1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
Commission File Number: 0-19822
LITCHFIELD FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS
04-3023928
(State or other jurisdiction
(I.R.S. Employer Identification No.)
of incorporation or organization)
430 MAIN STREET, WILLIAMSTOWN, MA 01267
(Address of principal executive
offices) (Zip Code)
Registrant's telephone number, including area code: (413) 458-1000
789 MAIN ROAD, STAMFORD VT 05352
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of May 12, 1998, there were 5,667,751 shares of common stock of Litchfield
Financial Corporation outstanding.
FORM 10-Q
1
LITCHFIELD FINANCIAL CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LITCHFIELD FINANCIAL CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
<TABLE>
<S> <C> <C>
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Cash and cash equivalents................................. $ 11,429 $ 19,295
Restricted cash .......................................... 24,381 23,496
Loans held for sale, net of allowance for loan losses of
$1,273 in 1998 and $1,388 in 1997...................... 16,246 16,366
Other loans, net of allowance for loan losses of
$2,312 in 1998 and $2,044 in 1997...................... 116,816 86,307
Retained interests in loan sales.......................... 29,937 30,299
Other..................................................... 11,367 11,027
Total assets........................................ $210,176 $186,790
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Lines of credit........................................ $ 23,222 $ 177
Term note payable...................................... 4,428 5,210
Accounts payable and accrued liabilities............... 5,730 6,479
Dealer/developer reserves.............................. 10,616 10,655
Deferred income taxes.................................. 7,190 6,851
51,186 29,372
9.3% Notes ............................................ 20,000 20,000
8.45% Notes due 2002................................... 51,750 51,750
8.875% Notes due 2003.................................. 15,317 15,317
10% Notes due 2004..................................... 18,280 18,280
105,347 105,347
Stockholders' equity:
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued
and outstanding..................................... --- ---
Common stock, $.01 par value; authorized 8,000,000 shares, 5,660,790
shares issued and outstanding in 1998 and 5,656,609 shares issued
and outstanding in 1997............................. 56 56
Additional paid in capital............................. 36,727 36,681
Net unrealized gain on retained interests in loan sales 1,047 1,071
Retained earnings ..................................... 15,813 14,263
Total stockholders' equity.......................... 53,643 52,071
Total liabilities and stockholders' equity.......... $210,176 $186,790
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
LITCHFIELD FINANCIAL CORPORATION
<TABLE>
Consolidated Statements of Income
(In thousands, except share and per share amounts)
Unaudited
<S> <C> <C>
Three Months Ended March 31,
1998 1997
Revenues:
Interest and fees on loans.......................... $5,233 $4,546
Gain on sale of loans............................... 2,227 1,504
Servicing and other fee income...................... 493 357
7,953 6,407
Expenses:
Interest expense.................................... 2,997 2,394
Salaries and employee benefits...................... 1,133 813
Other operating expenses............................ 953 903
Provision for loan losses........................... 350 435
5,433 4,545
Income before income taxes............................. 2,520 1,862
Provision for income taxes............................. 970 717
Net income............................................. $1,550 $1,145
Earnings per common share:
Basic............................................... $ .27 $ .21
Diluted............................................. $ .26 $ .20
Weighted average number of shares:
Basic............................................... 5,659,756 5,446,679
Diluted............................................. 6,020,158 5,792,078
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
(In thousands)
Unaudited
<TABLE>
<S> <C> <C>
Three Months Ended March 31,
1998 1997
Net income............................................ $1,550 $1,145
Other comprehensive income, net of tax:
Net unrealized (loss) gain on retained
interests in loan sales......................... (24) 235
Comprehensive income.................................. $1,526 $1,380
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statement of Stockholders' Equity
(In thousands, except share amounts)
Unaudited
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Unrealized
Gain (Loss) on
Additional Retained
Common Paid In Interests in Retained
Stock Capital Loan Sales Earnings Total
Balance, December 31, 1997..... $56 $36,681 $1,071 $14,263 $52,071
Issuance of 4,181 shares of common
stock .................... --- 46 --- --- 46
Net unrealized loss on retained
interests in loan sales... --- --- (24) --- (24)
Net income.................. --- --- --- 1,550 1,550
Balance, March 31, 1998........ $56 $36,727 $1,047 $15,813 $53,643
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<S> <C> <C>
Three Months Ended March 31,
1998 1997
Cash flows from operating activities:
Net income........................................... $ 1,550 $ 1,145
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of loans............................. (2,227) (1,504)
Amortization and depreciation..................... 223 129
Amortization of retained interests in loan sales.. 1,436 1,014
Provision for loan losses......................... 350 435
Deferred income taxes............................. 339 392
Net changes in operating assets and liabilities:
Restricted cash................................ (885) (1,904)
Loans held for sale............................ 994 (547)
Retained interests in loan sales............... (563) (132)
Dealer/developer reserves...................... (39) 3
Net change in other assets and liabilities..... (647) 2,110
Net cash provided by operating activities......... 531 1,141
Cash flows from investing activities:
Net originations and principal payments on other loans (30,777) (10,973)
Collections on retained interests in loan sales...... 931 1,499
Capital expenditures and other assets................ (860) (32)
Net cash used in investing activities............ (30,706) (9,506)
Cash flows from financing activities:
Net borrowings on lines of credit.................... 23,045 11,230
Payments on term note................................ (782) (525)
Net proceeds from issuance of common stock........... 46 689
Net cash provided by financing activities......... 22,309 11,394
Net (decrease) increase in cash and cash equivalents..... (7,866) 3,029
Cash and cash equivalents, beginning of period........... 19,295 5,557
Cash and cash equivalents, end of period................. $11,429 $ 8,586
Supplemental Schedule of Noncash Financing and Investing Activities:
Exchange of loans for retained interests in loan sales $ 447 $ ---
Transfers from loans to real estate acquired through foreclosure$ 797 $ 447
Supplemental Cash Flow Information:
Interest paid........................................ $ 3,255 $ 2,300
Income taxes paid.................................... $ 31 $ 325
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
A. Basis of Presentation
The accompanying unaudited consolidated interim financial statements as of
March 31, 1998 and for the three month periods ended March 31, 1998 and 1997
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal accruals) considered necessary for a fair presentation
have been included. Operating results for the three month period ended March
31, 1998, are not necessarily indicative of the results expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in Litchfield Financial
Corporation's annual report on Form 10-K for the year ended December 31, 1997.
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130, "Reporting Comprehensive Income."
The Company adopted the requirements of this statement in the first quarter.
This statement established standards for reporting comprehensive income
and its components and requires this disclosure be added as a new item in the
financial statements.
B. Gain on Sale of Loans and Retained Interests in Loan Sales
Gains on sales of loans are based on the difference between the allocated
cost basis of the assets sold and the proceeds received, which includes the fair
value of any assets or liabilities that are newly created as a result of the
transaction. Newly created interests which consist primarily of interest only
strips and recourse obligations are initially recorded at fair value. The
previous carrying amount is allocated between the assets sold and any retained
interests based on their relative fair values at the date of transfer. Retained
interests in transferred assets consist primarily of subordinate portions of the
principal balance of transferred assets and interest only strips.
The Company estimates fair value using discounted cash flow analysis (using
a discount rate commensurate with the risks involved), because quoted market
prices are not available. The Company's analysis incorporates assumptions that
market participants would be expected to use in their estimates of future cash
flows including assumptions about interest, defaults and prepayment rates. The
Company considers retained interests in loan sales, such as subordinated
pass-through certificates and interest only strips, as available for sale
because such assets are subject to prepayment.
There is generally no servicing asset or liability because the Company
estimates that the benefits of servicing are offset by the related costs
associated with its servicing responsibilities.
Since its inception, the Company has sold $366,700,000 of loans at face
value ($348,198,000 through December 31, 1997). The principal amount remaining
on the loans sold was $184,157,000 at March 31, 1998 and $179,790,000 at
December 31, 1997. In connection with certain loan sales, the
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company guarantees, through replacement or repayment, loans in default up to a
specified percentage of loans sold. Dealer/developer guaranteed loans are
secured by repurchase or replacement guarantees in addition to, in most
instances, dealer/developer reserves.
The Company's exposure to loss on loans sold in the event of nonperformance
by the consumer, default by the dealer/developer on its guarantee, and the
determination that the collateral is of no value was $9,940,000 at March 31,
1998 ($9,238,000 at December 31, 1997). Such amounts have not been discounted.
The Company repurchased $118,000 and $335,000 of loans under the recourse
provisions of loan sales during the three months ended March 31, 1998 and 1997,
respectively, and $740,000 during the year ended December 31, 1997. In
addition, when the Company sells loans through securitization programs, the
Company commits either to replace or repurchase any loans that do not conform to
the requirements thereof in the operative loan sale documents. As of March
31, 1998, $22,751,000 of the Company's cash was restricted as credit
enhancements in connection with certain securitization programs.
The Company's Serviced Portfolio is geographically diversified with
collateral and consumers located in 45 and 50 states, respectively. The
Serviced Portfolio consists of the principal amount of loans serviced by or
on behalf of the Company. At March 31, 1998, 18.2% of the Serviced Portfolio
by collateral location was located in Texas (19.1% at December 31, 1997), and
18.2% and 17.1% of the Serviced Portfolio by borrower location was located
in Texas and Florida (19.1% and 12.9% at December 31, 1997), respectively.
No other state accounted for more than 10.0% of the total by either collateral
or borrower location.
<TABLE>
C. Allowance for loan losses and recourse obligations
The total allowance for loan losses consists of the following:
<S> <C> <C>
March 31, December 31,
1998 1997
Allowance for losses on loans held for sale... $1,273,000 $1,388,000
Allowance for losses on other loans........... 2,312,000 2,044,000
Recourse obligation on retained interests in loan sales 2,579,000 2,445,000
$6,164,000 $5,877,000
</TABLE>
D. Debt
As of March 31, 1998 and December 31, 1997, the Company had no unsecured
lines of credit.
In January 1997, the Company amended a line of credit, secured by consumer
receivables and other secured loans, to increase the line from $5,000,000 to
$8,000,000. This line of credit matures in January 1999. There were no
outstanding borrowings at March 31, 1998 or December 31, 1997.
In March 1997, the Company entered into an additonal $25,000,000 secured
line of credit. The outstanding borrowings under this line of credit at March
31, 1998 were $13,327,000 and there were no outstanding borrowings at December
31, 1997. The facility is secured by loans to developers of vacation ownership
interest resorts ("VOI resorts"), popularly known as timeshare resorts, for the
acquisition and development of VOI resorts ("Facility A") and the related
financing of consumer purchases of VOIs ("Facility B"). Although the maximum
amount that can be borrowed on each facility is $15,000,000, the aggregate
outstanding borrowings cannot exceed $25,000,000. This facility expires in March
2000.
In May 1997, the Company renewed and amended an additional secured line of
credit to increase the line from $30,000,000 to $50,000,000 and extend the
maturity to April 2000. The outstanding borrowings under this line of credit at
March 31, 1998 were $6,200,000. There were no outstanding borrowings at December
31, 1997. This line of credit is secured by consumer receivables and other
secured loans.
In December 1997, the Company amended an additional line of credit to
increase the line from $20,000,000 to $30,000,000. Outstanding borrowings under
this line of credit at March 31, 1998, were $3,100,000. There were no
outstanding borrowings at December 31, 1997. This facility is secured by certain
retained interests in loan sales, cash collateral accounts and certain other
loans and matures in September 1999.
In March 1998, the Company renewed an additional $3,000,000 line of credit
which is secured by consumer receivables and other secured loans. This line of
credit matures in March 1999. There were no outstanding borrowings under this
line of credit at March 31, 1998 and December 31, 1997.
In March 1998, the Company amended the $1,500,000 construction mortgage
secured by certain assets of the Company extending the maturity date to March
2009. Outstanding borrowings under this construction mortgage were $498,000 and
$8,000 at March 31, 1998 and December 31, 1997, respectively.
Interest rates on the above lines of credit range from the Eurodollar or
LIBOR rates plus 2% to the prime rate plus 1.25%. The Company is not required to
maintain compensating balances or forward sales commitments under the terms of
these lines of credit.
The Company has a revolving line of credit and sale facility as part of an
asset backed commercial paper facility with a multi-seller commercial paper
issuer ("Conduit A"). In November 1997, the Company amended the facility
to increase the facility to $125,000,000, subject to certain terms and
conditions. The facility expires in June 1998. The Company expects to extend
the term of the facility to June 2001 prior to its expiration and to increase
the amount of the facility to $150,000,000 subject to substantially the same
terms and conditions.
In connection with the facility, the Company formed a wholly owned
subsidiary, Litchfield Mortgage Securities Corporation 1994 ("LMSC"), to
purchase loans from the Company. LMSC either pledges the loans on a revolving
line of credit with Conduit A or sells the loans to Conduit A. Conduit
A issues commercial paper or other indebtedness to fund the purchase or
pledge of loans from LMSC. Conduit A is not affiliated with the Company or its
affiliates. As of March 31, 1998 and December 31, 1997, the outstanding
balance of the sold or pledged loans securing this facility was $116,597,000
and $108,625,000, respectively. Outstanding borrowings under the line of
credit at March 31, 1998 and December 31, 1997 were $97,000 and $169,000,
respectively. Interest is payable on the line of credit at an interest rate
based on certain commercial paper rates.
In March 1997, the Company closed an additional revolving line of credit
and sale facility of $25,000,000 with another multi-seller of commercial paper
conduit ("Conduit B"). The facility, which expires in March 2000, is subject to
certain terms and conditions, credit enhancement requirements and loan
eligibility criteria. The outstanding aggregate balance of the loans pledged
and sold under the facility at any time cannot exceed $25,000,000.
In connection with the facility, the Company formed a wholly owned
subsidiary, Litchfield Capital Corporation 1996 ("LCC"), to purchase loans from
the Company. LCC either pledges the loans on a revolving line of credit with
Conduit B or sells the loans to Conduit B. Conduit B issues commercial paper or
other indebtedness to fund the purchase or pledge of loans from LCC. Conduit B
is not affiliated with the Company or its affiliates. As of March 31, 1998 and
December 31, 1997, the outstanding aggregate balance of the loans sold under the
facility was $13,276,000 and $12,517,000, respectively. There were no
outstanding borrowings under the line of credit as of March 31, 1998 or December
31, 1997. Interest is payable on the line of credit at an interest rate based
on certain commercial paper rates.
The term note is payable monthly based on collections from the underlying
collateral. The note is currently redeemable only with the approval of the
noteholder. The note is collateralized by certain of the Company's retained
interests in loan sales and cash. The balance outstanding on the note was
$4,428,000 and $5,210,000 at March 31, 1998 and December 31, 1997, respectively.
In April 1997, the Company issued unsecured notes with an initial principal
balance of $20,000,000. Interest is payable at 9.3% semiannually in arrears. The
notes require principal reductions of $7,500,000, $6,000,000, $6,000,000 and
$500,000 in March 2001, 2002, 2003 and 2004, respectively.
In November 1997, the Company completed a public offering of $51,750,000 of
8.45% Notes due 2002 ("1997 Notes"), which are unsecured obligations of the
Company. The proceeds were used to repay the outstanding balance on certain of
the Company's lines of credit and to retire the 10% Notes due 2002. The 1997
Notes allow for a maximum annual redemption at the election of the noteholders
of $2,588,000 and contain certain restrictions regarding the payment of cash
dividends and require the maintenance of certain financial ratios.
Previously, the Company completed public debt offerings of $17,570,000 in
May 1993 ("1993 Notes") and $18,400,000 in March 1995 ("1995 Notes"). The 1993
Notes and the 1995 Notes bear interest at 8 7/8% and 10%, respectively, and are
due 2003 and 2004, respectively. The 1993 Notes and the 1995 Notes are unsecured
obligations of the Company and each such issuance allows for a maximum annual
redemption by noteholders of 5% of the original principal amount thereof. In
June 1997, the noteholders redeemed, and the Company paid $613,000 of the 1993
Notes.
E. Derivative financial instruments held for purposes other than trading
The Company's objective in managing interest rate exposure is to match its
proportion of fixed versus variable rate assets, liabilities and loan sale
facilities. In June 1997, the Company entered into two interest rate swap
agreements. The swap agreements involve the payment of interest to the
counterparty at the prime rate on a notional amount of $110,000,000 and the
receipt of interest at the commercial paper rate plus a spread and the LIBOR
rate plus a spread on notional amounts of $80,000,000 and $30,000,000,
respectively. The swap agreements expire in June, 2000. There is no exchange
of the notional amounts upon which the interest payments are based.
The differential to be paid or received as interest rates change is accrued
and recognized as an adjustment to interest expense on outstanding debt, (the
accrual accounting method.) The related amount receivable from or payable to the
counterparty is included in other assets or other liabilities. The fair values
of the swap agreements are not recognized in the financial statements. The
Company intends to keep the contracts in effect until they mature in June 2000.
In June, 1994, the Company entered into an interest rate cap agreement with
a bank in order to manage its exposure to certain increases in interest rates.
The interest rate cap entitles the Company to receive an amount, based
on an amortizing notional amount, when commercial paper rates exceed 8%. If
payments were to be received as a result of the cap agreement, they would be
accrued as a reduction of interest expense. This agreement expires in July 2003.
The Company is exposed to credit loss in the event of non-performance by
the swap counterparty or cap provider.
F. Subsequent Events
At the Company's Annual Meeting held on April 24, 1998, the stockholders
voted to increase the authorized shares of common stock of the Company from
8,000,000 to 12,000,000.
FORM 10-Q
1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking Statements
Except for the historical information contained or incorporated by reference
in this Form 10-Q, the matters discussed or incorporated by reference herein
are forward-looking statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk factors set forth under "Risk Factors" as well as the
following: general economic and business conditions; industry trends; changes
in business strategy or development plans; availability and quality of
management; and availability, terms and deployment of capital. Special
attention should be paid to such forward-looking statements including,
but not limited to, statements relating to (i) the Company's ability to
execute its growth strategies and to realize its growth objectives and (ii)
the Company's ability to obtain sufficient resources to finance its working
capital needs and provide for its known obligations. Refer to form 10-K for
the year ended 1997 for a complete list of factors as discussed under
"Risk Factors".
Overview
Litchfield Financial Corporation (the "Company") is a specialty finance
company that provides financing to creditworthy borrowers for assets not
typically financed by banks. The Company provides such financing by purchasing
consumer loans and by making loans to businesses secured by consumer receivables
or other assets.
The Company purchases consumer loans (the "Purchased Loans") consisting
primarily of loans to purchasers of rural and vacation properties ("Land Loans")
and vacation ownership interests popularly known as timeshare interests ("VOI
Loans"). Land Loans are typically secured by one to twenty acre rural parcels.
VOI Loans typically finance the purchase of ownership interests ("VOIs") in
fully furnished vacation properties.
The Company also provides financing to rural land dealers, timeshare resort
developers and others secured by receivables ("Hypothecation Loans") and to
dealers and developers for the acquisition and development of rural land and
timeshare resorts ("A&D Loans"). In addition, the Company provides financing to
other businesses secured by consumer and other receivables ("Other Loans").
The principal sources of the Company's revenues are (i) interest and fees on
loans, (ii) gains on sales of loans and (iii) servicing and other fee income.
Gains on sales of loans are based on the difference between the allocated cost
basis of the assets sold and the proceeds received, which includes the fair
value of any assets or liabilities that are newly created as a result of the
transaction. Because a significant portion of the Company's revenues is
comprised of gains realized upon sales of loans, the timing of such sales has
a significant effect on the Company's results of operations.
Results of Operations
The following table sets forth the percentage relationship to revenues,
unless otherwise indicated, of certain items included in the Company's
statements of income.
<TABLE>
<S> <C> <C>
Three months ended
March 31,
1998 1997
Revenue
Interest and fees on loans.............. 65.8% 70.9%
Gain on sale of loans.................. 28.0 23.5
Servicing and other fee income.......... 6.2 5.6
100.0 100.0
Expenses:
Interest expense........................ 37.7 37.3
Salaries and employee benefits.......... 14.2 12.7
Other operating expenses................ 12.0 14.1
Provision for loan losses............... 4.4 6.8
68.3 70.9
FORM 10-Q
1
Income before income taxes.................. 31.7 29.1
Provision for income taxes.................. 12.2 11.2
Net income.................................. 19.5% 17.9%
</TABLE>
Revenues increased 24.1% to $7,953,000 for the three months ended March 31,
1998, from $6,407,000 for the same period in 1997. Net income for the three
months ended March 31, 1998 increased 35.4% to $1,550,000 compared to $1,145,000
for the same period in 1997. Loan originations grew 87.2% to $67,493,000 for the
three months ended March 31, 1998 from $36,063,000 for the same period in 1997.
The Serviced Portfolio increased 32.1% to $338,502,000 at March 31, 1998 from
$256,192,000 at March 31, 1997.
Interest and fees on loans increased 15.1% to $5,233,000 for the three
months ended March 31, 1998 from $4,546,000 for the same period in 1997,
primarily as the result of the higher average balance of other loans during the
1998 period. The average rate earned on the Serviced Portfolio decreased to
12.0% at March 31, 1998 from 12.4% at March 31, 1997, primarily due to the
effect of the growth in Hypothecation Loans as a percentage of the portfolio.
Hypothecation Loan yields are usually less than Land Loan or VOI Loan yields,
but Hypothecation Loan servicing costs and loan losses are generally less as
well.
Gain on the sale of loans increased 48.1% to $2,227,000 for the three months
ended March 31, 1998 from $1,504,000 in the same period in 1997. The volume of
loans sold increased 53.6% to $18,502,000 for the three months ended March 31,
1998 from $12,043,000 during the corresponding period in 1997 primarily due to
the growth in originations.
Servicing and other fee income increased 38.1% to $493,000 for the three
months ended March 31, 1998, from $357,000 for the same period in 1997 mostly
due to the increase in the other fee income resulting from the collection
of a significant prepayment penalty from a Hypothecation Loan. Although loans
serviced for others increased 40.4% to $184,157,000 as of March 31, 1998 from
$131,162,000 at March 31, 1997, servicing income remained relatively constant
due to an increase in Hypothecation Loans serviced for others and a decrease
in the average servicing fee per loan.
Interest expense increased 25.2% to $2,997,000 during the three months ended
March 31, 1998 from $2,394,000 for the same period in 1997. The increase in
interest expense primarily reflects an increase in average borrowings. During
the three months ended March 31, 1998, borrowings averaged $119,122,000 at an
average rate of 8.9% as compared to $98,952,000 at an average rate of 8.9%
during the same period in 1997. Interest expense includes the amortization
of deferred debt issuance costs.
Salaries and employee benefits increased 39.4% $1,133,000 for the three
months ended March 31, 1998 from $813,000 for the same period in 1997 because of
an increase in the number of employees in 1998 and, to a lesser extent, an
increase in salaries. Personnel costs as a percentage of revenues increased to
14.2% for the three months ended March 31, 1998 compared to 12.7% for the same
period in 1997. As a percentage of the Serviced Portfolio, personnel costs
increased to 1.34% for the three months ended March 31, 1998 from 1.27% for the
same period in 1997.
Other operating expenses increased 5.5% to $953,000 for the three months
ended March 31, 1998 from $903,000 for the same period in 1997. As a percentage
of revenues, other operating expenses decreased to 12.0% for the three months
ended March 31, 1998 compared to 14.1% for the corresponding period in 1997. As
a percentage of the Serviced Portfolio, other operating expenses decreased to
1.13% for the three months ended March 31, 1998 from 1.41% for the same period
in 1997.
During the three months ended March 31, 1998, the provision for loan losses
decreased 19.5% to $350,000 from $435,000 for the same period in 1997. The
provision for loan losses decreased because of the growth in Hypothecation Loans
as a percentage of the Serviced Portfolio. Hypothecation Loans have experienced
significantly lower delinquency and default rates than Purchased Loans.
Liquidity and Capital Resources
The Company's business requires continued access to short and long-term
sources of debt financing and equity capital. The Company's principal cash
requirements arise from loan originations, repayment of debt on maturity,
payments of operating and interest expenses and loan repurchases. The Company's
primary sources of liquidity are loan sales, short-term borrowings under secured
lines of credit, long-term debt and equity offerings and cash flows from
operations.
Since its inception, the Company has sold $366,700,000 of loans at face value
($348,198,000 through December 31, 1997). The principal amount remaining on the
loans sold was $184,157,000 at March 31, 1998 and $179,790,000 at December 31,
1997. In connection with certain loan sales, the Company commits to repurchase
from investors any loans that become 90 days or more past due. This obligation
is subject to various terms and conditions, including, in some instances, a
limitation on the amount of loans that may be required to be repurchased. There
were approximately $9,940,000 of loans at March 31, 1998 which the Company could
be required to repurchase in the future should such loans become 90 days or
more past due. The Company repurchased $118,000 and $335,000 of loans under the
recourse provisions of loan sales during the three months ended March 31, 1998
and 1997, respectively. As of March 31, 1998, $22,751,000 of the Company's cash
was restricted as credit enhancement for certain securitization programs.
To date, the Company has participated $8,388,000 of A&D and Other Loans without
recourse to the Company ($6,936,000 through December 31, 1997).
The Company funds its loan purchases in part with borrowings under various
lines of credit. Lines are paid down when the Company receives the proceeds
from the sale of the loans or when cash is otherwise available. These lines of
credit totaled $116,000,000 at March 31, 1998 and December 31, 1997.
Outstanding borrowings on these lines of credit were $22,627,000 at March 31,
1998. At March 31, 1998 and December 31, 1997, lines of credit also included
outstanding borrowings of $498,000 and $8,000, respectively, on the $1,500,000
construction mortgage. Interest rates on these lines of credit range from the
Eurodollar or LIBOR rate plus 2% to the prime rate plus 1.25%. The Company is
not required to maintain compensating balances or forward sales commitments
under the terms of these lines of credit.
The Company also finances its loan purchases with two revolving line of
credit and sale facilities as part of asset backed commercial paper facilities
with multi-seller commercial paper issuers. Such facilities totaled $150,000,000
at March 31, 1998 and December 31, 1997. As of March 31, 1998 and December 31,
1997, the outstanding balances of loans sold or pledged under these facilities
were $129,873,000 and $121,142,000, respectively. Outstanding borrowings under
these lines of credit were $97,000 at March 31, 1998 and $169,000 at December
31, 1997. Interest is payable on these lines of credit based on certain
commercial paper rates.
The Company also finances its liquidity needs with long-term debt.
Long-term debt totaled $105,347,000 at March 31, 1998 and December 31, 1997.
The Company also has a term note payable monthly based on the collection
of the underlying collateral. The note is redeemable only with the approval of
the noteholder. The note is collateralized by certain of the Company's
retained interests in loan sales and cash. The balance outstanding on the
note was $4,428,000 and $5,210,000 at March 31, 1998 and December 31, 1997,
respectively.
In June 1997, the Company entered into two interest rate swap agreements.
The swap agreements involve the payment of interest to the counterparty at the
prime rate on a notional amount of $110,000,000 and the receipt of interest at
the commercial paper rate plus a spread and the LIBOR rate plus a spread on
notional amounts of $80,000,000 and $30,000,000, respectively. The swap
agreements expire in June 2000. There is no exchange of the notional amounts
upon which interest payments are based.
Historically, the Company has not required major capital expenditures to
support its operations.
Credit Quality and Allowances for Loan Losses
The Company maintains allowances for loan losses and recourse obligations
on retained interests in loan sales at levels which, in the opinion of
management, provide adequately for current and estimated future losses on such
assets. Past-due loans (loans 30 days or more past due which are not
covered by dealer/developer reserves and guarantees) as a percentage of the
Serviced Portfolio as of March 31, 1998, remained constant from December 31,
1997, at 1.20% and decreased from 1.34% at March 31, 1997. Management evaluates
the adequacy of the allowances on a quarterly basis by examining current
delinquencies, the characteristics of the accounts, the value of the underlying
collateral, and general economic conditions and trends. Management also
evaluates the extent to which dealer/developer reserves and guarantees can be
expected to absorb loan losses. When the Company does not receive guarantees
on loan portfolios purchased, it adjusts its purchase price to reflect
anticipated losses and its required yield. This purchase adjustment is recorded
as an increase in the allowance for loan losses and is used only for the
respective portfolio. A provision for loan losses is recorded in an amount
deemed sufficient by management to maintain the allowances at adequate levels.
Total allowances for loan losses and recourse obligations on retained
interests in loan sales increased to $6,164,000 at March 31, 1998 compared
to $5,877,000 at December 31, 1997. The allowance ratio (the allowances
for loan losses divided by the amount of the Serviced Portfolio) at March 31,
1998 decreased slightly to 1.82% from 1.93% at December 31, 1997.
As part of the Company's financing of Purchased Loans, arrangements are
entered into with dealers and resort developers, whereby reserves are
established to protect the Company from potential losses associated with such
loans. As part of the Company's agreement with the dealers and resort
developers, a portion of the amount payable to each dealer and resort developer
for a Purchased Loan is retained by the Company and is available to the Company
to absorb loan losses for those loans. The Company negotiates the amount of the
reserves with the dealers and developers based upon various criteria, two of
which are the financial strength of the dealer or developer and credit risk
associated with the loans being purchased. Dealer/developer reserves amounted to
$10,616,000 and $10,655,000 at March 31, 1998 and December 31, 1997,
respectively. The Company generally returns any excess reserves to the
dealer/developer on a quarterly basis as the related loans are repaid by
borrowers.
Impact of Year 2000
As the year 2000 approaches, an issue impacting all companies has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Substantially all of the Company's operating
systems are already year 2000 compliant. The Company does not expect to incur
any significant additional costs to make its remaining applications year 2000
compliant.
Inflation
Inflation has not had a significant effect on the Company's operating
results to date.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April 24, 1998,
John A. Costa was elected to serve as a director of the Company for a term
of three years by a vote of 4,935,548 shares voting for his election and
131,432 shares withheld. The stockholders also voted to increase the
authorized shares of common stock of the Company from 8,000,000 to
12,000,000 by a vote of 4,991,829 shares for, 33,199 shares against and
41,952 shares abstaining. The stockholders voted to ratify, confirm and
approve the Sixth Amendment to the 1990 Stock Option Plan by a vote of
3,062,746 shares for, 774,323 shares against, 21,984 shares abstaining and
1,207,927 shares were not voted. Finally, the stockholders voted to
ratify, confirm and approve the First Amendment to the 1995 Stock Option
Plan for Non-Employee Directors of the Company by a vote of 4,202,603
shares for, 807,644 shares against and 56,733 shares abstaining.
The Company solicited proxies for the Annual Meeting pursuant to
Regulation 14 under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the Company's nominee for director, and the
nominee was elected.
Item 5. Other Information
None
Item 6. Exhibits
The following exhibits are filed herewith:
10.167Amendment No. 4 to Loan Agreement dated September 13, 1996,
dated December 16, 1997, between the Company and Bank of
Scotland.
10.168Amendment No. 3 to Security Agreement dated September 13,
1996, dated December 16, 1997, between the Company and Bank
of Scotland.
10.169Loan and Security Agreement, dated December 12, 1997, between
the Company and Berkshire Bank.
10.170Promissory Note, dated December 12, 1997, from the Company to
Berkshire Bank
10.171Loan Modification Agreement to Loan and Security Agreement
dated December 12, 1997, dated March 23, 1998 between the
Company and Berkshire Bank.
11.1 Statement re: computation of earnings per share
27.1 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITCHFIELD FINANCIAL CORPORATION
DATE: May 12, 1998 /s/ Richard A. Stratton
RICHARD A. STRATTON
Chief Executive Officer,
President and Director
DATE: May 12, 1998 /s/ Ronald E. Rabidou
RONALD E. RABIDOU
Chief Financial Officer
Exhibit 10.167
Amendment No.4 to Loan Agreement
AMENDMENT, dated as of December 16, 1997, between Litchfield Financial
Corporation, a Massachusetts corporation (the "Borrower"), and Bank of Scotland
(the "Bank") to the Loan Agreement dated as of September 13, 1996 between the
Borrower and the Bank, as amended by Amendment No. 1 to Loan Agreement dated as
of December 20, 1996, Amendment No. 2 to Loan Agreement dated as of January 10,
1997 and Amendment No. 3 to Loan Agreement dated as of June 18, 1997 (the "Loan
Agreement"). Capitalized terms used but not defined herein shall have the
meanings provided for such terms in the Loan Agreement.
WHEREAS, the Borrower desires to have the Loan Agreement amended to increase
the maximum aggregate principal amount of Loans available to be outstanding at
any one time thereunder to $30,000,000; and
WHEREAS, on and subject to the terms hereof, the Bank is willing to execute
this Amendment and, subject to the terms and conditions of the Loan Agreement as
amended hereby, so increase the maximum aggregate amount of Loans available
under the Loan Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Sections. All references to Sections in this Amendment shall be deemed
references to Sections of the Loan Agreement unless otherwise specified.
2. Effect of Amendment. As used in the Loan Agreement (including all
Exhibits thereto) and the other Loan Documents and all other instruments and
documents executed in connection with any of the foregoing, any reference to the
Loan Agreement shall mean the Loan Agreement as amended hereby.
3. Amendments. Subject to the occurrence of the Amendment Closing Date, the
Loan Agreement is amended as follows:
(A) Section 2.3(b) of the Loan Agreement is amended by deleting the
amount "$20,000,000" therein and inserting in its place "$30,000,000".
(B) Section 2.6 of the Loan Agreement is amended by deleting
subsections 2.6(b), 2.6(c) and 2.6(d).
(C) Section 3.1 of the Loan Agreement is restated in its entirety as
follows:
"3.1 Rate of Interest. The Borrower agrees to
pay interest in respect of the unpaid principal amount of the
Revolving Credit Loans from time to time outstanding (x) from the
Closing Date through and including the FAD, at a rate per annum equal
(subject to the provisions of Section 3.3) to the sum of (A) the Base
Rate,
which interest rate shall change as and when the Base Rate changes,
plus (B) 1% per annum; and (y) from and after the FAD until maturity
(whether by acceleration or otherwise), at a rate per annum equal
(subject to the provisions of Section 3.3) to the Base Rate, which
interest rate shall change as and when the Base Rate changes.
(D) Section 4.1 of the Loan Agreement is amended by deleting the
proviso to the first sentence of such Section.
(E) Section 4.2 of the Loan Agreement is restated in its entirety as
follows:
"4.2 Arrangement Fee. The Borrower agrees to
pay to the Bank an arrangement fee for establishing its Commitment, as
follows: $25,000 on the Closing Date; $25,000 on the first
anniversary of the Closing Date; $12,500 on the FAD; and $37,500 on
the second anniversary of the Closing Date; provided that if prior to
either anniversary date specified above the Commitment shall have been
terminated and no Loans are outstanding and all other obligations of
the Borrower under this Agreement and the other Loan Documents have
been paid in full, the Borrower's obligation to pay the arrangement
fee on such anniversary date (and the succeeding anniversary date, if
any) shall be terminated.
(F) Section 6A.5 of the Loan Agreement is restated in its entirety as
follows:
"6A.5 Assignment Assets - On the date of such
Loan the Bank shall have received an Assignment Asset Certificate
dated the date of such Loans."
(G) Section 7.1 of the Loan Agreement is amended by deleting the word
"and" at the end of subsection (h) thereof and deleting subsection (i) thereof,
and by inserting the following subsections (i), (j) and (k) following
subsection (h) thereof:
"(i) Copies of each notice and each other
material communication sent by the Borrower to Ironwood, Palo Verde,
the TLC Custodian or any other Person pursuant to, in connection with,
or relating in any way to, the Ironwood Credit Agreement or any
Collateral, at the same time such notice or other communication is
sent by the Borrower;
(j) Copies of (x) each notice and each other
communication received by Borrower from Ironwood, Palo Verde, the TLC
Custodian or any other Person pursuant to, in any way relating to, or
in connection with, the Ironwood Credit Agreement or any Collateral,
within one Business Day after Borrower's receipt thereof; and (y) each
financial statement and all other financial information of or with
respect to Ironwood or Palo Verde received by Borrower, within one
Business Day after Borrower's receipt
thereof; and
(k) with reasonable promptness, such other
information respecting the business, properties, operations, prospects
or condition (financial or otherwise) of the Consolidated Group or any
member thereof, or of Ironwood, Palo Verde or the TLC Custodian, or
relating to any Collateral, as the Bank may from time to time
reasonably request."
(H) Section 7.2 of the Loan Agreement is amended by adding the
following sentence at the end thereof:
"Borrower will give written notice to the Bank of the following
promptly after obtaining knowledge thereof: (i) any action,
proceeding or claim commenced or asserted, or reasonably likely to be
commenced or asserted, against Ironwood, Palo Verde or the TLC
Custodian; (ii) any dispute which may exist between Ironwood, Palo
Verde or any Governmental Authority (including, without limitation,
any audit by the IRS); or (iii) any dispute which may substantially
affect the normal business operations or expected services to be
provided by Ironwood, Palo Verde or the TLC Custodian."
(I) Section 7.8 of the Loan Agreement is amended by adding the
following subsections (c) and (d) thereto:
"(c) Upon three Business Days' notice, the Borrower shall
cause each of Ironwood, Palo Verde and the TLC Custodian to allow the
Bank or any representative, officer, accountant or other auditor of or
for the Bank to visit and inspect any of the property of any such
Person, to examine such Person's books of record and account, and to
discuss its affairs and procedures relating to Tax Certificates or any
Collateral; provided however, that if no Default or Event of Default
then exists, the Borrower shall not be obligated to cause such Person
to permit such visits and inspections more than once per year; and
provided further, that, if Borrower requests, Borrower shall be
permitted to accompany Bank on such visits.
(d) In connection with any visit or inspection referred to
in subsection (a) or (c) above, the Bank or its representatives,
officers, accountants or other auditors shall be permitted to make
such verifications and tests of the Collateral as the Bank shall deem
appropriate."
(J) Section 7.14 is amended by adding the following sentence at the end
thereof:
"In addition, the Borrower will give the Bank prompt notice of any
Environmental Claim relating to any Collateral, any property which
secures any Collateral or any property to which any Tax Certificate
relates, of the discovery of any contaminant or release on, in or
emanating from any Collateral or any such other property, or any other
liability or potential liability under any Environmental Law which in
any way relates to, or could be imposed on, the owner of the
Collateral or any such other property, in each case, promptly
obtaining knowledge thereof."
(K) Section 7 is further amended by adding a new Section 7.24 thereto
as follows:
"7.24. Administration of Ironwood Documents.
Subject to the other provisions relating thereto contained in this
Agreement and in the Security Agreement, the Borrower shall administer
and enforce the Ironwood Credit Agreement and Ironwood Security
Documents in a commercially reasonable manner and in compliance with
all applicable laws and take all action required or permitted
thereunder which, in the reasonable opinion of the Company, is
necessary to protect the interests of the Company and the Bank therein
and in the Collateral covered thereby."
(L) Section 8.3 of the Loan Agreement is amended by inserting in clause
(iv) of subsection (a) thereof the words "by the Borrower or its Subsidiaries
(other than LMSC)" after the words "other Indebtedness incurred".
(M) Section 8.12 of the Loan Agreement is amended by adding a new
clause (c) thereto as follows:
"(c) The Borrower will not (and will not permit
any Subsidiary to) (i) enter into any transaction with Ironwood or any
Affiliate of Ironwood, other than the transactions evidenced by the
Ironwood Credit Agreement and the Ironwood Equity Documents, on more
favorable terms to Ironwood or an Ironwood Affiliate than if such
transaction was with a totally unrelated Person, or (ii) make any
payments to Ironwood or any Affiliate of Ironwood (other than loans
required by the Ironwood Credit Agreement or payments contemplated by
the Ironwood Equity Documents), except pursuant to a transaction
permitted by clause (i) above."
(N) Section 8.23 of the Loan Agreement is amended by adding a new
clause (c) immediately before the period at the end thereof as follows:
"or (c)(i) without the prior written consent of the Bank, (x) amend,
supplement or otherwise modify, waive, terminate, or agree to or
otherwise permit there to be any amendment, supplement, modification,
waiver or termination of, the Ironwood Credit Agreement or the
Ironwood Security Documents, (y) consent to any action or deviation
from any covenant or agreement contained in, or otherwise grant any
consent or approval under, the Ironwood Credit Agreement or any
Ironwood Security Document (whether or not any such consent or
approval is in any way contemplated by the Ironwood Credit Agreement
or by any Ironwood Security Document) or (ii) subordinate its rights
with respect to any obligations of Ironwood to it or with respect to
any security therefor unless it shall have given the Bank 20 Business
Days prior written notice of its intention so to do and unless it
shall be in compliance with all provisions of this Agreement on the
date such subordination becomes effective (including, without
limitation, its obligations under Section 2.4(b) hereof) provided,
that (A) in the case of clause (i) above, Borrower shall be permitted,
without the prior written consent of the Bank, to amend, supplement or
otherwise modify or waive any provision of the Ironwood Credit
Agreement which relates only to Tax Certificates issued by Taxing
Authorities in a particular State (a "Permitted Amendment") if (1) the
Borrower gives Bank written notice thereof on or prior to the date the
same becomes effective, (2) no Default shall have occurred and be
continuing at the time such Permitted Amendment is made or entered
into and (3) prior to the time any such Permitted Amendment is made or
entered into all Tax Certificates issued by Taxing Authorities in such
state are removed from the Borrowing Base Collateral (it being
understood, as set forth in the definition of "Qualifying State", that
no Tax Certificate issued by any Taxing Authority in such state shall
thereafter be included as Borrowing Base Collateral unless and until
the Bank (in its sole discretion) shall have consented to such
Permitted Amendment).
(O) Section 8.25 of the Loan Agreement is deleted.
(P) Section 10 of the Loan Agreement is amended by adding a new
section, Section 10.22, thereto as follows:
"10.22 Ironwood Documents. On the FAD, and at
all times thereafter when any Tax Certificate is included or proposed
to be included in the Borrowing Base, the Borrower makes the following
representations, covenants and warranties:
(a) To the best of Borrower's
knowledge, each representation made by Ironwood and Palo Verde
in the Ironwood Credit Agreement or any Ironwood Security
Document is true and correct;
(b) To the best of Borrower's
knowledge, Ironwood has and will have good and marketable title
to each Eligible TLC;
(c) On the date that any Eligible
TLC is included in the computation of the Borrowing Base, all
necessary and appropriate recordings and filings shall have been
made in all necessary and appropriate public offices, and all
other necessary and appropriate action shall have been taken
(including, without limitation, delivery of all Tax Certificates
to the Custodian) such that the Borrower shall have assigned to
the Bank a perfected, first priority security interest in all of
Ironwood and Palo
Verde's right, title and interest in and to such
Eligible TLC;
(d) Each Eligible TLC creates in
favor of the owner thereof (i) the right to be paid the amount
of taxes shown thereon plus interest at not less than the Coupon
Rate, and (ii) the right to foreclose on the real property in
respect of which such taxes were assessed upon expiration of the
statutory redemption period applicable thereto;
(e) Under law applicable to each
Tax Certificate, each of Ironwood and Palo Verde has the
unqualified right to collaterally assign its rights to and under
each Eligible TLC to any Person and Palo Verde has the
unqualified right to mortgage its interest in any Real Property
or Acquired Real Property to any Person, and any such assignee
or mortgagee has the unqualified right to collaterally assign
the rights so assigned to it, in each case without notice to,
recordation or filing with, or approval from any Governmental
Authority except, in the case of interests in Real Property or
Acquired Real Property, recordations required for mortgages in
the jurisdiction where such real property is located; and
(f) Each of the Ironwood Credit
Agreement and each Ironwood Security Document is in full force
and effect."
(Q) Section 11.3 of the Loan Agreement is amended by deleting the
portion of the final sentence thereof beginning with the words "provided
however" and replacing such deleted portion with the following:
"provided however, that unless the Bank otherwise consents in writing,
no such redesignation, removal or deletion of such asset
shall occur if after giving effect to such redesignation, removal or
deletion, the aggregate principal amount of outstanding Loans would
exceed the amount of the Borrowing Base."
(R) Annex I to the Loan Agreement is amended as follows:
(a) The following defined terms are deleted:
(1) "Book Value Increase"
(2) "Commitment Reduction Amount"
(3) "Permitted Reduction Commitment"
(b) The definitions of the following defined terms
are amended as follows:
(1) The definition of the term "Borrowing Base" is
restated in its entirety as follows:
"Borrowing Base" shall mean at a particular
time the product of (x) 0.60 and (y) the Security
Value of the Borrowing Base Collateral.
(2) The definition of the term "Borrowing Base
Collateral" is restated in its entirety as follows:
"Borrowing Base Collateral" shall mean,
collectively, (a) the Class B Certificate, (b) the
Uncertificated Residual Rights, (c) the Primary
Assignment Assets, and (d) from and after the TLC
Effective Date (if such date occurs), the Eligible
TLCs."
(3) The definition of the term "Commitment" is
restated in its entirety as follows:
"Commitment" shall mean $30,000,000, as
such amount may from time to time be reduced or
terminated pursuant to Section 2.6(a), Section 9 or
any other section of this Agreement.
(4) The definition of the term "Portfolio Amount" is
amended by deleting the period at the end thereof and replacing
said period with a semi-colon, and adding the following clause
after said semi-colon:
"provided, however that for purposes of this
definition, the term "Receivables" shall not include any
amount payable by Ironwood, or by any successor or assign
of Ironwood."
(5) The definition of the term "REO Property" is
amended by deleting the period at the end thereof and replacing
said period with a semi- colon, and adding the following clause
after said semi-colon:
"provided, however that for purposes of Section
8.21 of this Agreement, no Real Property which becomes
Acquired Real Property pursuant to the Ironwood Credit
Agreement shall constitute REO Property."
(6) The definition of "Security Value" is restated in
its entirety as follows:
"Security Value" shall mean (i) with
respect to the Class B Certificate and the
Uncertificated Residual Rights, the value of such
item of Borrowing Base Collateral as specified in
the most recent certificate delivered pursuant to
Section 6.16, 6A.4 or 7.16 hereof (or, if less, as
then reflected on the books of the Borrower, LMSC or
LTSC, as the case may be); (ii) with respect to the
Primary Assignment Assets, the Primary Assignment
Asset Book Value, as specified in the most recent
certificate delivered pursuant to Section 6A.4,
6A.5, or 7.16; provided, however, that
notwithstanding the aggregate value at any time of
the Primary Assignment Assets, the Security Value of
the Primary Assignment Assets shall be capped at,
and the portion of the Borrowing Base allocable to
the Security Value of Primary Assignment Assets
shall in no event exceed, (A) $10,000,000 at any
time prior to April 28, 1998, and (B) unless the
Bank otherwise consents in writing, $5,000,000 at
any time on or after April 28, 1998; and (iii) with
respect to the Eligible TLCs, the TLC Amount as
specified in the most recent certificate delivered
pursuant to Section 6A.4 or 7.16; provided that the
Security Value of the TLC Amount shall be zero (x)
unless and until TLC Effective Date occurs; and (y)
after the TLC Effective Date, if (i) any of
Borrower's rights under the Ironwood Credit
Agreement or Ironwood Security Documents shall have
been subordinated or (ii) any action referred to in
clause (B) to the first proviso to Section 8.23(c)
has been taken and the Bank shall not have consented
in writing (in its sole discretion) to such action;
provided, further, that (A) if any certificate
referred to in clause (i), (ii), or (iii) above has
not been delivered as required on any date, the
Security Value of the Class B Certificate, the
Uncertificated Residual Rights, the Primary
Assignment Assets and/or the Eligible TLCs shall be
the value of such items as reasonably determined by
the Bank; and (B) if at any time the Bank reasonably
determines that any of the most recently delivered
certificates referred to in clause (i), (ii) or
(iii) above, overstates the value of any such item
(whether due to what the Bank has determined to be a
mistake in valuation by the Borrower, due to any
property related to any item of Borrowing Base
Collateral ceasing to provide the basis for
valuation of such item reflected in such
certificate, due to a mistake by the Borrower in
treating an item as eligible for inclusion in the
Borrowing Base, or otherwise), the Security Value of
such item shall be such amount as the Bank shall
reasonably determine or such item shall be
eliminated from the computation of Security Value,
as appropriate.
(c) The following defined terms are added to Annex
I in their appropriate alphabetical place:
(1) "Acquired Real Property" shall have the meaning
assigned to such term in the Ironwood Credit Agreement.
(2) "Adverse Claim" shall mean a lien, security
interest, charge, encumbrance or other right or claim of any
Person (other than the Bank) in another Person's assets, other
than, in the case of a Purchased Tax Certificate, a lien
evidenced by a Third Party Tax Certificate (as defined in the
Ironwood Credit Agreement) or one in favor of a Taxing Authority
for prior or subsequent taxes or assessments owed on the Real
Property related to such Purchased Tax Certificate.
(3) "Collection Event" shall have the meaning
assigned to such term in the Ironwood Credit Agreement.
(4) "Colorado Auction Letter Agreement" shall mean
the Colorado Auction Letter Agreement dated October 20, 1997,
between Borrower and Ironwood.
(5) "Coupon Rate" shall mean, with respect to any Tax
Certificate, the rate of interest assessed by a Taxing Authority
on its Tax Certificates or, if less, the rate of interest
payable on such Tax Certificate.
(6) "Custodial Agreement" shall mean the Custodial
Agreement dated as of September 10, 1997 between Borrower,
Ironwood, and Yavapai Court Messenger Service, Inc., as such as
agreement may be amended, supplemented, restated or otherwise
modified from time to time.
(7) "Defaulted Tax Certificate" means a Tax
Certificate with respect to which (i) Ironwood has not
instituted Foreclosure within 90 days (or 31 days, in the case
of a Tax Certificate issued by a Taxing Authority of or in
Indiana) following the expiry of the statutory redemption period
applicable thereto, (ii) the Real Property related thereto has
not become subject to a Collection Event within 180 days after
interest at the Coupon Rate ceases to accrue thereon, (iii) the
Bank, the Borrower or Ironwood has determined in its reasonable
judgment is either uncollectible or cannot be sold on the
secondary market for a price at least equal to (x) all amounts
related thereto included as part of the TLC Amount, or, if
greater (y) its Outstanding Amount (as defined in the Ironwood
Credit Agreement) or (iv) a Collection Event has occurred.
(8) "Eligible TLC" shall mean a Purchased Tax
Certificate:
(i) which is not a Defaulted Tax Certificate;
(ii) which, if the Real Property related thereto has
not become subject to a Collection Event within 120 days
after interest at the Coupon Rate ceases to accrue
thereon, when combined with the aggregate Purchase Price
of all such Purchased Tax Certificates, does not exceed
twenty percent (20%) of the TLC Basis;
(iii) which is not a Tax Certificate with respect to
which the Bank or Borrower reasonably believes (based on
reasonable evidence requested by the Bank from time to
time and provided by Borrower at Borrower's expense) that
the Real Property is, was, could be, or could have been
subject to Environmental Problems;
(iv) which is not a Tax Certificate with respect to
which Ironwood or Palo Verde has failed to commence
Foreclosure or apply for a tax deed in the full names of
Ironwood and/or Palo Verde and the Borrower, within the
time period permitted by the Taxing Authority which issued
such Tax Certificate;
(v) (x) which is subject to a sole first priority
security interest in favor of the Bank, as determined by
the Bank based on advice of local counsel in the
applicable jurisdictions and (y) which is not a Tax
Certificate in respect of which any act, filing or other
measure listed in any local counsel opinion delivered to
Bank pursuant to this Agreement as necessary or desirable
in order for the Bank to have and maintain a first
priority perfected Lien has not been taken or made;
(vi) which is denominated and payable only in United
States Dollars in the United States of America;
(vii) (x) which has not been compromised, adjusted or
modified by tax appeal or otherwise, and (y) the Real
Property related to which has not been subject of a
condemnation order or other taking other than as a result
of a partial taking by the applicable Taxing Authority if
such Taxing Authority has repaid a pro rata portion of
such Tax Certificate and all accrued interest thereon,
based on the fair market value of the portion of the Real
Property which has been taken, and the fair market value
of the Real Property before the taking;
(viii) which does not contravene in any material
respect any laws, rules or regulations applicable thereto
and which no party thereto is in violation of any such
law, rule or regulation in any material respect;
(ix) which, subject to clause (x) of this definition,
does not have an LTV greater than ten percent (10%) for
residential properties (including without limitation,
large scale residential properties such as apartment
houses and condominiums, and agricultural properties) and
fifteen percent (15%) for commercial properties or any
other properties unless the Bank shall have given its
prior written approval;
(x) (1) which, with respect to any Eligible TLCs
purchased in Indiana other than Eligible TLCs described in
clause (2) below and with application only until
[March 19, 1998], if the LTV is in excess of the amounts
prescribed in clause (ix) of this definition, does not
have an LTV greater than fifty (50%) and, when combined
with the aggregate Purchase Price all such Purchased Tax
Certificates in Indiana, does not exceed 25% of the TLC
Basis and (2) with respect only to Purchased Tax
Certificates purchased in 1997 auctions in Indiana which
are referred to in the Indiana Auction Letter Agreement
and permitted to be purchased thereunder, does not have an
LTV in excess of 75%;
(xi) the Coupon Rate for which is not less than the
Prime Rate (as defined in the Ironwood Credit Agreement)
plus two percent (2%) per annum;
(xii) if the acquisition of which from a Taxing
Authority would require a bid on the price that Ironwood
would pay for the Real Property in Foreclosure, Borrower
shall have approved a bidding strategy proposed by
Ironwood;
(xiii) which is not a Tax Certificate relating to Real
Property for which there has already been sold to other
parties three or more other Tax Certificates;
(xiv) which does not relate to Real Property with
respect to which there are real property taxes which, as
of any date of determination, are more than five years
delinquent since that date of determination, provided,
however, if the applicable Tax Certificate related to such
delinquent real property taxes has not been previously
offered for sale by a Taxing Authority, then such real
property taxes may be no more than six years delinquent
since that date of determination, unless the Bank shall
have given its prior written approval;
(xv) relating to Real Property (1) on which, to
Ironwood's and Borrower's best knowledge an Adverse Claim
has not been filed by the United States Internal Revenue
Service, or (2) the owner or operator of which, to
Ironwood's and Borrower's best knowledge has not become
the subject of any proceeding by or against such owner of
a type described in Section 6.01(b)(i) of the Ironwood
Credit Agreement nor has the owner or operator authorized
any such action;
(xvi) the Purchase Price of which does not exceed the
lesser of (1) five percent (5%) of the outstanding
principal amount of Advances under the Ironwood Credit
Agreement or (2) $500,000;
(xvii) if the Purchase Price of which exceeds $250,000
but is less than or equal to the maximum Purchase Price
permitted pursuant to clause (xvi), the sum of such
Purchase Price and the aggregate Purchase Price of all
Eligible TLC's with a Purchase Price of more than $250,000
does not exceed the greater of (1) $1,000,000 or (2) ten
percent (10%) of the TLC Basis (but not exceeding
$2,000,000) on the date that such Tax Certificate is
proposed to be included in the Borrowing Base Collateral;
(xviii) if related to a non-residential property (as
determined pursuant to clause (ix)), when combined with
the aggregate Purchase Price of all Purchased Tax
Certificates relating to non-residential properties, does
not exceed forty percent (40%) of the TLC Basis;
(xix) which is issued by a Taxing Authority in a
Qualifying State;
(xx) which is not a void Tax Certificate;
(xxi) with respect to which, the Fair Market Value is
at least equal to (1) $30,000 for residential properties
and (2) $50,000 for commercial properties;
(xxii) which relates to Real Property which has been
viewed by an employee of Ironwood;
(xxiii) which was acquired by Ironwood in conformity
with its underwriting policies attached as Schedule 1 to
the Ironwood Credit Agreement as in effect on the FAD;
(xxiv) which, except with respect to Original Eligible
Tax Certificates, has a Purchase Price of at least $500
or, for Tax Certificates the purchase of which is
permitted by the Colorado Auction Letter Agreement, $300;
(xxv) which, if it relates to any Real Property (or
portion thereof) in respect of which Borrower, Ironwood,
Palo Verde or any other Person has acquired any fee
interest upon or following Foreclosure, (1) such Tax
Certificate constituted an Eligible TLC prior to such
Foreclosure and (2) the Real Property to which it relates
is covered by a mortgage (or deed of trust), satisfactory
to the Bank, made by Palo Verde in favor of Ironwood,
which has been collaterally assigned to Borrower and in
turn collaterally assigned to the Bank pursuant to
collateral assignments satisfactory to the Bank, which
mortgage (or deed of trust) and collateral assignments
have been recorded in accordance with law applicable to
the perfection and priority of a secured party's rights in
the subject property and in compliance with the
requirements thereof; provided, that if the collateral
assignment of such mortgage (or deed of trust) to the Bank
is not so recorded and the sum of the Purchase Price of
such Tax Certificate plus the aggregate Purchase Price of
all other Eligible TLCs in respect of which fee interests
in the related Real Property have been so acquired and
collateral assignments of the mortgages (or deeds of
trust) in favor of Bank not so recorded does not exceed
the greater of (x) $500,000 or (y) 7.5% of the
outstanding principal amount of Advances under the
Ironwood Credit Agreement on the date such fee interest is
acquired (which amount shall not exceed $1,000,000), the
collateral assignment to the Bank of such mortgage (or
deed of trust) shall not be required to be so recorded in
order for such Tax Certificate to comply with the criteria
set forth in this clause (xxv);
(xxvi) which constitutes an "Eligible Tax Certificate"
under the Ironwood Credit Agreement; and
(xxvii) which does not constitutes a tax deed or Deed
Certificate (as defined in the Ironwood Credit Agreement)
unless the inclusion of such tax deed or Deed Certificate
as an Eligible TLC has been specifically approved in
writing by the Bank (in its sole discretion);
provided, however, that no Tax Certificate shall constitute an Eligible TLC at
any time when an "Event of Default" (as defined in the Ironwood Credit
Agreement) or "Potential Event of Default" (as defined in the Ironwood Credit
Agreement) shall have occurred and be continuing.
(9) "Environmental Problems" shall have the meaning
assigned as such term in the Ironwood Credit Agreement.
(10) "FAD" shall mean the Fourth Amendment Date.
(11) "Fair Market Value" shall have the meaning
assigned to such term in the Ironwood Credit Agreement.
(12) "Foreclosure" shall have the meaning assigned
to such term in the Ironwood Credit Agreement.
(13) "Fourth Amendment" shall mean the amendment to
this Agreement (as then in effect) designated as Amendment No.
4 to Loan Agreement and dated as of December 16, 1997.
(14) "Fourth Amendment Date" shall have the same
meaning as the term "Amendment Closing Date" in the Fourth
Amendment.
(15) "Indiana Auction Letter Agreement" shall mean
the Indiana Auction Letter Agreement dated September 16, 1997
between Borrower and Ironwood.
(16) "Ironwood" shall mean Ironwood Acceptance
Corporation, L.L.C., an Arizona limited liability company.
(17) "Ironwood Credit Agreement" shall mean the
Revolving Credit Agreement dated as of August 22, 1997 between
Ironwood and Borrower, as amended by the Indiana Auction Letter
Agreement, as further amended by the Colorado Auction Letter
Agreement and as such agreement may be further amended,
supplemented, restated or otherwise modified from time to time.
(18) "Ironwood Equity Documents" shall mean
collectively, Warrant No. 1 (Warrant to Purchase Membership
Interests of Ironwood) with Original Issue Date of September 11,
1997; the Owners Agreement dated as of September 11, 1997 among
Peter Reardon, Richard Miller, William Crisp, Borrower and
Ironwood; and the Warrant Purchase Agreement dated as of
September 11, 1997 between Ironwood and Borrower.
(19) "Ironwood Security Documents" shall mean,
collectively, the Security Agreement dated as of September 11,
1997 executed by Ironwood and Palo Verde in favor of Borrower,
and the Limited Liability Company Pledge Agreement made as of
September 11, 1997 by Ironwood, Palo Verde and Borrower, as
either such agreement may be amended, supplemented, restated or
otherwise modified from time to time.
(20) "LTV" shall have the meaning assigned to such
term in the Ironwood Credit Agreement.
(21) "Original Eligible Tax Certificates" shall have
the meaning assigned to such term in the Ironwood Credit
Agreement.
(22) "Palo Verde" shall mean Palo Verde Trading
Company, L.L.C., an Arizona limited liability company.
(23) "Permitted Amendment" - Section 8.23.
(24) "Primary Assignment Asset Book Value" shall mean,
at any time, the Book Value of the Assignment Assets
constituting (without duplication) portions of the Primary
Assignment Assets at such time, but shall in no event exceed (x)
the aggregate Book Value of such Assignment Assets, as the Book
Value of such Assignment Assets is reduced pursuant to the terms
of this Agreement or (y) if less, the aggregate outstanding
principal amount of the notes constituting part of the Primary
Assignment Assets then listed on Schedule 2 to the Security
Agreement.
(25) "Purchase Price" shall mean, at any time, with
respect to any Purchased Tax Certificate, the purchase price
paid by Ironwood for such Purchased Tax Certificate minus the
sum of (i) the amount (if any) by which the principal amount of
the Lien on the related Real Property evidenced by such
Purchased Tax Certificate on the date of purchase by Ironwood
has been reduced by any Governmental Authority and (ii) the
amount (if any) paid on or with respect to such Purchased Tax
Certificate or the related real property by any Governmental
Authority or any other Person at any time after such Purchased
Tax Certificate was acquired by Ironwood, and (iii) if such
purchase price paid by Ironwood exceeded the principal amount of
the Lien on the related real property evidenced by such
Purchased Tax Certificate on the date of such purchase and the
Borrower has not delivered to the Bank an opinion of counsel
satisfactory to the Bank that in all circumstances such excess
will be paid to Ironwood and its direct and indirect assigns
(including collateral assigns) by the issuer of the Purchased
Tax Certificate upon redemption thereof or Foreclosure thereof,
the amount of such excess.
(26) "Purchased Tax Certificate" shall have the
meaning assigned to such term in the Ironwood Credit Agreement.
(27) "Qualifying State" shall mean a state (i) that
Bank has notified Borrower constitutes a "Qualifying State" for
purposes of this Agreement and in respect of which Bank has
received a copy of the opinion (which shall be satisfactory to
Bank) addressed to Borrower from counsel to Ironwood as to the
Borrower's obtaining a first priority, perfected security
interest in Tax Certificates issued by Taxing Authorities in
such state and certain other matters, (ii) in respect of which
following receipt of the opinion referred to in clause (i) above
either (x) Bank has notified Borrower that it has determined
that the criteria set forth in the definition of "Eligible TLCs"
are acceptable for purposes of Tax Certificates issued by Taxing
Authorities of or in such jurisdiction or (y) additional
eligibility criteria for Tax Certificates issued by Taxing
Authorities of or in such jurisdiction have been agreed in
writing by Borrower and the Bank in form and substance
satisfactory to Bank, and (iii) which is not a State in respect
of the Tax Certificates issued by Taxing Authorities thereof or
therein that a Non-Qualifying Specific Amendment has been made
or entered into unless the Bank (in its sole discretion) has
consented thereto in writing.
(28) "Real Property" shall have the meaning assigned
to such term in the Ironwood Credit Agreement.
(29) "Taxing Authority" shall have the meaning
assigned to such term in the Ironwood Credit Agreement.
(30) "Tax Certificate" shall have the meaning assigned
to such term in the Ironwood Credit Agreement.
(31) "TLC Amount" shall mean, as of any date, the sum
of (i) the TLC Basis; and (ii) accrued and unpaid interest on
the TLC Basis at the applicable Coupon Rate; provided, however,
that such accrued and unpaid interest shall not exceed 25% of
the TLC Basis (any amount above such 25% level being disregarded
for purposes of determining the TLC Amount); and provided
further, that with respect to any Eligible TLC relating to any
property on or in respect of which Ironwood, Palo Verde or any
other Affiliate of Ironwood has initiated Foreclosure, interest
shall be deemed to have ceased to accrue on the portion of the
TLC Basis applicable thereto not later than the time in the
Foreclosure process mandated under local or other applicable law
and, provided further that the TLC Amount shall at no time
exceed the "Borrowing
Base" as defined in the Ironwood Credit Agreement.
(32) "TLC Basis", at any time, means the sum of (i)
the aggregate Purchase Price of Eligible TLCs at such time owned
by Ironwood or Palo Verde relating to properties not in
Foreclosure plus (ii) the aggregate Purchase Price of Eligible
TLCs at such time owned by Ironwood or Palo Verde relating to
properties on which Ironwood or an Affiliate of Ironwood has
initiated Foreclosure.
(33) "TLC Custodian" shall mean Yavapai Court
Messenger Service, Inc., an Arizona corporation, or such other
company as discharges the functions of the Custodian described
in the Custodial Agreement.
(34) "TLC Effective Date" shall mean the date when
each of the following conditions has been fulfilled to the
satisfaction of the Bank (or waived in writing by the Bank);
provided that the TLC Effective Date shall not occur unless each
of the following conditions have been so fulfilled (or so waived
by the Bank) on or before the close of business (New York time)
on March 31, 1998 (or such later date as may be specified by the
Bank in writing).
(a) The Bank shall have received (i) legal opinions
from Arizona counsel to Ironwood (addressed to the Bank or
addressed to the Borrower accompanied by a reliance letter
addressed to the Bank) in form and substance (and from counsel)
satisfactory to Bank stating, inter alia, (without other than
customary qualifications), that upon possession of Tax
Certificates by the TLC Custodian and the filing of UCC-3
Financing Statements naming the Bank as Secured Party and the
Borrower as Debtor, the Bank will have a perfected security
interest in all Tax Certificates and (ii) such opinions of
counsel to the Borrower as the Bank shall reasonably request.
(b) The Bank shall have received UCC-1 and UCC-3
financing statements executed by the Borrower with respect to
all Tax Certificates and other collateral described in Amendment
No. 3 to Security Agreement, in form appropriate for filing in
all relevant jurisdictions and otherwise in form and substance
satisfactory to the Bank;
(c) The legal fees of the Bank's New York counsel
shall (to the extend demand for payment thereof shall have been
made) have been paid in full;
(d) The Bank shall have received an acknowledgment
and agreement from the TLC Custodian with respect to the TLC
Custodian acting as the Bank's agent and certain other matters,
executed by the Borrower, the TLC Custodian, Ironwood and Palo
Verde in the form of Exhibit A hereto;
(e) The Bank shall have received deposit account
agreements in the form of Exhibit B hereto from the financial
institutions at which the "Reserve Account" (as defined in the
Ironwood Credit Agreement) and "Lock-Box Account" (as defined in
the Ironwood Credit Agreement) are maintained, executed by such
financial institutions, the Borrower, Ironwood and Palo Verde;
(f) The Bank shall have received an acknowledgment
from Palo Verde of the Borrower's assignment to it of the
interests in Palo Verde pledged to the Borrower;
(g) The Bank shall have received the "Revolving Loan
Note" and each "Intracompany Note" (in each case, as defined in
the Ironwood Credit Agreement) endorsed in blank by Ironwood and
the Borrower;
(h) The Borrower shall have received a consent to
assignment, executed by each of the Ironwood and Palo Verde
(which consent shall include, in addition to a consent to
Borrower's assignments and pledges to the Bank, each of Ironwood
and Palo Verde's agreement as to the Bank's rights to visit and
inspect their premises and verify the Collateral) in the form of
Exhibit C hereto;
(i) The Bank shall have received from Borrower copies
of all financial statements referred to in Section 5.01 of the
Ironwood Credit Agreement and all other material communications
received by Borrower or sent by Borrower to Ironwood with
respect or pursuant to the Ironwood Credit Agreement since the
date it was executed;
(j) The Bank shall have received copies of the
Ironwood Credit Agreement, Ironwood Security Documents and
Ironwood Equity Documents, certified by an authorized senior
officer of the Borrower as complete and correct and as
constituting all agreements relating to Borrower's arrangements
with Ironwood;
(k) The Bank shall have received copies of all legal
opinions delivered to the Borrower in connection with the
Ironwood Credit Agreement;
(l) The Bank shall have received copies of the UCC
searches conducted by the Borrower with respect to Ironwood and
Palo Verde and copies of the UCC-1 financing statements filed by
Borrower as Secured Party and naming Ironwood or Palo Verde as
Debtor, certified as complete and correct by an authorized
senior officer of Borrower and such search results and financing
statements shall evidence that Borrower has a first priority
Lien on all assets of Ironwood and Palo Verde.
(m) The Bank shall have received the delegation of
Power of Attorney substantially in the form of Exhibit D hereto.
(n) The Bank shall have received and approved a
revised form of Exhibit E to the Loan Agreement (showing the
60%, advance rate (which in any event shall have become
effective as of the Initial Amendment Closing Date), providing
information as to Primary Assignment Assets and providing
information and representations as to Tax Certificates).
(o) The Bank shall have received a certificate from a
senior officer of the Borrower that the representations and
warranties set forth in Section 6 of this Amendment are true and
correct as of the TLC Effective Date as if made on and as of
such date.
(p) All of the opinions, documents, statements,
agreements and papers referred to in clauses (a) - (o) shall be
in form and substance satisfactory to the Bank.
4. Effectiveness Date. This Amendment shall become effective when and as of
the date that each of the following conditions have been fulfilled to the
satisfaction of the Bank (or waived in writing by the Bank). The first date on
which all of the following conditions have been so satisfied (or so waived by
the Bank) is herein referred to as the "Amendment Closing Date". If the
Amendment Closing Date shall not have occurred by the close of business (New
York time) on [January 15, 1998,], this Amendment shall be deemed rescinded,
null and void.
(a) The Borrower and the Bank shall have executed a copy of
this Agreement and the Borrower shall have delivered the same to the
Bank in New York, New York;
(b) The Bank shall have received legal opinions from New
York and Massachusetts counsel to the Borrower in form and substance
satisfactory to it;
(c) The Bank shall have received certificates of authorized
officers of the Borrower in the form of Exhibit E hereto certifying
the corporate resolutions of the Borrower relating to the entering
into and performance of this Amendment and of Amendment No. 3 to
Security Agreement ("Amendment No. 3 to Security Agreement") between
Bank and Borrower dated as of the date hereof;
(d) The legal fees of the Bank's New York counsel shall (to
the extent demand for payment thereof shall have been made) have been
paid in full;
(e) The Bank shall have received a restated Revolving
Credit Note in the principal amount of $30,000,000 in the form of
Exhibit F hereto; and
(f) Amendment No. 3 to Security Agreement in the form of
Exhibit G hereto shall have been executed and delivered by the
Borrower to the Bank and, in connection therewith, appropriate UCC-1
financing statements (in form and substance satisfactory to the Bank)
shall have been executed and delivered by Borrower to the Bank;
(g) The Bank shall have received (i) a release and form
UCC-3 financing statements executed by First National Bank of Boston
("Bank of Boston"), in each case, in form and substance satisfactory to
the Bank, terminating such bank's security interests in certain
property specified by the Bank, including Borrower's rights under the
Ironwood Credit Agreement, all Tax Certificates and property relating
thereto, the Revolving Loan Note, the Reserve Account, Lockbox Account
and each Intracompany Note (in each case, as defined in the Ironwood
Credit Agreement), all interests in Palo Verde and in Borrower's
rights under the Ironwood Equity Documents, or (ii) evidence
satisfactory to the Bank that amendments to existing Bank of Boston
financing statements effecting the release the result described in
clause (i) above have been duly filed in all relevant jurisdictions;
(h) The $12,500 arrangement fee payable pursuant to Section
4.2 of the Credit Agreement (after giving effect to this Amendment
No. 4) shall have been paid to the Bank.
5. Exhibit E to Loan Agreement. Upon the occurrence of the TLC Effective
Date, the form of Exhibit E referred to in clause (n) of said definitions shall
be substituted for the existing Exhibit E to the Loan Agreement (and,
thereafter, all references to "Exhibit E" in the Loan Documents shall be deemed
to refer to such revised form of Exhibit E).
6. Representations and Warranties. The Borrower represents and warrants
to the Bank that as of the date hereof, as of the Amendment Effective Date and
as of the TLC Effective Date, both before and after giving effect to the
amendments contained in Section 3 hereof, (A)the representations and warranties
contained in the Loan Agreement and the other Loan Documents are true and
correct with the same force and effect as if made on and as of such times (or,
if any such representation or warranty is expressly stated to have been made as
of a specific date, as of such specific date), (B)no Default of Event of Default
has occurred and is continuing or will occur as a result of such amendments and
(C) without limiting the foregoing, each of the Loan Agreement and each other
Loan Document constitutes the legal, valid and binding obligation of the
Borrower, and is enforceable against the Borrower in accordance with its
respective terms. The Borrower further represents and warrants to the Borrower
that (i) its execution and delivery of this Amendment has been duly authorized
by all necessary corporate action and (ii) its obligations under each Loan
Document remain in full force and effect, without release, diminution or
impairment, notwithstanding, without limitation, the execution and delivery of
this Amendment.
7. Miscellaneous. The Borrower will reimburse the Bank for its reasonable
legal fees and disbursements of counsel incurred in connection with this
Amendment. The amendments set forth herein are limited precisely as written
shall not be deemed to (a) modify any other term or condition of the Loan
Agreement or any other Loan Document or (b) prejudice any right which the Bank
may have now or in the future under or in connection with the Loan Agreement or
any other Loan Document. Except as expressly amended hereby, the Loan Agreement
shall remain unchanged and in full force and effect. This Amendment constitutes
a Loan Document. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same amendatory
instrument and either of the parties hereto may execute this Amendment by
signing any such counterpart. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED WHOLLY WITHIN THE STATE OF NEW YORK (REGARDLESS OF THE PLACE WHERE THE
LOAN AGREEMENT OR THIS AMENDMENT IS OR WAS EXECUTED).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
LITCHFIELD FINANCIAL CORPORATION
By:
/s/ Heather A.
Sica
HEATHER A. SICA
Executive Vice President
BANK OF SCOTLAND
By:
/s/ Annie Chin Tat
ANNIE CHIN TAT
Vice President
Exhibit 10.168
Amendment No. 3 to Security Agreement
AMENDMENT, dated as of December 16, 1997, between Litchfield Financial
Corporation, a Massachusetts corporation (the "Debtor"), and Bank of Scotland
(the "Secured Party"), to the Security Agreement between the Debtor and Secured
Party dated as of September 13, 1996, as amended by Amendment No. 1 to Security
Agreement dated as of December 20, 1996 and Amendment No.2 to Security Agreement
dated as of January 10, 1997 (the "Security Agreement"). Capitalized terms used
but not defined herein shall have the meanings provided for such terms in the
Security Agreement. Capitalized terms used herein but not defined herein or in
the Security Agreement shall have the meanings provided for such terms in the
Loan Agreement (as defined below).
WHEREAS, the Debtor and the Secured Party are parties to a Loan Agreement
dated as of September 13, 1996, as amended by Amendment No. 1 to Loan Agreement
dated as of December 20, 1996, Amendment No. 2 to Loan Agreement dated as of
January 10, 1997, Amendment No. 3 to Loan Agreement dated as of June 18, 1997
and Amendment No. 4 to Loan Agreement ("Amendment No. 4 to Loan Agreement")
dated as of the date hereof (the "Loan Agreement");
WHEREAS, pursuant to Amendment No. 4 to Loan Agreement, on and subject to
the terms and conditions of the Loan Agreement and said Amendment No. 4 to Loan
Agreement, the maximum amount of credit available to the Debtor under the Loan
Agreement would be increased;
WHEREAS, a condition to the effectiveness of Amendment No. 4 to Loan
Agreement is the execution and delivery by Debtor of this Amendment No. 4 to
Security Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1.Sections. All references to Sections in this Amendment shall be deemed
references to Sections in the Security Agreement unless otherwise specified.
2.Effect of Amendment. As used in the Security Agreement and the other
Loan Documents and all other instruments and documents executed in connection
with any of the foregoing, any reference to the Security Agreement shall mean
the Security Agreement as amended hereby.
3.Amendments. The following Sections of the Security Agreement are
amended as follows:
(A) Section 1 of the Security Agreement is amended by adding a new
definition thereto (in its appropriate alphabetical place) as follows:
"Assigned Ironwood Interest" means each of the following:
the Ironwood Credit Agreement; the Revolving Loan Note issued to
Debtor under the Ironwood Credit Agreement and each other promissory
note of Ironwood which may be delivered to Debtor thereunder; each
Ironwood Security Document and all of Debtor's right, title and
interest in or to any collateral or other security provided thereby
(including, without limitation, each Tax Certificate, each tax deed,
all Real Property, all Acquired Real Property, all membership and
other interests in Palo Verde and each deposit or other bank account
established to receive collections on Tax Certificates, providing
support for Ironwood's obligations to Debtor or otherwise provided to
Debtor as collateral for Ironwood's obligations to Debtor, including,
without limitation, each lock box account and reserve account) or to
support Ironwood's obligations under the Ironwood Credit Agreement;
each Tax Certificate; each tax deed; all Real Property; all Acquired
Real Property; all membership and other interests in Palo Verde; the
Lock- Box Account (as defined in the Ironwood Credit Agreement) and
each other lock-box account maintained pursuant to the Ironwood Credit
Agreement; the Reserve Account (as defined in the Ironwood Credit
Agreement); each Intracompany Promissory Note (as defined in the
Ironwood Credit Agreement); each power of attorney provided by
Ironwood or Palo Verde to Debtor; the Custodial Agreement; and each
and every bond, indemnity, warranty, guaranty and other similar
document relating to the performance by any party (except the Debtor)
of any of the foregoing; as each of the foregoing agreements, notes,
documents or other items may be amended, supplemented, restated or
otherwise modified from time to time, including, without limitation,
(i) all rights of the Debtor to receive moneys due and to become due
under or pursuant to any of the foregoing items, (ii) all rights of
the Debtor to receive proceeds of any insurance, bond, indemnity,
warranty or guaranty with respect to any of the foregoing items,
(iii) all claims of the Debtor for damages arising out of or for breach
of or default under any of the foregoing items and (iv) all rights of
the Debtor to enforce, terminate, amend, supplement, modify or waive
performance under any of the foregoing items, to perform thereunder
and to compel performance and otherwise to exercise all remedies
thereunder (all the foregoing being collectively referred to herein as
the "Assigned Ironwood Interests").
(B) Section 1 of the Security Agreement is further amended by
deleting clause (vi) of the definition of "Collateral" and inserting in such
definition new clauses (vi) and (vii) as follows:
"(vi) each and every present and future Assigned Ironwood
Interest, including, without limitation, each general intangible,
account, chattel paper, note, instrument, security, good, mortgage,
deed of trust, document, guaranty, letter of credit, other support
arrangement, insurance policy and right to proceeds of each insurance
policy (whether casualty insurance, liability insurance, life
insurance or otherwise) and all other
collateral and property comprising all or any portion of, or
securing, providing support for, relating to, or in which Debtor has
been given any right or interest to support the obligations under, any
Assigned Ironwood Interest, all property acquired by Debtor through
foreclosure or deed-in-lieu of foreclosure of any Assigned Ironwood
Interest, and all proceeds of, and other payments made on and rights
to amounts payable in respect of, each and every present and future
Assigned Ironwood Interest; and
(vii) All additions, accessions, replacements, substitutions or
improvements and all products and proceeds, including, without
limitation, proceeds of insurance, of any and all of the Collateral
described in clauses (i) through (vi) above."
(C) Section 1 of the Security Agreement is further amended by
restating the definition of "Designated Assignment Asset" in its entirety as
follows:
"Designated Assignment Asset" means (i) each note (other than any note
constituting an Assigned Ironwood Interest, a Pledged Interest (as defined
in the Pledge Agreement), a Receivables Loan Right or a Receivables Purchase
Right) delivered by Debtor to Secured Party and (ii) each Assignment Asset
and other asset the loan number in respect of which is listed on Schedule 2
hereto or which is otherwise identified as a Designated Assignment Asset on
Schedule 2 hereto, as such Schedule may be modified from time to time, and
together (in each case) with all of the following (the following property
and rights being collectively referred to as the "Related Rights"): all
property securing or providing security for such note, Assignment Asset or
other asset (including without limitation, each Mortgage and security
agreement relating to any of the foregoing), all of Debtor's rights under
each and every Assignment Asset Agreement, other agreement, Mortgage Note,
other note, instrument, account, general intangible, document, security,
good, guaranty, letter of credit, other support arrangement and insurance
policy relating to or provided to Debtor in connection with any such note,
Assignment Asset or other asset or any of the other foregoing property, and
all other property relating to or forming a part of such note, Assignment
Asset or other asset.
(D) Section 3(c) of the Security Agreement is amended by inserting
after the words "Designated Assignment Asset" (and before the comma immediately
following such words), the words "or any Assigned Ironwood Interest".
(E) Section 5A of the Security Agreement is amended by restating the
introductory clause thereof as follows:
(a) As at the time when any Assignment Asset, other property or
Related Right becomes a Designated Assignment Asset, the Debtor
shall be deemed to have warranted as to each such Designated
Assignment Asset as follows:
(F) Section 5A of the Security Agreement is further amended by (x)
deleting from the beginning thereof the clause "Notwithstanding any provision to
the contrary contained in this Agreement or any other Loan Document : (i) on or
before the date that any asset becomes a Designated Assignment Asset,"; (y)
deleting the words "such Designated Assignment Asset" from clause (A) thereof
and replacing such words with the words "each Designated Assignment Asset"; and
(z) deleting the words "Debtor shall deliver to Secured Party, in New York, with
respect to such Designated Assignment Asset" from the beginning of clause (B)
thereof, and replacing such words with the words "Debtor shall deliver to
Secured Party, in New York, with respect to each Designated Assignment Asset."
(G) The Security Agreement is further amended by inserting therein a
new section, Section 5B, immediately following Section 5A of the Security
Agreement, as follows:
"Section 5B. Special Provisions Concerning Assigned Ironwood
Interests.
(a) Without the prior written consent of the
Secured Party, the Debtor will not rescind or cancel any indebtedness
evidenced by any Assigned Ironwood Interest or modify any term thereof
or make any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any dispute, claim, suit or legal
proceeding relating thereto, or sell any Assigned Ironwood Interest or
interest therein, or suffer or permit any such rescission,
cancellation, modification, adjustment, extension, renewal,
compromise, settlement or sale to occur.
(b) The Debtor will duly fulfill all
obligations on its part to be fulfilled under or in connection with
each Assigned Ironwood Interest and will do nothing to impair the
rights of the Secured Party therein.
(c) If any Assigned Ironwood Interest becomes
evidenced by an instrument or chattel paper (in each case, as defined
in the UCC), the Debtor will notify the Secured Party thereof, and
deliver such instrument or chattel paper to Secured Party or, if such
instrument or chattel paper is a Tax Certificate, deliver such Tax
Certificate to the TLC Custodian.
(d) Upon request of the Secured Party, the
Debtor shall promptly notify (in manner, form and substance
satisfactory to the Secured Party) all Persons who are at any time
obligated under any Assigned Ironwood Interest that the Secured Party
possesses a security interest in such Assigned Ironwood Interest and
that all payments in respect thereof are to be made to such account as
the Secured Party directs.
(e) At the sole cost and expense of Debtor, the
Debtor shall cause each insurance company which has issued any
insurance policy in respect of or relating to any Assigned Ironwood
Interest to name Secured Party as loss payee with respect to such
insurance policy and to promptly deliver to Secured Party a customary
insurance certificate evidencing the foregoing.
(f) At the sole cost and expense of Debtor, the
Debtor will enforce or secure the performance of each and every
obligation, covenant, condition and agreement contained in, or
relating to, each Ironwood Assigned Interest and agreement relating
thereto.
(g) Unless an Event of Default shall have
occurred and Secured Party otherwise instructs, Debtor will appear in
and defend every action or proceeding arising under, growing out of or
in any manner connected with any Ironwood Assigned Asset or the
obligations, duties, liabilities, or rights of Debtor or any assignee
thereunder.
(h) Should the Debtor fail to make any payment
or fail to do any act as herein provided, the Secured Party may (but
without any obligation on the Secured Party's part to do so and
without notice to or demand on the Debtor and without release, the
Debtor from any obligation hereunder) make or do the same in such
manner and to the extent the Secured Party may deem necessary to
protect the security interests provided hereby or its rights in the
Assigned Ironwood Interests, including specifically, without limiting
the general powers, the right to appear in and defend any action or
proceeding purporting to effect the security interests provided hereby
or the Assigned Ironwood Interests, and the Secured Party may also
perform and discharge each or any obligation, covenant or agreement of
Debtor relating to any Assigned Ironwood Interest and, in exercising
any such powers, pay necessary costs and expenses, employ counsel and
incur and pay reasonable attorneys' fees."
(i) Debtor hereby represents, warrants and
covenants to the Secured Party that the Reserve Account (as defined in
the Ironwood Credit Agreement) is account no. 4278-0041 (Litchfield
Financial Corp. - Tax Lien Reserve) maintained at BancOne Arizona and
that the Lock-Box Account (as defined in the Ironwood Credit
Agreement) is account no. 2237-5542 (Litchfield Financial Corp. - Tax
Lien Collection) maintained at BancOne Arizona. Debtor hereby
covenants and agrees that it will establish no other reserve account
or lock-box account with respect to the Ironwood Credit Agreement or
the obligations of Ironwood thereunder unless it shall (i) have given
Secured Party 30 days advance written notice of its intention so to
do, and executed such agreements and instruments, and caused the
depositary institution where such new account will be maintained to
execute such instruments and agreements, as may be reasonably
requested by Secured Party to ensure that Secured Party will hold a
first priority perfected security interest in such new account and
(ii) taken, and caused such depository institution to take, such other
action in connection therewith as may be reasonably requested by
Secured Party.
(H) Section 11(c) of the Security Agreement is amended by inserting,
after the words "other Assignment Asset" the words "or any Assigned Ironwood
Interest".
(I) Section 12 of the Security Agreement is amended by deleting the
subsection (a) thereof and inserting in lieu of the text of said subsection (a)
the words "Intentionally Omitted".
4. Representations and Warranties. The Debtor represents and warrants to
the Secured Party that as of the date hereof and both before and after giving
effect to the amendments contained in Section 3 hereof, (A) the representations
and warranties contained in the Loan Agreement and the other Loan Documents are
true and correct with the same force and effect as if made on and as of such
times (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date), (b) no Default or
Event of Default has occurred and is continuing or will occur as a result of
such amendments, and (C) without limiting the foregoing, each of the Loan
Agreement and each other Loan Document constitutes the legal, valid and binding
obligation of the Debtor, and is enforceable against the Debtor in accordance
with its respective terms. The Debtor further represents and warrants to the
Secured Party that (i) its execution and delivery of this Amendment has been
duly authorized by all necessary corporate action and (ii) its obligations under
each Loan Document remain in full force and effect, without release, diminution
or impairment, notwithstanding, without limitation, the execution and delivery
of this Amendment.
5. Miscellaneous. The Debtor will reimburse the Secured Party for its
reasonable legal fees and disbursements of counsel incurred in connection with
this Amendment. The amendments set forth herein are limited precisely as
written and shall not be deemed to (a) modify any other term or condition of the
Security Agreement or any other Loan Document or (b) prejudice any right which
the Secured Party may have now or in the future under or in connection with the
Security Agreement or any other Loan Document. Except as expressly amended
hereby, the Security Agreement shall remain unchanged and in full force and
effect. This Amendment constitutes a Loan Document. This Amendment may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and either of the parties
hereto may execute this Amendment by signing any such counterpart. THIS
AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED WHOLLY WITHIN THE STATE OF
NEW YORK (REGARDLESS OF THE PLACE WHERE THE SECURITY AGREEMENT OR THIS AMENDMENT
IS OR WAS EXECUTED).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
Security Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
LITCHFIELD FINANCIAL CORPORATION, as Debtor
By:
/s/ Heather A. Sica
HEATHER A. SICA
Executive Vice President
BANK OF SCOTLAND, as Secured Party
By:
/s/ Annie Chin Tat
ANNIE CHIN TAT
Vice President
Exhibit 10.169
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of the
12th day of December, 1997 by and between LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation, with a mailing address for the purposes hereof
at P.O. Box 488, Route 2, Williamstown, Massachusetts 01267 (the "Borrower")
and BERKSHIRE BANK, a Massachusetts banking corporation with its principal
office and place of business at 24 North Street, P. 0. Box 1308, Pittsfield,
Massachusetts 01202 ("Lender").
W I T N E S S E T H:
FOR CONSIDERATION PAID and to secure payment of that certain loan
(the "Loan") from the Lender to the Borrower evidenced by that certain
promissory note of even date herewith between Borrower, as Maker, and Lender,
as Payee (the "Note") in the original principal amount of ONE MILLION FIVE
HUNDRED THOUSAND AND N0/100 DOLLARS ($1,500,000.00) and to secure the full
performance by the Borrower of the terms and conditions herein and in the Note
together with any and all other obligations and liabilities of the Borrower
to the Lender including, but not limited to, any future advances which may be
made by the Lender to the Borrower, with interest thereon and with the
provisions for payment of principal and interest as provided in the Note, and
to secure payment of any other value extended to Borrower from time to time
by the Lender including, but not limited to, reasonable expenses incurred
by the Lender in the protection, enforcement, collection, realization or
disposition of the Collateral, as hereinafter defined, the Borrower hereby
grants to the Lender a first priority security interest in and to the Collateral
defined below);
PROVIDED THAT if the Borrower shall well and truly pay the Indebtedness,
as hereinafter defined, in accordance with the terms of the Note or
any renewal, modification or extension thereof, and shall also pay, when due,
all other indebtedness of the Borrower to the Lender existing at any time
prior to the full payment, satisfaction and discharge hereof, and shall
well and truly perform and observe all covenants, agreements, obligations and
conditions on the Borrower's part to be performed or observed herein and in the
Note, then this Agreement shall cease, determine and be void; otherwise this
Agreement shall remain in full force and effect for all purposes.
1. Definitions. Borrower and Lender agree that, unless the context.
otherwise specifies or requires, the following terms shall have the meanings
herein specified, such definitions to be applicable equally to the singular
and the plural forms of such terms:
(a) "Collateral" shall mean and include the following property of
the Borrower, whether now owned or hereafter acquired all Personalty (all as
defined herein), and all proceeds thereof, including personal property of the
foregoing type purchased with cash.
(b) "Indebtedness" shall mean (i) the outstanding principal
balance of the Note together with the interest thereon as provided in the Note
and (ii) all other amounts, payments and other consideration due on account of
the Note and/or this Agreement or the other Loan Documents, as hereinafter
defined.
(c) "Interest Rate" shall mean the Interest Rate as defined in the
Note.
(d) "Loan Documentsof shall mean this Agreement, the Note, Uniform
Commercial Code Financing Statements issued by Borrower of even date herewith,
the mortgage and security agreements from the Borrower to the Lender of
even date herewith, the assignments of rents and leases from the Borrower to
the Lender of even date herewith, together with all other documentation
collateral thereto or which may now or hereafter be given to the Lender by
Borrower evidencing, securing or further securing the Loan, it being
understood that to the extent that any of the terms of the Commitment Letter are
in conflict with the terms of this Agreement, the terms of this Agreement shall
prevail.
(e) "Obligations" shall mean any of the covenants, promises and
other obligations made or owing by the Borrower to or due to the Lender pursuant
to or as otherwise set forth herein or in the Note or in any other documents,
instruments or agreements to which Borrower is a party or to which Borrower is
bound.
(f) "Personalty" shall mean all of the right, title, interest,
estate, claim or demand of the Borrower in and to any and all furniture,
furnishings, equipment, leasehold improvements, and any and all such property
which is at any time installed in, affixed to, placed upon or used in connection
with the Borrower's properties at 789 Main Road, Stamford, Vermont and at Route
2, Williamstown, Massachusetts, now in existence or hereafter created, and
all replacements thereof, additions and accessions thereto, substitutions
therefor, and all proceeds and products from the sale, exchange or other
disposition of the foregoing.
(g) "UCC" shall mean the Uniform Commercial Code as adopted and
amended from time to time by the Commonwealth of Massachusetts.
2. Representations and Warranties. Borrower warrants and represents to
the Lender that (i) Borrower will pay the Indebtedness in the manner described
in the Note or in any modification, renewal or extension, supplementation or
replacement thereof, (ii) the Loan Documents have been duly authorized,
executed and delivered by and on behalf of the Borrower, (iii) the Borrower
is duly existing and in good standing with all power, authority, and legal
right to engage in the transactions contemplated by the Loan Documents,
(iv) the execution and delivery of the Loan Documents and the consumation of
the transactions contemplated thereby will not conflict with or result in
breach of the terms of any agreement to which the Borrower, any endorser of the
Note or any guarantor is a party and will not conflict with any law or order of
any court, agency or other governmental body, (v) there are no actions,
suits or proceedings pending, or, to the knowledge of the Borrower,
threatened before any court, any agency or any other governmental body
which could adversely affect the Collateral, Borrower, or the Borrower's
ability to pay the Indebtedness and/or perform the obligations in accordance
with the terms of the Loan Documents, (vi) the Collateral is in good working
order and free from defects, (vii) the Borrower's title to the Collateral is
good and marketable, free from defects, liens or encumbrances, except the lien
created by this Agreement, and such defects, liens or encumbrances approved by
Lender, if any, and listed on Exhibit A attached hereto and made a part hereof
for all purposes (the "Permitted Encumbrances"), (viii) the Borrower's name set
forth above is the Borrower's correct legal name and the Borrower has no other
trade name, and the Borrower will not change ita legal, trade, or style name
without Lender's prior written consent, (ix) neither the financial statements
or any other document furnished by the Borrower to the Lender in connection
with the transaction contemplated by the Loan Documents contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein misleading, and (x) there is no fact known to
the Borrower which materially adversely affects, nor, so far as the Borrower
can reasonably foresee, will materially adversely affect the Borrower's
business, business prospects, financial condition, operations or properties
or the Borrower's ability to pay the Indebtedness and/or perform the
Obligations in accordance with the terms of the Loan Documents.
3. UCC Representations. The Borrower warrants that its principal
place of business inMassachusetts is at Route 2, Williamstown, Massachusetts.
The Borrower agrees to maintain complete and accurate records listing and
describing the Collateral and the location of the Collateral and to deliver such
records to the Lender upon request of the Lender.
4. Affirmative Covenants. Until the Loan is paid in full, the Borrower
shall: (a) keep the Collateral in good order and working condition, damage
from casualty expressle not excepted; (b) pay promptly when due all taxes and
assessments of whatever nature imposed upon the Collateral; (c) maintain
insurance at all times with respect to the Collateral against such risks, in
such amounts, in such form and written by such companies as the Lender may
require, naming the Lender and its successors and assigns, as their interests
may appear, as additional insureds and providing for twenty (20) days prior
notice of cancellation or amendment to the Lender; (d) deliver all insurance
policies covering the Collateral or certificates evidencing appropriate
insurance coverages to the Lender on the closing date of the transaction
contemplated by the Loan Documents; and (e) reimburse Lender for all fees and
expenses for filing all financing statements and continuation statements (and
any other necessary filings) relating thereto.
5 Neg tive Covenants. Until the Loan is paid in full, the Borrower
shall not: (a) directly or indirectly, create, incur, assume, or suffer to exist
any lien, charge, or encumbrance (except for Permitted Encumbrances) on or with
respect to the whole or any part of the Collateral; (b) lease or lend any
Collateral except in the ordinary course of Borrower's business without the
express written consent of the Lender; (c) sell or otherwise transfer the
Collateral outside the ordinary course of Borrower's business and/or for
sums less than the cost thereof without the written consent of the Lender; and
(d) permit or suffer anything to be done which shall have the effect of
materially impairing the value of the security given by the Borrower to the
Lender for the Loan.
6. Inspection of Collateral. The Borrower agrees that the Lender or its
agents or representatives, may, at reasonable times, enter upon the Borrower's
premises and inspect the condition of the Collateral.
7. Casualty and Condemnation-Award. If the whole or a material part of
the Collateral shall be damaged or destroyed byfire or other hazard insured
against, or if the Collateral or any portion thereof or interest therein
shall be taken by eminent domain, the Borrower shall promptly give written
notice thereof to the Lender and promptly take such action as is required to
collect any applicable insurance proceeds or any eminent domain award. No
settlement on account of any loss, damage or taking shall be made without the
prior written consent of the Lender, which consent shall not be unreasonably
withheld. If, in the Lender's sole judgement, the Borrower is not
proceeding promptly to settle such claims in a manner satisfactory to the
Lender or if an Event of Default (hereinafter defined) has occurred hereunder or
under the Note which has not been waived in writing by the Lender, the Lender
may settle any claims with the insurers or the taking authority and the
Lender is hereby irrevocably appointed attorney- in- fact for the Borrower,
which appointment is acknowledged by the parties hereto to be coupled with an
interest, to settle such claims and to collect and endorse any checks issued in
the name of the Borrower. Any and all proceeds from insurance or eminent domain
awards, as the case may be, shall be paid to the Lender. The Lender, in the
exercise of its sole discretion, may apply any such proceeds against the
Indebtedness or release all or a portion of such proceeds to the Borrower
upon such terms and conditions as the Lender deems appropriate, and apply the
balance thereof, if any, to the Indebtedness. Application of the proceeds of
casualty or eminent domain awards against the Indebtedness shall be done in
such a manner and order as the in the exercise of its sole discretion, shall
determine.
8. Lender Right To Cure And Expenses. The Lender shall be entitled to,
but not obligated to, cure any failure of the Borrower under the Loan
Documents in the performance of the obligations an to commence, intervene in or
otherwise participate in any legal or equitable proceeding which, in the
Lender's sole judgement, affects the Collateral or any rights or obligations
created or secured by the Loan Documents. If the Lender shall become involved
in any action or course of conduct with respect to the Loan Documents or the
Collateral in order to cure any default of the Borrower under the Loan
Documents or to protect its interest in the Collateral, the Borrower shall
reimburse the Lender for all charges, costs and expenses incurred by the
Lender in connection therewith, including, without limitation, reasonable
attorneys' fees. Such charges, costs and expenses described above shall be
payable by the Borrower upon demand of the Lender.
9. Events of Default. The Indebtedness shall become immediately due and
payable by the Borrower, at the option of Lender, if any of the following events
(each an "Event of Default") shall occur under any of the Loan Documents
(including this agreement) and shall continue beyond applicable grace and cure
periods contained therein, if any:
(a) Borrower fails to pay any interest or principal when due in
accordance with the terms an conditions of the Note;
(b) breach of any other covenant, condition or agreement contained
herein or in the Note or in any of the other Loan Documents remaining
uncured for a period in excess of ten (10) days after Lender has
provided Borrower with written notice of such breach, provided
that in case of any breach which is susceptible to cure but
cannot be cured within ten (10) days through. the exercise of
reasonable diligence, so long as the Borrower commences such cure
within ten (10) days, such breach remains susceptible to cure,
and the Borrower diligently pursues such cure, such breach shall
not be deemed to create an Event of Default hereunder;
(c) failure of the Borrower to cause to be dismissed any proceeding
against the Borrower, and, if applicable, any holder of a general
partnership interest in the Borrower, any guarantor of any of the
Borrower's obligations under the Loan Documents or any endorser of
the Note (the Borrower, and, if applicable, any such general
partner, guarantor or endorser hereinafter referred to as an
"Obligor") under any law relating to bankruptcy, reorganization,
insolvency or relief of debtors within sixty (60) days from the
date upon which such proceeding is filed or instituted, or the
filing or other institution of a proceeding by any obligor under
any such law;
(d) failure of an Obligor to cause to be dismissed a proceeding
for the enforcement of a money judgement instituted against said
Obligor within thirty (30) days from the date upon which such
proceeding is filed or instituted unless such proceeding is
contested in good faith by the Obligor and bonded or otherwise
secured to Lender's satisfaction;
(e) the liquidation, termination, dissolution, merger/ transfer of a
controlling interest in, or a consolidation of, any Obligor which is
not an individual, the insolvency of any Obligor or the inability
of any Obligor to pay such Obligor's debts when due;
(f) material inaccuracy of any statement, representation or warranty made
by the Borrower to the Lender in the Loan Documents or in any
instrument, document or statement heretofore or hereafter submitted
to the Lender by an obligor; and
(g) the loss, theft, substantial damage, destruction, or encumbrance of
any substantial part of the Collateral.
If an Event of Default shall occur, then, at the option of the Lender,
without any further notice to the Borrower, the Indebtedness, together with
all other charges due under the Loan Documents shall be due and payable, and
the Lender shall be entitled to exercise any and all of the rights and remedies
provided for in the Loan Documents or available at law or in equity, including,
but not limited to, all rights and remedies available to a secured party under
the UCC. The Borrower shall, upon request of the Lender, assemble the
Collateral not already in the Lender's possession and make it available to the
Lender at a place to be designated by the Lender and reasonably convenient to
both the Borrower and the Lender.
10. Application Of Deposits After Default. If the Borrower shall default
in the performance or observance of any covenant or agreement under the Loan
Documents, the Lender may apply any deposit, payment or any sum due from the
Lender to any Obligor toward the Indebtedness in such manner or order as the
Lender, in the exercise of its sole discretion, shall determine, without first
enforcing any other rights of the Lender against any obligor or against the
Collateral.
11. Separate Foreclosure Sales and Waiver of Marshalling. If the Borrower
shall default in the performance or observance of any covenant or agreement
under the Loan Documents, the Lender may sell the Collateral and any other
security given by the Borrower for the payment of the Indebtedness and the
performance of the obligations in one lot or in parts or parcels. such sales may
be held from time to time by public or private sale and the power of sale herein
given to the Lender shall not be fully executed until all of the Collateral and
other security not previously sold shall have been sold. The Lender may apply
the net proceeds of any sale, lease or other disposition of the Collateral to
the payment of the Indebtedness and the performance of the obligations in such
manner and order as the Lender, in the exercise of its sole discretion, shall
determine, after deducting all costs and expenses of every kind incurred therein
or incidental to the retaking, holding, preparing for sale, selling, leasing or
other disposition of the Collateral or in any way relating to the protection
and/or enforcement of the rights of the Lender hereunder, including, but not
limited to, reasonable attorney's fees. If the amount realized from such sale,
lease or other disposition of the Collateral is insufficient to satisfy and
discharge the Indebtedness and other charges due and owing by Borrower to
Lender, the Borrower shall remain liable to Lender for the payment of any such
deficiency and interest shall accrue thereon, until paid, at the Default Rate,
as defined in the Note. If surplus proceeds are realized from such a sale,
lease, or other disposition of the Collateral, the Lender shall not be liable
for any interest thereon pending distribution of such proceeds to the Borrower.
Any separate items of property sold together for a single price may be accounted
for in one account without distinction between the items of security or without
assigning to them any proportion of such proceeds. The Borrower hereby waives
the application of any doctrine of marshalling of assets.
The Borrower agrees that the requirement of the UCC with respect to
personal property that a secured party give a debtor reasonable notice of any
proposed sale or disposition of collateral shall be met if such notice is given
to Borrower at least five (5) days before such time of sale or disposition.
No such notice need be given by Lender with respect to collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market.
12. Intentionally Omitted.
13. Effect of Releases and Waivers. Any failure by Lender to insist upon
the strict performance by Borrower of any of the Obligations shall not be deemed
to be a waiver of the strict performance of any of the Obligations and Lender,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Borrower of any and all of the Obligations. Neither
Borrower nor any other person or entity now or hereafter obligated for the
payment of the whole or any part of the Indebtedness shall be relieved of such
obligation by reason of (i) the failure of Lender to comply with any request of
Borrower, or of any other person or entity so obligated; (ii) the failure of
Lender to take action in collection or protection of the Collateral or to
otherwise enforce the performance of any of the Obligations; (iii) the release,
regardless of consideration, of the whole or any part of the security held for
the payment of the Indebtedness and the performance of the obligations, or (iv)
any agreement or stipulation between the Lender and any subsequent owner or
owners of the equity of redemption in the Collateral modifying the covenants,
terms and provisions of this Loan Agreement and of the Loan Documents without
first having obtained the consent of Borrower or such other person or entity.
In the last mentioned event, Borrower and all such other persons or entities
shall continue to be liable to make such payments according to the terms and
provisions of the Loan Documents, as amended, unless expressly released and
discharged of record by Lender. Lender may release, regardless of consideration,
any part of the security held for payment of the Indebtedness and the
performance of the obligations without, as to the remainder of the security, in
any way impairing or affecting the lien created by this Agreement or the
priority of such lien over any subordinate lien. Lender may resort for the
payment of the Indebtedness and the performance of the Obligations to any
other security therefor held by Lender, in such manner and order as Lender may
elect.
14. Waiver of Jury Trial. The Borrower and Lender waive trial by jury in
any litigation in any court with respect to, in connection with, or arising out
of this Agreement, any other LoanDocument, or the Indebtedness, or the
validity, protection, interpretation, collection or enforcement thereof,or the
relationship between Borrower and Lender as borrower and lender, or any other
claim or dispute however arising between the Borrower and Lender.
15. Interest To Accrue. If the Indebtedness shall become due and
payable because of an acceleration by the Lender of the Borrower's obligation
to repay the Indebtedness caused by an Event of Default hereunder or if the
Indebtedness shall mature and become due, then interest on the Indebtedness
shall continue to accrue at the Default Rate, as defined in the Note, until
paid in full.
16.No Set-Off, Counterclaim, etc. The Borrower's obligation to pay the
Indebtedness shall be absolute and unconditional and shall not be affected by
any circumstance, including, without limitation:
(a) Any set-off, counterclaim, recoupment, defense, or other right
which the Borrower may have against the Lender or anyone else;
(b) Any defect in title, condition, design, fitness for use, or
operation of, damage to, or loss or destruction of the Collateral, or
any interruption or cessation in the use or possession thereof by the
Borrower for any reason whatsoever;
(c) Any insolvency, bankruptcy, reorganization, or similar
proceedings by or against the Borrower or any guarantor; or
(d)Any other circumstance, happening, or event whatsoever, whether or
not similar to any of the foregoing.
17. Remedies Cumulative. The rights and remedies afforded to Lender
under the Loan Documents shall be cumulative and supplementary to and not
exclusive of any other rights and remedies which the Lender may have at law or
in equity.
18. Further Assurances. The Borrower agrees to execute and cause to be
filed or recorded, and hereby appoints the Lender its duly authorized attorney-
in- fact, which appointment is acknowledged by the parties hereto to be coupled
with an interest, with full power of substitution and with authority to execute,
file and record on behalf of the Borrower all instruments from time to time
deemed by the Lender to be necessary or appropriate to evidence further the
Indebtedness and/or the obligations or to secure further to the Lender the
security intended to be provided by this Agreement. Borrower shall pay, upon
demand of the Lender, all costs, expenses and fees, including, without
limitation, reasonable attorneys' fees, incurred as a result of the operation of
this paragraph.
19. Statement of Amount Due. Borrower, within five (5) days after
receipt of a written request from the Lender, shall furnish a written statement
duly acknowledged of the amount due on the Note to the Lender.
20. Notices. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addressee at the address for
such party set forth herein, or such other address as each may designate in
writing to the other. All notices given hereunder shall be in writing and shall
be deemed given, in the case of notice by personal delivery, upon actual
delivery, and in the case of mail or courier service, upon deposit with the U.S.
Postal Service or deliver to the courier service.
21. Assignment by Lender. The Lender shall have the right at any time to
assign any or all of its right, title, and interest in and to the Loan Documents
and all or any part of the Collateral. Upon any such assignment, the Lender
shall not be deemed the assignee's agent for any purpose and the Lender may
deliver all or any part of the Collateral held by it to the assignee which
shall thereupon become vested with all rights, powers, and privileges of the
Lender in respect thereto, and the Lender shall thereupon be forever and
released and fully discharged from all future liabilit and responsibility for
the whole or any part of the Collatera transferred. With respect to any
Collateral not transferred, Lender shall retain all powers and rights hereby
given to Lender. This Agreement shall not be assignable by the Borrower without
the prior written consent of the Lender.
22. Interpretation And Binding Effect. This Agreement and the
other Loan Documents constitute the entire agreement between Borrower and
Lender and, to the extent that any writings not signed by the Lender or oral
statements at any time made or had by either party hereto are inconsistent
with the provisions of this Agreement, the unsigned writings and oral
statements shall be null and void and of no force or effect. The Loan
Documents shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. If any provision of this
Agreement shall be found unenforceable or invalid for any reason, such
provision shall be deemed modified to the extent necessary to be enforceable
or, if such modification is not practicable, such provision shall be deemed
deleted from this Agreement without otherwise affecting any other provision
of this Agreement. The headings of sections and paragraphs shall be ignored
in interpreting this Agreement. The word "Borrower", as used herein, means
the Borrower named herein and also means any subsequent owner or owners of all
or any part of the equity of redemption in the Collateral. All of the
covenants and agreements of the Borrower herein contained shall be binding
upon the Borrower, and (if applicable) its heirs, executors, administrators,
successors and assigns and shall be joint and several if more than one person
constitute the Borrower. The word "Lender", as used herein, means the Lender
named herein and any subsequent holder or holders of one or both of the Note
and this Agreement.
IN WITNESS WHEREOF, Borrower has caused this instrument to be executed
by Ronald E. Rabidou, its duly authorized Chief Financial Officer, and Lender
has caused this instrument to be executed by James W. Reid, its duly authorized
Vice President, and their corporate seals to be hereunto affixed as of the date
first above written.
LITCHFIELD FINANCIAL
CORPORATION
By:
_________________________________________
Ronald E. Rabidou, Chief
Financial officer
BERKSHIRE BANK
By:
_________________________________________
James W. Reid, Vice
President
COMMONWEALTH OF MASSACHUSETTS
BERKSHIRE, ss.
December 12, 1997
Then personally appeared the above-named Ronald E. Rabidou, Chief
Financial officer, who acknowledged the foregoing instrument to be the free act
and deed of Litchfield Financial Corporation, before me,
__________________________________________
Notary Public
My Commission Expires:
Exhibit 10.170
Approved
by:
___________
PROMISSORY NOTE
$1,500,000.00 Pittsfield, Massachusetts
Date: December 12, 1997
FOR VALUE RECEIVED, LITCHFIELD FINANCIAL CORPORATION, a Massachusetts
corporation, with a mailing address for the purposes hereof at P.O. Box 488,
Route 2, Williamstown, Massachusetts 01267 (the "Borrower") promises to pay
to the order of BERKSHIRE BANK, a Massachusetts banking corporation with its
principal office and place of business at 24 North Street, P. 0. Box 1308,
Pittsfield, Massachusetts 01202 ("Lender") the principal sum of ONE MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00) or so much thereof
as may be advanced from time to time (the "Loan") as hereinafter set forth
with interest on the unpaid principal balance of such amount from the date of
this Note or such advance, as the case may be, at the Interest Rate (hereinafter
defined) . This Note is secured by mortgage and security agreements
(collectively, the "Mortgage") dated even date herewith which create first
priority mortgage and security interests on certain parcels of real property
located in Williamstown, Massachusetts and Stamford, Vermont (collectively,
the "Real Property") , and certain personal property; a loan and security
agreement and financing statements (the "Security Agreement") evidencing a
first priority security interest in certain personal property (the "Personal
Property") more particularly described therein; assignments of rents and
leases (collectively, the "Assignment") which will conditionally assign all
rents and absolutely assign all leases applicable to the Real Property to
Lender; and such other security as may now or hereafter be given to Lender
as collateral for the Loan. This Note, the Mortgage, the Security Agreement,
the Assignment, and all other documents evidencing, securing and/or relating
to the Loan, are hereinafter collectively referred to as the "Loan Documents".
I
DEFINITIONS
(a) "PRIME RATE" shall mean the rate of interest set, determined or
announced on a periodic basis, and published in the Money Rate Section of The
Wall Street Journal (the "Journal"), or in its successor, as the highest
"prime rate" charged for commercial loans at large U.S. Money Center Commercial
Banks. If the Journal, or its successor, shall no longer publish the "prime
rate", then "Prime Rate" hereunder shall mean the highest prime rate set,
determined or announced on a periodic basis by Chase Manhattan Bank, N.A.,
of New York, New York, or its successor, for commercial loans.
(b) "INTEREST RATE" shall mean the rate of interest to be paid by
Borrower on any outstanding principal due under this Note and shall be equal to
8.50 percent (8.50%) per annum up to and through the payment due hereunder on
December 12, 1998. The interest rate charged hereunder shall be reviewed by
Lender on each December 12th hereafter (each an "Anniversary Date") and shall
be equal to the Prime Rate in effect on each Anniversary Date, which rate shall
be set on each Anniversary Date occurring during the term of the Loan
commencing with said Anniversary Date and shall remain in effect until midnight
on the calendar day immediately preceding the next Anniversary Date.
(c) "LOAN YEAR" shall mean the period between the date hereof and
December 12, 1998 for the first Loan Year and each succeeding twelve (12)
month period until the Maturity Date.
(d) "MATURITY DATE" shall mean December 12, 2008.
II
INTEREST
(a) COMPUTATION OF INTEREST. Interest on the outstanding principal
balance of this Note shall be computed on the basis of "a 360-day year for the
actual number of days elapsed" (such phrase, as used throughout this Note,
shall mean that in computing interest for the subject period, the interest rate
shall be multiplied by a fraction, the denominator of which is 360 and the
numerator of which is the actual number of days elapsed from the date of the
first disbursement of the Loan or the date of the preceding interest and/or
principal due date, as the case may be, to the date of the next interest and/or
principal due date). Interest shall accrue until the date of receipt of payment.
(b) INTEREST CHANGE PROCEDURES. Any change in the Prime Rate shall effect
a corresponding change in the Interest Rate without notice to the Borrower,
such change to take effect on each and shall thereafter be fixed for that Loan
Year.
III
PAYMENT OF PRINCIPAL AND INTEREST
(a) Borrower shall pay monthly installments of interest at the Interest
Rate on the sums advanced hereunder commencing on January 12, 1998 and
continuing on the 12th day of each month thereafter until December, 1998;
(b) Commencing on January 12, 1999, and continuing on the 12th day of
each month thereafter until December 12, 1999, Borrower shall pay twelve (12)
equal consecutive monthly installments of principal and interest at the
Interest Rate in the amount sufficient to amortize the then outstanding
principal balance due hereunder over the period ending on the Maturity Date
(the "Amortization Period"). On each Anniversary Date, the required monthly
payments for the next succeeding twelve (12) months shall be recalculated by
Lender to an amount sufficient, at the Interest Rate in effect on such
Anniversary Date, to amortize the then outstanding principal balance hereunder
over the Amortization Period, and said payments shall continue until the
Maturity Date (or such earlier date in the event Lender accelerates Borrower's
obligations hereunder pursuant to its rights under the Loan Documents), when
the full outstanding balance of principal remaining plus accrued interest shall
be fully due and payable.
IV
GENERAL CONDITIONS
(a) METHOD OF PAYMENT. All payments under this Note are payable at 24
North Street, P.O. Box 1308, Pittsfield, Massachusetts 01202 or at such other
place as Lender shall notify Borrower in writing. Lender reserves the right to
require any payment on this Note, whether such payment is of a regular
installment or represents a prepayment, to be by wired federal funds or other
immediately available funds or to be paid at a place other than the above
address.
(b) APPLICATION OF PAYMENTS RECEIVED. Except as otherwise
provided in this Note, all payments received by Lender on this Note
shall be applied by Lender as follows:
FIRST, to accrued and unpaid interest then due and owing; and
SECOND, to the reduction of principal of this Note; and
THIRD, to any unpaid Late Payment Charges (herein below defined).
If an Event of Default (hereinbelow defined) occurs, or an event which,
but for the passage of time, the giving of notice, or both would constitute an
Event of Default, Lender may apply any payments received to any sums due
hereunder or under any other Loan Document in such manner as it deems
appropriate.
(c) LATE PAYMENT CHARGES. If Borrower fails to pay any amount of
principal and/or interest on this Note for ten (10) days after such payment
becomes due, whether by acceleration or otherwise, Lender may, at its option,
whether immediately or at the time of final payment of the amounts evidenced by
this Note, impose a late payment charge (the "Late Payment Charge") computed
by multiplying the amount of each past due payment by five percent (5.00%).
Until any and all Late Payment Charges are paid in full, the amount thereof
shall be added to the indebtedness secured by any of the Loan Documents. The
Late Payment Charge is not a penalty and is deemed to be liquidated damages
for the purpose ofompensating Lender for the difficulty in computing the
actual amount of damages incurred by Lender as a result of the late payment by
Borrower.
(d) DEFAULT RATE. Principal and any accrued interest not paid when due,
whether at the Maturity Date or resulting from the acceleration of the Maturity
Date upon the occurrence of an Event of Default (as such term is defined
herein), and any advances which are made by the holder pursuant to any provision
of any other instruments or agreements securing this Note from the date of any
such advance shall bear interest at a rate of four percent (4.00%) above the
Prime Rate, but in no event at an annual interest rate greater than the maximum
amount permitted by applicable law.
(e) PREPAYMENT. The principal balance may be prepaid in whole or in part
at any time without the payment of any prepayment consideration.
In the event Lender receives partial prepaymeno, or in the event
that Lender shall receive proceeds of condemnation or insurance proceeds for
application against the Loan, such prepayments and proceeds shall be applied
to installments of principal in the inverse order of maturity and no prepayment
consideration shall be deducted from such prepayments or such condemnation or
insurance proceeds.
(f) ACCELERATION. If:
(i) Borrower shall fail to pay any sum due on this Note within
ten (10) days of the date the same is due; or
(ii) Borrower shall fail to perform any other obligation
required to be performed by Borrower under this Note, or any other Loan
Document, for thirty (30) days after Lender has given written notice of
such failure to Borrower provided that in the case of any such failure
which is susceptible to cure but cannot be cured within thirty (30)
days through the exercise of due diligence, so long as the Borrower
commences such cure within such thirty (30) day period, such failure
remains susceptible to cure, and the Borrower diligently pursues such
cure, such failure shall not be deemed to create an Event of Default
hereunder; or
(iii) Any warranty, representation or other statement by or on
behalf of Borrower in any instrument furnished in compliance with or in
reference to this Note be false or misleading in any material respect; or
(iv) Borrower shall generally not be paying debts as they
become due or file a petition or seek relief under or take advantage of
any insolvency law; make an assignment for the benefit of creditors;
commence a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of Borrower or of the whole or
substantially all of Borrower's property or of any collateral pledged
AL security for this Note; or if Borrower shall file a petition under any
chapter of the Bankruptcy Reform Act of 1994, as amended (or any
successor statute thereto) , or file a petition or seek relief under
or take advantage of any other similar law or statute of the United
States of America, any State thereof, or any foreign country or
subdivision thereof; or
(v) A court of competent jurisdiction shall enter an order,
judgment or decree appointing or authorizing a receiver, trustee,
liquidator, custodian or conservator of Borrower or of the whole or
substantially all of Borrower's property, or any portion of the
collateral pledged as security for this Note, or enter an order for
relief against Borrower in any case commenced under any chapter of the
Bankruptcy Reform Act of 1994, as amended (or any successor statute
thereto) , or grant relief under any other similar law or statute of the
United States of America, any State thereof, or any foreign country or
subdivision thereof and the same is not stayed or discharged within sixty
(60) days of entry; or
(vi) Under the provisions of any law for the reliefor aid of
debtors, a court of competent jurisdiction or a receiver, trustee,
liquidator, custodian or conservator shall assume custody or control or
take possession from Borrower of all or substantially all of Borrower's
property or any portion of any collateral pledged as security for this
Note; or
(vii) There shall be commenced against Borrower any proceeding
for any of the foregoing relief or if a petition is filed against
Borrower under any chapter of the Bankruptcy Reform Act of 1994, as
amended (or any successor statute thereto), or under any other similar
law or statute of the United States of America, any State thereof, or any
foreign country or subdivision thereof, and such proceeding or petition
remains undismissed for a period of sixty (60) days or if Borrower by
any act indicates consent to, approval of or acquiescence in any such
proceeding or petition; or
(viii) Lender shall receive a notice to creditors with regard
to a bulk transfer by Borrower pursuant to Article VI of any applicable
Uniform commercial Code; or
(ix) A judgement shall enter or a tax lien be filed against the
Borrower or the property of the Borrower and shall not be satisfied
or bonded to the satisfaction of the Lender within sixty (60) days of
entry or recording, as the case may be; or
(x) the liquidation or dissolution of the Borrower shall occur;
or
(xi) Borrower sham fail to comply with the terms of or an
"event of default" occurs under any other loan transaction or credit
arrangement of any kind with Lender; or
(xii) an "Event of Default", as said term is defined in any
other Loan Document, shall occur;
then, and in any such event (an "Event of Default"), the Lender may, at its
option, refuse to make any further advances of loan proceeds and declare the
entire unpaid balance of this Note together with interest accrued thereon
and any other sums due hereunder or under the Loan Documents, to be immediately
due and payable and Lender may proceed to exercise any rights or remedies that
it may have under this Note or any other Loan Documents, or such other rights
and remedies which Lender may have at law, equity or otherwise. In the event of
such acceleration, Borrower may discharge its obligations to Lender by paying:
(i) accrued interest computed in the manner set forth above,
plus
(ii) the unpaid principal balance hereof as at the date of such
payment, plus
(iii) any Late Payment Charge computed in the manner set forth
above, plus
(iv) any other sum due and owing Lender under this Note or any
other Loan Document.
(g) COSTS AND EXPENSES ON DEFAULT. After default, in addition to
principal, interest and any Late Payment Charge, Lender shall be entitled to
collect all costs of collection, including, but not limited to, reasonable
attorneys' fee, incurred in connection with the protection or realization of
collateral or in connection with any of Lender's collection efforts, whether
or not suit on this Note or any foreclosure proceeding'is filed, and all
such costs and expenses shall be added to the principal due hereunder and shall
be payable on demand and until paid shall be secured by the Loan Documents
and by all other collateral held by Lender as security for Borrower's
obligations to Lender.
(h) NO WAIVER BY LENDER. No failure on the part of Lender or other
holder hereof to exercise any right or remedy hereunder, whether before or
after the happening of an Event of Default, shall constitute a waiver thereof,
and no waiver of any past right, remedy, or Event of Default shall constitute
a waiver of any future default or of any other default. No failure to
accelerate the Loan evidenced hereby by reason of default hereunder, or
acceptance of a past due installment, or indulgence granted from time to time
shall be construed to be a waiver of the right to insist upon prompt payment
thereafter, or shall be deemed to be a novation of this Note or as a
reinstatement of the Loan evidenced hereby or as a waiver of such right of
acceleration or any other right, or be construellso asRo prec~lude The exercise
of any right which Lender may have, whether by the laws of the state governing
this Note, by agreement or otherwise; and Borrower and each endorser hereby
expressly waive the benefit of any statute or rule of law or equity which would
produce a result contrary to or in conflict with the foregoing. This Note may
not be changed orally, but only by an agreement in writing signed by the party
against whom such agreement is sought to be enforced.
(i) FINANCIAL INFORMATION. Borrower will at all times keep proper
books of records and accounts in which full, true and correct entries shall be
made in accordance with generally accepted accounting principles and will
deliver to Lender by April 15th of each year a copy of Borrower's income tax
returns for such prior year and copies of Borrower's financial statement in
such form as shall be acceptable to the Lender, and from time to time, at the
request of the Lender, such other financial information with respect to
Borrower as the Lender may request.
(j) COMPLIANCE WITH USURY LAWS. It is the intention of the parties to
conform strictly to the usury laws, whether state or federal, that are
applicable to this Note. All agreements between Borrower and Lender, whether
now existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to Lender or the holder hereof, or collected by Lender or such holder,
for the use, forbearance or detention of the money to be loaned hereunder or
otherwise, or for the payment or performance of any covenant or obligation
contained herein, or in any of the Loan Documents, exceed the maximum amount
permissible under applicable federal or state usury laws. If under any
circumstances whatsoever fulfillment of any provision hereof or of the Loan
Documents, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Lender or other holder hereof shall ever receive an amount deemed
interest by applicable law, which would exceed the highest lawful rate, such
amount that would be excessive interest under applicable usury laws shall be
applied to the reduction of the principal amount owing hereunder or to other
indebtedness secured by the Loan Documents and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and such
other indebtedness, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to Borrower or to any other person making such
payment on Borrower's behalf. All sums paid or agreed to be paid to the holder
hereof for the use, forbearance or detention of the indebtedness of Borrower
evidenced hereby, outstanding from time to time shall, to the extent permitted
by applicable law, and to the extent necessary to preclude exceeding the limit
of validity prescribed by law, be amortized, pro-rated, allocated and spread
from the date of disbursement of the proceeds of this Note until payment in full
of the Loan evidenced hereby and thereby so that the actual rate of interest on
account of such indebtedness is uniform throughout the term hereof and thereof.
The terms and provisions of this paragraph shall control and supersede every
other provision of all agreements between Borrower, any endorser and Lender.
(k) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Note shall be
governed by and construed under the laws of the Commonwealth of Massachusetts
and shall have the effect of a sealed instrument. Borrower and each endorser
hereby submits to personal jurisdiction in Berkshire County in said
Commonwealth for the enforcement of Borrower's obligations hereunder or under
any other Loan Document and waives any and all personal rights under the law of
any other state to object to jurisdiction within such Commonwealth for the
purposes of litigation to enforce such obligations of Borrower.
(1) WAIVER OF JURY TRIAL. Lender and the Borrower hereby waive trial by
jury in any litigation in any court with respect to, in connection with, or
arising out of this Note, any other Loan Document or the Loan, or any instrument
or document delivered in connection with the Loan, or the validity, protection,
interpretation, collection or enforcement thereof, or any other claim or dispute
howsoever arising between the Borrower and Lender.
(m) AUTHORITY OF LENDER. Borrower authorizes Lender to date this Note
as of the day when the Loan is made and to complete or correct this Note as to
any terms of the Loan not set forth herein at the time of delivery hereof.
(n) NOTICES. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by
overnight courier service, in each instance addressed to the addresses set
forth at the head of this Note, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given,
in the case of notice by personal delivery, upon actual delivery, and in the
case of mail or courier service, upon deposit with the U.S. Postal Service or
delivery to the courier service.
(o) LIABILITY IF MORE THAN ONE BORROWER. If more than one person or
entity executes this Note as a Borrower, all of said persons or entities are
jointly and severally liable hereunder.
(p) ENTIRE AGREEMENT. This Note and the other Loan Documents constitute
the entire understanding between Borrower and Lender and to the extent that any
writings not signed by Lender or oral statements or conversations at any
time made or had shall be inconsistent with the provisions of this Note and
the other Loan Documents, the same shall be null and void.
(q) "BUSINESS PURPOSE" WARRANTY. The undersigned covenants and warrants
that the proceeds of this Loan shall be used solely for business purposes and
that the transaction evidenced hereby is not a consumer transaction subject to
MGL c.140D, Federal Reserve Board Regulation Z or other "consumer protection"
statutes, regulations or restrictions, without exception.
(r) RIGHTS OF SET OFF. Borrower grants to the Lender a continuing lien
for the amount of this Note upon any and all monies, securities and other
property of Borrower and the proceeds thereof, now or hereafter held or received
by or in transit to the Lender from or for Borrower whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of Borrower with, any and all
claims of Borrower against the Lender at any time is authorized at any time and
from time to time, without notice to Borrower, to set off, appropriate and apply
any and all items hereinabove referred to against the outstanding indebtedness
evidenced by this Note.
IN WITNESS WHEREOF, Borrower has caused this instrument to be executed by
Ronald E. Rabidou, its duly authorized Chief Financial Officer and its corporate
seal to be hereunto affixed as of the date first above written.
LITCHFIELD FINANCIAL CORPORATION
By: _______________________________________
Ronald E. Rabidou, Chief Financial Officer
COMMONWEALTH OF MASSACHUSETTS
BERKSHIRE, ss.
December 12, 1997
Then personally appeared the above-named Ronald E. Rabidou, Chief
Financial Officer, who acknowledged the foregoing instrument to be the free act
and deed of Litchfield Financial Corporation, before me,
_______________________________________
Notary Public
My Commission Expires:
Exhibit 10.171
LOAN MODIFICATION AGREEMENT
60104506
LOAN NUMBER
Agreement made as of this 23rd day of march, 1998 effective by and between
Litchfield Financial Corporation, with a mailing address, for the purposes
hereof, at P.O. Box 488, Route 2, Williamstown, MA 01267 ("Borrower") and
Berkshire Bank, a Massachusetts banking corporation with its principal office
and place of business at The PopCorner, 24 North Street, Pittsfield,
Massachusetts 01201 ("Lender").
1. Preliminary Statement
1.1 Borrower is indebted to Lender by virtue of a promissory note
("The Note") date December 12, 1997, in the original amount of
$ 1,500,000.00, having due on this date here of the principal sum of
$498,339.50.
1.2 The parties now desire to revise the terms of said note.
Now, Therefore, the Borrower Agrees with the Lender as Follows:
2.1 To extend the maturity date from December 12, 2008 to March 12, 2009.
2.2 To defer principal repayment on the loan for three months from
January 12, 1999 through March 12, 1999. To pay accrued interest
monthly during this period.
2.3 To change the date for the annual rate and payment adjustment from December
12 reflecting in the January 12 billing to adjusting annually March 12
to be reflected in the April 12 billing. The next annual rate and
payment adjustment shall be for the April 12, 1999 billing.
2.4 To change the interest rate from Wall Street Journal Prime rate
floating daily, currently at 8.50% to be fixed at 8.00 % from March
23, 1998 through March 12, 1999, when the interest rate will revert
to the Wall Street Journal Prime rate floating daily as stated in
the loan note.
2.5 Commencing with the April 12, 1999 billing, the loan shall be reamortized
over the remaining 120 month term of the loan.
2.6 All terms, covenants and conditions of the Note and all other
documents and security shall remain in full force and effect in
their original tenor, except as provided for herein, and not
otherwise. This Agreement shall be incorporated by reference within
the Note as if stated therein.
Initials of Borrower(s):_______
Continuation of Loan Modification Agreement
to Litchfield Financial Corporation
Loan# 60104506
Page 2 of 2 Pages
2.7 Except for the modifications made hereby, this Agreement is in
addition to or an extension of other previous modifications and not
in substitution of the Note or any security instrument.
3. Consideration
The Borrower hereby acknowledges that the making of this Agreement by
Lender constitutes, and Borrower has received, full, complete and new
consideration for making this Loan Modification Agreement.
4. Ratification and Incorporation
4.1 Except as modified hereby, Borrower hereby ratifies the terms and
conditions of the NOTE described in paragraph as amended hereby,
and the terms and conditions of said NOTE are fully incorporated
herein by reference.
4.2 Borrower agrees to perform each and all of the terms,covenants and
conditions of the said NOTE, as amended hereby.
5. Construction
This agreement shall be deemed to have been entered into in the
Commonwealth of Massachusetts, and the laws of the Commonwealth of
Massachusetts shall govern the construction of this Agreement and the
rights and duties of the parties hereto. It is agreed and understood that,
as this form of agreement may be used by persons of either sex, and for one
or more corporations, and also where there are several parties, in such
cases, the masculine and plural, as herein used, shall be instead of and
shall stand for the feminine or neuter gender of the single number, as the
context may require.
WITNESS OUR HAND(S) AND SEAL(S) W23RD DAY OF MARCH, 1998.
LITCHFIELD FINANCIAL CORPORATION
_______________________________
________________________
RONALD E. RABIDOU, CHIEF FINANCIAL OFFICER WITNESS
BERKSHIRE BANK
BY:____________________________
JAMES W. REID, VICE PRESIDENT
<TABLE>
Exhibit 11.1
Litchfield Financial Corporation
Computation of Earnings Per Share
<S> <C> <C>
Three months ended
March 31,
1998 1997
Basic:
Weighted average number of common
shares outstanding...................... 5,659,756 5,446,679
Net income.................................. $1,550,000 $1,145,000
Net income per common share................. $ .27 $ .21
Diluted:
Weighted average number of common
shares outstanding...................... 5,659,756 5,446,679
Weighted average number of common
stock equivalents outstanding:
Stock options............................ 360,402 345,399
Weighted average common
and common equivalent shares
outstanding............................. 6,020,158 5,792,078
Net income.................................. $1,550,000 $1,145,000
Net income per common share................. $ .26 $ .20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 35,810
<SECURITIES> 29,937
<RECEIVABLES> 133,062
<ALLOWANCES> 6,164
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 210,176
<CURRENT-LIABILITIES> 0
<BONDS> 105,347
<COMMON> 56
0
0
<OTHER-SE> 53,587
<TOTAL-LIABILITY-AND-EQUITY> 210,176
<SALES> 0
<TOTAL-REVENUES> 7,953
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 350
<INTEREST-EXPENSE> 2,997
<INCOME-PRETAX> 2,520
<INCOME-TAX> 970
<INCOME-CONTINUING> 1,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,550
<EPS-PRIMARY> .27
<EPS-DILUTED> .26
</TABLE>
