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EXHIBIT 10.167
FORBEARANCE AND
MODIFICATION AGREEMENT
THIS FORBEARANCE AND MODIFICATON AGREEMENT (this "Agreement")
is entered into as of the 7th day of May, 1999 by and between Preferred Equities
Corporation, a Nevada corporation ("Borrower") and Xxxxxx Financial, Inc., a
Delaware corporation (the "Lender").
R E C I T A L S
A. The Borrower and Lender are parties to that certain
Acquisition and Renovation Loan Agreement (the "Colorado Acquisition Loan") made
in connection with a Routt County, Colorado timeshare resort (the "Colorado
Resort") and that certain Interval Receivables Loan and Security Agreement (the
"Colorado Receivables Loan") made in connection with the Colorado Resort, both
dated as of August 6, 1996 (together, as each have been or may be amended from
time to time, the "Colorado Loan Agreements");
B. The Borrower and Lender are also parties to that certain
Acquisition and Renovation Loan Agreement dated March 29, 1996 (the "Florida
Acquisition Loan") made in connection with a Tango Bay, Florida timeshare resort
(the "Florida Resort") and that certain Interval Receivables Loan and Security
Agreement dated March 28, 1996 (the "Florida Receivables Loan") made in
connection with the Florida Resort (together, as each have been or may be
amended from time to time, the "Florida Loan Agreements"). The Florida Loan
Agreements and the Colorado Loan Agreements are referred to herein as the "Loan
Agreements";
C. Borrower failed to make payments due for the months of
September, 1998, December, 1998 and March, 1999 under Section 4.1 of the
Colorado Acquisition Loan and Section 4.1 of the Florida Acquisition Loan. Such
failure to comply with said provisions would constitute,absent the agreement to
forbear set forth in this Agreement, an Event of Default under those agreements
and Events of Default under the Florida Receivables Loan and Colorado
Receivables Loan, thus entitling Lender to exercise its rights and remedies as
provided in the Loan Agreements and all documents and agreements executed in
connection with the foregoing (collectively, the "Loan Documents");
D. Borrower has requested Lender to forbear from declaring
Events of Default as set forth above and enforcing its rights and remedies under
the Loan Documents until July 31, 1999 for the purpose of affording the Borrower
an opportunity to formulate a comprehensive proposal for the restructuring of
Borrower's Obligations under the Loan Agreements; and
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E. Lender is willing to forbear from declaring such Events of
Default and from enforcing its rights and remedies that would arise therefrom
for a limited period of time, provided that Borrower performs and meets the
conditions of the forbearance set forth herein.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged the parties hereto
agree as follows:
SECTION 1. Definitions.
1.1 Capitalized terms used and not otherwise defined
herein are used with the meanings set forth in the Loan
Agreements.
1.2 The following terms used in this Agreement shall
have the meaning set forth below:
1.2.2 "Creditor Action" shall have the meaning set
forth in Section 6 hereof.
1.2.3 "Existing Defaults" shall mean the potential
Events of Default set forth in Recital C hereof.
1.2.4 "Forbearance Default" shall mean (a) the
occurrence of any Default or Event of Default under the Loan
Documents other than the Existing Defaults, (b) the failure of
the Borrower to comply with any term, condition, or covenant
set forth in this Agreement within the time frame set forth,
(c) if any representation made by Borrower under or in
connection with this Agreement shall prove to be materially
false as of the date when made, (d) a material adverse change
in the financial condition of Borrower, (e) the occurrence of
a Creditor Action, or (f) the filing of any petition
(voluntary or involuntary) under the insolvency or bankruptcy
laws of the United States or any state.
1.2.5 "Termination Date" shall mean the earlier to
occur of (a) 5:00 p.m. Chicago Time on July 31, 1999, (b)
immediately upon the occurrence of a Creditor Action, or (c)
the date and time, which is twenty-four (24) hours subsequent
to the receipt by Borrower of a notice from Lender that a
Forbearance Default (other than a Creditor Action) has
occurred.
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SECTION 2. Agreement to Forbear.
2.1 The Recitals set forth above are fully
incorporated herein by this reference. Provided that no
Forbearance Default occurs, the Lender hereby agrees to
refrain through the Termination Date from exercising any of
its rights under the Loan Agreements, or any of the Loan
Documents that may exist by virtue of the Existing Defaults.
2.2 Nothing in this Agreement shall be construed to
be a waiver of or acquiescence in any Existing Default, and
all such Existing Defaults shall continue in existence,
subject only to the Lender's agreement, as set forth herein,
not to enforce its remedies for a limited period of time.
Except as expressly set forth in Section 4 below, the
execution and delivery of this Forbearance Agreement shall not
(i) constitute an extension, modification, or waiver of any
aspect of the Loan Agreements or the Loan Documents; (ii)
extend the terms of the Loan Agreements or the due date of any
of Borrower's Obligations; (iii) give rise to any obligation
on the part of Lender to extend, modify, or waive any aspect
of the Loan Agreements or Loan Documents; or (iv) give rise to
any defenses or counterclaims to Lender's right to compel
payment of Borrower's Obligations, or otherwise enforce the
Loan Agreements and the Loan Documents. Except as expressly
limited herein, Lender hereby expressly reserves all of its
rights and remedies under the Loan Documents and under
applicable law with respect to such Existing Defaults,
including, without limitation, the Lender's right to charge
interest on Borrower's Obligations at the Default Rate. From
and after the Termination Date, the Lender shall be entitled
to enforce the Loan Documents according to the original terms
of the Loan Documents.
SECTION 3. Representations and Warranties.
In consideration of the Lender's promise to forbear
herein contained, the Borrower hereby represents and warrants
to the Lender as of the date hereof:
3.1 In connection with the execution of this
Agreement, Borrower has made full disclosure to Lender of all
material aspects of its financial condition and business
operations.
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3.2 The execution, delivery and performance by the
Borrower of this Agreement is within its corporate power and
has been duly authorized by all necessary corporate action,
and this Agreement constitutes a valid and binding agreement
of Borrower, subject only to the effect of any applicable
bankruptcy, insolvency, reorganization, or other similar laws
or equitable principles relating to or affecting the
enforcement of creditors' rights generally.
3.3 All Loan Documents, including without limitation
the Loan Agreements and the Exclusive Financing Agreement
dated August 6, 1996 with respect to the Colorado Resort and
the Exclusive Financing Agreement dated March 29, 1996 with
respect to the Florida Resort, constitute valid and binding
legal obligations of Borrower and are enforceable against
Borrower and the assets thereof in accordance with the terms
thereof. This Agreement shall not be deemed or be construed to
be a satisfaction, reinstatement, novation, or release of the
Loan Agreements or of any of the other Loan Documents, or a
waiver by Lender of any of the rights of Lender under the Loan
Agreements or any of the other Loan Documents, or any of them,
or at law or in equity. Borrower has no defenses, setoffs,
claims, counterclaims or causes of action of any kind or
nature whatever with respect to the Loan Documents or the
obligations thereunder to Lender, or with respect to any other
documents or instruments now or heretofore evidencing,
securing, or in any other way relating to the Obligations or
the Loan Documents, or with respect to the administration or
funding of any of Borrowers Obligations to Lender.
SECTION 4. Other Agreements.
In consideration of the Lender's promise to forbear
herein contained, the Borrower hereby covenants and agrees
with the Lender the following:
4.1 Borrower shall provide full and complete access
to Lender in order that Lender may conduct audits, as
necessary in Lender's sole discretion, of Borrower's books and
records with regard to cash flow and projections;
4.2 The definition of "Revolving Period" set forth in
the Appendix to the Colorado Receivables Loan is hereby
amended to state as follows:
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"The period commencing on the date of the first
Advance and ending on July 31, 1999."
4.3 The definition of "Revolving Period" set forth in
the Appendix to the Florida Receivables Loan is hereby amended
to state as follows:
"The period commencing on the date of the first
Advance and ending on July 31, 1999."
4.4 Section 1.5(a) Voluntary Prepayments of the
Colorado Receivables Loan is amended by replacing the second
sentence of that Section, which states "Notwithstanding the
foregoing, in the event of a prepayment of the Loan in whole
or in part, upon a bulk sale by Borrower of Financed Notes
Receivable, no Prepayment Premium shall be payable and
Borrower shall, in lieu thereof, pay to Lender an exit fee of
one percent (1%) of the amount of prepayment," with the
following sentence:
"Notwithstanding the foregoing, in the event of a
prepayment of the Loan in whole or in part, upon a
bulk sale by Borrower of Financed Notes Receivable,
no Prepayment Premium shall be payable and Borrower
shall, in lieu thereof, pay to Lender an exit fee of
one percent (1%) of the amount of prepayment;
provided, however, that the purchase price for any
such bulk sale(s) are individually no more than 30%
of the outstanding Receivables Loan balance and, in
the aggregate for any twelve month period, does not
result in a reduction of the Receivables Loan balance
of greater than 50%, as calculated from the time of
the first bulk sale within the said 12 month period."
4.5 Section 1.5(a) Voluntary Prepayments of the Florida
Receivables Loan is amended by replacing the second sentence
of that Section, which states "Notwithstanding the foregoing,
in the event of a prepayment of the Loan in whole or in part,
upon a bulk sale by Borrower of Financed Notes Receivable, no
Prepayment Premium shall be payable and Borrower shall, in
lieu thereof, pay to Lender an exit fee of one percent (1%) of
the amount of prepayment," with the following sentence:
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"Notwithstanding the foregoing, in the event of a
prepayment of the Loan in whole or in part, upon a
bulk sale by Borrower of Financed Notes Receivable,
no Prepayment Premium shall be payable and Borrower
shall, in lieu thereof, pay to Lender an exit fee of
one percent (1%) of the amount of prepayment;
provided, however, that the purchase price for any
such bulk sale(s) are, individually no more than 30%
of the outstanding Receivables Loan balance and, in
the aggregate for any twelve month period, does not
result in a reduction of the Receivables Loan balance
of greater than 50%, as calculated from the time of
the first bulk sale within the said 12 month period."
4.6 Borrower shall remit to Lender all payments, fees
or other sums received as prepayments or upon modification to
Financed Notes Receivable under the Colorado Receivables
Agreement or the Florida Receivables Agreement;
4.7 Borrower shall complete all steps necessary for
sales registration of the Colorado Resort for the states of
Nevada and Texas prior to the Termination Date.
4.8 Borrower shall throughout the term of this
Agreement continue to make a full and complete disclosure of
all material aspects of its financial condition and business
operations and continue to comply with the Loan Documents in
all respects excepts as expressly set forth herein.
4.9 Borrower shall cure all Existing Defaults prior
to the Termination Date. If any Existing Defaults remain
uncured as of the day after the Termination Date, then such
Existing Defaults shall immediately and without any notice or
demand, become Events of Default under the Loan Documents,
entitling Lender to take all rights and remedies available
under the Loan Documents or applicable law.
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SECTION 5. Release.
In further consideration of the execution of this
Agreement by Lender, the Borrower and each Guarantor hereby
releases Lender and its affiliates, officers, employees,
directors, agents and attorneys (collectively the "Releasees")
from any and all claims, disputes, causes of action, and
liabilities that Borrower or any Guarantor may have against
any of the Releasees which arise from or relate to any action
or inactions which any of the Releasees have taken prior to
the date hereof with respect to the Loan Agreements and the
other Loan Documents.
SECTION 6. Creditor Action.
Lender's obligation to forbear hereunder are
conditioned upon all other creditors of Borrower (including
but not limited to trade creditors and subordinated creditors)
refraining from taking any action whatsoever (including
acceleration of indebtedness) during the term of this
Agreement. In the event that any such creditor takes such
action (including acceleration of indebtedness) (a "Creditor
Action") all of Lender's obligations hereunder shall terminate
without notice.
SECTION 7. Miscellaneous.
7.1 Section Headings.
Section headings in this Agreement are included
herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
7.2 Applicable Law.
This Agreement and the rights and obligations of the
parties hereto and all other aspects hereof shall be deemed to
be made under, shall be governed by, and shall be construed
and enforced in accordance, the internal laws (as opposed to
the conflict of laws provision) and decisions of the State of
Illinois.
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7.3 Counterparts.
This Agreement may be executed in any number of
counterparts, and by different parties hereto and separate
counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts
together shall constitute but one in the same instrument.
7.4 Continued Effectiveness.
Notwithstanding anything contained herein, the terms
of this Agreement are not intended to and do not serve to
affect a novation as to the Loan Agreements or any of the
other Loan Documents. The parties hereto expressly do not
intend to extinguish the Loan Agreements or any of the Loan
Documents. Instead it is the expressed intention of the
parties hereto to reaffirm the Indebtedness created under the
Loan Agreements and Loan Documents.
7.5 Notices.
Any Notice to any party hereto shall be given in the
manner and to the party at the address of such party in
accordance with the provisions of Subsection 6.1 of the Loan
Agreements.
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IN WITNESS WHEREOF, the parties hereto have caused this Forbearance
Agreement to be executed as of the date set forth above, by the respective
officers thereunto duly authorized.
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ [SIGNATURE]
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Title: Vice President
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XXXXXX FINANCIAL, INC.,
a Delaware corporation
By:
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Title:
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GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ [SIGNATURE]
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Title: Vice President
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