U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 15, 1996
WESTERN STANDARD CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
WYOMING 0-3802 83-0184378
- ------- ------ ----------
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
205 SOUTH BROADWAY, RIVERTON, WY 82501
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(address of principal executive offices)
(307) 856-9288
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(Registrant's telephone number)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
SNOW KING RESORT, INC. IS A SUBSIDIARY OF WESTERN STANDARD
CORPORATION
BORROWER: SNOW KING RESORT, INC., a Wyoming Corporation
LENDER: ORIX USA CORPORATION, a Delaware Corporation
THIS THIRD MODIFICATION TO LOAN AGREEMENT ("Third
Modification") is made as of April 15, 1996 , by and between SNOW
KING RESORT, INC., a Wyoming corporation ("Borrower"), and ORIX USA
CORPORATION, a Delaware corporation and a licensed California
commercial finance lender, having its principal place of business
at 780 Third Avenue, 48th Floor, New York, NY 10017 ("Lender").
RECITALS:
This Third Modification is made with reference to the following
facts:
A. Borrower and Lender made and executed that certain Loan
Agreement (the "Loan Agreement") as of March 11, 1992, pursuant to
which Lender lent to Borrower and Borrower borrowed from Lender the
sum of Five Million Dollars ($5,000,000). Pursuant to the Loan
Agreement, Borrower made and delivered to Lender a Promissory Note
dated March 13, 1992 (the "Note") and a Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Filing, dated
March 13, 1992, recorded in Official Records of Teton County,
Wyoming, Doc. 325644, Book 248, Pages 0922-0964, March 13, 1992
("Mortgage").
B. Borrower and Lender made and entered into a Modification
to Loan Agreement on August 30, 1993 (the "First Modification").
C. Borrower and Lender made and entered into a Second
Modification to Loan Agreement on September 13, 1994 ("Second
Modification").
D. As of April 15, 1996, the outstanding balance of the Loan
is $4,983,600.
E. Borrower has requested Lender to advance to Borrower
additional funds to be used by Borrower for certain specific
purposes as herein set forth, and make certain additional
modifications to the terms and conditions of said Loan Agreement,
which Lender is willing to make as hereinafter set forth in this
Third Modification.
F. This Third Modification is made to among other things:
(1) Extend the Maturity Date to the date of March 13,
2001.
(2) Change the Interest Rate to a fixed rate per annum
determined by the rate of then current annual yield on U.S.
Treasury Notes with a term of five years plus 3.8% determined as of
the date of April 10, 1996.
(3) Increase the Principal of the Loan to an amount of
$6,150,000.
(4) Require that one-twelfth of the annual real estate
property tax for the mortgaged Real Property be deposited by
Borrower into a reserve account with Jackson State Bank as the "R/E
Tax Reserve Account", from which account Borrower shall pay
currently when due, and not delinquent, each installment of real
estate property taxes levied on the mortgaged Real Property.
NOW, THEREFORE, IT IS AGREED by the parties to amend and
modify the Loan Agreement as follows:
1. Definitions: The terms used in this Modification to Agreement
shall be as defined in the Loan Agreement, unless the context
thereof clearly requires otherwise.
2. Additional Funding. Lender shall advance, upon satisfaction of
all conditions hereto, additional funds in the amount of ONE
MILLION ONE HUNDRED SIXTY SIX THOUSAND FOUR HUNDRED DOLLARS
($1,166,400.00) to Borrower. Upon such advance, the then
outstanding balance of Principal of the Loan shall be SIX MILLION
ONE HUNDRED FIFTY THOUSAND DOLLARS ($6,150,000). The Note and the
Mortgage shall be modified to reflect this Additional Funding.
2.1. Participation in Additional Funding. Lender shall be
obligated to fund $1,049,760 of said Additional Funding only if,
and at such time, as Jackson State Bank agrees to, and does,
simultaneously fund an amount of $116,640 of such Additional
Funding.
2.2. Additional Funding Date. The Additional Funding Date
shall be April 15, 1996, subject to all conditions stated herein
then being met.
3. Revised Maturity Date: The Maturity Date of the Loan is
revised and extended to the date of March 13, 2001.
4. Revised Interest Rate: The Interest Rate on the Loan shall be
changed effective April 15, 1996 to a fixed rate per annum for the
revised term of the Note from the date of the Additional Funding to
the Revised Maturity Date, determined and established as of the
date which is two (2) days prior to the Additional Funding, [or
earlier date if Borrower so elects] at the rate which is three
hundred eight basis points (3.8%) above the Treasury Index, rounded
to the next highest one-eight of one percent (0.125%)("Revised
Fixed Interest Rate"). The term "Treasury Index" means the average
yield on actively traded United States Treasury Securities,
adjusted to a constant maturity of five (5) years as made available
by the Federal Reserve Board in Statistical Release H.15 (519) or
the Federal Reserve Bulletin. If Lender reasonably determines that
the Treasury Index is no longer published by the Federal Reserve
Board or otherwise available, then Lender, exercising its
reasonable judgment, shall specify a comparable substitute index to
be used in place of the Treasury Index in the preceding
calculation.
5. Use of Proceeds. The Additional Funding shall be used for the
following purposes:
5.1. To pay down in full the outstanding balance of the
$600,000 line of credit with Jackson State Bank;
5.2. To pay off in full the outstanding balance of principal
and accrued but unpaid interest on the $400,000 loan of Borrower
with the Jackson State Bank in the current principal amount of
$370,000;
5.3. To pay off overdue real estate property taxes which are
liens against the Real Property in the amount of $44,526.77;
5.4. To pay all costs and expenditures of Lender related to
the obtaining of this Additional Funding, including the legal fees
for preparation of the various agreements and documents, title
insurance fees, fees and costs payable by the Lender;
5.5. To pay to Lender and Jackson State Bank the sum of
$46,125, from proceeds of the Additional Funding in payment of the
commitment fee payable to Lender with $41,513 of such amount to be
paid to ORIX USA Corporation and $4,612 of such amount to be paid
to Jackson State Bank.
5.6. To pay to Borrower the sum of $46,125, from proceeds of
the Additional Funding as reimbursement for payment of one-half of
the commitment fee payable to Lender.
5.7. To pay $41,327.04 for March 1, 1996 property tax
installment to R/E Tax Reserve Account established by Borrower with
Jackson State Bank.
5.8. Any amounts remaining from the Additional Funding shall
be deposited into the Capital Expenditure Reserve Account and shall
be applied as a credit to the three percent (3%) of gross revenues
required to be placed as a reserve for 1996.
6. Monthly Principal and Interest Payment. The "Monthly Scheduled
Principal Payments" described in section 2.57 of the Loan Agreement
shall be modified to be the "Monthly Scheduled Principal and
Interest Payments" meaning monthly payments of the Principal and
Interest at the Revised Fixed Interest Rate, as established upon
the Additional Funding at $6,150,000, to be made by Borrower to
Lender computed on a fifteen (15) year amortization schedule
determined as of April 10, 1996. For example, as of February 26,
1996 the Monthly Scheduled Principal and Interest Payments would be
$63,756.76 per month based upon an assumed interest rate for
calculation of such Monthly Scheduled Principal and Interest
Payments of 9.375% per annum, based upon the then current annual
yield on U.S. Treasury Notes with a term of five years stated by
the Federal Reserve Board in Statistical Release H.15(519) or the
Federal Reserve Bulletin as of February 26, 1996 being 5.54% plus
3.8% equalling 9.34% rounded up to 9.375%. The Second Modified
Note shall set forth the correct Monthly Scheduled Principal and
Interest Payments based upon the Revised Fixed Interest Rate as of
April 10, 1996.
7. Prepayment. The Loan as modified by this Third Modification
can be prepaid only upon the following conditions, which shall
modify the provisions of Section 9.1(c) of the Loan Agreement, and
the provisions of the Second Modification:
The Loan may not be prepaid during the first two (2) years of the
Loan Term unless specifically requested and approved by Lender.
Thereafter, the Loan may be prepaid, in whole only, on any monthly
payment date upon sixty (60) days prior written notice and upon
payment of a Prepayment Premium equal to (i) two percent (2%) of
the outstanding Loan Principal amount if repaid anytime during the
third year of the Loan Term; or (ii) one percent (1%) of the
outstanding Loan Principal amount if repaid anytime during the
fourth year of the Loan Term. No prepayment Premium will be
charged if the Loan is prepaid anytime during the fifth year of the
Loan Term.
In addition to the Prepayment Premium, Borrower agrees to pay
Lender a "Swap Breakage Fee" to compensate Lender for any premature
termination of its fixed rate funding for the Loan. As used
herein, Swap Breakage Fee shall be determined by Lender and be
defined as the sum of Present Value on the date of prepayment of
each Monthly Interest Shortfall of the remaining Term of the Loan
discounted at the Replacement Treasury Yield. The Monthly Interest
Shortfall is calculated for each monthly payment date as follows:
(i) The positive difference, if any, between the Lender's Funding
Rate less the Replacement Treasury Yield,
(ii) Divided by 12;
(iii) Multiplied by the outstanding Principal balance of the Loan
on the monthly payment date for which the calculation is made for
each full and partial month remaining in the term.
The Present Value is then determined by discounting each Monthly
Interest Shortfall at the Replacement Treasury Yield divided by
Twelve.
FOR EXAMPLE, if the Loan was prepaid with 24 months remaining in
the Term, at a time when the two year Replacement Treasury Yield
was 5.37% assuming interest rate scenario remained unchanged from
day one, then:
<TABLE>
<S> <C>
Lender's Funding Rate (at original closing) .0621
Less the Replacement Treasury Yield .0537
Equals the rate difference .0084
Divided by 12
Equals the monthly rate difference .0007
Times the estimated outstanding principal $4,920,000
Monthly Interest Shortfall $3,444.00
</TABLE>
The Present value of each Monthly Interest Shortfall of $3,444.00
discounted at the monthly Replacement Treasury Yield (5.37% divided
by 12 or 0.4475%) equals $78,206.
As used herein, the term "Replacement Treasury Yield" shall mean
the rate of interest equal to the closing price (yield to maturity)
of the most recently issued U. S. Treasury security as quoted in
the Wall Street Journal on the prepayment date. If the remaining
Term is less than one year, the Replacement Treasury Yield will
equal the yield for 1 year Treasury's yield. If the remaining Term
is longer than one year but does not equal one of the maturities
being quoted, then the Replacement Treasury Yield will equal the
yield for Treasury's with a maturity closest to be not exceeding
the remaining Term. In the event that the Wall Street Journal
ceases to publish such quotes, the U. S. Treasury security shall be
determined from such financial reporting service or sources as
Lender shall determine.
Also as used herein, the term "Lender's Funding Rate" shall mean
the Treasury Index as defined in Paragraph (4) of this Agreement
plus fifty basis points (0.5%) determined as of the date which is
two (2) dates prior to the Additional Funding Date. 8.
Real Property Tax Account. Commencing May 13, 1996, and monthly
thereafter on the Payment Date, Borrower shall deposit with Jackson
State Bank, in a separate account an amount equal to one-twelfth of
the annual real estate property tax for the mortgaged Real Property
as the "R/E Tax Reserve Account", from which R/E Tax Reserve
Account Borrower shall pay currently when due, and not delinquent,
each installment of real estate property taxes levied on the
mortgaged Real Property. Interest on the R/E Tax Reserve Account
shall inure to Borrower. Before the Additional Advance to be made
hereunder, and each year thereafter, when received, Borrower shall
deliver to Lender a copy of the most recent real property tax
statements of assessment or levy or tax bills as issued by the
county in which the Real Property is located, and shall upon
receipt in the future deliver to Lender copies of all future
assessments, levies and tax bills pertaining to the Real Property.
Upon payment, Borrower shall deliver to Lender a copy of evidence
that Borrower has paid each installment of real property taxes
levied on the Real Property before each such installment is
delinquent. Borrower shall provide Lender with a security interest
and pledge of the R/E Tax Reserve Account in such form as Lender
requires as additional security for the Loan.
9. Borrower's Line of Credit. Section 13.1(h)(ii) of the Loan
Agreement is revised to provide as follows: indebtedness of the
line of credit to be provided to Borrower by Jackson State Bank, or
any other Bank acceptable to Lender, in an amount of $600,000 for
the purposes of financing the operations of the Resort, provided
however that the following conditions are met:
(a) the line of credit shall be not secured by any assets
of Borrower'
(b) any balance outstanding under the line of credit
drawn and unpaid must be paid down to zero by Borrower no later
than September 16 of each year and must be maintained at zero
balance for a 30 consecutive day period between September 1 and
October 15 of each year.
(c) the minimum line of credit to be maintained by
Borrower shall be $600,000 pursuant to Paragraph 12.1(af) of the
Loan Agreement with Participant or any other institution acceptable
to Lender.
10. Environmental Assessment. Borrower shall immediately commence
a subsurface investigation, at the cost of the Borrower, to
evaluate the potential of contamination by oil and hazardous
materials through the two floor openings at the Vine Street
Maintenance Shop. Borrower agrees that any and all recommendations
and remedial efforts suggested will immediately be adopted and/or
implemented by Borrower to ensure that all outstanding
environmental issues have been resolved to Lender's satisfaction.
The above Investigation and the corresponding remedial work must be
completed within six (6) months from the Additional Funding Date,
with proof of completion provided to Lender.
11. Hazard Insurance. The minimum amount of insurance to be
maintained by the Borrower for hazard insurance under subparagraph
13.1 (q)(i) of the Loan Agreement shall be $6,150,000. Borrower
shall provide to Lender a certificate of insurance evidencing that
this amount of insurance has been obtained on or before the date of
the Additional Funding.
12. Capital Expenditure Reserve Requirements. Commencing on April
15, 1996, and continuing thereafter, as provided in section
13.1(ab) of the Loan Agreement, Borrower shall establish and
maintain the Capital Expenditure Reserve Account with Jackson State
Bank, and deposit into said Capital Expenditure Reserve Account
three percent (3%) of Gross Income received by Borrower from
operation of the Hotel and or Resort as specified in section
13.1(ab). Borrower shall make expenditures for capital
expenditures in the manner set forth in section 13.1(ab).
13. Capital Expenditure Limitations. Before Borrower commences
any capital expenditures for any calendar year, Borrower shall
submit to Lender its financial statement for the prior calendar
year. Lender shall specify to Borrower a maximum expenditure for
capital expenditures that Borrower can make for the ensuing
calendar year, which Borrower shall not exceed.
14. Loan Modification Fee. Borrower shall pay to Lender a loan
modification and extension fee of 1.5% of the Loan after the making
of Additional Funding, amounting to $92,250, as consideration for
Lender agreeing to make the Additional Funding, the extension of
the Loan Term, and this Third Modification. One-half of said loan
modification fee, amounting to $46,125, shall be payable upon
Lender's written approval to Borrower of the making of this Third
Modification and Additional Funding; one-half of the loan
modification fee shall be paid at the time of the Additional
Funding. However, if the Additional Funding does not occur because
of failure of Borrower to comply with the terms and conditions of
this Third Modification Agreement, Borrower shall nonetheless owe
the balance of the loan modification fee and reimbursement of all
of Lender's costs to Lender.
15. Title Insurance Endorsements. Lender's obligations to fund
the Additional Funding and make the modifications to the Loan
Documents herein stated are expressly conditioned upon Lender
obtaining from the Title Company endorsements of Lender's title
insurance policy for the Loan - as issued by the Title Company at
the closing of the Loan, March 13, 1992, policy number 22-16330-M,
(the "Title Insurance Policy") - (a) ensuring that the priority of
its Mortgage is a first lien subject to no other liens,
encumbrances or claims, except as set forth in the Title Insurance
Policy; (b) the amount of such title insurance coverage to Lender
being revised to the amount of $6,150,000 and (c) taxes on the
Property shall be shown to be paid for all years except for taxes
for 1995, which are due and not yet payable.
16. Representations, Warranties and Undertakings. Borrower hereby
restates as of the execution of this Third Modification, and as of
the closing of the funding of the Additional Funding, each of the
representations, warranties and undertakings set forth in the Loan
Agreement in Section 11.1, subparagraphs (a) through (k),
inclusive. Each of such representations, warranties and
undertakings shall be deemed to apply to all of the covenants and
obligations of Borrower under this Third Modification, and to the
Loan, which includes the Additional Funding, as if reference to
this Third Modification was explicitly made in Section 11 of the
Loan Agreement.
17. Additional Representations and Warranties. Borrower hereby
makes the following additional representations and warranties to
Lender.
(a) Town Lease and Forest Service Permits. The Town
Lease, including that certain Lease Agreement (Commercial) Ski
Shelter, Ski Lift and Mountain Tract, made between Borrower and the
Town of Jackson dated April 22, 1994 (the "Ski Shelter Lease") and
the Forest Service Permits are each in full force and effect and
Borrower knows of no defaults thereunder or of any events that with
the passage of time could result in a default thereunder.
(b) Ice Skating Rink Lease. The lease between the Town
and Snow King Resort Center, Inc., dated April 22, 1994, for use of
the ice skating rink building and improvements therein (the "Ice
Skating Rink Lease") is in full force and effect and Borrower knows
of no defaults thereunder or of any events that with the passage of
time could result in a default thereunder.
(c) Permits and Licenses. All permits and licenses for
operation of the Resort, are in full force and effect and Borrower
knows of no defaults thereunder or of any events that with the
passage of time could result in a default thereunder.
(d) Encumbrances to Title. Since the closing of the
Loan, Borrower has not made any agreements or executed any
documents or undertaken any actions which have resulted in or would
result in an encumbrance or lien upon the title to the Property or
any part thereof.
18. Conditions to Funding of Additional Funding. The following
shall be conditions precedent to the Lender's obligation to fund
the Additional Funding.
18.1. No Defaults. There shall be no event of default under
the Loan Agreement or any other of the Loan Documents.
18.2. Fees Paid. Borrower shall have paid the loan
modification and extension fee of Lender in the amount of $92,250
for its committing to make the Additional Funding and modifying and
extending the Maturity Date of the Loan.
18.3. Review of Financial Statements.
(a) Snow King Resort, Inc. 1995 Financial. The financial
statement of Snow King Resort, Inc. for year end of 1995 shall be
reviewed by Lender and found by Lender to be acceptable.
(b) SKRCI Financial Statement. The financial statements
of SKRCI and all obligations of SKRCI shall be reviewed by Lender
and found by Lender to be acceptable.
18.4. Reports and Information. Borrower shall have delivered
to Lender an updated appraisal on the Resort and updated
environmental and engineering reports on the Resort, each
satisfactory to Lender.
18.5. April 15, 1996 Regular Interest Payment. Borrower shall
pay Lender the sum of $40,847 on or before April 12, 1996 to be
applied to the April Regular Interest Payment under the Loan
Agreement, prior to it being modified under this Third
Modification.
18.6. Issuance of Title Insurance. Pursuant to Paragraph 14,
hereof, the obtaining from the Title Company the endorsements of
Lender's title insurance.
18.7. R/E Tax Reserve Account. The opening by Borrower with
Jackson State Bank of the R/E Tax Reserve Account, pursuant to
paragraph 8 hereof with a deposit of $6,887.84.
18.8. Pledge of Account. Borrower shall have executed and
delivered to Lender a pledge of the R/E Tax Reserve Account as
additional security in form or forms required by Lender.
18.9. Execution and Delivery of Documentation. Borrower shall
have executed and delivered to Lender or to the escrow holder
designated by Lender all documentation and payments of fees for
costs of this transaction, including escrow instructions for
recordation of a Second Modification of the Mortgage and other
documentation required to satisfy Lender and the Title Company with
respect to the Additional Funding being secured by the Mortgage in
first priority to any other liens or encumbrances on the Property
and the Resort, except those set forth in the Title Insurance
Policy, and that the advance of the Additional Funding does not
result in the lien of the Mortgage securing the Loan from being
anything other than a first lien with priority over any and all
obligations and encumbrances against the Property, except those set
forth in policy of Title Insurance Policy. The documentation shall
include those documents listed on Exhibit "A" attached hereto.
18.10. Corporate Resolution. The Board of Directors of
Borrower shall adopt a resolution authorizing and approving the
making of this Third Modification by the corporation and the
borrowing of the Additional Funding of the Loan, including the
conditions that no funds be paid from the corporation during the
term of the Loan to any shareholder which is not repaid to the
corporation by the debenture holder in exchange for stock.
18.11. Consent of Guarantors. The written consent by each of
the Guarantors shall have been obtained to the making of this Third
Modification and the further advance of the Additional Funding
secured by the Mortgage.
18.12. Participant Funding. Jackson State Bank shall have
agreed to participate in the making of this Additional Funding in
the amount of $116,640. The Participant shall fund its share of
the Additional Funding, in the amount of $116,640, concurrently
with the funding of Lender's share of the Additional Funding.
19. Costs of Modification to Agreement. The costs of preparation
or review of this Third Modification, and all documents required
thereunder, shall be paid by Borrower directly to Lender's or
Participant's attorney from proceeds at close of escrow of the
Additional Funding. Additionally, Borrower shall pay from such
proceeds at close of escrow to Lender, or directly to parties
designated in writing by Lender, other costs or expenses incurred
by Lender or the Participant in the making of this Third
Modification, including the costs of any appraisal or revisions to
existing appraisals.
20. Notices: section 21.2 of the Loan Agreement is revised to
delete lines 20 through 25 and to state that copies of notices to
Lender shall be sent to:
David M. Van Atta
Hanna & Van Atta
525 University Avenue, Suite 705
Palo Alto, Ca 94301
21. Ratification and Incorporation of Loan Agreement. The terms
and provisions of the Loan Agreement are hereby ratified, restated
and confirmed by Borrower, unchanged, except as stated otherwise
herein, or in the First Modification, the Second Modification, or
this Third Modification, as though fully set forth herein, with all
references to the Loan to include the Additional Funding made
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Modification to Loan Agreement to be executed by their respective
officers, duly authorized, as of the day and year first above
written.
BORROWER:
SNOW KING RESORT, INC., a Wyoming Corporation
By: /s/ Manuel B. Lopez
Manuel B. Lopez
Its: President
LENDER:
ORIX USA CORPORATION, a Delaware Corporation
By: /s/ Hiroyuki Sakai
Hiroyuki Sakai
Its: Vice President
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WESTERN STANDARD CORPORATION
Dated: May 3, 1996 By /s/ Stanford E. Clark
Stanford E. Clark, President
