UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the quarterly
period ended JUNE 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from ______________ to _______________.
Commission File No. 1-4385
DUNES HOTELS AND CASINOS INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-1687244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Northgate Boulevard, Suite 130, Sacramento, California 95834
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (916) 929-2295
4045 South Spencer, Suite 206, Las Vegas, Nevada 89119
Former name, former address and former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
Class August 1, 1997
Common Stock, $.50 par value 6,375,096 shares
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Income
(Loss) for the three months ended June 30,
1997 and 1996 5
Consolidated Condensed Statements of Income
(Loss) for the six months ended June 30,
1997 and 1996 7
Consolidated Condensed Statements of Cash Flows
for the six months ended June 30, 1997
and 1996 9
Notes to Consolidated Condensed Financial
Statements, June 30, 1997 and 1996 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Part II. Other Information
Item 1. Legal Proceedings 27
Item 3. Defaults Upon Senior Securities 27
Item 5. Other Events 27
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
2
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
June December
30, 1997 31, 1996
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $ 679 $ 1,283
Marketable securities 843 527
Receivables
Trade, less allowance 1997, $91; 1996, $141 111 133
Related party, less allowance of $2,049 in
1997 and 1996 185 397
Real estate sales, less allowance of $64 in 1997 515 928
Other 20 47
Inventory of real estate held for sale 10,511 10,919
Inventory, other 38 38
Prepaid expenses 42 116
Property and equipment, less accumulated depreciation
and amortization, 1997, $484; 1996, $424 2,467 1,678
Investments 1,049 1,049
Deferred costs and other 2 11
$ 16,462 $ 17,126
</TABLE>
(continued)
3
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
JUNE 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
June December
30, 1997 31, 1996
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Accounts payable $ 598 $ 98
Accrued expenses 219 246
Deferred income 29 70
Income taxes 307 247
Short-term debt 69
Long-term debt and capitalized lease obligations 1,642 1,955
Accrued preferred stock dividends 1,137 1,101
Total liabilities 3,932 3,786
Minority interest 2,982 2,897
Shareholders' equity
Preferred stock - authorized 10,750,000 shares ($.50 par);
issued 10,512 shares Series B $7.50 cumulative
preferred stock, outstanding 9,250 shares in 1997
and 1996, aggrerate liquidation value $2,337
including dividends in arrears 5 5
Common stock - authorized 25,000,000 shares ($.50 par);
issued 7,799,780 shares, outstanding 6,375,096
shares in 1997 and 1996 3,900 3,900
Capital in excess of par 25,881 25,881
Deficit (18,238) (17,343)
11,548 12,443
Treasury stock at cost; Preferred - Series B, 902 shares
Common 1,424,684 shares in 1997 and 1996 2,000 2,000
Total shareholders' equity 9,548 10,443
$ 16,462 $ 17,126
The accompanying notes are an intergal part of these consolidated
condensed financial statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands, except
per share)
<S> <C> <C>
Operating revenues:
Sales of real estate $ 264 $ 229
Cost of real estate sold 257 284
7 (55)
Rental income - agricultural properties 195 114
Cost and expense of rental income 36 134
159 (20)
Rice drying and storage revenues 35 35
Cost of rice drying and storage 87 102
(52) (67)
Miscellaneous income - net 24
138 (142)
Operating expenses:
Selling, administrative and general
Corporate 288 234
Real estate operations 39 49
Bad debts, net of recoveries 1 (11)
Loss on real estate investments 290
Depreciation 18 25
346 587
Loss before other credits (charges) and
minority interest (208) (729)
Other credits (charges):
Interest and dividend income 66 80
Interest expense (40) (26)
Partnership income (loss) (64)
Securities gains (losses), net 23
Other (29) 85
20 75
</TABLE>
(continued)
5
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)(CONTINUED)
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands,
per share)
<S> <C> <C>
Loss before minority interest (188) (654)
Minority interest in income of the White Ranch (70)
Net income (loss) $ (258) $ (654)
Income (loss) per common share: $ (0.04) $ (0.10)
The accompanying notes are an intergal part of these consolidated
condensed financial statements
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands, except
per share)
<S> <C> <C>
Operating revenues:
Sales of real estate $ 447 $ 443
Cost of real estate sold 428 476
19 (33)
Rental income - agricultural properties 305 323
Cost and expense of rental income 83 235
222 88
Rice drying and storage revenues 70 70
Cost of rice drying and storage 191 228
(121) (158)
Miscellaneous income - net 37 45
157 (58)
Operating expenses:
Selling, administrative and general
Corporate 558 565
Real estate operations 93 95
Bad debts, net of recoveries 124 (45)
Loss on real estate investments 290
Depreciation 35 48
810 953
Loss before other credits (charges), income taxes
and minority interest (653) (1,011)
Other credits (charges):
Interest and dividend income 116 162
Interest expense (86) (85)
Partnership income (loss) (149)
Securities gains (losses), net 16
Other (113) 15
(67) (57)
</TABLE>
(continued)
7
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands, except
per share)
<S> <C> <C>
Loss before income taxes and minority interest (720) (1,068)
Income taxes (53)
Loss before minority interest (773) (1,068)
Minority interest in income of the White Ranch (85)
Net income (loss) $ (858) $ (1,068)
Income (loss) per common share: $ (0.13) $ (0.16)
The accompanying notes are an intergal part of these consolidated
condensed financial statements
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operating activities $ 60 $ (4)
Cash flows from investing activities:
Decrease (increase) in investments (316) 495
Decrease (increase) in notes receivable 324 (51)
Purchase of equipment (290) (2)
(282) 442
Cash flows from financing activities:
Decrease in long-term debt (313) (377)
Decrease in short-term debt (69) (75)
(382) (452)
Increase (decrease) in cash and cash equivalents (604) (14)
Cash and cash equivalents, beginning of period 1,283 495
Cash and cash equivalents, end of period $ 679 $ 481
The accompanying notes are an intergal part of these consolidated
condensed financial statements
</TABLE>
9
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
1. Summary of significant accounting policies:
Consolidation:
The accompanying consolidated condensed financial statements
include the accounts of the Company and its wholly-owned
subsidiaries Continental California Corporation
(Continental), M&R Corporation (MRC), and MRC's subsidiary
M&R Investment Company, Inc. (MRI) and MRI's subsidiaries
SHF Acquisition Corporation (SHF) and Southlake Acquisition
Corporation (Southlake).
Description of business:
The Company operates in two principal business segments:
Real estate investments (development and sale of residential
lots and rental of agricultural land) and agricultural (rice
drying and storage).
The Company's real estate segment sells completed
residential lots primarily to builders of custom homes and
to the general public located in and around the greater
Sacramento, California area. The agricultural properties
are leased to farmers in the area where the agricultural
properties are located.
The agricultural segment dries harvested rice over a two
month period (approximately September 15 to November 15) and
stores, for a fee, the dried rice (or other grains) until it
is removed by the owner. The Company dries and stores rice
principally for one customer, Farmers Rice Co-operative
(Farmers). Farmers accounts for approximately 98% of the
Company's rice drying and storage revenues. If the Company
were to lose Farmers as a customer, it would have a material
adverse effect on the Company's drying and storage
operation. (See Note 5 of Notes to Consolidated Condensed
Financial Statements)
Basis of presentation:
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The
Consolidated Condensed Financial Statements should be read
in conjunction with the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
10
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
1. Summary of significant accounting policies (continued):
The results of operations for the six months ended June 30,
1997, are not necessarily indicative of the results to be
expected for the full year.
Capitalized interest:
The Company follows the policy of capitalizing interest as a
component of the cost of property and equipment constructed
for its own use. For the six months ended June 30, 1997,
the Company did not incur any interest expense in connection
with the construction of the rice drying facility (the
Drying Facility). The capitalization rate that will be used
to determine the amount of interest eligible for
capitalization will be 12% which is the rate applicable to
the debt related to the construction of the Drying Facility.
Earnings per share:
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS No. 128) which establishes a new
accounting standard for the computation and reporting on net
income (loss) per share. SFAS NO. 128 is effective for
financial statements issued for periods ending after
December 15, 1997, and early adoption is prohibited. The
Company expects that there will be no material effect upon
implementing SFAS 128 on its net income (loss) per share
computations.
Reclassifications:
For the six months ended June 30, 1996, the Company has
changed the format of its Consolidated Condensed Statement
of Income (Loss) to conform to the June 30, 1997
presentation. The Company believes this change better
reflects the revenues and expenses of the segments within
which the Company operates.
11
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
2. Fair value of financial instruments:
Estimated fair value of the Company's financial instruments
(all of which are held for non-trading purposes) are as
follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $ 679 $ 679 (a)
Marketable securities 843 843 (a)
Notes receivable, real estate sales,
net of allowance of $64 515 (b)
Note receivable, related party, net
of allowance 185 (c)
Solano County Option 1,043 1,043 (d)
Long-term debt (1,642) (e)
</TABLE>
(a) The carrying amount approximates fair value of cash,
cash equivalents and marketable securities. For
marketable securities, fair values are estimated based
on quoted market prices as of June 30, 1997.
(b) The fair value of the notes receivable are based on
their outstanding balances (net of allowances of
$64,000), interest rates and the fair value, based on
comparable sales in the area, of the real property
which serves as collateral for the note. In the event
any purchaser were to default on the real estate notes,
the Company could institute foreclosure proceedings and
reacquire the property which serves as the collateral
for the note.
(c) It is not possible to determine the fair value of the
Baby Grand Corp. note (the BGC Note) because the
Company is unable to predict whether Baby Grand Corp.
will be able to pay it first lien note on its due date,
which is the same date that the BGC Note payable to the
Company comes due. See Footnote 6d of Notes to
Consolidated Condensed Financial Statements. The BGC
Note is more fully described in detail in the Company's
Form 10-K for the year ended December 31, 1996, see
"Item 1. Business - Other Activities - Certain Loans -
Baby Grand Corp."; Form 8-K, "Item
12
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
2. Fair value of financial instruments (continued):
5. Other Events," dated February 4, 1997; Form 8-K,
"Item 5. Other Events," dated March 26, 1997; and
Form 8- K, "Item 5. Other Events," dated July 8, 1997.
(d) The fair value of the Solano County Option is estimated
based on an appraisal of the real property, and
subsequent discussions with local realtors, to which
the option relates and the length of the option period
which enables the Company to have some flexibility as
to when and if the option should be exercised. The
Company can only recover the fair value of the option
(i) by exercising the option and selling the property
or (ii) selling the option. However, if the fair value
of the real property should drop below the option
purchase price, the Company would not be able to
recover all of its investment in the Solano County
Option. The owner of the property under option has
informed the Company that it is two payments in
arrears, which approximates $130,000, including
interest, on the first mortgage lien which had a
balance due of approximately $1,356,000 as of December
31, 1996. The Company and the owner are continuing to
attempt to negotiate a solution. If the Company and the
owner are unable to arrive at a solution, the Company
may make the payments to the mortgage lien holder in
order to protect its investment in the Solano County
Option. The Company is unable to predict what the
outcome of this matter will be. The Solano County
Option is more fully described in the Company's Form
10-K for the year ended December 31, 1996, see "Item 1.
Business - Real Estate Segment - Solano County Option."
(e) The fair value of long-term debt is not subject to
reasonable estimation because the debt arose
principally as a result of the settlement of a dispute.
The settlement is described in detail in the Company's
Form 10-K for the year ended December 31, 1996, see
"Item 1. Business - Resolution of SASA Dispute."
13
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
3. Inventory of real estate held for development and sale:
<TABLE>
<CAPTION>
1997 1996
(Dollars in thousands)
<S> <C> <C>
The Fairways (a) $ 4,256 $ 4,664
Residential lots, North Las Vegas (b) 469 469
White Ranch (c) 5,600 5,600
Sam Hamburg Farm (d) 146 146
Other 40 40
$10,511 $10,919
</TABLE>
(a) On October 7, 1996, the Company entered into a
Purchase and Option Agreement regarding the sale of
certain lots at The Fairways. The Purchase and Option
Agreement is described in the Company's report on Form
10-K for the year ended December 31, 1996, see "Item
1. Business - Real Estate Segment - The Fairways."
(b) On July 3, 1997, the Company completed the sale of the
57 residential lots in North Las Vegas, Nevada. Net
proceeds to the Company were approximately $573,000 of
which $318,000 was paid to Beal Bank, the purchaser of
the Company's obligation to San Antonio Savings
Association (the SASA Obligation). In addition, the
Company received a note and deed of trust in the amount
of $72,597 representing reimbursement of water fees
previously paid. The note was paid in full on July 21,
1997.
(c) On July 15, 1997, the Company completed the sale of the
White Ranch. Net proceeds from the sale were
approximately $5,965,000 of which approximately
$2,982,500 was paid to the Company. The balance of the
proceeds were paid to the other 50% owner of the White
Ranch.
(d) See footnote 6b of Notes to Consolidated Condensed
Financial Statements regarding the chemical cleanup at
Sam Hamburg Farm.
14
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
4. Related party transactions:
John B. Anderson, the Company's controlling stockholder and
Chairman of the Board of Directors of the Company, and
entities owned or controlled by him (Anderson Entities) own
approximately 67.2% of the Company's common stock as of
August 1, 1997, subject to the rights and claims of the
Federal Deposit Insurance Corporation (the FDIC) to those
shares or approximately 47.1% of the Company's common
stock. See footnote 6d of Notes to Consolidated Condensed
Financial Statements.
From time to time the Company has made loans to various
Anderson Entities and to directors and executive officers
of the Company, details of which are more fully described
in the Company's Form 10-K for the year ended December 31,
1996.
5. Property and equipment:
On May 29, 1997, SHF signed a contract (the Contract) in
the amount of $1,651,800 with Tolson Construction Company
(the Contractor) for the construction of the Drying
Facility adjacent to the rice storage facility in Yolo
County, California. The Contract does not include certain
costs such as permits, landscaping, paving, utility lines,
interest costs, etc. These additional costs are estimated
to be between $200,000 and $250,000. As of July 31, 1997,
SHF has paid approximately $980,000 of which approximately
$946,000 has been paid to the Contractor. In connection
with the financing of the Drying Facility construction,
SHF has entered into the following agreements with ICON
Cash Flow Partners, L.P., Series E (ICON, LP) and ICON
Financial Corp. (ICON): (1) A promissory note (the Note)
dated April 3, 1997, between ICON, LP and SHF in the
principal amount of $1,150,000, with interest thereon at
the rate of 12% per annum. Interest is payable on the first
day of the month following the first advance and on the
first day of the month thereafter. In the event the Drying
Facility is not completed by December 31,1997, the Note will
be payable on demand. If the Drying Facility is completed
before December 31, 1997, advances made under the Note will
be rolled into the equipment lease financing as of the Base
Lease Commencement Date (the last day of the month
following the date the Drying Facility is declared complete
by both SHF and ICON, LP). As of July 31, 1997, SHF had
drawn approximately $446,000 against the note. (2) A
Master Equipment Lease (the Lease) dated April 3, 1997,
between ICON and SHF. Beginning with the Base Lease
Commencement Date, ICON will lease to SHF the Drying
Facility for a period of five years. At the end of the
five year period, SHF will have the right to purchase not
less than all of the Drying Facility
15
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
5. Property and equipment (continued):
for $1.00. The monthly rental under the Lease will be
approximately 2.202% of the funded Drying Facility cost
(estimated to be approximately $25,000 per month). In
addition to being collateralized by the Drying Facility, SHF
has provided additional collateral in the form of a Deed of
Trust on certain parcels of property, including the parcel
on which the storage facility is located. Both the Note
and the Lease are guaranteed by MRI and the Company (the
Guarantors). Before the Guarantors are liable for any
deficiency, ICON or ICON, LP must first proceed against
the Drying Facility and the additional collateral. Both the
Lease and the Note contain certain events of defaults, one
of which relates to any material adverse change in the
business or financial condition of SHF or the Guarantors
(defined as a reduction of Tangible Net Worth of 20% or
more) and to the loss of Farmers as a customer. These
events of defaults only apply during the period the Note
remains unpaid. Because construction of the Drying
Facility commenced later than anticipated, the Company is
unable to predict if the Drying Facility will be completed
in time for the 1997 rice drying season (approximately
September 15 to November 15).
6. Contingencies:
a. As of June 30, 1997, there were no material legal
proceedings pending against the Company. However, see
footnote 6d of Notes to Consolidated Condensed
Financial Statements regarding legal proceedings, not
involving the Company, that may have a material adverse
effect on the Company.
b. SHF was advised of possible contamination on two sites
at Sam Hamburg Farm, a storage facility for diesel
fuels and an old airstrip which had been used for the
loading and fueling of aircraft applying agricultural
chemicals to the surrounding farm lands. The Company
has completed the cleanup relating to the diesel
storage tank at a cost of approximately $100,000.
The Company has disposed of a large amount of the
contaminated earth at an approved site for the storage
of toxic wastes. However, 5,000 cubic yards of
contaminated earth still remain to be disposed of. The
Company, through its chemical and toxic clean-up
consultant, has been working with the California State
Environmental Protection Agency, in seeking alternate
means to the disposal of the
16
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DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
6. Contingencies (continued):
contaminated earth in toxic dump sites. The State has
participated in the funding of several projects by a
number of chemical treatment firms in efforts to try
other detoxification methods on the soil.
Because of the ongoing testing, the State has not
imposed a disposal date upon the Company. Cost of
disposal is estimated at $100 per cubic yard. However,
if on-site remediation can be achieved, it is estimated
that the aggregate cost of disposal will be between
$90,000 and $115,000. The Company is unable to predict
when the ongoing testing will be complete or what the
outcome of these tests will be.
As of June 30, 1997, the Company has paid approximately
$500,000, including the $100,000 expended for the
cleanup relating to the diesel storage tank, and
accrued an estimated $174,000 relating to the balance
of the clean-up of the contaminated earth. That
estimate could change as the remediation work takes
place.
c. The Company received a notice from the California
Franchise Tax Board (FTB) wherein the FTB alleges that
one of the Company's subsidiaries owes California
franchise tax, penalties and interest of approximately
$563,800. The tax arose out of a gain in 1988
resulting from a foreclosure sale of certain real
property owned by the subsidiary. The FTB contends
that the gain is non-business income to the subsidiary
and therefore should be allocated 100% to California
without the benefit of any of the losses of the
Company. The Company has exhausted all of its appeals
with the FTB and therefore this matter has been
referred to the California State Board of Equalization
(SBE). On June 12, 1997, the Company filed its Reply
Brief with the SBE wherein the Company requested,
based on reasons stated in the Reply Brief, that the
SBE reverse the FTB's proposed assessment and withdraw
its Notice of Proposed Assessment. Because of the
likelihood of either litigation or a settlement, the
Company has provided in its balance sheet $300,000
relating to this matter.
17
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
6. Contingencies (continued):
d. John B. Anderson, Edith Anderson, Cedar Development
Co., J.A. Inc. and J.B.A. Investments, Inc.
(collectively the Anderson Parties) are involved in
litigation with the Federal Deposit Insurance
Corporation (the FDIC). This matter is more fully
described in the Company's Form 10-K for the year
ended December 31, 1996, see "Item 3. Legal
Proceedings - Federal Deposit Insurance Corporation,
et al v. John B. Anderson et al."; Form 8-K, "Item 5.
Other Events," dated February 4, 1997; Form 8-K, "Item
5. Other Events," dated March 26, 1997; and Form 8-K,
"Item 5. Other Events," dated July 8, 1997. Mr.
Anderson, through his ownership of Cedar Development
Co. (Cedar), the parent of Baby Grand Corp. (BGC) and
J.B.A. Investments, Inc. (J.B.A.), owns approximately
4,280,756 shares or 67.2% of the outstanding common
stock of the Company. Of these shares (i) 3,000,000
shares or 47.1% of the outstanding common stock of the
Company (the Pledged Dunes Shares) are pledged as
collateral in favor of entities of which the FDIC is a
successor and/or assign and (ii) 1,280,756 shares or
20.1% of the outstanding common shares are pledged to
MRI as collateral for the BGC Note. In April 1997,
the Company was informed that the FDIC had filed
applications with the Nevada Gaming Control Board (the
NGCB) and the Nevada Gaming Commission (the NGC) for
permission to enforce the FDIC's security interest in,
including the right to vote, the common stock of
Cedar, BGC and other entities. The successful
enforcement of the security interests by the FDIC in
the common stock of the foregoing companies would,
among other things, result in a change in control of
such companies. The NGCB referred the matter back to
the NGCB staff for further review. As of July 31,
1997, the FDIC has not received the specific
permission of the NGCB or the NGC to vote the pledged
shares. On June 3, 1997, the FDIC filed a motion for
a declaration that the FDIC has the right to exercise
voting rights to the Pledged Dunes Shares, and
requiring stockholders meetings be held for the
Company and certain other entities. On July 8, 1997,
the Nevada District Court granted the FDIC's motion.
In August 1997, the Anderson Parties filed in the
Nevada District Court a Motion to Clarify Order
Granting Motion of FDIC for a Declaration of Voting
Rights Respecting the Exercise of Voting for Certain
Stock. The request is based on the fact that the
Nevada District court order is silent as to whether or
not the FDIC is required to comply with certain
18
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
6. Contingencies (continued):
sections of the Nevada Gaming Commission Regulations
requiring prior approval of the NGCB and NGC before
voting rights can be exercised by the FDIC. On July 3,
1997, the United States District Court, District of
Nevada (the Nevada District Court) approved the FDIC's
proposed plan (the Plan) for disposition of the
collateral which includes the Pledged Dunes Shares. The
Plan requires, among other things, that the Special
Master gather material to be provided to prospective
bidders, to review bids and negogiate with prospective
bidders, to submit qualified bids to the Nevada District
Court and to obtain a hearing date at which time the
Nevada District Court may consider any qualified
overbids, as well as credit bids for the FDIC. The
proposed time schedule of the Plan is approximately 215
days. Any proceeds from the disposition of the
Company's common shares held by BGC, and pledged to MRI,
would be payable to MRI. The Company does not know if
the FDIC will attempt to exercise voting rights to the
Pledged Dunes Shares. Should the FDIC successfully
assert voting rights over, or dispose of, the Pledged
Dunes Shares, there will be a change in control of the
Company. Although the Company is not a party to any of
the above-referenced actions, a change in control of the
Company (including Cedar or BGC) may adversely affect
the Company's ability to collect on certain obligations
owed to the Company by the Anderson Parties, including
the BGC Note in the approximate amount of $2,083,735
(including interest of approximately $167,000) from BGC.
The Company cannot predict the outcome of the foregoing
at this time.
7. Loss per common share:
Loss per common share has been computed using the number of
shares outstanding (6,375,096) at June 30, 1997 and 1996.
Dividends on the Company's non-convertible preferred stock,
Series B (Series B Preferred Stock), have been deducted from
income or added to the loss applicable to common shares.
Dividends on the Company's Series B Preferred Stock have not
been paid since the first quarter of 1982. The Company is in
arrears on such dividends in the amount of approximately
$1,137,000 as of June 30, 1997.
19
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Section 21E of the Securities Exchange Act of 1934 provides a
"safe harbor" for forward-looking statements. Certain
information included herein contains statements that are
forward-looking, such as anticipated liquidity requirements for
the coming fiscal year, anticipated sources of liquidity for the
coming fiscal year, the impact of anticipated asset sales,
proposed facilities construction and potential changes in
control of the Company. Such forward-looking information
involves important risks and uncertainties that could
significantly affect the Company's financial condition and
future results of operations, and, accordingly, such future
financial condition and results of operations may differ from
those expressed in any forward-looking statements made herein.
These risks and uncertainties include, but are not limited to,
those risks relating to actual costs necessary to clean-up
certain real property chemical contamination, actual
construction costs and construction contingencies in connection
with construction of new facilities, real estate market
conditions and general economic conditions, the abilities of
certain third parties to obtain financing and otherwise perform
under real estate purchase agreements, and the outcome of
certain litigation and other risks. The Company cautions
readers not to place undue reliance on any such forward-looking
statements, and, such statements speak only as of the date made.
OVERVIEW
On July 3, 1997, the Company completed the sale of its 57
residential lots in North Las Vegas, Nevada. Net proceeds to
the Company were approximately $573,000 of which $318,000 was
paid to Beal Bank, the purchaser of the SASA Obligation. In
addition, the Company received a note and deed of trust in the
amount of $72,597 representing reimbursement of water fees
previously paid. The note was paid in full on July 21, 1997.
On July 15, 1997, the Company completed the sale of the White
Ranch. Net proceeds from the sale were approximately $5,965,000
of which approximately $2,985,500 was paid to the Company. The
balance of the proceeds were paid to the other 50% owner of the
White Ranch.
On May 29, 1997, SHF signed a contract (the Contract) in the
amount of $1,651,800 with Tolson Construction Company (the
Contractor) for the construction of the Drying Facility
adjacent to the rice storage facility in Yolo County,
California. The Contract does not include certain costs such as
permits, landscaping, paving, utility lines, interest costs,
etc. These additional costs are estimated to be between
$200,000 and $250,000. As of July 31, 1997, SHF has paid
approximately $980,000 of which approximately $946,000 has been
paid to the Contractor. In connection with the financing of the
Drying Facility construction, SHF has entered into the following
agreements
20
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
with ICON Cash Flow Partners, L.P., Series E (ICON,
LP) and ICON Financial Corp. (ICON): (1) A promissory note (the
Note) dated April 3, 1997, between ICON, LP and SHF in the
principal amount of $1,150,000, with interest thereon at the
rate of 12% per annum. Interest is payable on the first day of
the month following the first advance and on the first day of
the month thereafter. In the event the Drying Facility is not
completed by December 31, 1997, the Note will be payable on
demand. If the Drying Facility is completed before December 31,
1997, advances made under the Note will be rolled into the
equipment lease financing as of the Base Lease Commencement Date
(the last day of the month following the date the Drying
Facility is declared complete by both SHF and ICON, LP). As of
July 31, 1997, SHF has drawn $446,000 against the note. (2) A
Master Equipment Lease (the Lease) dated April 3, 1997, between
ICON and SHF. Beginning with the Base Lease Commencement Date,
ICON will lease to SHF the Drying Facility for a period of five
years. At the end of the five year period, SHF will have the
right to purchase not less than all of the Drying Facility for
$1.00. The monthly rental under the Lease will be approximately
2.202% of the funded Drying Facility cost. (estimated to be
approximately $25,000 per month). In addition to being
collateralized by the Drying Facility, SHF has provided
additional collateral in the form of a Deed of Trust on certain
parcels of property, including the parcel on which the storage
facility is located. Both the Note and the Lease are guaranteed
by MRI and the Company (the Guarantors). Before the Guarantors
are liable for any deficiency, ICON or ICON, LP must first
proceed against the Drying Facility and the additional
collateral. Both the Lease and the Note contain certain events
of defaults, one of which relates to any material adverse change
in the business or financial condition of SHF or the Guarantors
(defined as a reduction of Tangible Net Worth of 20% or more)
and to the loss of Farmers Rice Coop as a customer. These events
of defaults only apply during the period the Note remains
unpaid. Because construction of the Drying Facility commenced
later than anticipated, the Company is unable to predict if the
Drying Facility will be completed in time for the 1997 rice
drying season (approximately September 15 to November 15).
John B. Anderson, Edith Anderson, Cedar Development Co., J.A.
Inc. and J.B.A. Investments, Inc. (collectively the Anderson
Parties) are involved in litigation with the Federal Deposit
Insurance Corporation (the FDIC). This matter is more fully
described in the Company's Form 10-K for the year ended December
31, 1996, see "Item 3. Legal Proceedings - Federal Deposit
Insurance Corporation, et al v. John B. Anderson et al."; Form
8-K, "Item 5. Other Events," dated February 4, 1997; Form 8-K,
"Item 5. Other Events", dated March 26, 1997; and Form 8-K,
"Item 5. Other Events," dated July 8, 1997. Mr. Anderson,
through his ownership of Cedar Development Company (Cedar) the
parent of Baby Grand Corp. (BGC) and J.B.A. Investments, Inc.
(J.B.A.), owns approximately 4,280,756 shares or 67,2% of the
outstanding common stock of the Company. Of these shares (i)
3,000,000 shares or 47.1% of the outstanding common stock of the
Company (the Pledged Dunes Shares) are pledged as collateral in
favor of entities of which the FDIC is a successor and /or
assign and (ii) 1,280,756 shares or 20.1% of the outstanding
common shares are pledged to
21
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
MRI as collateral for the BGC Note. In April 1997, the Company
was informed that the FDIC had filed application with the Nevada
Gaming Control Board (NGCB) and the Nevada Gaming Commission
(NGC) for permission to enforce the FDIC's security interest
in, including the right to vote, the common stock of Cedar, BGC
and other entities. The successful enforcement of the security
interest by the FDIC in the common stock of the foregoing
companies would, among other things, result in a change in
control of such companies. The NGCB referred the matter back
to the NGCB staff for further review. As of July 31,1997, the
FDIC has not received the specific permission of the NGCB
or the NGC to vote the pledged Shares. On June 3, 1997, the FDIC
filed a motion for a declaration that the FDIC has the right to
excercise voting rights to the Pledged Dunes Shares, and requiring
that stockholders meetings be held for the Company and certain
other entities. On July 8, 1997, The Nevada District Court
granted the FDIC's motion. In August 1997, the Anderson Parties
filed in the Nevada District Court a Motion to Clarify Order
Granting Motion of FDIC for a Declaration of Voting Rights
Respecting the Exercise of Voting for Certain Stock. The request
for clarification is based on the fact that the Nevada District
Court's order is silent as to whether or not the FDIC is
required to comply with certain sections of the Nevada Gaming
Commission Regulations requiring prior approval of the NGCB and
the NGC before voting rights can be exercised by the FDIC.
On July 3, 1997, the United States District Court, District of
Nevada (the Nevada District Court) approved the FDIC's proposed
plan (the Plan) for disposition of the collateral which includes
the Pledged Dunes Shares. The Plan requires, among other
things, that the Special Master gather material to be provided
to prospective bidders, to review bids and negogitate with
prospective bidders, to submit qualified bids to the Nevada
District Court and to obtain hearing date at which time the
Nevada District Court may consider any qualified overbids, as
well as credit bids from the FDIC. The proposed time schedule
for the Plan is approximately 215 days. Any proceeds from the
disposition of the Company's common shares held by BGC, and
pledged to MRI, would be payable to MRI. The Company does not
know if the FDIC will attempt to exercise voting right to the
Pledged Dunes Shares. Should the FDIC successfully assert voting
rights over, or dispose of, the Pledged Dunes Shares, there will
be a change in control of the Company. Although the Company
is not a party to any of the above-referenced actions, a change
in control of the Company (including Cedar or BGC) may adversely
affect the Company's ability to collect on certain obligations
owed to the Company by the Anderson Parties, including the BGC
Note in the approximate amount of $2,083,735 (including interest
of approximately $167,000) from BGC. The Company cannot predict
the outcome of the foregoing at this time.
The Company received a notice from the California Franchise Tax
Board (FTB) wherein the FTB alleges that one of the Company's
subsidiaries owes California franchise tax, penalties and
interest of approximately $563,000. The tax arose out of a gain
in 1988 resulting form a foreclosure sale of certain real
property owned by the subsidiary. The FTB contends that the
gain is non-business income to the subsidiary and therefore
should be allocated 100% to California without benefit of any
22
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
losses of the Company. The Company has exhausted all of its
appeals with the FTB and therefore this matter has been referred
to the California State Board of Equalization (SBE). On June
12, 1997, the Company filed its Reply Brief with the SBE wherein
the Company requested, based on reasons stated in the Reply
Brief, that the SBE reverse the FTB's proposed assessment and
withdraw its Notice of Proposed Assessment. Because of the
likelihood of either litigation or a settlement, the Company has
provided in its balance sheet $300,000 relating to this matter.
The Company has no present intentions to pay dividends on
either its common or preferred stock.
OPERATING RESULTS
Results of operations for the six months ended June 30, 1997,
were impacted by a write down of approximately $157,000 relating
to real estate notes resulting from sales at The Fairways. This
was a result of two of the original purchasers of lots at The
Fairways asking to have their loans reduced so that their total
investment in their lots would be closer to their current market
value. Although the Company could have foreclosed on the lots
and resold them, it was management's decision to grant the
reduction rather than go through a lengthy and costly
foreclosure proceeding.
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE
30, 1996
REAL ESTATE
The increase in revenues from the sale of real estate for the
three months ended June 30, 1997 resulted from the sale of
higher priced lots sold at The Fairways in the quarter ended
June 30, 1997 when compared with the quarter ended June 30,
1996. Cost of real estate sold decreased because of a write
down of the carrying value of the Fairway lots in a prior
period.
Net rental income from agricultural properties for the three
months ended June 30, 1997 increased by approximately $81,000
when compared with the three months ended June 30, 1996. The
increase was due to the recognition of rental income which had
been deferred from prior periods. The decrease in cost and
expenses of rental income for the three months ended June 30,
1997, was due to a decrease in water assessment fees.
AGRICULTURAL
The loss from the rice drying and storage operations for the
three months ended June 30, 1997 decreased by $64,000 when
compared with the three months ended June 30, 1996. The
decrease was
23
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
primarily attributable to the termination of the lease of the
West Sacramento rice dryer and the agreement to use the Cal-Dehy
name, which also included a covenant not to compete.
GENERAL
When compared with the three months ended June 30, 1996,
corporate selling, general and administrative expenses increased
by approximately $54,000; loss on real estate investments
decreased by approximately $290,000; partnership losses
decreased by approximately $64,000; interest income decreased by
approximately $22,000; and interest expense increased by
approximately $14,000.
The increase in corporate selling, general and administrative
expenses was due primarily to an increase in salaries of $17,000
as a result of severance pay paid to former employees and an
increase in property taxes of approximately $19,000.
The loss on real estate investments decreased because no
further write down of the carrying value of the lots at The
Fairways was deemed necessary.
The decrease in partnership losses was due to the termination
of the Pine Ridge Joint Venture and Steadfast Cattle Company in
1996.
The decrease in interest income and interest expense was due
to principal collections on notes receivable and a reduction in
the principal balance owing on the RTC note.
SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996
REAL ESTATE
Profit from the sale of real estate for the six months
ended June 30, 1997, increased by $52,000 when compared to the
six months ended June 30, 1996. This was a result of higher
sales prices and a reduction of the carrying value of the lots
taken in a prior period.
Net rental from agricultural properties for the six months
ended June 30, 1997, increased by $134,000 when compared with
the six months ended June 30, 1996. This was due primarily
to a reduction in water assessment fees and a reduction in
the cost of toxic clean up at Sam Hamburg Farm.
24
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
AGRICULTURAL
Net loss from the rice drying and storage operation for the
six months ended June 30, 1997, decreased by approximately $37,000
when compared with the six months ended June 30, 1996. The
decrease was primarily attributable to the termination of
the lease of the West Sacramento drying facility and the
agreement to use the Cal-Dehy name, which also included a covenant
not to compete.
GENERAL
When compared with the six months ended June 30, 1996,
operating expenses decreased by approximately $143,000. The
decrease consisted of a net of a reduction in loss on real
estate investments of $290,000, an increase in bad debts, net
of recoveries, of $169,000 and a decrease in depreciation
expense. The loss on real estate investments was a result of
the Company writing down the carrying value of the Fairway
lots. The increase in bad debt expense relates to the
reduction of certain notes receivable resulting from the sale
of lots at The Fairways which is described above.
Depreciation expense decreased because the Company does not
depreciate property and equipment held for sale.
The decrease in interest and dividend income for the six
months ended June 30, 1997, was due to a reduction in the
principal balance of various notes receivable.
The decrease in partnership losses was due to the
termination of the Pine Ridge Joint Venture and Steadfast
Cattle Company in 1996.
Other charges increased by approximately $128,000 when
compared with the six months ended June 30, 1996. The
increase was due primarily to the settlement of certain
liabilities related to the Pine Ridge Joint Venture and to
the reduction of the carrying value of equipment used in the
Steadfast Cattle operation.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, cash, cash
equivalents and marketable securities decreased by $288,000
from $1,810,000 at December 31, 1996, to $1,522,000 at June
30, 1997. The most significant source of cash during the six
months ended June 30, 1997, was the collection of loans made
to others, including related parties, of $324,000. The most
significant uses of cash during the six months ended June
30, 1997, consisted of payments on long-term debt ($313,000),
payments on short term debt ($42,000), costs paid for the
construction of the Drying Facility ($290,000) and an
increase in investments of $316,000.
25
<PAGE>
The Company believes that its primary requirements for
liquidity in the coming fiscal year will be to fund ongoing
expenses at The Fairways, which include, among other things,
association dues, water and sewer fees, property taxes and
the final payment due the Rancho Murieta Association on
December 31, 1997 for unpaid park fees; to fund the required
payments on the note to the RTC; to fund a portion of the
construction and carrying costs of the new rice dryer; to
fund costs that may be incurred relating to the toxic clean-
up at Sam Hamburg Farm; to fund amounts, if any, that may be
due to the California Franchise Tax Board; and to fund
general and administrative expenses. In addition, the
Company may be required to fund certain mortgage payments
relating to the Solano County Option if the current owner is
unable to do so.
The Company believes that sources of required liquidity in
addition to cash, cash equivalents and marketable securities
at June 30, 1997, will be cash generated from the rice drying
and storage facilities, collections on loans made to others,
including related parties, anticipated lots sales at The
Fairways, collections of notes receivable resulting from
sales at The Fairways, proceeds from the sale of the White
Ranch, completed on July 15, 1997, Success Payments related
to the venture with Murieta Investors and the sale of the 57
lots in North Las Vegas completed on July 3, 1997. Based on
known commitments, the Company believe s that the sources of
cash described will be adequate to fund known liquidity
requirements. However, if the sources of required liquidity
prove to be insufficient to cover the Company's primary
liquidity requirements, it will be necessary to sell some of
the Company's non-income producing assets.
26
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
None, except for the discussion contained in "Part I, Item 2,
Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Dividends in arrears. See Note 7 of Notes to Consolidated
Condensed Financial Statements.
ITEM 5. OTHER EVENTS
The Company moved its executive offices to Sacramento,
California on May 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 Construction contract dated March 24, 1997, between
SHF Acquisition Corporation and Tolson Construction
Co. for the construction of a new rice drying
facility.
10.02 Master Equipment Lease dated April 3, 1997, between
ICON Financial Corp. and SHF Acquisition Corporation;
Promissory Note dated April 3, 1997, in the principal
amount of $1,150,000 between ICON Cash Flow Partners,
L.P., Series E; Guaranty by Dunes Hotels and Casinos
Inc. to ICON Financial Corp. dated May 19, 1997;
Guaranty by M & R Investment Company, Inc. to ICON
Financial Corp. dated May 19, 1997; Short Form Deed of
Trust and Assignment of Rents dated May 21, 1997, by
SHF Acquisition Corporation in favor of ICON Cash Flow
Partners, L.P., Series E
27.01 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated July 8, 1997, wherein the Company reported
that the Nevada District Court granted the FDIC's motion to
allow it to vote the shares of common stock of the Company
that the FDIC holds as collateral for Mr. Anderson's
obligation to the FDIC.
27
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
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.
DUNES HOTELS AND CASINOS INC.
Registrant
Date: By: /s/ James H. Dale
James H. Dale
Duly Authorized Officer and Chief
Financial Officer
28
<PAGE>
EXHIBIT INDEX
Item Description Page No.
10.01 Construction contract dated March 24, 1997
between SHF Acquisition Corporation and Tolson
Construction Co. for the construction of a new
rice drying facility.
10.02 Master Equipment Lease dated April 3, 1997,
between ICON Financial Corp. and SHF Acquisition
Corporation; Promissory Note dated April 3, 1997,
in the principal amount of $1,150,000 between
ICON Cash Flow Partners, L.P., Series E; Guaranty
by Dunes Hotels and Casinos Inc. to ICON
Financial Corp. dated May 19, 1997; Guaranty by M
& R Investment Company, Inc. to ICON Financial
Corp. dated May 19, 1997; Short Form Deed of
Trust and Assignment of Rents dated May 21, 1997,
by SHF Acquisition Corporation in favor of ICON
Cash Flow Partners, L.P., Series E.
27.01 Financial data schedule
29
SHF Acquisition Corp.
Contract
General Contractor: Tolson Construction Co.
P.O. Box 8247
Woodland, CA 95776
Customer: SHF Acquisition Corp.
4045 S. Spencer Street #206
Las Vegas, NV 89119
March 24, 1997
<PAGE>
CONTRACT
EXHIBIT "A"
<TABLE>
<CAPTION>
CUSTOMER: GENERAL CONTRACTOR:
<S> <C>
SHF Acquisition Corporation Tolson Construction Co.
4045 S. Spencer Street #206 1120 Gum Ave., Ste. D Woodland, CA 95695
Las Vegas, NV 89119 P.O. Box 8247 Woodland, CA 95776
15361 Pear Valley Lane Auburn, CA 95603
P.O. Box 1410 Davis, CA 95617
CONTACT PERSON: TOLSON CONSTRUCTION
Brent Bowen CONTRACTOR'S LICENSE:
(916) 753-5695 Ext. 17 704893
(916) 878-6152 Home
(916) 756-8252 Fax
CONSTRUCTION LENDER: JOB SITE ADDRESS:
Icon Financial Corporation 46735 County Road 32B
4 Embarcadero Center #590 County of Yolo, CA
San Francisco, CA 94111
ASSESSOR'S PARCEL NO.:
33-020-07
</TABLE>
SCOPE OF WORK:
Tolson Construction Co., the general contractor, hereby proposes
to furnish tools, materials, equipment, supervision, labor and
engineering necessary to construct a rice dryer and working bins
that will be located on the owner property located in Davis,
California. The owners will provide to the general contractor a
soils report and drawings developed by a civil engineer that
shows the property lines and site requirements required to
construct the rice dryer facility. The general contractor has
worked with the owners to develop the following rice dryer
project.
1
<PAGE>
The new construction will consist of the following:
I. Shanzer Model 5R6 Rice Dryer with a capacity of 5,400
bushels per hour reducing the moisture an average of 2-3%
per pass. The Shanzer Rice Dryer includes the following
features.
COLUMNS: Dryer columns formed of high carbon woven wire
screens, 14 Ga. corten divider plates, 10 Ga. H.R. end
plates.
EXCHANGERS: Two levels of 10 Ga. H.R. grain exchanger rice
turning devises.
ENCLOSURE: 6' exhaust plenum with the top 10' exhaust
louvers with 1/2" bird screen (14-10' louvers), the next 48'
exhaust louvers with 24 mesh stainless steel filter media
(54-10', 28-4' louvers), enclosure roofs 14 Ga. H.R. tread
plate.
WARM AIR: 730 CLI airfoil centrifugal fan delivering
193,000 CFM with a 150 HP TEFC motor and V-Belt drive.
BURNER: 14.6 million BTU's per hour at 80 degrees
temperature rise. Maxon NP 5 natural gas burner.
CONTROLS: NEMA 12 control panel for safety and operating
controls. NEMA 12 motor control center with a 300 amp main,
480 volt, 3 phase, 60 cycle.
GARNER BIN: 10 Ga. H.R., 15' tall with high and low
bindicators.
II. Commercial Hopper Tanks
A. A total of five (5) commercial hopper tanks, will be
constructed, each having a capacity of approximately
20,615 bushel of rice at 45 PPB dry and free flowing.
The 24' diameter tanks will stand 68'-8" (to peak) and
will be constructed of structural steel braced columns,
galvanized high strength steel 45 degree hopper,
corrugated galvanized high strength steel sidewall
panels and high tensile galvanized steel roof panels.
All of the hopper tanks will have a side access door,
roof access hatch, roof access ladder and roof vents.
B. Two (2) of the commercial hopper tanks will be
designated for rough rice receiving. The remaining
commercial hopper tanks will be for dryer storage. The
total storage capacity of the commercial hopper tanks
combined is approximately 103,075 bushel of rice.
C. A concrete pad foundation for all of the tanks as well
as the tank erection is included.
III. Elevator and Conveying System
A. Two (2) bucket elevators will be erected in a concrete
pit, having a material moving capacity of 5,500 bushels
per hour each. One (1) elevator will feed the rice
dryer, the
2
<PAGE>
other elevator will be used for the discharge of the
rice dryer. The two (2) bucket elevators will be
equipped with service and maintenance platforms.
B. A catwalk will be constructed over the top of the
commercial hopper bins. The catwalk will have two (2)
conveyor systems, one conveyor will feed the first two
(2) bins for receiving rough rice. The second conveyor
system will feed all five (5) bins and will be used for
the dryer discharge.
C. A cross catwalk system will be installed with a
conveyor system to feed dry rice from the five (5)
hopper bins to the concrete storage warehouses. The
existing concrete storage warehouses are equipped with
16" screw conveyors with design capacity of 48,480 BPH.
On this walkway system will be a second conveyor that
will move rough rice from the existing receiving pit
and elevator to the two (2) new hopper bins.
D. All of the tanks, elevators and dryer will by feed by
12 Ga. steel spouting.
E. A dust collection system will be installed. The system
will pick up dust at the ground level from all the new
equipment. The system will pick up dust from the
bucket elevator boots, screw conveyor discharges, and
the discharge screw of the rice dryer. The dust system
will include bagfilter, fan, and discharge rotary
valve. A structural stand will be equipped with an
overhead tank to hold the dust for truck loading. The
bagfilter will be mounted on top of the structure. All
air ducting for pick up points is included in the
system.
IV. Concrete and Site Work
A. Rice dryer foundation.
B. Hopper bin foundation.
C. Footing foundation for walkway systems.
D. Elevator pit for two (2) bucket elevators.
E. Dust system foundation with concrete pad under the dust
system for truck load out.
F. Site work for under rice dryer foundation and hopper
bins only.
V. Electrical and Gas
A. Electrical for the main service for the equipment that
the general contractor installs.
B. Motor control for all motors added by general
contractor.
C. Control wiring bin level controls supplied by general
contractor.
D. PG & E Gas will be used for the rice dryer. The gas
system will include underground piping, approximately
30 feet from the dryer and hook-up of all gas piping
and gas equipment in the rice dryer.
SPECIAL CONDITIONS:
1. All work included in this proposal is to be performed with
conventional construction practices during normal working
shifts. There is no allowance for specialized work or
phasing required as the result of any abnormal conditions
which may be discovered to
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exist or because of weather or other unknown conditions.
Any special phasing or splitting of work will be at an extra
cost.
2. Any removal or replacement of unsuitable soil materials will
be at an extra cost. Unsuitable material includes that which
is in the opinion of the soils engineer, unacceptable for
use in its pre-existing or original conditions as a result
of soil type or excessive moisture content.
3. This proposal excludes all permits, surveys, costs and
remediation costs of asbestos or other hazardous materials.
This applies to all existing or proposed federal, state or
local regulations which apply to hazardous materials. The
owner is responsible to ensure that the site is free of
hazardous materials. Should Tolson Construction Co. or sub-
contractor on the job encounter any hazardous substances, we
will immediately cease work in the affected area. Any costs
resulting from delays, remobilization or loss of production
will be paid as additional work.
WARRANTIES:
The general contractor will pass on all Warranties given by any
manufacturers of machinery or component parts that the general
contractor supplies. The general contractor will warrant all of
his workmanship for a one year period commencing with final
inspection by local building department. In the event that a
final inspection is not held, the completion date will be the
date which the final contract billing is issued to the owner
(excluding punchlist items and change orders).
CONSTRUCTION SCHEDULE:
This project is scheduled for completion by September 15, 1997.
With the signing of the contract, the general contractor will
begin the engineering. Our scheduled completion date assumes
that no delays in the permitting process due to plan-checking or
financing of the project will affect our planned work schedule.
If payments from the owner to the general contractor are delayed,
this will delay the completion of the project.
PAYMENT SCHEDULE:
* Down payments on the machinery, or fabricated items will be
required.
* Payment for machinery may be required before shipment if
required by machinery manufacturer.
* Monthly payments will be required for machinery and
materials on job site.
* Bi-monthly payments for labor used on the project could be
required if the general contractor feels it is necessary.
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TERMS OF PAYMENT:
* The general contractor will submit an invoice which shall
include all material, equipment, and labor by the 10th of
each month with payment due by the 30th of the same month.
The general contractor will pay his subcontractors and
venders by the 5th of the following month.
* Contractor agrees that the final $160,000.00 due on the
Contract may be withheld by the Owner for up to 30 days
following the issuance of a Certificate of Completion of the
project.
* If the general contractor is not paid in the terms or time
of the Contract he has the right to stop work until payments
are made. If the general contractor incurs extra costs
because payments were not made on time, he has the right to
recover these extra costs from the owner prior to the
resumption of work of the project.
* Payments by owner will be exchanged for conditional lien
releases from the general contractor and subcontractors
involved in the payment requests.
CONTRACT AMOUNT:
* The contract as defined in this Scope of Work will be for
fixed amount not to exceed as set forth below.
* Owners Builders Risk Insurance costs set forth in Exhibit
"B" are not included in costs of construction.
PRICE FOR PROJECT: $1,651,800.00
Includes applicable California sales tax @ 7.25%
THIS COST WILL NOT INCLUDE:
* Permit and development fees.
* Civil Engineering Plans.
* Soils Engineering and report.
* Surveys.
* Landscaping.
* Site de-watering.
* Erosion control.
* Driveway construction.
* Bonding.
* Fire sprinklers or fire suppression systems.
* Removing or relocating any underground obstacles which may
be discovered while excavating.
* Any hazardous waste disposal including testing for hazardous
waste. If hazardous waste is found while working on this
project, the owner will bear all costs.
* All work not covered by scope of this contract.
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* Any work not specifically mentioned above.
* PG & E cost for gas line, electrical lines or work required
by PG & E.
ATTORNEYS FEES:
If either party files any action, brings any proceeding, or
incurs attorney fees in enforcing this Agreement, then the
prevailing party shall be entitled to recover reasonable
attorneys fees.
CHANGE ORDERS:
If a change in the Work is to be ordered, a Supplementary
Instruction shall be issued by owner to the general contractor
describing the change and requesting the submission of Change
Order Request. When time does permit the processing of a Change
Order in advance of commencing the change in the Work, upon
receipt of a written authorization from the owner, the general
contractor shall proceed with a change in the Work, and the
general contractor shall concurrently proceed with submission of
a Change Order Request. Oral Change Orders will not be allowed
or paid. If a field Change Order is necessary it shall be
followed up by a written Change Order within five (5) days or it
will be disallowed.
Within five days of its receipt of a Supplementary Instruction,
general contractor shall provide preliminary estimate of any
change in Contract Sum or Contract not to exceed cost plus 15%
for overhead and margin.
In the event that the owners wish to remove a portion of the Work
covered by this contract from the project, a credit will be
issued to the owners less the 10% for overhead and margin.
HAZARDOUS WASTE:
The Owner will certify that the Construction Site in which the
Contractor will be working will be free of all hazardous waste.
The Contractor will not bring any materials on site which may
result in the presence of any hazardous waste.
/S/ BILL TOLSON Date: 4/7/97
BILL TOLSON, President
Tolson Construction Co.
/S/ BRENT BOWEN Date: 5/26/97
BRENT BOWEN
SHF Acquisition Corp.
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<PAGE>
LIEN FREE POSSESSION:
Upon the completion of the construction of said Rice Dryer and
supporting equipment provided all payments have been made by
owner as herein stated, general contractor will deliver
possession of the premises without any mechanics liens.
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EXHIBIT "B"
GENERAL INSURANCE REQUIREMENT:
General contractor, prior to commencement of the Work, shall be
qualified under the Worker's Compensation Laws of the state or
states in which the Work or any portion of the Work is to be
performed or under any applicable Worker's Compensation Laws and
shall at all times comply with the provisions of said laws.
Contractor shall procure, carry and maintain employer's liability
insurance. Contractor shall procure, carry and maintain upon all
of its operations hereunder comprehensive general liability
insurance covering all operations of Contractor and lower tier
subcontractors. Such policies shall be in such form and shall be
issued by such insurance company or companies as may be
satisfactory to owner. The Contractor will have $ 1,000,000.00
liability insurance coverage with the owner named as additional
insured.
If Contractor fails to procure and maintain such insurance, Owner
shall have the right to procure and maintain the said insurance
for and in the name of the Contractor and the Contractor shall
pay the cost thereof and shall furnish all necessary information
to make effective and maintain such insurance.
Each comprehensive general liability policy shall contain a
"contractual liability" endorsement making specific reference to
this Contract and covering any liability herein assumed by the
Contractor.
In the event that at any time during the term of this Contract,
Owner shall deem the amount of the insurance coverage agreed to
be provided hereunder by Contractor to be inadequate, or coverage
for risks other than those provided for herein shall be required
by law or deemed reasonably necessary by Owner, Contractor agrees
to comply promptly with the request of Owner to increase the
amount of existing coverage or provide additional coverage, as
the case may be, the reasonable cost providing which shall form
an addition to the Contract Price.
Owner is additionally insured under said insurance policies and
said policies are primary as to any loss to which the insurance
coverage provided thereby is applicable without right of
contribution from any insurance otherwise maintained by Owner.
The owner will be required to carry a Builders Risk Insurance to
protect against damages caused by fire or thief during the
construction phase.
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SUBCONTRACTORS:
All Subcontractors shall be subject to the approval of any
lender. The Contractor shall select Subcontractors with whom the
Contractor is reasonably familiar and who have the necessary
financial capacity and job skills to complete their work on
schedule.
The Owner may require the Contractor, for good cause, to change
any Subcontractor previously approved and, if at such time the
Contractor is not in default hereunder, the Contract Sum shall be
increased or decreased by the difference in costs occasioned by
such change.
Any part of the Work performed for the Contractor by a
Subcontractor shall be pursuant to a written Subcontract between
the Contractor and such Subcontractor, which shall be prepared on
the form of Subcontract which the Owner has approved. Each such
Subcontract shall:
a) Require that such Work be performed in accordance with the
requirements of the Contract documents;
b) Require the Subcontractor to carry and maintain liability
insurance in accordance with Contract Documents;
c) Require the Subcontractor to furnish such certificates and
waivers as any lender may reasonably request;
d) Require the Subcontractor to certify that it is thoroughly
familiar with all of the terms, conditions, obligations,
guarantees and warranties of the Contract Documents, and all
plans, specifications, drawings, and other materials
necessary for Subcontractor's properly performing the work
which Subcontractor has agreed to undertake, as well as the
location of the job site and the conditions under which the
Subcontractor's work is to be performed.
OWNERS BUILDERS RISK INSURANCE
Owner shall, throughout the term of this agreement maintain
insurance, at Owner's expense as follows:
* Builders Risk
* Public Liability Insurance in the amount of at least One
Million Dollars ($1,000,000.00), single limit.
* Property Damage Insurance protecting against the damage or
destruction of the building under construction, in an amount
equal to the replacement value of the building.
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TRANSFER OF TITLE AND RISK OF LOSS:
Contractor may store construction supplies, materials and
equipment upon the project site. However, Contractor assumes all
risk of loss of such goods and equipment caused by fire, theft,
vandalism, acts of God, etc. Legal title and risk of loss for
such goods and equipment shall pass to Owner, when and if such
items have been permanently affixed to the realty or have been
paid for by the owner in the monthly billings. When the owner
pays for equipment or work that has been completed, the items
become the owners property. In the event of fire or casualty
loss to the building improvements at no fault of the Contractor,
Contractor shall repair and replace the work which he has
previously installed. This shall be treated as "extra work", and
Contractor shall be paid a reasonable amount of additional
compensation for this extra work.
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MASTER EQUIPMENT LEASE
Master Equipment Lease dated as of April 3, 1997, by
and between ICON FINANCIAL CORP., a Delaware
corporation. ("Lessor"), having its principal office
and place of business at 4 Embarcadero Center, Suite
590, San Francisco, California 94111 and SHF
ACQUISITION CORPORATION, a Nevada Corporation,
("Lessee"), having its principal office and place of
business at 4045 South Spencer Street, Suite 206, Las
Vegas, Nevada 89119.
IN CONSIDERATION of the mutual agreements set forth
hereinafter and the payment of rent as provided for
herein, the parties agree as follows:
1. PROPERTY LEASED. Lessor hereby agrees to advance
funds up to an aggregate amount not to exceed One
Million One Hundred and Fifty Thousand Dollars,
($1,150,000.00) for the construction of a Rice Drying
Tower and all attachments and ancillary equipment
thereto, and any other equipment as described in
either: (i) a Promissory Note, substantially in the
form of Exhibit "A" attached hereto; or (ii) an
Equipment Schedule, substantially in the form of
Exhibit "B" attached hereto, and to lease the Equipment
to Lessee, all pursuant to the terms and conditions set
forth herein. The equipment described in either the
Promissory Note or the Equipment Schedule shall be
referred to hereinafter as the "Equipment".
This contract is a Master Equipment Lease and the terms
of the February 10, 1997 and the March 21, 1997 letters
from Lessor to Lessee acknowledged by Lessee, and
appearing as Exhibit "D" hereto, (herein collectively
referred to as the "Letters"), and Promissory Note or
Equipment Schedule hereto are subject to any and all
conditions and provisions set forth herein as may from
time to time be amended by the parties in writing. The
Letters, and Promissory Note or Equipment Schedule
shall be made a part hereof, shall incorporate therein
all of the terms and conditions of this Master
Equipment Lease and shall contain such additional terms
and conditions as Lessor and Lessee shall agree upon in
writing. The Letters, and Promissory Note or Equipment
Schedule are enforceable according to the terms and
conditions contained therein and herein. In the event
of a conflict between the language of this Master
Equipment Lease and any Promissory Note or Equipment
Schedule hereto, the language of the Promissory Note or
Equipment Schedule shall prevail in respect of that
Promissory Note or Equipment Schedule.
Lessor, by its acceptance hereof at its home office,
agrees to lease to Lessee, and Lessee agrees to lease
from Lessor, in accordance with the terms and
conditions herein, the Equipment. Lessee shall have no
right, title or interest in the Equipment, except as
expressly set forth in this Master Equipment Lease.
The Lessor shall have no obligation hereunder until the
execution and delivery of any Promissory Note or
Equipment Schedule by Lessor and Lessee.
2. TERM, RENT AND TERMINATION. The term of Master
Equipment Lease shall commence on the date set forth
above and shall continue thereafter so long as any
Promissory Note or Equipment Schedule entered into
pursuant to this Master Equipment Lease remains in
effect.
The Lease Term and the Rent payable with respect to the
equipment shall be as set forth in and as stated in the
respective Promissory Note or Equipment Schedule(s).
At the end of the Base Lease Term, if no Event of
Default shall exist, Lessee shall have the right to
purchase not less than all of the Equipment for $1.00.
3. ACCEPTANCE, WARRANTIES, LIMITATION OF LIABILITY.
Lessee represents and agrees that as of the date the
Equipment is accepted hereunder (the "Acceptance
Date"), the Equipment is of a size, design, capacity
and manufacture selected by Lessee and that Lessee has,
as between Lessee and Lessor, unconditionally accepted
such Equipment. On the Acceptance Date, Lessee will
execute and deliver the Equipment Schedule and
Certificate of Delivery and Acceptance ("Acceptance")
in the form attached as Exhibit "C" with respect to the
Equipment, which Acceptance will be conclusive evidence
of the foregoing. Should Lessee fail to so execute and
deliver either document promptly upon the completion of
the construction of the project Lessor may in its sole
discretion require that Lessee
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 2 of 9
immediately repay the amounts outstanding under the
Promissory Note in accordance with the terms of the
fourth paragraph thereof.
LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM,
LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY,
INDIRECTLY, INCIDENTALLY OR CONSEQUENTIALLY BY THE
EQUIPMENT, BY ANY INADEQUACY THEREOF OR DEFICIENCY OR
DEFECT THEREIN, BY ANY INCIDENT ARISING OUT OF THIS
AGREEMENT. LESSOR MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF ANY KIND, INCLUDING THOSE OF
MERCHANTABILITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE EQUIPMENT
AND EXPRESSLY DISCLAIMS THE SAME. Notwithstanding the
foregoing, Lessee will be entitled to the benefit of
any applicable manufacturer's warranties, and, to the
extent assignable, such warranties are hereby assigned
by Lessor for the benefit of Lessee, and Lessee shall
take all reasonable action to enforce such warranties
where available to Lessee.
4. ASSIGNMENT, OBLIGATION TO PAY RENT UNCONDITIONAL.
Lessor may assign or sell all or a portion of its
right, title and interest in and to the Equipment or
this Master Equipment Lease, the Promissory Note and/or
any Equipment Schedule and/or grant a security interest
in the Equipment to one or more lenders or equity
sources ("Assignees"). Lessee hereby (a) consents to
such assignments and/or grants, (b) agrees promptly to
execute and deliver such further acknowledgments,
agreements and other instruments as may be reasonably
requested by Assignee to effect such assignments and/or
grants, from time to time as a Promissory Note or
Equipment Schedule is executed, and (c) agrees to
comply fully with the terms of any such assignments
and/or grants so long as, or provided that, such
compliance shall not increase Lessee's obligations or
diminish its rights hereunder. In the event of an
assignment, Lessor shall notify Lessee of such
assignment and thereafter all references herein to
Lessor shall include Assignee; provided, however, that
Assignee shall not be obligated to perform the
obligations of Lessor hereunder unless Assignee
expressly agrees to do so in writing. Lessor agrees
that, in the event of any such assignment hereunder,
such assignment shall specifically provide, and Lessee
shall be notified, that Lessor and/or Assignee shall
bear the responsibility (herein "Responsible Party")
for making or causing to be made the progress payments
provided for in the Letters in accordance with the
terms of such Letters. In the event the Responsible
Party fails to make or cause to be made the progress
payments provided for in the Letters ("Progress
Payment") and Lessee is not in default under this
Master Equipment Lease, the Promissory Note or the
Letters and has not suffered a "material adverse
change" as defined in the Letters, Lessee shall provide
notice to the Responsible Party of its failure to make
the Progress Payment. If the Responsible Party does
not make or cause to be made the Progress Payment
within ten (10) days following receipt of the notice as
receipt is provided for in Paragraph 18(b), such
failure to make the Progress Payment shall be deemed a
breach of this Agreement and Lessee may seek its
available legal remedies resulting from such breach.
This Master Equipment Lease, together with the
Promissory Note and/or any Equipment Schedule is a net
lease and Lessee agrees that its obligation to pay all
Rent and other sums payable hereunder or thereunder
(collectively, "Rent"), and the rights of Lessor and
Assignee in and to such Rent, are absolute and
unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment
due to alleged to be due to, or by reason of, any past,
present, or future claims which Lessee may have against
Lessor, Assignee, the manufacturer or seller of the
Equipment, or against any person for any reason
whatsoever.
Lessee may, with the prior written consent of Lessor,
which consent shall not be unreasonably withheld,
sublet the Equipment, provided; (a) the rights of the
sublessee are expressly subject and subordinate to the
rights of Lessor, (b) the Equipment will be located
only in those jurisdictions in the United States which
have adopted and have in effect the Uniform Commercial
Code, (c) Lessee has filed or caused to be filed in
such state all financing statements necessary to
continue in effect any security interest of Lessor, and
(d) if Lessee intends to lease replacement Equipment,
Lessee shall give Lessor the opportunity to bid on the
lease of such replacement Equipment. If Lessee leases
replacement Equipment from Lessor, Lessor shall use its
best efforts to market or lease the Equipment to a new
buyer or new Lessee. No sublease will in any way
discharge or diminish any of Lessee's obligations to
Lessor hereunder.
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 3 of 9
5. INSTALLATION, MAINTENANCE AND REPAIR. Lessee
shall, at its expense, be responsible for the delivery,
installation, deinstallation, redelivery, maintenance
and repair of the Equipment by a party acceptable to
Lessor. Lessee agrees, at all times during the term of
the Promissory Note or Equipment Schedule, at its sole
expense, to keep the Equipment in good repair,
condition and working order, and to furnish all parts,
mechanisms or devices which may be required in the
course of so doing. Lessor or Assignee will have the
right, but not the obligation, to inspect the Equipment
during reasonable business hours.
6. REPRESENTATIONS AND WARRANTIES. Lessee represents
and warrants for the benefit of Lessor, and, if
requested by Lessor, will provide an opinion of counsel
and other supporting documents to the effect that:
(a) Lessee is a legal entity, duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization and in each
jurisdiction where any Leased Item will be located and
has adequate power to enter into and perform this
Master Equipment Lease and the Promissory Note and
Equipment Schedule executed hereunder.
(b) This Master Equipment Lease and the Promissory
Note and Equipment Schedule executed hereunder have
been duly authorized, executed and delivered by Lessee
and together constitute a valid, legal and binding
agreement of Lessee, enforceable in accordance with its
terms.
(c) The entering into and performance of this Master
Equipment Lease and the Promissory Note and Equipment
Schedule executed hereunder will not violate any
judgment, order, law or regulation applicable to Lessee
or any provision of Lessee's entity constituting
documents (e.g. Articles of Incorporation, Partnership
Agreement, etc.) or bylaws or result in any breach of,
or constitute a default under, or result in the
creation of any lien, charge, security interest or
other encumbrance upon any assets of Lessee or on the
Equipment pursuant to any instrument to which Lessee is
a party or by which it or its assets may be found.
(d) There are no actions, suits or proceedings
pending, or to the knowledge of the Lessee threatened,
before any court, administrative agency, arbitrator or
governmental body which will, if determined adversely
to the Lessee, materially adversely affect its ability
to perform its obligations under this Master Equipment
Lease or any related agreement to which it is a party.
(e) Lessee is not in any material default under any
loan agreement.
7. LOSS AND DAMAGE.
(a) Lessee agrees to bear the risk of loss with
respect to any damage, destruction, loss, theft, or
governmental taking of any Leased Item, whether partial
or complete and whether or not through any default or
neglect of Lessee. Except as provided in this Section
7, no such event shall relieve Lessee of its obligation
to pay Rent hereunder.
(b) If any Leased Item is damaged, Lessee must
promptly notify Lessor and within 60 days of such
damage shall, at its expense, cause such repairs to be
made as are necessary to return such Leased Item to its
previous condition. Lessee shall then be entitled to
receive from Lessor or Assignee, as the case may be,
any insurance proceeds received or in connection with
such damage.
(c) In the event that any Leased Item is destroyed,
damaged beyond repair, lost, stolen or taken by
governmental action for a stated period extending
beyond the term of this Master Equipment Lease (an
"Event of Loss"), Lessee must promptly notify Lessor
and Assignee and pay to Lessor or Assignee, as the case
may be, on the next Rent payment date following the
Event of Loss, an amount equal to the Casualty Value
set forth in Exhibit "E" of such Leased Item in effect
on the date of Event of Loss and all Rent accrued on
such item up to the date of payment. Upon payment of
such amounts, Lessee's obligation to pay further Rent
will cease with respect to that Leased Item (but not
with respect to the remaining Equipment) and Lessee
will be entitled to receive any insurance proceeds or
other recovery received by Lessor or Assignee in
connection with such Event of Loss.
(d) In the event of a governmental taking of a Leased
Item for an indefinite period or for a stated period
which does not extend beyond the term of the applicable
Promissory Note and Equipment Schedule(s), all
obligations of the Lessee with respect to such Leased
Item (including payment of Rent) will continue. So
long as Lessee is not in default hereunder, Lessor will
pay to Lessee all sums received by Lessor by reason of
such governmental taking up to the amount paid by
Lessee during such period.
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 4 of 9
8. INSURANCE. Lessee, at its expense, shall insure
the Equipment against all risks and in such amounts as
Lessor reasonably requires (but not less than the
Casualty Value as identified on each Exhibit B with
respect to the corresponding Promissory Note and
Equipment Schedule) with carriers acceptable to Lessor,
shall maintain a loss payable endorsement in favor of
Lessor and Assignee affording them such additional
protection as they reasonably require, and shall
maintain liability insurance satisfactory to Lessor.
All such insurance policies must name Lessor, Lessee
and Assignee as insureds and loss payees, and must
provide that they may not be canceled or altered
without at least 30 days' prior written notice to
Lessor and Assignee. Upon Lessor' and Assignee's
written consent, Lessee may act as a self-insurer in
amounts acceptable to Lessor and any Assignee.
9. INDEMNITY. Lessee agrees to indemnify Lessor and
Assignee against, and hold Lessor and Assignee harmless
from any and all claims, actions, suits, proceedings,
costs, expenses, damages and liabilities at law or in
equity, including attorneys' fees, arising out of,
connected with or resulting from this Master Equipment
Lease or the Equipment, including, without limitation,
the manufacture, selection, purchase, delivery,
possession, condition, use, operation or return
thereof, with the exception of events caused directly
by any intentionally wrongful acts of Lessor. Lessee's
obligations hereunder will survive the expiration of
this Master Equipment Lease with respect to acts or
events occurring or allege to have occurred prior to
the return of the Equipment to Lessor at the end of the
Lease Term.
10. LIENS AND TAXES. Lessee will, at its expense,
keep the Equipment free and clear of all levies, liens
and encumbrances. Lessee shall not assign or otherwise
encumber this Master Equipment Lease, any Promissory
Note and Equipment Schedule or any of its rights
hereunder without the prior written consent of Lessor.
Lessee will declare and pay when due all license fees,
registration fees, assessments, charges and taxes,
whether municipal, state or federal, including, but not
limited to, sales, use, excise and property taxes, and
penalties and interest with respect thereto, excluding,
however, any taxes based on or measured solely by
Lessor's net income. Lessee shall provide evidence of
any payment hereunder upon request of Lessor. In the
event of a default under this Master Lease Agreement if
requested by Lessor, Lessee shall pay, on such periodic
basis as Lessor shall reasonably require, such
proportionate amount of the aforesaid fees as shall be
necessary to enable Lessor to pay such taxes as and
when due (herein "Impound Account"). Lessor may
commingle such tax payment amounts with its other funds
and shall not be obligated to pay Lessee interest on
such funds collected.
Notwithstanding the foregoing, Lessee may in good faith
by appropriate proceedings and upon notice to Lessor,
contest the validity, applicability or amount of any
asserted tax or assessment so long as (a) such contest
is diligently pursued, (b) Lessor determines, in its
subjective opinion, that such contest suspends the
obligation to pay the tax and the nonpayment of such
tax or assessment will not result in the sale, loss,
forfeiture or diminution of the Equipment or Real
Property or any part thereof or any interest of Lessor
therein, and (c) prior to the earlier of the
commencement of such contest or the delinquency date of
the asserted tax or assessment, Lessee deposits with
Lessor in the Impound Account an amount to be adequate
to cover possible interest, costs and penalties;
provided, however, that Lessee shall promptly cause to
be paid any amount adjudged by a court of competent
jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes
final; and provided further that in any event each such
contest shall be concluded and the taxes, assessments,
interest, costs and penalties shall be paid prior to
the date any writ or order is issued under which the
Equipment and/or the Real Property may be sold, lost or
forfeited.
11. LESSEE'S FAILURE TO PERFORM. Should Lessee fail
to make any payment or do any act required herein,
Lessor has the right, but not the obligation and
without releasing Lessee from any obligation hereunder,
to make or do the same, and to pay, purchase, contest
or compromise any encumbrance, charge or lien which in
the judgment of Lessor appears to affect the Equipment,
and in exercising any such rights, incur any liability
and expend whatever amounts in its absolute discretion
it may deem necessary therefor. All sums so incurred
or expended by Lessor shall be, without demand,
immediately due and payable by Lessee and shall be
considered Rent hereunder and will bear interest at the
lesser of 1 1/2% per month or the highest interest rate
legally permissible.
12. FIRST MORTGAGE LIEN ON REAL PROPERTY; LOCATION OF
EQUIPMENT. Lessee shall provide Lessor with Additional
Collateral in the form of a Deed of Trust with
Assignment of Rents for the benefit of Lessor
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 5 of 9
covering the following described Real Property: Two of
three parcels of real property (such that one of the
parcels contains the building known as the rice storage
facility), known as Lot 41, and Lots 44, 57 and the
North half of Lot 60, Eucalyptus Grove being Sacramento
Improvement Subdivision No. 10, filed June 2, 1909, in
book 3 of Maps and Surveys, page 83, Yolo County
Records, excepting therefrom those portions described
in the Final Order of Condemnation in favor of the
people of the State of California, recorded January 20,
1961, in Book 625 of Official Records at page 289.
In the event that the Deed of Trust with Assignment of
Rents has not otherwise been reconveyed or discharged,
upon satisfaction of Lessee's obligations under this
Master Lease Agreement, Lessor as Beneficiary shall
cause the Deed of Trust with Assignment of Rents to be
discharged. In the event of a default by Lessee and
the exercise by Lessor of any remedies pursuant to
Section 16 hereof, Lessor's obligations to discharge
the Deed of Trust with Assignment of Rents upon
satisfaction of Lessee's obligations under this Master
Lease Agreement will be vitiated if the remedy pursued
pursuant to Section 16 otherwise affects the Deed of
Trust with Assignment of Rents in such a manner to
preclude Lessor from effecting a discharge of the Deed
of Trust with Assignment of Rents.
Lessor agrees to release such portions of the above
described property from the Deed of Trust as may be
reasonably requested by Lessee to enable Lessee to
complete financing and construction of expansions to
its rice drying and storage operation, provided that
Lessor, is left with Liens sufficient in its sole
judgment to adequately secure its position as secured
lender or Lessor of the Equipment to Lessee.
Lessee will not move the Equipment from the addresses
set forth in the Equipment Schedule without Lessor's
consent, which consent will not be unreasonably
withheld; PROVIDED, HOWEVER, that in no event will any
of the Equipment be moved to a location outside the
United States of America or to any jurisdiction within
the United States of America which has not adopted the
Uniform Commercial Code.
13. DESIGNATION OF OWNERSHIP. If at any time during
the term hereof, Lessee is supplied with labels, plates
or other markings stating that the Equipment is owned
by Lessor or is subject to any interest of Assignee,
Lessee agrees to affix and keep the same prominently
displayed on the Equipment. Lessee agrees to execute
and file Uniform Commercial Code financing statements
and any and all other instruments necessary to perfect
Lessor's or Assignee's interest in this Master
Equipment Lease, Promissory Note and Equipment
Schedule(s), the payment due hereunder or the
Equipment. Lessor may file a copy of this Master
Equipment Lease and appropriate Promissory Note or
Equipment Schedule(s) as a financing statement.
14. USE. Lessee shall use the Equipment in a careful
and proper manner in conformance with manufacturer's
specifications and shall comply with and conform to all
federal, state, municipal and other laws, ordinances
and regulations in any way relating to the possession,
use or maintenance of the Equipment.
15. DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default and shall,
at the option of Lessor, terminate this Master
Equipment Lease and any or all Promissory Note or
Equipment Schedule(s) hereto involved with such Event
of Default and Lessee's right to possession of the
Equipment covered by such Promissory Note or Equipment
Schedule(s):
(a) The nonpayment by Lessee of any item of Rent
within 10 days of the date on which it is due.
(b) The failure by Lessee to perform or observe any
other term, covenant or condition of this Master
Equipment Lease or any Equipment Schedule, which is not
cured within 10 days after notice thereof from Lessor
or Assignee.
(c) Any affirmative act of insolvency by Lessee, or
the filing by Lessee of any petition or action under
any bankruptcy, reorganization, insolvency arrangement,
liquidation, dissolution or moratorium law, or any
other law or laws for the relief of, or relating to
debtors.
(d) The filing of any involuntary petition against
Lessee under any bankruptcy, reorganization,
insolvency, arrangement, liquidation, dissolution or
moratorium law or any other law for the relief of or
relating to debtors which
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 6 of 9
is not dismissed within 60 days thereafter, or the
appointment of any receiver, liquidator or trustee to
take possession of any substantial portion of the
properties of Lessee, unless the appointment is set
aside or ceases to be in effect within 60 days from the
date of said filing or appointment.
(e) The subjection of a substantial part of Lessee's
property or any Leased Item to any levy, seizure,
assignment or sale for or by any creditor or
governmental agency.
(f) The untruth of any representation or warranty made
by Lessee in this Master Equipment Lease or in any
Equipment Schedule or in any document furnished by
Lessee to Lessor or Assignee in connection with this
Master Equipment Lease or any Equipment Schedule or
with respect to the acquisition or use of the
Equipment.
(g) The occurrence of any material adverse change in
the business or financial condition of Lessee or
Guarantor(s). A material adverse change shall be
generally defined as a reduction in the Tangible Net
Worth of Lessee or Guarantor(s) of 20% or more
(determined in accordance with Generally Accepted
Accounting Principles), or the loss of Farmers' Rice
Coop as a customer for Lessee's Rice Drying and Storage
Services. The provisions of this sub-paragraph (g)
shall only apply during the period in which Promissory
Notes are in force, and eliminates Lessor's obligations
to enter into any further Promissory Notes or Equipment
hereunder. Once an Equipment Schedule has been entered
into, which by definition shall have superseded the
Promissory Notes, the provisions of this sub paragraph
"(g)" shall no longer apply.
16. REMEDIES. Upon the happening of events (a)
through (f), above:
(a) Lessee will, without demand, on the next Rent
payment date following the Event of Default, pay
to Lessor, as liquidated damages and not as a
penalty, an amount equal to the Casualty Value of
the Equipment set forth in Exhibit B together with
any Rent then due and owing by Lessee hereunder;
and
(b) Lessor may, without notice to or demand upon
Lessee, pursue any and all remedies available to
Lessor to the extent permissible under California
law including but not limited to California Real
Property Law and the California Commercial Code,
provided, however, that:
(i) In the event Lessor elects to
pursue the remedy of a sale of the Real
Property secured by the Deed of Trust and
Assignment of Rents, which is referred to
herein as the Additional Collateral, under
the power of sale contained in the Deed of
Trust and Assignment of Rents ("Trustee's
Sale"), then prior to delivery of the notice
of default as is required to proceed to a
Trustee's Sale under California law, Lessor
shall give Lessee written notice of Lessor's
election to proceed with a Trustee's Sale
(the "Lessor Election Notice"). Lessee shall
have the option (exercisable by written
notice to Lessor within five (5) days
following Lessee's receipt of the Lessor
Election Notice and otherwise deemed waived)
to use its diligent best efforts to market
and sell the Real Property, for a period of
ninety (90) days following the Lessor
Election Notice, for net cash proceeds in
excess of the amounts owing to Lessor under
this Master Equipment Lease and Promissory
Note or Equipment Schedule(s) or otherwise
upon terms acceptable to Lessor in its sole
discretion (a "Lessee Sale"), and during this
period and any extension thereof Lessee
agrees to provide Lessor with regular
detailed reports on the status and progress
of its efforts to arrange a Lessee Sale; and
(ii) In the event Lessee has elected to
proceed with a Lessee Sale and, at the
expiration of the initial 90-day period has
not completed a Lessee Sale but has entered
into a binding contract therefor to a third
party subject only to reasonable and standard
contingencies as reasonably determined by
Lessor (a "Contract of Sale"), then Lessor
shall allow Lessee an additional period not
to exceed ninety (90) days from the date of
such Contract of Sale (the "Extension
Period") to consummate the Lessee Sale (which
Extension Period shall terminate immediately
if the Contract of Sale is terminated for any
reason); and
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 7 of 9
(iii) In the event Lessee does not
complete a Lessee Sale or enter into a
Contract of Sale within the initial 90-day
period described above, or if Lessee has not
completed a Lessee Sale within the Extension
Period, Lessor shall thereafter be free to
proceed to deliver a notice of default as is
required to proceed to a Trustee's Sale under
California law and thereafter to proceed
under the following paragraph; and
in the event of any form of sale of the Equipment
or the Additional Collateral, apply or pay the
proceeds of such sale, including the proceeds of
any Lessee Sale or Trustee's Sale described in
clause (i) above (collectively "Proceeds"), (A)
FIRST, to pay all costs and expenses, including
reasonable legal fees and disbursements, incurred
by Lessor as a result of the default and the
exercise of its remedies with respect thereto, and
(B) SECOND, to pay Lessor an amount equal to any
unpaid Rent due and payable accrued to the date of
Lessor's receipt thereof, plus the Casualty Value
applicable as of such date (or if such date occurs
prior to the Rent Commencement Date or after the
expiration date of the Lease, the Casualty Value
as of the Rent Commencement Date or the last
Monthly Rent Payment Date, as the case may be), to
the extent not previously paid by Lessee (the sum
of clause (A) and clause (B) hereinafter "Lessor's
Damages"). Any deficiency of the Proceeds below
Lessor's Damages ("Deficiency") shall be
immediately paid by Lessee to Lessor (Lessee
hereby waiving to the extent permitted by law any
anti-deficiency rights it may have under
applicable law); any surplus of the Proceeds
remaining after full satisfaction of Lessor's
Damages shall be paid to Lessee. To the extent
and for so long as Lessee has not paid Lessor the
amount specified in this Section 16, Lessee will
pay to Lessor interest on Lessor's Damages at the
Late Payment Rate as defined in the applicable
Promissory Note or Equipment Schedule, computed
from the date of Lessee's default hereunder until
such amounts are paid.
The exercise of any of the foregoing remedies by Lessor
will not constitute a termination of this Master
Equipment Lease or any Promissory Note or Equipment
Schedule unless Lessor so notifies Lessee. No remedy
referred to in this Section 16 is intended to be
exclusive, but each shall be cumulative and in addition
to any other remedy referred to above or otherwise
available to Lessor at law or in equity.
In an Event of Default resulting from any of the events
described in Section of 15(g), above, Lessor shall have
the option to either: (1) declare the then Casualty
Value immediately due and payable; (2) declare the then
Casualty Value payable over the next twelve months at
an interest rate of 7.65%; or (3) allow the terms and
conditions of the Lease to continue without amendment.
17. SPECIAL TERMS. Any special terms set forth in one
or more Exhibits, Schedules, Addenda or Riders to this
Master Equipment Lease as they apply to the applicable
Promissory Note or Equipment Schedule(s) will be
applicable as though fully set forth herein.
18. MISCELLANEOUS.
(a) EFFECT OF WAIVER. No delay or omission to
exercise any right or remedy accruing to Lessor upon
any breach or default of Lessee will impair any such
right or remedy or be construed to be a waiver of any
such breach or default, nor will a waiver of any single
breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval on the part of
Lessor of any breach or default under this Master
Equipment Lease, or any Promissory Note or Equipment
Schedule or of any provision or condition hereof, must
be in writing and will be effective only to the extent
in such writing specifically set forth. All remedies,
either under this Master Equipment Lease, or at law or
in equity or otherwise afforded to Lessor, are
cumulative and not alternate.
(b) NOTICES. Any notice required or permitted to be
given by the provisions hereof must be in writing and
will be conclusively deemed to have been received by a
party hereto on the day it is delivered to such party
at the address indicated below (or at such other
address as such party specifies to the other party in
writing) or, if sent by certified mail, on the fifth
business day after the day on which mailed, addressed
to such party at such address:
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 8 of 9
IF TO LESSOR: ICON Financial Corp.
600 Mamaroneck Avenue
Harrison, NY 10528
IF TO LESSEE: As set forth in the applicable
Promissory Note or Equipment
Schedule.
(c) ATTORNEYS' FEES AND COSTS. In the event of any
action at law or suit in equity in relation to this
Master Equipment Lease or any Promissory Note or
Equipment Schedule, the prevailing party will be
entitled to a reasonable sum for its attorneys' fees
and costs. The terms of this section shall not be
deemed to amend or supersede the provisions of Section
9 or 17 with respect to attorneys' fees.
(d) APPLICABLE LAW. This Master Equipment Lease and
Promissory Note or Equipment Schedule(s) will be
governed by and construed in accordance with, the laws
of the State of California.
(e) SECURITY INTEREST.
(i) Each executed copy of this Master Equipment
Lease will be an original. To the extent, if any,
that this Master Equipment Lease constitutes
chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in
this Master Equipment Lease may be created through
the transfer or possession of any counterpart
other than an Original. Although this Master
Equipment Lease is dated as of the date first
above written for convenience, the actual date or
dates of execution hereof by the parties hereto is
or are, respectively, the date or dates set forth
opposite the signatures hereto and this Master
Equipment Lease is effective on the latest of such
dates.
(ii) There shall be only one original of the
Promissory Note or Equipment Schedule to the
Master Equipment Lease, and it shall be marked
"Original," and all other counterparts will be
duplicates. To the extent, if any, that any
Promissory Note or Equipment Schedule(s) to this
Master Equipment Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction)
no security interest in any Promissory Note or
Equipment Schedule(s) may be created in any
document(s) other than the "Original."
(f) SUSPENSION OF OBLIGATIONS OF LESSOR. The
obligations of Lessor hereunder will be suspended to
the extent that it is hindered or prevented from
complying therewith because of labor disturbances,
including, but not limited to, strikes and lockouts,
acts of God, fires, storms, accidents, failure of the
manufacturer to deliver any item of Equipment,
governmental regulations or interference or any cause
whatsoever not within the sole and exclusive control of
Lessor.
(g) FINANCIAL STATEMENTS. Lessee agrees promptly to
furnish, or cause to be furnished, to Lessor and
Assignee such financial or other statements respecting
the condition, operations and affairs of Lessee or
respecting the Equipment as Lessor or Assignee may from
time to time reasonably request.
(h) ENTIRE AGREEMENT. Lessor and Lessee acknowledge
that there are no agreements or understandings, written
or oral, between Lessor and Lessee with respect to the
Equipment, other than as set forth herein together with
any addendum, riders or exhibits attached hereto, and
in the Promissory Note or Equipment Schedule and that
this Master Equipment Lease and the Letters, and the
Promissory Note or Equipment Schedule contain the
entire agreement between Lessor and Lessee with respect
thereto. Neither this Master Equipment Lease nor the
Letters, Promissory Note or Equipment Schedule may be
altered, modified, terminated or discharged except by a
writing signed by the party against whom such
alteration, modification or discharge is sought.
(i) INVESTMENT TAX CREDIT. Investment Tax Credits
which may be available as to the Equipment under the
United States Federal Income Tax Laws shall be claimed
by Lessee.
(j) SEVERABILITY. Any provision of this Master
Equipment Lease or any Promissory Note or Equipment
Schedule prohibited by or unlawful or unenforceable
under any applicable law or any jurisdiction shall, at
the sole option of the Lessor, be ineffective as to
such jurisdiction without invalidating the remaining
provisions of this Master Equipment Lease or such
Promissory Note or Equipment Schedule; provided,
however, that to the extent that the provisions of any
such applicable law can be waived, they are hereby
waived by Lessee.
(k) NONSPECIFIED FEATURES. If the Equipment delivered
pursuant to any Promissory Note or Equipment Schedule
contains any features not specified therein, Lessee
grants Lessor, at Lessor's option and Lessor's expense,
the
<PAGE>
Master Equipment Lease
ICON Financial Corp.-SHF Acquisition Corp.
April 3, 1997
Page 9 of 9
right to remove or deactivate any of such features.
Such removal or deactivation shall be performed by the
manufacturer or another party acceptable to Lessee upon
the request of Lessor, at a time convenient to Lessee,
provided that Lessee shall not unreasonably delay the
removal of such features.
(j) QUIET ENJOYMENT. Provided that no Event of
Default has occurred or is continuing hereunder,
Lessor, Assignee or their agents or assigns shall not
interfere with Lessee's right of quiet enjoyment and
use of the Equipment.
(m) GUARANTY. If Lessee is a subsidiary of another
entity, Lessee will secure, upon request of Lessor, a
guaranty from such parent, on the form provided by
Lessor, whereby such parent guaranties, and undertakes
as a surety, all financial and other obligations of
Lessee under this Master Equipment Lease and any
Promissory Note or Equipment Schedule thereto.
(n) SURVIVAL OF OBLIGATIONS. All agreements,
representations and warranties, including, without
limitation the obligation with respect to
indemnification provided in Section 9 hereof, contained
in this Master Equipment Lease or in any document or
certificate delivered pursuant hereto or in connection
therewith, shall survive the execution and delivery of
this Master Equipment Lease and the expiration or other
termination of the Master Equipment Lease.
(o) SUBSTITUTION. Lessor may, upon written notice to
Lessee, provide Equipment with different serial numbers
and locations than those shown on the Equipment
Schedule if Lessor determines that it is in the best
interest of both Lessee and Lessor to do so. Any such
substituted Equipment will meet or exceed
specifications of Equipment specified on the Equipment
Schedule.
(p) ALTERATIONS. Lessee shall be permitted, with
Lessor's consent and at its own expense, to make
alterations or improvements to the Equipment which are
readily removable without causing material damage to
the Equipment and do not adversely affect any
manufacturer's warranties with respect to such
equipment.
(q) HEADINGS. Section headings are for convenience
only and shall not be construed as part of this Master
Equipment Lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this
Master Equipment Lease to be duly executed all as of
the date first above written.
LESSOR LESSEE
ICON FINANCIAL CORP. SHF ACQUISITION CORPORATION
By: /s/ By: /s/ James H. Dale
Title: Title: President
Date: Date: May 19, 1997
IFCmaster.doc
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$1,150,000.00
April 3, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter
called the "Borrower") promises to pay to the order of
ICON Cash Flow Partners, L.P., Series E (hereinafter
called "ICON"), at 600 Mamaroneck Avenue, Harrison, New
York 10528, or at such other place as may be designated
in writing by the holder of this Note, the amounts
advanced to the Borrower pursuant to the terms of that
certain letter agreement dated February 10,1997 (as
modified by that certain letter agreement dated March
21, 1997) between Borrower and ICON Financial Corp.
(together, the "Letter Agreement"), in an amount not to
exceed the principal amount of One Million One Hundred
Fifty Thousand Dollars ($1,150,000.00), together with
interest thereon at a rate of 12% per annum. The
interest shall be payable on the first day of the month
following the first advance and on the first day of
each month thereafter with all unpaid and accrued
interest being payable on or before the date which is
30 days following the final Installation Date of the
Rice Drying Facility being financed hereby, but in no
event later than December 31, 1997 (herein the "Due
Date).
The Borrower has executed and delivered to ICON a
Master Lease Agreement dated as of April 3, 1997 in
connection with this Note ("Master Lease Agreement")
and this Note is secured by the Equipment described in
Exhibit "A" hereto, and the real property described on
that certain Deed of Trust with Assignment of Rents
dated as of April ___, 1997. Except to the extent
inconsistent herewith, the terms and conditions of the
Master Lease Agreement are hereby incorporated herein
by this reference.
The obligations of Borrower under this Note shall
be deemed satisfied by either: (i) the completion of
construction of the Equipment and Borrower's signing
and delivery of an Equipment Schedule and Certificate
of Delivery and Acceptance substantially in the form of
Exhibit "B" hereto and as contemplated by the Letter
Agreement; or (ii) the prepayment by Borrower of this
Note, in whole but not in part, upon not less than
thirty (30) days prior written notice to ICON, in an
amount equal to: (a) the unpaid principal remaining
plus all interest accrued thereon; (b) any late charges
outstanding hereunder; (c) any additional obligations
due or outstanding under or related to this Note or the
Master Lease Agreement; and (d) a prepayment premium
calculated by multiplying the sum of (a), (b) and (c)
above by 10%.
If the Borrower fails to pay any interest
installment on its due date, which failure continues
for a period of five (5) days, Borrower shall pay a
late charge equal to two percent (2%) per month on the
amount of such late installment from the due date of
such installment to the date of payment (or, if sooner,
the date upon which ICON makes the declaration
described in the following sentence), but only to the
extent permitted by law. In the event that (a) such
interest installment remains unpaid for a period of
fifteen days after Borrower's receipt of notice of non-
payment thereof, or (b) Borrower shall not have fully
satisfied its obligations hereunder as set forth in the
previous paragraph on or before the Due Date and such
failure continues for a period of ten days after
Borrower's receipt of notice of such non-performance,
or (c) an Event of Default shall have occurred and be
continuing under the Master Lease Agreement following
written notice and the expiration of the applicable
cure period set out therein, then, in any such event,
ICON may, at its option and without further notice to
the Borrower, declare the entire unpaid balance of the
principal, accrued interest, accrued late charges, and
other sums due hereunder and under the Master Lease
Agreement immediately due and payable, with interest
thereafter at the rate of 18% per annum or the maximum
amount permitted by law, whichever is less,
-1-
<PAGE>
until fully paid; and if such entire amount is not paid
in full to ICON within thirty (30) days following
Borrower's receipt of notice of any such default, as
liquidated damages, Borrower shall also pay to ICON an
amount equal to ten percent (10%) of such entire
balance, together with interest thereon at 18% per
annum or the highest rate permitted by law, whichever
is less. Reference is made to the Master Lease
Agreement for a statement of the rights of ICON with
respect to the collateral securing this Note other
remedies.
In the event that ICON institutes an action upon
this Note or pursuant to the Master Lease Agreement,
the Borrower shall pay, in addition to unpaid
principal, interest, penalty and unpaid late charges,
the expenditures incurred by ICON, in enforcing
collection of this Note and its rights under the Master
Lease Agreement, including all reasonable attorney
fees. In addition, if the Borrower defaults under this
Note, then ICON shall be entitled to all the rights and
remedies of a secured party under the Uniform
Commercial Code, applicable California real property
law, and as set forth in the Master Lease Agreement.
THE BORROWER AND ICON WAIVE ALL RIGHTS TO A JURY TRIAL
IN ANY ACTION OR PROCEEDING BASED UPON THIS NOTE.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF ICON
AND THE BORROWER HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
This Note and the Master Lease Agreement may not
be modified or discharged, in whole or in part, and no
right or remedy of ICON hereunder or under any other
agreement may be waived except by a written agreement
signed by ICON.
SHF Acquisition Corp.
BY:
TITLE:
SHFNote.doc/
-2-
<PAGE>
EXHIBIT B
TO
MASTER LEASE AGREEMENT
DATED APRIL 3, 1997
EQUIPMENT SCHEDULE
TO
MASTER EQUIPMENT LEASE DATED APRIL 3, 1997
Equipment Schedule Date: [Date X, below].
LESSEE: LESSOR:
SHF Acquisition Corp. ICON Capital Corporation
4045 South Spencer Street, #206 4 Embarcadero Center, #590
Las Vegas, NV 89119 San Francisco, CA 94111
Address for Notices: Billing Reference:
Same as above. Brent Bower
Location of Equipment: Davis California
Expected Delivery Date: [Date X-this shall be the date
the Project is declared
complete by both parties].
Equipment Description: Rice drying Tower, and
ancillary equipment
Total Equipment Cost: $1,650,000, of which
$1,150,000 is financed
hereunder.
Installation Date: [Date X].
Rent Commencement Date: Shall be the last day of the
month following [Date X]. An
amount equal to 1/30th of the
monthly Rental for each Leased
Item of Equipment times the
number of days which have
elapsed from the Installation
Date to the Rent Commencement
Date shall be payable on the
Rent Commencement Date. The
period from the Installation
Date to the Rent Commencement
Date shall be called the
"Interim Lease Term."
Lease Term: 60 months plus the Interim
Lease Term, if any. Rent is
due, in advance, on the last
day of each month during the
Lease Term.
<PAGE>
Exhibit B to Master Lease Agreement
April 3, 1997
Page 2 of 2
Late Payment Rate: Interest for overdue Rent shall
equal the lesser of 1.5% per
month, or the maximum amount
allowable by law.
Total Monthly Rent: [2.202%, (subject to change per
the CAPITAL MARKETS ADJUSTMENT
section of the February 10, 1997
Letter), times the funded
Equipment Cost-] payable monthly,
in advance on the 30th day of each
month. Both the first and the
last payment shall be due on [Date
X].
Prepayment: Lessee shall have the right to
prepay the Rent due hereunder by
paying to Lessor the present value
of the then remaining Rent
discounted by using the applicable
interest rate provided to Lessee
by Lessor, plus the following
penalty (penalty is based on a
percentage of the present value as
calculated above):
Year of Penalty
Prepayment:
1-2 4.0%
3-4 3.0%
5 2.0%
Investment Tax Credit:: Any available Investment Tax
Credit will be for the account of
the Lessee.
Effectiveness: This Equipment Schedule shall not
be binding and effective until
executed by both Lessor and
Lessee.
Master Lease: This Equipment Schedule is issued
pursuant to the Master Equipment
Lease identified.
Equipment Obligation: In the event the Equipment is
being delivered from the
manufacturer, Lessor's obligation
to provide the Equipment is
predicated on Lessor's succeeding
to the on-order position of Lessee
with the manufacturer
Master Lease: This Equipment Schedule is issued
pursuant to the Master Equipment
Lease Agreement between Lessor and
Lessee dated [ ].
LESSEE: LESSOR:
SHF ACQUISITION CORP. ICON CAPITAL CORP.
By: By:
Title: Title:
Date: Date:
<PAGE>
EXHIBIT D-1
[ICON Financial Corp. Letterhead]
March 21, 1997
Mr. James Dale
SHF Acquisition Corp.
4045 South Spencer Street, #206
Las Vegas, NV 89119
Dear Mr. Dale:
Enclosed please find the following documents which
shall constitute the necessary documentation for the
funding of the rice dryer in Davis, California:
1. Master Lease Agreement
2. Promissory Note ("Note")
The PROGRESS PAYMENTS, COMMITMENT FEE, and LESSOR'S
EXPENSES portions of the February 10, 1997 letter,
appearing herein as Exhibit D to the Master Lease
Agreement, shall be modified and shall hereinafter be
read as follows:
PROGRESS Lessor shall participate in the funding of
PAYMENTS: construction costs as they are due, on the basis
that Lessee pay the first $200,000 of such
expenses, and 50% of the next $600,000, as long as
the required payments are not significantly in
advance of the following schedule, and further that
Lessor shall not be required to make any payments
in an amount less than $50,000:
Est. Total SHF to ICON to
Payment Pay Pay
May 375,000 290,000 85,000
June 435,000 210,000 225,000
July 435,000 0 435,000
Aug-Sept 407,000 2,000 405,000
$1,652,000 $500,000 $1,150,000
Progress payment fundings shall be charged interest
only at 12% per annum, payable monthly on the
outstanding balance.
They shall then be rolled into the Lease Financing
as of the Base Lease Commencement Date. Should the
project not
<PAGE>
[ICON LOGO] SHF Acquisition Corp.-ICON Financial Corp.
March 21, 1997
Page 2 of 2
be completed by December 31, 1997 the notes
shall be payable on demand.
Lessor shall make the Progress Payments
timely when billed by the Contractor, and
after such bills have been approved by
Lessee, no later than the later of: 15 days
after receipt of approved invoices from
Lessee; or two business days after Lessee
has provided evidence of such payment to
Lessor in the form of copies of the checks,
(Lessor shall further confirm that such
such payment(s) have been made by calling
the contractor). Lessor shall have no
obligation to fund hereunder until all of
the above referenced documents have been
properly executed by Lessee. Lessor agrees
that if it does not deliver the first
payment as required above that it will
promptly reconvey the Deed of Trust to
Lessee.
COMMITMENT FEES: Upon acceptance of this Commitment and the
satisfactory review of the documentation,
Lessee shall deposit with Lessor $30,000 as
a commitment fee. This commitment fee
shall be deemed earned upon receipt and is
non-refundable. If funding does not occur
through no fault of Lessor, Lessor shall
retain said deposit as an earned fee.
$14,000 of the fee shall be applied to
payments due from Lessee to Lessor after
Lessor has funded a cumulative amount of
$575,000.
LESSOR'S EXPENSES: Lessee will be responsible for and will
reimburse Lessor the full amount of all out
of pocket costs. Such costs shall not
exceed $1,000 without the prior consent of
Lessee.
Additionally, Lessee shall pay a $750.00
documentation fee at closing, plus $250 for
each progress payment requested. A
Progress Payment shall be defined as a
funding package, which may contain requests
for multiple checks so long as each such
check is in an amount of $50,000 or more,
in which case only one charge of $250 shall
apply to such package.
Sincerely, Agreed: SHF Acquisition Corp.
/s/ Richard S. Brennan By: /s/ James H. Dale
Richard S. Brennan Title: President
Managing Director
Date: May 19, 1997
<PAGE>
EXHIBIT D-2
[ICON Financial Corp. Letterhead]
February 10, 1997
Mr. James Dale
SHF Acquisition Corp.
4045 South Spencer Street, #206
Las Vegas, NV 89119
Dear Mr. Dale:
We are most pleased to present SHF Acquisition Corp. with the
following revised financing commitment for your review and
acceptance. This proposal is subject to the final review and
credit approval by the Executive Committees of the Lessor.
LESSOR: ICON Capital Corp. or its assignee(s).
LESSEE: SHF Acquisition Corp.
GUARANTORS: M & R Investment Company, and Dunes
Hotels and Casinos Corporation.
TRANSACTION
TYPE: Finance Lease.
ADDITIONAL
COLLATERAL: Lessee shall provide Lessor with a first
mortgage on two of the three contiguous
parcels of land upon which the Dryer is
to be sited and the Rice Storage
Building. An appraisal shall be
required which shows the orderly
liquidation value of the additional
collateral to be greater than $1.5
million. Lessee shall bear the cost of
this appraisal.
EQUIPMENT: One new rice drying facility.
FACILITY COST: $1,650,000.
BASE LEASE TERM: 60 months.
LEASE AMOUNT: Not less than 70% of total facility cost
or $1,150,000.
FUNDING DATE: February, 1997, through August, 1997.
<PAGE>
SHF Acquisition Corp.-ICON Financial Corp.
February 10, 1997
Page 2 of 4
RENTAL FACTOR: Lessee shall make 60 equal monthly payments, the
first and last of which shall be in advance, of
2.202% of funded cost.
COMMITMENT Upon acceptance of this Commitment and the
FEES: satisfactory review of the documentation, Lessee
shall deposit with Lessor $30,000 as a commitment
fee. This commitment fee shall be deemed earned
upon receipt and is non-refundable. If funding
does not occur through no fault of Lessor, Lessor
shall retain said deposit as an earned fee.
Lessor shall remit $16,000 of said fee to
Fidelity Leasing Corporation for its role in
structuring the transaction.
The remaining $14,000 shall be applied to the
first payments due from Lessee upon Funding.
END OF LEASE: At the end of the Base Lease Term, Lessee shall
have the option to purchase not less than all of
the Equipment for $1.00.
CAPITAL The Rental Factor quoted herein shall be subject
MARKETS to change as the yield on 5 Year Constant
ADJUSTMENT: Maturity U.S. Treasury Notes (Treasuries) changes
up until the Base Lease Commencement Date. As of
the Final Funding Date, the Rental Factor shall
increase or decrease by .0005% for each basis
point that Treasuries are above 6.40% or below
6.20%. (The Rentals shall remain fixed
thereafter.)
PROGRESS Lessor shall participate in the funding of
PAYMENTS: construction costs as they are due, on the basis
that Lessee pay the first $200,000 of such
expenses, and 50% of the next $600,000, as long
as the required payments are not significantly in
advance of the following schedule:
Est. Total SHF to ICON to
Payment Pay Pay
Februa $150,000 $150,000 $0
ry
March 300,000 175,000 125,000
April 150,000 75,000 75,000
May 300,000 100,000 200,000
June 300,000 0 300,000
July 300,000 0 300,000
August 150,000 0 150,000
$1,650,000 $500,000 $1,150,000
<PAGE>
SHF Acquisition Corp.-ICON Financial Corp.
February 10, 1997
Page 3 of 4
Progress payment fundings shall be
charged interest only at 13% per annum,
payable monthly on the outstanding
balance. They shall then be rolled into
the Lease Financing as of the Base Lease
Commencement Date. Should the project
not be completed by December 31, 1997,
the notes shall be payable on demand.
LESSOR'S EXPENSES: Lessee will be responsible for and will
reimburse Lessor the full amount of all
out of pocket costs. Such costs shall
not exceed $1,000 without the prior
consent of Lessee.
Additionally, Lessee shall pay a $750.00
documentation fee at closing, plus $250
for each progress payment requested.
INTERIM RENT: Interim Rent shall be payable at the
daily equivalent of the monthly Payment
from the Final Funding Date until the
Base Lease Commencement Date.
MATERIAL ADVERSE
CHANGE: Lessor's shall have no obligation to
fund the subject Lease, or to continue
Progress Payments should a material
adverse change in the business or
financial condition of Lessee or
Guarantor(s) occur. A material adverse
change shall be generally defined as a
reduction in the Tangible Net Worth of
Lessee or Guarantor(s) of 20% or more,
(determined in accordance with Generally
Accepted Accounting Principles), or the
loss of Farmers' Rice Coop as a customer
for Lessee's Rice Drying and Storage
services.
FINANCIAL
STATEMENTS: Lessee shall provide Lessor with
financial statements and other financial
information as Lessor shall reasonably
request on itself and the guarantors
from the date of its acceptance of this
commitment through the end of the Lease
Term.
INSURANCE: Lessee shall maintain all risk property
damages and liability insurance on the
Equipment Leased and the Additional
Collateral in form and amount and with
such insurers as Lessor shall reasonably
request. Lessor shall be named as
additional insured on liability coverage
and as loss payee on property damage
insurance as its interests may appear.
<PAGE>
SHF Acquisition Corp.-ICON Financial Corp.
February 10, 1997
Page 4 of 4
DOCUMENTATION: The completion of the transaction is
subject to the execution of mutually
acceptable documentation.
The foregoing commitment expires on February 17, 1997 unless it
is accepted on or before that date as evidenced by Lessee's
counter-executing a copy of this letter and returning it to the
Lessor.
We look forward to doing business with your fine company.
Sincerely,
/s/ Richard S. Brennan
Richard S. Brennan
Managing Director Accepted:SHF Acquisition Corp.
By /s/ James H. Dale
Title President
Date May 19, 1997
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT E
TO
MASTER LEASE AGREEMENT
DATED APRIL 3, 1997
CASUALTY VALUES
Casualty Value
After as
Payment Number a % of Total
Funded Amount
<S> <C>
1 102.28
2 100.98
3 99.68
4 98.36
5 97.02
6 95.67
7 94.31
8 92.93
9 91.54
10 90.13
11 88.71
12 87.28
13 85.83
14 84.36
15 82.88
16 81.38
17 79.87
18 78.35
19 76.80
20 75.24
21 73.67
22 72.08
23 70.47
24 68.84
25 67.20
26 65.54
27 63.87
28 62.18
29 60.47
30 58.74
31 56.99
32 55.23
33 53.44
34 51.64
35 49.82
36 47.98
37 46.13
38 44.25
39 42.35
40 40.43
41 38.50
42 36.54
43 34.57
44 32.57
45 30.55
46 28.51
47 26.45
48 24.37
49 22.27
50 20.14
51 18.00
52 15.83
53 13.64
54 11.42
55 9.18
56 6.92
57 4.64
58 2.33
59 0.00
</TABLE>
<PAGE>
PROMISSORY NOTE
$1,150,000.00 April 3, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter
called the "Borrower") promises to pay to the order of
ICON Cash Flow Partners, L.P., Series E (hereinafter
called "ICON"), at 600 Mamaroneck Avenue, Harrison, New
York 10528, or at such other place as may be designated
in writing by the holder of this Note, the amounts
advanced to the Borrower pursuant to the terms of that
certain letter agreement dated February 10,1997 (as
modified by that certain letter agreement dated March
21, 1997) between Borrower and ICON Financial Corp.
(together, the "Letter Agreement"), in an amount not to
exceed the principal amount of One Million One Hundred
Fifty Thousand Dollars ($1,150,000.00), together with
interest thereon at a rate of 12% per annum. The
interest shall be payable on the first day of the month
following the first advance and on the first day of
each month thereafter with all unpaid and accrued
interest being payable on or before the date which is
30 days following the final Installation Date of the
Rice Drying Facility being financed hereby, but in no
event later than December 31, 1997 (herein the "Due
Date).
The Borrower has executed and delivered to ICON a
Master Lease Agreement dated as of April 3, 1997 in
connection with this Note ("Master Lease Agreement")
and this Note is secured by the Equipment described in
Exhibit "A" hereto, and the real property described on
that certain Deed of Trust with Assignment of Rents
dated as of April __, 1997. Except to the extent
inconsistent herewith, the terms and conditions of the
Master Lease Agreement are hereby incorporated herein
by this reference.
The obligations of Borrower under this Note shall
be deemed satisfied by either: (i) the completion of
construction of the Equipment and Borrower's signing
and delivery of an Equipment Schedule and Certificate
of Delivery and Acceptance substantially in the form of
Exhibit "B" hereto and as contemplated by the Letter
Agreement; or (ii) the prepayment by Borrower of this
Note, in whole but not in part, upon not less than
thirty (30) days prior written notice to ICON, in an
amount equal to: (a) the unpaid principal remaining
plus all interest accrued thereon; (b) any late charges
outstanding hereunder; (c) any additional obligations
due or outstanding under or related to this Note or the
Master Lease Agreement; and (d) a prepayment premium
calculated by multiplying the sum of (a), (b) and (c)
above by 10%.
If the Borrower fails to pay any interest
installment on its due date, which failure continues
for a period of five (5) days, Borrower shall pay a
late charge equal to two percent (2%) per month on the
amount of such late installment from the due date of
such installment to the date of payment (or, if sooner,
the date upon which ICON makes the declaration
described in the following sentence), but only to the
extent permitted by law. In the event that (a) such
interest installment remains unpaid for a period of
fifteen days after Borrower's receipt of notice of non-
payment thereof, or (b) Borrower shall not have fully
satisfied its obligations hereunder as set forth in the
previous paragraph on or before the Due Date and such
failure continues for a period of ten days after
Borrower's receipt of notice of such non-performance,
or (c) an Event of Default shall have occurred and be
continuing under the Master Lease Agreement following
written notice and the expiration of the applicable
cure period set out therein, then, in any such event,
ICON may, at its opti on and without further notice to
the Borrower, declare the entire unpaid balance of
the principal, accrued interest, accrued late charges,
and other sums due hereunder and under the Master Lease
Agreement immediately due and payable, with interest
thereafter at the rate of 18% per annum or the maximum
amount permitted by law, whichever is less,
-1-
<PAGE>
until fully paid; and if such entire amount is not paid
in full to ICON within thirty (30) days following
Borrower's receipt of notice of any such default, as
liquidated damages, Borrower shall also pay to ICON
an amount equal to ten percent (10%) of such entire
balance, together with interest thereon at 18% per annum
or the highest rate permitted by law, whichever is less.
Reference is made to the Master Lease Agreement for a
statement of the rights of ICON with respect to the
collateral securing this Note other remedies.
In the event that ICON institutes an action upon
this Note or pursuant to the Master Lease Agreement,
the Borrower shall pay, in addition to unpaid
principal, interest, penalty and unpaid late charges,
the expenditures incurred by ICON, in enforcing
collection of this Note and its rights under the Master
Lease Agreement, including all reasonable attorney
fees. In addition, if the Borrower defaults under this
Note, then ICON shall be entitled to all the rights and
remedies of a secured party under the Uniform
Commercial Code, applicable California real property
law, and as set forth in the Master Lease Agreement.
THE BORROWER AND ICON WAIVE ALL RIGHTS TO A JURY TRIAL
IN ANY ACTION OR PROCEEDING BASED UPON THIS NOTE.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF ICON
AND THE BORROWER HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
This Note and the Master Lease Agreement may not
be modified or discharged, in whole or in part, and no
right or remedy of ICON hereunder or under any other
agreement may be waived except by a written agreement
signed by ICON.
SHF Acquisition Corp.
BY: /s/ James H. Dale
TITLE: President
-2-
<PAGE>
GUARANTY
This Guaranty is made, effective as of the date of
execution set forth below, by DUNES HOTELS AND CASINOS
INC., a New York corporation of 404 So.Spencer Street,
#206, Las Vegas, Nevada 89119 ("Guarantor") to ICON
FINANCIAL CORP., of 600 Mamaroneck Avenue, Harrison,
New York 10528, and its successors and assigns
("Lessor"), with respect to the obligations of SHF
Acquisition Corporation, a Nevada corporation, of 4045
o. Spencer Street, #206, Las Vegas, Nevada 89119
("Lessee") under that certain Master Lease Agreement
dated as of April 3, 1997, including without limitation
the letter agreement between Lessor and Lessee with
respect thereto dated as of February 10, 1997 and
modified as of March 21, 1997 and any Promissory Note
and Equipment Schedule thereunder (collectively, the
"Lease"). Capitalized terms used in this Guaranty and
not otherwise defined herein shall have the meanings
given to them in the Lease.
INTRODUCTION
Guarantor desires to induce Lessor to acquire,
finance and lease certain facilities and equipment
(such facilities and equipment and all substitutions,
replacements, accessions and additions thereto
hereinafter called the "Equipment") to Lessee, a direct
or indirect wholly owned subsidiary of Guarantor,
pursuant to the Lease in order to enhance and protect
Guarantor's financial interest in Lessee, and in order
to promote Guarantor's general business enterprise.
IN CONSIDERATION of the foregoing matters, for ten
dollars, and other valuable consideration, the receipt
and sufficiency of each of which is acknowledged,
Guarantor covenants and agrees as follows:
1. GUARANTY. Guarantor guarantees the full and
punctual payment, performance and observance of all
debts, obligations and liabilities of Lessee to Lessor,
whether now existing or subsequently arising,
liquidated or unliquidated, absolute or contingent, now
due or hereafter falling due, arising out of or in
connection with the Lease including the full, prompt
and complete performance by the Lessee of all of the
terms and conditions contained in the Lease to be kept
and performed by the Lessee, together with all costs of
collection, including reasonably attorneys' fees (all
of the foregoing, collectively, the "Obligations").
2. CONTINUING GUARANTY. This is a continuing
guaranty of payment and performance, which shall apply
to all Obligations which now exist or subsequently
arise, whether or not notice of such Obligations is
given to Guarantor, whether or not any or all prior
Obligations had been fully paid, performed and observed
before any such Obligations arose, and notwithstanding
Guarantor's dissolution. The Lease specifically allows
for several acceptances of Equipment by Lessee, and
Guarantor waives notices of each such acceptances or
deliveries of Equipment, in whole or in part. This
Guaranty may be terminated by the Guarantor only as of
the date on which the Guarantor has received written
notice from the Lessor stating that the Lessee has
fully paid and performed all of the Obligations.
3. OTHER RIGHTS, REMEDIES, SECURITY AND
OBLIGATIONS Guarantor's liability is direct, primary
and unconditional, and, except as set forth below in
this paragraph, may be enforced by Lessor without first
resorting to any other right, remedy or security,
including without limitation any right or remedy
against Lessee, the Equipment, or against any other
person, partnership or entity which now is or may at
any time become liable with respect to any of the
Obligations, or against any security given by Lessee,
by Guarantor or by any other person. Notwithstanding
the foregoing or anything contained in this Guaranty to
the contrary, upon the occurrence and continuance of an
"Event of Default" under and as defined in the Lease,
Lessor shall first proceed against the Equipment and
the Additional Collateral, and provided that Lessor
proceeds against the Equipment and the Additional
Collateral in a manner consistent with applicable law
(and, in the case of a Trustee's Sale or a Lessee Sale,
with the provisions of Section 16(b) of the Lease),
Guarantor shall be liable
<PAGE>
for the entire Deficiency together with interest
thereon at the Late Payment Rate and other sums due
under the Lease, notwithstanding any defenses or
limitations with respect thereto available to the
Lessee under applicable law (including without
limitation Lessee's anti-deficiency rights under
applicable California law), which are hereby waived by
Guarantor as to Guarantor. Guarantor's liability shall
not be discharged or diminished (w) by any waiver by
Lessor of any of the terms, covenants or conditions of
any of the Obligations, (x) by the granting of any
indulgence or extension of time to Lessee, (y) by any
modification, supplement or extension of any of the
Obligations, or (z) by any agreement or arrangement
with Lessee or anyone else. Lessor shall be entitled,
in its sole discretion, without discharging or
diminishing Guarantor's liability under this Guaranty,
(i) to apply any payment or transfer received from
Lessee, from Guarantor or from any person, to any of
the Obligations, or (ii) to apply any recovery from
security to any of the Obligations or to any other
debts, obligations or liabilities secured thereby,
whether or not then due, or (iii) to hold any such
payment, transfer or recovery from security as
additional security for any or all of the Obligations,
or for other debts, obligations or liabilities of
Lessee, or of the payor or transferor, or which were
secured by such security, whether or not then due.
4. UNLIMITED LIABILITY. Guarantor's liability
hereunder is unlimited in amount. Guarantor's liability
shall be joint and several with the liability of
Lessee.
5. WAIVER OF NOTICES, ETC Guarantor agrees, to
the greatest extent permitted by law, that Lessor shall
not be required to give Guarantor any notice pursuant
to this Guaranty, and that no failure to give any such
notice shall discharge or diminish the liability which
Guarantor would have had under this Guaranty if such
notice had been given. Guarantor waives, without
limitation, to the greatest extent permitted by law:
notice of acceptance of this Guaranty; notice of the
incurring or additional or increased Obligations;
notice of the application of any payment, transfer or
recovery from security; presentment, demand and protest
of any instrument, and notice thereof; notice of non-
payment of other default under this Guaranty or under
any Obligation; notice of foreclosure; notice of any
release, discharge, or modification of or failure to
obtain any security for any of the Obligations; notice
of any waiver by Lessor of any of the terms, covenants
or conditions or any of the Obligations; notice of the
granting of any indulgence or extension of time to
Lessee; notice of any modification, supplement or
extension of any of the Obligations; notice of any
agreement or arrangement with Lessee, or anyone else;
any right to exoneration or to require election of
remedies; and all suretyship defenses.
6. ACCELERATION. Guarantor shall, at Lessor's
option, without notice, immediately become liable for
the outstanding balance of all Obligations, whether or
not then due, (a) in the event of any failure by
Guarantor fully and punctually to pay, perform or
observe any debt, obligation or liability of Guarantor
under this Guaranty, (b) in the event that Lessee or
Guarantor becomes insolvent, or attempts to make a
composition, moratorium or similar agreement with its
creditors, or makes a general assignment for the
benefit of creditors or has a custodian or receiver
appointed for a substantial portion of its assets, or
(c) if a petition under the federal bankruptcy laws or
any moratorium, insolvency, receivership, or
reorganization proceeding is filed or commenced by or
against the Lessee or Guarantor, or (d) if Lessor would
be entitled to accelerate any of the Obligations but
for the fact that acceleration has been stayed or
enjoined, or (e) in the event of a default by Lessee
under any one or more of the Obligations.
7. UNENFORCEABILITY. In the event that any
Obligation is for any reason not legal, valid or
unenforceable against Lessee, or if any Obligation is
limited, modified, voided, released or discharged in
any proceeding under the federal bankruptcy laws or in
any moratorium, insolvency, receivership, arrangement
or reorganization proceeding, or if any Obligation is
subject to any setoff, direct or indirect counterclaim
or defense by Lessee against Lessor, Guarantor's
liability hereunder shall be the same as if such
Obligation were legal, valid and enforceable, and had
not been so limited, modified, voided, released or
discharged, and were
2
<PAGE>
not subject to such setoff, counterclaim or defense.
If any payment or transfer to Lessor or recovery from
security by Lessor, which has been credited against any
Obligations, is voided or rescinded or required to
be resumed by Lessor, this Guaranty and any security
given by Guarantor for the Obligations or for this
Guaranty shall continue in effect or be reinstated
as though such payment, transfer or recovery had not
been made.
8. WAIVER OF SUBROGATION; SUBORDINATION;
INDEMNITY. Guarantor shall have no right of, and
hereby unconditionally and irrevocably agrees that it
will not at any time assert or exercise against Lessee
any right of subrogation, reimbursement, indemnity,
contribution or payment to the extent such rights may
otherwise have arisen, by reason of Guarantor's
performance, satisfaction or discharge of any or all of
the Obligations. All present and future debts,
obligations and liabilities of Lessee to Guarantor are
hereby waived and postponed in favor of and
subordinated to the full payment, performance and
observance of the Obligations, and Guarantor agrees to
assign and deliver to Lessor on request, as security
for this guaranty, (a) any such debts, obligations or
liabilities, (b) any instruments or documents
evidencing the same, (c) any security therefor, and
(d) any payments or transfers with respect thereto, or
recoveries on security therefor, received by Guarantor
after default under any of the Obligations. Guarantor
indemnifies and holds harmless Lessor and its
stockholders, directors, officers, trustees,
beneficiaries, agents, employees and persons acting by,
through, under or in concert with any of them, and any
of their successors, personal representatives or
assigns (collectively, the "Indemnitees") from and
against any liability, darnage, loss, cost or expense,
including reasonable attomeys' fees, incurred in
connection with any claim, suit or proceeding by Lessee
or anyone claiming out of or relating to the
Obligations, the transactions pursuant to which the
Obligations were incurred, or any actions by any of the
Indemnitees to enforce the Obligations or to recover on
security for the Obligations.
9. FINANCIAL STATEMENTS. Guarantor agrees
promptly to furnish, or cause to be furnished, to
Lessor such financial or other statements respecting
the condition, operations and affairs of Guarantor or
respecting the Equipment as Lessor may from time to
time reasonably request.
10. LEGAL ACTION. Any legal action to enforce
this Guaranty may be maintained alone, without first
proceeding against Lessee, any other person or any
security, or may be consolidated, at Lessor's election,
with any action or other proceeding against Lessee or
any other person. Lessor's books and records showing
the account between Lessor and Lessee shall be
admissible in any action or proceeding and shall
constitute prima facie proof of the items stated in
such books and records. Lessor's rights are cumulative
and shall not be exhausted by the exercise of its
rights against Guarantor in any number of actions,
except when and so long as all Obligations have been
fully paid, performed and observed, and have not been
reinstated by reason of the avoidance of any transfer,
the retum of any payment, or otherwise, in which event
Guarantor's liability under this Guaranty shall be
likewise reinstated. GUARANTOR CONSENTS TO THE
JURISDICTION AND VENUE IN THE SUPERIOR COURTS OF THE
STATE OF CALIFORNIA, AND, IN THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF CALIFORNIA, WITH RESPECT TO
ANY ACTION BY-LESSOR TO ENFORCE THIS GUARANTY.
GUARANTOR WAIVES ANY RIGHT TO A JURY TRIAL IN ANY
ACTION TO ENFORCE THIS GUARANTY. GUARANTOR ACKNOWLEDGES
THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
CONSENTED TO THE JURISDICTION AND THE WAIVER OF JURY
TRIAL AS SET FORTH ABOVE FOLLOWING CONSULTATION WITH
LEGAL COUNSEL.
11. SUCCESSOR AND ASSIGNS. The benefit of this
Guaranty shall run to Lessor and its successors and
assigns. In the event that any Obligation is assigned
or otherwise transferred by Lessor, all of Lessor's
rights under this Guaranty may, at Lessor's option, be
assigned to the immediate and any subsequent
3
<PAGE>
assignees or transferees of such Obligation and shall
continue to run to Lessor with respect to any
Obligations not so assigned or transferred. The burden
of this Guaranty shall bind Guarantor and its successors
and assigns. This Guaranty shall apply to the
Obligations of Lessee and of Lessee's successors and
assigns, including without limitation the successor to
Lessee upon any merger, consolidation, liquidation or
dissolution of Lessee and, including without
limitation, any transferee of all or substantially all
of the assets of the Lessee and any partnership, person
or entity which carries on the business of Lessee.
12. NOTICES. Any notice under this Guaranty
shall be in writing and shall be deemed to have been
duly given, (a) if to Guarantor, when mailed, by
registered or certified mail, retum receipt requested,
or when mailed by first class mail, or when delivered
by hand, to Guarantor's address set forth above, or to
such other one address as Guarantor may designate from
time to time by notice hereunder to Lessor, (b) if to
Lessor, when received by Lessor at the address set
forth above, or at such other one or more addresses as
Lessor may designate from time to time by notice
hereunder to Guarantor, and also to each successor,
assign and transferee of any Obligation of which notice
has been given hereunder to Guarantor, at the address
or addresses specified in such notice.
13 GOVERNING LAW. This Guaranty, all acts and
transactions hereunder, and the rights and duties of
the parties hereto shall be governed by, and construed
and enforced according to, the laws of the State of
California.
14. INTEGRATION, AMENDMENT AND WAIVER. This
Guaranty sets forth the entire agreement between
Guarantor and Lessor, and supersedes any prior or
contemporaneous agreements, understandings or
representations, oral or written, with respect to the
subject matter hereof, but is supplementary to and does
not supersede any prior guaranty, subordination
agreement or grant of security unless expressly so
stated herein. No amendment or waiver of any provision
of this Guaranty shall be effective unless evidenced in
writing signed by the Lessor.
15. SEVERABILITY. If any provision of this
Guaranty shall be held in any court to be illegal or
unenforceable, all other provisions of this Guaranty
shall remain in full force and effect.
EXECUTED in any number of counterparts as a sealed
instrument, as of this 3rd day of
April, 1997.
Attest Guarantor:
DUNES HOTELS AND CASINOS INC.
/s/ Dunes Hotels and Casino Inc.
/s/ Brent Bowen /s/ James H. Dale
Name: Brent Bowen Name: James H. Dale
Title: Vice President Title: Treasurer
May 19, 1997
STATE OF _______________________
___________________________ County, ss:
The above-named ______________________to me known
personally appeared before me this
4
<PAGE>
____ day of _________________, 1997 and acknowledged
the foregoing Guaranty to be the free act and deed of
DUNES HOTELS AND CASINOS INC.
______________________
Notary Public
My commission expires:
5
<PAGE>
GUARANTY
This Guaranty is made, effective as of the date of
execution set forth below, by M&R INVESTMENT COMPANY,
INC., a Nevada corporation, of 4045 So. Spencer Street,
#206, Las Vegas, Nevada 89119 ("Guarantor") to ICON
FINANCIAL CORP., of 600 Mamaroneck Avenue, Harrison,
New York 10528, and its successors and assigns
("Lessor"), with respect to the obligations of SHF
Acquisition Corporation, a Nevada corporation, of 4045
o. Spencer Street, #206, Las Vegas, Nevada 89119
("Lessee") under that certain Master Lease Agreement
dated as of April 3, 1997, including without limitation
the letter agreement between Lessor and Lessee with
respect thereto dated as of February 10, 1997 and
modified as of March 21, 1997 and any Promissory Note
and Equipment Schedule thereunder (collectively, the
"Lease"). Capitalized terms used in this Guaranty and
not otherwise defined herein shall have the meanings
given to them in the Lease.
INTRODUCTION
Guarantor desires to induce Lessor to acquire,
finance and lease certain facilities and equipment
(such facilities and equipment and all substitutions,
replacements, accessions and additions thereto
hereinafter called the "Equipment") to Lessee, a direct
or indirect wholly owned subsidiary of Guarantor,
pursuant to the Lease in order to enhance and protect
Guarantor's financial interest in Lessee, and in order
to promote Guarantor's general business enterprise.
IN CONSIDERATION of the foregoing matters, for ten
dollars, and other valuable consideration, the receipt
and sufficiency of each of which is acknowledged,
Guarantor covenants and agrees as follows:
1. GUARANTY. Guarantor guarantees the full and
punctual payment, performance and observance of all
debts, obligations and liabilities of Lessee to Lessor,
whether now existing or subsequently arising,
liquidated or unliquidated, absolute or contingent, now
due or hereafter falling due, arising out of or in
connection with the Lease including the full, prompt
and complete performance by the Lessee of all of the
terms and conditions contained in the Lease to be kept
and performed by the Lessee, together with all costs of
collection, including reasonably attorneys' fees (all
of the foregoing, collectively, the "Obligations").
2. CONTINUING GUARANTY. This is a continuing
guaranty of payment and performance, which shall apply
to all Obligations which now exist or subsequently
arise, whether or not notice of such Obligations is
given to Guarantor, whether or not any or all prior
Obligations had been fully paid, performed and observed
before any such Obligations arose, and notwithstanding
Guarantor's dissolution. The Lease specifically allows
for several acceptances of Equipment by Lessee, and
Guarantor waives notices of each such acceptances or
deliveries of Equipment, in whole or in part. This
Guaranty may be terminated by the Guarantor only as of
the date on which the Guarantor has received written
notice from the Lessor stating that the Lessee has
fully paid and performed all of the Obligations.
3. OTHER RIGHTS, REMEDIES, SECURITY AND
OBLIGATIONS Guarantor's liability is direct, primary
and unconditional, and, except as set forth below in
this paragraph, may be enforced by Lessor without first
resorting to any other right, remedy or security,
including without limitation any right or remedy
against Lessee, the Equipment, or against any other
person, partnership or entity which now is or may at
any time become liable with respect to any of the
Obligations, or against any security given by Lessee,
by Guarantor or by any other person. Notwithstanding
the foregoing or anything contained in this Guaranty to
the contrary, upon the occurrence and continuance of an
"Event of Default" under and as defined in the Lease,
Lessor shall first proceed against the Equipment and
the Additional Collateral, and provided that Lessor
proceeds against the Equipment and the Additional
Collateral in a manner consistent with applicable law
(and, in the case of a
<PAGE>
Trustee's Sale or a Lessee Sale, with the
provisions of Section 16(b) of the Lease),
Guarantor shall be liable for the entire Deficiency
together with interest thereon at the Late Payment Rate
and other sums due under the Lease, notwithstanding any
defenses or limitations with respect thereto available
to the Lessee under applicable law (including without
limitation Lessee's anti-deficiency rights under
applicable California law), which are hereby waived by
Guarantor as to Guarantor. Guarantor's liability shall
not be discharged or diminished (w) by any waiver by
Lessor of any of the terms, covenants or conditions of
any of the Obligations, (x) by the granting of any
indulgence or extension of time to Lessee, (y) by any
modification, supplement or extension of any of the
Obligations, or (z) by any agreement or arrangement
with Lessee or anyone else. Lessor shall be entitled,
in its sole discretion, without discharging or
diminishing Guarantor's liability under this Guaranty,
(i) to apply any payment or transfer received from
Lessee, from Guarantor or from any person, to any of
the Obligations, or (ii) to apply any recovery from
security to any of the Obligations or to any other
debts, obligations or liabilities secured thereby,
whether or not then due, or (iii) to hold any such
payment, transfer or recovery from security as
additional security for any or all of the Obligations,
or for other debts, obligations or liabilities of
Lessee, or of the payor or transferor, or which were
secured by such security, whether or not then due.
4. UNLIMITED LIABILITY. Guarantor's liability
hereunder is unlimited in amount. Guarantor's liability
shall be joint and several with the liability of
Lessee.
5. WAIVER OF NOTICES, ETC Guarantor agrees, to
the greatest extent permitted by law, that Lessor shall
not be required to give Guarantor any notice pursuant
to this Guaranty, and that no failure to give any such
notice shall discharge or diminish the liability which
Guarantor would have had under this Guaranty if such
notice had been given. Guarantor waives, without
limitation, to the greatest extent permitted by law:
notice of acceptance of this Guaranty; notice of the
incurring or additional or increased Obligations;
notice of the application of any payment, transfer or
recovery from security; presentment, demand and protest
of any instrument, and notice thereof; notice of non-
payment of other default under this Guaranty or under
any Obligation; notice of foreclosure; notice of any
release, discharge, or modification of or failure to
obtain any security for any of the Obligations; notice
of any waiver by Lessor of any of the terms, covenants
or conditions or any of the Obligations; notice of the
granting of any indulgence or extension of time to
Lessee; notice of any modification, supplement or
extension of any of the Obligations; notice of any
agreement or arrangement with Lessee, or anyone else;
any right to exoneration or to require election of
remedies; and all suretyship defenses.
6. ACCELERATION. Guarantor shall, at Lessor's
option, without notice, immediately become liable for
the outstanding balance of all Obligations, whether or
not then due, (a) in the event of any failure by
Guarantor fully and punctually to pay, perform or
observe any debt, obligation or liability of Guarantor
under this Guaranty, (b) in the event that Lessee or
Guarantor becomes insolvent, or attempts to make a
composition, moratorium or similar agreement with its
creditors, or makes a general assignment for the
benefit of creditors or has a custodian or receiver
appointed for a substantial portion of its assets, or
(c) if a petition under the federal bankruptcy laws or
any moratorium, insolvency, receivership, or
reorganization proceeding is filed or commenced by or
against the Lessee or Guarantor, or (d) if Lessor would
be entitled to accelerate any of the Obligations but
for the fact that acceleration has been stayed or
enjoined, or (e) in the event of a default by Lessee
under any one or more of the Obligations.
7. UNENFORCEABILITY. In the event that any
Obligation is for any reason not legal, valid or
unenforceable against Lessee, or if any Obligation is
limited, modified, voided, released or discharged in
any proceeding under the federal bankruptcy laws or in
any moratorium, insolvency, receivership, arrangement
or reorganization proceeding, or if any Obligation is
subject to any setoff, direct or indirect counterclaim
or defense by Lessee against Lessor, Guarantor's
liability hereunder shall be the same as if such
Obligation were
2
<PAGE>
legal, valid and enforceable, and had not been so
limited, modified, voided, released or discharged, and
were not subject to such setoff, counterclaimor defense.
If any payment or transfer to Lessor or recovery from
security by Lessor, which has beencredited against any
Obligations, is voided orrescinded or required to be
returned by Lessor,this Guaranty and any security given
by Guarantor for theObligations or for this Guaranty
shall continue in effect or be reinstated as though
such payment, transfer or recovery had not been made.
8. WAIVER OF SUBROGATION; SUBORDINATION;
INDEMNITY Guarantor shall have no right of, and hereby
unconditionally and irrevocably agrees that it will not
at any time assert or exercise against Lessee any right
of subrogation, reimbursement, indemnity, contribution
or payment to the extent such rights may otherwise have
arisen, by reason of Guarantor's performance,
satisfaction or discharge of any or all of the
Obligations. All present and future debts, obligations
and liabilities of Lessee to Guarantor are hereby
waived and postponed in favor of and subordinated to
the full payment, performance and observance of the
Obligations, and Guarantor agrees to assign and deliver
to Lessor on request, as security for this guaranty,
(a) any such debts, obligations or liabilities, (b) any
instruments or documents evidencing the same, (c) any
security therefor, and (d) any payments or transfers
with respect thereto, or recoveries on security
therefor, received by Guarantor after default under any
of the Obligations. Guarantor indemnifies and holds
harmless Lessor and its stockholders, directors,
officers, trustees, beneficiaries, agents, employees
and persons acting by, through, under or in concert
with any of them, and any of their successors, personal
representatives or assigns (collectively, the
"Indemnitees") from and against any liability, damage,
loss, cost or expense, including reasonable attorneys'
fees, incurred in connection with any claim, suit or
proceeding by Lessee or anyone claiming out of or
relating to the Obligations, the transactions pursuant
to which the Obligations were incurred, or any actions
by any of the Indemnitees to enforce the Obligations or
to recover on security for the Obligations.
9. FINANCIAL STATEMENTS. Guarantor agrees
promptly to furnish, or cause to be furnished, to
Lessor such financial or other statements respecting
the condition, operations and affairs of Guarantor or
respecting the Equipment as Lessor may from time to
time reasonably request.
10. LEGAL ACTION. Any legal action to enforce
this Guaranty may be maintained alone, without first
proceeding against Lessee, any other person or any
security, or may be consolidated, at Lessor's election,
with any action or other proceeding against Lessee or
any other person. Lessor's books and records showing
the account between Lessor and Lessee shall be
admissible in any action or proceeding and shall
constitute prima facie proof of the items stated in
such books and records. Lessor's rights are cumulative
and shall not be exhausted by the exercise of its
rights against Guarantor in any number of actions,
except when and so long as all Obligations have been
fully paid, performed and observed, and have not been
reinstated by reason of the avoidance of any transfer,
the return of any payment, or otherwise, in which event
Guarantor's liability under this Guaranty shall be
likewise reinstated. GUARANTOR CONSENTS TO THE
JURISDICTION AND VENUE IN THE STATE COURTS OF THE STATE
OF CALIFORNIA, AND, IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CALIFORNIA, WITH RESPECT TO ANY
ACTION BY LESSOR TO ENFORCE THIS GUARANTY. GUARANTOR
WAIVES ANY RIGHT TO A JURY TRIAL IN ANY ACTION TO
ENFORCE THIS GUARANTY. GUARANTOR ACKNOWLEDGES THAT IT
HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL
COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY CONSENTED TO
THE JURISDICTION AND THE WAIVER OF JURY TRIAL AS SET
FORTH ABOVE FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
11. SUCCESSOR AND ASSIGNS. The benefit of this
Guaranty shall run to Lessor and its successors and
assigns. In the event that any Obligation is assigned
or otherwise transferred by Lessor, all of Lessor's
3
<PAGE>
rights under this Guaranty may, at Lessor's option, be
assigned to the immediate and any subsequent assignees
or transferees of such Obligation and shall continue to
run to Lessor with respect to any Obligations not so
assigned or transferred. The burden of this Guaranty
shall bind Guarantor and its successors and assigns.
This Guaranty shall apply to the Obligations of Lessee
and of Lessee's successors and assigns, including
without limitation the successor to Lessee upon any
merger, consolidation, liquidation or dissolution of
Lessee and, including without limitation, any
transferee of all or substantially all of the assets of
the Lessee and any partnership, person or entity which
carries on the business of Lessee.
12. NOTICES. Any notice under this Guaranty
shall be in writing and shall be deemed to have been
duly given, (a) if to Guarantor, when mailed, by
registered or certified mail, return receipt requested,
or when mailed by first class mail, or when delivered
by hand, to Guarantor's address set forth above, or to
such other one address as Guarantor may designate from
time to time by notice hereunder to Lessor, (b) if to
Lessor, when received by Lessor at the address set
forth above, or at such other one or more addresses as
Lessor may designate from time to time by notice
hereunder to Guarantor, and also to each successor,
assign and transferee of any Obligation of which notice
has been given hereunder to Guarantor, at the address
or addresses specified in such notice.
13 GOVERNING LAW. This Guaranty, all acts and
transactions hereunder, and the rights and duties of
the parties hereto shall be governed by, and construed
and enforced according to, the laws of the State of
California.
14. INTEGRATION, AMENDMENT AND WAIVER. This
Guaranty sets forth the entire agreement between
Guarantor and Lessor, and supersedes any prior or
contemporaneous agreements, understandings or
representations, oral or written, with respect to the
subject matter hereof, but is supplementary to and does
not supersede any prior guaranty, subordination
agreement or grant of security unless expressly so
stated herein. No amendment or waiver of any provision
of this Guaranty shall be effective unless evidenced in
writing signed by the Lessor.
15. SEVERABILITY. If any provision of this
Guaranty shall be held in any court to be illegal or
unenforceable, all other provisions of this Guaranty
shall remain in full force and effect.
EXECUTED in any number of counterparts as a sealed
instrument, as of this 3rd day of April, 1997.
Attest: Guarantor:
M&R INVESTMENT COMPANY, INC.
/s/ M&R Investment Company, Inc.
/s/ Brent Bowen /s/ James H. Dale
Name: Brent Bowen Name: James H. Dale
Title: Vice President Title: President
May 19, 1997
STATE OF _______________________
___________________________ County, ss:
4
<PAGE>
The above-named ______________________ to me known
personally appeared before me this ____ day of
_________________,, 1997 and acknowledged the foregoing
Guaranty to be the free act and deed of M&R INVESTMENT
COMPANY, INC.
_______________________
Notary Public
My commission expires:
5
<PAGE>
RECORDING REQUESTED BY
NORTH AMERICAN TITLE COMPANY
Escrow No. 401958 Order No.
AND WHEN RECORDED MAIL TO
Name Icon Cash Flow Partners, L.P. READ AND APPROVED
Robert Kohlmeyer X /s/ BRC
Street 600 Mamaroneck Avenue X________________
Address
City & Harrison, NY 10528
State
_____SPACE ABOVE THIS LINE FOR RECORDER'S USE________
SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS
(INDIVIDUAL)
J.P.N. (DUE ON SALE CLAUSE) A.P.N.33-020-07 & 29
THIS DEED OF TRUST, made this 21st day of May, 1997,
between SHF Acquisition Corporation, a Nevada
corporation, herein called TRUSTOR, whose address is
4045 S. Spencer Street #206, Las Vegas, NV 89119,
(number and street) (city) (state) (zip)
North American Title Company, a California
corporation, herein called TRUSTEE, and ICON Cash Flow
Partners L.P. Series E, a Delaware Limited Partnership,
herein called BENEFICIARY,
WITNESSETH: That Trustor IRREVOCABLY GRANTS, TRANSFERS
AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE,
that property in , Yolo County,
California, described as:
Lots 44 and 57 and the north 1/2 of Lot 60, Eucalyptus
Grove, being Sacramento Valley Improvement Subdivision
No. 10, filed June 2, 1909, in book 3 of Maps and
Surveys, page 83, Yolo County Records.
For additional provisions, see Exhibit "A" attached
hereto and made a part hereof.
(Continued)
IF THE TRUSTOR SHALL SELL, CONVEY OR ALIENATE SAID
PROPERTY, OR ANY PART THEREOF, OR ANY INTEREST THEREIN,
OR SHALL BE DIVESTED OF HIS TITLE OR ANY INTEREST
THEREIN IN ANY MANNER OR WAY, WHETHER VOLUNTARILY OR
INVOLUNTARILY, WITHOUT THE WRITTEN CONSENT OF THE
BENEFICIARY BEING FIRST HAD AND OBTAINED, BENEFICIARY,
SHALL HAVE THE RIGHT, AT ITS OPTION, EXCEPT AS
PROHIBITED BY LAW, TO DECLARE AN INDEBTEDNESS OR
OBLIGATIONS SECURED HEREBY, IRRESPECTIVE OF THE
MATURITY DATE SPECIFIED IN ANY NOTE EVIDENCING THE
SAME, IMMEDIATELY DUE AND PAYABLE. CONSENT TO ONE SUCH
TRANSACTION SHALL NOT BE DEEMED TO BE A WAIVER OF THE
RIGHT TO REQUIRE SUCH CONSENT TO FUTURE SUCCESSIVE
TRANSACTIONS.
TOGETHER WITH the rents, issues and profits thereof,
SUBJECT, HOWEVER, to the right, power and authority
given to and conferred upon Beneficiary by paragraph
(10) of the provisions incorporated herein by reference
to collect and apply such rents, issues and profits.
FOR THE PURPOSE OF SECURING: 1. Performance of each
agreement of Trustor incorporated by reference or
contained herein.
2. Payment of the indebtedness evidenced by one
promissory note dated April 3, 1997, and any extension
or renewal thereof, in the principal sum of
$1,150,000.00 executed by Trustor in favor of
Beneficiary or order.
3. Payment of such further sums as the then record
owner of said property hereafter may borrow from
Beneficiary, when evidenced by another note (or notes)
reciting it is so secured.
4. As additional collateral for the performance of
the obligations of Trustor under that certain Master
Lease Agreement dated April 3, 1997.
Page 1 of 2
<PAGE>
(Continued)
EXHIBIT "A"
Beneficiary agrees to release such portions of the
above described real property as may be reasonably
requested by Trustor to enable Trustor to complete
financing and construction of expansions to its rice
drying and storage operation, provided that Beneficiary
is left with Liens sufficient in its sole judgment to
adequately secure its position as the Lessor of the
Equipment to Trustor.
<PAGE>
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
AGREES: By the execution and deliver of this Deed of
Trust and the note secured hereby, that provisions (1)
to (14), inclusive, of the fictitious deed of trust
recorded in Santa Barbara County and Sonoma County
October 18, 1961, and in all other counties October 23,
1961, in the book and at the page of Official Records
in the office of the county recorder of the county
where said property is located, noted below opposite
the name of the county, viz.:
<TABLE>
<CAPTION>
COUNTY BOOK PAGE COUNTY BOOK PAGE
<S> <C> <C> <C> <C> <C>
ALAMEDA 435 684 KINGS 792 833
ALPINE 1 250 LAKE 362 39
AMADOR 104 348 LASSEN 171 471
BUTTE 1145 1 LOS ANGELES T2055 899
CALAVERAS 145 152 MADERA 810 170
COLUSA 296 617 MARIN 1508 339
CONTRA COSTA 3978 47 MARIPOSA 77 292
DEL NORTE 78 414 MENDOCINO 579 530
EL DORADO 568 456 MERCED 1547 538
FRESNO 4626 572 MODOC 184 851
GLENN 422 184 MONO 52 429
HUMBOLDT 657 527 MONTEREY 2194 538
IMPERIAL 1091 501 NAPA 639 86
INYO 147 598 NEVADA 305 320
KERN 3427 60 ORANGE 5889 611
</TABLE>
<TABLE>
<CAPTION>
COUNTY BOOK PAGE COUNTY BOOK PAGE
<S> <C> <C> <C> <C> <C>
PLACER 895 301 SIERRA 29 335
PLUMAS 151 5 SISKIYOU 468 181
RIVERSIDE 3005 523 SOLANO 1105 182
SACRAMENTO 4331 62 SONOMA 1851 689
SAN BENITO 271 383 STANISLAUS 1715 456
SAN BERNARDINO 5567 61 SUTTER 572 297
SAN FRANCISCO A332 905 TEHAMA 401 289
SAN JOAQUIN 2470 311 TRINITY 93 366
SAN LUIS OBISPO 1151 12 TULARE 2294 275
SAN MATEO 4078 420 TUOLUMNE 135 47
SANTA BARBARA 1878 860 VENTURA 2062 386
SANTA CLARA 5336 341 YOLO 653 245
SANTA CRUZ 1431 494 YUBA 334 486
SHASTA 684 528
</TABLE>
SAN DIEGO SERIES 2 BOOK 1961, PAGE 183887
(which provisions, identical in all counties, are
printed on attached herewith) hereby are adopted and
incorporated herein and made a part hereof as fully as
though set forth herein at length; that he will observe
and perform said provisions; and that the references to
property, obligations and parties in said provisions
shall be construed to refer to the property,
obligations, and parties set forth in this Deed of
Trust.
The undersigned Trustor requests that a copy of
any Notice of Default and of any Notice of Sale
hereunder be mailed to him at his address hereinbefore
set forth.
STATE OF CALIFORNIA )SS. Signature of Trustor
COUNTY OF ________________)
____________________
On_______________before me, ____________________
________, personally appeared
_____________________________ ____________________
_____________________________
personally known to me (or ____________________
proved to me on the basis of
satisfactory evidence) to be
the person(s) whose name(s)
is/are subscribed to the
within instrument and acknow-
ledged to me that he/she/they
executed the same in his/her/
their authorized capacity(ies),
and that by his/her/their
signatures(s) on the instrument
the person(s), or the entity
upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature________(This area for official notarial seal)
FOR RECONVEYANCE SEND TO THE NEAREST OFFICE OF NORTH
AMERICAN TITLE COMPANY
REQUEST FOR FULL RECONVEYANCE
TO BE USED ONLY WHEN NOTE HAS BEEN PAID.
Dated _________________________
TO NORTH AMERIAN TITLE COMPANY, Trustee:
The undersigned is the legal owner and holder of
all indebtedness secured by the within Deed of Trust.
All sums secured by said Deed of Trust have been fully
paid and satisfied; and you are hereby requested and
directed, on payment to you of any sums owing to you
under the terms of said Deed of Trust, to cancel all
evidences of indebtedness, secured by said Deed of
Trust, delivered to you herewith together with said
Deed of Trust, and to reconvey, without warranty, to
the parties designated by the terms of said Deed of
Trust, the estate now held by you under the same.
MAIL RECONVEYANCE TO:
___________________ __________________
___________________ (By)_______________
___________________ (By)_______________
DO NOT LOSE OR DESTROY THIS DEED OF TRUST OR THE NOTE
WHICH IT SECURES.
BOTH MUST BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
BEFORE RECONVEYANCE WILL BE MADE.
Page 2 of 2
3
<PAGE>
DO NOT RECORD/FOR INFORMATION PURPOSES
SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS
(INDIVIDUAL)
The following is a copy of provisions (1) to (14),
inclusive, of the fictitious deed of trust, recorded in
each county in California, as stated in the foregoing
Deed of Trust and incorporated by reference in said
Deed of Trust as being a part thereof as if set forth
at length therein.
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
AGREES:
(1) To keep said property in good condition and
repair; not to remove or demolish any building thereon;
to complete or restore promptly in good and workmanlike
manner any building which may be constructed, damaged
or destroyed thereon and to pay when due all claims for
labor performed and materials furnished therefor; to
comply with all laws affecting said property or
requiring any alterations or improvements to be made
thereon; not to commit or permit waste thereof; not to
commit, suffer or permit any act upon said property in
violation of law; to cultivate, irrigate, fertilize,
prune and do all other acts which from the character or
use of said property may be reasonably necessary, the
specific enumerations herein not excluding the general.
(2) To provide, maintain and deliver to
Beneficiary fire insurance satisfactory to and with
loss payable to Beneficiary. The amount collected
under any fire or other insurance policy may be applied
by Beneficiary upon any indebtedness secured hereby and
in such order as Beneficiary may determine, or at
option of Beneficiary the entire amount so collected or
any part thereof may be released to Trustor. Such
application or release shall not cure or waive any
default hereunder or invalidate any act done pursuant
to such notice.
(3) To appear in and defend any action or
proceeding purporting to affect the security hereof or
the rights or powers of Beneficiary or Trustee; and to
pay all costs and expenses, including cost of evidence
of title and attorney's fees in a reasonable sum, in
any such actions or proceeding in which Beneficiary or
Trustee may appear, and in any suit brought by
Beneficiary to foreclose this Deed.
(4) To pay: at least ten days before delinquency
all taxes and assessments affecting said property,
including assessments on appurtenant water stock; when
due, all encumbrances, charges and liens with interest,
on said property or any part thereof, which appear to
be prior or superior hereto; all costs, fees and
expenses of this Trust.
Should Trustor fail to make any payment or to do
any act as herein provided, the Beneficiary or Trustee,
but without obligation so to do and without notice to
or demand upon Trustor and without releasing Trustor
from any obligation hereof, may: make or do the same in
such manner and to such extent as either may deem
necessary to protect the security hereof, Beneficiary
or Trustee being authorized to enter upon said property
for such purposes; appear in and defend any action or
proceeding purporting to affect the security hereof or
the rights or powers of Beneficiary or Trustee; pay,
purchase, contest or compromise any incumbrance, charge
or lien which in the judgement of either appears to be
prior to or superior hereto; and, in exercising any
such powers, pay necessary expenses, employ counsel and
pay his reasonable fees.
(5) To pay immediately and without demand all
sums so expended by Beneficiary or Trustee, with
interest from date of expenditure at amount allowed by
law in effect at the date hereof, and to pay for any
statement provided for by law in effect at the date
hereof regarding the obligation secured hereby any
amount demanded by the Beneficiary not to exceed the
maximum allowed by law at the time when said statement
is demanded.
(6) That any award of damages in connection with
any condemnation for public use or injury to said
property or any part thereof is hereby assigned and
shall be paid to Beneficiary who may apply or release
such moneys received by him/her/them in the same manner
and with the same effect as above provided for
disposition of proceeds of fire or other insurance.
(7) That by accepting payment of any sum secured
hereby after its due date, beneficiary does not waive
his right either to require prompt payment when due of
all other sums so secured or to declare default for
failure so to pay.
(8) That at any time or from time to time,
without liability therefor and without notice, upon
written request of Beneficiary and presentation of this
Deed and said Note for endorsement, and without
affecting the personal liability of any person for
payment of the indebtedness secured hereby, Trustee
may; reconvey any part of said property, consent to the
making of any map or plat thereof; join in granting any
easement thereon, or join in any extension agreement or
any agreement subordinating the lien or charge hereof.
(9) That upon written request of Beneficiary
stating that all sums secured hereby have been paid,
and upon surrender of this Deed and said note to
Trustee for cancellation and retention and upon payment
of its fees, Trustee shall reconvey, without warranty,
the property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. The
grantee in such reconveyance may be described as "the
person or persons legally entitled thereto." Five
years after issuance of such full reconveyance, Trustee
may destroy this document (unless directed in such
request to retain it).
(10) That as additional security, Trustor hereby
gives to and confers upon Beneficiary the right, power
and authority, during the continuance of these Trusts,
to collect the rents, issues and profits of said
property, reserving unto Trustor the right, prior to
any default by Trustor in payment of any indebtedness
secured hereby or in performance of any agreement
hereunder, to collect and retain such rents, issues and
profits as they become due and payable. Upon any such
default, Beneficiary may at any time without notice,
either in person, by agent, or by a receiver to be
appointed by a court, and without regard to adequacy of
any security for the indebtedness hereby secured enter
upon and take possession of said property or any part
thereof, in his/her/their own name sue for or otherwise
collect such rents, issues and profits, including those
past due and unpaid, and apply the same, less costs and
expenses of operation and collection, including
reasonable attorney's fees, upon any indebtedness
secured issues and profits and the application thereof
as aforesaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done
pursuant to such notice.
(11) That upon default by trustor in payment of
any indebtedness secured hereby or in performance of
any agreement hereunder, Beneficiary may declare all
sums secured hereby immediately due and payable by
delivery to Trustee of written declaration of default
and demand for sale and of written notice of default
and of election to case to be sold said property, which
notice Trustee shall cause to be filed for record.
Beneficiary also shall deposit with Trustee this Deed,
said Note and all documents evidencing expenditure
secured hereby.
After the lapse of such time as may then be
required by law following the recordation of said
notice of default, and notice of sale having been given
as then required by law, Trustee, without demand on
Trustor, shall sell said property at the time and place
fixed by it in said notice of sale, either as a whole
or in separate parcels, and in such order as it may
determine, at public auction to the highest bidder for
cash in lawful money of the United States, payable at
time of sale. Trustee may postpone sale of all or any
portion of said property by public announcement at such
time and place of sale and from time to time thereafter
may postpone such sale by public announcement at the
time fixed by the preceding postponement. Trustee
shall deliver to such purchaser its deed conveying the
property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any
matters of facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustor,
Trustee, or Beneficiary as hereinafter defined, may
purchase at such sale.
After deducting all costs, fees and expenses of
Trustee and of this Trust, including cost of evidence
of title in connection with sale, Trustee shall apply
the proceeds of sale to payment of: all sums expended
under the terms hereof, not the repaid, with accrued
interest at the amount allowed by law in effect at the
date hereof; all other sums then secured hereby; and
the remainder, if any, to the person or persons legally
entitled thereto.
(12) Beneficiary, or any successor in ownership of
any indebtedness secured hereby, may from time to time,
by instrument in writing, substitute a successor or
successors to any Trustee named herein or acting
hereunder, which instrument executed by the Beneficiary
and duly acknowledged and recorded in the office of the
recorder of the county or counties where said property
is situated, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who
shall, without conveyance from the Trustee predecessor,
succeed to all its title, estate, rights, powers and
duties. Said instrument must contain the name of the
original Trustor, Trustee and Beneficiary hereunder,
the book and page where this Deed is recorded and the
name and address of the new Trustee.
(13) That this Deed applies to, inures to the
benefit of, and binds all parties hereto, their heirs,
legatees, devisees, administrators, executors,
successors and assigns. The term Beneficiary shall
mean the owner and holder, including pledgees, of the
Note secured hereby, whether or not named as
Beneficiary herein. In this Deed, whenever the context
so requires, the masculine gender includes the feminine
and/or neuter, and the singular number includes the
plural.
(14) That trustee accepts this Trust when this
Deed, duly executed and acknowledged, is made a public
record as provided by law. Trustee is not obligated to
notify any party hereto of pending sale under any other
Deed of Trust or of any action or proceeding in which
Trustor, Beneficiary or Trustee shall be a party unless
brought by Trustee.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 679
<SECURITIES> 843
<RECEIVABLES> 3,035
<ALLOWANCES> 2,204
<INVENTORY> 38
<CURRENT-ASSETS> 0
<PP&E> 2,951
<DEPRECIATION> 484
<TOTAL-ASSETS> 16,462
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
5
<COMMON> 3,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,462
<SALES> 447
<TOTAL-REVENUES> 859
<CGS> 428
<TOTAL-COSTS> 1,084
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> (720)
<INCOME-TAX> (53)
<INCOME-CONTINUING> 773
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<CHANGES> 0
<NET-INCOME> 855
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
