EXHIBIT 10.8.1
LOAN AND SECURITY AGREEMENT
between
PORT ROYAL RESORT, L.P.
and
GREYHOUND FINANCIAL CORPORATION
DATED AS OF OCTOBER 7, 1993
LOAN AND SECURITY AGREEMENT
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BY THIS LOAN AND SECURITY AGREEMENT entered into as of October 7, 1993
between GREYHOUND FINANCIAL CORPORATION, a Delaware corporation ("Lender") and
PORT ROYAL RESORT, L.P., a South Carolina limited partnership ("Borrower"),
hereby confirm and agree as follows:
ARTICLE I
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INTRODUCTION
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1.1 Borrower desires to obtain a revolving line of credit from
Lender, the proceeds of which shall be used for working capital purposes and for
purposes of paying and satisfying certain construction indebtedness owing from
Borrower to Lender.
1.2 Lender is willing to extend to Borrower a revolving line of
credit for the purposes stated in the preceding paragraph upon the terms and
conditions set forth herein.
ARTICLE II
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DEFINITIONS
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Except where the context clearly requires a different interpretation,
all capitalized terms used in this Agreement shall have the meanings assigned to
them above, immediately below, or elsewhere herein.
"Additional Advance" shall mean an additional Receivables Advance
advanced by Lender to Borrower from time to time with respect to an Eligible
Instrument that then constitutes Receivables Collateral against which a previous
Receivables Advance has been made.
"Advance" shall mean, collectively and individually, a Receivables
Advance and a Working Capital Advance.
"Advance Date" shall mean each date on which an Advance is made.
"Affiliate" shall mean any person or entity directly or indirectly
Controlling, Controlled by or under common Control with the person or entity to
whom the definition is applied, including blood relatives or spouse of the
person to whom the definition applies, if such person is a natural person.
"Agreement" shall mean this Loan and Security Agreement, as from time
to time modified, extended, renewed, replaced or restated.
"Applicable Environmental Laws" shall have the meaning set forth in
the Environmental Certificate.
"Applicable Usury Law" shall mean the usury law applicable pursuant to
the terms of Article XI, paragraph 11.11 hereof or such other usury law which is
applicable if the law chosen by the parties is not applicable.
"Assignments" shall mean written Assignments, in such form as Lender
shall prescribe, of specific Instruments and/or Purchaser Mortgages and the
proceeds thereof delivered to Lender concurrently with each Advance under the
terms of which Borrower transfers and assigns with full recourse all of
Borrower's right, title and interest in and to the Instrument and/or Purchaser
Mortgage, free and clear of all claims, demands, liens and encumbrances of third
parties, as collateral security for the Loan.
"Borrower" shall mean Port Royal Resort, L.P., a South Carolina
limited partnership.
"Borrowing Base (Receivables Loan)" shall mean an amount equal to the
lesser of (i) 90% of the unpaid principal balance payable under the Eligible
Instruments or (ii) 90% of the then present value assigned to the unmatured
installments of principal and interest payable under the Eligible Instruments
discounted at Lender's Prevailing Discount Rate.
"Borrowing Base (Working Capital Loan)" shall mean an amount equal to
the sum of (A) the lesser of (i) 40% of the unpaid principal balance payable
under the Eligible Instruments against which a Working Capital Advance will be
made or (ii) 40% of the then present value assigned to the unmatured
installments of principal and interest payable under the Eligible Instruments
against which a Working Capital Advance will be made, discounted at Lender's
Prevailing Discount Rate, (B) 40% of any cash down payments and principal and
interest payments then made by the Purchaser under such Eligible Instruments at
the time of such Working Capital Advance; and (C) 40% of any cash sales of Units
then made at the time of such Working Capital Advance, provided that the
proceeds of the cash sales and such cash down payments and principal and
interest payments are held and shall continue to be held in escrow by a Person
who is not an Affiliate of Borrower.
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"Borrowing Term (Receivables Loan)" shall mean the period of time
during which Lender is committed to make Receivables Advances under this
Agreement, which commitment shall terminate on the earlier of (i) the date which
occurs twelve (12) months after the date of the first Receivables Advance or
(ii) April 11, 1995.
"Borrowing Term (Working Capital Loan)" shall mean the period of time
during which Lender is committed to make Working Capital Advances under this
Agreement, which commitment shall terminate on the earlier of (i) the date which
occurs twelve (12) months after the date of the first Working Capital Advance or
(ii) December 11, 1994.
"Business Day" shall mean a calendar day other than a Saturday, Sunday
or legal holiday.
"Capital Expenditure" shall mean payments that are made by the
Borrower for the lease, purchase, improvement, construction or use of any
property, the value of which under GAAP is required to be capitalized and shall
include, without limitation, payments for the installment purchase of property
and payments under capitalized leases.
"Cash Flow" shall mean, for any period, the net income or loss of
Borrower, determined in accordance with GAAP (excluding the effect of any
extraordinary gains or losses from the sale of property not in the ordinary
course of business), plus each of the following items to the extent deducted
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from the revenues of Borrower in calculating the net income: (A) depreciation;
(B) amortization; and (C) interest and taxes during such period, and less
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Capital Expenditures to the extent paid in such period.
"Closing Date" shall have the meaning set forth in Paragraph 5.1
hereof.
"Commitment Fee" shall have the meaning set forth in Paragraph 8.16
hereof.
"Construction Loan" shall mean the loan made pursuant to the
Construction Loan Agreement.
"Construction Loan Agreement" shall mean that certain Construction
Loan Agreement of even date herewith, pursuant to which Lender has agreed,
subject to the terms and provisions thereof, to make a $2,425,000 construction
loan to Borrower, the proceeds of which are to be used to construct the Project.
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"Construction Loan Documents" shall have the meaning set forth in the
Construction Loan Agreement.
"Construction Mortgage" shall mean the Mortgage, Assignment of Rents
and Proceeds and Security Agreement delivered by Borrower pursuant to the
Construction Loan Agreement.
"Control" or "Controlling" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of another person or entity by any means.
"Delinquencies" shall mean, individually and collectively, an Eligible
Instrument, against which an Advance has been made, under which an installment
payment due becomes more than 59 days past due.
"Distribution" shall mean any distribution, advance, payment,
including but not limited to, loan repayments, dividends, bonuses, salary, other
compensation and management fees.
"Documents" shall mean this Agreement, the Receivables Note, the
Working Capital Note, the Construction Mortgage, the Environmental Certificate,
the Servicing Agreement, the Lockbox Agreement, the Services and Fees Agreement,
the Guarantee, the Assignments, the Subordination Agreement, and each and every
other document, instrument or writing executed or delivered by Borrower to
Lender in connection with the Loan.
"Eligible Instruments" shall mean the Instruments, each in
substantially the form of Exhibit "A" hereto, entered into by and between
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Borrower and those Persons who purchase a Time-Share Interest (at least 90% of
whom shall be United States or Canadian residents), which Eligible Instruments
shall conform to the criteria and standards set forth on Exhibit "B" hereto;
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provided, however, that an Instrument shall cease to be an Eligible Instrument
if (i) any installment payable thereunder becomes more than 59 days past due and
the Instrument under which such installment is payable is not replaced within
ninety (90) days following the due date of such installment or (ii) the contract
fails to continue to conform to the criteria and standards of Exhibit "B".
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"Environmental Certificate" shall mean that certain Environmental
Certificate with Representations, Covenants and Warranties of even date herewith
executed by Borrower and related to the Project.
"Event of Default" has the meaning set forth in Article IX hereof.
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"Force Majeure" has the meaning set forth in Paragraph 9.2 of the
Construction Loan Agreement.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time, consistently applied, throughout the period involved
and with prior periods, which shall include the official interpretations thereof
by the Financial Accounting Standards Board or any successor thereto.
"GPSI" shall mean GFC Portfolio Services, Inc., an Arizona
corporation, its successors and assigns.
"Guarantee(s)" shall mean a written Guarantee and Subordination
Agreement, in such form as Lender shall prescribe, executed and delivered by a
Person (or Persons) to Lender, under the terms and conditions of which such
Person (or Persons), as Guarantor(s), shall individually and/or jointly and
severally guarantee Borrower's Performance of all of its Obligations under the
Documents and the Environmental Certificate and shall agree to subordinate any
indebtedness owed by Borrower to Guarantor(s) to the Obligations owed by
Borrower to Lender.
"Guarantor(s)" shall mean individually, a Person, and collectively
each and every Person, who executes and delivers to Lender a Guarantee pursuant
to the terms and conditions of this Agreement. The Guarantor of this Loan is
Argosy/KGI Port Royal Partners, a South Carolina general partnership.
"Impositions" shall mean any and all taxes (other than any tax
measured by net income payable by Lender to any state or political subdivision
thereof or to the U.S. under Section 11 or 1201 of the Internal Revenue Code, as
amended), in consequence of the receipt of payments provided for herein, license
fees, assessments, charges, fines, penalties, property, privilege, excise, real
estate or other taxes currently or hereafter levied or imposed by any state,
local or federal authority upon or in connection with or measured by the
Documents or the Receivables Collateral.
"Incipient Default" shall mean any act or event which after the giving
of notice or the lapse of time (or both) would constitute an Event of Default.
"Instrument" shall mean a promissory note which has arisen out of the
sale of a Time-Share Interest in Phase I or Phase II by Borrower to a Purchaser,
which note is secured by a Purchaser Mortgage.
"Loan" shall mean, collectively and individually, the Receivables Loan
and the Working Capital Loan.
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"Lockbox Agent" shall mean the entity designated as the Lockbox Agent
in the Lockbox Agreement, or should such entity cease to act as Lockbox Agent
under the Lockbox Agreement, such other entity as Lender may appoint.
"Lockbox Agreement" shall mean the Lockbox Agreement, in such form as
Lender shall prescribe, to be made among Borrower, Lender and the Lockbox Agent,
as from time to time modified, replaced or restated.
"Maturity Date" shall mean that date which shall occur seven (7) years
after the date on which the last Receivables Advance is made under the terms of
this Agreement.
"Maximum Loan Amount" shall mean the sum of $10,000,000.00 less the
principal amount then outstanding under the Working Capital Loan and the
Construction Loan.
"Maximum Working Capital Loan Amount" shall mean the sum of
$1,700,000.00.
"Nondisturbance Agreement" shall mean an agreement, in form and
substance satisfactory to Lender, pursuant to which the holders of any lien
interest on the streets, amenities, common areas, or other off-site improvements
forming a part of the Project agree that, notwithstanding a foreclosure or other
realization of such encumbrance, (i) the Purchasers shall have uninterrupted use
of such streets, amenities, common areas and other off-site improvements and
uninterrupted use and possession of their respective Time-Share Interests, (ii)
the rights and privileges of such Purchasers shall not be otherwise impaired,
and (iii) the governing documents of the Project, including any declarations of
condominium, shall not be modified.
"Obligations" shall mean each and every obligation, duty, covenant,
undertaking and conditions which Borrower is required or has agreed to perform
under the Documents and under the Construction Loan Documents, and each and
every other obligation of Borrower now or hereafter owing to Lender.
"Opening Prepayment Date" shall mean the date which occurs twenty-four
(24) months after the last Receivables Advance hereunder.
"Overdue Rate" shall have the same meaning as set forth in the
Receivables Note.
"Perform, Performed or Performance" shall mean the timely, faithful
and complete payment and performance of all Obligations by Borrower.
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"Permitted Encumbrances" shall mean each and every restriction,
reservation and easement of record and liens for taxes and assessments securing
amounts not yet due and payable, which individually and in the aggregate do not
render unmarketable the title to the property which they encumber, or liens
being contested in good faith by proceedings diligently contested, or any lien
against property to secure payment of all or a portion of the purchase price of
such property, and any encumbrance, lien or security interest described in
Exhibit "C" hereto.
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"Person" shall mean any adult individual, partnership, corporation or
other form of business entity whatsoever.
"Phase I" shall mean the initial 12 Units to be constructed on the
Project together with the infrastructure, swimming pool, recreational building,
and spa.
"Phase II" shall mean the second 12 Units to be constructed on the
Project.
"Present Value" shall mean with respect to any Eligible Instrument the
present value of the unmatured and unpaid installments of principal and interest
due thereunder, calculated using a discount rate equal to the Prevailing
Discount Rate applicable to said Eligible Instrument as provided herein.
"Prevailing Discount Rate" shall mean Lender's prevailing discount
rate at the time each Advance is made, which rate shall be Prime Rate plus 2.5%
but in no event less than 11.5%.
"Prime Rate" shall mean the rate of interest publicly announced from
time to time by Citibank, N.A., New York, New York as its corporate base rate of
interest charged to its most creditworthy commercial borrowers notwithstanding
the fact that some such borrowers may borrow at lower rates. The initial Prime
Rate shall be the rate in effect as of the first Business Day of the month of
the initial Advance and, subsequently, the Prime Rate shall be redetermined as
of the first Business Day of each month.
"Project" shall mean the time-share condominium project known as Royal
Dunes Beach Villas at Port Royal Resort, to be constructed by Borrower in
Beaufort County, South Carolina, comprised of the 24 time-share units in Phase I
and Phase II.
"Purchaser" shall mean a Person who purchases a Time-Share Interest in
the Project from Borrower.
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"Purchaser Mortgage" shall mean the purchase money mortgage given to
secure an Instrument.
"Real Property" shall mean that parcel of real property and all
existing and future improvements located thereon, more fully described on the
attached Exhibit "G".
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"Receivables Advance" shall mean an Advance of the Receivables Loan
advanced by Lender to Borrower from time to time in accordance with the terms
and provisions of this Agreement. A Receivables Advance shall include an
Additional Advance.
"Receivables Collateral" shall mean (i) all of the Instruments which
Borrower now or hereafter assigns, transfers, endorses or delivers to Lender in
consideration for an Advance made by Lender pursuant to the terms of this
Agreement and as collateral security for the Obligation; (ii) all Instruments
against which Lender makes an Advance pursuant to the terms of this Agreement,
notwithstanding whether or not such Instrument is assigned, transferred,
endorsed or delivered to Lender; (iii) all Purchaser Mortgages, purchase
contracts, purchase agreements, guarantees and other documents or instruments
evidencing or securing the obligations of the Purchasers and/or any other person
primarily or secondarily liable on the Instruments; (iv) all policies of
insurance related to the Instruments or delivered in connection with the
Instruments (provided that the inclusion of such policies of insurance as part
of the Receivables Collateral shall not be deemed to restrict or limit the
Borrower's ability to encumber such insurance to the extent relating to or
delivered in connection with Instruments pledged to another lender, subject,
however, to the provisions of paragraph 8.27); (v) all rights under escrow
agreements relating to the Instruments and all impound and/or reserve accounts
related to the Instruments (excluding, however, any escrows set aside for
improvements to the Project); (vi) all licenses, contracts, management contracts
or agreements, franchise agreements, permits, subordination or certificates now
or hereafter required or used in connection with the ownership, operation or
maintenance of the Project (provided that the inclusion of such licenses,
contracts, management contracts and other agreements or permits as part of the
Receivables Collateral shall not be deemed to restrict or limit the Borrower's
ability to encumber such documents and agreements to the extent relating to or
delivered in connection with Instruments pledged to another lender, subject,
however, to the provisions of paragraph 8.27); (vii) all files, books and
records pertaining to any of the foregoing; and (viii) cash and non-cash
proceeds from all of the foregoing, including, without limitation, all goods,
instruments, documents, general intangibles, chattel paper and accounts wherever
located, which have been acquired with cash proceeds from any of the foregoing
and the proceeds thereof.
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"Receivables Loan" shall mean the line of credit loan extended by
Lender to Borrower in accordance with the terms of this Agreement in an
outstanding principal amount not to exceed at any time the Maximum Loan Amount.
"Receivables Note" shall mean the Promissory Note, in the amount of
the Receivables Loan, to be made and delivered by Borrower to Lender pursuant
hereto, in a form acceptable to Lender.
"Security Interest" shall mean a direct and exclusive first security
interest which has been perfected under the Uniform Commercial Code of the
state(s) in which any such security interest must be perfected; provided that
with respect to any portion of the Receivables Collateral not covered by the
Uniform Commercial Code, it shall mean a direct and exclusive first lien on such
property which has been perfected in the manner provided by law.
"Servicing Agent" shall mean GPSI or, should such entity cease to act
as Servicing Agent under the Servicing Agreement and Services and Fees
Agreement, such other entity as Lender may appoint.
"Servicing Agreement" shall mean the Servicing Agreement, in such form
as Lender shall prescribe, to be made among Borrower, Lender, and the Servicing
Agent, as from time to time modified, replaced or restated.
"Services and Fees Agreement" shall mean the Services and Fees
Agreement, in such form as Lender shall prescribe, to be made between Borrower
and Servicing Agent and acknowledged by Lender, as from time to time modified,
replaced or restated.
"Subordination Agreement" shall mean an agreement, in such form as
Lender shall prescribe, delivered to Lender pursuant to paragraph 5.2(iv)
hereof, as from time to time modified, replaced or restated.
"Term" shall mean the duration of this Agreement commencing as of the
year and day first above written and terminating on the date Borrower has
Performed all of its Obligations under the Documents.
"Time-Share Interest" shall mean the rights sold to a Purchaser to the
exclusive use of a Unit in the Project and the Project common areas for a one
(1) week period each year.
"Unit" shall mean a condominium unit in the Project as shown on the
recorded condominium plat therefor.
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"Working Capital Advance" shall mean an Advance of the Working Capital
Loan advance by Lender to Borrower from time to time in accordance with the
terms and provisions of this Agreement.
"Working Capital Loan" shall mean a revolving line of credit loan
extended by Lender to Borrower in accordance with the terms of this Agreement in
an outstanding principal amount not to exceed at any time the Maximum Working
Capital Loan Amount.
"Working Capital Note" shall mean the Promissory Note, in the amount
of the Working Capital Loan, to be made and delivered by Borrower to Lender
pursuant hereto, in a form acceptable to Lender.
ARTICLE III
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THE LOAN
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3.1 Lender hereby agrees that the Receivables Loan (including
Additional Advances of the Receivables Loan) will be disbursed to Borrower, from
time to time, in periodic Receivables Advances, but in no event after the
Borrowing Term (Receivables Loan) has expired, in amounts determined by
subtracting from the Borrowing Base (Receivables Loan) the unpaid principal
balance outstanding under the Receivables Loan at the time of each Receivables
Advance and the unpaid principal balance of the portion of the Working Capital
Loan attributable to the Instrument against which such Receivables Advance is
being made; provided that at no time shall the unpaid principal balance of the
Receivables Loan exceed the Maximum Loan Amount.
(i) Receivables Advances shall not be made more frequently
than twice per month, and each Receivables Advance shall be in an amount of
not less than One Hundred Thousand Dollars ($100,000.00). Lender shall
charge a fee of Five Hundred Dollars ($500.00) for the second Receivables
Advance made during any month and shall be entitled to deduct such fee from
the Receivables Advance so made. The foregoing fee is to be paid to Lender
strictly in consideration for Lender's agreement to make a second
Receivables Advance during any particular calendar month and shall not be
applied or credited against any other Obligations.
(ii) The Receivables Loan is a revolving line of credit under
the terms of which Borrower, during the Borrowing Term (Receivables Loan),
shall have the right to obtain Receivables Advances, repay Receivables
Advances, and obtain additional Receivables Advances so long as no Event of
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Default has occurred and is continuing and so long as all other conditions
precedent to the making of a Receivables Advance have been satisfied.
(iii) No Receivables Advances will be made after the Borrowing
Term (Receivables Loan) has expired unless Lender, in its sole discretion,
shall agree in writing to make such Receivables Advances.
(iv) Borrower shall use the proceeds of the Receivables Loan
for working capital purposes and to repay the Construction Loan and the
Working Capital Loan, in full. The proceeds of the Receivables Loan shall
be used to pay and satisfy the then unpaid principal balance and all
accrued interest under the Working Capital Loan before any portion of the
Receivables Loan is paid in satisfaction of any portion of the Construction
Loan. The foregoing notwithstanding, upon the occurrence of any Event of
Default, the proceeds of the Receivables Loan may be applied by Lender in
satisfaction of the Obligations in such order and manner as Lender shall
determine.
(v) At no time during the term hereof shall the unpaid
principal balance of the Receivables Loan, together with the unpaid
principal balance of the Construction Loan and the Working Capital Loan,
exceed a total amount equal to Ten Million Dollars ($10,000,000.00), and
Lender shall have no obligation to make any Receivables Advance if such
Advance would cause the foregoing limitation to be exceeded.
3.2 Lender agrees that the Working Capital Loan will be disbursed to
Borrower, from time to time, in periodic Working Capital Advances, but in no
event after the Borrowing Term (Working Capital Loan) has expired, in an amount
determined by subtracting from the Borrower Base (Working Capital Loan) the
unpaid principal balance of the Working Capital Loan at the time of each Working
Capital Advance; provided that at no time shall the unpaid principal balance of
the Working Capital Loan exceed the Maximum Working Capital Loan Amount.
(i) Working Capital Advances shall be made no more frequently
than twice per month and each Working Capital Advance shall be in an amount
not less than One Hundred Thousand Dollars ($100,000.00). Lender shall
charge a fee of Five Hundred Dollars ($500.00) for the second Working
Capital Advance made during any month and shall be entitled to deduct such
fee from the Working Capital Advance so made. The foregoing fee is to be
paid to Lender strictly in consideration for Lender's agreement to make a
second Working Capital Advance during any particular calendar month and
shall not be applied or credited against any other Obligations.
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(ii) The Working Capital Loan is a revolving line of credit
under the terms of which Borrower, during the Borrowing Term (Working
Capital Loan), shall have the right to obtain Working Capital Advances,
repay Working Capital Advances, and obtain additional Working Capital
Advances so long as no Event of Default has occurred and is continuing and
so long as all other conditions precedent to the making of a Working
Capital Advance have been satisfied. The foregoing notwithstanding, under
no circumstances shall Borrower have the right to obtain a Working Capital
Advance against Eligible Instruments arising from Phase II until all
Working Capital Advances made against Eligible Instruments arising from
Phase I have been paid in full, including all accrued interest thereon. At
such time as Borrower has received a Working Capital Advance against
Eligible Instruments arising from Phase II, Borrower shall have no further
right to obtain any Working Capital Advances against Eligible Instruments
arising from Phase I.
(iii) No Working Capital Advances will be made after the
Borrowing Term (Working Capital Loan) has expired unless Lender, in its
sole discretion, shall agree to make such Working Capital Advances.
(iv) Borrower shall use the proceeds of the Working Capital
Loan for working capital purposes.
(v) Any cash down payments and principal and interest payments
made by Purchasers that are used in calculating the Borrowing Base (Working
Capital Loan) shall be held in escrow by a Person who is not an Affiliate
of Borrower and shall not be released to Borrower unless a principal
payment under the Working Capital Loan is made in an amount equal to the
amount of the Working Capital Advance originally made against the
Instrument under which such cash down payment or principal and interest
payment was made.
(vi) At no time during the term hereof shall the unpaid principal
balance of the Working Capital Loan, together with the unpaid principal
balance of the Construction Loan and Receivables Loan, exceed a total
amount equal to Ten Million Dollars ($10,000,000.00), and Lender shall have
no obligation to make any Working Capital Advance if such Advance would
cause the foregoing limitation to be exceeded.
3.3 All Advances made pursuant to this Agreement shall be deemed to
be a single Loan.
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ARTICLE IV
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SECURITY FOR THE LOAN
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4.1 As security for Borrower's payment and Performance of all
Obligations owed to Lender, other than those arising out of the Environmental
Certificate, Borrower hereby grants to Lender a first and exclusive Security
Interest in and to the Receivables Collateral assigned, transferred, endorsed or
delivered to Lender under this Agreement or against which an Advance is made
hereunder. Lender's Security Interest in such Receivables Collateral and the
Residual Collateral shall be absolute, continuing and applicable to all existing
and future Advances and shall secure the repayment of the Loan and the
Construction Loan and the Performance of all Obligations throughout the Term of
the Loan. At the time each Advance is made hereunder, Borrower shall deliver to
Lender (i) an executed Assignment against which an Advance is requested; (ii)
the original of each Instrument; and (iii) other documents which comprise such
Eligible Instruments. In addition, Borrower's payment and Performance of the
Working Capital Loan and Receivables Loan shall be secured by the Construction
Mortgage. Notwithstanding the foregoing, at such time as the Working Capital
Loan and the Construction Loan have been paid in full and all other obligations
due and owing to Lender under the Construction Loan Documents have been paid and
satisfied in full, and Lender has no further obligation to make any further
advances of the Construction Loan or the Working Capital Loan, and provided
there does not then exist an Event of Default or Incipient Default, Lender shall
release the Construction Mortgage, as more fully set forth in the Construction
Mortgage, even though the Receivables Loan is then outstanding.
4.2 If an Eligible Instrument which comprises a part of the
Receivables Collateral shall cease to qualify as an Eligible Instrument,
Borrower shall, within 30 days thereafter, pay to Lender an amount equal to that
portion of the Loan, together with interest, costs, and expenses, if any,
attributable to such ineligible Instrument or shall replace such ineligible
Instrument with another Eligible Instrument having a value of not less than that
portion of the Loan together with interest, costs, and expenses, if any,
attributable to the Eligible Instrument being replaced. No prepayment premium
shall be payable with respect to the payment to be made by Borrower pursuant to
the previous sentence as long as Borrower did not cause the Instrument to cease
qualifying as an Eligible Instrument. Concurrently with the delivery of the
replacement Eligible Instrument to Lender, Borrower shall deliver to Lender all
pertinent items (except for a "Request for Advance and Certification") which
Borrower is required to deliver to Lender in connection with an Advance pursuant
to Article V hereof, together with a Borrower's Certificate in form and
substance identical to Exhibit "E" hereto. Upon substitution of the replacement
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Eligible Instrument for the ineligible Instrument, Lender will terminate its
Security
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Interest in and reassign and endorse to Borrower, without recourse or warranty
of any kind, the replaced ineligible Instrument, together with the Purchaser
Mortgage securing the same, provided that no Event of Default or Incipient
Default has occurred and is continuing.
4.3 Reserved.
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4.4 In connection with a Receivables Advance but not a Working
Capital Advance, Borrower shall, at its expense, deliver to Lender, at the time
of delivery of the Assignment, a policy or policies of title insurance insuring
Lender's interest in the Purchaser Mortgage which is the subject of the
Assignment. Such policy or policies shall be in the amount of the Receivables
Advances made against or, in the case of substitutions, a portion of the
Receivables Loan attributable to the Instruments secured by the insured
Purchaser Mortgages and shall be issued by a title insurer and be in form and
substance satisfactory to Lender in its sole discretion. The title insurance
policies must reflect that the Purchaser Mortgages constitute valid liens
against the real property to which they pertain subject only to the Permitted
Encumbrances.
4.5 Borrower shall deliver or cause to be delivered to Lender, and
thereafter shall maintain in full force and effect according to the terms
thereof, Guarantees duly executed by the Guarantors identified in paragraph 2.17
hereof.
4.6 Reserved.
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ARTICLE V
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ADVANCES
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5.1 Lender shall have no obligation to make any Advance hereunder
until all conditions precedent set forth in the following paragraphs and
elsewhere in this Agreement have been satisfied, at Borrower's sole expense, as
determined by Lender in its reasonable discretion; provided, however, to the
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extent such condition provides that it pertains only to a Receivables Advance
and not to a Working Capital Advance, such condition need not be satisfied as to
a Working Capital Advance. The date that Lender makes the first Working Capital
Advance after the Borrower's satisfaction of all conditions precedent shall be
referred to as the "Closing Date."
5.2 Borrower shall have delivered to Lender the following Documents,
duly executed in form and substance satisfactory to Lender (and, when required,
in recordable form):
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(i) The Documents;
(ii) The Construction Loan Documents;
(iii) The Guarantee from the Guarantor;
(iv) All documents required to effectuate the purposes of
paragraphs 8.12 and 8.21(ii) hereof;
(v) A Nondisturbance Agreement which shall be filed and
recorded in such offices as Lender shall designate;
(vi) UCC Financing Statements for filing and recording, if
appropriate, as necessary to perfect Lender's Security Interest in the
Receivables Collateral and all other security for the Performance of
Borrower's Obligations which is subject to Article 9 of the Uniform
Commercial Code;
(vii) The title policy referred to in paragraph 4.4 hereof,
(viii) A favorable opinion from Borrower's independent counsel as
to such matters as Lender may reasonably require; and
(ix) A favorable opinion from each Guarantor's independent
counsel as to such matters as Lender may reasonably require.
5.3 Not less than ten (10) Business Days before the date on which the
initial Advance is to be made, Borrower shall deliver or cause to be delivered
to Lender the following additional items:
(i) With respect to Borrower and each Guarantor or Person
which is a corporation or a general or limited partnership, certified
copies of their articles, certificates and agreements of general or limited
partnership or their articles of incorporation and by-laws (and all
amendments thereto), together with evidence that Borrower and each such
Guarantor or Person is duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which they are organized,
and in each and every other jurisdiction where the nature of their
respective businesses require them to be so qualified;
(ii) With respect to Borrower and each Guarantor or Person
which is a corporation or a general or limited partnership, a copy of the
resolutions certified to be true and complete by the corporate secretary or
all of
-15-
the general partners (as the case may be), authorizing the execution,
delivery and performance of the Documents, and evidencing the authority of
all Persons executing the Documents on behalf of Borrower, the Guarantor,
and such other Persons, and if Borrower, Guarantor or such Persons are
operating under a fictitious name, a copy of the recorded certificate of
fictitious name;
(iii) As a condition to making the initial Receivables Advance
but not the Working Capital Advances, other surveys and certifications by
surveyors or engineers acceptable to Lender, showing the dimensions of the
Units within the Project, access thereto, street lines, easements and other
details.
(iv) Evidence satisfactory to Lender that the Project complies
with all applicable laws, rules and regulations and public and private
restrictions affecting the use of the Project;
(v) A copy of the registrations/consents to sell and the final
subdivision public reports/public offering statements/prospectuses and/or
approvals thereof required to be issued by or used in the State of South
Carolina and other jurisdictions where Time-Share Interests are or have
been offered or sold, together with all other approvals from regulatory
agencies having jurisdiction over the Project;
(vi) If the Project has not been registered under such act, an
opinion from Borrower's counsel that the Project does not fall within the
purview of the Interstate Land Sales Full Disclosure Act;
(vii) A copy of the purchase contract, deed, note, mortgage/deed
of trust and other documents in existence, including, without limitation,
any covenants running with the land comprising the Project, as well as any
covenants enforceable as equitable servitudes, the Project management
agreement and advertising materials, which have been or are being used by
Borrower in connection with the Project or the sale of Time-Share Interests
therein;
(viii) Copies of the insurance policies required pursuant to
paragraph 8.9 hereof;
(ix) Evidence that the Project is not located within a "special
flood hazard" area as such term is used in the National Flood Insurance Act
of 1968, as amended and supplemented by the Flood Disaster Protection Act
of 1973, and in regulations, interpretations and rulings thereunder;
-16-
(x) With respect to a Receivables Advance, the items described
in Exhibit "E" hereto;
-----------
(xi) With respect to a Working Capital Advance, the items
described in the following paragraphs of Exhibit "E" hereto: (a), (b)
-----------
(copies only), (e), (f), (g), (h), and (i);
(xii) Such other items as Lender requests which are reasonably
necessary to evaluate whether the request for the Advance satisfied the
requirements set forth herein;
(xiii) Credit references and credit bureau reports for ▇.▇. ▇▇▇▇
Construction (Borrower's general contractor), Argosy Group, Inc., KOAR
Group, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇; customer references for Sevelex Consultants, Inc., ▇▇▇ ▇▇▇▇▇▇
and Associates, and ▇.▇. ▇▇▇▇ Construction; and UCC, tax lien, litigation
and judgment searches for the following parties: (i) Borrower, (ii)
Guarantor, (iii) KGI Port Royal, Inc.; and (iv) Argosy Hilton Head, Inc.
(xiv) Copies of the forms of Instrument and Purchaser Mortgage;
and
(xv) Satisfactory operating budget for the Project owner's
association.
5.4 No material adverse change shall have occurred in the Project or
Borrower's or any Guarantor's business or financial condition since the date of
the latest financial and operating statements given to Lender by or on behalf of
Borrower or any Guarantor. Lender shall be satisfied (in Lender's sole and
absolute discretion) with the results of (i) Lender's physical inspection of the
Project and (ii) an environmental survey of the Project and, if deemed necessary
by Lender, a level one environmental assessment of the Project to be obtained at
Borrower's expense.
5.5 There shall have been no material adverse change in the
warranties and representations made by Borrower or any Guarantor in the
Documents.
5.6 Neither an Event of Default nor an Incipient Default shall have
occurred and be continuing.
5.7 The interest rate applicable to the Advance (before giving effect
to any savings clause) will not exceed the maximum contract rate permitted by
the Applicable Usury Law.
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5.8 Borrower has paid the entire Commitment Fee to Lender.
5.9 The Construction Loan shall have closed and, with respect to a
Receivables Advance, Borrower shall have satisfied all of the conditions
precedent to the making of the first Advance (as the term Advance is defined in
the Construction Loan Agreement).
5.10 Reserved.
---------
5.11 Lender shall have no obligation to make any Advance until the
conditions specified in paragraphs 5.1 through 5.9 (as applicable to the
particular type of Advance) inclusive herein have been satisfied as determined
by Lender in its reasonable discretion. In the event the conditions specified in
Sections 5.1 through 5.9 (as applicable to the particular type of Advance)
hereof have not been satisfied as determined by Lender in its reasonable
discretion, on or before the Closing Date, Lender shall have no further
obligation to make the Loan or the Construction Loan and the entire Commitment
Fee (as defined in Paragraph 8.16) shall nevertheless be deemed earned by Lender
in consideration for Lender's issuing of the Commitment (as defined in Paragraph
8.16) and holding itself ready and willing to make the Loan upon the terms and
conditions set forth herein. Payment of the Commitment Fee is in addition to
Borrower's obligation under Paragraph 8.16.
5.12 Advances shall be requested in writing on the Request for
Advance and Certification, in the form of the attached Exhibit "E-l," executed
--------------
by Borrower (or, if Borrower is a corporation or partnership, by those officers
or general partners, as the case may be, or agents of Borrower named in
authorizing resolutions of Borrower from time to time delivered to Lender and
which are in form and substance satisfactory to Lender).
5.13 Advances may be disbursed by checks, drafts or wire transfer
payable to Borrower; or, at the option of Lender after Borrower's written
request, to third parties, either severally or jointly with Borrower, for the
credit or benefit of Borrower. If Advances are made by wire transfer, Borrower
shall pay to Lender, Lender's usual and customary fee for wiring such funds.
Lender can withhold such fee from the Advance so made.
5.14 Although Lender shall have no obligation to make an Advance
unless and until all applicable conditions thereto set forth herein have been
satisfied, Lender may, at its sole discretion, make Advances before that time
without waiving or releasing any of the Obligations, but Borrower shall continue
to be required to strictly Perform all such Obligations.
-18-
pay and satisfy in full the Working Capital Loan, the Construction Loan and all
amounts then due and owing to Lender under the Construction Loan Documents.
Therefore, Lender shall have the right to disburse any Receivables Advance
directly to Lender in payment or satisfaction of then outstanding Working
Capital Advances, and interest thereon, and any amounts then due to Lender under
the Construction Loan Documents.
5.16 Working Capital Advances shall be made only against cash down
payments and principal and interest payments made and to be made under Eligible
Instruments and against the proceeds of cash sales of Units, based upon the
Borrowing Base (Working Capital Loan); provided that with respect to Working
Capital Advances only, the eligibility criteria set forth in the following
subparagraphs of Exhibit "B" need not be satisfied as a condition to the making
-----------
of such Advance: (j), (k), (m) and (n) to the extent that such rescission rights
pertain only to Borrower's obligations under subparagraph (k) thereof.
ARTICLE VI
----------
RESERVED
--------
ARTICLE VII
-----------
NOTE; MAINTENANCE OF BORROWING BASE;
------------------------------------
PAYMENTS; SERVICING AND COLLECTION
----------------------------------
7.1 In connection with the Receivables Loan:
(i) In no event shall the aggregate principal amount of the
Receivables Loan outstanding at any time exceed the Maximum Loan Amount and
in the event for any reason the aggregate principal amount of the
Receivables Loan does exceed the Maximum Loan Amount, then Borrower upon
demand, shall immediately make a principal payment to Lender in an amount
equal to such excess plus accrued and unpaid interest thereon.
(ii) If for any reason the aggregate principal amount of the
Receivables Loan outstanding as of the last Business Day of any month shall
exceed the then Borrowing Base (Receivables Loan), Borrower, upon demand,
shall immediately make to Lender a principal payment in an amount equal to
such excess plus accrued and unpaid interest thereon.
-19-
(iii) The Receivables Loan shall be evidenced by the
Receivables Note and shall be repaid in immediately available funds
according to the terms thereof and such provisions of this Agreement as are
applicable.
7.2 In connection with the Working Capital Loan:
(i) In no event shall the aggregate principal amount of the
Working Capital Loan outstanding at any time exceed the Maximum Working
Capital Loan Amount and in the event for any reason the aggregate principal
amount of the Working Capital Loan does exceed the Maximum Working Capital
Loan Amount, then Borrower upon demand, shall immediately make a principal
payment to Lender in an amount equal to such excess plus accrued and unpaid
interest thereon.
(ii) If for any reason the aggregate principal amount of the
Working Capital Loan outstanding as of the last Business Day of any month
shall exceed the then Borrowing Base (Working Capital Loan), Borrower, upon
demand, shall immediately make to Lender a principal payment in an amount
equal to such excess plus accrued and unpaid interest thereon.
(iii) The Working Capital Loan shall be evidenced by the Working
Capital Note and shall be repaid in immediately available funds according
to the terms thereof and such provisions of this Agreement as are
applicable.
7.3 Borrower is not entitled to prepay, in whole or in part, the
Receivables Loan until the Opening Prepayment Date. Thereafter, if (i) Borrower
has paid all sums due and payable to Lender in connection with the Receivables
Loan, Working Capital Loan and the Construction Loan, and (ii) Borrower has
given Lender at least 30 days prior written notice of the prepayment and has
paid to Lender at the time of prepayment a prepayment premium equal to a
percentage, as set forth below, of the then principal balance of the Receivables
Loan, then Borrower shall have the option to prepay the Receivables Loan in
full, but not in part, on any date an installment is due on the Receivables
Note:
Period Premium
------ -------
Through the Second Anniversary Closed to Prepayment
Date of the last Receivables
Advance
-20-
After the Second Anniversary Date 3%
and through the Fourth Anniversary
Date of the last Receivables
Advance
After the Fourth Anniversary Date 2%
and through the Sixth Anniversary
Date of the last Receivables
Advance
After the Sixth Anniversary Date 1%
and through the period ending 30
days prior to the Seventh
Anniversary Date of the last
Receivables Advance
Within 30 days prior to the Seventh 0%
Anniversary Date of the last
Receivables Advance
If there should occur an acceleration of maturity following an
Event of Default and such occurrence results in prepayment of the Receivables
Loan, a prepayment premium will be required in the amount specified above; or if
occurring prior to the Opening Prepayment Date, Borrower shall pay to Lender
with the prepayment a prepayment premium equal to 5% the then principal balance
of the Receivables Loan being prepaid. A Purchaser shall be permitted to prepay
the amount owed on its Instrument without penalty. There shall be no prepayment
premium payable in connection with the prepayment, in whole or in part, of the
Working Capital Loan. If there should occur a casualty to or condemnation of
the Project and such occurrence results in a prepayment of the Receivables Loan,
no prepayment premium shall be payable in connection with such prepayment.
7.4 (a) Lockbox Agent, as agent for Lender, shall collect
payments on the Eligible Instruments used in making Borrowing Base
computations or otherwise constituting part of the Receivables Collateral
and shall remit them to Lender on the last Business Day of each and every
month according to the terms of the Lockbox Agreement; and Borrower shall
immediately forward all such payments received by it to Lockbox Agent for
Lender. However, the Obligation to make, or any requirement that Lender
receives, payments called for in the Documents shall not be deemed
satisfied until Lender actually receives such payments from Lockbox Agent.
For the purpose of determining the adequacy of such payments, Borrower will
cause
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Servicing Agent to furnish to Lender at Borrower's sole cost and expense,
no later than the tenth day of each month commencing with the first full
calendar month following the first Advance, a report meeting the following
requirements: (i) shows as of the end of the prior month with respect to
each Eligible Instrument which is used in making Borrowing Base
computations or otherwise constitutes part of the Receivables Collateral
(A) all payments received during the prior month on the Eligible
Instrument, allocated as between principal, interest, late charges, taxes,
and the like, (B) the opening and closing balances during the prior month
on each such Eligible Instrument, (C) present value of the cash flow (if
required by Lender) and (D) extensions, refinances, prepayments, and other
similar adjustments; and (ii) itemizes the Eligible Instrument which are
used in making Borrowing Base computations or otherwise constitute part of
the Receivables Collateral to show delinquencies of 30, 60, 90 and in
excess of 90 days. On the basis of such reports, Lender will compute the
amount, if any, which was due and payable by Borrower on the last day of
the preceding month and will notify Borrower as soon as possible of any
amount due. If such reports are not timely received, Lender may estimate
the amount which was due and payable; and, in such event, Borrower shall
pay upon demand the amount estimated by Lender to be due and payable. If
payment is made on the basis of Lender's estimate, and reports required by
this paragraph are thereafter received by Lender, the estimated payment
amount shall be adjusted by an additional payment or a refund to the
correct amount, as the reports may indicate; such additional amount to be
paid by Borrower upon demand and such refund to be made by Lender within
five Business Days after receipt by Lender of a written request therefor by
Borrower. In addition, at each calendar quarter, Borrower shall deliver to
Lender a current list of the names addresses and phone numbers of the
Purchasers related to Eligible Instruments.
(b) Subject to the following sentence, GPSI shall act as
the Servicing Agent during the Term. Lender, subject to any restriction
contained in the Services and Fees Agreement, the Servicing Agreement or
the Lockbox Agreement, may at any time and from time to time in its
discretion substitute a successor or successors to any Servicing Agent or
Lockbox Agent acting in such capacity under the Services and Fees
Agreement, the Servicing Agreement and Lockbox Agreement, if the Servicing
Agent or Lockbox Agent is not satisfactorily performing its respective
obligations thereunder. In the event Lender substitutes a successor
Servicing Agent or Lockbox Agent pursuant to the provisions of this
paragraph, Borrower shall have the right to approve the identity of such
successor Servicing Agent or Lockbox Agent; provided that there does not
-------- ----
then exist an Event of Default or an Incipient Default and further provided
------- --------
that Borrower shall not unreasonably withhold or unduly delay its consent.
----
-22-
7.5 Subject to Lender's rights upon the occurrence of an Event
of Default, all proceeds from the Receivables Collateral (except payments which
are identified by Purchasers as tax or maintenance and other assessment payments
and are required to be so treated by Borrower) during the Term hereof shall be
applied first to the payment of all costs, fees and expenses required by the
Documents to be paid by Borrower, second to accrued and unpaid interest due on
the Receivables Note, third to the unpaid principal balance of the Receivables
Note, and then to the other Obligations in such order and manner as Lender may
determine. Unless and until all such Obligations have been Performed, Borrower
shall have no right to any portion of the proceeds of the Receivables
Collateral.
7.6 Whether or not the proceeds from the Receivables Collateral
shall be sufficient for that purpose, Borrower shall pay when due all payments
required to be made pursuant to the Receivables Note, Working Capital Note and
other Documents; and any and all amounts payable by Borrower under the
Receivables Note, Working Capital Note and other Documents shall be paid without
notice (except as otherwise expressly provided therein), demand, counterclaim,
set-off, deduction, recoupment or defense, and without abatement, suspension,
deferment, diminution or proration by reason of any circumstance or occurrence
whatsoever, Borrower's Obligation to make such payments being absolute and
unconditional.
7.7 All payments to be made by Borrower under the Documents
shall be free of expense to Lender with respect to the amount of any
Impositions, all of which Impositions Borrower assumes and shall pay on demand
in addition to the other payments provided for in the Documents to be made by
it. Borrower's Obligation to pay Impositions shall likewise include the
Obligation to pay any increase to Lender in federal, state, or local income tax
as a result of inclusion in income of Lender of any amount required by this
paragraph to be paid to or for Lender.
ARTICLE VIII
------------
BORROWER'S ADDITIONAL REPRESENTATIONS,
--------------------------------------
WARRANTIES AND COVENANTS
------------------------
8.1 (a) Borrower is, and will continue to be during the Term
hereof, a limited partnership duly organized, validly existing and in good
standing under the laws of the State of South Carolina and is, and will
continue to be during the Term hereof, qualified to do business and in good
standing in each jurisdiction in which it is selling Time-Share Interests
or where the location or nature of its properties or business makes such
qualification necessary (except where failure to do so would not adversely
affect Lender's ability to realize upon the Receivables Collateral or any
other security for the
-23-
Performance of the Obligations or materially adversely affect the business
or financial condition of Borrower or the ability of Borrower to complete
Performance of the Obligations). Borrower has, and will continue to have,
powers adequate for making and Performing under the Documents, for
undertaking and Performing the Obligations, and for carrying on its
business and owning its property. Guarantor is a general partnership duly
organized, validly existing and in good standing under the laws of the
State of South Carolina, is, and will continue during the Term hereof,
qualified to do business and in good standing in each jurisdiction where
Borrower is selling Time-Share Interests or where the location or nature of
the properties or business of Guarantor make such qualification necessary
(except where failure to do so would not adversely affect Lender's ability
to realize upon the Receivables Collateral or any other security for the
Performance of the Obligations or materially adversely affect the business
or financial condition of Borrower or the ability of Borrower to complete
Performance of the Obligations). Guarantor is the general partner of
Borrower. KGI Port Royal, Inc. ("KGI") is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina and is the managing general partner of Guarantor.
(b) Borrower has good right and power to grant the Security
Interest in the Receivables Collateral and to execute and deliver this
Agreement and the other Documents and to Perform the Obligations. All
action necessary and required by Borrower's organization documents and all
applicable laws for the obtaining of the Loan and for the execution and
delivery of this Agreement and all other Documents executed and delivered
in connection with the Loan has been duly and effectively taken; and, to
the best of Borrower's knowledge, this Agreement is and shall be, and all
other Documents are and shall be, legal, valid, binding and enforceable
against Borrower in accordance with their respective terms, other than as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or similar laws relating to or
affecting the rights of creditors generally or general principles of equity
(except to the extent that such laws, rights, remedies or principles are
waivable by Borrower and have been waived in the Documents). To the best of
Borrower's knowledge, the Documents do not violate the Applicable Usury Law
or any other usury law known to Borrower. The execution, delivery and
Performance of the provisions of this Agreement and all the other Documents
will not violate, constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the properties or
assets of Borrower pursuant to any provision of: any law, regulation,
judgment, decree, order, franchise or permit applicable to Borrower;
Borrower's charter documents; or any contract or other agreement or
instrument to which Borrower is a party or by which Borrower or Borrower's
properties or
-24-
assets are bound. No consent of any government or agency thereof, or any
other person, firm or entity not a party hereto, is or will be required as
a condition to the execution, delivery, Performance or enforceability of
the Documents.
8.2 (a) There is no action, litigation or other proceeding
pending (or, to Borrower's knowledge, threatened) before any arbitration
tribunal, court, governmental agency or administrative body against
Borrower which, if adversely determined, might adversely affect Lender's
ability to realize upon the Receivables Collateral or any other security
for the Performance of the Obligations, or materially adversely affect the
Project, the business or financial condition of Borrower, or the ability of
Borrower to complete Performance of the Obligations; or which questions the
validity of the Documents.
(b) If Borrower or a Guarantor becomes a party to any
action, litigation or other proceeding which asserts a material claim
against Borrower or a Guarantor, or Borrower becomes the subject of an
investigation by a governmental agency or administrative body with respect
to the Project, then Borrower shall within 10 days after it obtains
knowledge thereof notify Lender of such action, litigation, proceeding or
investigation and the particulars thereof. Thereafter, if requested by
Lender, Borrower shall report to Lender with respect to the status of such
matter and the particulars thereof.
8.3 (a) Except as set forth in Exhibit "F" hereto, Borrower has
-----------
sold or has offered for sale Time-Share Interests which generate Eligible
Instruments only in the States of South Carolina and Georgia and all sales
have been made at the Project or in the private residences of potential
Purchasers. Before it sells or offers for sale Time-Share Interests outside
the State of South Carolina and those listed in Exhibit "F" hereto,
-----------
Borrower shall promptly notify Lender and provide Lender with evidence that
Borrower has complied with all laws of such jurisdiction governing the
proposed conduct of Borrower.
(b) Except for violations which do not individually or in
the aggregate affect Lender's ability to realize upon the Receivables
Collateral or any other security for the Performance of the Obligations or
do not materially adversely affect the business or financial condition of
Borrower or the ability of Borrower to complete Performance of the
Obligations, Borrower has complied, and will comply, with all laws and
regulations of the United States and every state, county and municipal
jurisdiction in which Time-Share Interests have been sold or offered for
sale.
(c) Without limiting the generality of any other
representation or warranty contained herein, Borrower will not violate any
-25-
private covenant or restriction or any zoning, use or similar law,
ordinance or regulation affecting the use or occupancy of the Project, the
violation of which could have a material adverse effect on Lender's ability
to realize upon the Receivables Collateral or any other security for the
Performance of the Obligations or materially adversely affect the business
or financial condition of the Borrower or the ability of Borrower to
complete Performance of the Obligations.
8.4 (a) Each Instrument at the time it is assigned to Lender in
connection with the Loan and this Agreement shall be an Eligible
Instrument. At the time such Instrument is assigned to Lender, Borrower
shall have performed all of its obligations to Purchasers, and there shall
be no executory obligations to Purchasers to be Performed by Borrower.
Borrower further warrants and guarantees the value and enforceability of
the Receivables Collateral. The foregoing notwithstanding, Lender
acknowledges that with respect to Instruments against which a Working
Capital Advance has been made, Borrower shall not, at the time of such
Advance, have completed the improvements that the Borrower has represented
will be available to Purchasers.
(b) Borrower shall not, without the prior written consent
of Lender, cancel or materially modify, or consent to or acquiesce in any
material modification to, or solicit the prepayment of, any Eligible
Instrument used in making Borrowing Base computations or which otherwise
constitutes part of the Receivables Collateral; or waive the timely
performance of the obligations of the Purchaser thereunder. Borrower shall
not pay or advance directly or indirectly for the account of any Purchaser
any sum owing by the Purchaser under any of the Eligible Instruments used
in making Borrowing Base computations or which otherwise constitute part of
the Receivables Collateral.
(c) Borrower at all times shall fulfill, and cause its
affiliates, agents and independent contractors at all times to fulfill, all
obligations to Purchasers under all Eligible Instruments which are used in
making Borrowing Base computations or otherwise constitute part of the
Receivables Collateral.
(d) True and complete copies of the Project governing
documents, the purchase contract, deed, note, mortgage/deed of trust, the
Instruments, advertising materials and other documents and exhibits thereto
which have been and are being used by Borrower in connection with the
Project and the sale or offering for sale of Time-Share Interests therein
have been delivered to Lender. Such documents are the only ones which have
been used in connection with the Project and the sale of Time-Share
Interests therein. Borrower shall not, without the prior written consent of
Lender, cancel
-26-
or materially modify any such documents, which consent will not be
unreasonably withheld. Borrower shall Perform all of its obligations under
the Project governing documents.
(e) All off-site roads and other off-site improvements
contained within the Project (other than private easements) will have been
dedicated to and accepted by the responsible governmental authority or
utility prior to the initial Receivables Advance. Borrower shall maintain
or cause to be maintained in good condition and repair all amenities,
common areas and private easements which have been promised or represented
as being available to Purchasers and all off-site roads and off-site
improvements which have not been dedicated to or accepted by the
responsible governmental authority or utility.
(f) Each Purchaser shall automatically be a member of the
Project's owners association or associations, if any, and shall be entitled
to vote on the affairs thereof (subject, however, to any preferential
voting rights in favor of Borrower as permitted under South Carolina time-
share laws). Each such owners association shall be governed by a Board of
Directors, which have the authority to fix and levy pro rata upon each
Purchaser annual assessments to cover the costs of maintaining and
operating the Project (including, without limitation, taxes and assessments
not levied by the appropriate taxing authority directly against owners of
Time-Share Interests) and to establish a reasonable reserve for
improvements, the replacement of items and furnishings, and contingencies.
If Borrower controls an owners association, Borrower will while it controls
such association: (i) cause such owners association to (A) discharge timely
and completely its obligations under the Project governing documents and
maintain the reserve described above; and (ii) pay to such owners
association not less often than every twelve months hereafter the
difference between (A) the cumulative total amount of the maintenance and
operating expenses incurred by such association, together with the amount
of any installment of real property taxes currently due and payable with
respect to the Project not directly levied against owners of Time-Share
Interests, through the end of the calendar month preceding the month in
which such payment is made and (B) the cumulative total amount of
assessments (less amounts thereof allocated to reserve expenses) payable to
the association by Time-Share Interest owners other than Borrower through
the end of the calendar month preceding the month in which such payment is
made.
(g) Except as otherwise permitted by the Project governing
documents, the Project owners association or the owners of Time-Share
Interests in common shall own the furnishings in the Project Units and all
the common areas in the Project and other amenities which have been
promised or
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represented as being available to Purchasers, free and clear of liens and
security interests, except for the Permitted Encumbrances and the
Construction Mortgage; and no part of the Project is subject to partition
by owners of Time-Share Interests. Borrower will maintain or cause to be
maintained in good condition and repair all common areas in the Project and
other amenities which have been promised or represented as being available
to Purchasers and which are not the responsibility of the Project owners
association to maintain and repair. Borrower will maintain a reasonable
reserve to assure compliance of the terms of the foregoing sentence.
(h) The common areas and amenities and the streets and
other off-site improvements contained within the Project are free and clear
of all liens or other encumbrances of third parties, subject to the
Permitted Encumbrances. Borrower agrees that such common areas, amenities,
streets and other off-site improvements will not, during the Term hereof,
be encumbered.
8.5 LENDER DOES NOT ASSUME AND SHALL HAVE NO RESPONSIBILITY,
OBLIGATION OR LIABILITY TO PURCHASERS, LENDER'S RELATIONSHIP BEING SOLELY THAT
OF A CREDITOR WHO HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED TO IT, A
COLLATERAL ASSIGNMENT FROM BORROWER OF INSTRUMENTS. EXCEPT AS REQUIRED BY LAW,
OR TO THE EXTENT NECESSARY IN ORDER FOR BORROWER TO OBTAIN A PERMIT TO SELL
TIME-SHARE INTERESTS IN A PARTICULAR STATE, BORROWER SHALL NOT, AT ANY TIME, USE
THE NAME OF OR MAKE REFERENCE TO LENDER WITH RESPECT TO THE PROJECT, THE SALE OF
TIME-SHARE INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF
LENDER.
8.6 Borrower shall undertake the collection of amounts
delinquent under each Eligible Instrument which is used in making Borrowing Base
computations or otherwise constitutes part of the Receivables Collateral, shall
bear the entire expense of such collection work, and shall diligently and timely
do such work respecting collection, including forfeiture or foreclosure
proceedings. Lender shall have no obligation to undertake any collection,
eviction or foreclosure action against the obligor under any Eligible Instrument
or to otherwise realize upon any Eligible Instrument.
8.7 Borrower shall maintain in a secure place in its offices at
the address specified below proper and accurate books, records, ledgers,
correspondence and other papers relating to the Receivables Collateral. Lender
may notify the appropriate Purchasers of the existence of Lender's interest as
assignee in the Receivables Collateral and request from such Purchasers any
information relating to
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the Receivables Collateral. Borrower shall cooperate with Lender in giving such
notice and will do so under its letterhead if requested. Borrower's chief
executive office is as set forth on the signature page of this Agreement.
Borrower will not change its chief executive office without giving Lender thirty
(30) days prior written notice of such contemplated change. Borrower has not
operated under any names or fictitious names other than Port Royal Resort, L.P.
during the previous six (6) years. Borrower will not change its name or operate
under any fictitious names without first giving Lender thirty (30) days prior
written notice.
8.8 Borrower shall not, without the prior written consent of
Lender: (i) sell, convey, pledge, hypothecate, encumber or otherwise transfer
any security for the Performance of the Obligations; or (ii) permit or suffer to
exist any liens, security interests or other encumbrances on any security for
the Performance of the Obligations, except with respect to either (i) or (ii)
for the Permitted Encumbrances and liens and security interests expressly
granted to Lender.
8.9 Borrower shall obtain before funding, shall maintain during
the Term of the Loan, and shall deliver to Lender evidence of such insurance,
written by such insurers, and in such forms and such amounts, as Lender may
reasonably require.
8.10 (a) This Agreement and the other Documents, certificates,
financial statements, tax returns (including without limitation, the tax
returns of Borrower and Guarantors) and written materials furnished to
Lender by or on behalf of Borrower in connection with the transactions
contemplated herein do not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact known to
Borrower which materially adversely affects or in the future may (so far as
Borrower can now foresee) materially adversely affect the Receivables
Collateral or any other security for the Performance of the Obligations or
the business or financial condition of Borrower or the Project which has
not been set forth in this Agreement or the other Documents, certificates,
financial statements or written materials furnished to Lender in connection
with the transactions contemplated herein.
(b) The fact that Lender's representatives may have made
certain examinations and inspections or received certain information
pertaining to the Receivables Collateral or the Project and the proposed
operation thereof does not in any way affect or reduce the full scope and
protection of the warranties, representations and Obligations contained
herein, which have induced Lender to enter into this Agreement.
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8.11 (a) Borrower shall maintain a standard, modern system of
accounting and shall keep and maintain all books and records in accordance
with generally accepted accounting principles on a consistent basis.
(b) On or before the tenth day of each month, Borrower
shall furnish or cause to be furnished to Lender (i) the reports of the
Servicing Agent and Borrower required pursuant to paragraph 7.4 hereof and
(ii) a sales report for the prior month showing the number of sales of
Time-Share Interests and the aggregate dollar amount thereof, including
down payments.
(c) Borrower shall furnish or cause to be furnished to
Lender, as soon as the same are available, and in any event within 110 days
after the end of each fiscal year and within 45 days after the end of each
interim quarterly fiscal period of the subject, a copy of the current
financial statements of each of Borrower and Guarantor, and within 110 days
after the end of each fiscal year and within 45 days after the end of each
interim quarterly fiscal period of the subject, current financial
statements of the Project's owners association (the "Association"). Such
financial statements shall contain a balance sheet as of the end of the
relevant fiscal period and statements of income and cash flows for such
fiscal period (together, in each case, with the comparable figures for the
corresponding period of the previous fiscal year, if available), all in
reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied throughout the period involved
and with prior periods. All annual financial statements of Borrower and
the Association required pursuant hereto shall be audited by a certified
public accountant, and shall be certified to by said certified public
accountant. All annual financial statements of Guarantor shall be reviewed
by a certified public accountant; provided, however, that upon the giving
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of written notice by Lender to each of Borrower and Guarantor, the annual
financial statements of Guarantor thereafter supplied to Lender (commencing
with the fiscal year ending at least 30 days beyond the giving of such
notice) shall be audited by a certified public accountant and shall be
certified to by said certified public accountant. In addition to the
foregoing, all financial statements required pursuant hereto shall be
certified correct by the individual who is the subject of such statements,
or the chief financial officer or general partner, as the case may be, of
the subject of such statements. The financial statements of Borrower shall
also contain in reasonable detail a statement of income and expenses
covering the operation of the Project. Together with such financial
statements, Borrower shall deliver to Lender a certificate signed by the
chief financial officer or managing general partner, as the case may be, of
Borrower stating that to the best of his knowledge, after inquiry, there
exists no Event of Default and no condition, event or act which, with
notice or lapse of time or both, would become an Event of Default or, if
any such Event of Default or any
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such condition, event or act exists, specifying the nature and period of
existence thereof and what action Borrower proposes to take with respect
thereto. Together with such financial statements, Borrower shall also
deliver to Lender a certificate of its chief executive officer certifying
that Borrower is in compliance with all Applicable Environmental Laws or in
the event of noncompliance, specifying the nature and period of the
existence of such noncompliance.
(d) Borrower shall deliver to Lender from time to time, as
available, and promptly upon amendment or effective date, current price
lists, sales literature, registrations/consents to sell, final public
reports/public offering statements/prospectuses, and other items requested
by Lender which relate to the Project.
(e) So long as the same shall be pertinent to the Loan, the
Project, the documents or any transactions contemplated therein, Borrower
shall at its expense (i) permit Lender and its representatives at all
reasonable times to inspect, audit and copy, as appropriate, the Project,
Borrower's facilities, activities, books of account, logs and records; (ii)
cause its employees, agents and accountants to give their full cooperation
and assistance in connection with any such visits of inspection or
financial conferences; and (iii) make available such further information
concerning its business and affairs as Lender may from time to time
reasonably request.
(f) Borrower shall annually submit to Lender within 45 days
after each is available proposed annual maintenance and operating budgets
for the Project, certified to be adequate by Borrower and a statement of
the annual assessment to be levied upon the Purchasers.
(g) Borrower shall cause to be delivered to Lender as soon
as available, and in any event no later than forty-five (45) days following
its filing with the Internal Revenue Service, the signed income tax returns
for each Guarantor for the fiscal year then ended, as filed with the
Internal Revenue Service, together with all schedules thereto; provided,
that in the event a Guarantor obtains an extension of the date for filing
such tax returns, Borrower shall cause to be delivered to Lender a signed
copy of such extension within fifteen (15) days following the filing
deadline for such return in the absence of such extension.
8.12 Borrower shall cause any and all indebtedness owed by
Borrower or secured by the Project to be subordinated to the Obligations
pursuant to subordination agreements satisfactory to Lender in form and
substance.
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8.13 Borrower shall not, without Lender's prior written consent:
(i) (other than the sale of Time-Share Interests in the ordinary course of
Borrower's business or the rental of condominium units in the Project in the
ordinary course of Borrower's business) sell, lease, transfer or dispose of its
all or substantially all of its assets to another entity; or (ii) dissolve or
liquidate, or merge or consolidate with or into any other entity, transfer to
any person or entity, the right to control, Borrower or Guarantor, turn over the
management or operation of Borrower or Guarantor to any other person or entity,
or permit any of the foregoing to occur with respect to Borrower or Guarantor.
Borrower shall have the right to retain a third-party management company to
manage the operation of the Project, provided that Lender has first approved the
identity of such management company.
8.14 Borrower is not in default of any payment on account of
indebtedness for borrowed money or of any repurchase obligations in connection
with a receivables purchase financing, or in violation of or in default under
any material term in any agreement, instrument, order, decree or judgment of any
court, arbitration or governmental authority to which it is a part or by which
it is bound.
8.15 Borrower has filed all tax returns and paid all taxes,
assessments, levies and penalties, if any, in respect thereof required to be
filed by it or paid by it to any governmental or quasi-governmental authority.
All real estate taxes and assessments have been paid which are due and owing in
connection with the common areas and the Project and other amenities which have
been promised or represented as being available to Purchasers for use by them.
Borrower shall use its best efforts to provide to Lender not more than 30 days
after such taxes and assessments would become delinquent if not paid evidence
that all taxes and assessments on the Project and common areas have been paid in
full.
8.16 Borrower shall pay to Lender on demand all reasonable out-
of-pocket costs and expenses incurred or to be incurred by Lender or its counsel
in connection with the initiation, documentation and closing of the Loan, the
making of Advances hereunder, the administration of the Loan, the protection of
the security for the Performance of the Obligations, or the enforcement of the
Obligations against Borrower or any Guarantor (including, without limitation,
travel costs, a non-refundable documentation fee of $20,000.00 (which
documentation fee shall be credited against Lender's attorneys' fees and is the
same documentation fee due and payable under the Construction Loan Agreement),
all attorneys' fees, any brokerage or similar fees, all filing and recording
fees, all charges for consumer credit reports and UCC, tax lien, judgment and
litigation searches, all revenue and documentary stamp and intangible taxes, and
all fees and expenses of the Servicing Agent and Lockbox Agent to perform the
services contemplated hereunder and under the terms of the Services and Fees
Agreement, the Servicing Agreement and Lockbox Agreement, respectively).
Borrower shall pay to Lender a non-refundable commitment fee (the
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"Commitment Fee") in the amount of One Hundred Twenty-Five Thousand Five Hundred
Dollars and NO/100 ($125,500.00), which fee was earned by Lender upon issuance
by Lender to Borrower of the Commitment Letter (the "Commitment") in connection
with the Loan, dated August 24, 1993, in consideration of Lender holding itself
ready, willing and able to make the Loan upon the terms and conditions set forth
herein. Lender acknowledges the receipt of the entire Commitment Fee. In the
event the Loan does not close on or before the Closing Date, as such date may be
extended by Lender, other than due solely to the default of Lender; (i) the
entire Commitment Fee shall nevertheless be deemed fully earned by Lender in
consideration for Lender's issuing of the Commitment and holding itself ready
and willing to make the Loan upon the terms and conditions set forth herein and
shall be due and payable upon demand and (ii) Lender shall have no further
obligation to make the Loan or the Construction Loan. The payment of the
Commitment Fee is in addition to Borrower's obligation to pay a commitment fee
under the Construction Loan Agreement. Lender acknowledges the receipt of a
$3,000 application fee (which application fee is also referenced in the
Construction Loan Agreement) which has been earned by Lender and shall not be
applied against the Commitment Fee. Lender shall act as custodian for purposes
of holding Eligible Instruments and Borrower shall pay to Lender on demand, a
custodial fee of Ten Dollars ($10.00) for each Eligible Instrument so held by
Lender, exclusive of Eligible Instruments that are substituted for ineligible
Instruments (provided that such custodial fee was paid in connection with such
ineligible Instrument) and exclusive of Instruments that have been cancelled by
the Purchaser or the Borrower. Notwithstanding the foregoing, Borrower shall
have the right to select an independent custodian to held Eligible Instruments
on Lender's behalf and as Lender's agent, so long as (i) Borrower pays all costs
charged by such independent custodian, and (ii) such independent custodian is
approved in advance, in writing by Lender.
8.17 Borrower shall INDEMNIFY, DEFEND AND HOLD HARMLESS, Lender,
its successors, assigns and shareholders (including corporate shareholders), and
the directors, officers, employees, agents and servants of the foregoing, from
any and all losses, costs, expenses (including, without limitation, court costs
and attorneys' fees), demands, claims, suits, proceedings (whether civil or
criminal), orders, judgments, penalties, fines and other sanctions arising from
or brought in connection with (i) the Project, the security for the Performance
of the Obligations, Lender's status by virtue of the Assignments, creation of
Security Interests, the terms of the Documents or the transactions related
hereto, or any act or omission of Borrower, the Servicing Agent or the Lockbox
Agent, or the employees or agents of any of them, whether actual or alleged, and
(ii) any and all brokers' commissions or finders' fees or other costs of similar
type, or claims by any broker, agent or other party in connection with this
transaction (other than fees claimed owed by a broker, finder, or other party
with whom Lender has a specific agreement). On written request by anyone covered
by the above agreement of indemnity, Borrower shall undertake, at its own cost
and expense, on behalf of such indemnitee, using
-33-
counsel satisfactory to the indemnitee, the defense of any legal action or
proceeding to which the indemnitee shall be a party, provided that such action
or proceeding shall result from, or grow or arise out of any of the events set
forth in this paragraph.
8.18 Borrower shall not directly or indirectly invest all or any
part of the proceeds of the Loan in any investment security subject to the
margin requirements of Regulation G of the Board of Governors of the Federal
Reserve System.
8.19 Borrower shall execute or cause to be executed all Documents
and do or cause to be done all acts necessary for Lender to perfect and to
continue the perfection of the Security Interest of Lender in the Receivables
Collateral or the other security for the Performance of the Obligations or
otherwise to effect the intent and purposes of the Documents. Borrower shall
prosecute or defend any action involving the priority, validity or
enforceability of the Security Interest granted to lender; provided that, at
Lender's option, Lender may do so at Borrower's expense.
8.20 Borrower is fully familiar with all of the terms and
conditions of the Documents and is not in default thereunder. No act or event
has occurred which after notice and/or lapse of time would constitute such a
default or an Event of Default.
8.21 During the Term, Borrower shall not pay or make any
Distributions to its officers, partners, or Guarantor or to any relatives or
Affiliates of Borrower, of Guarantor or of any other of the foregoing. The
foregoing notwithstanding, on the condition that:
(i) There does not then exist an Event of Default or an
Incipient Default; and
(ii) Prior to the incurring of any obligation to make a
Distribution, Borrower has caused the proposed recipient of such
Distribution (the "Affiliated Party") to have entered into a Subordination
Agreement in form and substance satisfactory to Lender pursuant to which
the Affiliated Party agrees (A) that it shall not exercise any rights
against Borrower or against any of the collateral securing the Construction
Loan, the Working Capital Loan or the Receivables Loan unless and until the
date that all of the obligations of Borrower under and with respect to the
Construction Loan, Working Capital Loan and Receivables Loan have been
fully paid, performed and discharged; (B) that any entitlement to a
Distribution is and shall be fully subordinated as to right and time of
payment to the payment in full of the Construction Loan, the Working
Capital Loan and the Receivables Loan and (C) that upon and during the
continuance of an Event of Default or an Incipient Default, no
Distributions shall be permitted, made, demanded or accepted;
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the following Distributions shall be permitted:
(x) Such Distribution is made to the partners of Borrower
no more frequently than quarterly in an amount sufficient for the payment
of federal and state income taxes payable by such partner with respect to a
tax year of Borrower (a "Tax Year") resulting from the inclusion in such
partners' taxable income of the partner's share of taxable income of
Borrower for that Tax Year, subject to reasonable assumptions as to the
marginal tax bracket to which the partners of Borrower generally are
subject (the "Tax Amount"). Notwithstanding the foregoing, if for any
prior Tax Year of the Borrower, the Borrower had a loss for tax purposes
which, under tax laws then in effect, would offset taxable income (which
loss has not been previously used to offset taxable income in accordance
with this sentence), then for purposes of determining the Tax Amount for
the current Tax Year, the taxable income of the Borrower for the current
Tax Year shall be reduced by the amount of such loss. On or about the fifth
(5th) day prior to each date on which estimated federal income tax payments
are required to be paid by the partners of Borrower, Borrower may make a
distribution to the partners which, together with prior distributions for
the Tax Year on account of the Tax Amount, shall not exceed the applicable
percentage (which shall be 25%, 50%, 75%, and 100% for the first, second,
third and fourth calendar quarters, respectively) of a reasonable estimate
of the Tax Amount. If, at the end of the Tax Year, the aggregate estimated
quarterly distributions exceed the actual Tax Amount for such Tax Year,
future quarterly tax distributions shall cease with respect to the affected
partners until such excess amount has been fully recaptured or until the
excess amount has been repaid by the affected partners to the Borrower;
(xi) Such Distribution is made to Argosy/KGI Port Royal
Partners in an amount not in excess of $42,000 per month to reimburse
Argosy/KGI Port Royal Partners for certain overhead costs and expenses
incurred by Argosy/KGI Port Royal Partners in connection with the
acquisition, development and operation of the Project;
(xii) Such Distribution is made to KPI General Partnership
Hilton Head in an amount not in excess of $100,000 on the Closing Date in
consideration for the services rendered by the foregoing entity in raising
equity for Borrower; provided that such Distribution is paid out of
Borrower's equity and not out of the proceeds of the Construction Loan,
Receivables Loan or Working Capital Loan;
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(xiii) Such Distribution is made in an amount equal to or
less than 100% of Borrower's Cash Flow, with respect to the period in which
such Distribution is to be made; provided however, that no Distribution
-------- -------
shall be permitted under this clause (xiii) until such time as the Working
Capital Loan, Construction Loan and all other obligations under the
Construction Loan Documents have been paid in full and until such time as
Lender has no further obligation to make any advances of the Working
Capital Loan and Construction Loan; and
(xiv) Such Distribution is made in an amount necessary to
reimburse a general partner of Borrower who has made an advance for the
benefit of Borrower to pay Project costs for items and in amounts
consistent with the Borrower's budget as approved by Lender.
8.22 Borrower hereby covenants and agrees as follows during the
Term hereof:
(a) As of the end of each fiscal quarter of Borrower,
Borrower shall maintain a net worth, calculated in accordance with GAAP of
at least $2,200,000. The foregoing covenant shall be tested quarterly
beginning with the quarter year ending December 31, 1993.
(b) Marketing Expenses associated with the marketing and
sale of Time-Share Interests shall not exceed 50% of Net Sales, determined
quarterly. Net Sales shall mean gross sales of Time-Share Interests during
such quarterly period reduced only by cancellations thereof. Marketing
Expenses shall mean the aggregate of all expenses incurred in the sale and
marketing of Time-Share Interests, including without limitation, all costs
and expenses for advertising, mailing, consumer premiums, referral and lead
generation. The foregoing covenant shall be tested quarterly, commencing
December 31, 1993. Each of the tests conducted as of the end of December
1993, March 1994 and June 1994 shall cover the period from the Closing Date
through the end of the relevant quarter. Commencing with the test for
September 30, 1994, and thereafter throughout the Term hereof, the
foregoing covenant shall be tested quarterly, on a rolling twelve (12)
month basis.
(c) Borrower's general and administrative expenses shall
not exceed 10% of Net Sales. The foregoing covenant shall be tested
quarterly, commencing June 30, 1994. Each of the tests conducted as of the
end of June 1994 and September 1994 shall cover the period from the Closing
Date through the end of the relevant quarter. Commencing with the test for
December 31, 1994, and thereafter throughout the Term hereof, the foregoing
covenant shall be tested quarterly, on a rolling twelve (12) month basis.
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(d) Borrower shall not permit Delinquencies as of the end
of any three (3) consecutive calendar months during the Term to exceed
three percent (3%) of the aggregate then unpaid principal balance of all
Eligible Instruments against which an Advance has been made.
(e) Upon request by Lender, Borrower shall provide from
time to time such information as Lender may reasonably require to
determining compliance with the foregoing requirements.
8.23 Borrower shall not, without Lender's prior written consent:
(i) construct additional condominium or time-share units within or adjacent to
the Project (other than to the initial 24 Units) until such time as at least 40%
of the Time-Share Interests applicable to the initial 24 Units are sold in bona-
fide transactions to parties who are not Affiliates of Borrower or Guarantor; or
(ii) sell any time-share intervals from such additional condominium or time-
share units until at least 75% of the Time-Share Interests applicable to the
initial 24 Units are sold in bona-fide transactions to parties who are not
Affiliates of Borrower or Guarantor.
8.24 If there occurs a material adverse change in the Project or
in the financial condition of Borrower or any Guarantor or in the Receivables
Collateral or any other security for the Performance of the Obligations, which
change is not enumerated in paragraph 8.22 or 9.1, Borrower will promptly
provide Lender with assurance that neither the prospect of Performance of the
Obligations nor Lender's security therefore is imperiled. If Borrower fails to
provide Lender with assurance satisfactory to Lender in its reasonable
discretion, such failure will be considered an Event of Default.
8.25 As additional consideration to Lender, Borrower shall pay to
Lender an incentive fee equal to Forty-Eight Thousand Nine Hundred Sixty Dollars
($48,960.00) with respect to the Time-Share Interests sold by Borrower in the
Project. Such incentive fee shall be paid in installments of Five Hundred
Dollars ($500.00) per Time-Share Interest sold, (all as more fully provided in
the Construction Mortgage), commencing with all sales occurring after the date
upon which the Construction Loan is due and payable in full, and shall continue
until the entire incentive fee is paid in full. Notwithstanding anything
contained herein to the contrary, the incentive fee is payable in full by
Borrower on the first day of the 15th month after the initial advance of the
proceeds of the Construction Loan.
8.26 The Borrower is in compliance in all material respects with
all applicable federal, state or local environmental, health and safety statutes
and regulations. The Borrower has not filed any notice under any federal or
state law indicating past or present treatment, storage or disposal of a
hazardous waste or
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reporting a spill or release of a hazardous or toxic waste, substance or
constituent, or other substances into the environment. None of the operations of
Borrower are the subject of federal or state litigation or proceedings
involving, or any investigation evaluating whether any remedial action involving
a material expenditure is needed to respond to, any improper treatment, storage,
recycling, disposal or release into the environment of any hazardous or toxic
substance, waste or constituent, or other substance. The Borrower does not have
any material contingent liability in connection with any improper treatment,
storage, recycling, disposal or release into the environment of any hazardous or
toxic substance, waste or constituent. None of the operations of Borrower are
subject to any judicial or administrative proceeding alleging the violation of
any federal, state or local environmental, health or safety statute or
regulation. The Borrower does not transport any hazardous wastes, substances or
constituents.
8.27 Provided that Borrower has not then borrowed the Maximum
Loan Amount, Borrower shall not, during the Borrowing Term (Receivables Loan),
pledge, assign, or hypothecate any Eligible Instruments other than to Lender,
without Lender's prior written consent and without the execution by Lender and
any and all other lenders providing financing secured by Instruments of an
intercreditor agreement in form and substance satisfactory to Lender. After the
expiration of the Borrowing Term (Receivables Loan), Lender shall have the right
of first negotiation with Borrower in the event Borrower wishes to accept or
seek an offer from a third party to loan moneys to Borrower in exchange for a
pledge, assignment or hypothecation of any Instruments. In the event Borrower
desires to seek or obtain such an offer, Borrower shall first give Lender
written notice to that effect and give Lender the opportunity, within 10
Business Days thereafter, to issue a financing proposal to Borrower, before
Borrower enters into a binding agreement with such third party with respect to
such financing. Borrower shall have no obligation to accept any proposal made by
Lender with respect to such financing; provided that if Borrower obtains any
such financing from a lender other than Lender, any and all such lenders
providing financing secured by Instruments shall have entered into an
intercreditor agreement with Lender in form and substance satisfactory to
Lender.
8.28 All representations and warranties contained in this
Agreement are continuing and shall be deemed to be made and reaffirmed prior to
the making of each Advance under this Agreement.
8.29 The representations, warranties and covenants contained in
this Agreement shall be applicable to and binding upon Borrower during the Term
hereof, notwithstanding the fact that no Advances have yet been made hereunder.
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ARTICLE IX
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DEFAULT
-------
9.1 The occurrence of any of the following events or conditions
shall constitute an Event of Default by Borrower under the Documents:
(a) Lender fails to receive from Borrower when due and
payable any amount which Borrower is obligated to pay on the Note or any
other payment due under the Documents; and such failure shall continue for
seven (7) days, except for the payment of the final installment due at the
Maturity Date, for which no grace period is allowed;
(b) any material representation or warranty of Borrower
contained in the documents or in any certificate furnished under the
Documents proves to be, in any material respect, false or misleading as of
the date deemed made;
(c) there is a default in the Performance of the
Obligations set forth in paragraphs 8.8, 8.9 or 8.13 hereof or Borrower
knowingly violates or suffers or permits the violation of any of the
warranties or conditions of the policies of insurance required under
paragraph 8.9;
(d) there is a default in the Performance of the
Obligations or a violation of any term, covenant or provision of the
Documents (other than a default or violation referred to elsewhere in this
paragraph 9.1) and such default or violation continues unremedied (i) for a
period of five days after the giving of notice thereof to Borrower in the
case of a default or violation which can be cured by the payment of money
alone or (ii) in the case of any other default or violation, for a period
of (A) thirty (30) days after the giving of notice to Borrower, or (B) (in
the event such default is not capable of being cured within such thirty
(30) day period) for a period not exceeding sixty (60) days after the
giving of such notice provided Borrower is diligently and in good faith
pursuing such cure;
(e) an "Event of Default," as defined elsewhere herein or
in any of the other Documents, occurs, or an act or event occurs under any
of the Documents, which is not cured within applicable notice or grace
periods, whether or not denominated as an Event of Default, which expressly
entitles Lender to accelerate any of the Obligations or exercise its other
remedies upon the occurrence of an Event of Default hereunder;
-39-
(f) any material default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money or a receivables
purchase financing has occurred and there has been an acceleration of such
indebtedness or repurchase obligations, which accelerated repayment or
repurchase obligations are in excess of $100,000 in the aggregate;
(g) any final, non-appealable judgment or decree for money
damages or for a fine or penalty against Borrower which is not paid and
discharged or stayed within 30 days thereafter and when aggregated with all
other judgment(s) or decree(s) that have remained unpaid and undischarged
or not stayed for such period is in excess of $100,000;
(h) any party holding a lien or security interest in the
Receivables Collateral, or any other security for the Performance of the
Obligations or a lien on any common areas or other amenities in the Project
commences foreclosure or similar sale thereof;
(i) (i) Borrower or any Guarantor becomes insolvent or unable
to pay its debts when due; generally fails to pay its debts when due; files
a petition in any bankruptcy, reorganization, winding-up or liquidation
proceeding or other proceeding analogous in purpose or effect relating to
such entity; applies for or consents to the appointment of a receiver,
trustee or other custodian for the bankruptcy, reorganization, winding-up
or liquidation of such entity; makes an assignment for the benefit of
creditors; or admits in writing that it is unable to pay its debts; (ii)
any court order or judgment is entered confirming the bankruptcy or
insolvency of Borrower or any Guarantor or approving any reorganization,
winding-up or liquidation of such entity or a substantial portion of its
assets; (iii) there is instituted against Borrower or any Guarantor any
bankruptcy, reorganization, winding-up or liquidation proceeding or other
proceeding analogous in purpose or effect and the same is not dismissed
within 90 days after the institution thereof; or (iv) a receiver, trustee
or other custodian is appointed for any part of the Receivables Collateral
or the Project or all or a substantial portion of the assets of Borrower or
any Guarantor;
(j) Performance by Borrower or any Guarantor of any material
obligation under any Document or Guarantee, as the case may be, is rendered
unenforceable in any material respect, or any Guarantor repudiates,
rescinds, limits or annuls its Guarantee; or
(k) An Event of Default, as defined in the Construction Loan
Agreement, occurs, or an act or event occurs under any of the Construction
-40-
Loan Documents, whether or not denominated as an Event of Default, which
expressly entitles the Lender to exercise its remedies.
9.2 At any time after an Event of Default has occurred and while it is
continuing, Lender shall have the right to do any one or more of the following:
(a) cease to make further Advances;
(b) declare each of the Receivables Note and Working Capital
Note, together with prepayment premiums and all other sums owing by
Borrower to Lender in connection with the Documents, immediately due and
payable without notice, presentment, demand or protest, which are hereby
waived by Borrower;
(c) with respect to the Receivables Collateral, (i) institute
collection actions against all Persons obligated thereon and in default
thereunder; (ii) enter into modification agreements and make extension
agreements with respect to payments and other performances; (iii) release
Persons liable for the payment and performance thereof or the securities
for such payment and performance; and (iv) settle and compromise disputes
with respect to payments and performances claimed due thereon, all without
notice to Borrower, without being called to account therefor by Borrower
and without relieving Borrower from Performance of the Obligations;
(d) in the event Lender has previously agreed that Borrower may
act as Servicing Agent, remove Borrower as Servicing Agent and substitute
as Servicing Agent such other Person as Lender shall designate; and
(e) proceed to protect and enforce its rights and remedies
under this Agreement, the Construction Loan Documents or any other
documents and to foreclose or otherwise realize upon its security for the
Performance of the Obligations, or to exercise any other rights and
remedies available to it at law, in equity or by statute.
The rights and powers granted pursuant to this paragraph are not
intended to limit the rights and powers granted elsewhere herein.
9.3 Notwithstanding anything in the Documents to the contrary, while
an Event of Default exists, any cash received and retained by Lender in
connection with the Receivables Collateral may be applied to payment of the
Obligations in the manner provided in paragraph 9.5 hereof.
-41-
9.4 (a) Pursuant to its rights under paragraph 9.2 hereof, following
an Event of Default, and subject to the terms and conditions hereof, Lender
may sell, assign and deliver the Receivables Collateral, or any part
thereof, at public or private sale, conducted in a commercially reasonable
manner by an officer, or agent of, or auctioneer or attorney for, Lender at
Lender's place of business or elsewhere, for cash, upon credit or future
delivery, and at such price or prices as Lender shall reasonably determine,
and Lender may be the purchaser of any or all of the Receivables Collateral
so sold. Lender may, in its reasonable discretion, at any such sale,
restrict the prospective bidders or purchasers as to number, nature of
business and investment intention, and, without limitation, may require
that the persons making such purchases represent and agree to the
satisfaction of Lender that they are purchasing the Receivables Collateral
for their account, for investment, and not with a view to the distribution
or resale of any thereof. Lender shall have no obligation to delay sale of
any Receivables Collateral for the period of time necessary to permit such
Receivables Collateral to be registered for public sale under the
Securities Act of 1933, as amended, and any applicable state securities
laws. Private sales made without registration shall not be deemed to have
been made in a commercially unreasonable manner by virtue of any terms less
favorable to the seller resulting from the private nature of such sales.
(b) Without prejudice to the right of Lender to make such sale
within such shorter period as may be reasonable under the circumstances,
foreclosure sale of all or any part of the Receivables Collateral shall be
deemed held pursuant to reasonable notice if held:
(i) 45 days after notice is given, based upon default
consisting of insolvency, bankruptcy or other default of a nature
which cannot be corrected by Borrower, or default for which no grace
period is specified herein; or
(ii) 60 days after notice of any other act, circumstance or
event which, if uncorrected, after expiration of any applicable grace
period, shall constitute a default hereunder.
Where any notice to Borrower and grace period thereafter is required under
this Agreement, such grace period shall be deducted from the 60 day notice
of foreclosure sale specified in item (ii) above, so that the maximum
period between notice to Borrower of any act, circumstance or event which,
if uncorrected after elapse of any applicable grace period, would
constitute an Event of Default and the foreclosure sale of the Receivables
Collateral based upon such Event of Default shall in no event be required
to exceed 60 days.
-42-
(c) At any sale following an Event of Default, the Receivables
Collateral may be sold as an entirety or in partial interests. Lender shall
not be obligated to make any sale pursuant to any notice previously given.
In case of any sale of all or any part of the Receivables Collateral on
credit or for future delivery, the Receivables Collateral so sold may be
retained by Lender until the selling price is paid by the purchaser
thereof, but Lender shall not incur any liability in case of the failure of
such purchaser to take up and pay for the collateral so sold; and in case
of any such failure, such Receivables Collateral may again be sold under
and pursuant to and in compliance with the provisions hereof.
(d) In connection with sales made following an Event of Default,
Lender may, in the name and stead of Borrower or in its own name, make and
execute all conveyances, assignments and transfers of the Receivables
Collateral sold pursuant to this Agreement; and Lender is hereby appointed
Borrower's attorney-in-fact for this purpose. Nevertheless, Borrower will,
if so requested by Lender, ratify and confirm any sale or sales by
executing and delivering to Lender, or to such purchaser or purchasers, all
such instruments as may, in the judgment of Lender, be advisable for that
purpose.
(e) The receipt by Lender of the purchase money paid at any
sale made following an Event of Default shall be a sufficient discharge
therefor to any purchaser of the Receivables Collateral or any portion
thereof, and no such purchaser, after paying such purchase money and
receiving such receipt, shall be bound to see to the application of such
purchase money or any part thereof or in any manner whatsoever be
answerable for any loss, misapplication or nonapplication of any such
purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(f) Each purchaser at any sale following an Event of Default
shall hold the Receivables Collateral so sold absolutely free from every
claim or right of Borrower, including, without limitation, any equity or
right of redemption of Borrower, which Borrower hereby specifically waives
to the extent Borrower may lawfully do so. Lender, its employees and agents
shall after such sale be fully discharged from any liability or
responsibility in any matter relating to the Receivables Collateral and
such other security that is sold and resulting from any action or inaction
on the part of such purchaser or any successor-in-interest of such
purchaser.
9.5 The proceeds of any sale of all or any part of the Receivables
Collateral shall be applied in the following order or priorities: first, to the
payment of all reasonable costs and expenses of such sale, including, without
limitation,
-43-
reasonable compensation to Lender and its agents, attorneys' fees, and all other
reasonable expenses, liabilities and advances incurred or made by Lender, its
agents and attorneys, in connection with such sale, and any other unreimbursed
expenses for which Lender may be reimbursed pursuant to the Documents; second,
to the payment of the Obligations, in such order and manner as Lender shall in
its discretion determine, with no amounts applied to payment of principal until
all interest has been paid; and third, to the payment to Borrower, its
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
9.6 Lender may, at its option, and without any obligation to do so,
pay, perform and discharge any and all amounts, costs, expenses and liabilities
herein agreed to be paid or performed by Borrower if Borrower fails to do so
within 7 days following the giving of written notice of such failure; and for
such purposes Lender may use the proceeds of the Receivables Collateral and is
hereby appointed Borrower's attorney-in-fact. All amounts expended by Lender in
so doing or in exercising its remedies hereunder following an Event of Default
shall become part of the Obligations secured hereby, shall be immediately due
and payable by Borrower to Lender upon demand therefor, and shall bear interest
at the Overdue Rate from the dates of such expenditures until paid. Exercise by
Lender of its option under this paragraph will not cure any default of Borrower.
9.7 No remedy herein or in any other Document conferred on or reserved
to Lender is intended to be exclusive of any other remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder, under any other Document or now or hereafter
existing at law or in equity. Notwithstanding anything herein to the contrary,
in any non-judicial, public or private sale or sales under the Uniform
Commercial Code or in any judicial foreclosure and sale of the Receivables
Collateral, the Receivables Collateral may be sold in any manner whatsoever not
prohibited by law. No delay or omission to exercise any right or power shall be
construed to be a waiver of any default or acquiescence therein or a waiver of
any right or power; and every such right and power may be exercised from time to
time and as often as may be deemed expedient. Lender's acceptance of any
performance due hereunder which does not comply strictly with the terms hereof
shall not be deemed to be a waiver of any right of Lender to strict Performance
by Borrower. Acceptance of past due amounts or partial payments shall not
constitute a waiver of full and timely payment of the Obligations. No Event of
Default, declaration of the unpaid principal of the Loan to be immediately due
and payable or exercise of any other right to remedy upon default shall stay,
waive, or otherwise affect Lender's right to receive payments on and other
proceeds of the Receivables Collateral.
-44-
9.8 Borrower, for itself and for all who may claim through or under
it, hereby expressly waives and releases all right to have the Receivables
Collateral or any other security for the Performance of the Obligations, or any
part thereof, marshalled on any foreclosure, sale or other enforcement hereof.
9.9 While an Event of Default exists, Borrower shall, on the request
of Lender, assemble the Receivables Collateral not already in Lender's
possession and make it available to Lender at a time and place reasonably
convenient to Lender.
9.10 In the event that Borrower at any time fails to do or perform any
act, or pay any amount, or take any action, when such performance, payment or
action is required hereunder (and, if applicable, following the lapse of any
grace or compliance period in which such payment, performance or action may be
taken by Borrower hereunder), then Lender may make such payment or cause such
performance or action to be taken, and all amounts expended by Lender in making
such payment or causing such performance or action to be taken, together with
all expenses incurred by Lender in connection therewith shall be immediately due
and payable by Borrower to Lender, the payment performance of which shall be an
Obligation hereunder, and shall be secured by the Receivables Collateral. All
such amounts expended by Lender in making such payment or causing such
performance or action to be taken, together with all expenses incurred by Lender
in connection therewith, shall bear interest at the Overdue Rate from the date
incurred by Lender until paid.
ARTICLE X
---------
POWER OF ATTORNEY.
------------------
For the purpose of enabling Lender to protect and preserve its
Security Interest in the Receivables Collateral and its rights and remedies
under this Agreement and the Documents, Borrower does hereby constitute and
appoint Lender, and its successors and assigns, to be Borrower's true and lawful
attorney-in-fact upon the occurrence of an Event of Default, and during the
continuance thereof, to perform any act, take any action, execute and sign any
document, statement, instrument or other writing, and to do and perform any and
all deeds and things in the name, place, and stead of Borrower, which Lender in
its discretion shall determine necessary or required to protect and preserve its
Security Interest in the Receivables Collateral and its rights and remedies
under this Agreement and the Documents, or which Borrower is required or
obligated to perform under the terms of this Agreement or the Documents.
-45-
ARTICLE XI
----------
CONSTRUCTION AND GENERAL RULES
------------------------------
11.1 All moneys payable hereunder or under the Documents shall be paid
to Lender at its address set forth below.
11.2 This Agreement and the other Documents exclusively and completely
state the rights and obligations of Lender and Borrower with respect to the
Loan. No modification, termination, variation, discharge or abandonment hereof
and no waiver of any of the provisions or conditions shall be valid unless in
writing and signed by duly authorized representatives of Lender and Borrower or
the successor, transfers or assigns of either, subject, however, to the
limitations on assignment herein by Borrower. This Agreement supersedes any and
all prior agreements or understandings, written or oral, between Borrower and
Lender (other than in the other Documents) concerning this transaction.
11.3 The powers and agency hereby granted by Borrower are coupled with
an interest and are irrevocable and are granted as cumulative to the remedies
for collection of the indebtedness secured hereby provided by law.
11.4 This Agreement may be executed simultaneously in any number of
identical copies each of which shall constitute an original for all purposes.
11.5 Any notice required or permitted to be given hereunder shall be
in writing and shall be (i) personally delivered to the party being notified if
an individual or to an officer or general partner if a corporation or
partnership, or (ii) transmitted by postage prepaid, certified or registered
mail (return receipt requested) to such party at its address after its signature
on the signature page hereof or such other address as the party being notified
may have otherwise designated in a notice given as provided in this paragraph.
Such notice shall be deemed to be given and effective, unless actual receipt is
expressly elsewhere specified herein, upon the date of receipt or the date
delivery is first attempted and refused if transmitted by registered or
certified mail, whichever shall first occur. A copy of any notices given to
Borrower shall also be given to:
-▇▇-
▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
The ▇▇▇▇▇▇▇ Building, 16th Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Stroock & Stroock & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
11.6 All the covenants, promises, stipulations and agreements of
Borrower and all the rights and remedies of the Lender in this Agreement
contained shall bind Borrower, and, subject to the restrictions on merger,
consolidation and assignment herein contained, its successors and assigns, and
shall inure to the benefit of Lender, its successors and assigns, whether so
expressed or not. Borrower may not assign its rights herein in whole or in part.
Except as may be expressly provided herein, no person or other entity shall be
deemed a third party beneficiary of this Agreement.
11.7 Subject to the provisions of Article IX hereof, if any one or
more of the provisions contained in this Agreement shall be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
11.8 Time is of the essence in the Performance of the Obligations.
11.9 All headings are inserted for convenience only and shall not
affect any construction or interpretation of this Agreement. The provisions of
this Agreement shall apply to the parties according to the context hereof and
without regard to the number or gender of words and expressions used herein.
Unless otherwise indicated, all references herein to clauses and other
subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of this Agreement; the words "herein", "hereof", "hereto",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular paragraph, clause or other subdivision hereof; and
reference to a numbered or lettered subdivision of an Article, or paragraph
shall include relevant matter within the Article or paragraph which is
applicable to but not within such numbered or lettered subdivision.
-47-
11.10 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF ARIZONA. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY
DIVISION, OR THE UNITED STATES DISTRICT COURT OF ARIZONA OR, IF LENDER INITIATES
SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH LENDER
SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS
ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS
AGREEMENT. BORROWER WAIVES ANY CLAIM THAT PHOENIX, ARIZONA OR THE DISTRICT OF
ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.
SHOULD BORROWER, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY
LAW AFTER THE MAILING THEREOF, BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED
FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM
FOR BORROWER SET FORTH IN THIS PARAGRAPH SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING
BY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY
SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
-48-
11.11 It is the intent of the parties hereto to comply with the
Applicable Usury Law. Accordingly, notwithstanding any provisions to the
contrary in this Agreement or in any of the other Documents in no event shall
this Agreement or the Documents require the payment or permit the collection of
interest in excess of the maximum contract rate permitted by the Applicable
Usury Law. If (i) any such excess of interest otherwise would be contracted for,
charged or received from Borrower or otherwise in connection with the
Obligations or (ii) the maturity of the Obligations is accelerated in whole or
in part, or (iii) all or part of the principal or interest of the Obligations
shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received in connection with the Obligations would
exceed the maximum contract rate permitted by the Applicable Usury Law, then in
any such event (A) the provisions of this paragraph shall govern and control,
(B) neither Borrower nor any other person or entity now or hereafter liable for
the payment hereof will be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum contract rate permitted by the
Applicable Usury Law, (C) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal amount of the
Obligations of Borrower or refunded to Borrower, at Lender's option, and (D) the
effective rate of interest will be automatically reduced to the maximum contract
rate permitted by the Applicable Usury Law. Without limiting the generality of
the foregoing, to the extent permitted by the Applicable Usury Law: (x) all
calculations of the rate of interest which are made for the purpose of
determining whether such rate would exceed the maximum contract rate permitted
by the Applicable Usury Law shall be made by amortizing, prorating, allocating
and spreading during the period of the full stated term of the Obligations, all
interest at any time contracted for, charged or received from Borrower or
otherwise in connection with the Obligations; and (y) in the event that the
effective rate of interest on the Obligations should at any time exceed the
maximum contract rate permitted by the Applicable Usury Law, such excess
interest that would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law shall be paid to Lender from time to time,
if and when the effective interest rate on the Obligations otherwise falls below
the maximum contract rate permitted by the Applicable Usury Law, to the extent
that interest paid to the date of calculation does not exceed the maximum
contract rate permitted by the Applicable Usury Law, until the entire amount of
interest which would have otherwise been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Should the maximum
contract rate permitted by the Applicable Usury Law be increased at any time
hereafter because of a change in the law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all the Obligations
regardless of when incurred; but, again to the extent not prohibited by the
Applicable Usury Law, should the maximum contract rate permitted by the
Applicable Usury Law be decreased because of a change in the law, such decreases
shall not apply to the Obligations regardless if resulting from an advance of
the Loan made after the effective date of such decrease.
-49-
ARTICLE XII
-----------
SPECIAL PROVISIONS
------------------
12.1 Lender covenants and agrees that, notwithstanding anything to the
contrary herein or in any other Document, during the Term hereof it shall take
no action to disturb Purchasers in their use and possession of their Time-Share
Interests or otherwise to impair the rights and privileges of such Purchasers
under their Time-Share Interests or the governing documents of the Project so
long as such Purchasers are fulfilling their obligations under their respective
Instruments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by Persons duly authorized on the day and year first above written.
"Lender"
GREYHOUND FINANCIAL
CORPORATION, a Delaware corporation
BY /S/ ^^^
-----------------------------------
Vice President
[CORPORATE SEAL]
Address:
Dial ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice-President-Law
-50-
With a copy to:
Dial ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President - Operations
Management
"Borrower"
PORT ROYAL RESORT, L.P.,
a South Carolina limited partnership
By: Argosy/KGI Port Royal Partners,
a South Carolina general partnership
Title: General Partner
By: KGI Port Royal, Inc.,
a South Carolina corporation
Title: Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
[CORPORATE SEAL]
Address:
c/o Argosy/KGI Port Royal Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-51-
FIRST AMENDMENT TO LOAN
-----------------------
AND SECURITY AGREEMENT
----------------------
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ("First
Amendment") is made and entered into as of the 26th day of April, 1995, by and
between PORT ROYAL RESORT, L.P., a South Carolina limited partnership
("Borrower") and FINOVA CAPITAL CORPORATION, a Delaware corporation, formerly
known as Greyhound Financial Corporation, ("Lender").
WITNESSETH:
WHEREAS, as of October 7, 1993, Borrower and Lender entered into that
Loan and Security Agreement (the "Original Agreement") pursuant to which Lender
agreed to make certain revolving loans to Borrower for the purposes set forth
therein; and
WHEREAS, Borrower and Lender have agreed to amend the Original
Agreement, pursuant to the terms and provisions of this First Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Except as specifically set forth in and/or modified
-----------
by this First Amendment, all capitalized terms set forth herein shall have the
same meanings as set forth in the Original Agreement. The following capitalized
terms, however, shall have the meanings set forth below, notwithstanding any
contrary definitions contained in the Original Agreement.
1.1 "Borrowing Term (Receivables Loan)" shall mean the period of
time during which Lender is committed to make Receivables Advances under
the Receivables Loan Agreement, which commitment shall terminate on May 5,
1997.
1.2 "Borrowing Term (Working Capital Loan)" shall mean the period
of time during which Lender is committed to make Working Capital Advances
under the Receivables Loan Agreement, which commitment shall terminate on
January 5, 1997.
1.3 "Construction Loan Agreement" shall mean that certain
Construction Loan Agreement dated as of October 7, 1993, between Borrower
and Lender, as modified and amended pursuant to that First Amendment to
Construction Loan Agreement dated of even date herewith, pursuant to which
Lender agreed, subject to the terms and provisions thereof, to make (i) a
$2,425,000.00 construction loan, the proceeds of which were used to
construct Phase I and Phase II; and (ii) a $2,100,000.00 construction loan,
the proceeds of which are to be used to construct Phase III and Phase IV.
1.4 "Construction Mortgage" shall mean, collectively, that
certain Mortgage, Assignment of Rents and Proceeds and Security Agreement
dated as of October 7, 1993, delivered by Borrower pursuant to the
Construction Loan Agreement, as amended by that certain First Amendment to
Mortgage, Assignment of Rents and Proceeds and Security Agreement dated of
even date herewith between Borrower and Lender.
1.5 "GPSI" shall mean FINOVA Portfolio Services, Inc., an Arizona
corporation, its successors and assigns, formerly known as GFC Portfolio
Services, Inc.
1.6 "Instrument" shall mean a promissory note which has arisen
out of the sale of a Time-Share Interest in Phase I, Phase II, Phase III,
or Phase IV by Borrower to a purchaser, which note is secured by a
Purchaser Mortgage.
1.7 "Maturity Date" shall mean that date which shall occur ten
(10) years after the date on which the last Receivables Advance is made
under the terms of the Original Agreement, as modified by the First
Amendment.
1.8 "Maximum Loan Amount" shall mean the lesser of (i) Fifteen
Million Dollars ($15,000,000.00) or (ii) the amount remaining when
Seventeen Million Five Hundred Thousand Dollars ($17,500,000.00) is reduced
by the principal amount then outstanding under each of the Working Capital
Loan and the Construction Loan.
1.9 "Maximum Working Capital Loan Amount" shall mean the lesser
of (i) Three Million ($3,000,000.00) or (ii) the amount remaining when
Seventeen Million Five Hundred Thousand Dollars ($17,500,000.00) is reduced
by the principal amount then outstanding under each of the Receivables Loan
and the Construction Loan.
-2-
1.10 "Opening Prepayment Date" shall mean the date which occurs
twenty-four (24) months after the date on which the last Receivables
Advance is made under the terms of the Original Agreement as amended by the
First Amendment.
1.11 "Phase III" shall mean the 16 Units and related amenities to
be constructed on the Project following completion of Phase II.
1.12 "Phase IV" shall mean the 16 Units and related amenities,
together with the picnic/play area and sand volleyball court, to be
constructed on the Project following completion of Phase III.
1.13 "Prevailing Discount Rate" shall mean Lender's prevailing
discount rate at the time each Advance is made, which rate shall be Prime
Rate plus 2% per annum, but in no event less than 12.5% per annum.
1.14 "Project" shall mean the time-share condominium project
known as Royal Dunes Beach Villas at Port Royal Resort, constructed and to
be constructed by Borrower in Beaufort County, South Carolina, comprised of
the 56 time-share units in Phase I, Phase II, Phase III, and Phase IV.
1.15 "Receivables Loan Agreement" shall mean, collectively, the
Original Agreement and the First Amendment.
1.16 "Receivables Note" shall mean the Receivables Note defined
in the Original Agreement, as modified and amended pursuant to that First
Allonge to Receivables Promissory Note of even date herewith, executed by
Borrower and Lender.
1.17 "Working Capital Note" shall mean the Working Capital Note
defined in the Original Agreement, as modified and amended pursuant to that
First Allonge to Working Capital Promissory Note of even date herewith
executed by Borrower and Lender.
2. Prepayment. The Loan may be prepaid as provided in the Original
----------
Agreement; provided however that for purposes of determining when and under what
-------- -------
circumstances a prepayment may occur, the elapsed time of the term of the Loan
shall be measured from the date on which the last Receivables Advance is made
under the terms of the Original Agreement, as amended by this First Amendment.
The foregoing notwithstanding, the provisions of Section 7.3 of the Original
Agreement shall be modified to provide for the following premium for prepayment
in the event the Receivables Loan is prepaid at any time after the sixth
anniversary date of the last
-3-
Receivables Advance made under the Original Agreement as amended by the First
Amendment:
Period Premium
------ -------
After the Sixth Anniversary Date and 1%
through the Seventh Anniversary Date of
the last Receivables Advance
Thereafter 0%
3. LIMITATION ON RECEIVABLES ADVANCES. The provisions of Section
----------------------------------
3.1 (v) of the Original Agreement shall be amended and restated in its entirety
to read as follows:
At no time during the Term shall the unpaid principal balance of the
Receivables Loan, together with the unpaid principal balance of the
Construction Loan and Working Capital Loan, exceed a total amount
equal to Seventeen Million Five Hundred Thousand Dollars
($17,500,000.00), and Lender shall have no obligation to make any
Receivables Advance if such Receivables Advance would cause the
foregoing limitation to be exceeded.
4. LIMITATION ON WORKING CAPITAL ADVANCES. The provisions of
--------------------------------------
Section 3.2 (vi) of the Original Agreement shall be amended and restated in its
entirety to read as follows:
At no time during the Term shall the unpaid principal balance of the
Working Capital Loan, together with the unpaid principal balance of
the Construction Loan and Receivables Loan, exceed a total amount
equal to Seventeen Million Five Hundred Thousand Dollars
($17,500,000.00), and Lender shall have no obligation to make any
Working Capital Advance if such Working Capital Advance would cause
the foregoing limitation to be exceeded.
5. ORDER OF WORKING CAPITAL ADVANCES. Section 3.2(ii) of the
---------------------------------
Original Agreement shall be amended with the addition of the following language:
-4-
Under no circumstances shall Borrower have the right to obtain a
Working Capital Advance against Eligible Instruments arising from
Phase III until all Working Capital Advances made against Eligible
Instruments arising from each of Phase I and Phase II have been paid
in full, including all accrued interest thereon. At such time as
Borrower has received a Working Capital Advance against Eligible
Instruments arising from Phase III, Borrower shall have no further
right to obtain any Working Capital Advances against Eligible
Instruments arising from Phase I or Phase II. Furthermore, under no
circumstances shall Borrower have the right to obtain a Working
Capital Advance against Eligible Instruments arising from Phase IV
until all Working Capital Advances made against Eligible Instruments
arising from each of Phase I, Phase II and Phase III have been paid in
full, including all accrued interest thereon. At such time as Borrower
has received a Working Capital Advance against Eligible Instruments
arising from Phase IV, Borrower shall have no further right to obtain
any Working Capital Advances against Eligible Instruments arising from
Phase I, Phase II or Phase III.
6. ADDITIONAL UNITS. SECTION 8.23 of the Original Agreement shall
----------------
be amended in its entirety to read as follows:
8.23 Borrower shall not, without Lender's prior written consent: (i)
construct additional condominium or time-share units within or
adjacent to the Project (other than the 56 time-share units in Phase
I, Phase II, Phase III and Phase IV) until such time as at least 95%
of the Time-Share Interests contained within each of Phase I and Phase
II and at least 40% of the Time-Share Interests contained within each
of Phase III and Phase IV, have been sold, in bona fide transactions,
to parties who are not Affiliates of Borrower or Guarantor; or (ii)
sell any time-share intervals from such additional condominium or
time-share units until at least 95% of the Time-Share Interests
contained within each of Phase I and II and at least 75% of the
Time-Share Interests contained within each of Phase III and Phase
IV, have been sold, in bona fide transactions, to parties who are
not Affiliates of Borrower or Guarantor.
-5-
7. NOTICES. SECTION 11.5 of the Original Agreement shall be amended
-------
to provide that all notices sent to Lender shall be sent to Lender at the
following address:
FINOVA Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Group Counsel
With a copy to:
FINOVA Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Operations Management
8. DOCUMENT REFERENCE. All references to the "Loan Agreement" in
------------------
the Documents and to "this Agreement", "herein", "hereof", "hereto", and
"hereunder" in the Original Agreement are hereby amended to refer to the
Original Agreement as amended by this First Amendment.
9. FEES AND EXPENSES. In addition to the fees and expenses that
-----------------
have been paid or are payable by Borrower pursuant to the Original Agreement,
Borrower shall pay to Lender (i) a loan fee (the "Working Capital Loan Fee") in
the amount of $30,000.00, which fee was earned by Lender in consideration of
Lender holding itself ready, willing and able to amend the Original Agreement
upon the terms and conditions set forth herein and (ii) a loan fee (the
"Receivables Loan Fee") in the amount of $50,000.00, which fee shall be earned
by Lender under the circumstances set forth below. The payment of the Working
Capital Loan Fee and the Receivables Loan Fee is in addition to Borrower's
obligation to pay a loan fee to Lender in consideration for the Lender's
commitment to modify and amend the Construction Loan Agreement and in addition
to all other fees and expenses required to be paid by Borrower pursuant to the
First Amendment to Construction Loan Agreement of even date herewith. Fifteen
Thousand Dollars ($15,000.00) of the Working Capital Loan Fee shall be due and
payable on the earlier of May 31, 1995 or concurrently with the making of the
first Working Capital Advance after the date of this First Amendment. The
remaining Fifteen Thousand Dollars ($15,000.00) of the Working Capital Loan Fee
shall be due and payable on the earlier of July 31, 1995 or concurrently with
the making of the second Working Capital Advance after the date of this First
Amendment. Twenty-Five Thousand Dollars ($25,000.00) of the Receivables Loan Fee
shall be due and payable concurrently with the making of the Receivables Advance
which causes the unpaid principal balance of the Receivables Loan to exceed
-6-
Ten Million Dollars ($10,000,000.00) and shall be deemed earned by Lender at
that time, in consideration for Lender's agreement to make such Advance. The
remaining Twenty-Five Thousand Dollars ($25,000.00) of the Receivables Loan Fee
shall be due and payable concurrently with the making of the Receivables Advance
which causes the unpaid principal balance of the Receivables Loan to exceed
Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) and shall be
deemed earned by Lender at that time, in consideration for Lender's agreement to
make such Advance. Furthermore, Borrower shall pay, on demand, all costs and
expenses arising from the preparation of this First Amendment and the closing of
the amendment to the Construction Loan Documents, or otherwise incurred by
Lender in connection with this First Amendment, including, but not limited to,
title insurance premiums, other title company charges, recording fees, all
charges for consumer credit and ▇▇▇▇▇▇'▇ reports, and U.C.C., tax lien, judgment
and litigation searches, Lender's attorneys' fees and costs, appraisal fees, if
any, survey costs, if any, inspection costs and fees, both during construction
or otherwise, escrow disbursement expenses, any revenue and/or documentary
stamps, intangible or recording taxes, out-of-pocket travel expenses incurred by
Lender or its agents and employees, brokerage commissions, all fees and expenses
of the Servicing Agent and Collection Agent in connection with this First
Amendment, and any other costs, expenses or charges that may be imposed on or
incurred by Lender as a result of this Amendment. Borrower shall indemnify and
hold Lender harmless from any and all liability for payment of any brokerage
fees. Lender shall have the right to withhold from any Advance made hereunder,
any costs, fees, expenses or reimbursements due and owing to Lender .
10. INCENTIVE FEE.
--------------
(i) As additional consideration to Lender, Borrower shall pay
to Lender an incentive fee (the "Phase III Incentive Fee") equal to Thirty
Two Thousand Six Hundred Forty Dollars ($32,640.00) with respect to the
Time-Share Interests sold by Borrower in Phase III ("Phase III Intervals").
The Phase III Incentive Fee shall be paid in installments equal to $500.00
per Phase III Interval, plus related reasonable fees and expenses (all as
set forth in the Construction Mortgage), commencing with the first sale of
a Phase III Interval occurring after payment in full of all Phase III
Advances (as defined in the Construction Loan Agreement) and continuing
until the entire Phase III Incentive Fee is paid in full. The foregoing
notwithstanding, any unpaid portion of the Phase III Incentive Fee shall be
due and payable on the Phase III Maturity Date (as defined in the
Construction Loan Agreement).
(ii) As additional consideration to Lender, Borrower shall pay to
Lender an incentive fee (the "Phase IV Incentive Fee") equal to Thirty Two
Thousand Six Hundred Forty Dollars ($32,640.00) with respect to the Time-
Share Interests sold by Borrower in Phase IV ("Phase IV Intervals"). The
-7-
Phase IV Incentive Fee shall be paid in installments equal to $500.00 per
Phase IV Interval, plus related reasonable fees and expenses (all as set
forth in the Construction Mortgage), commencing with the first sale of a
Phase IV Interval occurring after payment in full of the Construction Loan
and continuing until the entire Phase IV Incentive Fee is paid in full. The
foregoing notwithstanding, any unpaid portion of the Phase IV Incentive Fee
shall be due and payable on the Phase IV Maturity Date (as defined in the
Construction Loan Agreement).
(iii) Nothing contained herein shall modify, amend or limit the
incentive fee payable by Borrower pursuant to SECTION 8.25 of the Original
Agreement; provided however that the incentive fee payable pursuant to
-------- ------- ----
SECTION 8.25 of the Original Agreement shall pertain only to Phase I and
Phase II; and further provided that as provided in Section 13 hereof,
------- -------- ----
payment in full of the remaining unpaid balance of the incentive fee as
pertaining to Phase I and Phase II shall be a condition precedent to
Lender's obligations under this First Amendment.
11. CONFIRMATION OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
----------------------------------------------------------
Borrower hereby reaffirms, as if made as of the date hereof, all of Borrower's
representations and warranties contained in the Original Agreement. Borrower
furthermore reaffirms the validity, enforceability and legality of the
Documents, and all provisions of the Documents, as modified, are hereby
confirmed and ratified. Without limiting the generality of the foregoing,
Borrower hereby reaffirms the validity and enforceability of the Security
Interest granted to Lender in the Receivables Collateral as security for
Borrower's payment and Performance of all Obligations, other than those
Obligations arising out of the Environmental Certificate with Representations,
Covenants and Warranties delivered in connection with the Construction Loan
Agreement. Borrower hereby acknowledges and agrees that the definition of
Obligations includes, without limitation, each and every obligation, duty,
covenant, undertaking and condition which Borrower is required or has agreed to
perform under the Documents and under the Construction Loan Documents, and each
and every obligation of Borrower now or hereafter owing to Lender. In the event
of a conflict or inconsistency between the provisions of the Original Agreement
and the provisions of this First Amendment, the provisions of this First
Amendment shall prevail. All terms, conditions and provisions of the Original
Agreement are continued in full force and effect and shall remain unaffected and
unchanged except as specifically amended or modified hereby. Borrower
acknowledges that as of the date hereof, it has (i) no defense, counterclaim,
offset, cross-complaint, claim or demand of any nature whatsoever which can be
asserted as a basis to seek affirmative relief or damages from Lender or as a
basis to reduce or eliminate all or any part of its liability to repay the Loan
and (ii) no other claim against Lender with respect to any aspect of the
transaction in respect to which the Loan was made.
-8-
12. GUARANTOR'S RATIFICATION. As a condition precedent to the
------------------------
effectiveness of this First Amendment, Borrower shall cause the Guarantor to
execute a Ratification and Confirmation of Partnership Guarantee Agreement in
the form approved by Lender, thereby acknowledging the making of the agreements
contained herein.
13. CONDITIONS PRECEDENT. The amendments and modifications to the
--------------------
Original Agreement contained herein and Lender's obligations in this regard are
subject to the following express conditions precedent, all of which Borrower
shall satisfy on or before July 28, 1995:
13.1 The following shall be delivered to Lender all in a form,
manner and substance satisfactory to Lender:
(a) An original of this First Amendment fully executed by
the Borrower;
(b) An original of the First Allonge to Receivables
Promissory Note in a form acceptable to Lender, fully executed by
Borrower;
(c) An original of the First Allonge to Working Capital
Promissory Note in a form acceptable to Lender, fully executed by
Borrower;
(d) An original First Amendment to Mortgage, Assignment of
Rents and Proceeds and Security Agreement in a form acceptable to
Lender, fully executed by Borrower (the "First Mortgage
Modification");
(e) Ratification and Confirmation of Partnership Guarantee
Agreement in a form approved by Lender, fully executed by Guarantor;
(f) A detailed budget regarding construction of Phase III
and a preliminary budget regarding construction of Phase IV, in such
detail and containing such information as Lender shall require;
(g) An acknowledgment from each of KPI General Partnership
Hilton Head and Argosy/KGI Port Royal Partners acknowledging the
continued subordination in favor of Lender of any indebtedness owed to
them by Borrower;
-9-
(h) All documents required to be executed and delivered to
Lender in connection with the amendment and modification of the
Construction Loan Agreement;
(i) Such resolutions and authorizations and such other
documents as Lender may require relating to the existence and good
standing of the Borrower and Guarantor, and the authority of any
person executing this First Amendment or any other documents on behalf
of the Borrower or Guarantor;
(j) A commitment from Chicago Title Insurance Company, the
issuer of Lender's ALTA extended coverage title insurance policy
insuring the lien of the Construction Mortgage (the "Title Policy"),
to issue an endorsement, in form satisfactory to Lender, to the Title
Policy, insuring that the Construction Mortgage, as modified pursuant
to the First Mortgage Modification, continues to be a first lien upon
the real property described therein, as security for, among other
things, the timely and faithful payment of the Phase III/IV Incentive
Fee, subject only to those exceptions contained in such title policy
and to such additional exceptions as Lender may specifically approve
in writing.
(k) Updated UCC, tax lien, litigation and judgment searches
for the following parties: (i) Borrower, (ii) Guarantor, (iii) KGI
Port Royal, Inc., (iv) Argosy Hilton Head, Inc., and (v) Royal Dunes
Beach Villas at Port Royal Resort.
(l) Evidence that Borrower has good and marketable title to
the collateral pledged to Lender, that Lender's liens and security
interest in such collateral have been duly perfected as first and
prior liens and security interests, and that there are no other
financing statements or liens filed against Borrower or on the
property of Borrower except those that are approved by Lender.
(m) Evidence that any fees due to any broker utilized by
Borrower in connection with the subject transaction have been paid,
together with evidence of the payment by Borrower of any other costs,
fees and expenses then payable in connection with the Construction
Loan and the Loan, including, without limitation, those fees, costs
and expenses described in Section 9 hereof.
-10-
(n) A satisfactory legal opinion from counsel to Borrower as
to such matters as Lender shall require.
13.2 Borrower shall have paid the remaining Incentive Fee as
respects Phase I and Phase II, in the amount of $48,960.
13.3 No Event of Default shall exist and no event or condition
shall exist which after notice or lapse of time, or both, would constitute
an Event of Default.
13.4 There shall have occurred no material adverse change in the
Real Property or in the business or financial condition of Borrower and
Guarantor since the date of the last financial statement submitted to
Lender.
13.5 Neither Borrower nor Guarantor shall have failed to disclose
to Lender any material information and no material information supplied by
Borrower or Guarantor shall be found to be misleading, misrepresented or
materially incorrect.
13.6 All representations and warranties by Borrower shall remain
true and correct, in all material respects, and all agreements the Borrower
is to have performed or complied with at such time shall have been
performed or complied with.
14. COUNTERPARTS. This First Amendment may be executed in any number
------------
of separate counterparts, each of which when taken together shall constitute one
and the same instrument notwithstanding the fact that all parties have not
signed the same counterpart.
-11-
IN WITNESS WHEREOF, these presents are executed as of the date first
indicated above.
"BORROWER"
PORT ROYAL RESORT, L.P., a South Carolina limited
partnership
By: ARGOSY/KGI PORT ROYAL PARTNERS, a South
Carolina general partnership
Its: General Partner
By: KGI PORT ROYAL, INC.,
a South Carolina corporation
Its: Managing General Partner
By: /s/ ^^???
-------------------------------
Its: President
-------------------------------
[CORPORATE SEAL]
"LENDER"
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ ^^???
-----------------------------------------
Its: Group Vice President
----------------------------------------
[CORPORATE SEAL]
-12-
