1996, the Company terminated its sales and marketing arrangement
with a developer in the Bahamas and curtailed the sales of VOIs in the Bahamas.
The Company derived no revenues from such commissions for the six months ended
June 30, 1997 and $1.1 million for the six months ended June 30, 1996 with
related costs in the 1996 period of $0.8 million or 75.5% of related commission
revenues.
General and administrative expenses, consisting primarily of expenses
relating to corporate overhead, increased to $7.1 million for the six months
ended June 30, 1997 compared to $6.4 million for the six months ended June 30,
1996, and amounted to approximately 11.4% of the Company's total revenues during
the six months ended June 30, 1997 as compared to 10.5% during the six months
ended June 30, 1996. The increase for the six months ended June 30, 1997
includes an increase in reserves for various legal and regulatory matters.
During the six months ended June 30, 1997, the Company charged
approximately $0.5 million to operations representing legal, accounting and
other costs related to the termination of the merger agreement with the Lambert
Companies.
The provision for doubtful accounts increased to $1.8 million for the
six months ended June 30, 1997 from $0.7 million for the six months ended June
30, 1996. This represents 3.6% of VOI sales revenues for the six months ended
June 30, 1997 compared to 1.3% for the six months ended June 30, 1996. The
Company monitors its provision for doubtful accounts on a quarterly basis to
provide for future losses associated with defaults on customer mortgages
receivable. This increase was due to the increased provision against mortgages
receivable resulting from the increased mortgage receivable portfolio balance
and to reflect current trends.
Depreciation and amortization expense remained constant at $1.1 million
for the six months ended June 30, 1997 and the six months ended June 30, 1996.
As a result of the foregoing, the Company's net income was $5.1 million
for the six months ended June 30, 1997, a decrease of $1.3 million or 20.7% from
$6.4 million for the six months ended June 30, 1996. Net income for the six
months ended June 30, 1996 included approximately $2.4 million (net of income
taxes) relating to the recognition of deferred revenues (net of related costs)
that had been deferred at December 31, 1995 under the percentage of completion
method of accounting.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company offers financing to the purchasers of VOIs in the Company's
resort properties who make a down payment generally equal to at least 10% of the
purchase price. This financing bears interest at fixed rates, unless the down
payment equals at least 50% of the purchase price and the purchaser agrees to
pay the balance of the purchase price within one year from the date of purchase,
in which case the Company's loan bears no interest. This financing is
collateralized by a mortgage on the underlying VOI. The Company has entered into
agreements with three lenders for the financing of customer receivables which
provide an aggregate of up to approximately $90.0 million of available financing
(of which $53.2 million was outstanding as of June 30, 1997) to the Company
bearing interest at variable rates tied to the "prime" rate plus 2.00% to 2.50%
or a rate ranging between 375 and 475 basis points over LIBOR. Included in this
availability is up to $20.0 million of pre-construction sales financing
(financing of sales of units under construction which have not been deeded), of
which $5.0 million was outstanding at June 30, 1997. A significant portion of
this indebtedness has been guaranteed by Ralph Muller, the Chairman, Chief
Executive Officer and majority shareholder of the Company. Under these
arrangements, the Company hypothecates, or pledges as security, qualified
purchaser promissory notes to these lenders, who lend the Company 75% to 85% of
the principal amount of such notes or, in the case of pre-sale financing, 60% of
the purchase price of the underlying VOI or 65% of the outstanding balance of
such notes. Payments under these promissory notes are made by the purchaser
borrowers directly to a 'lockbox,' or payment processing center, and such
payments are credited against the Company's outstanding balance with the
respective lenders. Of the aggregate availability of $90.0 million, $10.0
million of such financing is a revolving loan with scheduled availability until
December 1997; $15.0 million of such financing is a revolving loan with
scheduled availability until March 1998, $40.0 million of such financing is a
revolving loan with scheduled availability until November 1998 and $25.0 million
of such financing is a revolving loan with scheduled availability until May
1999. The Company is in the process of consolidating the $15.0 million line and
the $25.0 million line into a $40.0 million warehouse facility. After the
respective termination of the availability period, the respective outstanding
borrowings under the aggregate agreements are required to be repaid over a
period of five to eight years. The Company believes that, for the four presently
active selling resorts, it has substantial loan availability to provide
financing of new VOI purchases through 1997. Although the Company believes it
can obtain additional financing from other lenders if necessary, other than as
set forth herein, it does not presently have binding agreements to extend the
terms of such financing or for any replacement financing, and there can be no
assurance that alternative or additional arrangements can be made on terms that
are satisfactory to the Company. Accordingly, future sales of VOIs may be
limited by both the availability of funds to finance the initial negative cash
flow that results from sales that are financed by the Company and by reduced
demand which may result if the Company is unable to provide financing to
purchasers of VOIs. If the Company is required to sell its customer receivables,
discounts from the face value of such receivables may be required. At June 30,
1997, the Company had a portfolio of 13,339 loans to VOI purchasers, which loans
had a weighted average maturity of approximately 5.2 years, and a weighted
average interest rate of 16.3%, compared to a weighted average interest rate of
10.2% on borrowings against loans hypothecated by the Company to unaffiliated
lenders. The Company has historically derived substantial income from its
financing activities.
The Company also requires funds to finance the future purchases of and
improvements to resort properties. Such funds have been provided from operations
and from secured term loans under existing credit facilities, as well as from
the proceeds of the Company's initial public offering ("IPO"). The Company
presently has no commitments to make capital expenditures other than (i) a $13.0
million construction facility from SunTrust and Finova Capital Corporation to
finance the construction of the ten story, 84 unit Ocean Palms addition to the
SEA GARDENS RESORT and (ii) a $12.7 million construction facility from Bank
Atlantic to finance the construction of the 99 unit renovation and new
construction to ROYAL VISTA RESORT (formerly known as OCEAN RANCH) and (iii) an
unconditional $8.8 million obligation to purchase units at STAR ISLAND, complete
construction of such units and guarantee a maximum of $6.5 million of
construction debt.
The Company intends to continue to provide financing to purchasers of
VOIs and to obtain funds to finance the negative cash flow resulting from the
payment of sales commissions and other selling expenses and to make release
payments on bank indebtedness relating to development of its resort properties.
For the six months ended June 30, 1997 and 1996, the Company derived interest
income of $5.9 million and $3.7 million, respectively, from the financing of
purchaser notes receivable and incurred interest expense of $2.1 and $1.0
million, respectively, relating to loans secured by notes hypothecated to these
unaffiliated lenders.
13
<PAGE>
During the six months ended June 30, 1997 and 1996, the Company's
operating activities provided approximately $1.3 million and used approximately
$11.3 million, respectively, in cash and cash equivalents and its investing
activities used approximately $10.7 million and $4.7 million, respectively, in
cash. During these periods $6.7 million and $15.2 million, respectively, was
provided through the Company's financing activities, resulting in a net decrease
in cash and cash equivalents of $2.7 million for the six months ended June 30,
1997 and $0.8 million for the six months ended June 30, 1996.
The Company believes that funds from operating and financing
activities, borrowings under its existing credit facilities and the net
remaining proceeds from the IPO are sufficient to satisfy its contemplated cash
requirements through 1997, and that its long-term financing requirements will be
met through operating and financing activities in the normal course of its
business and, if deemed necessary or appropriate, through additional financing.
No assurance can be given that additional financing will be available on terms
and conditions acceptable to the Company.
The foregoing Management's Discussion and Analysis contains various
"forward looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 which represent the Company's expectations or beliefs
concerning future events, including, but not limited to, statements regarding
increased sales of VOIs in Company owned resorts and the sufficiency of the
Company's cash flow, as well as receivables financing, for its future liquidity
and capital resource needs. These forward looking statements are further
qualified by important factors that could cause actual results to differ
materially from those in the forward looking statements. These factors include,
without limitation, the Company's ability to continue to develop and market
resort properties, increases in marketing costs, the availability of favorable
financing agreements, increases in sales of vacation packages, fluctuations in
interest rates and the effects of governmental regulation. Results actually
achieved may differ materially from expected results included in these
statements as a result of these or other factors.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Refer to Note 6, Commitments and Contingencies, of the Consolidated
Condensed Financial Statements included elsewhere herein.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on June 27, 1997.
At the meeting, each of Ralph P. Muller, Kevin Sheehan, Joyce North, Henry M.
Cairo, Steven McPhee, Richard Adrey, Ronald J. Korn, Michael J. Kollender,
Edward R. Allen and Francis X. Maguire were elected as directors of the Company.
The following table indicates the number of votes cast by shareholders of the
Company for, against or withheld in connection with the election of each of the
directors:
-----------------------------VOTES------------------------------
DIRECTOR FOR AGAINST WITHHELD
Ralph P. Muller 7,216,977 0 9,459
Kevin Sheehan 7,204,126 0 22,309
Joyce North 7,223,576 0 2,859
Henry M. Cairo 7,223,426 0 3,009
Steven McPhee 7,221,276 0 5,159
Richard Adrey 7,224,576 0 1,859
Ronald J. Korn 7,224,376 0 2,059
Michael J. Kollender 7,223,576 0 2,859
Edward R. Allen 7,224,576 0 1,859
Francis X. Maguire 7,223,576 0 2,859
14
<PAGE>
In addition, the shareholders approved the following matters:
(1) An amendment to the Company's Articles of Incorporation to
provide that the number of directors constituting the Company's Board
of Directors shall not be less than three (3) nor more than fifteen
(15). The number of votes cast by shareholders of the Company for or
against or respecting this proposal were 7,207,375, 910 and 18,150,
respectively. (2) An amendment to the Company's Directors' Stock
Option Plan to increase from 40,000 to 100,000 the number of shares
of Common Stock reserved for issuance pursuant to the Directors'
Stock Option Plan. The number of votes cast by shareholders of the
Company for or against or withheld respecting this proposal were
7,192,422, 14,973 and 19,040, respectively.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.82 Construction Loan Agreement dated November 27, 1996
between Sea Gardens Beach and Tennis Resort, Inc. and SunTrust
Bank.
10.83 Amended and Restated Loan and Security Agreement dated November
19, 1996 among Sea Gardens Beach and Tennis Resort, Inc.,
Vacation Break Resorts, Inc., Vacation Break Resorts at Cocoa
Beach, Inc., Palm Vacation Group and Finova Capital Corporation
10.84 Second Amendment, dated June 3, 1997 to Loan and Security
Agreement among Sea Gardens Beach and Tennis Resort, Inc.,
Vacation Break Resorts at Star Island, Inc. and Heller
Financial, Inc.
11.1 Statement regarding computation of per share earnings
27.1 Financial Data Schedule
b. Reports on Form 8-K:
NONE
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VACATION BREAK U.S.A., INC.
By: /S/ RALPH P. MULLER
----------------------------
Ralph P. Muller
Chairman of the Board and Chief Executive Officer
Date: August 13, 1997
By: /S/ KEVIN M. SHEEHAN
-----------------------------
Kevin M. Sheehan
President
Date: August 13, 1997
By: /S/ HENRY M. CAIRO
Henry M. Cairo
Chief Financial Officer and Chief Operating Officer
Date: August 13, 1997
16
<PAGE>
EXHIBIT INDEX
Exhibit Page
- --------- -----
10.82 Construction Loan Agreement dated November 27, 1996
between Sea Gardens Beach and Tennis Resort, Inc. and SunTrust
Bank.
10.83 Amended and Restated Loan and Security Agreement dated November
19, 1996 among Sea Gardens Beach and Tennis Resort, Inc.,
Vacation Break Resorts, Inc., Vacation Break Resorts at Cocoa
Beach, Inc., Palm Vacation Group and Finova Capital Corporation
10.84 Second Amendment, dated June 3, 1997 to Loan and Security
Agreement among Sea Gardens Beach and Tennis Resort, Inc.,
Vacation Break Resorts at Star Island, Inc. and Heller
Financial, Inc.
11.1 Statement regarding computation of per share earnings
27.1 Financial Data Schedule
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement (the "SECOND
AMENDMENT") dated as of this 3rd day of June, 1997 is by and between (i) SEA
GARDENS BEACH AND TENNIS RESORT, INC., a Florida corporation whose address is
6400 North Andrews Avenue, Suite 200, Fort Lauderdale, Florida 33309 ("SEA
GARDENS, INC."), (ii) VACATION BREAK RESORTS, INC., a Florida corporation, whose
address is 6400 North Andrews Avenue, Park Plaza, Suite 200, Fort Lauderdale,
Florida 33309, ("VBR, INC."), and (iii) VACATION BREAK RESORTS AT STAR ISLAND,
INC., a Florida corporation whose address is 6400 North Andrews Avenue, Park
Plaza, Suite 200. Fort Lauderdale, Florida 33309, ("STAR ISLAND, INC.") and
HELLER FINANCIAL, INC., a Delaware corporation whose address is 500 West Monroe
Street, 17th Floor, Chicago, Illinois 60661 ("LENDER"). All references herein to
"Borrower" shall be deemed separate, individual references to each of Sea
Gardens, Inc., VBR, Inc. and Star Island, Inc. respectively.
R E C I T A L S:
WHEREAS, Lender and Borrower previously entered into a Loan and
Security Agreement dated as of December 19, 1995 (the "Loan Agreement");
WHEREAS, Lender and Borrower previously entered into an Amendment to
Loan and Security Agreement dated as of April 30, 1997 (the "Amendment");
WHEREAS, The parties wish to further amend the Loan Agreement on the
terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto hereby amend the Loan Agreement
as follows:
1. All capitalized terms used herein, but not defined, shall have the
meanings ascribed to them in the Loan Agreement.
2. Section 2.2 of the Loan Agreement is deleted in its entirety and the
following new section is inserted in lieu thereof:
2.2 TERM. The Loan shall be for a term of One Hundred
Twenty-Four (124) full months plus the number of days from the
Closing Date to the end of the month in which the Closing Date
occurs.
3. Section 6.8 of the Loan Agreement is deleted in its entirety and the
following, new section is inserted in lieu thereof:
6.8 NET WORTH. Corporate Guarantor agrees to maintain a
minimum net worth. determined in accordance with GAAP, of
Fifteen Million Dollars ($1S,000,000.00) at all times that
<PAGE>
the Indebtedness is outstanding or Lender is obligated to make
Advances. Borrower agrees to maintain a net profit margin on
all timeshare sales operations of ten (10%) percent (earnings,
calculated before income taxes and excluding earnings from
minority interest, less actually incurred expenses).
4. Section 7.8 of the Loan Agreement is deleted in its entirety and the
following new section is inserted in lieu thereof:
7.8 MAXIMUM LOAN AMOUNT. At no time shall Lender be required
to make additional Advances to Borrower pursuant to the terms
and conditions of the Agreement so that the outstanding
principal balance under Borrower's Twenty Five Million Dollar
($25,000,000.00) Promissory Note and Borrower's Eight Million
Dollar ($8,000,000.00) Promissory Note exceed Twenty Five
Million Dollars ($25,000,000.00) in the aggregate.
5. Section 11.1 of the Loan Agreement is amended by inserting the
following new notice address for Lender:
Notice to Lender: Heller Financial, Inc.
Heller Sales Finance
Attn: Portfolio Manager, Vacation
Ownership Group
500 West Monroe Street, Suite 1700
Chicago, IL 60661
Telecopy: (312) 441-7924
With a copy to: Heller Financial, Inc.
Heller Sales Finance
Attn: General Counsel
500 West Monroe Street, Suite 1500
Chicago, IL 60661
Telecopy: (312) 441-7872
6. Section 11.18 of the Loan Agreement is amended by adding the
following new paragraph at the end thereof:
In addition to the original Commitment Fee equal to One
Hundred Fifty Thousand Dollars ($150,000.00) and as a condition to the
execution of this Second Amendment by Lender, Borrower shall pay to
Lender an additional Commitment Fee equal to One Hundred Thousand
Dollars ($100,000.00) which Commitment Fee is in consideration of
Lender's agreement to enter into the Second Amendment increasing the
Loan amount by an additional Ten Million Dollars ($ 10,000,000.00)
subject to the terms and conditions set forth herein and which amount
Borrower agrees Lender has earned of which
-2-
<PAGE>
$50,000.00 has already been earned and paid to Lender, with the
remaining being paid once the loan balance is Twenty Million Dollars
($20,000,000.00).
7. The definition of "AVAILABILITY" appearing in the APPENDIX is
amended by deleting the references to "Fifteen Million Dollars" appearing in
subsections (a)(iii) and (b)(i) of the definition of "AVAILABILITY" and the new
references to "Twenty Five Million Dollars" are inserted in lieu thereof.
8. The definition of "CONSTRUCTION LENDER" appearing in the APPENDIX is
deleted in its entirety and the following new definition of "CONSTRUCTION
LENDER" is inserted in lieu thereof:
CONSTRUCTION LENDER. Textron Financial, Inc. for Vacation Break Resorts
at Star Island I, a Condominium and Vacation Break Resorts at Star
Island II; Colonial Bank for Vacation Break Resorts at Star island III;
and Sun Trust Bank, South Florida, National Association for the Sea
Gardens Resort and the Santa Barbara Resort.
9. The definition of "DECLARATION" appearing in the Appendix is amended
by adding the following new Declaration at the end thereof:
(vii) the Declaration of Fort Lauderdale Beach Resort dated
____________ and recorded in Book _______, Page _______, Document
______ of the official records of _____________ County, Florida is now
and hereafter amended or restated.
10. Paragraph (b) within the definition of "ELIGIBLE NOTE RECEIVABLE"
appearing in the APPENDIX is amended by deleting the last two (2) lines of the
paragraph and inserting the following language thereof:
at another timeshare resort and at least two timely monthly payments
have been received;
11. Paragraph (d) within the definition of "ELIGIBLE NOTE RECEIVABLE"
appearing in the APPENDIX is amended by deleting the first three (3) lines of
the paragraph and inserting the following language in lieu thereof:
(d) The weighted average interest rate on all Financed Notes
Receivable is not less than 13.5% per annum; provided, however, a
maximum of ten percent (10%) of the total notes
12. A new paragraph (aa) is inserted in the definition of "ELIGIBLE
NOTE RECEIVABLE" appearing in the APPENDIX as follows:
(aa) Anything contained herein to the contrary notwithstanding, a Note
Receivable relating to the Fort Lauderdale Beach Resort shall not be
considered an Eligible Note Receivable until such time as Lender has
reviewed and approved all documentation relating to the Fort Lauderdale
Beach Resort including but not limited to the following: (i) survey;
(ii) management and other agreements; (iii)
-3-
<PAGE>
compliance documents; (iv) evidence of insurance, (v) title insurance;
(vi) Phase I environmental report; (vii) consumer purchase documents,
(viii) Declaration and Public Offering Statement and (ix) and such
other agreements, documents, instruments and certificates as Lender may
request concerning the Fort Lauderdale Beach Resort.
13. The definition of "ESCROWED SALE AVAILABILITY" appearing in the
APPENDIX is deleted in its entirety and the following new definition of
"ESCROWED SALE AVAILABILITY" is inserted in lieu thereof:
ESCROWED SALE AVAILABILITY. Advances may be made as follows for the
purpose of financing Escrowed Sales during the Revolving Period. With
respect to Escrowed Sales at Star Island Resort, the lesser of (i)
Eight Million Dollars ($8,000,000) minus outstanding Advances
previously made to finance Escrowed Sales at Star Island Resort, or
(ii) an amount equal to sixty-five percent (65%) of the sales price of
each Interval which is the subject of a Financed Note Receivable to be
assigned to Lender in connection with any then current Advance for the
purpose of financing Escrowed Sales at Star Island Resort.
After expiration of the Revolving Period, Escrowed Sales Availability
shall be zero.
14. A new definition of "FORT LAUDERDALE RESORT" is inserted in the
APPENDIX as follows:
FORT LAUDERDALE RESORT. That certain timeshare vacation resort located
in Fort Lauderdale, Florida on the land more particularly described in
Exhibit D, commonly known as the Fort Lauderdale Beach Resort,
including, all related common elements, limited common elements,
parking areas and other amenities as established by the Declaration.
15. The definition of "INTEREST RATE" appearing in the APPENDIX is
deleted in its entirety and the following new definition of "INTEREST RATE" is
inserted in lieu thereof:
INTEREST RATE. A floating rate per annum equal to the Base Rate plus
three and three-quarters percent (3.75%) (the aggregate rate referred
to as the "Interest Rate"). "Base Rate, shall mean the rate published
each business day in THE WALL STREET JOURNAL for notes maturing three
(3) months after issuance under the caption "Money Rates, London
Interbank Offered Rates (LIBOR)". The Interest Rate for each calendar
month shall be fixed based upon the Interest Rate published prior to
and in effect on the first (1st) business day of such month. Interest
shall be calculated based on a 360 day year and charged for the actual
number of days elapsed.
16. The definition of "RESORT" appearing in the Appendix is deleted in
its entirety and the following new definition of "RESORT" is inserted in lieu
thereof:
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<PAGE>
RESORT. Each of the Sea Gardens Resort, Santa Barbara Resort, the Star
Island Resort and Fort Lauderdale Resort, respectively.
17. The definition of "REVOLVING PERIOD" appearing in the APPENDIX is
deleted in its entirety and the following new definition of "REVOLVING PERIOD"
is inserted in lieu thereof:
"REVOLVING PERIOD" means the period commencing on the Closing Date and
ending on May 31, 1999.
18. FURTHER ASSURANCES. Borrower shall execute and deliver to Lender
such additional documents and agreements as may be reasonably required by Lender
and its counsel from time to time to evidence and secure the Loan and to
evidence, perfect and preserve the obligations of Borrower and the Guarantor
pursuant to this Second Amendment and the other Loan Documents. In the event of
any inconsistency between this Second Amendment and the other Loan Documents,
the provisions of this Loan Agreement shall prevail and control.
19. RATIFICATION BY BORROWER. Borrower hereby ratifies and confirms the
Loan Documents amended pursuant hereto, and agrees that as modified pursuant
hereto, the Note, and the other Loan Documents are, and continue to be, in full
force and effect and are enforceable in accordance with their respective terms.
Borrower hereby incorporates by reference all covenants, warranties and
representations contained in the Loan Documents and reaffirms such covenants,
warranties and representations as of the date hereof:
20. RATIFICATION AND REAFFIRMATION BY GUARANTORS. Each of the
Guarantors hereby (a) reaffirms that it/he is legally and validly indebted to
the Lender pursuant to and in accordance with the Guaranty, (b) acknowledges and
consents to the Guaranty and the Loan Documents in accordance with the terms
hereof (c) acknowledges and affirms that the Guaranty remains in full force and
effect. Any references in the Guaranty Agreement to the Loan shall mean the Loan
as amended and affected pursuant hereto.
21. RATIFICATION AND _REAFFIRMATION BY SUBORDINATING CREDITORS. Each of
the Subordinating Creditors hereby (a) reconfirms the covenants and obligations
contained in the Subordination Agreement with respect to any and all amounts at
any time owing by Borrower to Lender under the Loan Agreement as amended herein
(b) acknowledges and consents to the Subordination Agreement and the Loan
Documents in accordance with the terms hereof (c) acknowledges and affirms that
the Subordination Agreement remains in full force and effect. Any references in
the Subordination Agreement to the Loan shall mean the Loan as amended and
affected pursuant hereto.
22. CONFIRMATION OF HAZARDOUS MATERIALS INDEMNITY AGREEMENT. The
Principals each hereby (a) ratify and confirm all of their respective covenants
and obligations under the Hazardous Materials Indemnity Agreement given by the
Principals in favor of Lender and (b) acknowledge that all obligations
thereunder remain in full force and effect. Any references in the Hazardous
Materials Indemnity Agreement to the Loan shall mean the Loan as amended and
affected pursuant hereto.
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<PAGE>
23. NO WAIVER. Execution of this Second Amendment by Lender shall be
without prejudice to Lender's rights at any time in the future to exercise any
and all rights conferred upon it by any of the Loan Documents in accordance with
their original terms as previously and hereby amended. Neither this Second
Amendment nor any provision hereof or of any other documents modifying the Loan
Documents shall constitute, or shall be construed to constitute, a waiver of any
default, right, or remedy of Lender under the Note or the other Loan Documents
subsequent to the date hereof. Any failure by Lender at any point in time during
the term of the Note, the other Loan Documents or this Second Amendment to
insist upon strict and timely compliance with the terms and provisions of each
such document shall not be deemed a waiver either expressly or impliedly by
Lender of any of its rights, under any such document, not shall the same excuse
Borrower's obligation to strictly and timely perform its obligations hereunder
and thereunder.
24. RELEASE. The Borrower and each Guarantor, by execution of this
Second Amendment, hereby declare that as of this date it has no claim, set-off,
counterclaim, defense' or other cause of action against Lender including, but
not limited to, a defense of usury, any claim or cause of action at common law,
in equity, statutory or otherwise, in contract or in tort, for fraud,
malfeasance, misrepresentation, financial loss, usury, deceptive trade practice,
or any other loss, damage or liability of any kind, including without limitation
any claim for exemplary or punitive damages arising out of any transaction
between Borrower, Guarantors, Subordinating Creditors, Principals and Lender in
connection with the Loan, the Note or any of the other Loan Documents, any
security therefore or this Second Amendment, or any document mentioned herein.
Further, to the extent that any such set-off, counterclaim, defense, or other
cause of action may exist or might hereafter arise based on facts known or
unknown which exist as of this date, such set-off, counterclaim, defense and
other cause of action is hereby expressly and knowingly waived and released by
Borrower and Guarantor.
25. COUNTERPARTS. This Loan Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
26. APPLICABLE LAW. The validity and effect of this Second Amendment
shall be governed by and construed in accordance with the laws of the State of
Illinois applicable to contracts to be performed in that state.
27. EFFECTIVE DATE. This Second Amendment shall not be effective until
a fully executed copy of this Second Amendment has been executed by all parties
and delivered to Lender.
28. MODIFICATIONS SEVERABILITY. There are and were no oral or written
representations, warranties, understandings, stipulations, agreements, or
promises made by either party, or by any agent. employee, or other
representative of either party, pertaining to the subject matter of this Second
Amendment which have not be incorporated into this Second Amendment. This Second
Amendment shall not be modified, changed, terminated, amended, superseded,
waived, or extended except by a written instrument executed by the parties
hereto. If any term, covenant, or condition of this Second Amendment is held to
be invalid, illegal, or unenforceable as to a
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<PAGE>
particular person, entity, or situation, this Second Amendment shall, at the
option of Lender, be construed and enforced without such provision, but will
otherwise be enforced to the fullest extent permitted by law as to such person,
entity, or situation, and this Second Amendment will also be enforced to the
fullest extent permitted by law as to any other person, entity, or situation.
Except as specifically modified by the terms of this Second Amendment, the Note,
the Guaranty and all of the remaining Loan Documents shall not be affected by
this Second Amendment and each shall remain in full force and effect. This
Second Amendment does not constitute the extinguishment of the debt evidenced by
the Note before modification. Nothing herein contained shall be construed to
impair Lender's security under Loan Documents nor to limit or impair any rights
or powers that Lender now enjoys or may hereafter enjoy under the Loan Documents
for recovery of the indebtedness secured thereby.
29. FEES AND EXPENSES. Each Borrower agrees that it is responsible for
all costs, expenses and fees, including, but not limited to, reasonable Lender's
attorneys' fees and all title insurance costs, in connection with this Second
Amendment, the administration of the Loan Documents and this Second Amendment
and enforcement actions with respect thereto.
30. WARRANTIES AND REPRESENTATIONS OF BORROWER. Each Borrower hereby
warrants and represents to the Lender that:
(a) the persons executing this Second Amendment on behalf of
Borrower have full authority to execute this Second Amendment on behalf
of Borrower and to bind Borrower thereby;
(b) the execution and delivery by Borrower of this Second
Amendment and the performance thereunder by Borrower has not and will
not result in a breach of, or constitute a default under, any mortgage,
lease, bank loan, credit arrangement, or other instrument or agreement
to which either Borrower is a party or by which either Borrower or the
property security the Loan may be bound or affected;
(c) all covenants and representations made by the Borrower in
the Loan Documents and all recitals and representations made in this
Second Amendment and other Loan Documents evidencing or securing this
Second Amendment are true and accurate as of the date hereof;
(d) Borrower is a corporation duly organized and validly
existing under the laws of the State of Florida,
(e) there exists no action, suit, proceeding or investigation
at law or in equity before any court, public board or body pending or
threatened against or affect Borrower or the property securing the Loan
wherein an unfavorable decision, ruling or finding would materially
adversely affect the business, operations, properties or financial
condition of Borrower or the property securing the Loan;
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<PAGE>
(f) since the date of the Loan, there has been no material
adverse change in the condition, financial or otherwise, of the
Borrower, except as has been disclosed to Lender by the Borrower;
Borrower has filed all tax returns which are required by federal or
state law to be filed and has paid all of the Borrower's taxes that
have become due, no material adverse change has occurred in connection
with the property securing the Loan, except as has been disclosed to
Lender by the Borrower; the Borrower has not been involved as a debtor
in any bankruptcy, reorganization or insolvency proceeding, or in any
proceeding seeking the appointment of receiver, conservator,
liquidating agent or similar person for all or a substantial portion of
the properly owned by Borrower has not made an assignment for the
benefit of creditors or taken any other similar action for the
protection or benefit of creditors. As used herein, the term "material
adverse change" shall mean a severe financial reversal which could be
reasonably expected to create the possibility that the Borrower would
become insolvent within a period of two (2) years from the date hereof,
(g) all financial statements delivered to the Lender were true
and accurate as of the date of delivery to Lender;
(h) the execution, delivery and performance by the Borrower of
this Second Amendment, the Note and other Loan Documents, as amended as
of the date hereof, have been duly and validly authorized and all
consents and approvals which are necessary for authorization, binding
effect, performance, and enforceability of this Second Amendment, the
Note and the remaining Loan Documents have been received.
IN WITNESS WHEREOF, the parties lave executed this Second Amendment to
Loan and Security Agreement as of the date first written above.
WITNESSES: BORROWER AND PRINCIPALS
SEA GARDENS BEACH AND TENNIS
RESORT, INC.
______________________________
Name: By: /S/ HENRY M. CAIRO
----------------------
Henry M. Cairo
Its: COO/CFO
______________________________ Duly Authorized
Name:
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<PAGE>
VACATION BREAK RESORTS, INC.
______________________________
Name:
By: /S/ HENRY M. CAIRO
______________________________ ----------------------
Name: Henry M. Cairo
Its: COO/CFO
Duly Authorized
VACATION BREAK RESORTS AT
STAR ISLAND, INC.
______________________________
Name:
By: /S/ HENRY M. CAIRO
______________________________ ----------------------
Name: Henry M. Cairo
Its: COO/CFO
Duly Authorized
PRINCIPALS AND CONTINUING
GUARANTORS:
VACATION BREAK USA, INC.
______________________________
Name:
By: /S/ HENRY M. CAIRO
______________________________ ----------------------
Name:
Its:
Duly Authorized
RALPH P. MULLER
______________________________
Name:
______________________________ By:_________________________
Name:
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<PAGE>
SUBORDINATING CREDITORS:
VACATION BREAK, U.S.A., INC.
______________________________
Name:
By: /S/ HENRY M. CAIRO
______________________________ --------------------------
Name: Its:__________________
Duly Authorized
ATLANTIC MARKETING REALTY, INC.
______________________________
Name:
By: /S/ HENRY M. CAIRO
______________________________ -------------------------
Name: Its:_________________________
Duly Authorized
RALPH P. MULLER
______________________________
Name:
______________________________ By:_________________________
Name:
LENDER:
HELLER FINANCIAL, INC.
______________________________
Name:
______________________________ By:___________________________
Name: Its:__________________________
Duly Authorized
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<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this 3rd day of
June, 1997 by Henry M. Cairo, COO/CFO of Sea Gardens Beach and Tennis Resort,
Inc., a Florida corporation on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
STATE OF NEW YORK )
)ss.:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this 3rd day of
June, 1997 by Henry M. Cairo, COO/CFO of Vacation Break Resorts, Inc., a Florida
corporation on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
STATE OF NEW YORK )
)ss.:
COUNTY OF ______ )
The foregoing instrument was acknowledged before me this 3rd day of
June, 1997 by Henry M. Cairo, COO/CFO of Vacation Break Resorts at Star Island,
Inc., a Florida corporation on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
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<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF )
The foregoing, instrument was acknowledged before me this 3rd day of
June, 1997 by Henry M. Cairo of Vacation Break, U.S.A., Inc. a Florida
corporation on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
STATE OF NEW YORK )
)ss.:
COUNTY OF _______ )
The foregoing instrument was acknowledged before me this 3rd day of
June, 1997 by Ralph P. Muller.
________________________________
Notary Public
My Commission Expires:__________
STATE OF NEW YORK )
)ss.:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this 3rd day of
June, 1997 by Henry M. Cairo, COO/CFO of Atlantic Market Group, Inc., a Florida
corporation on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
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<PAGE>
STATE OF ILLINOIS )
)ss.:
COUNTY OF COOK )
The foregoing instrument was acknowledged before me :his 3rd day of
June, 1997 by Elisa Nicely of Heller Financial, Inc., a Delaware corporation on
behalf of the corporation.
________________________________
Notary Public
My Commission Expires:__________
-13-
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
("Agreement") is entered into as of November 19, 1996, by and among FINOVA
Capital Corporation, a Delaware corporation, formerly known as Greyhound
Financial Corporation, a Delaware corporation ("Lender"), and Sea Gardens Beach
and Tennis Resort, Inc., a Florida corporation ("Sea Gardens"), Vacation Break
Resorts, Inc., a Florida corporation ("Vacation Break"), Vacation Break Resorts
at Cocoa Beach, Inc., a Florida corporation ("VB-Cocoa Beach"), and Palm
Vacation Group, a Florida general partnership (individually, "Palm Vacation",
and jointly and severally with Sea Gardens, Vacation Break, and VB-Cocoa Beach,
"Borrower").
I. DEFINITIONS
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other
Documents, the following terms shall have the following meanings (such
meanings to be applicable equally both to the singular and plural terms
defined).
1.1 "Advance": an advance of the proceeds of the Loan by
Lender on behalf of Borrower in accordance with the terms and
provisions of this Agreement.
1.2 "Agents": the Servicing Agent and the Lockbox Agent.
1.3 "Aggregate Funding Limitation": Fifty Million Dollars
($50,000,000.00).
1.4 "Applicable Usury Law": the usury law chosen by the
parties pursuant to the terms of paragraph 8.10 or such other
usury law which is applicable if such usury law is not.
1.5 "Articles of Organization": the charter, articles,
agreements and other written documents evidencing the
formation, organization and continuing existence of an entity.
1.6 "Assignment": a written assignment of specific Instruments
and/or Purchaser Mortgages and their proceeds, delivered by
Borrower to Lender in the form of EXHIBIT A.
1.7 "Borrowing Base": with respect to an Eligible Instrument,
an amount equal to the lesser of:
(a) eighty-five percent (851) of the unpaid principal
balance of such Eligible Instrument; or
(b) ninety percent (90%) of the present value of the
unmatured installments of principal and interest under
such Eligible Instrument, discounted at the higher of
(i) the applicable interest rate under the terms of the
Note or (ii) the Discount Rate.
<PAGE>
1.8 "Borrowing Term": the period commencing on the date of
this Agreement and ending on the close of Lender's normal
business hours on the second anniversary of the date of this
Agreement.
1.9 "Business Day": any day other than a Saturday, Sunday or a
day on which banks in Phoenix, Arizona are required to close.
1.10 "Cocoa Beach Loan": any acquisition and renovation loan
Lender may make to VB-Cocoa Beach for the acquisition and
renovation of property in Cocoa Beach, Florida.
1.11 "Collateral": the Receivables Collateral, Insurance
Policies, and any and all other assets now or hereafter
serving as security for the Performance of the Obligations,
and all products and proceeds thereof.
1.12 "Construction Loan": $13,000,000 construction loan made
by SunTrust Bank to Sea Gardens for purposes of providing
financing for the construction of Ocean Palms, and in which
Lender holds a 40% ($5,200,000) participation interest.
1.13 "Construction Loan Documents": all documents and
instruments evidencing and/or securing the Construction Loan.
1.14 "Default Rate": as defined in the Note.
1.15 "Discount Rate": twelve and one-half percent (12.5%).
1.16 "Documents": the Note, the Guaranty, the Subordination
Agreement, the Assignment, the Lockbox Agreement, the
Servicing Agreement, the Services and Fees Agreement, the
Environmental Certificate, this Agreement and all other
documents executed in connection with the Loan, together with
any and all renewals, amendments, restatements or replacements
of such documents.
1.17 "Eligible Instrument": an Instrument which conforms to
the standards set forth in EXHIBIT B. An Instrument that has
qualified as an Eligible Instrument shall cease to be an
Eligible Instrument upon the date of the first occurrence of
any of the following: (a) any installment due with respect to
that Instrument becomes more than 59 days past due or (b) that
Instrument otherwise fails to continue to conform to the
standards set forth in EXHIBIT B.
1.18 "Environmental Certificate": an environmental certificate
executed by Borrower and such other persons or parties as
required by Lender in the form of EXHIBIT C.
1.19 "Event of Default": the meaning set forth in paragraph
7.1.
1.20 "The Fairways": a time-share resort included in the
Project as described in EXHIBIT F hereto.
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<PAGE>
1.21 "Guaranty": a primary, joint and several guaranty made by
a Guarantor or Guarantors of the Obligations.
1.22 "Guarantor": each person or entity now or hereafter
guaranteeing the Obligations, jointly and severally,
including, without limitation, Atlantic Marketing Realty,
Inc., and Vacation Break U.S.A., Inc.
1.23 "Incipient Default": an event which after notice and/or
lapse of time would constitute an Event of Default.
1.24 "Instrument": a promissory note which has arisen out of
the sale of a Time-Share Interest by Borrower to a Purchaser
and is secured by a Purchaser Mortgage.
1.25 "Insurance Policies": such insurance policies required
by, and written by insurers, and in amounts and form
satisfactory to, Lender.
1.26 "Loan": the loan made pursuant to this Agreement and the
other Documents.
1.27 "Loan Fee": a renewal fee for the Loan in the amount of
$100,000 payable by Borrower to Lender in accordance with
paragraph 6.14(a).
1.28 "Lockbox Agent ": Bank One of Arizona, N.A., or its
successor as lockbox agent under the Lockbox Agreement.
1.29 "Lockbox Agreement": an agreement in form and substance
satisfactory to Lender in its sole and absolute discretion to
be made between Lender, Borrower and Lockbox Agent, which
provides for the Lockbox Agent to collect through a lockbox
payments made on Instruments constituting part of the
Receivables Collateral and to remit them to Lender.
1.30 "Maturity Date": the date (or if not a Business Day, the
first Business Day thereafter) eighty-four (84) months after
the date of the last Advance.
1.31 "Maximum Loan Amount": Forty Million United States
Dollars ($40,000,000.00).
1.32 "Minimum Utilization Date": the first date upon which the
outstanding principal balance of the Loan reaches or exceeds
$20,000,000.
1.33 "New Projects ": the time-share resorts or portions of
such resorts identified as New Projects in EXHIBIT F.
1.34 "Note": the "Amended and Restated Promissory Note" issued
by Borrower in the form of EXHIBIT D to evidence the Loan.
1.35 "Obligations": all obligations, agreements, duties,
covenants and conditions that Borrower is now or hereafter
required to Perform under the Documents.
3
<PAGE>
1.36 "Ocean Palms": a time-share resort included in the
Project as described in Exhibit F hereto.
1.37 "Opening Prepayment Date": the date (or if not a Business
Day, the first Business Day thereafter) two (2) years after
the date of the last Advance.
1.38 "Performance" or "'Perform": full, timely and faithful
performance.
1.39 "Permitted Encumbrances": the rights, restrictions,
reservations, encumbrances, easements and liens of record with
respect to each Project which Lender has agreed to accept as
set forth in Exhibit E.
1.40 "Prepayment Premium": an amount equal to (a) six percent
(6%) of the outstanding principal balance of the Loan in the
event of a prepayment of the Loan occurring prior to the
Opening Prepayment Date or (b) a percent, determined in
accordance with paragraph 5.3, of the outstanding principal
balance of the Loan in the event of a prepayment of the Loan
occurring subsequent to the Opening Prepayment Date.
1.41 "Presales Funding Limitation": Forty Million Dollars
($40,000,000.00).
1.42 "Presales Loan": a working capital loan to be made by
Lender to Sea Gardens in a principal amount up to $8,000,000
pursuant to a Loan and Security Agreement (Working Capital),
for purposes of providing working capital financing for the
start-up of Ocean Palms.
1.43 "Presales Loan Documents": all documents and instruments
which evidence and/or secure the Presales Loan.
1.44 "Project": individually or collectively (as the context
requires) the time-share resorts or portions of such resorts
described in EXHIBIT F and such other time-share resorts or
parts thereof as Lender may in its discretion from time to
time hereafter approve in writing.
1.45 "Purchaser": a purchaser of a Time-Share Interest from
Borrower.
1.46 "Purchaser Mortgage": the purchase money mortgage given
to secure an Instrument.
1.47 "Receivables Collateral ": (a) the Instruments which are
now or hereafter assigned, endorsed or delivered to Lender
pursuant to this Agreement or against which an Advance has
been made; (b) all rights under all documents evidencing,
securing or otherwise pertaining to such Instruments,
including, without limitation, Purchaser Mortgages and
purchase agreements; (c) all insurance policies and related
rights pertaining to the foregoing; (d) all rights under any
escrow agreements and accounts pertaining to the foregoing;
(e) all files, books and
4
<PAGE>
records of Borrower pertaining to the foregoing; and (f) the
proceeds from the foregoing.
1.48 "Resolutions": the corporate resolution of a corporation
certified as true and correct by an authorized officer of such
corporation or a partnership certificate signed by all of the
general partners of such partnership.
1.49 "Security Interest ": a perfected, direct and exclusive
first priority security interest in and charge upon the
property intended to be covered by it.
1.50 "Servicing Agent": FINOVA Portfolio Services, Inc., an
Arizona corporation, or its successor as Servicing Agent under
the Servicing Agreement.
1.51 "Servicing Agreement ": an agreement in form and
substance satisfactory to Lender in its sole and absolute
discretion, to be made among Lender, Borrower and Servicing
Agent, which provides for Servicing Agent to perform for the
benefit of Lender accounting, reporting and other servicing
functions with respect to the Instruments constituting part of
the Receivables Collateral.
1.52 "Subordination Agreement(s)": the subordination
agreement(s) made and delivered to Lender pursuant to
paragraph 6.11.
1.53 "Term": the duration of this Agreement, commencing on the
date as of which this Agreement is entered into and ending
when all of the Obligations shall have been Performed.
1.54 "Time-Share Interest": the estate described in EXHIBIT F
in a Project.
1.55 "Title Policy (Purchaser Mortgage)": a policy of title
insurance in an amount not less than Borrowing Base of an
Instrument secured by a Purchase Mortgage, insuring Lender's
interest in such Purchaser Mortgage as a valid first priority
lien subject only to the Permitted Encumbrances, issued by a
title company and in form and substance acceptable to Lender.
1.56 "Unit": a dwelling unit in a Project.
II. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Lender hereby agrees, if Borrower has Performed all of the
Obligations then due, to make Advances to Borrower in amounts
equal to (a) the then Borrowing Base of the Eligible
Instruments comprising Receivables Collateral less (b) the
then unpaid principal balance of the Loan; PROVIDED, at no
time shall the unpaid principal balance of the Loan exceed the
Maximum Loan Amount, at no time shall the unpaid principal
balance of the Loan plus the unpaid principal balance of the
Presales Loan exceed the Presales Funding Limitation, and at
no time shall the sum of (i) the unpaid principal balance of
the Loan, (ii) the unpaid principal
5
<PAGE>
balance of the Presales Loan, (iii) the Lender's $5,200,000
maximum commitment with respect to the Construction Loan
(whether or not funded, but with credit given to any
repayment), and (iv) the unpaid balance of the Cocoa Beach
Loan; exceed the Aggregate Funding Limitation. Lender shall
have no obligation to make any Advance after the Borrowing
Term has expired.
2.2 The Loan is a revolving line of credit; however, all of
the Advances shall be viewed as a single loan. Borrower shall
not be entitled to obtain Advances after the expiration of the
Borrowing Term unless Lender, in its sole and absolute
discretion, agrees in writing with Borrower to make Advances
thereafter on terms and conditions satisfactory to Lender.
This Agreement and Borrower's liability for Performance of the
Obligations shall continue, however, until the end of the
Term.
2.3 Borrower will use the proceeds of the Loan only for
Borrower's business purposes, which shall consist of use for
working capital.
2.4 Borrower shall pay to Lender at the time of each
Availability Advance against an Eligible Instrument a fee
equal to 1.0% of the amount of such Availability Advance. The
term "Availability Advance" means each Advance of the Loan
made against an Eligible Instrument after the first Advance
made against such Instrument; provided that in the case of an
Eligible Instrument substituted for an ineligible Instrument
pursuant to paragraph 3.2, an Availability Advance shall be
deemed made at the time of the first Advance made against such
substituted Instrument.
2.5 Borrower agrees that in the event there are amounts then
due and owing on the maturity date of the Presales Loan [which
if the Presales Loan is made, shall be the earlier of sixty
(60) days after Completion (as defined in Section 721.05 of
the Florida Statutes) or eighteen (18) months after the date
of the loan agreement evidencing the Presales Loan], then on
and after such maturity date of the Presales Loan, the
proceeds of all Advances hereunder shall be applied by Lender
to repayment of the Presales Loan prior to payment of -any
such Advance to Borrower. Notwithstanding the foregoing, all
Advances on Eligible Instruments from Ocean Palms shall be
applied by Lender to repayment of the Presales Loan prior to
payment of any such Advance to Borrower.
III. SECURITY
3.1 To secure the Performance of all of the Obligations
hereunder (collectively, the "Secured Obligations"), Borrower
hereby grants to Lender a Security Interest in and assigns to
Lender the Receivables Collateral. Such Security Interest
shall be absolute, continuing and applicable to all existing
and future Advances and to all of the Secured Obligations. All
of the Receivables Collateral shall secure repayment of the
Loan and the Performance of the Secured Obligations. Borrower
will unconditionally deliver to Lender, with full recourse,
all Instruments which
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are part of the Receivables Collateral. Lender is hereby
appointed Borrower's attorney-in-fact to take any and all
actions in Borrower's name and/or on Borrower's behalf deemed
necessary or appropriate by Lender with respect to the
collection and remittance of payments (including the
endorsement of payment items) received on account of the
Receivables Collateral.
3.2 If at any time the aggregate principal amount of the Loan
outstanding exceeds the Borrowing Base for all Eligible
Instruments then assigned to Lender, then within five (5)
Business Days thereafter, Borrower will either (i) pay to
Lender an amount equal to that necessary to restore the
Borrowing Base limitation, or (ii) provide Lender with an
Eligible Instrument or Eligible Instruments having a Borrowing
Base sufficient to restore the Borrowing Base to the required
level. Simultaneously with such payment or the delivery of the
replacement Instrument to Lender, Borrower will deliver to
Lender all of the items (except for a "Request for Advance and
Certification") required to be delivered by Borrower to Lender
pursuant to paragraph 4.1, together with a "Borrower's
Certificate" in form and substance identical to EXHIBIT G. If
no Event of Default or Incipient Default has occurred and is
continuing, then upon the substitution of an Eligible
Instrument for an ineligible Instrument, Lender will reassign
to Borrower, without recourse or warranty of any kind, the
ineligible Instrument. Borrower will prepare the reassignment
instrument, which shall be in form and substance identical to
EXHIBIT G-1, and shall deliver it to Lender for execution.
3.3 Borrower will deliver or cause to be delivered to Lender and
will maintain or cause to be maintained throughout the Term in
full force and effect the Guaranties, the Subordination
Agreement(s), and all other security agreements required
pursuant to the Documents.
IV. ADVANCES
4.1 Lender's obligation to make the initial Advance and
subsequent Advances shall be subject to and conditioned upon
the terms and conditions set forth in the following
subparagraphs and elsewhere in this Agreement being satisfied
and remaining satisfied during the Term.
(a) Borrower shall have delivered to Lender the
following Documents, duly executed, delivered and in
form and substance satisfactory to Lender:
(i) the Note;
(ii) the Guaranty;
(iii) the Subordination Agreement(s);
(iv) the Environmental Certificate;
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<PAGE>
(v) UCC financing statements for filing and/or
recording, as appropriate, where necessary to
perfect the Security Interest in the
Collateral subject to the UCC;
(vi) a favorable opinion from independent
counsel for Borrower in form and substance
substantially identical to EXHIBIT H;
(vii) a favorable opinion from independent
counsel for Guarantor in form and substance
substantially identical to EXHIBIT I;
(viii) Amendment No. 2 to Lockbox Agreement;
(ix) Amendment No. 2 to Servicing Agreement
and Amendment No. 2 to Services and Fees
Agreement;
(x) non-disturbance agreements or other
evidence satisfactory to Lender that each
Purchaser has a right to use its Time-Share
Interest and related amenities so long as the
Purchaser has performed its obligations under
the Purchaser Mortgage and the Project
governing documents; and
(xi) this Agreement.
(b) Borrower shall have delivered to Lender (or to any
agent of Lender pursuant to Lender's written
direction) at least ten (10) Business Days prior to
the date of the Advance, or in the case of the items
called for in item (x) at least five (5) Business
Days prior to the date of the Advance, all of which
shall be properly completed and executed and shall
otherwise be satisfactory tin form and substance to
Lender:
(i) the Articles of Organization of Borrower,
Guarantors, any other surety for the
Obligations and their respective partners, if
any, to the extent any such entity is not a
natural person;
(ii) the Resolutions of Borrower, Guarantors,
any other surety for the Obligations and their
respective partners, if any, to the extent any
such entity is not a natural person;
(iii) an environmental assessment of the New
Projects in form and substance satisfactory to
Lender in its sole discretion and such other
environmental information on the Projects as
is required by Lender;
(iv) unless waived in writing by Lender, a
1988 ALTA/ACSM survey and condominium map of
the Project prepared by a licensed land
8
<PAGE>
surveyor acceptable to Lender, showing the
dimensions of each Unit and such other details
as Lender may reasonably require;
(v) a copy of the registrations/consents to
sell, the final subdivision public
reports/public offering statements and/or
prospectuses and approvals thereof required to
be issued by or used in the state where he
Project is located and other jurisdictions
where Time-Share Interests have been offered
for sale or sold;
(vi) if the Project has not been registered
under the Interstate Land Sales Full
Disclosure Act, and Lender requests such an
opinion, a copy of an advisory opinion issued
by the federal Office of Interstate Land Sales
Registration that the Project does not fall
within the purview of such act;
(vii) a copy of the form of the purchase
contract, deed, Instrument, Purchaser
Mortgage, credit applications and disclosures,
and other documents and exhibits which have
been or are being used by Borrower in
connection with the Project or the sale of
Time-Share Interests, together with the
Project governing documents, the Project
management agreement, the Project exchange
affiliation agreement(s) and advertising
materials;
(viii) the Insurance Policies;
(ix) evidence that the Project is not located
within a flood prone area or evidence of flood
insurance acceptable to Lender;
(x) the items described in EXHIBIT J;
(xi) current financial statements and budgets
for the owner's association for each Project;
(xii) such other items as Lender requests
which are reasonably necessary to evaluate the
request for the Advance and the satisfaction
of the conditions precedent to the Advance.
(c) No material adverse change shall have occurred in
the Project or in Borrower's or any Guarantor's
business or financial condition since the date of the
latest financial and operating statements given to
Lender by or on behalf of Borrower or any Guarantor.
(d) There shall have been no change in the warranties
and representations made in the Documents by
Borrower, any Guarantor and/or any other surety for
the Performance of any of the Obligations.
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<PAGE>
(e) Neither an Event of Default nor Incipient Default
shall have occurred and be continuing.
(f) The interest rate applicable to the Advance
(before giving effect to any savings clause) will not
exceed the maximum rate permitted by the Applicable
Usury Law.
(g) Borrower shall have paid to Lender the portion of
the Loan Fee and all other fees required to be paid
at the time of the Advance.
(h) Borrower shall not be entitled to any Advance
unless on or before the date of closing of the
Construction Loan, all Documents have been executed
by the persons required to do so and delivered to
Lender.
(i) No Advance shall be made which would
cause the combined outstanding balance of
the Loan, the Presales Loan and the Cocoa
Beach Loan plus the Lender's maximum
$5,200,000 commitment under the Construction
Loan (whether or not funded, but with credit
for any repayments) to exceed the Aggregate
Funding Limitation.
4.2 Advances shall be requested in writing by Borrower and
shall not be made more frequently than (together with advances
of the Presales Loan) three times per month or in amounts less
than $100,000. In addition to all other fees required to be
paid pursuant to this Agreement, Borrower shall pay to Lender
at the time of the third Advance in a month a fee equal to the
greater of (a) 0.25% of such Advance or (b) $500.
4.3 Advances may be disbursed by checks, wire transfers or
drafts payable to Borrower; or at the option of Lender, to
others, either severally or jointly with Borrower, for the
credit or benefit of Borrower.
4.4 Although Lender shall have no obligation to make an
Advance unless and until all of the conditions precedent to
the Advance have been satisfied, Lender may, at its sole
discretion, make Advances prior to that time without waiving
or releasing any of the Obligations.
4.5 Borrower shall be entitled to Advances for Projects other
than The Fairways at Palm-Aire prior to satisfaction of
paragraph 4.1(iii) for The Fairways; provided, however, that
Borrower shall not be entitled to any Advances of the Loan
secured by Eligible Instruments from The Fairways until
Borrower has provided evidence of environmental conditions
satisfactory to Lender including, without limitation, a new
Level I environmental assessment of The Fairways, and such
other environmental testing and reports Lender deems necessary
in response to the above referenced Phase I, and/or as are
required to assure Lender of appropriate resolution of all
environmental issues raised by the February, 1991
Environmental
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<PAGE>
Audit performed by Shevenell, Gallen, & Fell, Inc. (including
without limitation, the nine underground storage tanks located
on the property, a state testing request for a tank located in
an easement area, and a contamination plume from a leaking
storage tank located on adjacent property).
4.6 Borrower shall be entitled to Advances for Projects other
than Ocean Palms prior to satisfaction of paragraphs 4.1(b)
(v), (vii) and (xi) as such sections relate to Ocean Palms;
provided, however, Borrower shall not be entitled to any
Advances of the Loan secured by Eligible Instruments from
Ocean Palms until Borrower has satisfied the requirements of
paragraph 4.1(b) (v), (vii), and (xi), and provided such other
information concerning Ocean Palms as required by Lender,
including, without limitation, a pro forma title policy and a
legal opinion regarding Ocean Palms' consumer documents.
4.7 Borrower may add as a project a resort in Cocoa Beach,
Florida which VB-Cocoa Beach is in the process of acquiring
and converting to a time-share resort, which shall be included
in the Project at such time as the conditions set forth in
paragraphs 4.1(a)(x), 4.1(b)(iii) through (ix) inclusive, (xi)
and (xii), 4.1(j) have been satisfied with respect to such
resort, and Borrower has restated all applicable
representations, warranties and covenants appearing in Article
6 with respect to such resort; such addition to be evidenced
by a formal amendment to EXHIBITS E AND F to this Agreement
and accompanied by a UCC financing statement, environmental
certificate, and such other documents as may be required by
Lender.
V. NOTE; MAINTENANCE OF BORROWING BASE; PAYMENTS; SERVICING AND
COLLECTION; MINIMUM UTILIZATION
5.1 The Loan shall be evidenced by the Note and shall be
repaid in immediately available funds according to the terms
of the Note.
5.2 Subject to Borrower's rights under paragraph 3.2 to
provide replacement Eligible Instruments, if for any reason
the aggregate principal amount of the Loan outstanding at any
time shall exceed the then Borrowing Base of all Eligible
Instruments, Borrower, without notice or demand, will
immediately make to Lender a principal payment in an amount
equal to such excess plus accrued and unpaid interest on such
principal payment.
5.3 (a) Borrower will not be entitled to prepay the
entire outstanding amount of the Loan until the
Opening Prepayment Date. Thereafter, if neither an
Event of Default nor an Incipient Default has
occurred and is continuing, then Borrower shall have
the option to prepay the Loan in full, but not in
part, upon 60 days prior written notice and the
simultaneous payment of the Prepayment Premium, which
is calculated by applying the percentage determined
in accordance with the following schedule to the
unpaid principal balance of the Loan on the Notice
Date:
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<PAGE>
YEARS AFTER OPENING PERCENTAGE OF
PREPAYMENT DATE PREPAYMENT
1 3.0%
2 2.0%
3 1.0%
4 - 5 None
Year 1 shall be the period of time commencing on the
Opening Prepayment Date and expiring twelve months
thereafter. Year 2 begins upon the expiration of Year
1 (i.e. the first anniversary of the Opening
Prepayment Date). If (a) there shall occur an Event
of Default and (b) such occurrence results in
acceleration or prepayment of the Loan, a Prepayment
Premium will be required in the amount which shall be
determined as of and due on the earlier of the date
of acceleration or prepayment.
(b) Following the Minimum Utilization Date, Borrower
will be entitled to make partial prepayments of the
Loan only if (i) neither an Event of Default nor an
Incipient Default has occurred and is continuing,
(ii) Borrower has given to Lender at least thirty
(30) days prior written notice of such partial
prepayment, (iii) such partial prepayment is in an
amount no less than $3,000,000, and is accompanied by
an exit fee equal to 0.75% of the principal amount
prepaid, and (iv) after giving effect to such partial
prepayment, the outstanding amount of the Loan is not
less than $20,000,000.00.
(c) The prohibition on full prepayment, the
requirement to pay a Prepayment Premium, and the
restrictions on partial prepayment shall not apply to
prepayment resulting from the application of payments
required from obligors on the Receivables Collateral
(unless solicited by Borrower in contravention of its
Obligations) or from performance by Borrower of its
Obligations under paragraph 3.2 or 5.2 (unless due to
a misrepresentation or breach of warranty concerning
the Receivables Collateral qualifying as Eligible
Instruments).
5.4 (a) Lockbox Agent shall collect payments on the
Instruments constituting part of the Receivables
Collateral and remit collected payments to Lender on
the last Business Day of each and every month after
the date of first Advance, according to the terms of
the Lockbox Agreement. Payments shall not be deemed
received by Lender until Lender actually receives
such payments from Lockbox Agent. Servicing Agent
shall furnish to Lender at Borrower's sole cost and
expense, no later than the 10th day of each month
commencing with the first full calendar month
following the
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<PAGE>
date of this Agreement, a report, substantially in
the format of Exhibit R, which: (i) shows as of the
end of the prior month with respect to each
Instrument which constitutes part of the Receivables
Collateral (A) all payments received, allocated
between principal, interest, late charges and taxes,
(B) the opening and closing balances, (C) present
value, (D) average consumer interest rate, and (E)
extensions, refinances, prepayments, and other
similar adjustments; and (ii) indicates delinquencies
of 30, 60 and 90 days and in excess of 90 days. On
the basis of such reports, Lender will compute the
amount, if any, which was due and payable by Borrower
on the last Business Day of the preceding month and
will notify Borrower of any amount due. If such
reports are not timely received, Lender may estimate
the amount which was due and payable. Borrower will
pay upon demand the amount determined by Lender to be
due and payable. If payment is made on the basis of
Lender's estimate and thereafter reports required by
this paragraph are received by Lender, the estimated
payment amount shall be adjusted by an additional
payment or a refund to the correct amount, as the
reports may indicate; such additional amount to be
paid by Borrower upon demand and such refund to be
made by Lender within five (5) Business Days after
receipt of written request therefor by Borrower. At
the end of each calendar quarter, Borrower will
deliver or cause the Servicing Agent to deliver to
Lender a current list of the names, addresses and
phone numbers of the obligors on each of the
Instruments constituting part of the Receivables
Collateral. Borrower will also deliver or cause
Servicing Agent to deliver to Lender, promptly after
receipt of a written request for them, such other
reports with respect to Instruments constituting part
of the Receivables Collateral as Lender may from time
to time require.
(b) Lender, subject to any restriction contained in
the Lockbox Agreement or the Servicing Agreement, as
the case may be, may at any time and from time to
time in its discretion substitute or require Borrower
to substitute a successor or successors to any Agent
acting under the Lockbox Agreement or the Servicing
Agreement.
5.5 Subject to Lender's rights under Article VII, all proceeds
from the Receivables Collateral (except payments which are
identified by Purchasers as tax and insurance impounds or
maintenance and other assessment payments and are required to
be so treated by Borrower) and the other security shall be
applied as follows: first to any past due accrued and unpaid
interest, then to current accrued and unpaid interest, then to
late charges, then to reimbursable fees and expenses, and the
balance, if any, to outstanding principal and any other
Obligations in such order and manner as Lender may determine.
Unless and until all the Obligations have been Performed,
Borrower shall have no right to any portion of the proceeds of
the Receivables Collateral.
5.6 Whether or not the proceeds from the Receivables Collateral
shall be sufficient for that purpose, Borrower will pay when
due all payments required to be made
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<PAGE>
pursuant to any of the Documents, Borrower's Obligation to
make such payments being absolute and unconditional.
5.7 Borrower covenants and agrees that it shall obtain
Advances of the Loan sufficient to cause the Minimum
Utilization Date to occur on or before the date one year after
the date of this Agreement.
VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Borrower is, and will remain at all times,
duly organized, validly existing and in good standing
under the laws of Florida and in each jurisdiction in
which it is selling Time-Share Interests or where the
location or nature of its properties or its business
makes such qualification necessary. Borrower has full
authority to Perform the Obligations and to carry on
its business and own its property.
(b) Borrower has full power and authority to grant
the Security Interest in the Receivables Collateral
and to execute and deliver the Documents and-to
Perform the Obligations. All action necessary and
required by the Articles of Organization and all
applicable laws for the obtaining of the Loan and for
the execution and delivery of the Documents executed
and delivered in connection with the Loan has been
duly and effectively taken. The Documents are and
shall be legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable
Usury Law or constitute a default or result in the
imposition of a lien under the terms or provisions of
any agreement to which Borrower is a party. No
consent of any governmental agency or any other
person not a party to this Agreement is or will be
required as a condition to the execution, delivery or
enforceability of the Documents.
6.2 There is no action, litigation or other proceeding
pending or, to Borrower's knowledge, threatened before any
arbitration tribunal, court, governmental agency or
administrative body involving Borrower, its property or the
Project which might materially adversely affect the
Performance of the Obligations, the Project, the business or
financial condition of Borrower, or the ability of Borrower to
Perform the Obligations.
6.3 (a) Borrower has sold or has offered for sale
Time-Share Interests only in the state in which the
Project is located and the state(s) described in
Schedule 1 hereof and all sales have been made at the
Project. Before it sells or offers for sale
Time-Share Interests in jurisdictions other than the
state in which the Project is located and the
state(s) listed in the preceding sentence, Borrower
will promptly notify Lender and provide Lender with
evidence that it has complied with all laws of such
jurisdiction governing its proposed conduct.
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<PAGE>
(b) Borrower has complied, and will comply, with all
laws and regulations of the state in which the
Project is located and all other governmental
jurisdictions in which the Project is located or in
which Time-Share Interests have been sold or offered
for sale.
(c) The time-share use and occupancy of Units will not
violate or constitute a non-conforming use under any
private covenant or restriction or any zoning, use or
similar law, ordinance or regulation affecting the
use or occupancy of the Project.
6.4 (a) Each Instrument assigned to Lender pursuant
to this Agreement shall be an Eligible Instrument.
Borrower has Performed all its obligations to
Purchasers, and there are no executory obligations to
Purchasers to be Performed by Borrower. Borrower
further warrants and guarantees the enforceability of
the Receivables Collateral.
(b) Without the prior written consent of Lender,
Borrower will not cancel or materially modify, or
consent to or acquiesce in any material modification
to, or solicit the prepayment of, any Instrument
which constitutes part of the Receivables Collateral;
or waive the timely performance of the obligations of
the Purchaser under any such Instrument or its
security; or release the security for any such
Instrument. Borrower will not pay or advance directly
or indirectly for the account of any Purchaser any
sum owing by the Purchaser under any Instrument which
constitutes part of the Receivables Collateral.
(c) Borrower at all times will fulfill and will cause
its affiliates, agents and independent contractors at
all times to fulfill all obligations to Purchasers.
(d) True and complete copies of the Project governing
documents, the purchase contract form, the deed form,
the Instrument form, the Purchaser Mortgage form,
advertising materials and other documents and
exhibits thereto which have been and are being used
by Borrower in connection with the Project and the
sale or offering for sale of Time-Share Interests
have been delivered to Lender. Borrower, without the
prior written consent of Lender, will not cancel or
materially modify any such documents except as
required by law. .Borrower will perform all of its
obligations under the Project governing documents.
(e) Each Purchaser is a member of a Project owners'
association or associations having authority to levy
annual assessments to cover the costs of maintaining
and operating the Project. To Borrower's knowledge,
all owners' associations related to the Project are
solvent; currently levied assessments are adequate to
cover such costs and to establish and maintain a
reasonable reserve for capital improvements following
the two year reserve waiver period; and there are no
events which could give rise to a
15
<PAGE>
material increase in such costs. Borrower will use
its best efforts to: (i) cause such owner's
association to (A) discharge its obligations under
the Project governing documents and (B) maintain the
reserve described above commencing with the
applicable association's third budget year; and (ii)
until the Borrower's loss of control of the Project's
owners' association, Borrower shall pay all operating
and maintenance expenses of the Project incurred in
excess of the maintenance fee assessments actually
collected from Purchasers other than the Borrower;
and (iii) shall timely pay to the proper governmental
authority the real property taxes currently due and
payable with respect to the unsold time-share
intervals, related common elements and common
recreational and support property and any additional
amounts required under Florida Statutes 718.116.
(f) Except as otherwise permitted and disclosed by
the Project governing documents, the Project owners'
association(s) or the owners of Time-Share Interests
in common own(s) (i) all the common areas in the
Project and other amenities which have been promised
or represented as being available to Purchasers, free
and clear of liens and security interests except for
the Permitted Encumbrances; and (ii) all access roads
and utilities and offsite improvements necessary to
the use of the Project have been dedicated to and/or
accepted by the responsible governmental authority or
utility company. Borrower will maintain or cause to
be maintained in good condition and repair all
amenities and common areas which have been promised
or represented as being available to Purchasers and
all roads and off-site improvements which are not the
responsibility of the Project owners' association(s)
to maintain and repair and have not been dedicated to
or accepted by the responsible governmental authority
or utility company. Borrower will maintain a
reasonable reserve to assure compliance with the
terms of the foregoing sentence.
6.5 Borrower will undertake the diligent and timely collection
of amounts delinquent under each Instrument which constitutes
part of the Receivables Collateral and will bear the entire
expense of such collection. Lender shall have no obligation to
undertake any action to collect under any Instrument.
6.6 Lender may notify Purchasers of the existence of Lender's
interest as assignee in the Receivables Collateral and request
from Purchasers any information relating to the Receivables
Collateral. Borrower will deliver such notice under its
letterhead if requested.
6.7 Borrower, without the prior written consent of Lender,
will not: (a) sell, convey, pledge, hypothecate, encumber or
otherwise transfer any of the Collateral; (b) permit or suffer
to exist any liens, security interests or other encumbrances
on any of the Collateral, except for the Permitted
Encumbrances and liens and security interests expressly
granted to Lender; (c) sell, lease, transfer or dispose of all
or
16
<PAGE>
substantially all of its assets to another entity; or (d)
permit or suffer to exist any transfer of the ownership
interests or control of Borrower and, if Borrower is a
partnership, any general partner of Borrower.
6.8 Borrower will maintain and pay the cost of the Insurance
Policies and will deliver copies of the Insurance Policies to
Lender.
6.9 (a) The Documents and all certificates, financial
statements and written materials furnished to Lender
by or on behalf of Borrower in connection with the
Loan do not contain any untrue statement of a
material fact or omit to state a fact which
materially adversely affects or in the future may
materially adversely affect the Collateral or the
business or financial condition of Borrower or the
Project.
(b) Lender's examination, inspection, or receipt of
information pertaining to the Collateral or the
Project and its proposed operation shall not in any
way be deemed to reduce the full scope and protection
of the warranties, representations and Obligations
contained in this Agreement.
6.10 (a) On or before the tenth (l0th) day of each
month, Borrower will cause to be furnished to Lender
(i) the reports required pursuant to paragraph 5.4(a)
and (ii) if requested by Lender, a sales report for
the prior month showing the number of sales of
Time-Share Interests, their aggregate dollar amount
and related down payments.
(b) Borrower will furnish or cause to be furnished to
Lender within one hundred twenty (120) days after
each fiscal year of the subject, a copy of the
current audited annual financial statements of each
entity comprising Borrower, each Guarantor and,
subject to the best efforts of Borrower, the Project
owners' association(s); and shall furnish or cause to
be furnished to Lender within forty five (45) days
after each interim quarterly fiscal period of each
entity comprising Borrower a copy of the current
financial statements of Borrower for the period
commencing with the first day of the fiscal year and
concluding with such quarter end.
Such financial statements shall contain a balance
sheet as of the end of the relevant fiscal period and
statements of income and of cash flow for such fiscal
period (together, in each case, with the comparable
figures for the corresponding period of the previous
fiscal year), all in reasonable detail. All financial
statements shall be prepared in accordance with
generally accepted accounting principles,
consistently applied. All financial statements
required pursuant to this paragraph shall be
certified by the chief financial officer or general
partner, as the case may be, of the subject of such
statements. Annual statements of Borrower and
corporate Guarantors shall be audited and certified
by a recognized firm of certified public accountants
reasonably satisfactory to Lender. Together with such
17
<PAGE>
financial statements, Borrower will deliver to Lender
a certificate signed by the chief financial officer
of Borrower stating that there exists no Event of
Default or Incipient Default or, if any such Event of
Default or Incipient Default exists, specifying the
nature and period of its existence and what action
Borrower proposes to take with respect to it.
(c) Borrower will deliver to Lender from time to time,
as available, and promptly upon amendment or
effective date, current price lists, sales
literature, registrations/consents to sell, final
subdivisions public reports/public offering
statements/prospectuses, purchase documents, and any
other items requested by Lender which relate to the
Time-Share Interests.
(d) Borrower will at its expense permit Lender and its
representatives at all reasonable times to inspect
the Project and to inspect, audit and copy Borrower's
records; and shall make available such further
information as Lender may from time to time
reasonably request.
(e) Borrower will submit to Lender annually, within
ten (10) days after each is available, proposed
annual maintenance and operating budgets of the
Project owners' association(s), certified to be
adequate by the managing agent for such
association(s) and a statement of the annual
assessment to be levied upon the Purchasers; and will
use its best efforts to cause to be made available to
Lender for inspection, auditing and copying, upon
Lender's request, the books of account, logs and
records of the Project owners' association(s).
6.11 Borrower will cause any and all indebtedness owing by it
to its shareholders, directors, officers or partners, as the
case may be, Guarantor(s), or the relatives and affiliates of
Borrower or the foregoing to be subordinated in all aspects to
the Obligations; PROVIDED, -------- however, that if no Event
of Default is outstanding, such subordination shall not
require deferral of regularly scheduled payments on such
indebtedness, or extend to reasonable salaries or to fees at
normal and customary rates for services actually rendered.
6.12 Borrower is not in default of any payment on account of
indebtedness for borrowed money or of any repurchase
obligations in connection with a receivables purchase
financing, or in violation of or in default under any material
term in any agreement, order, decree or judgment of any court,
arbitration or governmental authority to which it is a party
or by which it is bound.
6.13 Borrower has filed all tax returns and paid all taxes,
assessments, levies and penalties, if any, required to be
filed by it or paid by it to any governmental or quasi
governmental authority or subdivision, including real estate
taxes and assessments relating to the Project. Borrower will
provide to Lender not more than 30 days after such taxes and
assessments become due evidence that all taxes
18
<PAGE>
and assessments on the Units and Project common areas and
related amenities have been paid in full.
6.14 (a) Borrower has paid to Lender (through
Lender's application of Borrower's good faith deposit
made at the time of its application for the Loan)
$10,000 of the Loan Fee. Borrower acknowledges that
the Loan Fee has been earned and is nonrefundable.
The remaining unpaid balance of the Loan Fee shall be
paid in 3 equal installments of $30,000 each, payable
on the date of Lender's first 3 Advances of the Loan
following the date hereof, provided, however, that if
not previously paid, the balance of the Loan Fee
shall be due and payable in full on the date falling
one-hundred twenty days following the date of this
Agreement. Borrower will pay on demand any and all
costs and expenses incurred by Lender in connection
with the initiation, documentation and closing of the
Loan, the making of Advances, the protection of the
Collateral or the enforcement of the Obligations
against Borrower or Guarantor(s), including, without
limitation, all attorneys' and other professionals'
fees, consumer credit reports, and revenue,
documentary stamp and intangible taxes.
(b) In addition to all other fees required to be paid
in connection with the Loan, Borrower shall pay to
Lender a fee ("Custodial Fee") equal to Ten Dollars
($10) per each Instrument which is delivered to
Lender in connection with the Loan and is in the
physical custody of Lender. The Custodial Fee for an
Instrument shall be paid by Borrower to Lender at the
time the Instrument is assigned to Lender. After the
Custodial Fee is paid for an Instrument, no fee shall
be payable to Lender for any Instrument which is
delivered to Lender pursuant to paragraphs 3.2 in
replacement of an Instrument for which Borrower has
paid a Custodial Fee. Once a Custodial Fee has been
paid to Lender, Borrow shall not be entitled to any
reimbursement of any portion thereof.
6.15 Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, AND
DEFEND Lender, its successors, assigns and shareholders
(including corporate shareholders), and the directors,
officers, employees, agents and servants of the foregoing,
for, from and against any and all losses, costs, expenses
(including, without limitation, and attorneys' fees), demands,
claims, suits, proceedings (whether civil or criminal),
orders, judgments, penalties, fines and other sanctions
arising from or brought in connection with (a) the Project,
the Collateral, Lender's status by virtue of the Assignments,
creation of Security Interests, the terms of the Documents or
the transactions related thereto, or any act or omission of
Borrower or any Agent, or their respective employees,
contractors or agents, whether actual or alleged, and (b) any
and all brokers' commissions or finders' fees or other costs
of similar type by any party in connection with the Loan. On
written request by a person or other entity covered by the
above agreement of indemnity, Borrower will undertake, at its
own cost and expense, on behalf of such indemnitee, using
19
<PAGE>
counsel satisfactory to the indemnitee, the defense of any
legal action or proceeding to which such person or entity
shall be a party. At Lenders option, Lender may at Borrower's
expense prosecute or defend any action involving the priority,
validity or enforceability of the Security Interests in the
Collateral.
6.16 Borrower will execute or cause to be executed all documents
and do or cause to be done all acts necessary for Lender to
perfect and to continue the perfection of the Security
Interest of Lender in the Collateral or otherwise to effect
the intent and purposes of the Documents.
6.17 Borrower covenants and agrees that it shall not incur
Marketing Expenses (as defined below) during each twelve month
period terminating at the end of each fiscal quarter of
Borrower in excess of fifty percent (50%) of the net sales of
Time-Share Interests during such period. "Marketing Expenses"
shall mean the aggregate of all costs and expenses for
commissions and sales relating to the sale of Time-Share
Interests, including but not limited to all costs and expenses
for advertising, mailing, consumer premiums, referral and lead
generation.
6.18 Borrower covenants and agrees that Vacation Break U.S.A.,
Inc., a Florida corporation, the parent of Sea Gardens and
Vacation Break, shall maintain a minimum tangible net worth in
an amount not less than $18,000,000, measured quarterly
throughout the term of the Loan. As used in this Agreement,
the term "tangible net worth" means the worth of tangible
assets, such as plant equipment, and current assets (but
exclusive of intangibles such as good will) over liabilities,
all in accordance with generally accepted accounting
principles ("GAAP").
6.19 Borrower covenants and agrees that it shall not deny any
Purchaser access to any recreational amenities located at any
Project (including, without limitation, hotel lobby areas)
unless (a) such Purchaser has failed to pay assessments
required under the Declaration governing the Project and the
denial of access is made in accordance with Florida time-share
law, (b) Lender consents in writing to such denial of access
in Lender's sole and absolute discretion, or (c) such
Purchaser is physically endangering other users of the
recreational facilities.
6.20 Borrower represents and warrants that 559.927 Florida
Statutes, including without limitation, the 1992 amendments
thereto, has not had an adverse impact on the sale of
Time-Share Interests.
6.21 The representations, warranties and covenants contained in
this Article VI are in addition to, and not in derogation of,
the representations, warranties and covenants contained
elsewhere in the Documents and shall be deemed to be made and
reaffirmed prior to the making of each Advance.
20
<PAGE>
VII. DEFAULT
7.1 The occurrence of any of the following events or
conditions shall constitute an Event of Default by Borrower
under the Documents:
(a) failure of Lender to receive from Borrower within
five (5) Business Days of the date when due and
payable (i) any amount payable under the Note or (ii)
any other payment due under the Documents, except for
the Note payment due at the Maturity Date for which
no grace period is allowed;
(b) any representation or warranty of Borrower
contained in the Documents or in any certificate
furnished under the Documents proves to be, in any
material respect, false or misleading as of the date
deemed made;
(c) a default in the Performance of the Obligations
set forth in paragraph 3.2, 6.7(a), 6.7(c), 6.7(d),
6.8 or 6.11;
(d) a default in the Performance of the Obligations or
a violation of any term, covenant or provision of the
Documents (other than a default or violation referred
to elsewhere in this paragraph 7.1) which continues
unremedied (i) for a period of five (5) Business Days
after notice of such default or violation to Borrower
in the case of a default under or violation of
paragraph 6.7(b) or any other default or violation
which can be cured by the payment of money alone or
(ii) for a period of twenty (20) Business Days after
notice to Borrower in the case of any other default
or violation;
(e) an "Event of Default", as defined elsewhere in any of
the Documents;
(f) any default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money
or a receivables purchase financing involving an
obligation in excess of $50,000.00 to make a payment
of principal or interest or to repurchase receivables
or any other material default permitting the
acceleration of the repayment of the borrowed money
or the repurchase of receivables, which accelerated
repayment or repurchase obligations are in excess of
$50,000.00 in the aggregate;
(g) any final, non-appealable judgment or decree for
money damages or for a fine or penalty against
Borrower which is not paid and discharged or stayed
within thirty (30) days thereafter and when
aggregated with all other judgment(s) or decree(s)
that have remained unpaid and undischarged or stayed
for such period is in excess of $50,000.00;
(h) any party holding a lien or security interest in
the Collateral or a lien (other than a lien created
by Purchaser solely with respect to its Time-
21
<PAGE>
Share Interest) on any part of the Project or its
related amenities commences foreclosure or similar
sale thereof;
(i) Borrower shall (i) generally not be paying its
debts as they become due, (ii) file or consent by
answer or otherwise to the filing against it of a
petition for relief or reorganization, arrangement or
liquidation or any other petition in bankruptcy or
insolvency under the laws of any jurisdiction, (iii)
make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar
powers for itself or any substantial part of its
property, (v) be adjudicated insolvent, (vi) dissolve
or commence to wind-up its affairs or (vii) take any
action for purposes of the foregoing;
(j) a material adverse change in the Project or in the
business or financial condition of Borrower or in the
Collateral, which change is not enumerated in this
paragraph 7.1 as the result of which Lender in good
faith deems the prospect of Performance of the
Obligations impaired or its Collateral imperiled;
(k) any of the events enumerated in paragraph 7.1(b),
(f), (g), (i) or (j) occurs with respect to any
Guarantor or surety for the Performance of the
Obligations;
(l) Any partial prepayment in violation of paragraph
5.3(b);
(m) the occurrence of a default by Borrower under the
Construction Loan Documents or the Presales Loan
Documents; or
(n) failure of Lender to receive from Borrower,
within twenty (20) days of the date Borrower knows or
should have known of such change, notice of any
material change in any representations or warranties
in the Documents or otherwise made in connection with
the Loan.
7.2 At any time after an Event of Default has occurred and while
it is continuing, Lender may but without obligation, in
addition to the rights and powers granted elsewhere in the
Documents and not in limitation thereof, do any one or more of
the following:
(a) cease to make further Advances;
(b) declare the Note, together with prepayment
premiums and all other sums owing by Borrower to
Lender in connection with the Documents, immediately
due and payable without notice, presentment, demand
or protest, which are hereby waived by Borrower;
22
<PAGE>
(c) with respect to the Receivables Collateral, (i)
institute collection, foreclosure and other
enforcement actions against Purchasers and other
persons obligated on the Receivables Collateral, (ii)
enter into modification agreements and make extension
agreements with respect to payments and other
performances, (iii) release persons liable for
performance, (iv) settle and compromise disputes with
respect to payments and performances claimed due, all
without notice to Borrower, without being called to
account for such actions by Borrower and without
relieving Borrower from Performance of the
Obligations, and (v) receive, collect, open and read
all mail of Borrower for the purpose of obtaining all
items pertaining to the Receivables Collateral;
(d) proceed to protect and enforce its rights and
remedies under the Documents, to foreclose or
otherwise realize upon the Collateral and/or to
exercise any other rights and remedies available to
it at law, in equity or by statute; and
(e) impose the Default Rate as defined in and described
in, the Note.
7.3 Notwithstanding anything in the Documents to the contrary,
while an Event of Default exists, any cash received and
retained by Lender in connection with the Collateral may be
applied to payment of the Obligations in the manner provided
in paragraph 7.5.
7.4 (a) Lender shall have all of the rights and
remedies of a secured party under the Uniform
Commercial Code of the State of Arizona and all other
rights and remedies accorded to a Secured Party at
equity or law. Any notice of sale or other
disposition of the Collateral given not less than 10
Business Days prior to such proposed action in
connection with the exercise of Lender's remedies
shall constitute reasonable and fair notice of such
action. Lender may postpone or adjourn any such sale
from time to time by announcement at the time and
place of sale stated on the notice of sale or by
announcement of any adjourned sale, without being
required to give a further notice of sale. Any such
sale may be for cash or, unless prohibited by
applicable law, upon such credit or installment as
Lender may determine. Borrower shall be credited with
the net proceeds of such sale only when such proceeds
are actually received by Lender in good current
funds. Despite the consummation of any such sale,
Borrower shall remain liable for any deficiency on
the Obligations which remains outstanding following
such sale. All net proceeds recovered pursuant to a
sale shall be applied in accordance with the
provisions of paragraph 7.5.
(b) Lender may, in the name of Borrower or in its own
name, make and execute all conveyances, assignments
and transfers of the Collateral sold
23
<PAGE>
in connection with the exercise of Lender's remedies;
and Lender is hereby appointed Borrower's
attorney-in-fact for this purpose.
(c) Upon request of Lender when an Event of Default
exists, Borrower shall assemble the Collateral not
already in Lender's possession and make it available
to Lender at a time and place designated by Lender.
7.5 The proceeds realized from any sale of all or any part of
the Collateral made in connection with the exercise of
Lender's remedies shall be applied in the following order of
priorities; first, to the payment of all costs and expenses of
such sale, including without limitation, reasonable
compensation to Lender and its agents, attorneys fees, and all
other expenses, liabilities and advances incurred or made by
Lender, its agents and attorneys, in connection with such
sale, and any other unreimbursed expenses for which Lender may
be reimbursed pursuant to the Documents; second, to the
payment of the other Obligations, in such order and manner as
Lender shall in its discretion determine, with no amounts
applied to payment of principal until all interest has been
paid; third, to the payment of any and all unsatisfied
obligations of Borrower under the Presales Loan Documents; and
fourth, to the payment to Borrower, its successors or assigns,
or to whomsoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
7.6 Lender may, at its option, and without any obligation to
do so, pay, perform and discharge any and all liabilities
agreed to be paid or performed in the Documents by Borrower,
any Guarantor or any surety for the Performance of the
Obligations if the person obligated fails to do so, including,
without limitation, the obligation under paragraph 6.8 with
respect to maintenance of the Insurance Policies. For such
purposes Lender may use the proceeds of the Collateral. All
amounts expended by Lender in so doing or in exercising its
remedies under the Documents following an Event of Default
shall become part of the Obligations, shall be immediately due
and payable by Borrower to Lender upon demand, and shall bear
interest at the Default Rate from the dates of such
expenditures until paid.
7.7 No remedy in any Document conferred on or reserved to
Lender is intended to be exclusive of any other remedy or
remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under any
Document or now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power shall be
construed to be a waiver of or acquiescence to any default or
a waiver of any right or power; and every such right and power
may be exercised from time to time and as often as may be
deemed expedient.
7.8 Borrower, for itself and for all who may claim through or
under it, hereby expressly waives and releases all right to
have the Collateral or any part thereof,
24
<PAGE>
marshalled on any foreclosure sale or other enforcement of
Lender's rights and remedies.
7.9 For the purpose of exercising its rights and remedies
under Paragraph 7.2(c) and 7.6, Lender may do so in Borrower's
name or its name and is hereby appointed as Borrower's
attorney-in-fact to take any and all actions in Borrower's
name and/or on Borrower's behalf as Lender may deem necessary
or appropriate in its sole and absolute discretion in the
accomplishment of such purposes.
VIII. CONSTRUCTION AND GENERAL TERMS
8.1 All moneys payable under the Documents shall be paid to
Lender at its address set forth on the signature page of this
Agreement in lawful monies of the United States of America,
unless otherwise designated in the Documents or by Lender by
notice.
8.2 The Documents exclusively and completely state the rights
and obligations of Lender and Borrower with respect to the
Loan. No modification, variation, termination, discharge,
abandonment or waiver of any of the terms or conditions of the
Documents shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by
such action. The Documents supersede any and all prior
representations, warranties and/or inducements, written or
oral, heretofore made by Lender concerning this transaction,
including any commitment for financing.
8.3 The powers and agency granted to Lender by Borrower in the
Documents are coupled with an interest and are irrevocable and
are granted as cumulative to Lender's other remedies for
collection and enforcement of the Obligations.
8.4 Any Document may be executed simultaneously in any number
of identical copies each of which shall constitute an original
for all purposes.
8.5 All notices required or permitted to be given hereunder
shall be in writing, and shall be deemed delivered (a) one (1)
Business Day after such are deposited for delivery via Federal
Express or other nationally recognized overnight courier
service, or (b) three (3) Business Days after such are
deposited in the United States mails, certified or registered
mail, in either case, with all postage prepaid, and addressed
as shown below, or to such other address as either party may,
from time to time, designate in writing. Written notice may be
given by telecopy to the telecopier number shown below or such
other telecopier number as either party may designate, from
time to time, in writing, provided that such notice shall not
be deemed effective unless it is confirmed within 24 hours by
hand delivery, courier delivery or mailing of a copy of such
notice in accordance with the requirements set forth above.
25
<PAGE>
If to Lender: FINOVA Capital Corporation
(two copies) Vice President - Resort Finance
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Telecopy No.: 602-874-6444
with a copy to:
Vice President - Group Counsel
7272 East Indian School Road
Suite 410
Scottsdale, Arizona 85251
Telecopy No.: 602-874-6445
with a copy to: DeConcini McDonald Brammer Yetwin
& Lacy, P.C.
2901 North Central Avenue
Suite 1644
Phoenix, Arizona 85012-2736
Attn: Gregory W. Huber, Esq.
Telecopy No.: 602-241-0220
If to Borrower: Sea Gardens Beach and Tennis Resort
Vacation Break Resorts, Inc.
Vacation Break at Cocoa Beach, Inc.
Palm Vacation Group
6400 North Andrews Ave.
Fort Lauderdale, FL 33309
Attn: Henry M. Cairo and
Rochelle Golub, Esq.
Telecopy No. (954) 351-8540
8.6 All the covenants of Borrower and all the rights and
remedies of the Lender contained in the Documents shall bind
Borrower, and, subject to the restrictions on merger,
consolidation and assignment contained in the Documents, its
successors and assigns, and shall inure to the benefit of
Lender, its successors and assigns, whether so expressed or
not. Borrower may not assign its rights in the Documents in
whole or in part. Except as may be expressly provided in a
Document, no person or other entity shall be deemed a third
party beneficiary of any provision of the Documents.
8.7 If any one or more of the provisions contained in any
Document shall be held invalid, illegal or unenforceable in
any respect, the validity, legality and
26
<PAGE>
enforceability of the remaining provisions contained in the
Document shall not in any way be affected or impaired thereby.
8.8 Time is of the essence in the Performance of the Obligations.
8.9 All headings are inserted for convenience only and shall
not affect any construction or interpretation of the
Documents. Unless otherwise indicated, all references in a
Document to clauses and other subdivisions refer to the
corresponding paragraphs, clauses and other subdivisions of
the Document; the words "herein", "hereof", "hereto",
hereunder" and words of similar import refer to the Document
as a whole and not to any particular paragraph, clause or
other subdivision; the use of any gender shall be deemed to
include other genders, unless inappropriate; and reference to
a numbered or lettered subdivision of an Article, or paragraph
shall include relevant matter within the Article or paragraph
which is applicable to but not within such numbered or
lettered subdivision. All Schedules and Exhibits referred to
in this Agreement are incorporated in this Agreement by
reference.
8.10 (a) CHOICE OF LAW. THE DOCUMENTS AND THE RIGHTS, DUTIES
AND OBLIGATIONS OF THE PARTIES THERETO SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE
EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS
OF THE UNITED STATES.
(b) CHOICE OF JURISDICTION AND VENUE. BORROWER: (A)
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS,
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF
ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES
OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT
OR THEIR SUBJECT MATTER, OR, IF LENDER INITIATES SUCH
ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH
ACTION AND THE CHOICE OF SUCH VENUE SHALL IN ALL
INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION,
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT BORROWER IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
SUCH
27
<PAGE>
SUIT, ACTION OR PROCEEDING IS IMPROPER. BORROWER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
JUDGMENT OR ACTION IN ANY OTHER FORUM.
(c) WAIVER OF JURY TRIAL. LENDER AND BORROWER
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER ANY OF THE DOCUMENTS WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE
PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY
SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING
WITHOUT A JURY, AND BORROWER HEREBY KNOWINGLY AND
VOLUNTARILY WAIVES TRIAL BY JURY IN ANY SUCH
PROCEEDING.
(d) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET
FORTH IN THIS PARAGRAPH ARE A MATERIAL INDUCEMENT FOR
LENDER'S MAKING THE LOAN TO BORROWER.
[Borrower (initial ____ ______ _______ ______)]
8.11 It is the intent of the parties hereto to comply with the
Applicable Usury Law. Accordingly, notwithstanding any
provision to the contrary in the Documents, in no event shall
this Agreement or the Documents require the payment or permit
the collection of interest in excess of the maximum contract
rate permitted by the Applicable Usury Law.
8.12 LENDER DOES NOT HEREBY ASSUME AND SHALL HAVE NO
RESPONSIBILITY, OBLIGATION OR LIABILITY TO PURCHASERS.
LENDER'S ONLY RELATIONSHIP TO PURCHASERS IS THAT OF A CREDITOR
WHO HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED TO LENDER BY
BORROWER, A COLLATERAL ASSIGNMENT FROM BORROWER OF THE
INSTRUMENTS. EXCEPT AS REQUIRED BY LAW, BORROWER WILL NOT, AT
ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO LENDER WITH
RESPECT TO THE TIME-SHARE PROJECT, THE SALE OF TIME-SHARE
INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF
LENDER.
IX. SPECIAL PROVISIONS.
9.1 The obligations of each entity comprising the Borrower
under this Agreement shall be joint and several, primary,
direct and immediate. Each such party shall be and remain
liable for all Obligations until the Obligations have been
fully paid and performed notwithstanding the previous
discharge (total or partial) of any other such party. Borrower
acknowledges that Advances will be made on Eligible
Instruments owned by less than all of the entities comprising
Borrower hereunder,
28
<PAGE>
and that the Advances may be used by any such entity in
connection with a Project in which less than all of the
entities identified as Borrower hereunder have an interest.
Borrower represents and warrants to Lender that each entity
identified as Borrower hereunder will benefit both directly
and indirectly from the Loan. Borrower authorizes one or more
of the following persons or entities: Sea Gardens, Vacation
Break, VB-Cocoa Beach, or Palm Vacation (the "Authorized
Advance Signatory(ies)") to execute request for Advances
hereunder, and Borrower authorizes Lender to disburse Advances
at the direction of any Authorized Advance Signatory. All such
requests for Advance executed by any Authorized Advance
Signatory shall be binding upon Borrower (and each of them).
9.2 This Agreement is an amendment and restatement of, and is
executed in replacement and substitution for, that certain
Loan and Security Agreement dated as of August 16, 1993, as
amended by an Amendment No. 1 to Loan and Security Agreement
dated December 16, 1993, and an Amendment No. 2 to Loan and
Security Agreement dated December 7, 1994, a letter agreement
dated November 29, 1994, an Amendment No. 4 to Loan and
Security Agreement dated December 7, 1994, and an Amendment
No. 5 to Loan and Security Agreement dated March 1, 1996.
9.3 From the date hereof through the Borrowing Term, Lender
shall have an exclusive right to provide time-share
receivables financing for fifty percent (50%) of all Eligible
Instruments arising from Ocean Palms and Cocoa Beach on the
same terms as the Loan.
9.4 Borrower agrees that if an Event of Default occurs, then
Lender has the right, in Lender's sole and absolute
discretion, to make an Advance of the Loan for the sole
purpose of applying the amount of such Advance to the
outstanding obligations under the Presales Loan. Such Advance
amount may be up to, but not exceed (i) the unpaid principal
balance of all Eligible Instruments held by Lender, minus (ii)
the outstanding balance of the Loan prior to such Advance.
Lender's right to make such Advance shall not constitute a
waiver of any of the requirements for Advances set forth
herein.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective names, personally or by their duly
authorized representatives as of the date above written.
"BORROWER"
Sea Gardens Beach and Tennis Resort, Inc., a Florida
corporation
By /S/ HENRY M. CAIRO
--------------------------------------
Print Name: HENRY M. CAIRO
--------------------------------------
Title: COO/CFO
--------------------------------------
Vacation Break Resorts, Inc., a Florida corporation
By /S/ HENRY M. CAIRO
--------------------------------------
Print Name: HENRY M. CAIRO
--------------------------------------
Title: COO/CFO
--------------------------------------
Vacation Break at Cocoa Beach, Inc., a Florida
corporation
By /S/ HENRY M. CAIRO
-------------------------------------
Print Name: HENRY M. CAIRO
-------------------------------------
Title: COO/CFO
-------------------------------------
Palm Vacation Group, a Florida general partnership
By: Vacation Break Resorts at
Palm-Aire, Inc., a Florida
corporation, its general partner
By /S/ HENRY M. CAIRO
-------------------------------------
Print Name: HENRY M. CAIRO
-------------------------------------
Title: COO/CFO
-------------------------------------
By: Palm Resort Group, Inc., a
Florida corporation, its general
partner
By /S/ MARC J. LANDAU
-------------------------------------
Print Name: MARC J. LANDAU
-------------------------------------
Title: GROUP VICE PRESIDENT
-------------------------------------
30
<PAGE>
"LENDER"
FINOVA Capital Corporation, a
Delaware corporation, formerly known
as Greyhound Financial Corporation,
a Delaware corporation;
By__________________________________
Print Name:_________________________
Title:______________________________
31
<PAGE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C>
Schedule 1 Status of Sale of Time-Share Interests
Exhibit A Assignment of Mortgages
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D Promissory Note
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Resort and Time-Share Interest
Exhibit G Borrower's Certificate
Exhibit G-1 Re-Assignment of Mortgages
Exhibit H Borrower's Opinion of Counsel
Exhibit I Guarantor's Opinion of Counsel
Exhibit J Additional Condition to Advances
Exhibit J-1 Request for advance and Certification
Exhibit K Borrower's Monthly Reports (Format)
</TABLE>
CONSTRUCTION LOAN AGREEMENT
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THIS AGREEMENT (the "Loan Agreement") is made and executed by and
between SEA GARDENS BEACH AND TENNIS RESORT, INC., A FLORIDA CORPORATION, of
6400 North Andrews Avenue, Fort Lauderdale, Florida 33319 (hereinafter referred
to as "Borrower"), and SUNTRUST BANK, SOUTH FLORIDA, N.A., A NATIONAL BANKING
ASSOCIATION, OF 515 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FLORIDA 33301
(hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Borrower is the Developer of the Sea Garden Beach & Tennis
Resort located in Pompano Beach, Florida (hereinafter referred to as "the
Resort"); and
WHEREAS, there is an existing loan from Lender to Borrower ("the Loan")
which is secured by a mortgage ("the Mortgage") encumbering portions of the
Resort; and
WHEREAS, the parties have agreed that the Loan will be modified so that
the indebtedness will be increased by THIRTEEN MILLION AND NO/100 Dollars
($13,000,000.00) pursuant to a certain Future Advance Promissory Note, the
proceeds of which will be used to construct certain improvements on the "Ocean
Palms" Parcel ("the Improvements"), which Improvements are more specifically
defined in that certain loan commitment letter to Borrower dated September 11,
1996, (hereinafter referred to as "the Commitment"); and
WHEREAS, the Improvements will be located upon a portion of the
property encumbered by the Mortgage, which portion is sometimes described as the
"Ocean Palms Parcel" and which is described in EXHIBIT "A" (the "Land") located
in Pompano Beach, Broward County, Florida (the Improvements and the Land
hereinafter being referred to collectively as the "Property");
WHEREAS, Borrower and Lender wish to enter into this Agreement in order
to set forth the terms and conditions of the disbursement of the Loan;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants, representations, warranties and agreements contained herein, the sum
of Ten and 10/100 Dollars ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender agree as follows:
ARTICLE I
LOAN DOCUMENTS
Subject to the conditions contained in the Commitment and prior to any
disbursement, Borrower shall execute and deliver, or cause to be executed and
delivered to Lender the following documents (hereinafter collectively and
together with this Loan Agreement referred to as the "Loan Documents"), all in a
form satisfactory to Lender:
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1. NOTE. A Future Advance Promissory Note of even date
herewith payable to the order of Lender in the principal amount of THIRTEEN
MILLION AND NO/100 Dollars ($13,000,000.00) (hereinafter referred to as the
"Note") which shall include such terms and conditions as have heretofore been
mutually agreed upon between Borrower and Lender. Interest reserves in the
initial amount of $500,000.00 shall be established from a portion of the Loan
proceeds. Borrower hereby authorizes Lender to deduct from the interest reserve
the accrued interest on the outstanding balance of the Loan on the first day of
each month of the term of the Loan in accordance with the provisions of the
Note. Lender agrees that the accrued interest shall be disbursed from the
interest reserve so long as no Event of Default has occurred and sufficient
amounts remain in the interest reserve; provided, however, that Lender shall at
all times be authorized, even if not otherwise obligated, to disburse accrued
interest from the interest reserve. Interest shall be payable in local funds to
the extent that same is not disbursed from the interest reserve.
2. MORTGAGE AND SECURITY AGREEMENT. A Mortgage Modification
Agreement modifying the Mortgage which, upon recordation, shall constitute a
first lien on the Property and which shall be in a form satisfactory to Lender
and shall be subject only to those exceptions and matters satisfactory to
Lender.
3. ASSIGNMENT OF RENTS AND LEASES. An assignment of rents
and leases from Borrower to Lender assigning any and all leases and rents now in
existence or which may come into existence in connection with the Property
during the life of this Loan from Borrower to Lender.
4. UCC-1 FINANCING STATEMENTS (LOCAL AND STATE). UCC-1
Financing Statements (local and state) covering all personal property, fixtures
and equipment placed or to be placed on or under the Property, and such other
documents as will insure Lender a first perfected security interest in and to
said personal property, fixtures and equipment.
5. MORTGAGEE TITLE INSURANCE POLICY. A mortgagee title
insurance policy providing title insurance coverage in the amount of THIRTEEN
MILLION AND NO/100 Dollars $13,000,000.00), insuring the Mortgage as a valid
first lien on the Property encumbered by the Mortgage subject only to exceptions
as shall be approved in writing by Lender, issued by a title company
satisfactory to Lender ("Title Insurer"), and in a form satisfactory to and
approved by Lender and satisfying the requirements set forth in the title
insurance commitment, including such reinsurance and/or coinsurance agreements,
if any, and any affirmative coverage required by Lender. Borrower shall deliver
to Lender copies of any documents which may affect the Property in any manner
(as determined by Lender's counsel) at any time prior to or during the term of
the Loan at Borrower's expense, including all existing or proposed restrictive
covenants, or other documents or restrictions affecting the Ocean Palms Parcel.
6. OPINION OF COUNSEL. An opinion of counsel licensed in the
State of Florida and satisfactory to Lender which covers such matters as may be
required by Lender.
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7. MORTGAGOR'S AFFIDAVIT. Mortgagor's Affidavit, in form and
content sufficient to permit the Title Insurer to delete any exception for
parties in possession, matters of survey, mechanic's or materialmen's liens,
gap, and taxes and assessments which are due and payable.
8. BORROWING AUTHORITY INSTRUMENTS. Documents evidencing the
necessary authorization for all actions taken by Borrower in connection with
this Loan as may be required by Lender. Appropriate documents may include
corporate resolutions, certificates of active status, and certified copies of
articles of incorporation and by-laws and all amendments thereto.
9. GENERAL CONSTRUCTION CONTRACT. A General Construction
Contract as amended (the "Construction Contract") in form and content acceptable
to Lender, executed by and between Borrower and HDL Construction, Inc., a
Florida corporation, which is a licensed Florida contractor (the "Contractor")
to construct the Improvements in accordance with the plans and specifications
entitled: "Mediterranean Palms" (now known as "Ocean Palms") originally dated
February 23, 1996 and revised and modified including those revisions described
on the attached Exhibit "C" (the "Plans and Specifications") prepared by Berrie
Architecture & Design, Inc. (the "Architect"), together with financial
statements and resume of the Contractor. The Contractor shall agree in writing,
upon the happening of an Event of Default, as defined in the Mortgage or this
Agreement, Contractor will, at the request of Lender, continue performance
pursuant to its agreement with Borrower until completion of construction of the
Improvements.
Exhibit "B" provides for the Contractor's overhead, but not
the Contractor's fee. The entire Contractor's fee shall be paid by Borrower out
of its own funds.
10. MAJOR SUBCONTRACTS. Contracts in form and content
acceptable to Lender, which have been executed by and between Contractor and all
major subcontractors, materialmen and suppliers ("Subcontractors") to construct
the Improvements in accordance with the Plans and Specifications. For the
purposes hereof, a major subcontract shall be any contract which is a contract
for Twenty-Five Thousand and 00/100 Dollars ($25,000.00) or more and which is
designated by Lender to be a Major Subcontract. All Major Subcontracts shall
contain the agreement of Subcontractors to perform the contract with Lender if
an "Event of Default" as defined below, occurs. Borrower shall provide Lender
with agreements, acceptable to Lender, that, upon the happening of an Event of
Default, Subcontractors will, at Lender's request, continue performance pursuant
to their agreements with Contractor, until completion of construction of the
Improvements, provided that Subcontractors shall be compensated by Lender, from
the date on which Lender assumes any such Major Subcontracts, in accordance with
their agreements with Contractor. If Major Subcontracts have not been executed,
Borrower shall furnish to Lender firm bids or internal estimates of the work to
be covered by the Major Subcontract, and such supporting documentation therefor
as Lender may require. Borrower shall submit to Lender a list of all other
Subcontractors working on the Improvements and shall keep the list current until
the Improvements are completed. All subcontracts for work, labor and materials
entered into by Contractor or directly by Borrower, either with Major
Subcontractors, other subcontractors or with Borrower's own employees or agents,
shall cover completion of the Improvements shown on the Plans and
Specifications. The aggregate contract price for constructing and equipping the
Improvements in accordance with the Plans and Specifications and
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representations made to Lender and all other costs of the project being financed
with the Loan proceeds and pursuant to the terms and conditions hereof (the
"Project") shall not exceed the amount allocated and described in the budget for
the Loan (the "Loan Budget") approved in writing by Lender and attached hereto
and made part hereof as Exhibit "B". Borrower shall furnish such additional
supporting documentation for the cost of the items described in the Loan Budget
as may be required by Lender.
11. SURVEY. Three (3) original copies of a current (not more
than three (3) months old) survey, satisfactory to Lender and prepared by a
registered land surveyor in accordance with Lender's requirements, of all
property covered by the Mortgage, showing the location and dimensions of all
proposed Improvements thereon and indicating the routes of ingress and egress
for public access to the Property, all utility lines, walks, drives, recorded or
visible easements and rights-of-way on the Property, and showing that there are
no encroachments, improvements, projections or easements (recorded or
unrecorded) on the property lines. Foundation perimeters are to be added to the
survey by the surveyor as soon as they are in place for the building. The survey
shall certify the acreage of the Land and shall indicate whether the Land is
located within any flood hazard area. The survey must be prepared in accordance
with the Minimum Technical Standards set forth by the Florida Board of Land
Surveyors pursuant to the provisions of Section 472.127 of the Florida Statutes
and must be certified in favor of Lender and Title Insurer. The surveyor's
certificate placed on the survey shall include a statement that said survey
locates any and all items set forth as exceptions in the mortgagee title
insurance policy (the "Title Policy") as Lender may require, shall satisfy all
of the survey requirements in the Commitment, and shall include any other
requirements of Lender. A final survey shall be furnished after all Improvements
are completed on the Property.
12. NOTICE OF COMMENCEMENT. A Notice of Commencement signed
by Borrower at closing or prior to the commencement of construction of the
Improvements by not more than thirty (31) days prior to such commencement, shall
be placed of record, with a certified copy thereof being posted at the job site
in accordance with the Florida Construction Lien Law, Chapter 713, Florida
Statutes (the "Florida Construction Lien Law") and a copy thereof furnished to
Lender. The legal description in the Notice of Commencement shall apply only to
the "Ocean Palms Parcel." Proof acceptable to Lender, in its sole discretion,
that the Notice of Commencement has been properly posted at the job site in
accordance with the requirements of the Florida Construction Lien Law, shall be
delivered to Lender and to the Title Insurer. The Notice of Commencement shall
name the Lender and Title Insurer as additional parties to whom all notices
shall be given.
13. BORROWER'S ARCHITECT'S AND ENGINEER'S OPINIONS AND
AGREEMENTS. Written opinions from Borrower's Architect and Engineer ("Engineer"
or "Architect") covering such matters as may be required by Lender and stating
that the proposed Improvements, when completed in accordance with the Plans and
Specifications, will comply with all governmental restrictions, ordinances and
regulations. Further, Borrower will provide Lender with an agreement by the
Architect and Engineer in form and content acceptable to Lender, that, in the
event of default under the terms of any of the Loan Documents, the Architect and
the Engineer will, at Lender's request: (a) continue performance pursuant to its
agreement with Borrower until completion of construction of the Improvements,
provided that Lender shall compensate the
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Architect and the Engineer from the date of Lender's assuming such agreement in
accordance with said agreement for all such services rendered, and (b) permit
Lender to use the Plans and Specifications at no cost to Lender.
14. LENDER'S INSPECTOR'S PROJECT EVALUATION REPORT. A
Project Evaluation Report, including a Plan and Cost Review, acceptable to
Lender, completed by Zimmer Construction Consultants ("Lender's Inspector" or
"the Inspector") substantiating that the Plans and Specifications are adequate
and that the costs of constructing the Improvements in accordance with the Plans
and Specifications are fairly represented by the Borrower's Cost Breakdown and
do not exceed the amounts set forth in the attached Exhibit "B" and that the
proposed Improvements when completed in accordance with the Plans and
Specifications, will comply with all governmental restrictions, ordinances and
regulations. The cost of the Evaluation Report shall be borne by Borrower.
15. ASSIGNMENT OF CONTRACT RIGHTS. An assignment to Lender
of all Borrower's contract rights under the Major Subcontracts, the Architect's
Contract and all other contracts.
16. COMMITMENT FEE. The commitment fee is in the amount of
$130,000.00. The amount of $65,000.00 (including $26,000.00 paid to Lender's
Participant, FINOVA Capital Corporation ("Participant") was paid at the time of
the execution of the Commitment, and the balance of $65,000.00, including
$26,000.00 payable to Participant shall be due at closing.
17. GUARANTIES. The unqualified and unconditional guaranties
of the Guarantors named in the Commitment ("the Guarantors").
18. TAXES. Proof of payment of real property and personal
property taxes for 1995 and all prior years, and information as to tax
identification numbers, tax rates, estimated tax values and the identities of
the taxing authorities and evidence of payment of any outstanding liens or other
outstanding obligations or encumbrances against the Property or Improvements.
Proof of payment of 1996 real and personal property taxes shall be provided by
Borrower to Lender no later than February 1, 1997.
19. UTILITIES. Letters (or other evidence satisfactory to
Lender) evidencing the availability and sufficiency of water, sewer, electric,
telephone and natural gas utility services to satisfactorily service the
proposed Improvements and that such facilities are available and will be
furnished.
20. PERMITS. Building permit(s) and satisfactory evidence
that the Land and the Improvements and the intended uses of the Property are in
compliance with all applicable laws, regulations and ordinances. Such evidence
may include letters, licenses, permits, certificates and other correspondence
from the appropriate governmental authorities, opinions of Borrower's attorney
or other attorneys and opinions or certifications from Borrower's Architect, as
Lender may determine. Those laws, regulations and ordinances with which
compliance should be evidenced include, by way of illustration but not
limitation, the following: (a) environmental protection laws; (b) erosion
control ordinances; (c) doing-business and/or licensing laws; and (d)
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zoning laws (in this regard, the evidence submitted should include (i) the
zoning designation made for the Land; (ii) the permitted uses of the Land under
such zoning designation, (iii) zoning requirements as to parking, lot size,
ingress and egress and building setbacks, (iv) the absence of moratoriums that
would prohibit construction of the Improvements, (v) site plan approval, and
(vii) the length of time of the validity of all such approvals, variances and
permits).
21. COST BREAKDOWN. A detailed construction and
non-construction cost breakdown and loan budget on Lender approved forms of all
construction and non-construction costs including specification of which items
are to be funded from sources other than the Loan. If the Project Evaluation
Report prepared by Lender's Inspector indicates the total estimated costs of the
Improvements to the Property to the Borrower exceed the principal amount of the
Loan, Lender may require Borrower to invest immediately the amount of the
difference in accordance with the equity requirements of this Loan Agreement and
the Commitment.
22. SOIL TESTS. A report as to soil borings and compaction
reports and analysis made at the Land by a soil testing firm satisfactory to
Lender and Lender's Supervising Inspector. The number and location of such
borings shall be in accordance with the recommendations of the soil testing firm
and must also be satisfactory to Lender. The report shall include the
recommendations of the soil testing firm as to the preparation of the soil
needed in order to adequately support the Improvements. (During the course of
construction, Borrower shall also provide such reports as to concrete tests and
additional soil tests as are requested or required by Lender).
23. FINANCIAL STATEMENTS. Current financial statements, tax
returns, and such other credit information as Lender may require for Borrower
and Guarantors in form and content satisfactory to Lender, and including
evidence of the availability of Borrower's funds necessary, in Lender's sole
opinion, to pay the total costs (hard construction and indirect costs) of the
project in excess of the amount of the Loan. The Commitment contains further
requirements with respect to the foregoing financial statements and credit
information.
24. PLANS AND SPECIFICATIONS. Two (2) sets of the approved
site plan and the complete and detailed Plans and Specifications for the
development of the Improvements which Borrower shall have approved in writing
and which shall be satisfactory to Lender, including any changes or
modifications thereto to the date of receipt by Lender, and any and all
construction contracts or other documents in the possession or control of
Borrower relating to the construction of the Improvements. The two (2) sets must
include plans and specifications for architectural, structural, mechanical,
plumbing, electrical and site development (including storm drainage, utility
lines, erosion control and landscaping) work, and must be stamped with all
required approvals from all applicable governmental authorities; certified under
seal by Architect and signed by Borrower to be true copies of the Plans and
Specifications architecturally and structurally approved by all authorities and
agencies having jurisdiction thereon and for which a building permit has been
issued. They must also incorporate the recommendations made in the soil testing
report. No changes shall be made thereafter in the Plans and Specifications
without the prior written consent of the Lender, except as set forth herein.
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25. CERTIFICATE OF ARCHITECT. Certificate of the Architect
who prepared the Plans and Specifications addressed to Lender and stating that
any necessary soil testing has been performed and soil conditions are
satisfactory for the structural support of the Improvements; that there is
adequate ingress and egress; that the Plans and Specifications have been
approved by all governmental authority and meet all State construction, energy
conservation, and environmental codes; that provisions have been made for the
handicapped; that the zoning is proper; that the permit has been properly
issued; that all utilities necessary to service the Improvements on the Property
are available with adequate capacity; that all required governmental permits and
approvals have been obtained; and such additional items as may be required by
Lender. The Certificate of Architect shall include submission of reports and
certifications regarding fill, foundation, design, settlement, H.V.A.C. and such
other reports and certifications as required by Lender.
26. CERTIFICATE OF ENGINEER. Certificate of the Engineer who
prepared the Plans and Specifications addressed to Lender and stating that any
necessary soil testing has been performed and soil conditions are satisfactory
for the structural support of the Improvements; that there is adequate ingress
and egress; that the Plans and Specifications have been approved by all
governmental authority and meet all State construction, energy conservation, and
environmental codes; that the zoning is proper; that the permit has been
properly issued; that all utilities necessary to service the Improvements on the
Property are available with adequate capacity; that all required governmental
permits and approvals have been obtained; and such additional items as may be
required by Lender. The Certificate of Engineer shall include submission of
reports and certifications regarding fill, foundation, design, settlement, and
such other reports and certifications as reasonably required by Lender.
27. LIEN WAIVERS. Waivers of lien from each and every
contractor, subcontractor, laborer or material supplier performing services or
supplying material to the Property within the past ninety (91) days, and an
affidavit listing all of said entities and certifying that no work has been
performed and no materials have been supplied for which the costs remain unpaid
prior to closing.
28. FORM OF CONTRACT. Copy of form of contract for the sale
of the timeshare units.
29. INSURANCE. Evidence of insurance in form and content
satisfactory to Lender, as set forth herein.
30. TIMESHARE DOCUMENTS. Copies of all timeshare documents
pertaining to the "Ocean Palms" Parcel in form and content acceptable to Lender
and in compliance with Florida law.
31. COLLATERAL ASSIGNMENT OF LICENSES AND PERMITS. A
Collateral Assignment of all licenses, permits, approvals and certifications
relating to the use and construction of the Improvements on the Property,
including but not limited to trade and fictitious names, all of which must be
transferable during the entire term of the Loan, in form and content acceptable
to Lender.
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32. APPRAISAL. M.A.I. appraisal in accordance with the
requirements of the Commitment.
33. BORROWER'S AUTHORIZED SIGNERS AND DISBURSEMENT
INSTRUCTIONS AGREEMENT. A Borrower's Authorized Signers and Disbursement
Instructions Agreement shall be executed by Borrower.
34. CERTIFICATE OF HAZARDOUS WASTE. If required by Lender,
an environmental audit prepared by an independent engineer or other qualified
consultant or expert which contains conclusions reasonably satisfactory to
Lender and which evaluates (i) whether any hazardous materials or other toxic
substances are present in the soil or surface or groundwater at the Property or
the soil or surface or groundwater adjacent to the Property in quantities that
would violate applicable federal, state or local laws or requirements, (ii)
whether any hazardous materials or other toxic substances have previously been
released, intentionally or unintentionally, to the soil or surface or
groundwater at the Property, (iii) whether hazardous materials or other toxic
substances are now or have previously been used, stored or disposed of at the
Property, and (iv) whether activities presently being conducted at the Property
are in compliance with all applicable federal, state or local environmental
regulations. The environmental audits shall be based upon such sampling of the
soil, air, and waters; visual inspections; and such other methods as shall be
appropriate. All sampling shall be conducted using accepted and scientifically
valid technology and methodologies. The consultant shall prepare a written
report detailing its findings and conclusions. Should this audit indicate the
presence of hazardous materials on the Property, the Borrower shall take all
steps necessary to further define the nature of the materials, any risks
resulting therefrom, and possible remedial measures. For this purpose the Lender
reserves the right upon reasonable notice to enter and investigate the Property
and to take such samples as may be necessary to perform soil, water or other
analyses.
35. PAYMENT AND PERFORMANCE BONDS. Unconditional Statutory
Payment and Performance Bonds, including dual obligee riders, for all Major
Subcontractors (and for such other Subcontractors as Lender may require) which
will guarantee the completion of all Improvements in accordance with the
approved Plans and Specifications and payment of all costs incurred.
36. RECEIVABLE LENDERS COMMITMENTS. Commitments for
receivable financing acceptable to Lender together with such agreements,
consents and/or subordinations from receivable lenders as may be required by
Lender.
37. MISCELLANEOUS.
a. Copies of any and all existing or
proposed restrictive covenants or agreements
affecting the Property.
b. Such other matters or documents as Lender
shall require.
All of the Loan Documents shall be in form and content satisfactory to
the Lender, and shall comply with all of the requirements set forth in the Loan
Agreement and the Commitment.
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ARTICLE II
INITIAL DISBURSEMENT
The proceeds of this Loan which are approved by the Lender for any
initial funding shall be funded subsequent to the following:
1. Execution of all such documents as Lender and
Lender's counsel may require to insure that the Lender has a valid first lien in
the amount of the Loan.
2. Recording of all documents as required by Lender's
counsel.
3. Receipt by Lender of the marked-up Title Insurance
Commitment, insuring Lender's Mortgage, which marked-up commitment must be
approved by Lender's counsel.
4. Evidence reasonably satisfactory to Lender and
Lender's counsel of the fulfillment of any other condition to funding.
5. Delivery to Lender of the documents required above
as a condition to funding.
ARTICLE III
WARRANTIES OF BORROWER
As material inducements to Lender to enter into this Loan Agreement and
to make the Loan, Borrower hereby warrants to Lender as follows:
1. VALIDITY OF LOAN DOCUMENTS. That the Loan Documents are
in all respects legal, valid and binding according to their terms and grant to
Lender a direct, valid and enforceable first lien security interest in the
Property and the personally located thereon subject only to bankruptcy,
insolvency and other similar laws affecting the rights of creditors.
2. PRIORITY OF LIEN ON PERSONALTY. That no bill of sale,
security agreement, financing statement or other title retention agreement
(except those executed in favor of Lender or executed in connection with
receivable financing) has or will be executed with respect to any personal
property, equipment or fixtures used in conjunction with the construction,
operation or maintenance of the Improvements.
3. CONFLICTING TRANSACTIONS OF BORROWER. That the
consummation of the transactions hereby contemplated and the performance of
Borrower's obligations under and by virtue of the Loan Documents will not result
in any breach of, or constitute a default under any mortgage, security deed,
deed of trust, lease, bank loan or credit agreement, corporate charter or bylaws
or other instrument to which Borrower is a party or by which it may be bound or
affected.
4. PENDING LITIGATION. That there are no actions, suits
or proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or any
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Guarantor which affect any of the Property securing the Loan, or involving the
validity or enforceability of any of the Loan Documents or the priority of the
lien thereof, at law or in equity, or before or by any governmental authority,
except actions, suits and proceedings which are fully covered by insurance and
which, if adversely determined, would not substantially impair Borrower's
ability to perform each and every one of its obligations under and by virtue of
the Loan Documents; and that to Borrower's knowledge, it is not in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR
REGULATIONS. That Borrower has no knowledge of any violation or notice of
violations of any federal or state law or municipal ordinance or order or
requirement of the county or city in which the Property are located or any
municipal department or other governmental authority having jurisdiction
affecting the Property, which violations in any way relate to or affect the
Property.
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS. That
the Plans and Specifications and construction pursuant thereto and the use of
the Property contemplated thereby have been approved by all appropriate
governmental and quasi-governmental authorities and accordingly comply and will
continue to comply with all applicable governmental and quasi-governmental laws,
regulations, and standard requirements.
7. AVAILABILITY OF UTILITIES. That all utility services
necessary for the construction of the Improvements and the operation thereof for
their intended purpose are available at the boundaries of the Land, including
water supply, storm and sanitary sewer facilities, electric and telephone
facilities.
8. BUILDING PERMITS. That all building permits required
for the construction of the Improvements have been obtained or may be obtained
without undue delay, unusual expense or material alteration of the Plans and
Specifications. Borrower shall deliver copies of all permits to Lender as they
are obtained and before construction commences.
9. CERTIFICATE OF OCCUPANCY. That upon completion of
the Improvements all certificates of occupancy required for the occupancy of the
Improvements may be obtained without undue delay or unusual expense. Borrower
shall deliver copies of all certificates of occupancy to Lender as they are
obtained.
10. CONDITION OF PROPERTY. That the Property is not
now damaged or injured as a result of any fire, explosion, accident, flood or
other casualty.
11. BROKERAGE COMMISSIONS. That any brokerage commission
due in connection with the transaction contemplated hereby has been paid in full
and that any such commission coming due in the future will be paid promptly by
Borrower. Borrower agrees to and shall indemnify Lender from any liability,
claim or loss arising by reason of any such brokerage commission. This provision
shall survive the repayment of the Loan and shall continue in full force and
effect so long as the possibility of such liability, claim or loss exists.
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12. USURY. The amounts to be received by Lender which are
or which may be deemed to be interest hereunder or under any of the Loan
Documents or otherwise in connection with the transactions herein contemplated
constitute lawful interest and are not usurious or illegal under the laws of the
State of Florida, and no aspect of the transactions contemplated by this Loan
Agreement is or will be usurious under current Florida law.
13. ACCURACY OF INFORMATION. Lender's commitment to make
the Loan, as expressed in the Commitment and accepted by Borrower is based on
the accuracy of Borrower's and each Guarantor's representations and statements.
Neither this Loan Agreement nor any document, financial statement, credit
information, certificate or statement required herein to be furnished or
furnished to Lender contains any untrue statement of a fact or omits to state a
fact material to this Loan Agreement or to Lender's decision to enter into this
Loan Agreement or the transaction contemplated hereunder. Lender shall have the
option to declare the Commitment to be breached if there shall have been any
material misrepresentation or misstatement or any material error in any
statement, document or other submission delivered to Lender, or if prior to the
initial Loan disbursement, there shall have been a material adverse change in
the state of facts submitted to Lender, or Borrower or any Guarantor has become
insolvent, bankrupt or incapacitated, or has otherwise been subject to any
material adverse change in financial condition. The Commitment is hereby
incorporated herein by reference, but to the extent it conflicts with the Loan
Documents, the Loan Documents shall govern.
14. SET-OFFS. Borrower does not have any defense or
set-off with respect to any money disbursed or otherwise advanced or to be
advanced hereunder.
15. CONTINUATION AND INVESTIGATION. The warranties and
representations contained herein shall be and remain true and correct so long as
any of Borrower's obligations hereunder have not been satisfied, or so long as
part of the Loan shall remain outstanding, and each request by Borrower for a
disbursement or extension of the Loan shall constitute an affirmation that the
foregoing representations and warranties remain true and correct as of the date
thereof. All representations, warranties, covenants and agreements made herein
or in any certificate or other document delivered to Lender by or on behalf of
Borrower pursuant to or in connection with this Loan Agreement shall be deemed
to have been relied upon by Lender notwithstanding any investigation heretofore
or hereafter made by Lender or on its behalf, and shall survive the making of
any or all of the disbursements contemplated hereby.
ARTICLE IV
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
1. LOAN AGREEMENT. To duly and punctually perform, observe
and comply with all of the terms, provisions, conditions, covenants and
agreements on its part to be performed, observed and complied with hereunder and
under the Loan Documents and any other documents and instruments delivered to
Lender in connection herewith. Borrower will not suffer or permit any default or
Event of Default to exist hereunder or thereunder. Borrower will
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promptly give notice in writing to Lender (a) of the occurrence of any material
litigation or proceeding affecting Borrower and whether or not Borrower's
liability, if any, is covered by insurance, and (b) of any dispute between
Borrower and any governmental or regulatory body or any other party, which
dispute may materially interfere with Borrower's normal operations or with
construction of the Improvements.
2. CONSTRUCTION CONTRACT. (a) To permit no default
under the terms of the Construction Contract; (b) to waive none of Contractor's
obligations thereunder; (c) to do no act which would relieve Contractor from its
obligations to construct the Improvements according to the Plans and
Specifications; and (d) to make no amendments, other than change orders as may
be permitted hereunder and under the Mortgage, to the Construction Contract
without Lender's prior written consent.
3. [DELETED]
4. [DELETED]
5. CONSTRUCTION SUBCONTRACTS.
a. To permit no default under the terms of the
Major Subcontracts;
b. To waive none of Subcontractors'
obligations thereunder;
c. To do no act which would relieve
Subcontractors of their respective obligations to construct the Improvements
according to the Plans and Specifications; and
d. To make no amendments, other than change
orders as Lender may approve in writing to any of the Major Subcontracts or
other subcontracts, without Lender's prior written consent.
6. INSURANCE. Borrower will procure for, deliver
copies of and original certificates of and maintain for the benefit of Lender
during the life of the Mortgage, insurance policies in such amounts as Lender
shall require, including a minimum of $2,000,000.00 of liability insurance, and
insurance insuring the Property against fire, builder's risk, hazard, extended
coverage, contents insurance and such other insurable hazards, casualties and
contingencies as Lender may require. The form of such policies and the companies
issuing them shall be acceptable to Lender. All policies, including builders
risk, hazard and liability policies, shall contain a standard, non-contributory
mortgagee clause making losses payable to Lender, its successors or assigns, as
mortgagee and loss payee. All policies shall include a provision for a minimum
thirty (31) day advance notice to Lender of any intended policy cancellation or
modification. Borrower shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained
hereunder, unless Lender is included thereon under a standard, non-contributory
mortgagee endorsement making losses payable to Lender. Borrower shall
immediately notify Lender whenever any such separate insurance is taken out and
shall promptly deliver to Lender the policy or policies of such insurance. The
said property insurance so obtained shall include "all risks", builder's risk,
on a reporting completed
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value form, on the Improvements, buildings, machinery, equipment, materials,
supplies and temporary structures and all other property of any nature used for
the construction of the buildings, with an endorsement which includes as a loss
payable any additional interest expense caused by a peril insured against under
the policy. This coverage for interest expense is limited to the period of time
from the date of physical damage until such time as will reasonably elapse, in
the exercise of due diligence, to the repair of the damage to its prior state.
The amount of coverage of the policy of insurance shall be the full replacement
cost, including underground work, but not less than $11,000,000.00. Insurance
certificates (and evidence of the payment of premiums for increases)
representing increased property insurance coverage shall be provided on a
monthly basis to cover the work in place. Applicable notice to be given to
Lender at the following address: 515 East Las Olas Boulevard, Fort Lauderdale,
Florida 33301, attention: Commercial Real Estate Lending Department.
The Borrower shall submit to Lender evidence satisfactory to
Lender as to whether or not the Property or any part thereof is located within
an area identified pursuant to the Flood Disaster Protection Act of 1973 as
being in a flood hazard area. If the Property is located in a flood hazard area,
flood insurance shall be obtained for the maximum amount of coverage available
through the federal flood insurance program for the improvements located on the
Property from time to time or 100% of the highest insurance value of the
improvements on a replacement cost basis, whichever is less. The National Flood
Insurance Program flood policy shall cover the same parties covered under the
builder's risk policy other insurance policies with coverage for flood,
collapse, rain damage and such other usual coverage as may be obtained
thereunder, and such policy will be written with an insurance company and with
cancellation provisions as hereinabove provided. The insurance coverage, without
limiting the same by this description, shall extend to any loss occasioned by
fire, windstorm, other perils of extended coverage, vandalism, malicious
mischief, theft, mysterious disappearance and such other coverage as is a normal
incidence of builder's risk. The foregoing insurance shall specifically cover
necessary architect and engineering fees necessary to repair or replace any
insured property and shall also cover debris removal. Further, the insurance
shall at least permit waiver of subrogation so any release of liability entered
into prior to any loss will not affect the validity of the coverage otherwise
provided.
At least thirty (31) days prior to the expiration date of all
such policies, Borrower shall deliver to Lender proof of renewals of all
required policies in a form satisfactory to Lender. As further security for the
indebtedness secured hereby, the delivery of the insurance policies to Lender
shall constitute an assignment of all unearned premiums. In the event of the
foreclosure of this Mortgage or any other transfer of title to the Property in
extinguishment of the indebtedness secured hereby, all right, title and interest
of Borrower in and to all insurance policies then in force shall pass to the
purchaser or grantee.
Lender is hereby authorized and empowered, at its option, to
adjust or compromise any loss under any insurance policy. Each insurance company
is hereby authorized and directed to make payment for all such losses directly
to Lender instead of to Borrower and Lender jointly. After deducting from the
insurance proceeds any expense incurred by it in the collection or handling of
said funds, Lender shall apply the net proceeds, at its sole option, to the
reduction of the sums secured hereby or toward the repair and restoration of the
Improvements,
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or for any other purpose or object satisfactory to Lender without affecting the
lien of the Mortgage for the full amount secured hereby before such payment took
place. Lender shall not be held responsible for any failure to collect any
insurance proceeds due under the terms of any policy, regardless of the cause of
such failure.
If required by Lender, Borrower will pay to Lender on the
first (1st) day of each month, together with and in addition to the regular
installment of interest and principal and until the Note is fully paid, an
amount equal to one-twelfth (1/12) of the yearly premiums for insurance, to
enable Lender to pay such insurance premiums when due. The Borrower shall
promptly furnish Lender with the insurance premium statements. Such added
payments shall not be nor be deemed to be trust funds, but may be commingled
with the general funds of Lender and Lender shall not pay interest on them. At
the option of Lender, such added payments may be carried as a debit item on
Lender's books and accounts. Upon demand of Lender, Borrower agrees to deliver
to Lender such additional sums as are necessary to make up any deficiencies in
the amounts necessary to enable Lender to pay such insurance premiums. Lender
shall have no responsibility for payment of any premium for insurance hereunder,
except to the extent that funds are deposited by Borrower with Lender hereunder.
In the event of a default by Borrower in the performance of any of the terms,
covenants and conditions in the Mortgage, this Loan Agreement or the Note,
Lender may, at Lender's option, apply any amount then held by Lender under this
paragraph to the reduction of the indebtedness secured in the Mortgage.
7. COLLECTION OF INSURANCE PROCEEDS. To cooperate with
Lender in obtaining for Lender the benefits of any insurance or other proceeds
lawfully or equitably payable to Borrower or Lender in connection with the
transactions contemplated hereby and in paying any indebtedness or obligation of
Borrower to Lender incurred hereunder (including the payment by Borrower of the
expense of an independent appraisal on behalf of Lender in case of a fire or
other casualty affecting the Property).
8. AD VALOREM TAX. Subject to the provisions in the
Mortgage, Borrower shall submit proof, on an annual basis, that all real
property taxes have been timely paid.
9. APPLICATION OF LOAN PROCEEDS. To use the proceeds of the
Loan solely for the purpose set forth herein and in no event to use any of the
Loan proceeds for any other purpose whatsoever. Borrower shall make only such
payments on account of other construction contracts or other work which may
entitle the person performing it to lien rights in the Property as are proper
payments under the Florida Construction Lien Law.
10. EXPENSES. To pay all costs of closing the Loan and
incurred during the term of the Loan and all expenses of Lender with respect
thereto, including but not limited to fees of Lender's Inspector, Lender's and
Participant's attorneys' fees and costs (including attorneys' fees and costs
incurred by Lender subsequent to the closing of the Loan in connection with the
disbursement, administration, collection, restructure, amendment or transfer of
the Loan), advances, recording expenses, surveys, title insurance premiums,
intangible taxes, documentary stamps, sales taxes, surtax and other revenue
fees, escrow fees, Architect's and Engineer's costs and inspection fees,
expenses of foreclosure (including reasonable attorneys' fees and costs) and
similar items, and to allow all closing papers, Loan Documents and other legal
matters to be
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subject to the approval of Lender's and Participant's attorneys. Under no
circumstances will Lender pay to any third party any mortgage brokerage or other
fees incurred in connection with this Loan and Borrower covenants and agrees to
indemnify Lender and hold Lender harmless from any and all such claims for fees
or commissions by third parties. Further, Borrower agrees to pay all of Lender's
costs and attorneys' fees, including all appellate litigation, involving any of
such claims.
11. BORROWER'S EQUITY REQUIREMENT. Lender reserves the
right to require, at Borrower's expense, a construction cost analysis by
Lender's Inspector or by an expert in the construction cost field, which expert
shall be designated by Lender. If Lender estimates, at any time and from time to
time, that the amount necessary to assure final completion of the construction
of the Improvements including but not limited to interest and other soft or
non-construction budget items during the term of the Loan (the "Total Budget")
shall exceed the amount of the undisbursed Loan proceeds plus the total amount
of all equity investments made or scheduled to be made by Borrower, then Lender
shall have the option to require Borrower (a) to immediately deposit with Lender
the amount of any such difference, in cash or other form satisfactory to Lender,
which amount shall be disbursed toward the Total Budget costs prior to any
advance by Lender under the Loan, or (b) to expend the amount of any such
difference for items included in the Total Budget with satisfactory evidence of
such expenditure being provided to Lender prior to any advance by Lender of the
Loan funds. Lender shall be assured at all times, to its satisfaction, that the
undisbursed Loan funds are sufficient to complete the Improvements in accordance
with the Total Budget and in accordance with the Plans and Specifications and
this Loan Agreement. (Lender reserves the right of continual verification of
adequate equity investments made by Borrower as herein set forth.) Each such
deposit shall be expended before any or any other Loan disbursements will be
made, and it shall be advanced as construction progresses.
12. COMMENCEMENT AND COMPLETION OF CONSTRUCTION.
Construction of the Improvements shall commence within thirty (31) days of this
date and subsequent to the recordation of a Notice of Commencement, and Borrower
shall diligently pursue said construction to completion. Good workmanship and
quality materials shall be utilized. Quality of construction is of the essence
and each construction draw shall be subject to satisfactory quality and
completion of work in place. Borrower shall supply such sums of money and
perform such duties as may be necessary to complete the construction of the
Improvements pursuant to the Plans and Specifications and in full compliance
with all terms and conditions of the Loan Documents, all of which shall be
accomplished within the Term of the Construction Period as defined herein, and
without liens, claims or assessments (actual or contingent) asserted against the
Property for any material, labor or other items furnished in connection
therewith, and all in full compliance with the Florida Construction Lien Law,
and further in compliance with all construction, use, building, zoning and other
similar requirements of any pertinent governmental authority. Borrower will
provide to Lender evidence of satisfactory compliance with all of such
requirements upon request therefor by Lender. Completion of construction shall
include but not be limited to grading, landscaping, adequate sewer, water,
electrical, gas, telephone and other utility facilities, completed streets,
sidewalks, drainage and curbs, both on-site and off-site, public and private.
The construction and development of the Improvements described herein shall be
substantially completed within sixteen (16) months from the date of this
Agreement ("the Construction
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Period"). Borrower shall not be required to substantially complete said
construction within sixteen (16) months if said completion is delayed due to any
acts of God, emergencies, strikes or other causes out of Borrower's control.
Notwithstanding the Lender's determination that the Construction Period shall be
extended for this reason, the Lender, in its sole discretion at any time, shall
determine the length of the extension period to substantially complete the
construction of the improvements and Borrower shall promptly and diligently
complete said construction therefor. The construction and development of the
improvements shall be inspected by Lender. "Substantially Completed" shall mean
that the improvements have been completed in a sufficient manner to obtain all
requisite Certificates of Occupancy.
13. SALES CONTRACTS. Borrower shall not enter into any
sales contract which materially amends or modifies the form of sales contract
previously approved by Lender or which imposes conditions on the effectiveness
of the sales contract, without Lender's prior written consent.
14. ACCESS. Except for driveways located on the Property,
the rights-of-way for all roads necessary for the full utilization of the
Improvements for their intended purposes, have either been acquired by the
appropriate governmental authority or have been dedicated to public use and
accepted by such governmental authority, and all such roads shall have been
completed, or all necessary steps shall have been taken by Borrower and such
governmental authority to assure the complete construction and installation
thereof prior to the date upon which access to the Property via such roads will
be necessary. All curb cuts and traffic signals shown on the Plans and
Specifications are existing or have been fully approved by all necessary
governmental authorities.
15. RIGHT OF LENDER TO INSPECT PROPERTY AND RENEW PLANS. To
permit Lender and its representatives and agents, including Lender's Inspector,
to enter upon the Property and to inspect the Improvements and all materials to
be used in the construction thereof and to cooperate and cause Contractor to
cooperate with Lender and its representatives and agents during such inspections
(including making available to Lender working copies of the Plans and
Specifications together with all related supplementary materials); provided,
however, that this provision shall not be deemed to impose upon Lender any
obligation to undertake such inspections. Lender's Inspector shall perform
various services on behalf of Lender as described in the Commitment. The costs
of these services shall be charged to and shall be paid by Borrower. The
services performed by Lender's Inspector include but are not limited to review
of the Plans and Specifications, review of any and all construction contracts,
review of any and all other documents in the possession or control of Borrower
or any general contractor relating to the construction of Improvements and all
proposed changes to them, inspection of construction work for conformity with
the approved Plans and Specifications and approval of requests for Loan
disbursements. Borrower's supervising architect and engineer shall perform those
services described in the architect's and engineer's contracts, including
approvals of requisitions for payment required herein and the submission to
Lender of the architect's and engineer's certification required prior to final
disbursement.
16. CORRECTION OF DEFECTS. To promptly correct any defect
in the Improvements or any departure from the Plans and Specifications not
permitted herein which has
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not been approved previously by Lender. The advance of any Loan proceeds shall
not constitute a waiver of Lender's right to require compliance with this
covenant.
17. SIGN REGARDING FINANCING. To promptly erect and
maintain on the Property, on a site suitable to Lender, a sign (1) indicating
that Lender is providing financing, all to Lender's reasonable satisfaction, and
to prevent the destruction or removal of said sign without Lender's prior
written approval; provided, however, such sign shall not violate any ordinance
or restrictive covenant.
18. APPROVAL OF CHANGE ORDERS. To permit, during the
construction of the Improvements, no individual deviation from the Plans and
Specifications which exceeds $5,000.00 and to permit no multiple deviations
which, in the aggregate, exceed $25,000.00, without Lender's prior written
approval. Regardless of amount, Borrower shall submit all proposed change orders
to Lender within five (5) days.
19. BOOKS AND RECORDS. To keep and maintain proper and
accurate books, records and accounts reflecting all items of income and expense
of Borrower in connection with the Property and the construction thereon; and
upon the request of Lender, to make such books, records and accounts immediately
available to Lender for inspection or independent audit. Such inspection shall
take place in Borrower's offices during normal business hours.
20. NOTIFICATION OF CLAIMS BY SUBCONTRACTORS AND
MATERIALMEN. To advise Lender promptly and in writing if Borrower receives any
Notice to Owner, written or oral, from any laborer, subcontractor or materialman
in connection with any labor or materials furnished in the construction of the
Improvements.
21. FINANCIAL AND OPERATING STATEMENTS. To submit to Lender
current audited (if so required by Lender), annual financial statements, in form
and content satisfactory to Lender, for Borrower and Guarantors within ninety
(91) days after the end of their respective fiscal year, the first to be
submitted no later than one (1) year from the date hereof, and the rest to be
submitted annually thereafter.
22. REPORTS. To submit to Lender the following:
a. within forty-five (45) days after each month end,
monthly sales reports inclusive of all projects of Borrower and its related
entities, along with Financing Summary Reports for all projects owned by
Vacation Break U.S.A.
b. within fifteen (15) days after the end of each
quarter Form 10-Q Reports and Summary Aging Reports and Escrow Account Analysis,
and Borrowing Base Reports from Textron Financial Corporation, FINOVA Capital
Corporation and Borrower's other receivable lenders as may be applicable.
23. UPDATED OPINION OF COUNSEL. To submit to Lender an
opinion of counsel licensed in the State of Florida and satisfactory to Lender
covering such further matters regarding the Improvements as Lender may require
from time to time.
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24. ADDITIONAL DOCUMENTS. To perform hereunder as follows:
a. CONSTRUCTION. To furnish to Lender all
instruments, documents, initial surveys, footing or foundation surveys
(following the pouring of the final slab), certificates, plans and
specifications, appraisals, title insurance and other insurance, reports and
agreements and upon request (i) financial statements of Borrower and Guarantors
and (ii) other or further information as to the financial condition of Borrower
and Guarantors and (iii) the names of all persons with whom Borrower has
contracted or intends to contract for major contracts for the construction of
the Improvements or the furnishing of labor or materials therefor (for the
purposes hereof, a major contract shall be any contract in excess of $25,000.00
designated by Lender to be a Major Contract), and (iv) copies and/or lists of
all paid and/or unpaid bills for labor and materials with respect to the
construction of the Improvements, and (v) budgets of Borrower and revisions
thereof showing the estimated cost of construction of the Improvements and funds
required at any given time to complete and pay for such construction, and each
and every other document and instrument required to be furnished by the terms of
the Commitment.
b. PRESERVATION OF SECURITY. To sign and
deliver to Lender such documents, instruments, assignments and other writings,
and to do such other acts necessary or desirable to preserve and protect the
collateral at any time securing or intended to secure the Note, as Lender may
require.
c. THIS LOAN AGREEMENT. To do and execute
all and such further lawful and reasonable acts, conveyances and assurances in
the law for the better and more effective carrying out of the intents and
purposes of this Loan Agreement, as Lender shall reasonably require from time to
time.
25. FURTHER ENCUMBRANCES. With the exception of
receivable financing approved in writing by Lender, there shall be no secondary
or further financing of the personal or real property now or hereafter located
on the Property, or any part thereof, without Lender's prior written consent,
which consent Lender may arbitrarily withhold.
26. MORTGAGEE TITLE INSURANCE. Borrower warrants that
there are no matters pending against Borrower or the project which could result
in a change in the status of the title to the Property in the period of time
between the effective date of the commitment for mortgagee title insurance and
the recording of the Mortgage (the "gap"). Borrower covenants that it shall not
commit any act or permit any act to be committed which might result in a change
in the status of the title to the Property during the gap, and Borrower shall
indemnify Lender and the title insurance agent and the title insurance
underwriter from any and all losses, costs and expenses (including reasonable
attorneys' fees and costs) suffered as a result of a change in the status of the
title to the Property during the gap.
ARTICLE V V
METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS
1. DISBURSEMENTS.
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A. Loan proceeds for hard costs will be disbursed
upon Borrower's request under the percentage of completion program
(i.e., disbursement will be made periodically based on material and
work-in-place.) There shall be a ten percent (10%) retainage holdback
from each disbursement (unless otherwise agreed by Lender) until
completion of a construction line item and receipt of subcontractor's
Final Affidavit, applicable final releases of lien and such other
documentation as Lender may require, as well as inspection by Lender's
Inspector and such Inspector's concurrence that all work is completed
and satisfactory. The cost of furnishings shall be supported by
invoices.
B. Loan proceeds will be advanced substantially in
accordance with the Loan Budget attached hereto as Exhibit "B" (subject
to revision only with Lender's approval). Any amounts remaining
undisbursed from allocated reserves for the cost of the Improvements,
interest or indirect/supplemental soft costs shall be used to reduce
the committed loan amount accordingly.
C. Loan proceeds for soft costs will be funded upon
submission of approved invoices and such other written documentation as
Lender may require.
D. Interest will be billed and payable monthly on
disbursed loan proceeds outstanding. Interest will be automatically
paid monthly out of the interest reserve so long as all loans to the
Borrower are in good standing.
2. CERTIFICATE FOR PAYMENT. At such time as Borrower shall
desire to obtain a disbursement of any portion of the Loan proceeds, subject to
the other requirements hereof, Borrower shall complete, execute and deliver to
Lender and Participant, a request for an advance on a form of draw request
approved by Lender, with copies to the Lender's Inspector setting forth a
detailed breakdown of the requested disbursement and the original cost breakdown
approved by Lender together with the percentage of completion of each item and
the balance remaining to complete each item. The Certificate for Payment shall
be certified by Borrower and approved by Lender's Inspector.
Each contractor in privity with Borrower shall submit
their request on a properly completed Application and Certificate for Payment
and a Continuation Sheet (AIA Documents G712 and G713), properly notarized along
with any supporting requisitions or invoices of subcontractors and/or suppliers.
3. EVIDENCE OF PROGRESS OF CONSTRUCTION. The abovesaid
Certificate for Payment shall be accompanied by such evidence, at Borrower's
expense, in form and content satisfactory to Lender, which shall include but not
be limited to properly executed certificates, affidavits, waivers and releases
of lien from Borrower, Contractors and Subcontractors and/or such other persons
as Lender may require, showing:
a. The value of the portion of the Improvements completed
at that time;
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b. That all outstanding claims for labor, materials and
fixtures for which Lender has funded prior requests for advance, have been
properly paid;
c. That there are no liens outstanding against the
Property except for Lender's lien and other than inchoate liens for property
taxes not yet due;
d. That Borrower has complied with all of Borrower's
obligations, as of the date thereof, under the Loan Documents;
e. That all construction prior to the date of the request
for an advance has been completed in a good and workmanlike manner in accordance
with the Plans and Specifications and as required by all inspecting governmental
authorities having jurisdiction thereof;
f. That all funds previously disbursed by Lender have
been applied in accordance with the Loan Budget;
g. That copies of all bills or statements for indirect
expenses for which the advance is requested are attached to said Certificate of
Payment; and
h. Except as otherwise may be provided, that all change
orders shall have been approved in writing by Lender.
A request for advance shall include a statement of the purposes for
which the advance is desired and invoices for the same, as Lender shall
reasonably require and approve. Prior to each hard cost advance, Lender must
receive a report from Lender's Inspector certifying that the value of the work
in place is not less than the amount being requested and that there are
sufficient funds remaining to complete the Improvements according to the
approved Plans and Specifications.
4. FOUNDATION SURVEY. Immediately upon the completion of the
construction of the foundation, three (3) copies of a foundation survey shall be
submitted to Lender which shall show and which shall certify to Lender and Title
Insurer, the locations of such foundations. The surveyor shall also submit a
certification as to the absence of encroachments from or onto the Property and
compliance of the Improvements, as then constructed, setback requirements and
other relevant restrictions. Lender reserves the right to require an endorsement
to the title insurance policy insuring that the building location is not in
violation of any easements of record and a Certificate of Architect certifying
that the building location is not in violation of any setback restrictions.
5. AS-BUILT SURVEYS. At Lender's request during
construction, Borrower shall submit as-built surveys for the site improvements
on the Property to Lender and shall reference the as-built survey in the title
insurance policy. In addition, during construction, Lender may request
certification from Borrower that all on-site and off-site Improvements required
to be constructed have been completed strictly in accordance with the approved
Plans and Specifications. The surveys shall show and include the requirements
expressed in the Commitment and such other requirements as Lender may require.
All surveys shall be sealed and certified to Lender and the title insuror.
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6. ACCESS TO STREETS. Lender shall not make any
disbursement for construction of any of the Improvements on the Property if any
such Improvement shall not have satisfactory access to dedicated and completed
streets unencumbered by liens.
7. FINAL DISBURSEMENT DATE. Subject to the provisions of
this Article, Lender shall not be required to make any disbursement from the
proceeds of this Loan later than eighteen (18) months after the date of this
Agreement.
8. LIEN PRIORITY AS PREREQUISITE FOR CONSTRUCTION. As of
the date hereof, the Mortgage shall be of first lien priority as to the
Property. Lender shall in no event disburse funds from the Loan proceeds for the
construction of any of the Improvements unless (a) the Mortgage then shall
constitute a first lien on such Improvement, and (b) there shall exist no other
lien encumbering the Property other than those approved by Lender.
9. MATERIALS STORED. In no event shall Lender be required
to make any loan disbursement for any materials (or deposits therefor) unless
such materials are installed or securely stored on-site.
10. MATERIALS STORED ON-SITE. Lender is willing to make
loan disbursements based on the invoice value of insured materials securely and
properly stored on the construction site. All invoices for materials stored
on-site and the reasonableness of the quantity of such materials are subject to
Lender's review and approval. Lender must have a first lien on the materials
stored on-site. A list must be submitted to Lender of the materials to be stored
on-site for which loan disbursements will be requested. Such list must include a
breakdown by type, number of units and cost per unit.
11. MATERIALS STORED OFF-SITE. Lender will not make any
loan disbursements based on the value of materials stored off-site.
12. CONTINUATION OF TITLE INSURANCE COVERAGE. At the
discretion of Lender, the abovesaid Certificate for Payment shall be accompanied
by a construction loan endorsement to the Title Policy (paid for by the
Borrower), which endorsement shall (a) indicate that since the effective date of
the Title Policy (or the effective date of the last such endorsement,if
any),there has been no change in the status of title to the Land as set out in
the Title Policy, and (b) have the effect of increasing the coverage of the
Title Policy by an amount equal to the advance then being made, unless the Title
Policy expressly provides automatically and unconditionally for such increase in
coverage upon each such disbursement. Lender reserves the right to require an
endorsement to the title insurance policy, insuring that the building location
is not in violation of any easements of record.
13. EVIDENCE OF SOFT COST ALLOCATIONS. Borrower shall
furnish written documentation (invoices) which satisfactorily accounts to Lender
for the expenditure of funds allocated to the payment of the soft costs set
forth on Exhibit "B".
14. CONDITIONS PRECEDENT TO EACH DISBURSEMENT. At no time
and in no event shall Lender be obligated to disburse funds:
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a. if any Event of Default as described herein or in
the Mortgage or other Loan Documents shall have occurred and shall not have been
cured, except that Lender may, at Lender's option, pay itself accrued interest
to the extent that Loan proceeds allocated to an interest reserve in the Loan
Budget remain undisbursed; or
b. if Lender determines that construction cannot be
completed within the time required by this Loan Agreement; or
c. if, prior to the Loan closing and at all times
during the term of the Loan, Lender is not satisfied, in its sole discretion,
that the proceeds of the Loan remaining undisbursed will be sufficient to
complete all of the Improvements according to the Plans and Specifications and
to pay for all labor, materials and costs and all other costs and disbursements
required to complete the Improvements, including interest and other
non-construction costs. If required by Lender, Borrower shall pay with its own
funds and furnish written documentation which satisfactorily accounts to Lender
for all acquisition, development, or other construction costs in excess of the
proceeds of this Loan necessary to fully complete the construction of the
Improvements. Each such payment shall be expended before any or any other Loan
disbursement will be made, and it shall be advanced as construction progresses;
or
d. if the Property shall have been damaged by fire or
other casualty.
15. RETAINAGE: CONDITIONS PRECEDENT TO FINAL
DISBURSEMENT. The final Loan disbursement shall be withheld by Lender, and shall
be disbursed along with all other retainages under this paragraph only upon
compliance with the following requirements (in addition to the requirements for
all other disbursements):
a. EVIDENCE OF COMPLETION. Receipt by Lender of
satisfactory evidence of the completion of the Improvements substantially in
accordance with the Plans and Specifications and approval of such completion by
all applicable governmental authorities.
b. AS-BUILT SURVEY. Receipt by Lender of three (3)
copies of a satisfactory "as-built" survey prepared by a registered surveyor, in
accordance with the Plans and Specifications and showing all of the Improvements
in place, including striping of parking areas, and a statement as to the number
of parking spaces. The survey shall be certified to Lender and Title Insurer and
shall also include a legal description of the boundary of the Land, the area of
the Land and of the Improvements, the location and dimensions of any easement
and the dimensions of the Improvements. The surveyor must include on the survey
a signed narrative statement certifying the existence or nonexistence of any
encroachment from or onto the Land and must include the date of the survey and
the surveyor's registration number and seal and such other matters as required
by Title Insurer, in form and substance satisfactory to Lender and Title
Insurer.
c. FINAL RELEASES OF LIEN: CONTRACTOR'S AFFIDAVIT.
Receipt by Lender of all final releases of lien by Contractor and all
Subcontractors and potential lienors and of a final Contractor's Affidavit from
all contractors in privity with Borrower notarized sufficient in the opinion of
Lender's counsel to comply with the Florida Construction Lien Law, and the
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dissolution of any mechanics' and materialmen's liens (inchoate or otherwise)
affecting title to the Property.
d. BORROWER'S SUPERVISING ARCHITECT'S CERTIFICATION.
Certification from the Architect that all on-site and off-site Improvements
required to be constructed have been completed substantially in accordance with
the approved Plans and Specifications and are free of structural deficiency.
e. CONTRACTOR'S CERTIFICATION. Certification from
Contractor that all on-site and off-site Improvements required to be constructed
have been completed strictly in accordance with the approved Plans and
Specifications and are free of structural deficiency.
f. BORROWER'S AFFIDAVIT. Certification by Borrower
that all on-site and off-site Improvements required to be constructed have been
completed substantially in accordance with the approved Plans and Specifications
and are free of structural deficiency.
g. AS-BUILT PLANS AND SPECIFICATIONS. One (1) set of
detailed as-built plans and specifications must be submitted to Lender as soon
as they are completed but in no event later than one month from the issuance of
the Certificate(s) of Occupancy of the Improvements. They must be approved and
identified as such in writing by Borrower and Borrower's Architect. The set must
include plans and specifications for architectural, structural, mechanical,
plumbing, electrical and all site development (including storm drainage, utility
lines and landscaping) work.
h. CERTIFICATE OF OCCUPANCY. Certificate of Occupancy
from the applicable governmental authority and applicable acceptance
certification by the applicable governmental authority as to public works.
i. OTHER EVIDENCE. Such other evidence as Lender may
require to establish that the Improvements and their intended use comply with
all applicable zoning and other requirements of the public authorities having
jurisdiction including but not limited to compliance with the National
Environmental Policy Act and any other applicable Federal, State, local or
municipal environmental impact or energy laws or regulations.
j. INSURANCE. Insurance coverage shall be broadened
to include plate glass insurance and other permanent insurance in form
satisfactory to Lender.
16. NOTICE, FREQUENCY AND PLACE OF DISBURSEMENTS. At
Lender's option (a) the abovesaid request for advance shall be submitted to
Lender at least seven (7) business days prior to the date of the requested
advance, (b) disbursements shall be made no more frequently than monthly
(excluding advances at Lender's discretion for the payment of interest,
inspections, title endorsements or other advances from reserved funds in the
Loan Budget as permitted by this Agreement) and (c) all disbursements shall be
made by transfer to Borrower's account at Lender or at such other place as
Lender may designate from time to time.
17. DEPOSIT OF FUNDS ADVANCED. The above notwithstanding,
following any Event of Default, at Lender's option, Borrower shall deposit all
loan proceeds advanced by
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Lender in a separate and exclusive account to be withdrawn and used solely for
the payment of bills for labor, materials and fixtures used or to be used in
construction of the Improvements and other costs contemplated by the approved
budget, and Borrower will promptly furnish Lender with evidence thereof.
18. ADVANCES DO NOT CONSTITUTE A WAIVER. No advance of
Loan proceeds hereunder shall constitute a waiver of any of the conditions of
Lender's obligation to make further advances, nor in the event Borrower is
unable to satisfy any such condition, shall any such waiver have the effect of
precluding Lender from thereafter declaring such inability to be an event of
default described herein or in the Mortgage.
19. WARRANTIES AND REPRESENTATIONS TRUE. Borrower's
warranties, representations and covenants in the Loan Documents shall be true
and correct on and as of the date of each advance with the same effect as if
made on such date.
ARTICLE VI
DEFAULTS
Upon the occurrence of any one or more of the following circumstances
("Event(s) of Default"), Lender shall, at its option, be entitled, in addition
to and not in lieu of the remedies provided for in the Note, Mortgage, or other
Loan Documents, to proceed to exercise any remedy described herein:
1. DEFAULT UNDER PROMISSORY NOTE. Failure by Borrower to
pay, as and when due and payable, any installment of interest, principal or any
other payment required to be paid by the Mortgage, the Note hereby secured or
any other Loan Documents, after the expiration of any applicable grace period;
or
2. DEFAULT UNDER LOAN DOCUMENTS. Failure by Borrower to
duly observe any other covenant, condition or agreement of the Mortgage, the
Note, the Commitment, or any Loan Document or any other security instrument
given hereunder after the expiration of any applicable grace period; or
3. DEFAULT OF OTHER OBLIGATIONS. Failure by Borrower to
pay, as and when due and payable, all the indebtedness, or to duly observe all
of the covenants, conditions and agreements now or hereafter existing between
Borrower or Participant and Lender pursuant to the terms and conditions of any
other obligation or indebtedness; or
4. BREACH OF WARRANTY. Any warranty made or agreed to be
made herein or in any related Loan Document heretofore, concurrently or
hereafter executed shall be breached by Borrower or shall prove to be false or
misleading; or
5. FILING OF LIENS AGAINST THE PROPERTY. Any lien for
labor, material, taxes or otherwise shall be filed against the Property or
otherwise incurred and not be removed within fifteen (15) days from the date of
filing any such lien; or
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6. MATERIAL ADVERSE CHANGE. Borrower or any Guarantor
shall suffer any material adverse change in either's respective financial
condition which, in Lender's reasonable opinion, could impair the ability of
Borrower to perform all of its duties and obligations under the Loan Documents;
or
7. DEFICIENCY. In Lender's sole opinion, the cost of
completing the Improvements in accordance with the Plans and Specifications
exceeds the total amount set forth in the Loan Budget, and Borrower has failed
to make arrangements satisfactory to Lender, in Lender's sole discretion, for
the payment of such additional costs; or
8. LEVY UPON THE PROPERTY. A levy be made under any
process on, or a receiver be appointed for the Property or any other property of
Borrower; or
9. BANKRUPTCY OR INSOLVENCY OF BORROWER.
a. The filing by Borrower or any Guarantor of a
voluntary petition in bankruptcy for adjudication as a bankrupt or insolvent, or
the filing by Borrower or any Guarantor of any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, or Borrower or any Guarantor
seeking or consenting to or acquiescing in the appointment of any trustee,
receiver or liquidator of Borrower or any Guarantor or of all or any substantial
part of the Property or of any or all of the rents, revenues, issues, earnings,
profits or income thereof, or the making of any general assignment for the
benefit of creditors, or written admission by Borrower or any Guarantor of its
inability to pay its debts generally as they become due; or
b. The filing of a petition against Borrower or any
Guarantor seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors, or the appointment of any trustee, receiver or
liquidator of Borrower or any Guarantor or of all or any substantial part of the
Property or of any or all of the rents, revenues, issues, earnings, profits or
income thereof without Borrower's consent or acquiescence or the death of
Borrower or Guarantor or both; or
10. ASSIGMENT FOR THE BENEFIT OF CREDITORS. Borrower or
any Guarantor shall make a general assignment for the benefit of creditors; or
11. TRANSFER OF PROPERTY. Borrower shall, without
Lender's prior written consent, whether voluntarily or by operation of law,
sell, transfer, convey or further encumber all or any part of its interest in
the Property or in any of the personally located thereon or used or intended to
be used in connection therewith, excepting only transfers due to involuntary
condemnation which do not render the Property useless for its intended purpose
hereunder.
12. ABANDONMENT OR CESSATION OF CONSTRUCTION.
Construction of the Improvements shall be abandoned or shall cease for any
reason and not be resumed within thirty
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(31) business days thereafter unless such cessation is due to any reason set
forth in Paragraph 12, Article IV of this instrument, to strike or
unavailability of materials unless such events of force majeure shall delay
construction so long that the Improvements reasonably cannot be completed within
the time allocated for completion herein; or
13. LIEN AGAINST PROPERTY. Borrower grants any mortgage,
lien or encumbrance upon the Property other than in connection with receivables
financing for which Borrower has obtained Lender's written approval; or
14. FAILURE TO DISPROVE DEFAULT. Lender shall reasonably
suspect the occurrence of one or more of the abovesaid Events of Default and
Borrower, upon Lender's written request specifying such Event of Default, shall
fail to provide evidence reasonably satisfactory to Lender that such Event or
Events of Default have not in fact occurred; or
15. ENCROACHMENTS AND PERMITS. Any Improvements which
encroach upon any street or road setback or easement or upon any adjoining
property, or violate any ordinance, regulation, rule or direction of any federal
or state agency, or of any governmental or quasi-governmental authority, or any
zoning setback line, or the building permit(s) shall be revoked or suspended or
shall lapse, or if any building or other permit or license shall be conditional
in nature and Borrower shall fail to punctually satisfy the conditions so as to
prevent its invalidity; or
16. UNAUTHORIZED WORK. Borrower shall, without Lender's
prior written consent, undertake or contract for work on the Property outside of
or beyond the scope of the Plans and Specifications; or
17. BREACH. A violation or breach shall occur in any
agreement, covenant or restriction affecting title to the Property, including
but not limited to matters appearing as permitted exceptions in the Title
Policy; or
18. COMMENCEMENT OF CONSTRUCTION. Construction of the
Improvements has not commenced within thirty (31) days of the date hereof; or
19. CROSS-DEFAULT OF NOTE. The Mortgage, and the Note it
secures, is and shall continue to be cross-defaulted with that certain Mortgage,
dated November 9, 1994, between Lender and Vacation Break Resorts, Inc., a
Florida corporation, (the "Ramada Mortgage"), as modified, and the Note it
secures. In the event of default under the Ramada Mortgage or the Note it
secures, such default shall also constitute a default under the Mortgage and the
Note it secures; and any default under the Mortgage or the Note it secures shall
constitute a default under the Ramada Mortgage and the Note it secures. In
addition, any default (after the expiration of any applicable grace period) of
any obligations of Vacation Break Resorts, Inc. and any and all of its
affiliates to FINOVA Capital Corporation under that Certain Loan and Security
Agreement dated as of August 16, 1993 as amended by Amendment No. 1 to Loan and
Security Agreement dated December 16, 1993, Amendment No. 2 to Loan and Security
Agreement dated December 7, 1994, a letter agreement dated November 29, 1994,
and Amendment No. 4 to Loan and Security Agreement dated December 7, 1994 and
Amendment No. 5 To, and Assumption Of,
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Loan and Security Agreement dated March 1, 1996, as the same may be further
amended or modified hereafter shall automatically be a default under the
Mortgage and the Note it secures.
20. FILING OF NOTICE. The filing for record by Borrower
or any Guarantor of a notice limiting the maximum amount which may be secured by
the Mortgage pursuant to Section 697.14(1)(b) of the Florida Statutes (1993).
21. DEATH OF GUARANTOR. The death of an individual
Guarantor.
ARTICLE VII
REMEDIES OF LENDER
Upon the occurrence of any one or more of the circumstances set out as
an Event of Default herein, Lender shall, at its option, be entitled, in
addition to and not in lieu of the remedies provided for in the Note, Mortgage
or other related Loan Documents, to proceed to exercise any of the following
remedies:
1. DEFAULT CONSTITUTES DEFAULT UNDER LOAN DOCUMENTS.
Borrower agrees that the occurrence of such Event of Default shall constitute a
default under each of the Loan Documents, thereby entitling Lender (a) to
exercise any of the various remedies therein provided, including the
acceleration of the indebtedness evidenced by the Note and the foreclosure of
the Mortgage, and (b) cumulatively to exercise all other rights, options and
privileges provided by law or in equity.
2. RIGHT OF LENDER TO ASSUME POSSESSION AND TO COMPLETE
CONSTRUCTION. Borrower agrees, upon Lender's request, to vacate the Premises and
permit Lender:
a. to enter into possession, and
b. to employ security watchmen or otherwise to
protect and secure the Property.
c. to perform or cause to be performed any and
all work and labor necessary to complete the Improvements in accordance with
the Plans and Specifications,
d. to disburse that portion of the Loan
proceeds not previously disbursed (including any retainage) to the extent
necessary to complete construction of the Improvements in accordance with the
Plans and Specifications, and if such completion requires a larger sum than the
remaining undisbursed portion of the Loan, to disburse such additional funds,
all of which funds so disbursed by Lender shall be deemed to have been disbursed
to Borrower and shall be secured by the Mortgage. For this purpose, Borrower
hereby constitutes and appoints Lender its true and lawful attorney-in-fact with
full power of substitution to complete the construction of the Improvements in
Borrower's name and hereby empowers Lender as said attorney-in-fact to take all
actions necessary in connection therewith, including but not limited to the
following: (i) to use any funds of Borrower, including any balance which may be
held in
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escrow and any funds which may remain unadvanced hereunder, for the purpose of
completing the Improvements in the manner called for by the Plans and
Specifications; (ii) to make such additions and changes and corrections in the
Plans and Specifications which shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the Plans and
Specifications; (iii) to employ such contractors, subcontractors, agents,
architects, engineers and inspectors as shall be required for said purposes;
(iv) to pay, settle or compromise all existing or future bills and claims which
are or may be liens against the Property or which may be necessary or desirable
for the completion of the Improvements or the clearance of title to the
Property; (v) to execute all applications and certificates in Borrower's name
which may be required by any construction contract; and (vi) to do any and every
act with respect to the construction of the Improvements which Borrower may do
in its own behalf. It is understood and agreed that this power of attorney shall
be deemed to be a power coupled with an interest which cannot be revoked by
death or otherwise. Said attorney-in-fact shall also have power to prosecute and
defend all actions or proceedings in connection with the construction of the
Improvements and to take such action and require such performance as it deems
necessary. In accordance therewith, Borrower hereby assigns and quitclaims to
Lender all sums to be advanced hereunder, including retainage and any sums in
escrow, conditioned upon the use of said sums, if any, for the completion of the
Improvements.
ARTICLE VIII
MISCELLANEOUS
In the event of a conflict with other provisions of this Loan
Agreement, the provisions of this Article shall control.
1. BINDING TERMS. All of the obligations, covenants, terms and
conditions hereof shall be binding obligations, covenants, terms and conditions
throughout the term of this Loan.
2. BANK ACCOUNTS. Borrower shall open and maintain during the
entire term of this Loan all of its accounts with respect to this project at
SUNTRUST BANK, SOUTH FLORIDA, N.A., a national banking association. Provided,
however, receivable bank accounts shall be maintained as required by receivable
loan agreements.
3. CERTIFICATE RE: APPLICATION OF PROCEEDS AND REMAINING
COSTS. Bills or statements for all expenses for which a disbursement is
requested shall, at Lender's option, be presented to Lender along with both a
certification from Borrower, Architect, and Contractor that all labor and
materials for which funds are requested have gone into the Project according to
the approved Plans and Specifications, and a certification from all of said
parties setting forth the estimated remaining cost of construction to complete
the Project.
4. PAYMENT OF CONSTRUCTION COSTS. Lender shall be under no
duty or obligation to anyone to ascertain whether Borrower has used or will use
the Loan proceeds for the payment of bills incurred by Borrower in connection
with the construction of
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the Improvements. Payment of all bills for labor and materials in connection
with the construction of the Improvements shall be Borrower's responsibility,
and Lender's sole obligation shall be to advance the proceeds of the Loan
subject to, and in accordance with this Loan Agreement.
5. RECOMMENDATION BY LENDER'S INSPECTOR. At no time shall
Lender be obligated to disburse funds in excess of that recommended by Lender's
Inspector.
6. NOTICES TO ALL PARTIES. All notices, statements, requests
and demands given to or made upon any party hereto in accordance with the
provisions of this Loan Agreement shall be deemed to have been given or made
when hand delivered or when deposited in the Certified Mails of the United
States, Return Receipt Requested, postage prepaid, addressed to such party at
the address or addresses hereinabove stated following the names of the
respective parties, or to a different address in accordance with any unrevoked
written direction from such party to the other parties hereto, except in cases
where it is expressly provided herein that such notice, request or demand shall
not be effective until received by the party to whom it is intended.
7. NO PARTNERSHIP OR JOINT VENTURE. Nothing herein contained
nor the acts of the parties hereto shall be construed to create a partnership or
joint venture between Borrower and Lender, and the parties hereby acknowledge
that no such relationship exists between them.
8. NO ASSIGNMENT BY BORROWER. This Agreement may not be
assigned by Borrower without the prior written consent of Lender. If Lender
approves an assignment hereof by Borrower, Lender shall be entitled to make
advances to such assignee and such advances shall be evidenced by the Note and
secured by the Mortgage and related Loan Documents. Borrower shall remain liable
for payment of all sums advanced hereunder before and after such assignment and
all Guarantors shall remain liable under their respective guaranties.
9. PARTIAL RELEASES. Provided there exists no event of default
under this Loan Agreement, the Note, the Mortgage or any related Loan Document,
at the closings of the sale of vacation ownership weeks, Lender will release
such vacation ownership weeks from the lien of the Mortgage upon payment of the
applicable release price together with a $25.00 release fee per vacation
ownership week ($12.50 for biennial unit weeks). The release prices shall be
determined based upon the outstanding balance of the Loan as of eighteen (18)
months from the date of this Loan Agreement and shall be in such an amount that
would cause Loan repayment in full assuming eighty percent (80%) of the vacation
ownership weeks are sold and released. For example, if the Loan is fully funded
eighteen (18) months from the date of this Loan Agreement, then the vacation
ownership week release price would be $3,721.00. The release price for biennial
vacation ownership weeks will be one-half of the vacation ownership week release
price.
Payments received from the Borrower after 11:00 A.M. eastern
time will be effective on the next business day.
10. PARTICIPATION. As set forth in the Commitment,
Participant, pursuant to a Participation Agreement, is providing forty percent
(40% of the loan funds. All payments received will be applied in proportion to
the respective Loan shares of Lender and Participant.
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11. PREPAYMENT. Pursuant to the $13,000,000.00 Future Advance
Note, prepayments are permitted only as set forth in this Agreement. As to that
portion of the Loan accruing interest at one percent (1%) above the Prime Rate
("Lender's Share") prepayment shall be permitted at any time, without penalty.
However, except for payments made for the release of vacation ownership weeks as
set forth in Paragraph 9 of this Article VIII, there shall be prepayment
penalties for any prepayments pertaining to that portion of the Loan accruing
interest at two percent (2%) above the Prime Rate ("Participant's Share") of the
Loan as follows:
(a) A prepayment penalty of three percent (3%) of any
such prepayment made during the first year after the Loan closing date.
(b) A prepayment penalty of two percent (2%) of any
such prepayment made during the second year after the Loan closing date.
(c) A prepayment penalty of one percent (1%) of any
such prepayment made during the third year after the Loan closing date.
(d) No prepayment penalty thereafter.
In the event a prepayment is made which is not in the same
proportion as Participant's and Lender's Shares, the Note payments thereafter
shall be adjusted appropriately.
Borrower acknowledges and agrees that in the event that it,
pursuant to the terms of the said Future Advance Note, elects to fix the
interest rate as to that portion of the indebtedness which now bears interest at
2 % above the Prime Rate, then the same pre-payment penalties as set forth above
shall thereafter apply to that portion of the indebtedness converted to a fixed
rate.
12. USURY. It is the intention of the parties to comply with
all applicable usury laws. Accordingly, it is agreed that notwithstanding any
provision to the contrary in the Loan Documents, in no event shall the Loan
Documents require the payment or permit the collection of interest in excess of
the maximum amount permitted by such laws. If any such excess of interest is
contracted for, charged or received under the Loan Documents, or in the event
the maturity of the indebtedness evidenced by such Loan Documents is accelerated
in whole or in part, so that under any such circumstance, the amount of interest
contracted for, charged or received shall exceed the maximum amount of interest
permitted by the applicable usury laws, then in any such event (a) the
provisions of this paragraph shall govern or control, (b) neither Borrower nor
any other person or entity now or hereafter liable for repayment of the Loan
shall be obligated to pay the amount of such interest not permitted by the
applicable usury laws, (c) any such excess which may have been collected shall
be refunded to Borrower and (d) the effective rate of interest for the Note
shall be automatically reduced to the maximum lawful rate allowed under
applicable usury laws.
13. TIME. Time is of the essence of this Loan Agreement.
14. WAIVER. No waiver of any term, provision, condition,
covenant or agreement herein contained shall be effective unless set forth in a
writing signed by Lender, and
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any such waiver shall be effective only to the extent set forth in such writing.
No failure by Lender to exercise, or no delay by Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof, or the exercise of any right or remedy
provided by law. No notice to or demand on Borrower in any case shall, in
itself, entitle Borrower to any other or further action in any circumstance
without notice or demand.
15. CONFLICT. The provisions of this Loan Agreement shall
control in the event of any conflict among it, the Commitment, the Note, the
Mortgage and any other Loan Document.
16. NO ADDITIONAL FINANCING. The Lender's obligation to fund
this loan is limited to the principal amount set forth herein and the Lender is
not obligated to fund any additional amounts other than as set forth herein. It
is expressly understood that Borrower has sought and agreed to the terms for
repayment set forth herein and it is the burden of the Borrower to provide any
permanent financing, bridge financing, or other financing which may be necessary
to repay this loan on or prior to the maturity date. It is expressly understood
that it is not the responsibility of the Lender to provide to Borrower further
financing of the Project or the repayment of this loan.
ARTICLE IX
GENERAL CONDITIONS
The following conditions shall apply throughout the term of
this Loan Agreement:
1. RIGHTS OF THIRD PARTIES. All conditions of Lender's
obligations hereunder, including the obligation to make advances, are imposed
solely and exclusively for the benefit of Lender, its successors and assigns,
and no other person other than the Borrower, shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled to
assume that Lender will refuse to make advances in the absence of strict
compliance with any or all thereof, and no other person, other than the
Borrower, under any circumstance, shall be deemed to be a beneficiary of such
conditions, any and all of which Lender freely may waive in whole or in part at
any time if, in its sole discretion, it deems it desirable to do so. In
particular, Lender makes no representation and assumes no obligation as to third
parties concerning the quality of the construction of the Improvements by
Borrower or the absence therefrom of defects. In this connection, Borrower
agrees to and shall indemnify Lender from any liability, claim or loss and
attorneys' fees and costs resulting from the disbursement of the Loan proceeds
or from the condition of the Property, whether related to the quality of
construction or otherwise and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and shall continue
in full force and effect so long as the possibility of such liability, claim or
loss exists.
2. EVIDENCE OF SATISFACTION OF CONDITIONS. Any condition of
this Loan Agreement which requires the submission of evidence of the existence
or nonexistence of a specified fact or facts, implies as a condition the
existence or nonexistence, as the case may be, of
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such fact or facts, and Lender shall, at all times, be free to establish
independently and to its satisfaction and in its absolute discretion such
existence or non-existence.
3. WAIVER OF TRIAL BY JURY. Borrower hereby knowingly,
voluntarily and intentionally waives the right it may have to a trial by jury in
respect of any litigation based hereon, or arising out of, under or in
connection with this Loan Agreement and any document contemplated to be executed
in conjunction herewith, or any course of conduct, course of dealing, statements
(whether verbal or written) or actions of either party. This provision is a
material inducement for the Lender to enter into this Loan.
4. ASSIGNMENT. Lender shall have the unconditional right to
assign all or any part of its interest hereunder to any third party, but
Borrower may not assign this Loan Agreement or any of its rights or obligations
hereunder without Lender's prior written consent.
5. SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in
this Loan Agreement one of the parties hereto is named or referred to, the
heirs, legal representatives, successors and permitted assigns of such party
shall be included, and all covenants and agreements contained in this Loan
Agreement by or on behalf of Borrower or by or on behalf of Lender shall bind
and inure to the benefit of their respective heirs, legal representatives,
successors and permitted assigns, whether so expressed or not.
6. HEADINGS. The headings of the sections, paragraphs and
subdivisions of this Loan Agreement are for the convenience of reference only,
are not to be considered a part hereof and shall not limit or otherwise affect
any of the terms hereof.
7. INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment of
any provision hereof or any transaction related hereto at the time performance
of such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision herein
contained operates or would prospectively operate to invalidate this Loan
Agreement in whole or in part, then only such clause or provision shall be held
for naught as though not herein contained, and the remainder of this Loan
Agreement shall remain operative and in full force and effect.
8. NUMBER AND GENDER. Whenever the singular or plural number,
masculine or feminine, or neuter gender is used herein, it shall equally include
the other.
9. AMENDMENTS. Neither this Loan Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by
written instrument signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
10. GOVERNING LAW. This Loan Agreement shall be governed in
its enforcement, construction and interpretation by the laws of the State of
Florida.
11. LITIGATION. In the event any legal proceedings are
instituted between the parties concerning this Loan Agreement, the Note, the
Mortgage, or any other Loan Documents,
32
<PAGE>
the Lender shall be entitled to recover its costs of suit, including attorneys'
fees, at both trial and appellate levels.
33
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on
the dates specified below.
WITNESSES: BORROWER:
SEA GARDENS BEACH AND TENNIS
______________________ RESORT, INC , a Florida Corporation
______________________ BY:/S/HENRY M.CAIRO
----------------------------------------
HENRY M. CAIRO, CHIEF OPERATING
OFFICER/CHIEF FINANCIAL OFFICER
Dated: November 27, 1996
LENDER:
SUNTRUST BANK, SOUTH FLORIDA,
N.A., a national banking association
______________________ By: /S/CHARLENE A. BENDER
----------------------------------------
CHARLENE A. BENDER, FIRST VICE PRESIDENT
______________________ Dated: November 27, 1996
34
<TABLE>
EXHIBIT 11.1
VACATION BREAK U.S.A., INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
<CAPTION>
Three months ended
June 30, 1997 June 30, 1996
------------- -------------
Fully
Primary Primary Diluted
Actual number of common shares
<S> <C> <C> <C>
outstanding 8,615,141 8,570,000 8,570,000
--------- --------- ---------
Weighted average number of common
shares issued and outstanding 8,612,889 8,570,000 8,570,000
Common stock equivalents computed
under the Treasury Stock method - 295,391 408,918
---------- --------- ---------
8,612,889 8,865,391 8,978,918
========= ========= =========
Net income $ 2,808,173 $ 4,938,950 $ 4,938,950
========= ========= =========
Net income per share (1) $ 0.33 $ 0.56 $ 0.55
==== ==== ====
(1) The dilutive effect of common stock equivalents was less that 3% for the
three months ended June 30, 1997
Six months ended
June 30, 1997 June 30, 1996
------------- -------------
Fully
Primary Primary Diluted
Actual number of common shares
outstanding 8,615,141 8,570,000 8,570,000
--------- --------- ---------
Weighted average number of common
shares issued and outstanding 8,593,973 8,555,000 8,555,000
Common stock equivalents computed
under the Treasury Stock method 286,965 201,236 359,403
--------- --------- ---------
8,880,938 8,756,236 8,914,403
========= ========= =========
Net income $ 5,094,134 $ 6,426,949 $ 6,426,949
========= ========= =========
Net income per share (2) $ 0.57 $ 0.73 $ 0.72
==== ==== ====
(2) The use of Common stock equivalents for the EPS computation was
anti-dilutive to the computation of the fully diluted EPS for the six months
ended June 30, 1997.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,180
<SECURITIES> 124
<RECEIVABLES> 97,482
<ALLOWANCES> (3,182)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,878
<DEPRECIATION> (5,183)
<TOTAL-ASSETS> 158,030
<CURRENT-LIABILITIES> 24,570
<BONDS> 63,799
0
0
<COMMON> 86
<OTHER-SE> 32,961
<TOTAL-LIABILITY-AND-EQUITY> 158,030
<SALES> 56,871
<TOTAL-REVENUES> 62,755
<CGS> 14,623
<TOTAL-COSTS> 34,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,808
<INTEREST-EXPENSE> 2,437
<INCOME-PRETAX> 8,050
<INCOME-TAX> 2,956
<INCOME-CONTINUING> 5,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,094
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0
</TABLE>
