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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: FEBRUARY 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER: 1-8645
MEGO FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-5629885
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
4310 PARADISE ROAD, LAS VEGAS, NEVADA 89109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(702) 737-3700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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:
As of April 12, 2000, there were 3,500,557 shares of Common Stock, $.01
par value per share, of the Registrant outstanding.
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MEGO FINANCIAL CORP. AND SUBSIDIARIES
INDEX
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Page
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PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at February 29, 2000 and August 31, 1999........ 1
Condensed Consolidated Income Statements for the Three and Six Months Ended
February 29, 2000 and February 28, 1999............................................. 2
Condensed Consolidated Statements of Stockholders' Equity for the Six Months Ended
February 29, 2000................................................................... 3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
February 29, 2000 and February 28, 1999............................................. 4
Notes to Condensed Consolidated Financial Statements.................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................ 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... 15
Item 6. Exhibits and Reports on Form 8-K...................................................... 15
SIGNATURE ....................................................................................... 16
</TABLE>
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PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
ASSETS 2000 1999
------------ ----------
<S> <C> <C>
Cash and cash equivalents $ 1,850 $ 1,821
Restricted cash 1,277 1,676
Notes receivable, net of allowance for cancellations and discounts of $13,921 at
February 29, 2000 and $14,340 at August 31, 1999 82,427 69,300
Interest only receivables, at fair value 2,295 2,566
Timeshare interests held for sale 27,506 29,529
Land and improvements inventory 5,270 6,649
Other investments 4,787 5,111
Property and equipment, net of accumulated depreciation of $16,623 at February 29,
2000 and $16,252 at August 31, 1999 23,044 23,560
Deferred selling costs 5,205 4,285
Prepaid debt expenses 1,902 1,757
Other assets 15,446 12,707
-------- --------
TOTAL ASSETS $171,009 $158,961
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and contracts payable $115,942 $104,555
Accounts payable and accrued liabilities 17,382 18,141
Reserve for notes receivable sold with recourse 3,472 4,162
Deposits 2,714 2,287
Accrued income taxes 3,505 3,505
-------- --------
Total liabilities before subordinated debt 143,015 132,650
-------- --------
Subordinated debt 4,500 4,478
Stockholders' equity:
Preferred stock, $.01 par value (authorized--5,000,000 shares, none outstanding) - -
Common stock, $.01 par value (authorized--50,000,000 shares; 3,500,557
shares issued and outstanding at February 29, 2000 and August 31, 1999) 35 35
Additional paid-in capital 13,068 13,068
Retained earnings 10,391 8,730
-------- --------
Total stockholders' equity 23,494 21,833
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $171,009 $158,961
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED INCOME STATEMENTS
(thousands of dollars, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Timeshare interest sales, net $ 10,906 $ 8,559 $ 22,897 $ 17,609
Land sales, net 4,563 3,518 8,582 7,009
Interest income 3,172 1,952 6,043 3,944
Financial income 269 400 541 709
Gain on sale of investments 678 - 678 513
Incidental operations 511 586 1,135 1,276
Other 919 871 1,839 1,691
----------- ----------- ----------- -----------
Total revenues 21,018 15,886 41,715 32,751
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Direct cost of:
Timeshare interest sales 2,210 1,680 4,588 3,434
Land sales 741 682 1,297 1,262
Incidental operations 499 461 1,099 1,112
Marketing and sales 8,593 7,782 17,867 16,615
Depreciation 461 488 951 1,008
Interest expense 3,113 2,173 5,979 4,261
General and administrative 4,395 3,411 8,273 6,971
----------- ----------- ----------- -----------
Total costs and expenses 20,012 16,677 40,054 34,663
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 1,006 (791) 1,661 (1,912)
INCOME TAXES (BENEFIT) - (269) - (650)
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 1,006 $ (522) $ 1,661 $ (1,262)
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE
Basic:
Net income (loss) applicable to common stock $ 0.29 $ (0.15) $ 0.47 $ (0.36)
=========== =========== =========== ===========
Weighted-average number of common shares 3,500,557 3,500,557 3,500,557 3,500,557
=========== =========== =========== ===========
Diluted:
Net income (loss) applicable to common stock $ 0.29 $ (0.15) $ 0.47 $ (0.36)
=========== =========== =========== ===========
Weighted-average number of common shares and
common share equivalents outstanding 3,500,557 3,500,557 3,500,557 3,500,557
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(thousands of dollars, except per share amounts)
(unaudited)
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<CAPTION>
COMMON STOCK
$.01 PAR VALUE ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1999 3,500,557 $ 35 $ 13,068 $ 8,730 $ 21,833
Net income for the six months ended
February 29, 2000 - - - 1,661 1,661
--------- --------- --------- --------- ---------
Balance at February 29, 2000 3,500,557 $ 35 $ 13,068 $ 10,391 $ 23,494
========= ========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(unaudited)
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<CAPTION>
SIX MONTHS ENDED
----------------------------
FEBRUARY 29, FEBRUARY 28,
2000 1999
----------- ------------
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,661 $ (1,262)
---------- ----------
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Charges to allowance for cancellations (3,831) (3,280)
Provision for cancellations 2,717 2,276
Gain on sale of other investments (678) (513)
Cost of sales 5,885 4,697
Depreciation 951 1,008
Amortization of interest only receivables 271 320
Repayments on notes receivable 24,334 20,485
Additions to notes receivable (36,347) (27,085)
Purchase of land and timeshare interests (2,483) (2,339)
Changes in operating assets and liabilities:
(Increase) decrease in restricted cash 399 (79)
Increase in other assets (3,574) (3,617)
Increase in deferred selling costs (920) (310)
Increase (decrease) in accounts payable and accrued liabilities (759) 682
Increase (decrease) in deposits 427 (926)
Decrease in accrued income taxes - (783)
---------- ----------
Total adjustments (13,608) (9,464)
---------- ----------
Net cash used in operating activities (11,947) (10,726)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (435) (898)
Proceeds from the sale of other investments 1,001 597
Additions to other investments (29) (101)
Decrease in other investments 30 150
---------- ----------
Net cash provided by (used in) investing activities 567 (252)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 33,675 27,022
Reduction of debt (22,288) (16,337)
Payments on subordinated debt (215) (252)
Increase in subordinated debt 237 307
---------- ----------
Net cash provided by financing activities 11,409 10,740
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29 (238)
CASH AND CASH EQUIVALENTS-- BEGINNING OF PERIOD 1,821 1,813
---------- ----------
CASH AND CASH EQUIVALENTS-- END OF PERIOD $ 1,850 $ 1,575
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest, net of amounts capitalized $ 5,795 $ 4,167
========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Issuance of warrants related to debt $ - $ 33
</TABLE>
See notes to condensed consolidated financial statements.
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MEGO FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2000 AND 1999
(unaudited)
1. FINANCIAL STATEMENTS
In the opinion of management, when read in conjunction with the audited
Consolidated Financial Statements for the years ended August 31, 1999 and 1998,
contained in the Form 10-K of Mego Financial Corp. (Mego Financial) filed with
the Securities and Exchange Commission for the year ended August 31, 1999, the
accompanying unaudited Condensed Consolidated Financial Statements contain all
of the information necessary to present fairly the financial position of Mego
Financial and subsidiaries at February 29, 2000, the results of its operations
for the three and six months ended February 29, 2000 and February 28, 1999, the
change in stockholders' equity for the six months ended February 29, 2000 and
the cash flows for the six months ended February 29, 2000 and February 28, 1999.
All intercompany accounts between the parent and its subsidiaries have been
eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management, all material adjustments necessary for the fair
presentation of these statements have been included herein which are normal and
recurring in nature. The results of operations for the three and six months
ended February 29, 2000 are not necessarily indicative of the results to be
expected for the full year.
2. NATURE OF OPERATIONS
Mego Financial, through its wholly-owned subsidiary, Preferred Equities
Corporation (PEC), established in 1970, is a premier developer of timeshare
properties and a provider of consumer financing to purchasers of its timeshare
intervals and land parcels, in select resort areas. PEC also manages timeshare
properties, and receives management fees as well as fees based on sales of
timeshare interests. By providing financing to virtually all of its customers,
PEC also originates consumer receivables that it hypothecates and services. In
February 1988, Mego Financial acquired PEC, pursuant to an assignment by the
Assignors (Comay Corp., Growth Realty Inc., RER Corp., and H&H Financial, Inc.)
of their contract right to purchase PEC. Mego Financial and its subsidiaries are
herein collectively referred to as the Company. Mego Financial was incorporated
under the laws of the state of New York in 1954 under the name Mego Corp. and,
in 1992, changed its name to Mego Financial Corp.
To facilitate its sales of timeshare interests, the Company has entered
into several trust agreements. The trustees administer the collection of the
related notes receivable. The Company has assigned title to certain of its
resort properties in Nevada and its interest in certain related notes receivable
to the trustees.
3. STOCKHOLDERS' EQUITY
Mego Financial's stock option plan (Stock Option Plan), which was
amended and restated as of September 16, 1998 upon the approval of Mego
Financial's shareholders, provides for grants of non-qualified and qualified
incentive options to officers, key employees and directors. Options for 58,906
shares were outstanding as of February 29, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations section contains certain forward-looking
statements and information relating to Mego Financial Corp. (Mego Financial)
(Mego Financial and it subsidiaries are referred to herein collectively as the
Company) that are based on the beliefs of management as well as assumptions made
by and information currently available to management. Such forward-looking
statements include, without limitation, the Company's expectation and estimates
as to the Company's business operations, including the introduction of new
timeshare and land sales programs and future financial performance, including
growth in revenues and net income and cash flows. Such forward-looking
statements also include, without limitation, the Company's expectations and
beliefs as to the results of its year 2000 compliance efforts and the impact on
the Company's operations of efforts its lenders and other third parties in
respect of such compliance. In addition, included herein, the words
"anticipates," "believes," "estimates," "expects," "plans," "intends" and
similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company's management with respect to future events and are
subject to certain risks, uncertainties and assumptions. In addition, the
Company specifically advises readers that the factors listed under the caption
"Liquidity and Capital Resources" could cause actual results to differ
materially from those expressed in any forward-looking statement. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected.
The following discussion and analysis should be read in conjunction with
the Condensed Consolidated Financial Statements, including the notes thereto,
contained elsewhere herein and in the Company's Form 10-K for the fiscal year
ended August 31, 1999.
GENERAL
The business of the Company is primarily the marketing, financing and
sale of timeshare interests, retail lots and land parcels, and servicing the
related receivables, and operating and/or managing timeshare properties. The
Company, through its subsidiary Preferred Equities Corporation (PEC), provides
financing to purchasers of its timeshare interests and land. This financing is
generally evidenced by notes secured by deeds of trust and mortgages. These
notes receivable are generally, payable over a period up to twelve years, bear
interest at rates ranging from 10.0% to 15.5%, and require equal monthly
installments of principal and interest.
PEC
PEC recognizes revenue primarily from sales of timeshare interests and
land sales in resort areas, gain on sale of receivables and interest income. PEC
periodically sells its consumer receivables while generally retaining the
servicing rights. Revenue from sales of timeshare interests and land is
recognized after the requisite rescission period has expired and at such time as
the purchaser has paid at least 10% of the sales price for sales of timeshare
interests and 20% of the sales price for land sales. Land sales typically meet
these requirements within six to ten months of closing, and sales of timeshare
interests typically meet these requirements at the time of sale. The sales
price, less a provision for cancellation, is recorded as revenue and the
allocated cost related to such net revenue of the timeshare interest or land
parcel is recorded as expense in the year that revenue is recognized. When
revenue related to land sales is recognized, the portion of the sales price
attributable to uncompleted required improvements, if any, is deferred.
Notes receivable with payment delinquencies of 90 days or more have been
considered in determining the allowance for cancellations. Cancellations occur
when the note receivable is determined to be uncollectible and the related
collateral, if any, has been recovered. Cancellation of a note receivable in the
quarter the revenue is recognized is deemed to not represent a sale and is
accounted for as a reversal of the revenue with an adjustment to cost of sales.
Cancellation of a note receivable subsequent to the quarter the revenue was
recognized is charged to the allowance for cancellations.
Gain on sale of notes receivable includes the present value of the
differential between contractual interest rates charged to borrowers on notes
receivable sold by PEC and the interest rates to be received by the purchasers
of such notes receivable, after considering the effects of estimated prepayments
and a normal servicing fee. PEC retains certain
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participations in cash flows from the sold notes receivable and generally
retains the associated servicing rights. PEC generally sells its notes
receivable at par value.
The present values of expected net cash flows from the sale of notes
receivable are recorded at the time of sale as interest only receivables.
Interest only receivables are amortized as a charge to income, as payments are
received on the retained interest differential over the estimated life of the
underlying notes receivable. Interest only receivables are recorded at the lower
of unamortized cost or estimated fair value. The expected cash flows used to
determine the interest only receivables asset have been reduced for potential
losses under recourse provisions of the sales agreements. Reserve for notes
receivable sold with recourse represents PEC's estimate of the fair value of its
future credit losses to be incurred over the lives of the notes receivable in
connection with the recourse provisions of the sales agreements and is shown
separately as a liability in the Company's Condensed Consolidated Balance
Sheets.
In discounting cash flows related to notes receivable sales, PEC defers
servicing income at an annual rate of 1% and discounts cash flows on its sales
at the rate it believes a purchaser would require as a rate of return. Earned
servicing income is included under the caption of financial income. The cash
flows were discounted to present value using a discount rate of 15% for the six
months ended February 29, 2000 and February 28, 1999. PEC has developed its
assumptions based on experience with its own portfolio, available market data
and consultation with its financial advisors.
In determining expected cash flows, management considers economic
conditions at the date of sale. In subsequent periods, these estimates may be
revised as necessary using the original discount rate, and any losses arising
from prepayment and loss experience will be recognized as realized.
Provision for cancellations relating to notes receivable is recorded as
expense in amounts sufficient to maintain the allowance at a level considered
adequate to provide for anticipated losses resulting from customers' failure to
fulfill their obligations under the terms of their notes receivable. PEC records
provision for cancellations at the time revenue is recognized, based on
historical experience and current economic factors. The related allowance for
cancellations represents PEC's estimate of the amount of the future credit
losses to be incurred over the lives of the notes receivable. The allowance for
cancellations is adjusted for actual cancellations experienced, including
cancellations related to previously sold notes receivable which were reacquired
pursuant to the recourse obligations discussed herein. Such allowance is also
reduced to establish the separate liability for reserve for notes receivable
sold with recourse. PEC's judgment in determining the adequacy of this allowance
is based upon a periodic review of its portfolio of notes receivable. These
reviews take into consideration changes in the nature and level of the
portfolio, historical cancellation experience, current economic conditions which
may affect the purchasers' ability to pay, changes in collateral values,
estimated value of inventory that may be reacquired and overall portfolio
quality. Changes in the allowance as a result of such reviews are included in
the provision for cancellations.
Fees for servicing notes receivable originated by PEC and sold with
servicing rights retained are generally based on a stipulated percentage of the
outstanding principal balance of such notes receivable and are recognized when
earned. Interest received on notes receivable sold, less amounts paid to
investors, is reported as financial income. Interest only receivables are
amortized systematically to reduce notes receivable servicing income to an
amount representing normal servicing income and the present value discount. Late
charges and other miscellaneous income are recognized when collected. Costs to
service notes receivable are recorded to expense as incurred. Interest income
represents the interest received on loans held in PEC's portfolio, the accretion
of the discount on the interest only receivables and interest on cash funds.
Total costs and expenses consist primarily of marketing and sales
expenses, general and administrative expenses, direct costs of sales of
timeshare interests and land, depreciation and amortization and interest
expense. Marketing and sales costs directly attributable to unrecognized sales
are accounted for as deferred selling costs until such time as the sale is
recognized or cancelled prior to recognition.
Land sales as of February 29, 2000 exclude $18.7 million of sales not
yet recognized under generally accepted accounting principles (GAAP) since the
requisite payment amounts have not yet been received or the respective recission
periods have not yet expired. Of the $18.7 million unrecognized land sales, the
Company estimates that it will ultimately
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recognize $15.3 million of revenues, which would be reduced by a provision for
cancellations of $1.4 million, deferred selling costs of $4.3 million and cost
of sales of $2.1 million.
PEC has entered into financing arrangements with certain purchasers of
timeshare interests and land whereby an interest rate of 5% per annum is charged
on those sales where the aggregate down payment is at least 50% of the purchase
price and the balance is payable in 36 or fewer monthly payments. Notes
receivable of $6.0 million at February 29, 2000 and August 31, 1999,
respectively, were made under this arrangement.
RESULTS OF OPERATIONS
Three Months Ended February 29, 2000 Compared to Three Months Ended February 28,
1999
Total revenues for the Company increased 32.3% or $5.1 million to $21.0
million during the three months ended February 29, 2000 from $15.9 million
during the three months ended February 28, 1999. The increase was primarily due
to a net increase of $3.4 million in timeshare and land sales to $15.5 million
during the three months ended February 29, 2000 from $12.1 million during the
three months ended February 28, 1999 (net timeshare sales increased by $2.4
million and net land sales increased by $1.0), an increase in interest income to
$3.2 million during the three months ended February 29, 2000 from $2.0 million
during the three months ended February 28, 1999 and a gain of $678,000 on sale
of other investments during the three months ended February 29, 2000.
Gross sales of timeshare interests increased to $12.0 million during the
three months ended February 29, 2000 from $9.4 million during the three months
ended February 28, 1999, an increase of 28.0%. Net sales of timeshare interests
increased to $11.0 million from $8.6 million, an increase of 27.4%. The
provision for cancellations represented 9.2% and 8.8%, respectively, of gross
sales of timeshare interests for the three months ended February 29, 2000 and
February 28, 1999.
Gross sales of land increased to $4.8 million during the three months
ended February 29, 2000 from $3.8 million during the three months ended February
28, 1999, an increase of 25.9%. Net sales of land increased to $4.6 million
during the three months ended February 29, 2000 from $3.5 million during the
three months ended February 28, 1999, an increase of 29.7%. The provision for
cancellations decreased to 4.2% of gross sales of land for the three months
ended February 29, 2000 from 7.0% for the three months ended February 28, 1999,
primarily due to a decrease in cancellation experience during the second quarter
of fiscal 2000 and a downward adjustment based on the results of the customary
quarterly review of the adequacy of the allowance.
Interest income increased 62.5% to $3.2 million for the three months
ended February 29, 2000 from $2.0 million for the three months ended February
28, 1999, primarily due to increased notes receivable for the current quarter.
A net gain on sale of other investments of $678,000, resulting from the
sale of two golf courses, was recorded for the three months ended February 29,
2000.
Total costs and expenses for the Company increased to $20.0 million for
the three months ended February 29, 2000 from $16.7 million for the three months
ended February 28, 1999, an increase of 20.0%. The increase resulted primarily
from an increase in direct costs of timeshare sales to $2.2 million from $1.7
million, an increase of 31.6%; an increase of $811,000 in marketing and sales
expense, an increase of 10.4%; an increase of $940,000 in interest expense, an
increase of 43.3%; and, an increase of $984,000 in general and administrative
expenses, an increase of 28.8%. The increase in direct costs of timeshare sales
is attributable to higher net timeshare sales during the current fiscal quarter
compared to the same quarter last year. The increase in marketing and sales
expenses is due primarily to higher gross sales. As discussed below, marketing
and sales expenses decreased as a percentage of gross sales. The increase in
interest expense is due to increased notes and contracts payable. The increase
in general and administrative expenses is due to the increase in escrow
collection costs related to the increased sales volume and an increase in
maintenance fees paid to Homeowner Associations by PEC.
As a percentage of gross sales of timeshare interests and land,
marketing and sales expenses relating thereto decreased to 51.2% during the
three months ended February 29, 2000 from 59.1% during the three months ended
February 28, 1999, and cost of sales decreased to 17.6% during the three months
ended February 29, 2000 from 17.9% during the three months ended February 28,
1999. Subsequent to the first quarter of fiscal 1999, the Company restructured
its marketing and
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sales programs, which restructuring included the closing of unprofitable sales
locations, the elimination of certain marketing programs and the layoff of
related personnel. Sales prices of timeshare interests are typically lower than
those of land, while selling costs per sale, other than commissions, are
approximately the same in amount for timeshare interests and land; accordingly,
the Company generally realizes lower profit margins from sales of timeshare
interests than from sales of land.
Interest expense increased to $3.1 million during the three months ended
February 29, 2000 from $2.2 million during the three months ended February 28,
1999, an increase of 43.3%. The increase is a result of increased notes and
contracts payable during the three months ended February 29, 2000 compared to
the three months ended February 28, 1999. This increase relates to interest
carrying costs for maintaining the notes in the Company's owned portfolio.
Historically, PEC has from time to time sold notes receivable and applied the
net proceeds to reduce its outstanding debt. There have been no such sales since
August 1998.
Pre-tax income of $1.0 million was earned during the three months ended
February 29, 2000 compared to a pre-tax loss of $791,000 during the three months
ended February 28, 1999. The improvement in the three months ended February 29,
2000 resulted from the $5.1 million increase in revenues partially offset by the
$3.3 million increase in expenses.
No income taxes were recorded for the three months ended February 29,
2000 compared to a tax benefit of $269,000 during the three months ended
February 28, 1999, due to the use of net operating loss carryforwards which were
previously fully reserved and currently are used to offset income on a
consolidated basis. Income taxes are recorded, and the liability is adjusted,
based on an ongoing review of related facts and circumstances.
Net income applicable to common stock amounted to $1.0 million during
the three months ended February 29, 2000 compared to a net loss applicable to
common stock of $522,000 during the three months ended February 28, 1999,
primarily due to the forgoing.
Six Months Ended February 29, 2000 Compared to Six Months Ended February 28,
1999
Total revenues for the Company increased 27.4%, or $9.0 million, to
$41.7 million during the six months ended February 29, 2000 from $32.8 million
during the six months ended February 28, 1999. The increase was primarily due to
an increase in timeshare and land sales to $31.5 million during the six months
ended February 29, 2000 from $24.6 million during the six months ended February
28, 1999 (net timeshare sales increased by $5.3 million and net land sales
increased by $1.6 million), an increase in interest income to $6.0 million
during the six months ended February 29, 2000 from $3.9 million during the six
months ended February 28, 1999, and a gain on sale of other investments of
$678,000 during the six months ended February 29, 2000 compared to $513,000
during the six months ended February 28, 1999.
Gross sales of timeshare interests increased to $25.3 million during the
six months ended February 29, 2000 compared to $19.4 million during the six
months ended February 28, 1999, an increase of 30.3%. Net sales of timeshare
interests increased to $22.9 million from $17.6 million, an increase of 30.0%.
The provision for cancellations represented 9.5% and 9.3%, respectively, of
gross sales of timeshare interests for the six months ended February 29, 2000
and February 28, 1999.
Gross sales of land increased to $8.9 million during the six months
ended February 29, 2000 from $7.5 million during the six months ended February
28, 1999, an increase of 19.0%. Net sales of land increased to $8.6 million
during the six months ended February 29, 2000 from $7.0 million during the six
months ended February 28, 1999, an increase of 22.4%. The provision for
cancellations decreased to 3.6% of gross sales of land for the six months ended
February 29, 2000 from 6.3% for the six months ended February 28, 1999,
primarily due to a decrease in cancellation experience during the six months
ended February 29, 2000 and a downward adjustment based on the results of the
customary quarterly review of the allowance adequacy.
Interest income increased to $6.0 million for the six months ended
February 29, 2000 from $3.9 million for the six months ended February 28, 1999,
an increase of 53.2%, primarily due to increased notes receivable for the
current period.
9
<PAGE> 12
A net gain on sale of other investments of $678,000, resulting from the
sale of two golf courses in Pahrump, was recorded for the six months ended
February 29, 2000 compared to a gain in the amount of $513,000 on the sale of a
commercial land parcel recorded for the six months ended February 28, 1999.
Total costs and expenses for the Company increased to $40.1 million for
the six months ended February 29, 2000 from $34.7 million for the six months
ended February 28, 1999, an increase of 15.6%. The increase resulted primarily
from an increase in direct costs of timeshare sales to $4.6 million from $3.4
million, an increase of 33.6%; an increase in marketing and sales expenses to
$17.9 million from $16.6 million, an increase of 7.5%; an increase in interest
expense to $6.0 million from $4.3 million, an increase of 40.3% and an increase
in general and administrative expenses to $8.3 million from $7.0 million, an
increase of 18.7%. The increase in direct costs of timeshare sales is
attributable to higher net timeshare sales during the current fiscal period
compared to the same period last fiscal year. The increase in marketing and
sales expenses is due primarily to higher gross sales. As discussed below, the
increase in these expenses on a dollar basis was accompanied by a decrease in
marketing and sales expenses as a percentage of gross sales. The increase in
interest expense is due to increased notes and contracts payable. The increase
in general and administrative expenses is primarily due to the increase in
escrow collection costs related to sales volume and an increase in maintenance
fees paid to Homeowner Associations by PEC.
As a percentage of gross sales of timeshare interests and land,
marketing and sales expenses relating thereto decreased to 52.2% during the six
months ended February 29, 2000 from 61.8% during the six months ended February
28, 1999, and cost of sales decreased to 17.2% during the six months ended
February 29, 2000 from 17.5% during the six months ended February 28, 1999.
Sales prices of timeshare interests are typically lower than those of land,
while selling costs per sale, other than commissions, are approximately the same
in amount for timeshare interests and land; accordingly, the Company generally
realizes lower profit margins from sales of timeshare interests than from sales
of land.
Interest expense increased to $6.0 million during the six months ended
February 29, 2000 from $4.3 million during the six months ended February 28,
1999, an increase of 40.3%. The increase is a result of increased notes and
contracts payable during the six months ended February 29, 2000 compared to the
six months ended February 28, 1999.
Pre-tax income of $1.7 million was earned during the six months ended
February 29, 2000 compared to a pre-tax loss of $1.9 million during the six
months ended February 28, 1999. The improvement in the first six months of
fiscal 2000 resulted from the $9.0 million increase in revenues partially offset
by the $5.4 million increase in expenses.
No income tax provision or benefit was recorded for the six months ended
February 29, 2000 compared to an income tax benefit of $650,000 during the six
months ended February 28, 1999, due to the use of net operating loss
carryforwards which were previously fully reserved and currently are used to
offset income on a consolidated basis. Income taxes are recorded, and the
liability is adjusted, based on an ongoing review of related facts and
circumstances.
Net income applicable to common stock was $1.7 million during the six
months ended February 29, 2000 compared to a net loss applicable to common stock
of $1.3 million during the six months ended February 28, 1999, primarily due to
the foregoing.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents for the Company was $1.9 million at February
29, 2000 compared to $1.8 million at August 31, 1999.
PEC's cash requirements arise from the acquisition of timeshare
properties and land, payments of operating expenses, payments of income taxes to
Mego Financial, payments of principal and interest on debt obligations, and
payments of marketing and sales expenses in connection with sales of timeshare
interests and land. Marketing and sales expenses payable by PEC in connection
with sales of timeshare interests and land typically exceed the down payments
received at the time of sale, as a result of which PEC generates a cash
shortfall. This cash shortfall and PEC's other cash requirements are funded
primarily through advances under PEC's lines of credit in the aggregate amount
of $133.5 million, sales of receivables and cash flows from operations. At
February 29, 2000, no commitments existed for material capital expenditures.
10
<PAGE> 13
At February 29, 2000, PEC had arrangements with 4 institutional lenders
for the financing of receivables in connection with sales of timeshare interests
and land and the acquisition of timeshare properties and land, which provide for
lines of credit of up to an aggregate of $133.5 million. Such lines of credit
are secured by timeshare and land receivables and mortgages. At February 29,
2000, an aggregate of $114.0 million was outstanding under such lines of credit,
and $19.5 million was available for borrowing. Under the terms of these lines of
credit, PEC may borrow 70% to 90% of the balances of the pledged timeshare and
land receivables. PEC is required to comply with certain covenants under these
agreements, which, among other things, require PEC to meet certain minimum
tangible net worth requirements. The most stringent of such requirements
provides that PEC maintain a minimum tangible net worth of $25 million. At
February 29, 2000, PEC exceeded this net worth requirement by $3.8 million.
Summarized lines of credit information and accompanying notes relating to these
lines of credit outstanding at February 29, 2000, consist of the following
(thousands of dollars):
<TABLE>
<CAPTION>
BORROWING MAXIMUM
AMOUNT AT BORROWING REVOLVING
FEBRUARY 29, 2000 AMOUNTS EXPIRATION DATE (a) MATURITY DATE INTEREST RATE
----------------- --------- --------------------- ------------- --------------------
<S> <C> <C> <C> <C>
$ 72,994 $ 75,000 (b) May 31, 2000 Various Prime + 2.0 - 2.25%
--------- ----------
15,605 15,000 (c) December 1, 2002 Various Prime + 2.0
5,850 11,500 (d) May 31, 2000 Various Prime + 2.0 - 3.00%
--------- ----------
21,455 26,500 Considered one borrowing line for the maximum amount.
--------- ----------
17,611 30,000 (e) June 30, 2001 Various Libor + 4.0 - 4.25%
1,972 1,972 (f) July 31, 2000 Prime + 2.0 - 2.25%
--------- ----------
$ 114,032 $ 133,472
========= ==========
</TABLE>
(a) Revolving expiration dates represent the expiration of the revolving
features of the lines of credit , at which time the credit lines become
loans with fixed maturities. As is customary, the Company is negotiating
for extensions of the revolving periods expiring in fiscal year 2000.
(b) Restrictions include PEC's requirement to maintain a minimum tangible
net worth of $25 million. Other restrictions, commencing with the fiscal
quarter ended November 30, 1999, include: PEC's requirement to maintain
costs and expenses for marketing and sales and general and
administrative expenses relating to net processed sales for each fiscal
quarter; PEC's requirement to maintain a minimum net processed sales
requirement for each fiscal quarter; and PEC's requirement not to exceed
a ratio of 4:1 of consolidated total liabilities to consolidated
tangible net worth. At February 29, 2000, $56.7 million of loans secured
by receivables were outstanding related to financings at prime plus 2%,
of which $37.7 million of loans secured by land receivables mature May
15, 2010 and $19.0 million of loans secured by timeshare receivables
mature May 15, 2007. The outstanding borrowing amount includes $6.4
million in acquisition and development (A&D) financing maturing October
1, 2005 for the corporate office buildings, which is an amortizing loan,
and a real estate loan with an outstanding balance of $1.2 million
maturing December 31, 2000, all bearing interest at prime plus 2.25%.
The remaining A&D loans, receivables loans and a resort lobby loan
outstanding of $8.6 million are at prime plus 2% and mature at various
dates through February 18, 2001.
In December 1998, Finova Capital Corporation (FINOVA), PEC and Mego
Financial entered into an Agreement under which FINOVA agreed to make a
loan in the amount of $5,662,000 to PEC with an original maturity date
of June 30, 1999, which date has been extended to December 31, 2000.
Mego Financial guaranteed the loan and issued warrants to FINOVA to
purchase a total of 83,333 shares of common stock of Mego Financial at
an exercise price of $6.00 per share, exercisable within a five-year
period commencing January 1, 1999. The balance outstanding under this
Agreement, which is included in the $73.0 million balance in the
preceding table, was $3.4 million as of February 29, 2000.
(c) Restrictions include PEC's requirement to maintain a minimum tangible
net worth of $25 million during the life of the loan. These credit lines
include available financing for A&D and receivables. At February 29,
2000, $7.2
11
<PAGE> 14
million was outstanding under the A&D loan, which matures on June 30,
2004, and $8.4 million was outstanding under the receivables loan, which
matures on May 31, 2004.
(d) Restrictions include PEC's requirement to maintain a minimum tangible
net worth of $15 million. This credit line consists of receivable
financing with a maturity date of May 31, 2004, under which $1.9 million
was outstanding at February 29, 2000 , and a real estate loan of $4.0
million with a maturity date of August 30, 2000.
(e) Restrictions include PEC's requirement to maintain a minimum tangible
net worth of $17 million during the life of the loan. These credit lines
include available financings for A&D and receivables. At February 29,
2000, $3.4 million was outstanding under the A&D loans which have a
maturity date of June 30, 2001 and bear interest at the 90-day London
Interbank Offering Rate (LIBOR) plus 4.25%. The available receivable
financings, of which $14.2 million was outstanding at February 29, 2000,
are at 90-day LIBOR plus 4% and have a maturity date of June 5, 2005.
(f) Restrictions include PEC's requirement to maintain a minimum tangible
net worth of $25 million.
A schedule of the cash shortfall arising from recognized and
unrecognized sales for the periods indicated is set forth below (thousands of
dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------ --------------------------------------
FEBRUARY 29, 2000 FEBRUARY 28, 1999 FEBRUARY 29, 2000 FEBRUARY 28, 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Marketing and selling expenses attributable
to recognized and unrecognized sales $ 8,990 $ 7,931 $ 18,787 $ 16,927
Less: Down payments (2,617) (2,670) (5,678) (5,402)
------------ ------------ ------------ ------------
Cash Shortfall $ 6,373 $ 5,261 $ 13,109 $ 11,525
============ ============ ============ ============
</TABLE>
During the six month periods ended February 29, 2000 and February 28,
1999, PEC did not sell any notes receivable.
PEC sells notes receivable subject to recourse provisions as contained
in each agreement. PEC is obligated under these agreements to replace or
repurchase accounts that become over 90 days delinquent or are otherwise subject
to replacement or repurchase in either cash or receivables generally at the
option of the purchaser. At February 29, 2000, PEC was contingently liable to
replace or repurchase notes receivable sold with recourse totaling $48.4
million. The repurchase provisions provide for substitution of receivables as
recourse for $19.9 million of sold notes receivable and cash payments for
repurchase relating to $28.5 million of sold notes receivable. The undiscounted
amounts of the recourse obligations on such notes receivable were $4.7 million
and $6.5 million at February 29, 2000 and February 28, 1999, respectively. PEC
continually reviews the adequacy of this liability. These reviews take into
consideration changes in the nature and level of the portfolio, current and
future economic conditions which may affect the obligors' ability to pay,
changes in collateral values, estimated value of inventory that may be
reacquired and overall portfolio quality.
The components of the Company's debt, including lines of credit consist
of the following (thousands of dollars):
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------ ----------
<S> <C> <C>
Notes collateralized by receivables $ 81,270 $ 67,457
Mortgages collateralized by real estate properties 33,605 35,846
Installment contracts and other notes payable 1,067 1,252
---------- ----------
Total $ 115,942 $ 104,555
========== ==========
</TABLE>
12
<PAGE> 15
FINANCIAL CONDITION
Changes in the aggregate of the allowance for cancellations, excluding
discounts, and the reserve for notes receivable sold with recourse for the six
months ended February 29, 2000, consisted of the following (thousands of
dollars):
<TABLE>
<S> <C>
Balance at beginning of period $ 18,149
Provision for cancellations 2,717
Amounts charged to allowance for cancellations, net (3,831)
--------
Balance at end of period $ 17,035
========
</TABLE>
The allowance for cancellations and the reserve for notes receivable
sold with recourse consisted of the following at these dates (thousands of
dollars):
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------ ----------
<S> <C> <C>
Allowance for cancellations, excluding discounts $ 13,563 $ 13,987
Reserve for notes receivable sold with recourse 3,472 4,162
---------- ----------
Total $ 17,035 $ 18,149
========== ==========
</TABLE>
February 29, 2000 Compared to August 31, 1999
Cash and cash equivalents increased to $1.9 million at February 29, 2000
from $1.8 million at August 31, 1999.
Notes receivable, net, increased 19.0% to $82.4 million at February 29,
2000 from $69.3 million at August 31, 1999 primarily as a result of net new
receivables added, and no sales of receivables during the six months ended
February 29, 2000.
Timeshare interests held for sale decreased 6.9% to $27.5 million at
February 29, 2000 from $29.5 million at August 31, 1999.
Land and improvements inventory decreased 20.7% to $5.3 million at
February 29, 2000 from $6.7 million at August 31, 1999.
Notes and contracts payable increased 10.9% to $115.9 million at
February 29, 2000 from $104.6 million at August 31, 1999. There were increased
borrowings and no receivable sales during the six months ended February 29,
2000. The proceeds of such sales would normally be used to pay down debt.
Reserve for notes receivable sold with recourse decreased 16.6% to $3.5
million at February 29, 2000 from $4.2 million at August 31, 1999 due to the
reduced balance of the sold notes receivable. Recourse to the Company on sales
of notes receivable is governed by the agreements between the purchasers and the
Company.
Stockholders' equity increased 7.6% to $23.5 million at February 29,
2000 from $21.8 million at August 31, 1999.
YEAR 2000 COMPLIANCE
The Company believes it is Year 2000 compliant. There have been no
significant problems experienced as a result of the occurrence of Year 2000
which have disrupted operations. The Company will continue to monitor its
operations for Year 2000 problems.
13
<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There was no material change for the three months ended February 29,
2000 in the information about the Company's "Quantitative and Qualitative
Disclosures About Market Risk" as disclosed in its Annual Report on Form 10-K
for the fiscal year ended August 31, 1999.
14
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 23, 1998, an action was filed by Robert J. Feeney, as a
purported class action against Mego Mortgage Corporation, (MMC) a former
subsidiary of Mego Financial, and Jeffrey S. Moore, the former President and
Chief Executive Officer of MMC. On June 29, 1998, an amended complaint was filed
which, among other things, added Mego Financial as a defendant. On March 13,
2000, the court dismissed with prejudice the case brought against MMC and Mego
Financial.
On August 27, 1998, an action was filed in Nevada District Court, County
of Clark, No. A392585, by Robert and Jocelyne Henry, husband and wife
individually and on behalf of all others similarly situated against PEC, PEC's
wholly-owned subsidiary, Central Nevada Utilities Company (CNUC), and certain
other defendants. The plaintiffs' complaint asked for class action relief
claiming that PEC and CNUC were guilty of collecting certain betterment fees and
not providing sewer and water lines to their property. The court determined that
plaintiffs had not properly pursued their administrative remedies with the
Nevada Public Utilities Commission (PUC) and dismissed plaintiffs' amended
complaint, without prejudice. Notwithstanding plaintiffs' appeal of the
dismissal, plaintiff filed for administrative relief with the PUC. On November
17, 1999, the PUC found that CNUC, the only defendant over which the PUC has
jurisdiction, was not in violation of any duties owed the plaintiffs or
otherwise in violation of CNUC's approved tariffs. Subsequent to the PUC's
decision, plaintiffs attempted to voluntarily dismiss their appeal of the trial
court's order dismissing their case without prejudice and directing plaintiffs
to exhaust their administrative remedies. Defendant PEC has challenged this
voluntary dismissal arguing it is entitled to fees incurred in defense of the
appeal. To date, the Supreme Court of Nevada has not ruled on PEC's motion and
plaintiffs have not refiled their complaint.
There has been no material change in the status of other litigation
reported in the Company's Annual Report on Form 10-K for the year ended August
31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.199 Fifth Amendment to Forbearance Agreement and Amendment Number 10
to Second Amended and Restated and Consolidated Loan and Security
Agreement dated as of February 25, 2000 by and among FINOVA
Capital Corporation, Preferred Equities Corporation, and Mego
Financial Corp.
10.200 Eighth Amendment to Assignment and Assumption Agreement by and
between RER Corp., COMAY Corp., Growth Realty Inc. and H&H
Financial Inc., and Mego Financial Corp., dated January 31,
2000.
10.201 Amended, Restated and Increased Receivables Promissory Note No. 1
by Preferred Equities Corp. to Heller Financial, Inc. dated
December 22, 1999.
10.202 Amended, Restated and Consolidated Acquisition Promissory Note
No. 1 by Preferred Equities Corp. to Heller Financial, Inc. dated
December 22, 1999.
10.203 Fourth Amendment to Interval Receivables Loan and Security
Agreement dated December 22, 1999 between Heller Financial, Inc.,
and Preferred Equities Corporation.
10.204 Third Amendment to Acquisition and Construction Loan Agreement
dated December 22, 1999 between Heller Financial, Inc., and
Preferred Equities Corporation.
10.205 General Loan and Security Agreement (Inventory Loan) executed
December 17, 1999 by and among Textron Financial Corp., Preferred
Equities Corp. and Steamboat Suites, Inc.
10.206 General Loan and Security Agreement (Receivable Loan Facility)
executed December 17, 1999 by and among Textron Financial Corp.,
Preferred Equities Corp. and Steamboat Suites, Inc.
10.207 Sixth Amendment to Forbearance Agreement and Amendment No. 11 to
Second Amended and Restated and Consolidated Loan and Security
Agreement dated March 31, 2000 by and among FINOVA Capital
Corporation, Preferred Equities Corporation and Mego Financial
Corp.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
No reports on Form 8-K were filed during the period.
15
<PAGE> 18
SIGNATURE
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.
MEGO FINANCIAL CORP.
By:/s/ Charles G. Baltuskonis
-------------------------------
Charles G. Baltuskonis
Vice President and Chief Accounting Officer
Date: April 14, 2000
16
<PAGE> 1
EXHIBIT 10.199
FIFTH AMENDMENT TO FORBEARANCE AGREEMENT AND
AMENDMENT NO. 10 TO SECOND AMENDED AND RESTATED AND
CONSOLIDATED LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Forbearance Agreement and Amendment No.
10 to Second Amended and Restated and Consolidated Loan and Security Agreement
("Amendment") is made and entered into this 25th day of February, 2000 (the
"Effective Date"), by and among FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA" or "Lender"), PREFERRED EQUITIES CORPORATION, a Nevada
corporation ("Borrower") and MEGO FINANCIAL CORP., a New York corporation
("Guarantor") and has reference to the following facts:
A. Lender and Borrower entered into a Second Amended and Restated
and Consolidated Loan and Security Agreement dated as of May 15, 1997 (the
"Original Loan Agreement") that evidences a loan from Lender to Borrower. The
Original Loan Agreement was amended by the Hartsel Springs Side Letter dated
February 18, 1998 (the "First Amendment"); by the Letter Agreement [Biloxi
Property] dated March 20, 1998 (the "Second Amendment"); by the Letter Agreement
[Headquarters Readvance] dated September 29, 1998 (the "Third Amendment"); by
the Amendment No. 4 to Second Amended and Restated and Consolidated Loan and
Security Agreement dated November 6, 1998 (the "Fourth Amendment"); by the
Forbearance Agreement and Amendment No. 5 to Second Amended and Restated and
Consolidated Loan and Security Agreement dated December 23, 1998, as the same
was amended by a Letter Agreement dated February 8, 1999 (the "Fifth
Amendment"); by the First Amendment to Forbearance Agreement and Amendment No. 6
to Second Amended and Restated and Consolidated Loan and Security Agreement
dated May 7, 1999 (the "Sixth Amendment"); by the Second Amendment to
Forbearance Agreement and Amendment No. 7 to Second Amended and Restated and
Consolidated Loan and Security Agreement dated August 6, 1999 (the "Seventh
Amendment"); by the September 7, 1999 letter agreement regarding the Additional
Advance Note (the "Additional Advance Letter"); by the Third Amendment to
Forbearance Agreement and Amendment No. 8 to Loan and Security Agreement dated
November 9, 1999 (the "Eighth Amendment"); a side letter, dated December 3, 1999
between the Borrower and Lender (the "Receivable Loan Lot Cap Letter"); and, by
the Fourth Amendment to Forbearance Agreement and Amendment No. 9 to Loan and
Security Agreement dated December 17, 1999 (the "Ninth Amendment"). The Original
Loan Agreement, First Amendment, Second Amendment, Third Amendment, Fourth
Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment, Additional
Advance Letter, Eighth Amendment, the Receivable Loan Lot Cap Letter and Ninth
Amendment are collectively called the "Loan Agreement." Capitalized terms used
in this Amendment which are defined in the Loan Agreement shall have the same
meaning and definition when used herein.
<PAGE> 2
B. Borrower has informed the Lender of occurrence of certain
Events of Default and Incipient Defaults on the part of the Borrower under the
Loan Agreement which are more particularly hereinafter described and has
requested the Lender to forebear from exercising its rights under the Loan
Agreement which arise as a result of the same, and the Lender is willing to do,
upon and subject to the terms and conditions set forth in this Amendment.
Now, therefore, in consideration of the foregoing and for the
good and valuable consideration provided herein, Lender, Borrower and Guarantor
agree as follows:
1. On the Effective Date, the provisions of Article 1 of the Loan
Agreement is amended to add the following definitions:
"TENTH AMENDMENT": shall mean and collectively refer to the Tenth
Amendment to Forbearance Agreement and Amendment No. 10 to Second
Amended and Restated and Consolidated Loan and Security Agreement made
and entered into on February 25, 2000 among Borrower, Lender and
Guarantor.
2. (a) Under the Loan Agreement, the maximum Borrowing Base
allocable to Eligible Receivables arising from Unsolidified Lot Sales is limited
to 65% of the unpaid principal balance of all Eligible Receivables consisting of
Receivables Collateral constituting Unsolidified Lot Sales (the "Unsolidified
Lot Sale Advance Rate"). The Borrower has notified Lender that as a result of a
computer problem in the Borrower's reporting system, the system used to monitor
the Unsolidified Lot Sales was not able to recognize dates occurring after
December 31, 1999, and as a result, the system inaccurately listed in many cases
the Recession Period for the Instrument or Contract as occurring in the year
1900 not the year 2000 (the "Y2K Error"). As a result of the Y2K Error, the
system incorrectly classified the Instrument or Contract that had Rescission
Periods, as not being an Unsolidified Lot Sale, and all reports supplied by the
Borrower related to the same were incorrect and inaccurate. Based solely on the
material supplied by the Borrower, as of January 31, 2000, the Y2K Error has
resulted in the Borrowing Base being overstated by approximately $2,400,000.00.
Under the provisions of Section 3.4 of the Loan Agreement, the Borrower is
required to make a principal payment on the Receivables Loan in approximately
the amount of $2,400,000.00 or deliver new Eligible Receivables of equal or
greater value. The Borrower has informed the Lender that it is unable to
accomplish the foregoing within the time periods permitted by Section 3.4 of the
Loan Agreement.
(b) In addition to the limitations created by the
Unsolidified Lot Sales Advance Rate, the Loan Agreement limits the total amount
of the Eligible Receivables constituting Unsolidified Lot Sales that may be
included in the Borrowing Base to the lesser of (i) an amount equal to ten
percent (10%) of the total unpaid principal balance of all the Eligible
Receivables consisting of Receivables Collateral which are not constituted of
Unsolidified Lots Sales if the Borrowing Base allocable to the Unsolidified Lot
Sales exceeds at anytime the amount of $2,500,000.00, or (ii) $3,500,000.00 (the
foregoing
2
<PAGE> 3
limitation on the Eligible Receivables included in the Borrowing Base
constituting Unsolidified Lot Sales is called the "Unsolidified Lot Sales Cap").
Based solely on the information supplied by the Borrower, the Y2K Error has
resulted in the total amount of Eligible Receivables constituting Unsolidified
Lot Sales in the Borrowing Base exceeding the Unsolidified Lot Sales Cap.
(c) The Borrower acknowledges that the matters described in
Sections 2(a) and (b) of this Amendment are an Event of Default and Incipient
Default, thus entitling the Lender to, among other things, cease making Advances
from the Loan (the Events of Default and Incipient Defaults related to the
matters specifically described in Sections 2(a) and (b) are collectively called
the "Unsolidified Lot Sale Defaults"). Despite the occurrence of the
Unsolidified Lot Sales Default, the Borrower has requested the Lender to
continue to make Advances from the Receivables Loan and forbear from exercising
the rights and remedies available to the Lender under the Documents which arise
by virtue of the Unsolidified Lot Sales Default.
(d) During the period (the "Forbearance Period") commencing on
the Effective Date and continuing until the earlier of (i) March 17, 2000, or
(ii) the date that FINOVA exercises its termination right described in the
following subparagraph of this Section, FINOVA shall forbear from exercising
FINOVA's remedies under the Documents arising by virtue of the Unsolidified Lot
Sales Default. Notwithstanding contrary provisions contained in the Loan
Agreement, during the Forbearance Period, FINOVA shall make Advances of the
Receivables Loan, under the conditions set forth in the Loan Agreement but
without requiring that the Unsolidified Lots Sales Default be cured as a
condition to the Advance, and during the Forbearance Period, the maximum
Borrowing Base allocable to the Unsolidified Lot Sales shall be determined in
the same manner as all other forms of Eligible Receivables, with the effect
that, during the Forbearance Period, the Unsolidified Lot Sales shall be treated
as if the Recession Period applicable to the Unsolidified Lot Sales Contract or
Instrument has expired without the consumer exercising any termination rights
that it may have under the Instrument or Contract. Further, during the
Forbearance Period, FINOVA shall, under the conditions set forth in the Loan
Agreement, partially release Units and Lots from FINOVA's Security Interest
without requiring that the Unsolidified Lot Sales Default described herein be
cured as a condition precedent to such partial releases. FINOVA is not, however,
waiving the Unsolidified Lot Sales Default and specifically reserves all its
rights under the Documents with respect to the same. However, so long as
Borrower is in compliance with this Amendment and the other Documents, during
the Forbearance Period, the Unsolidified Lot Sales Default shall not be deemed
an Event of Default.
(e) FINOVA's agreement to so forbear and to make Advances under
the Loan Agreement shall automatically terminate, without further act or
instrument, upon the occurrence of any of the following events:
3
<PAGE> 4
(i) Borrower or Guarantor repudiates or asserts a
defense to any obligation or liability under the Documents or
makes or pursues a claim against FINOVA;
(ii) Borrower fails to timely perform any of its
obligations (other than the Existing Events of Default and
Unsolidified Lot Sales Default) set forth in the Documents (after
giving effect to the then applicable provisions of this
Amendment), including, without limitation, the requirements of
subparagraph 2(f) of this Amendment;
(iii) Borrower or Guarantor makes an assignment for
the benefit of creditors, or generally admits its inability to
pay its obligations as they come due or files a petition in
bankruptcy or an involuntary petition in bankruptcy is filed
naming either Borrower or Guarantor as debtors; or
(iv) FINOVA hereafter becomes aware of (i) any fact
or circumstance that FINOVA believes in good faith is reasonably
likely to impair FINOVA's security of (ii) any Incipient Defaults
(other than those described in this Amendment) or Event of
Default under the Documents after giving effect to the then
applicable provisions of this Amendment and other than Existing
Events of Default, whether now or existing or hereafter
occurring, which would give rise to a right by FINOVA to exercise
any rights or remedies under the Documents.
(f) On or before March 5, 2000, the Borrower agrees to supply to
Lender not less than $400,000 in cash or new Eligible Receivables, which will be
applied by the Lender to the Borrowing Base so as to partially correct the
Unsolidified Lots Sales Default described in Section 2(a) hereof. The Borrower
further acknowledges that FINOVA specifically reserves the right,
notwithstanding any contrary provisions in the Documents, to require the
Borrower to deliver additional Eligible Receivables or cash in a amount required
to correct any imbalance in the Borrowing Base, in the event that further
reconciliations of the Borrowing Base pursuant to Section 3.4(a) of the Loan
Agreement or an audit or review of the Borrower's records to determine the
magnitude of the Y2K Error reveals that the (i) outstanding principal balance of
the Receivables Loan exceeds the Borrowing Base, or (ii) the actual Borrowing
Base allocable to Eligible Receivables exceeds the Unsolidified Lot Sales
Advance Cap, or (ii) the unpaid principal balance of all Eligible Receivables
allocable to the Unsolidified Lot Sales exceeds the Unsolidified Lot Sale Cap,
3. The Documents are amended to provide that all notices to the
Lender shall be sent to its new address: 4800 North Scottsdale Road, Scottsdale,
Arizona 85251.
4. The Borrower agrees to reimburse Lender for all of Lender's
out-of-pocket costs and expenses including, without limitation, attorney's,
engineers' and other consultants' fees and costs, incurred in connection with
this Amendment.
4
<PAGE> 5
5. Borrower and Guarantor each represents and warrants that:
(a) All financial information and other documents it has
provided to Lender in connection with this Amendment are true, complete
and correct as of the date provided and the date hereof;
(b) There exists no Event of Default or Incipient Default,
after giving effect to the then applicable provisions of this Amendment
and other than the Existing Events of Default and the Unsolidified Lot
Sales Default;
(c) After giving effect to this Amendment, there has been
no material adverse change in any real property or in the business or
financial condition of Borrower and Guarantor since the date of the last
financial statements submitted to Lender; and
(d) After giving effect to this Amendment and the most
recent financial and litigation reports supplied to Lender, all
representations and warranties by Borrower and Guarantor remain true,
complete, and correct, in all material respects as of the date hereof.
6. Guarantor acknowledges and agrees that (i) the Guarantee shall
remain in full force and effect, (ii) the obligations of the Guarantor under the
Guarantee are joint and several with those of each other Obligor (as that term
is defined in the Guarantee), (iii) Guarantor's liability under the Guarantee
shall continue undiminished by this Amendment, and (iv) all terms, conditions
and provisions set forth in this Amendment and any other documents and
instruments executed by Borrower in connection with this Amendment and each of
the other Documents, as amended through the date hereof, are hereby ratified,
approved and confirmed.
7. Borrower and Guarantor acknowledge and agree that they have no
defenses, counterclaims, setoffs, recoupments or other adverse claims or causes
of action in tort, contract or of any other kind existing against Lender or with
respect to the Documents, including without limitation, claims regarding the
amount, validity, perfection, priority and enforceability of the Documents.
8. The Documents shall be deemed amended by the provisions of
this Amendment, as and when applicable and any conflict or inconsistency between
this Amendment and the Documents shall be resolved in favor of this Amendment.
Except as so amended, all other consistent terms and conditions of the Documents
will remain in full force and effect, and are hereby ratified and affirmed
(including, but not limiting the generality of the foregoing, Section 14 of the
Fifth Amendment is hereby specifically ratified and affirmed and all references
therein to the term "Amendment" shall be deemed to refer to this Amendment).
5
<PAGE> 6
9. Except as may be expressly provided herein, Borrower's and
Guarantor's respective obligations under the Documents shall remain in full
force and effect and shall not be waived, modified, superseded or otherwise
affected by this Amendment. This Amendment is not a novation, nor is it be
construed as a release, waiver, extension of forbearance or modification of any
of the terms, conditions, representations, warranties, covenants, rights or
remedies set forth in any of the Documents, except as expressly stated herein.
10. This Amendment in no way acts as a waiver of any default of
Borrower or as a release or relinquishment of any of the liens, security
interests, rights or remedies securing payment and Performance of the Borrower's
Obligations or the enforcement thereof. Such liens, security interests, rights
and remedies are hereby ratified, confirmed, preserved, renewed and extended by
Borrower in all respects. Further, Lender's execution of this Amendment shall
not constitute a waiver (either express or implied) of the requirement that any
further forbearance under or modification of the Loan Agreement or any other
Document shall require the express written approval of Lender. No such approval
(either express or implied) has been given as of the date hereof.
11. Borrower and Guarantor acknowledge that Lender has performed,
and is not in default of, its obligations under the Documents; that there are no
offsets, defenses or counterclaims in tort, contract or otherwise, with respect
to any of Borrower's or Guarantor's or other party's obligations under the
Documents; and that Lender has not directed Borrower to pay or not pay any of
Borrower's payables.
12. Borrower and Guarantor will execute and deliver such further
instruments and do such things as in the judgment of Lender are necessary or
desirable to effect the intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by the terms of this
Amendment and any other documents executed in connection herewith.
13. If any provision of this Amendment is held to be
unenforceable under present or future laws effective while this Amendment is in
effect (all of which invalidating laws are waived to the fullest extent
possible), the enforceability of the remaining provisions of this Amendment
shall not be affected thereby. In lieu of each such unenforceable provision,
there shall be added automatically as part of this Amendment a provision that is
legal, valid and enforceable and is similar in terms to such unenforceable
provisions as may be possible.
14. Any further discussions by and among Borrower, Guarantor and
Lender, if any, and all such discussions in the past, together with any other
actions or inactions taken by and among Borrower, Guarantor and Lender, shall
not cause a modification of the Documents, establish a custom or waive (unless
Lender made such express waiver in writing), limit or condition the rights and
remedies of Lender under the Documents, all of which rights and remedies are
expressly reserved. All of the provisions of
6
<PAGE> 7
the Documents, including, without limitation, the time of the essence provision,
are hereby reiterated and if ever waived are hereby reinstated (unless Lender
made such express waiver in writing), except as expressly provided herein.
Notwithstanding anything to the contrary contained herein or in any other
instrument executed by the parties and notwithstanding any other action or
conduct undertaken by the parties on or before the date hereof, the agreements,
covenants and provisions contained herein and the Loan Agreement shall
constitute the only evidence of Lender's agreement to forbear or to modify the
Loan Agreement. Accordingly, no express or implied consent to any further
forbearances or modifications shall be inferred or implied by Lender's execution
of this Amendment. The Loan Agreement and this Amendment, together with the
other Loan Documents, constitute the entire agreement and understanding among
the parties relating to the subject matter hereof, and supersedes all prior
proposals, negotiations, agreements and understandings relating to such subject
matter. In entering into this Amendment, Borrower acknowledges that it is
relying on no statement, representation, warranty, covenant or agreement of any
kind made by the Lender or any employee or agent of the Lender, except for the
agreements of Lender set forth herein.
15. This Amendment shall not be binding upon Lender until
accepted by Borrower and Guarantor as provided for below. This Amendment may be
executed in counterpart, and any number of which have been executed by all
parties shall be deemed to constitute one original. Lender, its attorneys and
agents may also integrate into a single Amendment signature pages from separate
counterpart Amendments. The telecopied signature of a person shall be deemed an
original signature, may be relied upon by others and shall be binding upon the
signer for all purposes provided however that Borrower, Guarantor or any person
otherwise consenting hereto by telecopied signature shall confirm its telecopied
signature by signing and returning to Lender a copy of this Amendment with an
original signature.
16. Borrower's and Guarantor's representatives are experienced
and knowledgeable business people and have been represented by independent legal
counsel who are experienced in all matters relevant to this Amendment,
including, but not limited to, bankruptcy and insolvency law. The parties hereto
have accepted and agreed to this Amendment after being fully aware and advised
of the effect and significance of all of its terms, conditions, and provisions.
17. Unless otherwise specifically stipulated elsewhere in the
Documents, if a matter is left in the Documents or this Amendment to the
decision, right, requirement, request, determination, judgment, opinion,
approval, consent, waiver, satisfaction, acceptance, agreement, option or
discretion of Lender, its employees, Lender's counsel or any agent for or
contractor of Lender, such action shall be deemed to be exercisable by Lender or
such other person in its sole and absolute discretion and according to standards
established in its sole and absolute discretion. Without limiting the generality
of the foregoing, "option" and "discretion" shall be implied by use of the words
"if" or "may."
7
<PAGE> 8
18. The Recitals in this Amendment are incorporated into the body
hereof as fully set forth herein.
19. THIS AMENDMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE
PERFORMED IN THE STATE OF ARIZONA. THE PROVISIONS OF THIS AMENDMENT AND ALL
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. EACH OF
BORROWER, GUARANTOR AND LENDER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA
COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR
OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO ANY DOCUMENT OR THE SUBJECT
MATTER THEREOF, OR, IF LENDER SHALL INITIATE SUCH ACTION, IN THE COURT IN WHICH
SUCH ACTION IS INITIATED PROVIDED THAT SUCH COURT HAS JURISDICTION, AND THE
CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN ANY
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER, GUARANTOR AND LENDER HEREBY WAIVE THE RIGHT TO
COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
[SIGNATURE PAGE FOLLOWS]
8
<PAGE> 9
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:__________________________________
Its:_____________________________
BORROWER:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By:__________________________________
Its:_____________________________
Signed in the presence of:
GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By:__________________________________
Its:_____________________________
Signed in the presence of:
_____________________________________
9
<PAGE> 10
STATE OF NEVADA )
) ss.
County of ___________________)
The foregoing instrument was acknowledged before me this ____ day
of February, 2000 by ______________ as _______________ of PREFERRED EQUITIES
CORPORATION, a Nevada corporation, on behalf of the corporation.
________________________________________
Notary Public
My Commission Expires:
_____________________________
STATE OF NEVADA )
) ss.
County of ___________________)
The foregoing instrument was acknowledged before me this ____ day
of February 2000, by ______________ as _______________ of MEGO FINANCIAL CORP.,
a New York corporation, on behalf of the corporation.
________________________________________
Notary Public
My Commission Expires:
STATE OF ARIZONA )
) ss.
County of Maricopa )
This instrument was acknowledged before me this ___ day of
February 2000, by ______________________, as _______________ of FINOVA CAPITAL
CORPORATION, a Delaware corporation, on behalf of the corporation.
________________________________________
Notary
My Commission expires:
10
<PAGE> 1
EXHIBIT 10.200
EIGHTH AMENDMENT
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
This Eighth Amendment (the "Amendment") to Assignment and Assumption Agreement,
by and between RER Corp., COMAY corp., GROWTH REALTY INC. and H&H FINANCIAL,
INC. (the "Assignors") and MEGO FINANCIAL CORP., formerly named Mego Corp., (the
"Assignee")
WITNESSETH:
WHEREAS, the Assignors are parties to the Assignment Agreement dated October 25,
1987, with the Assignee, and the Assignment and Assumption Agreement, dated
February 1, 1988, between the Assignors and the Assignee, which two agreements
were amended by the Amendment to Assignment and Assumption Agreement dated July
29, 1988 and by the Second Amendment to Assignment and Assumption Agreement
dated as of March 2, 1995, the Third Amendment to Assignment and Assumption
Agreement dated as of August 20, 1997 and the Fourth, Fifth, Sixth, and Seventh
Amendments to Assignment and Assumption Agreement dated as of February 26, 1999,
May 28, 1999, August 9, 1999, and November 1, 1999, respectively, between the
Assignors and the Assignee (collectively, the described agreements as so amended
are hereinafter referred to as the "Assignment"): and
WHEREAS, the Assignment fixed the date of January 31, 1995 as the date
on which the accrual of amounts due to the Assignors under the Assignment would
terminate, except for interest on any of such amounts which remained unpaid; and
WHEREAS, the amount due the Assignors as of January 31, 1995 was
$13,328,742.25, plus interest from January 28, 1995, in the amount of $9,322.57,
collectively, and with interest from January 31, 1995 to March 2, 1995 (the
"Amount Due"); and
WHEREAS, $10,000,000 of the Amount Due was agreed to be considered
subordinated debt (the "Subordinated Debt"), against which payments were made as
follows: (i) $1,428,571.43 was paid on March 1, 1997 as scheduled, (ii)
$4,250,000 was deemed paid by credit against the exercise price of certain
warrants as is set forth in the Third Amendment, and (iii) $35, 714.28 was paid
on September 1, 1998, leaving a remaining balance of the Subordinated Debt of
$4,285,714.29; and
WHEREAS, the balance of the Subordinated Debt continues to be secured by
a pledge of all of the issued and outstanding common stock of Preferred Equities
Corporation ( and any distributions in respect thereto) pursuant to a Pledge and
Security
<PAGE> 2
Agreement dated as of February 1, 1988 (the "Pledge Agreement") between the
Assignee and the Assignors; and
WHEREAS, interest on the Subordinated Debt has been paid through
September 1, 1999; and
WHEREAS, under the terms of the Assignment, a payment in the amount of
$1,428,571.43, which was originally due on March 1, 1999, and a payment in the
amount of $1,428,571.43, which was originally due September 1, 1999, were both
deferred to February 1, 2000; and
WHEREAS, under the terms of the Assignment, a payment in the amount of
$1,428,571.43, will be due on March 1, 2000; and
WHEREAS, the Assignee has requested that the Assignors further defer the
payment of principal of the Subordinated Debt payable on February 1, 2000, in
the total amount of $2,857,142.86, and the payment of principal of the
Subordinated Debt due March 1, 2000, in the amount of $1,428,571.43, to May 1,
2000.
NOW THEREFORE, in consideration of the mutual covenants herein contained
it is hereby agreed as follows:
1. The statements in the foregoing preamble are true and correct.
2. The payments previously deferred to February 1, 2000, totaling in the
aggregate $2,857,142.86, and the payment due March 1, 2000 in the amount of
$1,428,571.43, are hereby deferred to May 1, 2000.
3. The Assignee and Assignors agree that all amounts due to Assignors
pursuant to the Assignment as amended by this Amendment shall continue to be
secured as set forth in the Pledge Agreement and that the Pledge Agreement
remains in full force and effect.
4. The Assignee and Assignors agree that this Amendment is an amendment
to the Assignment and not a novation, and that except as modified hereby, all
terms and conditions of the Assignment, including but not limited to provisions
with respect to the payment of interest and acceleration of the entire balance
of principal and interest if any payment is not made within 30 days of its due
date, shall remain in full force and effect.
5. It is agreed that this Amendment may be signed in counterparts, and
all such counterparts in the aggregate shall constitute one agreement.
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
January 31, 2000.
MEGO FINANCIAL CORP.
By:/s/ Jerome J. Cohen
---------------------------------
Jerome J. Cohen, President
RER CORP.
By:/s/ Robert Nederlander
---------------------------------
Title: President
Comay Corp
By:/s/ Jerome J. Cohen
---------------------------------
Title: President
Growth Realty Inc.
By: s/s Eugene Schuster
---------------------------------
Title: C.E.O.
<PAGE> 1
EXHIBIT 10.201
Loan No. 95-227
THIS AMENDED, RESTATED AND INCREASED RECEIVABLES PROMISSORY NOTE NO. 1 AMENDS
AND RESTATES IN ITS ENTIRETY AND INCREASES THE PRINCIPAL AMOUNT OF THAT CERTAIN
RECEIVABLES PROMISSORY NOTE DATED MARCH 28, 1996, IN THE ORIGINAL PRINCIPAL
AMOUNT OF $15,000,000.00, THE ORIGINAL OF WHICH IS ATTACHED HERETO.
AMENDED, RESTATED AND INCREASED
RECEIVABLES PROMISSORY NOTE NO. 1
$30,000,000.00 December 22, 1999
THIS AMENDED, RESTATED AND INCREASED RECEIVABLES PROMISSORY NOTE NO. 1
amends and restates in its entirety and increases the principal amount of the
following described promissory note as described in that certain Interval
Receivables Loan and Security Agreement dated March 28, 1996 as subsequently
amended, made by Preferred Equities Corporation, a Nevada corporation, to Heller
Financial, Inc.: that certain Receivables Promissory Note dated March 28, 1996,
in the principal amount of $15,000,000.00; (the "ORIGINAL NOTE"). Pursuant to
that certain Fourth Amendment to Interval Receivables Loan and Security
Agreement between Holder and Maker dated _________________, 1999, Maker hereby
executes and delivers to Holder this Amended, Restated and Increased Receivables
Promissory Note No. 1 which amends, restates and increases the principal amount
of the Original Note, as follows:
1. PROMISE TO PAY.
FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("MAKER") whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation, and its
successors and assigns ("HOLDER"), in lawful money of the United States of
America and in immediately available funds, the aggregate unpaid principal
amount of all Advances made by Holder to Maker (the "LOAN") pursuant to that
certain Interval Receivables Loan and Security Agreement, dated March 28, 1996,
between Holder and Maker, as amended, modified or supplemented from time to time
in accordance with its terms (the "Receivables Loan Agreement"). This is a
revolving Note, the principal amount of which may increase or decrease from time
to time during the term hereof. This Note shall evidence Advances made under the
Receivables Loan Agreement, notwithstanding that the total aggregate of
principal advances and repayments exceed the original maximum principal amount
hereof, and notwithstanding that the principal balance may be zero at any time.
Payments shall be made to Holder at 500 West Monroe Street, 15th Floor, Chicago,
Illinois 60661 (or such other address as Holder may hereafter designate in
writing to Maker).
The repayment of the Loan evidenced by this Note is secured by the
Receivables Loan Agreement pursuant to which Maker has assigned, pledged and
granted a security interest to Lender in certain receivables related to the sale
of Intervals and other collateral described therein. This Note, the Receivables
Loan Agreement and any other documents evidencing or securing the Loan or
executed in connection therewith, and any modification, renewal or extension of
any of the foregoing are collectively called the "Receivables Loan Documents".
<PAGE> 2
This Note has been issued pursuant to the Receivables Loan Agreement,
and all of the terms, covenants and conditions of the Receivables Loan Agreement
(including all Exhibits thereto) and all other instruments evidencing or
securing the indebtedness hereunder are hereby made a part of this Note and are
deemed incorporated herein in full. Defined terms used herein and not otherwise
defined shall have the meanings set forth in the Receivables Loan Agreement.
2. PRINCIPAL AND INTEREST
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a rate equal to a floating rate per annum equal to four
percent (4.0%) plus the Base Rate (the aggregate rate referred to as the
"INTEREST RATE"). "BASE RATE" shall mean the rate published each Business Day in
the Wall Street Journal for deposits maturing three (3) months after issuance
under the caption "Money Rates, London Interbank Offered Rates (Libor)." The
Interest Rate for each calendar month shall be fixed based upon the Base Rate
published prior to and in effect on the first (1st) Business Day of such month.
Interest shall be calculated on a 360 day year and charged for the actual number
of days elapsed.
3. PAYMENT.
This Note is subject to mandatory payments as provided in Section
1.4 of the Receivables Loan Agreement.
Maker shall pay interest to Lender monthly, in arrears, on the
first day of each calendar month, commencing January 1, 2000, on the unpaid
principal amount of this Note outstanding during the previous calendar month at
a fluctuating interest rate per annum (computed daily on the basis of a year of
360 days and charged for the actual number of days elapsed) equal to the
Interest Rate; provided, however, that after the occurrence of an Event of
Default under the Receivables Loan Agreement this Note shall bear interest at
the Default Rate set forth below.
The Loan shall be due and payable on or before June 30, 2006, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "MATURITY DATE").
4. PREPAYMENT.
This Note is (i) subject to mandatory prepayments in whole or in
part as provided in Section 1.5(b) of the Receivables Loan Agreement; and (ii)
permitted optional prepayments in accordance with Section 1.5(a) of the
Receivables Loan Agreement, subject to applicable Prepayment Premiums.
Not in limitation of any other mandatory prepayment requirements
under the Receivables Loan Agreement, if at any time the outstanding aggregate
principal balance under (i) this Note; (ii) that certain Amended, Restated and
Consolidated Acquisition Promissory Note No. 1 of even date herewith, between
Holder and Maker in the principal amount of $2,802,680.00, together with any
acquisition promissory note or notes given in connection with the Second
Supplemental Acquisition Commitment as set forth in that certain Third Amendment
to Acquisition and Construction Loan Agreement dated ________________, 1999
(such acquisition promissory notes being collectively referred to as the
"Acquisition Note"); and (iii) that certain Amended, Restated and Consolidated
Revolving Renovation Promissory Note dated December 23, 1997, between Holder and
Maker in the maximum principal amount of $2,500,000.00, together with any
renovation promissory note or notes given in connection with the Supplemental
Renovation Commitment as set forth in that certain Third Amendment to
Acquisition and Construction Loan Agreement dated ________________, 1999 (such
renovation promissory notes being collectively referred to as the "Renovation
Note") exceeds $30,000,000.00 or such lesser amount as set
Page 2
<PAGE> 3
forth in the Receivables Loan Agreement, such excess amount shall be due and
payable by Maker to Holder within five (5) Business Days after notice from
Holder without premium or penalty and such amount shall be applied by Holder to
reduce the outstanding principal balance of any of the above-referenced notes in
any manner or amount that Holder determines.
5. DEFAULT.
A. Events of Default.
An "Event of Default" under this Note shall mean the occurrence of any
Event of Default under any of the Receivables Loan Documents, after giving
effect to any applicable grace or cure period.
B. Remedies.
So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "DEFAULT RATE"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the
Receivables Loan Agreement or any other Receivables Loan Documents. Holder's
rights, remedies and powers, as provided in this Note and the other Receivables
Loan Documents, are cumulative and concurrent, and may be pursued singly,
successively or together against Maker, any guarantor of the Loan, the security
described in the Receivables Loan Documents, and any other security given at any
time to secure the payment hereof, all at the sole discretion of Holder.
Additionally, Holder may resort to every other right or remedy available at law
or in equity without first exhausting the rights and remedies contained herein,
all in Holder's sole discretion. Failure of Holder, for any period of time or on
more than one occasion, to exercise its option to accelerate the Maturity Date
shall not constitute a waiver of the right to exercise the same at any time
during the continued existence of any Event of Default or any subsequent Event
of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Receivables Loan Documents, whether or not legal proceedings are
thereafter instituted by Holder; (ii) to represent Holder in any bankruptcy,
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens and security
interests of the Receivables Loan Agreement or any of the Receivables Loan
Documents; (iv) to foreclose on the Collateral; (v) to represent Holder in any
other proceedings whatsoever in connection with the Receivables Loan Agreement
or any of the Receivables Loan Documents including post judgment proceedings to
enforce any judgment related to the Receivables Loan Documents; or (vi) in
connection with seeking an out-of-court workout or settlement of any of the
foregoing, then Maker shall pay to Holder all reasonable costs, attorneys' fees
and expenses in connection therewith, in addition to all other amounts due
hereunder.
6. LATE CHARGE.
If payments of principal and/or interest, or any other amounts under the
other Receivables Loan Documents are not timely made or remain overdue for a
period of ten (10) days, Maker, without notice or demand by Holder, promptly
shall pay an amount ("Late Charge") equal to four percent (4%) of each
delinquent payment.
Page 3
<PAGE> 4
7. GOVERNING LAW; SEVERABILITY.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. WAIVER.
Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their heirs, successors, assigns and legal representatives, hereby
waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor, notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note except as provided in the
Receivables Loan Agreement, and agrees that their respective liability shall be
unconditional and without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Holder. Maker, for itself and
all endorsers, guarantors and sureties of this Note, and their heirs, legal
representatives, successors and assigns, hereby consents to every extension of
time, renewal, waiver or modification that may be granted by Holder with respect
to the payment or other provisions of this Note, and to the release of any
makers, endorsers, guarantors or sureties, and of any collateral given to secure
the payment hereof, or any part hereof, with or without substitution, and agrees
that additional makers, endorsers, guarantors or sureties may become parties
hereto without notice to Maker or to any endorser, guarantor or surety and
without affecting the liability of any of them.
9. SECURITY, APPLICATION OF PAYMENTS.
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Receivables Loan Documents. Payments will be applied to
any fees, expenses or other costs Maker is obligated to pay under this Note or
the other Receivables Loan Documents, to interest due on the Loan and to the
outstanding principal balance of the Loan, in any order that Holder, at its sole
option, may deem appropriate.
10. MISCELLANEOUS.
A. Amendments.
This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.
B. Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid or agreed to be
paid to Holder pursuant to this Note or any of the Receivables Loan Documents
exceed the highest lawful rate of interest permissible under applicable law. If,
from any circumstances whatsoever, fulfillment of any provision of this Note and
the other Receivables Loan Documents shall involve exceeding the lawful rate of
interest which a court of competent jurisdiction may deem applicable hereto
("Excess Interest"), then ipso facto, the obligation to be fulfilled shall be
reduced to the highest lawful rate of interest permissible under such law and
if, for any reason whatsoever, Holder shall receive, as interest, an amount
which would be deemed unlawful under such applicable law, such interest shall be
applied to the principal of the Loan (whether or not due and payable), and not
to the payment of interest, or refunded to Maker if the Loan has
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been paid in full. Neither Maker nor any guarantor or endorser shall have any
action against Holder for any damages whatsoever arising out of the payment or
collection of any such Excess Interest.
C. Captions.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
D. Notices.
Notices shall be given under this Note in conformity with the terms and
conditions of the Receivables Loan Agreement.
E. Joint and Several.
The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.
F. Time of Essence.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.
11. VENUE.
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE
SHALL BE LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS
HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS. MAKER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND
DESIGNATES C T CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION
SYSTEM, 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED
AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED A
COPY OF SUCH SERVICE OF PROCESS IS ALSO SENT WITHIN THREE (3) DAYS THEREAFTER TO
MAKER EXCEPT IN THE CASE OF SERVICE OF PROCESS FOR ACTIONS WHEREIN THE MAKER'S
RESPONSE IS DUE IN LESS THAN TWENTY (20) DAYS, A COPY OF SUCH PROCESS WILL BE
SENT TO MAKER ON THE SAME DAY AS SERVICE ON C T CORPORATION SYSTEM. IN THE EVENT
SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN
CHICAGO, ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST,
APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH
PERIOD NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY HOLDER ON THE RECEIVABLES LOAN DOCUMENTS IN ACCORDANCE WITH THIS
PARAGRAPH.
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12. SALE OF LOAN.
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Receivables Loan
Agreement and the other Receivables Loan Documents, any guaranties given in
connection with the Loan and any collateral given to secure the Loan. In the
event Holder sells, transfers, conveys or assigns all of Holder's right, title
and interest in this Note or the Loan, Holder shall give notice thereof to Maker
and Holder shall thereupon be released from liability and obligations of the
Lender hereunder and under all other transferred Loan Documents from and after
the date of such transfer provided such transferee agrees to be bound by the
obligations of Lender thereunder and provided such transferee is of equal or
greater financial capacity than Holder. Notice to Maker shall not be required
for any partial sale, transfer, assignment or conveyance of this Note.
13. JURY TRIAL WAIVER.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF
THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same
to be executed by its duly authorized representatives as of the date first set
forth above.
MAKER:
Preferred Equities Corporation,
a Nevada corporation
By: /s/ JON A. JOSEPH
--------------------------------
Print Name: Jon A. Joseph
------------------------
As Its: Vice President
----------------------------
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<PAGE> 1
EXHIBIT 10.202
Loan No. 95-227
THIS AMENDED, RESTATED AND CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 1
AMENDS, RESTATES AND CONSOLIDATES (a) THAT CERTAIN AMENDED AND RESTATED
ACQUISITION PROMISSORY NOTE DATED DECEMBER 23, 1997 IN THE ORIGINAL PRINCIPAL
AMOUNT OF $4,865,000.00, AND (b) THAT CERTAIN FUTURE ADVANCE ACQUISITION
PROMISSORY NOTE NO. 1 DATED OCTOBER 19, 1999, IN THE ORIGINAL PRINCIPAL AMOUNT
OF $1,000,000.00, (THE OUTSTANDING COMBINED PRINCIPAL BALANCE OF WHICH FOREGOING
NOTES AS OF THE DATE HEREOF IS $1,802,680.00), AND (c) THAT CERTAIN FUTURE
ADVANCE ACQUISITION PROMISSORY NOTE NO. 2 OF EVEN DATE HEREWITH IN THE PRINCIPAL
AMOUNT OF $1,000,000.00, THE ORIGINALS OF WHICH ARE ATTACHED HERETO. ALL
DOCUMENTARY STAMP TAX DUE ON THE ATTACHED AMENDED AND RESTATED ACQUISITION
PROMISSORY NOTE DATED DECEMBER 23, 1997 IN THE PRINCIPAL AMOUNT OF $4,865,000.00
HAS BEEN PAID AND AFFIXED TO THE ORIGINAL MORTGAGE, ASSIGNMENT OF RENTS AND
LEASES AND SECURITY AGREEMENT DATED MARCH 29, 1996 AND RECORDED IN THE PUBLIC
RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL RECORDS BOOK 5038, PAGE 3903. ALL
DOCUMENTARY STAMP TAX DUE ON THE ATTACHED FUTURE ADVANCE ACQUISITION PROMISSORY
NOTE NO. 1 DATED OCTOBER 19, 1999, IN THE PRINCIPAL AMOUNT OF $1,000,000.00 HAS
BEEN PAID AND AFFIXED TO THE NOTICE OF FUTURE ADVANCE NO. 2 DATED OCTOBER 19,
1999, AND RECORDED IN THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA, AT OFFICIAL
RECORDS BOOK 5868, PAGE 14. ALL DOCUMENTARY STAMP TAX DUE ON THE ATTACHED FUTURE
ADVANCE ACQUISITION PROMISSORY NOTE NO. 2 OF EVEN DATE HEREWITH, IN THE
PRINCIPAL AMOUNT OF $1,000,000.00 HAS BEEN PAID AND AFFIXED TO THE NOTICE OF
FUTURE ADVANCE NO. 3 OF EVEN DATE HEREWITH TO WHICH REFERENCE IS MADE HEREIN. NO
DOCUMENTARY STAMP OR INTANGIBLES TAX IS DUE ON THIS AMENDED, RESTATED AND
CONSOLIDATED ACQUISITION PROMISSORY NOTE NO. 1.
AMENDED, RESTATED AND CONSOLIDATED
ACQUISITION PROMISSORY NOTE NO. 1
$2,802,680.00 December 22, 1999
THIS AMENDED, RESTATED AND CONSOLIDATED ACQUISITION PROMISSORY NOTE NO.
1 amends, restates and consolidates in their entirety the following described
promissory notes as are described in that certain Acquisition and Construction
Loan Agreement dated March 27, 1996 as subsequently amended, made by Preferred
Equities Corporation, a Nevada corporation, to Heller Financial, Inc.: (i) that
certain Amended and Restated Acquisition Promissory Note dated December 23, 1997
in the principal amount of $4,865,000.00, (ii) that certain Future Advance
Acquisition Promissory Note No. 1 dated October 19, 1999, in the principal
amount of $1,000,000.00, and (iii) that certain Future Advance Acquisition
Promissory Note No. 2 of even date herewith in the principal amount of
$1,000,000.00; ((i), (ii) and (iii) being collectively referred to as the
"ORIGINAL NOTES"). Pursuant to that certain Third Amendment to Acquisition and
Construction Loan Agreement between Holder and Maker dated _______________,
______, Maker hereby executes and delivers to Holder this Amended, Restated and
Consolidated Acquisition Promissory Note No. 1 which amends, restates and
consolidates the Original Notes, as follows:
<PAGE> 2
1. Promise to Pay.
FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Maker") whose address is 4310 Paradise Road, Las Vegas, Nevada 89109, promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation, and its
successors and assigns ("Holder") the sum of Two Million Eight Hundred Two
Thousand Six Hundred Eighty Dollars and No/100 ($2,802,680.00), together with
all other amounts added thereto pursuant to this Note (the "Loan") (or so much
thereof as may from time to time be outstanding), together with interest thereon
as hereinafter set forth, payable in lawful money of the United States of
America. Payments shall be made to Holder at 500 West Monroe Street, Chicago,
Illinois 60661 (or such other address as Holder may hereafter designate in
writing to Maker).
The repayment of the Loan evidenced by this Note is secured by among
other things (i) that certain Mortgage, Assignment of Rents and Security
Agreement dated March 29, 1996 (the "Mortgage") recorded in the Public Records
of Orange County, Florida at Official Records Book 5038, Page 3903, encumbering,
among other things, the property commonly described as Ramada Vacation Suites at
Tango Bay located in Orange County, Florida (the "Property"), and (ii) that
certain Interval Receivables Loan and Security Agreement dated March 28, 1996
(the "Receivables Security Agreement") pursuant to which Maker has assigned,
pledged and granted a security interest to Lender in certain receivables related
to the sale of Interval Units and other Collateral described therein. This Note,
the Amended, Restated and Consolidated Revolving Renovation Promissory Note
dated December 23, 1997 (the "Renovation Note"), the Mortgage, the Acquisition
and Construction Loan Agreement dated March 27, 1996, as subsequently amended
(the "Loan Agreement") and any other documents evidencing or securing the Loan
or executed in connection therewith, and any amendment, modification,
consolidation, notification under, renewal or extension of any of the foregoing
are collectively called the "Loan Documents."
This Note has been issued pursuant to the Loan Agreement, and all of the
terms, covenants and conditions of the Loan Agreement (including all Exhibits
thereto) and all other instruments evidencing or securing the indebtedness
hereunder are hereby made a part of this Note and are deemed incorporated herein
in full. Defined terms used herein and not otherwise defined shall have the
meanings set forth in the Loan Agreement.
2. Principal and Interest.
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding, and Maker shall pay
interest thereon, at a floating rate of interest per annum equal to four and
one-quarter percent (4.25%) plus the Base Rate (the aggregate rate referred to
as the "Interest Rate"). "Base Rate" shall mean the rate published each business
day in the Wall Street Journal for deposits maturing three (3) months after
issuance under the caption "Money Rates, London Interbank Offered Rates
(Libor)". The Interest Rate for each calendar month shall be fixed based upon
the Base Rate published prior to and in effect on the first (1st) business day
of such month. Interest shall be calculated based on a 360 day year and charged
for the actual number of days elapsed.
3. Payment.
Commencing on May 1, 1996, Maker shall pay interest computed at the
Interest Rate monthly in arrears on the first day of each month during the term
of this Note.
Concurrently with Maker's sale of any Interval Unit (as defined in the
Loan Agreement), Maker shall pay to Holder the Interval Release Payment and
Interval Incentive Fee (as defined in the Loan Agreement) with respect to such
Interval Unit. The portion of the Interval Release Payment designated in
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<PAGE> 3
the Loan Agreement to be applied to the Acquisition Commitment shall be applied
first to accrued but unpaid interest which is past due hereunder, if any, and
then to the outstanding principal balance of this Note. The balance of the
Interval Release Payment shall be applied as set forth in the Renovation Note.
The Interval Incentive Fee due hereunder shall be the same as the Interval
Incentive Fee due under the Renovation Note, and Maker shall pay only one such
fee per Interval Unit sold.
The outstanding principal balance of this Note together with all
accrued interest shall be due and payable on or before June 30, 2001, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date"). This Note is subject to
mandatory payments in whole or in part as provided in Section 4.1 of the Loan
Agreement as amended from time to time.
4. Prepayment; Interval Incentive Fees.
Maker may prepay this Note in full or in part upon not less than three
(3) days prior written notice to Holder provided that at the time of such
prepayment Maker pays Holder an Interval Incentive Fee multiplied by the number
of Interval Release Payments which would be necessary to pay off the outstanding
principal balance of this Note at the time of such prepayment. Only one such
Interval Incentive Fee shall be payable by Maker under this Note and the
Renovation Note. In the event of prepayment of this Note only, Maker shall be
credited with the number of Interval Incentive Fees paid hereunder in connection
with such prepayment against the number of Interval Incentive Fees due under the
Renovation Note.
Not in limitation of any mandatory prepayment requirements under the
Loan Agreement, if, at any time, the outstanding aggregate principal balance
under (i) this Note; (ii) the Renovation Note; and (v) that certain Amended,
Restated and Consolidated Receivables Promissory Note No. 2 of even date
herewith between Holder and Maker in the maximum principal amount of
$30,000,000.00 (the "Receivables Note") exceeds the aggregate amount of
$30,000,000.00 or such lesser amount as set forth in the Loan Agreement, such
excess amount shall be due and payable by Maker to Holder within five (5)
business days after notice from Holder without premium or penalty and such
amount shall be applied by Holder to reduce the outstanding principal of any of
the referenced notes in any manner or amount that Holder determines.
5. Default.
5.1 Events of Default.
Events of Default hereunder shall be those set forth in the Loan
Agreement.
5.2 Remedies.
So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the Mortgage
or any other Loan Documents. Holder's rights, remedies and powers, as provided
in this Note and the other Loan Documents, are cumulative and concurrent, and
may be pursued singly, successively or together against Maker, any guarantor of
the Loan, the security described in the Loan Documents, and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Holder. Additionally, Holder may pursue every other right or remedy available at
law or in equity without first exhausting the rights and remedies contained
herein, all in Holder's sole discretion. Failure of Holder, for any period of
time
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<PAGE> 4
or on more than one occasion, to exercise its option to accelerate the Maturity
Date shall not constitute a waiver of the right to exercise the same at any time
during the continued existence of any Event of Default or any subsequent Event
of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Loan Documents, whether or not legal proceedings are thereafter
instituted by Holder; (ii) to represent Holder in any bankruptcy,
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens of the
Mortgage or any of the Loan Documents; (iv) to foreclose the Mortgage or enforce
any security interests under the Loan Documents; (v) to represent Holder in any
other proceedings whatsoever in connection with the Mortgage or any of the Loan
Documents including post judgment proceedings to enforce any judgment related to
the Loan Documents; or (vi) in connection with seeking an out-of-court workout
or settlement of any of the foregoing, then Maker shall pay to Holder all
reasonable costs, attorneys' fees and expenses in connection therewith, in
addition to all other amounts due hereunder.
6. Late Charge.
If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of ten
(10) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.
7. Governing Law: Severability.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Illinois. The invalidity illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. Waiver.
Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their heirs, successors, assigns, and legal representatives, hereby
waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor, notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note except as provided in the
Loan Agreement, and agrees that their respective liability shall be
unconditional and without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Holder. Maker, for itself and
all endorsers, guarantors and sureties of this Note, and their heirs, legal
representatives, successors and assigns, hereby consents to every extension of
time, renewal, waiver or modification that may be granted by Holder regarding
obligations of guarantors, endorsers or sureties with respect to the payment of
other provisions of this Note, and to the release of any makers, endorsers,
guarantors or sureties, and of any collateral given to secure the payment
hereof, or any part hereof, with or without substitution, and agrees that
additional makers, endorsers, guarantors or sureties may become parties hereto
without notice to Maker or to any endorser, guarantor or surety and without
affecting the liability of any of them.
9. Security, Application of Payments.
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated
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herein. Payment will be applied, at Holder's option, first to any fees, expenses
or other costs Maker is obligated to pay under this Note or the other Loan
Documents, second to interest due on the Loan and third to the outstanding
principal balance of the Loan.
10. Miscellaneous.
10.1 Amendments.
This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.
10.2 Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid or agreed to be
paid to Holder pursuant to this Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which a
court of competent jurisdiction may deem applicable hereto ("Excess Interest"),
then ipso facto, the obligation to be fulfilled shall be reduced to the highest
lawful rate of interest permissible under such law and if, for any reason
whatsoever, Holder shall receive, as interest, an amount which would be deemed
unlawful under such applicable law, such interest shall be applied to the
principal of the Loan (whether or not due and payable), and not to the payment
of interest, or refunded to Maker if such Loan has been paid in full. Neither
Maker nor any guarantor or endorser shall have any action against Holder for any
damages whatsoever arising out of the payment or collection of any such Excess
Interest.
10.3 Captions.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
10.4 Notices.
Notices shall be given under this Note in conformity with the terms and
conditions of the Loan Agreement.
10.5 Joint and Several.
The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.
10.6 Time of Essence.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.
11. Sale of Loan.
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note, the Mortgage, the Loan
Agreement and the other Loan Documents, any guaranties given in connection with
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the Loan and any collateral given to secure the Loan. In the event Holder sells,
transfers, conveys or assigns all of Holder's right, title and interest in this
Note or the Loan, Holder shall give notice thereof to Maker and Holder shall
thereupon be released from liability and obligations of the Lender hereunder and
under all other transferred Loan Documents from and after the date of such
transfer provided such transferee agrees to be bound by the obligations of
Lender thereunder and provided such transferee is of equal or greater financial
capacity than Holder.
12. Venue.
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE
SHALL BE LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS
HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS. MAKER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND
DESIGNATES C T CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION
SYSTEM, 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED
AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED A
COPY OF SUCH SERVICE OF PROCESS IS ALSO SENT WITHIN THREE (3) DAYS THEREAFTER TO
MAKER IN ACCORDANCE WITH THE NOTICE PROVISIONS OF THE LOAN AGREEMENT PROVIDED,
HOWEVER, IN THE CASE OF SERVICE OF PROCESS FOR ACTIONS WHEREIN MAKER'S RESPONSE
IS DUE IN LESS THAN TWENTY (20) DAYS, A COPY OF SUCH PROCESS WILL BE SENT TO
MAKER ON THE SAME DAY AS SERVICE ON C T CORPORATION SYSTEM. IN THE EVENT SERVICE
IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN CHICAGO,
ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH PERIOD
NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY HOLDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.
13. Jury Trial Waiver.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF
THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
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OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same
to be executed by its duly authorized representatives as of the date set first
forth above.
MAKER:
PREFERRED EQUITIES CORPORATION, a Nevada
corporation
By: /s/ JON A. JOSEPH
------------------------------------
Its: Vice President
-----------------------------------
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<PAGE> 1
EXHIBIT 10.203
FOURTH AMENDMENT TO
INTERVAL RECEIVABLES LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO INTERVAL RECEIVABLES LOAN AND SECURITY
AGREEMENT (the "Fourth Amendment") is made as of the 22nd day of December, 1999
by and between Heller Financial, Inc., a Delaware corporation ("Lender") whose
address is 500 West Monroe Street, Chicago, Illinois 60661 and Preferred
Equities Corporation, a Nevada corporation ("Borrower") whose address is 4310
Paradise Road, Las Vegas, Nevada 89109.
WHEREAS, the parties entered into that certain Interval
Receivables Loan and Security Agreement dated March 28, 1996, as amended by that
certain Amendment to Interval Receivables Loan and Security Agreement dated
December 23, 1997, that certain Second Amendment to Interval Receivables Loan
and Security Agreement dated July 7, 1998, and that certain Amendment No.2 to
Interval Receivables Loan and Security Agreement dated March 1, 1999
(collectively and as amended hereby, the "Agreement"); and
WHEREAS, the parties desire to further amend the Agreement
pursuant to the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties agree as follows:
1. The Recitals set forth above are true and correct and
incorporated herein by reference.
2. The term "Overlook Repayment" shall mean the receipt by Lender
of all outstanding amounts due Lender under that certain Interval Receivables
Loan and Security Agreement between Borrower and Lender and dated as of the 6th
day of August 1996, as modified by that certain First Modification to the
Interval Receivables Loan and Security Agreement dated as of the 7th day of July
1998, and that certain Acquisition and Renovation Loan Agreement between
Borrower and Lender and dated as of the 6th day of August 1996, as modified by
that certain First Modification to the Acquisition and Renovation Loan Agreement
dated as of the 7th day of July 1998, and any further amendments, modifications
and substitutions therefor.
3. Section 1.6 regarding Commitment Fee is hereby amended by
adding the following thereto:
An additional commitment fee in the amount of Eighty-Seven
Thousand Five Hundred Dollars and No/100 ($87,500.00) shall be deemed
fully earned and payable as of the date hereof, and shall be paid at the
time when such amount is withheld by Lender
1
<PAGE> 2
from disbursements of the Acquisition Commitment as follows: Forty-Three
Thousand Seven Hundred Fifty Dollars and No/100 ($43,750.00) of the
additional commitment fee shall be withheld from disbursement of the
first One Million Dollars and No/100 ($1,000,000.00) of the First
Supplemental Acquisition Commitment (as defined in the Acquisition and
Construction Loan Agreement) and the remaining Forty-Three Thousand
Seven Hundred Fifty Dollars and No/100 ($43,750.00) of the additional
commitment fee shall be withheld from disbursement of the second One
Million Dollars and No/100 ($1,000,000.00) of the First Supplemental
Acquisition Commitment.
4. The defined term "Acquisition and Construction Loan" shall
refer to the loan by Lender to Borrower evidenced in part by the Acquisition and
Construction Loan Agreement dated March 27, 1996, as amended by that certain
Amendment to Acquisition and Construction Loan Agreement dated December 23,
1997, that certain Second Amendment to Acquisition and Construction Loan
Agreement dated July 7, 1998, and that certain Third Amendment to Acquisition
and Construction Loan Agreement of even date herewith, which together provide an
Acquisition Loan Commitment in the maximum aggregate amount of $7,805,000.00,
secured by a mortgage on the Resort, and made by Lender to finance a portion of
the purchase price of the Resort (the "Acquisition Loan") and a Renovation Loan
Commitment in the maximum aggregate amount of $4,522,000.00 (of which a maximum
principal amount of $2,500,000.00 shall be outstanding at any time) secured by a
mortgage on the Resort and made by Lender to finance the upgrade, refurbishment,
furnishing and renovation of the Resort and the Units (the "Construction Loan").
The Acquisition and Construction Loan is further evidenced by, inter alia, an
Acquisition Promissory Note, Revolving Renovation Promissory Note, Mortgage and
Guaranty.
5. The definition of Availability shall be deleted in its
entirety and replaced with the following:
At all times during the Revolving Period, Availability shall be the
lesser of:
(a) $18,000,000.00 minus the sum of (i) Advances then outstanding, plus
(ii) the then outstanding principal balance of the Acquisition Loan, plus (iii)
the then outstanding principal balance of the Construction Loan; or
(b) the sum of (i) an amount equal to 75% of the principal balance of
Eligible Notes Receivable to be assigned to Lender in connection with any then
current Advance upon which the Purchaser thereunder has not theretofore made the
first three (3) monthly payments, plus (ii) an amount equal to 85% of the
principal balance of those Eligible Notes Receivable to be assigned to Lender in
connection with any then current Advance upon which the Purchaser thereunder has
theretofore made the first three (3) monthly payments in a timely manner;
provided, however, at all times during the portion of the Revolving Period that
follows Lender's receipt of the Overlook Repayment, if at all, Availability
shall be the lesser of:
2
<PAGE> 3
(a) $30,000,000.00 minus the sum of (i) Advances then outstanding, plus
(ii) the then outstanding principal balance of the Acquisition Loan, plus (iii)
the then outstanding principal balance of the Construction Loan; or
(b) an amount equal to 85% of the principal balance of Eligible Notes
Receivable to be assigned to Lender in connection with any then current Advance.
After expiration of the Revolving Period, Availability shall in all cases be
zero (0).
6. The definition of Loan shall be deleted in its entirety and
replaced with the following:
The Eighteen Million Dollars and No/100 ($18,000,000.00) credit
facility described in this Agreement, which upon satisfaction of certain
conditions precedent as set forth in the Agreement shall become a Thirty
Million Dollars and No/100 ($30,000,000.00) credit facility.
7. The definition of Maturity Date shall be deleted in its
entirety and replaced with "June 30, 2006."
8. The definition of Maximum Exposure shall be deleted in its
entirety and replaced with the following:
The amount by which (a) the lesser of (i) $18,000,000.00, or (ii)
the sum of (A) 75% of the outstanding principal balance of all Financed
Notes Receivable upon which the Purchaser thereunder has not theretofore
made the first three (3) monthly payments, plus (B) 85% of the
outstanding principal balance of all Financed Notes Receivable upon
which the Purchaser thereunder has theretofore made the first three (3)
monthly payments in a timely manner; exceeds (b) the aggregate
outstanding principal balances of the Acquisition and Construction Loan;
provided, however, that upon and after Lender's receipt of the Overlook
Repayment, if at all, Maximum Exposure shall be
the amount by which (a) the lesser of (i) $30,000,000.00, or (ii) 85% of
the outstanding principal balance of all Financed Notes Receivable;
exceeds (b) the aggregate outstanding principal balances of the
Acquisition and Construction Loan.
9. The defined term Note is hereby amended to add to the end
thereof the phrase "together with all amendments, modifications and
substitutions thereof."
10. The defined term Permitted Exceptions is hereby amended to
add the following to the end thereto:
3
<PAGE> 4
At such time as the Resort is expanded to include additional
property, the acquisition of which was financed under the Acquisition
and Construction Loan, Borrower and Lender shall execute an exhibit to
this Agreement setting forth the exceptions to title applicable to such
portion of the Resort.
11. For purposes of clarification, all references to the term
Revolving Period within the definition of Prepayment Premium shall be deemed to
refer to the amended definition of Revolving Period as set forth herein.
12. The defined term Resort is hereby amended to add the
following to the end thereto:
together with any timeshare vacation resort located on property,
the acquisition of which was financed under the Acquisition and
Construction Loan and for which Borrower and Lender shall execute an
exhibit to this Agreement setting forth the legal description thereof,
including all related common elements, limited common elements, parking
areas and other amenities, to be established by the Declaration.
13. The defined term Revolving Period is hereby amended to
provide that the Revolving Period is currently in effect as of the date of this
Amendment and shall end on June 30, 2001.
14. In connection with this Amendment, Borrower hereby certifies
that (a) all Borrower's representations, warranties, covenants and agreements
contained in the Agreement are true and correct and in full force and effect as
of the date hereof with the exception that (i) the Financial Statements
referenced in Section 4.3 of the Agreement are true, correct and complete as
reflected in the quarterly financial report dated May 31, 1999, and the monthly
financial report dated July 31, 1999, and (ii) there are no material adverse
changes to the information reflected in the disclosure of litigation matters
concerning PEC and dated October 6, 1999 and attached hereto as Exhibit "A", (b)
as of the date hereof there are no Events of Default thereunder, and (c) all of
the Loan Documents as defined therein are in full force and effect.
15. Except as modified by this Amendment, all other terms and
conditions of the Agreement and other Loan Documents shall remain in full force
and effect. Should Borrower currently be in default under the Agreement, which
default would not have existed if this Amendment were effective, such default is
hereby waived.
16. As consideration for, and as a mutual inducement to Lender
entering into this Amendment, Borrower hereby waives and releases any and all
setoffs, counterclaims and defenses it has of the date hereof with respect to
the Loans and performance by Lender under the Loan Documents, and hereby
acknowledges that Lender has fully performed all of its obligations and is not
in default under the Loan Documents. Execution of this Amendment shall not be
4
<PAGE> 5
deemed to constitute a waiver or release by Lender of any its rights or remedies
under the Loan Documents.
IN WITNESS whereof the parties have executed this Agreement as of
the date above.
PREFERRED EQUITIES CORPORATION, HELLER FINANCIAL, INC., a
a Nevada corporation Delaware corporation
By: /s/ JON A. JOSEPH By:
----------------------------- -----------------------------
Jon A. Joseph
- ---------------------------------- ---------------------------------
Print Name Print Name
Its: Vice President Its:
------------------------------ ------------------------------
APPROVED BY GUARANTOR:
MEGO FINANCIAL CORP., a
New York corporation
By: /s/ JON A. JOSEPH
------------------------------
Jon A. Joseph
----------------------------------
Print Name
Its: Vice President
-----------------------------
5
<PAGE> 6
deemed to constitute a waiver or release by Lender of any its rights or
remedies under the Loan Documents.
IN WITNESS whereof the parties have executed this Agreement as of
the date above.
PREFERRED EQUITIES CORPORATION, HELLER FINANCIAL, INC., a
a Nevada corporation Delaware corporation
By: /s/ JON A. JOSEPH By: /s/ DENNIS K. HOLLAND
----------------------------- -----------------------------
Jon A. Joseph Dennis K. Holland
- ---------------------------------- ---------------------------------
Print Name Print Name
Its: Vice President Its: Senior Vice President
------------------------------ -----------------------------
APPROVED BY GUARANTOR:
MEGO FINANCIAL CORP., a
New York corporation
By: /s/ JON A. JOSEPH
------------------------------
Jon A. Joseph
----------------------------------
Print Name
Its: Vice President
-----------------------------
5
<PAGE> 7
EXHIBIT "A"
LITIGATION DISCLOSURE SCHEDULE
6
<PAGE> 1
EXHIBIT 10.204
THIRD AMENDMENT TO
ACQUISITION AND CONSTRUCTION LOAN AGREEMENT
THIS THIRD AMENDMENT TO ACQUISITION AND CONSTRUCTION LOAN
AGREEMENT (the "Third Amendment") is made as of the 22nd day of December, 1999
by and between Heller Financial, Inc., a Delaware corporation ("Lender") whose
address is 500 West Monroe Street, Chicago, Illinois 60661 and Preferred
Equities Corporation, a Nevada corporation ("Borrower") whose address is 4310
Paradise Road, Las Vegas, Nevada 89109.
WHEREAS, the parties entered into that certain Acquisition and
Construction Loan Agreement dated March 27, 1996, as amended by that certain
Amendment to Acquisition and Construction Loan Agreement dated December 23, 1997
and that certain Second Amendment to Acquisition and Construction Loan Agreement
dated July 7, 1998 (collectively and as amended hereby, the "Agreement"); and
WHEREAS, the parties desire to further amend the Agreement
pursuant to the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties agree as follows:
1. The Recitals set forth above are true and correct and
incorporated herein by reference.
2. Section 1.1 regarding Acquisition Commitment is hereby amended
to provide that the term "Acquisition Commitment" shall be deemed to be
increased hereby and include (i) an additional One Million Dollars and No/100
($1,000,000.00) , which taken together with the One Million Dollars and No/100
($1,000,000.00) acquisition commitment set forth in that certain Letter
Agreement between Lender and Borrower dated as of October 19, 1999, shall be
hereafter jointly referred to as the "First Supplemental Acquisition Commitment"
in the amount of Two Million Dollars and No/100 ($2,000,000.00) and shall be for
the purpose of providing Borrower with additional working capital subject to any
agreement regarding the use of such funds under Section 2.1 of the Agreement as
amended hereby and (ii) an additional Nine Hundred Forty Thousand Dollars and
No/100 ($940,000.00) (the "Second Supplemental Acquisition Commitment") for the
purpose of acquiring eighteen (18) condominium units (the "Additional Units")
adjacent to the existing Resort for the development of additional timeshare
units (jointly, the "Supplemental Acquisition Commitments"); provided, however,
that the Supplemental Acquisition Commitments shall only be advanced pursuant to
the terms and upon satisfaction of the conditions set forth in Section 2.1 as
modified hereby.
1
<PAGE> 2
3. Section 1.2 regarding Acquisition Note is hereby amended to
add to the end thereof the phrase "together with any and all promissory notes
given to evidence funds advanced pursuant to the Supplemental Acquisition
Commitments, and shall also include any and all amendments, modifications and
substitutions thereof, including, but not limited to, that certain Future
Advance Acquisition Promissory Note No. 1 dated as of October 19, 1999, in the
amount of One Million Dollars and No/100 ($1,000,000.00), and that certain
Future Advance Acquisition Promissory Note No. 2, in the amount of One Million
Dollars and No/100 ($1,000,000.00) to be given in connection with the advance of
the balance of the First Supplemental Acquisition Commitment, all of which shall
be replaced by an Amended, Restated and Consolidated Acquisition Promissory Note
No. 1 which shall evidence the First Supplemental Acquisition Commitment in the
amount of Two Million Dollars and No/100 ($2,000,000.00) plus the outstanding
balance of that certain Amended and Restated Acquisition Promissory Note dated
December 23, 1997 in the original principal amount of Four Million Eight Hundred
Sixty-Five Thousand Dollars ($4,865,000.00)."
4. Section 1.46 regarding Renovation Commitment is hereby amended
to provide that the term "Renovation Commitment" shall be deemed to be increased
by and include an additional Seven Hundred Sixty Thousand Dollars and No/100
($760,000.00) (the "Supplemental Renovation Commitment") for the purpose of
construction and renovation of the Additional Units; provided, however, that the
Supplemental Renovation Commitment shall only be advanced pursuant to the terms
and upon satisfaction of the conditions applicable to Advances of the Renovation
Commitment and the terms and conditions that specifically apply to the
Supplemental Renovation Commitment.
5. Section 1.6 regarding Approved Budget is hereby amended to
provide that the term "Approved Budget" shall also be deemed to refer to any
exhibit executed by Borrower and Lender setting forth an approved budget for the
renovation of the Additional Units to be used for timeshare purposes, the
expenses of which shall be reimbursed under the Supplemental Renovation
Commitment pursuant to the terms and conditions hereof, and the approval of
which budget shall be a condition precedent to any Advance under the
Supplemental Renovation Commitment.
6. Section 1.7 regarding Approved Construction Schedule is hereby
amended to provide that the term "Approved Construction Schedule" shall also be
deemed to refer to any exhibit executed by Borrower and Lender setting forth the
approved schedule and order of renovation and construction of the Additional
Units and any modifications thereto permitted in accordance with Section 2.7,
and the approval of which schedule shall be a condition precedent to any Advance
under the Supplemental Renovation Commitment.
7. Section 1.8 regarding Approved Timeshare Document Filing
Schedule is hereby amended to provide that the term "Approved Timeshare Document
Filing Schedule" shall also be deemed to refer to any exhibit executed by
Borrower and Lender setting forth the approved schedule for filing and approval
of the Timeshare Public Offering Statement for the Additional Units with and by
all Governmental Authorities for the sale of Interval Units and the operation of
2
<PAGE> 3
the Additional Units as a portion of the Resort Property, and the approval of
which schedule shall be a condition precedent to any Advance under the
Supplemental Renovation Commitment.
8. Section 1.19 regarding Declaration of CCRs is hereby amended
to provide that the term "Declaration of CCRs" shall be deemed to include any
supplemental declaration that subjects the Additional Units to the governance of
the Declaration of CCRs.
9. Section 1.27 regarding Guarantee is hereby amended to add to
the end thereof the phrase "together with all amendments, modifications and
substitutions thereof."
10. Section 1.29 regarding Improvements is hereby amended to
provide that the term "Improvements" shall also be deemed to refer to the
Additional Units upon their acquisition by Borrower.
11. Section 1.38 regarding Loan is deleted in its entirety and
replaced by the following:
The term "Loan" shall mean the loan by Lender to Borrower, in the
maximum amount of the Acquisition and Renovation Commitment, not to
exceed, in the aggregate, the advance of (a) the lesser of Seven Million
Eight Hundred Five Thousand Dollars and No/100 ($7,805,000.00) or 90% of
the costs of acquisition of the Property plus (b) 100% of the costs of
labor, materials, and services supplied for the construction of the
Improvements and all other expenses incident to construction of the
Property, as to each item only to the extent specified in the Approved
Budget which amount shall not exceed a total of Four Million Five
Hundred Twenty-Three Thousand Dollars and No/100 ($4,523,000.00) over
the term of the Loan and shall not exceed the amount of Two Million Five
Hundred Thousand Dollars and No/100 ($2,500,000.00) outstanding at any
one time.
12. Section 1.39 regarding Loan Commitment is deleted in its
entirety and replaced by the following:
The term "Loan Commitment" shall mean a maximum of Twelve Million
Three Hundred Twenty-Eight Thousand Dollars and No/100 ($12,328,000.00),
which is the maximum amount of Advances of the Loan which Lender may be
obligated to make under this Loan Agreement, and is comprised of the
Acquisition Commitment and the Renovation Commitment.
13. Section 1.41 regarding Mortgage is hereby amended to provide
that the term "Mortgage" shall be deemed to refer to the existing Mortgage
together with any modification or amendment thereto for the purpose of spreading
the lien thereof to the Additional Property (defined below).
3
<PAGE> 4
14. Article I - Definitions is hereby amended to add the
following defined term:
The term "Overlook Repayment" shall mean the receipt by Lender of
all outstanding amounts due Lender under that certain Interval
Receivables Loan and Security Agreement between Borrower and Lender and
dated as of the 6th day of August 1996, as modified by that certain
First Modification to the Interval Receivables Loan and Security
Agreement dated as of the 7th day of July 1998 (collectively, the
"Overlook Receivables Loan"), and that certain Acquisition and
Renovation Loan Agreement between Borrower and Lender and dated as of
the 6th day of August 1996, as modified by that certain First
Modification to the Acquisition and Renovation Loan Agreement dated as
of the 7th day of July 1998 (collectively, the "Overlook Acquisition and
Renovation Loan"), and any further amendments, modifications and
substitutions therefor.
15. Section 1.43 regarding Permitted Exceptions is hereby amended
to provide that the term "Permitted Exceptions" shall also include, at such time
as the Resort is expanded to include Additional Property (as defined below),
such exceptions to and encumbrances on title that have been approved by Lender
and set forth on an exhibit to the Agreement to be executed by Borrower and
Lender.
16. Section 1.45 regarding Property is hereby amended to provide
that the term "Property" shall also be deemed to include and refer to the
property upon which the Additional Units are located (the "Additional Property")
at the time the Additional Units are acquired by Borrower, the legal description
of which shall be set forth in an exhibit to be executed hereafter by Borrower
and Lender.
17. Section 2.1 regarding Commitment of Lender is hereby amended
by adding the following thereto:
The initial One Million Dollars and No/100 ($1,000,000.00) of the
First Supplemental Acquisition Commitment has been advanced by Lender to
Borrower, as evidenced by that certain Future Advance Acquisition
Promissory Note No.1 dated October 19, 1999, for application by Borrower
to the payment of its accounts payable.
Upon Lender's receipt of the portion of Overlook Repayment due
Lender under the Overlook Acquisition and Renovation Loan and Borrower's
delivery to Lender of a statement executed by Borrower which describes
Borrower's intended use of the One Million Dollars and No/100
($1,000,000.00) balance of funds to be advanced under the First
Supplemental Acquisition Commitment (the "Statement of Use"), and
provided that such Statement of Use is acceptable to Lender as set forth
below, the balance of the First Supplemental Acquisition Commitment
shall be made available and applied as set forth in the Agreement and
the Statement of Use, concurrently with the recording of a Notice of
Future Advance and delivery of a Future Advance Acquisition Promissory
Note. Borrower and Lender hereby agree that the Statement of Use shall
be acceptable to Lender if it
4
<PAGE> 5
provides that Five Hundred Thousand Dollars and No/100 ($500,000.00)
shall be used for working capital purposes and that that remaining Five
Hundred Thousand Dollars and No/100 ($500,000.00) shall be used for the
establishment of Borrower's sales centers or off-premises contact
operations, provided that the budgets for such centers and operations
are acceptable to Lender in Lender's sole discretion.
In addition to and separate from Lender's commitment to advance
the First Supplemental Acquisition Commitment as set forth above,
commencing November 1, 1999, and ending April 15, 2000, and provided
that Lender has received the Overlook Repayment and that the Conditions
Precedent to Second Supplemental Acquisition Commitment (defined below)
have been satisfied, the Second Supplemental Acquisition Commitment
shall be made available concurrently with the recording of a Mortgage
Spreader Agreement and Notice of Future Advance and the delivery of
Future Advance Promissory Note made by Borrower, which shall together
spread the lien of the Mortgage to encumber the Additional Property and
Additional Units and evidence Lender's advance of funds to reimburse
Borrower for up to ninety percent (90%) of the acquisition costs of the
Additional Property and Additional Units to be sold as Interval Units,
the acquisition of which shall have occurred prior to March 31, 2000.
The Conditions Precedent to Second Supplemental Acquisition Commitment
shall be defined as and consist of the approval in Lender's sole
discretion of the following items with respect to the Additional
Property or Additional Units, as applicable: Survey, flood hazard
certification, mortgagee title commitment, Phase I environmental audit,
appraisal, building inspection report, certificate of occupancy and
evidence of compliance with Fair Housing Act and Americans with
Disabilities Act.
Subject to all conditions precedent applicable to advances of the
Renovation Commitment and provided that Lender has received the Overlook
Repayment and that Borrower has acquired the Additional Property,
commencing November 1, 1999, the Supplemental Renovation Commitment
shall be made available for reimbursement of renovation costs for the
Additional Units in accordance with the Agreement.
Until such time as the Overlook Repayment has been received by
Lender, Lender shall not be obligated to make any Advances or disburse
any portion of the Acquisition Commitment or the Renovation Commitment
if at any time the combined outstanding balance of the Acquisition Note,
the Renovation Note and the Promissory Note given by Borrower to Lender
pursuant to the Interval Receivables Loan would exceed Eighteen Million
Dollars and No/100 ($18,000,000.00). Upon and after such time as the
Overlook Repayment has been received by Lender, Lender shall not be
obligated to make any Advances or disburse any portion of the
Acquisition Commitment or the Renovation Commitment if at any time the
combined outstanding balance of the Acquisition Note, the Renovation
Note and the Promissory Note given by Borrower to Lender pursuant to the
Interval Receivables Loan would exceed Thirty Million Dollars and No/100
($30,000,000.00).
5
<PAGE> 6
18. Section 2.4 regarding Advances is hereby amended by adding
the following:
Lender shall withhold twenty percent (20%) of all advances under the
Supplemental Renovation Commitment (the "Reservation") to be held by Lender
until such time as all conditions precedent set forth in the Agreement to the
final Advance under the Supplemental Renovation Commitment have been satisfied,
whereupon the Reservation shall be disbursed together with the final Advance.
19. Section 4.1(b) regarding Mandatory Payments is hereby deleted
and replaced with the following:
So long as there is any indebtedness outstanding under the Acquisition
Note or the Renovation Note, if during the period of the Loan Agreement ending
on the following dates ("Ending Dates"), the outstanding principal balance of
the Loan evidenced by such notes exceeds the following amounts ("Maximum
Principal Balance"), the Borrower shall pay the amount of such excess
immediately to Lender:
<TABLE>
<CAPTION>
Ending Dates Maximum Principal Balance
- ------------ -------------------------
<S> <C>
February 28, 2000 $2,333,000.00
May 31, 2000 $1,860,000.00
August 31, 2000 $1,391,000.00
November 30, 2000 $ 925,000.00
February 28, 2001 $463,000.00;
</TABLE>
provided, however, that if Lender shall have advanced funds to Borrower under
the Second Supplemental Acquisition Commitment and Supplemental Renovation
Commitment, the following Ending Dates and Maximum Principal Balances shall be
applicable, and any excess thereof shall be immediately payable by Borrower to
Lender:
<TABLE>
<CAPTION>
<S> <C>
February 28, 2000 $3,368,000.00
May 31, 2000 $3,183,000.00
August 31, 2000 $2,907,000.00
November 30, 2000 $2,440,000.00
February 28, 2001 $1,978,000.00.
</TABLE>
20. Section 6.16 regarding Commitment Fee is hereby amended by
adding the following thereto:
6
<PAGE> 7
Borrower has agreed to pay Lender a commitment fee in the amount
of one percentage point in connection with the First Supplemental
Acquisition Commitment. Borrower has previously paid Lender the amount
of Ten Thousand Dollars and No/100 ($10,000.00) which represents a
portion of the Lender's commitment fee payable in connection with the
First Supplemental Acquisition Commitment. At the time of Lender's
receipt of the portion of the Overlook Repayment due Lender under the
Overlook Acquisition and Renovation Loan and the satisfaction of other
conditions precedent to the advance of the balance of the First
Supplemental Acquisition Commitment, Lender shall be paid a commitment
fee of Ten Thousand Dollars and No/100 ($10,000.00) representing the
balance of the commitment fee payable in connection with the First
Supplemental Acquisition Commitment, together with the amount of
Forty-Three Thousand Seven Hundred Fifty Dollars and No/100 ($43,750.00)
representing the balance of the loan fee payable in connection with
availability under the Interval Receivables Loan , all of which shall be
withheld by Lender from disbursement of the balance of the First
Supplemental Acquisition Commitment.
Buyer has further agreed to pay Lender a commitment fee in the
amount of one percentage point in connection with the Second
Supplemental Acquisition Commitment and in connection with the
Supplemental Renovation Commitment, each of which shall be payable by
Borrower and withheld from disbursements by Lender at the time funds are
advanced under such commitments.
21. In connection with this Amendment, Borrower hereby certifies
that (a) all Borrower's representations, warranties, covenants and agreements
contained in the Agreement are true and correct and in full force and effect as
of the date hereof with the exception that (i) the Financial Statements
referenced in Section 3.3 of the Agreement are true, correct and complete as
reflected in the quarterly financial report dated May 31, 1999, and the monthly
financial report dated July 31, 1999, and (ii) there are no material adverse
changes to the information reflected in the disclosure of litigation matters
concerning PEC and dated October 6, 1999 and attached hereto as Exhibit "A", (b)
as of the date hereof there are no Events of Default thereunder, and (c) all of
the Loan Instruments as defined therein are in full force and effect.
22. Except as modified by this Amendment, all other terms and
conditions of the Agreement and other Loan Instruments shall remain in full
force and effect. Should Borrower currently be in default under the Agreement,
which default would not have existed if this Amendment were effective, such
default is hereby waived.
23. As consideration for, and as a mutual inducement to Lender
entering into this Amendment, Borrower hereby waives and releases any and all
setoffs, counterclaims and defenses it has of the date hereof with respect to
the Loans and performance by Lender under the Loan Instruments, and hereby
acknowledges that Lender has fully performed all of its obligations and is not
in default under the Loan Instruments. Execution of this Amendment shall not be
7
<PAGE> 8
deemed to constitute a waiver or release by Lender of any its rights or remedies
under the Loan Instruments.
IN WITNESS whereof the parties have executed this Agreement as of
the date above.
PREFERRED EQUITIES CORPORATION, HELLER FINANCIAL, INC., a
a Nevada corporation Delaware corporation
By: /s/ JON A. JOSEPH By:
----------------------------- -----------------------------
Jon A. Joseph
- ---------------------------------- ---------------------------------
Print Name Print Name
Its: Vice President Its:
------------------------------ -----------------------------
APPROVED BY GUARANTOR:
MEGO FINANCIAL CORP., a
New York corporation
By: /s/ JON A. JOSEPH
------------------------------
Jon A. Joseph
----------------------------------
Print Name
Its: Vice President
-----------------------------
8
<PAGE> 9
deemed to constitute a waiver or release by Lender of any its rights or remedies
under the Loan Documents.
IN WITNESS whereof the parties have executed this Agreement as of
the date above.
PREFERRED EQUITIES CORPORATION, HELLER FINANCIAL, INC., a
a Nevada corporation Delaware corporation
By: /s/ JON A. JOSEPH By: /s/ DENNIS K. HOLLAND
----------------------------- -----------------------------
Jon A. Joseph Dennis K. Holland
- ---------------------------------- ---------------------------------
Print Name Print Name
Its: Vice President Its: Senior Vice President
------------------------------ -----------------------------
APPROVED BY GUARANTOR:
MEGO FINANCIAL CORP., a
New York corporation
By: /s/ JON A. JOSEPH
------------------------------
Jon A. Joseph
----------------------------------
Print Name
Its: Vice President
-----------------------------
8
<PAGE> 1
EXHIBIT 10.205
GENERAL LOAN AND SECURITY AGREEMENT
(INVENTORY LOAN)
AMONG
STEAMBOAT SUITES, INC.
PREFERRED EQUITIES CORPORATION
AND
TEXTRON FINANCIAL CORPORATION
DATED AS OF DECEMBER 17, 1999
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SECTION 1. INTERPRETATION OF THIS AGREEMENT
1.1 Terms Defined
1.2 Directly or Indirectly
1.3 Headings
1.4 Accounting Principles
SECTION 2. ADVANCES AND NOTES
2.1 Inventory Advances; Inventory Loan
2.2 Issuance of Note; Rate of Interest; Receipt of Payments
2.4 Release Payments; Voluntary Prepayments of Inventory Loan
2.5 Participating Lender
2.6 Commitment Fee
SECTION 3. COLLATERAL
3.1 Security
3.2 Undertakings Regarding Collateral
3.3 Financing Statements
3.4 Location of Collateral; Books and Records
3.5 Insurance of Collateral
3.6 Condemnation
3.7 Taxes Affecting Collateral
3.8 Discharge of Liens Affecting Collateral
3.9 Use of Resort
3.10 Other Timeshare Covenants
3.11 Protection of Collateral; Assessments; Reimbursement
3.12 Interest on Lender Paid Expenses
3.13 Lender Responsibility
3.14 Notice to Obligors
3.15 Release of Lien on Unsold Inventory Timeshare Intervals
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Subsidiaries and Capital Structure
4.2 Corporate Organization and Authority
4.3 Business and Property
4.4 Financial Statements
4.5 Full Disclosure
4.6 Pending Litigation
4.7 Title to Properties
4.8 Trademarks; Licenses and Permits
4.9 Transaction Is Legal and Authorized
4.10 No Defaults
4.11 Governmental Consent
4.12 Taxes
4.13 Use of Proceeds
4.14 Compliance with Law
4.15 Restrictions of Debtor
4.16 Brokers' Fees
4.17 Deferred Compensation Plans
4.18 Labor Relations
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4.19 Validity and Enforceability
4.20 Validity of Liens Granted to Lender
4.21 Timeshare Regimen Reports
4.22 The Timeshare Intervals
4.23 Pre-Sale of Timeshare Intervals
SECTION 5. CONDITIONS PRECEDENT TO ACQUISITION INVENTORY ADVANCE AND
EFFECTIVENESS OF THIS AGREEMENT
5.1 Opinions of Counsel
5.2 Warranties and Representations True as of Closing Date
5.3 Compliance with this Agreement
5.4 Officer's Certificates; Secretary's Certificates; Good-Standing
Certificates
5.5 Uniform Commercial Code Financing Statements
5.6 Assignment of Property-Related Contracts
5.7 Intentionally Deleted
5.8 Guaranty Agreement
5.9 Subordination of Indebtedness
5.10 Expenses
5.11 Inventory Note; Inventory Deed of Trust
5.12 Title Insurance; Casualty Insurance
5.13 Environmental Site Assessment Report
5.14 Taxes
5.15 Inspection
5.16 Survey
5.17 Engineering Report
5.18 Intentionally Deleted
5.19 Intentionally Deleted
5.20 First Lienholder Status; Quit-Claim Deed; Proxy Acknowledged
5.21 Proceedings Satisfactory
SECTION 6. Intentionally Deleted
SECTION 7. COVENANTS
7.1 Payment of Taxes and Claims
7.2 Maintenance of Properties; Corporate Existence; Stock Ownership;
Renovations; Supervisory Architect; Indebtedness; Liens; Business
7.3 Payment of Notes and Maintenance of Office
7.4 Sale of Properties
7.5 Consolidation and Merger
7.6 Guaranties
7.7 Compliance with Environmental Laws
7.8 Transactions with Affiliates; Principal Properties
7.9 Use of the Lender Name
7.10 Subordinated Obligations
7.11 Notice of Legal Proceedings
7.12 Further Assurances
7.13 Financial Statements
7.14 Officers' Certificate
7.15 Inspection
SECTION 8. EVENTS OF DEFAULT
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8.1 Default
8.2 Default Remedies
SECTION 9. REVIVAL OF OBLIGATIONS AND LIENS
SECTION 10. MISCELLANEOUS
10.1 Governing Law
10.2 Expenses and Closing Fees
10.3 Parties, Successors and Assigns
10.4 Notices
10.5 Total Agreement
10.6 Survival
10.7 Litigation
10.8 Power of Attorney
10.9 Survival of Indemnities
10.10 Conflicting Obligations; Rights and Remedies
Schedule 1a -- Property Description of Hilltop Resort
Schedule 1b -- Property Description of Steamboat Resort
Schedule 2 -- Property-Related Contracts
Schedule 3 -- Affiliates and Capital Structure
Schedule 4 -- Reserved
Schedule 5 -- Reserved
Schedule 6 -- Litigation
Schedule 7 -- Title Exceptions
Schedule 8 -- Personal Property Exceptions
Schedule 9 -- Permitted Leases and Rentals of Units
Schedule 10 -- Hazardous Substances
Schedule 11 -- Use of Proceeds
Schedule 12 -- Licenses, Permits, Etc. Not Obtained
Schedule 13 -- Deferred Compensation Plans
Schedule 14 -- Payment Instructions
Schedule 15 -- Address of Debtor for Books and Records
Schedule 16 -- Address of Debtor for Notices
Schedule 17 -- Address of Lender for Notices
Schedule 18 Description of Defaulted Note
Exhibit A -- Form of Inventory Deed of Trust
Exhibit B -- Form of Inventory Note
Exhibit C -- Form of Proxy
Exhibit D -- Form of Request for Lien Release
Exhibit E -- Form of Partial Release from Inventory Deed of Trust
Exhibit F -- Form of UCC-3 Partial Release
Exhibit G -- [Reserved.]
Exhibit H -- Form of Opinion from [Ballard]
Spahr Andrews & Ingersol
Exhibit I -- Form of Opinion of Lionel Sawyer & Collins
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Exhibit J -- Form of Opinion of [Greenbury Tranig]
Exhibit K -- Form of Steamboat's Officer's Certificate
Exhibit L -- Form of Steamboat's Secretary's Certificate
Exhibit M -- Form of Preferred Equities' Secretary's Certificate
Exhibit N -- Form of Mego Financials Secretary's Certificate
Exhibit O -- Form of Guaranty Agreement
Exhibit P -- Form of Assignment of Rents
Exhibit Q Form of Officers Certificate - Financial Statements
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GENERAL LOAN AND SECURITY AGREEMENT
(INVENTORY LOAN)
THIS GENERAL LOAN AND SECURITY AGREEMENT (as amended from time to time,
this "Agreement"), made and executed as of the 17th day of December, 1999, by
and among TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as secured
party (herein referred to as the "Lender"), PREFERRED EQUITIES CORPORATION, a
Nevada corporation, and STEAMBOAT SUITES, INC., a Colorado corporation, each
jointly and severally as debtor (collectively herein referred to as the
"Debtor").
BACKGROUND:
Lender and Steamboat Suites, Inc. ("Steamboat") are parties to a General
Loan and Security Agreement dated October 5, 1994 amended by First Amendment to
General Loan and Security Agreement dated as of February 27, 1995, Second
Amendment to General Loan and Security Agreement dated as of November 30, 1995,
Third Amendment to General Loan and Security Agreement dated as of November 29,
1996, Fourth Amendment to General Loan and Security Agreement dated as of June
30, 1999, and letter amendments dated respectively September 23, 1996, December
10, 1997 and October 15, 1999 (collectively "Existing Loan Agreement"). Such
Existing Loan Agreement evidences a $15,000,000 receivable loan and a $7,500,000
original inventory loan to Steamboat for the Steamboat Resort (as defined
below). The obligations of the Existing Loan Agreement are guaranteed by
Preferred Equities Inc. ("Preferred") and Mego Financial Corp. Steamboat and
Preferred have requested an extension of the Existing Loan Agreement and
increase of the inventory loan to provide financing to both Steamboat and
Preferred and to include the Hilltop Resort (as defined below). Lender has
agreed to such request and determined to provide an inventory loan and a
receivable loan facility to both Preferred and Steamboat so long as the Existing
Loan Agreement is rewritten and the loans are evidenced by separate loan
agreements. For purposes of maintaining and continuity of agreement between
Steamboat and Lender, this Agreement shall be considered as necessary, an
amendment and restatement of the Existing Loan Documents and not a prepayment
under the terms thereof. Any defined terms used herein and not defined in
Section 1 hereof shall have meanings assigned in the Existing Loan Agreement. It
is the intention of Lender and Debtor that the inventory loan and receivable
loan be cross collateralized and cross defaulted during the term of each loan
and with all other indebtedness owed to Lender by either Debtor. To that end,
certain security documents shall evidence and secure both loans and all other
obligations owed by Steamboat or Preferred to Lender.
SECTION 1. INTERPRETATION OF THIS AGREEMENT
1.1 TERMS DEFINED.
As used in this Agreement, the following terms shall have the following
respective meanings set forth below or set forth in the Section referred to
following such term:
ADVANCE -- means the Inventory Advance.
AFFILIATE -- means any Person
(a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Debtor;
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(b) which beneficially owns or holds 5% or more of any
class of the Voting Stock of the Debtor; or
(c) 5% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Debtor.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of Voting Stock, other voting
Securities, by contract or otherwise.
AGENCY AGREEMENT - means an agreement among the Debtor, the
Collection Agent and the Lender, reasonably satisfactory in form and
substance to the Lender, relating to lockbox services in connection with
a post office box and a related lockbox account.
AGREEMENT OR THIS AGREEMENT -- as defined in the preamble hereto.
AMENITY BUILDING -- means that certain building built at the
Steamboat Resort which contains, among other things, a lobby, a
hospitality coffee bar, a hot tub, a sauna and sales facilities, and to
have individual ski storage lockers affixed thereto.
ASSIGNMENT OF RENTS -- as defined in Section 5.11 of this
Agreement.
ASSOCIATION AND ASSOCIATIONS -- means collectively or
individually, as applicable, The Suites at Steamboat Owners'
Association, a Colorado nonprofit corporation, or any successor
association thereto as provided in the Steamboat Timeshare Documents and
Hilltop Resort Owners Association, Inc., a Colorado nonprofit
corporation, or any successor association thereto as provided in the
Hilltop Timeshare Documents.
BOOKS AND RECORDS -- means all books, records, computer tapes,
disks, software and microfiche records of the Debtor related to the
Resorts.
BUILDING -- means Building A and/or Building B and/or Building I.
BUILDING A -- means the first residential building at the
Steamboat Resort, designated "Building A," which consists of 30 Units,
as provided in the Steamboat Declaration.
BUILDING B -- means the second residential building at the
Steamboat Resort, designated "Building B" which consists of 30 Units, as
provided in the Steamboat Declaration.
BUILDING I - means the residential building at the Hilltop Resort
which consists of 56 residential units and 2 commercial condominium
units.
BUSINESS DAY -- means a day other than a Saturday or Sunday or a
day on which banks in the State of Nevada, the State of Rhode Island or
the State of Connecticut are required or authorized by law to be closed
(other than for a general banking moratorium or holiday for a period
exceeding 4 consecutive days).
CHANGE IN MANAGEMENT -- means that Preferred and/or Guarantor
shall cease to own, directly or indirectly, in the aggregate 100% of the
total combined voting power of all classes of
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Voting Stock or other equity interests of any Person which shall have
managerial and/or supervisory operational responsibilities in respect of
the Resort.
CLOSING DATE -- means, December 17, 1999.
COLORADO UNIFORM COMMERCIAL CODE -- means the Uniform Commercial
Code as adopted and in force in the State of Colorado, as from time to
time in effect.
COLLATERAL -- as defined Section 3.1 of this Agreement.
COLLECTION AGENT -- at any time means the Person, acting as agent
for the Lender, which is responsible for receiving payments under the
Pledged Notes Receivable from the Makers thereof and which is a party to
an Agency Agreement and pursuant thereto maintains or may maintain one
or more lockbox accounts for the deposit of payments in respect of
Pledged Notes Receivable.
COMMITMENT LETTER -- means that certain letter dated October 12,
1999 from the Lender to Debtors, which letter was accepted by Debtors on
October 13, 1999.
COMMON AMENITIES -- means the common areas and other amenities at
the Resorts as contemplated in the Declarations which any purchaser of a
Timeshare Interval shall be entitled to use pursuant to the
Declarations. "Common Amenities" shall include the amenities offered in
the Amenity Building of the Steamboat Resort.
COMPENSATION -- as defined in Section 3.1(g) of this Agreement.
CONDEMNATION COMPENSATION -- as defined in Section 3.6(a) of this
Agreement.
CONTRACT -- means any purchase and sale agreement between one or
more natural Persons and the Debtor which agreement provides for the
sale by the Debtor to such natural Person or Persons of one or more
Timeshare Intervals.
DEBTOR -- as defined in the preamble hereto.
DECLARATION OR DECLARATIONS -- means collectively and
individually the Steamboat Declaration and the Hilltop Declaration.
DECLARANT -- the status of the Debtor as the declarant under
applicable Colorado law and under the respective Declarations and the
Articles of Incorporation and By-Laws of the respective Associations.
DEFAULT -- means an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DEFAULT RATE -- means, at any time, the per annum rate of
interest equal to the Interest Rate, then in effect, plus 2% per annum;
provided, however, that the Default Rate shall in no event exceed the
Maximum Rate.
DORFINCO -- means Dorfinco Corporation, a Delaware corporation.
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ENVIRONMENTAL PROTECTION LAW -- means each federal, state,
county, regional or local law, statute, or regulation enacted in
connection with or relating to the protection or regulation of the
environment, including, without limitation, those laws, statutes, and
regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of
Hazardous Substances, and any regulations issued or promulgated in
connection with such statutes by any governmental authority and any
orders, decrees or judgments issued by any court of competent
jurisdiction in connection with any of the foregoing.
EQUIPMENT -- means the furniture, fixtures and furnishings of
each Unit and all fixtures, fittings, machinery, appliances, equipment,
apparatus, furnishings and personal Property of every nature found on or
used in connection with the Resorts, but excluding motor vehicles,
Property owned by the Associations, Property owned by occupants of the
Units and telephone and computer equipment leased in the ordinary course
of business.
EVENT OF DEFAULT -- as defined in Section 8.1 of this Agreement.
FAIR MARKET VALUE -- at any time with respect to any Property
means the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer,
and an informed and willing seller, under no compulsion to buy or sell,
respectively.
GUARANTY -- as defined in Section 7.6(b) of this Agreement.
GUARANTY AGREEMENT -- as defined in Section 5.8 of this
Agreement.
GUARANTOR -- means Mego Financial.
HAZARDOUS SUBSTANCES -- means any and all pollutants,
contaminants, toxic or hazardous wastes or any other substances that
might pose a hazard to health or safety, the removal of which may be
required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which
is or shall be restricted, prohibited or penalized by any Environmental
Protection Law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls); provided,
however, that "Hazardous Substances" shall not include any substance
used by the Debtor, any homeowner or their respective agents in the
ordinary course of business in compliance with applicable Environmental
Protection Laws.
HILLTOP DECLARATION -- means that certain Condominium Declaration
with Timeshare Ownership, Covenants, Conditions and Restrictions Hilltop
Resort, A Condominium Declaration dated January 5, 1998 and recorded
with the Office of the Clerk and Recorder for Routt County, Colorado on
February 18, 1998 in Book 743, Page 478 as amended from time to time in
accordance with the terms and provisions thereof and hereof.
HILLTOP RESORT -- means the Property described on Schedule 1-A
hereto, including, without limitation, all of the currently existing and
hereafter created buildings, Units, Timeshare Intervals, Common
Amenities in respect thereof and all other currently existing or
hereafter constructed buildings, structures and improvements of every
nature whatsoever now or hereafter situated on, or serving, said
Property.
IMPOSITIONS -- as defined in Section 3.7 of this Agreement.
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INSURANCE PREMIUMS -- as defined in Section 3.5(a) of this
Agreement.
INTEREST RATE -- means, with respect to any calendar month, a per
annum rate of interest equal to the greater of:
(a) 8.75%, or
(b) the sum of
(i) 2.0%, plus
(ii) the Prime Rate then in effect for such month.
The interest rate for each calendar month shall be based upon the Prime
Rate in effect at 9:00 a.m. (Eastern time) on the 1st day of such month.
The term "Prime Rate" shall mean the "prime rate" as announced from time
to time by Chase Manhattan Bank, N.A. or any successor thereto. In the
event Chase Manhattan Bank, N.A., or any successor thereto, shall
discontinue announcement of said Prime Rate, a comparable index
designated by the Lender shall be used in calculating the Interest Rate.
It is expressly agreed that the use of the term "prime rate" or any
other similar designation is not intended to, nor does it, imply that
said rate of interest is a preferred rate of interest or one which is
offered by Chase Manhattan Bank, N.A. or any successor thereto to its
most creditworthy customers.
INVENTORY ADVANCE - as defined in Section 2.1(a) of this
Agreement.
INVENTORY DEED OF TRUST -- means that certain combination deed of
trust, security agreement and fixture financing statement, substantially
in the form of Exhibit A to this Agreement, as the same may be amended
from time to time.
INVENTORY LOAN -- means, at any time, the non-revolving loan
facility comprised of a maximum of $8,400,000 attributed as follows:
$2,200,000 refinancing the existing inventory loan advanced by Lender
for Steamboat Resort and $6,200,000 refinancing the Hilltop Resort .
Such principal amount represents a 17% advance against the retail value
of the remaining unsold inventory at the Resorts.
INVENTORY MATURITY DATE -- means December 1, 2002.
INVENTORY NOTE -- as defined in Section 2.2(a) of this Agreement.
LENDER -- as defined in the preamble to this Agreement.
LETTER OF INTENT -- means, with respect to any request by the
Debtor regarding (a) an extension of the Receivables Commitment Period,
(b) additional loans to be extended to it by the Lender or (c) the sale
of Notes Receivable by the Debtor to the Lender, a letter from the
Lender to the Debtor expressing an interest in such request, provided
that any such Letter of Intent may incorporate or be subject to
conditions and contingencies as are customarily included in such letters
and shall not be deemed to be an acceptance of any offer of the Debtor
in such request or a commitment or offer by the Lender to make loans to,
or purchase Notes Receivable from the Debtor.
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LIEN -- any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and
including, but not limited to, attachments, judgments or tax liens
(except for inchoate tax liens which arise in connection with taxes not
yet due and payable) and the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of
this Agreement, the Debtor shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security
purposes.
LOAN -- means the Inventory Loan.
LOAN COSTS -- as defined in Section 10.2 of this Agreement.
MAKER -- means any natural Person, who shall have, in a bona fide
transaction, purchased a Timeshare Interval and executed a Contract and
a Note Receivable in respect thereof.
MANDATORY INVENTORY PREPAYMENT - means any prepayment required by
Section 2.4(c) of this Agreement.
MAXIMUM RATE -- as defined in Section 2.2(b) of this Agreement.
MEGO FINANCIAL -- means Mego Financial Corp., a New York
corporation.
MONTHLY AVERAGE WEIGHTED LOAN BALANCE -- means, for any calendar
month with respect to the Inventory Loan the quotient of
(a) the aggregate of the Daily Loan Balances for each of
the days of such month in respect of such Loan divided by
(b) the number of days in such month.
For purposes of this definition, "Daily Loan Balance" shall mean, for
any day, the principal balance of the Inventory Loan outstanding as of
the close of business of the Lender for such day after giving effect to
all payments received made during such day.
NOTES -- means the Inventory Note.
NOTE RECEIVABLE -- means any promissory note made payable to the
order of the Debtor which provides for payment of the deferred purchase
price of one or more Timeshare Intervals purchased by the Maker thereof.
OBLIGATIONS -- means all sums now or hereafter loaned, advanced
or incurred by the Lender to or on behalf of the Debtor under this
Agreement, the Receivable Loan Security Documents, the Inventory Note
and any other Security Document (including, without limitation, accrued
and unpaid interest, unpaid prepayment premium and Loan Costs), and the
full, prompt and complete performance of all obligations owed by, or
undertakings or indemnities of, Debtor arising hereunder or thereunder.
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PEC OBLIGATIONS -- means all sums now or hereafter loaned,
advanced or incurred by the Lender or Dorfinco to or on behalf of
Preferred under the Loan and Security Agreement dated as of August 12,
1998, as amended, and Loan and Security Agreement dated as of July 31,
1991, as amended, together with any amendments thereto, and Security
Documents (including, without limitation, accrued and unpaid interest,
unpaid prepayment premium and Loan Costs), and the full, prompt and
complete performance of all obligations owed by, or undertakings or
indemnities of, Debtor arising hereunder or thereunder.
PARTICIPATING LENDER -- means any Person which (a) shall have
been granted the right by the Lender to participate in any of the Notes
and the Collateral and (b) shall have entered into a participation
agreement in form and substance satisfactory to the Lender which shall
provide, inter alia, that the Participating Lender shall communicate and
deal only with the Lender with respect to the Participating Lender's
interest in the Notes and the Collateral.
PERMITTED EXCEPTIONS -- means the title exceptions set forth in
Schedule 7 of this Agreement.
PERSON -- means an individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
PHASE II COMMITMENT LETTER - means, with respect to any Letter of
Intent issued by the Lender, a letter from the Lender to the Debtor
whereby the Lender offers to extend credit to, or purchase Notes
Receivable from, the Debtor substantially in accordance with the terms
and conditions set forth in such Letter of Intent. Such offer may be
subject to such conditions and contingencies as are customarily found in
commitment letters.
PLEDGED CONTRACT -- means any Contract related to a Pledged Note
Receivable, which Pledged Note Receivable evidences the payment of the
deferred purchase price of one or more Timeshare Intervals provided for
in such Contract.
PLEDGED NOTE RECEIVABLE DEED OF TRUST -- with respect to any
Pledged Note Receivable financing the purchase of a Timeshare Interval
means a deed of trust, in form and substance reasonably acceptable to
the Lender, (a) which deed of trust shall have created a first priority
Lien in and to such Timeshare Interval, (b) which deed of trust shall
have been duly recorded (and all fees and taxes in connection therewith
paid by the Debtor) in the appropriate land records, (c) the original of
which deed of trust, which shall contain an appropriate official
acknowledgement of its due recordation in the appropriate local land
records, shall have been delivered to the Lender by the Debtor, provided
that if such original deed of trust has been delivered for recordation
but has not yet been returned to the Debtor, the Debtor shall deliver to
the Lender a copy of such original deed of trust, certified by the
Debtor to be a true copy, together with a certificate of the Debtor
certifying that such original deed of trust has been delivered for
recordation, provided, further, that the Debtor shall deliver to the
Lender the original deed of trust containing an official acknowledgement
of its due recordation within 60 days of the purchase of the related
Timeshare Interval, (d) which deed of trust shall have been assigned to
the Lender by the Debtor pursuant to an assignment, in form and
substance reasonably acceptable to the Lender (and such assignment shall
have been duly recorded {and all fees and taxes in connection therewith
paid by the Debtor} in the appropriate land records) and (e) in respect
of which deed of trust a mortgagee's title insurance policy shall have
been issued by a title insurance company acceptable to the Lender and
delivered to the Lender (each such mortgagee's title insurance policy
shall be in form and substance reasonably satisfactory to the Lender and
its counsel {all exceptions thereto, other than
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Permitted Exceptions, being subject to the approval of the Lender and
its counsel} and shall name the Lender, by way of an endorsement thereto
{which endorsement shall have been delivered to the Lender}, as the
insured party thereon, and the amount of coverage provided by each such
mortgagee's title insurance policy shall not be less than the principal
amount of such Pledged Note Receivable.
PLEDGED NOTES RECEIVABLE -- means any Note Receivable which shall
have been assigned and delivered to the Lender pursuant to the
Receivables Loan Agreement and not reassigned or redelivered by the
Lender to the Debtor.
PREFERRED OR PREFERRED EQUITIES -- means Preferred Equities
Corporation, a Nevada corporation.
PRIME RATE -- as defined in the definition of "Interest Rate" in
this Section 1.1.
PROPERTY OR PROPERTIES -- means any interest in any kind of
property or asset of Debtor, whether real, personal or mixed, or
tangible or intangible.
PROPERTY-RELATED CONTRACT -- as defined in Section 3.1(b) of this
Agreement.
RECEIVABLES LOAN -- means, that certain $15,000,000 Timeshare
Interval receivable loan made or to be made by lender to Debtor and all
documents.
RECEIVABLE LOAN AGREEMENT -- means that certain General Loan and
Security Agreement among Lender and Debtor of even date hereof to
provide for the Receivables Loan.
RECEIVABLE LOAN SECURITY DOCUMENTS - means Security Documents
defined under the Receivable Loan Agreement.
RELEASE FEE -- as defined in Section 3.15 of this Agreement.
RELEASE PRICE -- means, with respect to any Unsold Inventory
Timeshare Interval, $ 3,075 or such other amounts necessary to retire
the Inventory Loan upon an 80% sell out of the then remaining Unsold
Inventory Timeshare Intervals.
RESORT OR RESORTS -- collectively means the Hilltop Resort and
Steamboat Resorts.
SECURITY -- shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS -- means this Agreement, the Inventory Note,
all assignments of Property-Related Contracts, the Agency Agreement, the
Inventory Deed of Trust, the Guaranty Agreement, all Receivable Loan
Security Documents and all assignments, instruments, certificates,
notices and other documents executed and delivered in connection with
the transactions contemplated herein.
STEAMBOAT DECLARATION -- means that certain Amended and Restated
Declaration with Timeshare Ownership Covenants, Conditions and
Restrictions, The Suites at Steamboat, A Condominium dated March 21,
1995 and recorded with the Office of the Clerk and Recorder for Routt
County, Colorado on March 22, 1995 in Book 706, Page 337.
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STEAMBOAT RESORT -- means the Property described on Schedule 1B
hereto, including, without limitation, all of the currently existing and
hereafter created buildings, Units, Timeshare Intervals, Common
Amenities in respect thereof and all other currently existing or
hereafter constructed buildings, structures and improvements of every
nature whatsoever now or hereafter situated on, or serving, said
Property, including, without limitation, the Amenity Building.
STEAMBOAT OR STEAMBOAT SUITES -- means Steamboat Suites, Inc., a
Colorado corporation.
SUBORDINATION AGREEMENT -- as defined in Section 5.9 of this
Agreement.
SUBSIDIARY -- means any present or future corporation of which
the Debtor owns, directly or indirectly, more than 50% of the Voting
Stock.
TIMESHARE DOCUMENTS - collectively or Hilltop Timeshare Documents
or Steamboat Timeshare Documents respectively means all documents and
instruments establishing, memorializing, governing, or affecting the
rights and obligations of the purchasers of Timeshare Intervals in and
to a Unit, including, without limitation, the documents and certificates
creating and effecting the timeshare regimen for such Unit, which shall
include, without limitation, the respective Declarations, the Articles
of Incorporation and By-Laws of the Associations, any restrictive
covenants in respect of such regimen and all other project instruments
in respect of such regimen.
TIMESHARE INTERVAL -- means (i) (A) an estate for years in and to
any Unit which shall confer an exclusive right to use, occupy and
possess such or any other similar Unit for a stipulated week or a week
in a stipulated season, together with a vested remainder as a tenant in
common in such Unit at the end of such estate for years, all as more
particularly provided for by the Declarations and the other Timeshare
Documents in respect of such Unit or (B) a freehold estate in any Unit
created by the Declarations and the other Timeshare Documents in respect
of such Unit, which freehold estate shall entitle the owner thereof to
the exclusive use and occupancy of one of the 51 annually recurring
weekly timeshare periods or a week in a stipulated season established
and designated in said Declarations in respect of such Unit or any other
similar Unit and (ii) the proportionate interest in the Common Amenities
related to such Unit, as set forth in the Declarations.
TITLE INSURANCE POLICY {BLANKET} -- as defined in Section 5.12
hereof.
UNIT -- means any unit (within the meaning of such term in the
Declaration) in any Building.
UNSOLD INVENTORY TIMESHARE INTERVAL -- means, at any time, any
Timeshare Interval arising out of a Unit, which Timeshare Interval
shall, as at such time, not have been released from the Lien of the
Inventory Deed of Trust.
VOTING STOCK -- means securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions) of such corporation.
1.2 DIRECTLY OR INDIRECTLY.
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Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provisions
shall be applicable whether such action is taken directly or indirectly by such
Person.
1.3 HEADINGS.
Section headings have been inserted in this Agreement as a matter of
convenience of reference only; such section headings are not a part of this
Agreement and shall not be used in the interpretation of this Agreement.
1.4 ACCOUNTING PRINCIPLES.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be determined or made in accordance with generally
accepted accounting principles, procedures and practices consistently applied at
the time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
SECTION 2. ADVANCES AND NOTES.
2.1 INVENTORY ADVANCES; INVENTORY LOAN.
(a) INVENTORY ADVANCES. The Lender agrees, pursuant to the terms
of this Agreement and subject to the satisfaction of the conditions
precedent in Section 5 of this Agreement, to make a one time advance
(an "Inventory Advance") to the Debtor for the purposes stated herein.
Other than payments of the Release Price with respect to
Timeshare Intervals that have been sold, the application of insurance
proceeds to the prepayment of the Inventory Loan pursuant to Section 3.5
hereof or the application of Condemnation Compensation pursuant to
Section 3.6 hereof, the Debtor may not prepay Inventory Advances, and in
no circumstance may it re-borrow previously paid Inventory Advances. The
Inventory Loan shall be payable in the manner set forth in Section 2.4
of this Agreement and in the Inventory Note. The Inventory Loan shall be
due and payable on the Inventory Maturity Date together with any accrued
interest thereon then remaining unpaid and any other amounts then due in
connection therewith, under the Inventory Note or under any of the other
Security Documents relating to, or otherwise securing, the Inventory
Loan.
(b) LENDING LIMITS: Debtor acknowledges, agrees and confirms that
the obligations of Lender after giving effect to all participations is
limited to a maximum aggregate principal amount of $19,000,000. Debtor
further acknowledges, agrees and confirms that the obligation of Lender
to make the full amount of the Receivable Loan shall be subject to
Lender participating $7,500,000 of the Receivable Loan.
2.2 ISSUANCE OF NOTE; RATE OF INTEREST; RECEIPT OF PAYMENTS.
(a) INVENTORY NOTE. The Debtor shall authorize, issue and deliver
to the Lender a promissory note (as amended from time to time, the
"Inventory Note") substantially in the form attached to this Agreement
as Exhibit B.
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(b) RATE OF INTEREST: INVENTORY LOAN. Interest shall accrue on
the Inventory Loan and be due monthly in arrears on the first (1st)
Business Day of each month, as more particularly provided in the last
sentence of this paragraph, and shall be paid as provided in Section 2.4
of this Agreement. Subject to the accrual of interest on the Inventory
Loan after the occurrence of a Default or Event of Default, as more
particularly provided below in this clause (b), the Monthly Average
Weighted Loan Balance in respect of the Inventory Loan for each calendar
month shall bear interest at a rate per annum equal to the Interest
Rate.
Interest shall be calculated under this clause (b) on the basis
of actual days elapsed over a period of a 360-day year.
The Inventory Loan shall bear interest as of the date of the
Lender's wiring of funds thereof through the date of the receipt by the
Lender of the repayment of such Loan (if the repayment of all or any
portion of the Loan is received by the Lender later than 3:00 p.m.
Eastern time, then interest accrual thereon shall be through the next
Business Day following such receipt). After the occurrence of an Event
of Default or after the Inventory Maturity Date (if the aggregate
principal balance of the Inventory Loan is not paid in full on the
Inventory Maturity Date), the Inventory Loan will bear interest at the
Default Rate.
The Debtor and the Lender intend to comply at all times with
applicable usury laws. All agreements between the Debtor and the Lender,
whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of
demand or acceleration of the maturity of any Note or otherwise, shall
the interest contracted for, charged, received, paid or agreed to be
paid to the Lender exceed the maximum amount permissible under
applicable law, or in the absence of a maximum allowable rate under
applicable law, then, 45% per annum (the "Maximum Rate"). The Lender
may, in determining the Maximum Rate in effect from time to time, take
advantage of any law, rule or regulation in effect from time to time
available to the Lender which exempts the Lender from any limit upon the
rate of interest it may charge or grants to the Lender the right to
charge a higher rate of interest than that otherwise permitted by
applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to the Lender in excess of the Maximum Rate, the
interest payable to the Lender shall be reduced to the Maximum Rate; and
if from any circumstance the Lender shall ever receive anything of value
deemed interest by applicable law in excess of the Maximum Rate, an
amount equal to any excessive interest shall be applied to the reduction
of the principal of the Loan and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of the
Loan, such excess shall be refunded to the Debtor. All interest paid or
agreed to be paid to the Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout
the full period until payment in full of the principal so that the
interest on the Loan for such full period shall not exceed the Maximum
Rate. The Debtor agrees that in determining whether or not any interest
payment under the Security Documents exceeds the Maximum Rate, any
non-principal payment (except payments specifically described in the
Security Documents as "interest") including without limitation,
prepayment fees and late charges, shall to the maximum extent not
prohibited by law, be an expense, fee or premium rather than interest.
The Lender hereby expressly disclaims any intent to contract for, charge
or receive interest in an amount which exceeds the Maximum Rate. The
provisions of this Agreement, the Notes, and all other Security
Documents are hereby modified to the extent necessary to conform with
the limitations and provisions of this paragraph, and this paragraph
shall govern over all other provisions in any document or agreement now
or hereafter existing. This paragraph shall never be superseded or
waived unless there is a written document executed by the Lender and the
Debtor, expressly declaring the usury limitation set forth in this
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<PAGE> 17
paragraph to be null and void, and no other method or language shall be
effective to supersede or waive this paragraph.
(c) INTEREST AND OTHER PAYMENTS DUE ON HOLIDAYS. If any payment
due on, or with respect to, this Agreement, the Notes or any other
Security Document shall fall due on a day other than a Business Day,
then such payment shall be made on the 1st Business Day following the
day on which such payment shall have so fallen due; provided that if all
or any portion of such payment shall consist of a payment of interest,
for purposes of calculating such interest, such payment shall be deemed
to have been originally due on such first following Business Day, and
such interest shall accrue and be payable to (but not including, subject
to clause (d) below) the actual date of payment.
(d) APPLICATION OF PAYMENTS RECEIVED AFTER 3:00 P.M. Any payment
actually received by the Lender at or before 3:00 p.m. Eastern time, by
federal funds wire transfer on any Business Day, shall be deemed to have
been received by the Lender on such day. Any payment actually received
by the Lender after 3:00 p.m. Eastern time, by federal funds wire
transfer on any Business Day, shall be deemed to have been received on
the next following Business Day. All payments received by the Lender on
a day other than a Business Day, or in a manner other than by federal
funds wire transfer, shall be deemed to have been received by the Lender
on the Business Day such amounts actually become available to the Lender
prior to 3:00 p.m. Eastern time in immediately available funds.
2.3 INTENTIONALLY DELETED
2.4 RELEASE PAYMENTS; VOLUNTARY PREPAYMENTS OF INVENTORY LOAN.
(a) RELEASE PAYMENTS. Payments of Release Prices in respect of
Unsold Inventory Timeshare Intervals shall be applied by the Lender when
received in good, collected funds as follows:
FIRST, towards the payment of fees, costs and expenses as
set forth in Section 10.2 of this Agreement, in each case, as the
same may have arisen in respect of the Inventory Loan,
SECOND, towards the payment of all unpaid Release Fees in
respect of the Inventory Loan,
THIRD, towards the payment of all billed and unpaid
interest, if any, in respect of the Inventory Loan,
FOURTH, to the payment of the principal amount of the
Inventory Loan,
FIFTH, towards the payment of fees, costs and expenses as
set forth in Section 10.2 of this Agreement, in each case, as the
same may have arisen in respect of the Receivables Loan,
SIXTH, to the payment of the principal amount of the
Receivables Loan.
SEVENTH, to the payment of any other Obligations or PEC
Obligations unpaid and in default
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<PAGE> 18
Interest which accrues on the Inventory Loan in respect of any
month shall be due and payable on, and shall be paid by the Debtor on,
the first (1st) Business Day of the immediately following month.
(b) VOLUNTARY PREPAYMENTS. Debtor shall not have the right to
prepay the Inventory Loan, except as provided in Section 2.1(a),
(c) MANDATORY PREPAYMENT. Debtor shall make payments in addition
to the Release Payments on or before the following anniversary dates to
the extent necessary so that the principal balance of the Inventory Loan
does not exceed the following levels:
<TABLE>
<CAPTION>
Date Principal Balance Remaining
---- ---------------------------
<S> <C>
December 1, 2000 $6,200,000
December 1, 2001 3,000,000
December 1, 2002 -0-
</TABLE>
2.5 PARTICIPATING LENDER.
The Lender shall have the right, without prior notice to the Debtor or
the approval of the Debtor, to designate one or more Participating Lenders and
to grant to such Participating Lenders participations in the Receivable Loan
Agreement and/or the Inventory Loan, on terms and conditions satisfactory to the
Lender. In the event that the Lender so designates a Participating Lender and
grants such Participating Lender a participation in any of such Loans, such
Participating Lender shall communicate and deal only with the Lender in respect
to such Participating Lender's interest in any of such Loans and the Collateral
and the Debtor shall communicate and deal hereunder only with the Lender and not
with any Participating Lender.
2.6 COMMITMENT FEE.
The Debtor has paid to the Lender the full amount of the commitment fee,
as provided for in the Commitment Letter.
SECTION 3. COLLATERAL
3.1 SECURITY.
For the purpose of securing the prompt and complete payment and
performance by the Debtor of all of the Obligations and the PEC Obligations, the
Debtor does unconditionally and irrevocably hereby grant to the Lender a
security interest in, and a Lien upon, the following Property of the Debtor,
whether now owned or hereafter acquired (such Property being herein referred to
as the "Collateral"):
(a) all of the Debtor's right, title and interest in, to and
under all Pledged Notes Receivable (now or hereafter existing) pledged
under the Receivable Loan Agreement together with all deposits,
accounts, accounts receivable, contract rights, general intangibles and
other receivables arising under or in connection with such Pledged Notes
Receivable or otherwise securing the obligations thereunder of the
Makers thereof, together with all payments and other proceeds thereunder
(including, without limitation, all Pledged Contracts, Pledged Note
Receivable Deeds of Trust, documents, instruments, title insurance and
chattel paper relating thereto and all proceeds, Property rights,
privileges and benefits arising out of the enforcement thereof);
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(b) all of the Debtor's right, title and interest in, to and
under (including, without limitation, all revenues, proceeds, rents and
other benefits derived from) any franchises (excluding the Hospitality
Franchise Systems and Ramada Franchise Systems license agreements),
permits, trade names, trademarks (and goodwill associated therewith),
approvals, leasehold interests (whether as lessor or lessee), management
contracts, marketing contracts, maintenance contracts, utility
contracts, security contracts, licensing contracts, Timeshare Documents
or other similar contracts and all guaranties of any of the foregoing,
including, without limitation, the contracts set forth on Schedule 2 to
this Agreement (individually, a "Property-Related Contract" and,
collectively, the "Property-Related Contracts") relating, in each case,
to one or more Units or Timeshare Intervals or to the Resort;
(c) all other accounts, contract rights, general intangibles,
documents, instruments and proceeds of the Debtor related to the
Property described in clause (a) or clause (b) above, or otherwise
connected with, or related to, the operation and/or use of the Resort
(including, without limitation, all rights of the Debtor in and to
unearned or prepaid Insurance Premiums, Impositions or other charges for
utilities and any deposits with respect thereto relating to the Resort
and any interest thereon and any Compensation that would be payable in
respect of any Pledged Note Receivable Deed of Trust) including any
construction, architect and engineering contracts entered into or to be
entered into by the Debtor in connection with the refurbishing of the
Resorts;
(d) all Books and Records;
(e) all Equipment;
(f) all of the Debtor's right, title and interest of whatever
character (whether as owner, vendor, mortgagee, chattel lessee,
Declarant, Unit owner, Timeshare Interval owner or otherwise, whether
vested or contingent and whether now owned or hereafter acquired) in and
to (i) the Resorts, including, without limitation, all Timeshare
Intervals (now existing or hereafter created) in the Resort (whether
sold or unsold), (ii) the Declarations (including, without limitation,
its Development Rights or Special Declarant Rights, as such terms are
defined in the Colorado Common Interest Ownership Act), (iii) all
building materials, supplies and other Property now or hereafter stored
at or delivered to the Resorts or any other location for installation in
or on the Resorts, (iv) except to the extent included in clause (a),
clause (b) or clause (c) above, all rents, issues, profits and
condemnation awards now or hereafter belonging or in any way pertaining
to the Resorts and/or any building, structure or improvement now or
hereafter located at the Resorts, provided that nothing in this clause
(iv) shall limit or restrict the right of the Debtor to collect "Rents"
as defined, and provided for, in the Assignment of Rents and (v) any and
all plans, specifications, drawings, books, records, marketing materials
and similar items now or hereafter relating to the Resorts, the
operation thereof, any rights of the Debtor thereto or any interest
therein;
(g) all of the Debtor's right, title and interest of whatever
character (whether as owner, chattel lessee, Declarant, Unit owner,
Timeshare Interval owner or otherwise, whether vested or contingent and
whether now owned or hereafter acquired) in and to any and all
judgments, settlements, claims, awards, insurance proceeds and other
proceeds and compensation, and any interest thereon (collectively,
"Compensation"), now or hereafter made or payable in connection with (i)
any casualty or other damage to all or any part of the Resorts, (ii) any
condemnation proceedings affecting the Resorts or any rights thereto or
any interest therein, (iii) any damage to or taking of the Resorts or
any rights thereto or any interest therein arising from or otherwise
relating to any exercise of the power of eminent domain (including,
without
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<PAGE> 20
limitation, any and all Compensation for change of grade of streets or
any other injury to or decrease in the value of the Resorts), or any
conveyance in lieu of or under threat of any such taking, (iv) any and
all proceeds of any sale, assignment or other disposition of the Resorts
or any rights thereto or any interest therein, (v) any and all proceeds
of any other conversion (whether voluntary or involuntary) of the
Resorts or any rights thereto or any interest therein or to cash or any
liquidated claim relating thereto, and (vi) any and all refunds and
rebates of or with respect to any Insurance Premium, any Imposition or
any other charge for utilities relating to the Resorts (including,
without limitation, any and all refunds and rebates of or with respect
to any deposit or prepayment relating to any such Insurance Premium,
Imposition or charge), and any and all interest thereon, whether now or
hereafter payable or accruing; and
(h) all other "Mortgaged Property," as such term is defined in
the Inventory Deed of Trust, whether such Collateral shall be presently
in existence or whether it shall be acquired or created by the Debtor at
any time hereafter, wherever located, together with the products and
proceeds thereof, and any replacements, additions and/or accessions
thereto and substitutions thereof and after-acquired Property related to
the Resort, provided that any Collateral which shall have been released
by the Lender from the Liens provided for herein or in any other
Security Document shall not be deemed to have again become subject to
such Liens solely by virtue of becoming after-acquired Property of the
Debtor.
The Lender agrees that, upon the release of a Timeshare Interval
from the Inventory Deed of Trust, the Lender will release any security
interest , the Lender any related Notes Receivable that are not Pledged
Notes Receivable at such time, together with all documents, instruments,
chattel paper, proceeds, revenues, Property rights, privileges and other
benefits relating thereto. In addition to its agreements in the
immediately preceding sentence, the Lender further agrees that, upon the
incurrence by the Debtor of indebtedness other than to the Lender as
permitted in Section 7.2(i) hereof, or the sale of Notes Receivable by
the Debtor to a Person other than the Lender as permitted in Section 7.4
hereof, and the written request of the Debtor, the Lender will release
its security interest under any Security Document (including, without
limitation, the Inventory Deed of Trust), in any Notes Receivable that
are not Pledged Notes Receivable at such time and are either being
pledged in connection with the incurrence of such indebtedness or being
sold in connection with such sale, as the case may be, together with all
documents, instruments, chattel paper, proceeds, revenues, Property
rights, privileges and other benefits relating thereto.
To the extent that the Debtor satisfies:
(a) the requirements of Section 7.2(i) hereof with respect to the
incurrence of additional indebtedness in connection with the financing
of Notes Receivable not pledged to the Lender under this Agreement or
(b) the requirements of Section 7.4 hereof with respect to the
sale of Notes Receivable not pledged to the Lender under this Agreement
and, in either case, if no Event of Default shall then exist, the Lender agrees,
upon receipt of a written request of the Debtor therefor, to enter into an
intercreditor agreement, which shall be in form and substance reasonably
satisfactory to the Lender and its counsel, with any other lender providing such
financing to the Debtor or any purchaser purchasing such Notes Receivable from
the Debtor, which intercreditor agreement shall provide:
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<PAGE> 21
(a) for an equal and ratable sharing between the Lender and such
other lender or such purchaser of any security interest in, and Lien
upon, the Collateral described in clause (b), in clause (c) (but only to
the extent that clause (c) shall relate to Property described in clause
(b)), clause (d) and clause (e) above, provided that the Lender shall
not be obligated to effect any such sharing if such other lender or
purchaser shall have failed to perfect its security interest in, and
Lien upon, said Collateral,
(b) that such other lender or purchaser shall recognize the
priority and exclusivity of the Lender's security interest in, and Lien
upon, all of the Collateral described in clause (a) above and in clause
(c) above (to the extent that clause (c) shall relate to Property
described in clause (a) above),
(c) that the Lender shall recognize the priority and exclusivity
of the other lender's or purchaser's security interest in, and Lien
upon, the Notes Receivable specifically pledged or sold and (in each
case) delivered to such other lender or such purchaser by the Debtor and
in and to the accounts, contract rights, general intangibles and
instruments, documents and proceeds in respect thereof, and
(d) for a proportionate sharing of the voting rights granted by
the Debtor to the Lender pursuant to Section 3.9(c) hereof, provided
that such other lender has provided for an assignment of such voting
rights to itself.
The Lender may, in its sole discretion, require the Debtor to deliver to the
Lender certified copies of the documents of such other lender or such purchaser
providing for such financing or sale and the exhibits and other instruments to
be delivered in connection therewith, all of which shall be reasonably
satisfactory to the Lender. All actions taken in connection with the execution
of any such intercreditor agreement shall be reasonably satisfactory to the
Lender and its counsel.
3.2 UNDERTAKINGS REGARDING COLLATERAL.
(a) The Lender shall not be required to take any steps to perfect
or maintain the perfection of its security interest in the Collateral
and no loss of, or damage to, the Collateral shall release the Debtor
from any of the Obligations.
(b) Notwithstanding that the Lender has agreed hereunder to make
Receivable Advances under the Receivable Loan Agreement to the Debtor
only in respect of Eligible Notes Receivable (as defined in the
Receivable Loan Agreement), the Lender shall have a security interest
in, and may collect payments under, all of the Pledged Notes Receivable
of the Debtor.
(c) The execution and delivery of this Agreement, and the
granting of the Liens in and to the Collateral, shall not subject the
Lender to, or transfer or pass to the Lender or in any way affect or
modify, the liability of the Debtor under any or all of the Pledged
Notes Receivable, the Pledged Contracts, the Property-Related Contracts
or in connection with the Resort, the Declaration or the Association's
Articles of Incorporation or By-Laws, it being understood and agreed
that notwithstanding this Agreement, and the granting of the Liens in
and to the Collateral, all of the obligations of the Debtor (whether as
owner, chattel lessee, vendor, mortgagee, Declarant, Unit owner,
Timeshare Interval owner or otherwise) to each and every other party
under each and every one of the Pledged Notes Receivable, the Pledged
Contracts and the Property-Related Contracts and/or in connection with
the Resort or the Declaration and Articles of Incorporation and By-Laws
of the Association shall be and remain enforceable by such other party,
its successors and assigns, only against the Debtor or Persons other
than the Lender, and
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<PAGE> 22
the Lender has not assumed any of the obligations or duties of the
Debtor under or with respect to any of the Pledged Notes Receivable, the
Pledged Contracts or the Property-Related Contracts or otherwise in
connection with the Resort or the Declaration or the Articles of
Incorporation or By-Laws of the Association.
(d) The Debtor hereby agrees and acknowledges that neither the
acceptance of this Agreement or any other Security Document by the
Lender nor the exercise of, or failure to exercise, any right, power or
remedy in this Agreement or in any other Security Document conferred
upon the Lender shall be deemed or construed to obligate the Lender to
pay any sum of money, take any other action or incur any liability in
connection with, or collect or realize upon, any of the Pledged Notes
Receivable, the Pledged Contracts or any other Collateral. It is further
agreed and understood by the Debtor that the Lender shall not be liable
in any way for any cost, expense or liability connected with, or any
charge or liability arising from, any of the Pledged Notes Receivable,
any of the Pledged Contracts, any of the Property-Related Contracts or
any other Collateral.
(e) The Debtor hereby agrees to indemnify the Lender, and hold it
harmless, from any and all liability, loss or damage which it may or
might incur by reason of any and all claims and demands whatsoever which
may be asserted against the Lender arising out of, as a result of, or
otherwise connected with, the Liens hereby granted to the Lender by the
Debtor under or in respect of any of the Pledged Notes Receivable, the
Property-Related Contracts or any other Collateral by reason of (i) the
failure by the Debtor to perform any obligations or undertakings
required to be performed by the Debtor under or in connection with any
of such Pledged Notes Receivables, the Pledged Contracts, the
Property-Related Contracts or any other Collateral, (ii) any failure by
the Debtor, in connection with any of such Pledged Notes Receivable, the
Pledged Contracts, the Property-Related Contracts or any other
Collateral, to comply with any applicable federal, state or local
consumer credit, sale rescission or usury statute, including, without
limitation, any such statute of any state in which a Maker may reside,
the Consumer Credit Protection Act, as amended, the Federal Trade
Commission Act, as amended, the Colorado Uniform Consumer Credit Code,
as amended, all rules and regulations promulgated under the foregoing
statutes, acts and codes, the Interstate Land Sales Full Disclosure Act,
the Colorado Condominium Ownership Act and the rules and regulations
promulgated thereunder and the Colorado Common Interest Ownership Act
and the rules and regulations promulgated thereunder, and (iii) failure
by the Debtor to comply with any applicable federal, state or local
statutes or ordinances and the rules and regulations promulgated
thereunder pertaining to the renovation, construction, use or operation
of the Resort (including, without limitation, the Units) or to otherwise
discharge its duties and obligations under applicable law and under the
Declaration or the Association's Articles of Incorporation or By-Laws as
Declarant.
3.3 FINANCING STATEMENTS/PERFECTION DOCUMENTS.
The Debtor agrees, at its own expense, to execute the financing
statements required by the Colorado Uniform Commercial Code together with any
and all other instruments or documents and take such other action, including
delivery of such instruments and documents, as may be necessary to perfect, and
to continue the perfection of, the Lender's security interest and Liens in the
Collateral and, unless prohibited by law, the Debtor hereby authorizes the
Lender to execute and file any such financing statement on the Debtor's behalf.
The parties agree that a legible carbon, photographic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.
3.4 LOCATION OF COLLATERAL; BOOKS AND RECORDS.
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All tangible Collateral (other than Collateral delivered to the Lender
and other than certain Books and Records which may be kept on Steamboat Suite's
or Preferred Equities' premises in Las Vegas, Nevada) which is personal Property
is to remain, at all times, on the premises of the Debtor in Steamboat Springs,
Colorado and the Debtor represents and warrants to the Lender that all of the
currently existing tangible Collateral is now located there, and the Debtor will
not transfer the Collateral from such premises to other locations without the
prior written approval of the Lender. The Debtor shall, upon receipt of a
written request therefor from the Lender, deliver to the Lender, then current
copies of all computer tapes, disks, software and microfiche records
constituting, in whole or in part, the Books and Records.
3.5 INSURANCE OF COLLATERAL.
(a) MAINTENANCE OF INSURANCE. The Debtor agrees to maintain, or
cause to be maintained, insurance, with financially sound and reputable
insurers acceptable to the Lender, with respect to the Buildings, the
Units and the personal Property located therein (including, without
limitation, the furniture, fixtures and furnishings thereof), all other
equipment and other personal Property of every nature whatsoever now or
hereafter located in or on, or attached to, and used or intended to be
used in connection with the Resort, the Common Amenities (including,
without limitation, the Amenity Building) and the Pledged Notes
Receivable, the Pledged Contracts and the Books and Records, against
casualties, contingencies, hazards and such other risks (including,
without limitation, (i) fire, hurricane, tornado, wind damage, and such
other risks insured against by a standard all-risk property and fire
insurance policy and endorsement for extended coverage and (ii) flood
insurance, if required by applicable law) and in such amounts as shall
be reasonably satisfactory to the Lender (such insurance to be
maintained during the refurbishing of the Resorts and to cover materials
in as well as adjacent to the structures so insured; such insurance
shall also be maintained prior to such refurbishing as well as after
such refurbishing); provided, however, that such casualty insurance
shall (A) in no case be in an amount less than an amount sufficient to
rebuild the Buildings, the Units or the Common Amenity which shall have
suffered the loss and replace any of the personal Property located
therein and (B) be sufficient to provide funds to fully compensate
owners of Timeshare Intervals in and to such Building and/or Unit for
any inability to utilize such Building, Unit and/or Common Amenity
during any period following a loss to such Building, Unit or Common
Amenity. The Debtor shall deliver copies of the policies of such
insurance to the Lender, with satisfactory lender's loss payable
endorsements naming the Lender as loss payee to the extent of its
interest and as such interest may appear on the Closing Date, as set
forth in Section 5.12 hereof and within 15 days after the Closing Date,
Debtor shall deliver a certification from the insurance company or
insurance companies issuing such policies certifying that such copies
are true and correct. Each such policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days'
prior written notice to the Lender in the event of cancellation of the
policy for any reason whatsoever and a clause that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Debtor or owner of the Property nor by the occupation of the premises
for purposes more hazardous than are permitted by said policy. If the
Debtor shall fail to provide and pay for such insurance, or have the
same provided and paid for, the Lender may, at the Debtor's expense,
procure the same, but shall not be required to do so. The Debtor agrees
to deliver to the Lender, promptly as rendered, true copies of all
reports made by the Debtor in any reporting form to insurance companies.
The Debtor shall maintain or caused to be maintained insurance with
financially sound and reputable insurers with respect to its Property
and business (including, without limitation, the Collateral) covering
any public liability of the Debtor, its officers, agents or employees
(including, without limitation, damage by Debtor or its officers, agents
or employees or the Association to the Property of other Persons, any
bodily injury caused by Debtor or its officers, agents or employees to
any other Person, or any negligent act or other similar liability of
Debtor or its officers, agents or
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<PAGE> 24
employees) and in such amounts as are satisfactory to the Lender; the
Lender shall be named as a co-insured thereon.
The Debtor shall, on or prior to August 15 of each year,
commencing on August 15, 2000, submit to the Lender insurance
certificates showing the type and amounts of insurance coverage
maintained, or caused to be maintained, by Debtor in respect of the
Resort, the then current premium cost in respect thereof and the amount
of such cost which shall have been previously paid. The Debtor shall, to
the extent permitted by applicable law, cause all casualty policies of
insurance provided under the Declarations to have mortgagee endorsements
in respect of the Lender's interests in and to the Timeshare Interval
that is the subject of any Pledged Note Receivable.
The Debtor shall pay, or cause to be paid, all premiums on the
aforesaid insurance policies and all other fees and charges payable in
connection with such insurance policies (such premiums, fees and charges
being collectively referred to herein as "Insurance Premiums") not later
than the due date thereof. If the Debtor shall fail to pay, or cause to
be paid, any such Insurance Premiums, the Lender may (but shall not be
obligated to), at Debtor's expense, pay the same. Any such payment shall
be subject to Section 3.11 hereof.
If the Mortgaged Property (as defined in the Inventory Deed of
Trust) is sold at a foreclosure sale or if the Lender shall acquire
title to said Mortgaged Property, the Lender shall have all of the
right, title and interest of the Debtor in and to all insurance policies
required under this clause (a) and the unearned premiums thereon,
related to the Mortgaged Property, and in and to the proceeds resulting
from any damage to said Mortgaged Property prior to such sale or
acquisition.
(b) CONDOMINIUM/TIMESHARE INSURANCE PROCEEDS. The Lender
acknowledges that application of all or a portion of any proceeds of
insurance may be subject to the Colorado Condominium Ownership Act, the
Colorado Common Interest Ownership Act and the terms and provisions of
the Declaration, and the foregoing requirements in this Section 3.5
shall be subject thereto (unless such laws may be modified by agreement
and have been so modified). For so long as the Inventory Loan shall
remain outstanding, any proceeds of insurance payable by the
Association, any manager retained by it or by the Declarant in respect
of any Unit or Timeshare Interval to the Debtor under the Declarations,
the Associations' Articles of Incorporation or By-Laws or under
applicable Colorado law shall be promptly paid and/or turned over to the
Lender as proceeds of the Collateral and applied either in accordance
with Colorado law or, if no such requirement exists, to the prepayment
of the Loan without prepayment penalty (after deducting therefrom all
out-of-pocket costs and expenses of the Lender in respect thereof),
first, as provided in Section 2.1(a) hereof and second, as provided in
the Receivable Loan Agreement. Without limiting the immediately
preceding sentence, any proceeds of insurance in respect of any Unit or
Timeshare Interval received by the Debtor or received by the Debtor as
Declarant or received by the Associations at a time during which
(i) the Debtor (as Debtor or as Declarant) or any
Affiliate shall be the only owner or owners of Units or Timeshare
Intervals, or
(ii) the insurance provisions of the Declarations shall
have been suspended, shall be promptly paid and/or turned over to
the Lender (and the Debtor, as Debtor or as Declarant, shall
cause such payment and/or turnover) as proceeds of the Collateral
and applied to the prepayment of the Loan (after deducting
therefrom all out-of-pocket costs
19
<PAGE> 25
and expenses of the Lender in respect thereof), first, as
provided in Section 2.1(a) hereof and second, as provided in the
Receivable Loan Agreement.
(c) MISCELLANEOUS APPLICATION OF INSURANCE PROCEEDS. Subject to
the terms, provisions and requirements of the Declarations and
applicable Colorado law and to the extent that clause (b) above shall
not be applicable, the Lender is hereby irrevocably authorized and
appointed the agent and attorney-in-fact of the Debtor (with full right
of substitution) to adjust or compromise any insured loss in respect of
the Resort and to collect and receive the proceeds from any such policy
in respect of any such loss, which appointment shall be deemed to be
coupled with an interest. Each insurance company issuing any of the
above-mentioned insurance policies is hereby irrevocably authorized and
directed to make payment in respect of any such loss (whether or not the
Lender shall have exercised its option to adjust or compromise such
loss) directly to the Lender alone and not to the Debtor and the Lender
jointly. The Debtor shall immediately pay over to the Lender any such
payments received directly from any such insurance company. The Lender
is hereby irrevocably authorized and appointed the agent and
attorney-in-fact of the Debtor (with full right of substitution) to
endorse the Debtor's name on any instrument in payment of such proceeds,
which appointment shall be deemed to be coupled with an interest. Such
insurance proceeds received by the Lender shall not be, nor be deemed to
be, trust funds and may be commingled with the general funds of the
Lender. No interest shall be payable in respect of any such insurance
proceeds received by the Lender. After deducting from such insurance
proceeds any expenses incurred by the Lender in the adjustment or
compromise of such loss or in the collection or handling of such funds
(including, without limitation, attorneys' fees and disbursements), the
Lender shall
(i) if an Event of Default shall then exist, apply such
net insurance proceeds to the prepayment of the Loan, first, as
provided in Section 2.1(a) hereof and second, as provided in the
Receivable Loan Agreement;
(ii) if no Event of Default shall then exist and such loss
shall not have been in respect of all, or substantially all, of
the Property in respect of the Resort and shall have exceeded
$20,000 and if the insurer which paid such insurance proceeds
shall not claim any right of participation and/or assignment of
rights in respect of the Lender with respect to the Obligations,
either deliver the net insurance proceeds to the Debtor as
contemplated in clause (A) below but subject to the conditions
set forth in said clause (A) or apply the same as contemplated in
clause (B) below:
(a) (1) the Debtor shall have, within 30 days of
such loss, delivered to the Lender a written undertaking
to rebuild, restore and/or repair the Property of the
Resorts damaged or destroyed;
(2) the Debtor shall have, within 60 days of
such loss, submitted to the Lender for its approval (x)
plans and specifications in respect of such rebuilding,
restoration and/or repairing, which plans and
specifications shall be reasonably satisfactory to the
Lender and which shall have been prepared by an architect
reasonably satisfactory to the Lender, (y) an estimate of
all costs of such rebuilding, restoration and/or repairing
signed by such architect and (z) copies of approvals or
consents of all necessary governmental authorities;
(3) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that such net insurance proceeds,
together with any additional funds made available for such
20
<PAGE> 26
purpose by the Debtor and deposited with the Lender, shall
be sufficient to effect such rebuilding, restoration
and/or repairing in accordance with the aforesaid plans
and specifications, free and clear of all Liens except the
Liens contemplated or otherwise permitted herein and in
the other Security Documents;
(4) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that such rebuilding, restoration
and/or repairing can be completed within any applicable
time limitation imposed by law or, if there are no such
time limitations, within a reasonable period of time;
(5) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that, after such application and such
rebuilding, restoration and/or repairing (taking into
account any restrictions imposed by law or agreement on
such rebuilding, restoration and/or repairing or on the
use of the Resorts after such rebuilding, restoration
and/or repairing), the Resorts shall have a Fair Market
Value substantially the same as, or greater than, the Fair
Market Value of the Resorts immediately prior to the
occurrence of such damage or destruction;
(6) at the time of each disbursement
contemplated by subclause (8) below, no Property-Related
Contract shall have been terminated or, if any
Property-Related Contract shall have been terminated, the
Lender shall be reasonably satisfied that the Debtor will
be able to replace such Property-Related Contract
reasonably promptly;
(7) the holder of any encumbrance senior to
the Liens provided herein or in any other Security
Document in respect of the Resort shall have consented and
agreed to the application of insurance proceeds as set
forth in this clause (A); and
(8) the disbursement of such net insurance
proceeds shall be in accordance with terms, conditions and
procedures customarily followed by prudent institutional
lenders in making construction loans in similar amounts
and on such other terms, conditions and procedures as the
Lender may reasonably require (as evidenced by its written
notice thereof to the Debtor prior to the first
disbursement pursuant to this subclause (8)) to assure the
proper application of such proceeds and the continuing
performance by the Debtor of its obligations hereunder and
under the other Security Documents, including without
limitation, receipt by the Lender of evidence of suitable
payment bonds with respect to all material contracts and
Builder's All Risk Insurance and a certificate from the
Debtor certifying that (x) all rebuilding, restoration
and/or repairing to the date of such disbursement has been
performed substantially in accordance with the aforesaid
plans and specifications and that there have been no
material changes or modifications made in such plans and
specifications, (y) the labor, services and/or materials
to be paid by such disbursement have been performed upon,
or furnished in respect of, the rebuilding, restoration
and/or repairing of the Resort and (z) no Event of Default
exists at the time of such disbursement, or
(B) the Lender shall apply such net insurance
proceeds to the prepayment of the Loan, first, as provided
in Section 2.1(a) of this Agreement
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<PAGE> 27
and second, as provided in the Receivable Loan Agreement,
if the Lender shall not have received the written
confirmation referred to in subclause (A)(1) above within
the time period required therefor or if the Debtor shall
have informed the Lender, in writing, of its intention not
to rebuild, repair and restore the Resort or the Lender
shall have determined the same at any time during the
rebuilding, repairing or restoration process referred to
in clause (A) above;
(iii) if no Event of Default shall then exist and such
loss shall not have been in respect of all, or substantially all,
of the Resort and shall not have exceeded $20,000, deliver all of
such net insurance proceeds to the Debtor and the Debtor shall
thereupon be obligated to, and shall, promptly rebuild, repair
and restore the Property of the Resort subject to such loss (or
shall cause such Property to be so promptly rebuilt, repaired and
restored) to the equivalent of its condition immediately prior to
such loss, whether or not such net insurance proceeds shall be
sufficient to cover the costs thereof, and shall certify, within
120 days of such loss, to the Lender that such rebuilding,
repairing and restoration has been completed and paid for in
full; or
(iv) if no Event of Default shall then exist and if such
loss shall be in respect of all, or substantially all, of the
Resort, apply such net insurance proceeds to the prepayment of
the Loan, first, as provided in Section 2.1(a) of this Agreement
and second, as provided in the Receivable Loan Agreement.
Any payment of insurance proceeds over to the Debtor, as provided
above, shall not affect the Lien of this Agreement or any other Security
Document as security for the Obligations. Notwithstanding any such loss,
the Debtor shall continue to pay interest and principal at the
applicable rate and amounts and at the applicable times provided in this
Agreement and in the Notes. Although the Lender intends to use
reasonable efforts to collect such insurance proceeds in a timely
fashion, the Lender shall not be responsible for any failure to collect
any proceeds due under the terms of any insurance policy, regardless of
the cause of such failure. Any balance of such net insurance proceeds
remaining after the aforesaid application thereof shall, if no Event of
Default shall then exist, belong, or be paid to, as the case may be, the
Debtor, provided that, if an Event of Default shall then exist, the
Debtor shall promptly deliver any such balance to the Lender and such
balance shall be applied as a prepayment of the Loan, first, as provided
in Section 2.1(a) hereof and second, as provided in the Receivable Loan
Agreement.
(D) DEBTOR UNDERTAKINGS. In the event of any casualty or loss in
respect of the Resort (including, without limitation, any of the
Collateral), (i) the Debtor shall immediately notify the Lender of the
same, (ii) the Lender may, in addition to its rights as beneficiary
under the Inventory Deed of Trust, elect to exercise the voting rights
of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
Deed of Trust or as the owner of any Timeshare Interval, as such voting
rights are provided for under the Declaration, regarding all matters of
repair and restoration and (iii) the Debtor shall pay all assessments as
required by the Declaration and/or the Association's Articles of
Incorporation or By-Laws for repair and restoration due to inadequacy of
insurance.
Debtor agrees to cause any contractor hired by it to effect any
of the refurbishing of the Resort to carry adequate insurance in respect
of bodily injury or other personal liability or property damage in
respect of its employees or other third persons in connection with such
refurbishing or construction. Certificates of such insurance shall be
filed with the Lender prior to commencement of work and shall be
reasonably acceptable to the Lender in form and substance.
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<PAGE> 28
3.6 CONDEMNATION.
(a) CONDOMINIUM/TIMESHARE CONDEMNATION COMPENSATION. Any
compensation, awards, damages, claims, rights of action, proceeds,
payment and other relief (collectively, "Condemnation Compensation") of,
or on account of, any damage or taking of all or any part of the Resort
in connection with any condemnation proceedings or any exercise of the
power of eminent domain (or any conveyance in lieu of or under threat of
any such taking), including, without limitation, any such Condemnation
Compensation for change of grade of streets or any other injury to or
decrease in the value of all or any part of the Resort payable by the
Association, any manager retained by it or by the Declarant in respect
of any Unit or Timeshare Interval to the Debtor under the Declaration,
the Association's Articles of Incorporation or By-Laws or under
applicable Colorado law shall be promptly paid and/or turned over to the
Lender as proceeds of the Collateral and applied to the prepayment of
the Loan, first, as provided in Section 2.1(a) hereof and second, as
provided in the Receivable Loan Agreement.
(b) APPLICABLE LAW.
(i) The Lender acknowledges that application of all or a
portion of any Condemnation Compensation may be subject to the
Colorado Condominium Ownership Act, the Colorado Common Interest
Ownership Act and the terms and provisions of the Declaration,
and the foregoing requirements in this Section 3.6 shall be
subject thereto (unless such laws may be modified by agreement
and have been so modified).
(ii) Any Condemnation Compensation in respect of any Unit
or Timeshare Interval received by the Debtor or received by the
Debtor as Declarant or received by the Association at a time
during which
(a) only the Debtor (as Debtor or as Declarant) or
any Affiliate shall be the only owner of Units or
Timeshare Intervals or
(b) the condemnation provisions of the Declaration
shall have been suspended shall be promptly paid and/or
turned over to the Lender (and the Debtor, as Debtor or as
Declarant, shall cause such payment and/or turnover) as
proceeds of the Collateral and applied to the prepayment
of the Loan, first, as provided in Section 2.1(a) hereof
and second, as provided in the Receivable Loan Agreement .
(c) MISCELLANEOUS APPLICATION OF CONDEMNATION COMPENSATION.
Subject to the requirements, terms and provisions of the Declaration and
applicable Colorado law and to the extent that clause (b) above shall
not be applicable, the Lender shall be entitled to all Condemnation
Compensation of, or on account of, any damage or taking of all or any
part of the Resort in connection with any condemnation proceedings or
any exercise of the power of eminent domain (or any conveyance in lieu
of or under threat of any such taking), including, without limitation,
any such Condemnation Compensation for change of grade of streets or any
other injury to or decrease in the value of all or any part of the
Resort. All such Condemnation Compensation, and the right thereto, is
hereby assigned to the Lender and included in the Collateral. The Debtor
shall promptly execute such further assignments of any such Condemnation
Compensation as the Lender may require, and the Lender shall take all
steps to assure that such Condemnation Compensation shall be paid to the
Lender alone, and not to the Debtor and the Lender jointly, and that
such Condemnation Compensation at all times shall be free and clear of
any Liens, charges or encumbrances of any kind whatsoever, except the
Liens
23
<PAGE> 29
permitted or otherwise provided for herein or in the other Security
Documents. The Lender is hereby irrevocably authorized and appointed the
agent and attorney-in-fact of the Debtor (with full right of
substitution) to endorse the Debtor's name on any instrument in payment
of such Condemnation Compensation, which appointment shall be deemed to
be coupled with an interest.
The Lender is hereby irrevocably authorized and appointed the
agent and attorney-in-fact of the Debtor (with full right of
substitution) to commence, appear in and prosecute in its own and/or the
Debtor's name any action or proceeding relating to any condemnation or
exercise of the power of eminent domain, to settle or compromise any
claim in connection therewith and to collect and receive such
Condemnation Compensation and give proper receipts and acquittances
therefor, which appointment shall be deemed to be coupled with an
interest. The Debtor from time to time shall promptly deliver to the
Lender any and all instruments and authorizations which the Lender may
request to enable the Lender to take any such action. Such Condemnation
Compensation received by the Lender shall not be, nor be deemed to be,
trust funds and may be commingled with the general funds of the Lender.
No interest shall be payable in respect of any such Condemnation
Compensation. After deducting from such Condemnation Compensation any
expenses incurred by the Lender in connection therewith (including,
without limitation, attorneys' fees and disbursements), the Lender shall
(i) if an Event of Default shall then exist, apply such
net Condemnation Compensation to the prepayment of the Loan,
first, as provided in Section 2.1(a) of this Agreement and
second, as provided in the Receivable Loan Agreement;
(ii) if no Event of Default shall then exist, such damage
or taking shall have not been in respect of all, or substantially
all, of the Resort, such damage or taking shall not have rendered
the remainder of the Resort economically inviable or unusable to
the same extent and in the same manner as it was immediately
prior to such damage or taking, and the Condemnation Compensation
payable in respect thereof shall have exceeded $20,000, either
deliver the Condemnation Compensation to the Debtor as
contemplated in clause (A) below but subject to the conditions
set forth in said clause (A) or apply the same as contemplated in
clause (B) below:
(a) (1) the Debtor shall have, within 30 days of
such condemnation or taking, delivered to the Lender a
written undertaking to rebuild, restore and/or repair the
Property of the Resort not condemned or taken;
(2) the Debtor shall have, within 60 days of
such condemnation or taking, submitted to the Lender for
its approval (x) plans and specifications in respect of
such rebuilding, restoration and/or repairing, which plans
and specifications shall be reasonably satisfactory to the
Lender and which shall have been prepared by an architect
reasonably satisfactory to the Lender, (y) an estimate of
all costs of such rebuilding, restoration and/or repairing
signed by such architect and (z) copies of approvals or
consents of all necessary governmental authorities;
(3) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that such Condemnation Compensation,
together with any additional funds made available for such
purpose by the Debtor and deposited with the Lender, shall
be sufficient to effect such rebuilding, restoration
and/or repairing in accordance with the
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<PAGE> 30
aforesaid plans and specifications, free and clear of all
Liens except the Liens contemplated or otherwise permitted
herein and in the other Security Documents;
(4) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that such rebuilding, restoration
and/or repairing can be completed within any applicable
time limitation imposed by law or, if there are no such
time limitations, within a reasonable period of time;
(5) at the time of each disbursement
contemplated by subclause (8) below, the Lender shall be
reasonably satisfied that, after such application and such
rebuilding, restoration and/or repairing (taking into
account any restrictions imposed by law or agreement on
such rebuilding, restoration and/or repairing or on the
use of the Resort after such rebuilding, restoration
and/or repairing), the Resort shall have a Fair Market
Value substantially the same as, or greater than, the Fair
Market Value of the Resort immediately prior to the
occurrence of such condemnation or taking;
(6) at the time of each disbursement
contemplated by subclause (8) below, no Property-Related
Contract shall have been terminated or, if any
Property-Related Contract shall have been terminated, the
Lender shall be reasonably satisfied that the Debtor will
be able to replace such Property-Related Contract
reasonably promptly;
(7) the holder of any encumbrance senior to
the Liens provided herein or in any other Security
Document in respect of the Resort shall have consented and
agreed to the application of Condemnation Compensation as
set forth in this clause (A); and
(8) the disbursement of such Condemnation
Compensation shall be in accordance with terms, conditions
and procedures customarily followed by prudent
institutional lenders in making construction loans in
similar amounts and on such other terms, conditions and
procedures as the Lender may reasonably require (as
evidenced by its written notice thereof to the Debtor
prior to the first disbursement pursuant to this subclause
(8)) to assure the proper application of such proceeds and
the continuing performance by the Debtor of its
obligations hereunder and under the other Security
Documents, including without limitation, receipt by the
Lender of evidence of suitable payment bonds with respect
to all material contracts and Builder's All Risk Insurance
and a certificate from the Debtor certifying that (x) all
rebuilding, restoration and/or repairing to the date of
such disbursement has been performed substantially in
accordance with the aforesaid plans and specifications and
that there have been no material changes or modifications
made in such plans and specifications, (y) the labor,
services and/or materials to be paid by such disbursement
have been performed upon, or furnished in respect of, the
rebuilding, restoration and/or repairing of the Resort and
(z) no Event of Default exists at the time of such
disbursement, or
(b) the Lender shall apply such Condemnation
Compensation to the prepayment of the Loan, first, as
provided in Section 2.1(a) of this Agreement and second,
as provided in the Receivable Loan Agreement, if Lender
(or its agent) shall have not received the written
confirmation referred to in subclause
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<PAGE> 31
(A)(1) above within the time period required therefor or
if the Debtor shall have informed the Lender, in writing,
of its intention not to rebuild, repair and restore the
Resort or the Lender shall have determined the same at any
time during the rebuilding, repairing or restoration
process referred to in clause (A) above;
(iii) if no Event of Default shall then exist and such
damage or taking shall not have been in respect of all, or
substantially all, of the Resort and the Condemnation
Compensation payable in respect thereof shall not have exceeded
$20,000, deliver all of such net Condemnation Compensation to the
Debtor and the Debtor shall thereupon be obligated to, and shall,
promptly rebuild, repair and restore the Resort (or shall cause
the Resort to be so promptly rebuilt, repaired and restored) such
that the Resort is useable to the same extent and in the same
manner, and is in substantially an equivalent condition, after
such damage or taking as it was immediately prior to such damage
or taking, whether or not such net Condemnation Compensation
shall be sufficient to cover the costs thereof, and shall
certify, within 120 days of such damage or taking, to the Lender
that such rebuilding, repairing and restoration has been
completed and paid for in full; or
(iv) if no Event of Default shall then exist and if such
damage or taking loss shall be in respect of all, or
substantially all, of the Resort or the Resort is no longer
economically viable or no longer useable to the same extent and
in the same manner after such damage or taking as it was
immediately prior to such damage or taking, apply such net
Condemnation Compensation to the prepayment of the Loan, first,
as provided in Section 2.1(a) of this Agreement and second, as
provided in the Receivable Loan Agreement.
The Lender may release such net Condemnation Compensation to the
Debtor without affecting the Lien of this Agreement or any other
Security Document as security for the Obligations. Any balance of such
net Condemnation Compensation remaining after the aforesaid application
thereof shall, if no Event of Default shall then exist, belong to, or be
paid to, as the case may be, the Debtor, provided that, if an Event of
Default shall then exist, the Debtor shall promptly deliver any such
balance to the Lender and such balance shall be applied as a prepayment
of the Loan, first, as provided in Section 2.1(a) hereof and second, as
provided in the Receivable Loan Agreement. Notwithstanding any such
condemnation, the Debtor shall continue to pay interest and principal at
the applicable rate and amounts and at the applicable times provided in
this Agreement and in the Notes. Although the Lender intends to use
reasonable efforts to collect such Condemnation Compensation, in a
timely fashion, the Lender shall not be responsible for any failure to
collect such Condemnation Compensation, regardless of the cause of such
failure.
(d) DEBTOR UNDERTAKINGS. In the event of any condemnation or
taking in respect of the Resort (including, without limitation, any of
the Collateral), (i) the Debtor shall immediately notify the Lender of
the same, (ii) the Lender may, in addition to its rights as beneficiary
under the Inventory Deed of Trust, elect to exercise the voting rights
of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
Deed of Trust or as the owner of any Timeshare Interval, as such voting
rights are provided for under the Declaration, regarding all matters of
repair and restoration and (iii) the Debtor shall pay all assessments as
required by the Declaration and/or the Association's Articles of
Incorporation or By-Laws for repair and restoration due to inadequacy of
the Condemnation Compensation.
3.7 TAXES AFFECTING COLLATERAL.
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<PAGE> 32
The Debtor shall pay or cause to be paid, on or before the last day when
they may be paid without interest or penalty, all taxes, assessments, rates,
dues, charges, fees, levies, excises, duties, fines, impositions, liabilities,
obligations and encumbrances (including, without limitation, water and sewer
rents and charges, charges for setting or repairing meters and charges for other
utilities or services), general or special, ordinary or extraordinary, foreseen
or unforeseen, of every kind whatsoever, now or hereafter imposed, levied or
assessed by any public or quasi-public authority or instrumentality upon or
against any of the Collateral or the use, occupancy or possession of the Resort,
or upon or against this Agreement, the Notes or the other Security Documents,
the Obligations or the interest of the Lender in the Pledged Notes Receivable,
the Pledged Note Receivable Deeds of Trust or the Inventory Deed of Trust or any
other item of Collateral (provided that this Section 3.7 shall not be construed
to require the Debtor to pay any income tax imposed upon the general income of
the Lender), as well as all assessments and other governmental charges imposed,
levied or assessed in respect of any Collateral, and any and all interest, costs
and penalties on or with respect to any of the foregoing (collectively, the
"Impositions"). Upon request by the Lender, the Debtor shall deliver to the
Lender receipts or other satisfactory proof of payment of any Impositions.
The Debtor shall not claim, demand or be entitled to receive any
reduction of, or credit toward, any Imposition on account of the Obligations. No
deduction shall be claimed from the taxable value of any Collateral or the
Resort by reason of the Obligations, any of the Security Documents or the
interest of the Lender in the Collateral.
If existing laws or procedures governing the taxation of mortgages,
security documents or debts secured by mortgages or other security documents
shall be changed in any manner after the date hereof so as to materially
adversely impair the security of the Inventory Deed of Trust or the security
interest herein granted or granted in any of the other Security Documents or to
reduce the net income to the Lender in respect of the Obligations (excluding
from any such determination of net income any reduction in such net income
attributable to a change in taxes imposed on, or measured by, the net income of
the Lender), then, upon request by the Lender, the Debtor shall pay to the
Lender or to the taxing authority (if so directed by the Lender), all taxes,
charges and related costs for which the Lender may be liable as a result
thereof.
The Debtor shall pay, or cause to be paid, when due, any and all
recording (mortgage or personal property), intangible property and documentary
stamp taxes, all similar taxes, and all filing, registration and recording fees,
which are now or hereafter may become payable in connection with the
Obligations, the Inventory Deed of Trust, this Agreement, any of the other
Security Documents, the Receivable Loan Security Documents or any of the other
Collateral. The Debtor shall pay when due any and all excise, transfer and
conveyance taxes which are now or hereafter may become payable in connection
with the Obligations, the Inventory Deed of Trust, any Pledged Note Receivable
Deed of Trust, this Agreement or any of the other Security Documents, or in
connection with any foreclosure of the Inventory Deed of Trust, any Pledged Note
Receivable Deed of Trust or any other foreclosure of any Collateral under this
Agreement or under any of the other Security Documents, or any other transfer of
any item of Collateral in extinguishment of all or any part of the Obligations
or any other enforcement of the rights of the Lender with respect thereto.
3.8 DISCHARGE OF LIENS AFFECTING COLLATERAL.
If any mechanic's, laborer's, materialman's, statutory or other Lien
(other than Permitted Exceptions) shall be filed or otherwise imposed upon or
against any item of the Collateral or the Resort, then the Debtor shall, within
30 days after being given notice of the filing of such Lien or otherwise
becoming aware of the imposition of such Lien, cause such Lien to be vacated or
discharged of record by payment, deposit, bond, final order of a court of
competent jurisdiction or otherwise.
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Except with respect to the Pledged Notes Receivable and the Pledged Note
Receivable Deeds of Trust, the Debtor shall have the right, at its sole expense,
to contest the validity of any such Lien or of the claim evidenced or secured
thereby, by appropriate proceedings commenced prior to the expiration of the
aforesaid 30-day period and thereafter diligently and continuously conducted in
good faith to final determination, in which event the Debtor shall not be
required to cause any such Lien to be vacated or discharged of record in
accordance with the immediately preceding paragraph if, and only so long as:
(a) no final judicial determination in respect of any foreclosure
or other enforcement proceeding in respect of such Lien or the claim
evidenced or secured thereby shall have been rendered and no nonjudicial
foreclosure proceeding or sale in respect of such Lien or such claim
shall have been commenced;
(b) no claim for liability of any kind shall have been asserted
against the Lender in connection with such Lien or the claim evidenced
or secured thereby; and
(c) if such Lien shall secure a claim of more than $20,000, the
Debtor shall have established an escrow with the Lender, or shall have
delivered to the Lender a satisfactory bond issued by a surety
acceptable to the Lender or a satisfactory letter of credit for the
benefit of the Lender issued by a bank acceptable to the Lender, in each
case in an amount estimated by the Lender to be adequate to cover (i)
the unpaid amount of such claim, (ii) all interest, penalties and
similar charges which reasonably can be expected to accrue by reason of
such contest or by reason of such nonpayment, and (iii) all costs, fees
and expenses (including, without limitation, attorneys' fees and
disbursements) which reasonably can be expected to be incurred in
connection therewith by the Lender, which escrow, bond or letter of
credit shall be maintained in effect throughout such contest and the
amount of which shall be increased from time to time if reasonably
required by the Lender to cover the foregoing amounts in subclause (i),
subclause (ii) and subclause (iii).
The Debtor shall inform the Lender, in advance and in writing, of its
intention to contest any Lien securing a claim, or such claim itself, under this
Section 3.8 if such claim shall exceed $20,000.
Upon termination of any such contest (whether by final determination or
otherwise), or at any time during the course of any such contest that the
conditions relieving the Debtor of its obligation to cause such Lien to be
vacated or discharged shall no longer be satisfied or shall be discovered not to
have been satisfied, the Debtor shall cause such Lien to be vacated or
discharged of record. At the Lender's option, the escrow established or bond or
letter of credit, as the case may be, delivered pursuant to this Section 3.8 may
be, in the case of the escrow, liquidated, or, in the case of the bond or the
letter of credit, drawn upon, at such time and the proceeds thereof may be
applied to payment of all or any part of the claim evidenced or secured by such
Lien and the interest, penalties, charges, costs, fees and expenses (including,
without limitation, attorneys' fees and disbursements) referred to in subclause
(ii) and subclause (iii) of the immediately preceding paragraph. Promptly after
such Lien has been vacated or discharged of record, the Debtor shall deliver to
the Lender evidence reasonably satisfactory to the Lender that such Lien has
been vacated or discharged of record. Thereafter, the amount then remaining in
the escrow established pursuant to this Section 3.8 or such bond or letter of
credit, as the case may be, shall be returned to the Debtor free and clear of
the Lien of this Agreement or any other Security Document so long as no Event of
Default shall have occurred and be continuing or, if an Event of Default shall
have occurred and be continuing, shall be retained by the Lender as part of the
Collateral.
If any Lien shall not be vacated or discharged as required by this
Section, then, in addition to any other right or remedy of the Lender, the
Lender may, but shall not be obligated to, discharge such Lien in
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such manner as the Lender may select, and the Lender shall be entitled, if the
Lender shall so elect, to compel the prosecution of an action for the
foreclosure of such Lien by the lienor and, if the Lender shall so elect, to pay
the amount of any judgment in favor of such lienor with interest, costs and
allowances. Upon request by the Lender, the Debtor shall pay to the Lender, or
to any other Person designated by the Lender, the amount of all payments made by
the Lender as provided above and all costs, expenses and liabilities (including,
without limitation, attorneys' fees and disbursements) incurred by the Lender in
connection therewith, together with interest thereon at the Default Rate from
the date paid or incurred by the Lender until the date so paid to, or as
directed by, the Lender. To the extent permitted by law, the Lender shall
thereupon be subrogated to the rights of such lienor and any such payments made
by the Lender pursuant to this Section 3.8 shall be secured by the Collateral.
3.9 USE OF RESORTS; VOTING RIGHTS OF DEBTOR; LENDER CONSENT TO TIMESHARE
DECLARATION AMENDMENT.
(a) RESORTS. The Debtor shall not, as Declarant, Timeshare
Interval owner or Unit owner, without the prior written consent of the
Lender.
(i) request or otherwise initiate, consent to or acquiesce
in any zoning classification or reclassification of either
Resorts or the adoption, issuance, imposition or amendment of any
other law, ordinance, rule, regulation, order, judgment,
injunction or decree relating to the use, occupancy, operation,
development or disposition of the Resort or which would limit the
use of the Units or the Timeshare Intervals therein or reduce its
or their Fair Market Value,
(ii) request or otherwise initiate, consent to or
acquiesce in the annexation of any part of either Resort by or
into any municipality or other governmental or quasi-governmental
unit,
(iii) execute, file or record any subdivision plat
affecting either Resort or request or otherwise initiate, consent
to or acquiesce in any subdivision of the Resort ,
(iv) enter into, consent to or otherwise cause, permit or
suffer either Resort to become subject to any covenant, agreement
or other arrangement restricting or limiting the use, occupancy,
operation, development or disposition thereof (other than any
covenant of this Agreement or the other Security Documents and
the Declarations ),
(v) materially and substantially modify, alter, remove or
improve the Common Amenities without the prior written consent of
the Lender (except for the creation of additional common elements
and limited common elements resulting from the refurbishing of
the Buildings),
(vi) except as set forth in Schedule 9 of this Agreement,
maintain the Units and/or Timeshare Intervals owned by it for
lease or as a rental project,
(vii) add or withdraw real Property from either Resort, or
create additional Units (beyond those Units existing or planned
for in the Buildings in accordance with, and pursuant to, the
Declarations , or
(viii) permit the Units or any Timeshare Interval to be
used other than for nonpermanent residential purposes;
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provided that the Debtor may create additional Timeshare
Intervals within the Hilltop Resort so long as Debtor notifies the
Lender promptly thereof.
(b) USE BY PUBLIC. The Debtor shall not cause, permit or suffer
the Resorts to be used by the public without restriction (except as
required by applicable law) or in any manner that might tend to impair
the Debtor's right, title and interest in and to the Resorts or in any
manner that might make possible any claim of adverse usage or adverse
possession by the public or any claim of implied dedication of all or
any part of the Resorts.
(c) VOTING RIGHTS. The Debtor hereby appoints and constitutes the
Lender as its attorney-in-fact (with full power of substitution) to
exercise all of its voting rights pertaining to any Unit or Timeshare
Interval owned by the Debtor or in which the Debtor has an interest
giving rise to the right to vote (whether as Declarant, as "Lienholder"
under any Pledged Note Receivable Deed of Trust or otherwise). This
power of attorney is coupled with an interest and shall be irrevocable
for so long as any Obligations are owing by the Debtor to the Lender.
This power of attorney may be used from time to time in the sole
discretion of the Lender if there shall exist an Event of Default, or a
material casualty, condemnation or taking shall have occurred with
respect to the Resort or any part thereof. The Debtor agrees to execute,
from time to time, such other documents as the Lender may request
(including, without limitation, the form of proxy substantially in the
form of Exhibit C to this Agreement; which proxy shall, at the request
of the Lender, be renewed every 11 months and shall be modified to
include Timeshare Intervals in addition to Units) and file the same with
the Secretary of the Association in accordance with the Association's
By-Laws.
Except with the prior written consent of the Lender, the Debtor
shall not propose or vote for or consent to any modification of, or
amendment to, the Declarations or the Associations' Articles of
Incorporation or By-Laws which could have (in the reasonable sole
opinion of the Lender) an adverse effect on the Collateral or the
operation or prospects of the Resorts. In each case under the
Declarations and/or the Associations' Articles of Incorporation or
By-Laws in which the consent or the vote of "Lienholders" in respect of
the Units and/or Timeshare Intervals (including any such case in which
the Debtor would be considered to be a "Lienholder" by virtue of any
Pledged Note Receivable Deed of Trust) is provided for or is required,
or in which the Debtor's consent is required (as Declarant or as an
owner of a Unit or a Timeshare Interval or as a vendor or mortgagee) for
any proposed action, the Debtor shall not vote or give such consent
without obtaining the prior written consent of the Lender if such action
(in the reasonable sole opinion of the Lender) could have an adverse
effect on the Collateral or the operation or prospects of the Resort.
3.10 OTHER TIMESHARE COVENANTS.
(a) ACCESS. The Debtor shall have caused the owners of Timeshare
Intervals to have direct access to a publicly dedicated road and shall
cause all private roadways and parking lots or areas inside of the
Resorts to be common elements or limited common elements under the
Declaration.
(b) UTILITIES. The Debtor shall have caused electric, gas, sewer,
and water service and other necessary utilities to be available to the
Units in sufficient capacity to service the Units.
(c) USE OF AMENITIES. The Debtor shall have caused each purchaser
of a Timeshare Interval to have access to, and the use of, all of the
amenities and public utilities relating to the Unit in which such
Timeshare Interval is located (consistent with the contractual
provisions and
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rules and regulations existing with respect to such amenities and public
utilities), including, without limitation, the Common Amenities.
(d) TIMESHARE REGIMEN. The Debtor shall do all things necessary
in order to preserve the condominium and timeshare regimens in respect
of each of the Units.
(e) EXCHANGE PROGRAM. The Debtor shall maintain its membership
in, and the Timeshare Intervals eligibility for, the timeshare exchange
program of Resorts Condominium International, Inc or Interval
International, Inc.
(f) LOCAL LEGAL COMPLIANCE. The Debtor shall comply, and shall
cause the Units and the Buildings to comply, with all applicable
restrictive covenants, zoning or land use ordinances and building codes,
health laws and regulations, and all other applicable laws, rules,
ordinances and regulations.
(g) REGISTRATION COMPLIANCE. The Debtor shall maintain, or cause
to be maintained, all necessary consents, franchises, approvals, and
exemption certificates, and the Debtor will make, or cause to be made,
all registrations or declarations with any government or any agency or
department thereof required in connection with the Units, the Buildings,
and the Timeshare Intervals and the occupancy, use and operation of the
Units and the Buildings, and the sale and offering for sale of Timeshare
Intervals.
(h) RECORDS. The Debtor shall maintain accurate and complete
files relating to the Pledged Notes Receivables and the other Collateral
(as well as in respect of all other Notes Receivable) to the reasonable
satisfaction of the Lender, and such files will contain copies of each
Pledged Note Receivable and the Pledged Contract and Pledged Note
Receivable Deed of Trust related thereto, copies of all relevant credit
memoranda relating thereto, and all collection information and
correspondence relating thereto received from the Collection Agent.
(i) PROPERTY-RELATED CONTRACTS. Except as required by applicable
law, the Debtor shall not materially modify or amend, or (subject to the
rights and obligations of the Associations under the Declarations or the
Associations' Articles of Incorporation or By-Laws) permit to be
materially modified or amended, any material Property-Related Contract
without the prior written consent of the Lender, which consent shall not
be unreasonably withheld, or enter into, or (subject to the rights and
obligations of the Associations under the Declarations or the
Associations' Articles of Incorporation or By-Laws) permit to be entered
into, any new material Property-Related Contract without the prior
written consent of the Lender, which consent shall not be unreasonably
withheld. The Debtor shall deliver any proposed amendment or
modification of an existing Property-Related Contract or proposed new
Property-Related Contract to the Lender at least 30 days prior to the
execution thereof and shall request the Lender's consent to the form and
substance of such amendment, modification or new Property-Related
Contract. If the Debtor shall not have received a written response to
such request from the Lender within 20 days of the delivery of such
amendment, modification or new Property-Related Contract to the Lender,
then the Debtor shall send a second request via nationally recognized
overnight courier. Failure by the Lender to respond to such second
request within 10 days of receipt thereof shall be deemed to constitute
a consent to such request. The Debtor shall perform all of its
obligations in a timely fashion under each Property-Related Contract.
(j) UNDERTAKING. The Debtor shall perform each and every
covenant, agreement, and undertaking applicable to the Debtor (whether
as Declarant, owner of a Unit, owner of a
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Timeshare Interval or otherwise) under the Declarations and/or the
Association's Articles of Incorporation or By-Laws.
(k) NOTICES. The Debtor shall promptly deliver to the Lender
copies of each written notice or request, financial statement, budget or
other information received by the Debtor under or with respect to the
Declarations and/or the Associations' Articles of Incorporation or
By-Laws, whether in its capacity as Declarant, owner of a Unit, owner of
a Timeshare Interval, Lienholder or otherwise.
3.11 PROTECTION OF COLLATERAL; ASSESSMENTS; REIMBURSEMENT.
All Insurance Premiums and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all Impositions on any of the Collateral or in respect of the sale or other
disposal thereof shall be borne and paid by the Debtor or the Debtor shall cause
the Association or any manager retained by it to pay the same, as provided for
in the Declaration and/or the Association's Articles of Incorporation or
By-Laws. The Debtor shall promptly pay, as the same become due and payable, its
share of all Insurance Premiums, expenses, Impositions and/or assessments as
required by the Declaration and/or the Association's By-Laws. If the Debtor
shall fail to pay, or cause to be paid, any such Insurance Premiums, expenses,
Impositions and/or assessments, the Lender may, at the Debtor's expense, pay the
same.
If, by reason of any suit or proceeding of any kind, nature or
description against the Debtor, or by the Debtor or any other party against any
other Person, or by reason of any other facts or circumstances, which in the
Lender's sole discretion makes it advisable for the Lender to seek counsel for
the protection and preservation of the Collateral, or to defend its own
interest, such expenses and counsel fees shall be allowed to the Lender and
borne and paid by the Debtor.
3.12 INTEREST ON LENDER PAID EXPENSES.
All sums paid or incurred by the Lender under this Section 3, and any
and all other sums for which the Debtor may become liable hereunder, and all
costs and expenses (including payments to other Lien holders and attorneys'
fees, legal expenses and court costs) which the Lender may incur in enforcing or
protecting its Lien on, or rights and interest in, the Collateral or any of its
rights or remedies under this Agreement or any other Security Document or in
respect of any of the transactions contemplated herein or therein shall (a) be
considered as additional indebtedness owing by the Debtor to the Lender
hereunder and, as such, shall be secured by all of the Collateral and (b) accrue
interest at the Default Rate from the date paid or incurred by the Lender until
paid in full by the Debtor.
3.13 LENDER RESPONSIBILITY.
The Lender shall not be (a) obligated or responsible for, the payment of
any of the amounts or sums referred to in this Section 3 or (b) liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto other than, to the extent it elects to safekeep the
Pledged Notes Receivable or any of the other Timeshare Documents related
thereto, to exercise the standard of care in respect thereof which would be
exercised by an institutional custodian similarly situated to the Lender and
similarly engaged in the safekeeping of collateral and, in any case, shall not
be liable or responsible in any way for any diminution in the value of the
Collateral or for any act or default of any manager of the Resort or the
Collection Agent and shall not be liable for any warranty (implied or express)
whether created by statute, at law or pursuant to the Declaration or any other
Timeshare Document.
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Upon the full, final and indefeasible payment of all Obligations , the
Lender shall release its Liens in and to the Collateral, execute in favor of the
Debtor any UCC release or termination statement in respect thereof and reassign
and deliver to the Debtor all Pledged Notes Receivables and the other Collateral
then in the physical possession of the Lender or its agent (without recourse and
without representations or warranties of any kind). The Debtor shall bear all
out-of-pocket expenses (including, without limitation, legal fees and
disbursements of the Lender) in connection with such release, reassignment and
delivery. All such release and/or termination documentation shall be reasonably
satisfactory to the Lender and its counsel. To the extent that all obligations
in respect of any Pledged Note Receivable shall have been fully, finally and
indefeasibly paid by the Maker thereof, the Lender, upon receipt of a written
request from the Debtor, shall reassign and deliver to the Debtor such Pledged
Note Receivable and/or Pledged Note Receivable Deed of Trust related thereto and
all other related documentation in the possession of the Lender (all without
recourse and without representations or warranties of any kind), shall release
any Lien the Lender may have therein and shall execute and deliver to the Debtor
any UCC release statement in respect thereof. The Debtor shall bear all expenses
(including, without limitation, legal fees and disbursements of the Lender) in
connection with such reassignment and delivery. All such reassignment and
release documentation shall be reasonably satisfactory to the Lender and its
counsel.
3.14 RELEASE OF LIEN ON UNSOLD INVENTORY TIMESHARE INTERVALS.
(a) INCREMENTAL RELEASE. The Lender agrees to execute and deliver
to the Debtor the documents referred to below pursuant to which the Lien
in its favor in and to any Unsold Inventory Timeshare Interval created
by this Agreement, the Inventory Deed of Trust or any other Security
Document will be released if, but only if, all of the following
conditions shall have been fully satisfied:
(i) the full Release Price in respect of such Unsold
Inventory Timeshare Interval shall have been paid to the Lender
in good, collected funds;
(ii) a request, substantially in the form of Exhibit D
attached hereto, shall have been completed and executed by the
Debtor and submitted to the Lender not less than 5 Business Days
in advance of the date on which the Debtor desires to consummate
such release together with a (nonrefundable) administrative
processing fee of $50 for each Unsold Inventory Timeshare
Interval to be so released (a "Release Fee");
(iii) a request for partial release of deed of trust,
substantially in the form of Exhibit E attached hereto or such
other form reasonably acceptable to the Lender and its counsel,
and a partial release of security interest, substantially in the
form of Exhibit F attached hereto, shall have been completed by
the Debtor and submitted to the Lender with the aforesaid
request; and
(iv) no Event of Default shall then exist.
The Debtor shall bear the responsibility of recording any and all
documents executed by the Lender under this Section 3.15. The Debtor shall pay
all escrow costs and recording costs in respect of such documents. If the Debtor
shall have established an escrow in respect of any sale of an Unsold Inventory
Timeshare Interval to a bona fide consumer purchaser, the Lender shall deposit
the documents to be executed by it pursuant to clause (iii) above in such escrow
if
(A) the documentation establishing such escrow is
in form and substance satisfactory to the Lender and such
documentation shall have been
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submitted to the Lender together with the written request
referred to in clause (ii) above,
(B) the escrowee under such escrow documentation is
satisfactory to the Lender,
(C) such escrow documentation provides that
simultaneously with the release from such escrow of the
documents referred to in clause (iii) above, the Release
Price in respect of the Unsold Inventory Timeshare
Interval to be so released shall be wired via Federal
Reserve Bank wire (in immediately available funds) to the
Lender,
(D) such escrow documentation provides that such
escrow will be consummated within 5 Business Days of the
Lender's depositing of such release documents therein or
such release documents shall be returned to the Lender by
the escrowee of such escrow and
(E) at the time of the depositing of such
documentation into such escrow, all of the conditions in
clauses (ii) through (iv) above shall have been fully
satisfied.
(b) FULL RELEASE OF INVENTORY DEED OF TRUST. Upon the
full, final and indefeasible payment of all Obligations in
respect of the Inventory Loan and if no Event of Default shall
then exist, the Lender shall release the Inventory Deed of Trust
and the Assignment of Rents and shall release its Liens in and to
the Collateral under clause (f), clause (g) and clause (h) of
Section 3.1 hereof and its Liens in respect of the Development
Rights or Special Declarant Rights, as such terms are defined in
the Colorado Common Interest Ownership Act, of the Debtor under
the assignment referred to in Section 5.6 hereof (provided that
its Lien in and to all other Collateral described in Section 3.1
hereof or in any other Security Document (including, without
limitation, its Lien in and to the Pledged Notes Receivable, the
Pledged Note Receivable Deeds of Trust, the Pledged Contracts,
any Compensation payable to Lender by virtue of its position as
beneficiary under any Pledged Note Receivable Deed of Trust, and
all proceeds and payments in respect thereof) shall not be
released and is expressly retained to secure the Receivables
Loan). The Debtor shall bear all out-of-pocket expenses
(including, without limitation, legal fees and disbursements of
the Lender) in connection with such releases, provided that a
release of the Inventory Deed of Trust pursuant to this clause
(b) shall not require the payment of Release Fees with respect to
remaining Unsold Inventory Timeshare Intervals. All documentation
in connection with any of the aforesaid releases shall be
reasonably satisfactory to the Lender and its counsel.
SECTION 4. REPRESENTATIONS AND WARRANTIES
As an inducement to the Lender to make the Inventory Loan, each Debtor
warrants and represents, as of the date hereof, and covenants to the Lender as
follows:
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4.1 SUBSIDIARIES AND CAPITAL STRUCTURE.
Steamboat Suites has no Subsidiaries. Schedule 3 to this Agreement
states (a) the name of each of the Affiliates of each Debtor and the nature of
the affiliation, (b) the number, nature and the holder of the outstanding
Securities of each Debtor, (c) the number of authorized, issued and treasury
shares of each Debtor, and (d) the name of each subsidiary of Preferred
Equities.
4.2 CORPORATE ORGANIZATION AND AUTHORITY.
(a) Steamboat Suites is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado;
(b) Preferred Equities is a duly organized, validly existing and
in good standing under the laws of the State of Nevada.
(c) Each Debtor has all requisite power and authority and
necessary licenses and permits to own and operate its Properties and to
carry on its business as now conducted; and
(d) EACH DEBTOR has duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each
jurisdiction where the character of its Properties or the nature of its
activities makes such qualification necessary or desirable.
4.3 BUSINESS AND PROPERTY.
Form 10K dated as of August 31, 1999 filed by Guarantor with the United
States Securities and Exchange Commission and delivered by Debtor to Lender and
except as set forth in the Form 10K correctly describes the general nature of
the businesses and Properties (including all owned real Property, leases and
leasehold interests) of each Debtor. Except as set forth in the Form 10K the
Debtor has not changed its name, been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
4.4 FINANCIAL STATEMENTS.
The Debtor shall have delivered tax returns and balance sheets and
statements of income and expenses of the Debtor and financial statements
required under the Existing Loan Documents.
4.5 FULL DISCLOSURE.
Neither this Agreement nor any written statement made by the Debtor in
connection with this transaction contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein not misleading. There is no fact which the Debtor has not disclosed
to the Lender in writing which materially affects adversely or, so far as the
Debtor can now foresee, will materially affect adversely the Property, business,
prospects, profits or condition (financial or otherwise) of the Debtor or the
ability of the Debtor to perform its Obligations under this Agreement, the Notes
or the other Security Documents.
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4.6 PENDING LITIGATION.
Except as set forth in Schedule 6 to this Agreement, there are no
proceedings pending, or to the knowledge of the Debtor threatened, against or
affecting the Debtor, any Affiliate, the Guarantor, the Resort or any Unit in
any court or before any governmental authority or arbitration board or tribunal
which involve the possibility of materially and adversely affecting the
Property, business, prospects, profits or condition (financial or otherwise) of
the Debtor or the ability of the Debtor to perform its obligations under this
Agreement, the Notes or the other Security Documents, provided that no such
proceedings shall be deemed to satisfy such material and adverse effect standard
if such proceeding shall have been commenced by one or more of the aforesaid
Persons as plaintiff and no counterclaim is pending in respect thereof against
such Person. Neither the Debtor nor any Affiliate nor the Resort nor any Unit is
in default with respect to any order of any court, governmental authority or
arbitration board or tribunal.
4.7 TITLE TO PROPERTIES.
The Debtor has good and marketable title in fee simple (or its
equivalent under applicable law) to the Resorts free from Liens except as set
forth on Schedule 7 to this Agreement, and has good title to, and is the sole
owner of, all Personal Property related to the Resorts which it purports to own
(including, without limitation, the personal Property constituting the
Collateral), which personal Property is free from all Liens except as set forth
on Schedule 8 to this Agreement. Except as set forth on Schedule 9 hereto, the
Resorts are not subject to any leases.
Neither the buildings in which the Units are located nor the Resorts are
under investigation with respect to, and is not in violation of, any
Environmental Protection Law. No proceedings have been commenced against, nor
notice received by, the Debtor or any Affiliate concerning any alleged violation
of any Environmental Protection Law. Neither the buildings in which the Units
are located nor the Resort is, or has been, the subject of any threatened,
proposed or actual cleanup or other protective or remedial action relating to
any Hazardous Substances, whether pursuant to any Environmental Protection Law
or otherwise. There are no Hazardous Substances in, on, or under the buildings
in which the Units are located or the Resort, except as set forth on Schedule 10
to this Agreement and except as used or stored in compliance with all applicable
Environmental Protection Laws or, with respect to ordinary cleaning materials
and supplies, as customarily and prudently used or stored in operations similar
to the Units or the Resort.
The Debtor shall cause all asbestos located in the Resort to be removed
by a duly licensed asbestos abatement contractor, all in accordance with
applicable federal and Colorado law.
4.8 TRADEMARKS; LICENSES AND PERMITS.
The Debtor owns or possesses all of the trademarks, service marks, trade
names, copyrights, franchises and licenses, and rights with respect thereto
necessary for the conduct of its business as now conducted and as proposed to be
conducted, without any known conflict with the rights of others.
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4.9 TRANSACTION IS LEGAL AND AUTHORIZED.
The execution and delivery of this Agreement, each of the Notes and the
other Security Documents by the Debtor and the grant of the Liens to the Lender
with respect to the Collateral by the Debtor and compliance by the Debtor with
all of the provisions of this Agreement, each of the Notes and the other
Security Documents are:
(a) within the corporate powers of the Debtor;
(b) duly authorized and approved by the Board of Directors of the
Debtor; and
(c) valid and legal acts and will not conflict with, or result in
any breach in any of the provisions of, or constitute a default under,
or result in the creation of any Lien (except Liens contemplated under
this Agreement or any other Security Document) upon any Property of the
Debtor under the provisions of, any agreement, charter instrument, bylaw
or other instrument to which the Debtor is a party or by which its
Property may be bound.
4.10 NO DEFAULTS.
No Default or Event of Default exists, and there is no violation in any
material respect of any term of any agreement, charter instrument, bylaw or
other instrument to which the Debtor is a party or by which it may be bound.
4.11 GOVERNMENTAL CONSENT.
Neither the nature of the Debtor, or of any of its businesses or
Properties, or any relationship between the Debtor and any other Person, or any
circumstance in connection with the execution or delivery of this Agreement, any
of the Notes or the other Security Documents, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Debtor, as a condition of the
execution, delivery or performance of this Agreement, any of the Notes or any
other Security Document.
4.12 TAXES.
The Debtor is not in default with respect to the payment of any taxes
levied or assessed against it or any of its assets and has not failed to file
any tax return required to be filed by it.
4.13 USE OF PROCEEDS.
The proceeds from the Inventory Loan will be used as set forth on
Schedule 11 to this Agreement. None of the transactions contemplated in this
Agreement will violate or result in the violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Debtor does
not intend to carry or purchase any "margin security" within the meaning of said
Regulation G. None of the proceeds will be used to purchase or carry (or
refinance any borrowing, the proceeds of which were used to purchase or carry)
any "margin security" within the meaning of said Regulation.
4.14 COMPLIANCE WITH LAW.
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The Debtor
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject; and
(b) except as set forth in Schedule 12 hereto, has not failed to
obtain any licenses, permits, franchises or other governmental
authorizations, or make or cause to be made any registrations or
declarations with any government or agency or department thereof,
necessary to the ownership of its Property or to the conduct of its
business;
which violation or failure to obtain or register would materially adversely
affect the business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor.
4.15 RESTRICTIONS OF DEBTOR.
The Debtor is not a party to any contract or agreement which restricts
its right or ability to incur indebtedness with respect to the Resort, or
prohibits the execution of, or compliance with, this Agreement or any of the
other Security Documents by the Debtor. The Debtor has not agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its Property constituting the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien other than the Liens provided for
herein and in the other Security Documents.
4.16 BROKERS' FEES.
The Debtor and the Lender hereby agree that there are no brokers or
finders which are entitled to receive compensation for their services rendered
to the Debtor with respect to the transactions described in this Agreement.
4.17 DEFERRED COMPENSATION PLANS.
Except as set forth on Schedule 13 hereto, the Debtor has no pension,
profit sharing or other compensatory or similar plan providing for a program of
deferred compensation for any employee or officer which is subject to any
requirement of the Employee Retirement Income Security Act of 1974, as amended.
4.18 LABOR RELATIONS.
The employees of the Debtor are not a party to any collective bargaining
agreement with the Debtor.
4.19 VALIDITY OF LIENS GRANTED TO LENDER.
Except with respect to the Permitted Exceptions and Liens subject to the
sharing provisions of the last paragraph of Section 3.1 hereof, all Liens
granted to the Lender in respect of the Collateral are, and shall continue to
be, prior in right and superior to all other Liens granted to, or held by, any
other Person.
SECTION 5. CONDITIONS PRECEDENT TO INVENTORY ADVANCE AND EFFECTIVENESS
OF THIS AGREEMENT.
The effectiveness of this Agreement and the obligation of the Lender to
make the Inventory Advance shall be subject to the following conditions
precedent:
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5.1 OPINIONS OF COUNSEL.
The Lender shall have received from Ballard Spahr Andrews & Ingersoll,
special Colorado counsel for the Debtor, a closing opinion substantially in the
form of Exhibit H attached to this Agreement dated the Closing Date, from Lionel
Sawyer & Collins, special counsel to Preferred Equities, a closing opinion
substantially in the form of Exhibit I attached to this Agreement and from
Greenberg Traurig, special counsel to Mego Financial, a closing opinion
substantially in the form of Exhibit J attached to this Agreement.
5.2 WARRANTIES AND REPRESENTATIONS TRUE AS OF CLOSING DATE.
(a) The warranties and representations contained in this
Agreement shall (except as affected by transactions contemplated by this
Agreement) be true in all material respects on the Closing Date with the
same effect as though made on and as of that date.
(b) The Debtor shall not have taken any action, or permitted any
condition to exist which would have been prohibited by any provision of
this Agreement if such provision had been binding and effective at all
times during the period from October 12, 1999 to and including the
Closing Date.
5.3 COMPLIANCE WITH THIS AGREEMENT.
The Debtor shall have performed and complied with all covenants,
agreements and conditions contained herein which are required to be performed or
complied with by it before or on the Closing Date.
5.4 OFFICER'S CERTIFICATES; SECRETARY'S CERTIFICATES; GOOD-STANDING
CERTIFICATES.
(a) The Lender shall have received a certificate, substantially
in the form of Exhibit K to this Agreement, dated as of the Closing Date
and signed by the President or a Vice-President of the Debtor,
certifying that the conditions specified in Section 5.2(a), Section
5.2(b) and Section 5.3 of this Agreement have been fulfilled.
(b) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Steamboat Suites , substantially in the
form of Exhibit L to this Agreement, dated as of the Closing Date,
certifying (i) the adoption by the Board of Directors of Steamboat
Suites of a resolution authorizing Steamboat Suites to enter into this
Agreement and the transactions and instruments contemplated hereby and
(ii) the incumbency and authority of, and verifying the specimen
signatures of, the officers of Steamboat Suites authorized to execute
and deliver this Agreement, the Note, the other Security Documents and
the other documents contemplated hereunder.
(c) Steamboat Suites shall have delivered to the Lender, in form
satisfactory to the Lender, a recent good standing certificate from the
Secretary of State of Colorado certifying the Steamboat's due corporate
existence.
(d) The Debtor shall have delivered to the Lender, in form
satisfactory to the Lender, (i) recent certificates of the Secretary of
State of Colorado certifying the due corporate existence of the
Associations, (ii) copies of the Articles of Incorporation and all
amendments thereto and (iii) copies of the By-Laws of the Associations.
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(e) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Preferred Equities, substantially in the
form of Exhibit M to this Agreement, dated as of the Closing Date,
certifying (i) the adoption by the Board of Directors of Preferred
Equities of a resolution authorizing Preferred Equities to enter into
this Agreement and the transactions and instruments contemplated hereby
and (ii) the incumbency and authority of, and verifying the specimen
signatures of, the officers of Preferred Equities authorized to execute
and deliver this Agreement, the Note, the other Security Documents and
the other documents contemplated thereunder.
(f) Preferred Equities shall have delivered to the Lender, in
form satisfactory to the Lender, a recent good standing certificate from
the Secretary of State of Nevada certifying Preferred Equities' due
corporate existence.
(g) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Mego Financial, substantially in the form
of Exhibit N to this Agreement, dated as of the Closing Date, certifying
(i) the adoption by the Board of Directors of Mego Financial of a
resolution authorizing Mego Financial to enter into the Guaranty
Agreement and the transactions and instruments contemplated thereby and
(ii) the incumbency and authority of, and verifying the specimen
signatures of, the officers of Mego Financial authorized to execute and
deliver the Guaranty Agreement and the other documents contemplated
thereunder.
(h) Mego Financial shall have delivered to the Lender, in form
satisfactory to the Lender, a recent good standing certificate from the
Secretary of State of New York certifying Mego Financial's due corporate
existence.
5.5 UNIFORM COMMERCIAL CODE FINANCING STATEMENTS.
All filings of Uniform Commercial Code financing statements and all
other filings and actions necessary to perfect the Lender's security interests
in and to the Collateral shall have been filed and confirmation thereof
received.
5.6 ASSIGNMENT OF PROPERTY-RELATED CONTRACTS.
The Debtor shall have delivered to the Lender certified copies of all
material Property-Related Contracts and executed and delivered in favor of the
Lender an assignment or assignments thereof, each in form and substance
satisfactory to the Lender and its counsel. All such Property-Related Contracts
shall be satisfactory to the Lender in form and substance. Each Person (other
than the Debtor) which is a party to any such Property-Related Contract shall
have been notified of the assignment thereof.
5.7 INTENTIONALLY DELETED
5.8 GUARANTY AGREEMENT.
Guarantor shall have executed and delivered to the Lender a Guaranty
Agreement (as amended from time to time, individually, a "Guaranty Agreement"
and, collectively, the "Guaranty Agreements") substantially in the form of
Exhibit O attached to this Agreement.
5.9 SUBORDINATION OF INDEBTEDNESS.
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The Debtor, the Lender and Guarantor shall have entered into one or more
Subordination Agreements, substantially in the form of Exhibit A attached to the
Guaranty Agreements (individually, a "Subordination Agreement" and,
collectively, the "Subordination Agreements").
5.10 EXPENSES.
The Debtor shall have paid all fees and expenses required to be paid by
it pursuant to Section 10.2 of this Agreement and shall have paid the commitment
fee referred to in Section 2.6 hereof.
5.11 INVENTORY NOTE; INVENTORY DEED OF TRUST.
The Debtor shall have executed , the Inventory Note and the Inventory
Deed of Trust. The Inventory Deed of Trust shall have been recorded, as of the
Closing Date, in the Office of the Clerk and Recorder for Routt County, Colorado
and all taxes, recording fees and other fees and charges required by applicable
law to be paid in connection therewith shall have been duly paid in full. The
Inventory Deed of Trust shall have created a valid Lien in and to the Resort in
respect of the Obligations subject to no other Liens except to the extent
permitted by Section 7.2(j) of this Agreement.
The Debtor shall have executed and delivered to the Lender an assignment
of leases and rents (as may be amended from time to time, the "Assignment of
Rents"), substantially in the form of Exhibit P to this Agreement. The
Assignment of Rents shall have been recorded in the Office of the Clerk and
Recorder for Routt County, Colorado and all taxes, recording fees and other fees
and charges required by applicable law to be paid in connection therewith shall
have been duly paid in full. The Assignment of Rents shall have created a valid
Lien in and to the Property referred to therein in respect of the Obligations
subject to no other Liens except to the extent permitted by Section 7.2(j) of
this Agreement.
5.12 TITLE INSURANCE; CASUALTY INSURANCE.
The Debtor shall have delivered to the Lender a mortgagee's title
insurance policy (issued to the Lender and in full force and effect) in respect
of the Inventory Deed of Trust (the "Title Insurance Policy {Blanket}") together
with such endorsements thereto as the Lender may require, dated the Closing
Date. The Title Insurance Policy {Blanket} (a) shall have been issued by a title
insurance company which is satisfactory to the Lender, (b) shall be in form and
substance satisfactory to the Lender and its special counsel, (c) shall be in
amount not less than the principal amount of the Inventory Loan, (d) shall
insure that the Inventory Deed of Trust creates a valid first Lien in and to the
Resorts free and clear of all defects, encumbrances and other Liens unacceptable
to the Lender and (e) shall contain such further endorsements and affirmative
coverage as the Lender may request, All premiums in respect of such Title
Insurance Policy {Blanket} shall have been paid in full and evidence thereof
shall have been delivered to the Lender.
The Debtor shall have delivered to the Lender certificates of insurance
evidencing the insurance policies and endorsements required to be delivered
pursuant to Section 3.5 hereof, together with copies of such insurance policies
certified by the Debtor to be true and correct except as otherwise provided in
Section 3.5. All premiums in respect of such insurance policies shall have been
paid in full and evidence thereof shall have been delivered to the Lender.
5.13 ENVIRONMENTAL SITE ASSESSMENT REPORT.
Except as may have been waived by the Lender, the Debtor (at its own
expense) shall have delivered to the Lender not less than 10 Business Days prior
to the Closing Date a Phase I environmental
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survey of the Hilltop Resort. The Phase I environmental survey shall provide
that the Lender may rely thereon in connection with its making Advances
hereunder.
5.14 TAXES.
The Debtor shall have delivered to the Lender copies of the most recent
tax receipts for the Resorts and each of the Units (or certificates in respect
thereof) evidencing no delinquency in the payment thereof and that each of the
Units has been segregated from all other Property at the Resort on the
applicable municipal tax rolls.
5.15 INSPECTION.
The Debtor shall have permitted the Lender or its representatives to
make an inspection/audit of its books, accounts and records and such other
papers as it may desire and of its premises and the Resorts, as the Lender may
in its sole discretion determine. Such inspection/audit shall have been
satisfactory to the Lender (in its sole determination).
5.16 SURVEY.
The Debtor shall have delivered to the Lender the existing as-built
survey of the Resorts; such survey shall be prepared in accordance with
ALTA/ACSM 1988 Minimum Survey Requirements by a licensed surveyor acceptable to
the Lender and shall be dated (or re-certified) as of a recent date and shall
contain a certification noted thereon in form and substance satisfactory to the
Lender; such survey shall show no easements, rights-of-way, party walls,
encroachments, streets or alleys which interfere with the use, enjoyment or
market value of the Units.
5.17 ENGINEERING REPORT.
The Debtor shall have delivered to the Lender a current engineering
report or reports which shall be in form and substance satisfactory to the
Lender and shall confirm that the Buildings and their Units are structurally and
mechanically sound. The engineering report shall provide that the Lender may
rely thereon in connection with its making Advances hereunder. The Lender shall
also deliver a letter addressed to the Lender from the engineering firm that
produced said engineering report stating how any problems or issues reported in
the report at the Resorts have been or are to be resolved; such letter shall be
satisfactory to Lender.
5.18 INTENTIONALLY DELETED.
5.19 INTENTIONALLY DELETED.
5.20 FIRST LIENHOLDER STATUS; QUIT-CLAIM DEED; PROXY ACKNOWLEDGED.
The Debtor shall have informed the Associations, in writing, as to the
first Lienholder status of the Lender in and to the Units and the Associations
shall have recognized the Lender as such First Lienholder. The Associations
shall have acknowledged and recognized the proxy referred to in Section 3.9
hereof.
5.21 PROCEEDINGS SATISFACTORY.
All actions taken in connection with the execution of this Agreement,
the Inventory Note, any other Security Document and all documents and papers
relating thereto shall be satisfactory to the Lender
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and its counsel. The Lender shall be satisfied with its physical inspection of
the Units and the Resorts. The Lender and its counsel shall have received copies
of such documents and papers as the Lender or such counsel may reasonably
request in connection therewith, all in form and substance satisfactory to the
Lender and its counsel, including, without limitation, certified copies of the
Declarations and the Associations' Articles of Incorporation and By-Laws.
SECTION 6. INTENTIONALLY DELETED.
SECTION 7. COVENANTS
The Debtor covenants that on and after the date hereof and so long as
any Obligation of the Debtor to the Lender exists as follows:
7.1 PAYMENT OF TAXES AND CLAIMS.
Except as otherwise provided for in Section 3.8 hereof, the Debtor shall
pay, or cause to be paid, before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property at the Resort, including, without
limitation, the Collateral; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might
result in the creation of a Lien upon its Property at the Resort,
including, without limitation, the Collateral.
7.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; STOCK OWNERSHIP;
RENOVATIONS; SUPERVISORY ARCHITECT; INDEBTEDNESS; LIENS; BUSINESS.
The Debtor shall:
(a) PROPERTY -- maintain its Property at the Resort in good
repair, working order and condition and make all necessary renewals,
repairs, replacements, additions, betterments and improvements thereto
and, without limiting the generality of the foregoing, maintain, or
cause to be maintained, the Resort in good repair, working order and
condition and shall make, or shall cause to be made, all necessary
repairs, replacements, additions, betterments and improvements to the
Resort;
(b) INSURANCE -- maintain, or cause to be maintained, insurance
as required by Section 3.5 of this Agreement;
(c) FINANCIAL RECORDS -- (i) keep true books of records and
accounts (including, without limitation, the Books and Records) in which
full and correct entries will be made of all its business transactions
and (ii) reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with generally accepted
accounting principles, practices and procedures at the time in effect
and consistently applied;
(d) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all
things necessary or required (i) to preserve and keep in full force and
effect its corporate existence, rights, powers and franchises,
including, without limitation, its authorization to do business in the
State of Colorado and (ii) to cause Preferred Equities to continue to
own 100% of all legal and beneficial interest in all of the Voting Stock
and other capital stock of Steamboat Suites ;
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(e) COMPLIANCE WITH LAW -- not be in violation of (i) any laws,
ordinances, governmental rules and regulations to which it is subject,
and to that end, the Debtor shall not fail to obtain any licenses,
permits, franchises or other governmental authorizations necessary to
the ownership of its Properties or to the conduct of its business, which
violation or failure to obtain might materially and adversely affect the
business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor, including, without limitation, any zoning,
land use, subdivision control or Environmental Protection Laws
applicable to its real Property (including, without limitation, the
Units and the Resort), (ii) any statutes, rules and regulations, whether
now or hereafter in force, in such jurisdictions as the Debtor may make
sales of Timeshare Intervals relating to the right to do business in any
of such jurisdictions and (iii) any applicable federal, state or
municipal statutes, rules and regulations relating to sales of Timeshare
Intervals and the manner of evidencing and financing the same,
including, without limitation, the Consumer Credit Protection Act, as
amended, the Federal Trade Commission Act, as amended, and Federal
Reserve Board Regulation Z, as amended, to the end that all of the
Pledged Notes Receivable, the Pledged Contracts related thereto and the
Pledged Note Receivable Deeds of Trust securing any of such Pledged
Notes Receivable shall be valid, binding and legally enforceable in
accordance with their respective terms subsequent to the assignment
thereof to the Lender;
(f) DEFERRED COMPENSATION PLANS -- to the extent that it has one
or more pension, profit sharing or other compensatory or similar plans
providing for a program of deferred compensation for any employee or
officer, be in compliance with all requirements of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated in connection therewith;
(g) RENOVATIONS AND CONSTRUCTION -- retain only duly licensed and
qualified architects, engineers, contractors and subcontractors to
complete the renovations at the Resorts , provided that the Debtor may
use qualified employees to complete such renovations and construction;
(h) EQUITY CONTRIBUTIONS -- until such time as all obligations of
the Debtor under the Inventory Loan, the Inventory Note and the
Inventory Deed of Trust have been fully and indefeasibly satisfied, not
pay out as a dividend or other distribution (in cash or Property) or
otherwise transfer back (directly or indirectly by loans, investments,
redemption of capital stock, repurchase of capital stock or otherwise)
or return to Preferred Equities or any other Affiliate for so long as
any Obligation shall be outstanding or the Lender shall have any
obligation hereunder to make Inventory Advance or Receivable Advances
the equity capital contributions previously made to Steamboat by
Preferred Equities;
(i) INDEBTEDNESS/RIGHT OF FIRST REFUSAL -- not incur any
indebtedness (other than the Loan and the leasing of motor vehicles,
telephone and computer equipment in the ordinary course of business) in
respect of the Collateral and/or the Resorts, whether such indebtedness
is secured or unsecured, and not permit the Association to incur any
indebtedness, whether secured or unsecured, provided that the Debtor may
incur additional indebtedness for borrowed money secured principally by
Notes Receivable (other than the Pledged Notes Receivable) if, but only
if, the following conditions shall have been satisfied:
(i) the Debtor shall have, at any time within the 120-day
period prior to the termination of the Receivables Commitment
Period (as defined in the Receivable Loan Agreement), delivered
to the Lender a written request for Lender's issuance to the
Debtor of a Letter of Intent in respect of its borrowing of
additional moneys to be secured
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principally by Notes Receivable (other than the Pledged Notes
Receivable) on the terms and conditions to be outlined by the
Debtor in such request (such terms to include, as applicable, the
extension of the then current Receivables Commitment Period, the
term of any new facility, the advance rate, the rate of interest,
the borrowing base requirements, the revolving period and such
other terms with respect to such borrowing as are customarily
included in letters of intent);
(ii) at the time of the delivery of such written request
to the Lender, the borrowing availability of the Debtor under the
Receivables Borrowing Base (as defined in the Receivable Loan
Agreement) is less than the requested additional indebtedness or
the Receivables Commitment Period will terminate within 120 days;
(iii) one of the following shall be true:
(A) the Lender shall not have delivered to the
Debtor a Letter of Intent in respect of the Debtor's
aforesaid request within 20 days after the Lender's
receipt of such request; or
(B) the Lender shall have delivered to the Debtor a
written response in respect of the Debtor's aforesaid
request rejecting the same; or
(C) (1) the Lender shall have delivered to the
Debtor a Letter of Intent in respect of the Debtor's
aforesaid request within 20 days after the Lender's
receipt of such request and (2) within 10 days after
receipt of such Letter of Intent, the Debtor shall have
informed the Lender that, in the good faith opinion of the
Debtor, such Letter of Intent fails to materially satisfy
the terms outlined in the aforesaid Debtor's request; or
(D) (1) the Lender shall have delivered to the
Debtor a Letter of Intent in respect of the aforesaid
Debtor's request within 20 days after the Lender's receipt
of such request, (2) within 10 days after receipt of such
Letter of Intent, the Debtor shall have executed and
returned such Letter of Intent to the Lender, and (3)
within 30 days after receipt of such executed Letter of
Intent by the Lender, the Lender shall have failed to
issue to the Debtor a Phase II Commitment Letter in
respect of such Letter of Intent;
(iv) the Debtor shall not have made more than 2 other such
requests under this clause (i) and/or under Section 7.4 hereof
during the then current fiscal year of the Debtor; and
(v) no Event of Default shall exist at the time of the
delivery of the aforesaid written request;
(j) LIENS -- (i) not allow any Liens or encumbrances whatsoever
to attach to the Collateral and/or the Resort other than the Liens and
security interests of the Lender created by the Security Documents, any
Liens in favor of the Association under the Declaration, the Liens set
forth on Schedule 7, Schedule 8 and Schedule 9 hereto and any Liens
permitted in connection with additional indebtedness for borrowed money
permitted under clause (i) above or in connection with the sale of Notes
Receivable under Section 7.4 hereof and (ii) cause the Liens and
security interests of the Lender created by the Security Documents in
and to the Collateral to continue to be valid, enforceable, perfected
Liens and security interests subject to no other Liens
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except as set forth in this Agreement or in any other Security Document
and in Schedule 7, Schedule 8 and Schedule 9 hereto;
((k) MATERIAL ADVERSE EFFECT -- not undertake any action that
would have a material adverse effect on the operation of the Resort or
the Collateral; and
(l) NOTIFICATION OF CLAIMS -- promptly notify the Lender of any
claim, action or proceeding affecting title to the Collateral, or any
part thereof, or any of the security interests granted hereunder, and,
at the request of the Lender, appear in and defend, at the Debtor's
expense, any such claim, action or proceeding.
7.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Debtor shall punctually pay or cause to be paid the principal and
interest (and prepayment premium, if any) to become due in respect of the Note
according to the terms thereof (all of which are incorporated herein by
reference). All payments hereunder or under the Note shall be made in accordance
with the payment instructions set forth in Schedule 14 to this Agreement. The
Debtor shall maintain an office in Steamboat Springs, Colorado and/or Las Vegas,
Nevada where notices, presentations and demands in respect of this Agreement,
the Notes or any other Security Document may be made upon the Debtor. Such
offices shall be maintained at the addresses of the Debtor set forth on Schedule
15 to this Agreement until such time as the Debtor shall so notify the Lender,
in writing, of any change of location of such offices. The books and records of
the Debtor shall be maintained at the Las Vegas, Nevada office of the Debtor.
The Debtor shall not change its name without 30-day prior written notice to the
Lender.
7.4 SALE OF PROPERTIES.
Without the prior written consent of the Lender, the Debtor shall not
sell, lease, transfer or otherwise dispose of any of the Collateral, provided
that the Debtor may sell the Unsold Inventory Timeshare Intervals in the
ordinary course of its business to unaffiliated consumers and remove and dispose
of (and receive the proceeds thereof) in the ordinary course of its business,
free from any Liens created or contemplated by this Agreement, items of
Collateral consisting of Equipment which shall have become worn out or obsolete
and provided further that the Debtor may sell Notes Receivable (other than the
Pledged Notes Receivable) if, but only if, the following conditions shall have
been satisfied:
(a) the Debtor shall have delivered to the Lender a written
request for Lender's issuance to the Debtor of a Letter of Intent in
respect of its sale to the Lender of Notes Receivable (other than the
Pledged Notes Receivable) on the terms and conditions to be outlined by
the Debtor in such request (such terms to include, the par value of such
Notes Receivable, the purchase price of such Notes Receivable and such
other terms with respect to such sale as are customarily included in
letters of intent);
(b) one of the following shall be true:
(i) the Lender shall not have delivered to the Debtor a
Letter of Intent in respect of the Debtor's aforesaid request
within 20 days after the Lender's receipt of such request; or
(ii) the Lender shall have delivered to the Debtor a
written response in respect of the Debtor's aforesaid request
rejecting the same; or
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(iii) (A) the Lender shall have delivered to the Debtor a
Letter of Intent in respect of the Debtor's aforesaid request
within 20 days after the Lender's receipt of such request and (B)
within 10 days after receipt of such Letter of Intent, the Debtor
shall have informed the Lender that, in the good faith opinion of
the Debtor, such Letter of Intent fails to materially satisfy the
terms outlined in the aforesaid Debtor's request; or
(iv) (A) the Lender shall have delivered to the Debtor a
Letter of Intent in respect of the aforesaid Debtor's request
within 20 days after the Lender's receipt of such request, (B)
within 10 days after receipt of such Letter of Intent, the Debtor
shall have executed and returned such Letter of Intent to the
Lender, and (C) within 30 days after receipt of such executed
Letter of Intent by the Lender, the Lender shall have failed to
issue to the Debtor a Phase II Commitment Letter in respect of
such Letter of Intent;
(c) the Debtor shall not have made more than 2 other such
requests under this Section 7.4 and/or under Section 7.2(i) hereof
during the then current fiscal year of the Debtor; and
(d) no Event of Default shall exist at the time of the delivery
of the aforesaid written request.
7.5 CONSOLIDATION AND MERGER.
Without the prior written consent of Lender, the Debtor shall not
consolidate with or merge into any other Person or permit any other Person to
consolidate with or merge into it or consent or agree to a Change in Management.
7.6 GUARANTIES.
(a) Except as required by applicable law or any government agency
having regulatory authority with respect to the sale of the Timeshare
Intervals, the Debtor shall not become liable in respect of, or be
liable in respect of, any Guaranty except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection.
(b) "Guaranty" by any Person shall mean all obligations of such
Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including but not limited to
obligations incurred through an agreement, contingent or otherwise, by
such Person:
(i) to purchase such indebtedness or obligation or any
Property or assets constituting security therefor;
(ii) to advance or supply funds
(A) for the purchase or payment of such
indebtedness or obligation, or
(B) to maintain working capital or other balance
sheet conditions or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or
obligation;
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(iii) to lease Property or to purchase any Security or
other Property or services primarily for the purpose of assuring
the owner of such indebtedness or obligation of the ability of
the primary obligor to make payment of the indebtedness or
obligation; or
(iv) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in respect
thereof.
7.7 COMPLIANCE WITH ENVIRONMENTAL LAWS.
The Debtor shall comply, and shall cause the Resorts to be in
compliance, in a timely and diligent fashion with
(a) all Environmental Protection Laws (including, without
limitation, all federal, state and local environmental or
pollution-control laws, regulations, orders and decrees governing the
emission of waste water effluent, the treatment, transportation,
disposal, generation and storage of solid and hazardous waste, hazardous
and toxic substances and air pollution, and/or setting forth general
environmental conditions),
(b) any other applicable requirements for conducting, on a timely
basis, periodic tests and monitoring for contamination of ground water,
surface water, air and/or land, and for biological toxicity of the
aforesaid and
(c) the regulations of each relevant federal, state or local
authority administering environmental laws, ordinances or regulations,
to the extent that the failure to so comply could have a material and adverse
effect on the business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor or the Resorts.
Without limiting the generality of the foregoing, the Debtor shall not
release or otherwise dispose of any Hazardous Substance or any other substance
regulated, controlled or described as hazardous under any Environmental
Protection Law on or beneath any real Property owned, leased or otherwise used
by the Debtor or allow the same to occur with respect to the Resorts; and no
asbestos, urea formaldehyde foam, polychlorinated biphenyls, aluminum wire or
lead-containing paint shall be installed or used on any such Property or the
Resorts. The Debtor shall not take or suffer to be taken any act or omission
that would subject it or the Resorts to liability under any Environmental
Protection Law which liability could have a material and adverse effect on the
business, prospects, profits, Property or condition (financial or otherwise) of
the Debtor or the Resorts.
The Lender shall have the right, but shall not be obligated, to notify
any state, federal or local governmental authority of information which may come
to its attention with respect to Hazardous Substances on or emanating from the
Resorts and the Debtor irrevocably releases the Lender from any claims of loss,
damage, liability, expense or injury relating to or arising from, directly or
indirectly, any such disclosure. The Lender will notify the Debtor prior to or
contemporaneously with any action taken by the Lender pursuant to this
paragraph, provided that the failure by the Lender to provide such notification
shall not affect any action so taken.
Without limiting the scope and the effectiveness of the foregoing
undertakings in this Section 7.7, the Debtor agrees to indemnify and hold the
Lender harmless from and against any losses, liabilities, damages, claims,
causes of action, costs or expenses (including, without limitation, attorneys'
fees and disbursements), arising from, incurred by, or asserted against, the
Lender in connection with any cleanup,
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removal or similar protective or remedial action that may be required or
undertaken by any governmental authority as a result of the presence of any
Hazardous Substances at the Resort, the release of any other Hazardous Substance
on or from the Resort or the generation, treatment, storage, handling or
disposal of any Hazardous Substances on or from the Resort (unless such
presence, release, generation, treatment, storage, handling or disposal is
directly caused by the Lender or by any agent of the Lender acting under the
Lender's direct orders). The liability of the Debtor to the Lender under this
paragraph shall survive any assignment, transfer, discharge or foreclosure of
the Inventory Deed of Trust or any transfer of the Resort (or any portion
thereof) by deed in lieu of foreclosure or otherwise, and any one or more
transfers of the Resort (or any portion thereof) by deed or otherwise, by
whosoever made.
If the Debtor fails to diligently take any action required under this
Section 7.7 or by any governmental entity with respect to the cleanup, control
or reporting of any Hazardous Substances, materials or wastes in, on, from or
under the Resort, the Lender, at its option, may enter upon the Resort, retain
such experts and consultants at the expense of the Debtor and take such action
as the Lender deems advisable, and the Lender may advance such sums of money as
it deems necessary, with respect to the cleanup, control or reporting of any
such substances, materials or wastes in, on or under the Resort. The Debtor
shall pay to the Lender immediately and upon demand, all sums of money so
advanced or expended by the Lender pursuant to this paragraph, together with
interest on each such advance at the Default Rate, and all such sums, and the
interest thereon, shall be secured by the Collateral. The Lender will notify the
Debtor prior to or contemporaneously with any action taken by the Lender
pursuant to this paragraph, provided that the failure by the Lender to provide
such notification shall not affect any action so taken.
7.8 TRANSACTIONS WITH AFFILIATES; PRINCIPAL PROPERTIES.
The Debtor shall not enter into any transaction including, without
limitation, the purchase, sale or exchange of Property or the rendering of any
service with any Affiliate except in the ordinary course of, and pursuant to the
reasonable requirements of, the Debtor's business and upon fair and reasonable
terms no less favorable to the Debtor than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate. Steamboat Suites shall
have no Subsidiaries.
7.9 USE OF THE LENDER NAME.
The Debtor shall not, nor shall it permit any Affiliate to, without the
prior written consent of the Lender, use the name of the Lender or the name of
any affiliate of the Lender in connection with any of its respective businesses
or activities, except in connection with internal business matters and as
required in dealings with governmental agencies.
7.10 SUBORDINATED OBLIGATIONS.
The Debtor shall not, directly or indirectly, (a) permit any payment to
be made in respect of any indebtedness, liabilities or obligations, direct or
contingent, which are subordinated by the terms thereof or by separate
instrument to the payment of principal of, and interest on, the Notes except in
accordance with the terms of such subordination, (b) permit the amendment,
rescission or other modification of any such subordination provisions of any of
the Debtor's subordinated obligations in such a manner as to affect adversely
the Lender's Lien or the prior position of the Notes, or (c) permit the
unscheduled prepayment or redemption of all or any part of any subordinated
obligations of the Debtor except in accordance with the terms of such
subordination and except as provided in this Section 7.10 in respect of
indebtedness extended to Steamboat Suites by Preferred Equities and except for
payments pursuant to tax sharing agreements. The Debtor shall cause Guarantor to
subordinate all indebtedness, liabilities or obligations, direct or contingent,
owing to it from the Debtor to the payment of the Obligations. The
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Debtor shall cause each of its other Affiliates to subordinate all indebtedness,
liabilities or obligations, direct or contingent, owing to it from the Debtor to
the payment of the Obligations. The terms of such subordination shall be
satisfactory to the Lender. Such subordination may permit payments by the Debtor
in respect of such subordinated indebtedness, liabilities or obligations if (i)
in the case of all such indebtedness other than that owing to Preferred
Equities, such payments are regularly scheduled payments and the terms of such
regularly scheduled payments are acceptable to the Lender and, in the case of
such indebtedness owing to Preferred Equities and except for payments pursuant
to the tax sharing agreements, no such payments (whether for interest, principal
or otherwise), shall be permitted or made for so long as the Inventory Loan is
outstanding and thereafter any payments of principal and interest may be made
(subject to the requirements of clause (ii) and (iii) which follow), (ii) no
Default or Event of Default then exists or, after giving effect to such payment,
would exist and (iii) the Debtor would not be rendered insolvent, made unable to
pay its debts as they come due or be left without adequate capital to pursue its
business after giving effect to such payment.
7.11 NOTICE OF LEGAL PROCEEDINGS.
Promptly upon becoming aware of the existence thereof, the Debtor shall
deliver to the Lender written notification of the institution of any litigation,
legal proceeding or dispute with any Person, entity or governmental authority in
any way involving the Debtor, the Guarantor, the Resort, the Collateral or any
of the Debtor's other assets as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would materially
adversely affect the Debtor, the Guarantor, the Resort, or the Collateral.
7.12 FURTHER ASSURANCES.
The Debtor shall from time to time execute and deliver to the Lender
such other instruments, certificates and documents and shall take such other
action and do all other things as may from time to time be reasonably requested
by the Lender in order to implement or effectuate the provisions of, or more
fully perfect the rights granted or intended to be granted by the Debtor to the
Lender pursuant to the terms of, this Agreement, the Notes or any other Security
Document. The Debtor agrees, in its capacity as Declarant (to the extent
permitted by applicable law), to cause the Association to take such action and
to do all other things as may from time to time be reasonably requested by the
Lender in order to implement or effectuate the provisions of this Agreement and
the other Security Documents.
7.13 FINANCIAL STATEMENTS. The Debtor shall submit to the Lender the
following:
(a) ANNUAL STATEMENTS -- As soon as practicable after the end of
each fiscal year of the Debtor, and in any event no later than 120 days
thereafter, duplicate copies of:
(i) a balance sheet of the Debtor (including all assets
and liabilities of, or in respect of, the Resort) as at the end
of such fiscal year, and
(ii) a statement of income of the Debtor (including the
operations of the Resort) for such fiscal year, and
(iii) a statement of changes in cash flows of the Debtor
(including the cash flows of, or in respect of, the Resort)
during such fiscal year, and
(iv) a statement of material changes of accounting
policies, presentations or principles during such fiscal year,
and
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(v) notes to such financial statements.
Each of the above shall have been prepared in reasonable detail
and in accordance with generally accepted accounting principles,
procedures and practices consistently applied and shall set forth, in
each case, in comparative form the figures for the previous fiscal year,
and shall be certified as complete and correct by the principal
financial officer of the Debtor. The Debtor shall also deliver to the
Lender with the above financial statements a report, certified as
complete and correct by the chief accounting officer of the Debtor,
showing all sales and cancellations made in respect of Timeshare
Intervals at the Resort for the fiscal year of the Debtor then most
recently ended and in respect of which said financial statements shall
have been prepared. The above financial statements shall be accompanied
by a certificate of the chief accounting officer of the Debtor, which
certificate shall be acceptable to the Lender and shall, without
qualification, state that such financial statements present the
financial condition of the Debtor and have been prepared in accordance
with generally accepted accounting principles consistently applied.
(b) QUARTERLY STATEMENTS -- As soon as practicable after the end
of each fiscal quarter of the Debtor, and in any event no later than 90
days thereafter, duplicate copies of:
(i) a balance sheet of the Debtor (including all assets
and liabilities of, or in respect of, the Resort) as at the end
of such fiscal quarter, and
(ii) a statement of income of the Debtor (including the
operations of the Resort) for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal year
ending with such quarter, and
(iii) a statement of changes in cash flows of the Debtor
(including the cash flows of, or in respect of, the Resort)
during such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such
quarter, and
(iv) a statement of material changes of accounting
policies, presentations or principles during such quarter.
Each of the above shall have been prepared in reasonable detail
and in accordance with generally accepted accounting principles,
procedures and practices consistently applied (other than the
preparation of notes to such financial statements), subject to changes
resulting from year-end adjustments, and shall set forth in each case in
comparative form the figures for the corresponding periods in the
immediately preceding fiscal year, and shall be certified as complete
and correct by the chief accounting officer of the Debtor.
(c) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- Promptly upon
becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Debtor is taking or proposes to take with respect thereto.
(d) NOTICE OF CLAIMED DEFAULT -- Immediately upon becoming aware
that the holder of any obligation or of any evidence of indebtedness or
other Security of the Debtor or Guarantor has given notice or taken any
other action with respect to a claimed default or event of default
thereunder, a written notice specifying the notice given or action taken
by such holder and the nature of the claimed default or event of default
and what action the Debtor is taking or proposes to take with respect
thereto.
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(e) MATERIAL ADVERSE DEVELOPMENTS -- Immediately upon becoming
aware of any development or other information which may materially and
adversely affect the Property, business, prospects, profits or condition
(financial or otherwise) of the Debtor or the ability of the Debtor to
perform its obligations under this Agreement, the Notes or the other
Security Documents, telephonic, telefax or telegraphic notice specifying
the nature of such development or information and the anticipated
effect.
(f) FINANCIAL INFORMATION. As promptly as possible after the
receipt thereof, all financial statements, budgets and other information
distributed by the Association. The Debtor, as Declarant or otherwise,
shall cause the Association to prepare annual financial statements,
substantially as provided in clause (a) above, and an annual budget, and
shall deliver the same to the Lender within 120 days of the end of each
of its fiscal years.
(g) REQUESTED INFORMATION -- With reasonable promptness, such
other data and information as from time to time may be reasonably
requested by the Lender.
7.14 OFFICERS' CERTIFICATE.
The financial statements delivered to the Lender pursuant to Section
7.13(a) and Section 7.13(b) of this Agreement shall be accompanied by a
certificate , substantially in the form of Exhibit Q, of the President or a
Vice-President and the Treasurer or an Assistant Treasurer of the Debtor setting
forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Debtor was in
compliance with all financial covenants contained in Section 7 of this
Agreement during the period covered by the financial statements or
reports then being furnished; and
(b) EVENT OF DEFAULT -- that the signers have reviewed the
relevant terms of the Agreement (and all other agreements and exhibits
between the parties) and have made, or caused to be made, under their
supervision, a review of the transactions and conditions of the Debtor
from the beginning of the period covered by the financial statements or
reports being delivered therewith to the date of the certificate and
that such review has not disclosed the existence during such period of
any condition or event which constitutes a Default or Event of Default
or, if any such condition or event existed or exists or will exist,
specifying the nature and period of existence thereof and what action
the Debtor has taken or proposes to take with respect thereto.
7.15 INSPECTION.
The Debtor shall permit the Lender or its representatives to make such
inspections/audits of its books, accounts, records, orders, original
correspondence and such other papers as it may desire and of its premises, the
Resort, the Units, and the other Collateral, from time to time, as the Lender
may in its sole discretion determine. The Debtor shall supply copies of such
records and papers as the Lender may reasonably request, and shall permit the
Lender to discuss the Debtor's respective affairs, finances and accounts with
the Debtor's officers, employees and independent public accountants (and by this
provision the Debtor hereby authorizes said accountants to discuss with the
Lender the finances and affairs of the Debtor), all at reasonable times and as
often as may be desired by the Lender. The Debtor further agrees to supply the
Lender with such other reasonable information relating to the Debtor and the
Collateral as the Lender may request. With respect to any inspections and/or
audits referred to in this Section 7.15, the Debtor shall pay for all
out-of-pocket costs and reasonable expenses incurred by the Lender (including,
without limitation, travel expenses, but excluding salaries of employees of the
Lender) and shall promptly reimburse the Lender therefor upon receipt by the
Debtor of a written demand therefor from the Lender.
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SECTION 8. EVENTS OF DEFAULT
8.1 DEFAULT.
The Debtor hereby covenants, agrees and acknowledges that an Event of
Default shall exist under this Agreement if any of the following events or
conditions (each, an "Event of Default") shall occur and be continuing:
(a) PAYMENTS -- (i) failure to make any payment of interest on
the Inventory Note, (ii) failure to make any payment of interest on the
Receivables Note ; (iii) failure to make any payment of principal of, or
prepayment premium on, the Inventory Note or the Receivable Note ; (iv)
failure to make any Mandatory Inventory Prepayment, ; or (v) failure to
make any other payment required pursuant to the terms of this Agreement,
the Note or any other Security Document or Receivable Loan Security
Documents; in each case on or before 2 Business Days after the date such
payment is due; or
(b) WARRANTIES OR REPRESENTATIONS -- any warranty, representation
or other statement made or furnished to the Lender by or on behalf of
the Debtor or Guarantor in this Agreement or any other Security Document
proves to have been false or misleading in any material respect when
made or furnished; or
(c) COLLATERAL AND FINANCIAL COVENANTS -- failure by Debtor to
comply with any covenant set forth in Section 3.5, Section 3.6, and
Section 7 of this Agreement; or
(d) OTHER COVENANTS -- failure by the Debtor to comply with any
other covenant relating to the Debtor contained in this Agreement or any
other Security Document, and the continuance of such failure for more
than 20 days after such failure shall have first become known to any
officer of the Debtor or Guarantor; or
(e) MATERIAL ADVERSE CHANGE -- any material adverse change in or
in respect of the Collateral (including, without limitation, the
termination of any applicable timeshare or condominium regimen {whether
by consent of the condominium or timeshare owners thereunder or
otherwise}, any modification or amendment to the Declaration which
shall, in the opinion of the Lender, adversely affect the Collateral or
the operations or prospects of the Resort, or the substantial
destruction of any uninsured Building, or any Unit) or in the financial
condition of the Debtor or Guarantor; or
(f) INSOLVENCY -- (i) a receiver, liquidator, custodian or
trustee of the Debtor or Guarantor, or of all or any of the Property of
any of them, shall be appointed by court order and such order remains in
effect for more than 50 days; or an order for relief shall be entered
with respect to the Debtor or Guarantor, or the Debtor or Guarantor
shall be adjudicated a bankrupt or insolvent; or any of the Property of
any of them shall be sequestered by court order and such order remains
in effect for more than 50 days; or a petition shall be filed against
the Debtor or Guarantor under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect,
and shall not be dismissed within 50 days after such filing; or (ii) the
Debtor or Guarantor shall file a petition in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect,
or shall consent to the filing of any petition against it under any such
law; or (iii) the Debtor or Guarantor shall make an assignment for the
benefit of its
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creditors, or shall admit in writing its inability, or shall fail, to
pay its debts generally as they become due, or shall consent to the
appointment of a receiver, liquidator or trustee of the Debtor or
Guarantor, or of all or any part of the Property of any of them; or
(g) JUDGMENT -- final judgment or judgments for the payment of
money, the aggregate of which exceeds $100,000, shall be outstanding
against one or more of the Debtor and the Guarantor and any of such
judgments shall have been outstanding for more than 30 days from the
date of its entry and shall not have been discharged in full or stayed;
or
(h) DEFAULT IN LENDER AGREEMENTS -- any default (after giving
effect to the expiration of any applicable grace periods) under, and as
defined in, the Receivable Loan Agreement, or any other agreement, now
existing or hereafter entered into, between (i) the Debtor and the
Lender or any affiliate of the Lender, (ii) Preferred Equities and the
Lender or any affiliate of the Lender (including, without limitation,
Dorfinco), (iii) Mego Financial and the Lender or any affiliate of the
Lender (including, without limitation, Dorfinco) or (iv) any Affiliate
of the Debtor and the Lender or any affiliate of the Lender (including,
without limitation, Dorfinco); or
(i) DEFAULT BY DEBTOR IN OTHER AGREEMENTS -- any default by the
Debtor or Guarantor in the payment of indebtedness for borrowed money;
any other default under such indebtedness which accelerates or permits
the acceleration (after the giving of notice or passage of time, or
both) of the maturity of such indebtedness, whether or not such default
has been waived by the holder of such indebtedness, provided that any
such acceleration or permitted acceleration with respect to a default by
Guarantor shall be an Event of Default only if such acceleration or
permitted acceleration could reasonably be expected to have a material
adverse affect on Guarantor and provide further that any default with
respect to that indebtedness described on Schedule 18 shall not be an
Event of Default hereunder unless such default becomes an unappealable
judgment against Debtor; or
(j) SUSPENSION OF SALES -- the issuance of any stay order, cease
and desist order or similar judicial or nonjudicial sanction limiting or
otherwise affecting the sale of Timeshare Intervals in any state or any
jurisdiction thereof in which the Debtor shall have made a material
percentage of sales of Timeshare Intervals and any one of such orders or
sanctions shall have been outstanding for more than 30 days from the
date of its entry and shall not have been discharged in full or stayed
by appeal, bond or otherwise; or
(k) GUARANTY -- any Guaranty Agreement shall have been
terminated, revoked or declared invalid.
8.2 DEFAULT REMEDIES.
(a) ACCELERATION OF OBLIGATIONS; RIGHT TO DISPOSE OF COLLATERAL.
If an Event of Default under Section 8.1(f) of this Agreement shall
occur, then the Obligations shall, automatically and without notice or
demand by the Lender, become at once due and payable, and the Debtor
will forthwith pay to the Lender, in addition to any and all sums and
charges otherwise due in respect of the Obligations, the entire
principal of and interest accrued on and the Inventory Note. If any
other Event of Default shall occur, all of the Obligations shall, at the
option of the Lender, and without notice or demand by the Lender, become
at once due and payable, and the Debtor will forthwith pay to the
Lender, in addition to any and all sums and charges otherwise due in
respect of the Obligations, the entire principal of and interest accrued
on the Inventory Note . The Lender shall have all the rights and
remedies of a secured party under the Colorado Uniform Commercial Code,
all the rights and remedies of a beneficiary under the Inventory Deed of
Trust
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and all other legal and equitable rights to which it may be entitled,
including, without limitation and without further notice to Debtor, the
right to continue to collect all payments being made on the Pledged
Notes Receivable and to apply such payments to the Obligations and to
sue in its own name (or the name of the Debtor) the obligor under any
defaulted Pledged Note Receivable. The Lender shall also have the right
to require the Debtor to assemble the Collateral, at the Debtor's
expense, and make it available to the Lender at a place to be designated
by the Lender, which is reasonably convenient to both parties, and the
Lender shall have the right to take immediate possession of the
Collateral and may enter any of the premises of the Debtor or wherever
the Collateral shall be located, in accordance with applicable law, and
to keep and store the same on said premises until sold (and if said
premises be the Property of the Debtor, the Debtor agrees not to charge
the Lender for storage thereof for a period of at least 90 days after
sale or disposition of such Collateral). The Debtor and the Lender agree
that 10 days' notice to the Debtor of any public or private sale or
other disposition of Collateral shall be reasonable notice thereof and
such sale shall be at such location(s) as the Lender shall designate in
said notice. The Lender shall have the right to bid at any such sale on
its own behalf.
In view of the fact that federal and state securities laws may
impose certain restrictions on the methods by which a sale of
Collateral, if comprised of Securities, may be effected after an Event
of Default, the Debtor agrees that, upon the occurrence and continuance
or existence of an Event of Default, the Lender may, from time to time,
attempt to sell all or any part of such Collateral by means of a private
placement restricting the bidding and prospective purchasers to those
who will represent and agree that they are purchasing for investment
only and not for, or with a view to, distribution. In so doing, and
without limiting any other means of private placement, the Lender may
solicit offers to buy such Collateral, or any part of it for cash, from
a limited number of investors deemed by the Lender, in its reasonable
judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if the Lender solicits such offers from
not less than four (4) such investors (and otherwise acts in good
faith), then the acceptance by the Lender of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
(b) APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon
the occurrence of any Event of Default, the Lender may, with or without
proceeding with such sale or foreclosure or demanding payment of the
Obligations, without notice, terminate the Lender's further performance
under this Agreement to extend Receivables Advances to the Debtor,
without further liability or obligation by the Lender, and may also, at
any time, appropriate and apply (as provided below) to any Obligations
any and all Collateral in its possession and any and all balances,
credits, deposits, accounts, reserves, indebtedness or other monies due
or owing to the Debtor held by the Lender hereunder or under any other
financing agreement or otherwise, whether accrued or not. Neither such
termination, nor the termination of this Agreement by lapse of time, the
giving of notice or otherwise, shall absolve, release or otherwise
affect the liability of the Debtor in respect of transactions prior to
such termination, or affect any of the Liens, security interests,
rights, powers and remedies of the Lender hereunder, but they shall, in
all events, continue until all of the Obligations are satisfied.
(c) APPLICATION OF PROCEEDS. To the extent permitted under
applicable law, the proceeds of any exercise of rights with respect to
Collateral or any part thereof shall be paid to and applied as follows:
FIRST, to the payment of
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(i) all costs and charges in connection therewith,
including, without limitation, (A) attorneys' fees for
advice, counsel or other legal services, (B) costs and
expenses incurred as a result of pursuing, reclaiming,
seeking to reclaim, taking, keeping, removing, storing,
advertising for sale, selling and foreclosing on the
Collateral and any and all other charges and expenses in
connection therewith, and (C) any costs and expenses
(including, without limitation, costs and expenses in the
management and operation of the Resort) provided for in
the Assignment of Rents, the Inventory Deed of Trust or
any other Security Document,
(ii) all taxes, assessments or Liens superior to
the Lien of this Agreement or the other Security
Documents, except any taxes, assessments or other superior
Liens subject to which any sale of Collateral may have
been made,
(iii) all fees, costs and expenses as set forth in
Section 10.2 of this Agreement, and
(iv) all Release Fees;
SECOND, towards the payment of accrued and unpaid interest
then due and payable, if any, at the Default Rate in respect of
the Loan,
THIRD, towards the payment of all other accrued and unpaid
interest, if any, then due and payable in respect of the Loan,
FOURTH, to the payment of the principal amount of the
Loan, and
FIFTH, to the payment of the surplus, if any, to the
Debtor, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same, provided that if any
Obligations then due and payable shall not have been paid in
full, any such surplus shall continue to be held as Collateral
hereunder and shall continue to be subject to the terms and
conditions hereof until such Obligations then due and payable
shall have been paid in full.
The Debtor shall remain liable hereunder for payment of any
deficiency owing on the Obligations after application of such proceeds.
To the extent that any amount allocated to any of the payment
categories set forth above is insufficient to fully satisfy all of the
Obligations referred to in said category, such amount shall be allocated
ratably to each of such Obligations in accordance with the ratio that
the amount of such Obligation bears to the aggregate amount of such
Obligations referred to in such category.
(d) REMEDIES CUMULATIVE. All covenants, conditions, provisions,
warranties, guaranties, indemnities and other undertakings of the Debtor
contained in this Agreement, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule given
to the Lender or contained in any other agreement between the Lender and
the Debtor, heretofore, concurrently or hereafter entered into,
including, without limitation, the Inventory Deed of Trust, shall be
deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions or agreements of the Debtor herein
contained. The failure or delay of the Lender to exercise or enforce any
rights, Liens, powers or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall
not
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operate as a waiver of such Liens, rights, powers and remedies, but all
such Liens, rights, powers and remedies shall continue in full force and
effect until the Loan and all other Obligations shall have been fully
satisfied. All Liens, rights, powers and remedies herein provided for
are cumulative and none are exclusive.
The acceptance by the Lender at any time and from time to time of
partial payments of the Obligations shall not be deemed to be a waiver of any
Event of Default then existing. No waiver by the Lender of any Event of Default
shall be deemed to be a waiver of any other or subsequent Event of Default. No
delay or omission by the Lender in exercising any right or remedy under the
Security Documents shall impair such right or remedy or be construed as a waiver
thereof or an acquiescence therein, nor shall any single or partial exercise of
any such right or remedy preclude other or further exercise thereof, or the
exercise of any other right or remedy under the Security Documents or otherwise.
SECTION 9. REVIVAL OF OBLIGATIONS AND LIENS
The Debtor expressly agrees that if the Debtor makes a payment to the
Lender, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, or otherwise required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then to the extent of such repayment, the
Obligations or any part thereof intended to be satisfied and the Liens provided
for hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW.
This Agreement and all transactions, assignments and transfers
hereunder, and all the rights of the parties hereto shall be governed as to the
validity, construction, enforcement and in all other respects by the internal
laws of the State of Colorado. To the extent any provision of this Agreement is
not enforceable under applicable law, such provision shall be deemed null and
void and shall have no effect on the remaining portions of this Agreement.
10.2 EXPENSES AND CLOSING FEES.
Whether or not the transactions contemplated hereunder are completed,
the Debtor shall pay all expenses of Lender relating to negotiating, preparing,
documenting, closing and enforcing this Agreement and relating to the making by
the Lender of any Advances hereunder to the Debtor (the "Loan Costs"),
including, but not limited to:
(a) the cost of reproducing this Agreement, the Inventory Note,
and the other Security Documents;
(b) the fees and disbursements of the Lender's counsel (including
in-house counsel) and Lender's special Colorado counsel;
(c) the Lender's out-of-pocket expenses, including, without
limitation, Lender's out-of-pocket expenses in connection with any
audits in respect of the Debtor and/or the Collateral conducted by
Lender prior to the date hereof (but excluding salaries of employees of
the Lender);
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(d) all fees and expenses (including fees and expenses of the
Lender's counsel and Lender's special Colorado counsel) relating to any
amendments, waivers, consents or review of documents in connection with
any subsequent closings pursuant to the provisions of this Agreement ;
(e) all costs, outlays, attorneys' fees and expenses of every
kind and character had or incurred in (i) the enforcement of any of the
provisions of, or rights and remedies under, this Agreement, any
assignment agreement, or any other Security Document and (ii) the
preparation for, negotiations regarding, consultations concerning, or
the defense of legal proceedings involving, any claim or claims made or
threatened against the Lender arising out of this transaction or the
protection of the Collateral securing the Obligations, expressly
including, without limitation, the defense by the Lender of any legal
proceedings instituted or threatened by any Person to seek to recover or
set aside any payment or setoff theretofore received or applied by the
Lender with respect to the Obligations; and
(f) all taxes levied against or paid by the Lender (other than
taxes on, or measured by, the income or profits of the Lender) and all
filing and recording fees, costs and expenses which may be incurred by
the Lender with respect to the filing or recording of any document or
instrument relating to the transactions described in this Agreement.
10.3 PARTIES, SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (except that the
Debtor may not assign any of its rights hereunder), and all representations,
covenants, provisions and agreements by or on behalf of the Debtor which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of the Lender. Except as provided in this Section 10.3, this Agreement
shall not create and shall not be construed as creating any rights enforceable
by, or benefits in favor of, any Person not a party hereto.
10.4 NOTICES.
All notices or demands by either party to the other relating to this
Agreement shall, except as otherwise provided herein, be in writing and sent by
certified or registered United States mail, first class postage prepaid and
return receipt requested, or by a nationally recognized overnight courier
service with all delivery fees prepaid. Notices shall be deemed received (a) on
the 3rd succeeding Business Day following deposit in the United States mail,
certified or registered and first class postage prepaid and return receipt
requested or (b) upon delivery if sent by nationally recognized overnight
courier with all delivery fees prepaid. Notices and demands shall be addressed,
if to the Debtor, at the mailing address set forth on Schedule 16 to this
Agreement or to such other address as the Debtor may from time to time specify
in writing or, if to the Lender, at the mailing address of the Lender set forth
on Schedule 17 hereto or to such other address as the Lender may from time to
time specify in writing to the Debtor.
10.5 TOTAL AGREEMENT.
This Agreement, including the Exhibits, the Schedules and the other
agreements referred to herein, is the entire agreement between the parties
hereto relating to the subject matter hereof, incorporates or rescinds all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof, and may not be changed or terminated orally or by course of
conduct. This Agreement may be modified or changed only in a writing executed by
both the Lender and the Debtor. The failure or delay of the Lender to exercise
or enforce any rights, Liens, powers, remedies, conditions
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or other terms hereunder or under any other agreement or instrument executed in
connection herewith shall not operate as a waiver of any such rights, Liens,
powers, remedies, conditions or other terms.
10.6 SURVIVAL.
All warranties, representations and covenants made by the Debtor herein
or in any certificate or other instrument delivered by it or on its behalf under
this Agreement shall be considered to have been relied upon by the Lender and
shall survive the delivery to the Lender of the Notes regardless of any
investigation made by the Lender or on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Debtor hereunder.
10.7 LITIGATION.
EACH OF THE DEBTOR AND THE LENDER HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY
BE COMMENCED ARISING OUT OF THIS AGREEMENT, THE NOTES, ANY OTHER SECURITY
DOCUMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE DEBTOR AND THE LENDER OF ANY KIND OR
NATURE.
THE DEBTOR AND THE LENDER HEREBY AGREE THAT THE FOLLOWING COURTS:
STATE COURT: COLORADO DISTRICT COURT FOR THE SECOND DISTRICT SITTING AT
DENVER; FEDERAL COURT: UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
SITTING AT DENVER, OR, (TO THE EXTENT PERMITTED BY APPLICABLE COLORADO LAW) AT
THE OPTION OF THE LENDER, ANY OTHER COURT LOCATED IN THE STATE OF COLORADO IN
WHICH IT SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH SHALL HAVE
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE
NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE DEBTOR AND THE LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT
OR TO ANY MATTER ARISING HEREFROM. THE DEBTOR AND THE LENDER EXPRESSLY SUBMIT
AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN ANY SUCH COURT.
THE STIPULATIONS OF THE DEBTOR AND THE LENDER IN THIS SECTION 10.7 SHALL
SURVIVE THE FINAL PAYMENT OF ALL OF THE OBLIGATIONS OF THE DEBTOR AND THE
RESULTING TERMINATION OF THIS AGREEMENT.
INITIALS____/____
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10.8 POWER OF ATTORNEY.
The Debtor hereby makes, constitutes and appoints the Lender the true
and lawful agent and attorney-in-fact of the Debtor, with full power of
substitution, (a) to receive, open and dispose of all mail addressed to the
Debtor relating to the Pledged Notes Receivable or the Pledged Contracts related
thereto; (b) to open all such mail and remove therefrom any notes, checks,
acceptances, drafts, money orders or other instruments constituting Collateral,
with full power to endorse the name of the Debtor upon any such notes, checks,
acceptances, drafts, money orders, instruments or other documents, and to effect
the deposit and collection thereof (in accordance with the procedures
established therefor in the Agency Agreement), and the Lender shall have the
further right and power to endorse the name of the Debtor on any documents
relating to the Collateral; (c) to execute on behalf of the Debtor assignments,
notices of assignment, financing statements and other public records and notices
in respect of the Pledged Notes Receivable or the Pledged Contracts related
thereto; (d) to notify Makers of Pledged Notes Receivable to make all payments
thereunder directly to the Lender at an address to be designated by the Lender
and to execute and send other notices to Makers of such Pledged Notes Receivable
or the Pledged Contracts related thereto; and (e) to do any and all things
necessary or take action in the name and on behalf of the Debtor to carry out
the intent of this Agreement, including, without limitation, the grant of the
security interest provided herein and to perfect and protect the security
interest granted to the Lender with respect to the Collateral and the Lender's
rights created under this Agreement. The Debtor agrees that neither the Lender
nor any of its agents, designees or attorneys-in-fact will be liable for any
acts of commission or omission, or for any error of judgment or mistake of fact
or law with respect to the exercise of the power of attorney granted under this
Section 10.8 except for its own gross negligence or willful misconduct. The
power of attorney granted under this Section 10.8 is coupled with an interest
and shall be irrevocable during the term of this Agreement.
10.9 SURVIVAL OF INDEMNITIES.
All indemnities set forth in this Agreement shall survive the execution
and delivery of this Agreement and the execution and delivery of the Notes as
well as the payment in full of the Notes and the otherwise full performance of
this Agreement.
10.10 CONFLICTING OBLIGATIONS; RIGHTS AND REMEDIES.
To the extent that the terms of any of the Security Documents contain
conflicting obligations, the terms set forth in this Agreement shall be deemed
to be the controlling terms, provided that all rights and remedies of the Lender
under the Security Documents are cumulative and in addition to every other right
or remedy, and no right or remedy is intended to be exclusive of any other right
or remedy.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
DEBTOR: LENDER:
STEAMBOAT SUITES, INC. TEXTRON FINANCIAL CORPORATION
By:_________________________________ By:________________________________
Title: President Title: Assistant Vice President
[CORPORATE SEAL]
PREFERRED EQUITIES CORPORATION
By:_________________________________
Title: President
[CORPORATE SEAL]
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STATE OF )
) ss.
COUNTY OF )
At in said County and State on this _____ day of December, 1999,
personally appeared _________________, duly authorized officer of Steamboat
Suites, Inc., and he/she acknowledged the foregoing instrument by him/her signed
and sealed to be his/her free act and deed and the free act and deed of
Steamboat Suites, Inc.
Before me:
Notary Public in and for said State
My Commission expires:
STATE OF )
) ss.
COUNTY OF )
At in said County and State on this _______ day of December, 1999,
personally appeared , duly authorized officer of Preferred Equities Corporation,
and he/she acknowledged the foregoing instrument by him/her signed and sealed to
be his/her free act and deed and the free act and deed of Textron Financial
Corporation.
Before me:
Notary Public in and for said State
My Commission expires:
62
<PAGE> 1
EXHIBIT 10.206
GENERAL LOAN AND SECURITY AGREEMENT
(RECEIVABLE LOAN FACILITY)
AMONG
STEAMBOAT SUITES, INC.,
PREFERRED EQUITIES CORPORATION
AND
TEXTRON FINANCIAL CORPORATION
DATED AS OF DECEMBER 17, 1999
<PAGE> 2
<TABLE>
<S> <C>
SECTION 1. INTERPRETATION OF THIS AGREEMENT
1.1 Terms Defined
1.2 Directly or Indirectly
1.3 Headings
1.4 Accounting Principles
SECTION 2. ADVANCES AND NOTES
2.1 Receivables Advances; Receivables Loan
2.2 Issuance of Note; Rate of Interest; Receipt of Payments
2.3 Mandatory Prepayments of Receivables Loan; Voluntary Prepayments
of Receivables Loan
2.4 Participating Lender
2.5 Commitment Fee
SECTION 3. COLLATERAL
3.1 Security
3.2 Undertakings Regarding Collateral
3.3 Financing Statements
3.4 Location of Collateral; Books and Records
3.5 Insurance of Collateral
3.6 Condemnation
3.7 Taxes Affecting Collateral
3.8 Discharge of Liens Affecting Collateral
3.9 Use of Resort
3.10 Other Timeshare Covenants
3.11 Protection of Collateral; Assessments; Reimbursement
3.12 Interest on Lender Paid Expenses
3.13 Lender Responsibility
3.14 Notice to Obligors
3.15 Release of Lien on Unsold Inventory Timeshare Intervals
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Subsidiaries and Capital Structure
4.2 Corporate Organization and Authority
4.3 Business and Property
4.4 Financial Statements
4.5 Full Disclosure
4.6 Pending Litigation
4.7 Title to Properties
4.8 Trademarks; Licenses and Permits
4.9 Transaction Is Legal and Authorized
4.10 No Defaults
4.11 Governmental Consent
4.12 Taxes
4.13 Use of Proceeds
4.14 Compliance with Law
4.15 Restrictions of Debtor
4.16 Brokers' Fees
4.17 Deferred Compensation Plans
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
4.18 Labor Relations
4.19 Validity and Enforceability
4.20 Validity of Liens Granted to Lender
4.21 Timeshare Regimen Reports
4.22 The Timeshare Intervals
4.23 Pre-Sale of Timeshare Intervals
SECTION 5. CONDITIONS PRECEDENT AND EFFECTIVENESS OF THIS AGREEMENT
5.1 Opinions of Counsel
5.2 Warranties and Representations True as of Closing Date
5.3 Compliance with this Agreement
5.4 Officer's Certificates; Secretary's Certificates; Good-Standing
Certificates
5.5 Uniform Commercial Code Financing Statements
5.6 Assignment of Property-Related Contracts
5.7 Intentionally Deleted
5.8 Guaranty Agreement
5.9 Subordination of Indebtedness
5.10 Expenses
5.11 Receivables Note; Inventory Note; Inventory Deed of Trust
5.12 Title Insurance; Casualty Insurance
5.13 Environmental Site Assessment Report
5.14 Taxes
5.15 Inspection
5.16 Survey
5.17 Engineering Report
5.18 Schedule of Subsequent Inventory Advances
5.19 First Lienholder Status; Quit-Claim Deed; Proxy Acknowledged
5.20 Proceedings Satisfactory
SECTION 6. RECEIVABLES ADVANCE CLOSING CONDITIONS
6.1 Requests for Advances
6.2 Pledged Notes Receivable
6.3 Proceedings Satisfactory
6.4 Other Conditions
6.5 Expenses
SECTION 7. COVENANTS
7.1 Payment of Taxes and Claims
7.2 Maintenance of Properties; Corporate Existence; Stock Ownership;
Renovations; Supervisory Architect; Indebtedness; Liens; Business
7.3 Payment of Notes and Maintenance of Office
7.4 Sale of Properties
7.5 Consolidation and Merger
7.6 Timeshare Covenants
7.7 Guaranties
7.8 Compliance with Environmental Laws
7.9 Transactions with Affiliates; Principal Properties
7.10 Use of the Lender Name
7.11 Subordinated Obligations
7.12 Notice of Legal Proceedings
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
7.13 Further Assurances
7.14 Financial Statements
7.15 Officers' Certificate
7.16 Inspection
SECTION 8. EVENTS OF DEFAULT
8.1 Default
8.2 Default Remedies
SECTION 9. REVIVAL OF OBLIGATIONS AND LIENS
SECTION 10. MISCELLANEOUS
10.1 Governing Law
10.2 Expenses and Closing Fees
10.3 Parties, Successors and Assigns
10.4 Notices
10.5 Total Agreement
10.6 Survival
10.7 Litigation
10.8 Power of Attorney
10.9 Survival of Indemnities
10.10 Conflicting Obligations; Rights and Remedies
</TABLE>
Schedule 1A/1B -- Property Description of Resorts
Schedule 2 -- Property-Related Contracts
Schedule 3 -- Affiliates and Capital Structure
Schedule 4 -- Reserved
Schedule 5 -- Reserved
Schedule 6 -- Litigation
Schedule 7 -- Title Exceptions
Schedule 8 -- Personal Property Exceptions
Schedule 9 -- Permitted Leases and Rentals of Units
Schedule 10 -- Hazardous Substances
Schedule 11 -- Use of Proceeds
Schedule 12 -- Licenses, Permits, Etc. Not Obtained
Schedule 13 -- Deferred Compensation Plans
Schedule 14 -- Payment Instructions
Schedule 15 -- Address of Debtor for Books and Records
Schedule 16 -- Address of Debtor for Notices
Schedule 17 -- Address of Lender for Notices
Schedule 18 Description of Defaulted Note
Exhibit A Form of Inventory Deed of Trust
Exhibit B -- Form of Receivables Note
Exhibit C Form of Timeshare Instruments
Exhibit D -- Form of Proxies
Exhibit E -- Reserved (?)
Exhibit F -- Form of Opinion from Ballard Spahr
Andrews & Ingersol
4
<PAGE> 5
Exhibit G -- Form of Opinion of Lionel Sawyer & Collins
Exhibit H -- Form of Opinion of
Greenberg Traurig et al
Exhibit I -- Form of Debtor's Officer's Certificate
Exhibit J -- Form of Debtor's Secretary's Certificate
Exhibit K -- Form of Preferred Equities' Secretary's Certificate
Exhibit L -- Form of Mego Financial's Secretary's Certificate
Exhibit M -- Form of Guaranty Agreement
Exhibit N Form of Assignment of Rents
Exhibit O Form of Officers Certificate - Financial Statements
Exhibit P Form of Receivable Advance Request
Exhibit Q Form of Collateral Assignment of Notes Receivable and
Supplement Collateral Assignment
5
<PAGE> 6
GENERAL LOAN AND SECURITY AGREEMENT
RECEIVABLE LOAN FACILITY
THIS GENERAL LOAN AND SECURITY AGREEMENT (as amended from time to time,
this "Agreement"), made and executed as of the 17th day of December, 1999, by
and among TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as secured
party (herein referred to as the "Lender"), PREFERRED EQUITIES CORPORATION, a
Nevada corporation, and STEAMBOAT SUITES, INC., a Colorado corporation, each
jointly and severally, as debtor (herein collectively and individually referred
to as the "Debtor").
BACKGROUND:
Lender and Steamboat Suites, Inc. ("Steamboat") are parties to a General
Loan and Security Agreement dated October 5, 1994 amended by First Amendment to
General Loan and Security Agreement dated as of February 27, 1995, Second
Amendment to General Loan and Security Agreement dated as of November 30, 1995,
Third Amendment to General Loan and Security Agreement dated as of November 29,
1996, Fourth Amendment to General Loan and Security Agreement dated as of June
30, 1999, and letter amendments dated respectively September 23, 1996, December
10, 1997 and October 15, 1999 (collectively "Existing Loan Agreement"). Such
Existing Loan Agreement evidences a $15,000,000 receivable loan and a $7,500,000
original inventory loan to Steamboat for the Steamboat Resort (as defined
below). The obligations of the Existing Loan Agreement are guaranteed by
Preferred Equities Inc. ("Preferred") and Mego Financial Corp. Steamboat and
Preferred have requested an extension of the Existing Loan Agreement and
increase of the inventory loan to provide financing to both Steamboat and
Preferred and to include the Hilltop Resort (as defined below). Lender has
agreed to such request and determined to provide an inventory loan and a
receivable loan facility to both Preferred and Steamboat so long as the Existing
Loan Agreement is rewritten and the loans are evidenced by separate loan
agreements. For purposes of maintaining and continuity of agreement between
Steamboat and Lender, this Agreement shall be considered as necessary, an
amendment and restatement of the Existing Loan Documents and not a prepayment
under the terms thereof. Any defined terms used herein and not defined in
Section 1 hereof shall have meanings assigned in the Existing Loan Agreement. It
is the intention of Lender and Debtor that the Inventory loan and Receivable
loan be cross collateralized and cross defaulted during the term of each loan
and with all other indebtedness owed to Lender by either Debtor. To that end,
certain security documents shall evidence and secure both loans and all other
obligations owed by Steamboat or Preferred to Lender.
SECTION 1. INTERPRETATION OF THIS AGREEMENT
1.1 TERMS DEFINED.
As used in this Agreement, the following terms shall have the following
respective meanings set forth below or set forth in the Section referred to
following such term:
ADVANCE -- means the Receivables Advances.
AFFILIATE -- means any Person
(a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Debtor;
<PAGE> 7
(b) which beneficially owns or holds 5% or more of any
class of the Voting Stock of the Debtor; or
(c) 5% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Debtor.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock,
other voting Securities, by contract or otherwise.
AGENCY AGREEMENT -- means an agreement among the Debtor, the
Collection Agent and the Lender, reasonably satisfactory in form and
substance to the Lender, relating to lockbox services in connection with
a post office box and a related Lockbox Account.
AGREEMENT OR THIS AGREEMENT -- as defined in the preamble hereto.
AMENITY BUILDING: -- means that certain building built at the
Steamboat Resort which contains, among other things, a lobby, a
hospitality coffee bar, a hot tub, a sauna and sales facilities, and to
have individual ski storage lockers affixed thereto.
ASSIGNMENT OF RENTS -- as defined in Section 5.11 of this
Agreement.
ASSOCIATION AND ASSOCIATIONS -- means collectively or
individually, as appropriate, The Suites at Steamboat Owners'
Association, a Colorado nonprofit corporation, or any successor
association thereto as provided in the Steamboat Timeshare Documents and
Hilltop Resort Owners' Association, Inc., a Colorado nonprofit
corporation, or any successor association thereto as provided in the
Hilltop Timeshare Documents.
BOOKS AND RECORDS -- means all books, records, computer tapes,
disks, software and micro-fiche records of the Debtor related to the
Resorts.
BUILDING -- means Building A and/or Building B.and/or Building I.
BUILDING A -- means the first residential building at the
Steamboat Resort, designated "Building A," which consists of 30 Units,
as provided in the Steamboat Declaration.
BUILDING B -- means the second residential building at the
Steamboat Resort, designated "Building B" which consists of 30 Units, as
provided in the Steamboat Declaration.
BUILDING I.-- means the residential building at the Hilltop
Resort which consists of 56 residential units and 2 commercial
condominium units.
BUSINESS DAY -- means a day other than a Saturday or Sunday or a
day on which banks in the State of Nevada, the State of Rhode Island or
the State of Connecticut are required or authorized by law to be closed
(other than for a general banking moratorium or holiday for a period
exceeding 4 consecutive days).
CHANGE IN MANAGEMENT -- means that Preferred and/or Guarantor
shall cease to own, directly or indirectly, in the aggregate 100% of the
total combined voting power of all classes of
2
<PAGE> 8
Voting Stock or other equity interests of any Person which shall have
managerial and/or supervisory operational responsibilities in respect of
the Resort.
CLOSING DATE -- means December 17, 1999.
COLORADO UNIFORM COMMERCIAL CODE -- means the Uniform Commercial
Code as adopted and in force in the State of Colorado, as from time to
time in effect.
COLLATERAL -- as defined Section 3.1 of this Agreement.
COLLECTION AGENT -- at any time means the Person, acting as agent
for the Lender,which is responsible for receiving payments under the
Pledged Notes Receivable from the Makers thereof; and which is a party
to an Agency Agreement and pursuant thereto maintains or may maintain
one or more Lockbox Accounts for the deposit of payments in respect of
Pledged Notes Receivable.
COMMON AMENITIES -- means the common areas and other amenities at
the Resort as contemplated in the Declaration which any purchaser of a
Timeshare Interval shall be entitled to use pursuant to the Declaration.
"Common Amenities" shall include the amenities offered in the Amenity
Building.
COMPENSATION -- as defined in Section 3.1(g) of this Agreement.
CONDEMNATION COMPENSATION -- as defined in Section 3.6(a) of this
Agreement.
CONTRACT -- means any purchase and sale agreement between one or
more natural Persons and the Debtor which agreement provides for the
sale by the Debtor to such natural Person or Persons of one or more
Timeshare Intervals.
DEBTOR -- as defined in the preamble hereto.
DECLARATIONS -- means the Steamboat Declaration and Hilltop
Declaration.
DECLARANT -- the status of the Debtor as the declarant under
applicable Colorado law and under the respective Declaration and the
Articles of Incorporation and By-Laws of the respective Association.
DEFAULT -- means an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DEFAULT RATE -- means, at any time, the per annum rate of
interest equal to the Interest Rate, then in effect, plus 2% per annum;
provided, however, that the Default Rate shall in no event exceed the
Maximum Rate.
DORFINCO -- means Dorfinco Corporation, a Delaware corporation.
ELIGIBLE NOTE RECEIVABLE -- means each Pledged Note Receivable in
respect of which all of the following requirements shall have been
satisfied:
3
<PAGE> 9
(a) such Pledged Note Receivable shall arise from the sale
of one or more Timeshare Intervals by the Debtor to the purchaser
thereof, provided that such purchaser may not be an employee of
the Debtor or an Affiliate, and provided further that,
(i) if such purchaser resides in Canada and, at the
time of the pledging of such Pledged Note Receivable of
such purchaser and after giving effect thereto and
assuming that it otherwise qualifies as an Eligible Note
Receivable, the aggregate outstanding principal balances
of all Eligible Notes Receivable of purchasers residing in
Canada exceeds 20% of the aggregate principal balance of
all Eligible Notes Receivable then outstanding, such
Pledged Note Receivable of such purchaser residing in
Canada shall not, at such time or thereafter for so long
as the aforesaid 20% condition shall exist, be deemed an
Eligible Note Receivable; and
(ii) if such purchaser is a resident of neither the
United States of America nor Canada and, at the time of
the pledging of such Pledged Note Receivable of such
purchaser and after giving effect thereto and assuming
that it otherwise qualifies as an Eligible Note
Receivable, the aggregate outstanding principal balances
of all Eligible Notes Receivable of purchasers not
residing in the United States of America or Canada exceeds
5% of the aggregate principal balance of all Eligible
Notes Receivable then outstanding, such Pledged Note
Receivable of such purchaser not residing in the United
States of America or Canada shall not, at such time or
thereafter for so long as the aforesaid 5% condition shall
exist, be deemed an Eligible Note Receivable;
(b) payments of principal and interest under the terms of
such Pledged Note Receivable shall be payable in legal tender of
the United States of America and in equal monthly installments of
principal and interest, provided that no interest is required to
be paid under such Pledged Note Receivable that qualifies as a
Zero Coupon Pledged Note Receivable;
(c) the unpaid balance of such Pledged Note Receivable
shall be due and payable not later than 120 months from the date
thereof.
(d) with respect to such Pledged Note Receivable, no
monthly installment in respect of such Pledged Note Receivable
shall be more than 60 days contractually delinquent, provided
that, if such Pledged Note Receivable shall have been pledged to
support a direct funding of a Receivables Advance and such
Receivables Advance is the first such Receivables Advance to be
made in respect of such Pledged Note Receivable, no monthly
installment in respect of such Pledged Note Receivable shall be
more than 30 days contractually delinquent at the time of such
first Receivables Advance;
(e) the Maker of such Pledged Note Receivable shall have
access, in accordance with the Pledged Contract related thereto
and the Timeshare Documents, to the Timeshare Interval in respect
of such Pledged Note Receivable and to the Common Amenities; at
the time of the pledging of such Pledged Note Receivable, such
Timeshare Interval shall provide such Maker with access to a
Unit;
(f) the executed original of such Pledged Note Receivable,
which shall be in form and substance reasonably satisfactory to
the Lender, shall have been endorsed by the Debtor to the order
of the Lender and delivered to the Lender;
4
<PAGE> 10
(g) the Lender shall have a valid and perfected,
first-priority Lien in and to such Pledged Note Receivable, the
Timeshare Instruments related thereto and all proceeds arising
therefrom and such Pledged Note Receivable shall be secured by a
Pledged Note Receivable Deed of Trust in and to the Timeshare
Interval or Timeshare Intervals being financed by such Pledged
Note Receivable;
(h) the Unit in respect of the Timeshare Interval being
financed by such Pledged Note Receivable shall not be subject to
any Lien not previously consented to by the Lender, and the
Debtor, as the mortgagee under the Pledged Note Receivable Deed
of Trust securing such Pledged Note Receivable shall be a "first
mortgagee" for purposes of the Declaration, and the Debtor shall
deliver a written notice to the Association informing it that all
notices to be sent to a "first mortgagee" in respect of the
aforesaid Timeshare Interval shall be sent to the Debtor and to
the Lender;
(i) the terms of such Pledged Note Receivable, the Pledged
Contract related thereto and all other Timeshare Instruments
related thereto shall comply in all respects with all applicable
federal and state laws and the regulations promulgated
thereunder, including, without limitation, the applicable
provisions of the Federal Consumer Credit Protection Act, as
amended, Regulation Z of the Federal Reserve Board, as amended,
and the Colorado Uniform Consumer Credit Code, as amended, and
copies of all such regulatory, rescission and other disclosure
documents shall be either delivered to the Lender or made readily
available to the Lender in the files of the Debtor, and all
rights of rescission in respect of such Pledged Note Receivable
or the related Pledged Contract shall have expired or otherwise
terminated;
(j) without the prior written approval of the Lender, such
Pledged Note Receivable shall not have an original principal
balance in excess of $25,000 and, at the time of the pledging of
such Pledged Note Receivable and after giving effect thereto and
assuming that it otherwise qualifies as an Eligible Note
Receivable, the aggregate outstanding principal balances of all
Eligible Notes Receivable of the Maker of such Pledged Note
Receivable and/or of any affiliate of such Maker shall not exceed
$25,000;
(k) no defense, offset, counterclaim, discount or
allowance (including any stay, defense or claim arising out of
any bankruptcy or insolvency proceeding) in respect of such
Pledged Note Receivable or any other Timeshare Instrument related
thereto shall have been asserted by the Maker thereof or on
behalf of such Maker, and the Debtor shall have represented in
writing to the Lender that it has no knowledge of any threatened
assertion of the same, provided that, notwithstanding the
foregoing in this clause (k), if the Lender has knowledge of, or
reasonable cause to believe that, any such defense, offset,
counterclaim, discount or allowance in respect of such Pledged
Note Receivable or such Timeshare Instrument has been asserted,
may be asserted or is threatened to be asserted and it confirms
the same, in writing, to the Debtor, such Pledged Note Receivable
shall be deemed not to, or to no longer, satisfy the requirements
of this clause (k);
(l) the Maker shall have previously paid to the Debtor, in
connection with the execution and delivery of the Pledged
Contract related to such Pledged Note Receivable, a down payment
(prior to all discounts not offered to purchasers generally in
the ordinary course of business of the Debtor) of not less than
10% of the purchase price
5
<PAGE> 11
(as set forth in such Pledged Contract) of the Timeshare
Interval being so purchased by such Maker;
(m) the sale of the Timeshare Interval related to such
Pledged Note Receivable shall have been recognized as a sale on
the books of the Debtor pursuant to, and in accordance with, the
definition thereof set forth in the Guidelines established by the
American Institute of Certified Public Accountants; and
(n) at the time of the pledging of such Pledged Note
Receivable and after giving effect thereto, the Note Receivable
Portfolio Average Rate of Interest shall be at least 12.5% per
annum, however, notwithstanding subsection (c) or (n) herein,
Pledged Notes Receivable evidencing 0% or 5% interest for terms
of 24 or 36 months, respectively, shall also be acceptable
provided Maker has paid to Debtor 50% of such purchase price and
such Pledged Notes Receivable do not exceed 30% of the aggregate
principal balance of the Pledged Notes Receivable outstanding at
the time of such determination.
If any Pledged Note Receivable, having met all of the
requirements of an "Eligible Note Receivable," shall fail, at any time
thereafter, to continue to meet the requirements set forth in
subparagraphs (a), (b), (c), (d), (e), (g), (h), (j), (k), (l) or (n)
above, such Pledged Note Receivable shall immediately be excluded from
the Receivables Borrowing Base as an Eligible Note Receivable. Before
any such Pledged Note Receivable shall be reinstated as an Eligible Note
Receivable, such Pledged Note Receivable shall meet all of the
requirements set forth in subparagraphs (a) through (n), inclusive,
above, as if such Pledged Note Receivable were being pledged anew at
such time, and the Debtor shall have received payment of all delinquent
payments thereunder.
ENVIRONMENTAL PROTECTION LAW -- means each federal, state,
county, regional or local law, statute, or regulation enacted in
connection with or relating to the protection or regulation of the
environment, including, without limitation, those laws, statutes, and
regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of
Hazardous Substances, and any regulations issued or promulgated in
connection with such statutes by any governmental authority and any
orders, decrees or judgments issued by any court of competent
jurisdiction in connection with any of the foregoing.
EQUIPMENT -- means the furniture, fixtures and furnishings of
each Unit and all fixtures, fittings, machinery, appliances, equipment,
apparatus, furnishings and personal Property of every nature found on or
used in connection with the Resort, but excluding motor vehicles,
Property owned by the Association, Property owned by occupants of the
Units and telephone and computer equipment leased in the ordinary course
of business.
EVENT OF DEFAULT -- as defined in Section 8.1 of this Agreement.
FAIR MARKET VALUE -- at any time with respect to any Property
means the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer,
and an informed and willing seller, under no compulsion to buy or sell,
respectively.
GUARANTY -- as defined in Section 7.7(b) of this Agreement.
GUARANTY AGREEMENT -- as defined in Section 5.8 of this
Agreement.
6
<PAGE> 12
GUARANTOR -- means Mego Financial.
HAZARDOUS SUBSTANCES -- means any and all pollutants,
contaminants, toxic or hazardous wastes or any other substances that
might pose a hazard to health or safety, the removal of which may be
required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which
is or shall be restricted, prohibited or penalized by any Environmental
Protection Law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls); provided,
however, that "Hazardous Substances" shall not include any substance
used by the Debtor, any homeowner or their respective agents in the
ordinary course of business in compliance with applicable Environmental
Protection Laws.
HILLTOP DECLARATION. -- means that certain Condominium
Declaration with Timeshare Ownership, Covenants, Conditions and
Restrictions Hilltop Resort, A Condominium dated January 5, 1998 and
recorded with the Office of the Clerk and Recorder for Routt County,
Colorado on February 18, 1998 in Book 743, Page 478 as amended for time
to time in accordance with the terms and provisions thereof and hereof.
HILLTOP RESORT -- means the Property described in Schedule 1-A
including without limitation, all of the currently existing and
hereafter created buildings, Units, Timeshare Intervals, Common
Amenities in respect thereof and all other currently existing or
hereafter constructed buildings, structures and improvements of every
nature whatsoever now or hereafter situated on or serving, said
Property.
IMPOSITIONS -- as defined in Section 3.7 of this Agreement.
INSURANCE PREMIUMS -- as defined in Section 3.5(a) of this
Agreement.
INTEREST RATE -- means, with respect to any calendar month, a per
annum rate of interest equal to the greater of:
(a) 8.75%, or
(b) the sum of
(i) 2.0%, plus
(ii) the Prime Rate then in effect for such month.
The interest rate for each calendar month shall be based upon the
Prime Rate in effect at 9:00 a.m. (Eastern time) on the 1st day of such
month. The term "Prime Rate" shall mean the "prime rate" as announced
from time to time by Chase Manhattan Bank, N.A. or any successor
thereto. In the event Chase Manhattan Bank, N.A., or any successor
thereto, shall discontinue announcement of said Prime Rate, a comparable
index designated by the Lender shall be used in calculating the Interest
Rate. It is expressly agreed that the use of the term "prime rate" or
any other similar designation is not intended to, nor does it, imply
that said rate of interest is a preferred rate of interest or one which
is offered by Chase Manhattan Bank, N.A. or any successor thereto to its
most creditworthy customers.
7
<PAGE> 13
INVENTORY DEED OF TRUST -- means that certain combination deed of
trust, security agreement and fixture financing statement, substantially
in the form of Exhibit A to this Agreement, as the same may be amended
from time to time.
INVENTORY LOAN -- means, that certain $8,400,000 Timeshare
Interval inventory loan made or to be made by lender to Debtor.
INVENTORY LOAN AGREEMENT -- means that certain General Loan and
Security Agreement among Lender and Debtor of even date hereof to
provide for the Inventory Loan.
INVENTORY NOTE - means the note in the amount of $8,400,000
delivered by Debtor to the Lender pursuant to the Inventory Loan
Agreement.
LENDER -- as defined in the preamble to this Agreement.
LETTER OF INTENT -- means, with respect to any request by the
Debtor regarding (a) an extension of the Receivables Commitment Period,
(b) additional loans to be extended to it by the Lender or (c) the sale
of Notes Receivable by the Debtor to the Lender, a letter from the
Lender to the Debtor expressing an interest in such request, provided
that any such Letter of Intent may incorporate or be subject to
conditions and contingencies as are customarily included in such letters
and shall not be deemed to be an acceptance of any offer of the Debtor
in such request or a commitment or offer by the Lender to make loans to,
or purchase Notes Receivable from, the Debtor.
LIEN -- any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and
including, but not limited to, attachments, judgments or tax liens
(except for inchoate tax liens which arise in connection with taxes not
yet due and payable) and the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of
this Agreement, the Debtor shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security
purposes.
LOAN -- means the Receivables Loan and the Inventory Loan.
LOAN COSTS -- as defined in Section 10.2 of this Agreement.
LOCKBOX ACCOUNT -- means a deposit account maintained by the
Collection Agent exclusively for, and in the name of, the Debtor for the
receipt and deposit of payments in respect of Pledged Notes Receivable.
MAKER -- means any natural Person, who shall have, in a bona fide
transaction, purchased a Timeshare Interval and executed a Contract and
a Note Receivable in respect thereof.
MANDATORY RECEIVABLES PREPAYMENT -- means any payment required by
Section 2.3(b) of this Agreement.
8
<PAGE> 14
MAXIMUM RATE -- as defined in Section 2.2(b) of this Agreement.
MEGO FINANCIAL -- means Mego Financial Corp., a New York
corporation.
MONTHLY AVERAGE WEIGHTED LOAN BALANCE -- means, for any calendar
month with respect to the Receivables Loan, the quotient of
(a) the aggregate of the Daily Loan Balances for each of
the days of such month in respect of such Receivable Loan divided
by
(b) the number of days in such month.
For purposes of this definition, "Daily Loan Balance" shall mean,
for any day, the principal balance of the Receivables Loan outstanding
as of the close of business of the Lender for such day after giving
effect to all payments received and Receivables Advances made during
such day.
NOTES -- means the Inventory Note and the Receivables Note.
NOTE RECEIVABLE -- means any promissory note made payable to the
order of the Debtor which provides for payment of the deferred purchase
price of one or more Timeshare Intervals purchased by the Maker thereof.
NOTE RECEIVABLE PORTFOLIO AVERAGE RATE OF INTEREST -- means, at
any time, the quotient of
(a) the sum of the respective products for each Eligible
Note Receivable, where each such product equals, with respect to
each such Eligible Note Receivable, the stated per annum rate of
interest (expressed as a decimal and rounded to the nearest
thousandth) times the principal balance of such Eligible Note
Receivable outstanding at such time divided by
(b) the aggregate of the principal balances of all
Eligible Notes Receivable outstanding at such time;
For the purposes of this definition, Pledged Notes Receivable
having an interest rate of 0% or 5% shall be excluded from the
determination of the Note Receivable Portfolio Average Rate of Interest
if all of the following conditions with respect thereto are satisfied:
(a) the aggregate unpaid principal balance of all such 0%
or 5% interest rate Pledged Notes Receivable shall not exceed 30%
of the aggregate outstanding principal balance of all Pledged
Notes Receivable outstanding at the time of such determination;
to extent that such 30% threshold shall be exceeded, the 0% or 5%
interest rate Pledged Notes Receivable contributing, in whole or
part, to such excess shall be included in the determination of
the Note Receivable Portfolio Average Rate of Interest;
(b) each purchaser of a Timeshare Interval related to each
such 0% interest rate Pledged Note Receivable shall have
previously paid to the Debtor, in connection with the execution
and delivery of the Pledged Contract related thereto, a down
payment (prior to all discounts not offered to purchasers
generally in the ordinary course of business of the Debtor) of
not less than 50% of the purchase price (as set forth in such
Pledged Contract) of the Timeshare Interval purchased by such
purchaser; and
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<PAGE> 15
(c) the unpaid principal balance of each 0% interest rate
Pledged Note Receivable shall be due and payable, in legal tender
of the United States of America, in equal monthly installments
and the remaining term of such Pledged Note Receivable shall not
exceed 24 months (each such 0% interest rate Pledged Note
Receivable meeting the requirements of this subclause (C) and
subclause (B) above is referred to herein as a "Zero Coupon
Pledged Note Receivable").
OBLIGATIONS -- means all sums now or hereafter loaned, advanced
or incurred by the Lender to or on behalf of the Debtor under this
Agreement, the Inventory Loan, the Receivables Note, and any other
Security Document (including, without limitation, accrued and unpaid
interest, unpaid prepayment premium and Loan Costs), and the full,
prompt and complete performance of all obligations owed by, or
undertakings or indemnities of, Debtor arising hereunder or thereunder
and the PEC Obligations.
PARTICIPATING LENDER -- means any Person which (a) shall have
been granted the right by the Lender to participate in any of the Notes
and the Collateral and (b) shall have entered into a participation
agreement in form and substance satisfactory to the Lender which shall
provide, inter alia, that the Participating Lender shall communicate and
deal only with the Lender with respect to the Participating Lender's
interest in the Notes and the Collateral.
PEC OBLIGATIONS -means all sums now or hereafter loaned, advanced
or incurred by the Lender or Dorfinco to or on behalf of Preferred under
the Loan and Security Agreement dated as of August 12, 1998, as amended,
and Loan and Security Agreement dated as of July 31, 1991, as amended,
together with any amendments thereto, and Security Documents (including,
without limitation, accrued and unpaid interest, unpaid prepayment
premium and Loan Costs), and the full, prompt and complete performance
of all obligations owed by, or undertakings or indemnities of, Debtor
arising hereunder or thereunder.
PERMITTED EXCEPTIONS -- means the title exceptions set forth in
Schedule 7 of this Agreement.
PERSON -- means an individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
PHASE II COMMITMENT LETTER - means with respect to any Letter of
Intent issued by the Lender, a letter from the Lender to the Debtor
whereby the Lender offers to extend credit to, or purchase Notes
Receivable from, the Debtor substantially in accordance with the terms
and conditions set forth in such Letter of Intent. Such offer may be
subject to such conditions and contingencies as are customarily found in
commitment letters.
PLEDGED CONTRACT -- means any Contract related to a Pledged Note
Receivable, which Pledged Note Receivable evidences the payment of the
deferred purchase price of one or more Timeshare Intervals provided for
in such Contract.
PLEDGED NOTE RECEIVABLE DEED OF TRUST -- with respect to any
Pledged Note Receivable financing the purchase of a Timeshare Interval
means a deed of trust, in form and substance reasonably acceptable to
the Lender, (a) which deed of trust shall have created a first priority
Lien in and to such Timeshare Interval, (b) which deed of trust shall
have been duly recorded (and all fees and taxes in connection therewith
paid by the Debtor) in the appropriate land records, (c) the original of
which deed of trust, which shall contain an appropriate official
acknowledgement of
10
<PAGE> 16
its due recordation in the appropriate local land records, shall have
been delivered to the Lender by the Debtor, provided that if such
original deed of trust has been delivered for recordation but has not
yet been returned to the Debtor, the Debtor shall deliver to the Lender
a copy of such original deed of trust, certified by the Debtor to be a
true copy, together with a certificate of the Debtor certifying that
such original deed of trust has been delivered for recordation,
provided, further, that the Debtor shall deliver to the Lender the
original deed of trust containing an official acknowledgement of its due
recordation within 60 days of the purchase of the related Timeshare
Interval, (d) which deed of trust shall have been assigned to the Lender
by the Debtor pursuant to an assignment, in form and substance
reasonably acceptable to the Lender (and such assignment shall have been
duly recorded {and all fees and taxes in connection therewith paid by
the Debtor} in the appropriate land records) and (e) in respect of which
deed of trust a mortgagee's title insurance policy shall have been
issued by a title insurance company acceptable to the Lender and
delivered to the Lender (each such mortgagee's title insurance policy
shall be in form and substance reasonably satisfactory to the Lender and
its counsel {all exceptions thereto, other than Permitted Exceptions,
being subject to the approval of the Lender and its counsel} and shall
name the Lender, by way of an endorsement thereto {which endorsement
shall have been delivered to the Lender}, as the insured party thereon,
and the amount of coverage provided by each such mortgagee's title
insurance policy shall not be less than the principal amount of such
Pledged Note Receivable.
PLEDGED NOTES RECEIVABLE -- means any Note Receivable which shall
have been assigned and delivered to the Lender pursuant hereto and not
reassigned or redelivered by the Lender to the Debtor.
PREFERRED OR PREFERRED EQUITIES -- means Preferred Equities
Corporation, a Nevada corporation.
PRIME RATE -- as defined in the definition of "Interest Rate" in
this Section 1.1.
PROPERTY OR PROPERTIES -- means any interest in any kind of
property or asset of Debtor, whether real, personal or mixed, or
tangible or intangible.
PROPERTY-RELATED CONTRACT -- as defined in Section 3.1(b) of this
Agreement.
RECEIVABLES ADVANCE -- means any advance made by the Lender
hereunder in respect of Eligible Notes Receivable.
RECEIVABLES BORROWING BASE -- means, at any time, the lesser of
(a) the remainder of (i) $26,500,000 minus (ii) the
principal amount of the Inventory Loan outstanding at such time
minus (iii) the principal amount outstanding under the Loan and
Security Agreement dated as of August 12, 1998, as amended, by
and between Preferred and Dorfinco minus (iv) the Obligations
outstanding under the General Loan and Security Agreement dated
as of July 31, 1991, as amended provided however such remainder
shall not exceed $15,000,000; and
(b) the sum, without duplication, of (i) 80% of the
aggregate of the unpaid principal balances of all Eligible Notes
Receivable outstanding at such time plus (ii) 90% of the
aggregate of the unpaid principal balances of all Eligible Notes
Receivable in respect of which at least three or more scheduled
monthly installment payment shall have been made.
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<PAGE> 17
RECEIVABLES BORROWING BASE DEFICIENCY -- means, at any time, the
remainder (if positive) of (a) the aggregate outstanding principal
amount of the Receivables Loan at such time minus (b) the Receivables
Borrowing Base at such time.
RECEIVABLES COMMENCEMENT DATE -- means the date on which the
first Receivables Advance is made, which date shall be no later than the
Closing Date.
RECEIVABLES COMMITMENT PERIOD -- means the period commencing on
the Receivables Commencement Date and ending on the Receivables
Termination Date.
RECEIVABLES LOAN -- means, at any time, the aggregate principal
balance of all Receivables Advances outstanding at such time.
RECEIVABLES MATURITY DATE -- means June 1, 2004.
RECEIVABLES NOTE -- means that certain promissory note, dated the
date hereof and substantially in the form of Exhibit B to this
Agreement.
RECEIVABLES PREPAYMENT PREMIUM -- with respect to any prepayment
of the Receivables Loan pursuant to Section 2.3(c) of this Agreement or
as a result of the acceleration of the Receivables Loan pursuant to
Section 8.2 of this Agreement, means the percentage set forth below,
corresponding to the date on which the Receivables Loan is prepaid or
accelerated, of the principal balance of the Receivables Loan
outstanding at such time:
<TABLE>
<CAPTION>
================================================================================
IF PREPAYMENT IS MADE, OR
ACCELERATION OCCURS, DURING THE APPLICABLE PERCENTAGE OF
FOLLOWING PERIODS PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
From and including the first anniversary of the 3%
Receivables Commencement Date to (but
excluding) the second anniversary of the
Receivables Commencement Date
- --------------------------------------------------------------------------------
From and including the second anniversary of 2%
the Receivables Commencement Date to (but
excluding) the third anniversary of the
Receivables Commencement Date
- --------------------------------------------------------------------------------
From and including the third anniversary of the 1%
Receivables Commencement Date to (but
excluding) the fourth anniversary of the
Receivables Commencement Date
- --------------------------------------------------------------------------------
After the fourth anniversary of the Receivables 0%
Commencement Date to (and including) the
Receivables Maturity Date
================================================================================
</TABLE>
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<PAGE> 18
RECEIVABLES TERMINATION DATE -- means the earliest of
(a) the date on which the Lender's obligations to make
Receivable Advances are terminated pursuant to Section 8.2(b) of
this Agreement,
(b) the date on which the Obligations are accelerated
pursuant to Section 8.2(a) of this Agreement,
(c) the date on which any of the Events of Default set
forth in Section 8.1(f) shall have occurred, and
(d) June 1, 2002
RELEASE FEE -- as defined in the Inventory Loan Agreement.
RELEASE PRICE -- means, with respect to any Unsold Inventory
Timeshare Interval, $3,075
RESORT OR RESORTS - means the Hilltop Resort and/or the Steamboat
Resort.
SECURITY -- shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS -- means this Agreement, the Receivables Note,
the Inventory Note, all assignments of the Pledged Notes Receivable and
Pledged Contracts related to the Receivables Note, all assignments of
Pledged Note Receivable Deeds of Trust securing Pledged Notes
Receivable, all assignments of Property-Related Contracts, the Agency
Agreement, the Inventory Deed of Trust, the Guaranty Agreements and all
assignments, instruments, certificates, notices and other documents
executed and delivered in connection with the transactions contemplated
herein.
STEAMBOAT: means Steamboat Suites, Inc. a Colorado corporation.
STEAMBOAT DECLARATION -- means that certain Amended and Restated
Declaration with Timeshare Ownership Covenants, Conditions and
Restrictions, The Suites at Steamboat, A Condominium dated March 21,
1995 and recorded with the Office of the Clerk and Recorder for Routt
County, Colorado on March 22, 1995 in Book 706, Page 337.
STEAMBOAT RESORT - means the Property described on Schedule 1-B
hereto, including, without limitation, all of the currently existing and
hereafter created buildings, Units, Timeshare Intervals, Common
Amenities in respect thereof and all other currently existing or
hereafter constructed buildings, structures and improvements of every
nature whatsoever now or hereafter situated on, or serving, said
Property, including, without limitation, the Amenity Building.
SUBORDINATION AGREEMENT -- as defined in Section 5.9 of this
Agreement.
SUBSIDIARY -- means any present or future corporation of which
the Debtor owns, directly or indirectly, more than 50% of the Voting
Stock.
TIMESHARE DOCUMENTS -- means all documents and instruments
establishing, memorializing, governing, or affecting the rights and
obligations of the purchasers of Timeshare Intervals in and to a Unit,
including, without limitation, the documents and certificates creating
13
<PAGE> 19
and effecting the timeshare regimen for such Unit, which shall include,
without limitation, the Declaration, the Articles of Incorporation and
By-Laws of the Association, any restrictive covenants in respect of such
regimen and all other project instruments in respect of such regimen.
TIMESHARE INSTRUMENTS -- as defined in Section 3.10(i) of this
Agreement.
TIMESHARE INTERVAL -- means (i) (A) an estate for years in and to
any Unit which shall confer an exclusive right to use, occupy and
possess such or any other similar Unit for a stipulated week or a week
in a stipulated season, together with a vested remainder as a tenant in
common in such Unit at the end of such estate for years, all as more
particularly provided for by the Declaration and the other Timeshare
Documents in respect of such Unit or (B) a freehold estate in any Unit
created by the Declaration and the other Timeshare Documents in respect
of such Unit, which freehold estate shall entitle the owner thereof to
the exclusive use and occupancy of one of the 51 annually recurring
weekly timeshare periods or a week in a stipulated season established
and designated in said Declaration in respect of such Unit or any other
similar Unit and (ii) the proportionate interest in the Common Amenities
related to such Unit, as set forth in the Declaration.
TITLE INSURANCE POLICY {BLANKET} -- as defined in Section 5.12
hereof.
UNIT -- means any unit (within the meaning of such term in the
Declaration) in any Building.
UNSOLD INVENTORY TIMESHARE INTERVAL -- means, at any time, any
Timeshare Interval arising out of a Unit, which Timeshare Interval
shall, as at such time, not have been released from the Lien of the
Inventory Deed of Trust.
VOTING STOCK -- means securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions) of such corporation.
ZERO COUPON PLEDGED NOTE RECEIVABLE -- as defined in the
definition of "Note Receivable Portfolio Average Rate of Interest " in
Section 1.1 of this Agreement.
1.2 DIRECTLY OR INDIRECTLY.
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provisions
shall be applicable whether such action is taken directly or indirectly by such
Person.
1.3 HEADINGS.
Section headings have been inserted in this Agreement as a matter of
convenience of reference only; such section headings are not a part of this
Agreement and shall not be used in the interpretation of this Agreement.
1.4 ACCOUNTING PRINCIPLES.
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Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be determined or made in accordance with generally
accepted accounting principles, procedures and practices consistently applied at
the time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
SECTION 2. ADVANCES AND NOTES
2.1 RECEIVABLES ADVANCES; RECEIVABLES LOAN;
(a) RECEIVABLES ADVANCES. The Lender agrees, pursuant to the
terms of this Agreement and subject to the satisfaction of the
conditions precedent in Section 6 of this Agreement, to make one or more
Receivables Advances to the Debtor from time to time during the
Receivables Commitment Period, provided that at such time (and after
giving effect to any Receivables Advance currently then to be made) the
aggregate outstanding principal amount of all Receivables Advances shall
not exceed the Receivables Borrowing Base. In accordance with the terms
and conditions of this Agreement, the Debtor may borrow, cause the
Receivables Loan to be repaid through collections and reborrow during
the Receivables Commitment Period. The Receivables Note shall be payable
in the manner set forth in Section 2.3 of this Agreement and the
Receivables Note. The Receivables Loan shall be due and payable on the
Receivables Maturity Date together with any accrued interest thereon
then remaining unpaid and any other amounts due hereunder, under the
Receivables Note or under any of the other Security Documents.
(b) LENDING LIMIT: Debtor acknowledges, agrees and confirms that
the obligations of Lender after giving effect to all participations to
extend the Receivable Loan, Inventory Loan and PEC Obligations is
limited to a maximum aggregate principal amount of $19,000,000. Debtor
further acknowledges, agrees and confirms that the obligation of Lender
to make the full amount of the Receivable Loan shall be subject to
Lender participating $7,500,000 of the Receivable Loan.
2.2 ISSUANCE OF NOTE; RATE OF INTEREST; RECEIPT OF PAYMENTS.
(a) RECEIVABLES NOTE. The Debtor shall authorize, issue and
deliver to the Lender the Receivables Note. On and after the Closing
Date the Lender is hereby authorized by the Debtor to record (in good
faith) in the manual or data processing records of the Lender, or on the
grid schedule annexed to the Receivables Note, the date and amount of
each Receivables Advance extended to the Debtor by the Lender hereunder
and the date and amount of each repayment of principal and each payment
of interest on account of the Receivables Loan. In the absence of
manifest error, such records and schedule shall be conclusive as to the
outstanding principal amount of all Receivables Advances and the payment
of interest accrued hereunder; provided, that the failure to make any
such record entry with respect to any Receivables Advance or payment
shall not limit or otherwise affect the obligations of the Debtor under
this Agreement, the Receivables Note or any other Security Document.
(b) RATE OF INTEREST: RECEIVABLES LOAN AND INVENTORY LOAN.
Interest shall accrue on the Receivables Loan and be due monthly in
arrears on the first (1st) Business Day of each month, as more
particularly provided in this clause (b), and shall be paid as provided
in Section 2.3 of this Agreement. Subject to the accrual of interest on
the Receivables Loan after the occurrence of a Default or Event of
Default, as more particularly provided in this clause (b), the Monthly
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Average Weighted Loan Balance in respect of the Receivables Loan for
each calendar month shall bear interest at a rate per annum equal to the
Interest Rate.
Interest shall be calculated under this clause (b) on the basis
of actual days elapsed over a period of a 360 day year.
Each Receivables Advance shall bear interest as of the date of
the Lender's wiring of funds thereof through the date of the receipt by
the Lender of the repayment of such Advance (if the repayment of all or
any portion of any Advance is received by the Lender later than 3:00
p.m. Eastern time, then interest accrual thereon shall be through the
next Business Day following such receipt). After the occurrence of an
Event of Default or after the Receivables Maturity Date (if the
aggregate principal balance of the Receivables Advances is not paid in
full on the Receivables Maturity Date), the Receivables Loan will bear
interest at the Default Rate.
The Debtor and the Lender intend to comply at all times with
applicable usury laws. All agreements between the Debtor and the Lender,
whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of
demand or acceleration of the maturity of any Note or otherwise, shall
the interest contracted for, charged, received, paid or agreed to be
paid to the Lender exceed the maximum amount permissible under
applicable law, or in the absence of a maximum allowable rate under
applicable law, then, 45% per annum (the "Maximum Rate"). The Lender
may, in determining the Maximum Rate in effect from time to time, take
advantage of any law, rule or regulation in effect from time to time
available to the Lender which exempts the Lender from any limit upon the
rate of interest it may charge or grants to the Lender the right to
charge a higher rate of interest than that otherwise permitted by
applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to the Lender in excess of the Maximum Rate, the
interest payable to the Lender shall be reduced to the Maximum Rate; and
if from any circumstance the Lender shall ever receive anything of value
deemed interest by applicable law in excess of the Maximum Rate, an
amount equal to any excessive interest shall be applied to the reduction
of the principal of the Loan and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of the
Loan, such excess shall be refunded to the Debtor. All interest paid or
agreed to be paid to the Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout
the full period until payment in full of the principal so that the
interest on the Loan for such full period shall not exceed the Maximum
Rate. The Debtor agrees that in determining whether or not any interest
payment under the Security Documents exceeds the Maximum Rate, any
non-principal payment (except payments specifically described in the
Security Documents as "interest") including without limitation,
prepayment fees and late charges, shall to the maximum extent not
prohibited by law, be an expense, fee or premium rather than interest.
The Lender hereby expressly disclaims any intent to contract for, charge
or receive interest in an amount which exceeds the Maximum Rate. The
provisions of this Agreement, the Notes, and all other Security
Documents are hereby modified to the extent necessary to conform with
the limitations and provisions of this paragraph, and this paragraph
shall govern over all other provisions in any document or agreement now
or hereafter existing. This paragraph shall never be superseded or
waived unless there is a written document executed by the Lender and the
Debtor, expressly declaring the usury limitation set forth in this
paragraph to be null and void, and no other method or language shall be
effective to supersede or waive this paragraph.
(c) INTEREST AND OTHER PAYMENTS DUE ON HOLIDAYS. If any payment
due on, or with respect to, this Agreement, the Notes or any other
Security Document shall fall due on a day other than a Business Day,
then such payment shall be made on the 1st Business Day following the
day
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on which such payment shall have so fallen due; provided that if all or
any portion of such payment shall consist of a payment of interest, for
purposes of calculating such interest, such payment shall be deemed to
have been originally due on such first following Business Day, and such
interest shall accrue and be payable to (but not including, subject to
clause (d) below) the actual date of payment.
(d) APPLICATION OF PAYMENTS RECEIVED AFTER 3:00 P.M. Any payment
actually received by the Lender at or before 3:00 p.m. Eastern time, by
federal funds wire transfer on any Business Day, shall be deemed to have
been received by the Lender on such day. Any payment actually received
by the Lender after 3:00 p.m. Eastern time, by federal funds wire
transfer on any Business Day, shall be deemed to have been received on
the next following Business Day. All payments received by the Lender on
a day other than a Business Day, or in a manner other than by federal
funds wire transfer, shall be deemed to have been received by the Lender
on the Business Day such amounts actually become available to the Lender
prior to 3:00 p.m. Eastern time in immediately available funds.
2.3 MANDATORY PREPAYMENTS OF RECEIVABLES LOAN; VOLUNTARY PREPAYMENTS OF
RECEIVABLES LOAN.
(a) COLLECTION AND APPLICATION OF PROCEEDS FROM PLEDGED NOTES
RECEIVABLE.
(i) The Debtor shall direct or otherwise cause all Makers
under the Pledged Notes Receivable to pay all moneys due
thereunder directly to the post office box established pursuant
to the Agency Agreement or to such other Person or place as the
Debtor may be advised by the Lender in writing.
(ii) The Debtor, to the extent it receives such payments
directly from or on behalf of such Makers, shall hold the same
(in the form so received) in trust for the sole and exclusive
benefit of the Lender and immediately shall deliver the same to
the Lender or, if so directed or agreed to in writing by the
Lender, shall either deliver the same to the Collection Agent or
shall mail the same to the post office box established pursuant
to the Agency Agreement.
(iii) Moneys (in good, collected funds in legal tender of
the United States of America) from Pledged Notes Receivable
collected by the Lender and/or collected and delivered to the
Lender by the Collection Agent or the Debtor shall be applied, on
each Wednesday of each week (and if such Wednesday is not a
Business Day, then on the next Business Day),
FIRST, towards the payment of fees, costs and
expenses as set forth in Section 10.2 of this Agreement,
in each case, as the same may have arisen in respect of
the Receivables Loan,
SECOND, towards the payment of all billed and
unpaid interest at the Interest Rate (except as provided
in clause third below) and any interest at the Default
Rate in respect of the Receivables Loan,
THIRD, towards the payment of accrued and unpaid
interest at the Interest Rate for and in respect of the
complete calendar month immediately preceding such week,
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FOURTH, to the payment of the remaining principal
amount of the Receivables Loan then outstanding,
FIFTH, towards the payment of all other fees, costs
and expenses as set forth in Section 10.2 of this
Agreement,
SIXTH, towards the payment of all billed and unpaid
interest, if any, in respect of the Inventory Loan,
SEVENTH, to the payment of the principal amount of
the Inventory Loan, if any, and
EIGHTH, to the payment of any other Obligations
then unpaid and in default.
Interest which accrues on the Receivables Loan in respect
of any month shall be due and payable on, and shall be paid by
the Debtor on, the first (1st) Business Day of the immediately
following month. To the extent that any interest due and payable
as of the first (1st) Business Day of any month shall not have
been previously paid in full by the application of the proceeds
of the Pledged Notes Receivable, as referred to above, the Debtor
shall pay such shortfall on or prior to the last day of such
month and, if such day is not a Business Day, on or prior to the
first Business Day immediately preceding such last day.
(b) MANDATORY PREPAYMENTS. If at any time the aggregate
outstanding principal amount of the Receivables Loan shall exceed the
Receivables Borrowing Base, the Debtor shall immediately notify the
Lender of such fact and make a mandatory prepayment ("Mandatory
Receivables Prepayment") in the amount necessary to reduce the then
outstanding amount of the Receivables Loan to the amount of the
Receivables Borrowing Base determined as at such time. If a Mandatory
Receivables Prepayment is required, the Debtor shall have the option to
eliminate all, or any part, of the Receivables Borrowing Base Deficiency
and thereby avoid the obligation, in whole or part, to make a Mandatory
Receivables Prepayment by (i) promptly notifying the Lender in writing
of the Debtor's intention to deliver new Notes Receivable, which when
pledged would constitute Eligible Notes Receivable, to the Lender so as
to increase the Receivables Borrowing Base to the required amount and
(ii) promptly assigning and delivering such new Notes Receivable to the
Lender or such other Person as Lender may designate, but in no event
later than 3 Business Days after the delivery of the monthly reports
required to be delivered pursuant to Section 7.14(f) hereof that show
that such Receivables Borrowing Base Deficiency exists, provided that,
if such monthly reports are not delivered on or before the date provided
therefor in said Section 7.14(f) or if such monthly reports are so
delivered but fail to reflect (in the reasonable opinion of the Lender)
a Receivables Borrowing Base Deficiency which exists in the month which
is the subject of such reports, the actions required to be undertaken in
subclause (i) and subclause (ii) above in respect of the Debtor's option
set forth in this sentence shall be undertaken in connection with the
Debtor's exercise of such option not later than the 15th day of the
month following the month in which such Receivables Borrowing Base
Deficiency occurred. Such assignment and delivery shall comply with the
document delivery and recordation requirements set forth in Section 6 of
this Agreement. Any Mandatory Receivables Prepayment to be made by the
Debtor pursuant to this Section 2.3(b) shall not affect any other
Obligation of the Debtor arising under this Agreement, the Notes or any
other Security Document. Mandatory Receivables Prepayments shall not be
subject to any prepayment premium. If any Receivables Borrowing Base
Deficiency arises as a result of one or
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more of the Pledged Notes Receivable no longer qualifying as Eligible
Notes Receivable and the Debtor effects, as provided above, a Mandatory
Receivables Prepayment or the actions required by sub-clause (i) and
sub-clause (ii) above and, as a result thereof, such Receivables
Borrowing Base Deficiency is cured, the Debtor may, at such time,
request the Lender, in writing, to return to it the Pledged Notes
Receivable which do not qualify as Eligible Notes Receivable, and the
Debtor shall identify said Pledged Notes Receivable in the aforesaid
writing. The Lender shall, upon the receipt of the aforesaid writing and
if such Receivables Borrowing Base Deficiency has been cured and no
Default or Event of Default shall then exist, release its Liens in and
to said Pledged Notes Receivable, the Pledged Note Receivable Deeds of
Trust that specifically relate thereto and the other documents,
instruments, title insurance and chattel paper that specifically relate
thereto and all proceeds, Property rights, privileges and benefits that
specifically arise from any of the same and shall endorse and deliver to
the Debtor all of said Pledged Notes Receivables and shall reassign and
(to the extent it has possession of the same) deliver to the Debtor all
of said Pledged Note Receivable Deeds of Trust and said other documents,
instruments, title insurance policies and chattel paper to the extent,
but only to the extent, that the said other documents, instruments,
title insurance or chattel paper relate specifically and solely to said
Pledged Notes Receivable (such endorsement, delivery and assignment
being without recourse to, and without representations or warranties of
any kind from, the Lender). The Debtor shall bear all out-of-pocket
expenses (including, without limitation, the reasonable legal fees and
the disbursements of the Lender) in connection with such release,
endorsement, delivery and assignment. All documentation related thereto
shall be reasonably satisfactory to the Lender and its counsel.
(c) VOLUNTARY PREPAYMENTS. Debtor shall have the right on
or after the first Business Day of the 12th full calendar month
following the Receivables Commencement Date (excluding for purposes of
this clause (c) the calendar month in which the Receivables Commencement
Date occurs), upon 30 days' prior written notice to the Lender, to
prepay the Receivables Loan, in whole but not in part (except the
Receivables Loan may be partially prepaid (without prepayment premium)
as contemplated in Section 3.5 and 3.6 hereof), together with (i) the
applicable Receivables Prepayment Premium in respect of such prepayment,
determined at the time making of such prepayment, (ii) all accrued and
unpaid interest due on the Receivables Loan as at the time of the making
of such prepayment and (iii) all other amounts payable hereunder,
determined at the time of making such prepayment, including, without
limitation, Loan Costs. Prepayments by Makers under their respective
Pledged Notes Receivable shall not be deemed to be "voluntary
prepayments" and shall not be subject to any Receivables Prepayment
Premium.
2.4 PARTICIPATING LENDER.
The Lender shall have the right, without prior notice to the Debtor or
the approval of the Debtor, to designate one or more Participating Lenders and
to grant to such Participating Lenders participations in the Receivables Loan
and/or the Inventory Loan, on terms and conditions satisfactory to the Lender.
In the event that the Lender so designates a Participating Lender and grants
such Participating Lender a participation in any of such Loans, such
Participating Lender shall communicate and deal only with the Lender in respect
to such Participating Lender's interest in any of such Loans and the Collateral
and the Debtor shall communicate and deal hereunder only with the Lender and not
with any Participating Lender.
SECTION 3. COLLATERAL
3.1 SECURITY.
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For the purpose of securing the prompt and complete payment and
performance by the Debtor of all of the Obligations, the Debtor does
unconditionally and irrevocably hereby grant to the Lender a security interest
in, and a Lien upon, the following Property of the Debtor, whether now owned or
hereafter acquired (such Property being herein referred to as the "Collateral"):
(a) all of the Debtor's right, title and interest in, to and
under all Pledged Notes Receivable (now or hereafter existing) together
with all deposits, accounts, accounts receivable, contract rights,
general intangibles and other receivables arising under or in connection
with such Pledged Notes Receivable or otherwise securing the obligations
thereunder of the Makers thereof, together with all payments and other
proceeds thereunder (including, without limitation, all Pledged
Contracts, Pledged Note Receivable Deeds of Trust, documents,
instruments, title insurance and chattel paper relating thereto and all
proceeds, Property rights, privileges and benefits arising out of the
enforcement thereof);
(b) all of the Debtor's right, title and interest in, to and
under (including, without limitation, all revenues, proceeds, rents and
other benefits derived from) any franchises, (excluding the Hospitality
Franchise Systems and Ramada Franchise Systems license agreements)
permits, trade names, trademarks (and goodwill associated therewith),
approvals, leasehold interests (whether as lessor or lessee), management
contracts, marketing contracts, maintenance contracts, utility
contracts, security contracts, licensing contracts, Timeshare Documents
or other similar contracts and all guaranties of any of the foregoing,
including, without limitation, the contracts set forth on Schedule 2 to
this Agreement (individually, a "Property-Related Contract" and,
collectively, the "Property-Related Contracts") relating, in each case,
to one or more Units or Timeshare Intervals or to the Resort;
(c) all other accounts, contract rights, general intangibles,
documents, instruments and proceeds of the Debtor related to the
Property described in clause (a) or clause (b) above, or otherwise
connected with, or related to, the operation and/or use of the Resort
(including, without limitation, all rights of the Debtor in and to
unearned or prepaid Insurance Premiums, Impositions or other charges for
utilities and any deposits with respect thereto related to the Resorts
and any interest thereon and any Compensation that would be payable in
respect of any Pledged Note Receivable Deed of Trust);
(d) all Books and Records;
(e) all Equipment;
(f) all of the Debtor's right, title and interest of whatever
character (whether as owner, vendor, mortgagee, chattel lessee,
Declarant, Unit owner, Timeshare Interval owner or otherwise, whether
vested or contingent and whether now owned or hereafter acquired) in and
to (i) the Resort, including, without limitation, all Timeshare
Intervals (now existing or hereafter created) in the Resort (whether
sold or unsold), (ii) the Declaration (including, without limitation,
its Development Rights or Special Declarant Rights, as such terms are
defined in the Colorado Common Interest Ownership Act), (iii) all
building materials, supplies and other Property now or hereafter stored
at or delivered to the Resort or any other location for installation in
or on the Resort, (iv) except to the extent included in clause (a),
clause (b) or clause (c) above, all rents, issues, profits and
condemnation awards now or hereafter belonging or in any way pertaining
to the Resort and/or any building, structure or improvement now or
hereafter located at the Resort, provided that nothing in this clause
(iv) shall limit or restrict the right of the Debtor to collect "Rents"
as defined, and provided for, in the Assignment of Rents, (v) any and
all plans,
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specifications, drawings, books, records, marketing materials and
similar items now or hereafter relating to the Resort, the operation
thereof, any rights of the Debtor thereto or any interest therein;
(g) all of the Debtor's right, title and interest of whatever
character (whether as owner, chattel lessee, Declarant, Unit owner,
Timeshare Interval owner or otherwise, whether vested or contingent and
whether now owned or hereafter acquired) in and to any and all
judgments, settlements, claims, awards, insurance proceeds and other
proceeds and compensation, and any interest thereon (collectively,
"Compensation"), now or hereafter made or payable in connection with (i)
any casualty or other damage to all or any part of the Resort, (ii) any
condemnation proceedings affecting the Resort or any rights thereto or
any interest therein, (iii) any damage to or taking of the Resort or any
rights thereto or any interest therein arising from or otherwise
relating to any exercise of the power of eminent domain (including,
without limitation, any and all Compensation for change of grade of
streets or any other injury to or decrease in the value of the Resort),
or any conveyance in lieu of or under threat of any such taking, (iv)
any and all proceeds of any sale, assignment or other disposition of the
Resort or any rights thereto or any interest therein, (v) any and all
proceeds of any other conversion (whether voluntary or involuntary) of
the Resort or any rights thereto or any interest therein or to cash or
any liquidated claim relating thereto, and (vi) any and all refunds and
rebates of or with respect to any Insurance Premium, any Imposition or
any other charge for utilities relating to the Resort (including,
without limitation, any and all refunds and rebates of or with respect
to any deposit or prepayment relating to any such Insurance Premium,
Imposition or charge), and any and all interest thereon, whether now or
hereafter payable or accruing; and
(h) all other "Mortgaged Property," as such term is defined in
the Inventory Deed of Trust, whether such Collateral shall be presently
in existence or whether it shall be acquired or created by the Debtor at
any time hereafter, wherever located, together with the products and
proceeds thereof, and any replacements, additions and/or accessions
thereto and substitutions thereof and after-acquired Property relating
thereto, provided that any Collateral which shall have been released by
the Lender from the Liens provided for herein or in any other Security
Document shall not be deemed to have again become subject to such Liens
solely by virtue of becoming after-acquired Property of the Debtor.
For purposes of the avoidance of doubt, the Lender and the Debtor
acknowledge that (1) this Agreement provides for the creation of a security
interest in, and a Lien upon, Pledged Notes Receivable, which (as provided in
the definition thereof set forth in this Agreement) only include Notes
Receivable which have been assigned and delivered to the Lender by the Debtor
under this Agreement and which have not been reassigned or redelivered by the
Lender to the Debtor, (2) it is not the intention of the Lender and the Debtor
that this Agreement or any other Security Document should create a security
interest in, or Lien upon, Notes Receivable which do not constitute Pledged
Notes Receivable, (3) the Inventory Deed of Trust grants a security interest for
the benefit of the Lender in and to the Debtor's right, title, interest and
income in respect of any contracts for the sale, transfer and other conveyance
of the Mortgaged Property or Timeshare Intervals therein and (4) it is not the
intention of the Lender and the Debtor that the Inventory Deed of Trust
(pursuant to the security interest referred to in subclause (3) above or
otherwise) shall require that the Debtor assign and deliver Notes Receivable to
the Lender or cause any Notes Receivable to qualify as Pledged Notes Receivable.
The Lender agrees that, upon the release of a Timeshare Interval from
the Inventory Deed of Trust, the Lender will release any security interest , in
any related Notes Receivable that are not Pledged Notes Receivable at such time,
together with all documents, instruments, chattel paper, proceeds, revenues,
Property rights, privileges and other benefits relating thereto. In addition to
its agreements in
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the immediately preceding sentence, the Lender further agrees that, upon the
incurrence by the Debtor of indebtedness other than to the Lender as permitted
in Section 7.2(g) hereof, or the sale of Notes Receivable by the Debtor to a
Person other than the Lender as permitted in Section 7.4 hereof, and the written
request of the Debtor, the Lender will release its security interest under any
Security Document (including, without limitation, the Inventory Deed of Trust),
in any Notes Receivable that are not Pledged Notes Receivable at such time and
are either being pledged in connection with the incurrence of such indebtedness
or being sold in connection with such sale, as the case may be, together with
all documents, instruments, chattel paper, proceeds, revenues, Property rights,
privileges and other benefits relating thereto.
To the extent that the Debtor satisfies
(a) the requirements of Section 7.2(g) hereof with respect to the
incurrence of additional indebtedness in connection with the financing
of Notes Receivable not pledged to the Lender under this Agreement or
(b) the requirements of Section 7.4 hereof with respect to the
sale of Notes Receivable not pledged to the Lender under this Agreement
and, in either case, if no Event of Default shall then exist, the Lender agrees,
upon receipt of a written request of the Debtor therefor, to enter into an
intercreditor agreement, which shall be in form and substance reasonably
satisfactory to the Lender and its counsel, with any other lender providing such
financing to the Debtor or any purchaser purchasing such Notes Receivable from
the Debtor, which intercreditor agreement shall provide
(a) for an equal and ratable sharing between the Lender and such
other lender or such purchaser of any security interest in, and Lien
upon, the Collateral described in clause (b), in clause (c) (but only to
the extent that clause (c) shall relate to Property described in clause
(b)), clause (d) and clause (e) above, provided that the Lender shall
not be obligated to effect any such sharing if such other lender or
purchaser shall have failed to perfect its security interest in, and
Lien upon, said Collateral,
(b) that such other lender or purchaser shall recognize the
priority and exclusivity of the Lender's security interest in, and Lien
upon, all of the Collateral described in clause (a) above and in clause
(c) above (to the extent that clause (c) shall relate to Property
described in clause (a) above),
(c) that the Lender shall recognize the priority and exclusivity
of the other lender's or purchaser's security interest in, and Lien
upon, the Notes Receivable specifically pledged or sold and (in each
case) delivered to such other lender or such purchaser by the Debtor and
in and to the accounts, contract rights, general intangibles and
instruments, documents and proceeds in respect thereof, and
(d) for a proportionate sharing of the voting rights granted by
the Debtor to the Lender pursuant to Section 3.9(c) hereof, provided
that such other lender has provided for an assignment of such voting
rights to itself.
The Lender may, in its sole discretion, require the Debtor to deliver to
the Lender certified copies of the documents of such other lender or such
purchaser providing for such financing or sale and the exhibits and other
instruments to be delivered in connection therewith, all of which shall be
reasonably
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satisfactory to the Lender. All actions taken in connection with the execution
of any such intercreditor agreement shall be reasonably satisfactory to the
Lender and its counsel.
3.2 UNDERTAKINGS REGARDING COLLATERAL.
(a) The Lender shall not be required to take any steps to perfect
or maintain the perfection of its security interest in the Collateral
and no loss of, or damage to, the Collateral shall release the Debtor
from any of the Obligations.
(b) Notwithstanding that the Lender has agreed hereunder to make
Receivable Advances to the Debtor only in respect of Eligible Notes
Receivable, the Lender shall have a security interest in, and may
collect payments under, all of the Pledged Notes Receivable of the
Debtor.
(c) The execution and delivery of this Agreement, and the
granting of the Liens in and to the Collateral, shall not subject the
Lender to, or transfer or pass to the Lender or in any way affect or
modify, the liability of the Debtor under any or all of the Pledged
Notes Receivable, the Pledged Contracts, the Property-Related Contracts
or in connection with the Resort, the Declaration or the Association's
Articles of Incorporation or By-Laws, it being understood and agreed
that notwithstanding this Agreement, and the granting of the Liens in
and to the Collateral, all of the obligations of the Debtor (whether as
owner, chattel lessee, vendor, mortgagee, Declarant, Unit owner,
Timeshare Interval owner or otherwise) to each and every other party
under each and every one of the Pledged Notes Receivable, the Pledged
Contracts and the Property-Related Contracts and/or in connection with
the Resort or the Declaration and Articles of Incorporation and By-Laws
of the Association shall be and remain enforceable by such other party,
its successors and assigns, only against the Debtor or Persons other
than the Lender, and the Lender has not assumed any of the obligations
or duties of the Debtor under or with respect to any of the Pledged
Notes Receivable, the Pledged Contracts or the Property-Related
Contracts or otherwise in connection with the Resort or the Declaration
or the Articles of Incorporation or By-Laws of the Association.
(d) The Debtor hereby agrees and acknowledges that neither the
acceptance of this Agreement or any other Security Document by the
Lender nor the exercise of, or failure to exercise, any right, power or
remedy in this Agreement or in any other Security Document conferred
upon the Lender shall be deemed or construed to obligate the Lender to
pay any sum of money, take any other action or incur any liability in
connection with, or collect or realize upon, any of the Pledged Notes
Receivable, the Pledged Contracts or any other Collateral. It is further
agreed and understood by the Debtor that the Lender shall not be liable
in any way for any cost, expense or liability connected with, or any
charge or liability arising from, any of the Pledged Notes Receivable,
any of the Pledged Contracts, any of the Property-Related Contracts or
any other Collateral.
(e) The Debtor hereby agrees to indemnify the Lender, and hold it
harmless, from any and all liability, loss or damage which it may or
might incur by reason of any and all claims and demands whatsoever which
may be asserted against the Lender arising out of, as a result of, or
otherwise connected with, the Liens hereby granted to the Lender by the
Debtor under or in respect of any of the Pledged Notes Receivable, the
Property-Related Contracts or any other Collateral by reason of (i) the
failure by the Debtor to perform any obligations or undertakings
required to be performed by the Debtor under or in connection with any
of such Pledged Notes Receivables, the Pledged Contracts, the
Property-Related Contracts or any other Collateral, (ii) any failure by
the Debtor, in connection with any of such Pledged Notes Receivable, the
Pledged
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Contracts, the Property-Related Contracts or any other Collateral, to
comply with any applicable federal, state or local consumer credit, sale
rescission or usury statute, including, without limitation, any such
statute of any state in which a Maker may reside, the Consumer Credit
Protection Act, as amended, the Federal Trade Commission Act, as
amended, the Colorado Uniform Consumer Credit Code, as amended, all
rules and regulations promulgated under the foregoing statutes, acts and
codes, the Interstate Land Sales Full Disclosure Act, the Colorado
Condominium Ownership Act and the rules and regulations promulgated
thereunder and the Colorado Common Interest Ownership Act and the rules
and regulations promulgated thereunder, and (iii) failure by the Debtor
to comply with any applicable federal, state or local statutes or
ordinances and the rules and regulations promulgated thereunder
pertaining to the renovation, construction, use or operation of the
Resort (including, without limitation, the Units) or to otherwise
discharge its duties and obligations under applicable law and under the
Declaration or the Association's Articles of Incorporation or By-Laws as
Declarant.
3.3 FINANCING STATEMENTS.
The Debtor agrees, at its own expense, to execute the financing
statements required by the Colorado Uniform Commercial Code together with any
and all other instruments or documents and take such other action, including
delivery of such instruments and documents, as may be necessary to perfect, and
to continue the perfection of, the Lender's security interest and Liens in the
Collateral and, unless prohibited by law, the Debtor hereby authorizes the
Lender to execute and file any such financing statement on the Debtor's behalf.
The parties agree that a legible carbon, photographic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.
3.4 LOCATION OF COLLATERAL; BOOKS AND RECORDS.
All tangible Collateral (other than Collateral delivered to the Lender
and other than certain Books and Records which may be kept on Debtors' premises
in Las Vegas, Nevada) which is personal Property is to remain, at all times, on
the premises of the Debtor in Steamboat Springs, Colorado and the Debtor
represents and warrants to the Lender that all of the currently existing
tangible Collateral is now located there, and the Debtor will not transfer the
Collateral from such premises to other locations without the prior written
approval of the Lender. The Debtor shall, upon receipt of a written request
therefor from the Lender, deliver to the Lender, then current copies of all
computer tapes, disks, software and micro-fiche records constituting, in whole
or in part, the Books and Records.
3.5 INSURANCE OF COLLATERAL.
(a) MAINTENANCE OF INSURANCE. The Debtor agrees to maintain, or
cause to be maintained, insurance, with financially sound and reputable
insurers acceptable to the Lender, with respect to the Buildings, the
Units and the personal Property located therein (including, without
limitation, the furniture, fixtures and furnishings thereof), all other
equipment and other personal Property of every nature whatsoever now or
hereafter located in or on, or attached to, and used or intended to be
used in connection with the Resort, the Common Amenities (including,
without limitation, the Amenity Building) and the Pledged Notes
Receivable, the Pledged Contracts and the Books and Records, against
casualties, contingencies, hazards and such other risks (including,
without limitation, (i) fire, hurricane, tornado, wind damage, and such
other risks insured against by a standard all-risk property and fire
insurance policy and endorsement for extended coverage and (ii) flood
insurance, if required by applicable law) and in such amounts as shall
be reasonably satisfactory to the Lender (such insurance to be
maintained during the refurbishing of the Resort and to cover materials
in as well as adjacent to the structures so insured; such insurance
shall also be maintained prior to such refurbishing as well as
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after such refurbishing); provided, however, that such casualty
insurance shall (A) in no case be in an amount less than an amount
sufficient to rebuild the Buildings, the Unit or the Common Amenity
which shall have suffered the loss and replace any of the personal
Property located therein and (B) be sufficient to provide funds to fully
compensate owners of Timeshare Intervals in and to such Building and/or
Unit for any inability to utilize such Building, Unit and/or Common
Amenity during any period following a loss to such Building, Unit or
Common Amenity. The Debtor shall deliver copies of the policies of such
insurance to the Lender, with satisfactory lender's loss payable
endorsements naming the Lender as loss payee to the extent of its
interest and as such interest may appear on the Closing Date, as set
forth in Section 5.12 hereof and within 15 days after the Closing Date,
Debtor shall deliver a certification from the insurance company or
insurance companies issuing such policies certifying that such copies
are true and correct. Each such policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days'
prior written notice to the Lender in the event of cancellation of the
policy for any reason whatsoever and a clause that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Debtor or owner of the Property nor by the occupation of the premises
for purposes more hazardous than are permitted by said policy. If the
Debtor shall fail to provide and pay for such insurance, or have the
same provided and paid for, the Lender may, at the Debtor's expense,
procure the same, but shall not be required to do so. The Debtor agrees
to deliver to the Lender, promptly as rendered, true copies of all
reports made by the Debtor in any reporting form to insurance companies.
The Debtor shall maintain or caused to be maintained insurance with
financially sound and reputable insurers with respect to its Property
and business (including, without limitation, the Collateral) covering
any public liability of the Debtor, its officers, agents or employees
(including, without limitation, damage by Debtor or its officers, agents
or employees or the Association to the Property of other Persons, any
bodily injury caused by Debtor or its officers, agents or employees to
any other Person, or any negligent act or other similar liability of
Debtor or its officers, agents or employees) and in such amounts as are
satisfactory to the Lender; the Lender shall be named as a co-insured
thereon.
The Debtor shall, on or prior to August 15 of each year,
commencing on August 15, 2000, submit to the Lender insurance
certificates showing the type and amounts of insurance coverage
maintained, or caused to be maintained, by Debtor in respect of the
Resort, the then current premium cost in respect thereof and the amount
of such cost which shall have been previously paid. The Debtor shall, to
the extent permitted by applicable law, cause all casualty policies of
insurance provided under the Declaration to have mortgagee endorsements
in respect of the Lender's interests in and to the Timeshare Interval
that is the subject of any Pledged Note Receivable.
The Debtor shall pay, or cause to be paid, all premiums on the
aforesaid insurance policies and all other fees and charges payable in
connection with such insurance policies (such premiums, fees and charges
being collectively referred to herein as "Insurance Premiums") not later
than the due date thereof. If the Debtor shall fail to pay, or cause to
be paid, any such Insurance Premiums, the Lender may (but shall not be
obligated to), at Debtor's expense, pay the same. Any such payment shall
be subject to Section 3.11 hereof.
If the Mortgaged Property (as defined in the Inventory Deed of
Trust) is sold at a foreclosure sale or if the Lender shall acquire
title to said Mortgaged Property, the Lender shall have all of the
right, title and interest of the Debtor in and to all insurance policies
required under this clause (a) and the unearned premiums thereon,
related to the Mortgaged Property, and in and to the proceeds resulting
from any damage to said Mortgaged Property prior to such sale or
acquisition.
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(b) CONDOMINIUM/TIMESHARE INSURANCE PROCEEDS. The Lender
acknowledges that application of all or a portion of any proceeds of
insurance may be subject to the Colorado Condominium Ownership Act, the
Colorado Common Interest Ownership Act and the terms and provisions of
the Declaration, and the foregoing requirements in this Section 3.5
shall be subject thereto (unless such laws may be modified by agreement
and have been so modified). For so long as the Inventory Loan shall
remain outstanding, any proceeds of insurance payable by the
Association, any manager retained by it or by the Declarant in respect
of any Unit or Timeshare Interval to the Debtor under the Declaration,
the Association's Articles of Incorporation or By-Laws or under
applicable Colorado law shall be promptly paid and/or turned over to the
Lender as proceeds of the Collateral and applied either in accordance
with applicable Colorado law or, if no such requirement exists, to the
prepayment of the Loan without prepayment premium (after deducting
therefrom all out-of-pocket costs and expenses of the Lender in respect
thereof), first, as provided in the Inventory Loan Agreement and second,
as provided in Section 2.3(c) hereof. Without limiting the immediately
preceding sentence, any proceeds of insurance in respect of any Unit or
Timeshare Interval received by the Debtor or received by the Debtor as
Declarant or received by the Association at a time during which
(i) the Debtor (as Debtor or as Declarant) or any
Affiliate shall be the only owner or owners of Units or Timeshare
Intervals, or
(ii) the insurance provisions of the Declaration shall
have been suspended,
shall be promptly paid and/or turned over to the Lender (and the Debtor,
as Debtor or as Declarant, shall cause such payment and/or turnover) as
proceeds of the Collateral and applied to the prepayment of the Loan
(after deducting therefrom all out-of-pocket costs and expenses of the
Lender in respect thereof), first, as provided in the Inventory Loan
Agreement and second, as provided in Section 2.3(c) hereof.
(c) MISCELLANEOUS APPLICATION OF INSURANCE PROCEEDS. Subject to
the terms, provisions and requirements of the Declaration and applicable
Colorado law and to the extent that clause (b) above shall not be
applicable, the Lender is hereby irrevocably authorized and appointed
the agent and attorney-in-fact of the Debtor (with full right of
substitution) to adjust or compromise any insured loss in respect of the
Resort and to collect and receive the proceeds from any such policy in
respect of any such loss, which appointment shall be deemed to be
coupled with an interest. Each insurance company issuing any of the
above-mentioned insurance policies is hereby irrevocably authorized and
directed to make payment in respect of any such loss (whether or not the
Lender shall have exercised its option to adjust or compromise such
loss) directly to the Lender alone and not to the Debtor and the Lender
jointly. The Debtor shall immediately pay over to the Lender any such
payments received directly from any such insurance company. The Lender
is hereby irrevocably authorized and appointed the agent and
attorney-in-fact of the Debtor (with full right of substitution) to
endorse the Debtor's name on any instrument in payment of such proceeds,
which appointment shall be deemed to be coupled with an interest. Such
insurance proceeds received by the Lender shall not be, nor be deemed to
be, trust funds and may be commingled with the general funds of the
Lender. No interest shall be payable in respect of any such insurance
proceeds received by the Lender. After deducting from such insurance
proceeds any expenses incurred by the Lender in the adjustment or
compromise of such loss or in the collection or handling of such funds
(including, without limitation, attorneys' fees and disbursements), the
Lender shall
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<PAGE> 32
(i) if an Event of Default shall then exist, apply such
net insurance proceeds to the prepayment of the Loan, first, as
provided in the Inventory Loan Agreement and second, as provided
in Section 2.3(c) hereof;
(i) if no Event of Default shall then exist and such loss
shall not have been in respect of all, or substantially all, of
the Property in respect of the Resort and shall have exceeded
$20,000 and if the insurer which paid such insurance proceeds
shall not claim any right of participation and/or assignment of
rights in respect of the Lender with respect to the Obligations,
either deliver the net insurance proceeds to the Debtor as
contemplated in clause (A) below but subject to the conditions
set forth in said clause (A) or apply the same as contemplated in
clause (B) below:
(A) (1) the Debtor shall have, within 30 days of
such loss, delivered to the Lender a written undertaking
to rebuild, restore and/or repair the Property of the
Resort damaged or destroyed;
(2) the Debtor shall have, within 60 days of
such loss, submitted to the Lender for its approval (x)
plans and specifications in respect of such rebuilding,
restoration and/or repairing, which plans and
specifications shall be reasonably satisfactory to the
Lender and which shall have been prepared by an architect
reasonably satisfactory to the Lender, (y) an estimate of
all costs of such rebuilding, restoration and/or repairing
signed by such architect and (z) copies of approvals or
consents of all necessary governmental authorities;
(3) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that such net insurance proceeds,
together with any additional funds made available for such
purpose by the Debtor and deposited with the Lender, shall
be sufficient to effect such rebuilding, restoration
and/or repairing in accordance with the aforesaid plans
and specifications, free and clear of all Liens except the
Liens contemplated or otherwise permitted herein and in
the other Security Documents;
(4) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that such rebuilding, restoration
and/or repairing can be completed within any applicable
time limitation imposed by law or, if there are no such
time limitations, within a reasonable period of time;
(5) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that, after such application and such
rebuilding, restoration and/or repairing (taking into
account any restrictions imposed by law or agreement on
such rebuilding, restoration and/or repairing or on the
use of the Resort after such rebuilding, restoration
and/or repairing), the Resort shall have a Fair Market
Value substantially the same as, or greater than, the Fair
Market Value of the Resort immediately prior to the
occurrence of such damage or destruction;
(6) at the time of each disbursement
contemplated by sub-clause (8) below, no Property-Related
Contract shall have been terminated or, if any
Property-Related Contract shall have been terminated, the
Lender shall be
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reasonably satisfied that the Debtor will be able to
replace such Property-Related Contract reasonably
promptly;
(7) the holder of any encumbrance senior to
the Liens provided herein or in any other Security
Document in respect of the Resort shall have consented and
agreed to the application of insurance proceeds as set
forth in this clause (A); and
(8) the disbursement of such net insurance
proceeds shall be in accordance with terms, conditions and
procedures customarily followed by prudent institutional
lenders in making construction loans in similar amounts
and on such other terms, conditions and procedures as the
Lender may reasonably require (as evidenced by its written
notice thereof to the Debtor prior to the first
disbursement pursuant to this sub-clause (8)) to assure
the proper application of such proceeds and the continuing
performance by the Debtor of its obligations hereunder and
under the other Security Documents, including without
limitation, receipt by the Lender of evidence of suitable
payment bonds with respect to all material contracts and
Builder's All Risk Insurance and a certificate from the
Debtor certifying that (x) all rebuilding, restoration
and/or repairing to the date of such disbursement has been
performed substantially in accordance with the aforesaid
plans and specifications and that there have been no
material changes or modifications made in such plans and
specifications, (y) the labor, services and/or materials
to be paid by such disbursement have been performed upon,
or furnished in respect of, the rebuilding, restoration
and/or repairing of the Resort and (z) no Event of Default
exists at the time of such disbursement, or
(B) the Lender shall apply such net insurance
proceeds to the prepayment of the Loan, first, as provided
in the Inventory Loan Agreement and second, as provided in
Section 2.3(c) of this Agreement, if the Lender shall not
have received the written confirmation referred to in
sub-clause (A)(1) above within the time period required
therefor or if the Debtor shall have informed the Lender,
in writing, of its intention not to rebuild, repair and
restore the Resort or the Lender shall have determined the
same at any time during the rebuilding, repairing or
restoration process referred to in clause (A) above;
(iii) if no Event of Default shall then exist and such
loss shall not have been in respect of all, or substantially all,
of the Resort and shall not have exceeded $20,000, deliver all of
such net insurance proceeds to the Debtor and the Debtor shall
thereupon be obligated to, and shall, promptly rebuild, repair
and restore the Property of the Resort subject to such loss (or
shall cause such Property to be so promptly rebuilt, repaired and
restored) to the equivalent of its condition immediately prior to
such loss, whether or not such net insurance proceeds shall be
sufficient to cover the costs thereof, and shall certify, within
120 days of such loss, to the Lender that such rebuilding,
repairing and restoration has been completed and paid for in
full; or
(iv) if no Event of Default shall then exist and if such
loss shall be in respect of all, or substantially all, of the
Resort, apply such net insurance proceeds to the prepayment of
the Loan, first, as provided in the Inventory Loan Agreement and
second, as provided in Section 2.3(c) of this Agreement.
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Any payment of insurance proceeds over to the Debtor, as provided
above, shall not affect the Lien of this Agreement or any other Security
Document as security for the Obligations. Notwithstanding any such loss,
the Debtor shall continue to pay interest and principal at the
applicable rate and amounts and at the applicable times provided in this
Agreement and in the Notes. Although the Lender intends to use
reasonable efforts to collect such insurance proceeds in a timely
fashion, the Lender shall not be responsible for any failure to collect
any proceeds due under the terms of any insurance policy, regardless of
the cause of such failure. Any balance of such net insurance proceeds
remaining after the aforesaid application thereof shall, if no Event of
Default shall then exist, belong, or be paid to, as the case may be, the
Debtor, provided that, if an Event of Default shall then exist, the
Debtor shall promptly deliver any such balance to the Lender and such
balance shall be applied as a prepayment of the Loan, first, as provided
in Section 2.4(b) hereof and second, as provided in Section 2.3(c)
hereof.
(d) DEBTOR UNDERTAKINGS. In the event of any casualty or loss in
respect of the Resort (including, without limitation, any of the
Collateral), (i) the Debtor shall immediately notify the Lender of the
same, (ii) the Lender may, in addition to its rights as beneficiary
under the Inventory Deed of Trust, elect to exercise the voting rights
of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
Deed of Trust or as the owner of any Timeshare Interval, as such voting
rights are provided for under the Declaration, regarding all matters of
repair and restoration and (iii) the Debtor shall pay all assessments as
required by the Declaration and/or the Association's Articles of
Incorporation or By-Laws for repair and restoration due to inadequacy of
insurance.
Debtor agrees to cause any contractor hired by it to effect any of the
refurbishing of the Resort to carry adequate insurance in respect of bodily
injury or other personal liability or property damage in respect of its
employees or other third persons in connection with such refurbishing or
construction. Certificates of such insurance shall be filed with the Lender
prior to commencement of work and shall be reasonably acceptable to the Lender
in form and substance.
3.6 CONDEMNATION.
(a) CONDOMINIUM/TIMESHARE CONDEMNATION COMPENSATION. Any
compensation, awards, damages, claims, rights of action, proceeds, payment and
other relief (collectively, "Condemnation Compensation") of, or on account of,
any damage or taking of all or any part of the Resort in connection with any
condemnation proceedings or any exercise of the power of eminent domain (or any
conveyance in lieu of or under threat of any such taking), including, without
limitation, any such Condemnation Compensation for change of grade of streets or
any other injury to or decrease in the value of all or any part of the Resort
payable by the Association, any manager retained by it or by the Declarant in
respect of any Unit or Timeshare Interval to the Debtor under the Declaration,
the Association's Articles of Incorporation or By-Laws or under applicable
Colorado law shall be promptly paid and/or turned over to the Lender as proceeds
of the Collateral and applied to the prepayment of the Loan, first, as provided
in the Inventory Loan Agreement and second, as provided in Section 2.3(c)
hereof.
(b) APPLICABLE LAW.
(i) The Lender acknowledges that application of all or a
portion of any Condemnation Compensation may be subject to the
Colorado Condominium Ownership Act, the Colorado Common Interest
Ownership Act and the terms and provisions of the Declaration,
and the foregoing requirements in this Section 3.6 shall be
subject thereto (unless such laws may be modified by agreement
and have been so modified).
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(ii) Any Condemnation Compensation in respect of any Unit
or Timeshare Interval received by the Debtor or received by the
Debtor as Declarant or received by the Association at a time
during which
(A) only the Debtor (as Debtor or as Declarant) or
any Affiliate shall be the only owner of Units or
Timeshare Intervals or
(B) the condemnation provisions of the Declaration
shall have been suspended
shall be promptly paid and/or turned over to the Lender (and the Debtor,
as Debtor or as Declarant, shall cause such payment and/or turnover) as
proceeds of the Collateral and applied to the prepayment of the Loan,
first, as provided in the Inventory Loan Agreement and second, as
provided in Section 2.3(c) hereof.
(c) MISCELLANEOUS APPLICATION OF CONDEMNATION COMPENSATION.
Subject to the requirements, terms and provisions of the Declaration and
applicable Colorado law and to the extent that clause (b) above shall
not be applicable, the Lender shall be entitled to all Condemnation
Compensation of, or on account of, any damage or taking of all or any
part of the Resort in connection with any condemnation proceedings or
any exercise of the power of eminent domain (or any conveyance in lieu
of or under threat of any such taking), including, without limitation,
any such Condemnation Compensation for change of grade of streets or any
other injury to or decrease in the value of all or any part of the
Resort. All such Condemnation Compensation, and the right thereto, is
hereby assigned to the Lender and included in the Collateral. The Debtor
shall promptly execute such further assignments of any such Condemnation
Compensation as the Lender may require, and the Lender shall take all
steps to assure that such Condemnation Compensation shall be paid to the
Lender alone, and not to the Debtor and the Lender jointly, and that
such Condemnation Compensation at all times shall be free and clear of
any Liens, charges or encumbrances of any kind whatsoever, except the
Liens permitted or otherwise provided for herein or in the other
Security Documents. The Lender is hereby irrevocably authorized and
appointed the agent and attorney-in-fact of the Debtor (with full right
of substitution) to endorse the Debtor's name on any instrument in
payment of such Condemnation Compensation, which appointment shall be
deemed to be coupled with an interest.
The Lender is hereby irrevocably authorized and appointed the
agent and attorney-in-fact of the Debtor (with full right of
substitution) to commence, appear in and prosecute in its own and/or the
Debtor's name any action or proceeding relating to any condemnation or
exercise of the power of eminent domain, to settle or compromise any
claim in connection therewith and to collect and receive such
Condemnation Compensation and give proper receipts and acquittances
therefor, which appointment shall be deemed to be coupled with an
interest. The Debtor from time to time shall promptly deliver to the
Lender any and all instruments and authorizations which the Lender may
request to enable the Lender to take any such action. Such Condemnation
Compensation received by the Lender shall not be, nor be deemed to be,
trust funds and may be commingled with the general funds of the Lender.
No interest shall be payable in respect of any such Condemnation
Compensation. After deducting from such Condemnation Compensation any
expenses incurred by the Lender in connection therewith (including,
without limitation, attorneys' fees and disbursements), the Lender shall
(i) if an Event of Default shall then exist, apply such
net Condemnation Compensation to the prepayment of the Loan,
first, as provided in the Inventory Loan Agreement and second, as
provided in Section 2.3(c) of this Agreement;
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<PAGE> 36
(ii) if no Event of Default shall then exist, such damage
or taking shall have not been in respect of all, or substantially
all, of the Resort, such damage or taking shall not have rendered
the remainder of the Resort economically inviable or unusable to
the same extent and in the same manner as it was immediately
prior to such damage or taking, and the Condemnation Compensation
payable in respect thereof shall have exceeded $20,000, either
deliver the Condemnation Compensation to the Debtor as
contemplated in clause (A) below but subject to the conditions
set forth in said clause (A) or apply the same as contemplated in
clause (B) below:
(A) (1) the Debtor shall have, within 30 days of
such condemnation or taking, delivered to the Lender a
written undertaking to rebuild, restore and/or repair the
Property of the Resort not condemned or taken;
(2) the Debtor shall have, within 60 days of
such condemnation or taking, submitted to the Lender for
its approval (x) plans and specifications in respect of
such rebuilding, restoration and/or repairing, which plans
and specifications shall be reasonably satisfactory to the
Lender and which shall have been prepared by an architect
reasonably satisfactory to the Lender, (y) an estimate of
all costs of such rebuilding, restoration and/or repairing
signed by such architect and (z) copies of approvals or
consents of all necessary governmental authorities;
(3) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that such Condemnation Compensation,
together with any additional funds made available for such
purpose by the Debtor and deposited with the Lender, shall
be sufficient to effect such rebuilding, restoration
and/or repairing in accordance with the aforesaid plans
and specifications, free and clear of all Liens except the
Liens contemplated or otherwise permitted herein and in
the other Security Documents;
(4) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that such rebuilding, restoration
and/or repairing can be completed within any applicable
time limitation imposed by law or, if there are no such
time limitations, within a reasonable period of time;
(5) at the time of each disbursement
contemplated by sub-clause (8) below, the Lender shall be
reasonably satisfied that, after such application and such
rebuilding, restoration and/or repairing (taking into
account any restrictions imposed by law or agreement on
such rebuilding, restoration and/or repairing or on the
use of the Resort after such rebuilding, restoration
and/or repairing), the Resort shall have a Fair Market
Value substantially the same as, or greater than, the Fair
Market Value of the Resort immediately prior to the
occurrence of such condemnation or taking;
(6) at the time of each disbursement
contemplated by sub-clause (8) below, no Property-Related
Contract shall have been terminated or, if any
Property-Related Contract shall have been terminated, the
Lender shall be reasonably satisfied that the Debtor will
be able to replace such Property-Related Contract
reasonably promptly;
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(7) the holder of any encumbrance senior to
the Liens provided herein or in any other Security
Document in respect of the Resort shall have consented and
agreed to the application of Condemnation Compensation as
set forth in this clause (A); and
(8) the disbursement of such Condemnation
Compensation shall be in accordance with terms, conditions
and procedures customarily followed by prudent
institutional lenders in making construction loans in
similar amounts and on such other terms, conditions and
procedures as the Lender may reasonably require (as
evidenced by its written notice thereof to the Debtor
prior to the first disbursement pursuant to this
sub-clause (8)) to assure the proper application of such
proceeds and the continuing performance by the Debtor of
its obligations hereunder and under the other Security
Documents, including without limitation, receipt by the
Lender of evidence of suitable payment bonds with respect
to all material contracts and Builder's All Risk Insurance
and a certificate from the Debtor certifying that (x) all
rebuilding, restoration and/or repairing to the date of
such disbursement has been performed substantially in
accordance with the aforesaid plans and specifications and
that there have been no material changes or modifications
made in such plans and specifications, (y) the labor,
services and/or materials to be paid by such disbursement
have been performed upon, or furnished in respect of, the
rebuilding, restoration and/or repairing of the Resort and
(z) no Event of Default exists at the time of such
disbursement, or
(B) the Lender shall apply such Condemnation
Compensation to the prepayment of the Loan, first, as
provided in the Inventory Loan Agreement and second, as
provided in Section 2.3(c) of this Agreement, if Lender
(or its agent) shall have not received the written
confirmation referred to in sub-clause (A)(1) above within
the time period required therefor or if the Debtor shall
have informed the Lender, in writing, of its intention not
to rebuild, repair and restore the Resort or the Lender
shall have determined the same at any time during the
rebuilding, repairing or restoration process referred to
in clause (A) above;
(iii) if no Event of Default shall then exist and such
damage or taking shall not have been in respect of all, or
substantially all, of the Resort and the Condemnation
Compensation payable in respect thereof shall not have exceeded
$20,000, deliver all of such net Condemnation Compensation to the
Debtor and the Debtor shall thereupon be obligated to, and shall,
promptly rebuild, repair and restore the Resort (or shall cause
the Resort to be so promptly rebuilt, repaired and restored) such
that the Resort is useable to the same extent and in the same
manner, and is in substantially an equivalent condition, after
such damage or taking as it was immediately prior to such damage
or taking, whether or not such net Condemnation Compensation
shall be sufficient to cover the costs thereof, and shall
certify, within 120 days of such damage or taking, to the Lender
that such rebuilding, repairing and restoration has been
completed and paid for in full; or
(iv) if no Event of Default shall then exist and if such
damage or taking loss shall be in respect of all, or
substantially all, of the Resort or the Resort is no longer
economically viable or no longer useable to the same extent and
in the same manner after such damage or taking as it was
immediately prior to such damage or taking, apply such net
Condemnation Compensation to the prepayment of the Loan, first,
as provided in the Inventory Loan Agreement and second, as
provided in Section 2.3(c) of this Agreement.
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The Lender may release such net Condemnation Compensation to the
Debtor without affecting the Lien of this Agreement or any other
Security Document as security for the Obligations. Any balance of such
net Condemnation Compensation remaining after the aforesaid application
thereof shall, if no Event of Default shall then exist, belong to, or be
paid to, as the case may be, the Debtor, provided that, if an Event of
Default shall then exist, the Debtor shall promptly deliver any such
balance to the Lender and such balance shall be applied as a prepayment
of the Loan, first, as provided in the Inventory Loan Agreement and
second, as provided in Section 2.3(c) hereof. Notwithstanding any such
condemnation, the Debtor shall continue to pay interest and principal at
the applicable rate and amounts and at the applicable times provided in
this Agreement and in the Notes. Although the Lender intends to use
reasonable efforts to collect such Condemnation Compensation, in a
timely fashion, the Lender shall not be responsible for any failure to
collect such Condemnation Compensation, regardless of the cause of such
failure.
(d) DEBTOR UNDERTAKINGS. In the event of any condemnation or
taking in respect of the Resort (including, without limitation, any of
the Collateral), (i) the Debtor shall immediately notify the Lender of
the same, (ii) the Lender may, in addition to its rights as beneficiary
under the Inventory Deed of Trust, elect to exercise the voting rights
of the Debtor as "Lienholder" in respect of any Pledged Note Receivable
Deed of Trust or as the owner of any Timeshare Interval, as such voting
rights are provided for under the Declaration, regarding all matters of
repair and restoration and (iii) the Debtor shall pay all assessments as
required by the Declaration and/or the Association's Articles of
Incorporation or By-Laws for repair and restoration due to inadequacy of
the Condemnation Compensation.
3.7 TAXES AFFECTING COLLATERAL.
The Debtor shall pay or cause to be paid, on or before the last day when
they may be paid without interest or penalty, all taxes, assessments, rates,
dues, charges, fees, levies, excises, duties, fines, impositions, liabilities,
obligations and encumbrances (including, without limitation, water and sewer
rents and charges, charges for setting or repairing meters and charges for other
utilities or services), general or special, ordinary or extraordinary, foreseen
or unforeseen, of every kind whatsoever, now or hereafter imposed, levied or
assessed by any public or quasi-public authority or instrumentality upon or
against any of the Collateral or the use, occupancy or possession of the Resort,
or upon or against this Agreement, the Notes or the other Security Documents,
the Obligations or the interest of the Lender in the Pledged Notes Receivable,
the Pledged Note Receivable Deeds of Trust or the Inventory Deed of Trust or any
other item of Collateral (provided that this Section 3.7 shall not be construed
to require the Debtor to pay any income tax imposed upon the general income of
the Lender), as well as all assessments and other governmental charges imposed,
levied or assessed in respect of any Collateral, and any and all interest, costs
and penalties on or with respect to any of the foregoing (collectively, the
"Impositions"). Upon request by the Lender, the Debtor shall deliver to the
Lender receipts or other satisfactory proof of payment of any Impositions.
The Debtor shall not claim, demand or be entitled to receive any
reduction of, or credit toward, any Imposition on account of the Obligations. No
deduction shall be claimed from the taxable value of any Collateral or the
Resort by reason of the Obligations, any of the Security Documents or the
interest of the Lender in the Collateral.
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If existing laws or procedures governing the taxation of mortgages,
security documents or debts secured by mortgages or other security documents
shall be changed in any manner after the date hereof so as to materially
adversely impair the security of the Inventory Deed of Trust or the security
interest herein granted or granted in any of the other Security Documents or to
reduce the net income to the Lender in respect of the Obligations (excluding
from any such determination of net income any reduction in such net income
attributable to a change in taxes imposed on, or measured by, the net income of
the Lender), then, upon request by the Lender, the Debtor shall pay to the
Lender or to the taxing authority (if so directed by the Lender), all taxes,
charges and related costs for which the Lender may be liable as a result
thereof.
The Debtor shall pay, or cause to be paid, when due, any and all
recording (mortgage or personal property), intangible property and documentary
stamp taxes, all similar taxes, and all filing, registration and recording fees,
which are now or hereafter may become payable in connection with the
Obligations, the Inventory Deed of Trust, this Agreement, any of the other
Security Documents, the Pledged Note Receivable Deeds of Trust or any of the
other Collateral. The Debtor shall pay when due any and all excise, transfer and
conveyance taxes which are now or hereafter may become payable in connection
with the Obligations, the Inventory Deed of Trust, any Pledged Note Receivable
Deed of Trust, this Agreement or any of the other Security Documents, or in
connection with any foreclosure of the Inventory Deed of Trust, any Pledged Note
Receivable Deed of Trust or any other foreclosure of any Collateral under this
Agreement or under any of the other Security Documents, or any other transfer of
any item of Collateral in extinguishment of all or any part of the Obligations
or any other enforcement of the rights of the Lender with respect thereto.
3.8 DISCHARGE OF LIENS AFFECTING COLLATERAL.
If any mechanic's, laborer's, materialman's, statutory or other Lien
(other than Permitted Exceptions) shall be filed or otherwise imposed upon or
against any item of the Collateral or the Resort, then the Debtor shall, within
30 days after being given notice of the filing of such Lien or otherwise
becoming aware of the imposition of such Lien, cause such Lien to be vacated or
discharged of record by payment, deposit, bond, final order of a court of
competent jurisdiction or otherwise.
Except with respect to the Pledged Notes Receivable and the Pledged Note
Receivable Deeds of Trust, the Debtor shall have the right, at its sole expense,
to contest the validity of any such Lien or of the claim evidenced or secured
thereby, by appropriate proceedings commenced prior to the expiration of the
aforesaid 30-day period and thereafter diligently and continuously conducted in
good faith to final determination, in which event the Debtor shall not be
required to cause any such Lien to be vacated or discharged of record in
accordance with the immediately preceding paragraph if, and only so long as:
(a) no final judicial determination in respect of any foreclosure
or other enforcement proceeding in respect of such Lien or the claim
evidenced or secured thereby shall have been rendered and no nonjudicial
foreclosure proceeding or sale in respect of such Lien or such claim
shall have been commenced;
(b) no claim for liability of any kind shall have been asserted
against the Lender in connection with such Lien or the claim evidenced
or secured thereby; and
(c) if such Lien shall secure a claim of more than $20,000, the
Debtor shall have established an escrow with the Lender, or shall have
delivered to the Lender a satisfactory bond issued by a surety
acceptable to the Lender or a satisfactory letter of credit for the
benefit of the Lender issued by a bank acceptable to the Lender, in each
case in an amount estimated by the
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Lender to be adequate to cover (i) the unpaid amount of such claim, (ii)
all interest, penalties and similar charges which reasonably can be
expected to accrue by reason of such contest or by reason of such
nonpayment, and (iii) all costs, fees and expenses (including, without
limitation, attorneys' fees and disbursements) which reasonably can be
expected to be incurred in connection therewith by the Lender, which
escrow, bond or letter of credit shall be maintained in effect
throughout such contest and the amount of which shall be increased from
time to time if reasonably required by the Lender to cover the foregoing
amounts in subclause (i), subclause (ii) and subclause (iii).
The Debtor shall inform the Lender, in advance and in writing, of its intention
to contest any Lien securing a claim, or such claim itself, under this Section
3.8 if such claim shall exceed $20,000.
Upon termination of any such contest (whether by final determination or
otherwise), or at any time during the course of any such contest that the
conditions relieving the Debtor of its obligation to cause such Lien to be
vacated or discharged shall no longer be satisfied or shall be discovered not to
have been satisfied, the Debtor shall cause such Lien to be vacated or
discharged of record. At the Lender's option, the escrow established or bond or
letter of credit, as the case may be, delivered pursuant to this Section 3.8 may
be, in the case of the escrow, liquidated, or, in the case of the bond or the
letter of credit, drawn upon, at such time and the proceeds thereof may be
applied to payment of all or any part of the claim evidenced or secured by such
Lien and the interest, penalties, charges, costs, fees and expenses (including,
without limitation, attorneys' fees and disbursements) referred to in subclause
(ii) and subclause (iii) of the immediately preceding paragraph. Promptly after
such Lien has been vacated or discharged of record, the Debtor shall deliver to
the Lender evidence reasonably satisfactory to the Lender that such Lien has
been vacated or discharged of record. Thereafter, the amount then remaining in
the escrow established pursuant to this Section 3.8 or such bond or letter of
credit, as the case may be, shall be returned to the Debtor free and clear of
the Lien of this Agreement or any other Security Document so long as no Event of
Default shall have occurred and be continuing or, if an Event of Default shall
have occurred and be continuing, shall be retained by the Lender as part of the
Collateral.
If any Lien shall not be vacated or discharged as required by this
Section, then, in addition to any other right or remedy of the Lender, the
Lender may, but shall not be obligated to, discharge such Lien in such manner as
the Lender may select, and the Lender shall be entitled, if the Lender shall so
elect, to compel the prosecution of an action for the foreclosure of such Lien
by the lienor and, if the Lender shall so elect, to pay the amount of any
judgment in favor of such lienor with interest, costs and allowances. Upon
request by the Lender, the Debtor shall pay to the Lender, or to any other
Person designated by the Lender, the amount of all payments made by the Lender
as provided above and all costs, expenses and liabilities (including, without
limitation, attorneys' fees and disbursements) incurred by the Lender in
connection therewith, together with interest thereon at the Default Rate from
the date paid or incurred by the Lender until the date so paid to, or as
directed by, the Lender. To the extent permitted by law, the Lender shall
thereupon be subrogated to the rights of such lienor and any such payments made
by the Lender pursuant to this Section 3.8 shall be secured by the Collateral.
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3.9 USE OF RESORT; VOTING RIGHTS OF DEBTOR; LENDER CONSENT TO TIMESHARE
DECLARATION AMENDMENT.
(a) RESORT. So long as the Inventory Loan is outstanding, the
Debtor shall not, as Declarant, Timeshare Interval owner or Unit owner,
without the prior written consent of the Lender
(i) request or otherwise initiate, consent to or acquiesce
in any zoning classification or reclassification of the Resort or
the adoption, issuance, imposition or amendment of any other law,
ordinance, rule, regulation, order, judgment, injunction or
decree relating to the use, occupancy, operation, development or
disposition of the Resort or which would limit the use of the
Units or the Timeshare Intervals therein or reduce its or their
Fair Market Value,
(ii) request or otherwise initiate, consent to or
acquiesce in the annexation of any part of the Resort by or into
any municipality or other governmental or quasi-governmental
unit,
(iii) execute, file or record any subdivision plat
affecting the Resort or request or otherwise initiate, consent to
or acquiesce in any subdivision of the Resort
(iv) enter into, consent to or otherwise cause, permit or
suffer the Resort to become subject to any covenant, agreement or
other arrangement restricting or limiting the use, occupancy,
operation, development or disposition thereof (other than any
covenant of this Agreement the Declarations or the other Security
Documents,
(v) materially and substantially modify, alter, remove or
improve the Common Amenities without the prior written consent of
the Lender (except for the creation of additional common elements
and limited common elements resulting from the refurbishing of
the Buildings,
(vi) except as set forth in Schedule 9 of this Agreement,
maintain the Units and/or Timeshare Intervals owned by it for
lease or as a rental project,
(vii) add or withdraw real Property from the Resort, or
create additional Units (beyond those Units existing or planned
for in the Buildings in accordance with, and pursuant to, the
Declaration ), or
(viii) permit the Units or any Timeshare Interval to be
used other than for nonpermanent residential purposes;
provided that the Debtor may create additional Timeshare
Intervals within the Hilltop Resort so long as Debtor notifies the
Lender promptly thereof.
(b) USE BY PUBLIC. The Debtor shall not cause, permit or suffer
the Resort to be used by the public without restriction (except as
required by applicable law) or in any manner that might tend to impair
the Debtor's right, title and interest in and to the Resort or in any
manner that might make possible any claim of adverse usage or adverse
possession by the public or any claim of implied dedication of all or
any part of the Resort.
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(c) VOTING RIGHTS. The Debtor hereby appoints and constitutes the
Lender as its attorney-in-fact (with full power of substitution) to
exercise all of its voting rights pertaining to any Unit or Timeshare
Interval owned by the Debtor or in which the Debtor has an interest
giving rise to the right to vote (whether as Declarant, as "Lienholder"
under any Pledged Note Receivable Deed of Trust or otherwise). This
power of attorney is coupled with an interest and shall be irrevocable
for so long as any Obligations are owing by the Debtor to the Lender.
This power of attorney may be used from time to time in the sole
discretion of the Lender if there shall exist an Event of Default, or a
material casualty, condemnation or taking shall have occurred with
respect to the Resort or any part thereof. The Debtor agrees to execute,
from time to time, such other documents as the Lender may request
(including, without limitation, the form of proxy substantially in the
form of Exhibit D to this Agreement; which proxy shall, at the request
of the Lender, be renewed every 11 months and shall be modified to
include Timeshare Intervals in addition to Units) and file the same with
the Secretary of the Association in accordance with the Association's
By-Laws.
Except with the prior written consent of the Lender, the Debtor
shall not propose or vote for or consent to any modification of, or
amendment to, the Declaration or the Association's Articles of
Incorporation or By-Laws which could have (in the reasonable sole
opinion of the Lender) an adverse effect on the Collateral or the
operation or prospects of the Resort. In each case under the Declaration
and/or the Association's Articles of Incorporation or By-Laws in which
the consent or the vote of "Lienholders" in respect of the Units and/or
Timeshare Intervals (including any such case in which the Debtor would
be considered to be a "Lienholder" by virtue of any Pledged Note
Receivable Deed of Trust) is provided for or is required, or in which
the Debtor's consent is required (as Declarant or as an owner of a Unit
or a Timeshare Interval or as a vendor or mortgagee) for any proposed
action, the Debtor shall not vote or give such consent without obtaining
the prior written consent of the Lender if such action (in the
reasonable sole opinion of the Lender) could have an adverse effect on
the Collateral or the operation or prospects of the Resort.
3.10 OTHER TIMESHARE COVENANTS.
(a) ACCESS. The Debtor shall have caused the owners of Timeshare
Intervals to have direct access to a publicly dedicated road and shall
cause all private roadways and parking lots or areas inside of the
Resort to be common elements or limited common elements under the
Declaration.
(b) UTILITIES. The Debtor shall have caused electric, gas, sewer,
and water service and other necessary utilities to be available to the
Units in sufficient capacity to service the Units.
(c) USE OF AMENITIES. The Debtor shall have caused each purchaser
of a Timeshare Interval to have access to, and the use of, all of the
amenities and public utilities relating to the Unit in which such
Timeshare Interval is located (consistent with the contractual
provisions and rules and regulations existing with respect to such
amenities and public utilities), including, without limitation, the
Common Amenities.
(d) TIMESHARE REGIMEN. The Debtor shall do all things necessary
in order to preserve the condominium and timeshare regimens in respect
of each of the Units.
(e) EXCHANGE PROGRAM. The Debtor shall maintain its membership
in, and the Timeshare Intervals eligibility for, the timeshare exchange
program of Resorts Condominium International, Inc or Interval
International, Inc.
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(f) LOCAL LEGAL COMPLIANCE. The Debtor shall comply, and shall
cause the Units and the Buildings to comply, with all applicable
restrictive covenants, zoning or land use ordinances and building codes,
health laws and regulations, and all other applicable laws, rules,
ordinances and regulations.
(g) REGISTRATION COMPLIANCE. The Debtor shall maintain, or cause
to be maintained, all necessary consents, franchises, approvals, and
exemption certificates, and the Debtor will make, or cause to be made,
all registrations or declarations with any government or any agency or
department thereof required in connection with the Units, the Buildings,
and the Timeshare Intervals and the occupancy, use and operation of the
Units and the Buildings, and the sale and offering for sale of Timeshare
Intervals.
(h) RECORDS. The Debtor shall maintain accurate and complete
files relating to the Pledged Notes Receivables and the other Collateral
(as well as in respect of all other Notes Receivable) to the reasonable
satisfaction of the Lender, and such files will contain copies of each
Pledged Note Receivable and the Pledged Contract and Pledged Note
Receivable Deed of Trust related thereto, copies of all relevant credit
memoranda relating thereto, and all collection information and
correspondence relating thereto received from the Collection Agent.
(i) FORMS OF TIMESHARE DOCUMENTS. Instruments in substantially
the form of the Pledged Note Receivable, Pledged Contract, Pledged Note
Receivable Deed of Trust and the special warranty deed set forth in
Exhibit C attached hereto (together with the form of the
Truth-in-Lending Statement and statement of rescission rights set forth
therein) and the other instruments and documents related thereto
(collectively, the "Timeshare Instruments") shall be used by the Debtor
for all transactions which may be entered into after the first
Receivables Advance for so long as any Obligation remains outstanding
and instruments in substantially the form of such Pledged Note
Receivable, Pledged Contract, Pledged Note Receivable Deed of Trust and
special warranty deed will be used in connection with the first
Receivables Advance. The Debtor shall not modify, amend or otherwise
alter the form of or any of the terms of such Timeshare Instruments
without the Lender's prior written consent, except as may be required by
any regulatory agency or applicable law. Notwithstanding the Lender's
review and determination of acceptability, if any, of the Timeshare
Instruments used by the Debtor, the Debtor shall remain solely liable
for all aspects of such Timeshare Instruments and their use; any
determination of acceptability, if any, by Lender relating to such
Timeshare Instruments shall only be for the Lender's benefit and no
other Person shall be entitled to rely thereon in any manner.
(j) PAYMENTS ON PLEDGED NOTES RECEIVABLE. The Debtor, except as
specifically consented to in writing by the Lender, shall not grant any
extensions of time for the payment of, compromise for less than the full
face value of, release in whole or in any part any Person liable for the
payment of, allow any credit whatsoever except for the amount of cash to
be paid upon, or otherwise modify or amend, any Pledged Note Receivable
or any other instrument or document executed in connection therewith or
consent to the sale of or further encumbering of the Timeshare Interval
related to such Pledged Note Receivable.
(k) PROPERTY-RELATED CONTRACTS. Except as required by applicable
law, the Debtor shall not materially modify or amend, or (subject to the
rights and obligations of the Associations under the Declarations or the
Associations' Articles of Incorporation or By-Laws) permit to be
materially modified or amended, any material Property-Related Contract
without the prior written consent of the Lender, which consent shall not
be unreasonably withheld, or enter into, or (subject
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to the rights and obligations of the Associations under the Declarations
or the Associations' Articles of Incorporation or By-Laws) permit to be
entered into, any new material Property-Related Contract without the
prior written consent of the Lender, which consent shall not be
unreasonably withheld. The Debtor shall deliver any proposed amendment
or modification of an existing Property-Related Contract or proposed new
Property-Related Contract to the Lender at least 30 days prior to the
execution thereof and shall request the Lender's consent to the form and
substance of such amendment, modification or new Property-Related
Contract. If the Debtor shall not have received a written response to
such request from the Lender within 20 days of the delivery of such
amendment, modification or new Property-Related Contract to the Lender,
then the Debtor shall send a second request via nationally recognized
overnight courier. Failure by the Lender to respond to such second
request within 10 days of receipt thereof shall be deemed to constitute
a consent to such request. The Debtor shall perform all of its
obligations in a timely fashion under each Property-Related Contract.
(l) FUTURE ADVANCES. The Debtor shall extend no future advance or
advances to any Maker of a Pledged Note Receivable which would be
secured, directly or indirectly, by the Timeshare Interval related to
such Pledged Note Receivable.
(m) UNDERTAKING. The Debtor shall perform each and every
covenant, agreement, and undertaking applicable to the Debtor (whether
as Declarant, owner of a Unit, owner of a Timeshare Interval or
otherwise) under the Declarations and/or the Associations' Articles of
Incorporation or By-Laws.
(n) NOTICES. The Debtor shall promptly deliver to the Lender
copies of each written notice or request, financial statement, budget or
other information received by the Debtor under or with respect to the
Declarations and/or the Associations' Articles of Incorporation or
By-Laws, whether in its capacity as Declarant, owner of a Unit, owner of
a Timeshare Interval, Lienholder or otherwise.
3.11 PROTECTION OF COLLATERAL; ASSESSMENTS; REIMBURSEMENT.
All Insurance Premiums and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all Impositions on any of the Collateral or in respect of the sale or other
disposal thereof shall be borne and paid by the Debtor or the Debtor shall cause
the Association or any manager retained by it to pay the same, as provided for
in the Declaration and/or the Association's Articles of Incorporation or
By-Laws. The Debtor shall promptly pay, as the same become due and payable, its
share of all Insurance Premiums, expenses, Impositions and/or assessments as
required by the Declaration and/or the Association's By-Laws. If the Debtor
shall fail to pay, or cause to be paid, any such Insurance Premiums, expenses,
Impositions and/or assessments, the Lender may, at the Debtor's expense, pay the
same.
If, by reason of any suit or proceeding of any kind, nature or
description against the Debtor, or by the Debtor or any other party against any
other Person, or by reason of any other facts or circumstances, which in the
Lender's sole discretion makes it advisable for the Lender to seek counsel for
the protection and preservation of the Collateral, or to defend its own
interest, such expenses and counsel fees shall be allowed to the Lender and
borne and paid by the Debtor.
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3.12 INTEREST ON LENDER PAID EXPENSES.
All sums paid or incurred by the Lender under this Section 3, and any
and all other sums for which the Debtor may become liable hereunder, and all
costs and expenses (including payments to other Lien holders and attorneys'
fees, legal expenses and court costs) which the Lender may incur in enforcing or
protecting its Lien on, or rights and interest in, the Collateral or any of its
rights or remedies under this Agreement or any other Security Document or in
respect of any of the transactions contemplated herein or therein shall (a) be
considered as additional indebtedness owing by the Debtor to the Lender
hereunder and, as such, shall be secured by all of the Collateral and (b) accrue
interest at the Default Rate from the date paid or incurred by the Lender until
paid in full by the Debtor.
3.13 LENDER RESPONSIBILITY.
The Lender shall not be (a) obligated or responsible for, the payment of
any of the amounts or sums referred to in this Section 3 or (b) liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto other than, to the extent it elects to safekeep the
Pledged Notes Receivable or any of the other Timeshare Instruments related
thereto, to exercise the standard of care in respect thereof which would be
exercised by an institutional custodian similarly situated to the Lender and
similarly engaged in the safekeeping of collateral and, in any case, shall not
be liable or responsible in any way for any diminution in the value of the
Collateral or for any act or default of any manager of the Resort or the
Collection Agent and shall not be liable for any warranty (implied or express)
whether created by statute, at law or pursuant to the Declaration or any other
Timeshare Document. If the Lender shall elect (in its sole discretion) to store
and safekeep the Pledged Notes Receivable and the other related Timeshare
Instruments, the Debtor agrees to pay the Lender a fee, to compensate it for its
costs and expenses in connection therewith, of $5 for each Pledged Note
Receivable delivered to the Lender; such fee shall be payable at the time of the
delivery thereof. Such fee shall be nonrefundable. If the Lender shall elect (in
its sole discretion) to use the services of an institutional custodian to store
and safekeep the Pledged Notes Receivable and the other related Timeshare
Instruments, the Debtor shall pay all reasonable fees, costs and expenses in
respect thereof. Any such institutional custodian shall be the agent solely of
the Lender.
Upon the full, final and indefeasible payment of all Obligations and the
termination of the Receivable Commitment Period, the Lender shall release its
Liens in and to the Collateral, execute in favor of the Debtor any UCC release
or termination statement in respect thereof and reassign and deliver to the
Debtor all Pledged Notes Receivables and the other Collateral then in the
physical possession of the Lender or its agent (without recourse and without
representations or warranties of any kind). The Debtor shall bear all
out-of-pocket expenses (including, without limitation, legal fees and
disbursements of the Lender) in connection with such release, reassignment and
delivery. All such release and/or termination documentation shall be reasonably
satisfactory to the Lender and its counsel. To the extent that all obligations
in respect of any Pledged Note Receivable shall have been fully, finally and
indefeasibly paid by the Maker thereof, the Lender, upon receipt of a written
request from the Debtor, shall reassign and deliver to the Debtor such Pledged
Note Receivable and/or Pledged Note Receivable Deed of Trust related thereto and
all other related documentation in the possession of the Lender (all without
recourse and without representations or warranties of any kind), shall release
any Lien the Lender may have therein and shall execute and deliver to the Debtor
any UCC release statement in respect thereof. The Debtor shall bear all expenses
(including, without limitation, legal fees and disbursements of the Lender) in
connection with such reassignment and delivery. All such reassignment and
release documentation shall be reasonably satisfactory to the Lender and its
counsel.
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3.14 NOTICE TO MAKERS.
The Debtor authorizes the Lender (but the Lender shall not be obligated)
to communicate at any time and from time to time with any Maker of a Pledged
Note Receivable or any other Person primarily or secondarily liable under a
Pledged Note Receivable with regard to (i) any delinquent payment under, or
other default in respect of, such Pledged Note Receivable, (ii) any other matter
relating to any Timeshare Instrument associated with such Pledged Note
Receivable or (iii) verifying that such Maker did execute and deliver such
Pledged Note Receivable and verifying the terms and provisions thereof, provided
that, the foregoing notwithstanding, the Lender agrees that it shall not, unless
and until an Event of Default shall then exist, communicate with any such Maker
or other such Person with respect to any delinquent payment (or the collection
thereof) or any other default under such Pledged Note Receivable. The Debtor
agrees, upon the request of the Lender (which may be made only if an Event of
Default shall then exist), to notify each Maker of a Pledged Note Receivable in
writing of the assignment to the Lender of its respective Pledged Note
Receivable and the related Timeshare Instruments, the Lender's Lien therein and
any other matter relating thereto. Notwithstanding the immediately preceding
sentence, the Lender shall, during the existence of any Event of Default, have
the right, without first making a request of the Debtor, to notify each Maker of
a Pledged Note Receivable of the assignment to the Lender of its respective
Pledged Note Receivable and the related Timeshare Instruments, the Lender's Lien
therein and any other matter relating thereto. Debtor agrees, as provided in
Section 2.3(a) of this Agreement, to direct each obligor of a Pledged Note
Receivable to remit all payments under its respective Pledged Note Receivable to
the post office box established under the Agency Agreement or to such other
Person as the Lender may designate. The Debtor agrees, as it may be instructed
by the Lender or the Collection Agent, to endorse any checks or other
instruments received directly by it in respect of Pledged Notes Receivable and
to deliver the same as provided in Section 2.3 (a) hereof.
The Debtor shall not undertake any action, direct or indirect, to
terminate, or cause the termination of, the Agency Agreement without having
received the prior written consent of the Lender in respect thereof, and the
Debtor shall comply with all of its obligations thereunder. The Debtor may, in
accordance with the terms of the Agency Agreement, replace the Collection Agent
under the Agency Agreement with another bank, provided that the Debtor shall
have obtained the prior written consent of the Lender in respect thereof. In
connection with any request by the Debtor to the Lender for the Lender's written
consent, as provided in the immediately preceding two sentences, the Lender will
not, if no Default or Event of Default shall then exist, unreasonably withhold
such consent and will, in connection with the granting of any such consent, join
in the execution of any instruments to effect the action then being consented
to, provided that such instruments are in form and substance reasonably
satisfactory to the Lender and its counsel. The Debtor agrees and consents that
the Lender may, at any time during which an Event of Default exists and in its
sole discretion, terminate the Agency Agreement and/or replace the Collection
Agent in respect thereof. If the Lender shall terminate the Agency Agreement,
the Debtor shall cooperate with the Lender in establishing a new Agency
Agreement and a successor Collection Agent. The Debtor acknowledges and agrees
that the Collection Agent with respect to receiving payments under the Pledged
Notes Receivable and collecting and holding the proceeds thereof is the sole
agent of the Lender and that all payments, instruments, and moneys in respect of
the Pledged Notes Receivable are Property of the Lender, are to be promptly
deposited into the Lockbox Account and applied to the Receivables Loan or
otherwise disposed of, all as set forth herein. The Debtor acknowledges that the
Lockbox Account is the exclusive property of the Lender and it confirms that it
has no, and will have no, interest therein. The Debtor acknowledges that the
post office box established under the Agency Agreement is the exclusive property
of the Lender and it confirms that it has no, and will have no, interest
therein. The Debtor agrees to promptly make all payments in respect of the fees
and expenses of the Collection Agent under the Agency Agreement.
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The Debtor shall promptly invoice (through payment books or otherwise)
all Makers in respect of all payments due under their respective Pledged Notes
Receivable, promptly enter into its accounting system all payments in respect of
such Pledged Notes Receivable received and otherwise fully and completely
service such Pledged Notes Receivable. During the existence of any Event of
Default, the Debtor shall, if requested by the Lender, cause such other Person
or Persons, as shall have been selected by the Lender, to service the Pledged
Notes Receivable.
SECTION 4. REPRESENTATIONS AND WARRANTIES
As an inducement to the Lender to make the Receivables Loan , each
Debtor warrants and represents, as of the date hereof, and covenants to the
Lender as follows:
4.1 SUBSIDIARIES AND CAPITAL STRUCTURE.
Steamboat Suites has no Subsidiaries. Schedule 3 to this Agreement
states (a) the name of each of the Affiliates of each Debtor and the nature of
the affiliation, (b) the number, nature and the holder of the outstanding
Securities of each Debtor, (c) the number of authorized, issued and treasury
shares of each Debtor, and (d) the name of each subsidiary of Preferred
Equities.
4.2 CORPORATE ORGANIZATION AND AUTHORITY.
(a) Steamboat is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado;
(b) Preferred Equities is a duly organized, validly existing and
in good standing under the laws of the State of Nevada.
(c) Each Debtor has all requisite power and authority and
necessary licenses and permits to own and operate its Properties and to
carry on its business as now conducted; and
(d) Each Debtor has duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each
jurisdiction where the character of its Properties or the nature of its
activities makes such qualification necessary or desirable.
4.3 BUSINESS AND PROPERTY.
Form 10K dated as of August 31, 1999 filed by Guarantor with the United
States Securities and Exchange Commission and delivered by Debtor to Lender and
except as set forth in the Form 10K correctly describes the general nature of
the businesses and Properties (including all owned real Property, leases and
leasehold interests) of the Debtor. Except as set forth in the Form 10K the
Debtor has not changed its name, been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
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4.4 FINANCIAL STATEMENTS.
The Debtor shall have delivered tax returns and balance sheets and
statements of income and expense of the Debtor and financial statements required
under the Existing Loan Agreement.
4.5 FULL DISCLOSURE.
Neither this Agreement nor any written statement made by the Debtor in
connection with this transaction contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein not misleading. There is no fact which the Debtor has not disclosed
to the Lender in writing which materially affects adversely or, so far as the
Debtor can now foresee, will materially affect adversely the Property, business,
prospects, profits or condition (financial or otherwise) of the Debtor or the
ability of the Debtor to perform its Obligations under this Agreement, the Notes
or the other Security Documents.
4.6 PENDING LITIGATION.
Except as set forth in Schedule 6 to this Agreement, there are no
proceedings pending, or to the knowledge of the Debtor threatened, against or
affecting the Debtor, any Affiliate, the Resort or any Unit in any court or
before any governmental authority or arbitration board or tribunal which involve
the possibility of materially and adversely affecting the Property, business,
prospects, profits or condition (financial or otherwise) of the Debtor or the
ability of the Debtor to perform its obligations under this Agreement, the Notes
or the other Security Documents, provided that no such proceedings shall be
deemed to satisfy such material and adverse effect standard if such proceeding
shall have been commenced by one or more of the aforesaid Persons as plaintiff
and no counterclaim is pending in respect thereof against such Person. Neither
the Debtor nor any Affiliate nor the Resort nor any Unit is in default with
respect to any order of any court, governmental authority or arbitration board
or tribunal.
4.7 TITLE TO PROPERTIES.
The Debtor has good and marketable title in fee simple (or its
equivalent under applicable law) to all the real Property which it purports to
own at the Resorts free from Liens except as set forth on Schedule 7 to this
Agreement, and has good title to, and is the sole owner of, all personal
Property related to the Resorts which it purports to own (including, without
limitation, the personal Property constituting the Collateral), which personal
Property is free from all Liens except as set forth on Schedule 8 to this
Agreement. Except as set forth on Schedule 9 hereto, the Resort is not subject
to any leases.
Neither the buildings in which the Units are located nor the Resort is
under investigation with respect to, and is not in violation of, any
Environmental Protection Law. No proceedings have been commenced against, nor
notice received by, the Debtor or any Affiliate concerning any alleged violation
of any Environmental Protection Law. Neither the buildings in which the Units
are located nor the Resort is, or has been, the subject of any threatened,
proposed or actual cleanup or other protective or remedial action relating to
any Hazardous Substances, whether pursuant to any Environmental Protection Law
or otherwise. There are no Hazardous Substances in, on, or under the buildings
in which the Units are located or the Resort, except as set forth on Schedule 10
to this Agreement and except as used or stored in compliance with all applicable
Environmental Protection Laws or, with respect to ordinary cleaning materials
and supplies, as customarily and prudently used or stored in operations similar
to the Units or the Resort.
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The Debtor shall cause all asbestos located in the Resort to be removed
by a duly licensed asbestos abatement contractor, all in accordance with
applicable federal and Colorado law.
4.8 TRADEMARKS; LICENSES AND PERMITS.
The Debtor owns or possesses all of the trademarks, service marks, trade
names, copyrights, franchises and licenses, and rights with respect thereto
necessary for the conduct of its business as now conducted and as proposed to be
conducted, without any known conflict with the rights of others.
4.9 TRANSACTION IS LEGAL AND AUTHORIZED.
The execution and delivery of this Agreement, each of the Notes and the
other Security Documents by the Debtor and the grant of the Liens to the Lender
with respect to the Collateral by the Debtor and compliance by the Debtor with
all of the provisions of this Agreement, each of the Notes and the other
Security Documents are:
(a) within the corporate powers of the Debtor;
(b) duly authorized and approved by the Board of Directors of the
Debtor; and
(c) valid and legal acts and will not conflict with, or result in
any breach in any of the provisions of, or constitute a default under,
or result in the creation of any Lien (except Liens contemplated under
this Agreement or any other Security Document) upon any Property of the
Debtor under the provisions of, any agreement, charter instrument, bylaw
or other instrument to which the Debtor is a party or by which its
Property may be bound.
4.10 NO DEFAULTS.
No Default or Event of Default exists, and there is no violation in any
material respect of any term of any agreement, charter instrument, bylaw or
other instrument to which the Debtor is a party or by which it may be bound.
4.11 GOVERNMENTAL CONSENT.
Neither the nature of the Debtor, or of any of its businesses or
Properties, or any relationship between the Debtor and any other Person, or any
circumstance in connection with the execution or delivery of this Agreement, any
of the Notes or the other Security Documents, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Debtor, as a condition of the
execution, delivery or performance of this Agreement, any of the Notes or any
other Security Document.
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4.12 TAXES.
The Debtor is not in default with respect to the payment of any taxes
levied or assessed against it or any of its assets and has not failed to file
any tax return required to be filed by it.
4.13 USE OF PROCEEDS.
The proceeds from the Inventory Loan and the Receivables Loan will be
used as set forth on Schedule 11 to this Agreement. None of the transactions
contemplated in this Agreement will violate or result in the violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulations G, T, U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
II. The Debtor does not intend to carry or purchase any "margin security" within
the meaning of said Regulation G. None of the proceeds will be used to purchase
or carry (or refinance any borrowing, the proceeds of which were used to
purchase or carry) any "margin security" within the meaning of said Regulation.
4.14 COMPLIANCE WITH LAW.
The Debtor
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject; and
(b) except as set forth in Schedule 12 hereto, has not failed to
obtain any licenses, permits, franchises or other governmental
authorizations, or make or cause to be made any registrations or
declarations with any government or agency or department thereof,
necessary to the ownership of its Property or to the conduct of its
business;
which violation or failure to obtain or register would materially adversely
affect the business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor.
4.15 RESTRICTIONS OF DEBTOR.
The Debtor is not a party to any contract or agreement which restricts
its right or ability to incur indebtedness with respect to the Resort, or
prohibits the execution of, or compliance with, this Agreement or any of the
other Security Documents by the Debtor. The Debtor has not agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its Property constituting the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien other than the Liens provided for
herein and in the other Security Documents.
4.16 BROKERS' FEES.
The Debtor and the Lender hereby agree that there are no brokers or
finders which are entitled to receive compensation for their services rendered
to the Debtor with respect to the transactions described in this Agreement.
4.17 DEFERRED COMPENSATION PLANS.
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Except as set forth on Schedule 13 hereto, the Debtor has no pension,
profit sharing or other compensatory or similar plan providing for a program of
deferred compensation for any employee or officer which is subject to any
requirement of the Employee Retirement Income Security Act of 1974, as amended.
4.18 LABOR RELATIONS.
The employees of the Debtor are not a party to any collective bargaining
agreement with the Debtor.
4.19 VALIDITY AND ENFORCEABILITY.
Each of the Pledged Notes Receivable is, and will (after the creation
thereof) be, undisputed, bona fide indebtedness (enforceable in accordance with
its terms) of the Maker named therein and shall have been incurred by such Maker
in a fixed sum (as stated therein) with respect to the bona fide sale of a
Timeshare Interval, and no defense, offset, counterclaim, discount or allowance
shall have been asserted in respect of such Pledged Note Receivable and the
Debtor has no knowledge of any threatened assertion of any of the same. Each
such Pledged Note Receivable is genuine and true and no signature or endorsement
thereon has been forged.
To the extent that any of the foregoing representations in this Section
4.19 with respect to any Pledged Note Receivable (such Pledged Note Receivable
is referred to in this paragraph as an "impaired Pledged Note Receivable") shall
have been false or misleading in any material respect when made or furnished and
would constitute an Event of Default under Section 8.1(b) hereof, no action
solely in respect of such Event of Default arising from such impaired Pledged
Note Receivable shall be taken by the Lender under Section 8.2 hereof if, within
20 days after the falsity or misleading nature of any such representation shall
have first become known to any officer of the Debtor or Guarantor, a new Note
Receivable, which when pledged hereunder would constitute an Eligible Note
Receivable, is assigned and delivered to the Lender by the Debtor (such
assignment and delivery shall comply with the document delivery and recordation
requirements set forth in Section 6 of this Agreement) in exchange for such
impaired Pledged Note Receivable or, in the alternative, the Debtor prepays the
Receivables Loan in an amount equal to 80% (or, if at least one scheduled
monthly installment shall have been made in respect of such impaired Pledged
Note Receivable, 90%) of the then outstanding principal balance of such impaired
Pledged Note Receivable together with (to the extent not already previously paid
pursuant to Section 2.3(a) hereof) all accrued interest and a Receivables
Prepayment Premium in respect of the portion of the Receivables Loan being so
prepaid, provided that, if the sum of the principal amount of the Receivables
Loan which is then being prepaid pursuant to this paragraph and which was
prepaid pursuant to this paragraph within the then last 10 Business Days shall
not exceed 15% of the principal balance of the Receivables Loan outstanding at
the beginning of such 10 Business Day period, the aforesaid accrued interest
shall be paid as otherwise provided in Section 2.3(a) hereof. In either case,
the Lender will, upon receipt of the aforesaid new Eligible Note Receivable or
the aforesaid prepayment, release its Lien in and to the such impaired Pledged
Note Receivable, the Pledged Note Receivable Deed of Trust that relates thereto
and the other documents, instruments, title insurance and chattel paper that
specifically relate thereto and all proceeds, Property rights, privileges and
benefits that specifically arise from any of the same and will endorse and
deliver to the Debtor such impaired Pledged Note Receivable and reassign and (to
the extent it has possession of the same) deliver to the Debtor said Pledged
Note Receivable Deed of Trust and said other documents, instruments, title
insurance policy and chattel paper to the extent, but only to the extent, that
the said other documents, instruments, title insurance or chattel paper are
related specifically and solely to such impaired Pledged Note Receivable (such
endorsement, delivery and assignment being without recourse to, and without
representations or warranties of any kind from, the
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Lender). The failure of the Debtor to either deliver a new Eligible Note
Receivable or to effect a prepayment in respect of an impaired Pledged Note
Receivable, as provided for in this paragraph, shall be an immediate Event of
Default in respect of which the Lender shall have all of its rights and remedies
under Section 8.2 of this Agreement and as otherwise provided for in the
Security Documents. The Debtor shall bear all out-of-pocket expenses (including,
without limitation, the reasonable legal fees and the disbursements of the
Lender) in connection with such release, endorsement, delivery and assignment.
All documentation related thereto shall be reasonably satisfactory to the Lender
and its counsel.
4.20 VALIDITY OF LIENS GRANTED TO LENDER.
Except with respect to the Permitted Exceptions and Liens subject to the
sharing provisions of the last paragraph of Section 3.1 hereof, all Liens
granted to the Lender in respect of the Collateral are, and shall continue to
be, prior in right and superior to all other Liens granted to, or held by, any
other Person.
4.21 TIMESHARE REGIMEN REPORTS.
The Debtor has furnished to the Lender true and correct copies of all
Timeshare Documents, including, without limitation, the Declaration, and any
other Timeshare Document placed on file by the Debtor with any federal, state or
local regulatory or recording agencies, offices or departments. All filings
and/or recordations in order to establish the condominium and timeshare regimens
in respect of the Units and the Timeshare Intervals have been done and all
applicable laws and statutes in connection therewith have been complied with.
4.22 THE TIMESHARE INTERVALS.
(a) ACCESS. The owners of Timeshare Intervals in respect of each
of the Units have direct access to a publicly dedicated road and/or
insured easement, and all roadways inside the Resort are common elements
under the Declaration.
(b) UTILITIES. Electric, sewer, water facilities and other
necessary utilities are available in sufficient capacity to service each
of the Units.
(c) AMENITIES. Each purchaser of a Timeshare Interval in respect
of a Unit has access to, and the use of, all of the amenities and public
utilities relating to such Unit, including, without limitation, the
Common Amenities (subject to only the requirements of the Debtor in
respect of on-going renovations and construction with respect to the
Units that are not completed Units ).
(d) LAWS. The Units and the Timeshare Intervals in respect
thereof comply with all applicable restrictive covenants, zoning and
land use ordinances and regulations and building codes, all applicable
health and environmental laws and regulations and all other applicable
laws, rules and regulations and all approvals, consents, licenses and
certificates of occupancy in respect of the use and operation of the
Units and the Timeshare Intervals in respect thereof have been obtained
and are in full force and effect.
(e) SALE OF TIMESHARE INTERVALS. The sale, offering of sale, and
financing of Timeshare Intervals (i) do not constitute the sale, or the
offering of sale, of Securities subject to the registration requirements
of the Securities Act of 1933, as amended, or the blue-sky securities
laws of the State of Colorado, (ii) are only done in the State of
Colorado, the State of Nevada and/or the the State of Texas and will
only be done in such jurisdictions where the Debtor has made all
necessary filings and obtained all necessary permits to do so (and no
solicitation and no
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advertising in respect of the sale of Timeshare Intervals that would, in
either case, be in violation of applicable law is done in any other
State or Province), (iii) do not violate any applicable federal, state
or local consumer credit, sale rescission or usury statute, including,
without limitation, any such statute of any state in which an obligor of
a Note Receivable may reside, and (iv) do not violate in any material
respect any other applicable federal, state or local law, statute or
regulation. Without limiting the generality of the immediately preceding
sentence, the Debtor has, to the extent required by its activities and
businesses, fully complied with (1) all of the applicable provisions of
(A) the Consumer Credit Protection Act, as amended, (B) the Federal
Trade Commission Act, as amended, (C) all rules and regulations
promulgated under the foregoing Acts, (D) the Interstate Land Sales Full
Disclosure Act and the rules and regulations promulgated thereunder, and
(E) all other applicable federal statutes and the rules and regulations
promulgated thereunder pertaining to the operation of the Resort and (2)
all of the applicable provisions of any law of any state (and the rules
and regulations promulgated thereunder) or municipality relating to the
operation of the Resort, including, without limitation, the laws, rules
and regulations of the State of Colorado, the County of Routt, Colorado
and the Town of Steamboat Springs, Colorado. The sale and offering of
sale of Timeshare Intervals is not effected by any home solicitations.
(f) EXCHANGE PROGRAM. The Resort has been accepted by Resorts
Condominium International, Inc. or Interval International, Inc. into its
timeshare exchange program and the Debtor and the Resort are in good
standing as participants in each such timeshare exchange program and
have satisfied all eligibility requirements in respect thereof.
SECTION 5. CONDITIONS PRECEDENT TO INITIAL RECEIVABLE ADVANCE AND EFFECTIVENESS
OF THIS AGREEMENT
The effectiveness of this Agreement and the obligation of the Lender to
make the initial Receivable Advance shall be subject to the following conditions
precedent:
5.1 OPINIONS OF COUNSEL.
The Lender shall have received from Ballard Spahr Andrews & Ingersoll,
special Colorado counsel for the Debtor, a closing opinion substantially in the
form of Exhibit F attached to this Agreement dated the Closing Date, from Lionel
Sawyer & Collins, special counsel to Preferred Equities, a closing opinion
substantially in the form of Exhibit G attached to this Agreement and from
Greenberg Traurig, special counsel to Mego Financial, a closing opinion
substantially in the form of Exhibit H attached to this Agreement.
5.2 WARRANTIES AND REPRESENTATIONS TRUE AS OF CLOSING DATE.
(a) The warranties and representations contained in this
Agreement shall (except as affected by transactions contemplated by this
Agreement) be true in all material respects on the Closing Date with the
same effect as though made on and as of that date.
(b) The Debtor shall not have taken any action, or permitted any
condition to exist which would have been prohibited by any provision of
this Agreement if such provision had been binding and effective at all
times during the period from October 19, 1999 to and including the
Closing Date.
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5.3 COMPLIANCE WITH THIS AGREEMENT.
The Debtor shall have performed and complied with all covenants,
agreements and conditions contained herein which are required to be performed or
complied with by it before or on the Closing Date.
5.4 OFFICER'S CERTIFICATES; SECRETARY'S CERTIFICATES; GOOD-STANDING
CERTIFICATES.
(a) The Lender shall have received a certificate, substantially
in the form of Exhibit I to this Agreement, dated as of the Closing Date
and signed by the President or a Vice-President of the Debtor,
certifying that the conditions specified in Section 5.2(a), Section
5.2(b) and Section 5.3 of this Agreement have been fulfilled.
(b) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Steamboat, substantially in the form of
Exhibit J to this Agreement, dated as of the Closing Date, certifying
(i) the adoption by the Board of Directors of Steamboat of a resolution
authorizing Steamboat to enter into this Agreement and the transactions
and instruments contemplated hereby and (ii) the incumbency and
authority of, and verifying the specimen signatures of, the officers of
Steamboat authorized to execute and deliver this Agreement, each of the
Notes, the other Security Documents and the other documents contemplated
hereunder.
(c) Steamboat shall have delivered to the Lender, in form
satisfactory to the Lender, a recent good standing certificate from the
Secretary of State of Colorado certifying Steamboat's due corporate
existence.
(d) The Debtor shall have delivered to the Lender, in form
satisfactory to the Lender, (i) a recent certificate of the Secretary of
State of Colorado certifying the due corporate existence of the
Association, (ii) copies of the Articles of Incorporation and all
amendments thereto and (iii) copies of the By-Laws of the Association.
(e) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Preferred Equities, substantially in the
form of Exhibit K to this Agreement, dated as of the Closing Date,
certifying (i) the adoption by the Board of Directors of Preferred
Equities of a resolution authorizing Preferred Equities to enter into
this Agreement and the transactions and instruments contemplated hereby
and (ii) the incumbency and authority of, and verifying the specimen
signatures of, the officers of Preferred Equities authorized to execute
and deliver this Agreement and the other documents contemplated
thereunder.
(f) Preferred Equities shall have delivered to the Lender, in
form satisfactory to the Lender, a recent good standing certificate from
the Secretary of State of Nevada certifying Preferred Equities' due
corporate existence.
(g) The Lender shall have received a certificate of the Secretary
or any Assistant Secretary of Mego Financial, substantially in the form
of Exhibit L to this Agreement, dated as of the Closing Date, certifying
(i) the adoption by the Board of Directors of Mego Financial of a
resolution authorizing Mego Financial to enter into the Guaranty
Agreement and the transactions and instruments contemplated thereby and
(ii) the incumbency and authority of, and verifying the specimen
signatures of, the officers of Mego Financial authorized to execute and
deliver the Guaranty Agreement and the other documents contemplated
thereunder.
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(h) Mego Financial shall have delivered to the Lender, in form
satisfactory to the Lender, a recent good standing certificate from the
Secretary of State of New York certifying Mego Financial's due corporate
existence.
5.5 UNIFORM COMMERCIAL CODE FINANCING STATEMENTS.
All filings of Uniform Commercial Code financing statements and all
other filings and actions necessary to perfect the Lender's security interests
in and to the Collateral shall have been filed and confirmation thereof
received.
5.6 ASSIGNMENT OF PROPERTY-RELATED CONTRACTS.
The Debtor shall have delivered to the Lender certified copies of all
material Property-Related Contracts and executed and delivered in favor of the
Lender an assignment or assignments thereof, each in form and substance
satisfactory to the Lender and its counsel. All such Property-Related Contracts
shall be satisfactory to the Lender in form and substance. Each Person (other
than the Debtor) which is a party to any such Property-Related Contract shall
have been notified of the assignment thereof.
5.7 INTENTIONALLY DELETED
5.8 GUARANTY AGREEMENT.
Guarantor shall have executed and delivered to the Lender a Guaranty
Agreement (as amended from time to time, the "Guaranty Agreement") substantially
in the form of Exhibit M attached to this Agreement.
5.9 SUBORDINATION OF INDEBTEDNESS.
The Debtor, the Lender and Guarantor shall have entered into one or more
Subordination Agreements, substantially in the form of Exhibit A attached to the
Guaranty Agreement (individually, a "Subordination Agreement" and, collectively,
the "Subordination Agreements").
5.10 EXPENSES.
The Debtor shall have paid all fees and expenses required to be paid by
it pursuant to Section 10.2 of this Agreement and the Inventory Loan Agreement.
5.11 RECEIVABLES NOTE; INVENTORY DEED OF TRUST.
The Debtor shall have executed the Receivables Note, and the Inventory
Deed of Trust. The Inventory Deed of Trust shall have been recorded, as of the
Closing Date, in the Office of the Clerk and Recorder for Routt County, Colorado
and all taxes, recording fees and other fees and charges required by applicable
law to be paid in connection therewith shall have been duly paid in full. The
Inventory Deed of Trust shall have created a valid Lien in and to the Resort in
respect of the Obligations subject to no other Liens except to the extent
permitted by Section 7.2(h) of this Agreement.
The Debtor shall have executed and delivered to the Lender an assignment
of leases and rents (as may be amended from time to time, the "Assignment of
Rents"), substantially in the form of Exhibit N to this Agreement. The
Assignment of Rents shall have been recorded in the Office of the Clerk and
Recorder for Routt County, Colorado and all taxes, recording fees and other fees
and charges required by applicable law to be paid in connection therewith shall
have been duly paid in full. The Assignment of
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Rents shall have created a valid Lien in and to the Property referred to therein
in respect of the Obligations subject to no other Liens except to the extent
permitted by Section 7.2(h) of this Agreement.
5.12 TITLE INSURANCE; CASUALTY INSURANCE.
The Debtor shall have delivered to the Lender a mortgagee's title
insurance policy (issued to the Lender and in full force and effect) in respect
of the Inventory Deed of Trust (the "Title Insurance Policy {Blanket}") together
with such endorsements thereto as the Lender may require, dated the Closing
Date. The Title Insurance Policy {Blanket} (a) shall have been issued by a title
insurance company which is satisfactory to the Lender, (b) shall be in form and
substance satisfactory to the Lender and its special counsel, (c) shall be in
amount not less than the principal amount of the outstanding Inventory Loan, (d)
shall insure that the Inventory Deed of Trust creates a valid first Lien in and
to the Resort free and clear of all defects, encumbrances and other Liens
unacceptable to the Lender and (e) shall contain such further endorsements and
affirmative coverage as the Lender may request. All premiums in respect of such
Title Insurance Policy {Blanket} shall have been paid in full and evidence
thereof shall have been delivered to the Lender.
The Debtor shall have delivered to the Lender certificates of insurance
evidencing the insurance policies and endorsements required to be delivered
pursuant to Section 3.5 hereof, together with copies of such insurance policies
certified by the Debtor to be true and correct, except as otherwise provided in
Section 3.5. All premiums in respect of such insurance policies shall have been
paid in full and evidence thereof shall have been delivered to the Lender.
5.13 ENVIRONMENTAL SITE ASSESSMENT REPORT.
Except as may have been waived by the Lender, the Debtor (at its own
expense) shall have delivered to the Lender not less than 10 Business Days prior
to the Closing Date a Phase I environmental survey of the Hilltop Resort. The
Phase I environmental survey shall provide that the Lender may rely thereon in
connection with its making Advances hereunder.
5.14 TAXES.
The Debtor shall have delivered to the Lender copies of the most recent
tax receipts for the Resort and each of the Units (or certificates in respect
thereof) evidencing no delinquency in the payment thereof and that each of the
Units has been segregated from all other Property at the Resort on the
applicable municipal tax rolls.
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5.15 INSPECTION.
The Debtor shall have permitted the Lender or its representatives to
make an inspection/audit of its books, accounts and records and such other
papers as it may desire and of its premises and the Resort, as the Lender may in
its sole discretion determine. Such inspection/audit shall have been
satisfactory to the Lender (in its sole determination).
5.16 SURVEY.
The Debtor shall have delivered to the Lender the existing as-built
survey of the Resort; such survey shall be prepared in accordance with ALTA/ACSM
1988 Minimum Survey Requirements by a licensed surveyor acceptable to the Lender
and shall be dated (or re-certified) as of a recent date and shall contain a
certification noted thereon in form and substance satisfactory to the Lender;
such survey shall show no easements, rights-of-way, party walls, encroachments,
streets or alleys which interfere with the use, enjoyment or market value of the
Units.
5.17 ENGINEERING REPORT.
The Debtor shall have delivered to the Lender a current engineering
report or reports which shall be in form and substance satisfactory to the
Lender and shall confirm that the Buildings and their Units are structurally and
mechanically sound. The engineering report shall provide that the Lender may
rely thereon in connection with its making Advances hereunder.
5.18 INTENTIONALLY DELETED.
5.19 INTENTIONALLY DELETED.
5.20 FIRST LIENHOLDER STATUS; QUIT-CLAIM DEED; PROXY ACKNOWLEDGED.
The Debtor shall have informed the Association, in writing, as to the
first Lienholder status of the Lender in and to the Units and the Association
shall have recognized the Lender as such First Lienholder. The Associations
shall have acknowledged and recognized the proxy referred to in Section 3.9
hereof.
5.21 PROCEEDINGS SATISFACTORY.
All actions taken in connection with the execution of this Agreement,
the Receivable Note, any other Security Document and all documents and papers
relating thereto shall be satisfactory to the Lender and its counsel. The Lender
shall be satisfied with its physical inspection of the Units and the Resorts.
The Lender and its counsel shall have received copies of such documents and
papers as the Lender or such counsel may reasonably request in connection
therewith, all in form and substance satisfactory to the Lender and its counsel,
including, without limitation, certified copies of the Declarations and the
Associations' Articles of Incorporation and By-Laws.
SECTION 6. SUBSEQUENT RECEIVABLE ADVANCES CLOSING CONDITIONS
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The obligation of the Lender to make a Receivables Advance on any date
(herein referred to as a "Subsequent Receivables Advance Date") shall be subject
to the satisfaction of all of the following conditions precedent:
6.1 REQUESTS FOR ADVANCES.
Each request for a Receivables Advance
(a) shall be in writing,
(b) shall designate the principal amount of the Receivables
Advance requested, the Subsequent Receivables Advance Date on which such
Receivables Advance is to be made, and the account to which the proceeds
of such requested Receivables Advance are to be transferred,
(c) shall have been delivered to the office of the Lender at
least 10 Business Days in advance of the Subsequent Receivables Advance
Date in respect of such requested Receivables Advance and
(d) shall otherwise be substantially in the form of Exhibit P
attached hereto.
6.2 PLEDGED NOTES RECEIVABLE.
With respect to any Receivables Advance in respect of Notes Receivable,
not less than 5 Business Days prior to such Subsequent Receivables Advance Date,
the Debtor shall have:
(a) delivered to the Lender a list of all Notes Receivable which
are to be the subject of such requested Receivables Advance, together
with such additional information concerning such Notes Receivable, the
obligors of such Notes Receivable and the Pledged Note Receivable Deeds
of Trust securing the same as the Lender may reasonably require,
together with detailed computations showing borrowing availability as of
such Subsequent Receivables Advance Date under the Receivables Borrowing
Base;
(b) delivered to the Lender the original of each such Note
Receivable (duly endorsed to the order of the Lender) referred to in
such list, together with the original Pledged Note Receivable Deed of
Trust (bearing a recordation acknowledgement from the Office of the
Clerk and Recorder for Routt County, Colorado) referred to in such list,
and copies of all other related Timeshare Instruments in respect of each
such Note Receivable, provided that, if the original Pledged Note
Receivable Deed of Trust bearing a recordation acknowledgement is not
then available, the Debtor may substitute therefor a copy of such
Pledged Note Receivable Deed of Trust showing the recordation of the
same or if such copy with such recordation noted thereon is not then
available, the Debtor may deliver a copy of such Pledged Note Receivable
Deed of Trust together with a certificate of an officer of the Debtor
certifying the recordation information in respect of such Pledged Note
Receivable Deed of Trust together with a receipt showing the payment of
all recording fees in respect thereof; the Debtor agrees to promptly
deliver the original thereof to the Lender upon its receipt thereof;
(c) delivered to the Lender an instrument (substantially in the
form of Exhibit Q attached hereto) assigning to the Lender all of the
Debtor's right, title and interest in and to each such Note Receivable
and the related Pledged Note Receivable Deed of Trust;
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(d) delivered to the Lender all filings of Uniform Commercial
Code financing statements and all other filings and shall have taken all
other actions necessary to perfect the Lender's security interests in
and to the aforesaid Notes Receivable and such financing statements and
other filings shall have been recorded and confirmation thereof
received; and
(e) delivered to the Lender either (i) a separate mortgagee's
title insurance policy insuring the Lien of each of the Pledged Note
Receivable Deeds of Trust in the amount of the Note Receivable (referred
to in the aforesaid list) secured thereby outstanding on the Subsequent
Receivables Advance Date or (ii) a blanket mortgagee's title insurance
policy (in the case of the first Receivables Advance) or an endorsement
to an existing blanket mortgagee's title insurance policy (in the case
of any subsequent Receivables Advance), in either case, in respect of
the Pledged Note Receivable Deeds of Trust securing the Notes Receivable
referred to in the aforesaid list (which blanket policy and/or
endorsement are more particularly described below) and, in either case,
showing that such Pledged Note Receivable Deeds of Trust have been
assigned as collateral to Lender.
The Pledged Note Receivable Deeds of Trust and the assignments
thereof to the Lender shall each have been duly recorded in the Office
of the Clerk and Recorder for Routt County, Colorado in order to
constitute the same a valid first Lien on the Timeshare Interval
encumbered thereby and an effective assignment of the same to the
Lender. The aforesaid mortgagee's title insurance policies shall be in
form and substance satisfactory to the Lender and shall be issued by
Chicago Title Insurance Company (or such other title insurance company
as shall be satisfactory to the Lender) and shall name the Lender, by
way of an endorsement thereto (which endorsement shall have been
delivered to the Lender), as the insured party thereon; as an
alternative to the aforesaid mortgagee's title insurance policies in
respect of each Pledged Note Receivable Deed of Trust, the Debtor may
maintain a blanket mortgagee's title insurance policy insuring the
Lender and, by way of an endorsement thereto, add the Pledged Note
Receivable Deeds of Trust to the coverage thereof, increase the amount
of coverage thereunder to include the Notes Receivable secured by the
Pledged Note Receivable Deeds of Trust and make such changes effective
as of such Subsequent Receivables Advance Date, provided that (A) such
blanket mortgagee's title insurance policy shall be in form and
substance satisfactory to the Lender and shall be issued by Chicago
Title Insurance Company (or such other title insurance company as shall
be satisfactory to the Lender) and shall name the Lender as the insured
party thereon (and no exceptions or exclusions not satisfactory to the
Lender shall be included therein) and (B) such endorsement thereto shall
be satisfactory to the Lender in both form and substance (and no
exceptions or exclusions not satisfactory to the Lender shall be
included therein, provided that, with respect to any such endorsement,
any such exceptions or exclusions previously accepted in respect of such
blanket mortgagee's title insurance policy shall be deemed satisfactory
to the Lender). The Title Insurance Policy {Blanket} shall have been
"brought down to date" and shall otherwise be acceptable to the Lender.
The contemporaneous funding of the requested Receivables Advance
and delivery of the aforesaid Collateral and title insurance endorsement
and recording of the original Pledged Note Receivable Deeds of Trust and
assignments thereof shall be effected by way of an escrow arrangement
with Chicago Title Insurance Company (or such other title insurance
company as shall be acceptable to the Lender), the form and substance of
which shall be satisfactory to the Lender.
6.3 PROCEEDINGS SATISFACTORY.
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All actions taken in connection with any requested Receivables Advance
shall be reasonably satisfactory to the Lender and its counsel. The Lender and
its counsel shall receive copies of such documents and papers as the Lender or
such counsel may reasonably request in connection with any such requested
Receivables Advance, all in form and substance satisfactory to the Lender and
its counsel.
6.4 OTHER CONDITIONS. The making of such requested Receivables Advance
shall be subject to the satisfaction of the following conditions:
(a) no Default or Event of Default shall exist immediately prior
to the making of such requested Receivables Advance or, after giving
effect thereto, immediately after the making of such requested
Receivables Advance;
(b) each agreement required to have been executed and delivered
in connection with any prior Receivables Advance shall be in full force
and effect;
(c) the date on which such requested Receivables Advance is to be
made is not on or after the Receivables Termination Date and shall be a
Business Day;
(d) at least 5 Business Days in advance of the Subsequent
Receivables Advance Date, the Debtor shall have delivered to the Lender
a current aging report in respect of all Pledged Notes Receivable
previously pledged hereunder and the Notes Receivable being pledged
contemporaneously with such requested Receivables Advance, which report
shall be in form and substance satisfactory to the Lender and shall show
which of such Pledged Notes Receivable is delinquent and the duration of
such delinquency, provided that the aforesaid aging report shall not be
required to be delivered under this clause (d) if the Debtor is current
with respect to all of the reports required to be delivered under
Section 7.14(f) hereof;
(e) not more than two Receivables Advances shall have previously
been made in the same calendar month in which such requested Receivables
Advance is to be made, provided that the Lender may, in its sole
discretion, fund more than three Receivables Advances in any month;
(f) upon making such requested Receivables Advance and after
giving effect thereto, the aggregate principal amount of the Receivables
Loan then outstanding would not exceed the Receivables Borrowing Base;
(g) such requested Receivables Advance shall be in a principal
amount of not less than $50,000, provided that the Lender may, in its
sole discretion, make a Receivables Advance in a principal amount which
is less than $50,000.
6.5 EXPENSES.
The Debtor shall have paid all fees and expenses required to be paid
pursuant to Section 10.2 of this Agreement in connection with such requested
Receivables Advance.
SECTION 7. COVENANTS
The Debtor covenants that on and after the date hereof and so long as
any Obligation of the Debtor to the Lender exists as follows:
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7.1 PAYMENT OF TAXES AND CLAIMS.
Except as otherwise provided for in Section 3.8 hereof, the Debtor shall
pay, or cause to be paid, before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property at the Resorts, including, without
limitation, the Collateral; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might
result in the creation of a Lien upon its Property at the Resorts,
including, without limitation, the Collateral.
7.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; STOCK OWNERSHIP;
RENOVATIONS; SUPERVISORY ARCHITECT; INDEBTEDNESS; LIENS; BUSINESS.
The Debtor shall:
(a) PROPERTY -- maintain its Property at the Resorts in good
repair, working order and condition and make all necessary renewals,
repairs, replacements, additions, betterments and improvements thereto
and, without limiting the generality of the foregoing, maintain, or
cause to be maintained, the Resort in good repair, working order and
condition and shall make, or shall cause to be made, all necessary
repairs, replacements, additions, betterments and improvements to the
Resort;
(b) INSURANCE -- maintain, or cause to be maintained, insurance
as required by Section 3.5 of this Agreement;
(c) FINANCIAL RECORDS -- (i) keep true books of records and
accounts (including, without limitation, the Books and Records) in which
full and correct entries will be made of all its business transactions
and (ii) reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with generally accepted
accounting principles, practices and procedures at the time in effect
and consistently applied;
(d) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all
things necessary or required (i) to preserve and keep in full force and
effect its corporate existence, rights, powers and franchises,
including, without limitation, its authorization to do business in the
State of Colorado and (ii) to cause Preferred Equities to continue to
own 100% of all legal and beneficial interest in all of the Voting Stock
and other capital stock of Steamboat;
(e) COMPLIANCE WITH LAW -- not be in violation of (i) any laws,
ordinances, governmental rules and regulations to which it is subject,
and to that end, the Debtor shall not fail to obtain any licenses,
permits, franchises or other governmental authorizations necessary to
the ownership of its Properties or to the conduct of its business, which
violation or failure to obtain might materially and adversely affect the
business, prospects, profits, Property or condition (financial or
otherwise) of the Debtor, including, without limitation, any zoning,
land use, subdivision control or Environmental Protection Laws
applicable to its real Property (including, without limitation, the
Units and the Resort), (ii) any statutes, rules and regulations, whether
now or hereafter in force, in such jurisdictions as the Debtor may make
sales of Timeshare Intervals relating to the right to do business in any
of such jurisdictions and (iii) any applicable federal, state or
municipal statutes, rules and regulations relating to sales of Timeshare
Intervals and the
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manner of evidencing and financing the same, including, without
limitation, the Consumer Credit Protection Act, as amended, the Federal
Trade Commission Act, as amended, and Federal Reserve Board Regulation
Z, as amended, to the end that all of the Pledged Notes Receivable, the
Pledged Contracts related thereto and the Pledged Note Receivable Deeds
of Trust securing any of such Pledged Notes Receivable shall be valid,
binding and legally enforceable in accordance with their respective
terms subsequent to the assignment thereof to the Lender;
(f) DEFERRED COMPENSATION PLANS -- to the extent that it has one
or more pension, profit sharing or other compensatory or similar plans
providing for a program of deferred compensation for any employee or
officer, be in compliance with all requirements of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated in connection therewith;
(g) INDEBTEDNESS/RIGHT OF FIRST REFUSAL -- not incur any
indebtedness (other than the Loan and the leasing of motor vehicles,
telephone and computer equipment in the ordinary course of business) in
respect of the Collateral and/or the Resort, whether such indebtedness
is secured or unsecured, and not permit the Association to incur any
indebtedness, whether secured or unsecured, provided that the Debtor may
incur additional indebtedness for borrowed money secured principally by
Notes Receivable (other than the Pledged Notes Receivable), if, but only
if, the following conditions shall have been satisfied:
(i) the Debtor shall have, at any time within the 120-day
period prior to the termination of the Receivables Commitment
Period, delivered to the Lender a written request for Lender's
issuance to the Debtor of a Letter of Intent in respect of its
borrowing of additional moneys to be secured principally by Notes
Receivable (other than the Pledged Notes Receivable) on the terms
and conditions to be outlined by the Debtor in such request (such
terms to include, as applicable, the extension of the then
current Receivables Commitment Period, the term of any new
facility, the advance rate, the rate of interest, the borrowing
base requirements, the revolving period and such other terms with
respect to such borrowing as are customarily included in letters
of intent);
(ii) at the time of the delivery of such written request
to the Lender, the borrowing availability of the Debtor under the
Receivables Borrowing Base is less than the requested additional
indebtedness or the Receivables Commitment Period will terminate
within 120 days;
(iii) one of the following shall be true:
(A) the Lender shall not have delivered to the
Debtor a Letter of Intent in respect of the Debtor's
aforesaid request within 20 days after the Lender's
receipt of such request; or
(B) the Lender shall have delivered to the Debtor a
written response in respect of the Debtor's aforesaid
request rejecting the same; or
(C) (1) the Lender shall have delivered to the
Debtor a Letter of Intent in respect of the Debtor's
aforesaid request within 20 days after the Lender's
receipt of such request and (2) within 10 days after
receipt of such Letter of Intent, the Debtor shall have
informed the Lender that, in the good faith opinion of the
Debtor, such Letter of Intent fails to materially satisfy
the terms outlined in the aforesaid Debtor's request; or
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(D) (1) the Lender shall have delivered to the
Debtor a Letter of Intent in respect of the aforesaid
Debtor's request within 20 days after the Lender's receipt
of such request, (2) within 10 days after receipt of such
Letter of Intent, the Debtor shall have executed and
returned such Letter of Intent to the Lender, and (3)
within 30 days after receipt of such executed Letter of
Intent by the Lender, the Lender shall have failed to
issue to the Debtor a Phase II Commitment Letter in
respect of such Letter of Intent;
(iv) the Debtor shall not have made more than 2 other such
requests under this clause (g) and/or under Section 7.4 hereof
during the then current fiscal year of the Debtor; and
(v) no Event of Default shall exist at the time of the
delivery of the aforesaid written request;
(h) LIENS -- (i) not allow any Liens or encumbrances whatsoever
to attach to the Collateral and/or the Resort other than the Liens and
security interests of the Lender created by the Security Documents, any
Liens in favor of the Association under the Declaration, the Liens set
forth on Schedule 7, Schedule 8 and Schedule 9 hereto and any Liens
permitted in connection with additional indebtedness for borrowed money
permitted under clause (g) above or in connection with the sale of Notes
Receivable under Section 7.4 hereof and (ii) cause the Liens and
security interests of the Lender created by the Security Documents in
and to the Collateral to continue to be valid, enforceable, perfected
Liens and security interests subject to no other Liens except as set
forth in this Agreement or in any other Security Document and in
Schedule 7, Schedule 8 and Schedule 9 hereto;
(i) MATERIAL ADVERSE EFFECT -- not undertake any action that
would have a material adverse effect on the operation of the Resort or
the Collateral; and
(j) NOTIFICATION OF CLAIMS -- promptly notify the Lender of any
claim, action or proceeding affecting title to the Collateral, or any
part thereof, or any of the security interests granted hereunder, and,
at the request of the Lender, appear in and defend, at the Debtor's
expense, any such claim, action or proceeding.
7.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Debtor shall punctually pay or cause to be paid the principal and
interest (and prepayment premium, if any) to become due in respect of each of
the Notes according to the terms thereof (all of which are incorporated herein
by reference). All payments hereunder or under the Notes shall be made in
accordance with the payment instructions set forth in Schedule 14 to this
Agreement. The Debtor shall maintain an office in Steamboat Springs, Colorado
and/or Las Vegas, Nevada where notices, presentations and demands in respect of
this Agreement, the Notes or any other Security Document may be made upon the
Debtor. Such offices shall be maintained at the addresses of the Debtor set
forth on Schedule 15 to this Agreement until such time as the Debtor shall so
notify the Lender, in writing, of any change of location of such offices. The
books and records of the Debtor shall be maintained at the Las Vegas, Nevada
office of the Debtor . The Debtor shall not change its name without 30-day prior
written notice to the Lender.
7.4 SALE OF PROPERTIES.
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Without the prior written consent of the Lender, the Debtor shall not
sell, lease, transfer or otherwise dispose of any of the Collateral, provided
that the Debtor may sell the Unsold Inventory Timeshare Intervals in the
ordinary course of its business to unaffiliated consumers and remove and dispose
of (and receive the proceeds thereof) in the ordinary course of its business,
free from any Liens created or contemplated by this Agreement, items of
Collateral consisting of Equipment which shall have become worn out or obsolete
and provided further that the Debtor may sell Notes Receivable (other than the
Pledged Notes Receivable) provided no Event of Default exists under the
Inventory Loan and any applicable Release Fee and Release Price have been paid.
7.5 CONSOLIDATION AND MERGER.
Without the prior written consent of Lender, the Debtor shall not
consolidate with or merge into any other Person or permit any other Person to
consolidate with or merge into it or consent or agree to a Change in Management.
7.6 TIMESHARE COVENANTS.
The Debtor covenants that:
(a) ACCESS -- the owner of each Timeshare Interval in respect of
each Unit shall have direct access to a publicly dedicated road and all
roadways inside the Resort shall be common elements under the
Declaration;
(b) UTILITIES -- electric, sewer, water facilities and other
necessary utilities shall be available in sufficient capacity to service
each Unit;
(c) AMENITIES -- each purchaser of a Timeshare Interval in
respect of a Unit shall have access to, and the use of, all of the
amenities and public utilities relating to such Unit, including, without
limitation, the Common Amenities (subject to only the requirements of
the Debtor in respect of on-going renovations and construction with
respect to the Units that are not completed Units and the Amenity
Building);
(d) LAWS -- each of the Units and the Timeshare Intervals in
respect thereof shall comply with all applicable restrictive covenants,
zoning and land use ordinances and building codes, all applicable health
and environmental laws and regulations and all other applicable laws,
rules and regulations and all approvals, consents, licenses, and all
certificates of occupancy in respect of the use and operation of the
Units and the Timeshare Intervals in respect thereof shall be obtained
and remain in full force and effect;
(e) SALE OF TIMESHARE INTERVALS -- the sale, offering of sale,
and financing of Timeshare Intervals (i) shall not constitute the sale,
or the offering of sale, of Securities subject to the registration
requirements of the Securities Act of 1933, as amended, or the blue-sky
securities laws of the State of Colorado, (ii) shall only be done in the
State of Colorado, the State of Nevada and/or the State of Texas and in
such other jurisdictions where the Debtor has made all necessary filings
and obtained all necessary permits, to do so (and no solicitation and no
advertising in respect of the sale of Timeshare Intervals that would, in
either case, be in violation of applicable law shall be done in any
other State or Province), (iii) shall not violate any applicable
federal, state or local consumer credit, sale rescission or usury
statute, including, without limitation, any such statute of any state in
which a Maker of a Note Receivable may reside, and (iv) shall not
violate in any material respect any other applicable federal, state or
local law, statute or regulation. Without limiting the generality of the
foregoing, the Debtor shall, to the extent
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required by its activities and businesses, fully comply with (1) all of
the applicable provisions of (A) the Consumer Credit Protection Act, as
amended, (B) the Federal Trade Commission Act, as amended, (C) all rules
and regulations promulgated under the foregoing Acts, (D) the Interstate
Land Sales Full Disclosure Act and the rules and regulations promulgated
thereunder, and (E) all other applicable federal statutes and the rules
and regulations promulgated thereunder pertaining to the operation of
the Resort and (2) all of the applicable provisions of any law of any
state (and the rules and regulations promulgated thereunder) or
municipality relating to the operation of the Resort, including, without
limitation, the laws, rules and regulations of the State of Colorado and
the Town of Steamboat Springs, Colorado; and the sale and offering of
sale of Timeshare Intervals shall not be effected by any home
solicitations.
(f) EXCHANGE PROGRAM -- the Resorts (including, without
limitation, each of the Units and the Timeshare Intervals in respect
thereof) shall be and shall remain a participant in good standing in the
timeshare exchange programs of Resort Condominium International, Inc.
and/or Interval International, Inc. and all eligibility requirements in
respect thereof shall be and shall continue to be satisfied.
7.7 GUARANTIES.
(a) Except as required by applicable law or any government agency
having regulatory authority with respect to the sale of the Timeshare
Intervals, the Debtor shall not become liable in respect of, or be
liable in respect of, any Guaranty except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection.
(b) "Guaranty" by any Person shall mean all obligations of such
Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including but not limited to
obligations incurred through an agreement, contingent or otherwise, by
such Person:
(i) to purchase such indebtedness or obligation or any
Property or assets constituting security therefor;
(ii) to advance or supply funds
(A) for the purchase or payment of such
indebtedness or obligation, or
(B) to maintain working capital or other balance
sheet conditions or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or
obligation;
(iii) to lease Property or to purchase any Security or
other Property or services primarily for the purpose of assuring
the owner of such indebtedness or obligation of the ability of
the primary obligor to make payment of the indebtedness or
obligation; or
(iv) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in respect
thereof.
7.8 COMPLIANCE WITH ENVIRONMENTAL LAWS.
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The Debtor shall comply, and shall cause the Resorts to be in
compliance, in a timely and diligent fashion with
(a) all Environmental Protection Laws (including, without
limitation, all federal, state and local environmental or
pollution-control laws, regulations, orders and decrees governing the
emission of waste water effluent, the treatment, transportation,
disposal, generation and storage of solid and hazardous waste, hazardous
and toxic substances and air pollution, and/or setting forth general
environmental conditions),
(b) any other applicable requirements for conducting, on a timely
basis, periodic tests and monitoring for contamination of ground water,
surface water, air and/or land, and for biological toxicity of the
aforesaid and
(c) the regulations of each relevant federal, state or local
authority administering environmental laws, ordinances or regulations,
to the extent that the failure to so comply could have a material and
adverse effect on the business, prospects, profits, Property or
condition (financial or otherwise) of the Debtor or the Resort.
Without limiting the generality of the foregoing, the Debtor shall not
release or otherwise dispose of any Hazardous Substance or any other substance
regulated, controlled or described as hazardous under any Environmental
Protection Law on or beneath any real Property owned, leased or otherwise used
by the Debtor or allow the same to occur with respect to the Resort; and no
asbestos, urea formaldehyde foam, polychlorinated biphenyls, aluminum wire or
lead-containing paint shall be installed or used on any such Property or the
Resort. The Debtor shall not take or suffer to be taken any act or omission that
would subject it or the Resort to liability under any Environmental Protection
Law which liability could have a material and adverse effect on the business,
prospects, profits, Property or condition (financial or otherwise) of the Debtor
or the Resort.
The Lender shall have the right, but shall not be obligated, to notify
any state, federal or local governmental authority of information which may come
to its attention with respect to Hazardous Substances on or emanating from the
Resort and the Debtor irrevocably releases the Lender from any claims of loss,
damage, liability, expense or injury relating to or arising from, directly or
indirectly, any such disclosure. The Lender will notify the Debtor prior to or
contemporaneously with any action taken by the Lender pursuant to this
paragraph, provided that the failure by the Lender to provide such notification
shall not affect any action so taken.
Without limiting the scope and the effectiveness of the foregoing
undertakings in this Section 7.8, the Debtor agrees to indemnify and hold the
Lender harmless from and against any losses, liabilities, damages, claims,
causes of action, costs or expenses (including, without limitation, attorneys'
fees and disbursements), arising from, incurred by, or asserted against, the
Lender in connection with any cleanup, removal or similar protective or remedial
action that may be required or undertaken by any governmental authority as a
result of the presence of any Hazardous Substances at the Resort, the release of
any other Hazardous Substance on or from the Resort or the generation,
treatment, storage, handling or disposal of any Hazardous Substances on or from
the Resort (unless such presence, release, generation, treatment, storage,
handling or disposal is directly caused by the Lender or by any agent of the
Lender acting under the Lender's direct orders). The liability of the Debtor to
the Lender under this paragraph shall survive any assignment, transfer,
discharge or foreclosure of the Inventory Deed of Trust or any transfer of the
Resort (or any portion thereof) by deed in lieu of foreclosure or otherwise, and
any one or more transfers of the Resort (or any portion thereof) by deed or
otherwise, by whosoever made.
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If the Debtor fails to diligently take any action required under this
Section 7.8 or by any governmental entity with respect to the cleanup, control
or reporting of any Hazardous Substances, materials or wastes in, on, from or
under the Resort, the Lender, at its option, may enter upon the Resort, retain
such experts and consultants at the expense of the Debtor and take such action
as the Lender deems advisable, and the Lender may advance such sums of money as
it deems necessary, with respect to the cleanup, control or reporting of any
such substances, materials or wastes in, on or under the Resort. The Debtor
shall pay to the Lender immediately and upon demand, all sums of money so
advanced or expended by the Lender pursuant to this paragraph, together with
interest on each such advance at the Default Rate, and all such sums, and the
interest thereon, shall be secured by the Collateral. The Lender will notify the
Debtor prior to or contemporaneously with any action taken by the Lender
pursuant to this paragraph, provided that the failure by the Lender to provide
such notification shall not affect any action so taken.
7.9 TRANSACTIONS WITH AFFILIATES; PRINCIPAL PROPERTIES.
The Debtor shall not enter into any transaction including, without
limitation, the purchase, sale or exchange of Property or the rendering of any
service with any Affiliate except in the ordinary course of, and pursuant to the
reasonable requirements of, the Debtor's business and upon fair and reasonable
terms no less favorable to the Debtor than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate. Steamboat shall have no
Subsidiaries.
7.10 USE OF THE LENDER NAME.
The Debtor shall not, nor shall it permit any Affiliate to, without the
prior written consent of the Lender, use the name of the Lender or the name of
any affiliate of the Lender in connection with any of its respective businesses
or activities, except in connection with internal business matters and as
required in dealings with governmental agencies.
7.11 SUBORDINATED OBLIGATIONS.
The Debtor shall not, directly or indirectly, (a) permit any payment to
be made in respect of any indebtedness, liabilities or obligations, direct or
contingent, which are subordinated by the terms thereof or by separate
instrument to the payment of principal of, and interest on, the Notes except in
accordance with the terms of such subordination, (b) permit the amendment,
rescission or other modification of any such subordination provisions of any of
the Debtor's subordinated obligations in such a manner as to affect adversely
the Lender's Lien or the prior position of the Notes, or (c) permit the
unscheduled prepayment or redemption of all or any part of any subordinated
obligations of the Debtor except in accordance with the terms of such
subordination and except as provided in this Section 7.11 in respect of
indebtedness extended to Steamboat by Preferred Equities and except for payments
pursuant to tax sharing agreements. The Debtor shall cause the Guarantor to
subordinate all indebtedness, liabilities or obligations, direct or contingent,
owing to it from the Debtor to the payment of the Obligations. The Debtor shall
cause each of its other Affiliates to subordinate all indebtedness, liabilities
or obligations, direct or contingent, owing to it from the Debtor to the payment
of the Obligations. The terms of such subordination shall be satisfactory to the
Lender. Such subordination may permit payments by the Debtor in respect of such
subordinated indebtedness, liabilities or obligations if (i) in the case of all
such indebtedness other than that owing to Preferred Equities and except for
payments pursuant to tax sharing agreements, such payments are regularly
scheduled payments and the terms of such regularly scheduled payments are
acceptable to the Lender and, in the case of such indebtedness owing to
Preferred Equities, no such payments (whether for interest, principal or
otherwise), shall be permitted or made for so long as the Inventory Loan is
outstanding and thereafter any payments of principal and interest may be made
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(subject to the requirements of clause (ii) and (iii) which follow), (ii) no
Default or Event of Default then exists or, after giving effect to such payment,
would exist and (iii) the Debtor would not be rendered insolvent, made unable to
pay its debts as they come due or be left without adequate capital to pursue its
business after giving effect to such payment.
7.12 NOTICE OF LEGAL PROCEEDINGS.
Promptly upon becoming aware of the existence thereof, the Debtor shall
deliver to the Lender written notification of the institution of any litigation,
legal proceeding or dispute with any Person, entity or governmental authority in
any way involving the Debtor, the Guarantor, the Resort, the Collateral or any
of the Debtor's other assets as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would materially
adversely affect the Debtor, the Guarantor, the Resort the Collateral or any of
the Debtor's other real Property assets.
7.13 FURTHER ASSURANCES.
The Debtor shall from time to time execute and deliver to the Lender
such other instruments, certificates and documents and shall take such other
action and do all other things as may from time to time be reasonably requested
by the Lender in order to implement or effectuate the provisions of, or more
fully perfect the rights granted or intended to be granted by the Debtor to the
Lender pursuant to the terms of, this Agreement, the Notes or any other Security
Document. The Debtor agrees, in its capacity as Declarant (to the extent
permitted by applicable law), to cause the Association to take such action and
to do all other things as may from time to time be reasonably requested by the
Lender in order to implement or effectuate the provisions of this Agreement and
the other Security Documents.
7.14 FINANCIAL STATEMENTS.
The Debtor shall submit to the Lender the following:
(a) ANNUAL STATEMENTS -- As soon as practicable after the end of
each fiscal year of the Debtor, and in any event no later than 120 days
thereafter, duplicate copies of:
(i) a balance sheet of the Debtor (including all assets
and liabilities of, or in respect of, the Resort) as at the end
of such fiscal year, and
(ii) a statement of income of the Debtor (including the
operations of the Resort) for such fiscal year, and
(iii) a statement of changes in cash flows of the Debtor
(including the cash flows of, or in respect of, the Resort)
during such fiscal year, and
(iv) a statement of material changes of accounting
policies, presentations or principles during such fiscal year,
and
(v) notes to such financial statements.
Each of the above shall have been prepared in reasonable detail
and in accordance with generally accepted accounting principles,
procedures and practices consistently applied and shall set forth, in
each case, in comparative form the figures for the previous fiscal year,
and shall be certified as complete and correct by the principal
financial officer of the Debtor. The Debtor shall also deliver to the
Lender with the above financial statements a report, certified as
complete
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and correct by the chief accounting officer of the Debtor, showing all
sales and cancellations made in respect of Timeshare Intervals at the
Resort for the fiscal year of the Debtor then most recently ended and in
respect of which said financial statements shall have been prepared. The
above financial statements shall be accompanied by a certificate of the
chief accounting officer of the Debtor, which certificate shall be
acceptable to the Lender and shall, without qualification, state that
such financial statements present the financial condition of the Debtor
and have been prepared in accordance with generally accepted accounting
principles consistently applied.
(b) QUARTERLY STATEMENTS -- As soon as practicable after the end
of each fiscal quarter of the Debtor, and in any event no later than 90
days thereafter, duplicate copies of:
(i) a balance sheet of the Debtor (including all assets
and liabilities of, or in respect of, the Resort) as at the end
of such fiscal quarter, and
(ii) a statement of income of the Debtor (including the
operations of the Resort) for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal year
ending with such quarter, and
(iii) a statement of changes in cash flows of the Debtor
(including the cash flows of, or in respect of, the Resort)
during such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such
quarter, and
(iv) a statement of material changes of accounting
policies, presentations or principles during such quarter.
Each of the above shall have been prepared in reasonable detail
and in accordance with generally accepted accounting principles,
procedures and practices consistently applied (other than the
preparation of notes to such financial statements), subject to changes
resulting from year-end adjustments, and shall set forth in each case in
comparative form the figures for the corresponding periods in the
immediately preceding fiscal year, and shall be certified as complete
and correct by the chief accounting officer of the Debtor.
(c) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- Promptly upon
becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Debtor is taking or proposes to take with respect thereto.
(d) NOTICE OF CLAIMED DEFAULT -- Immediately upon becoming aware
that the holder of any obligation or of any evidence of indebtedness or
other Security of the Debtor or Guarantor has given notice or taken any
other action with respect to a claimed default or event of default
thereunder, a written notice specifying the notice given or action taken
by such holder and the nature of the claimed default or event of default
and what action the Debtor is taking or proposes to take with respect
thereto.
(e) MATERIAL ADVERSE DEVELOPMENTS -- Immediately upon becoming
aware of any development or other information which may materially and
adversely affect the Property, business, prospects, profits or condition
(financial or otherwise) of the Debtor or the ability of the Debtor to
perform its obligations under this Agreement, the Notes or the other
Security Documents, telephonic, telefax or telegraphic notice specifying
the nature of such development or information and the anticipated
effect.
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(f) NOTES RECEIVABLE INFORMATION. On or before the 15th day of
each month, a detailed trial balance of all Pledged Notes Receivable
together with a detailed report setting forth (i) which of the Pledged
Notes Receivable are delinquent and the duration of such delinquency,
(ii) a summary of collections of the Pledged Notes Receivable for the
preceding month and the balances of the Pledged Notes Receivable as at
the end of such month, and (iii) such other information, in type and
scope, as the Lender may reasonably request including, but not limited
to the updated name, address and telephone number of each purchaser
whose note has been pledged to Lender. Debtor may discharge its
obligations under this clause (f) by having the Collection Agent deliver
the aforesaid information and reports.
(g) SALES INFORMATION. On or before the 15th day of each month, a
report showing the previous month's sales of, and cancellations of sales
of, Timeshare Intervals.
(h) FINANCIAL INFORMATION. As promptly as possible after the
receipt thereof, all financial statements, budgets and other information
distributed by the Association. The Debtor, as Declarant or otherwise,
shall cause the Association to prepare annual financial statements,
substantially as provided in clause (a) above, and an annual budget, and
shall deliver the same to the Lender within 120 days of the end of each
of its fiscal years.
(i) REQUESTED INFORMATION -- With reasonable promptness, such
other data and information as from time to time may be reasonably
requested by the Lender.
7.15 OFFICERS' CERTIFICATE.
The financial statements delivered to the Lender pursuant to Section
7.14(a) and Section 7.14(b) of this Agreement shall be accompanied by a
certificate substantially in the form of Exhibit O of the President or a
Vice-President and the Treasurer or an Assistant Treasurer of the Debtor setting
forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Debtor was in
compliance with all financial covenants contained in Section 7 of this
Agreement during the period covered by the financial statements or
reports then being furnished; and
(b) EVENT OF DEFAULT -- that the signers have reviewed the
relevant terms of the Agreement (and all other agreements and exhibits
between the parties) and have made, or caused to be made, under their
supervision, a review of the transactions and conditions of the Debtor
from the beginning of the period covered by the financial statements or
reports being delivered therewith to the date of the certificate and
that such review has not disclosed the existence during such period of
any condition or event which constitutes a Default or Event of Default
or, if any such condition or event existed or exists or will exist,
specifying the nature and period of existence thereof and what action
the Debtor has taken or proposes to take with respect thereto.
7.16 INSPECTION.
The Debtor shall permit the Lender or its representatives to make such
inspections/audits of its books, accounts, records, orders, original
correspondence and such other papers as it may desire and of its premises, the
Resort, the Units, and the other Collateral, from time to time, as the Lender
may in its sole discretion determine. The Debtor shall supply copies of such
records and papers as the Lender may reasonably request, and shall permit the
Lender to discuss the Debtor's respective affairs, finances and accounts with
the Debtor's officers, employees and independent public accountants (and by this
provision the Debtor hereby authorizes said accountants to discuss with the
Lender the finances and affairs of the
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Debtor), all at reasonable times and as often as may be desired by the Lender.
The Debtor further agrees to supply the Lender with such other reasonable
information relating to the Debtor and the Collateral as the Lender may request.
With respect to any inspections and/or audits referred to in this Section 7.16,
the Debtor shall pay for all out-of-pocket costs and reasonable expenses
incurred by the Lender (including, without limitation, travel expenses, but
excluding salaries of employees of the Lender) and shall promptly reimburse the
Lender therefor upon receipt by the Debtor of a written demand therefor from the
Lender.
SECTION 8. EVENTS OF DEFAULT
8.1 DEFAULT.
The Debtor hereby covenants, agrees and acknowledges that an Event of
Default shall exist under this Agreement if any of the following events or
conditions (each, an "Event of Default") shall occur and be continuing:
(a) PAYMENTS -- (i) failure to make any payment of interest on
the Inventory Note, (ii) failure to make any payment of interest on the
Receivables Note; (iii) failure to make any payment of principal of, or
prepayment premium on, any Note; (iv) failure to make any Mandatory
Receivables Prepayment, whether by payment of money or addition of
Eligible Note Receivables; or (v) failure to make any other payment
required pursuant to the terms of this Agreement, the Notes or any other
Security Document or any instrument securing the Inventory Loan; in
each case on or before 2 Business Days after the date such payment is
due; or
(b) WARRANTIES OR REPRESENTATIONS -- any warranty, representation
or other statement made or furnished to the Lender by or on behalf of
the Debtor or Guarantor in this Agreement or any other Security Document
proves to have been false or misleading in any material respect when
made or furnished; or
(c) COLLATERAL AND FINANCIAL COVENANTS -- failure by Debtor to
comply with any covenant set forth in Section 3.5, Section 3.6, and
Section 7 of this Agreement; or
(d) OTHER COVENANTS -- failure by the Debtor to comply with
Section 2.3(a) of this Agreement and the continuance of such failure for
more than 2 Business Days after such failure shall have first become
known to any officer of the Debtor or the failure by the Debtor to
comply with any other covenant relating to the Debtor contained in this
Agreement or any other Security Document, and the continuance of such
failure for more than 20 days after such failure shall have first become
known to any officer of the Debtor or Guarantor; or
(e) MATERIAL ADVERSE CHANGE -- any material adverse change in or
in respect of the Collateral (including, without limitation, the
termination of any applicable timeshare or condominium regimen {whether
by consent of the condominium or timeshare owners thereunder or
otherwise}, any modification or amendment to the Declaration which
shall, in the opinion of the Lender, adversely affect the Collateral or
the operations or prospects of the Resort, or the substantial
destruction of any uninsured Building, or any Unit) or in the financial
condition of the Debtor or Guarantor; or
(f) INSOLVENCY -- (i) a receiver, liquidator, custodian or
trustee of the Debtor or Guarantor, or of all or any of the Property of
any of them, shall be appointed by court order and such order remains in
effect for more than 50 days; or an order for relief shall be entered
with respect to the Debtor or Guarantor, or the Debtor or Guarantor
shall be adjudicated a bankrupt or insolvent; or any of the Property of
any of them shall be sequestered by court order and such
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order remains in effect for more than 50 days; or a petition shall be
filed against the Debtor or Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, and shall not be dismissed within 50 days after
such filing; or (ii) the Debtor or Guarantor shall file a petition in
voluntary bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or shall consent to the filing of any petition
against it under any such law; or (iii) the Debtor or Guarantor shall
make an assignment for the benefit of its creditors, or shall admit in
writing its inability, or shall fail, to pay its debts generally as they
become due, or shall consent to the appointment of a receiver,
liquidator or trustee of the Debtor or Guarantor, or of all or any part
of the Property of any of them; or
(g) JUDGMENT -- final judgment or judgments for the payment of
money, the aggregate of which exceeds $100,000, shall be outstanding
against one or more of the Debtor and the Guarantor and any of such
judgments shall have been outstanding for more than 30 days from the
date of its entry and shall not have been discharged in full or stayed;
or
(h) DEFAULT IN LENDER AGREEMENTS -- any default (after giving
effect to the expiration of any applicable grace periods) under, and as
defined in the Inventory Loan Agreement or any other agreement, now
existing or hereafter entered into, between (i) the Debtor and the
Lender or any affiliate of the Lender, (ii) Preferred Equities and the
Lender or any affiliate of the Lender (including, without limitation,
Dorfinco), (iii) Mego Financial and the Lender or any affiliate of the
Lender (including, without limitation, Dorfinco) or (iv) any Affiliate
of the Debtor and the Lender or any affiliate of the Lender (including,
without limitation, Dorfinco); or
(i) DEFAULT BY DEBTOR IN OTHER AGREEMENTS -- any default by the
Debtor or Guarantor in the payment of indebtedness for borrowed money;
any other default under such indebtedness which accelerates or permits
the acceleration (after the giving of notice or passage of time, or
both) of the maturity of such indebtedness, whether or not such default
has been waived by the holder of such indebtedness, provided that any
such acceleration or permitted acceleration with respect to a default by
Guarantor shall be an Event of Default only if such acceleration or
permitted acceleration could reasonably be expected to have a material
adverse affect on Guarantor and provided further that any default with
respect to that indebtedness described on Schedule 18 shall not be an
Event of Default hereunder unless such default becomes an unappealable
judgement against Debtor; or
(j) SUSPENSION OF SALES -- the issuance of any stay order, cease
and desist order or similar judicial or nonjudicial sanction limiting or
otherwise affecting the sale of Timeshare Intervals in any state or any
jurisdiction thereof in which the Debtor shall have made a material
percentage of sales of Timeshare Intervals and any one of such orders or
sanctions shall have been outstanding for more than 30 days from the
date of its entry and shall not have been discharged in full or stayed
by appeal, bond or otherwise; or
(k) GUARANTY -- any Guaranty Agreement shall have been
terminated, revoked or declared invalid; or
8.2 DEFAULT REMEDIES.
(a) ACCELERATION OF OBLIGATIONS; RIGHT TO DISPOSE OF COLLATERAL.
If an Event of Default under Section 8.1(f) of this Agreement shall
occur, then the Obligations shall, automatically and
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without notice or demand by the Lender, become at once due and payable,
and the Debtor will forthwith pay to the Lender, in addition to any and
all sums and charges otherwise due in respect of the Obligations, the
entire principal of and interest accrued on the Receivables Note and the
Inventory Note and, to the extent permitted by law, a premium in an
amount equal to the amount which would be payable if the Debtor then had
elected to prepay the Receivables Note at a premium pursuant to Section
2.3 of this Agreement. If any other Event of Default shall occur, all of
the Obligations shall, at the option of the Lender, and without notice
or demand by the Lender, become at once due and payable, and the Debtor
will forthwith pay to the Lender, in addition to any and all sums and
charges otherwise due in respect of the Obligations, the entire
principal of and interest accrued on each of the Receivables Note and
the Inventory Note and, to the extent permitted by law, a premium in an
amount equal to the amount which would be payable if the Debtor then had
elected to prepay the Receivables Note at a premium pursuant to Section
2.3 of this Agreement. The Lender shall have all the rights and remedies
of a secured party under the Colorado Uniform Commercial Code, all the
rights and remedies of a beneficiary under the Inventory Deed of Trust
and all other legal and equitable rights to which it may be entitled,
including, without limitation and without further notice to Debtor, the
right to continue to collect all payments being made on the Pledged
Notes Receivable and to apply such payments to the Obligations and to
sue in its own name (or the name of the Debtor) the obligor under any
defaulted Pledged Note Receivable. The Lender shall also have the right
to require the Debtor to assemble the Collateral, at the Debtor's
expense, and make it available to the Lender at a place to be designated
by the Lender, which is reasonably convenient to both parties, and the
Lender shall have the right to take immediate possession of the
Collateral and may enter any of the premises of the Debtor or wherever
the Collateral shall be located, in accordance with applicable law, and
to keep and store the same on said premises until sold (and if said
premises be the Property of the Debtor, the Debtor agrees not to charge
the Lender for storage thereof for a period of at least 90 days after
sale or disposition of such Collateral). The Debtor and the Lender agree
that 10 days' notice to the Debtor of any public or private sale or
other disposition of Collateral shall be reasonable notice thereof and
such sale shall be at such location(s) as the Lender shall designate in
said notice. The Lender shall have the right to bid at any such sale on
its own behalf.
In view of the fact that federal and state securities laws may
impose certain restrictions on the methods by which a sale of
Collateral, if comprised of Securities, may be effected after an Event
of Default, the Debtor agrees that, upon the occurrence and continuance
or existence of an Event of Default, the Lender may, from time to time,
attempt to sell all or any part of such Collateral by means of a private
placement restricting the bidding and prospective purchasers to those
who will represent and agree that they are purchasing for investment
only and not for, or with a view to, distribution. In so doing, and
without limiting any other means of private placement, the Lender may
solicit offers to buy such Collateral, or any part of it for cash, from
a limited number of investors deemed by the Lender, in its reasonable
judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if the Lender solicits such offers from
not less than 4 such investors (and otherwise acts in good faith), then
the acceptance by the Lender of the highest offer obtained therefrom
shall be deemed to be a commercially reasonable method of disposition of
such Collateral.
(b) APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon
the occurrence of any Event of Default, the Lender may, with or without
proceeding with such sale or foreclosure or demanding payment of the
Obligations, without notice, terminate the Lender's further performance
under this Agreement to extend Receivables Advances to the Debtor,
without further liability or obligation by the Lender, and may also, at
any time, appropriate and apply (as provided below) to any Obligations
any and all Collateral in its possession and any and all balances,
credits, deposits, accounts, reserves, indebtedness or other monies due
or owing to the
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Debtor held by the Lender hereunder or under any other financing
agreement or otherwise, whether accrued or not. Neither such
termination, nor the termination of this Agreement by lapse of time, the
giving of notice or otherwise, shall absolve, release or otherwise
affect the liability of the Debtor in respect of transactions prior to
such termination, or affect any of the Liens, security interests,
rights, powers and remedies of the Lender hereunder, but they shall, in
all events, continue until all of the Obligations are satisfied.
(c) APPLICATION OF PROCEEDS. To the extent permitted under
applicable law, the proceeds of any exercise of rights with respect to
Collateral or any part thereof shall be paid to and applied as follows:
FIRST, to the payment of
(i) all costs and charges in connection therewith,
including, without limitation, (A) attorneys' fees for
advice, counsel or other legal services, (B) costs and
expenses incurred as a result of pursuing, reclaiming,
seeking to reclaim, taking, keeping, removing, storing,
advertising for sale, selling and foreclosing on the
Collateral and any and all other charges and expenses in
connection therewith, and (C) any costs and expenses
(including, without limitation, costs and expenses in the
management and operation of the Resort) provided for in
the Assignment of Rents, the Inventory Deed of Trust or
any other Security Document,
(ii) all taxes, assessments or Liens superior to
the Lien of this Agreement or the other Security
Documents, except any taxes, assessments or other superior
Liens subject to which any sale of Collateral may have
been made,
(iii) all fees, costs and expenses as set forth in
Section 10.2 of this Agreement, and
(iv) all Release Fees;
SECOND, towards the payment of accrued and unpaid interest
then due and payable, if any, at the Default Rate in respect of
the Loan,
THIRD, towards the payment of all other accrued and unpaid
interest, if any, then due and payable in respect of the Loan,
FOURTH, to the payment of the principal amount of the Loan
(and any prepayment premium payable in respect thereof), and
FIFTH, to the payment of the surplus, if any, to the
Debtor, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same, provided that if any
Obligations then due and payable shall not have been paid in
full, any such surplus shall continue to be held as Collateral
hereunder and shall continue to be subject to the terms and
conditions hereof until such Obligations then due and payable
shall have been paid in full.
The Debtor shall remain liable hereunder for payment of any
deficiency owing on the Obligations after application of such proceeds.
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To the extent that any amount allocated to any of the payment
categories set forth above is insufficient to fully satisfy all of the
Obligations referred to in said category, such amount shall be allocated
ratably to each of such Obligations in accordance with the ratio that
the amount of such Obligation bears to the aggregate amount of such
Obligations referred to in such category.
(d) REMEDIES CUMULATIVE. All covenants, conditions, provisions,
warranties, guaranties, indemnities and other undertakings of the Debtor
contained in this Agreement, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule given
to the Lender or contained in any other agreement between the Lender and
the Debtor, heretofore, concurrently or hereafter entered into,
including, without limitation, the Inventory Deed of Trust, shall be
deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions or agreements of the Debtor herein
contained. The failure or delay of the Lender to exercise or enforce any
rights, Liens, powers or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall
not operate as a waiver of such Liens, rights, powers and remedies, but
all such Liens, rights, powers and remedies shall continue in full force
and effect until the Loan and all other Obligations shall have been
fully satisfied. All Liens, rights, powers and remedies herein provided
for are cumulative and none are exclusive.
The acceptance by the Lender at any time and from time to time of
partial payments of the Obligations shall not be deemed to be a waiver
of any Event of Default then existing. No waiver by the Lender of any
Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default. No delay or omission by the Lender in
exercising any right or remedy under the Security Documents shall impair
such right or remedy or be construed as a waiver thereof or an
acquiescence therein, nor shall any single or partial exercise of any
such right or remedy preclude other or further exercise thereof, or the
exercise of any other right or remedy under the Security Documents or
otherwise.
SECTION 9. REVIVAL OF OBLIGATIONS AND LIENS
The Debtor expressly agrees that if the Debtor makes a payment to the
Lender, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, or otherwise required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then to the extent of such repayment, the
Obligations or any part thereof intended to be satisfied and the Liens provided
for hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW.
This Agreement and all transactions, assignments and transfers
hereunder, and all the rights of the parties hereto shall be governed as to the
validity, construction, enforcement and in all other respects by the internal
laws of the State of Colorado. To the extent any provision of this Agreement is
not enforceable under applicable law, such provision shall be deemed null and
void and shall have no effect on the remaining portions of this Agreement.
10.2 EXPENSES AND CLOSING FEES.
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Whether or not the transactions contemplated hereunder are completed,
the Debtor shall pay all expenses of Lender relating to negotiating, preparing,
documenting, closing and enforcing this Agreement and relating to the making by
the Lender of any Advances hereunder to the Debtor (the "Loan Costs"),
including, but not limited to:
(a) the cost of reproducing this Agreement, the Receivables Note,
and the other Security Documents;
(b) the fees and disbursements of the Lender's counsel and
Lender's special Colorado counsel;
(c) the Lender's out-of-pocket expenses, including, without
limitation, Lender's out-of-pocket expenses in connection with any
audits in respect of the Debtor and/or the Collateral conducted by
Lender prior to the date hereof (but excluding salaries of employees of
the Lender);
(d) all fees and expenses (including fees and expenses of the
Lender's counsel and Lender's special Colorado counsel) relating to any
amendments, waivers, consents or review of documents in connection with
any subsequent closings pursuant to the provisions of this Agreement;
(e) all costs, outlays, attorneys' fees and expenses of every
kind and character had or incurred in (i) the enforcement of any of the
provisions of, or rights and remedies under, this Agreement, any
assignment agreement, or any other Security Document and (ii) the
preparation for, negotiations regarding, consultations concerning, or
the defense of legal proceedings involving, any claim or claims made or
threatened against the Lender arising out of this transaction or the
protection of the Collateral securing the Obligations, expressly
including, without limitation, the defense by the Lender of any legal
proceedings instituted or threatened by any Person to seek to recover or
set aside any payment or setoff theretofore received or applied by the
Lender with respect to the Obligations;
(f) all expenses relating to the maintenance and administration
of the lock box account or accounts by the Collection Agent;
(g) all expenses relating to the safekeeping of the Pledged Notes
Receivable, the Pledged Contracts related thereto and the other
documents in connection therewith by the Lender (including, without
limitation, the retention by the Lender of any custodian or trust
department to safekeep such Pledged Notes Receivable, Pledged Contracts
and other documents), as set forth in the first paragraph of Section
3.13 hereof;
(h) all expenses and fees of the Collection Agent; and
(i) all taxes levied against or paid by the Lender (other than
taxes on, or measured by, the income or profits of the Lender) and all
filing and recording fees, costs and expenses which may be incurred by
the Lender with respect to the filing or recording of any document or
instrument relating to the transactions described in this Agreement.
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10.3 PARTIES, SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (except that the
Debtor may not assign any of its rights hereunder), and all representations,
covenants, provisions and agreements by or on behalf of the Debtor which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of the Lender. Except as provided in this Section 10.3, this Agreement
shall not create and shall not be construed as creating any rights enforceable
by, or benefits in favor of, any Person not a party hereto. If Textron Financial
Corporation shall delegate to any other Person any of its obligations hereunder
to extend Advances to the Debtor, Textron Financial Corporation shall provide to
the Debtor a guaranty of performance of such Person in respect of such
obligations; such guaranty of performance shall be in form and substance
reasonably acceptable to the Debtor.
10.4 NOTICES.
All notices or demands by either party to the other relating to this
Agreement shall, except as otherwise provided herein, be in writing and sent by
certified or registered United States mail, first class postage prepaid and
return receipt requested, or by a nationally recognized overnight courier
service with all delivery fees prepaid. Notices shall be deemed received (a) on
the 3rd succeeding Business Day following deposit in the United States mail,
certified or registered and first class postage prepaid and return receipt
requested or (b) upon delivery if sent by nationally recognized overnight
courier with all delivery fees prepaid. Notices and demands shall be addressed,
if to the Debtor, at the mailing address set forth on Schedule 16 to this
Agreement or to such other address as the Debtor may from time to time specify
in writing or, if to the Lender, at the mailing address of the Lender set forth
on Schedule 17 hereto or to such other address as the Lender may from time to
time specify in writing to the Debtor.
10.5 TOTAL AGREEMENT.
This Agreement, including the Exhibits, the Schedules and the other
agreements referred to herein, is the entire agreement between the parties
hereto relating to the subject matter hereof, incorporates or rescinds all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof, and may not be changed or terminated orally or by course of
conduct. This Agreement may be modified or changed only in a writing executed by
both the Lender and the Debtor. The failure or delay of the Lender to exercise
or enforce any rights, Liens, powers, remedies, conditions or other terms
hereunder or under any other agreement or instrument executed in connection
herewith shall not operate as a waiver of any such rights, Liens, powers,
remedies, conditions or other terms.
10.6 SURVIVAL.
All warranties, representations and covenants made by the Debtor herein
or in any certificate or other instrument delivered by it or on its behalf under
this Agreement shall be considered to have been relied upon by the Lender and
shall survive the delivery to the Lender of the Notes regardless of any
investigation made by the Lender or on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Debtor hereunder.
10.7 LITIGATION.
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EACH OF THE DEBTOR AND THE LENDER HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY
BE COMMENCED ARISING OUT OF THIS AGREEMENT, THE NOTES, ANY OTHER SECURITY
DOCUMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE DEBTOR AND THE LENDER OF ANY KIND OR
NATURE.
THE DEBTOR AND THE LENDER HEREBY AGREE THAT THE FOLLOWING COURTS:
STATE COURT: COLORADO DISTRICT COURT FOR THE SECOND DISTRICT SITTING AT
DENVER;
FEDERAL COURT: UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
SITTING AT DENVER,
OR, (TO THE EXTENT PERMITTED BY APPLICABLE COLORADO LAW) AT THE OPTION OF THE
LENDER, ANY OTHER COURT LOCATED IN THE STATE OF COLORADO IN WHICH IT SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH SHALL HAVE SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE DEBTOR AND
THE LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR TO ANY MATTER
ARISING HEREFROM. THE DEBTOR AND THE LENDER EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH
COURT.
THE STIPULATIONS OF THE DEBTOR AND THE LENDER IN THIS SECTION 10.7 SHALL
SURVIVE THE FINAL PAYMENT OF ALL OF THE OBLIGATIONS OF THE DEBTOR AND THE
RESULTING TERMINATION OF THIS AGREEMENT.
INITIALS____/___
10.8 POWER OF ATTORNEY.
The Debtor hereby makes, constitutes and appoints the Lender the true
and lawful agent and attorney-in-fact of the Debtor, with full power of
substitution, (a) to receive, open and dispose of all mail addressed to the
Debtor relating to the Pledged Notes Receivable or the Pledged Contracts related
thereto; (b) to open all such mail and remove therefrom any notes, checks,
acceptances, drafts, money orders or other instruments constituting Collateral,
with full power to endorse the name of the Debtor upon any such notes, checks,
acceptances, drafts, money orders, instruments or other documents, and to effect
the deposit and collection thereof (in accordance with the procedures
established therefor in the Agency Agreement), and the Lender shall have the
further right and power to endorse the name of the Debtor on any documents
relating to the Collateral; (c) to execute on behalf of the Debtor assignments,
notices of assignment, financing statements and other public records and notices
in respect of the Pledged Notes Receivable or the Pledged Contracts related
thereto; (d) to notify Makers of Pledged Notes Receivable to make all payments
thereunder directly to the Lender at an address to be designated by the Lender
and to execute and send other notices to Makers of such Pledged Notes Receivable
or the Pledged Contracts related thereto; and (e) to do any and all things
necessary or take action in the name and on behalf of the Debtor to carry out
the intent of this Agreement, including, without limitation, the grant of the
security interest provided herein and to perfect and protect the security
interest granted to the Lender with respect
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to the Collateral and the Lender's rights created under this Agreement. The
Debtor agrees that neither the Lender nor any of its agents, designees or
attorneys-in-fact will be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 10.8 except for its own gross
negligence or willful misconduct. The power of attorney granted under this
Section 10.8 is coupled with an interest and shall be irrevocable during the
term of this Agreement.
10.9 SURVIVAL OF INDEMNITIES.
All indemnities set forth in this Agreement shall survive the execution
and delivery of this Agreement and the execution and delivery of the Notes as
well as the payment in full of the Notes and the otherwise full performance of
this Agreement.
10.10 CONFLICTING OBLIGATIONS; RIGHTS AND REMEDIES.
To the extent that the terms of any of the Security Documents contain
conflicting obligations, the terms set forth in this Agreement shall be deemed
to be the controlling terms, provided that all rights and remedies of the Lender
under the Security Documents are cumulative and in addition to every other right
or remedy, and no right or remedy is intended to be exclusive of any other right
or remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
DEBTOR: LENDER:
STEAMBOAT SUITES, INC. TEXTRON FINANCIAL CORPORATION
By: By:
--------------------------------- ---------------------------------
Title: President Title: Assistant Vice President
[CORPORATE SEAL]
PREFERRED EQUITIES CORPORATION
By:
---------------------------------
Title:
[CORPORATE SEAL]
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<PAGE> 80
STATE OF )
) ss.
COUNTY OF )
At __________ in said County and State on this ___ day of _______, 1999,
personally appeared ___________________, duly authorized officer of Steamboat
Suites, Inc., and he/she acknowledged the foregoing instrument by him/her signed
and sealed to be his/her free act and deed and the free act and deed of
Steamboat Suites, Inc.
Before me:
Notary Public in and for said State
My Commission expires:
STATE OF )
) ss.
COUNTY OF )
At _________ in said County and State on this ___ day of December, 1999,
personally appeared _____________, duly authorized officer of Preferred Equities
Corporation, and he/she acknowledged the foregoing instrument by him/her signed
and sealed to be his/her free act and deed and the free act and deed of
Preferred Equities Corporation.
Before me:
Notary Public in and for said State
My Commission expires:
STATE OF )
) ss.
COUNTY OF )
At _______________ in said County and State on this ___ day of December,
1999, personally appeared _________________, duly authorized officer of Textron
Financial Corporation, and he/she acknowledged the foregoing instrument by
him/her signed and sealed to be his/her free act and deed and the free act and
deed of Textron Financial Corporation.
Before me:
Notary Public in and for said State
My Commission expires:
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<PAGE> 1
EXHIBIT 10.207
SIXTH AMENDMENT TO FORBEARANCE AGREEMENT AND
AMENDMENT NO. 11 TO SECOND AMENDED AND RESTATED AND
CONSOLIDATED LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Forbearance Agreement and Amendment No.
11 to Second Amended and Restated and Consolidated Loan and Security Agreement
("Amendment") is made and entered into this 31 day of March, 2000 (the
"Effective Date"), by and among FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA" or "Lender"), PREFERRED EQUITIES CORPORATION, a Nevada
corporation ("Borrower") and MEGO FINANCIAL CORP., a New York corporation
("Guarantor") and has reference to the following facts:
A. Lender and Borrower entered into a Second Amended and Restated
and Consolidated Loan and Security Agreement dated as of May 15, 1997 (the
"Original Loan Agreement") that evidences a loan from Lender to Borrower. The
Original Loan Agreement was amended by the Hartsel Springs Side Letter dated
February 18, 1998 (the "First Amendment"); by the Letter Agreement [Biloxi
Property] dated March 20, 1998 (the "Second Amendment"); by the Letter Agreement
[Headquarters Readvance] dated September 29, 1998 (the "Third Amendment"); by
the Amendment No. 4 to Second Amended and Restated and Consolidated Loan and
Security Agreement dated November 6, 1998 (the "Fourth Amendment"); by that
certain Forbearance Agreement and Amendment No. 5 to Second Amended and Restated
and Consolidated Loan and Security Agreement dated December 23, 1998 ("Amendment
5"), as the same was amended by a Letter Agreement dated February 8, 1999 (the
"Release Fee Letter") (the Amendment 5 and Release Fee Letter are collectively
called the "Fifth Amendment"); by a First Amendment to Forbearance Agreement and
Amendment No. 6 to Second Amended and Restated and Consolidated Loan and
Security Agreement dated May 7, 1999 (the "Sixth Amendment"); by a Second
Amendment to Forebearance Agreement and Amendment No. 7 to Second Amended and
Restated and Consolidated Loan and Security Agreement dated August 6, 1999 (the
"Seventh Amendment"); by a September 7, 1999 letter agreement regarding the
Additional Advance Note (the "Additional Advance Letter"); by a Third Amendment
to Forebearance Agreement and Amendment No. 8 to Loan and Security Agreement
dated November 9, 1999 (the "Eighth Amendment"); by a letter agreement dated
December 3, 1999 between the Borrower and Lender (the "Receivable Loan Lot Cap
Letter"); by a Fourth Amendment to Forebearance Agreement and Amendment No. 9 to
Loan and Security Agreement dated December 17, 1999 (the "Ninth Amendment");
and, by a Fifth Amendment to Forebearance Agreement and Amendment No. 10 to Loan
and Security Agreement dated February 25, 2000 (the "Tenth Amendment"). The
Original Loan Agreement, First Amendment, Second Amendment, Third Amendment,
Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment,
Additional Advance Letter, Eighth Amendment, the Receivable Loan Lot Cap Letter,
Ninth Amendment, and Tenth Amendment are collectively called the "Loan
Agreement." Capitalized terms used in this Amendment
<PAGE> 2
which are defined in the Loan Agreement shall have the same meaning and
definition when used herein.
B. Borrower has requested the Lender to make certain
modifications to the Loan Agreement and the Loan, which the Lender is willing to
do, upon and subject to the terms and conditions set forth in this Amendment.
Now, therefore, in consideration of the foregoing and for the
good and valuable consideration provided herein, Lender, Borrower and Guarantor
agree as follows:
1. On the Effective Date, Article 1 of the Loan Agreement is
amended by amending and restating the following terms:
"ASSOCIATIONS": shall mean the Association (Fountains), the
Association (Reno), the Association (Suites), the Association
(Terraces), the Association (Terraces Four), the Association (Towers),
the Association (Villas), the Association (Winnick), and the Association
(White Sands), collectively.
"CUSTODIAL AGREEMENT": shall mean that certain Custodial
Agreement, dated as of August 5, 1999, among Lender, Borrower, and
Custodian, and all renewals, extensions, amendments, restatements,
replacements, supplements or modifications from time to time made
thereto.
"CUSTODIAN": shall mean Chicago Title Company, in its sole
capacity as custodian under the Custodial Agreement, or should such
entity cease to act as custodian under the Custodial Agreement, its
successor as custodian under the Custodial Agreement.
"PROJECT": shall mean each of, or collectively, as the context
may require, the Winnick Building Addition, the Ida Building Addition,
Aloha Bay, Ida Building One, Ida Building Two, South Park Ranches,
Suites Phase I, Suites Phase II, Fountains, Winnick, the Second Winnick
Building Addition, Project (Reno), Project (Towers), Project (Villas),
Project (Terraces-Phase I), Project (Terraces-Phase 2), any Additional
Projects, those certain real estate developments which are owned by the
Borrower or the Trustee, located in Nye County and Clark County in the
State of Nevada, and Huerfano County in the State of Colorado, which are
more particularly described in EXHIBIT "I-J" hereto, and White Sands.
"RECEIVABLES BORROWING TERM": shall mean the period of time
during which Lender is committed to make Advances of the Receivables
Loan under this Agreement which commitment shall terminate on December
29, 2000.
2
<PAGE> 3
"TRUST AGREEMENTS": shall mean the Trust Agreement (Reno), the
Trust Agreement (Towers), the Trust Agreement (Terraces), the Trust
Agreement (Villas) and the Trust Agreement (Suites) and Trust Agreement
(White Sands), collectively.
"TRUSTS": shall mean the Trust (Reno), the Trust (Towers), the
Trust (Terraces), the Trust (Villas), Trust (Suites), and Trust (White
Sands), collectively.
2. On the Effective Date, Article 1 of the Loan Agreement is
amended to add the following definitions:
"ASSOCIATION (WHITE SANDS)": shall mean the Association of Owners
of White Sands Waikiki Resort Club, a Hawaiian nonprofit corporation
"ELEVENTH AMENDMENT": shall mean and collectively refer to the
Sixth Amendment to Forbearance Agreement and Amendment No. 11 to Second
Amended and Restated and Consolidated Loan and Security Agreement made
and entered into on March 31, 2000 among Borrower, Lender and Guarantor.
"TRUST AGREEMENT (WHITE SANDS)": shall mean that certain Amended
and Restated White Sands Trust Agreement, dated September 15, 1983 with
First Hawaiian Bank, as Trustee and The Bank of California, N..A.
("BankCal"), as agent, as amended by an Agreement, dated March 31, 1988,
among VSR, FN Realty Services, Inc, a California corporation ("FN"),
Association (White Sands) and BankCal, and that certain Agreement, dated
February 8, 1991, by and among VSR, FN, Association (White Sands) and
Valley Bank of Nevada, a Nevada corporation (now called Bank of America,
N.A.).
"TRUSTEE (WHITE SANDS)": shall mean First Hawaiian Bank, in its
sole capacity as trustee under the Trust Agreement (White Sands) or
should such entity cease to act as trustee under the Trust Agreement
(White Sands), its successor as trustee under the Trust Agreement (White
Sands).
3. (a) Under the provisions of Section 2 of the Tenth Amendment,
the Lender agreed during the Forbearance Period (as defined in Section 2(d) of
the Tenth Amendment) to forbear from exercising its rights under the Documents
arising by virtue of the Unsolidified Lot Sales Defaults (as defined in the
Tenth Amendment). In addition to the foregoing, the Lender and Borrower agreed
that, during the Forbearance Period, the Borrowing Base would be determined by
treating the Unsolidified Lot Sales in the same manner as all other forms of
Eligible Receivables. Since the Tenth Amendment, the Lender and Borrower have
reached additional agreements concerning the Unsolidified Lot Sale Defaults.
Notwithstanding anything to the contrary contained in the Loan Agreement, the
Lender and Borrower agree as follows with respect to the Unsolidified Lot Sales:
3
<PAGE> 4
(i) The Forbearance Period for the Unsolidified Lot Sales
Defaults shall continue until such time as all of the Unsolidified Lot Sales
which were affected by the Y2K Error (as defined in the Tenth Amendment) (such
contracts being called the "Affected Contracts") have (i) converted to a normal
Eligible Receivables as a result of the consumers thereunder electing not to
exercise any recission rights thereunder, or (ii) been replaced with Eligible
Receivables that are not Unsolidified Lot Sales;
(ii) The Unsolidified Lot Sale Advance Rate for (1) the Affected
Contracts shall remain at 90% of the unpaid principal balance of the same and
(2) any Unsolidified Lot Sales that is not one of the Affected Contracts will be
65% of the unpaid principal balance of the contract;
(iii) Commencing on March 31, 2000 the various advance rates
applicable to the Eligible Receivables and the Borrowing Base will be tested
monthly, on a weighted average basis for each classification of Eligible
Receivables, and the Borrowing Base as a whole;
(iv) Commencing on the Effective Date, the Unsolidified Lot Sales
Cap shall be amended to Twelve Million Dollars ($12,000,000.00); and
(v) The Lender will have the right to (1) periodically audit and
review the Unsolidified Lot Sales and (2) unilaterally exclude the Unsolidified
Lots Sales as being part of the Eligible Receivables in the event that during
any three (3) consecutive month period occurring after February 29, 2000, either
(a) the delinquency rate on the Unsolidified Lot Sales exceeds an average of
three percent (3%), or (b) more than twenty five percent (25%) of aggregate
amount of the Unsolidified Lot Sales during such period are terminated
regardless of whether the termination is due to the consumer exercising its
termination or recission rights thereunder, or the Borrower terminating the
contract because of a default by the consumer thereunder.
(b) During the Forbearance Period, in the event that at
any time the Borrowing Base exceeds the outstanding principal balance of the
Receivables Loan (the "Excess Borrowing Base Availability"), then,
notwithstanding contrary provisions that may be contained in the Loan Agreement,
the Borrower will not be entitled to any Advance from the Receivables Loan which
may arise because of the Excess Borrowing Base Availability.
4. Under the Documents, the Lender advanced to Borrower funds
from the Loan that are evidenced by the Aloha Bay Note and secured by the Aloha
Bay Mortgage. Prior to the Effective Date, the Borrower has repaid to the Lender
all amounts due under the Aloha Bay Note. The provisions of Section 8 of the
Fifth Amendment, provide in part that, except for the periodic release of Units
or Lots or as otherwise provided in the Fifth Amendment, the Lender shall have
no obligation to release its lien on any collateral pledged to Lender pursuant
to the Documents until the latter to occur of (i) the full satisfaction of the
Forebearance Collateral Release Conditions or (ii) the full satisfaction of the
events set forth
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<PAGE> 5
in the particular Documents that are condition precedent to such collateral
release. As of the Effective Date the Forebearance Collateral Release Conditions
have not been fully satisfied and, as a result thereof, the Lender has no
obligation to release the Aloha Bay Mortgage. Consistent with the Fifth
Amendment, the Borrower hereby agrees that notwithstanding the payment in full
of the Aloha Bay Note, the Lender will retain its lien on all unsold Units at
Aloha Bay (the Units encumbered by the Aloha Bay Mortgage at or
contemporaneously with the final payment of all sums due under the Aloha Bay
Note are called the "Remaining Aloha Bay Units") until such time as the Borrower
has fully Performed and paid all of its Obligations under the Additional Advance
Note. As each of the Remaining Aloha Bay Units are sold, the Lender agrees to
release the Unit from the lien of the Aloha Bay Mortgage upon the payment of the
Aloha Bay Release Fee due for such Unit. Provided there is no Event of Default
or Incipient Default, the payments received pursuant to the previous sentence
will be applied by the Lender first against fees, costs and expenses due to
Lender; then against the unpaid principal balance of the Additional Advance Note
and all accrued interest thereon. However, upon the occurrence of an Event of
Default or Incipient Default, the Aloha Bay Release Fee shall be applied against
the Obligations in such order as the Lender shall deem appropriate. The Borrower
agrees to execute and deliver to the Lender such documents, as the Lender may
deem reasonably appropriate to evidence the agreement of the Borrower under this
subparagraph.
5. (a) As described in the Loan Agreement, the Borrower is
obligated to pay to the Lender the Hartsel Springs Release Fee (as defined in
the First Amendment) in order to obtain releases of Lots located at Hartsel
Springs from the lien of the Hartsel Springs Deed of Trust. After the Hartsel
Springs Release Fee for a Lot has been paid to the Lender and the Lot released
from the Hartsel Springs Deed of Trust, the ownership of the Lot may revert back
to the Borrower as a result of a Foreclosure (as such term is defined in the
Release Fee Letter), or a Trade (as such term is defined in the Release Fee
Letter) (such lots being called (the "Reacquired Lots"). Provided the conditions
set forth in this Section 5 are satisfied, the Lender will, for each Reacquired
Lot, make available to the Borrower advances from the Mortgage Loan Facility
equal to the Hartsel Springs Release Fee paid to Lender for the Reacquired Lot.
Such Advances may be made in increments of no less than $100,000.00 and no more
frequently than once each calendar quarter.
(b) The obligations of the Lender under Sections 5(a) are
conditioned upon the satisfaction of the following conditions:
(1) The Borrower executing and delivering to the Lender an
amendment to the Hartsel Springs Deed of Trust, in form and content
acceptable to the Lender, which encumbers the Reacquired Lots for which
the advance is being made (the "Hartsel Deed of Trust Amendment");
(2) The Borrower delivering evidence to the Lender, in form and
content acceptable to the Lender, that the Borrower (i) owns the entire
fee simple interest in the Reacquired Lots being encumbered by the
Hartsel Deed of Trust Amendment free
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<PAGE> 6
and clear of any and all claims of the original owner of the same, and
(ii) may grant unto the Lender a valid first lien, subject only to those
title exceptions which may be approved by the Lender, in and to all of
the Borrower's right title and interest in and to the Lots in question;
(3) The Borrower, at its sole cost and expense, delivering to the
Lender. an endorsement to the Lender's existing title policy for the
Hartsel Springs Deed of Trust which (i) adds to the deed of trust
insured thereby the particular Hartsel Deed of Trust Amendment, (ii)
amends the land referenced in the policy to include the Reacquired Lots
that are encumbered by the particular Hartsel Deed of Trust Amendment,
(iii) insures that the lien of the Hartsel Spring Deed of Trust (as
amended by the particular Hartsel Deed of Trust Amendment) is subject
only to the title exceptions previously approved by the Lender, (iv)
"dates down" or endorses the date of the policy to the recordation of
the particular Hartsel Deed of Trust Amendment, and (v) contains such
endorsements as the Lender may reasonably request;
(4) The Borrower executing and delivering to Lender amendments to
UCC financing statements, or such additional financing statements as the
Lender may reasonably request, so as to evidence the Lender's security
interest in and to the Reacquired Lots being encumbered by the
particular Hartsel Spring Deed of Trust Amendment;
(5) The Lender obtaining and approving title, judgment and lien
searches with respect to the Reacquired Lots in question;
(6) The Borrower delivering to Lender such additional documents
and instruments as the Lender may reasonably request; and
(7) The advance is made prior to December 31, 2000.
The Borrower acknowledges that the foregoing conditions must be
satisfied each time that it requests an advance pursuant to Section 5(a).
(c) Each advance made by the Lender pursuant to this
Section 5 shall be considered a part of the Borrower's indebtedness to the
Lender which is evidenced by the Hartsel Springs Ranch Note and (i) shall bear
interest from the date of its advance by the Lender, at the Interest Rate set
forth in the Hartsel Springs Ranch Note, and (ii) if not sooner repaid, be
entirely due and payable to the Lender on the Maturity Date of the Hartsel
Springs Ranch Note. In no event shall the Lender be obligated to make any
advance under this Section 5 if (i) there exists an Event of Default or
Incipient Default, or (ii) after giving effect to the advance, the outstanding
principal balance of all advances under the Mortgage Loan Facility applicable to
Hartsel Springs Ranch exceed the face amount of the Hartsel Springs Ranch Note.
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<PAGE> 7
6. (a) The provisions of the Sixth Amendment revised the Biloxi
Maturity Date to the New Biloxi Maturity Date (defined as being March 20, 2000).
The Lender hereby agrees to extend the Biloxi Maturity Date to provide that the
entire remaining balance of the Biloxi Note, together with all accrued and
unpaid interest and all other sums due and owing thereon, shall be due and
payable in full on December 31, 2000 (the "Amended Biloxi Maturity Date"). From
and after the Effective Date, references in the Documents and the in the Biloxi
Note to the term Maturity Date of the Biloxi Note, or the Biloxi Maturity Date
shall now refer to the Amended Biloxi Maturity Date.
(b) In consideration for the agreements of the Lender set
forth in Section 6 hereof, the Borrower agrees to pay to Lender an amendment fee
for the Biloxi Note equal to three quarters of one percent (.75%) of the
outstanding principal balance of the Biloxi Note (the "Biloxi Amendment Fee")
determined as of the Effective Date. The Borrower agrees that the Lender fully
earned the entire amount of the Biloxi Amendment Fee and that such fee, along
with the Deferred Fee (as defined in the Sixth Amendment), are presently due and
payable to the Lender. The Borrower hereby authorizes the Lender to draw upon
the Loan to pay itself the Biloxi Amendment Fee and the Deferred Fee.
7. (a) As of the Effective Date, White Sands has been added as a
Project. White Sands is also part of the Excess Proceeds Collateral and will
remain a part of the same. Under the Release Fee Letter, the Borrower is
obligated to pay a Release Fee of $484 for each Unit sold at White Sands (the
"White Sands Release Fee"). As of the Effective Date, the White Sands Release
Fee is amended to refer to $800. The Lender and Borrower hereby agree that the
Lender may retain from Advances from the Receivables Loan any White Sands
Release Fee, which is due and owing to Lender to the extent that the same has
not been paid by the Borrower. All payments of the White Sands Release Fee shall
be applied against the outstanding principal balance of the Additional Advance
Note.
(b) In connection with the addition of White Sands as a
Project, environmental and other inspections were conducted. The inspectors
discovered floor tiles and mastic which were identified as containing asbestos.
Within one hundred twenty (120) days after the Effective Date, the Borrower
shall retain a licensed asbestos abatement contractor to abate or take
appropriate corrective action with respect to the damaged asbestos containing
floor tiles and mastic identified by the inspectors and deliver a certification
to Lender (Attn: Elizabeth Barringer) that the abatement or corrective actions
have been completed in accordance with local, state and federal laws and
regulations.
(c) Notwithstanding the addition of White Sands as a
Project, no advances may be obtained from the Receivables Loan with respect to
White Sands until such time as the Borrower has (i) executed and delivered to
Lender a mutually acceptable environmental indemnity agreement, and (ii)
supplied to Lender a legal opinion or other evidence acceptable to Lender that
it has obtained all governmental and other required approvals needed to sell the
Unit at White Sands.
7
<PAGE> 8
8. The obligations of the Lender under this Amendment are
conditioned upon the satisfaction of the following conditions:
(a) This Amendment has been fully signed by the Borrower
and Guarantor;
(b) An allonge of the Biloxi Note, in form and content
acceptable to Lender which reflects the amendments to the same made by
this Amendment and addresses such additional matters as the Lender may
desire, has been fully signed by the Borrower and delivered to the
Lender;
(c) An Environmental Certificate and Indemnity Agreement
for White Sands, in a form acceptable to Lender, has been executed by
Borrower and delivered to Lender;
(d) Lender has received, on or before April 17, 2000: (i)
legal opinions of from the counsels for Borrower and Guarantor, in a
form and content acceptable to the Lender; and (ii) such resolutions,
authorizations and other documents as Lender may request relating to the
existence and good standing of Borrower, and Guarantor, and the
authority of any person executing this Amendment and other documents on
behalf of Borrower and Guarantor.
(e) The Borrower executing and delivering to the Lender
such additional documents or instruments as required and approved by the
Lender so as to fully perfect the liens and security interest of Lender
granted under the Loan Agreement and this Amendment which security
interests include but are not limited to a security interest in the
Eligible Receivables arising from White Sands;
(f) Borrower shall have reimbursed Lender for all of
Lender's out-of-pocket costs and expenses including, without limitation,
attorney's, engineers' and other consultants' fees and costs, incurred
in connection with the documentation and closing of this Amendment; and
(g) Borrower shall have paid to Lender the Amendment Fee
(defined below).
8
<PAGE> 9
9. In consideration of, among other things, the consent of the
Lender to this Amendment, Borrower agrees to pay to Lender, upon Borrower's
execution of this Amendment, the amount of Fifteen Thousand Dollars ($15,000.00)
(the "Amendment Fee"). The Amendment Fee has been fully earned by Lender, is
nonrefundable, and may be deducted from Advances made from the Loan.
10. Borrower and Guarantor each represents and warrants that:
(a) All financial information and other documents it has
provided to Lender in connection with this Amendment are true, complete
and correct as of the date provided and the date hereof;
(b) There exists no Event of Default or Incipient Default,
after giving effect to the then applicable provisions of this Amendment
and other than the Existing Events of Default and the Unsolidified Lot
Sales Default;
(c) After giving effect to this Amendment, there has been
no material adverse change in any real property or in the business or
financial condition of Borrower and Guarantor since the date of the last
financial statements submitted to Lender; and
(d) After giving effect to this Amendment (including the
disclosures contained herein) and the most recent financial and
litigation reports supplied to Lender, all representations and
warranties by Borrower and Guarantor remain true, complete, and correct,
in all material respects as of the date hereof.
11. Guarantor acknowledges and agrees that (i) the Guarantee
shall remain in full force and effect, (ii) the obligations of the Guarantor
under the Guarantee are joint and several with those of each other Obligor (as
that term is defined in the Guarantee), (iii) Guarantor's liability under the
Guarantee shall continue undiminished by and shall include the obligations of
the Borrower under this Amendment and any other documents and instruments
executed by Borrower in connection with this Amendment and each of the other
Documents, as amended through the date hereof and (iv) all terms, conditions and
provisions set forth in this Amendment and any other documents and instruments
executed by Borrower in connection with this Amendment and each of the other
Documents, as amended through the date hereof, are hereby ratified, approved and
confirmed.
12. Borrower and Guarantor acknowledge and agree that they have
no defenses, counterclaims, setoffs, recoupments or other adverse claims or
causes of action in tort, contract or of any other kind existing against Lender
or with respect to the Documents, including without limitation, claims regarding
the amount, validity, perfection, priority and enforceability of the Documents.
13. The Documents shall be deemed amended by the provisions of
this Amendment, as and when applicable and any conflict or inconsistency between
this
9
<PAGE> 10
Amendment and the Documents shall be resolved in favor of this Amendment. Except
as so amended, all other consistent terms and conditions of the Documents will
remain in full force and effect, and are hereby ratified and affirmed.
14. Except as may be expressly provided herein, Borrower's and
Guarantor's respective obligations under the Documents shall remain in full
force and effect and shall not be waived, modified, superseded or otherwise
affected by this Amendment. This Amendment is not a novation, nor is it be
construed as a release, waiver, extension of forbearance or modification of any
of the terms, conditions, representations, warranties, covenants, rights or
remedies set forth in any of the Documents, except as expressly stated herein.
15. This Amendment in no way acts as a waiver of any default of
Borrower or as a release or relinquishment of any of the liens, security
interests, rights or remedies securing payment and Performance of the Borrower's
Obligations or the enforcement thereof. Such liens, security interests, rights
and remedies are hereby ratified, confirmed, preserved, renewed and extended by
Borrower in all respects. Further, Lender's execution of this Amendment shall
not constitute a waiver (either express or implied) of the requirement that any
further forbearance under or modification of the Loan Agreement or any other
Document shall require the express written approval of Lender. No such approval
(either express or implied) has been given as of the date hereof.
16. Borrower and Guarantor acknowledge that Lender has performed,
and is not in default of, its obligations under the Documents; that there are no
offsets, defenses or counterclaims in tort, contract or otherwise, with respect
to any of Borrower's or Guarantor's or other party's obligations under the
Documents; and that Lender has not directed Borrower to pay or not pay any of
Borrower's payables.
17. Borrower and Guarantor will execute and deliver such further
instruments and do such things as in the judgment of Lender are necessary or
desirable to effect the intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by the terms of this
Amendment and any other documents executed in connection herewith.
18. If any provision of this Amendment is held to be
unenforceable under present or future laws effective while this Amendment is in
effect (all of which invalidating laws are waived to the fullest extent
possible), the enforceability of the remaining provisions of this Amendment
shall not be affected thereby. In lieu of each such unenforceable provision,
there shall be added automatically as part of this Amendment a provision that is
legal, valid and enforceable and is similar in terms to such unenforceable
provisions as may be possible.
19. Any further discussions by and among Borrower, Guarantor and
Lender, if any, and all such discussions in the past, together with any other
actions or
10
<PAGE> 11
inactions taken by and among Borrower, Guarantor and Lender, shall not cause a
modification of the Documents, establish a custom or waive (unless Lender made
such express waiver in writing), limit or condition the rights and remedies of
Lender under the Documents, all of which rights and remedies are expressly
reserved. All of the provisions of the Documents, including, without limitation,
the time of the essence provision, are hereby reiterated and if ever waived are
hereby reinstated (unless Lender made such express waiver in writing), except as
expressly provided herein. Notwithstanding anything to the contrary contained
herein or in any other instrument executed by the parties and notwithstanding
any other action or conduct undertaken by the parties on or before the date
hereof, the agreements, covenants and provisions contained herein and the Loan
Agreement shall constitute the only evidence of Lender's agreement to forbear or
to modify the Loan Agreement. Accordingly, no express or implied consent to any
further forbearances or modifications shall be inferred or implied by Lender's
execution of this Amendment. The Loan Agreement and this Amendment, together
with the other Documents, constitute the entire agreement and understanding
among the parties relating to the subject matter hereof, and supersedes all
prior proposals, negotiations, agreements and understandings relating to such
subject matter. In entering into this Amendment, Borrower acknowledges that it
is relying on no statement, representation, warranty, covenant or agreement of
any kind made by the Lender or any employee or agent of the Lender, except for
the agreements of Lender set forth herein.
20. This Amendment shall not be binding upon Lender until
accepted by Borrower and Guarantor as provided for below. This Amendment may be
executed in counterpart, and any number of which have been executed by all
parties shall be deemed to constitute one original. Lender, its attorneys and
agents may also integrate into a single Amendment signature pages from separate
counterpart Amendments. The telecopied signature of a person shall be deemed an
original signature, may be relied upon by others and shall be binding upon the
signer for all purposes provided however that Borrower, Guarantor or any person
otherwise consenting hereto by telecopied signature shall confirm its telecopied
signature by signing and returning to Lender a copy of this Amendment with an
original signature.
21. Borrower's and Guarantor's representatives are experienced
and knowledgeable business people and have been represented by independent legal
counsel who are experienced in all matters relevant to this Amendment,
including, but not limited to, bankruptcy and insolvency law. The parties hereto
have accepted and agreed to this Amendment after being fully aware and advised
of the effect and significance of all of its terms, conditions, and provisions.
22. Unless otherwise specifically stipulated elsewhere in the
Documents, if a matter is left in the Documents or this Amendment to the
decision, right, requirement, request, determination, judgment, opinion,
approval, consent, waiver, satisfaction, acceptance, agreement, option or
discretion of Lender, its employees, Lender's counsel or any agent for or
contractor of Lender, such action shall be deemed to be exercisable by Lender or
11
<PAGE> 12
such other person in its sole and absolute discretion and according to standards
established in its sole and absolute discretion. Without limiting the generality
of the foregoing, "option" and "discretion" shall be implied by use of the words
"if" or "may."
23. The Recitals in this Amendment are incorporated into the body
hereof as fully set forth herein.
24. THIS AMENDMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE
PERFORMED IN THE STATE OF ARIZONA. THE PROVISIONS OF THIS AMENDMENT AND ALL
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. EACH OF
BORROWER, GUARANTOR AND LENDER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA
COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR
OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO ANY DOCUMENT OR THE SUBJECT
MATTER THEREOF, OR, IF LENDER SHALL INITIATE SUCH ACTION, IN THE COURT IN WHICH
SUCH ACTION IS INITIATED PROVIDED THAT SUCH COURT HAS JURISDICTION, AND THE
CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN ANY
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER, GUARANTOR AND LENDER HEREBY WAIVE THE RIGHT TO
COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE> 13
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
------------------------------------
Its:
--------------------------------
BORROWER:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
/s/ JON A. JOSEPH
By: Jon A. Joseph
------------------------------------
Its: Vice President
--------------------------------
Signed in the presence of:
[SIGNATURE ILLEGIBLE]
- ---------------------------------------
GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
/s/ JON A. JOSEPH
By: Jon A. Joseph
------------------------------------
Its: Vice President
--------------------------------
Signed in the presence of:
[SIGNATURE ILLEGIBLE]
- ---------------------------------------
13
<PAGE> 14
STATE OF NEVADA )
) ss.
County of Clark )
The foregoing instrument was acknowledged before me this 31st day
of March, 2000 by Jon A. Joseph as Vice President of PREFERRED EQUITIES
CORPORATION, a Nevada corporation, on behalf of the corporation.
/s/ DEBBIE L. ALEXANDER
Notary Public
My Commission Expires: [SEAL]
_____________________
STATE OF NEVADA )
) ss.
County of Clark )
The foregoing instrument was acknowledged before me this 31st day
of March 2000, by Jon A. Joseph as Vice President of MEGO FINANCIAL CORP., a
New York corporation, on behalf of the corporation.
/s/ DEBBIE L. ALEXANDER
Notary Public
My Commission Expires: [SEAL]
_____________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
This instrument was acknowledged before me this ___ day of March
2000, by ______________________, as _______________ of FINOVA CAPITAL
CORPORATION, a Delaware corporation, on behalf of the corporation.
______________________________________
Notary
My Commission expires:
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 3,127
<SECURITIES> 0
<RECEIVABLES> 96,348
<ALLOWANCES> 13,921
<INVENTORY> 32,776
<CURRENT-ASSETS> 0
<PP&E> 39,667
<DEPRECIATION> 16,623
<TOTAL-ASSETS> 171,009
<CURRENT-LIABILITIES> 0
<BONDS> 115,942
0
0
<COMMON> 35
<OTHER-SE> 23,459
<TOTAL-LIABILITY-AND-EQUITY> 171,009
<SALES> 31,479
<TOTAL-REVENUES> 41,715
<CGS> 5,885
<TOTAL-COSTS> 24,851
<OTHER-EXPENSES> 15,203
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,979
<INCOME-PRETAX> 1,661
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,661
<EPS-BASIC> .47
<EPS-DILUTED> .47
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