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EXHIBIT 10.130
LOAN AND SECURITY AGREEMENT
$10,000,000.00 Working Capital and Note Receivable Loan
provided by Litchfield Financial Corporation to
Preferred Equities Corporation
As of July 30, 1997
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated as of July 30, 1997 among Preferred
Equities Corporation, a Nevada corporation, having an address of and office at
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("Borrower") and LITCHFIELD
FINANCIAL CORPORATION, a Massachusetts corporation, having an office at ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and having a mailing address of POB 488,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
In consideration of the mutual covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties to this Agreement, intending to
be legally bound, hereby agree as follows:
SECTION 1
1. DEFINITION OF TERMS
1.1. TERM DEFINITIONS. Capitalized terms used in this Agreement are defined
in this Section 1.1. The definitions include the singular and plural forms of
the terms defined.
ADA. Defined in Section 6.13 of this Agreement.
ADVANCE. A portion of the proceeds of the Loan advanced
from time to time by Lender to Borrower in accordance with the
terms of this Agreement.
AFFILIATE. Any party controlled by, controlling, or
under common control with, the Borrower or Guarantor.
AGREEMENT. This Loan and Security Agreement among
Borrower, Guarantor and Lender (including the exhibits and
schedules to it), as it may be amended from time to time.
ASSIGNED DEED OF TRUST. A properly recorded, first priority deed of
trust executed and delivered by each Purchaser to Borrower, securing a
Pledged Note Receivable and encumbering all of the right, title and
interest of such Purchaser in the related Encumbered Interval and related
or appurtenant easement, access and use rights and benefits.
ASSIGNMENT OF NOTES RECEIVABLE AND DEEDS OF TRUST. A recordable
assignment made by Borrower in favor of Lender evidencing the assignment to
Lender of all of the Pledged Notes Receivable and Assigned Deeds of Trust.
ASSIGNMENTS OF INTEREST IN CONTRACTS, PERMITS, LICENSES AND APPROVALS.
The properly recorded assignments made by
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Borrower in favor of Lender evidencing the assignment to Lender of all of
Borrower's interest in and to all contracts, permits, licenses and
approvals in respect of the Property.
BACKGROUND DOCUMENTS. Defined in Section 4.1(e) of this
Agreement.
BANKRUPTCY CODE. Defined in Section 11.13 of this
Agreement.
BORROWING BASE. With respect to Eligible Notes Receivable pledged to
Lender in connection with each Receivables Loan Advance, an amount equal to
the sum of: (1) eighty-five percent (85%) of the remaining principal
balance of each such Eligible Note Receivable pursuant to which the
Purchaser has made at least six (6) monthly payments; plus (2) eighty
percent (80%) of the remaining principal balance of each such Eligible Note
Receivable pursuant to which the Purchaser has made less than six (6)
monthly payments.
BUSINESS DAY. Each day which is not a Saturday or Sunday or a legal
holiday under the laws of the State of Vermont, the State of Nevada, the
Commonwealth of Massachusetts or the United States.
CLOSING DATE. The date of this Agreement.
CODE. The Uniform Commercial Code in force in the
Commonwealth of Massachusetts as amended from time to time.
COLLATERAL. The Real Estate Collateral and the
Receivables Collateral.
COMMITMENT. The Commitment Letter issued by Lender to
Borrower dated June 20, 1997.
COMMITMENT FEE. $100,000 payable on the Closing Date.
COMMON ELEMENTS. Common elements and limited common
elements, as each is defined or provided for in the Timeshare
Declaration or other Timeshare Documents.
DEBTOR RELIEF LAWS. Any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or
similar law, proceeding or device providing for the relief of debtors from
time to time in effect and generally affecting the rights of creditors.
DEED OF TRUST. The properly recorded, first priority deed of trust
executed and delivered by Borrower in favor of Lender, as beneficiary,
securing the Obligations of Borrower to Lender and encumbering all of the
right, title and interest
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of Borrower in the Property. Deed of Trust when used in the context of
"Assigned Deed of Trust" shall have the meaning ascribed to the term
Assigned Deed of Trust.
DEFAULT. An event or condition the occurrence of which immediately is
or, with a lapse of time or the giving or notice or both, becomes an Event
of Default.
DEFAULT RATE. Four (4) percentage points in excess of the Mortgage
Loan Interest Rate and/or the Receivables Loan Interest Rate as applicable.
DIVISION. The division of the Nevada Division of Real Estate having
jurisdiction over the enforcement of violations of the Nevada timeshare
statutes, regulations and rules.
ELIGIBLE NOTES RECEIVABLE. Those Pledged Notes Receivable which
satisfy each of the following criteria:
(i) the Borrower shall be the sole payee;
(ii) it arises from a bona fide installment sale by Borrower
of one or more fee simple timeshare Intervals;
(iii) the Interval sale from which it arises shall not have
been cancelled by the Purchaser, and any statutory or
other applicable cancellation or rescission period
shall have expired and such Pledged Note Receivable
shall otherwise be in compliance with this Agreement;
(iv) it is secured by a first lien priority Assigned Deed of
Trust on the purchased Interval and there shall have
been issued to Lender or for Lender's benefit an
American Land Title Association (ALTA) form of title
insurance policy acceptable in form, scope and
substance to Lender and its counsel which may be a
blanket policy covering more than one Interval;
(v) it is generated from the sale of a fee simple timeshare
Interval at the Property and the principal and interest
payments on it are payable to the Borrower in United
States Dollars;
(vi) payments of principal and, if applicable, interest on
it are payable in equal monthly installments;
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(vii) it shall have an original term of no more than one
hundred twenty (120) months;
(viii) a cash down payment has been received from the
Purchaser or the maker in an amount equal to at least
ten percent (10%) of the actual Purchase Price, net of
all discounts, credits and adjustments in reduction of
such Purchase Price, of each Interval and Purchaser
shall have received no cash or other rebates of any
kind; provided however, that in the case of a Note
Receivable representing an upgrade or downgrade either
a cash down payment shall have been received and/or the
Purchaser shall have paid in principal reduction of the
prior Note Receivable an aggregate amount equivalent to
at least 10% of the Purchase Price of the present
Interval;
(ix) no monthly installment is more than thirty (30) days
contractually past due at the time of an initial
Advance in respect of such Eligible Note Receivable, or
more than sixty one (61) days contractually past due at
any time subsequent to the initial Advance;
(x) the weighted average interest rate on the
entire assigned portfolio of Eligible
Notes Receivable bearing interest rates
greater than 0% against which Receivable
Loan Advances are outstanding is at least
12.0% per annum and no greater than
fifteen (15%) percent of the entire
assigned portfolio of Eligible Notes
Receivable against which Receivable Loan
Advances are outstanding have interest
rates of 0%;
(xi) Subject to Borrower's applicable reservation criteria,
the Purchaser of an Interval has immediate access, for
the timeshare "unit week" related to such purchase, to
an Interval at the Property which Interval has been
completed, developed, and furnished in accordance with
the specifications provided in the Purchaser's purchase
contract, public offering statement and other Timeshare
Documents; and the Purchaser has, subject
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to the terms of the Timeshare Declaration, purchase
contract, public offering statement and other Timeshare
Documents, complete and unrestricted access to an
Interval; provided however, in connection with any
Eligible Note Receivable initially pledged to Lender
but as to which subsequent to such pledge Borrower has
entered into an upgrade or downgrade of such Eligible
Note Receivable such upgrade or downgrade shall
continue to be an Eligible Note Receivable so long as
such upgrade or downgrade is from or to the Property,
or the Grand Flamingo Villas resort located in the
metropolitan area of Las Vegas, Nevada which has been
dedicated to timeshare ownership by Borrower pursuant
to Declaration of Timeshare Ownership Covenants,
Conditions and Restrictions recorded in the Official
Records of ▇▇▇▇▇ County, Nevada on November 10, 1983 in
Book 1832 as Document No. 1791580 and rerecorded on
February 6, 1984 in Book 1871 as Document No. 1830906,
or the Grand Flamingo Towers resort located in the
metropolitan area of Las Vegas, Nevada which has been
dedicated to timeshare ownership by Borrower pursuant
to Declarations of Timeshare Ownership Covenants,
Conditions and Restrictions recorded in the Official
Records of ▇▇▇▇▇ County, Nevada on August 23, 1984 in
Book 1978 as Document No. 1937487, or the Grand
Flamingo Terraces resort located in the metropolitan
area of Las Vegas, Nevada which has been dedicated to
timeshare ownership by Borrower pursuant to Declaration
of Timeshare Plan Ownership Covenants, Conditions and
Restrictions recorded in the Official Records of ▇▇▇▇▇
County, Nevada on December 12, 1989 in Book 891212 as
Document No. 00188, Amended Declaration of Timeshare
Ownership Covenants, Condition and Restrictions
recorded in the Official Records of ▇▇▇▇▇ County,
Nevada on April 11, 1990 in Book 900411 as Document No.
00406 and Declaration of Annexation recorded in the
Official Records of ▇▇▇▇▇ County, Nevada on December
14, 1990 in Book 901214 as
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Document No. 00077, or the Grand Flamingo ▇▇▇▇▇▇▇
resort located in the metropolitan area of Las Vegas,
Nevada which has been dedicated to timeshare ownership
by Borrower pursuant to Declaration of Timeshare
Ownership Covenants, Conditions and Restrictions
recorded in the Official Records of ▇▇▇▇▇ County,
Nevada on March 19, 1993 in Book 930319 as Document No.
00051, or the Grand Flamingo Fountains resort located
in the metropolitan area of Las Vegas, Nevada which has
been dedicated to timeshare ownership by Borrower
pursuant to Declaration of Timeshare Ownership recorded
in the Official Records of ▇▇▇▇▇ County, Nevada on May
26, 1993 in Book 930526 as Document No. 00566, or the
Grand Flamingo Terraces Four resort located in the
metropolitan area of Las Vegas, Nevada which has been
dedicated to timeshare ownership by Borrower pursuant
to Declaration of Timeshare Ownership Covenants,
Conditions and Restrictions recorded in the Official
Records of ▇▇▇▇▇ County,Nevada on August 17, 1995 in
Book 950817 as Document No. 01139, or the Grand
Flamingo Plaza resort located in the metropolitan area
of Las Vegas, Nevada which has been dedicated to
timeshare ownership by Borrower pursuant to Declaration
of Timeshare Ownership recorded in the Official Records
of ▇▇▇▇▇ County, Nevada on May 23, 1997 in Book 970523
as Document No. 01649;
(xii) neither the Purchaser of the related Interval or any
other maker of the Note Receivable is an Affiliate of,
or related to, or employed by the Borrower or
Guarantor;
(xiii) the Purchaser or other maker has no claim against
Borrower and no defense, set-off or counterclaim with
respect to the Note Receivable;
(xiv) the maximum remaining principal balance of any such
Note Receivable shall not exceed $20,000.00 and the
total maximum remaining principal balance of the Notes
Receivable executed by any one Purchaser
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or other maker shall not exceed $20,000.00 in the
aggregate (or such greater amount as may be approved in
writing in advance by Lender);
(xv) it is executed by a U.S. resident;
provided, however, that no more than ten
percent (10%) of the outstanding
principal balance of all Eligible Notes
Receivable shall at any time be comprised
of Notes Receivable executed by non U.S.
residents, and, to the extent such
outstanding principal balance of such
Notes Receivable exceeds such ten percent
(10%), they shall not be considered
Eligible Notes Receivable;
(xvi) the original of such Note Receivable has been endorsed
to Lender and delivered to Lender as provided in this
Agreement, and the terms thereof and all instruments
related thereto shall comply in all respects with all
applicable federal and state laws and the regulations
promulgated thereunder;
(xvii) the timeshare Interval being financed or evidenced by
such Note Receivable is not subject to any Lien which
is not previously consented to in writing by Lender;
(xviii) the Purchaser has made at least two (2) scheduled
monthly payments under the Note Receivable; and
(xix) Lender has been provided with all credit application
information furnished by such Purchaser, and Lender has
the ability to perform a credit review and underwriting
of such Purchaser at the cost of Lender.
ENCUMBERED INTERVALS. The Intervals subject to Assigned Deeds of
Trust.
ENVIRONMENTAL LAWS. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time
("CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended
from time to time ("RCRA"), the Superfund Amendments and Reauthorization
Act of 1986, as amended, the federal Clean Air Act, the federal Clean Water
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Act, the federal Safe Drinking Water Act, the federal Toxic Substances
Control Act, the federal Hazardous Materials Transportation Act, the
federal Emergency Planning and Community Right to Know Act of 1986, the
federal Endangered Species Act, the federal Water Pollution Control Act and
all applicable Nevada environmental laws, rules and regulations applicable
to the Property, as all of the foregoing legislation may be amended from
time to time, and any regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal laws, rules, ordinances
or regulations enacted or promulgated after the date of this Agreement,
that concern the management, control, storage, discharge, treatment,
containment, removal and/or transport of Hazardous Materials or other
substances that are or may become a threat to public health or the
environment; together with any common law theory involving Hazardous
Materials or substances which are (or alleged to be) hazardous to human
health or the environment, based on nuisance, trespass, negligence, strict
liability or other tortious conduct, or any other federal, state or local
statute, regulation, rule, policy, or determination pertaining to health,
hygiene, the environment or environmental conditions.
EXCHANGE COMPANY. Resort Condominiums International or another similar
company approved by Lender.
EVENT OF DEFAULT. Defined in Section 8.1 of this Agreement.
FINANCIAL STATEMENTS. The tax returns, on a consolidated basis with
Guarantor, statements of financial condition and statements of income and
expense of the Borrower, and the related notes and schedules delivered by
Borrower prior to the Closing Date and provided for in Section 4.1(l) of
this Agreement; and the financial statements and reports of the Guarantor
delivered to Lender prior to the Closing Date; and the monthly, quarterly
and annual financial statements and reports required to be provided to
Lender pursuant to Section 7.1(h) (i), (ii) and (iii) of this Agreement and
pursuant to the Guaranty.
FISCAL QUARTER. Defined in Section 7.1 (h)(iii) of this Agreement.
FISCAL YEAR. Defined in Section 7.1 (h)(ii) of this Agreement.
GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board which are applicable
in
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the circumstances as of the date in question.
GOVERNMENTAL AGENCY. Defined in Section 7.1(w) of this Agreement.
GUARANTY. The Guaranty Agreement executed and delivered to Lender
concurrently with this Agreement by the Guarantor.
GUARANTOR. Mego Financial Corp., a New York corporation, which owns
all of the issued and outstanding capital stock of Borrower.
HAZARDOUS MATERIALS. "Hazardous substances," "hazardous waste" or
"hazardous constituents," "toxic substances", or "solid waste", as defined
in the Environmental Laws, and any other contaminant or any material, waste
or substance which is petroleum or petroleum based, asbestos,
polychlorinated biphenyls, flammable explosives, or radioactive materials.
ILSA. Defined in Section 6.13 of this Agreement.
IMPROVEMENTS. All buildings, structures, recreational facilities and
appurtenances now or hereafter located on the Property.
INDEMNIFIED LENDER PARTIES. Defined in Section 7.1(w) of this
Agreement.
INITIAL RECEIVABLES LOAN ADVANCE. The first Receivables Loan Advance
made by Lender to Borrower of proceeds of the Receivables Loan in
accordance with the terms of this Agreement.
INTERVAL. A "time share" as defined in Chapter 119A of the Nevada
Revised Statutes sold to a Purchaser by delivery of a deed, being comprised
of (i) an undivided fee title interest in the Grand Flamingo Suites or in
the event of an upgrade or downgrade of an existing Eligible Note
Receivable, the name of the relevant project resort shall be substituted
for Grand Flamingo Suites in this definition for purposes of determining if
such upgrade or downgrade qualifies as an Eligible Note Receivable; and
(ii) the exclusive right to use and occupy an assigned Unit of a particular
type and the common furnishings in such assigned Unit together with the
nonexclusive right to use the common area, all for a specified use period
as defined in the Timeshare Declaration and subject to the covenants,
conditions and restrictions set forth in the Timeshare Declaration and any
rules and regulations pursuant thereto.
LIEN. Any interest in property securing an obligation owed to, or
claim by, a Person other than the owner of such property, whether such
interest arises in equity or is based
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on common law, statute, or contract.
LOAN. The Mortgage Loan and Receivables Loan to be advanced on the
terms set forth in this Agreement and with an aggregate outstanding
principal balance which may not exceed the Maximum Loan Amount.
LOAN COSTS. All costs incurred by Lender in connection with the Loan,
including without limitation, all taxes and assessments, exclusive of
income, franchise and similar taxes, recording fees, title insurance
premiums and other title charges, lock box and Lockbox Agent fees,
custodial fees due to Lender under Section 3.8, Borrower's and lender's
attorney's fees, document binding costs, appraisal fees, lien, judgment and
litigation search costs, fees of architects, engineers, surveyors and any
special consultants, brokers fees (except as otherwise specified herein),
escrow fees, all travel and out-of-pocket expenses of Lender to conduct
audits or inspections and wire transfer fees.
LOAN DOCUMENTS. Collectively, this Agreement and the following
documents and instruments listed below, as such agreements, documents,
instruments or certificates may be amended, renewed, extended, restated or
supplemented from time to time.
(i) This Agreement;
(ii) The Deed of Trust;
(iii) The Guaranty;
(vi) The Assignment of Notes Receivable and Deeds
of Trust;
(v) UCC financing statements covering the Collateral, to be
filed in all offices necessary to perfect the Lender's Liens
in the Collateral; and
(vi) Such other agreements, documents, instruments, certificates
and materials as Lender may request to evidence the
Obligations, to evidence and perfect the rights and Liens
and security interests of Lender contemplated by the Loan
Documents and to effectuate the transactions contemplated
herein and to appoint the Lockbox Agent and implement the
Lockbox Agreement.
LOAN YEAR. The period from the Closing Date through the last day of
the twelfth (12th) calendar month thereafter
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and each twelve (12) month period thereafter.
LOCKBOX AGENT. Bank of America or such other Person as is approved by
Lender in writing to act as Lockbox Agent for the receipt of collections
under the Pledged Notes Receivable.
LOCKBOX AGREEMENT. A Lockbox Agreement between Borrower and Lender
pursuant to which Lockbox Agent is to provide for the receipt of
collections on the Pledged Notes Receivable and disbursement of such
collections as directed by Lender and Borrower.
MANDATORY PREPAYMENT. Any prepayment required by Section 2.6 of this
Agreement.
MATERIAL PARTY. Defined in Section 4.1(h) of this Agreement.
MAXIMUM LOAN AMOUNT. $10,000,000.00.
MORTGAGE LOAN. An advance of $4,500,000 to be used for general working
capital purposes and to pay for marketing and administrative expenses
incurred in the marketing and sale of timeshare Intervals at the Property
as is more particularly set forth in this Agreement.
MORTGAGE LOAN INTEREST RATE. A variable rate, adjusted as of the first
Business Day of each calendar month, equal to the sum of the Prime Rate as
of the first Business Day of each calendar month, plus two and one quarter
percent (2.25%) per annum calculated on the average daily balance
outstanding during the month, on an actual days elapsed over a 360 day year
basis.
MORTGAGE LOAN MATURITY DATE. The last day of the third (3rd) Loan Year
or if earlier, at such time, as one thousand five hundred (1500) Intervals
have been sold to Purchasers after the Closing Date.
NON UTILIZATION FEE. The fee referenced in Section 2.4(b).
NOTE RECEIVABLE. A promissory note executed in favor of Borrower in
connection with a Purchaser's acquisition of an Interval.
OBLIGATIONS. All amounts due or becoming due to Lender in respect of
the Loan or any of the Loan Documents, including principal, interest,
prepayment premiums, Commitment Fee, Release Payments, Release Fees,
Non-Utilization Fees, indemnity obligations, contributions, taxes,
insurance, loan charges, custodial fees, attorneys' and paralegals' fees
and
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expenses and other fees or expenses incurred by Lender or advanced to
or on behalf of Borrower by Lender pursuant to any of the Loan Documents,
and the prompt and complete payment and performance by the Borrower, and by
the Guarantor, jointly and severally, of all obligations, indebtedness and
liabilities pursuant to this Agreement, any of the Loan Documents or
otherwise, or any future loan agreements, notes or other agreements between
Borrower or Guarantor and Lender, or by Borrower or Guarantor in favor of
Lender. The term Obligations shall also include any damages incurred by
Lender and any costs, fees and expenses of enforcement incurred by Lender
in connection with the covenant contained in Section 7.1(y).
OPERATING CONTRACTS. All contracts, agreements and arrangements
relating to the operation of the Property, including without limitation,
those related to utilities, maintenance, management, services, marketing
and sales.
PAYMENT AUTHORIZATION AGREEMENT. Pre-authorized electronic debit
agreement by Purchaser for payment of a Note Receivable.
PENSION REFORM ACT. Defined in Section 6.16 of this Agreement.
PERSON. An individual, partnership, corporation, limited liability
company, trust, unincorporated organization, other entity, or a government
or agency or political subdivision thereof.
PERMITTED EXCEPTIONS. Defined in Section 4.1(e)(vii) of this
Agreement.
PLEDGED NOTE RECEIVABLE. Any Note Receivable which at any time has
been pledged to Lender by Borrower pursuant to this Agreement or any of the
Loan Documents.
PREPARER. Defined in Section 13.15 of this Agreement.
PRIME RATE. The highest prime rate of interest from time to time
published in the eastern edition of the Wall Street Journal under the Money
Rates Section.
PROPERTY. The Borrower's interest in the real property more
particularly described in Exhibit A hereto comprising the Grand Flamingo
Suites, together with the Borrower's interest in all amenities,
improvements and fixtures now or hereafter located thereon and all
easements and other rights appurtenant thereto.
PROPERTY CONTRACTS. Defined in Section 3.1(c) of this
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Agreement.
PURCHASE PRICE. The total purchase price of an Interval, as set forth
in the Timeshare Documents relating to the purchase of such Interval.
PURCHASER. Any Person who purchases one or more Intervals.
REAL ESTATE COLLATERAL. Defined in Section 3.1 of this Agreement.
RECEIVABLES COLLATERAL. Collectively, all now owned or hereafter
acquired right, title and interest of the Borrower, in all of the
following:
(i) Pledged Notes Receivable and all proceeds of or from
them;
(ii) Assigned Deeds of Trust and all proceeds of or from
them;
(iii) All Encumbered Intervals together with all appurtenant
rights and interests and easement, license and use
rights in and to all Property facilities and amenities,
as described and provided for in the Timeshare
Declaration or other Timeshare Documents;
(iv) Documents, instruments, accounts, chattel paper, and
general intangibles relating to the Pledged Notes
Receivable, the Assigned Deed of Trusts and the other
Receivables Collateral;
(v) Furniture, furnishings and fixtures of every kind and
description (and all improvements and accessions
thereto) located in or on or used in connection with
the Units and any Encumbered Interval;
(vi) Easements, leasehold interests (whether as lessor or
lessee), franchises, permits, approvals, licenses,
facilities and amenities on, affecting or appurtenant
to the Pledged Notes Receivable; and rights to occupy,
use and enjoy any such facilities or amenities, and any
such appurtenant Units or
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Encumbered Intervals;
(vii) Purchaser's interest, if any, in any management,
maintenance, marketing, sales, service, utility,
security and other agreements or arrangements relating
to the Pledged Notes Receivable, and any agreements
guaranteeing the performance of any of them, and all
related accounts and proceeds;
(viii) All rights in, to and under all Payment Authorization
Agreements signed and delivered by or on behalf of each
Purchaser, and all accounts and proceeds relating
thereto or deriving therefrom;
(ix) Extensions, additions, improvements, betterments,
renewals, substitutions and replacements of, for or to
any of the Receivables Collateral, wherever located,
together with the products, proceeds, issues, rents and
profits thereof, and any replacements, additions or
accessions thereto or substitutions thereof, and all
rights in or under insurance policies and to the
proceeds of any insurance policies covering any of the
other Receivables Collateral, all rights to unearned or
refunded insurance premiums, and the proceeds of any
condemnation awards or any claims regarding any of the
other Receivables Collateral to the extent that any of
the foregoing relate to the Receivables Collateral; and
(x) All books, records, reports, computer tapes, disks and
software relating to the Receivables Collateral.
RECEIVABLES LOAN. A revolving loan facility in an amount not to exceed
an aggregate outstanding balance of the lesser of (i) $10,000,000.00 less
the principal balance of the Mortgage Loan, or (ii) the Borrowing Base, to
be used to finance Note Receivables on the terms set forth in this
Agreement.
RECEIVABLES LOAN ADVANCE. A portion of the proceeds of the Receivables
Loan advanced from time to time by Lender to Borrower in accordance with
the terms of this Agreement.
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RECEIVABLES LOAN INTEREST RATE. A variable rate, adjusted as of the
first Business Day of each calendar month, equal to the sum of the Prime
Rate as of the first Business Day of each calendar month, plus two percent
(2.00%) per annum calculated on the average daily balance outstanding
during the month, on an actual days elapsed over a 360 day year basis.
RECEIVABLES LOAN MATURITY DATE. The last day of the sixth (6th) Loan
Year.
RECEIVABLES LOAN REVOLVING CREDIT PERIOD. A period of three calendar
years from the Closing Date.
RELEASE FEE. Defined in Section 2.5 of this Agreement.
RELEASE PAYMENT. Defined in Section 2.5 of this Agreement.
RESORT. The real property described on Exhibit C.
SECURITY. Shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
STATE. The State of Nevada.
SUBMISSIONS. Defined in Section 13.15 of this Agreement.
TANGIBLE NET WORTH. The Tangible Net Worth of any Person shall mean,
as of any date, (a) the amount of any capital stock, paid in capital and
similar equity accounts plus (or minus in the case of a deficit) the
capital surplus and retained earnings of such Person and the amount of any
foreign currency translation adjustment account shown as a capital account
of such Person, less (b) the net book value of all items of the following
character which are included in the assets of such Person: (i) good will,
including without limitation, the excess of cost over book value of any
asset, (ii) organization or experimental expenses, (iii) unamortized debt
discount and expense, (iv) patents, trademarks, trade names and copyrights,
(v) treasury stock, (vi) deferred taxes and deferred charges, (vii)
franchises, licenses and permits, and (viii) other assets which are deemed
intangible assets under generally accepted accounting principles, provided,
however, that, notwithstanding the foregoing, no deduction shall be made
pursuant to clause (b) in respect of any asset presently shown on the
statement of financial condition of Borrower as "Deferred Selling Expense"
as determined in accordance with generally accepted accounting principles.
Tenant Leases. Defined in Section 3.1(b) of this Agreement.
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TIMESHARE ACT. The Nevada Timeshare Act (Nevada Revised Statutes
Chapter 119 A) or any successor thereto or replacement thereof, as the same
may be amended from time to time and any rules and regulations promulgated
thereunder.
TIMESHARE DECLARATION. With respect to the Property, the Declaration
of Covenants, Conditions and Restrictions for the Grand Flamingo Suites
resort located in the metropolitan area of Las Vegas, Nevada which has been
dedicated to timeshare ownership by Borrower pursuant to Declaration of
Timeshare Ownership Covenants, Conditions and Restrictions recorded in the
Official Records of ▇▇▇▇▇ County, Nevada on November 8, 1991 in Book 911108
as Document No. 00235.
TIMESHARE DOCUMENTS. Defined in Section 5.2(c)(xv) of this Agreement.
TIMESHARE OWNERS' ASSOCIATION. With respect to the Property, The Grand
Flamingo Suites Owners Association, a Nevada non profit corporation.
TITLE COMPANY. Defined in Section 4.1(e)(vii) of this Agreement.
TITLE POLICY. Defined in Section 4.1(e)(vii) of this Agreement.
RESPA. Defined in Section 6.13 of this Agreement.
UNIT. One individual air space living unit in a building incorporated
into the Property pursuant to the Timeshare Declaration.
VOLUNTARY PREPAYMENT. Any voluntary prepayment of the Loan permitted
to be made by the Borrower under the terms of this Agreement.
SECTION 2
2. LOAN
2.1. LOAN.
(a) GENERAL. Subject to the terms and conditions hereinafter set forth,
Lender agrees to extend the Loan to Borrower.
(b) MORTGAGE LOAN. Upon and subject to the conditions set forth in this
Agreement, Lender shall advance to Borrower and Borrower shall borrow from
Lender the Mortgage Loan in an amount of $4,500,000.00. The Mortgage Loan shall
be disbursed to Borrower for general working capital purposes and to pay for
marketing and administrative expenses incurred in the marketing and
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sale of timeshare Intervals at the Property as is more particularly set forth in
this Agreement.
(c) RECEIVABLES LOAN. Upon the terms and subject to the conditions set
forth in this Agreement, Lender shall advance to Borrower, and Borrower may
borrow, repay and reborrow, principal under the Receivables Loan in an amount
not to exceed at any time the lesser of (i) the amount of the Borrowing Base, or
(ii) $10,000,000.00 less the amount outstanding under the Mortgage Loan. Lender
shall have no obligation to make any further Receivables Loan Advances after the
expiration of the Receivables Loan Revolving Credit Period.
(d) TOTAL LOAN. Notwithstanding anything herein or elsewhere to the
contrary, Borrower shall not be entitled to and Lender shall have no obligation
to make any Advance which would cause the aggregate outstanding principal
balance of the Loan (including the Mortgage Loan and the Receivable Loan) to
exceed the Maximum Loan Amount.
2.2. LOAN DOCUMENTS. The Loan Documents shall be satisfactory in form and
substance to Lender and Lender's counsel. The Mortgage Loan and the Receivables
Loan shall be evidenced by this Agreement and shall be governed by the terms
contained herein. The Deed of Trust shall be a first and prior lien upon the
Property, subject only to the Permitted Exceptions. The Guaranty shall be the
absolute and unconditional guaranty of payment and performance of the Loan and
all sums secured by or under the Loan Documents in favor of Lender, subject only
to the limitations set forth therein.
2.3. COMMITMENT FEE. Borrower agrees to pay the Commitment Fee on the
Closing Date.
2.4. INTEREST RATE AND NON-UTILIZATION FEE.
(a) MORTGAGE LOAN. The average daily outstanding principal balance of
the Mortgage Loan, will bear interest in arrears at a rate equal to the Mortgage
Loan Interest Rate. The outstanding principal balance of the Mortgage Loan shall
bear interest as of Lender's wiring of funds through its receipt of repayment of
the Mortgage Loan (if received by Lender later than 12 noon, Eastern Time, then
interest accrual shall be through, but not including, the next Business Day
following such receipt). Immediately upon the occurrence of an Event of Default
and after the Mortgage Loan Maturity Date (if the Mortgage Loan is not paid in
full on or before the Mortgage Loan Maturity Date), at Lender's election in its
discretion, the Mortgage Loan will bear interest at the Default Rate.
(b) RECEIVABLES LOAN. The average daily outstanding principal balance
of the Receivable Loan will bear interest in
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arrears at a rate equal to the Receivables Loan Interest Rate. The outstanding
principal balance of the Receivables Loan shall bear interest as of Lender's
wiring of funds through its receipt of repayment of the Receivables Loan (if
received by Lender later than 12 noon, Eastern Time, then interest accrual shall
be through, but not including, the next Business Day following such receipt).
Immediately upon the occurrence of an Event of Default and after the Receivables
Loan Maturity Date (if the Receivables Loan is not paid in full on or before the
Receivables Loan Maturity Date), at Lender's election in its discretion, the
Receivables Loan will bear interest at the Default Rate.
In addition to interest, commencing on the ninetieth (90th) day after the
Closing Date, Borrower shall pay to Lender, in arrears, a Non-Utilization Fee in
an amount equal to 0.25% per annum multiplied by the difference between
$5,500,000 and the average outstanding balance of the Receivables Loan during
the prior calendar month.
2.5. PAYMENTS.
(a) MORTGAGE LOAN. The Borrower agrees punctually to pay or cause to
be paid to the Lender all principal and interest due under the Mortgage Loan or
in respect of the Mortgage Loan. The Borrower shall make the following payments
on the Mortgage Loan:
(i) INTEREST. Interest only on the outstanding principal balance
of the Mortgage Loan for the preceding calendar month shall be payable monthly
on the fifth day of each calendar month, commencing on the fifth day of
September, 1997 (which payment shall also include any interest due for July,
1997) at the Mortgage Loan Interest Rate.
(ii) PRINCIPAL.
(A) The entire outstanding principal balance of the Mortgage
Loan, all accrued and unpaid interest thereon and all other sums due in
connection therewith shall be payable in full, if not earlier paid pursuant to
the terms hereof and of the Loan Documents, on the Mortgage Loan Maturity Date.
(B) In addition to all other payments required herein,
during such time as there is any outstanding principal balance due under the
Mortgage Loan, upon the sale of each Interval, Borrower must make a principal
reduction payment on the Mortgage Loan in an amount equal to the greater of (i)
25% of the Interval sales price or (ii) $3,000 (each, a "RELEASE PAYMENT", and
collectively, the "RELEASE PAYMENTS"). In addition to paying to Lender such
Release Payments, upon the sale of each Interval, during such time as there is
any outstanding principal balance due under the Mortgage Loan, Borrower shall
also pay to Lender, as a
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fee and not in reduction of principal on the Mortgage Loan, a release fee
("RELEASE FEE") in the amount of $25.00.
(C) In addition to the Release Payments, Borrower shall, on
November 1, 1997, make a principal payment to Lender in an amount equal to the
difference between (w) Three Hundred Seventy Five Thousand ($375,000) Dollars
less (x) the sum of all Release Payments made to Lender during the period from
the Closing Date through October 31, 1997; and on the first day of each third
month thereafter (each February 1, May 1, August 1 and November 1) make a
payment in the amount of the difference between (y) Three Hundred Seventy Five
Thousand ($375,000) Dollars multiplied by the number of quarterly periods having
expired since October 31, 1997 plus one less (z) the sum of all Release Payments
made to Lender since the Closing Date, if such differences are positive numbers.
(iii) FINAL PAYMENT. The entire outstanding principal amount of
the Mortgage Loan together with any and all other Obligations related to the
Mortgage Loan (exclusive of the Receivables Loan and any Obligations related
solely thereto) shall be paid in full by not later than the Mortgage Loan
Maturity Date.
(iv) LATE FEE. The Borrower agrees that a late fee, in the amount
of 5% of the amount unpaid, may be charged by Lender should Borrower fail to
punctually pay or cause to be paid to the Lender any principal or interest due
under the Mortgage Loan within five (5) days of the date that any such sum is
due. Any unpaid amount representing late fees shall become part of the
Obligations.
(b) RECEIVABLES LOAN. The Borrower agrees punctually to pay or cause
to be paid to the Lender all principal and interest due under the Receivables
Loan together with any Non-Utilization Fee due. The Borrower shall make the
following payments on the Receivables Loan:
(i) MONTHLY PAYMENTS. The Borrower shall direct or otherwise
cause all makers of all Pledged Notes Receivable to pay all monies due
thereunder to a post office box agreed to between Borrower and Lender and as to
which Lockbox Agent shall have the exclusive right to withdraw funds and
distribute same in accordance with the Lockbox Agreement. One hundred percent
(100%) of the cleared funds collected from the Pledged Notes Receivable received
by Lender will be applied by Lender in the following order: (A) to the payment
of costs or expenses incurred by Lender pursuant to this Agreement in creating,
maintaining, protecting or enforcing its Liens in and to the Collateral, in
acting as custodian of the Collateral and in collecting any other fees
(including late fees including but not limited to the custodial fees set forth
in Section 3.8 hereof), expenses or amounts due to Lender in connection with the
Loan; (B) to any
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interest accrued on the Receivables Loan at the Default Rate, if applicable and
to any Non-Utilization Fee due; (C) to the payment of accrued and unpaid
interest at the Receivables Loan Interest Rate; (D) to the reduction of the
principal balance of the Receivables Loan and (E) to the payment of interest and
principal on the Mortgage Loan. If the amount of the funds received by Lender
from collections under the Pledged Notes Receivable in any month is insufficient
to pay in full the amounts provided for in clauses (A), (B), and (C) of the
preceding sentence for such month, without notice or demand after receipt by
Borrower of the monthly accounting provided for in (ii) below, Borrower shall
pay the difference to Lender on or before the last day of the month following
the interest accrual. In the event Borrower receives any payments on any of the
Pledged Notes Receivable directly from or on behalf of the maker or makers
thereof, Borrower shall receive all such payments in trust for the sole and
exclusive benefit of Lender; and Borrower shall deliver to Lender all such
payments (in the form so received by Borrower) as and when received by Borrower.
(ii) MONTHLY ACCOUNTING. Lender agrees to render to Borrower an
accounting during each month showing the accrual of interest and charges to the
Obligations and showing the payments of interest and principal received and
further indicating if any deficiency exists which is to be paid by Borrower.
(iii) FINAL PAYMENT. The entire outstanding principal amount of
the Receivables Loan together with all other Obligations then outstanding shall
be paid in full by not later than the Receivables Loan Maturity Date.
2.6. PREPAYMENTS.
(a) MORTGAGE LOAN. Except as set forth in Section 2.5(a) above,
Borrower may not prepay the Mortgage Loan, in whole or in part, at any time
without the payment of the difference between (i) $30,240 and (ii) the amount of
Release Fees paid by Borrower to Lender through the date of such prepayment
without the prior written approval of Lender.
(b) RECEIVABLES LOAN.
(i) VOLUNTARY PREPAYMENTS. Subject to the terms of this
Agreement, and to the payment of the applicable premium set forth in Subsection
(iii) below, Borrower may prepay the Receivables Loan, in whole but not in part
(except that partial prepayments shall be allowed in connection with bulk sales
of Eligible Notes Receivable after the first Loan Year), at any time, after
first providing Lender with thirty (30) days prior written notice. Any such
prepayment must include the principal amount being prepaid, accrued but unpaid
interest and all other then due Obligations, including any applicable prepayment
premium provided
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in Subsection (iii) below.
(ii) MANDATORY PREPAYMENTS. If at any time and for any reason,
the outstanding unpaid principal balance of the Receivables Loan shall exceed
the aggregate amount of the Borrowing Base, then, within two (2) Business Days
following Borrower's receipt of telecopied notice from Lender of the occurrence
of such excess over the Borrowing Base or, absent such telecopied notice, within
five (5) days after the end of the calendar month in which such excess occurred,
Borrower shall either (A) prepay the principal balance of the Receivables Loan
in an amount equal to the difference between the aggregate principal amount of
the Receivables Loan and the amount of the Borrowing Base, or (B) increase the
aggregate principal amount of Eligible Note Receivables pledged to Lender so
that the amount of Borrowing Base equals or exceeds the aggregate outstanding
principal amount of the Receivables Loan. The pledge and delivery to Lender of
additional Eligible Notes Receivable shall comply with the document delivery and
recordation requirements set forth in Section 5.2(b) of this Agreement and shall
be accompanied by a written certification of the Borrower to the effect that
such additional Pledged Notes Receivable are Eligible Notes Receivable, and
that, giving effect to the pledge to Lender of such Eligible Note Receivable,
the outstanding unpaid principal balance of the Receivables Loan is equal to or
less than the aggregate amount of the Borrowing Base. If Borrower elects to
prepay the excess principal balance of the Receivables Loan pursuant to this
Section 2.6(b)(ii)(A) above, no prepayment premium shall be payable in
connection with such prepayment.
(iii) PREMIUMS. Any prepayment of the Receivables Loan pursuant
to Section 2.6(b)(i) above must be accompanied by a prepayment premium
calculated, as of immediately prior to such prepayment, as follows:
Date of Prepayment Premium
------------------ -------
Within the First Three percent (3%) of the then outstanding balance
Loan Year of the Receivables Loan.
Within the Second Two percent (2%) of the then outstanding balance
Loan Year of the Receivables Loan; provided however, in the
event of a prepayment resulting from a bulk
sale of Eligible Notes Receivable no prepayment
premium shall be due, but, in lieu of such
premium, an exit fee of one (1%) percent of the
amount of such prepayment shall be due with
respect to the principal
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amount of the Eligible Notes Receivable subject to
such bulk sale provided that Lender has been given
the first right of refusal to effect such purchase
for a period of twenty (20) days after written
notification from Borrower to Lender and Lender
has not agreed to purchase such Eligible Notes
Receivable within such twenty (20) day period or
has failed to consummate such purchase within
sixty (60) days of the expiration of the initial
notification period.
Within the Third One percent (1%) of the then outstanding balance
Loan Year of the Receivables Loan; provided however, in the
event of a prepayment resulting from a bulk sale
of Eligible Notes Receivable no prepayment premium
shall be due, but, in lieu of such premium, an
exit fee of one (1%) percent of the amount of such
prepayment shall be due with respect to the
principal amount of the Eligible Notes Receivable
subject to such bulk sale provided that Lender has
been given the first right of refusal to effect
such purchase for a period of twenty (20) days
after written notification from Borrower to Lender
and Lender has not agreed to purchase such
Eligible Notes Receivable within such twenty (20)
day period or has failed to consummate such
purchase within sixty (60) days of the expiration
of the initial notification period.
After the Third Zero (0).
Loan Year
No prepayment premium shall be payable in connection with any prepayment of the
principal balance of the Receivables Loan which arises from the normal monthly
payments, made in the ordinary course by Purchasers or the prepayment of one or
more Eligible Notes Receivable by its maker or makers in full or in part. No
prepayment premium or exit fee shall be payable in the event that Lender engages
in a bulk purchase of Eligible Notes Receivable from
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Borrower.
In the event that Lender shall initially agree to purchase, in bulk, Eligible
Notes Receivable within the twenty (20) day period described above and Lender
fails to consummate such purchase within sixty (60) days of the expiration of
the initial notification by Lender of its agreement to purchase such bulk
Eligible Notes Receivables, due solely to and wholly as a result of the fault of
Lender, Borrower may then sell such Eligible Notes Receivables in bulk on the
same or better terms to another party without the obligation to pay an exit fee.
SECTION 3
3. COLLATERAL
3.1. REAL ESTATE COLLATERAL. To secure the payment and performance of the
Obligations for value received, Borrower unconditionally and irrevocably
assigns, pledges and grants to Lender a continuing first priority lien and
security interest in the following collateral (collectively, the "Real Estate
Collateral"):
(a) The Deed of Trust constituting a first lien in and to Borrower's
fee simple interest in the Property.
(b) An absolute and unconditional primary assignment of all: (i)
leases, subleases, licenses, concessions, entry fees or other agreements
which grant a possessory interest in and to, or the right to use the
Property or any portion thereof now in existence or which may come into
existence hereafter (the "Tenant Leases"); and (ii) rents, revenues,
income, proceeds, royalties, profits, deposits and other benefits payable
for using, leasing, licensing, possessing, operating from or in or
otherwise enjoying the Property pursuant to any of the Tenant Leases
together with any damages and insurance and condemnation proceeds in
respect thereof. Tenant Leases shall not include any contracts for sale of
the Intervals or any receivables arising therefrom.
(c) An assignment of all of Borrower's rights in and to all licenses,
permits, approvals, authorizations, consents and other agreements and
orders pertaining to the Property or the use, occupancy, maintenance or
enjoyment of the Property, including, but not limited to, utility
contracts, maintenance agreements, management agreements, marketing, sales
and service contracts, and any agreements or arrangements guaranteeing the
performance of the obligations contained in any of the foregoing agreements
or relating to the Property (collectively, the "Property Contracts"), and
in and to all related accounts and proceeds and all deposits, letters of
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credit or other property pledged or delivered pursuant thereto.
(d) A first lien priority security interest in all of Borrower's
interest in all inventory, supplies, accounts, chattel paper and general
intangibles (except for receivables arising from the sale of Intervals) at
any time located at, arising out of the use of and/or used or useful in
connection with the operation of any of the Property, subject to
appropriate non-disturbance language acceptable to Lender relating to
common area equipment, fixtures and furniture.
(e) A first priority security interest in all of Borrower's interest
in all furniture, appliances, furnishings, machinery, plumbing, heating,
ventilating, air conditioning systems, fixtures and equipment, owned or
hereafter acquired by Borrower, used or useful in connection with, and/or
placed or to be placed on or under the Property.
(f) All proceeds of the Real Estate Collateral.
3.2. RECEIVABLES COLLATERAL. To secure the payment and performance of the
Obligations, for value received, Borrower unconditionally and irrevocably
assigns, pledges and grants to Lender a continuing first priority security
interest in and to the Receivables Collateral.
3.3. SECURITY INTEREST IN ALL PLEDGED NOTES RECEIVABLE. Notwithstanding
that the Lender may be obligated, subject to the conditions of the Loan
Documents, to make Receivables Loan Advances only in respect of Eligible Notes
Receivable, Lender shall have a continuing security interest in all of the
Pledged Notes Receivable, and may collect all payments made under or in respect
of all Pledged Notes Receivable, including Eligible Notes Receivable that may
become ineligible, until any of the same may be released by Lender, if at all,
pursuant to Section 13.11 below.
3.4. GUARANTY. As further security for the Obligations, Borrower shall
cause to be executed and delivered to Lender the unconditional Guaranty of the
Guarantor. The liability of the Guarantor under its Guaranty shall be limited as
set forth in the Guaranty.
3.5. FINANCING STATEMENTS. Borrower agrees, at its own expense, to execute
the financing statements provided for by the Code together with any and all
other instruments or documents and take such other action as may be required to
perfect and to continue the perfection of Lender's liens and security interests
in the Collateral and, unless prohibited by law, Borrower hereby authorizes
Lender to execute and file any such financing statements as other instruments or
documents on the Borrower's behalf.
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3.6. LOCATION OF COLLATERAL. All tangible Collateral (other than Collateral
delivered to Lender) which is personal property is to remain, at all times, on
or at the Resort and the Borrower may not transfer the Collateral from the
Resort without the prior written approval of Lender. Notwithstanding anything to
the contrary contained in this Section 3.6, Borrower or the Timeshare Owners'
Association may remove or replace any tangible Collateral if any item thereof is
no longer needed for the operation of the Resort and is of no material value to
Borrower or to the Resort or if such Collateral is replaced by or with
Collateral of equivalent value.
3.7. INSURANCE AND PROTECTION OF COLLATERAL. Borrower agrees to maintain
and pay for insurance upon all Collateral wherever located (whether in storage
or in transit) covering risks in such amounts and with such insurance companies
as is provided in Section 7.1(d) hereof. To the extent any casualty insurance
coverage required under this Agreement with respect to the Property is provided
by the Timeshare Owners' Association, and to the extent any portion of the
Collateral is covered by such insurance, with respect to such portion of the
Collateral only, the Borrower's obligation under this Section 3.7 to maintain
casualty insurance coverage shall be deemed satisfied.
3.8. PROTECTION OF COLLATERAL; REIMBURSEMENT. The portion of the Collateral
consisting of (i) the original Pledged Notes Receivable, (ii) the original
Assigned Deeds of Trusts, (iii) the original purchase contracts (including
addendum) related to such Pledged Notes Receivable and Assigned Deeds of Trusts,
and (iv) originals or true copies of the related truth-in-lending disclosure,
loan application, grant, bargain and sale deed, and if required by Lender, the
related Purchaser's acknowledgement, receipt, payment authorization agreement
and the Exchange Company application and disclosures, shall, unless directed
otherwise be delivered at Borrower's expense to the Lender at its Stamford,
Vermont office, and held in Lender's possession and control until the
Obligations are fully satisfied. The portion of the Collateral delivered to
Lender as described above shall be segregated by Lender and stored in a
fire-resistant filing cabinet. Borrower and the Guarantor agree that such
storage is and shall be deemed to constitute reasonable care by Lender with
respect to such Collateral, provided that Lender uses the same type of storage
and undertakes the same degree of care with respect to the Collateral as it uses
and undertakes with respect to its own notes and property and the notes,
property and collateral of other borrowers which it retains in its possession.
All insurance expenses and all expenses of protecting the Collateral, including
without limitation, storing, warehousing, insuring, handling, maintaining and
shipping the Collateral, and any and all excise, property, intangibles, sales
and use taxes imposed by any state, federal or local authority on any of the
Collateral or in respect of the sale thereof shall be borne and paid by the
Borrower. If the Borrower
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fails to promptly pay any portion thereof when due, Lender may, at its option,
but shall not be required to, pay the same and charge the Borrower's account
therefor, and the Borrower agrees promptly to reimburse Lender therefor with
interest accruing thereon daily at the Default Rate. All sums so paid or
incurred by Lender for any of the foregoing and any and all other sums for which
the Borrower may become liable hereunder and all costs and expenses (including
attorneys' and paralegals' fees, legal expenses and court costs) which the
Lender may incur in enforcing or protecting its Lien on, or rights and interest
in, the Collateral or any of its rights or remedies under this Agreement or any
other Loan Document or in respect to any of the transactions to be had hereunder
or thereunder, until paid by the Borrower to Lender with interest at the Default
Rate, shall be included among the Obligations, and, as such, shall be secured by
all of the Collateral.
Provided that Lender retains the original Pledged Notes Receivable and
Assigned Deeds of Trust, and originals or copies of the related Timeshare
Documents delivered to it as listed above, in a fire-resistant filing cabinet
and otherwise as provided above, Lender shall not be liable or responsible in
any way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default of
any warehouseman, carrier, forwarding agency, Lockbox Agent or any other Person
whomsoever.
Lender represents to Borrower that at the present time, neither the
Commonwealth of Massachusetts nor the State of Vermont impose an intangibles tax
or similar tax on assets or property held by a lender as collateral but that in
the event that either state enacts legislation or imposes such a levy, which
would have the impact of charging Borrower a fee, tax or levy as a result of
Lender's retention of the Collateral in the State of Vermont, Lender will, upon
Borrower's written request, remove the Collateral from the State of Vermont to
another jurisdiction to avoid the charging or imposition of such fee, tax or
levy upon Borrower and the Collateral.
Borrower agrees, in consideration of Lender agreeing to hold the
Collateral, to pay to Lender as a custodial fee, at the time initial pledge of
each Note Receivable (whether at the time of an Advance, replacement for a Note
which fails to remain an Eligible Note Receivable, or a Note Receivable
resulting from an upgrade or a downgrade) a fee of $10.00 for each Note
Receivable pledged to Lender.
All of the above custodial fees shall be Loan Costs and Lender is
authorized to deduct same from any cash proceeds received from the Lockbox Agent
in accordance with Section 2.5(b)(i)(A) above.
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3.9. Cross-Collateral. The Collateral shall secure all of the Obligations,
including those related to the Mortgage Loan and those related to the
Receivables Loan.
SECTION 4
4. CONDITIONS PRECEDENT TO THE CLOSING
4.1. CONDITIONS PRECEDENT. The obligation of Lender to enter into this
Agreement and to fund any Advance hereunder, shall be subject to the
satisfaction of each of the conditions precedent set forth in the Commitment or
in any other communications from Lender, in addition to all of the conditions
precedent set forth elsewhere in the Loan Documents and to all of the following
conditions:
(a) OPINIONS OF COUNSEL. Lender shall have received from counsel for
the Borrower and Guarantor licensed in the States of Nevada and New York and
reasonably acceptable to Lender, closing opinions in form and substance
satisfactory to Lender dated as of the Closing Date, covering such items as may
be required by Lender, including without limitation, that the Loan Documents are
valid, binding and enforceable in accordance with their terms and that they do
not violate any applicable usury laws or other laws, that, to the best of their
knowledge, the Property and its intended use comply with all timeshare and other
applicable laws and that, to the best of their knowledge, the Borrower, the
Guarantor and the Property are in compliance with all applicable laws and that
the Notes Receivable and all documentation related to such Notes Receivable
comply in all material respects with all applicable consumer and disclosure
laws, rules and regulations of any applicable local, state or federal authority
including but not limited to Truth in Lending and Regulation Z of the Federal
Reserve Board.
(b) REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. The
representations and warranties contained in the Loan Documents and in any
certificates delivered to Lender in connection with the closing shall be true
and correct in all material respects, and all covenants and agreements to have
been complied with and performed by Borrower and Guarantor shall have been fully
complied with and performed to the satisfaction of Lender.
(c) NO PROHIBITIONS. Neither Borrower nor Guarantor shall have taken
any action or permitted any condition to exist which would have been prohibited
by any provision of this Agreement, the Loan Documents or the Commitment.
(d) CLOSING CERTIFICATES. Lender shall have received certificates, in
form satisfactory to it, dated as of the Closing Date and signed by the Borrower
and Guarantor respectively,
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certifying that the conditions specified in Sections 4.1(b) and (c) have been
fulfilled.
(e) BACKGROUND DOCUMENTS. Borrower shall have delivered to Lender and
Lender shall have approved each of the following (collectively, the "Background
Documents"):
(i) CORPORATE DOCUMENTS. Copies of the Articles of
Incorporation stamped by the Secretary of State of Nevada and New York, and
the By-Laws of the Borrower and Guarantor and any amendments thereto, all
certified to be true and complete by the Secretary of each of Borrower and
Guarantor.
(ii) GOOD STANDING CERTIFICATES. Current good standing
certificates issued by the Secretary of State of Nevada in respect of
Borrower, and New York in respect of Guarantor.
(iii) RESOLUTIONS. The resolutions of the board of directors
of the Borrower and the Guarantor and all other necessary resolutions and
consents of Borrower or Guarantor, authorizing the execution of all Loan
Documents to which they are a party and authorizing performance of all
obligations thereunder.
(iv) BORROWER'S AFFIDAVIT. If required by the Title Company
(as hereafter defined), Borrower's Affidavit, in form and content
sufficient to permit the Title Company to delete any exception for parties
in possession, matters of survey, mechanics' or materialmen's liens, the
gap period, and taxes and assessments which are due and payable.
(v) SURVEY. One (1) original copy of a perimeter survey
dated, satisfactory to Lender and prepared by a licensed surveyor
satisfactory to Lender and the Title Company in accordance with Lender's
requirements, of the Property, showing the location and dimensions of all
Improvements thereon and indicating the routes of ingress and egress for
public access to the Property, all utility lines, walks, drives, recorded
or visible easements and rights-of-way on the Property, and showing that
there are no encroachments, improvements, projections or unacceptable
easements (recorded or unrecorded) on the property lines. The survey shall
certify the acreage of the Property and shall indicate whether the Property
is located within any flood hazard area. The survey must be prepared in
accordance with the standards set forth by ALTA, any and all Nevada state
surveyors' bureaus or associations and any and all regulations or
applicable local, state and federal law and must be certified to Lender and
the Title Company. The surveyor's certificate placed on the survey shall
include a statement that said survey locates any
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and all items set forth as exceptions in the Title Policy as Lender may
require, shall satisfy all of the survey requirements in the Commitment,
and shall include any other requirements of Lender and the Title Company.
(vi) ENVIRONMENTAL REPORT. A phase I environmental survey
covering the Property satisfactory to Lender.
(vii) DEED OF TRUST TITLE INSURANCE COMMITMENT AND POLICY. A
commitment to issue a 1992 ALTA extended coverage mortgagee's policy of
title insurance (the "Title Policy") underwritten by a title company
acceptable to Lender (the "Title Company"), in an amount at least equal to
$4,500,000.00 and insuring that the Deed of Trust creates a first lien in
and to the Property without exception for filed and unfiled mechanics liens
and claims or for matters which an accurate survey would disclose, subject
to Liens being contested as permitted by this Agreement, immaterial
easements, taxes not yet due and payable and such exceptions and conditions
to title as Lender shall approve in writing (the foregoing taxes, Liens,
easements, exceptions and conditions being referred to as the "Permitted
Exceptions"). Such Title Policy shall contain such affirmative coverage as
Lender deems necessary, including but not limited to an affirmative
statement that the Title Policy insures Lender against all mechanics' and
materialmen's liens and shall contain endorsements in form and content
acceptable to Lender: (A) insuring against matters which would be disclosed
on an accurate survey; (B) insuring that no building restriction or similar
exception to title disclosed on the Title Policy has been violated and that
any violation thereof would not create or result in any reversion, reverter
or forfeiture of title; (C) a zoning endorsement in the form typically
issued in the State of Nevada.
(f) EVIDENCE OF INSURANCE. Lender shall have received evidence
satisfactory to Lender that Borrower has obtained and is maintaining all
policies of insurance required by and in accordance with Section 7.1(d).
(g) APPLICABLE LAWS AND APPROVALS. Lender shall have received evidence
satisfactory to Lender that all existing and contemplated improvements are and
will be in compliance with all applicable zoning, building and other laws in
connection with the existence and operation of the Property and the sale, use,
marketing and occupancy of the Intervals and that Borrower has obtained and
maintains all necessary approvals, for its operation of the Property including
but not limited to all necessary timeshare operating and sales approvals and
registrations.
(h) LITIGATION. Other than those particular matters
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described in Exhibit B, there shall be no bankruptcy, foreclosure action or
other material litigation or judgments pending or outstanding against the
Property, the Units, any portion of the Collateral, the Borrower, Guarantor or
the managing agent for the Property (each a "Material Party"). The term "other
material litigation" as used herein shall not include matters in which (i) a
Material Party is plaintiff and no counterclaim is pending or (ii) Lender
determines, in its reasonable discretion, that such litigation is immaterial due
to settlement, insurance coverage, frivolity, or amount or nature of claim.
Lender shall have obtained an independent search, at Borrower's expense,
confirming that no such bankruptcy, foreclosure action or other material
litigation or judgment exists.
(i) LOAN DOCUMENTS. On or prior to the Closing Date, Borrower shall
execute and deliver (or cause to be executed and delivered, as the case may be)
to Lender, all of the Loan Documents.
(j) UCC/OTHER SEARCHES. Lender shall have obtained such searches of
the applicable public records as it deems necessary under Nevada and other
applicable law to verify that it has a first and prior perfected Lien and
security interest covering all of the Collateral, except as otherwise provided
herein. Lender shall not be obligated to fund any Advance if Lender determines
that it does not have a first and prior perfected lien and security interest
covering any portion of the Collateral, except as otherwise provided herein.
(k) TAXES AND ASSESSMENTS. Lender shall have received evidence
satisfactory to it that, except as noted on Exhibit D, all taxes and assessments
owed by or for which Borrower or the Timeshare Owners' Association are
responsible for collection have been paid, or will be paid out of closing
proceeds, which taxes and assessments include, without limitation, sales taxes,
room occupancy taxes, payroll taxes, personal property taxes, excise taxes,
intangibles taxes, real property taxes, income taxes, and any assessments
related to the Property. Lender shall have also received information
satisfactory to Lender disclosing the tax identification numbers, tax rates,
estimated tax values, assessment ratios and estimated assessment values or
amounts with respect to the Property and as to the identities of the taxing
authorities having jurisdiction over the Property and the instrumentalities and
entities having the power and jurisdiction to impose assessments against the
Property.
(l) FINANCIAL STATEMENTS. Lender shall have received and approved the
Financial Statements required pursuant to the Commitment to be delivered to
Lender, or otherwise required by Lender, for Borrower and Guarantor, all in form
and substance satisfactory to Lender.
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(m) PRECLOSING INSPECTIONS. Lender shall have conducted and approved
due diligence investigations satisfactory to Lender, of the Borrower, the
Guarantor and the Property.
(n) PROCEEDINGS SATISFACTORY. All actions taken in connection with the
execution or delivery of the Loan Documents, and compliance with closing
conditions and all documents and papers relating thereto, shall be reasonably
satisfactory to Lender and its counsel. Lender and its counsel shall have
received copies of such documents and papers as Lender or such counsel may
reasonably request in connection therewith, all in form and substance
satisfactory to Lender and its counsel.
(o) EXPENSES. The Borrower shall have paid all fees and expenses
required to be paid prior to or at closing pursuant to this Agreement.
(p) OPERATING BUDGETS AND MISCELLANEOUS. The Borrower shall have
furnished an annual detailed operating budget for the Resort in form
satisfactory to Lender and Borrower shall furnish and comply with such other
matters, insurance or documents as Lender shall require.
SECTION 5
5. FUNDING PROCEDURES
5.1. FUNDING PROCEDURE-MORTGAGE LOAN. Upon compliance by Borrower with all
of the conditions contained in this Agreement applicable to the Mortgage Loan,
Lender shall on the Closing Date fund the Mortgage Loan.
5.2. FUNDING PROCEDURE-RECEIVABLES LOAN. The obligation of Lender to make
any Receivables Loan Advance, including the Initial Receivables Loan Advance,
shall be subject to the satisfaction of all of the following conditions
precedent:
(a) REQUESTS FOR ADVANCES. Each request for a Receivables Loan Advance
shall:
(i) be in writing and shall certify the amount of the
then-current Borrowing Base, specify the principal amount of the
Receivables Loan Advance requested and designate the account to which the
proceeds of such Receivables Loan Advance are to be transferred;
(ii) state that, except as noted in such request, the
representations and warranties of the Borrower contained in this Agreement
and any closing or funding related certifications are true and correct as
of the date of the
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request, and after giving effect to the making of such requested
Receivables Loan Advance, will be true and correct as of the date on which
the requested Receivables Loan Advance is to be made; provided that Lender
shall have no obligation to fund any request for an advance if Lender
determines, in its reasonable discretion, that such changes as noted in the
request for advance are material and affect adversely Lender's credit
underwriting of Borrower.
(iii) state that no Default or Event of Default exists as of
the date of the request and, after giving effect to the making of such
requested Receivables Loan Advance, no Default or Event of Default would
exist as of the date on which the requested Receivables Loan Advance is to
be made;
(iv) be delivered to the office of Lender at least five (5)
Business Days prior to the date of the requested Receivables Loan Advance
and contain a schedule setting forth all Notes Receivable intended to be
pledged and delivered to Lender with the actual delivery of such Notes
Receivable with all applicable endorsements and assignments being delivered
not less than three (3) Business Days prior to the date of the Receivables
Loan Advance;
(v) be signed by a principal financial officer of the
Borrower;
(vi) certify that the Borrower has no knowledge of any
asserted or threatened defense, offset, counterclaim, discount or allowance
in respect of each Note Receivable to be pledged in connection with such
requested Receivables Loan Advance, or in respect of any of the Pledged
Notes Receivable;
(vii) contain an aging report of the Pledged Notes
Receivable; identifying, among other things, which among them are Eligible
Notes Receivable; and
(viii) contain a delinquency report which shall be in form
and substance satisfactory to the Lender and shall show which of such Notes
Receivable is delinquent and the duration of such delinquency, and which of
such Pledged Notes Receivable is not an Eligible Note Receivable;
(b) LOAN DOCUMENTS/COLLATERAL. Not less than three (3) Business Days
prior to the date of any Receivables Loan Advance, the Borrower shall have:
(i) delivered to Lender a current aging report for all
Pledged Notes Receivable and a list of all Eligible Notes Receivable and
related Assigned Deeds of Trust which are to be the subject of such
requested Receivables Loan Advance,
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indicating the unpaid principal balance owing on each of the Pledged Notes
Receivable deemed to be an Eligible Note Receivable, together with such
additional information as Lender may reasonably require;
(ii) delivered to Lender (or, if Lender shall so instruct, a
designee appointed by Lender in writing) (A) the original of each Pledged
Note Receivable (duly endorsed with the words "Pay to the order of
Litchfield Financial Corporation with recourse"), (B) the original of each
Assigned Deed of Trust securing such Pledged Notes Receivable, (C) the
original of each purchase contract (including addenda) relating to the
Pledged Notes Receivable and Assigned Deeds of Trust, and (D) originals or
true copies of the related truth-in-lending disclosures, loan application,
grant, bargain and sale deed, Payment Authorization Agreement, if one
exists, and, if required by Lender, the related Purchaser's
acknowledgement, receipt by Purchaser of the Public Offering Statement and
Exchange Company application, disclosures and materials;
(iii) delivered to Lender a recorded Assignment of Notes
Receivable and Deed of Trusts assigning to Lender all of the Borrower's
right, title and interest in and to each such Pledged Note Receivable and
the related Assigned Deed of Trust; and
(iv) delivered to Lender, with respect to each Encumbered
Interval, a mortgagee's title insurance policy showing that the Assigned
Deed of Trust in respect of such Interval has been assigned to Lender and
insuring in favor of Lender the first priority lien of such Assigned Deed
of Trust in the original principal amount of the Pledged Note Receivable
secured thereby and containing such other affirmative insurance
endorsements as Lender may reasonably require. The condition of title must
be satisfactory to Lender in all respects.
The Assigned Deed of Trust and the applicable Assignment of Notes
Receivable and Deed of Trusts shall each have been duly recorded in the
land records of ▇▇▇▇▇ County, Nevada. The mortgagee's title insurance
policies shall be in form and substance reasonably satisfactory to Lender
and shall be issued by the Title Company, and name Lender as the insured
party therein. The funding of the requested Receivables Loan Advance,
delivery of the documentation related to the Pledged Notes Receivable and
issuance of the title insurance policy, and recording of the applicable
Assignment of Notes Receivable and Assigned Deeds of Trust or any releases
may, in Lender's discretion, be effected by way of an escrow or other
arrangement with the Title Company or other fiduciary, the form and
substance of which shall be satisfactory to Lender.
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If the Title Company fails to deliver the documentation related to the
Pledged Notes Receivable or issue the title insurance policies within the
time periods required by Lender. Lender shall have no obligation to make
further Receivables Loan Advances hereunder unless such failure has been
cured to Lender's satisfaction.
(c) OTHER CONDITIONS. In addition to the other conditions set forth in
this Agreement, the making of the Initial Receivables Loan Advance or any
requested Receivables Loan Advance shall be subject to the satisfaction of the
following conditions:
(i) no Default or Event of Default shall exist immediately
prior to the making of such requested Advance or, after giving effect
thereto, immediately after the making of such requested Receivables Loan
Advance.
(ii) each agreement required to have been executed and
delivered in connection with any prior Receivables Loan Advance shall be
consistent with the terms of this Agreement and shall be in full force and
effect.
(iii) the date on which such requested Receivables Loan
Advance is to be made shall be a Business Day.
(iv) Borrower shall have delivered to Lender a certification
showing the dollar amount of the requested Receivables Loan Advance based
on the Eligible Notes Receivable pledged to Lender, and the Notes
Receivable being pledged contemporaneously with each requested Advance.
(v) not more than two (2) Receivables Loan Advances shall
have previously been made in the same calendar month in which such
requested Receivables Loan Advance is to be made, unless Lender, in its
discretion, agrees to make additional Receivables Loan Advances during such
calendar month.
(vi) such requested Receivables Loan Advance shall be in a
principal amount of not less than $50,000.00, unless Lender, in its
discretion, agrees to make a Receivables Loan Advance in an amount less
than $50,000.00.
(vii) Lender shall have determined that the requested
Receivables Loan Advance, when added to the aggregate outstanding principal
amount of all previous Receivables Loan Advances, if any, does not exceed
the total amount of the Borrowing Base, based on the Eligible Notes
Receivable that have been duly pledged in favor of Lender or any other
restriction set forth in this Agreement.
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(viii) If Lender shall so require, Lender shall have
received an executed closing protection letter issued by the Title Company,
which shall be reasonably acceptable to Lender.
(ix) The representations and warranties contained in the
Loan Documents and in any certificates delivered to Lender in connection
with the closing shall be true and correct in all material respects except
as disclosed in Section 5.2(a)(ii) and all covenants and agreements to have
been complied with and performed by Borrower shall have been fully complied
with and performed to the satisfaction of Lender.
(x) Borrower shall have delivered to Lender and Lender shall
have approved the pro forma title commitment with respect to the Encumbered
Intervals, and a title commitment with respect to the Assignment of Notes
Receivable and Deeds of Trust, all in form and content reasonably
satisfactory to Lender.
(xi) Lender shall have received evidence reasonably
satisfactory to Lender that the Property, the Collateral, and the Borrower
are in compliance with all applicable laws in connection with the
establishment and operation of the Property, and the marketing and sales of
Intervals, including without limitation, the Timeshare Act.
(xii) There shall be no bankruptcy, foreclosure action or
other material litigation or judgments pending or outstanding against the
Property, any portion of the Collateral, the Borrower, Guarantor, or any
Material Party, which in Lender's reasonable judgment, would have a
material adverse effect on the Property or the Collateral or would
materially and adversely affect the likelihood of repayment of the Loan or
the performance by the Borrower and Guarantor of their obligations under
the Loan Documents.
(xiii) Lender shall have received such other agreements,
documents, instruments, certificates and materials as Lender may reasonably
request to evidence the Obligations; to evidence and perfect the rights,
liens and security interests of Lender contemplated by the Loan Documents,
and to effectuate the transactions contemplated herein.
(xiv) Lender shall have received and approved true, correct
and complete copies of all applicable governmental permits, approvals,
consents, licenses, and certificates for the establishment of the Property
as an interval ownership timeshare project in accordance with Nevada law,
and for the occupancy and intended use and operation of the Property,
including the Units and Intervals, and, letters
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from utility companies, governmental entities or other Persons, or
certification by the Borrower or other confirmation acceptable to Lender.
(xv) Lender shall have received and approved true, correct
and complete copies of the documents relating to the Property and the
creation, marketing and sale of Intervals (collectively, the "Timeshare
Documents"), all of which must be in form and substance satisfactory to
Lender, consisting of:
(A) the public offering statements, final subdivision public
report (timeshare project) and other registrations with approvals from the
Division related to the establishment and operation of the Property;
(B) other registrations, approvals and permits for creation
and sale of Intervals and operation of the Property, including, without
limitation, the Borrower's occupational and other business licenses
relating to the Borrower or the Property, samples of all advertising, gift,
prize and promotional materials and evidence of Division and other required
approvals thereof, as well as copies of any agreements with all Exchange
Companies and, upon request by Lender, a list of all salespeople in
connection with the Property, together with evidence that each is properly
licensed in accordance with applicable law.
(C) the Timeshare Owners' Association's certificate of good
standing, and certified articles of incorporation, bylaws and all
amendments;
(D) the exchange agreement for the Property with the
Exchange Company, and all other agreements entered into by or on behalf of
the Timeshare Owners' Association or the Borrower, including agreements
with any Affiliate, related to management, operations and maintenance of
the Property;
(E) the form of all documents used to market and sell
Intervals or that govern the rights of Purchasers, including without
limitation, purchase contracts, advertising and solicitation materials,
Notes Receivable, truth-in-lending statements, disclosures,
acknowledgments, deeds, deeds of trust, exchange club agreements,
reservation agreements, and management agreements; and
(F) A proforma commitment to issue lender's title insurance
policies from the Title Company for Intervals to be encumbered by Assigned
Deeds of Trust, in an amount at least equal to the amount of the Pledged
Note Receivable, naming Lender as insured lender and containing such
affirmative coverage as Lender may reasonably require.
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(xvi) with respect to the marketing and sales of Intervals in
jurisdictions other than Nevada, Borrower shall deliver to Lender (A) a
copy of any permit or approval from any jurisdiction where Borrower has
obtained the necessary registrations to effect such sales or a letter from
the applicable authorities in such jurisdiction or (B) for those
jurisdictions where no registration has occurred, an opinion of counsel,
acceptable to Lender, in form acceptable to Lender stating that no such
registration is necessary, or (C) such other evidence of compliance with
applicable laws as Lender may require.
(xvii) With respect to the Timeshare Documents, Borrower
shall deliver to Lender an opinion of counsel in form acceptable to Lender
regarding compliance by all Timeshare Documents with all applicable laws,
rules and regulations.
(xviii) Lender shall have received evidence satisfactory to
it that, except as noted on Exhibit D, taxes and assessments owed by or for
which Borrower or the Timeshare Owners' Association are responsible for
collection have been paid, or will be paid out of closing proceeds, which
taxes and assessments include, without limitation, sales taxes, room
occupancy taxes, payroll taxes, personal property taxes, excise taxes,
intangibles taxes, real property taxes, and income taxes, and any
assessments related to the Property.
(xix) Lender shall have conducted and approved due diligence
investigations reasonably satisfactory to Lender, of the Borrower, the
Guarantor, the Property, the Notes Receivable and other Collateral.
(xx) Lender shall have received evidence that the Units have
been accepted into the exchange program managed by the Exchange Company.
(d) Fees and Expenses. The Borrower shall have paid all fees and
expenses required to be paid pursuant to this Agreement in connection with such
requested Receivables Loan Advance or any conditions related thereto.
(e) Proceedings Satisfactory. All actions taken in connection with
such requested Receivables Loan Advance and all documents and papers relating
thereto shall be reasonably satisfactory to Lender and its counsel. Lender and
its counsel shall have received copies of such documents and papers as the
Lender or such counsel may reasonably request in connection with such requested
Receivables Loan Advance, all in form and substance reasonably satisfactory to
the Lender and its counsel.
Upon compliance by Borrower with all of the conditions contained in
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this Section 5.2 applicable to a Receivables Loan Advance, Lender shall fund the
Receivables Loan Advance.
SECTION 6
6. REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor, jointly and severally, hereby represent and warrant
to Lender as follows:
6.1. ORGANIZATION, STANDING, QUALIFICATION. Borrower: (a) is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada; and (b) has all requisite
power to conduct its business and to execute, deliver and perform
its obligations under the Loan Documents.
Guarantor (a) is a corporation duly organized, validly existing and in
good standing under the laws of New York; and (b) has all requisite power to
conduct its business and to execute, deliver and perform its obligations under
the Loan Documents.
6.2. AUTHORIZATION, ENFORCEABILITY, ETC.
(a) The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary action by Borrower and
Guarantor and does not and will not: (i) violate any provision of the articles
of incorporation, or bylaws of Borrower or Guarantor, or any agreement, law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect to which Borrower or Guarantor is a party or is
subject; (ii) result in, or require the creation or imposition of, any Lien upon
or with respect to any asset of Borrower or Guarantor other than Liens in favor
of Lender; or (iii) result in a breach of, or constitute a default by Borrower
or Guarantor under, any indenture, loan or credit agreement or any other
agreement, document, instrument or certificate to which Borrower or Guarantor is
a party or by which it or any of its assets are bound or affected.
(b) No approval, authorization, order, license, permit, franchise or
consent of, or registration, declaration, qualification or filing with, any
governmental authority or other Person, including without limitation, the
Division or the Timeshare Owners' Association is required in connection with the
execution, delivery and performance by Borrower or Guarantor of any of the Loan
Documents.
(c) The Loan Documents constitute legal, valid and binding obligations
of Borrower and Guarantor, enforceable against Borrower and Guarantor in
accordance with their respective terms, subject to the effect of any applicable
Debtor Relief Law and with respect to the enforcement of any specific provision
to the
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application of principles of equity.
(d) Borrower has and will have good and marketable title to the
Collateral, free and clear of any Lien, security interest, charge or encumbrance
except for the security interests created by this Agreement or any Loan Document
or otherwise created in favor of Lender or those specifically consented to in
writing by the Lender. No currently effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is or
will be on file in any recording office, except such as may have been filed in
favor of Lender.
(e) The execution and delivery of the Loan Documents, the endorsement
to Lender of the Pledged Notes Receivable, the filing of the UCC-1's with the
Nevada Secretary of State and the Official Records of ▇▇▇▇▇ County, Nevada, and
recording of the Deed of Trust and the Assignments of Notes Receivable and Deeds
of Trust in the Official Records of ▇▇▇▇▇ County, Nevada, create in favor of
Lender a valid and perfected continuing first priority security interest in the
Collateral, except as otherwise provided herein. The Collateral shall secure the
full payment and performance of the Obligations.
(f) To the best of the knowledge of Borrower, none of the Pledged
Notes Receivable will be forged or will have affixed thereto any unauthorized
signatures or will be entered into by any Person without the required legal
capacity;
(g) There will be, no modifications or amendments to the Pledged Notes
Receivable or Assigned Deeds of Trust, except in connection with a modification
resulting in an upgrade or downgrade not involving a delinquent Pledged Note
Receivable or except as otherwise permitted herein.
(h) To the best of the knowledge of Borrower, the makers of the
Eligible Notes Receivable have and during the term of this Agreement will have
no defenses, offsets, counterclaims or claims relating to the Eligible Notes
Receivable or the Assigned Deeds of Trust.
(i) The Pledged Notes Receivable and the Assigned Deeds of Trust will
be executed and delivered by Purchasers in favor of Borrower in connection with
the purchase of the related Encumbered Intervals.
(j) To the best of the knowledge of Borrower, the Assigned Deeds of
Trust will constitute valid and enforceable first and prior liens and security
interests on the Encumbered Intervals.
(k) The Pledged Notes Receivable and the Assigned Deeds of Trust will
remain in full force and effect, will be, to the best of the knowledge of
Borrower, valid and binding obligations of the
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respective makers in favor of Lender, as holder; and the Borrower further
warrants and guarantees the value, quantity and sound condition of the
Encumbered Intervals and rights, properties, easements and interests appurtenant
or related thereto.
(l) The grant of the security interests described herein has not
affected and will not affect the validity or enforceability of the obligations
of the respective makers of the Pledged Notes Receivable under such Notes
Receivable or the respective Assigned Deeds of Trust.
(m) The Lender is not and shall not be required to take, and the
Borrower has taken any and all required steps to protect Lender's security
interests in the Collateral; and Lender is not and shall not be required to
collect or realize upon the Collateral or any distribution of interest or
principal, nor shall loss of, or damage to, the Collateral release the Borrower
or Guarantor from any of the Obligations.
6.3. FINANCIAL STATEMENTS AND BUSINESS CONDITION. The financial statements
fairly present the respective financial conditions and results of operations of
Borrower and Guarantor as of the date or dates thereof and for the periods
covered thereby. The Financial Statements delivered to Lender are true and
correct. There were no material liabilities, direct or indirect, fixed or
contingent, of Borrower or Guarantor as of the dates of such Financial
Statements which were not reflected therein or in the notes thereto, which have
not otherwise been disclosed to Lender in writing. Except for any such changes
heretofore expressly disclosed in writing to Lender, there has been no material
adverse change in the respective financial conditions of Borrower or Guarantor
from the financial conditions shown in their respective Financial Statements,
nor have Borrower or Guarantor incurred any material liabilities, direct or
indirect, fixed or contingent, which are not shown in their respective Financial
Statements. Borrower and Guarantor, respectively, is able to pay all of its or
their respective debts as they become due, Borrower and Guarantor, as the case
may be, shall maintain such solvent financial condition, giving effect to the
Obligations, as long as the Borrower or Guarantor, is obligated to Lender under
the Agreement, or with respect to the Guarantor, the Guaranty, or in any other
manner whatsoever. Borrower's and Guarantor's obligations under this Agreement
and under the Loan Documents will not render Borrower or Guarantor unable to pay
its or their debts as they become due. The present fair market value of
Borrower's and Guarantor' assets is greater than the amount required to pay its
or their respective total liabilities.
6.4. TAXES. Except as set forth on Exhibit D, Borrower represents and
warrants that Borrower has paid, or caused to be paid, in full all ad valorem
taxes and other taxes and assessments against the Collateral, to the extent due
and payable. Borrower
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knows of no basis for any additional taxes or assessments against the Property
or the Collateral. Borrower has filed all tax returns required to have been
filed by it and has caused the Timeshare Owners' Association to file all tax
returns required to have been filed by it, and has paid or caused the Timeshare
Owners' Association to pay all taxes shown to be due and payable on such
returns, including interest and penalties, and all other taxes which are payable
by it or the Timeshare Owners' Association, as the case may be, to the extent
the same have become due and payable.
6.5. TITLE TO PROPERTIES: PRIOR LIENS. Borrower has good and marketable
title to all of the Collateral. Borrower is not in default under any of the
documents evidencing or securing any indebtedness which is secured, wholly or in
part, by any portion or all of the Collateral and no event has occurred which
with the giving of notice, the passage of time or both, would constitute a
default under any of the documents evidencing or securing any such indebtedness.
Other than the Liens granted in favor of Lender and the Permitted Exceptions, or
as otherwise permitted hereunder, there are no liens or encumbrances against the
Collateral.
6.6. SUBSIDIARIES, AFFILIATES AND CAPITAL STRUCTURE. Borrower has no
subsidiaries which have any involvement or interest in the Property in any way.
Guarantor owns all of the capital stock of Borrower. Guarantor derives
substantial financial benefit from the Borrower. For so long as Borrower is
obligated to Lender under any of the Loan Documents, there shall be no change in
the ownership of Borrower without the prior written consent of Lender.
6.7. LITIGATION, PROCEEDINGS, ETC. There are no actions, suits,
proceedings, orders or injunctions pending or threatened against or affecting
Borrower, Guarantor, the Collateral or the Timeshare Owners' Association at law
or in equity, or before or by any governmental authority or other tribunal,
which: (a) could have a material adverse effect on Borrower, or Guarantor; or
(b) relate to the Loan or which could have a material effect on the Collateral.
Borrower has received no notice from any court, governmental authority or other
tribunal alleging that Borrower or the Property have violated the Timeshare Act,
any of the rules or regulations thereunder, the Timeshare Declaration or any
other applicable laws, agreements or arrangements that could have any material
effect on the Loan or the Collateral.
6.8. LICENSES, PERMITS, ETC. The Borrower, the Property, the Timeshare
Owners' Association, Borrower's Affiliates involved in the operations of the
Property, and, to the best of Borrower's knowledge after diligent inquiry, other
Persons involved in the operations of the Property, possess and will at all
times continue to possess, all requisite franchises, certificates of convenience
and necessity, operating rights, approvals, licenses, permits, consents,
authorizations, exemptions and orders as are necessary to
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carry on its or their business without any known conflict with the rights of
others and, with respect to the Borrower, the Property and the Timeshare Owners'
Association, in each case subject to no mortgage, pledge, Lien, lease,
encumbrance, charge, security interest, title retention agreement or option
other than as provided for by this Agreement.
6.9. Environmental Matters. The Property does not and will not contain any
Hazardous Materials in violation of law. No Hazardous Materials are or will be
used or stored at or transported to or from the Property in violation of law.
Neither Borrower nor the Property nor any manager thereof or to Borrower's
knowledge, the Timeshare Owners' Association, have ever used the Property as a
facility for the storage, treatment or disposition of any Hazardous Materials in
violation of law or have received notice from any governmental agency, entity or
other Person with regard to Hazardous Materials on, under or affecting the
Property. Neither Borrower nor the Property, nor any portion thereof, nor to
Borrower's knowledge after diligent inquiry, the Timeshare Owners' Association,
are in violation of any Environmental Laws.
6.10. Full Disclosure. No information, exhibit or written report or the
content of any schedule furnished by or on behalf of Borrower or Guarantor to
Lender in connection with the Loan, the Collateral or the Property, and no
representation or statement made by Borrower or Guarantor in any Loan Document
contains any material misstatement of fact or omits the statement of a material
fact necessary to make the statement contained herein or therein not misleading.
Borrower and Guarantor know of no fact or condition which will prevent the sale
of Intervals to Purchasers or prevent the operation of the Property in
accordance with the Timeshare Declaration and related public offering statement,
and in accordance with applicable law, or prevent Borrower or Guarantor from
performing its Obligations pursuant to the Loan Documents.
6.11. Use of Proceeds/Margin Stock. None of the proceeds of the Loan will
be used to purchase or carry any "margin stock" (as defined under Regulation G
or U of the Board of Governors of the Federal Reserve System, as in effect from
time to time), and no portion of the proceeds of the Loan will be extended to
others for the purpose of purchasing or carrying margin stock. None of the
transactions contemplated in the Agreement (including, without limitation, the
use of the proceeds from the Loan) will violate or result in the violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulations G, T, U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
11. Borrower is not an investment company as defined by the Investment Company
Act of 1940, as amended, and is not required to register under said Act.
6.12. No Defaults. No Default or Event of Default exists,
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and there is no violation in any material respect of any term of any agreement,
charter instrument, bylaw or other instrument to which the Borrower or Guarantor
is a party or by which it may be bound.
6.13. COMPLIANCE WITH LAW. THE BORROWER
(a) is not in violation, nor is the Property, or the business
operations in respect of the Property, or to the Borrower's knowledge after
diligent inquiry, the Timeshare Owners' Association, in violation, of the
Timeshare Act or any laws, ordinances, governmental rules or regulations of
Nevada, any political subdivision of Nevada or any other jurisdiction to which
the Borrower or the Property, or the business operations conducted in respect of
the Property, or the Timeshare Owners' Association, are subject; and
(b) has not failed, nor has the Property or, to Borrower's knowledge,
the Timeshare Owners' Association failed, to obtain any consents or joinders, or
any approvals, licenses, permits, franchises or other governmental
authorizations, or to make or cause to be made any filings, submissions,
registrations or declarations with any government or agency or department
thereof, necessary to the establishment, ownership or operation of the Property
or any of Borrower's other assets, or to the conduct of Borrower's business,
which violation or failure to obtain or register materially adversely affects
the Borrower, the Property or the business, prospects, profits, properties or
condition (financial or otherwise) of the Borrower or Guarantor or the Property.
The Borrower has, to the extent required by its activities and businesses, and
the operations of the Property has, fully complied with (1) all of the
applicable provisions of: (a) the Consumer Credit Protection Act; (b) Regulation
Z of the Federal Reserve Board; (c) the Equal Credit Opportunity Act; (d)
Regulation B of the Federal Reserve Board; (e) the Federal Trade Commissions
3-day cooling off rule for Door-to Door Sales (f) Section 5 of the Federal Trade
Commission Act; (g) the Interstate Land Sales Full Disclosure Act ("ILSA"); (h)
federal postal laws; (i) applicable state and federal securities laws; (j)
applicable usury laws; (k) applicable trade practices, home and telephone
solicitation, sweepstakes, anti-lottery and consumer credit and protection laws;
(l) applicable real estate sales licensing, disclosure, reporting and escrow
laws; (m) the Americans With Disabilities Act and related accessibility
guidelines ("ADA"); (n) the Real Estate Settlement Procedures Act ("RESPA"); (o)
all amendments to and rules and regulations promulgated under the foregoing acts
or laws; and (p) other applicable federal statutes and the rules and regulations
promulgated thereunder; and (2) all of the applicable provisions of the
Timeshare Act, any Nevada law or law of any state (and the rules and regulations
promulgated thereunder) relating to ownership, establishment or operation of the
Property, or the sale, offering for sale, or financing of Intervals.
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6.14. RESTRICTIONS OF BORROWER OR GUARANTOR. Neither the Borrower, the
Guarantor nor the Property, nor to the Borrower's knowledge, the Timeshare
Owners' Association, is a party to any contract or agreement, or subject to any
Lien, charge or corporate or partnership restriction, which materially and
adversely affects its or their business. The Borrower will not be, on or after
the Closing Date, a party to any contract or agreement which prohibits the
Borrower's execution of, or compliance with the terms of this Agreement or the
other Loan Documents. The Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
the Collateral, whether now owned or hereafter acquired, to be subject to a Lien
except in favor of Lender as provided hereunder.
6.15. BROKER'S FEES. Lender and Borrower represent to each other that
neither of them has made any commitment or taken any action which will result in
a claim for any brokers', finders' or other similar fees or commitments with
respect to the transactions described in the Agreement.
6.16. DEFERRED COMPENSATION PLANS. The Borrower has no pension, profit
sharing or other compensatory or similar plan (herein called a "Plan") providing
for a program of deferred compensation for any employee or officer except for
Borrower's 401-K Plan. No fact or situation, including but not limited to, any
"Reportable Event," as that term is defined in Section 4043 of the Employee
Retirement Income Security Act of 1974 as the same may be amended from time to
time ("Pension Reform Act"), exists or will exist in connection with any Plan of
the Borrower which might constitute grounds for termination of any Plan by the
Pension Benefit Guaranty Corporation or cause the appointment by the appropriate
United States District Court of a Trustee to administer any such Plan. No
"Prohibited Transaction" within the meaning of Section 406 of the Pension Reform
Act exists or will exist upon the execution and delivery of the Agreement or the
performance by the parties hereto of their respective duties and obligations
hereunder. The Borrower will (a) at all times make prompt payment of
contributions required to meet the minimum funding standards set forth in
Sections 302 through 305 of the Pension Reform Act with respect to each of its
Plans; (b) promptly, after the filing thereof, furnish to the Lender copies of
each annual report required to be filed pursuant to Section 103 of the Pension
Reform Act in connection with each Plan for each Plan Year, including any
certified financial statements or actuarial statements required pursuant to said
Section 103; (c) notify the Lender immediately of any fact, including, but not
limited to, any Reportable Event arising in connection with any Plan which might
constitute grounds for termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a Trustee to administer the Plan; and (d) notify the Lender of any
"Prohibited Transaction" as that term is defined in Section 406 of the Pension
Reform Act. The Borrower will not (i)
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engage in any Prohibited Transaction, or (ii) terminate any such Plan in a
manner which could result in the imposition of a Lien on any property of the
Borrower pursuant to Section 4068 of the Pension Reform Act.
6.17. LABOR RELATIONS. The employees of the Borrower are not a party to any
collective bargaining agreement with the Borrower, and, to the best knowledge of
the Borrower and its officers, there are no material grievances, disputes or
controversies with any union or any other organization of the Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization with respect to the
Borrower.
6.18. ZONING ORDINANCES AND SIMILAR LAWS. The Property complies with all
appropriate governmental and quasi-governmental authorities laws, rules and
regulations and will continue to comply with all applicable governmental and
quasi-governmental laws, regulations, and standard requirements, including but
not limited to the Fair Housing Act of 1968 as amended, and the ADA.
6.19 AVAILABILITY OF UTILITIES. All utility services necessary for the
operation of the Property for its intended purposes are available to the
Property, including water supply, storm and sanitary sewer facilities, electric
and telephone facilities.
6.20 ACCESS. The rights-of-way for all roads necessary for the full
utilization of the Property for its intended purposes, have either been acquired
by the appropriate governmental authority and have been dedicated to public use
and accepted by such governmental authority, and all such roads are completed.
All curb cuts and traffic signals necessary in accordance with applicable laws,
rules and regulations are existing.
6.21. CONTINUATION AND INVESTIGATION. The warranties and representations
contained herein shall be and remain true and correct so long as any of the
Obligations have not been satisfied, or so long as part of the Loan shall remain
outstanding, and, except as noted in such request, each request by Borrower for
an Advance shall constitute an affirmation that the foregoing representations
and warranties remain true and correct as of the date thereof. All
representations, warranties, covenants and agreements made herein or in any
certificate or other document delivered to Lender by or on behalf of Borrower
pursuant to or in connection with this Agreement shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf, and shall survive the making of any or all of
the disbursements contemplated hereby.
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SECTION 7
7. COVENANTS
7.1. AFFIRMATIVE COVENANTS. So long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) Payment and Performance of Obligations. Borrower shall pay all of
the Obligations, Loan Costs and related expenses when and as the same become due
and payable, and Borrower shall strictly observe and perform all of the
Obligations including without limitation, all covenants, agreements, terms,
conditions and limitations contained in the Loan Documents, and all documents
collateral thereto and will do all things necessary which are not prohibited by
law to prevent the occurrence of any Event of Default hereunder or thereunder.
Borrower will maintain an office or agency in the State of Nevada where notices,
presentations and demands in respect of the Loan Documents may be made upon the
Borrower. Such office or agency and the books and records of the Borrower shall
be maintained at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ until such
time as the Borrower shall so notify the Lender, in writing, of any change of
location of such office or agency.
(b) Maintenance of Existence, Qualification and Assets. Borrower shall
at all times (i) maintain its legal existence, (ii) maintain its qualification
to transact business and good standing in the State and in any jurisdiction
where it conducts business in connection with the Property, and (iii) comply or
cause compliance with all governmental laws, rules, regulations and ordinances
applicable to the Property, the Borrower, the Collateral or Borrower's business,
including without limitation the Timeshare Act, if non-compliance would have a
material adverse effect on Borrower or the Property.
(c) Consolidation and Merger. Unless Guarantor shall have first
obtained Lender's prior written approval, which may be granted, withheld or
conditioned in Lender's discretion, or Borrower has prepaid the Obligations as
provided in Section 7.2(b), Guarantor will not consolidate with or merge into
any other Person or permit any other Person to consolidate with or merge into
it.
(d) Maintenance of Insurance. The Borrower, or if required pursuant to
the Timeshare Declaration, the Timeshare Owners' Association, shall maintain (or
the Borrower shall cause to be maintained) at all times during the term of this
Agreement, policies of insurance with premiums being paid when due, and shall
deliver to Lender certificates evidencing such insurance issued by insurance
companies in amounts, in form and in substance, and with expiration dates, all
reasonably acceptable to Lender and containing a waiver of subrogation rights by
the insuring company,
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a non-contributory standard mortgage benefit clause, or their equivalents, and a
mortgagee loss payable endorsement in favor of and satisfactory to Lender, and
breach of warranty coverage, providing the following types of insurance on and
with respect to the Borrower (or, as appropriate, the Timeshare Owners'
Association) and the Property:
(i) Public liability and property damage insurance covering
the Property in amounts and on terms satisfactory to Lender.
(ii) Such other insurance on the Property or any
replacements or substitutions therefor including, without limitation, flood
insurance (if the Property is or becomes located in an area which is
considered a flood risk by the U.S. Emergency Management Agency or pursuant
to the National Flood Insurance program), in such amounts and upon terms as
may from time to time be reasonably required by Lender.
The Borrower shall submit to Lender evidence satisfactory to
Lender as to whether or not any of the Property or any part thereof is
located within an area identified pursuant to the Flood Disaster Protection
Act of 1973 as being in a flood hazard area. If any of the Property is
located in a flood hazard area, flood insurance shall be obtained for the
maximum amount of coverage available through the federal flood insurance
program for any improvements located on any of the Property from time to
time or 100% of the highest insurance value of the improvements on a
replacement cost basis, whichever is less. The National Flood Insurance
Program flood policy shall cover the same parties covered under the
builder's risk policy, other insurance policies with coverage for flood,
collapse, rain damage and such other usual coverage as may be obtained
thereunder, and such policy will be written with an insurance company and
with cancellation provisions as hereinabove provided.
In the event of any insured loss or claim in respect of the Property,
Borrower shall apply (or cause to be applied), and Borrower covenants that
the Timeshare Owners' Association shall apply (or cause to be applied), all
proceeds of such insurance policies in a manner consistent with the
Timeshare Documents and the Timeshare Act.
All insurance policies required pursuant to this Agreement (or the
Timeshare Documents or Timeshare Act) shall provide that the coverage
afforded thereby shall not expire or be amended, canceled, modified or
terminated without at least thirty (30) days prior written notice to
Lender. At least thirty (30) days prior to the expiration date of each
policy maintained pursuant to this Section 7.1(d), a certificate evidencing
the renewal or replacement thereof satisfactory to
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Lender shall be delivered to Lender. Borrower shall deliver or cause to be
delivered to Lender receipts evidencing the payment for all such insurance
policies and renewals or replacements. The delivery of any certificates of
insurance hereunder shall constitute an assignment of all unearned
premiums, payable to the Borrower with respect to the Collateral, as
further security for the Obligations. In the event of the foreclosure of
any Deed of Trust or any other transfer of title to any of the Property in
extinguishment of any of the Obligations, all right, title and interest of
Borrower in and to all insurance policies then in force, with respect
thereto, shall pass to the purchaser or grantee.
In the event of any fire or other casualty to or with respect to the
Improvements or the Property, Borrower covenants that Borrower or the
Timeshare Owners' Association, as the case may be, will promptly restore or
repair (or cause to be restored, repaired or replaced) the damaged
Improvements and repair or replace any other personal property to the same
condition as immediately prior to such fire or other casualty and, with
respect to the Improvements and personal property on the Property, in
accordance with the terms of the Timeshare Documents or Timeshare Act.
All insurance proceeds payable to Borrower and received by Lender will
be turned over to Borrower or directly disbursed for repair, restoration or
replacement in accordance with the provisions contained herein at such
times and as necessary to effect such repairs or restoration. The
insufficiency of any net insurance proceeds shall in no way relieve the
Borrower or, as applicable, Borrower and Timeshare Owners' Association, of
its obligation to restore, repair or replace Improvements and other
personal property in accordance with the terms hereof, of the Timeshare
Declaration or other Timeshare Documents or of the Timeshare Act, and
Borrower covenants that Borrower or, as the case may be, the Timeshare
Owners' Association, shall promptly comply and cause compliance with the
provisions of the Timeshare Declaration and other Timeshare Documents, or
of the Timeshare Act relating to such restoration, repair or replacement.
To the extent that such proceeds are not necessary for or are not used for
any repair or restoration, such proceeds, payable to Borrower, in Lender's
discretion, may be applied to the payment of the Obligations, whether or
not due and in whatever order Lender elects.
Subject to the provisions of the Timeshare Declaration and the
Timeshare Documents, Lender is hereby authorized and empowered, at its
option, to adjust or compromise any loss under any insurance policy payable
to Borrower. Each insurance company is hereby authorized and directed to
make payment for all such losses directly to Lender instead of to Borrower
and Lender jointly. After deducting from the insurance proceeds any expense
incurred by it in the
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collection or handling of said funds, Lender shall apply the proceeds
payable to Borrower and received by Lender, toward the repair and
restoration of the Improvements or personal property or if no such repair
or restoration is necessary or is to occur to the reduction of the
Obligations. Lender shall not be held responsible for any failure to
collect any insurance proceeds due under the terms of any policy,
regardless of the cause of such failure. Borrower shall not take out
separate insurance concurrent in form or contributing in the event of loss
with that required to be maintained hereunder, unless Lender is included
thereon under a standard, non-contributory mortgagee endorsement making
losses payable to Lender. Borrower shall immediately notify Lender whenever
any such separate insurance is taken out and shall promptly deliver to
Lender a certificate of such insurance.
If required by Lender following the occurrence of an Event of Default,
Borrower will pay to Lender on the first (1st) day of each month, together
with and in addition to all other payments due on the Obligations, an
amount equal to one-twelfth (1/12) of the yearly premiums for insurance, to
enable Lender to pay such insurance premiums when due. The Borrower shall
promptly furnish Lender with the insurance premium statements. Such added
payments shall not be nor be deemed to be trust funds, but may be
commingled with the general funds of Lender and Lender shall not pay
interest on them. At the option of Lender, such added payments may be
carried as a debit item on Lender's books and accounts. Upon demand of
Lender, Borrower agrees to deliver to Lender such additional sums as are
necessary to make up any deficiencies in the amounts necessary to enable
Lender to pay such insurance premiums. Lender shall have no responsibility
for payment of any premium for insurance hereunder, except to the extent
that funds are deposited by Borrower with Lender hereunder. Upon the
occurrence of a Default or Event of Default, Lender may, at its option,
apply any amount then held by Lender under this paragraph to payment of the
Obligations.
Borrower shall cooperate with Lender in obtaining for Lender the
benefits of any insurance or other proceeds lawfully or equitably payable
to Borrower or Lender in connection with the transactions contemplated
hereby and shall pay the expense of an independent appraisal on behalf of
Lender in case of a fire or other casualty affecting the Property.
(e) MAINTENANCE OF SECURITY. Borrower shall execute and deliver (or
cause to be executed and delivered) to Lender all security agreements, financing
statements, assignments and such other agreements, documents, instruments and
certificates, and supplements and amendments thereto, and take such other
actions, as Lender deems necessary or appropriate in order to maintain as
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valid, enforceable and perfected first priority liens and security interests
except as permitted herein, all Liens and security interests in the Collateral
granted to Lender to secure the Obligations. Except as permitted herein in
connection with extensions and modifications in connection with Borrower's
normal collection practices, Borrower shall not grant extensions of time for the
payment of, compromise for less than the full face value or release in whole or
in part, any Purchaser or other Person liable for the payment of, or allow any
credit whatsoever except for the amount of cash paid upon, any Collateral or any
instrument, chattel paper or document representing the Collateral.
(f) PAYMENT OF TAXES AND CLAIMS. Except as noted on Exhibit D,
Borrower will pay when due and furnish to Lender such evidence of such payment
as Lender shall reasonably request from time to time, all taxes imposed upon the
Property, the Collateral, the Borrower, or any of its property, or with respect
to any of its franchises, businesses, income or profits, or with respect to the
Loan or any of the Loan Documents and all other charges and assessments against
Borrower, the Collateral and the Property which Borrower is legally obligated to
pay and shall cause the Timeshare Owners' Association to pay when due, all taxes
imposed upon the Property, the Collateral, the Timeshare Owners' Association, or
any of its property, or with respect to any of its franchises, businesses,
income or profits, or with respect to the Loan or any of the Loan Documents
which the Timeshare Owners' Association is legally obligated to pay, before any
claim (including, without limitation, claims for labor, services, materials and
supplies) arises for sums which have become due and payable. If the Timeshare
Owners' Association fails to make such payments, Borrower shall promptly pay
such amounts. Except for the Liens in favor of Lender granted pursuant to the
Loan Documents, and except as otherwise specifically provided for herein,
Borrower covenants that no statutory or other Liens whatsoever (including,
without limitation, mechanics', materialmen's, judgment or tax liens) shall
attach to any of the Collateral or the Property except for such Liens as are
expressly provided for pursuant to the Timeshare Declaration, which shall, in
any event, be subordinate to the Lien of Lender. In the event any such Lien
attaches to any of the Collateral or the Property, Borrower shall, within thirty
(30) days after any such Lien attaches, either: (i) cause such Lien to be
released of record; or (ii) provide Lender with a bond in accordance with the
applicable laws of the State, issued by a corporate surety acceptable to Lender,
in an amount and form acceptable to Lender.
Notwithstanding anything contained in this Agreement to the contrary, with
respect to (a) any taxes, assessments, charges, or Liens which Borrower is
required to pay, release or cause to be paid or released; and (b) any law, rule
or regulation which Borrower is required to comply with or cause compliance
with, such items of the foregoing description need not be paid or complied
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with, as applicable, while being contested in good faith and by appropriate
proceedings (in the written opinion of Borrower's independent counsel or based
upon other evidence reasonably satisfactory to Lender, which opinion or other
evidence shall be submitted to Lender in any case involving over $50,000); and,
if relevant, provided further that adequate book reserves (in the written
opinion of the Borrower's independent accountants or based upon other evidence
reasonably satisfactory to Lender, which opinion or other evidence shall be
submitted to Lender) have been established with respect thereto; and provided
further that Borrower's title to the Collateral is not materially and adversely
affected thereby.
(g) INSPECTIONS. Borrower shall, at any time and from time to time and
at the expense of Borrower, permit Lender or its agents or representatives to
inspect the Property, the Collateral and any of the Borrower's assets or
property, and to examine and make copies of and abstracts from its and, to the
extent it has access thereto or possession thereof, the Timeshare Owners'
Association's, books, accounts, records, original correspondence, computer
tapes, disks, software, and other papers as it may desire; and to discuss its
affairs, finances and accounts with any of its officers, employees, Affiliates,
contractors or independent public accountants (and by this provision Borrower
authorizes said accountants to discuss with Lender, its agents or
representatives, the affairs, finances and accounts of Borrower). Lender agrees
to use reasonable efforts not to unreasonably interfere with Borrower's business
operations in connection with any such inspections. Without limiting the
foregoing, Lender shall have the right to make such credit investigations as
Lender may deem appropriate in connection with its review of Pledged Notes
Receivable, and Borrower shall make available to Lender all credit information
in Borrower's possession or under its control or to which it may have access,
with respect to Purchasers or other obligors under Pledged Notes Receivable as
Lender may request. All audits and inspections shall be at Borrower's expense,
including all reasonable travel expenses of Lender's employees, provided
however, that Lender agrees, so long as no Event of Default has occurred, Lender
shall charge Borrower only for one (1) such audit and inspection per Loan Year.
(h) REPORTING REQUIREMENTS. So long as any portion of the Obligations
remains unsatisfied or this Agreement has not been terminated, Borrower and
Guarantor (as to items (ii) and (iii) below) shall furnish (or cause to be
furnished, as the case may be) to Lender the following:
(i) MONTHLY FINANCIAL REPORTS. As soon as available and in
any event within five (5) days after the end of each calendar month, a
report, for a monthly period ending not earlier than the 25th of the
previous month, showing (A) the trial balance of the Pledged Notes
Receivable, (B) an
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aging and delinquency report on the Pledged Notes Receivable, (C) a report
detailing the collections on each of the Pledged Notes Receivable and (D) a
Borrowing Base report;
(ii) ANNUAL FINANCIAL REPORTS. As soon as available and in
any event within one hundred twenty (120) days after the end of each of
calendar year or other fiscal year as may be applicable with respect to the
Borrower (a "Fiscal Year"), an audited statement of income and expense of
Borrower for the annual period ended as of the end of such Fiscal Year, and
an audited statement of financial condition of Borrower as of the end of
such Fiscal Year and a current annual sales report for Intervals at the
Property certified by Borrower, all in such detail and scope as may be
reasonably required by Lender and, except for the annual sales report,
prepared by a certified public accountant acceptable to Lender in
accordance with GAAP and on a basis consistent with prior accounting
periods;
(iii) QUARTERLY FINANCIAL REPORTS. As soon as available and
in any event within sixty (60) days after the end of each fiscal quarter of
Borrower (a "Fiscal Quarter"), a statement of income and expense of
Borrower for such Fiscal Quarter, and a statement of financial condition of
Borrower as of the end of such Fiscal Quarter, all in such detail and scope
as may be reasonably required by Lender and prepared by Borrower in
accordance with GAAP and on a basis consistent with prior accounting
periods, except that such Fiscal Quarter reports will be subject to year
end adjustments and will not contain footnotes. Each quarterly financial
statement of Borrower shall be certified by the chief financial officer of
Borrower to be true, correct and complete, and shall otherwise be in form
reasonably acceptable to Lender.
(iv) OFFICER'S CERTIFICATE. Each set of annual Financial
Statements or reports delivered to the Lender pursuant to Sections
7.1(h)(ii) and (iii) of this Agreement will be accompanied by a certificate
of the chief financial officer of the Borrower or Guarantor, as the case
may be, setting forth that the signers have reviewed the relevant terms of
the Agreement (and all other agreements and exhibits between the parties)
and have made, or caused to be made, under their supervision, a review of
the transactions and conditions of the Borrower and the Property or the
Guarantor, as the case may be, from the beginning of the period covered by
the Financial Statements or reports being delivered therewith to the date
of the certificate and that such review has not disclosed the existence
during such period of any condition or event which constitutes a Default or
Event of Default or, if any such condition or event existed or exists or
will exist, specifying the nature and period of existence thereof and what
action the Borrower or Guarantor, as the case
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may be, has taken or proposes to take with respect thereto;
(v) SALES REPORTS. As soon as available and in any event
within ten (10) days after the end of each month, Borrower shall deliver to
Lender, monthly and annually, a monthly or annual sales and cancellation
report, detailing the sales and cancellation of all Intervals at the
Property for the period covered thereby, certified by Borrower to be true,
correct and complete and otherwise in a form reasonably approved by Lender;
(vi) AUDIT REPORTS. Promptly upon receipt thereof, one (1)
copy of each other report submitted to the Borrower or Guarantor by
independent public accountants or other Persons in connection with any
annual, interim or special audit made by them of the books of the Borrower
or the Property;
(vii) NOTICE OF DEFAULT OR EVENT OF DEFAULT. Immediately
upon becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice specifying
the nature and period of existence thereof and what action the Borrower and
Guarantor are taking or propose to take with respect thereto.
(viii) NOTICE OF CLAIMED DEFAULT. Immediately upon becoming
aware that the holder of any material obligation of the Borrower or
Guarantor has given notice or taken any other action with respect to a
claimed default or event of default thereunder, a written notice specifying
the notice given or action taken by such holder and the nature of the
claimed default or event of default and what action the Borrower and
Guarantor are taking or propose to take with respect thereto.
(ix) MATERIAL ADVERSE DEVELOPMENTS. Immediately upon
becoming aware of any litigation, claim, action, proceeding, development or
other information which may materially and adversely affect the Borrower,
the Guarantor, the Collateral, the Property, or the business, prospects,
profits or condition (financial or otherwise) of the Borrower, or Guarantor
or the ability of the Borrower or Guarantor to perform its Obligations
under the Loan Documents, or of the existence of any dispute between
Borrower and any governmental or regulatory body or any other party which
dispute may materially delay or interfere with Borrower's normal business
operations, Borrower and Guarantor shall provide Lender with telephonic or
telegraphic notice, followed by telefaxed and mailed written confirmation,
specifying the nature of such litigation, development, information or
dispute and such anticipated effect.
(x) OTHER INFORMATION. Borrower will furnish
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on an annual basis to Lender: (i) a detailed operating budget for the
Property and a statement of financial condition and income and expense
statement for the Timeshare Owners' Association for the fiscal year just
ended within 120 days of each Timeshare Owners' Association fiscal year
end; (ii) not later than 30 days prior to the start of each of Borrower's
Fiscal Years, a pro forma cash flow and operating budget for Borrower for
such ensuing Fiscal Year; and (iii) Borrower and Guarantor will promptly
deliver to Lender any other information related to the Loan, the
Collateral, the Property, Borrower or Guarantor, consistent with
information provided to other lenders to Borrower, as Lender may in good
faith request.
(xi) HAZARDOUS MATERIALS. Borrower shall promptly notify
Lender of any material change in the nature or extent of any Hazardous
Materials, maintained on, in or under the Property or used in connection
therewith, and will deliver to Lender copies of any citations, orders,
notices or other material governmental or other communication received with
respect to any other Hazardous Materials, or other environmentally
regulated substances affecting the Property. Lender shall have the right,
if Lender believes in good faith that an event or situation has occurred
which has caused a material environmental impairment or adverse change to
the Property, to require Borrower to perform (at Borrower's expense) an
environmental audit or, if deemed reasonably necessary by Lender, an
environmental risk assessment of the Property. Such audit or risk
assessment must be by an environmental consultant satisfactory to Lender.
Should Borrower fail to perform such environmental audit or risk assessment
within sixty (60) days of the Lender's written request, Lender shall have
the right but not the obligation to retain an environmental consultant to
perform such environmental audit or risk assessment. All costs and expenses
incurred by Lender in the exercise of such rights shall bear interest at
the Default Rate set forth herein and shall be secured by the Collateral
and shall be payable by Borrower upon demand.
(i) RECORDS. Borrower and Guarantor shall keep adequate records and
books of account reflecting all financial transactions of Borrower and Guarantor
and with respect to the Property in which complete entries will be made in
accordance with GAAP. Borrower will maintain to the reasonable satisfaction of
Lender accurate and complete books, records and files relating to the Property,
the Collateral, the Improvements and the sales of Intervals and all payments in
respect of Pledged Notes Receivables. Borrower shall permit Lender to audit and
inspect at any time, and shall promptly deliver to Lender upon Lender's request
therefor, copies of all such books, records and files.
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(j) MANAGEMENT. The Borrower and the Guarantor shall cause the
Property to be managed at all times by Borrower or, upon the prior written
consent of Lender, a Person or Persons who have substantial experience,
background and demonstrated ability to perform, in accordance with a management
agreement satisfactory to Lender, and who are in all other respects reasonably
satisfactory to the Lender. Borrower and Guarantor further agree, at all times
during the term of this Agreement, that at least three (3) of the following:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall remain employed by Borrower and shall be actively
involved in Borrower's business.
(k) FICA. Upon the request of Lender, Borrower shall furnish to Lender
within forty five (45) days after the expiration of each calendar quarter, proof
reasonably satisfactory to Lender that Borrower's obligations to make deposits
for F.I.C.A., social security and withholding taxes have been satisfied.
(l) OPERATING CONTRACTS. Subject to the rights of the Timeshare
Owners' Association as set forth in the Timeshare Documents or any applicable
law or requirement of any governmental agency, no management agreement for the
Resort to which Borrower is a party or as to which Borrower's consent or joinder
is required, shall be modified, extended, terminated or entered into, without
the prior written approval of Lender.
(m) OWNERSHIP INTEREST. There shall be no change in the ownership
interests of Borrower. The Borrower shall not enter into proxies, voting trusts,
shareholders agreements or similar arrangements for the purpose of vesting
voting rights, authority or discretion in any other Person.
(n) NOTICES. Borrower shall notify Lender within five (5) Business
Days of the occurrence of any event: (i) as a result of which any representation
or warranty of Borrower or Guarantor contained in any Loan Documents would be
incorrect or materially misleading if made at that time; or (ii) as a result of
which Borrower or Guarantor is not in full compliance with all of its covenants
and agreements contained in this Agreement or any Loan Document; or (iii) which
constitutes or, with the passage of time, notice or a determination by Lender
would constitute, an Event of Default.
(o) MAINTENANCE. Borrower shall maintain, or shall cause to be
maintained, or to the extent provided for pursuant to the Timeshare Declaration,
shall use its best efforts to cause the Timeshare Owners' Association to
maintain the Property in good repair, working order and condition and shall make
all necessary replacements and improvements to the Property so that the value
and operating efficiency of the Property will be maintained at all times and so
that the Property remains in compliance in all respects with the Timeshare Act,
the Timeshare Documents and other
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applicable law.
(p) CLAIMS. Borrower shall promptly notify Lender of any material
claim, action or proceeding affecting the Property or Collateral, or any part
thereof, or any of the security interests or rights granted in favor of Lender
hereunder or under any of the Loan Documents. At the request of Lender, Borrower
shall appear in and defend in favor of Lender, at Borrower's sole expense, with
regard to any such claim, action or proceeding.
(q) REGISTRATION AND REGULATIONS.
(i) LOCAL LEGAL COMPLIANCE. Borrower will comply, and will
cause the Property to comply, with all applicable servitudes, restrictive
covenants, applicable planning, zoning or land use ordinances and building
codes, all applicable health and Environmental Laws and regulations, and
all other applicable laws, rules, regulations, agreements or arrangements.
(ii) REGISTRATION COMPLIANCE. Borrower will maintain, or
cause to be maintained, all necessary registrations, current filings,
consents, franchises, approvals, and exemption certificates, and Borrower
will make or pay, or cause to be made or paid, all registrations,
declarations or fees with the Division and any other government or any
agency or department thereof, whether in the State or another jurisdiction,
required in connection with the Property and the occupancy, use and
operation thereof, the incorporation of Units into the time-share plan
established pursuant to the Timeshare Declaration and the other Timeshare
Documents, and the sale, advertising, marketing, and offering for sale of
Intervals. All such registrations, filings and reports will be truthfully
completed. At Lender's request from time to time, Borrower shall deliver to
Lender a copy of(A) such registration, (B) written statements by the
applicable state authorities, in form acceptable to Lender, stating that no
registration is necessary for the sale of Intervals in the particular
state, (C) an opinion of counsel in form acceptable to Lender and rendered
by counsel acceptable to Lender, stating that no such registration is
necessary, or (D) such other evidence of compliance with applicable laws as
Lender may require; and
(iii) OTHER COMPLIANCE. The Borrower has, in all material
respects, complied with and will comply with all laws and regulations of
the United States, the State of Nevada the County of ▇▇▇▇▇, the City of Las
Vegas, Nevada and any other governmental, quasi-governmental or
administrative jurisdiction in which Intervals have been sold or offered
for sale, or in which sales, offers of sale or solicitations with respect
to the Property have been or will be conducted,
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including to the extent applicable, but not limited to: (1) the Timeshare
Act; (2) the Consumer Credit Protection Act; (3) Regulation Z of the
Federal Reserve Board; (4) the Equal Credit Opportunity Act; (5) Regulation
B of the Federal Reserve Board; (6) the Federal Trade Commission's 3-day
cooling-off Rule for Door-to-Door Sales; (7) ILSA; (8) Section 5 of the
Federal Trade Commission Act; (9) federal postal laws; (10) applicable
state and federal securities laws; (11) applicable usury laws; (12)
applicable trade practices, home and telephone solicitation, sweepstakes,
anti-lottery and consumer credit and protection laws; (13) applicable real
estate sales licensing, disclosure, reporting and escrow laws; (14) the
ADA; (15) RESPA; (16) all amendments to and rules and regulations
promulgated under the foregoing acts or laws; (17) other applicable federal
statutes and the rules and regulations promulgated thereunder; and (18) any
state law or law of any state (and the rules and regulations promulgated
thereunder) relating to ownership, establishment or operation of the
Property, or the sale, offering for sale, or financing of Intervals.
(r) OTHER DOCUMENTS. Borrower will maintain to the reasonable
satisfaction of the Lender, and make available to Lender, accurate and complete
files relating to the Property, the Pledged Notes Receivable and other
Collateral, and such files will contain true copies of each Pledged Note
Receivable, as amended from time to time, copies of all relevant credit
memoranda relating to such Notes Receivable and all collection information and
correspondence relating thereto.
(s) FURTHER ASSURANCES. Borrower will execute and deliver, or cause to
be executed and delivered, such other and further agreements, documents,
instruments, certificates and assurances as, in the judgment of Lender exercised
in good faith may be necessary or appropriate to more effectively evidence or
secure, and to ensure the performance of, the Obligations. In addition, Borrower
shall deliver to Lender from time to time upon each request by Lender such
documents, instruments or other matters or items as Lender may reasonably
require to evidence Borrower's compliance with the covenants set forth in this
Section 7.1.
(t) UTILITIES. Borrower will cause, or to the extent provided for
pursuant to the Timeshare Declaration, covenants to use its best efforts to
ensure that the Timeshare Owners' Association, or the manager of the Property,
as applicable, will cause, electric, gas, sanitary sewer, water facilities,
drainage facilities, solid waste disposal, telephone and other necessary
utilities to be available to the Property in sufficient capacity to service the
Property.
(u) AMENITIES. Borrower will cause, or to the extent provided for
pursuant to the Timeshare Declaration, will use its
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best efforts to ensure that the Timeshare Owners' Association, or the manager of
the Property, as applicable, will cause, the Property to be maintained in good
condition and repair, and in accordance with the provisions of the applicable
Timeshare Documents, and the Borrower will cause each Purchaser of an Interval
at the Property to have continuing access to, and the use of, to the extent of
such Purchaser's time-share periods and related or appurtenant services, rights
and benefits, all as provided in the Timeshare Declaration and the Timeshare
Documents.
(v) EXPENSES AND CLOSING FEES. Whether or not the transactions
contemplated hereunder are completed, the Borrower shall pay all expenses of the
Lender relating to negotiating, preparing, documenting, closing and enforcing
this Agreement and all other Loan Documents, including, but not limited to:
(i) the cost of preparing, reproducing and binding this
Agreement, the other Loan Documents and all Exhibits
and Schedules thereto;
(ii) the fees and disbursements of Lender's counsel;
(iii) Lender's out-of-pocket expenses;
(iv) all Loan Costs and all other fees and expenses
(including fees and expenses of the Lender's counsel)
relating to any Advances, amendments, waivers or
consents;
(v) all costs, outlays, legal fees and expenses of every
kind and character had or incurred in (1) the
interpretation or enforcement of any of the provisions
of, or the creation, preservation or exercise of rights
and remedies under, any of the Loan Documents including
the costs of appeal (2) the preparation for,
negotiations regarding, consultations concerning, or
the defense or prosecution of legal proceedings
involving any claim or claims made or threatened
against the Lender arising out of this transaction or
the protection of the Collateral securing the Loan or
Advances made hereunder, expressly including, without
limitation, the defense by Lender of any legal
proceedings instituted or threatened by any Person to
seek to recover or set aside any payment or setoff
theretofore
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received or applied by the Lender with respect to the
Obligations, and any and all appeals thereof; and (3)
the advancement of any expenses provided for under any
of the Loan Documents;
(vi) all expenses relating to any escrow by the Title
Company or any other escrow agent;
(vii) the custodial fees payable to Lender with respect to
the original Pledged Notes Receivable and related
Collateral;
(viii) all costs and expenses incurred by Lender under the
Loan and all fees and charges under the Loan; and
(ix) all real and personal property taxes and assessments,
documentary stamp and intangible taxes, sales taxes,
recording fees, title insurance premiums and other
title charges, document copying, transmittal and
binding costs, appraisal fees, lien and judgment search
costs, fees of architects, engineers, environmental
consultants, surveyors and any special consultants,
construction inspection fees, brokers fees, escrow
fees, wire transfer fees, and all travel and
out-of-pocket expenses of Lender to conduct inspections
or audits, except as otherwise specifically provided
for herein; Without limitation of the foregoing,
Borrower shall pay the costs of UCC and other searches,
UCC and other Loan Document recording fees and
applicable taxes, and premiums on each Title Policy
delivered to Lender pursuant to this Agreement.
The provision of this Section shall survive repayment of the Obligations or
termination of this Agreement.
(w) INDEMNIFICATION OF LENDER. In addition to (and not in lieu of) any
other provisions of any Loan Document providing for indemnification in favor of
Lender, the Borrower and Guarantor shall defend, indemnify and hold harmless
Lender, its subsidiaries, affiliates, officers, directors, agents, employees,
representatives, consultants, contractors, servants, and attorneys, as well as
the respective heirs, personal representatives, successors or assigns of any or
all of them (hereafter collectively
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the "Indemnified Lender Parties"), from and against, and promptly pay on demand
or reimburse each of them with respect to, any and all liabilities, claims,
demands, losses, damages, costs and expenses (including without limitation,
reasonable attorneys' and paralegals' fees and costs), actions or causes of
action of any and every kind or nature whatsoever asserted against or incurred
by any of them by reason of or arising out of or in any way related or
attributable to: (i) this Agreement, the Loan Documents, the Commitment or the
Collateral; (ii) the transactions contemplated under any of the Loan Documents
or any of the Timeshare Documents, including without limitation, those in any
way relating to or arising out of the violation of any federal or state laws,
including the Timeshare Act; (iii) any breach of any covenant or agreement or
the incorrectness or inaccuracy of any representation and warranty of the
Borrower or Guarantor contained in this Agreement or any of the Loan Documents
(including without limitation any certification of the Borrower or Guarantor
delivered to the Lender); (iv) any and all taxes, including real estate,
personal property, sales, mortgage, excise, intangible or transfer taxes
(exclusive of income, franchise or similar taxes), and any and all fees or
charges, including, without limitation under the Timeshare Act, with respect to
the Property or the Loan Documents which may at any time arise or become due
prior to the payment, performance and discharge in full of the Obligations; (v)
the breach of any representation or warranty as set forth herein regarding any
Environmental Laws; (vi) the failure of Borrower to perform any obligation or
covenant herein required to be performed pursuant to any Environmental Laws;
(vii) the use, generation, storage, release, threatened release, discharge,
disposal or presence on, under or about the Property of any Hazardous Materials;
(viii) the removal or remediation of any Hazardous Materials from the Property
required to be performed pursuant to any Environmental Laws or as a result of
recommendations of any environmental consultant or as reasonably required by
Lender; (ix) claims asserted by any Person (including without limitation any
governmental or quasi-governmental agency, commission, department,
instrumentality or body, court, arbitrator or administrative board
(collectively, a "GOVERNMENTAL AGENCY"), in connection with or any in any way
arising out of the presence, use, storage, disposal, generation, transportation,
release, or treatment of any Hazardous Materials on, in, under or affecting the
Property; (x) the violation or claimed violation of any Environmental Laws in
regard to the Property; or (xi) the preparation of an environmental audit or
report on the Property, whether conducted by Lender, Borrower, Guarantor or a
third-party, or the implementation of environmental audit recommendations. Such
indemnification shall give Borrower or Guarantor the right to participate in the
selection of counsel for Lender and in the conduct or settlement of any dispute
or proceeding for which indemnification may be claimed. Lender agrees to give
Borrower written notice of the assertion of any claim or the commencement of any
action or lawsuit described in this Section. It is the express intention of the
parties hereto that
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the indemnity provided for in this Section, as well as the disclaimers of
liability referred to in this Agreement, are intended to and shall protect and
indemnify Lender from the consequences of Lender's own negligence, but not
Lender's gross negligence or willful misconduct, whether or not that negligence
is the sole or concurring cause of any liability, obligation, loss, damage,
penalty, action, judgment, suit, claim, cost, expense or disbursement. The
provisions of this Section shall survive the full payment, performance and
discharge of the Obligations and the termination of this Agreement, and shall
continue thereafter in full force and effect.
(x) USE OF BORROWER'S NAME. Borrower shall at all times during the
term of the Loan permit Lender to use the name of Borrower, any of its
Affiliates, Guarantor and the Property in any press release, advertisement or
other promotional materials issued in respect to the Loan.
(y) RIGHT TO PROVIDE FUTURE FINANCING. Borrower hereby grants to
Lender an absolute option and right of first refusal, at Lender's discretion, to
provide financing in connection with the Property or the Collateral. Lender
shall have a period of twenty (20) days after written notification from Borrower
to Lender of Borrower's financing request to determine whether or not Lender
desires to provide such financing and if Lender shall agree to provide such
financing Lender shall have a further period of sixty (60) days from the
expiration of Borrower's initial notification period to consummate such
financing. If Lender has not agreed to provide the requested financing within
such twenty (20) days or Lender has failed to provide such financing within
sixty (60) days after agreeing to provide such financing, Borrower shall be
permitted to obtain such financing from other sources provided that the terms of
such financing obtained are not materially less advantageous to Borrower than
the terms initially offered to Lender.
(z) SALES AND MARKETING. Borrower may conduct its own sales and
marketing activities directly or through a subsidiary. In the event that
Borrower or such subsidiary does not conduct its own sales and marketing
activities, Borrower will only contract with or employ a sales and marketing
organization for the Property, which is reasonably acceptable to Lender.
(aa) FINANCIAL COVENANTS. Borrower shall not permit or suffer its
Tangible Net Worth to be less than $25,000,000 at any time, nor will Borrower
permit its cash balances plus unpledged notes receivable to be less than
$5,000,000 at any time and Borrower agrees that its net income, determined in
accordance with GAAP, shall be $1.00 or greater for each Fiscal Quarter.
(bb) LOCKBOX AGENT. Prior to the initial Advance of the
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Receivables Loan, Borrower will enter into a Lockbox Agreement reasonably
acceptable to Lender and Borrower in form and substance. The Lockbox Agent shall
disburse, on a weekly basis, all of the Pledged Notes Receivable collections to
which Lender is entitled to Lender. Lockbox Agent shall have no right of setoff
with respect to funds held by Lockbox Agent pursuant to the Lockbox Agreement.
Borrower shall pay all costs and fees in connection with the Lockbox Agreement.
7.2. NEGATIVE COVENANTS. So long as any portion of the Obligations remains
unsatisfied, Borrower and Guarantor hereby covenant and agree with Lender as
follows:
(a) LIMITATION ON OTHER DEBT/FURTHER ENCUMBRANCES. Without the prior
written consent of Lender which may be granted, withheld or conditioned in
Lender's discretion, Borrower will not obtain financing or grant liens with
respect to the Collateral (except for common collateral such as Operating
Contracts), other than those in favor of Lender.
(b) RESTRICTIONS ON TRANSFERS. Borrower shall not, without obtaining
the prior written consent of Lender (which consent may be given, withheld or
conditioned by Lender in Lender's discretion), whether voluntarily or
involuntarily, by operation of law or otherwise, except as otherwise permitted;
(i) transfer, sell, pledge, convey, hypothecate, factor or assign all or any
portion of the Property or the other Collateral, or contract to do any of the
foregoing, including, without limitation, pursuant to options to purchase, and
so-called "installment sales contracts", "land contracts", or "contracts for
deed" (except that Borrower shall have the right to sell Intervals to Purchasers
in arms-length transactions, conduct bulk sales of Pledged Notes Receivable, in
accordance with the terms of this Agreement, and Borrower shall be permitted to
convey property in lieu of condemnation); (ii) lease or license the Property or
any portion of the Property, or all or any portion of the Collateral, or change
the legal or actual possession or use thereof; (iii) permit the dilution,
transfer, pledge, hypothecation or encumbrance of any of the ownership interests
in Borrower except the existing pledge disclosed in the financial statement of
Guarantor; (iv) permit the assignment, transfer, change, modification or
diminution of the duties or responsibilities of Borrower, the Guarantor or, to
the extent within the control of Borrower, of any manager of the Property
approved by Lender as manager of the Property (except for an assignment of such
duties to a professional management company or companies reasonably acceptable
to Lender in advance); or (v) cause or permit the assignment, pledge or other
encumbrance of any of the Operating Contracts, except for any pledges to
existing lenders or as otherwise permitted herein. Without limiting the
generality of the preceding sentence, and subject to the terms of this
Agreement, except as otherwise permitted herein, the prior written consent of
Lender shall be required for: (A) any transfer of the Collateral or
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any part thereof (except with respect to the sale of Intervals to Purchasers in
arms length transactions and bulk sales in accordance with the terms of this
Agreement and conveyances in lieu of condemnation) made to a subsidiary, its
partners or any Affiliate or otherwise; (B) any merger or consolidation,
disposition or other reorganization of Guarantor, provided however, in the event
that Lender refuses to give its consent to any merger or consolidation involving
Guarantor, Borrower may prepay all Obligations without a prepayment premium
provided that such repayment of all Obligations occurs within thirty (30) days
of such merger or consolidation not consented to by Lender; and (C) any change
in the ownership of stock of Borrower. In the event that Lender, in Lender's
discretion, is willing to consent to a transfer which would otherwise be
prohibited by this Section 7.2(b) Lender may condition its consent on such terms
as it desires, including, without limitation, an increase in the applicable
Interest Rates and the requirement that Borrower pay a transfer fee, together
with any expenses incurred by Lender in connection with the granting of such
consent (including, without limitation, attorneys' fees and expenses). If
Borrower violates the terms of this Section 7.2(b), in addition to any other
rights or remedies which Lender may have herein, in any other Loan Document, or
at law or in equity, Lender may by written notice to Borrower increase,
effective immediately as of the date of such violation, the applicable Interest
Rate to the applicable Default Rate.
(c) USE OF THE LENDER'S NAME. Borrower and Guarantor will not, and
will not permit any Affiliate to, without the prior written consent of the
Lender, use the name of the Lender or the name of any affiliate of the Lender in
connection with any of their respective businesses or activities, except in
connection with internal business matters and as required in dealings with
governmental agencies.
(d) TRANSACTIONS WITH AFFILIATES. Without the prior written consent of
Lender, which shall not unreasonably be withheld, Borrower will not enter into
any transaction with any Affiliate in connection with the Property, including,
without limitation, relating to the purchase, sale or exchange any assets or
properties or the rendering of any service, except in the ordinary course of,
and pursuant to the reasonable requirements of, the operations of the Property
and upon fair and reasonable terms.
(e) RESTRICTIVE COVENANTS. Unless required by law, Borrower will not
without Lender's prior written consent seek, consent to, or otherwise acquiesce
in, any change in any private restrictive covenant, planning or zoning law or
other public or private restriction, which would limit or alter the use of the
Property or any of the Property.
(f) SUBORDINATED OBLIGATIONS. Upon the occurrence and during the
continuance of an Event of Default, Borrower will not,
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directly or indirectly: (i) permit any payment to be made in respect of any
indebtedness, liabilities or obligations, direct or contingent, to Guarantor or
any Affiliate of Guarantor or which are subordinated by the terms thereof or by
separate instrument to the payment of principal of, and interest on, the Loan,
except in accordance with the terms of such subordination; (ii) permit the
amendment, rescission or other modification of any such subordination provisions
of any of the Borrower's subordinated obligations in such a manner as to affect
adversely the Lender's Lien in and to the Collateral or Lender's senior priority
position and entitlement as to payment and rights with respect to the Loan and
the Obligations; or (iii) permit the prepayment or redemption, of all or any
part of Borrower's obligations to Guarantor or any Affiliate of Guarantor, or of
any subordinated obligations of the Borrower except in accordance with the terms
of such subordination provisions.
(g) TIMESHARE REGIME. Without Lender's prior written consent, Borrower
shall not amend, modify or terminate the Timeshare Declaration or other
Timeshare Documents, or any other restrictive covenants, agreements or easements
regarding the Property; nor shall Borrower further assign its rights as
"developer" or "declarant" under the Timeshare Declaration, or file or permit to
be filed any additional covenants, conditions, easements or restrictions against
or affecting the Property (or any portion thereof) without Lender's prior
written consent, unless required by law.
(h) NAME CHANGE. Borrower will not change its name and will not change
its chief executive office or the location at which it does business without
prior written notice to Lender.
(i) COLLATERAL. Borrower and Guarantor shall not take any action (nor
permit or consent to the taking of any action) which might materially impair the
value of the Collateral or any of the rights of Lender in the Collateral.
(j) MARKETING/SALES. Borrower shall not market, attempt to sell or
sell or permit or justify any sales or attempted sales of any Intervals except
in compliance with the Timeshare Act and applicable laws in Nevada and each
other jurisdiction where marketing, sales or solicitation activities occur.
(k) DISTRIBUTIONS. Borrower agrees, subsequent to the occurrence of an
Event of Default and during the continuance thereof, that it will not make any
distributions, direct or indirect, to Guarantor unless and until all of the
Obligations have been paid in full unless such failure to make such distribution
shall cause an event of default to occur under agreements between Guarantor and
third parties, in which event such distribution, to the extent necessary to
avoid such event of default by Guarantor shall be permitted.
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SECTION 8
8. EVENTS OF DEFAULT
8.1. NATURE OF EVENTS. An "Event of Default" shall exist if any of the
following shall occur:
(a) PAYMENTS. If Borrower shall fail to make, within five (5) days of
receipt of either a billing for or written notice of an amount due, any payment
or mandatory prepayment of principal, interest on the Mortgage Loan or the
Receivables Loan, any Release Payment, Release Fee or any other fee or amount
due to Lender with respect to the Loan.
(b) COVENANT DEFAULTS. If Borrower shall fail to perform or observe
any covenant (including but not limited to the affirmative covenants contained
in Section 7.1), agreement or warranty contained in this Agreement or in any of
the Loan Documents, (other than with respect to the failure to make timely
payments in respect of the Loan as provided in Section 8.1(a) or violate of any
negative covenant in contained in Section 7.2) and, such failure shall continue
for thirty (30) days after written notice of such failure is provided by Lender,
provided however, that if Borrower commences to cure such failure within such
thirty (30) day period, but, because of the nature of such failure, cure cannot
be completed within thirty (30) days notwithstanding diligent effort to do so,
then, provided Borrower diligently seeks to complete such cure, an Event of
Default shall not result unless such failure continues for a total of ninety
(90) days.
(c) WARRANTIES OR REPRESENTATIONS. If any representation or other
statement made by or on behalf of Borrower or Guarantor in this Agreement, in
any of the Loan Documents or in any instrument furnished in compliance with or
in reference to the Loan Documents, is false, misleading or incorrect in any
material respect as of the date made or reaffirmed.
(d) ENFORCEABILITY OF LIENS. If any lien or security interest granted
by Borrower to Lender in connection with the Loan is or becomes invalid or
unenforceable or is not, or ceases to be, a perfected first, or such other
priority as is permitted hereunder, priority lien or security interest in favor
of Lender encumbering the asset to which it is intended to encumber, and
Borrower fails to cause such lien or security interest to become a valid,
enforceable, first and prior lien or security interest in a manner satisfactory
to Lender within five (5) days after Lender delivers written notice thereof to
Borrower.
(e) INVOLUNTARY PROCEEDINGS. If a case is commenced or a petition is
filed against Borrower or Guarantor under any Debtor Relief Law and in the case
of a petition being filed against Borrower or Guarantor, the continuation of
such proceeding without
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dismissal for a period of sixty (60) days; a receiver, liquidator or trustee of
Borrower or Guarantor or of any material asset of Borrower or Guarantor is
appointed by court order and such order remains in effect for more than sixty
(60) days; or if any material asset of Borrower or Guarantor is sequestered by
court order and such order remains in effect for more than sixty (60) days.
(f) PROCEEDINGS. If Borrower or Guarantor voluntarily seeks, consents
to or acquiesces in the benefit of any provision of any Debtor Relief Law,
whether now or hereafter in effect; consents to the filing of any petition
against it under such law; makes an assignment for the benefit of its creditors;
admits in writing its inability to pay its debts generally as they become due;
or consents or suffers to the appointment of a receiver, trustee, liquidator or
conservator for it, him or her or any part of its, his or her assets.
(g) ATTACHMENT, JUDGMENT, TAX LIENS. The issuance, filing, levy or
seizure against the Collateral, or, with respect to the Property, or against the
Borrower or Guarantor, of one or more attachments, injunctions, executions, tax
liens or judgments for the payment of money cumulatively in excess of
$100,000.00, or the filing of any mechanics' or materialmen's lien or claim of
lien which is not discharged in full or stayed, in either case, within thirty
(30) days after issuance or filing.
(h) FAILURE TO DEPOSIT PROCEEDS. If Borrower shall fail to deliver
payments made under the Pledged Notes Receivable directly to Lender as required
pursuant to Section 2.5 above, or if Borrower or Guarantor shall take any other
act which Lender shall reasonably deem to be a conversion of the Collateral or
fraudulent with respect to Lender.
(i) TIMESHARE DOCUMENTS. If the Timeshare Declaration, any of the
other documents creating or governing the Property, its timeshare regime, or the
Timeshare Owners' Association, or the restrictive covenants with respect to the
Property, shall be terminated, amended or modified in any material respect
without Lender's prior written consent, except as required by law or any
government agency.
(j) REMOVAL OF COLLATERAL. If Borrower or Guarantor conceals, removes,
transfers, conveys, assigns or permits to be concealed, removed, transferred,
conveyed or assigned, any of the Collateral or any of its assets in violation of
the terms of the Loan Documents or with the intent to hinder, delay or defraud
its creditors or any of them including, without limitation, Lender.
(k) OTHER DEFAULTS. If a material default shall occur in any of the
covenants or Obligations set forth in this Agreement or any of the Loan
Documents and not referred to in any other portion of this Section 8.1.
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(l) MATERIAL ADVERSE CHANGE. Any material adverse change in the
financial condition of Borrower or Guarantor or in the condition of the
Collateral.
(m) DISSOLUTION OR DEFAULT OF GUARANTOR. (i) Any unapproved merger,
dissolution or liquidation of Guarantor unless the Obligations are prepaid as
provided in Section 7.2(b); (ii) any default under any Guaranty and the
expiration of any applicable grace period or the revocation or attempted
revocation or repudiation thereof, in whole or part, by Guarantor; or (iii)
except with Lender's prior written consent, any change in the ownership
structure of the Borrower or management or marketing responsibilities with
respect to the Borrower or the Property.
(n) DEFAULT BY BORROWER IN OTHER AGREEMENTS. Any default by the
Borrower or Guarantor: (i) in the payment of any indebtedness to Lender or to
any affiliate of Lender and the expiration of any applicable grace period; (ii)
in the payment or performance of other indebtedness for borrowed money or
obligations secured by any part of the Property or the Collateral and the
expiration of any applicable grace period; or (iii) in the payment or
performance of other material indebtedness or obligations where such default
accelerates or permits the acceleration (after the giving of notice or passage
of time or both) of the maturity of such indebtedness, or permits the holders of
such indebtedness to elect a majority of the board of directors of Borrower or
Guarantor (unless waived by such holder).
(o) LOSS OF LICENSE. The loss, revocation or failure to renew or file
for renewal of any registration, approval, license, permit or franchise now held
or hereafter acquired by the Borrower or with respect to the Property, or the
failure to pay any fee, which is necessary for the continued operation of the
Property or the Borrower's business in materially the same manner as it is being
conducted at the time of such loss, revocation, failure to renew or failure to
pay.
(p) SUSPENSION OF SALES. The issuance of any stay order, cease and
desist order, injunction, temporary restraining order or similar judicial or
nonjudicial sanction limiting or otherwise materially adversely affecting any
Interval sales activities, other material business operations in respect of the
Property, or the enforcement of Lender's remedies.
(q) VIOLATION OF NEGATIVE COVENANTS. Borrower or Guarantor violates
any negative covenant set forth in Section 7.2.
(r) TRANSFER OF PROPERTY. Except for the sale of Intervals in the
ordinary course of business in accordance with the terms hereof or as otherwise
permitted under the Loan Documents, if Borrower shall, without Lender's prior
written consent, sell,
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transfer, convey or further encumber all or any part of its interest in the
Property or in any of the Collateral. For purposes of this paragraph, an
assignment, sale or transfer shall also include any assignment, sale, transfer
or hypothecation of any ownership interests in the Borrower.
(s) LIEN AGAINST PROPERTY. If Borrower grants any mortgage, lien or
encumbrance upon any of the Collateral unless otherwise approved by Lender in
writing, except as otherwise permitted or required under the Loan Documents.
(t) ENCROACHMENTS AND PERMITS. If all or any portion of the
Improvements encroach upon any street or road setback or easement or upon any
adjoining property, or violate any ordinance, regulation, rule or direction of
any federal or state agency, or of any governmental or quasi-governmental
authority, or any zoning setback line; or if the building permit(s) shall be
revoked or suspended or shall lapse, or if any building or other permit or
license shall be conditional in nature and Borrower shall fail to punctually
satisfy the conditions so as to prevent its invalidity provided however, that if
Borrower commences to cure such encroachment, suspension or violation within
thirty (30) days of first discovering said condition, but, because of the nature
of such encroachment, suspension or violation, cure cannot be completed within
thirty (30) days notwithstanding diligent efforts to do so, then, provided
Borrower diligently seeks to complete such cure, an Event of Default shall not
result unless such encroachment, suspension or violation continues for a total
of ninety (90) days.
(u) BREACH. If any violation or breach by Borrower shall continue
after the expiration of any applicable cure period under any agreement, covenant
or restriction affecting title to the Property, including but not limited to any
Permitted Exceptions.
(v) RECEIVABLES COLLATERAL. Any amendment to or modification of any
Pledged Note Receivable, which is an Eligible Note Receivable and without which
the Receivables Loan would be in excess of the Borrowing Base, is made without
the prior written consent of Lender, other than upgrades or downgrades, and
other than modifications and extensions granted by Borrower in connection with
its normal collection practices which do not eliminate any defaults of Purchaser
thereunder and further provided that notice of such other modifications and
extensions specifying the details thereof has been provided to Lender ten (10)
Business Days prior to the effective date of such other modification and/or
extension with Lender having an absolute right of refusal over the grant of such
other modification and/or extension; provided any notice of disapproval is given
to Borrower within such ten (10) Business Day period. In addition, Borrower may
amend or modify any Pledged Note Receivable even though not otherwise permitted
by this Section 8.1(v) so long as concurrently therewith (or five (5) Business
Days
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after receipt of Lender's notice of disapproval in the case of modifications or
extensions submitted to Lender for approval pursuant to this Section 8.1(v))
Borrower replaces such Pledged Note Receivable with one or more Pledged Notes
Receivable with an aggregate outstanding principal balance at least equal to
that of the Pledged note Receivable being replaced and otherwise constituting
Eligible Notes Receivable.
(w) MANAGEMENT. Any change in the management of the Property without
the prior written consent of Lender which shall not be unreasonably withheld.
SECTION 9
9. REMEDIES
9.1. REMEDIES UPON DEFAULT. Should an Event of Default occur, Lender may
take any one or more of the actions described in this Section 9, all without
notice to Borrower or Guarantor:
(a) ACCELERATION. Without demand or notice of any nature whatsoever,
declare the unpaid balance of the Loan, or any part thereof, immediately due and
payable, whereupon the same shall be due and payable.
(b) TERMINATION OF OBLIGATION TO ADVANCE. With or without proceeding
with any sale or foreclosure or demanding payment or performance of the
Obligations, without notice, terminate Lender's further performance under this
Agreement or any other agreement or agreements between Lender and the Borrower,
including, without limitation, any commitment of Lender to lend under this
Agreement in its entirety, or any portion of any such commitment, to the extent
Lender shall deem appropriate, without further liability or obligation by
Lender.
(c) JUDGMENT. Reduce Lender's claim to judgment, foreclose or
otherwise enforce Lender's security interest in all or any part of the
Collateral by any available judicial or other procedure under law. Lender's
right to ▇▇▇ and recover a judgment either before, after or during the pendency
of any proceeding for the enforcement of any Deed of Trust, and the right of
Lender to recover such judgment shall not be affected by any taking, possession
or foreclosure sale hereunder or by the exercise of any other right, power or
remedy for the enforcement of the terms of any Deed of Trust or the foreclosure
of the lien thereof.
(d) FORECLOSURE. Whether or not Lender takes possession of the
Collateral, Lender may proceed to foreclose any Deed of Trust and to sell the
Property in its entirety or in separate parcels, under the judgment or decree of
a court or courts of competent jurisdiction and to pursue any other remedy
available to
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it, all as Lender shall deem appropriate. Upon commencement of suit or
foreclosure of any Deed of Trust, the unpaid principal balance of Loan, if not
previously accelerated and declared due, and the interest accrued thereon,
together with all other Obligations shall be immediately due and payable. Upon
any foreclosure sale pursuant to judicial proceedings, Lender may bid for and
purchase all or any portion of the Property and, upon compliance with the terms
of sale, may hold, retain and possess and dispose of the Property.
In case of a foreclosure sale of all or any part of the Property and
of the application of the proceeds of sale to the payment of the Obligations
Lender shall be entitled to enforce payment of and to receive all amounts then
remaining due and unpaid upon the Loan, and Lender shall be entitled to recover
judgment for any portion of the Obligations remaining unpaid, with interest.
Borrower agrees, to the full extent that it may lawfully so agree,
that no recovery of any such judgment by Lender and no attachment or levy of any
execution upon any such judgment upon any of the Property or upon any other
property shall in any manner or to any extent affect the lien of any Deed of
Trust upon the Property or any part thereof or any lien, rights, powers or
remedies of Lender hereunder, but such lien, rights, powers and remedies shall
continue unimpaired.
(e) LENDER'S RIGHT TO TAKE POSSESSION, OPERATE AND APPLY INCOME.
(i) Upon Lender's demand, Borrower shall forthwith surrender
to Lender the actual possession of the Property, terminate its position and
rights and duties as manager and, to the extent permitted by law, Lender
may enter and take possession of all the Property, appoint a new manager
for the Property and may exclude Borrower and its agents and employees
wholly therefrom. Lender shall have joint access with Borrower to
Borrower's books, papers and accounts. If Borrower fails to surrender or
deliver all or any portion of the Property or its management duties or
privileges to Lender upon demand, Lender may obtain a judgment or decree
conferring on Lender the right to immediate possession and management
delegation responsibility or requiring Borrower to deliver immediate
possession of all or part of the Property to Lender, and Borrower hereby
specifically consents to the entry of such a judgment or decree.
(ii) Upon every such entering upon or taking of possession,
Lender may or may delegate to a designee of Lender, the right to hold,
store, use, operate, manage and control the Property and conduct Borrower's
business on the Property and, from time to time do any of the following
things as Lender may from time to time deem necessary, appropriate or
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desirable:
(1) make all maintenance, repairs, renewals, replacements,
additions and improvements necessary and proper to the
Property and purchase or otherwise acquire additional
fixtures, personalty and other property;
(2) insure, manage and operate the Property and exercise
all of the rights and powers of Borrower (in Lender's
name or otherwise) with respect to the insurance,
management and operation of the Property;
(3) enter into any and all agreements with respect to the
exercise by others of any of the powers herein granted
to Lender; and
(4) perform or cause to be performed any and all work and
labor necessary to complete any Improvements.
(iii) Lender may collect and receive all the income,
revenues, rents, issues and profits of the Property, including those past
due as well as those accruing thereafter. Lender shall apply such sums
received by Lender, first to the payment of accrued interest and then to
the payment of principal and all other sums or indebtedness that may be due
hereunder, after deducting therefrom:
(1) All expenses of taking, holding, managing and operating
the Property (including compensation for the services
of all Persons employed for such purposes);
(2) The cost of all such maintenance, repairs, renewals,
replacements, additions, betterments, improvements,
purchases and acquisitions;
(3) The cost of insurance;
(4) Such taxes, assessments and other charges prior to the
liens in favor of Lender, as Lender may determine to
pay;
(5) Other proper charges upon the Property or any part
thereof; and
(6) The compensation, expenses and disbursements of the
attorneys and agents
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of Lender, including attorneys' fees and costs for any
appeal.
(iv) If an Event of Default giving rise to pursuit of the
foregoing remedy shall have been cured, Lender may, at its option,
surrender possession of the Property to Borrower, its successors or
assigns; provided, however, that Lender's right to take possession and to
pursue any other remedies hereunder or under any of the Loan Documents
shall exist if any subsequent Event of Default shall occur.
(f) SALE OF COLLATERAL. After notification, if any, provided for in
Section 9.2 below, sell or otherwise dispose of, at the office of Lender, or
elsewhere, as chosen by Lender, all or any part of the Collateral, and any such
sale or other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust Lender's power of sale, but
sales may be made from time to time until all of the Collateral has been sold or
until the Obligations, have been paid in full and fully performed), and at any
such sale it shall not be necessary to exhibit the Collateral. Borrower and the
Guarantor hereby acknowledge and agree that a private sale or sales of the
Collateral, after notification as provided for in Section 9.2, shall constitute
a commercially reasonable disposition of the Collateral sold at any such sale or
sales, and otherwise commercially reasonable action on the part of the Lender.
(g) RETENTION OF COLLATERAL/PURCHASE OF COLLATERAL. At its discretion,
retain such portion of the Collateral as shall aggregate in value to an amount
equal to the Loan, in satisfaction of the Obligations, whenever the
circumstances are such that Lender is entitled and elects to do so under
applicable law. Lender may buy the Collateral at any public or private sale.
(h) RECEIVER. As a matter of strict right and without regard to the
value or occupancy of the Property, apply by appropriate procedures for the
appointment of a receiver who will enter upon and take possession of the
Property, collect the rents and profits therefrom and apply the same as the
court may direct. The receiver shall have all the rights and powers permitted
under the laws of the State of Nevada. All costs and expenses (including
receiver's fees, attorneys fees and costs, including attorneys' fees and costs
incurred as a result of any appeal, and agents' compensation) incurred in
connection with the appointment of a receiver shall be secured by the
Collateral. The right to enter and take possession of the Property, to manage
and operate the same and to collect the rents, issues and profits thereof
(whether by a receiver or otherwise) shall be cumulative to any other right or
remedy hereunder or afforded by law and may be exercised by Lender concurrently
therewith or independently thereof. Lender shall be liable to account only for
such rents, issues and profit actually
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received by Lender. Notwithstanding the appointment of any receiver, trustee or
other custodian, Lender shall be entitled, as pledgee, to the possession or
control of any cash or other instruments, at the time held by or payable or
deliverable under the terms of this Agreement or the Deed of Trust to Lender.
Borrower hereby consents to any such appointment. Lender may also apply by
appropriate judicial proceedings for appointment of a receiver for the
Receivables Collateral, or any part thereof, and Borrower hereby consents to any
such appointment.
(i) EXERCISE OF OTHER RIGHTS. Lender shall have all the rights and
remedies of a secured party under the Code and other legal and equitable rights
to which it may be entitled, and may exercise any and all other rights or
remedies afforded by the Loan Documents as Lender shall deem appropriate, at
law, in equity or otherwise, including, but not limited to, the right to bring
suit or other proceeding, either for specific performance of any covenant or
condition contained in the Loan Documents or in aid of the exercise of any right
or remedy granted to Lender in the Loan Documents. Lender shall also have the
right to require the Borrower to assemble any of the Collateral not in Lender's
possession, at Borrower's expense, and make it available to Lender at a place to
be determined by Lender which is reasonably convenient to both parties, and
Lender shall have the right to take immediate possession of all of the
Collateral, and may enter the Property or any of the premises of Borrower or
wherever the Collateral shall be located, with or without process of law
wherever the Collateral may be, and, to the extent such premises are not the
property of Lender, to keep and store the same on said premises until sold (and
if said premises be the property of Borrower, Borrower agrees not to charge
Lender for use and occupancy, rent, or storage of the Collateral, for a period
of at least ninety (90) days after sale or disposition of the Collateral).
(j) REPLACEMENT OF LOCKBOX AGENT. Replace the Lockbox Agent and
terminate the applicable Lockbox Agreement.
9.2. NOTICE OF SALE. Reasonable notification of time and place of any
public sale of the Collateral or reasonable notification of the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be sent to Borrower and to any other Person entitled under the Code to
notice; provided, however, that if the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender may
sell or otherwise dispose of the Collateral without notification, advertisement
or other notice of any kind. It is agreed that notice sent not less than five
(5) calendar days prior to the taking of the action to which such notice relates
is reasonable notification and notice for the purposes of this Section 9.2.
Lender shall have the right to bid at any public or private sale on its own
behalf. Out of money
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arising from any such sale, Lender shall retain an amount equal to all costs and
charges, including attorneys' fees for advice, counsel or other legal services
or for pursuing, reclaiming, seeking to reclaim, taking, keeping, removing,
storing and advertising such Collateral for sale, selling same and any and all
other charges and expenses in connection therewith and in satisfying any prior
Liens thereon. Any balance shall be applied upon the Obligations, and in the
event of deficiency, the Borrower shall remain liable to Lender. In the event of
any surplus, such surplus shall be paid to the Borrower or to such other Persons
as may be legally entitled to such surplus. If, by reason of any suit or
proceeding of any kind, nature or description against the Borrower, or by the
Borrower or any other party against Lender, which in Lender's sole discretion
makes it advisable for Lender to seek counsel for the protection and
preservation of its security interest, or to defend its own interest, such
expenses and counsel fees shall be allowed to Lender and the same shall be made
a further charge and Lien upon the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the methods by which a sale of Collateral comprised of
Securities may be effected after an Event of Default, Borrower agrees that upon
the occurrence or existence of an Event of Default, Lender may, from time to
time, attempt to sell all or any part of such Collateral by means of a private
placement restricting the bidding and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for, or
with a view to, distribution. In so doing, Lender may solicit offers to buy such
Collateral, or any part of it for cash, from a limited number of investors
deemed by Lender, in its reasonable judgment, to be responsible parties who
might be interested in purchasing the Collateral, and if Lender solicits such
offers from not less than two (2) such investors, then the acceptance by Lender
of the highest offer obtained therefrom shall be deemed to be a commercially
reasonable method of disposition of such Collateral.
9.3. APPLICATION OF COLLATERAL; TERMINATION OF AGREEMENTS. Upon the
occurrence of any Event of Default, Lender may, with or without proceeding with
such sale or foreclosure or demanding payment or performance of the Obligations,
without notice, terminate Lender's further performance under this Agreement or
any other agreement or agreements between Lender and the Borrower, without
further liability or obligation by Lender, and may also, at any time,
appropriate and apply against any Obligations any and all Collateral in its (or
the Lockbox Agent's) possession, any and all balances, credits, deposits,
accounts, reserves, indebtedness or other moneys due or owing to the Borrower
held by Lender hereunder or under any other financing agreement or otherwise,
whether accrued or not. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice or otherwise, shall absolve,
release or otherwise affect the liability of the
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Borrower in respect of transactions prior to such termination, or affect any of
the Liens, security interests, rights, powers and remedies of Lender, but they
shall, in all events, continue until all of the Obligations are satisfied.
9.4. SUITS TO PROTECT THE PROPERTY. Lender shall have power to: (a)
institute and maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Property by any acts which may be unlawful or
which violate this Agreement or any of the Loan Documents ; (b) preserve or
protect Lender's interest in the Property and in the income, revenues, rents and
profits arising therefrom; and (c) restrain the enforcement of or compliance
with any legislation or other government enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair Lender's security. All payments made
or costs or expenses incurred by Lender in connection with this paragraph,
including reasonable attorneys' fees and costs, whether or not suit is filed
and, if filed, for all appeals, shall be secured by the Collateral and shall be
immediately repaid by Borrower to Lender on demand, with interest thereon from
the date incurred until the date repaid by Borrower at the same rate as provided
by the Mortgage Loan.
9.5. RIGHTS OF LENDER REGARDING COLLATERAL. In addition to all other rights
possessed by Lender, Lender, at its option, may from time to time after there
shall have occurred an Event of Default, and so long as such Event of Default
remains uncured, at its sole discretion, take the following actions:
(a) Transfer all or any part of the Collateral into the name of Lender
or its nominee;
(b) Take control of any proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises or
indulgences with respect to the Obligations, any portion thereof, any extension
or renewal thereof, or any security therefor, to any obligor hereunder or
thereunder; and
(d) Exchange certificates or instruments representing or evidencing
the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
9.6. WAIVER OF APPRAISEMENT, VALUATION, STAY, EXTENSION AND REDEMPTION
LAWS. To the extent permitted by law, Borrower agrees that in the event of a
Default on its part hereunder, neither Borrower nor anyone claiming by, through
or under it, shall set up, claim or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws now or hereafter in force, in
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order to prevent or hinder the enforcement or foreclosure of any Deed of Trust
or the final and absolute sale of the Property or the final and absolute
possession of the Property by the purchasers in foreclosure, and Borrower, for
itself and for all who may at any time claim through or under it, hereby waives
to the full extent that if may lawfully do so the benefit of all such laws and
any and all right to have the assets comprising the Property marshalled upon any
foreclosure and Borrower agrees that the Property may be sold in its entirety.
Any money collected by Lender or received by Lender following pursuit by
Lender of any remedy hereunder or under any of the Loan Documents shall be
applied to the payment of the compensation, expenses, costs and disbursements of
the agents and attorneys of Lender, to the payment of the amounts of accrued
interest and principal and any other amount due and unpaid under the Loan, and
to the payment of all other Obligations, in such order as Lender may determine.
9.7. DELEGATION OF DUTIES AND RIGHTS. Lender may execute any of its duties
and/or exercise any of its rights or remedies under the Loan Documents by or
through its officers, directors, employees, attorneys, agents or other
representatives.
9.8. LENDER NOT IN CONTROL. None of the covenants or other provisions
contained in this Agreement or in any Loan Document shall give Lender the right
or power to exercise control over the affairs and/or management of Borrower.
9.9. WAIVERS. The acceptance by Lender at any time and from time to time of
partial payments of the Loan or performance of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by Lender
of any Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default. No delay or omission by Lender in exercising any
right or remedy under the Loan Documents shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, nor shall any single
or partial exercise of any such right or remedy preclude other or further
exercise thereof, or the exercise of any other right or remedy under the Loan
Documents or otherwise. Further, except as otherwise expressly provided in this
Agreement or by applicable law, Borrower and each and every surety, endorser,
guarantor and other party liable for the payment or performance of all or any
portion of the Obligations, severally waive notice of the occurrence of any
Event of Default, presentment and demand for payment, protest, and notice of
protest, notice of intention to accelerate, acceleration and nonpayment, and
agree that their liability shall not be affected by any renewal or extension in
the time of payment of the Loan, or by any release or change in any security for
the payment or performance of the Loan, regardless of the number of such
renewals, extensions, releases or changes. If Lender: (a) grants forbearance or
an extension of time for the
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payment of any sums secured by the Collateral; (b) takes other or additional
security for the payment of the Obligations; (c) waives or does not exercise any
right granted in this Agreement or any Loan Documents; (d) releases any part of
the Property from the Lien in favor of Lender or otherwise changes any of the
terms of this Agreement or any Loan Documents; (e) consents to the filing of any
map, plat or replat of the Property; (f) consents to the granting of any
easement on the Property; or (g) makes or consents to any agreement
subordinating the Lender's Lien against any of the Collateral, except as
otherwise expressly provided in any instrument or instruments executed by
Lender, any such act or omission by Lender shall not release, discharge, modify,
change or affect Borrower's original liability under this Agreement or any of
the Loan Documents or otherwise, or the original liability of any maker, general
partner, co-signer, endorser, surety or guarantor nor shall any such act or
omission preclude Lender from exercising any right, power or privilege granted
in this Agreement or any Loan Document in the event of any other concurrent or
subsequent default, nor shall the Lender's Lien against any of the Collateral be
altered thereby. Upon the sale or transfer by operation of law or otherwise of
all or any part of the Collateral, Lender, without further notice, is authorized
and empowered to deal with any such transferee as fully and to the same extent
as it might deal with Borrower, without in any way releasing or discharging any
of Borrower's liabilities or obligations hereunder.
9.10. CUMULATIVE RIGHTS. All rights and remedies available to Lender under
the Loan Documents shall be cumulative of and in addition to all other rights
and remedies granted to Lender under any of the Loan Documents, at law or in
equity, whether or not the Loan is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
the Loan Documents.
9.11. EXPENDITURES BY LENDER. Any sums expended by or on behalf of Lender
pursuant to the exercise of any right or remedy provided herein, and all
expenses payable by Borrower under any provision of this Agreement shall become
part of the Obligations, shall be paid by Borrower to Lender upon demand and
shall bear interest at the Mortgage Loan Interest Rate, or the Receivables Loan
Interest Rate if the Mortgage Loan has been paid, from the date of such
expenditure until the date repaid or at the Default Rate after declaration of an
Event of Default.
9.12. DIMINUTION IN VALUE OF COLLATERAL. Lender shall not have any
liability or responsibility whatsoever for any diminution or loss in value of
any of the Collateral, specifically including that which may arise from Lender's
negligence or inadvertence (other than Lender's gross negligence or willful
misconduct), whether such negligence or inadvertence is the sole or concurring
cause of any damage provided that Lender has treated the Collateral with the
same degree of care that it treats its own notes and the
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collateral pledged to and held by it from other borrowers.
9.13. DISCONTINUANCE OF PROCEEDINGS. If Lender proceeds to enforce any
right or remedy under any Deed of Trust by foreclosure, entry or otherwise and
such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to Lender, then Borrower and Lender shall
be restored to their former positions and rights hereunder and all rights,
powers and remedies of Lender shall continue as if no such proceeding occurred.
SECTION 10
10. PARTIAL RELEASES AND FULL RELEASE
10.1 PARTIAL RELEASES. At Borrower's cost and expense, Lender agrees to
cause the trustee under the Deed of Trust to execute, acknowledge and deliver
from time to time, a release from the lien of the Deed of Trust encumbering the
Property, in form and substance acceptable to Lender and the Title Company in
their reasonable discretion, of Intervals in connection with the sale of such
Intervals as permitted hereunder, upon the written request of Borrower provided
that:
(a) No Event of Default or Default shall exist;
(b) The remaining unreleased portion of the Property complies with
all representations and warranties of Borrower contained in the
Loan Documents;
(c) For each Interval to be released, Borrower pays to Lender, the
required Release Payment which amount shall be applied to reduce
the outstanding principal balance of the Mortgage Loan and the
Release Fee which amount shall be a fee to Lender and not applied
in reduction of the principal amount of the Mortgage Loan;
(d) Borrower shall have paid all fees required under this Agreement
then due;
(e) All costs incident to the preparation and recording of the
release documents shall be paid by Borrower;
(f) Borrower shall execute such documents as Lender reasonably
requests to evidence satisfaction of all conditions of the
release set forth herein and shall provide Lender with copies of
all documents and information reasonably requested by Lender
regarding the sale of each Interval; and
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(g) Borrower's escrow agent and Lender shall have agreed upon
mutually acceptable escrow instructions setting forth the
logistical arrangements for the release of each Interval at
settlement of the sale thereof.
10.2 FULL RELEASE. Upon repayment by Borrower of all sums due under the
Mortgage Loan and all obligations related to the Mortgage Loan, at Borrower's
cost and expense, but without payment of any Release Payment or Release Fee,
Lender agrees to cause the trustee under the Deed of Trust to execute,
acknowledge and deliver, from time to time, a release from the lien of the Deed
of Trust encumbering the Property, in form and substance acceptable to Lender
and the Title Company in their reasonable discretion, of any Intervals upon the
written request of Borrower provided that:
(a) No Event of Default or Default shall exist;
(b) The Receivables Loan Revolving Credit Period has
not been extended;
(c) The Maximum Loan Amount has not been increased;
(d) Borrower shall have paid all fees required under this Agreement
then due;
(e) All costs incident to the preparation and recording of the
release documents shall be paid by Borrower;
(f) Borrower shall execute such documents as Lender reasonably
requests to evidence satisfaction of all conditions of the
release set forth herein and shall provide Lender with copies of
all documents and information reasonably requested by Lender; and
(g) Borrower's escrow agent and Lender shall have agreed upon
mutually acceptable escrow instructions setting forth the
logistical arrangements for the release of the Intervals.
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SECTION 11
11. CERTAIN RIGHTS OF LENDER
11.1. PROTECTION OF COLLATERAL. Lender may at any time and from time to
time take such actions as Lender deems necessary or appropriate to protect
Lender's Liens and security interests in and to preserve the Collateral, and to
establish, maintain and protect the enforceability of Lender's rights with
respect thereto, all at the expense of Borrower. Borrower agrees to cooperate
fully with all of Lender's efforts to preserve the Collateral and Lender's
Liens, security interests and rights and will take such actions to preserve the
Collateral and Lender's Liens, security interests and rights as Lender may
direct, including, without limitation, by promptly paying upon Lender's demand
therefor, all documentary stamp taxes or other taxes, other than income,
franchise or similar taxes, that may be or may become due in respect of any of
the Collateral. All of Lender's expenses of preserving the Collateral and its
liens and security interests and rights therein shall be added to the Loan.
11.2. PERFORMANCE BY LENDER. If Borrower fails to perform any agreement
contained herein, Lender may, after 10 days after notice by Lender to Borrower,
itself perform, or cause the performance of, such agreement, and the expenses of
Lender incurred in connection therewith shall be payable by Borrower under
Section 11.5 below. In no event, however, shall Lender have any obligation or
duties whatsoever to perform any covenant or agreement of Borrower contained
herein or in any of the Loan Documents, Timeshare Documents or Operating
Contracts, and any such performance by Lender shall be wholly discretionary with
Lender. The performance by Lender, of any agreement or covenant of Borrower on
any occasion shall not give rise to any duty on the part of Lender to perform
any such agreements or covenants on any other occasion or at any time. In
addition, Borrower acknowledges that Lender shall not at any time or under any
circumstances whatsoever have any duty to Borrower or to any third party to
exercise any of Lender's rights or remedies hereunder.
11.3. NO LIABILITY OF LENDER. Neither the acceptance of this Agreement by
Lender, nor the exercise of any rights hereunder by Lender, shall be construed
in any way as an assumption by Lender of any obligations, responsibilities or
duties of Borrower arising in connection with the Property or under the
Timeshare Documents or Timeshare Act, or under any of the Operating Contracts,
or in connection with any other business of Borrower, or the Collateral, or
otherwise bind Lender to the performance of any obligations with respect to the
Property or the Collateral; it being expressly understood that Lender shall not
be obligated to perform, observe or discharge any obligation, responsibility,
duty, or liability of Borrower with respect to the Property or any of the
Collateral, or under any of the Timeshare Documents, the Timeshare Act or under
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any of the Operating Contracts, including, but not limited to, appearing in or
defending any action, expending any money or incurring any expense in connection
therewith, except for Lender's gross negligence or willful misconduct. Without
limitation of the foregoing, neither this Agreement, any action or actions on
the part of Lender taken hereunder, nor the acquisition of the Pledged Notes
Receivable and the Assigned Deeds of Trust by Lender prior to or following the
occurrence of an Event of Default shall constitute an assumption by Lender of
any obligations of Borrower with respect to the Property, the Collateral, the
Pledged Notes Receivable, the Assigned Deeds of Trust or any documents or
instruments executed in connection therewith, and Borrower shall continue to be
liable for all of its obligations thereunder or with respect thereto.
Borrower and Guarantor, jointly and severally, agree to indemnify,
protect, defend and hold Lender harmless from and against any and all claims,
demands, causes of action, losses, damages, liabilities, suits, costs and
expenses, including, without limitation, attorneys' fees and court costs,
asserted against or incurred by Lender by reason of, arising out of, or
connected in any way with: (a) any failure of Borrower or Guarantor to perform
any of its covenants or obligations with respect to the Property, the Collateral
or to the Purchasers of any of the Intervals; (b) a breach of any certification,
representation, warranty or covenant of Borrower or Guarantor set forth in any
of the Loan Documents; (c) the ownership of the Pledged Notes Receivable, the
Assigned Deeds of Trust and the rights, titles and interests assigned hereby, or
intended so to be; (d) the debtor-creditor relationships between Borrower on the
one hand and the Purchasers or Lender, as the case may be, on the other; or (e)
the Pledged Notes Receivable, the Assigned Deeds of Trust or the operation of
the Property or sale of Intervals, except for Lender's gross negligence or
willful misconduct. The obligations of Borrower and Guarantor to indemnify,
protect, defend and hold Lender harmless as provided in this Agreement are
absolute, unconditional, present and continuing, and shall not be dependent upon
or affected by the genuineness, validity, regularity or enforceability of any
claim, demand or suit from which Lender is indemnified. The indemnity provisions
in this Section 11.3 shall survive the satisfaction of the Obligations and
termination of this Agreement, and remain binding and enforceable against the
Borrower and Guarantor, and Borrower and Guarantor hereby waive, except as
otherwise specifically provided herein, all notices with respect to any losses,
damages, liabilities, suits, costs and expenses, and all other demands
whatsoever hereby indemnified, and agrees that their obligations under this
Agreement shall not be affected by any circumstances, whether or not referred to
above, which might otherwise constitute legal or equitable discharges of its
obligations hereunder. If a court of competent jurisdiction should determine
that Borrower or Guarantor is entitled to recover damages from Lender for any
reason or upon any cause, claim or counterclaim, in connection with the Loan or
the transactions provided for or contemplated pursuant to this
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Agreement or the other Loan Documents, Borrower and Guarantor stipulate and
agree that any such damages or awards shall be limited to the amount of the
Commitment Fee (or any portion thereof actually paid by Borrower to Lender) and
shall not include consequential or punitive damages.
11.4. RIGHT TO DEFEND ACTION AFFECTING SECURITY. Lender may, at Borrower's
expense, appear in and defend any action or proceeding at law or in equity which
Lender in good faith believes may affect the value of the Collateral, the
Improvements, the security interests granted under this Agreement, including
without limitation the security interests in the Pledged Notes Receivables and
the Assigned Deeds of Trust, or Lender's rights under any of the Loan Documents.
11.5. EXPENSES. All expenses payable by Borrower under any provision of
this Agreement shall be part of the Obligations of the Borrower and shall be
paid by Borrower to Lender, upon demand, and shall bear interest at the Mortgage
Loan Interest Rate, or at the Receivables Loan Interest Rate if the Mortgage
Loan has been paid, from the date of demand until repaid by Borrower or at the
Default Rate after the declaration of an Event of Default.
11.6. LENDER'S RIGHT OF SET-OFF. Upon an Event of Default, Lender shall
have the right to set-off against any Collateral any Obligations then due and
unpaid by Borrower.
11.7. NO WAIVER. No failure or delay on the part of Lender in exercising
any right, remedy or power under this Agreement or in giving or insisting upon
strict performance by Borrower or Guarantor hereunder or in giving notice
hereunder shall operate as a waiver of the same or any other power or right, and
no single or partial exercise of any such power or right shall preclude any
other or further exercise thereof or the exercise of any other such power or
right. Lender, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Borrower or Guarantor of any and all of
the terms and provisions of this Agreement to be performed by Borrower or
Guarantor. The collection and application of proceeds, the entering and taking
possession of the Collateral, and the exercise of the rights of Lender contained
in the Loan Documents and this Agreement shall not cure or waive any default, or
affect any notice of default, or invalidate any acts done pursuant to such
notice. No waiver by Lender of any breach or default of or by any party
hereunder shall be deemed to alter or affect Lender's rights hereunder with
respect to any prior or subsequent default.
11.8. Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. Without affecting the liability of any Person including without
limitation, any Purchasers, if such Purchasers have any such liability, for the
payment of any of the Obligations or without affecting or impairing Lender's
Lien on the
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Collateral, or the remainder thereof, as security for the full amount of the
Loan unpaid and the Obligations, except to the extent Lender has specifically
agreed otherwise, Lender may from time to time, without notice: (a) release any
Person liable for the payment of any part of the Loan; (b) extend the time or
otherwise alter the terms of payment of any part of the Loan; (c) accept
additional security for the Obligations of any kind, including deeds of trust or
mortgages and security agreements; (d) alter, substitute or release any property
securing any part of the Obligations; (e) realize upon any collateral for the
payment of all or any portion of the Loan in such order and manner as it may
deem fit; or (f) join in any subordination or other agreement affecting this
Agreement or the lien or charge thereof.
11.9. ASSIGNMENT OF LENDER'S INTEREST. Lender shall have the right to
assign the Loan and all or any portion of its rights in or pursuant to this
Agreement or any of the Loan Documents to any subsequent holder or holders of
the Mortgage Loan, the Receivables Loan or the Obligations, but no such
assignment shall relieve Lender from the primary obligation to make any Advance
to which Borrower is entitled hereunder.
11.10. NOTICE TO PURCHASER. Borrower authorizes the Lender (but Lender
shall not be obligated) to communicate at any time and from time to time with
any Purchaser or any other Person primarily or secondarily liable under a
Pledged Note Receivable with regard to the Lien of the Lender thereon and any
other matter relating thereto, and by no later than the Closing Date, Borrower
shall deliver to Lender a notification to the Purchasers executed in blank by
the Borrower and in form acceptable to Lender, pursuant to which the Purchasers
(or other obligors) may be directed to remit all payments in respect of the
Collateral as Lender may require.
11.11. COLLECTION OF THE PLEDGED NOTES RECEIVABLE. Borrower hereby directs
and authorizes each party liable for the payment of the Pledged Notes
Receivable, and by no later than the date on which the applicable Receivables
Loan Advance is to be made, shall direct in writing each such party, to pay each
installment thereon pursuant to the Lockbox Agreement, unless and until directed
otherwise by written notice from Lender or, at Lender's direction, from
Borrower, after which such parties are and shall be directed to make all further
payments on the Pledged Notes Receivable in accordance with the directions of
Lender. Following the occurrence of an Event of Default, Lender shall have the
right to require that all payments becoming due under the Pledged Notes
Receivable be paid directly to Lender, and Lender is hereby authorized to
receive, collect, hold and apply the same in accordance with the provisions of
this Agreement. In the event that following the occurrence of an Event of
Default, Lender or Lockbox Agent does not receive any installment of principal
or interest due and payable under any of the Pledged Notes Receivable on or
prior to the date upon which such installment becomes due,
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Lender may, at its election (but without any obligation to do so), give (or
cause the Lockbox Agent to give) notice of such default to the defaulting party
or parties, and Lender shall have the right (but not the obligation), subject to
the terms of such Pledged Notes Receivable, to accelerate payment of the unpaid
balance of any of the Pledged Notes Receivable in default and to foreclose each
of the Assigned Deeds of Trust securing the payment thereof, and to enforce any
other remedies available to the holder of such Pledged Notes Receivable with
respect to such default. Borrower hereby further authorizes, directs and
empowers Lender (or any other Person as may be designated by Lender in writing)
to collect and receive all checks and drafts evidencing such payments and to
endorse such checks or drafts in the name of Borrower and upon such
endorsements, to collect and receive the money therefor. The right to endorse
checks and drafts granted pursuant to the preceding sentence is irrevocable by
Borrower, and the banks or banks paying such checks or drafts upon such
endorsements, as well as the signers of the same, shall be as fully protected as
though the checks or drafts have been endorsed by Borrower.
11.12. POWER OF ATTORNEY. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place and
stead, or otherwise, to: (a) endorse any checks or drafts payable to Borrower,
with respect to the Collateral, in the name of Borrower and in favor of Lender;
(b) to demand and receive from time to time any and all property, rights,
titles, interests and liens hereby sold, assigned and transferred, or intended
so to be, and to give receipts for same; (c) from time to time to institute and
prosecute in Lender's own name any and all proceedings at law, in equity, or
otherwise, that Lender may deem proper in order to collect, assert or enforce
any claim, right or title, of any kind, in and to the property, rights, titles,
interests and liens hereby sold, assigned or transferred, or intended so to be,
and to defend and compromise any and all actions, suits or proceedings in
respect of any of the said property, rights, titles, interests and liens; (d)
upon an Event of Default to change the Borrower's post office mailing address
with respect to the Collateral; and (e) generally to do all and any such acts
and things in relation to the Collateral as Lender shall in good ▇▇▇▇▇ ▇▇▇▇
advisable. Borrower hereby declares that the appointment made and the powers
granted pursuant to this Section 11.12 are coupled with an interest and are and
shall be irrevocable by Borrower in any manner, or for any reason, unless and
until the Obligations are paid in full or a release of the same is executed by
Lender and duly recorded in the appropriate public records of ▇▇▇▇▇ County,
Nevada.
11.13. RELIEF FROM AUTOMATIC STAY, ETC. To the fullest extent permitted by
law, in the event Borrower or Guarantor shall make application for or seek
relief or protection under the federal bankruptcy code ("Bankruptcy Code") or
other Debtor Relief Laws, or
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in the event that any involuntary petition is filed against the Borrower or
Guarantor under such Code or other Debtor Relief Laws, and not dismissed with
prejudice within 45 days, the automatic stay provisions of Section 362 of the
Bankruptcy Code are hereby modified as to Lender to the extent necessary to
implement the provisions hereof permitting set-off and the filing of financing
statements or other instruments or documents; and Lender shall automatically and
without demand or notice (each of which is hereby waived) be entitled to
immediate relief from any automatic stay imposed by Section 362 of the
Bankruptcy Code or otherwise, on or against the exercise of the rights and
remedies otherwise available to Lender as provided in the Loan Documents. In
addition, in the event relief is sought by or against Guarantor under the
Bankruptcy Code, such Guarantor agrees to not seek, directly or indirectly, in
any ensuing bankruptcy proceeding, any extension of the exclusivity period
otherwise available to a debtor under the Bankruptcy Code, including, without
limitation, the exclusivity period provided for under Section 1121(b) of the
Bankruptcy Code. Guarantor agree not to contest the validity or enforceability
of this Section.
11.14. INVESTIGATIONS AND INQUIRIES. Borrower hereby authorizes Lender to
conduct such investigations and inquiries as to credit, operations, the
Guarantor, the Property and Collateral as shall be necessary or desirable in
connection with monitoring the Loan, and all such Persons of whom Lender may
make such inquiry are empowered to cooperate with, and to provide requested
information to, Lender.
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SECTION 12
12. TERM OF AGREEMENT
This Agreement shall continue in full force and effect and the security
interests granted hereby and the duties, covenants and liabilities of the
Borrower and Guarantor hereunder and all the terms, conditions and provisions
hereof relating thereto shall continue to be fully operative until all of the
Obligations and all other obligations to Lender secured by the Collateral have
been satisfied in full, Lender has no further obligation to make Advances
hereunder and Borrower and Guarantor have provided to Lender, an executed
general release of any and all claims and matters, in a form satisfactory to
Lender and containing such covenants and provisions as are acceptable to Lender,
in Lender's sole discretion. The Borrower expressly agrees that if either the
Borrower or the Guarantor make a payment to the Lender, which payment or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, or otherwise required to be repaid to a trustee, receiver or any
other party under any Debtor Relief Laws, state or federal law, common law or
equitable cause, then to the extent of such repayment, the Obligations or any
part thereof intended to be satisfied and the Liens provided for hereunder
securing the same shall be revived and continued in full force and effect as if
said payment had not been made.
SECTION 13
13. MISCELLANEOUS
13.1. NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender or Borrower. Each such notice,
request or other communication shall be effective: (a) if given by mail, five
(5) days after such notice is deposited in the United States Mail with first
class postage prepaid, addressed as aforesaid, provided that such mailing is by
registered or certified mail, return receipt requested or the date of receipt,
if earlier; (b) if given by overnight delivery, the next Business Day after
being deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne Express with all fees and charges prepaid, addressed
as provided below, or the date of receipt if earlier; or (c) if given by any
other means, when delivered at the address specified in this Section 13.1.
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IF TO BORROWER: Preferred Equities Corporation, PEC Building, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Executive Vice
President, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President, ▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, with a
further copy to Mego Financial Corp., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇, or at such other address as shall be designated by Borrower by
written notice to the Lender.
IF TO LENDER: Litchfield Financial Corporation, POB 488, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or to ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Senior Vice President, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇,
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇.
13.2. SURVIVAL. All representations, warranties, covenants and agreements
made by Borrower and Guarantor herein, in the other Loan Documents or in any
other agreement, document, instrument or certificate delivered by or on behalf
of Borrower or Guarantor under or pursuant to the Loan Documents shall be
considered to have been relied upon by Lender and shall survive the delivery to
Lender of such Loan Documents (and each part thereof), regardless of any
investigation made by or on behalf of Lender.
13.3. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS
MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES; PROVIDED, HOWEVER, THAT MATTERS
RELATED TO THE RIGHTS AND REMEDIES OF LENDER WITH RESPECT TO ANY REAL PROPERTY
SHALL BE GOVERNED BY THE LAW OF THE STATE IN WHICH THE REAL PROPERTY IS LOCATED.
13.4. JURY TRIAL/JURISDICTION. Borrower hereby waives the right to trial by
jury in any litigation arising out of, relating to, or connected with this
Agreement, it being acknowledged by Borrower that Borrower is a professional
developer engaged and knowledgeable in sophisticated commercial real estate
transactions and that Borrower makes this waiver of trial by jury knowingly and
voluntarily and only after consultation with sophisticated legal counsel of
Borrower's choosing. Borrower hereby consents to the non-exclusive personal
jurisdiction of the federal and state courts located in Massachusetts in any and
all actions between the Borrower and the Lender arising under or in connection
with this Agreement, the Loan or any of the Loan Documents.
13.5. LIMITATION ON INTEREST. Lender and Borrower intend to comply at all
times with applicable usury laws. All agreements between Lender and Borrower,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in
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no contingency, whether by reason of demand or acceleration of the maturity of
the Loan or otherwise, shall the interest contracted for, charged, received,
paid or agreed to be paid to Lender exceed the highest lawful rate permissible
under applicable usury laws. If, from any circumstance whatsoever fulfillment of
any provision hereof, of the Mortgage Loan, the Receivables Loan or of any other
Loan Documents shall involve transcending the limit of such validity prescribed
by any law which a court of competent jurisdiction may deem applicable hereto,
then ipso facto, the obligation to be fulfilled shall be reduced to the limit of
such validity; and if from any circumstance Lender shall ever receive anything
of value deemed interest by applicable law which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal of the Loan and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of the Loan,
such excess shall be refunded to Borrower. All interest paid or agreed to be
paid to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal so that the interest on the Loan for such full period shall not
exceed the highest lawful rate. Borrower agrees that in determining whether or
not any interest payment under the Loan Documents exceeds the highest lawful
rate, any non-principal payment (except payments specifically described in the
Loan Documents as "interest") including without limitation, prepayment fees and
late charges, shall to the maximum extent not prohibited by law, be an expense,
fee, premium or penalty rather than interest. Lender hereby expressly disclaims
any intent to contract for, charge or receive interest in an amount which
exceeds the highest lawful rate. The provisions of the Mortgage Loan, the
Receivables Loan, this Agreement, and all other Loan Documents are hereby
modified to the extent necessary to conform with the limitations and provisions
of this Section, and this Section shall govern over all other provisions in any
document or agreement now or hereafter existing. This Section shall never be
superseded or waived unless there is a written document executed by the Lender
and the Borrower, expressly declaring the usury limitation of this Agreement to
be null and void, and no other method or language shall be effective to
supersede or waive this paragraph.
13.6. INVALID PROVISIONS. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be
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added automatically as a part of this Agreement and/or the Loan Documents (as
the case may be) a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
13.7. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower, the Guarantor and
Lender and their respective successors and assigns; provided that Borrower and
Guarantor may not transfer or assign any of their rights or obligations under
this Agreement, the Commitment or the other Loan Documents without the prior
written consent of Lender and provided further that Lender shall not be able to
assign its obligation, without retaining the primary responsibility, to make
Advances to Borrower under this Agreement. This Agreement and the transactions
provided for or contemplated hereunder or under any of the Loan Documents are
intended solely for the benefit of the parties hereto. No third party shall have
any rights or derive any benefits under or with respect to this Agreement, the
Commitment or the other Loan Documents except as provided in advance in a
writing signed on behalf of Lender and the Borrower. No Person other than the
Borrower, shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all thereof, and
no other Person, other than the Borrower, under any circumstance, shall be
deemed to be a beneficiary of such conditions, any and all of which Lender
freely may waive in whole or in part at any time if, in its sole discretion, it
deems it desirable to do so. Borrower agrees to and shall indemnify Lender from
any liability, claim or loss and attorneys' fees and costs resulting from the
disbursement of the Loan proceeds or from the condition of the Property, whether
related to the qualify of construction or otherwise and whether arising during
or after the term of the Loan. This provision shall survive the repayment of the
Loan and shall continue in full force and effect so long as the possibility of
such liability, claim or loss exists.
13.8. AMENDMENT. This Agreement may not be amended or modified, and no term
or provision hereof may be waived, except by written instrument signed by the
parties hereto.
13.9. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one or more
counterparts hereof signed by Borrower, Guarantor and Lender.
13.10. LENDER NOT FIDUCIARY. The relationship between Borrower and Lender
is solely that of debtor and creditor, and Lender has no fiduciary or other
special relationship with Borrower
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or Guarantor, and no term or provision of any of the Loan Documents shall be
construed so as to deem the relationship between Borrower and Lender to be other
than that of debtor and creditor. Nothing herein contained shall be construed to
create a partnership or joint venture between Borrower and Lender, and the
parties hereby acknowledge that no such relationship exists between them.
13.11. RETURN OF NOTES RECEIVABLE. In the event Borrower complies with its
Obligations under this Agreement with respect to Pledged Notes Receivable that
cease to be Eligible Notes Receivable, and Borrower thereafter desires to
enforce such ineligible Note Receivable against the Purchaser thereof, then
provided that no Event of Default has occurred which has not been cured to
Lender's reasonable satisfaction (as evidenced by a written acceptance of such
cure executed by Lender), and no Default has occurred, then within fifteen (15)
days after its receipt of a written request from Borrower, Lender shall endorse
the ineligible Note Receivable "Pay to the order of Preferred Equities
Corporation without recourse" and deliver such ineligible Note Receivable and
any related Collateral to Borrower.
In the event Borrower complies with its obligations under Section 8.1(v)
with respect to the replacement of Pledged Notes Receivables, then provided that
no Event of Default has occurred which has not been cured to Lender's reasonable
satisfaction (as evidenced by a written acceptance of such cure executed by
Lender), and no Default has occurred, then within fifteen (15) days after its
receipt of a written request from Borrower, Lender shall endorse the replaced
Note Receivable "Pay to the order of preferred Equities Corporation without
recourse" and deliver such replaced Note Receivable and any related Collateral
to Borrower.
In the event Borrower complies with its Obligations under this Agreement
with respect to offering to Lender the first opportunity to purchase Pledged
Notes Receivable, in bulk, provided that Lender has not exercised such right or
has not consummated said purchase within the time periods provided in Section
2.6(b)(iii) and provided further that no Event of Default has occurred which has
not been cured to Lender's reasonable satisfaction (as evidenced by a written
acceptance of such cure executed by Lender) then within fifteen (15) days after
its receipt of a written request from Borrower and any required fee set forth in
Section 2.6(b)(iii) and the amount of any Advances outstanding against all of
the Pledged Notes Receivable to be released, Lender shall endorse the Pledged
Notes Receivable which are part of such bulk sale "Pay to the order of Preferred
Equities Corporation without recourse" and deliver such Pledged Notes Receivable
and any related Collateral to Borrower.
In the event Borrower complies with its Obligations under this Agreement
and there are Pledged Notes Receivable in excess of the amount necessary to
support, as Collateral, the Receivables Loan
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and provided further that no Event of Default has occurred which has not been
cured to Lender's reasonable satisfaction (as evidenced by a written acceptance
of such cure executed by Lender) then not more frequently than once each Fiscal
Quarter or when the unpaid principal of Pledged Notes Receivable is in excess of
the amounts necessary to support, as Collateral, the Receivable Loan in excess
of $100,000, within fifteen (15) days after its receipt of a written request
from Borrower, Lender shall endorse those of the Pledged Notes Receivable which
are in excess of the amount of Pledged Notes Collateral necessary, in Lender's
reasonable discretion, to support the Receivables Loan "Pay to the order of
Preferred Equities Corporation without recourse" and deliver such Pledged Notes
Receivable and any related Collateral to Borrower.
In the event that all Obligations hereunder are fully satisfied, then
within fifteen (15) days thereafter, Lender shall endorse the Pledged Notes
Receivable "Pay to the order of Preferred Equities Corporation without recourse"
and deliver such Pledged Notes Receivable, together with any other nonrecourse
Collateral reassignment documents requested and prepared by Borrower, at
Borrower's sole cost and expense. In addition, if requested by Borrower in its
written request, Lender shall execute and deliver to Borrower UCC-3 termination
statements covering the Note Receivable being returned to Borrower, provided
that such termination statements are limited to the specific Notes Receivable
being released and are prepared by Borrower at Borrower's sole cost and expense.
13.12. ACCOUNTING PRINCIPLES. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined or made in accordance
with GAAP consistently applied at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
13.13. TOTAL AGREEMENT. This Agreement and the other Loan Documents,
including the Exhibits and Schedules to them, is the entire agreement between
the parties relating to the subject matter hereof, incorporates or rescinds all
prior agreements and understandings between the parties hereto relating to the
subject matter hereof, cannot be changed or terminated orally or by course of
conduct, and shall be deemed effective as of the date it is accepted by the
Lender at the offices set forth above.
13.14. LITIGATION. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE BORROWER, THE GUARANTOR AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY
ANY RIGHT, POWER, REMEDY OR DEFENSE ARISING OUT OF OR RELATED TO THIS
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AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF ANY PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. EACH OF THE BORROWER,
GUARANTOR AND LENDER FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH
LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN
WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, THE BORROWER AND
GUARANTOR HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, NOR LENDER'S
COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE
EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. THE BORROWER AND THE GUARANTOR ACKNOWLEDGE THAT THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
The waiver and stipulations of the Borrower, the Guarantor, and Lender in
this Section 13.14 shall survive the final payment or performance of all of the
Obligations of the Borrower and all other obligations secured by the Collateral
and the resulting termination of this Agreement.
13.15. SUBMISSIONS. All documents, agreements, reports, surveys,
appraisals, insurance, financial information or other submissions (collectively,
the "Submissions") required under the Loan Documents shall be in form and
content reasonably satisfactory to Lender and performed at Borrower's expense.
Lender shall have the prior right of approval of any Person responsible for
preparing each Submission (a "Preparer") and may reject any Submissions if
Lender believes in its reasonable opinion that the experience, skill, reputation
or other aspect of the Preparer is unsatisfactory in any respect. All reports
and appraisals related to the Property hereafter required pursuant to the Loan
Documents shall be addressed to Lender and include the following language:
"The undersigned acknowledges that Litchfield Financial Corporation is
relying on the within information in connection with its Advances to
Borrower on the Property."
13.16. INCORPORATION OF EXHIBITS. This Agreement, together with all
Exhibits and Schedules hereto, constitute one document and agreement which is
referred to herein by the use of the defined term Agreement. Such Exhibits and
Schedules are incorporated herein as to fully set out in this Agreement. The
definitions contained in any part of this Agreement shall apply to all parts of
this Agreement.
13.17. CONSENT TO ADVERTISING AND PUBLICITY OF TIMESHARE DOCUMENTS. The
Borrower and Guarantor agree that the Lender may
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issue and disseminate to the public information describing the credit
accommodation entered into pursuant to this Agreement, including the names and
addresses of Borrower, the Guarantor and any subsidiaries and Affiliates, the
amount, interest rate, maturity, collateral, and a general description of the
Borrower's business, upon consent of the Borrower which shall not be
unreasonably withheld.
13.18. DIRECTLY OR INDIRECTLY. Where any provision in the Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provisions shall be applicable whether such action is taken
directly or indirectly by such Person.
13.19. HEADINGS. Section headings have been inserted in the Agreement as a
matter of convenience of reference only; such section headings are not a part of
the Agreement and shall not be used in the interpretation of this Agreement.
13.20. GENDER. Words of any gender in this Agreement shall include each
other gender where appropriate.
13.21. TIME. Time is of the essence of this Agreement.
13.22. CONFLICT. The provisions of this Agreement shall control in the
event of any conflict among it, the Commitment and any other Loan Document.
13.23. LENDER RECORDS AND LOAN ACCOUNT. Lender shall maintain an account on
its books in the name of Borrower (the "Loan Account") on which Borrower will be
charged with all Advances, including the Mortgage Loan, and all other sums due
from Borrower to Lender or advanced by Lender for Borrower's account, including,
accrued interest, expenses, and any other Obligations of Borrower. The Loan
Account will be credited with all payments received by Lender from Borrower or
for Borrower's account. Lender shall render statements regarding the Loan
Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Loan Costs owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and Lender unless, within 30 days
after receipt thereof by Borrower, Borrower shall deliver to Lender written
objection thereto describing the error or errors contained in any such
statements.
13.24. DIVISION. If the Division requires changes to the Loan Documents
with respect to insurance, condemnation or releases to protect Purchasers and
such modifications would not materially adversely affect Lender's rights
hereunder, Lender agrees to so modify the Loan Documents.
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IN WITNESS WHEREOF, Borrower, Lender and the Guarantor have caused this
Agreement to be duly executed and delivered effective as of the date first above
written.
BORROWER:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President
[CORPORATE SEAL]
LENDER:
LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation
By:
Name/Title:
GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇ ▇. ▇▇▇▇▇▇,
Vice President
[SEAL]
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IN WITNESS WHEREOF, Borrower, Lender and the Guarantor have caused this
Agreement to be duly executed and delivered effective as of the date first above
written.
BORROWER:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President
[CORPORATE SEAL]
LENDER:
LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------------
Name/Title: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Senior Vice President
GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
[SEAL]
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IN WITNESS WHEREOF, Borrower, Lender and the Guarantor have caused this
Agreement to be duly executed and delivered effective as of the date first above
written.
BORROWER:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President
[CORPORATE SEAL]
LENDER:
LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation
By:
Name/Title:
GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------------
Name/Title: ▇▇▇ ▇. ▇▇▇▇▇▇,
Vice President
[SEAL]
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EXHIBIT A
TO
LOAN AND SECURITY AGREEMENT
LEGAL DESCRIPTION OF PROPERTY
An undivided /5202 interest in that portion of the Southwest Quarter (SW
1/4) of Section 16, Township 21 South, Range 61 East, M.D.B.&M., and being a
portion of Block four (4) of Flamingo Estates, as shown by map thereof on File
in Book 5 of Plats, Page 22, in the Office of the County Recorder of ▇▇▇▇▇
County, Nevada, described as Lots one (1) and two (2), as shown by Parcel Map
in File 70, Page 30 recorded September 19, 1991 as Document No. 00581 in Book
910919 of Official Records, ▇▇▇▇▇ County, Nevada; Excepting therefrom all gas
and oil rights that now exist or may be developed upon said land as reserved by
▇▇▇▇ ▇▇▇▇▇, in Deed recorded February 18, 1952 as Document No. 381100, in the
Office of the County Recorder of ▇▇▇▇▇ County, Nevada, and subsequently
conveyed to ▇▇▇▇▇ ▇▇▇▇, by Deed recorded March 25, 1957 as Document No. 102052
of Official Records, ▇▇▇▇▇ County Nevada
99
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
LITIGATION
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LITIGATION
1. ▇▇▇▇▇▇▇ v. CENTRAL NEVADA UTILITIES COMPANY & PREFERRED EQUITIES CORPORATION
In August 1991, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ filed an action in the ▇▇▇
County, Nevada, Judicial Court, Case No. 11885, against Central Nevada
Utilities Company and Preferred Equities Corporation for damages alleged to
have resulted from sewage backing up into the Plaintiffs' home. The suit
alleges that CNUC is the alter ego of PEC and requests damages in excess of
$10,000 for alleged damages to the Plaintiffs' residence, in excess of
$10,000 to the contents of the Plaintiffs' residence, punitive damages in
excess of $10,000, diminution in value of the residence, storage charges,
mental pain and suffering and costs and attorney fees. The suit alleges gross
negligence, trespass and absolute liability for operation of an inherently
dangerous instrumentality. The case has been accepted by Company's insurance
carrier for defense, subject to the limits of the policy. The Company feels
the case is fully insured and will not have a material adverse effect on the
business or financial condition of the Company.
2. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ v. PREFERRED EQUITIES CORPORATION
District Court, ▇▇▇▇▇ County, Nevada
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇, filed February 22, 1990
The complaint requests a reformation of an easement for parking on property
adjacent to the Company's offices in Las Vegas, removal of an alleged
encroachment, to require rental for parking pursuant to the easement, and for
compensation for security guard expenses. The Court granted PEC's motion to
dismiss the case based on the pleadings and arguments of counsel. The
Plaintiffs filed an appeal. They filed a new lawsuit based on an alleged
abuse of the easement. The new lawsuit claims overuse of the easement,
requests reformation of the easements, an injunction prohibiting overuse of
the easement, damages in excess of $10,000, attorney's fees and costs.
Agreement has been reached to dismiss the second suit after entry of a final,
nonappealable decision has been entered in the first case. The Supreme Court
reversed the dismissal of the initial case and remanded it for trial. The
second case was stayed pending a final disposition of the first case. Trial
was held during November 1994. A decision favorable to the Company was issued
and appealed by the Plaintiff. The Supreme Court of Nevada reversed the Trial
Court decision and directed the Trial Court to declare a parking easement to
be extinguished. The Company filed a Petition for Rehearing in connection
with the Supreme Court Order, which was denied. The Company does not feel
that this decision will have a material adverse effect on the property or on
the business or financial condition of the Company.
3. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇ v. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
1.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
Case No. A 306000
In April 1992, Mr. and ▇▇▇. ▇▇▇▇▇▇ filed an action for damages alleged to
have resulted from an automobile accident that occurred October 12, 1991.
The accident involved one of the vans owned by the corporation. The case,
which is being defended by the corporation's insurance carrier, requests
general damages in an amount less than $25,000, medical expenses, damages
for loss of services in an amount in excess of $25,000, and costs and
attorney fees. The Company feels the case is fully insured and will not
have a material adverse effect on the business or financial condition of
the Company.
4. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ v. THE BRIG INC., dba OCEANFRONT RESTAURANT & LOUNGE
Superior Court, Atlantic County, New Jersey
Case No. ATL-L-001997-93
In May 1993, Plaintiff filed a complaint for damages for alleged injuries
that are claimed to have resulted from a fight in the Oceanfront Restaurant
in the Brigantine Inn. The case has been tendered to ▇▇▇▇ ▇▇▇▇▇▇▇▇,
restaurant operator, and his insurance carrier. The Company's insurance
carrier has also been notified. The case does not specify the amount of
damages, but the Company feels the case is fully insured and will not have
a material adverse effect on the business or financial condition of the
Company.
5. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ v. BRIGANTINE INN LTD., PREFERRED EQUITIES
CORPORATION & BRIGANTINE NAUTILUS
Superior Court, Atlantic County, New Jersey
Case No. ATL-L-001992-93
In May 1993, Plaintiff, a minor, filed a complaint for unspecified damages
alleged to have occurred as a result of claimed negligence in maintenance
and operation of the swimming pool at the Brigantine Inn. The case has been
tendered to the health club operator for defense and has been sent to the
Company's insurance carrier. The Company feels that the case is fully
insured and will not have a material adverse effect on the business or
financial condition of the Company. In March 1994, the complaint was
amended to add Brigantine Preferred Properties, Inc. as a defendant.
6. ▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇▇▇▇ v. PEC, d.b.a. GRAND FLAMINGO CLUB HOTEL &
DOVER ELEVATOR COMPANY
United States District Court, Northern District of Texas
Case No. 4-94CV-253 y; filed April 14, 1994 and served April 4, 1994
The Plaintiffs filed suit for damages as a result of an alleged incident on
June 28, 1992. The
2.
102
Plaintiffs claim an elevator door at the Grand Flamingo Club slammed shut,
knocking ▇▇. ▇▇▇▇ to the floor. The complaint alleges the elevator door was
operating improperly, that the hotel failed to have it repaired, and
requests $335,000 damages together with interest and costs. The case was
forwarded to the insurance carrier for defense. The case was settled for
$5,100 and dismissed.
7. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ v. BRIGANTINE INN, BRIGANTINE PREFERRED PROPERTIES, et
al.
Superior Court, Bergen County, New Jersey
Case No. BER-L-3712-95
Plaintiff filed an action for damages alleged to have resulted from a fall
in the Oceanfront Restaurant at the Brigantine Inn on or about May 31,
1994. The complaint alleges negligence and requests damages, interest and
costs, but does not specify the amount of damages. The complaint has been
forwarded to the insurance carrier and the Company feels the case is fully
insured and will not have a material adverse effect on the business or
financial condition of the Company.
8. ▇▇▇▇▇▇▇ ▇▇▇▇▇ v. PREFERRED EQUITIES CORPORATION
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇; filed June 14, 1995 and served June 27, 1995
On June 14, 1995, ▇▇▇▇▇▇▇ ▇▇▇▇▇ filed a complaint in the ▇▇▇▇▇ County,
Nevada District Court against Preferred Equities Corporation. The Plaintiff
requests general damages in excess of $10,000; special damages in excess of
$10,000; and attorney's fees and costs. The Plaintiff claims to have fallen
boarding one of the Company's vans as a result of alleged negligence on the
part of an employee of the Company. The complaint has been forwarded to the
insurance carrier. The Company feels the case is fully insured and will not
have a material adverse effect on the business or financial condition of
the Company.
9. IN RE MEGO FINANCIAL CORP. SECURITIES LITIGATION
United States District Court, District of Nevada
Case No. CV-9-95-01082-LDG(LPH)
On or about June 10, 1996, the United States District Court, District of
Nevada, approved a stipulation for consolidation of two cases (▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ vs. Mego Financial Corp. [the "Company"], certain of the Company's
officers and directors and the Company's independent auditors, Deloitte &
Touche LLP ["▇▇▇▇▇▇▇▇ Case"]; and ▇▇▇▇ ▇▇▇▇▇▇ vs. the Company and certain
of the Company's officers and directors ["▇▇▇▇▇▇ Case"]). The complaint in
the ▇▇▇▇▇▇▇▇ Case alleges that certain financial reports prepared and
issued by the Company, including certain financial statements certified by
Deloitte & Touche, were false and misleading, that one of the director
defendants engaged in "▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇," and alleges other violations of
federal securities statutes and common law. The Complaint seeks
3.
SEE ATTACHED UPDATE OF ITEM 9.
103
to have the Plaintiff (who allegedly purchased 100 shares of the Company's
common stock on November 9, 1995) and other purchasers of the Company's
common stock between January 14, 1994 and November 9, 1995 declared to be a
class, that the action be declared to be a class action, and asks for
damages in an unspecified amount, costs, attorney's fees, and such other
relief as the court may deem just and proper. The Complaint in the ▇▇▇▇▇▇
Case alleges among other things that the Defendants violated the federal
securities laws by making statements and issuing certain financial reports
in 1994 and 1995 that overstated the Company's earnings and business
prospects. The named Plaintiff seeks to represent a class consisting of
purchasers of the Company's common stock between November 28, 1994 and
November 9, 1995. The Complaint seeks damages in an unspecified amount,
costs, attorney's fees and such other relief as the court may deem just and
proper. The Company believes that it has substantial and valid defenses to
the allegations in each case and in the consolidated case. The time for
responsive pleadings has been extended sine die by agreement with
Plaintiffs' counsel. The Company understands that the Plaintiffs plan to
amend their Complaints, after which the defendants will have an appropriate
time to respond. On December 26, 1996, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") filed a
purported class action complaint against Mego Financial Corp. certain of
its officers and directors, and its independent auditors. On or about July
26, 1996, ▇▇▇▇▇▇ filed a motion in the above matter requesting that he be
added as a class representative and that his attorney be added as
additional counsel for the class. On December 26, 1996, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇") filed a purported class action complaint against Mego Financial
Corp., certain of its officers and directors, and its independent auditors.
On or about December 26, 1996, ▇▇▇▇▇▇ filed a motion in the above matter
requesting that he be added as a class representative and that his attorney
be added as additional counsel for the class. On or about January 2, 1997,
▇▇▇▇▇▇ withdrew his motion to be added as a class representative, which had
been pending. On January 9, 1997, ▇▇▇▇▇▇ filed a motion for relief from
certain portions of a pretrial order entered in the ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
cases. On February 13, 1997 the Defendants moved to dismiss ▇▇▇▇▇▇'▇
complaint. On March 13, 1997, ▇▇▇▇▇▇ filed a motion for the filing of a
consolidated complaint, for certification of a class, the holding of a
pretrial conference and suspension of briefing on the Defendants' motion to
dismiss. The Company opposed such motion. On March 31, 1997, the court
denied ▇▇▇▇▇▇'▇ motion to be included as a putative class representative
and denied, without prejudice to refile after either the filing of a
consolidated complaint or a ruling on ▇▇▇▇▇▇'▇ motion for the filing of a
consolidated complaint, ▇▇▇▇▇▇'▇ motion for the relief from certain
portions of the pretrial order, ▇▇▇▇▇▇'▇ motion to consolidate and
defendants' motion to dismiss ▇▇▇▇▇▇'▇ complaint. The ▇▇▇▇▇▇ complaint
claims that the Defendants violated the federal securities laws and common
law and contained allegations similar to those in the ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
complaints. Mego Financial Corp. believes that it has substantial defenses
to the ▇▇▇▇▇▇ complaint; however, is not presently able to predict the
outcome of this matter.
10. ▇▇▇▇ ▇. ▇'▇▇▇▇▇ v. PREFERRED EQUITIES CORPORATION, CALVADA SPRINGS
CORPORATION & CENTRAL NEVADA UTILITIES COMPANY.
4.
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ ▇▇. ▇▇▇▇▇; filed December 4, 1995 and served January 2, 1996
The Plaintiff requests general and compensatory damages in excess of
$10,000, miscellaneous and incidental damages in excess of $10,000, damages
for costs of medical care and treatment, costs and attorney's fees. The
Plaintiff claims to have been injured on December 15, 1993 by driving a
motor vehicle into a trench allegedly dug by the Defendants. The Plaintiff
claims the Defendants were negligent in constructing the ditch and failing
to properly warn of the existence of the ditch. The complaint was forwarded
to the insurance carrier. The plaintiff and the Company's insurance carrier
agreed to submit the claim to binding arbitration rather than having the
case go to trial. The Company feels the case is fully insured and will not
have a material adverse effect on the business or financial condition of
the Company or other defendants.
11. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ v. BRIGANTINE PREFERRED PROPERTIES, INC., SUCCESSOR IN
INTEREST TO BRIGANTINE INN, LTD. & THE BRIG INC.
Superior Court, Chancery Division, Atlantic County, New Jersey
Case ATL-C-175-96; filed November 22, 1996 and served December 9, 1996
The Complainant requests an order for the Defendants to convey the
Oceanfront Restaurant and Lounge, part of the Brigantine Inn Resort Club,
to the Plaintiff pursuant to alleged obligations in a lease and management
agreement. The Complaint also requests an order for the sale and
conveyance to the Plaintiff of the capital stock of The Brig Inc., owner
of the liquor license, and requests unspecified compensatory and punitive
damages. The Plaintiff filed a Notice of Lis Pendens on the portion of the
property involved in the case. The Company believes the Defendants have
valid defenses to the Complaint and does not the believe the matter will
have a material adverse effect on the business or financial condition of
the Company.
12. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ v. PREFERRED EQUITIES CORPORATION aka Calvada Springs
Corporation,
District Court, ▇▇▇▇▇ County, Nevada
Case No. A371479, filed March 26, 1997. Served March 31, 1997
The Plaintiff requests general and special damages in excess of $10,000,
attorneys fees, costs and interest. The plaintiff claims to have been
injured on or about April 21, 1995 as the result of an assault and
robbery by an unidentifed individual at or near the Grand Flamingo
Terraces. The Company feels the case is fully insured and will not have a
material adverse effect on the business or financial condition of the
Company.
5
105
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On December 26, 1996, in the matter of "In re Mego Financial Corp.
Securities Litigation," Master File No. CV-9-95-01082-LDG (RLH)(the
"Litigation"), in the United States District Court for the District of Nevada
(the "Court"), which matter was described in the Company's Form 10-K for the
fiscal year ended August 31, 1996 (the "1996 10-K"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
filed a purported class action complaint against the Company, certain of the
Company's officers and directors, and the Company's independent auditors. On
February 13, 1997, defendants moved to dismiss ▇▇▇▇▇▇'▇ complaint. On March 13,
1997, ▇▇▇▇▇▇ filed a "Motion for the Filing of a Consolidated Complaint and a
Class Certification Motion, the Holding of a Pretrial Conference and the
Suspension of Briefing on Defendants' Motions to Dismiss." The Company opposed
that motion. On March 31, 1997, the Court issued an Order that, among other
things, denied, without prejudice to refiling after either the filing of a
consolidated complaint or a ruling on ▇▇▇▇▇▇'▇ motion for the filing of a
consolidated complaint, defendants' motions to dismiss ▇▇▇▇▇▇'▇ complaint. On
May 31, 1997, the Court issued an Order denying ▇▇▇▇▇▇'▇ "Motion to Compel
Compliance with Local Rule 26-6" against the Company and its officers and
directors, and granting that motion against other parties, who have moved for
reconsideration.
On May 12, 1997, counsel for the plaintiffs in the ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
actions, which were described in the 1996 10-K, and counsel for the defendants
executed a Memorandum of Understanding with respect to a proposed settlement.
The proposed settlement, which is subject to a number of conditions, including
approval by the Court, calls for certification, for settlement purposes only,
of a class consisting of all purchasers of Mego Financial stock (excluding the
defendants and their respective directors, executive officers, partners and
affiliates and their respective immediate families, heirs, successors and
assigns) during the period from January 14, 1994 through November 9, 1995,
inclusive, and for creation of a settlement fund of $1.725 million. The portion
of this amount to be contributed by the Company, net of anticipated insurance
proceeds, is not expected to have a material adverse effect on the Company. The
parties anticipate submitting papers to the Court in due course seeking
approval of the settlement. Final approval of the settlement is expected to
dispose of all class claims in the Litigation, including those asserted by
▇▇▇▇▇▇. The Company believes that it has substantial defenses to all of the
complaints that have been filed against it; however, the Company presently
cannot predict the outcome of this matter.
31
106
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
That real property located in ▇▇▇▇▇ County, Nevada, described as:
That portion of the Southwest Quarter (SW 1/4) of Section 16, Township 21
South, Range 61 East, M.D.B.&M., and being a portion of Block four (4) of
Flamingo Estates, as shown by map thereof on File in Book 5 of Plats, Page 22,
in the Office of the County Recorder of ▇▇▇▇▇ County, Nevada, described as Lots
one (1) and two (2), as shown by Parcel Map in File 70, Page 30, recorded
September 19, 1991 as Document No. 00581 in Book 910919 of Official Records,
▇▇▇▇▇ County, Nevada; Excepting therefrom all gas and oil rights that now exist
or may be developed upon said land as reserved by ▇▇▇▇ ▇▇▇▇▇, in Deed recorded
February 18, 1952 as Document No. 381100, in the Office of the County Recorder
of ▇▇▇▇▇ County, Nevada, and subsequently conveyed to ▇▇▇▇▇ ▇▇▇▇, by Deed
recorded March 25, 1957 as Document No. 102052 of Official Records, ▇▇▇▇▇
County, Nevada.
107
EXHIBIT D
TO
LOAN AND SECURITY AGREEMENT
UNPAID TAXES AND UNFILED TAX RETURNS
The State of Texas has requested from RVS Marketing, a subsidiary of
Borrower, a series of franchise tax returns for the periods ended December 31,
1995 and February 29, 1996. No request for additional time to file the
franchise tax return for the year ended February 28, 1997 was filed. The total
amount of tax due is not anticipated to exceed $100.00.
