EXHIBIT 10.2
FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED INVENTORY
LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED INVENTORY LOAN AND
SECURITY AGREEMENT ("Fourth Amendment") dated April 30, 2002, is made by and
between SILVERLEAF RESORTS, INC., a Texas corporation f/k/a SILVERLEAF VACATION
CLUB, INC., f/k/a ASCENSION CAPITAL CORPORATION, successor by merger to
ASCENSION RESORTS, LTD. d/b/a SILVERLEAF RESORTS, LTD., a Texas limited
partnership ("BORROWER"), whose address is 0000 Xxxxxxxxx, Xxxxx 000, Xxxxxx,
Xxxxx 00000, and Xxxxxx Financial, Inc., a Delaware corporation whose address is
000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 ("LENDER").
RECITALS:
WHEREAS, on December 27, 1995 Borrower and Lender entered into that
certain Loan and Security Agreement (the "Original Inventory Loan Agreement") as
amended on February 28, 1996 and December 27, 1996 (the "Original Inventory
Loan"); and
The Original Inventory Loan as amended was modified and amended
pursuant to that certain Amended and Restated Inventory Loan and Security
Agreement (the "Inventory Loan Agreement") between Borrower and Lender dated
September 1, 1999 (the "Inventory Loan"); and
The Inventory Loan was modified and amended pursuant to that certain
Second Amended and Restated Inventory Loan and Security Agreement (the
"Supplemental Loan Agreement") between Borrower and Lender dated March 1, 2001
to provide for a Supplemental Loan in the amount of $10,000,000.00 (the
"Supplemental Loan"), to be advanced to Borrower through a Supplemental
Revolving Period ending on March 23, 2001 (the "Original Supplemental Revolving
Period"), as modified and amended by that certain First Amendment to Second
Amended and Restated Inventory Loan and Security Agreement between Borrower and
Lender dated March 15, 2001 (the "First Amendment to Supplemental Loan"), and
that certain letter agreement dated April 12, 2001 ("Letter Agreement") (the
Original Inventory Loan Agreement, the Inventory Loan Agreement, the
Supplemental Loan Agreement, and all amendments and modifications thereto are
collectively referred to as the "Loan Agreement"); and
Due to the existence and continuation of certain Events of Default,
Lender and Borrower entered into that certain Forbearance Agreement dated April
27, 2001 (the "Forbearance Agreement") pursuant to which Borrower acknowledged
such Events of Default and Lender agreed to temporarily forbear in any
enforcement action conditioned upon certain matters set forth therein; and
The terms and obligations of Borrower under the Forbearance Agreement
shall continue in full force and effect in the event that the conditions set
forth in Section 4 and Section 8 hereof have not been satisfied; and
Pursuant to the Forbearance Agreement, the Supplemental Loan Agreement,
as amended, was further modified by that certain Second Amendment to Second
Amended and Restated Inventory Loan and Security Agreement between Borrower and
Lender dated May 3, 2001 (the "Second Amendment to Supplemental Loan") to extend
to Borrower a secured working capital credit facility (the "Working Capital
Facility") which is a component of the Supplemental Loan Agreement and provides
for advances to be additionally secured pursuant to the terms in the Second
Amendment to Supplemental Loan; and
Lender and Other Lenders entered into that certain Intercreditor
Agreement dated May 17, 2001 (the "Original Intercreditor Agreement") to
establish the priority of each Lender's respective security interest in the Real
Property Collateral (as defined therein) and to set forth their understanding
regarding future advances to Borrower; and
The Supplemental Loan Agreement, as amended, was further modified by
that certain Third Amendment to Second Amended and Restated Inventory Loan and
Security Agreement between Borrower and Lender effective July 27, 2001 (the
"Third Amendment to Supplemental Loan") to provide for certain terms in respect
of interest payments under the Working Capital Facility; and
Borrower, Lender and Union Bank of California, N.A. have entered into
that certain First Amendment to Forbearance Agreement dated December 31, 2001
("First Amendment to Forbearance Agreement") for the purpose of providing for,
among other things, the extension of the forbearance period as set forth under
the Forbearance Agreement; and
Borrower, Lender and Union Bank of California, N.A. have entered into
that certain Second Amendment to Forbearance Agreement dated February 12, 2002
("Second Amendment to Forbearance Agreement") for the purpose of providing for,
among other things, the extension of the forbearance period as set forth under
the Forbearance Agreement; and
Borrower desires to extend the Availability Period, the Revolving
Period, the Supplemental Availability Period, the Supplemental Revolving Period,
and the maturity dates for the Inventory Loan and the Supplemental Loan; and
As consideration in exchange for Lender's agreement to extend the
revolving and availability periods and the maturity dates of the Inventory Loan
and the Supplemental Loan, Borrower agrees to amend the terms for allocation of
the Real Estate Collateral Proceeds (as defined hereinbelow) under the Loan
Agreement, and grant to Lender security interests in the Additional Collateral
and the Ineligible Note Portfolio; and
Borrower's agreement to grant to Lender security interests in the
Additional Collateral and the Ineligible Note Portfolio and to modify the
conditions of collateralization under the Loan Agreement serves as significant
inducement for Lender to extend the revolving and availability periods and
maturity dates of the Inventory Loan and the Supplemental Loan; and
2
Lender and Borrower desire to further modify the provisions under the
Supplemental Loan and the Inventory Loan to extend the respective revolving
periods and maturity dates of the Supplemental Loan and the Inventory Loan, to
amend the conditions for collateralization under said Loans and to provide for
such security interests in the Additional Collateral and the Ineligible Note
Portfolio as described hereinbelow; and
Pursuant to the terms of this Fourth Amendment, Borrower shall make and
deliver to Lender that certain Second Amended and Restated Promissory Note dated
of even date herewith ("Second Amended and Restated Promissory Note"), a copy of
which is attached hereto as EXHIBIT A); and
Pursuant to the terms of this Fourth Amendment, Borrower shall make and
deliver to Lender that certain Amended and Restated Revolving Promissory Note
(Inventory Loan) dated of even date herewith ("Amended and Restated Revolving
Promissory Note"), a copy of which is attached hereto as EXHIBIT B; and
Lender and Borrower, together with Additional Lenders, shall enter into
that certain Amended and Restated Intercreditor Agreement dated as of the
Closing Date, a copy of which is attached hereto as EXHIBIT C ("Intercreditor
Agreement"), to provide for cross-collateralization of certain properties
secured under the Loan Agreements between Borrower and Lender and under the
Additional Loan Agreements; and
Borrower, Lender and Union Bank of California, N.A. are entering into
the Second Amendment to Amended and Restated Receivables Loan and Security
Agreement dated of even date herewith, a copy of which is attached hereto as
EXHIBIT P ("Second Amendment to Amended and Restated Receivables Loan
Agreement"); and
The parties desire to further amend the terms of the Supplemental Loan
Agreement, as amended, as set forth herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
1. RECITALS. The above recitals are true and correct and are
incorporated herein.
2. INCORPORATION. The Exhibits and Schedules attached hereto are
incorporated herein and made a part hereof.
3. DEFINITIONS. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
4. TEXTRON AND SOVEREIGN OBLIGATION TO FUND. Notwithstanding anything
herein to the contrary, the obligation of Lender to make any Advance under this
Loan Agreement shall be subject to and conditioned upon (i) both Textron and
Sovereign entering into agreements with
3
Borrower to extend certain additional financing to Borrower pursuant to the
Textron Documents and the Sovereign Documents as provided in the Intercreditor
Agreement dated as of the Closing Date among Textron, Sovereign and Lender, on
or before the date that any Advance hereunder is to be made and (ii) as
determined by Lender in its sole and absolute discretion, both Textron and
Sovereign each making advances to Borrower substantially in accordance with the
Business Plan, including the Senior Lender Advance Schedule attached thereto,
which Lender agrees will be determined on a quarterly basis commencing on April
1, 2002. Lender shall have no obligation to make any Advance hereunder to the
extent that: (i) either Sovereign or Textron terminates its respective facility;
(ii) as determined by Lender in its sole and absolute discretion, Sovereign or
Textron fails at any time to make advances to Borrower substantially in
accordance with the Business Plan, which Lender agrees will be determined on a
quarterly basis commencing on April 1, 2002; (iii) Borrower shall fail to close
under the DZ Facility and execute and deliver copies of the DZ Documents to
Lender; or (iv) the Bond Holder Exchange Transaction has not been consummated
pursuant to the terms of the Bond Holder Exchange Term Sheet.
5. LOANS; FORBEARANCE FEE.
(a) Borrower acknowledges, agrees and confirms that as of the
date hereof the outstanding principal balances of the Inventory Loan, the
Supplemental Loan, and the Receivables Loan are, respectively, $9,936,000,
$8,543,633.81, and $31,886,168.56.
(b) At no time shall Lender be required to advance outstanding
loans in excess of $50,000,000 in the aggregate under the Inventory Loan, the
Receivables Loan (the Receivables Loan also includes, in addition to Lender's
commitment, a $20,000,000 commitment by Union Bank of California, N.A.), and the
Supplemental Loan. In the event that the total sum of the outstanding balances
advanced by Lender under the Inventory Loan, the Receivables Loan and the
Supplemental Loan exceeds $50,000,000, Borrower shall immediately repay to
Lender one or more of such Loans in the amount necessary to reduce the aggregate
outstanding balances to $50,000,000 or a lesser amount.
(c) Borrower acknowledges, agrees and confirms that as of the
date hereof and during the term of this Loan Agreement Borrower has not and
shall not pledge any Timeshare Intervals as Collateral under the Supplemental
Loan.
(d) Borrower acknowledges that Borrower is not entitled to
request or receive any further Advances under the Receivables Loan.
(e) Borrower acknowledges, agrees and confirms that as of the
date hereof and during the term of this Loan Agreement Borrower shall not pledge
to Lender any Timeshare Interval which has been previously pledged or will be
simultaneously pledged to any lender or Person (except for the second priority
pledge described in Section 7(g) below).
(f) Borrower agrees that any repayment ("Excess Collateral
Payment") of the outstanding principal balance of the Inventory Loan from the
proceeds of the Real Estate
4
Collateral or from the Receivables Loan Collateral following the full payment of
all indebtedness and obligations under the Receivables Loan, or from the
proceeds of the Supplemental Loan Collateral following the full payment of all
indebtedness and obligations under the Supplemental Loan, or from the proceeds
of any collateral other than Intervals securing the Inventory Loan ("Excess
Collateral") shall constitute a permanent paydown of the Inventory Loan
resulting in a permanent reduction in the Inventory Loan Availability and
Borrower shall not have the right to reborrow any portion of such Excess
Collateral Payment under the Inventory Loan; nor shall Borrower be entitled to
the release of any Intervals in connection with such Excess Collateral Payment.
Thereafter, all Intervals in excess of that number of Intervals equal to (i) the
outstanding principal balance of the Inventory Loan after the application of the
Excess Collateral Payment, divided by (ii) 1600, shall be held by Lender as
additional collateral (the "Excess Intervals") for the Inventory Loan. The
Availability under the Inventory Loan shall be reduced by such Excess Collateral
Payment.
(g) Borrower agrees that proceeds derived from any excess
Notes Receivable securing the Receivables Loan shall be used to pay down the
Inventory Loan, subject to Subsection (f) above.
(h) As consideration in exchange for Lender's agreements under
the Second Amendment to Forbearance Agreement and this Fourth Amendment,
Borrower agrees to pay to Lender a forbearance fee ("Forbearance Fee") in the
amount of Four Hundred and Fifty Thousand Dollars ($450,000.00). Such
Forbearance Fee shall be paid as follows:
(i) On the Closing Date, the amount of Fifty Thousand
Dollars ($50,000.00), by wire transfer fund pursuant to transfer instructions
provided by Lender; and
(ii) The balance thereafter shall be paid in
quarterly installments of Fifty Thousand Dollars ($50,000.00) each due on the
first day of every July, October, January and April until paid in full unless
otherwise accelerated pursuant to the terms hereof.
6. THE FOLLOWING SECTION 1.7 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
SUSPENSION OF ADVANCES. Lender shall not be obligated to fund any
Advance hereunder if: (i) Borrower shall fail to substantially adhere to the
Business Plan as determined by Lender in its sole and absolute discretion, (ii)
Lender in its sole and absolute discretion determines that any of the conditions
in Sections 4, 5 and 6 of the Loan Agreement or Sections 4, 7, 9, 10 and 11 of
this Fourth Amendment are not true or have not been complied with, or (iii) a
Default or Event of Default shall have occurred and be continuing.
7. SECTION 2.2 OF THE SUPPLEMENTAL LOAN AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING THERETO:
5
(a) NOTES RECEIVABLE. Borrower shall not take any action (nor permit or
consent to the taking of any action) which might reasonably be anticipated to
impair the value of the Collateral or any of the rights of Lender in the
Collateral. Borrower shall not (i) modify or amend any of the Pledged Documents
without Lender's prior written consent except that Borrower shall be permitted
to modify up to (1) 15% of the Notes Receivable which are to be pledged to
Lender by reducing the interest rate charged and/or (2) 20% of the Notes
Receivable which are to be pledged to Lender by extending the term of the Notes
Receivable beyond 84 months so long as (a) no Financed Notes Receivable shall
have been modified more than two times; (b) all Financed Notes Receivable have a
weighted average interest rate of 13.75%; (c) no term exceeds 120 months; (d) no
more than 20% of all Financed Notes Receivable have a term exceeding 84 months;
(e) at such time as 10% of the Financed Notes Receivable constitute Notes
Receivable which have been modified as permitted hereunder any additional
modified Notes Receivable to be pledged to Lender shall be subject to the
further requirement that the Purchasers under such modified Notes Receivable to
be pledged to Lender shall have made two (2) timely and consecutive monthly
payments; (f) no additional modified Notes Receivable shall be pledged to Lender
after the expiration of the Revolving Period except in replacement of a modified
Financed Note Receivable which has become ineligible; (g) no unmodified Financed
Note Receivable which becomes ineligible may be replaced with a modified Note
Receivable; and (h) there shall be no limit on assumptions of Notes Receivable
provided the purchaser has made a 10% down payment, or (ii) grant extensions of
time for the payment of, compromise for less than the full face value, release
in whole or in part any Purchaser liable for the payment of, or allow any credit
whatsoever except for the amount of cash to be paid upon, any Collateral or any
instrument or document representing the Collateral.
If a Note Receivable is a newly originated Eligible Note Receivable
which is replacing an existing Eligible Note Receivable pledged as Collateral
under the Loan Agreement and the proceeds have been used to finance the purchase
of an Interval which is being upgraded by the consumer borrower to a more
expensive Interval, then (a) the principal balance of the existing Eligible Note
Receivable which is being upgraded may still be included for purposes of
calculating the Availability for a period of time expiring on the earlier to
occur of (i) the 31st day after the consumer documents effecting the upgrade
have been executed or (ii) the date on which any payment on such Eligible Note
Receivable becomes thirty (30) or more days past due, and (b) on or before the
second (2nd) Business Day after the expiration of the statutory rescission
period in connection with any consumer documents executed effecting any upgrade
involving an Eligible Note Receivable and in any event within ten (10) days of
such upgrade, Borrower shall deliver to Lender or its designee the original of
the new promissory note executed in connection with such upgrade duly endorsed
in blank by Borrower and Borrower will cause all payments made with respect to
such new promissory note to be forwarded to the Lockbox.
(b) ADDITIONAL COLLATERAL. In addition to the other Collateral and as
consideration for Lender's agreements herein and under the Intercreditor
Agreement, Borrower agrees that to secure the payment and performance of the
Inventory Loan and the Supplemental Loan, Borrower does hereby unconditionally
and irrevocably assign, pledge and grant to Lender,
6
together with Textron and Sovereign (as more particularly described in the
Intercreditor Agreement), a first priority continuing security interest and lien
in and to the right, title, and interest of Borrower in the (i) the Backup
Servicing Agreement, and (ii) the Consulting Agreement, and all proceeds,
profits, extensions, additions, improvements, betterments, renewals,
substitutions and replacements of the foregoing (collectively, the "Additional
Collateral"). On or before the Closing Date, Borrower shall execute and deliver
appropriate collateral assignments of each of the foregoing in the forms
approved by Lender at its sole and absolute discretion and attached hereto as,
respectively, EXHIBIT M and EXHIBIT N.
(c) REPLACEMENT NOTES RECEIVABLE. Except as may be provided in the
Business Plan, ineligible Notes Receivable shall be replaced with Eligible Notes
Receivable, to the extent available, on a dollar for dollar basis. If Borrower
is unable to deliver Eligible Notes Receivable to replace any ineligible Notes
Receivable, Borrower shall, subject to Lender's prior written consent (which
consent may be withheld at Lender's sole and absolute discretion), deliver
additional Notes Receivable, if available, to Lender to replace the ineligible
Notes Receivable, including such additional Notes Receivable that do not satisfy
the criteria for Eligible Notes Receivable ("Non-Conforming Notes Receivable"),
provided, that no event of default has occurred and is continuing under such
additional Note Receivable. In the event that any Eligible Note Receivable
becomes available thereafter, Borrower shall promptly substitute such Eligible
Note Receivable for the Non-Conforming Note Receivable. Borrower acknowledges
and agrees that Borrower shall only be entitled to deliver Non-Conforming Notes
Receivable to Lender and Additional Lenders pro rata based on the then
outstanding principal balance of their respective loans to Borrower.
Notwithstanding anything stated to the contrary herein, Borrower acknowledges,
confirms and agrees that the aggregate amount of Advances then outstanding under
the Supplemental Loan shall be at all times equal to or less than seventy-five
percent (75%) of the principal balance of all Notes Receivable pledged to Lender
hereunder.
(d) TAX REFUND. Borrower agrees that it shall use the proceeds of the
Tax Refund strictly to fund Operating Expenses in accordance with the Business
Plan and for no other reason, without Lender's prior written consent. Borrower
further agrees that notwithstanding anything herein to the contrary, so long as
there shall be adequate proceeds from the Tax Refund to fund Operating Expenses
as provided in the Business Plan, Borrower shall not be entitled, nor shall
Lender be obligated to make, any Advance hereunder. Upon request of Lender,
Borrower shall promptly provide to Lender such evidence as Lender may request as
to the manner in which the proceeds of the Tax Refund are being used.
(e) INELIGIBLE NOTE PORTFOLIO. In addition to the other Collateral and
as consideration for Lender's agreements herein and under the Intercreditor
Agreement, Borrower agrees that to secure the payment and performance of the
Inventory Loan and the Supplemental Loan, Borrower does hereby unconditionally
and irrevocably assign, pledge and grant to Lender, together with Textron and
Sovereign (as more particularly described in the Intercreditor Agreement), a
first priority continuing security interest and lien in and to the right, title,
and interest of Borrower in the Ineligible Note Portfolio, which shall include
the notes and mortgages
7
as set forth on the attached SCHEDULE A, and all proceeds, profits, extensions,
additions, improvements, betterments, renewals, substitutions and replacements
of the foregoing (collectively, the "Ineligible Note Portfolio"). To perfect the
security interest of Lender in the Ineligible Note Portfolio, Borrower agrees,
subject to Lender's prior approval, to execute and cause to be filed, at
Borrower's sole cost and expense, UCC-1 financing statement(s) with the
appropriate state and local governmental authorities as requested by Lender and
Borrower, as agent and on behalf of Lender, Textron and Sovereign, unless and
until an Event of Default shall occur, shall retain in its possession of and
collect all payments under or in respect of all Notes Receivable in the
Ineligible Note Portfolio. By executing this Fourth Amendment, Borrower
acknowledges and agrees that it is holding such Notes Receivables as bailee and
agent for the Lender. Borrower shall hold and designate such Notes Receivable
and related Mortgages in a manner which clearly indicates that they are being
held by Borrower as bailee on behalf of Lender. Upon the occurrence of an Event
of Default, Borrower shall promptly deliver to Textron, as agent for Lender,
Sovereign and Textron, all original Notes Receivable comprising the Ineligible
Note Portfolio, the related Mortgages and the documents listed on SCHEDULE A
attached hereto and with respect thereto and thereafter Textron, as agent for
Lender, Sovereign and Textron, shall have the right to collect all proceeds
therefrom and apply the same to payment of the Indebtedness as set forth in the
Intercreditor Agreement.
Borrower also shall execute and deliver in escrow to Textron as agent
and on behalf of Lender and Additional Lenders all appropriate Assignments of
Mortgage as requested by Lender and Additional Lenders, in the form attached
hereto as EXHIBIT O and as approved by Lender and Additional Lenders at their
sole and absolute discretion, assigning equally to each of Lender, Textron and
Sovereign all of Borrower's rights, title and interests in all of the mortgages
relating to the Notes Receivable in the Ineligible Note Portfolio. Borrower
further agrees to promptly execute and deliver modifications or additional
Assignments of Mortgage requested by Lender and Additional Lenders in order to
continue the security interests of Lender, Textron and Sovereign in the
Ineligible Note Portfolio. Borrower acknowledges and agrees that upon a Default
or an Event of Default under the Supplemental Loan, the Inventory Loan, the
Textron Facility or Sovereign Facility, Textron, or a designee as designated by
Lender and Additional Lenders pursuant to the terms of the Intercreditor
Agreement, shall have the right to automatically record, at Borrower's sole cost
and expense, all such Assignments of Mortgage executed by Borrower and delivered
to Textron in accordance with the terms of this Section. Upon a Default or Event
of Default under the Supplemental Loan, the Inventory Loan, the Textron Facility
or Sovereign Facility, Borrower shall immediately deliver possession of the
Ineligible Note Portfolio and all documents relating thereto to Textron as agent
on behalf of Lender, Textron and Sovereign, as more particularly described in
the Intercreditor Agreement.
(f) ADDITIONAL RESORT COLLATERAL. Lender acknowledges and agrees that
in connection with their respective facilities, Textron and Sovereign have a
first priority security interest and Lien in the Additional Resort Collateral,
as set forth on the attached SCHEDULE 7(f) and more particularly described in
the Intercreditor Agreement. As additional consideration for Lender's agreements
in this Fourth Amendment and the Intercreditor Agreement, Borrower
8
agrees, and shall cause Textron and Sovereign to agree (as set out in their
respective Loan Agreements and in the Intercreditor Agreement), that upon the
occurrence of an Event of Default, Textron and Sovereign shall , upon approval
of the Majority of the Lenders (as defined in the Intercreditor Agreement), take
action to enforce their rights against the Additional Resort Collateral, subject
to the terms and conditions of the Intercreditor Agreement, provided, however,
that the consent of the non-consenting Senior Lender (for purposes of this
Section 7(f) only, the term "Senior Lender" shall mean Textron, Sovereign or
Lender), which consent shall not be unreasonably withheld or delayed, shall be
required for any sale or other disposition of all or any portion of the
Additional Resort Collateral if such action would, in the reasonable
determination of the non-consenting Senior Lender, have a material adverse
impact on the Collateral securing the non-consenting Senior Lender's respective
Loans to Borrower. The non-consenting Senior Lender shall be entitled upon its
written request to receive such information from the other Senior Lenders and
Borrower as may be reasonably necessary for the non-consenting Senior Lender to
make such determination. In the event a Senior Lender determines that a decision
by the Majority of the Lenders hereunder to sell or otherwise dispose of all or
any portion of the Additional Resort Collateral would, in the reasonable
determination of such non-consenting Senior Lender, have a material adverse
impact on the Collateral securing such non-consenting Senior Lender's respective
Loans to Borrower, such non-consenting Senior Lender shall immediately notify
the other Senior Lenders in writing and shall specify therein the basis for its
decision. In such event, such non-consenting Senior Lender shall cooperate in
good faith with the other Senior Lenders to effectuate such sale or disposition
in a manner such that there is no material adverse impact on the Collateral
securing the non-consenting Senior Lender's respective Loans to Borrower.
Notwithstanding the foregoing, any such sale or disposition shall be conditioned
upon the execution and recording in the appropriate public records of
subordination agreements protecting all use rights of the owners of the
Intervals entitled to use of the Additional Resort Collateral. If the
non-consenting Senior Lender does not give such notice within ten (10) days of
the date of the decision of the Majority of the Lenders, the non-consenting
Senior Lender shall be deemed to have waived any right to object to such
decision.
Notwithstanding anything stated to the contrary herein, in the event
that Textron or Sovereign takes possession or control of the Additional Resort
Collateral, Borrower agrees that the Standby Manager shall be responsible for,
among other things, the marketing, sale, resale and financing of all Intervals
at the related Resort or Resorts on behalf of Lender, Textron and Sovereign and
that Lender shall not be denied access to the amenities, sales centers or Resort
related information reasonably necessary to sell, finance, dispose of or manage
Lender's Collateral under the Inventory Loan, the Supplemental Loan and the
Receivables Loan.
(g) SECURITY INTEREST IN ALL PLEDGED NOTES RECEIVABLE. Borrower
acknowledges and agrees that each of Lender and Additional Lenders has been and
is hereby granted a security interest in all of Borrower's Notes Receivable
securing the Loans of each other Lender and all related documents including,
without limitation, contracts, mortgages, title insurance policies (the "Second
Priority Collateral"). As consideration for Lender's agreements under this Loan
Agreement and the Intercreditor Agreement, Borrower agrees that to secure the
payment and
9
performance of the Inventory Loan, the Supplemental Loan and the Receivables
Loan, Borrower does hereby unconditionally and irrevocably assign, pledge and
grant to Lender, (i) a second priority continuing security interest and lien in
and to the right, title, and interest of Borrower in all of Borrower's Second
Priority Collateral pledged to Sovereign as Primary Secured Lender (as defined
in the Intercreditor Agreement), and (ii) a second priority continuing security
interest and lien in and to the right, title, and interest of Borrower in all of
Borrower's Second Priority Collateral pledged to Textron as Primary Secured
Lender (as defined in the Intercreditor Agreement), and all proceeds, profits,
extensions, additions, improvements, betterments, renewals, substitutions and
replacements of the foregoing. Borrower further acknowledges and agrees that
upon repayment in full of the Textron Facility and/or the Sovereign Facility,
Lender's security interest in the Second Priority Collateral securing such
facilities shall automatically become a first priority security interest
securing the Borrower's Indebtedness under the Inventory Loan, the Supplemental
Loan and the Receivables Loan, and Borrower shall take such steps as Lender may
request to deliver such collateral to Lender and to confirm Lender's first
priority security interest therein. Borrower and Lender acknowledge and agree
that Borrower has assigned, pledged, and granted to Additional Lenders equal
second priority continuing security interest and lien (subordinated in priority
and interest only to Lender) in and to the right, title, and interest of
Borrower in all of Borrower's Second Priority Collateral pledged to Lender as
Primary Secured Lender (as defined in the Intercreditor Agreement).
Notwithstanding that Lender is obligated, subject to the conditions of the Loan
Documents, to make Advances only in respect of Eligible Notes Receivable pledged
to Lender from and after the Closing Date hereof, Lender shall have a continuing
security interest in all of Borrower's Notes Receivable pledged to Lender,
including all Financed Notes Receivable, all ineligible Notes Receivable in the
Ineligible Note Portfolio and any Second Priority Collateral pledged to Textron
or Sovereign, and Lender, subject to the Intercreditor Agreement, may collect
all payments made under or in respect of all such pledged Notes Receivable,
including, without limitation, Eligible Notes Receivable that are or may become
ineligible, until any of the same may be released by Lender, if at all, pursuant
to this Loan Agreement.
Borrower acknowledges and agrees that, pursuant to the foregoing terms
contained in this Section and the Intercreditor Agreement, Lender shall be
deemed to hold in possession as agent and on behalf of each of the Additional
Lenders all of Borrower's Second Priority Collateral pledged to Lender as
Primary Secured Lender (as defined in the Intercreditor Agreement) and upon the
full repayment of all Indebtedness to Lender from Borrower under the Receivables
Loan, the Inventory Loan, and the Supplemental Loan (including, without
limitation, all fees, expenses, and other payment obligations in addition to the
outstanding balances and accrued interest under the Receivables Loan, the
Inventory Loan, and the Supplemental Loan), Lender may at Borrower's sole cost
and expense deliver possession to Textron and/or Sovereign, whose loans to
Borrower have not been repaid in full, all of Borrower's Second Priority
Collateral pledged to Lender as Primary Secured Lender. Borrower further
acknowledges and agrees that, pursuant to the foregoing terms contained in this
Section and the Intercreditor Agreement, each of the Additional Lenders shall be
deemed to hold in possession as agent and on behalf of each of Lender and the
remaining Additional Lender all of Borrower's Second Priority Collateral pledged
to such Lender as Primary
10
Secured Lender (as defined in the Intercreditor Agreement) and upon the full
payment of all such Primary Secured Lender's loans to Borrower under the Textron
Facility or the Sovereign Facility, as the case may be, such Primary Secured
Lender may at Borrower's sole cost and expense deliver possession to Lender and
the remaining Additional Lender, whose loans to Borrower have not been repaid in
full, all of Borrower's Second Priority Collateral pledged to such Primary
Secured Lender.
Pursuant to the foregoing and notwithstanding anything stated to the
contrary, Borrower further acknowledges and agrees that upon the full repayment
of all Indebtedness to Lender from Borrower under the Receivables Loan, the
Inventory Loan, and the Supplemental Loan (including, without limitation, all
fees, expenses, and other payment obligations in addition to the outstanding
balances and accrued interest under the Receivables Loan, the Inventory Loan,
and the Supplemental Loan), Lender shall not be obligated to deliver possession
to Borrower of the Second Priority Collateral pledged by Borrower to Lender to
secure such Loans and in Lender's possession. Notwithstanding anything
heretofore to the contrary, unless and until an Event of Default shall occur
Borrower shall retain possession of and collect all payments under or in respect
of all Notes Receivable in the Ineligible Note Portfolio. Except to the extent
that Lender is a Primary Secured Lender (as defined in the Intercreditor
Agreement) with respect to such Note Receivable, Lender agrees that it will not
file or record a financing statement with respect to any of Borrower's Second
Priority Collateral pledged to Textron, Sovereign or Lender.
Lender's security interest and rights with respect to the Shared
Collateral other than the Collateral pledged to Lender as Primary Lender (as
defined in the Intercreditor Agreement) are subject to the terms of the
Intercreditor Agreement. In the event of any conflict between the terms hereof
and the Intercreditor Agreement regarding the Shared Collateral other than the
Collateral pledged to Lender as Primary Lender (as defined in the Intercreditor
Agreement), the terms of the Intercreditor Agreement shall govern.
Notwithstanding anything stated herein or stated in the Intercreditor Agreement,
no provision contained herein or in the Intercreditor Agreement shall be
construed to permit Sovereign, Textron or any lender other than Lender to
interfere with Lender's rights, security interests, and remedies with respect to
any Collateral pledged to Lender as Primary Lender. So long as any indebtedness
or obligations from Borrower to Lender remain outstanding under the Loan
Agreement or the Receivables Loan Agreement, Lender shall have the sole and
absolute discretion to perfect, maintain, protect and enforce its security
interest, and exercise its remedies, sell or otherwise dispose of the Collateral
pledged to Lender as Primary Lender. Lender may exercise its discretion with
respect to exercising or refraining from exercising any of its rights and
remedies or taking any enforcement action with respect to the Collateral where
Lender is Primary Lender, and Borrower shall not permit Textron, Sovereign or
any lender other than the Lender to take an enforcement action against the
Collateral pledged to Lender as Primary Lender.
(h) FINANCED INTERVALS. The following are eligibility requirements for
Eligible Unsold Timeshare Intervals securing the Advances made under the
Inventory Loan after the date hereof which are in addition to those criteria set
out under the Loan Agreement:
11
(i) Each Unit from which a Financed Interval is derived shall
have been completed on January 1, 1995 or after.
(ii) No more than ten percent (10%) of Financed Intervals
shall at any time be derived from Units completed during the period between
January 1, 1995 and December 31, 1997.
(iii) Each Resort which has been approved shall generate no
more than twenty-five percent (25%) of all Financed Intervals at any one time.
Pursuant to the foregoing, Borrower shall deliver to Lender quarterly reports
providing such information during the terms of this Loan Agreement and the
Receivables Loan Agreement.
(iv) Each Financed Interval shall cease to qualify as an
Eligible Unsold Timeshare Interval upon the earlier of (A) the date such
Financed Interval is released by Lender as security hereunder or (B) the
expiration of twenty-four (24) months from the date such Financed Interval was
pledged to Lender. If the 24-month period from the date hereof expires and a
Financed Interval has not been released by Lender as security hereunder,
Borrower shall pay immediately to Lender a release fee in the amount of $1,600
in exchange for Lender's release of each such Financed Interval. No Financed
Interval currently or subsequently pledged to Textron shall be pledged to Lender
to secure an Advance under this Loan Agreement. A Financed Interval previously
pledged to Lender and released by Lender may be repledged to Lender only if (A)
Borrower retakes title to such Financed Interval as a result of foreclosure, a
deed in lieu of foreclosure, or a purchaser upgrade, (B) such Interval otherwise
complies with the eligibility requirements of an Eligible Unsold Timeshare
Interval hereunder, and (C) the 24-month eligibility period (as described
hereinabove) applicable to such specific Interval shall not be renewed, but the
period of time during which such Interval was previously pledged shall be
included in determining the total eligibility period for that Interval.
(v) In the event that any Financed Interval pledged to Lender
prior to the date hereof does not comply with the requirements set out under
subsections (i) - (iv) above, Borrower shall have a period of nine (9) months
from the date hereof to replace such non-conforming Interval with a conforming
Interval, or in the alternative, pay to Lender a release fee in the amount of
$1,600.
8. CONDITIONS PRECEDENT; CLOSING; ADVANCES; ADDITIONAL COVENANTS.
(a) APPROVAL OF DOCUMENTS PRIOR TO CLOSING DATE. Borrower has delivered
to Lender (with copies to Lender's counsel), prior to the Closing Date, and
Lender has reviewed and approved in its sole discretion, prior to the Closing
Date, the form and content of all of the items specified in Subsections (i)
through (vi) below (the "Submissions").
Lender shall have the right to review and approve any changes to the
form of any of the Submissions. If Lender disapproves of any changes to any of
the Submissions, Lender shall have the right to require Borrower either to cure
or correct the defect objected to by Lender or to elect not to fund any Advance
under the Inventory Loan or the Supplemental Loan. Under no
12
circumstances shall Lender's failure to approve or disapprove a change to any of
the Submissions be deemed to be an approval of such Submissions. All of the
Submissions were and shall be prepared at Borrower's sole cost and expense.
(i) A certificate in the form attached as EXHIBIT D to be
dated as of the Closing Date and signed by the president, vice president, or
secretary of Borrower, certifying that the conditions specified in Sections 4,
5, and 6 of the Loan Agreement and Sections 4, 7, 9, 10 and 11 of this Fourth
Amendment are true;
(ii) Copies of any amendments to the articles of
incorporation/charter and by-laws of Borrower not previously delivered to
Lender, certified to be true, correct and complete by Borrower and the Secretary
of State of the State of Texas and current certificates of good standing for
Borrower for the State of Texas and states where the Resorts are located, a
current certificate of authority to conduct business by the Secretary of State
in each state in which Borrower conducts business;
(iii) A certificate of the Secretary of Borrower certifying
the adoption by the Board of Directors of Borrower of a resolution authorizing
Borrower to enter into and execute this Fourth Amendment, the Amended and
Restated Revolving Promissory Note, the Second Amended and Restated Promissory
Note, the Intercreditor Agreement and the other Loan Documents, to borrow the
Loans from Lender, and to grant to Lender a first priority security interest
(subject to the Intercreditor Agreement) in and to the Additional Collateral and
the Ineligible Note Portfolio in the form attached hereto as EXHIBIT E.
(iv) A certificate of the secretary or assistant secretary of
Borrower certifying the incumbency, and verifying the authenticity of the
signatures, of the specified officers of Borrower authorized to sign this Fourth
Amendment, the Amended and Restated Revolving Promissory Note, the Second
Amended and Restated Promissory Note, the Intercreditor Agreement and the other
Loan Documents, and all such documents requested by Lender in the form attached
hereto as EXHIBIT F; and
(v) All items listed on the Closing and Document Checklist,
attached hereto as SCHEDULE 8(a)(v).
(b) EXECUTION AND DELIVERY OF LOAN DOCUMENTS. Borrower shall have
delivered to Lender, on or before the Closing Date, the following Loan
Documents, each of which shall be in the form of the respective Loan Documents
attached hereto as Exhibits, and each of which when required, shall be in
recordable form:
(i) Second Amended and Restated Promissory Note (EXHIBIT A).
(ii) Amended and Restated Revolving Promissory Note (EXHIBIT
B).
(iii) Closing Opinions of Counsels for Borrower (EXHIBIT G).
13
(iv) Consulting Agreement (EXHIBIT J).
(v) Backup Servicing Agreement (EXHIBIT K).
(vi) Modification to Real Estate Collateral Mortgages.
Borrower shall have executed and delivered to Lender, on or before the date
hereof, modifications to the Real Estate Collateral Mortgages, each of which
shall be in the form attached hereto as EXHIBIT H, and each of which shall be in
recordable form.
(vii) Intercreditor Agreement. Borrower, Textron, and
Sovereign shall have executed and delivered to Lender, on or before the Closing
Date, the Intercreditor Agreement, in the form attached hereto as EXHIBIT C.
(viii) Financing Statements. Original UCC-1 financing
statements covering the Collateral, filed with the Secretary of State of Texas
and the Secretary of State of each state in which the Collateral is located or
where required by the applicable Uniform Commercial Code to perfect and continue
the security interests granted under this Loan Agreement or as requested by
Lender. Such UCC-1 financing statements shall include, without limitation, the
financing statements required under Section 7(e) hereof and as requested by
Lender in order to perfect Lender's security interest in the Ineligible Note
Portfolio, as more particularly described in Section 7(e) hereinabove.
(ix) Collateral Assignment of Consulting Agreement (EXHIBIT
M).
(x) Collateral Assignment of Backup Servicing Agreement
(EXHIBIT N).
(xi) Assignments of Mortgages (EXHIBIT O).
(xii) Such other agreements, documents, instruments,
certificates and materials as Lender may request to evidence the Indebtedness,
to evidence and perfect the rights and Liens and security interests of Lender
contemplated by the Loan Documents, and to effectuate the transactions
contemplated herein.
(c) SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT. Borrower
and Lender shall have executed, on or before the Closing Date, the Second
Amendment to Amended and Restated Loan Agreement, in the form attached hereto as
EXHIBIT P.
(d) CLOSING DATE CONDITIONS. On or before the Closing Date, the
following conditions shall be satisfied:
(i) UCC SEARCH. Lender shall have obtained, at Borrower's
cost, such searches of the applicable public records as it deems necessary under
Texas, and other applicable law to verify that it has a first and prior
perfected Lien and security interest covering all of the Collateral. Lender
shall not be obligated to fund any Advance if Lender determines that Lender
14
does not have a first and prior perfected lien and security interest covering
any portion of the Collateral, subject to liens permitted by the Intercreditor
Agreement against the Collateral other than the Collateral pledged to Lender as
Primary Lender (as defined in the Intercreditor Agreement).
(ii) LITIGATION SEARCH. Lender shall have obtained, at
Borrower's cost, an independent search to verify that there are no bankruptcy,
foreclosure actions or other material litigation or judgments pending or
outstanding against the Resorts, any portion of the Collateral, Borrower, or any
Affiliates of Borrower (each a "Material Party"). The term "other material
litigation" as used herein shall not include matters in which (i) a Material
Party is plaintiff and no counterclaim is pending or (ii) which Lender
determines, in its sole discretion exercised in good faith, are immaterial due
to settlement, insurance coverage, frivolity, or amount or nature of claim.
Lender shall not be obligated to fund any advance if Lender determines that any
such litigation is pending.
(iv) RECORDING OF MODIFICATIONS TO REAL ESTATE COLLATERAL
MORTGAGES. The modifications to the Real Estate Collateral Mortgages shall have
been duly recorded in the applicable land records for each state in which the
Real Estate Collateral is located.
(v) DZ FACILITY. The DZ Letter Agreement dated December 12,
2001, attached hereto as EXHIBIT L ("DZ Letter Agreement"), shall be
satisfactory to Lender at its sole and absolute discretion, Lender shall have at
its sole and absolute discretion approved all of the DZ Documents, evidence
satisfactory to Lender that the DZ Facility has closed on terms and conditions
set forth in the DZ Letter Agreement, and Lender has been provided with copies
of all of the executed DZ Documents.
(vi) STANDBY MANAGER. Borrower will have entered into the
Consulting Agreement with the Standby Manager in form and substance satisfactory
to Lender in its sole discretion and shall be assigned by Borrower to Lender as
security for Indebtedness. The Standby Manager shall have such duties and
responsibilities as Lender may request, in its sole discretion, from time to
time, including without limitation: (1) preparation of a report evaluating
Borrower's business and the operation of the Resorts to be delivered to Lender
within ten (10) days after the Closing Date; (2) on an ongoing basis,
monitoring: (a) the operations of Borrower including the offer and sale of
Intervals by Borrower and the financing by Borrower of such sales, (b)
Borrower's compliance with the Business Plan, (c) Borrower's operation of the
Silverleaf Club, (d) Borrower's and/or Silverleaf's Club's management and
operation of the Resorts, the related amenities and the Additional Resort
Collateral; and (3) submission of weekly written reports to Lender as to the
foregoing. Notwithstanding the foregoing, Borrower acknowledges and agrees that
on and after an Event of Default, the Standby Manager shall be responsible for,
among other things: (i) managing the operation of the Resorts, the related
amenities, the Additional Resort Collateral and any other Collateral that Lender
deems necessary, (ii) monitoring or supervising the marketing, sale, resale and
financing of Intervals pledged to Lender as Collateral, (iii) at the discretion
and election of Lender, assuming and managing the
15
servicing operations carried on by the servicing agent, and (iv) Lender may
request, from time to time, in its sole discretion, such other duties and
responsibilities related to the operation of the Resorts and related amenities,
the Additional Resort Collateral, the Intervals and any other Collateral that
Lender deems necessary. Borrower shall provide Lender with a list in form and
substance satisfactory to Lender, in its sole discretion, of the duties and
responsibilities associated with the operation of the Resorts. Borrower agrees
that in accordance with the provisions contained therein the term of the
Consulting Agreement shall expire on June 30, 2004.
(vii) STANDBY SERVICER. Borrower will have entered into the
Backup Servicing Agreement in form and substance satisfactory to Lender in its
sole discretion with the Standby Servicer and such Backup Servicing Agreement
shall not have been modified, amended or otherwise rescinded.
(viii) BOND HOLDER EXCHANGE TRANSACTION CONSUMMATION. The Bond
Holder Exchange Term Sheet dated October 19, 2001, a copy of which is attached
hereto as EXHIBIT I, shall have been approved by the requisite number of bond
holders and shall be satisfactory to Lender at its sole and absolute discretion
and evidence satisfactory to Lender in its sole discretion that the Bond Holder
Exchange Transaction shall have fully closed. Lender shall have at its sole and
absolute discretion approved all of the Bond Holder Exchange Documents and has
been provided with copies of all of the executed Bond Holder Exchange Documents.
(ix) TEXTRON FACILITY AND SOVEREIGN FACILITY MODIFICATION. On
or before the Closing Date, Borrower shall deliver to Lender, evidence
satisfactory to Lender, that the Textron Facility and the Sovereign Facility
have each been modified in a manner substantially similar to that set forth in
their respective term sheets and as previously been approved by Lender and
Lender has been provided with copies of all of the executed Textron Documents
modifications and the executed Sovereign Documents modifications, as approved by
Lender at its sole and absolute discretion.
(x) ASSIGNMENTS OF MORTGAGE. On or before the Closing Date,
Borrower shall have executed and delivered in escrow to Textron, or an agent
designated by Lender and Additional Lenders under the Intercreditor Agreement,
all of the appropriate Assignments of Mortgage requested by Lender and
Additional Lenders in the form attached hereto as EXHIBIT O and as approved by
Lender and Additional Lenders at their sole and absolute discretion.
(xi) AVAILABILITY. Lender shall have determined that the
aggregate outstanding principal amount due to Lender under the Inventory Loan,
the Supplemental Loan, and the Receivables Loan, whether such requested Advance
is included or not, does not exceed $50,000,000.
LENDER SHALL NOT BE OBLIGATED TO MAKE ANY ADVANCES HEREUNDER UNTIL ALL
CONDITIONS SET FORTH IN SECTIONS 8(a) THROUGH 8(d) HEREOF AND SECTION 3 OF THE
SUPPLEMENTAL LOAN AGREEMENT HAVE BEEN SATISFIED, AS DETERMINED BY LENDER IN ITS
SOLE AND ABSOLUTE DISCRETION. IN THE EVENT THAT DZ FAILS TO MAKE ITS FIRST
FUNDING REQUIRED UNDER THE DZ FACILITY OR
16
LENDER DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION, THAT ANY OF THE
CONDITIONS SET FORTH IN THIS SECTION ARE NOT SATISFIED ON OR BEFORE MAY 31,
2002, THEN THIS FOURTH AMENDMENT, AND THE OBLIGATIONS OF LENDER HEREUNDER, SHALL
BE NULL AND VOID IN ALL RESPECTS AB INITIO. IN SUCH EVENT, THE SUPPLEMENTAL LOAN
AGREEMENT EXISTING PRIOR HERETO AND THE TERMS AND CONDITIONS THEREIN SET FORTH,
AS MODIFIED BY THE FORBEARANCE AGREEMENT AND THE ORIGINAL INTERCREDITOR
AGREEMENT, SHALL CONTINUE TO GOVERN AND CONTROL BORROWER'S OBLIGATIONS WITH
RESPECT TO REPAYMENT IN FULL OF THE INDEBTEDNESS, AS SUCH TERM IS DEFINED IN THE
SUPPLEMENTAL LOAN AGREEMENT.
(e) THE FOLLOWING SECTION 3.12 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
AVAILABLE UNRESTRICTED CASH. Borrower shall have less than five million
dollars ($5,000,000) in available unrestricted Cash.
(f) THE FOLLOWING SECTION 3.13 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
INSUFFICIENT TAX REFUND PROCEEDS. There are insufficient proceeds from
the Tax Refund to pay Operating Expenses as provided in the Business Plan.
(g) THE FOLLOWING SECTION 3.14 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
AVAILABILITY. Lender shall have determined that (a) the aggregate
outstanding principal balance due to Lender under the Inventory Loan, the
Supplemental Loan, and the Receivables Loan, whether such requested Advance is
included or not, does not exceed Fifty Million Dollars ($50,000,000); (b) the
total outstanding principal balance under the Inventory Loan does not exceed Ten
Million Dollars ($10,000,000); (c) the total outstanding principal balance under
the Supplemental Loan does not exceed Ten Million Dollars ($10,000,000); (d) the
aggregate amount of Advances then outstanding under the Receivables Loan shall
be at all times equal to or less than eighty-five percent (85%) of the principal
balance of all Notes Receivable pledged to Lender; and (e) the aggregate amount
of Advances then outstanding under the Supplemental Loan shall be at all times
equal to or less than seventy-five percent (75%) of the principal balance of all
Notes Receivable pledged to Lender hereunder. In the event that any maximum
principal balance or advance rate as set forth in Subsections (a) through (e) is
exceeded, Borrower shall immediately repay to Lender such necessary amount or
amounts in order not to exceed the maximum principal balance(s) and/or the
advance rate(s) established in Subsections (a) through (e) herein.
(h) THE FOLLOWING SECTION 3.15 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
17
MAINTENANCE OF INVENTORY CONTROL. Borrower shall maintain and
at all times fully comply with the Inventory Control Procedures set forth on
SCHEDULE 8(h) attached hereto from the date hereof until the Inventory Loan and
the Supplemental Loan are repaid in full. Borrower shall permit Lender, its
officers, employees, auditors, and other agents or designees to review the books
and records of Borrower and make such other examinations and inspections as
Lender in its sole discretion deems necessary to determine that Borrower is in
full compliance with such Inventory Control Procedures.
(i) REPAYMENT OF INVENTORY LOAN. Borrower shall repay to Lender the
outstanding principal balance and all accrued interest under the Inventory Loan
pursuant to the amortization schedule attached hereto as SCHEDULE 8(i)
("Amortization Schedule").
(j) SECTION 1.4(a) IS HEREBY AMENDED BY ADDING THERETO:
(iv) Borrower agrees that within ninety (90) days from the
Closing Date, if Lender determines in its sole discretion that ninety-five
percent (95%) ("Required Collection Rate") of all funds collected in connection
with the Financed Notes Receivable have not been deposited directly into
Lender's Lockbox by the individual obligors thereunder or the Lockbox Agent,
Lender shall have the right to direct Borrower to establish a separate lockbox
account for the collection of all payments received by Borrower on behalf of
Lender directly from obligors, it being the express intention of the parties
hereto to minimize the amount of such payments deposited directly into
Borrower's own accounts. Lender may appoint either Lender, Textron, or Sovereign
to serve as lockbox agent on behalf of Lender in respect to its facilities.
(k) REQUEST FOR ADVANCE. Lender shall have received five (5) days,
prior to each Advance under the Inventory Loan or the Supplemental Loan, a
completed and executed Request for Advance in the form attached as EXHIBIT A,
which shall be made in accordance with the terms of the Business Plan, the Loan
Agreement and the Intercreditor Agreement.
9. THE FOLLOWING SECTION 4.17 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
Borrower hereby represents and warrants to Lender that the following
are true and correct as of the Closing Date and as of the date of each Advance
(if any) made to Borrower hereunder:
(a) REAL ESTATE COLLATERAL.
(i) FIRST LIEN. Subject to the other first lien rights of
Textron and Sovereign as provided in the Intercreditor Agreement, upon execution
and delivery of the modification to the Real Estate Collateral Mortgages, as
modified, Lender will continue to have a valid first lien on the Real Estate
Collateral.
18
(ii) ACCESS. Each parcel of the Real Estate Collateral has
adequate legal rights of access to a public way.
(iii) SINGLE TAX LOT. Each parcel of the Real Estate
Collateral constituting real property consists of a single tax lot. No portion
of said lot covers property other than the land in question and no portion of
the land in question lies in any other tax lot.
(iv) FLOOD ZONE. Except as is disclosed in the surveys of each
portion of the Real Estate Collateral that have been or will be provided to
Lender, no portion of such land is located in a flood hazard area as defined by
the Federal Insurance Administration.
(v) SEISMIC EXPOSURE. No portion of Real Estate Collateral is
located in a zone 3 or zone 4 of the "Seismic Zone Map of the U.S."
(vi) CONDEMNATION. No portion of the Real Estate Collateral
has been taken in condemnation or other like proceedings nor is any proceeding
pending, threatened or known to be contemplated for the partial or the total
condemnation or taking of any portion of the Real Estate Collateral.
(vii) NO PURCHASE OPTIONS. No person or entity has an option
to purchase any portion of the Real Estate Collateral, or any portion thereof,
or any interest therein.
(b) TEXTRON AND SOVEREIGN FACILITIES. The modifications of the Textron
Facility and the Sovereign Facility on terms and conditions substantially
similar to those set forth in the Term Sheet and otherwise approved by Lender,
have closed and Lender has been provided with true and correct copies of the
Textron Documents and the Sovereign Documents, as so modified. There is no event
of default or event which, with the passage of time, notice or both, would
constitute an event of default under either the Textron Facility or the
Sovereign Facility and Borrower is in good standing under both of such
facilities.
(c) BOND HOLDER EXCHANGE TRANSACTION. The Bond Holder Exchange Term
Sheet has not been amended, modified or otherwise rescinded.
(d) DZ FACILITY. The DZ Letter Agreement is in full force and effect
and has not been amended, modified or otherwise rescinded.
(e) STANDBY MANAGER AND STANDBY SERVICER. Borrower has entered into the
Consulting Agreement and the Backup Servicing Agreement, in the forms attached
hereto as EXHIBITS J, and K, respectively, with each of the Standby Manager and
the Standby Servicer, and each such agreement is in full force and effect and
has not been modified, amended or terminated.
(f) ASSIGNMENTS OF MORTGAGE. Each such Assignment of Mortgage
(including any permitted modifications as requested and approved by Lender and
Additional Lenders thereto)
19
delivered to Textron or an agent or successor designated by Lender and
Additional Lenders pursuant to Section 7(e) hereof shall be in full force and
effect and has not be modified, amended or terminated (except as approved by
Lender and Additional Lenders pursuant to the terms of Section 7(e)
hereinabove), and Lender, Textron and Sovereign shall continue to have equal
one-third (1/3) first priority continuing security interest and lien in and to
the right, title, and interest of Borrower in the Ineligible Note Portfolio.
(g) INTERNAL LOANS. There are no existing loans to Borrower from any
officers, shareholders, or Affiliates of Borrower.
(h) APPROVAL OF J & J LIMITED, INC. J & J Limited, Inc. or, as the case
may be, an entity through which Xxxxx X. Xxxxxx shall perform the substantive
duties of Standby Manager, has been approved by Borrower's board of directors to
serve as the Standby Manager during the term of this Loan Agreement.
10. AFFIRMATIVE COVENANTS. So long as any portion of the Indebtedness
remains unpaid, Borrower hereby agrees with Lender as follows:
(a) AMENITIES. Borrower will cause, or to the extent provided for
pursuant to the Declarations, will use its best efforts to ensure that the
Timeshare Owners' Association, or the manager of the Resort, as applicable, will
cause, the Resort to be maintained in good condition and repair, and in
accordance with the provisions of the applicable Timeshare Documents, and
Borrower will cause each Purchaser of an Interval at the Resort to have
continuing access to, and the use of, to the extent of such Purchaser's
time-share periods, all of the Common Elements and related or appurtenant
services, rights and benefits, all as provided in the Declaration and the
Timeshare Documents.
(b) OPERATION OF BORROWER'S BUSINESS. Borrower will operate its
business in substantial compliance with the Business Plan attached hereto as
SCHEDULE 10(b).
(c) STANDBY MANAGER AND STANDBY SERVICER. Borrower will enter into the
Consulting Agreement with Standby Manager and the Backup Servicing Agreement
with Standby Servicer on or before the Closing Date and will maintain such
Consulting Agreement and Backup Servicing Agreement in full force and effect.
Lender shall have the right at any time to terminate any then existing servicing
agreement and replace any then existing Servicer with the Standby Servicer or
such other servicer as Lender may select in its sole and absolute discretion,
and the Standby Servicer will assume full control over the servicing of all
Financed Notes Receivable, reporting solely to Lender, as provided in Section 14
hereof. Borrower agrees that upon the occurrence of a Default or Event of
Default under this Loan Agreement, Lender may, with the approval of a majority
of the Borrower's board of directors, which approval shall not be unreasonably
withheld or delayed, terminate any then existing management agreements and
replace any existing manager with such manager as Lender, subject to the
Intercreditor Agreement, may select, provided however, if: (x) the obligations
have become immediately due and payable in accordance with the acceleration
provision under Section 8.1 (a) of the Inventory Loan Agreement,
20
or (y) Lender elects to have J & J Limited, Inc. act as Standby Manager, then no
such approval of Borrower's board of directors shall be required; and (2) at
Lender's election, the Standby Servicer will assume full control over the
servicing of all Financed Notes Receivable as provided in Section 14 hereof.
(d) DZ FACILITY LETTER AGREEMENT. The DZ Letter Agreement remains in
full force and effect and has not been amended, modified or rescinded and
Borrower shall promptly furnish to Lender copies of the DZ Documents upon
execution.
(e) TEXTRON FACILITY, SOVEREIGN FACILITY, DZ FACILITY AND BOND HOLDER
EXCHANGE TRANSACTION. Borrower will comply with each of the terms and conditions
of the Textron Facility, the Sovereign Facility, the DZ Facility and the Bond
Holder Exchange Documents and will promptly deliver to Lender, upon receipt by
Borrower, copies of any notices received by Borrower in connection with any of
the foregoing credit facilities.
(f) FINANCIAL COVENANTS.
(i) TANGIBLE NET WORTH. Borrower shall at all times have and
maintain a Tangible Net Worth in an amount which shall not be less than an
amount equal to (A) the greater of (1) $100,000,000 or (2) an amount equal to
90% of the Tangible Net Worth of Borrower as of September 30, 2001 plus (B) one
hundred percent (100%) of the aggregate amount of proceeds received by Borrower
after January 1, 2002 in connection with (1) each issuance by Borrower of any
class or classes of capital stock after January 1, 2002 and (2) each incurrence
of Indebtedness after January 1, 2002, other than Indebtedness which shall be
the most senior Indebtedness of Borrower plus (C) one hundred percent (100%) of
the aggregate amount of net income (calculated in accordance with GAAP) of
Borrower after January 1, 2002.
(ii) MARKETING AND SALES EXPENSES. Borrower will not permit as
of March 31, 2002 and as of the last day of each calendar quarter thereafter the
ratio of Marketing and Sales Expenses for any calendar quarter, singly and on a
cumulative basis, during the specified period below (the "Reference Period") to
Borrower's net proceeds from the sale of Intervals for such Reference Period to
equal or exceed the ratio set forth opposite such period described in the table
below during such Reference Period:
PERIOD RATIO
------ -----
4/1/02 to 12/31/02 0.550 to 1
1/1/03 and thereafter 0.525 to 1
(iii) MINIMUM LOAN DELINQUENCY. Borrower will not permit as of
the last day of each calendar quarter its over 30-day delinquency rate on its
entire Notes Receivable portfolio (including, without limitation, all Eligible
Notes Receivable pledged pursuant to the Textron Facility and the Sovereign
Facility) to be greater than twenty-five percent (25%). If, as
21
of the last day of each calendar quarter, Borrower's over 30-day delinquency on
its entire Notes Receivable portfolio (including, without limitation, all
Eligible Notes Receivable pledged to Lender under the Loan Agreement and all
Notes Receivable pledged pursuant to the Textron Facility and the Sovereign
Facility) is greater than twenty percent (20%), then Lender shall have the right
to conduct an audit, at Borrower's sole cost and expense, of all of Borrower's
Notes Receivable pledged to Lenders under this Loan Agreement, the Textron
Facility and the Sovereign Facility.
(iv) INTEREST COVERAGE. (A) For the calendar quarter of
Borrower ending June 30, 2002, Interest Coverage Ratio for Borrower shall be at
least 1.1:1, (B) for the calendar quarter of Borrower ending September 30, 2002,
the average of the Interest Coverage Ratio of Borrower of such calendar quarter
and the Interest Coverage Ratio for the immediately preceding calendar quarter
shall be at least 1.1:1, (C) for the calendar quarter of Borrower ending
December 31, 2002, the average of the Interest Coverage Ratio of Borrower for
such calendar quarter and the Interest Coverage Ratios for the two immediately
preceding calendar quarters shall be at least 1.1:1, (D) for each calendar
quarter of Borrower beginning with, and including, the calendar quarter ending
March 31, 2003 and for each calendar quarter of Borrower thereafter, the average
of the Interest Coverage Ratio of Borrower for such calendar quarter and the
Interest Coverage Ratios for each of the three immediately preceding calendar
quarters shall be at least 1.25:1. The term "Interest Coverage Ratio" means with
respect to any Person for any calendar quarter, the ratio of (y) EBITDA for such
period less capital expenditures, as determined in accordance with GAAP, for
such period to (z) the interest expense, minus all non-cash items constituting
interest expense for such period.
(v) PROFITABLE OPERATIONS. Borrower will not permit
Consolidated Net Income (A) for any fiscal year, commencing with the fiscal year
ending December 31, 2002, to be less than $1.00 and (B) for any two consecutive
fiscal quarters (treated as a single accounting period ) to be less than $1.00.
11. THE FOLLOWING SECTION 6.4 IS HEREBY ADDED TO THE SUPPLEMENTAL LOAN
AGREEMENT:
(a) LIMITATION ON OTHER DEBT, FURTHER ENCUMBRANCES AND/OR
SECURITIZATION. Borrower will not obtain financing and grant liens with respect
to the Collateral or any of its other assets or property, except as hereafter
provided. Prior to March 31, 2003, Borrower will not obtain financing and grant
liens with respect to any of Borrower's unpledged Notes Receivable, except as
provided in this Loan Agreement, the Receivables Loan, the Textron Facility and
the Sovereign Facility, without Lender's prior written consent, which consent
shall not be unreasonably withheld. At any time after March 31, 2003, Borrower
may obtain financing and grant liens with respect to any of Borrower's unpledged
Notes Receivable in an amount not to exceed twenty million dollars
($20,000,000.00), provided that: (i) no Default or Event of Default has
occurred; and (ii) any such financing does not result in Borrower's failure to
substantially adhere to the Business Plan, as determined by Lender in its sole
and absolute
22
discretion. At any time after March 31, 2003, if Borrower wishes to obtain
financing in excess of twenty million dollars ($20,000,000.00) which will be
secured by any of Borrower's unpledged Notes Receivable, Borrower shall obtain
Lender's written consent, which consent shall not be unreasonably withheld.
Borrower may obtain unsecured financing provided: (i) Borrower provides prior
written notice to Lender setting forth the terms and conditions thereof; (ii)
Lender is provided with a copy of the loan documents therefor; and (iii) such
financing does not result in Borrower's inability to substantially adhere to the
Business Plan, as determined by Lender in its sole and absolute discretion.
(b) COMPENSATION OF SENIOR MANAGEMENT. The compensation payable to the
senior management of the Borrower, as a group, shall not be increased by more
than twenty-five percent (25%) each fiscal year.
(c) MODIFICATIONS OF TEXTRON DOCUMENTS, DZ DOCUMENTS, BOND HOLDER
EXCHANGE DOCUMENTS, SOVEREIGN DOCUMENTS AND OTHER DEBT INSTRUMENTS. Borrower
shall not amend or modify the Textron Documents, the Sovereign Documents, DZ
Documents, Bond Holder Exchange Documents or the documents evidencing any other
indebtedness of Borrower, nor shall Borrower extend, modify, increase or
terminate the Textron Facility, DZ Facility, the Bond Holder Exchange
Transaction, the Sovereign Facility or any other credit facility or loan,
without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
(d) MODIFICATIONS OF CONSULTING AGREEMENT, BACKUP SERVICING AGREEMENT,
MANAGEMENT AGREEMENTS AND SERVICING AGREEMENTS. Borrower shall not amend or
modify the Consulting Agreement, the Backup Servicing Agreement or any
management agreements, servicing agreements, without the prior written consent
of Lender, which consent shall not be unreasonably withheld.
12. SECTION 7.12 OF THE SUPPLEMENTAL LOAN AGREEMENT IS HEREBY AMENDED
AS FOLLOWS:
(a) CROSS DEFAULT; CROSS COLLATERALIZATION. The Inventory Loan, the
Supplemental Loan, and the Working Capital Facility are given in connection with
one or more loans which Lender, either individually or as Lender on behalf of
itself and other Lenders, has made or will make to Borrower. Upon the occurrence
of an Event of Default under the Inventory Loan, the Supplemental Loan, the
Working Capital Facility or any of the other Loan Documents relating hereto or
the occurrence of an Event of Default under the Receivables Loan Agreement,
regarding the Receivables Loan, then in any such event, the Lender may declare
all of the principal, interest and other sums which may be outstanding under the
Inventory Loan, the Supplemental Loan, the Working Capital Facility and the
Receivables Loan to be immediately due and payable and the Lender may exercise
any and all rights and remedies provided in the Loan Documents or any Loan
Document in connection with this Loan Agreement or the Receivables Loan
Agreement.
23
Any and all Collateral pledged under the Inventory Loan and granted as
security for the Inventory Loan shall secure to Lender the payment of the total
Indebtedness under the Inventory Loan Agreement, the Supplemental Loan Agreement
and the Receivables Loan Agreement and the performance of the covenants and
agreements set forth therein, all of which are secured to Lender without
apportionment or allocation of any part or portion of said Collateral pledged
under the Inventory Loan Agreement. Notwithstanding the immediately preceding
sentence, Lender shall have the option, but not the obligation, to separate and
allocate the proceeds of the Collateral securing the Supplemental Loan from the
other Collateral when exercising its remedies in applying the Collateral against
the Indebtedness upon an Event of Default.
The Inventory Loan, the Supplemental Loan and the Working Capital
Facility are given in connection with one or more loans which Lender, the Other
Lenders and the Additional Lenders have made or will make to Borrower. Upon the
occurrence of an Event of Default under the Inventory Loan Agreement, the
Supplemental Loan Agreement, or the Receivables Loan Agreement, or any of the
other Loan Documents relating hereto or the occurrence of an Event of Default
under the Other Loan Agreements or the Additional Loan Agreements (collectively
the "Obligations"), then in any such event, the Lender may declare all of the
principal, interest and other sums which may be outstanding, due or payable
under all of the Loans or under any other loan agreements or indebtedness from
Borrower to Lender (collectively the "Indebtedness") to be immediately due and
payable and the Lender may exercise any and all rights and remedies provided in
the Loan Documents or any Loan Document in connection with the Loans.
Borrower acknowledges and agrees with Lender that with respect to the
Real Estate Collateral, subject to the Section 12(b) hereof, the Supplemental
Loan Agreement is cross-collateralized with the Other Loan Agreements pursuant
to the terms of the Intercreditor Agreement. Subject to Section 12(b) herein,
the Real Estate Collateral shall also be cross-collateralized with the Inventory
Loan Collateral to secure to Lender the payment of the total indebtedness under
the Inventory Loan.
Upon an Event of Default, Lender shall be entitled to enforce the
payment of the Indebtedness and performance of all of Borrower's obligations
under the Inventory Loan Agreement, the Supplemental Loan Agreement and the
Receivables Loan Agreement, and to exercise all of its rights, remedies and
powers provided hereunder or under any other Loan Document relating to the
Inventory Loan, the Supplemental Loan or the Receivables Loan, subject to the
terms of the Intercreditor Agreement, in one or more proceedings, whether
contemporaneous, consecutive or both to be determined by Lender in its sole and
absolute discretion. The enforcement of any such rights or remedies by Lender
shall not constitute an election of remedies and shall not prejudice in any way,
limit or preclude the enforcement of any other right or remedy under any of the
Loan Documents through one or more additional proceedings. No judgment obtained
by Lender in any one or more enforcement proceeding shall merge the debt secured
hereby into such judgment and any portion of the Indebtedness which shall remain
unpaid shall be a continuing obligation of Borrower not merged with such
judgment. Lender may bring any action or proceeding including without limitation
foreclosure through
24
judicial proceedings, power of sale or otherwise in any state or federal court
and such proceeding may relate to all or any part of the total Collateral
without regard to the fact that any one or more prior or contemporaneous
proceedings have been commenced elsewhere with respect to the same or any other
part of the total Collateral.
As contemplated herein, the documents and instruments evidencing and
securing each of the Inventory Loan, the Supplemental Loan and the Working
Capital Facility shall secure each such Loan and each of the other Loans.
Borrower acknowledges that the documents and instruments evidencing and securing
the debts and obligations under each of the Other Loan Agreements shall also
secure the obligations under the Inventory Loan Agreement, the Supplemental Loan
Agreement and the Receivables Loan Agreement and vice-versa. Further, the
documents and instruments evidencing and securing the debts and obligations
under the Additional Loan Agreements shall also secure each of the Inventory
Loan Agreement, the Supplemental Loan Agreement and the Receivables Loan
Agreement and vice-versa.
Except as provided in the Intercreditor Agreement, the proceeds of any
such enforcement or foreclosure shall be applied to the payment of the
Indebtedness in such order as Lender may determine in its sole discretion.
Notwithstanding anything stated to the contrary herein, but subject to
the Intercreditor Agreement, Borrower agrees that in respect to the Additional
Collateral and the Ineligible Note Portfolio, upon a sale or disposition or
Lender's enforcement of its security interests hereunder, the first Ten Million
Dollars ($10,000,000) of any proceeds derived therefrom shall be applied toward
repayment of the outstanding balance of the Inventory Loan, and the balance of
such proceeds, if any, shall then be applied, respectively, toward the full
repayment of first, the Supplemental Loan, and then the Receivables Loan. Any
excess of such proceeds shall be applied in accordance with the Intercreditor
Agreement and upon full payment of all indebtedness of Borrower to Additional
Lenders, any remaining balance of such proceeds shall be delivered to Borrower.
Borrower acknowledges and agrees that upon repayment in full of all indebtedness
under the Textron Facility, the Sovereign Facility, and all of the Other Loan
Agreements and the Additional Loan Agreements, Lender's security interest in the
collateral securing such facilities shall automatically become a first priority
security interest for Borrower's obligations under the Inventory Loan, the
Supplemental Loan and the Working Capital Facility, and Borrower shall take such
steps as Lender may request to deliver such collateral to Lender and to confirm
Lender's first priority security interest therein.
(b) ALLOCATION OF REAL ESTATE COLLATERAL PROCEEDS. Notwithstanding
anything stated to the contrary, Borrower hereby agrees with Lender that upon a
sale or other disposition of the Real Estate Collateral or the exercise of
Lender's remedies following the occurrence of an Event of Default, the proceeds
derived from the Real Estate Collateral shall be allocated as follows, subject
to the Intercreditor Agreement:
(i) The first One Million Dollars ($1,000,000.00) of the
proceeds from the Real Estate Collateral ("Real Estate Collateral Proceeds")
shall be applied toward repayment of
25
the outstanding principal balance of the Supplemental Loan. Such repayment shall
not constitute a permanent paydown of the Supplemental Loan and Borrower during
the term of the Supplemental Revolving Period shall have a right to reborrow
such amount under the Supplemental Loan so long as no Event of Default has
occurred and is continuing and provided, that the sum of Advances of such
reborrowed amount shall be less than seventy-five percent (75%) of the principal
balance of all Eligible Notes Receivable against which such Advances are
financed.
(ii) The greater of (1) any amount of the Real Estate
Collateral Proceeds in excess of One Million Dollars ($1,000,000.00) and (2) the
remaining amount of the Real Estate Collateral Proceeds following payment
pursuant to Subsection (i) hereinabove shall at its option be applied toward
payment of the outstanding principal balance of the Inventory Loan, or the
outstanding principal balance of the Supplemental Loan. Such repayment shall
constitute a permanent paydown of the Inventory Loan and Borrower shall not have
a right to reborrow such amount under the Inventory Loan or the Supplemental
Loan.
(c) ALLOCATION OF SHARED COLLATERAL. Notwithstanding anything stated to
the contrary and subject to Section 12(b) hereof, Borrower hereby agrees with
Lender that upon a sale or other disposition of any Collateral
cross-collateralized to secure the Textron Facility, the Sovereign Facility, the
Receivables Loan, the Inventory Loan and the Supplemental Loan (the "Shared
Collateral") or the exercise of Textron's, Sovereign's and/or Lender's remedies
following the occurrence of an Event of Default, the proceeds derived from such
Shared Collateral (which Shared Collateral shall not include the Real Estate
Collateral) at Lender's option, will be allocated as follows:
(i) With respect to any Shared Collateral where Lender is not
a Primary Secured Lender, any remaining proceeds following application against
the indebtedness of Borrower to such Primary Secured Lender that are allocated
to Lender pursuant to the terms of the Intercreditor Agreement shall be applied
(A) first toward repayment of any outstanding balance under the Inventory Loan
and the Supplemental Loan, and (B) any remaining proceeds thereafter will be
applied against any outstanding balance under the Receivables Loan, and (C) then
as provided in the Intercreditor Agreement.
(ii) With respect to any Shared Collateral securing the
Inventory Loan and where Lender is the Primary Secured Lender, any remaining
proceeds following application against the indebtedness of Borrower to Lender
under the Inventory Loan shall be applied (A) first toward repayment of any
outstanding balance under the Supplemental Loan, and (B) any remaining proceeds
thereafter will be applied against any outstanding balance under the Receivables
Loan, and (C) then as provided in the Intercreditor Agreement.
(iii) With respect to any Shared Collateral securing the
Supplemental Loan and where Lender is the Primary Secured Lender, any remaining
proceeds following application against the indebtedness of Borrower to Lender
under the Supplemental Loan shall be applied (A) first toward repayment of any
outstanding balance under the Inventory Loan, and (B)
26
any remaining proceeds thereafter will be applied against any outstanding
balance under the Receivables Loan, and (C) then as provided in the
Intercreditor Agreement.
13. SECTION 7 OF THE SUPPLEMENTAL LOAN AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING THERETO:
ADDITIONAL EVENTS OF DEFAULT. In addition to the Events of Default set
forth in the Loan Agreement, the following shall constitute an "Event of
Default" under the Loan Agreement:
(a) PAYMENTS. Failure of Lender to receive from Borrower within five
(5) days of the date of written notice has been sent to Borrower after the due
date: (i) any amount payable under the Amended and Restated Revolving Promissory
Note or the Second Amended and Restated Promissory Note, or (ii) any other
payment due under the Loan Agreements, except for the Amended and Restated
Revolving Promissory Note and the Second Amended and Restated Promissory Note
Maturity Dates for which no grace period is allowed.
(b) COVENANT DEFAULTS. Borrower shall fail to perform or observe any
covenant, agreement, obligation, representation or warranty contained in this
Fourth Amendment, the Intercreditor Agreement or in any of the Loan Documents
(other than any covenant or agreement obligating Borrower to pay the
Indebtedness), and in the absence of any other specified grace period provided
therein or herein with respect to such covenant, agreement, obligation,
representation or warranty, such failure shall continue for thirty (30) days
after Lender delivers written notice thereof to Borrower, provided, however, if
the failure is incapable of cure within such thirty (30) day period and Borrower
shall be diligently pursuing a cure, such thirty (30) day cure period shall be
extended by an additional period not to exceed sixty (60) days.
(c) WARRANTIES OR REPRESENTATIONS. Any representation or other
statement made by or on behalf of Borrower in this Fourth Amendment, any of the
Loan Documents or any instrument furnished in compliance with or in reference to
the Loan Documents, shall be false, misleading or incorrect in any material
respect as of the date made.
(d) [INTENTIONALLY DELETED.]
(e) DEFAULT UNDER MORTGAGES. If a default or Event of Default occurs
under a Deed of Trust, a Mortgage, or any other Loan Document and such default
or Event of Default is not cured within the applicable grace period (if any),
provided therein.
(f) MODIFICATION OF TEXTRON DOCUMENTS, SOVEREIGN DOCUMENTS, DZ
DOCUMENTS, BOND HOLDER EXCHANGE DOCUMENTS OR OTHER DEBT INSTRUMENTS. Any
modification, amendment, extension or termination of any of the Textron
Documents, the Sovereign Documents, DZ Documents, Bond Holder Exchange Documents
or the documents evidencing any other indebtedness of Borrower without the prior
written consent of Lender.
27
(g) BUSINESS OPERATIONS. Failure of Borrower to operate its business in
substantial compliance with the Business Plan.
(h) DEFAULT UNDER TEXTRON FACILITY OR SOVEREIGN FACILITY. Borrower
fails to perform or observe any covenant, agreement, or obligation, or breaches
any representation or warranty under the Additional Loan Agreements or either
(i) the Textron Documents or (ii) the Sovereign Documents, and such default or
Event of Default is not cured within the applicable grace period (if any)
permitted therein.
(i) DEFAULT UNDER DZ FACILITY AND/OR BOND HOLDER EXCHANGE TRANSACTION.
Borrower fails to perform or observe any covenant, agreement, or obligation, or
breaches any representation or warranty under either (i) the DZ Letter Agreement
or the DZ Documents, or (ii) the Bond Holder Exchange Term Sheet or the Bond
Holder Exchange Documents, and such default or Event of Default is not cured
within the applicable grace period (if any) permitted therein.
(j) DZ FACILITY NOTES RECEIVABLE PURCHASES. If DZ does not purchase
Notes Receivable in substantially the amounts (as determined by Lender in its
sole and absolute discretion) and during the periods specified in the Business
Plan or if the proceeds of such purchase are insufficient to make the principal
payments described in the DZ Letter Agreement or if Borrower fails to apply such
proceeds to repayment of the loans as provided in the DZ Letter Agreement.
(k) DEFAULT OR TERMINATION OF CONSULTING AGREEMENT. If the Consulting
Agreement terminates or Borrower fails to perform or observe any covenant,
agreement, or obligation, or breaches any representation or warranty under the
Consulting Agreement, and such default or Event of Default is not cured within
the applicable grace period (if any) permitted therein.
(l) DEFAULT OR TERMINATION OF BACKUP SERVICING AGREEMENT. If the Backup
Servicing Agreement terminates or Borrower fails to perform or observe any
covenant, agreement, or obligation, or breaches any representation or warranty
under the Backup Servicing Agreement, and such default or Event of Default is
not cured within the applicable grace period (if any) permitted therein.
(m) DEFAULT OR TERMINATION OF ASSIGNMENTS OF MORTGAGE. If any of the
Assignments of Mortgage terminates or Borrower fails to perform or observe any
covenant, agreement, or obligation, or breaches any representation or warranty
under the Assignments of Mortgage, and such default or Event of Default is not
cured within the applicable grace period (if any) permitted therein.
(n) DEFAULT OR TERMINATION OF COLLATERAL ASSIGNMENTS. If the Collateral
Assignment of Backup Servicing Agreement or the Collateral Assignment of
Consulting Agreement terminates or Borrower fails to perform or observe any
covenant, agreement, or
28
obligation, or breaches any representation or warranty under either the
Collateral Assignment of Backup Servicing Agreement or the Collateral Assignment
of Consulting Agreement, and such default or Event of Default is not cured
within the applicable grace period (if any) permitted therein.
(o) MODIFICATIONS OF CONSULTING AGREEMENT, BACKUP SERVICING AGREEMENT,
MANAGEMENT AGREEMENTS AND SERVICING AGREEMENTS. Any modification, extension of
amendment of the Consulting Agreement, the Backup Servicing Agreement or any
management agreements, servicing agreements without the prior written consent of
Lender.
(p) USE OF LOAN PROCEEDS. If the proceeds of any Advance are used for
any purpose not set forth in the Business Plan.
14. SECTION 8 OF THE SUPPLEMENTAL LOAN AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING THERETO:
REMEDIES. In addition to the Remedies set forth in the Loan Agreement,
upon the occurrence of an Event of Default, Lender may take any one or more of
the following actions, all without notice to Borrower:
(a) REPLACEMENT OF MANAGER AND SERVICER. Without demand or notice of
any nature whatsoever, Lender may, subject to the Intercreditor Agreement, (i)
terminate any then existing servicing agreement and replace any then existing
Servicer with the Standby Servicer or such other servicer as Lender may select
in its sole and absolute discretion; and (ii) upon an Event of Default terminate
any then existing management agreement and, with the approval of the majority of
Borrower's board of directors, which approval shall not be unreasonably withheld
or delayed, replace any existing manager with the Standby Manager, or such other
manager as Lender may select, in its sole and absolute discretion, provided
however, if: (x) the obligations of Borrower have become immediately due and
payable in accordance with the acceleration provision under Section 8.1 (a) of
the Inventory Loan Agreement, or (y) Lender elects to have J & J Limited, Inc.
act as Standby Manager, then no such approval of Borrower's board of directors
shall be required.
15. SECTION 9 OF THE SUPPLEMENTAL LOAN AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING THERETO:
CERTAIN RIGHTS OF LENDER. In addition those set forth in the Loan
Agreement, Lender's rights under the Loan Agreement shall also include the
following:
(a) STANDBY SERVICER. Borrower acknowledges and agrees that upon
written notice from Lender, to be given at any time during the terms of the
Inventory Loan, the Supplemental Loan and the Receivables Loan in Lender's sole
and absolute discretion, the Servicing Agent shall be replaced by the Standby
Servicer, or such other servicing entity as may be selected by
29
Lender in its sole and absolute discretion, for the purpose of servicing all
Notes Receivable comprising the Collateral.
16. SILVERLEAF FINANCE. Lender acknowledges and agrees that: (i) the
transfer of Notes Receivable to Silverleaf Finance I, Inc. in connection with
the DZ Facility is a true sale and not a financing transaction; (ii) Lender will
not file a motion to consolidate Silverleaf Finance I, Inc. with the Borrower in
the event of a bankruptcy of Borrower; and (iii) Lender will not take any
affirmative action in support of any such motion to consolidate.
17. FILING AUTHORITY. Borrower reaffirms and grants to Lender and its
designee full power and authority to execute, acknowledge, deliver and file any
security agreements and UCC-1 financing statements (and amendments thereto)
requested by Lender or necessary to perfect the security interest in the
Collateral granted to Lender by Borrower to secure the Inventory Loan, the
Supplemental Loan and the Working Capital Facility herewith.
18. BORROWER CONFIRMATION. Borrower hereby ratifies and confirms that
the Loan Agreement and other Loan Documents as amended herein are in full force
and effect and agrees that as modified, the Note, the Promissory Note as amended
and restated and the other Loan Documents are and continue to be in full force
and effect and 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 day hereof except with respect to the Specified Events
of Default and except as provided in Section 23 hereof.
19. BORROWER ESTOPPEL. Execution of this Fourth 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
the Fourth Amendment nor any provision hereof or of any other documents given in
connection herewith shall constitute or shall be construed to constitute a
waiver of any default, right, or remedy of Lender under the Note, the Promissory
Note as amended and restated 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 Promissory Note, the Loan Documents or the Inventory Loan Agreement or the
Supplemental Loan Agreement 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 implied by Lender of any or its rights under any such document nor
shall the same excuse Borrower's obligation to strictly and timely perform its
obligation hereunder and therein.
20. RELEASE. The Borrower by execution of this Fourth Amendment hereby
declares that as of this date the Borrower 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
30
damages arising out of any transaction between Borrower and Lender in connection
with the Loan Agreement, or any of the other Loan Documents, any security
therefore or this Fourth 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.
21. COMPLETE AGREEMENT, ETC. 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 the Fourth Amendment which
have not been incorporated into the Fourth Amendment. The Fourth 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
comment or condition of this Fourth Amendment is held to be invalid, illegal, or
unenforceable as to a particular person, entity, or situation and the Fourth
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 the Fourth Amendment, the Note, the Promissory Note as amended and restated
and all the remaining Loan Documents shall not be affected by the Fourth
Amendment and each shall remain in full force and effect. Nothing herein
contained shall be construed to impair Lender's security under any of the Loan
Agreements or 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 hereby.
22. FURTHER ASSURANCES. Borrower agrees to execute such further
documents, instruments and agreements as Lender may require from time to time to
effectuate the terms and conditions and understandings of this Fourth Amendment.
23. BORROWER REPRESENTATIONS. Borrower hereby represents and warrants
to the Lender that:
(a) The Persons executing the Fourth Amendment on behalf of
the Borrower have full authority to execute the Fourth Amendment on behalf of
Borrower and to bind Borrower thereby;
(b) The execution and delivery by Borrower of the Fourth
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 or
the Collateral securing the Loans may be bound or affected;
(c) Borrower is a corporation duly formed, validly existing
and in good standing under the laws of the State of Texas;
31
(d) The execution, delivery and performance by the Borrower of
the Fourth Amendment 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 affect, performance, and enforceability of
the Fourth Amendment and all other Loan Documents have been received; and
(e) Borrower will not be, on or after the date hereof, a party
to any contract or agreement which restricts its right or ability to incur
indebtedness or prohibits Borrower's execution of the Inventory Loan or the
Supplemental Loan, or compliance with the terms of the Loan Agreement, the Loan
Documents, the Receivables Loan Agreement, the Textron Documents, the Bond
Holder Exchange Documents, the Sovereign Documents or the DZ Documents. Borrower
has not agreed or consent to cause or permit in the future (upon the happening
of a contingency or otherwise) any of the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien except in favor of Lender as
provided herein, and, with respect to the Real Estate Collateral and the
Ineligible Note Portfolio, in favor of Textron and Sovereign.
(f) Except as disclosed on SCHEDULE 23(f) hereto, there are no
actions, suits, proceedings, orders or injunctions pending or, to the best of
Borrower's knowledge, threatened against or affecting Borrower any Resort or the
Intervals, at law or in equity, or before or by any governmental authority, in
any case individually in which the claim exceeds or would reasonably be expected
to exceed $50,000 or all cases for which claims in the aggregate exceed or could
reasonably be expected to exceed $250,000. Borrower has received no notice from
any court or governmental authority alleging that Borrower has violated any
applicable timeshare act, any of the rules or regulations thereunder, or any
other applicable laws.
(g) Since the date of the Inventory Loan and the Receivables
Loan, except as otherwise disclosed by the Borrower to Lender in writing, since
September 30, 2001, there has occurred no materially adverse change in the
financial condition or business of the Borrower and its subsidiaries as shown on
or reflected in the consolidated balance sheet of the Borrower and its
subsidiaries as of September 30, 2001, or the consolidated statement of income
as of such date, other than changes in the ordinary course of business that have
not had any materially adverse effect either individually or in the aggregate on
the business or financial condition of the Borrower or any of its subsidiaries.
Following Lender's receipt and approval of the Borrower's financial statements
for the fiscal year ended on December 31, 2001, there has occurred no materially
adverse change in the financial condition or business of the Borrower and its
subsidiaries as shown on or reflected in the consolidated balance sheet of the
Borrower and its subsidiaries as of December 31, 2001, or the consolidated
statement of income as of such date, other than changes in the ordinary course
of business that have not had any materially adverse effect either individually
or in the aggregate on the business or financial condition of the Borrower or
any of its Subsidiaries.
Since September 30, 2001, the Borrower has not made any Distribution.
32
24. WAIVER. Effective on the Closing Date of this Fourth Amendment, and
so long as each condition precedent to Lender's obligation to make Advances in
this Fourth Amendment has been satisfied, Lender agrees to waive all prior
Defaults and Events of Default under the Inventory Loan and the Supplemental
Loan, including but not limited to, the Specified Events of Default provided in
the Forbearance Agreement.
25. COUNTERPARTS. This Fourth Amendment 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.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
33
IN WITNESS WHEREOF, Borrower and Lender have caused this Fourth
Amendment to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
SILVERLEAF RESORTS, INC.,
a Texas corporation
By: /s/ Xxxxx X. Xxxxx, Xx.
--------------------------------------
Name: Xxxxx X. Xxxxx, Xx.
------------------------------------
Its: Chief Financial Officer
-------------------------------------
Silverleaf Resorts, Inc.
LENDER:
XXXXXX FINANCIAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
------------------------------------
Its: Senior Vice President
-------------------------------------
34
APPENDIX 1
DEFINITION OF TERMS
TERMS DEFINED. The following terms used in this Fourth Amendment are added to
the Appendix of the Supplemental Loan Agreement and shall have the following
meanings:
ADDITIONAL COLLATERAL. Collectively, all now owned or hereafter
acquired right, title and interest of Borrower, in all of the following:
(i) the Backup Servicing Agreement; and
(ii) the Consulting Agreement.
ADDITIONAL LENDERS. The Lenders who, together with Lender, are parties
to the Intercreditor Agreement with Borrower.
ADDITIONAL LOAN AGREEMENTS. The Loan Agreements between Borrower and
Additional Lenders as more particularly described in the Intercreditor
Agreement.
ADDITIONAL RESORT COLLATERAL. Shall mean the real and personal
property, now or hereafter acquired by Borrower and listed on SCHEDULE 7(f). For
the avoidance of doubt, "Additional Resort Collateral" shall not include the
promissory notes and other property of Silverleaf Finance I, Inc. that
constitutes "Pledged Assets" under the DZ Documents.
AMENDED AND RESTATED REVOLVING PROMISSORY NOTE. The Amended and
Restated Revolving Promissory Note (Inventory Loan) evidencing the Inventory
Loan in the principal amount of $10,000,000 executed and delivered by Borrower
to Lender on the date hereof and any substitution or replacement therefor.
ASSIGNMENTS OF MORTGAGE. The Assignments of Mortgage executed and
delivered by Borrower in connection with the Ineligible Note Portfolio and
pursuant to the terms of Section 7(e) of this Fourth Amendment, in the form
attached hereto as EXHIBIT O.
AVAILABILITY PERIOD. The availability period for the Inventory Loan
commencing on the Closing Date and ending on March 31, 2004.
BACKUP SERVICING AGREEMENT. Shall mean the agreement, in the form
attached hereto as EXHIBIT K, pursuant to which the Standby Servicer shall
provide servicing functions with respect to the pledged Notes Receivable upon
the occurrence of an Event of Default hereunder in accordance with Section 17
hereof.
BOND HOLDER EXCHANGE TRANSACTION. The term "Bond Holder Exchange
Transaction" shall mean that certain senior subordinate note holder exchange
transaction on the terms and
35
conditions outlined in that certain Term Sheet dated October 19, 2001 (the "Bond
Holder Exchange Term Sheet"), a copy of which is attached hereto as EXHIBIT I,
and which is to be consummated by the documents listed on SCHEDULE I hereto (the
"Bond Holder Exchange Documents").
BUSINESS PLAN. The term "Business Plan" shall mean the five (5) year
"Stand Alone" business plan prepared by Borrower, together with the Senior
Lender Advance, attached hereto as SCHEDULE 10(b). The Business Plan includes
the "Impact on Lenders Worksheet" setting forth the amounts to be advanced by
each of Lender, Textron and Sovereign pursuant to their respective credit
facilities (the "Senior Lender Advance Schedule").
CASH AND CASH EQUIVALENTS. Unrestricted (i) cash; (ii) marketable
direct obligations issued or unconditionally guaranteed by the United States
government and backed by the full faith and credit of the United States
government; and (iii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Rating Group or P-1
(or better) by Xxxxx'x Investor Service, Inc. provided that the maturities of
such Cash and Cash Equivalents shall not exceed one year.
CLOSING DATE. The Closing Date shall be the date on which (i) all
conditions set forth in Sections 4 and 8 of the Fourth Amendment are satisfied
by Borrower and (ii) the Fourth Amendment is duly executed by Borrower and
Lender, but not later than May 31, 2002. In the event that all of the conditions
under Sections 4 and 8 of this Fourth Amendment have not been satisfied by May
31, 2002, this Fourth Amendment shall become null and void.
COLLATERAL. Collective, all now owned or hereafter acquired right,
title and interest of Borrower, in all of the following:
(i) Financed Notes Receivable (including all Notes
Receivable comprising the Ineligible Notes Portfolio)
and all proceeds of or from them;
(ii) Mortgages and all proceeds of or from them
(including the Mortgages securing the Notes
Receivable comprising the Ineligible Note Portfolio);
(iii) Documents, instruments, accounts, chattel
paper, and general intangibles relating to the
Financed Notes Receivable (including any relating to
the Ineligible Note Portfolio) and the related
Mortgages;
(iv) the Backup Servicing Agreement;
(v) the Consulting Agreement;
36
(vi) All collateral under the Textron Facility, the
Sovereign Facility, the Receivables Loan, the
Inventory Loan, the Supplemental Loan and the Working
Capital Facility;
(vii) Real Estate Collateral;
(viii) All books, records, reports, computer tapes,
disks and software relating to the Collateral; and
(ix) Extensions, additions, improvements,
betterments, renewals, substitutions and replacements
of, for or to any of the Collateral, wherever
located, together with the products, proceeds,
issues, rents and profits thereof, and any
replacements, additions or accessions thereto or
substitutions thereof.
COLLATERAL ASSIGNMENT OF BACKUP SERVICING AGREEMENT. Shall mean the
Collateral Assignment of Backup Servicing Agreement, in the form attached here
as EXHIBIT N, by Borrower to Lender of all of Borrower's rights under the Backup
Servicing Agreement.
COLLATERAL ASSIGNMENT OF CONSULTING AGREEMENT. Shall mean the
Collateral Assignment of Consulting Agreement, in the form attached here as
EXHIBIT M, by Borrower to Lender of all of Borrower's rights under the
Consulting Agreement.
CONSULTING AGREEMENT. Shall mean the agreement between the Standby
Manager and Borrower, dated April 30, 2002, a copy of which is attached hereto
as EXHIBIT J, providing for the management of Borrower's business on the
occurrence of an Event of Default hereunder.
DISTRIBUTION. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
DZ FACILITY. The term "DZ Facility" shall mean that certain note
purchase facility to be provided by DZ Bank AG Deutsche
Zentral-Genossenschaftsbank Frankfurt Am Main, as agent for Autobahn Funding
Company LLC ("DZ") to Borrower, on the terms outlined in the DZ Letter Agreement
dated December 12, 2001, attached hereto as EXHIBIT L ("DZ Letter Agreement"),
and evidenced by the documents listed on SCHEDULE L hereto (the "DZ Documents").
ELIGIBLE NOTE RECEIVABLE. Each Note Receivable satisfying all of the
following criteria:
37
(a) Purchaser has made a cash down payment of at least ten percent of
the actual purchase price of the Interval and at least one monthly payment under
the related Note Receivable and no part of such payment has been made or loaned
to Purchaser by Borrower or an Affiliate;
(b) The weighted average interest rate of all Financed Notes Receivable
is no less than 13.75% per annum;
(c) No installment is more than thirty (30) days past due on a
contractual basis at the time of assignment to Lender, nor becomes more than
sixty (60) days past due on a contractual basis thereafter;
(d) The Unit with respect to the Interval purchased has been completed,
developed and furnished in accordance with the purchase contract;
(e) All amenities for the Resort have been completed and are available
for use by all Purchasers;
(f) The purchaser is not an Affiliate, shareholder, officer, director
or agent of, related to or employed by Borrower;
(g) Subject to the Intercreditor Agreement, the Note Receivable is free
and clear of adverse claims, liens and encumbrances and is not currently, nor
shall it be potentially in the future, subject to claims of rescission,
invalidity, unenforceability, illegality, defense, offset or counterclaim;
(h) The Note Receivable is secured by a first priority mortgage or deed
of trust on the purchased Interval or by a first priority perfected security
interest in the related Certificate of Beneficial Interest and an Assignment of
Mortgage and Assignment of Beneficial Interest;
(i) Subject to the provisions of SCHEDULE 3.2.6.(IV) of the Receivables
Loan Agreement, the Mortgage securing a Note Receivable is insured under a
mortgagee title insurance policy acceptable to Lender subject only to the
Permitted Exceptions;
(j) The Purchaser meets credit standards acceptable to Lender at its
sole and absolute discretion and shall have a minimum Fair Xxxxx Company (FICO)
Credit Bureau Score of at least 550;
(k) No single Purchaser shall have an aggregate outstanding principal
balance due under his/her or its Notes in excess of $36,000;
(l) Payments are to be in legal tender of the United States;
38
(m) The Note Receivable and the Purchase Documents are valid, genuine
and enforceable against the obligor thereunder, and such obligor has not
assigned his or her interest thereunder;
(n) At least 90% of the aggregate outstanding principal balance of all
Financed Notes Receivable arises from Purchasers who are U.S. or Canadian
residents and no more than 25% of the Notes Receivable comprising the Collateral
shall be originated from Sales of Biennial Intervals;
(o) Payments have been made by the obligor thereunder and not by
Borrower or any Affiliate of Borrower on the obligor's behalf; and
(p) The Interval or Biennial Interval with respect to each Eligible
Note Receivable is subject to a Purchaser Mortgage or to an Assignment of
Mortgage and Beneficial Interest;
(q) Up to 15% of the Eligible Notes Receivable may be modified to
reduce the interest rate charged in accordance with paragraph 6.4 of the Second
Amendment to Amended and Restated Receivables Loan Agreement.
(r) Up to 20% of the Eligible Notes Receivable may be modified to
extend the term thereof beyond 84 months, but not exceeding 120 months, and in
accordance with paragraph 6.4 of the Second Amendment to Amended and Restated
Receivables Loan Agreement.
(s) Each Eligible Note Receivable shall evidence a self-amortizing loan
and 80% of the Eligible Notes Receivable shall have a term not exceeding 84
months and the remainder shall have a term not exceeding 120 months.
FINANCED NOTE RECEIVABLE. An Eligible Note Receivable as to which an
Advance has been made and which has been assigned and delivered to Lender or an
agent on behalf of Lender as security for the Inventory Loan, the Supplemental
Loan or the Receivables Loan.
FIRST AMENDMENT TO FORBEARANCE AGREEMENT. That certain First Amendment
to Forbearance Agreement dated December 31, 2001 ("First Amendment to
Forbearance Agreement") entered into between Lender, Borrower and Union Bank of
California, N.A. providing for, among other things, the extension of the
forbearance period as set forth under the Forbearance Agreement.
INDEBTEDNESS. Collectively, all payment obligations of Borrower to
Lender: (i) under the Amended and Restated Revolving Promissory Note and the
Second Amended and Restated Promissory Note and other Loan Documents; (ii) under
the Loan Agreement; (iii) in connection with the Amended and Restated
Receivables Loan and Security Agreement from Lender to Borrower, as amended, and
(iv) in connection with any and all other indebtedness of Borrower to Lender
whether now existing or hereafter arising.
39
INELIGIBLE NOTE PORTFOLIO. Shall mean certain of Borrower's Notes
Receivable and Mortgages which are not currently pledged to any other Person and
which shall be held by Borrower, as agent for and on behalf of each of Lender,
Textron and Sovereign, unless and until an Event of Default shall occur and
which are listed on SCHEDULE A, attached hereto.
INTERCREDITOR AGREEMENT. The Amended and Restated Intercreditor
Agreement between Borrower and Lender and Additional Lenders dated as of the
Closing Date.
INTEREST RATE. The Interest Rate for the Inventory Loan shall be set
forth in the Amended and Restated Revolving Promissory Note. The Interest Rate
for the Supplemental Loan shall be defined in the Second Amended and Restated
Promissory Note.
INVENTORY CONTROL PROCEDURES. The Inventory Control Procedures as set
forth in the attached SCHEDULE 8(h) hereto.
INVENTORY LOAN COLLATERAL. The portion of the Collateral securing the
Inventory Loan.
LENDER'S LOCKBOX. The lockbox account designated by Lender as the
depositary of payments from obligors in connection with the Financed Notes
Receivable.
MARKETING AND SALES EXPENSES. Shall mean all promotion, lead
generation, sales commissions and all other marketing expenses incurred or paid
by Borrower pursuant to any marketing agreements or otherwise.
MATURITY DATE. The Maturity Date for the Inventory Loan shall be March
31, 2007, or any earlier date on which the Inventory Loan shall be required to
be paid in full, whether by acceleration or otherwise. The Maturity Date for the
Supplemental Loan shall be March 31, 2007, or any earlier date on which the
Supplemental Loan shall be required to be paid in full, whether by acceleration
or otherwise.
RECEIVABLES LOAN AGREEMENT. That certain Amended and Restated
Receivables Loan Agreement between Borrower, Lender and Union Bank of
California, N.A. dated September 1, 1999, as amended and modified.
RECEIVABLES LOAN COLLATERAL. The portion of the Collateral securing the
Receivables Loan.
REVOLVING PERIOD. The revolving period for the Inventory Loan
commencing on the Closing Date and ending on March 31, 2004.
SECOND AMENDED AND RESTATED PROMISSORY NOTE. The Second Amended and
Restated Promissory Note (Supplemental Loan) evidencing the Supplemental Loan in
the principal amount of $10,000,000 executed and delivered by Borrower to Lender
on the date hereof and any substitution or replacements therefor.
40
SECOND AMENDMENT TO AMENDED AND RESTATED RECEIVABLES LOAN AGREEMENT.
Shall mean that certain Second Amendment to Amended and Restated Receivables
Loan and Security Agreement between Borrower, Lender and Union Bank of
California, N.A. dated of even date herewith.
SECOND AMENDMENT TO FORBEARANCE AGREEMENT. That certain Second
Amendment to Forbearance Agreement dated February 12, 2002 entered into between
Lender, Borrower and Union Bank of California, N.A. providing for, among other
things, the extension of the forbearance period as set forth under the
Forbearance Agreement.
SOVEREIGN FACILITY. The term "Sovereign Facility" shall mean that
certain credit facility provided by Sovereign Bank ("Sovereign") and other
lenders to Borrower pursuant to the documents listed on SCHEDULE B hereto (the
"Sovereign Documents").
STANDBY MANAGER. Shall mean the Person selected by Lender to act as
standby manager of the Resorts in accordance with the Loan Agreement and the
Consulting Agreement.
STANDBY SERVICER. Shall mean the Person selected by Lender to act as
standby servicer in accordance with the Loan Agreement and the Backup Servicing
Agreement. The current Standby Servicer is Concord Servicing Corporation.
SUPPLEMENTAL AVAILABILITY PERIOD. The period commencing on the Closing
Date and ending on March 31, 2004.
SUPPLEMENTAL LOAN COLLATERAL. The portion of the Collateral securing
the Supplemental Loan.
SUPPLEMENTAL REVOLVING PERIOD. The period commencing on the Closing
Date and ending on March 31, 2004.
SURVEY. A plat or survey of the Resorts and the Real Estate Collateral
prepared by a licensed surveyor acceptable to Lender and in a form acceptable to
Lender.
TANGIBLE NET WORTH. Tangible Net Worth means, with respect to any
Person, the amount calculated in accordance with GAAP as: (i) the consolidated
net worth of such Person and its consolidated subsidiaries, plus (ii) to the
extent not otherwise included in such consolidated net worth, unsecured
subordinated debt of such Person and its consolidated subsidiaries, the terms
and conditions of which are reasonably satisfactory to Lender, minus (iii) the
consolidated intangibles of such Person and its consolidated subsidiaries,
including, without limitation, goodwill, trademarks, tradenames, copyrights,
patents, patent allocations, licenses and rights in any of the foregoing and
other items treated as intangible in accordance with GAAP. Notwithstanding the
foregoing, if subsequent to the Closing Date deferred sales are no longer
considered an asset under GAAP, Lender agrees, at the request of Borrower, to
determine, in its
41
reasonable discretion, whether deferred sales should continue to be considered
an asset for purposes of determining Borrower's Tangible Net Worth.
TAX REFUND. The term "Tax Refund" means that certain corporate tax
refund of Borrower for the 1998 and 1999 tax years in the estimated amount of
$5,000,000.
TEXTRON FACILITY. The term "Textron Facility" shall mean that certain
credit facility provided by Textron Financial Corporation ("Textron") to
Borrower pursuant to the documents listed on SCHEDULE C hereto (the "Textron
Documents").
42
LIST OF EXHIBITS
1. EXHIBIT A - SECOND AMENDED AND RESTATED PROMISSORY NOTE
2. EXHIBIT B - AMENDED AND RESTATED REVOLVING PROMISSORY NOTE
3. EXHIBIT C - INTERCREDITOR AGREEMENT
4. EXHIBIT D - CERTIFICATE OF BORROWER
5. EXHIBIT E - CERTIFICATE OF RESOLUTIONS OF BORROWER
6. EXHIBIT F - INCUMBENCY CERTIFICATE
7. EXHIBIT G - CLOSING OPINIONS OF COUNSELS FOR BORROWER
8. EXHIBIT H - MODIFICATION TO REAL ESTATE COLLATERAL MORTGAGES
9. EXHIBIT I - BOND HOLDER EXCHANGE TERM SHEET
10. EXHIBIT J - CONSULTING AGREEMENT
11. EXHIBIT K - BACKUP SERVICING AGREEMENT
12. EXHIBIT L - DZ LETTER AGREEMENT
13. EXHIBIT M - COLLATERAL ASSIGNMENT OF CONSULTING AGREEMENT
14. EXHIBIT N - COLLATERAL ASSIGNMENT OF BACKUP SERVICING AGREEMENT
15. EXHIBIT O - ASSIGNMENT(s) OF MORTGAGE
16. EXHIBIT P - SECOND AMENDMENT TO AMENDED AND RESTATED RECEIVABLES LOAN
AGREEMENT
17. EXHIBIT A - REQUEST FOR ADVANCE
LIST OF SCHEDULES
1. SCHEDULE 7(f) - ADDITIONAL RESORT COLLATERAL
2. SCHEDULE 8(a)(v) - CLOSING AND DOCUMENT CHECKLIST
3. SCHEDULE 8(h) - INVENTORY CONTROL PROCEDURES
4. SCHEDULE 8(i) - AMORTIZATION SCHEDULE
5. SCHEDULE 10(b) - BUSINESS PLAN
6. SCHEDULE 23(f) - LITIGATION SCHEDULE
7. SCHEDULE A - INELIGIBLE NOTE PORTFOLIO
8. SCHEDULE B - SOVEREIGN DOCUMENTS
9. SCHEDULE C - TEXTRON DOCUMENTS
10. SCHEDULE I - BOND HOLDER EXCHANGE DOCUMENTS
11. SCHEDULE L - DZ DOCUMENTS
43
