LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated effective as of March
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11, 2002, is made by and between PREFERRED EQUITIES CORPORATION, a Nevada
corporation ("Borrower"), whose address is 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx
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89109, CAPITALSOURCE FINANCE LLC, a Delaware limited liability company
("Lender"), whose address is 0000 Xxxxxxx Xxxxxx, 12/th/ Floor, Chevy Chase, MD
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20815 and MEGO FINANCIAL CORP., a New York corporation ("Guarantor"), whose
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address is 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx 00000.
RECITALS:
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WHEREAS, Borrower has asked Lender to make Borrower a secured acquisition
and development loan, of which up to $4,600,000 will be used by Borrower to pay
costs incurred in acquiring the Land and Existing Improvements, demolishing the
Existing Improvements on the Land, and constructing thereon the Resort
Improvements made or to be made a part of the Project, and the remainder
withheld and not funded by Lender unless and until Lender approves the uses for
such funds proposed by Borrower; and
WHEREAS, Borrower anticipates that the Resort Improvements will be used to
accommodate guests at the Project on a daily or weekly basis and ultimately to
sell Intervals to such guests; and
WHEREAS, Borrower's obligations under the Loan will be evidenced and
secured by the Loan Documents as hereinafter provided; and
WHEREAS, Guarantor will guaranty all of Borrower's obligations hereunder.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Guarantor and Lender agree
as follows:
ARTICLE 1
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DEFINITION OF TERMS
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1.1 Terms Defined. The following terms used in this Agreement shall have
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the following meanings:
Adjusted Committed Sum. As of any date, the maximum amount of the Loan
(eg., $7,000,000) reduced by the amount of any permanent reduction in the Loan
agreed to in writing by Borrower and Lender, if any, which relieves Lender of
its obligation to make further Advances hereunder.
Advance. Proceeds of the Loan advanced by Lender to Borrower in accordance
with this Agreement including the Initial Advance, each Interim Advance and each
Construction Advance.
LOAN AND SECURITY AGREEMENT - Page 1
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Affiliate. (a) Any Person who has a financial interest in Borrower or
Guarantor; (b) any Person under common ownership with Borrower or Guarantor; (c)
any Person in which Borrower or Guarantor has a financial interest (any of (a),
(b) or (c) are referred to as a "Related Party"); (d) any Person who has a
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financial interest in any Related Party; (e) any trust for the benefit of
Borrower or Guarantor or any Related Party; or (f) any Person in which any
Related Party has a financial interest.
Applicable Laws. Any and all federal, state, and local statutes,
ordinances, rules, regulations, court orders and decrees, administrative orders
and decrees, and other legal requirements of any and every conceivable type
applicable to Borrower, Guarantor, the Project or any portion thereof, or all or
any portion of the Collateral including, without limitation, (i) the Consumer
Credit Protection Act, the Federal Trade Commission Act, the Federal Interstate
Land Sales Full Disclosure Act, any applicable condominium act, and all other
applicable federal statutes, each as amended, and all rules and regulations
promulgated under any of the foregoing, and (ii) all of the applicable
provisions of any law of any state in which Borrower is selling Units (and the
rules and regulations promulgated thereunder) relating to the sale, offering for
sale or financing of Units or Intervals.
Approved Costs. Shall have the meaning set forth in Schedule 4.1 hereof.
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Architect. Any licensed architect in the State of Nevada who is acceptable
to Lender, in its sole discretion.
Biennial Interval(s). An undivided fee simple ownership interest as tenants
in common with all other Purchasers with respect to any Unit, with a right to
use such Unit for one week every other year, together with all appurtenant
rights and interests as more particularly described in the Timeshare
Documentation.
Budget. The preliminary budget affixed hereto as Schedule 2.1, relating to
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the costs of the Project, as amended or modified with the approval of Lender, in
its sole discretion. The Budget affixed hereto will be amended, with Lender's
sole consent, to provide a more detailed cost breakdown of the costs of the
Project prior to the making of any Construction Advance.
Business Day. Any day which is not a Saturday or Sunday or a legal holiday
under the laws of either the State of New York or the State of Nevada, or the
United States.
Collateral. Any and all collateral granted by Borrower to secure the
payment by Borrower of all principal, interest, and other amounts owed to Lender
in connection with the Loan and the performance of Borrower's Obligations under
the Loan Documents, including but not limited to the following (to the extent
applicable):
(a) The Deed of Trust;
(b) First priority Liens in and to any and all Units and FF&E,
together with the cash and non-cash proceeds thereof;
LOAN AND SECURITY AGREEMENT - Page 2
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(c) Absolute and unconditional first assignments of any and all
leases, subleases, licenses, concessions, entry fees, and other agreements
that grant a possessory interest in and to, or the right to use, any Units
and FF&E, Intervals, or any portion thereof (collectively, the "Resort
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Leases");
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(d) Absolute and unconditional first assignments of all of the rents,
revenues, income, proceeds, royalties, profits, and other amounts payable
for using, leasing, licensing, possessing, operating from or in, or
otherwise enjoying all or any portion of any Units or Intervals, including,
without limitation, damages received upon the occurrence of a default under
any of the Resort Leases and all proceeds payable under any policy of
insurance covering loss of rents with respect thereto (collectively, the
"Resort Income");
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(e) Absolute and unconditional first assignments of all other
agreements to which Borrower is or becomes a party or holds any interest
and which in any way relate to the use, occupancy, maintenance, or
enjoyment of any Units or Intervals, including but not limited to utility
contracts, maintenance agreements, management agreements, service
contracts, and any agreement guaranteeing the performance of the
obligations contained in any of the foregoing agreements;
(f) First priority assignments of all of Borrower's rights in and to
all Plans, all agreements for the furnishing of architectural, engineering,
and/or design services, and all construction contracts and other agreements
for the furnishing of labor and/or materials in connection with the
development and construction of the Resort Improvements;
(g) First priority assignments of all of Borrower's rights in and to
any and all easements, contracts, leasehold interests (whether as lessor or
lessee), permits, licenses, and approvals in respect of all or any portion
of the Project;
(h) First priority Liens in all inventory, supplies, accounts,
chattel paper, and general intangibles owned or hereafter acquired by
Borrower, used or useful in connection with the Units and the Intervals,
together with the cash and non-cash proceeds thereof;
(i) First priority Liens in and to all books, records, reports,
computer tapes, computer disks, and software relating to all or any portion
of the Project Improvements;
(j) Extensions, additions, improvements, betterments, renewals,
substitutions, and replacements of, for, or to any of the Land and Resort
Improvements, 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 Resort Improvements, all rights to unearned or refunded
insurance premiums, and the proceeds of any condemnation awards or any
claims regarding any of the Land and Resort Improvements; and
LOAN AND SECURITY AGREEMENT - Page 3
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(k) All now owned or hereafter acquired right, title, and interest of
Lender in and to any and all collateral for the Revolving Receivables Loan.
Commitment Fee. A non-refundable loan commitment fee with respect to the
Loan equal to $87,500 which is payable as follows: (i) $18,750 shall be paid to
Lender at the Closing from the proceeds of the Initial Advance, (ii) $18,750
shall be paid to Lender on or before May 31, 2002, and (iii) the remaining
$50,000 shall be paid by Borrower to Lender simultaneously with the making of
the first two Construction Advances hereunder (in equal parts of $25,000 each
for each Construction Advance), but in no event later than September 1, 2002.
So long as Borrower is not in default of its obligations under the documents
evidencing the Revolving Receivables Loan, the referenced commitment fee may be
funded from proceeds of the Revolving Receivables Loan. Alternatively, so long
as Borrower is not in default of its obligations hereunder and the conditions
precedent to the making of Construction Advances hereunder have been satisfied,
the remaining portion of the referenced commitment fee may be paid from proceeds
of the first two Construction Advances. If, however, Borrower is in default
hereunder or the conditions precedent hereunder for the making of Construction
Advances have not been satisfied on or before September 1, 2002, then Borrower
and Guarantor shall pay to Lender the remainder of the commitment fee from its
own funds.
Common Elements. The common areas and facilities as shown on the Plans for
the Resort Improvements, as defined or provided for in the Timeshare
Documentation, including, without limitation, the Land and all improvements
thereto except for any limited common elements, if any, identified in the
Timeshare Documentation.
Completion Date. September 30, 2003.
Construction Advance. Each Advance made by Lender hereunder following
satisfaction of the conditions precedent set forth in Section 2 of Schedule 4.1
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hereof.
Construction Contract. Shall have the meaning ascribed to such term in
Schedule 4.1 hereof.
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Construction Schedule. The schedule relating to the time frame for
construction of the Resort Improvements approved by Lender. The preliminary
Construction Schedule for the Project is attached hereto as Exhibit D, which
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Construction Schedule is subject to Lender's further review, verification and
approval in accordance with Schedule 4.1 hereof.
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Deed of Trust. That certain Deed of Trust, Assignment and Security
Agreement from Borrower, as grantor, to the Trustee named therein, in trust, for
the benefit of Lender, as same may from time to time be renewed, amended,
restated or replaced.
Default Rate. A per annum rate of interest equal to the Interest Rate plus
four percent (4%).
Disclosure Statement. A statement given to Purchasers describing the
Timeshare
LOAN AND SECURITY AGREEMENT - Page 4
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Program.
Draw Request. Shall have the meaning ascribed to such term in Section 4.1
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hereof.
Employee Benefit Plan. An employee benefit plan as defined in Section 3(3)
of ERISA (including a Multi-employer Plan) pursuant to which any employees of
Borrower or Guarantor participate.
Environmental Certificate. An environmental certificate executed by
Borrower, and such other persons or parties as required by Lender, in form and
substance satisfactory to Lender, as it may be from time to time renewed,
amended, restated or replaced.
Environmental Laws. The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time ("CERCLA"), the Resource
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Conservation and Recovery Act of 1976, as amended from time to time ("RCRA"),
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the Superfund Amendments and Reauthorization Act of 1986, as amended, the
federal Clean Air Act, the federal Clean Water 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
Occupational Safety and Health Act of 1970, the federal Water Pollution Control
Act, and any and all comparable statutes or ordinances enacted in the State of
Nevada, all of the foregoing laws may be amended from time to time, and any
rules or regulations promulgated pursuant to the foregoing; together with any
similar local, state or federal statutes, ordinances, rules, or regulations,
either in existence as of the date hereof or 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 that 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,
ordinance, regulation, rule, policy, or determination pertaining to health,
hygiene, the environment, or environmental conditions.
ERISA. The Employee Retirement Income Security Act of 1974, as amended from
time to time, and any regulation promulgated thereunder.
Event of Default. Has the meaning set forth in Article 8 of this
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Agreement.
Execution Date. The date this Agreement is executed and delivered by
Borrower, Lender and Guarantor.
Existing Improvements. All buildings and other improvements located on the
Land as of the Execution Date.
FF&E. All furniture, fixtures and equipment whether now owned or hereafter
acquired by Borrower in respect of the Resort Improvements and the Project and
any and all additions
LOAN AND SECURITY AGREEMENT - Page 5
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thereto, substitutions and replacements or any of the foregoing, wherever
located.
Funding Term. The period of 18 months after the Execution Date during
which Advances may be made under the terms of this Agreement.
GAAP. Generally accepted accounting principles, applied on a consistent
basis, set forth 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 the circumstances as of the
date in question; and the requisite that such principles be applied on a
consistent basis means that the accounting principles in a current period are
comparable in all material respects to those applied in a preceding period, with
any exceptions thereto noted.
General Contractor. Shall have the meaning ascribed to such term in
Schedule 4.1 hereof.
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Guarantor. MEGO Financial Corp., a New York corporation, and its proposed
successor by merger or consolidation, Leisure Industries Corporation of America,
Inc., a Delaware corporation.
Guaranty. A guaranty agreement on Lender's form, executed by Guarantor
guaranteeing the payment and performance of all Obligations by Borrower under
the Loan Documents.
Hard Costs. The direct costs of constructing the Resort Improvements, as
identified as Hard Costs in the Budget hereafter approved by Lender.
Hazardous Materials. "Hazardous substances," "hazardous waste," "hazardous
constituents," "toxic substances," or "solid waste," as defined in the
Environmental Laws, and any other contaminant or any material, waste, or
substance that is petroleum or petroleum based, asbestos, polychlorinated
biphenyls, flammable explosives, or radioactive materials.
Incipient Event of Default. An event which would be an Event of Default
but for the delivery of notice or the passage of time.
Indemnified Parties. Shall have the meaning assigned to such term in
Section 10.7 hereof.
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Initial Advance. The first Advance made by Lender hereunder.
Inspecting Engineer. Shall have the meaning assigned to such term in
Section 6.14(d) hereof.
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Interim Advance. Each Advance made by Lender hereunder after the Initial
Advance prior to satisfaction of all conditions precedent set forth in Schedule
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4.1 hereof related to the Construction Advances; provided, however, that the
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aggregate amount of the Initial Advance
LOAN AND SECURITY AGREEMENT - Page 6
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and all Interim Advances shall not exceed $1,770,000.
Interest Rate. A floating rate per annum equal to the greater of (i) the
Prime Rate plus two and one-half percent (2.50%), or (ii) ten percent (10%)
(the aggregate rate referred to as the "Interest Rate"). The term "Prime Rate"
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shall mean the interest rate published each day in the Wall Street Journal as
the "Prime Rate", the base rate on corporate loans posted by at least 75% of the
thirty (30) largest banks organized under the laws of the United States of
America or any state thereof. Interest shall be calculated based on a 360 day
year and charged for the actual number of days elapsed.
Interval(s). An undivided fee simple ownership interest as tenants in
common with all other Purchasers with respect to any Unit, with a right to use
such Unit for one week annually, (or one week every other year in the case of
any Biennial Interval(s)) together with all appurtenant rights and interests as
more particularly described in the Timeshare Documentation.
Land. The real property more particularly identified on Exhibit A attached
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hereto.
Lien. Any mortgage, security interest, pledge, assignment or other interest
in property securing an obligation owed to, or valid claim by, a Person other
than the owner of such property, whether such interest arises in equity or is
based on common law, statute, or contract.
Lender. CapitalSource Finance LLC, a Delaware limited liability company.
Loan. The Seven Million and 00/100 Dollars ($7,000,000.00) loan described
in this Agreement and evidenced by the Note.
Loan Documents. Collectively, this Agreement, the Note, the Deed of Trust,
the Guaranty, the Environmental Certificate, and any and all other agreements,
documents, instruments and certificates delivered or contemplated to be
delivered in connection with this Agreement, as such may be amended, renewed,
extended, restated or supplemented from time to time.
Loan Year. Each successive twelve (12) month period commencing on the
making of the first Construction Advance hereunder.
Mandatory Prepayment. Any prepayment required by Section 2.6(b) of this
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Agreement.
Material Subcontractor. Shall have the meaning ascribed to such term in
Schedule 4.1 hereof.
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Material Subcontracts. Shall mean each subcontract executed by Borrower or
a General Contractor with a Material Subcontractor.
Maturity Date. March 11, 2005, or any earlier date on which the Loan shall
be
LOAN AND SECURITY AGREEMENT - Page 7
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required to be paid in full, whether by acceleration or otherwise.
Maximum Loan Amount. Seven Million and 00/100 United States Dollars
($7,000,000.00).
Note. The promissory note evidencing the Loan in the original principal
amount of Seven Million and 00/100 Dollars ($7,000,000.00) executed and
delivered by Borrower to Lender concurrently herewith, as same may from time to
time be renewed, amended, restated, or replaced.
Obligations. All present and future indebtedness, liabilities, obligations,
and responsibilities, both financial and otherwise, to which Borrower is subject
under any of the Loan Documents, whether direct or indirect, absolute or
contingent, including but not limited to all amounts due or becoming due to
Lender in respect of (i) the Loan or any of the Loan Documents, (ii) the
Revolving Receivables Loan from Lender to Borrower, and (iii) any and all other
indebtedness of Borrower to Lender now existing or hereafter arising, including
principal, interest, prepayment premiums, contributions, taxes, insurance
premiums, loan charges, custodial fees, attorneys' and paralegals' fees and
expenses and other fees or expenses incurred by Lender (including attorneys'
fees for Lender's in-house counsel based upon the amount Lender would pay if
Lender were to obtain outside counsel) or advanced to or on behalf of Borrower
by Lender, pursuant to any of the Loan Documents or in connection with Lender's
enforcement of the prompt and complete payment and performance by Borrower and
Guarantor of all indebtedness, liabilities, obligations, and responsibilities
owed by Borrower, pursuant to this Agreement, any of the other Loan Documents,
the Revolving Receivables Loan, or otherwise.
Permitted Exceptions. The exceptions to title listed on Exhibit B.
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Person. Natural persons, corporations, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof; provided, however, that when used in the
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definition of "Affiliate" hereunder, the term "Person" shall not include natural
persons.
Plans. All plans and specifications for the development and construction of
the Resort Improvements hereafter approved by Lender, together with all
specifications and drawings in respect thereof and all modifications,
amendments, additions, and supplements thereto made in accordance with the
requirements of this Agreement. Said Plans, which shall be prepared by an
Architect, shall indicate the location of the Resort Improvements, the
configuration and dimensions of the Project and each Unit thereof, the means of
access thereto, street lines, easements, the Common Elements, and other relevant
details required under Applicable Laws.
Prepayment Premium. The percentage set forth below multiplied by the amount
prepaid, together with any other amounts due and owing to Lender hereunder
(excluding interest) as of the date of such prepayment, payable in connection
with a voluntary prepayment of the Loan in accordance with the provisions of
Section 2.6(a) of this Agreement:
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LOAN AND SECURITY AGREEMENT - Page 8
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Loan Year Percentage
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First Loan Year Two percent (2%)
After First Loan Year NONE
Project. The acquisition of the Land, the construction of the Resort
Improvements, the operation and management of the Resort Improvements, and the
marketing and sale of Units and/or Intervals.
Project Association. Shall have the meaning ascribed to such term in
Section 6.2 hereof.
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Property. All of the Land, Resort Improvements and Units (including
Intervals) owned by Borrower.
Purchase and Sale Agreement. The agreement between Borrower, as the buyer,
and Sebastian and Xxxxxx Xxxx Xxxxxxx, as the seller, of the Resort dated
January 10, 2002, as amended.
Purchaser. Any Person who purchases one or more Intervals in a Unit.
Release. A partial release of the lien of the Deed of Trust regarding an
Interval sold to a Purchaser in accordance with Section 2.7 hereof.
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Release Price. With respect to each Interval sold, an amount per Interval
hereafter determined by Lender to be sufficient to fully repay the Loan in full
upon the sale from Borrower to Purchasers of not less than eighty-five percent
(85%) of all Intervals. The Release Price for an Interval sold as a Biennial
Interval shall be one-half of the Release Price.
Resort. The real property and all improvements thereon and thereto
acquired by Borrower or to be acquired by Borrower pursuant to the Purchase and
Sale Agreement and commonly known as 000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx.
Resort Improvements. All on-site and off-site improvements now or
hereafter constructed on the Land (currently contemplated to include twenty-nine
(29) 2-bedroom Units and two (2) 1-bedroom Units), as approved by Lender
hereunder, together with all FF&E and appurtenances now or later to be located
on the Land and/or in such improvements.
Retainage. An amount equal to a minimum of ten percent (10%) of (a) the
amounts due a General Contractor under a Construction Contract for Hard Costs of
construction of the Resort Improvements (excluding costs of Stored Materials and
other materials purchased directly by General Contractor for incorporation into
the Resort Improvements); and/or (b) the amounts due to any subcontractor,
materialman, or other Person under any and all subcontracts or other agreements
entered into in connection with the construction of the Resort Improvements,
which amount shall be held and disbursed in accordance with Section 4.2 hereof.
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LOAN AND SECURITY AGREEMENT - Page 9
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Revolving Receivables Loan. The $20,000,000 loan from Lender to Borrower,
as the same may be amended, modified, increased and extended hereafter.
Revolving Receivables Loan Agreement. The Loan and Security Agreement
executed by Borrower and Lender, dated as of August 8, 2001, as modified by the
First Amendment to Loan and Security Agreement dated as of March 11, 2002,
executed by Borrower, Lender and Guarantor, in respect of the Revolving
Receivables Loan, as the same may be hereafter amended, modified or
supplemented.
Soft Costs. All costs of the Project, including interest, but excluding
Hard Costs, as identified as Soft Costs in the Budget hereafter approved by
Lender.
Stored Materials. All building materials, furnishings and other items of
construction work in the form of tangible property supplied for, or intended to
be utilized in, the construction of the Resort Improvements, but which are not
yet affixed to or incorporated into the Resort Improvements.
Survey. An ALTA land survey of the Land prepared in accordance with the
ALTA/ACSM 1988 Minimum Survey Requirements by a licensed surveyor and certified
by the surveyor to Borrower, Lender and the Title Insurer.
Timeshare Documentation. The declaration of covenants, conditions, and
restrictions, master deed, or similar document, together with any amendments or
restatements thereof, that establishes the underlying form of ownership of the
Project recorded/or to be recorded in the real estate records where the Project
is located for the purpose of creating a Timeshare Program, as it may be in
effect from time to time, together with any other documents and instruments
relating to the Project and/or the Units, Common Elements and Intervals,
including but not limited to the marketing, sale, and financing of such
Intervals.
Timeshare Program. The program in which Purchasers may purchase Intervals;
owners of Intervals have the right to use and enjoy their respective Intervals
on a recurring basis; and owners of Intervals share the expenses associated with
the operation and management of the Project and Intervals.
Title Insurer. First American Title Insurance Company, its successors and
assigns or such other title insurer as has been approved in writing by Lender.
Title Insurance Policy. Has the meaning ascribed to such term in Schedule
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4.1 hereof.
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UCC. The Uniform Commercial Code as adopted and in force in the State of
New York, the State of Nevada, and any other state, to the extent the same is
Applicable Law, as the same may be amended from time to time.
Unit. An apartment, condominium unit, or other structure that is affixed to
real property and designed and available, pursuant to the Timeshare
Documentation, for use and occupancy
LOAN AND SECURITY AGREEMENT - Page 10
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as a vacation residence by one or more individuals, on a daily or weekly basis,
together with all related Common Elements, easements, and other appurtenances
thereto.
Up-Front Equity. An amount payable by Borrower and Guarantor toward costs
of the Project, in cash, equal to ten percent (10%) of the Approved Costs of the
Project, which amount shall be payable by Borrower or Guarantor as follows: (i)
$150,000 of such amount shall be paid to the Title Insurer and applied by the
Title Insurer to pay costs incurred in connection with the acquisition of the
Land and the closing of the Loan, and (ii) the remaining amount shall be paid by
Borrower toward costs of the Project prior to the making by Lender of any
Construction Advance hereunder.
ARTICLE 2
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THE LOAN
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2.1 Loan; Purpose. Advances of up to $4,600,000 of the Loan shall be made
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by Lender to Borrower to finance the acquisition of the Land, the demolition of
the Existing Improvements and the costs of construction of the Resort
Improvements (including FF&E), as set forth in the Budget attached hereto as
Schedule 2.1, or as amended with Lender's consent, subject to the provisions
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contained in this Agreement and the other Loan Documents. No Advances in excess
of $4,600,000 of the Loan will be made by Lender unless and until Lender has
approved, in its sole and absolute discretion, the purpose for which Borrower
proposes or intends to use such funds. In no event shall (i) the Loan at any
time exceed the Maximum Loan Amount or (ii) an Advance be made after the Funding
Term. In the event that the proceeds of the Loan and any other amounts required
to be paid by Borrower hereunder are insufficient to pay all costs to which it
is contemplated hereunder that such proceeds will be applied, or if the use of
the Loan proceeds varies materially (as determined reasonably and in good faith
by Lender) from the uses described herein, then Lender shall have no obligation
to fund (or continue funding) the Loan or any portion thereof. The proceeds of
the Loan will be disbursed by Lender solely for the purposes set forth in this
Agreement.
2.2 Budget; Approved Costs. The Loan funds are allocated for the costs of
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the Project shown in the Budget. Lender shall not be required to make any
Advance (a) for any cost or purpose not set forth in the Budget hereafter
approved by Lender; or (b) for any line item in the Budget that, when added to
all prior Advances for that line item, exceeds the lesser of (i) the actual cost
incurred by Borrower for such line item, or (ii) the amount of Loan funds
allocated in the Budget for that line item. Borrower shall (a) not reallocate
Loan funds from one Budget line item to another or otherwise amend the Budget
without the prior written consent of Lender; and (b) notify Lender promptly
whenever Borrower becomes aware that the Budget is, or might be, inaccurate in
any material respect.
2.3 Term of Loan . The Loan shall be for a term of thirty-six (36)
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months.
2.4 Interest Rate. The outstanding principal balance of all Advances
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together with all other outstanding obligations of Borrower arising hereunder or
under the Loan Documents shall bear interest at the Interest Rate. After the
occurrence of an Event of Default and after the
LOAN AND SECURITY AGREEMENT - Page 11
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Maturity Date, the Loan will bear interest at the Default Rate.
2.5 Payments.
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(a) Monthly Interest Payments. Commencing on the first day of the
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month after the Initial Advance, Borrower shall pay interest computed at
the Interest Rate in arrears on the first day of each month. Interest
shall be calculated based on a 360 day year and charged for the actual
number of days elapsed.
(b) Final Payment. The entire outstanding amount of the Obligations
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shall be payable on the Maturity Date.
(c) Minimum Amortization. Beginning on the earliest to occur of (i)
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the commencement of the sale of Units, (ii) the completion of construction
of the Resort Improvements, or (iii) October 1, 2003 ("Start Date"),
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Borrower shall make additional payments of principal in the amount of the
Release Price applicable to each Interval sold, as and when such Intervals
are sold to Purchasers. On each Test Date thereafter, Borrower shall make
an additional payment to Lender equal to the positive difference, if any,
between (i) the total of all Release Prices paid to Lender as of such Test
Date, and (ii) the Minimum Amortization Amount payable as of such Test
Date. As used herein, "Test Period" means the six (6) most-recent full
-----------
calendar months preceding the applicable Test Date and the term "Test Date"
---------
means last day of the sixth consecutive calendar month immediately
following the Start Date and the last day of every consecutive sixth
calendar month period thereafter during the term of the Loan; provided,
--------
however, that if less than 3 months remain between the 3/rd/ Test Date and
-------
the Maturity Date of the Loan, the 3/rd/ Test Date shall be deemed to be
the Maturity Date, or if more than 3 months remain between the 3/rd/ Test
Date and the Maturity Date of the Loan, then Lender shall have the right,
at any time, to adjust the Test Date or the Minimum Amortization Amount to
ensure that the Loan amortizes fully by the Maturity Date. As used herein,
the term "Minimum Amortization Amount" means an amount equal to the
---------------------------
following:
Period Minimum Amortization
------ --------------------
Amount*
------
Execution Date to 1/st/ Test Date 33% of Adjusted Committed Sum
Execution Date to 2/nd/ Test Date 66% of Adjusted Committed Sum
Execution Date to 3/rd/ Test Date 100% of Adjusted Committed Sum
* Amounts shown are cumulative amounts payable to and including the noted
Test Date
2.6 Prepayments.
-----------
(a) Voluntary Prepayments. Prepayments of the Loan may be made in
---------------------
whole, but not in part, upon thirty (30) days prior written notice to
Lender at any time upon payment of the applicable Prepayment Premium
(whether such prepayment results from voluntary payments by Borrower,
acceleration, or otherwise); provided, however,
-------- -------
LOAN AND SECURITY AGREEMENT - Page 12
---------------------------
that no Prepayment Premium shall be payable as a result of any such payment
pursuant to the release provisions set forth in Section 2.7 hereof.
-----------
(b) Mandatory Prepayments. Subject to the terms of any Timeshare
---------------------
Documentation hereafter approved by Lender, If Borrower receives any
payment with respect to any insurance award or the condemnation or lease of
the Collateral (other than rental payments and expense reimbursements)
including, without limitation, lease termination, cancellation or similar
fees, Borrower shall immediately prepay the principal balance of the Loan
in an amount equal to such payment. No Prepayment Premium will be due with
respect to any such prepayments. Any Mandatory Prepayment shall be
accompanied by an amount equal to the interest accrued thereon to the date
of receipt of such prepayment in collected funds.
2.7 Releases of Collateral. Provided that no Event of Default shall
----------------------
have occurred and be continuing, Lender agrees to release each Interval of a
Unit to be conveyed to a prospective Purchaser and its appurtenant interests in
the Common Elements from the Lien of the Deed of Trust, in accordance with and
subject to all of the following terms, provisions and conditions:
(a) Borrower shall request Releases in writing not less than five (5)
Business Days prior to the date the Release is needed. Each request for
Release shall be submitted no more frequently than four (4) times per
calendar month.
(b) Lender shall have received, with respect to each Interval to be
released: (i) a Release prepared by Borrower at Borrower's expense in form
and content satisfactory to Lender; (ii) a schedule containing a list of
the Units and Intervals previously released by Lender and the Units and
Intervals remaining to be released; and (iii) all other data reasonably
necessary to support the Borrower's being entitled to the Release,
including, without limitation, such other documents, certificates and
assurances as Lender may reasonably request, together with the legal fees
and disbursements of Lender's counsel incurred in connection with the
issuance of each such Release.
(c) At the time of request for Release, Borrower shall pay to Lender,
in cash or immediately available funds, the Release Price for such
Interval.
(d) Releases of Intervals shall not affect or impair the Lien of the
Deed of Trust (or the Liens created by the other Loan Documents) as to
other Collateral not theretofore released, and said Liens shall continue in
full force and effect as to the unreleased Collateral.
ARTICLE 3
---------
COLLATERAL
----------
3.1 Grant of Security Interest. To secure the payment and performance of
--------------------------
the
LOAN AND SECURITY AGREEMENT - Page 13
---------------------------
Obligations, Borrower shall unconditionally and irrevocably assign, pledge
and grant to Lender a first priority continuing Lien in and to the right, title
and interest of Borrower in the Collateral.
3.2 Financing Statements. Borrower agrees, at its own expense, to execute
--------------------
UCC-1 and UCC-3 financing statements provided for by the UCC, together with any
and all other appropriate instruments and documents, and to take such other
action as may be required to perfect and to continue the perfection of Lender's
first priority Liens in the Collateral. In addition, unless prohibited by
Applicable Laws, Borrower hereby authorizes Lender to execute and file any such
financing statements on Borrower's behalf.
3.3 Location of Collateral. Except for FF&E that is replaced in the
----------------------
ordinary course of business, all tangible Collateral shall remain at all times
at the Project and Borrower may not transfer or cause the transfer of any such
Collateral from the Project without the prior written approval of Lender.
3.4 Cross-Collateralization and Cross-Default. The Collateral shall secure
-----------------------------------------
the payment and performance of the Obligations arising under this Agreement and
the other Loan Documents, the Revolving Receivables Loan, and all Liens,
pledges, assignments, mortgages, security interests, and collateral granted to
or for the benefit of Lender pursuant thereto or any other related documents or
instruments also shall secure the Revolving Receivables Loan. In addition, the
Loan and the Revolving Receivables Loan shall be cross-defaulted such that any
event of default with respect to the Revolving Receivables Loan shall constitute
an Event of Default hereunder, and vice versa.
ARTICLE 4
---------
ADVANCE PROCEDURES
------------------
4.1 Draw Requests. From time to time during the Funding Term, Borrower may
-------------
submit to Lender a written request for an Advance hereunder (hereinafter
sometimes called a "Draw Request") substantially in the form of Exhibit C
------------ ---------
attached hereto and incorporated herein by this reference. Provided that no
Event of Default hereunder then exists, each Advance approved by Lender shall be
made within ten (10) Business Days following the last to occur of Lender's
receipt of the applicable Draw Request and all items required to be submitted to
Lender hereunder, including but not limited to those items referenced in this
Article 4 (to the extent applicable). At least ten (10) Business Days before
---------
the requested date of each Advance, Borrower shall deliver a Draw Request to
Lender. Borrower shall be entitled to an Advance only in an amount approved by
Lender in accordance with the terms of this Agreement. Lender shall not be
required to make Advances more frequently than once each calendar month. Each
Draw Request, and Borrower's acceptance of any Advance, shall be deemed to
ratify and confirm that all representations and warranties in the Loan Documents
remain true and correct as of the date of the Draw Request and the Advance,
respectively.
4.2 Amount of Advances; Retainage. Borrower shall disburse all Advances
-----------------------------
made to Borrower, for payments of the Approved Costs of the Project incurred by
Borrower through
LOAN AND SECURITY AGREEMENT - Page 14
---------------------------
the end of the period covered by such Draw Request, not to exceed the value of
the work or material in place, less (1) Retainage; (2) all prior Advances; (3)
the amount of any costs (A) not certified or verified in accordance with this
Agreement, (B) covered by a previous Draw Request for which Lender has not
received lien waivers and subordinations, evidence and verification required by
this Agreement or copies of paid invoices, canceled checks, receipts or other
proof of payment satisfactory to Lender, or (C) applicable to work that does not
substantially comply with the Plans or the Loan Documents; and (4) any amount
required to be withheld by the owner of the Property under Applicable Law. All
Retainage shall be retained by Lender as a holdback until such time as the
Resort Improvements have been one hundred percent (100%) completed in accordance
with the Plans and all Applicable Laws, and all other conditions set forth in
Exhibit D hereof have been fully satisfied Notwithstanding the foregoing, upon
---------
compliance with the requirements regarding Advances hereunder, Retainage
previously withheld from prior Advances in respect of each subcontract executed
by or on behalf of any General Contractor (each, a "Subcontract") shall be
-----------
released, at the request of Borrower, if the following conditions have been
satisfied: (i) no less than 90 calendar days shall have elapsed since the date
of substantial completion of all work under such Subcontract, (ii) Lender shall
have received and approved all final lien waivers and other evidence of proof of
payment satisfactory to Lender to establish that all subcontractors and
materialmen performing work or providing materials in connection with such
Subcontract have been paid, and (iii) Lender shall have received an endorsement
to the Title Insurance Policy reflecting no liens or claims of liens have been
filed against the Property and neither Lender nor Borrower shall have received a
stop notice or other similar notice of non-payment in connection with such
Subcontract.
4.3 Advances for Stored Materials. Advances will not be made for Stored
-----------------------------
Materials unless (i) Borrower has good title to the Stored Materials and the
Stored Materials are components in a form ready for incorporation into the
Resort Improvements, (ii) the Stored Materials are in Borrower's possession and
satisfactorily stored on the Land or in a bonded warehouse or at such other site
as Lender may approve, (iii) the Stored Materials are protected and insured
against theft and damage in a manner and amount satisfactory to Lender, (iv) the
Stored Materials have been paid for in full or will be paid for with the
proceeds of an Advance and all lien rights and claims of the supplier have been
released or will be released upon payment with such proceeds, and (v) Lender has
or will have upon payment with such proceeds a perfected, first priority
security interest in the Stored Materials. Notwithstanding the foregoing, the
aggregate amount of advances for Stored Materials that have not yet been
incorporated into the Resort Improvements shall not exceed $100,000 unless
otherwise approved by Lender.
4.4 Conditions to the Initial Advance and Interim Advances.
------------------------------------------------------
(a) Borrower and Lender acknowledge and agree that, notwithstanding
anything to the contrary herein, Lender intends to make an initial Advance
hereunder to be used by Borrower to pay (i) the fees and costs of Lender's
attorneys (including up to $5,000 of Lender's inside counsel attorneys
fees) in connection with the documentation of the Loan and the due
diligence review of Borrower's deliveries; (ii) costs related to the
acquisition of the Land approved by Lender, and (iii) all applicable title,
filing and
LOAN AND SECURITY AGREEMENT - Page 15
---------------------------
recording fees and other closing costs related to the closing of the Loan
(including any required payment of the Commitment Fee or part thereof).
Thereafter, subject to compliance by Borrower with the other provisions of
this Agreement, Lender shall make additional Interim Advances to Borrower
for the purpose of funding the costs of demolition of the Existing
Improvements and the payment of interest on the Loan; provided, however,
-------- -------
that the sum total of the Initial Advance and all Interim Advances shall
not exceed $1,770,000. As conditions precedent to the Initial Advance
hereunder, Borrower must have satisfied the conditions required under this
Agreement, including all of those conditions set forth in Section 1 of
Schedule 4.1 attached hereto.
------------
(b) Lender shall have no obligation to make any Advance hereunder
which would cause the sum total of the Initial Advance and all Interim
Advances to exceed, in the aggregate, $1,770,000, unless and until Borrower
shall have received and delivered to Lender (and Lender shall have
approved) the documents, certificates, agreements and other items
identified in Section 2 of Schedule 4.1attached hereto. IF BORROWER FAILS
------------
TO SATISFY ANY OF THE CONDITIONS PRECEDENT TO FURTHER FUNDING SET FORTH IN
SECTION 2 OF SCHEDULE 4.1 HEREOF ON OR BEFORE AUGUST 15, 2002, (i) BORROWER
SHALL BE IN DEFAULT HEREUNDER, (ii) LENDER SHALL HAVE THE RIGHT TO
TERMINATE, IMMEDIATELY, ITS OBLIGATION HEREUNDER TO MAKE FURHTER ADVANCES
OF THE LOAN AND (iii) THE ENTIRE LOAN MAY, AT LENDER'S DISCRETION, BE
DEEMED DUE AND PAYABLE IMMEDIATELY.
(c) BORROWER RECOGNIZES THAT THE DELIVERY TO LENDER AND APPROVAL BY
LENDER OF THE ITEMS MORE PARTICULARLY IDENTIFIED IN SECTION 2 OF SCHEDULE
4.1 ATTACHED HERETO, AMONG OTHER THINGS, IS A CONDITION PRECEDENT TO
LENDER'S OBLIGATION TO MAKE ANY ADVANCE FOR THE PAYMENT OF COSTS OF
CONSTRUCTION OF THE RESORT IMPROVEMENTS OR OTHER BUDGETED COSTS OF THE
PROJECT (OTHER THAN THOSE PAID BY THE INITIAL ADVANCE AND INTERIM
ADVANCES), AND BORROWER AND GUARANTOR ASSUMES ALL RISK ASSOCIATED WITH THE
TERMINATION OF LENDER'S OBLIGATIONS TO FUND ADVANCES IN RESPECT OF ANY
COSTS RELATED TO THE CONSTRUCTION OF THE RESORT IMPROVEMENTS OR OTHER
BUDGETED COSTS OF THE PROJECT (OTHER THAN THOSE PAID BY THE INITIAL ADVANCE
AND INTERIM ADVANCES), OR ANY DELAYS IN FUNDING DUE TO BORROWER'S INABILITY
(REGARDLESS OF THE REASONS THEREFOR, OTHER THAN THE NEGLIGENCE OR
MISCONDUCT OF LENDER) TO SATISFY SUCH CONDITIONS PRECEDENT, AS AND WHEN
REQUIRED BY THIS AGREEMENT.
LOAN AND SECURITY AGREEMENT - Page 16
---------------------------
4.5 Conditions to All Advances. As conditions precedent to each Advance
--------------------------
made pursuant to a Draw Request, in addition to all other requirements contained
in this Agreement, Borrower must satisfy the following conditions, and deliver
to Lender evidence of such satisfaction:
a. Borrower must have delivered to Lender a properly executed and
completed Draw Request.
b. No Event of Default or Incipient Event of Default shall then
exist.
c Borrower shall have demonstrated to Lender's reasonable
satisfaction that all of the Up-Front Equity has been contributed to the
costs of the Project, as reflected in the final Budget for the Project
hereafter approved by Lender.
d. The representations and warranties made in the Loan Documents
must be true and correct in all material aspects on and as of the date of
each Advance and no event shall have occurred or condition or circumstance
shall exist which, if known to Borrower, would render any such
representation or warranty incorrect or misleading.
e. Each Construction Contract or Material Subcontract for labor,
materials, services and/or other work included in a Draw Request shall have
been duly executed and delivered by all parties thereto and shall be
effective, and Lender shall have received a true and complete copy of a
fully executed copy of each such Construction Contract or Material
Subcontract as Lender may have requested.
f. No mechanic's or materialmen's lien or other encumbrance shall
have been filed and remain in effect against the Property, and no stop
notices shall have been served on Lender that have not been bonded by
Borrower in a manner and amount satisfactory to Lender.
g. The Title Insurance Policy shall have been endorsed and brought
to date in a manner satisfactory to Lender to increase the coverage by the
amount of each Advance through the date of each such Advance with no
additional title change or exception not approved by Lender and Borrower
shall have provided to the Title Insurer such items as the Title Insurer
may require with respect to insuring the continuing priority of the Deed of
Trust over any filed mechanics' or materialmen's liens.
h. With respect to any Advance for Hard Costs, Lender shall have
received an AIA Document G-702 and G-703 (1983 Edition) completed by the
General Contractor and certified by the Architect ("Hard Cost Certificate")
---------------------
from the General Contractor and Borrower's Architect; and the Inspecting
Engineer's observation report that verifies the progress of construction.
i. As of the date of making such Advance, no event shall have
occurred, nor shall any condition exist, that could have an adverse effect
on the enforceability of
LOAN AND SECURITY AGREEMENT - Page 17
---------------------------
the Loan Documents, be materially adverse to the financial condition of
Borrower or Guarantor, impair the ability of Borrower or Guarantor to
fulfill its or their material obligations under the Loan Documents, or
otherwise have any adverse effect whatsoever on the Project.
j. The Resort Improvements shall not have been damaged and not
repaired and shall not be the subject of any pending or threatened
condemnation or adverse zoning proceeding.
k. Borrower shall have submitted copies of notarized partial lien
waiver forms in form approved by Lender, executed by each contractor and
each appropriate subcontractor, supplier and materialman, including,
without limitation, from all parties sending statutory notices to
contractors, notices to owners, or notices of nonpayment, specifying in
such partial lien waivers the amount paid in consideration of such partial
releases.
l. Borrower shall have delivered to Lender such other information,
documents legal opinions, schedules, affidavits, statements, invoices,
bills and other supporting documentation and material required by this
Agreement, necessary for the Inspecting Engineer to verify the progress of
construction, or required by Lender to substantiate any of the matters
necessary to qualify for the Advance.
m. With respect to the first Advance after the laying of the
foundation of each building or structure, Lender shall have received a
foundation survey showing no encroachment of the Improvements on any
boundary line, easement, building setback line or other restricted area and
the Title Insurance Policy shall be endorsed to affirmatively insure
against any encroachments of the foundation over any building or other
setback lines.
4.6 Final Advance for Resort Improvements. The final Advance for the
-------------------------------------
Resort Improvements (including Retainage) shall not be made until ninety (90)
days after the date on which the Resort Improvements have been "completed," as
defined by Applicable Law. In the case of each such Draw Request, Lender shall
have received the following as additional conditions precedent to the requested
Advance:
a. Certificates from the Architect and each General Contractor in
form approved by Lender, certifying that the Resort Improvements (including
any off-site improvements) have been completed in accordance with, and as
completed comply with, the Plans and all Applicable Laws.
b. Final affidavits and lien releases or waivers in form approved by
Lender, from the Architect, each General Contractor and every other
architect, engineer, and contractor who might be entitled to claim a
contractual, statutory or constitutional lien against the Property,
certifying that each of them and their subcontractors, laborers, and
materialmen has been paid in full for all labor and materials for
construction of the Resort Improvements.
LOAN AND SECURITY AGREEMENT - Page 18
---------------------------
c. The Title Insurance Policy shall be endorsed to remove any
exception for mechanics' or materialmen's liens or pending disbursements,
with no additional title change or exception objectionable to Lender, and
with such other endorsements required by Lender.
d. Evidence satisfactory to Lender that all Applicable Laws have
been satisfied, including receipt by Borrower of all necessary governmental
licenses, certificates and permits (including certificates of occupancy)
with respect to the completion, use, occupancy and operation of the Resort
Improvements, together with evidence satisfactory to Lender that all such
licenses, certificates, and permits are in full force and effect and have
not been revoked, canceled or modified.
e. A copy of a final as-built survey of the Resort Improvements
satisfactory to Lender.
4.7 Direct Advances. Borrower hereby irrevocably authorizes Lender (but
---------------
Lender shall have no obligation) to (i) advance Loan funds directly to itself to
pay interest due on the Loan, (ii) advance Loan funds directly to itself to pay
fees payable to Lender as set forth in the Budget, and (iii) advance and
directly apply the proceeds of any Advance to the satisfaction of any of the
Obligations, even though Borrower did not include that amount in a Draw Request
and/or no Event of Default exists. Each such direct Advance shall be added to
the outstanding principal balance of the Loan and shall be secured by the Loan
Documents. Unless Borrower pays such interest from other resources, Lender may
advance Loan funds pursuant to this Section for interest payments as and when
due. Nothing contained in this Agreement shall be construed to permit Borrower
to defer payment of interest on the Loan beyond the date(s) due. The allocation
of Loan funds in the Budget for interest shall not affect Borrower's absolute
obligation to pay the same in accordance with the Loan Documents. Advances may
also be made, in addition to other methods contemplated in this Agreement, from
time to time at Lender's option, in whole or in part by direct or joint check
payment to any or all Persons entitled to payment for construction work in
connection with the Project or the Loan, or by having the proceeds thereof made
available to the Title Insurer for disbursement. Lender shall not be required
to segregate undisbursed funds in any manner for the purposes of this Agreement
nor to supervise the proper application or distribution of funds to third
parties.
4.8 Conditions and Waivers. All conditions precedent to the obligation of
----------------------
Lender to make any Advance are imposed hereby solely for the benefit of Lender,
and no other party may require satisfaction of any such condition precedent or
be entitled to assume that Lender will refuse to make any Advance in the absence
of strict compliance with such conditions precedent. Any requirement of this
Agreement may be waived, in whole or in part, in a specific written waiver
intended for that purpose and signed by Lender. Lender shall have the right to
approve and verify the periodic progress of, costs incurred by Borrower for, and
the estimated costs remaining to be incurred for the construction of the Resort
Improvements. No Advance shall constitute a waiver of any condition precedent
to any further Advance. No waiver by Lender of any condition precedent or
obligation shall preclude Lender from requiring such condition or obligation to
be met prior to making any other Advance.
LOAN AND SECURITY AGREEMENT - Page 19
---------------------------
ARTICLE 5
---------
GENERAL REPRESENTATIONS AND WARRANTIES
--------------------------------------
Borrower and Guarantor hereby severally represent and warrant to Lender as
follows, which representations and warranties shall remain true throughout the
term of this Agreement:
5.1 Organization, Standing, Qualification. Borrower Existence. Borrower
---------------------------------------------------------
is, and will remain at all times, a corporation duly formed, validly existing
and in good standing under the laws of the State of Nevada, with its principal
place of business at 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx 00000. Guarantor is
a corporation duly formed, validly existing and in good standing under the laws
of the State of New York. Attached hereto as Schedule 5.1 is a correct and
------------
complete list of all Affiliates of Borrower and Guarantor.
5.2 Authorization and Enforceability.
--------------------------------
(a) Execution and Delivery. The execution, delivery and performance
----------------------
by Borrower and Guarantor of the Loan Documents has been duly authorized by
all necessary corporate action of Borrower and Guarantor, and does not and
will not (i) violate any provision of Borrower's or Guarantor's Articles of
Incorporation or Bylaws 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 Other Approvals. No approval, authorization, order, license,
------------------
permit, franchise or consent of, or registration, declaration,
qualification or filing with, any governmental authority is required in
connection with the execution, delivery and performance by Borrower or
Guarantor of any of the Loan Documents, except for such filings as are
contemplated by the Loan Documents.
(c) Validity of Documents. The Loan Documents have been duly
---------------------
authorized and, when duly executed and delivered by Borrower, will
constitute legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws now or hereafter in
effect which relate to or affect the enforceability of creditors' rights
generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
5.3 Intentionally omitted.
---------------------
5.4 Litigation and Proceedings. There are no actions, suits, proceedings,
--------------------------
orders or
LOAN AND SECURITY AGREEMENT - Page 20
---------------------------
injunctions pending or, to the best of Borrower's or Guarantor's knowledge,
threatened against or affecting Borrower, Guarantor or the Land, at law or in
equity, or before or by any governmental authority, which could have a material
adverse effect on Borrower or Guarantor or the Project. Borrower has received no
notice from any court or governmental authority alleging that Borrower has
violated any applicable condominium act, any of the rules or regulations
thereunder, or any other Applicable Laws.
5.5 Licenses and Permits. Borrower and Guarantor possesses all requisite
--------------------
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders as are
necessary to carry on its business as now being conducted.
5.6 Environmental Matters. Neither Borrower nor any Affiliate of Borrower
---------------------
or Guarantor have received notice from any governmental agency, entity or other
person with regard to Hazardous Materials on or affecting any of the Existing
Improvements.
5.7 Full Disclosure. No information, exhibit or written report furnished
---------------
by or on behalf of Borrower or Guarantor to Lender in connection with the Loan
contains any material misstatement of fact or omits any material fact necessary
to make the statement contained herein or therein not misleading. Borrower
knows of no legal or contractual restriction which will prevent it from offering
or selling Units to Purchasers.
5.8 Margin Regulations. The proceeds from the Loan to be evidenced by the
------------------
Note will be used to finance the Project. None of the transactions contemplated
in this 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.
5.9 No Defaults. No default exists, and there is no violation in any
-----------
material respect of any term of any agreement, partnership agreement, charter
instrument, bylaw or other instrument to which Borrower or Guarantor is a party
or by which either may be bound. No default exists with regard to any
obligations under the Purchase and Sale Agreement.
5.10 Compliance with Applicable Laws. Borrower:
-------------------------------
(a) is not in violation of any material Applicable Laws to which it
is subject; and
(b) has not failed, or will not fail, to make or cause to be made any
registrations or declarations with any government or agency or department
thereof, necessary to the ownership of the Project or to the conduct of its
business including, without limitation, the operation of the Project and
the sale, or offering for sale, of Units or Intervals therein; which
violation or failure to obtain or register materially adversely affects the
business, prospects, profits, properties or condition (financial or
otherwise) of Borrower. Borrower has, to the extent required by its
activities and businesses, fully
LOAN AND SECURITY AGREEMENT - Page 21
---------------------------
complied with (i) all of the applicable provisions of (A) the Consumer
Credit Protection Act, as amended; (B) the Federal Trade Commission Act, as
amended; (C) the Federal Interstate Land Sales Full Disclosure Act, as
amended; (D) any applicable condominium act; (E) all other applicable
federal statutes; and (F) all rules and regulations promulgated under any
of the foregoing; and (ii) all of the applicable provisions of any law of
any state in which Borrower is selling Units (and the rules and regulations
promulgated thereunder) relating to the sale, offering for sale or
financing of Units or Intervals.
5.11 Employee Benefit Plans. Borrower and Guarantor each is in compliance
----------------------
in all material respects with all applicable provisions of ERISA, the Internal
Revenue Code of 1986, as amended from time to time (herein, the "IRC"), and all
---
other Applicable Laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. No material liability has been incurred
by Borrower or Guarantor which remains unsatisfied for any funding obligation,
taxes or penalties with respect to any Employee Benefit Plan.
5.12 Representations as to the Land and Project.
------------------------------------------
(a) Access. The Land has direct access to a publicly dedicated road.
------
(b) Utilities. Electric, gas, sewer, water facilities and other
---------
necessary utilities are lawfully available in sufficient capacity to
service the Land and the contemplated Resort Improvements, including each
of the Units to be constructed on the Land, and any easements necessary to
the furnishing of such utility service have been obtained and duly
recorded.
(c) Amenities; Common Elements. All amenities and other Common
--------------------------
Elements described in the sales prospectus and the Disclosure Statement for
the Timeshare Program and the Project shall be completed in accordance with
the Plans. Each Purchaser of an Interval will have access to and the use
of all of the amenities and other Common Elements of the Project as and to
the extent provided in the Timeshare Documentation and the Disclosure
Statement.
(d) Construction. All costs arising from the construction of any of
------------
the Resort Improvements and the purchase of any equipment, inventory, or
furnishings located in or on each of the Units at the Project have been
paid or will be paid in the ordinary course of business but no later than
thirty (30) days after invoices for the work or equipment have been
received by Borrower unless Borrower contests such payment in accordance
with the requirements of Section 6.5 hereof.
-----------
(e) Sale of Intervals. The sale, offering of sale, and financing of
-----------------
Intervals: (i) do not (and will not) constitute the sale, or the offering
of sale, of securities subject to the registration requirements of the
Securities Act of 1933, as amended, or any state securities law; and (ii)
do not (and will not) violate any Applicable Law including, without
limitation, any applicable timesharing law, statute, or regulation.
LOAN AND SECURITY AGREEMENT - Page 22
---------------------------
5.13 Collateral.
----------
(a) Title. Borrower has good and marketable title to the Collateral,
-----
free and clear of any lien, security interest, charge or encumbrance except
for the security interest created by the Deed of Trust, this Agreement, or
otherwise created in favor of Lender. No financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in
favor of Lender.
(b) Power. Borrower has the lawful right, power and authority to
-----
grant a security interest in the Collateral. The Deed of Trust, this
Agreement and all filings and other actions necessary or desirable to
perfect and protect such security interest, create a valid and perfected
first priority security interest in the Collateral securing the payment and
performance of the Obligations.
(c) Taxes and Liens. Borrower has paid all taxes, levies and other
---------------
charges upon the Collateral. Borrower shall defend Lender against and save
it harmless from all claims of any Persons other than Lender with respect
to the Collateral, and this indemnity shall include all attorneys' fees and
legal expenses.
(d) Deed of Trust. The Deed of Trust will, when recorded, constitute
-------------
a valid and enforceable first and prior Lien on the properties and
interests covered thereby, including, but not limited to, the Land, the
Resort Improvements, Units, Intervals, Common Elements, all improvements to
same, and all FF&E of completed Units.
5.14 Financial Statements and Business Condition. The financial statements
-------------------------------------------
of Borrower and Guarantor fairly present the respective financial conditions and
results of operations of Borrower and Guarantor, respectively, as of the date or
dates thereof and for the periods covered thereby. There are no material
liabilities, direct or indirect, fixed or contingent, of Borrower or Guarantor
as of the dates of such financial statements that are not reflected therein or
in the notes thereto that have not otherwise been disclosed to Lender in
writing. Except for any such changes heretofore expressly disclosed in writing
to Lender, there have been no material adverse changes 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, that
are not shown in their respective financial statements. Borrower and Guarantor
are able to pay all of their respective debts as they become due, and Borrower
and Guarantor, as the case may be, will maintain such solvent financial
condition, giving effect to the Obligations, as long as Borrower or Guarantor
are obligated to Lender under this Agreement or any of the other Loan Documents.
Neither Borrower's nor Guarantor's obligations under this Agreement and the
other Loan Documents will render Borrower or Guarantor unable to pay their
respective debts as they become due.
5.15 Tax Identification Numbers. Borrower's and Guarantor's respective
--------------------------
federal taxpayer identification numbers are as follows: Borrower: 00-0000000,
and Guarantor: 00-0000000.
LOAN AND SECURITY AGREEMENT - Page 23
---------------------------
ARTICLE 6
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any portion of the Obligations remains unpaid or unperformed or
Lender is committed to make further Advances hereunder, Borrower and, as
applicable, Guarantor agree with Lender as follows:
6.1 Payment and Performance of Obligations. Borrower shall repay all of
--------------------------------------
the Loan and all related amounts 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 will do all things necessary
that are not prohibited by Applicable Law to prevent the occurrence of any Event
of Default hereunder.
6.2 Insurance. Borrower agrees that:
---------
(a) Policies. The Project shall be kept insured with such general
--------
liability coverage and such other coverages acceptable to Lender, by
carrier(s), in amounts and in form at all times satisfactory to Lender,
which carrier(s), amounts and form shall not be changed without the prior
written consent of Lender. During the construction of the Resort
Improvements, Borrower shall obtain and maintain All-Risk Builder's Risk
insurance in an amount equal to 100% of the replacement cost of the Resort
Improvements, providing all-risk coverage on the Resort Improvements and
Stored Materials, including collapse, damage resulting from error in design
or faulty workmanship or materials, water damage, and permission to occupy,
for the benefit of Borrower and Lender as named insured and/or loss payees.
Upon completion of construction of the Resort Improvements, all required
insurance may be maintained by the applicable owner's association for the
Project (the "Project Association") as required by the Timeshare
-------------------
Documentation, provided that in the event the Project Association fails to
maintain any insurance required under this Section 6.2(a), then Borrower
--------------
shall be required to obtain and maintain such insurance. If and to the
extent any of the Resort Improvements are located in a flood hazard area,
Borrower shall obtain and maintain a federal flood insurance policy in
amounts satisfactory to comply with the requirements of the National Flood
Insurance Program applicable to federally-insured lending institutions.
(b) Proofs of Claim. In case of loss or damage or other casualty,
---------------
Borrower shall give immediate written notice thereof to the insurance
carrier(s) and to Lender. Lender is authorized and empowered, and Borrower
hereby irrevocably appoints Lender as its attorney-in-fact (such
appointment is coupled with an interest), at Lender's option, to make or
file proofs of loss or damage and to settle and adjust any claim under
insurance policies which insure against such risks, or to direct Borrower,
in writing, to agree with the insurance carrier(s) on the amount to be paid
in regard to such loss.
LOAN AND SECURITY AGREEMENT-Page 24
---------------------------
(c) Loss or Casualty.
----------------
(i) Provided no Event of Default then exists and Borrower
certifies as to same, the net insurance proceeds shall be made
available for the restoration or repair of the Resort Improvements if
(i) in Lender's reasonable judgment: (A) restoration or repair and the
continued operation of the Resort Improvements is economically
feasible; (B) the value of Lender's security is not reduced; and (C)
the casualty loss is $250,000 or less; and (ii) the loss does not
occur in the six (6) month period preceding the Maturity Date and
Lender's Inspecting Engineer certifies that the restoration of the
Resort Improvements can be completed at least ninety (90) days prior
to the Maturity Date. Borrower shall pay all amounts, in addition to
the net insurance proceeds, necessary to pay in full the cost of the
restoration or repair and shall deposit such amount with Lender (or,
if pursuant to the Timeshare Documentation a trustee shall otherwise
be appointed for such purpose, such trustee), all in the discretion of
Lender.
(ii) Notwithstanding the foregoing, it shall be a condition
precedent to any disbursement of insurance proceeds held by Lender
hereunder that Lender shall have approved (x) all plans and
specifications for any proposed repair or restoration; (y) the
construction schedule; and (z) the architect's and general
contractor's contracts for restoration exceeding $250,000. Lender may
establish other conditions it deems reasonably necessary to assure the
work is fully completed in a good and workmanlike manner free of all
Liens by reason thereof, and in compliance with all Applicable Laws.
At Lender's option, the net insurance proceeds shall be disbursed
subject to the requirements of the Timeshare Documentation. If an
Event of Default then exists, or any of the conditions set forth in
this subsection have not been met or satisfied, the net insurance
proceeds shall be applied to the Loan in such order and manner as
Lender may elect, whether or not due and payable, with any excess paid
to Borrower.
6.3 Casualty and Condemnation. The proceeds of any award, payment or claim
-------------------------
for damages, direct or consequential, in connection with any condemnation or
other taking of any of the Collateral or part thereof, or for conveyances in
lieu of condemnation, are hereby assigned to and shall be paid to Lender.
Lender is authorized (but is under no obligation) to collect any such proceeds.
Lender shall apply the net proceeds of any such condemnation award (after
deduction of Lender's reasonable costs and expenses, if any, in collecting the
same) subject to the requirements of the Timeshare Documentation.
Notwithstanding anything to the contrary contained herein, for so long as any
part of the Project is subject to the Timeshare Documentation, any and all
awards and payment received by Lender arising from any condemnation or
conveyances in lieu thereof relating to the Project shall be delivered and paid
out by Lender (or, if pursuant to the Timeshare Documentation a trustee shall
otherwise be appointed for such purpose, such trustee), to be distributed and
used in accordance with the provisions of the Timeshare Documentation.
LOAN AND SECURITY AGREEMENT-Page 25
---------------------------
6.4 Financial Covenants.
-------------------
(a) Minimum Liquidity. Borrower agrees that during the term of the
-----------------
Loan, as of any date, Borrower shall maintain minimum liquidity of
$5,000,000 which shall be defined for purposes of this Agreement as
unrestricted cash, plus unpledged Eligible Note Receivables. As used
herein, the term "Eligible Note Receivables" shall have the meaning
-------------------------
assigned to such term in the Revolving Receivables Loan Agreement.
(b) Leverage. As of the last day of each fiscal quarter of Borrower
--------
and for so long as the Loan is outstanding or the Lender is obligated to
make Advances, Borrower and Guarantor each agree to maintain a Adjusted
Liabilities to Adjusted Net Worth ratio of 4.5:1, as shown on the balance
sheet of Borrower and Guarantor prepared in accordance with GAAP.
(c) Interest Coverage. As of the last day of each fiscal quarter of
-----------------
Borrower and for so long as Loan is outstanding or the Lender is obligated
to made Advances, Borrower agrees to maintain a ratio of EBITDA to Net
Total Interest Expense of not less than 1.0:1.
(d) Net Worth. Borrower agrees to maintain a minimum net worth,
---------
determined in accordance with GAAP, of Twenty-Seven Million Five Hundred
Thousand and 00/100 Dollars ($27,500,000.00) at all times during which the
Loan is outstanding, or Lender is obligated to make Advances hereunder.
(e) Defined Terms. For purposes of this Agreement, the following
-------------
shall have the meaning ascribed to the same below:
"Adjusted Liabilities" means, as of any date of determination and
--------------------
without duplication, all current liabilities of Borrower, as determined in
accordance with GAAP, less all Subordinated Debt owed (but not paid) by
----
Borrower to its parent corporation.
"Adjusted Net Worth" means, as of any date of determination and
------------------
without duplication, total assets of Borrower minus total liabilities of
Borrower, as determined in accordance with GAAP, plus all Subordinated Debt
----
payable (but not paid) from Borrower's parent corporation to Borrower (to
the extent not already included in the calculation of Borrower's assets).
"Debt" means, with respect to any Person, without duplication, (a) all
----
obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations under
conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (d) all obligations issued or assumed
as the deferred purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the ordinary course of
business), (e) all obligations secured by any Lien on any property or asset
owned by such Person (other than accounts payable arising in the ordinary
course of business), whether or not the obligation secured thereby shall
have been assumed
LOAN AND SECURITY AGREEMENT-Page 26
---------------------------
(provided that, unless such obligations shall have been assumed, for
purposes of this definition the amount of such Debt at any time shall be
deemed to equal the fair market value of such property or asset at such
time), and (f) any guaranty of such Person of any obligation of another
Person constituting obligations of a type set forth above.
"EBITDA" means, as of the last day of any fiscal quarter of the
------
Borrower, Net Income (as defined below) for the twelve (12) month period
ending on such last day, plus all amounts deducted in the computation of
such Net Income on account of (a) depreciation expense and amortization
expense for Intangible Assets; (b) income taxes; (c) all non-cash charges
in respect of pension and retiree benefit expense; and (d) interest expense
(including imputed interest in respect of leases capitalized in accordance
with GAAP [both current and long-term portions of such imputed interest
expense], amortization of debt discount and the current and long-term
portion of interest expense for all long-term indebtedness of Borrower)
(such amounts of interest are referred to herein as "Total Interest
--------------
Expense").
-------
"Intangible Assets" means, as of any fiscal quarterly determination
-----------------
date for this covenant, the amount of intangible assets of Borrower,
determined in conformity with GAAP, including, without limitation,
goodwill, patents, trademarks, tradenames, copyrights, licenses,
organizational costs, deferred amounts, prepaid expenses, covenants not to
compete, franchises, unearned income, and restricted funds.
"Net Income" means, with respect to any period, the net income of the
----------
Borrower for such period determined in accordance with GAAP without giving
effect to extraordinary gains or losses or gains or losses arising from
sales of assets other than inventory sold in the ordinary course of
business.
"Subordinated Debt" means any Debt of any Person having maturities and
-----------------
terms, and which is subordinated to payment of the Obligations in a manner
approved in writing by Lender.
"Subordinated Interest Expense" means, with respect to any period, the
-----------------------------
interest expense accrued for such period in respect of Subordinated Debt.
"Net Total Interest Expense" means, for any period, Total Interest
--------------------------
Expense for such period minus Subordinated Interest Expense for such
period.
6.5 Claims and Liens. The Collateral is and shall remain free of all
----------------
Liens whatsoever (including, without limitation, claims for labor, services,
materials and supplies) except for the Permitted Exceptions. In the event any
Lien attaches to any Collateral, Borrower shall, within thirty (30) days after
such attachment, 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
where the subject Collateral is located, issued by a corporate surety acceptable
to Lender, in an amount acceptable to Lender and in form acceptable to Lender
and in form otherwise acceptable to the Title Insurer to "insure around" such
Lien by endorsement to the Title Insurance Policy.
LOAN AND SECURITY AGREEMENT-Page 27
---------------------------
6.6 Title. Borrower shall promptly notify Lender of any claim, action or
-----
proceeding affecting title to the Collateral, or any part thereof, or any of the
security interests granted hereunder, and, at the request of Lender, appear in
and defend, at Borrower's expense, any such claim, action or proceeding.
6.7 Subordinated Obligations. Borrower will not, directly or indirectly,
------------------------
(i) permit any payment to be made in respect of any indebtedness, liabilities or
obligations, direct or contingent, which are subordinated by the terms thereof
or by separate instrument to the payment of principal of, and interest on, the
Note 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 Borrower's subordinated obligations in such a manner as to affect
adversely Lender's lien or the prior position of the Note, or (iii) permit the
prepayment or redemption, except for mandatory prepayments, of all or any part
of any subordinated obligations of Borrower except in accordance with the terms
any intercreditor agreement.
6.8 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 the Obligations and to ensure the performance of the terms and provisions
of the Loan Documents. 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 require to evidence Borrower's compliance with its
representations, warranties and covenants.
6.9 Affirmative Covenants in Other Documents. Borrower shall duly and
----------------------------------------
promptly comply with and perform, or cause to be complied with and performed,
all of the affirmative covenants set forth (a) in the Deed of Trust or in any
other Loan Document, (b) in any document or instrument evidencing, securing, or
executed in connection with the Revolving Receivables Loan, or (c) in any other
document or instrument evidencing, securing, or executed in connection with any
other Obligations.
6.10 Payment of Taxes. Borrower agrees to use its best efforts to cause to
----------------
be paid, when due, all taxes and assessments of any kind imposed on or with
respect to the Loan or any of the Loan Documents or the Collateral. Borrower
shall immediately notify Lender in writing of any failure to timely pay all
taxes and assessments due. In the event that Lender determines (through notice
from Borrower or otherwise) that any such taxes or assessments have not been
paid when due, Borrower shall have thirty (30) days from receipt of a written
request for payment from Lender to cause the required taxes to be paid. If such
required taxes (and any applicable late charges, etc.) are not paid within such
thirty (30) day period, Lender may, in its sole discretion, without any
obligation to do so, choose to pay such taxes on behalf of Borrower, in which
case Borrower shall pay Lender interest at the Default Rate on any amounts so
advanced from the date advanced by Lender until repaid by Borrower. In the
event Lender elects not to pay the required taxes and the required taxes are not
paid as set forth above, such failure shall constitute an Event of Default
hereunder.
LOAN AND SECURITY AGREEMENT-Page 28
---------------------------
6.11 Inspection of Records. Borrower and Guarantor shall, at any time and
---------------------
from time to time, upon reasonable notice and at the expense of Borrower, permit
Lender or its agents or representatives to inspect any the financial or
operating records relating to the Project, or any of Borrower's or Guarantor's
assets, including but not limited to all documents, bank statements, and other
records within Borrower's and Guarantor's possession, custody, or control, and
to examine and make copies and abstracts thereof; and to discuss its affairs,
finances and accounts with any of its officers, employees, Affiliates,
contractors or independent certified public accountants (and by this provision,
Borrower and Guarantor authorize said accountants to discuss with Lender, its
agents or representatives, the affairs, finances, and accounts of Borrower and
Guarantor). Lender agrees to use reasonable efforts not to interfere
unreasonably with Borrower's or Guarantor's business operations in connection
with any such inspections. Without limiting Section 10.3 hereof, for up to two
------------
(2) such inspections per year and for any inspections made after an Event of
Default, Borrower agrees to pay, on demand, all of Lender's reasonable expenses
to conduct such inspections; provided, however, that except with respect to any
-------- -------
audits conducted after an Event of Default hereunder, Borrower shall not be
required to pay in excess of $7,500 in any calendar year for audits performed
during such year.
6.12 Reporting Requirements. For so long as any of the Obligations remain
----------------------
unsatisfied, Borrower and Guarantor shall furnish (or cause to be furnished, as
the case may be) to Lender, certified in writing by Borrower and Guarantor as
true and correct, the following:
(a) Sales and Inventory Reports. Upon completion of construction of
---------------------------
the Resort Improvements and within fifteen (15) days after the end of each
month thereafter, a monthly report showing all sales and cancellations of
sales of Intervals, in form and content satisfactory to Lender; and within
thirty (30) days after the end of each calendar year, an annual sales and
inventory report for the Project detailing the sales of all Intervals
during such calendar year and the available inventory of Units and
Intervals, certified by Borrower to be true, correct and complete and
otherwise in the form approved by Lender.
(b) Monthly Financial Reports. Within forty-five (45) days after the
-------------------------
end of each month, unaudited financial statements of Borrower, Guarantor
the Project Association, if any, certified by the chief financial officer
of the subject thereof.
(c) Year-End Financial Reports. As soon as available and in any
--------------------------
event within one hundred and twenty (120) days after the end of each
calendar year: (i) the balance sheet[s] of Borrower, Guarantor and, upon
completion of the Resort Improvements, the Project Association, as of the
end of such year and the related statements of income and cash flow for
such calendar year; (ii) a schedule of all outstanding indebtedness of
Borrower and Guarantor describing in reasonable detail each such debt or
loan outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt or loan; and (iii) with respect to
the financial statements of Borrower, Guarantor and the Project
Association, copies of reports from a firm of independent certified public
accountants selected by Borrower, which report shall be unqualified as to
going concern and scope of audit and shall state that such financial
statements present fairly the financial position of Borrower,
LOAN AND SECURITY AGREEMENT-Page 29
---------------------------
Guarantor and the Project Association as of the dates indicated and the
results of its operations and cash flow for the periods indicated in
conformity with GAAP.
(d) Audit Reports. Promptly upon receipt thereof, one (1) copy of
-------------
each other report submitted to Borrower or Guarantor by independent public
accountants in connection with any annual, interim or special audit made by
them of the books of Borrower or Guarantor.
(e) Other Reports. Such other reports, statements, notices or
-------------
written communications relating to the Borrower, Guarantor, the Project
Association, or the Project as Lender may require in its reasonable
discretion.
(f) SEC Reports. Promptly upon their becoming available one (1) copy
-----------
of each financial statement, report, notice or proxy statement sent by
Guarantor to security holders generally, and of each regular or periodic
report and any registration statement, prospectus or written communication
(other than transmittal letters) in respect thereof filed by Guarantor
with, or received by Guarantor in connection therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency.
(g) Notice of Default or Event of Default. Promptly upon becoming
-------------------------------------
aware of the existence of any condition or event that constitutes an Event
of Default hereunder or any of the other Loan Documents, a written notice
specifying the nature and period of existence thereof and what action
Borrower is taking or proposes to take with respect thereto.
(h) Notice of Claimed Default. Promptly upon becoming aware that the
-------------------------
holder of any material obligation of Borrower or Guarantor has given notice
or taken any other action with respect to a claimed default or event of
default with respect thereto, 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 Borrower or Guarantor is taking or
proposes to take with respect thereto.
(i) Material Adverse Developments. Promptly upon becoming aware of
-----------------------------
any pending or threatened claim, action, proceeding, litigation,
development, or any other information that could materially and adversely
affect Borrower, Guarantor, or all or any portion of the Collateral,
including but not limited to the ability of Borrower to perform its
Obligations hereunder, Borrower shall provide Lender with telephonic notice
thereof, immediately followed by telecopied and mailed written
confirmation, specifying the nature of such development or information and
the anticipated effect thereof.
(j) Other Information. Borrower shall promptly deliver to Lender any
-----------------
other available information related to the Loan, the Collateral, Borrower,
Guarantor, and the Project, as Lender may in good faith request.
LOAN AND SECURITY AGREEMENT-Page 30
---------------------------
6.13 Records. Borrower shall keep adequate records and books of account
-------
reflecting all financial transactions of Borrower, including sales of Intervals,
in which complete entries will be made in accordance with GAAP.
6.14 Construction Covenants. Borrower and Guarantor hereby covenant and
----------------------
agree with Lender as follows:
(a) Construction Contract and Subcontracts. With respect to each
--------------------------------------
Construction Contract, Borrower shall not: (i) take any action that could
result in a default under the terms of the Construction Contract; (ii)
waive any of the General Contractor's obligations thereunder; (iii) take
any action that could relieve the General Contractor from its obligations
to construct the Resort Improvements according to the Plans and
Construction Schedule; or (iv) consent to any amendment, other than change
orders as may be permitted hereunder and under the Construction Contract,
without Lender's prior written approval. With respect to any applicable
subcontracts, Borrower agrees not to: (1) take any action that could
result in any material default under the terms of the subcontracts; (2)
waive any subcontractor's material obligations thereunder; (3) take any
action that could relieve any subcontractor of its obligations to construct
the Resort Improvements according to the Plans and Construction Schedule;
or (4) consent to any material amendments, other than change orders
permitted by this Agreement or as Lender may approve in writing, to any of
the subcontracts without Lender's prior written consent.
(b) Additional Equity. Lender reserves the right to require, at any
-----------------
time and from time to time, at Borrower's expense, a construction cost
analysis by an expert in the construction cost field selected by Lender.
Any such construction cost analysis shall be delivered to Lender promptly
upon its completion. If Lender reasonably estimates, at any time and from
time to time, that the amount necessary to assure final completion of
construction of any of the Resort Improvements in accordance with the Plans
and all Applicable Laws, including but not limited to interest and other
soft or non-construction budget items during the term of the Loan, exceeds
the amount of the undisbursed proceeds of the Loan plus the total amount of
all Up-Front Equity or other equity funds contributed by Borrower with
respect to such Resort Improvements, then the party making such
determination shall so notify the other parties hereto in writing,
whereupon Lender shall have the option of requiring Borrower (i) to
immediately deposit with Lender, to be held by Lender in a non-interest
bearing, non-escrow account, the amount of any such difference, in cash,
which amount shall be disbursed and applied toward the costs set forth in
the Budget prior to any further Advance by Lender in respect of the Loan;
or (ii) to expend the amount of any such difference for items included in
the Budget, with satisfactory evidence of such expenditure being provided
to Lender prior to any Advance by Lender in respect of the Loan. Lender
shall be assured at all times, to its complete satisfaction, that the
undisbursed proceeds of the Loan are sufficient to complete the Resort
Improvements in accordance with the Plans and all Applicable Laws. Lender
reserves the right of continual verification of adequate contributions by
Borrower of the Up-Front Equity, to the extent required hereby. Each such
deposit shall
LOAN AND SECURITY AGREEMENT-Page 31
---------------------------
be expended before any or any other Advances of the Loan in respect thereof
shall be made, and such deposit shall be advanced as construction
progresses.
(c) Commencement and Completion of Construction. Borrower shall
-------------------------------------------
diligently pursue the construction of the Resort Improvements to completion
utilizing good workmanship and quality materials. Quality of construction
is of the essence, and each Draw Request shall be subject to verification
by Lender of the satisfactory quality and completion of work in place.
Borrower shall supply such sums of money and performs such duties as may be
necessary to complete the construction of the Resort Improvements pursuant
to the Plans and in full compliance with all terms and conditions of the
Loan Documents and all Applicable Laws, all of which shall be accomplished
prior to the Completion Date, and without any Lien, claim, or assessment
(actual or contingent) asserted against all or any portion of the
Collateral for any material, labor, or other items furnished in connection
therewith, and all in full compliance with all applicable construction,
use, building, zoning, and other Applicable Laws. Borrower shall provide
to Lender evidence of satisfactory compliance with all of such requirements
upon request therefor by Lender and shall provide Lender with true and
correct copies of all certificates of occupancy issued by Xxxxx County,
Nevada or other applicable governmental entities immediately upon the
issuance thereof. Completion of construction shall include but not be
limited to grading, landscaping, adequate sewer, water, electrical, gas,
telephone and other utility facilities, completed streets, sidewalks,
drainage and curbs, both on-site and off-site, public and private. The
construction and development of the Resort Improvements described herein
shall be completed in accordance with the Construction Schedule.
"Substantial Completion" shall be deemed to have occurred when Borrower has
-----------------------
obtained a certificate of completion issued by the Architect (or if more
than one Architect has been engaged by Borrower, by the primary,
supervising Architect for the Project) and General Contractor and approved
by Lender stating that the Resort Improvements are substantially complete,
subject only to a "punch list" designating any minor incomplete work or
other performance remaining to be done under the Construction Contract to
accomplish final completion of the Resort Improvements (hereinafter
defined) and stating the amounts necessary to accomplish final completion
of the Resort Improvements.
(d) Right of Lender to Inspect Project and Review Plans. Lender, at
---------------------------------------------------
any reasonable time and from time to time, shall be entitled to enter upon
the Land and to inspect the Resort Improvements and all materials to be
used in the construction thereof, and Borrower shall cooperate and use its
good faith commercially reasonable efforts to cause each General Contractor
to cooperate with Lender during such inspections (including making
available to Lender working copies of the Plans, together with all related
supplementary materials); provided, however, that this provision shall not
-------- -------
be deemed to impose upon Lender any obligation to undertake such
inspections. Borrower acknowledges that Lender may retain a licensed
architect or engineer satisfactory to Lender (the "Inspecting Engineer"),
-------------------
at Borrower's sole cost and expense, for the purpose of performing
inspections as work progresses, certifying that each Draw Request is not in
excess of the work completed, less Retainage, certifying that the committed
and undisbursed Loan proceeds are sufficient to complete the Resort
Improvements, and
LOAN AND SECURITY AGREEMENT-Page 32
---------------------------
covering such other matters as Lender shall reasonably require. Any such
inspections shall be for Lender's sole benefit and shall not be relied upon
by any other Person. In accordance with the provisions hereof, the services
to be performed by Inspecting Engineer may include but not be limited to
(i) a review of the Plans, any and all Construction Contracts and
subcontracts, any and all other documents in the possession or control of
Borrower or a General Contractor relating to the construction of Resort
Improvements and all proposed changes to them; (ii) an analysis of the
foregoing to ensure conformity of the Resort Improvements with the approved
Plans and all Applicable Laws; and (iii) approval of Draw Requests in
respect of the Loan.
(e) Changes to Plans. Without Lender's prior written consent,
----------------
Borrower shall not change or modify the Plans, agree to any change order,
or allow any extras to any contractor, except that Borrower may make or
allow such changes or extras without Lender's prior consent if: (i)
Borrower notifies Lender in writing in advance of the change or extra with
appropriate supporting documentation and information; (ii) Borrower obtains
the approval of all applicable contractors, the Architect, and all sureties
and insurers whose approval is required; (iii) the structural integrity,
quality and standard of workmanship of the Resort Improvements is not
materially impaired or diminished; (iv) no substantial change in
architectural appearance is effected; (v) no Event of Default or Incipient
Event of Default and no default in any obligation to any other Person or
violation of any Laws would result from such change or extra; (vi) to the
extent that such change will result in an increase in the costs of the
Project not reflected in the Budget, Borrower takes appropriate action
under Section 6.14(b) above to provide additional equity funds (in addition
---------------
to the Up-Front Equity) to pay for such increased costs; (vii) the increase
or reduction in cost resulting from any single change or extra does not
exceed $25,000 and the aggregate amount of all such increases and/or
reductions does not exceed $50,000; and (viii) completion of the Resort
Improvements by the Completion Date will not be affected or delayed.
(f) Notification of Claims by Subcontractors and Materialmen.
--------------------------------------------------------
Borrower shall advise Lender promptly in writing if Borrower receives any
notice, written or oral, of any claim filed or asserted by any laborer,
subcontractor, or materialman in connection with any labor or materials
furnished in the construction of the Resort Improvements.
(g) Demolition of Existing Improvements. Borrower shall cause the
-----------------------------------
Existing Improvements to be demolished and all debris removed from the Land
in compliance with all Applicable Laws, including Environmental Laws. To
the extent the Existing Improvements contain friable asbestos or other
Hazardous Materials, Borrower shall engage a licensed abatement contractor
to remove the same in strict compliance with Applicable Laws and
Environmental Laws.
(h) Up-Front Equity. Borrower agrees that Borrower or Guarantor will
---------------
contribute an amount of equity proceeds equal to not less than ten percent
(10%) of the total Approved Costs of the Project.
LOAN AND SECURITY AGREEMENT-Page 33
---------------------------
6.15 Timeshare Documentation; Compliance with Applicable Laws.Borrower
--------------------------------------------------------
shall comply in all material respects with any requirements of the Federal Trade
Commission ("FTC") in whatever form including Xxxxx-Xxxxx-Xxxxxx Act and the
---
Telemarketing Laws and rules promulgated by the FTC and the various state
governments.
6.16 Environmental Matters .Borrower will comply, and will cause the
Project to comply, in all material respects with all applicable Environmental
Laws. Borrower will not cause, commit, permit or allow to continue (i) any
violation of any Environmental Law by (A) Borrower or any contractor or
subcontractor, or (B) by or with respect to the Project or any use of or
condition or activity on the Land, or (ii) the attachment of any environmental
lien to the Land. Borrower will not place, install, dispose of or release, or
cause, permit, or allow the placing, installation, disposal, spilling, leaking,
dumping or release of, any Hazardous Material or storage tank (or similar
vessel) on the Land and will keep the Project free of Hazardous Material. If
any Hazardous Material is discovered on the Property at any time and regardless
of the cause, Borrower shall promptly at Borrower's sole risk and expense
remove, treat, and dispose of the Hazardous Material in compliance with all
applicable Environmental Laws and solely under Borrower's name (or if removal is
prohibited by any Environmental Laws, take whatever action is required by any
Environmental Law), in addition to taking such other action as is necessary to
have the full use and benefit of the Property as contemplated by the Loan
Documents, and provide Lender with satisfactory evidence thereof.
6.17 First Right for Receivables Financing . Subject to the terms and
conditions of this paragraph, Borrower hereby agrees that Lender shall have an
exclusive right to provide timeshare receivables financing for the Project and
each Unit thereof, on the same terms as set forth in the Revolving Receivables
Loan and for an amount not to exceed $20,000,000. Borrower agrees that it will
not solicit any financing proposals until such time as it has requested or
obtained from Lender recognition in writing that Lender has advanced at least
$20,000,000 in respect of the Revolving Receivables Loan or that Borrower has no
more availability for further funding under the Revolving Receivables Loan.
Therefore, Borrower will not solicit proposals or commitments for such
receivables financing from other lenders without first requesting a proposal or
commitment from Lender. Borrower will permit Lender to provide such receivables
financing so long as Lender's proposal or commitment for the same is based on
the same terms as set forth in the Revolving Receivables Loan. If Lender is
unable or unwilling for any reason to provide such receivables financing on such
terms, Borrower may solicit proposals or commitments from other lenders. If
Borrower wishes to have a third party process an application from it for such
receivables financing (including a purchase of receivables) or any such entity
wishes to accept a third party's financing proposal or a third party's
commitment for such receivables financing, Borrower must give Lender notice of
its desire to do so, together with (a) a written copy of the application for the
subject financing or a copy of the commitment for the subject financing from the
third party lender, as the case may be; and (b) all information and other
materials delivered to such prospective lender in connection with the proposed
financing. The term "financing proposal" means a proposal made by a third party
to provide financing, which proposal is an expression of intent by a third party
to further consider providing financing and must be accepted by the offeree as a
condition precedent to the third party's further consideration to providing the
financing, but does not constitute a firm and binding offer to provide
financing; and the term "commitment" means a
LOAN AND SECURITY AGREEMENT-Page 34
---------------------------
firm and binding offer by a third party to provide financing, subject only to
approval by Borrower and the completion of due diligence and closing conditions
which do not involve further approval of the type or amount of investment or the
type or quantity of collateral or credit enhancements by the third party's
credit approval authorities. Lender shall have twenty (20) days from receipt of
the required written notice with regard to the subject financing and the items
required to be given to it with such written notice (a) to issue a financing
proposal to extend financing to the entity securing such financing upon terms
financially equivalent to the terms of the loan or credit agreement governing
the Revolving Receivables Loan or the third party offer (in Lender's sole
discretion); or (b) to refuse to do so. Issuance of such a conditional financing
proposal in a timely manner shall constitute adequate exercise (albeit
conditional) of Lender's right of first refusal. Failure to issue such a
conditional financing proposal in a timely manner shall be deemed to be an
election by Lender to refuse to make the newly requested financing. Lender's
election not to make any newly requested financing shall not be deemed a waiver
of any of the terms and conditions of the Loan Documents.
ARTICLE 7
---------
NEGATIVE COVENANTS
------------------
So long as any portion of the Obligations remains unpaid or unperformed or
Lender is committed to make further Advances hereunder, unless Lender otherwise
consents in writing, Borrower and, as applicable, Guarantor hereby covenants and
agrees with Lender as follows:
7.1 Negative Covenants in Other Documents. Borrower shall not violate or
-------------------------------------
permit to be violated any of the negative covenants set forth (a) in the Deed of
Trust or in any other Loan Document, (b) in any document or instrument
evidencing, securing, or executed in connection with the Revolving Receivables
Loan, or (c) in any other document or instrument evidencing, securing, or
executed in connection with any other Obligations.
7.2 Use of Lender Name. Borrower shall not, and shall not permit any
------------------
Affiliate to, without the prior written consent of Lender, use the name of
Lender or the name of any affiliates of Lender in connection with any of their
respective businesses or activities, except in connection with internal business
matters, administration of the Loan and as required in dealings with
governmental agencies.
7.3 Restrictions on Transfers. Borrower shall not, without obtaining the
-------------------------
prior written consent of Lender, which may be granted or withheld in Lender's
sole discretion, (a) transfer, sell, pledge, convey, assign or encumber all or
any portion of the Resort Improvements or the Collateral (or contract to do any
of the foregoing, including securitizations, options to purchase and so called
"installment sales contracts") except sales of Intervals to Purchasers in arms-
length transactions; (b) permit any sale, assignment, encumbrance, dilution or
other disposition of any ownership interests in Borrower (including any right to
receive profits, losses or cash flow related to the Project) now held by
Guarantor that would cause Guarantor to either (i) own less than less than a
fifty-one percent (51 %) interest in Borrower; or (ii) cease to have a
controlling interest in Borrower; (c) permit any change of the President of
Borrower other
LOAN AND SECURITY AGREEMENT-Page 35
---------------------------
than by voluntary retirement or natural causes; or (d) permit the creation of
any new ownership interests in Borrower, except to the extent such new ownership
interests are owned or controlled by Guarantor.
7.4 Name Change. Borrower shall not change its name, its place of
-----------
incorporation or organization, as applicable, or the locations at which any of
the Collateral is located without providing Lender at least thirty (30) days'
prior written notice thereof and executing, at Borrower's sole expense, such
UCC-3 amendments and all other documents and instruments as Lender, in its sole
discretion, deems reasonably necessary or appropriate in order to continue the
perfection of its Lien in and to all of the Collateral.
7.5 Consolidation and Merger. Borrower will not consolidate with or merge
------------------------
into any other Person or permit any other Person to consolidate with or merge
into it.
7.6 Timeshare Program. Without Lender's prior written consent, Borrower
-----------------
shall not adopt, amend, modify or terminate any Timeshare Documentation or
submit the Project or Resort Improvements to any Timeshare Program, except that
if any amendment or modification is required by Applicable Law, Borrower shall
implement the same and give prompt written notice thereof to Lender. Borrower
shall (i) submit all Timeshare Documentation to Lender for its prior approval,
(ii) ensure that all Timeshare Documentation complies with all Applicable Laws
and (iii) prior to the marketing or sale of any Units or Intervals at the
Project, comply with all rules, regulations and restrictions of state, local and
federal Applicable Laws, including the laws of any jurisdiction in which
Borrower markets or sells (or intends to market or sell) any Intervals or Units
to any Purchaser.
ARTICLE 8
---------
EVENTS OF DEFAULT
------------------
An "Event of Default" shall exist if any of the following shall occur:
----------------
8.1 Payments. Failure of Lender to receive from Borrower, within five (5)
--------
days of the date written notice has been sent to Borrower after the due date:
(a) any amount payable under the Note, or (b) any other payment due under the
Loan Documents, except for the Note payment due at the Maturity Date for which
no notice and grace period shall apply.
8.2 Covenant Defaults. Borrower shall fail to perform or observe any
-----------------
covenant, agreement, obligation, representation or warranty contained in this
Agreement or in any of the Loan Documents (other than any covenant or agreement
obligating Borrower to pay the Loan or any other amounts to Lender), and such
failure shall continue for fifteen (15) days after Lender delivers written
notice thereof to Borrower, provided, however, if the failure is incapable of
-------- -------
cure within such fifteen (15) day period and Borrower shall be diligently
pursuing a cure, such fifteen (15) day cure period shall be extended by an
additional period not to exceed fifteen (15) days.
8.3 Warranties or Representations. Any representation or other statement
-----------------------------
made
LOAN AND SECURITY AGREEMENT-Page 36
---------------------------
by or on behalf of Borrower in this Agreement, in any of the Loan Documents or
in any instrument furnished in compliance with or in reference to the Loan
Documents, shall be materially false, misleading or incorrect in any material
respect as of the date made.
8.4 Involuntary Proceedings. If a case is commenced or a petition is
-----------------------
filed and not dismissed within sixty (60) days against Borrower or Guarantor
under any applicable liquidation, conservatorship, bankruptcy, moratorium,
insolvency, reorganization or similar law providing for the relief of debtors
and generally affecting the rights of creditors; 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.
8.5 Proceedings. Either Borrower or Guarantor voluntarily seeks, consents
-----------
to or acquiesces in the benefit of any provision of any applicable liquidation,
conservatorship, bankruptcy, moratorium, insolvency, reorganization or similar
law providing for the relief of debtors and generally affecting the rights of
creditors, 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 to the appointment of a receiver, trustee, liquidator or
conservator for it or any part of its assets.
8.6 Attachment, Judgment, Tax Liens. The issuance, filing or levy against
-------------------------------
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
which is not discharged in full or stayed within thirty (30) days after issuance
or filing.
8.7 Insolvency. Either Borrower or Guarantor shall become insolvent or
----------
otherwise generally be unable to pay its debts when due.
8.8 Material Adverse Change. Any material adverse change in the financial
-----------------------
condition of Borrower or Guarantor (which is not otherwise specifically
described in this Article 8 as an Event of Default) which Lender in good faith
---------
believes impairs or may impair Borrower's or Guarantor's ability to duly and
promptly perform all of its obligations under this Agreement and the other Loan
Documents. A change shall not be deemed material and adverse until it results
in cumulative damages of at least $250,000 or is not subject to quantification
in Lender's reasonable opinion.
8.9 Default Under Other Agreements. Any default by Borrower or Guarantor
------------------------------
in the payment of Obligations for borrowed money in excess of $100,000 in the
aggregate (including the Revolving Receivables Loan) after the expiration of any
applicable grace or cure period; any other default under such Obligations which
accelerates or permits the acceleration (after the giving of notice or passage
of time, or both) of the maturity of such Obligations; or any default which
permits the holders of such Obligations to control Borrower or Guarantor.
LOAN AND SECURITY AGREEMENT-Page 37
---------------------------
8.10 Construction Related Defaults. The cessation of construction of the
-----------------------------
Resort Improvements for more than twenty (20) days (whether or not consecutive),
except for events of force majeure; a reasonable determination by Lender that
the Resort Improvements will not be completed on or before the Completion Date;
the failure of Borrower to complete the Resort Improvements on or before the
Completion Date; any failure of Borrower to provide additional equity funds
within ten (10) days after demand therefor by Lender pursuant to Section 6.14(b)
---------------
hereof; or any court enjoins or prohibits construction, occupancy, maintenance
or operation of any of the Resort Improvements, or Borrower or Lender from
performing the Loan Documents, and such proceeding is not properly contested and
such injunction or order is not vacated within forty-five (45) days after the
granting thereof.
8.11 Default Under Deed of Trust. If a default or Event of Default occurs
---------------------------
under the Deed of Trust or any other Loan Document and such default or event of
default is not cured within the applicable grace period (if any), provided
therein.
8.12 Default Under Other Loans. If a default or Event of Default occurs
-------------------------
under (a) any document or instrument evidencing, securing or executed in
connection with the Revolving Receivables Loan, or (b) any document or
instrument evidencing, securing, or executed in connection with any other
Obligations, and any such default or event of default (as described in (a) or
(b) above) is not cured within the applicable grace period (if any) provided
therein.
ARTICLE 9
---------
REMEDIES
--------
9.1 Remedies Upon Default. Upon the occurrence of an Event of Default,
---------------------
Lender may take any one or more of the following actions, all without notice to
Borrower:
(a) Acceleration. Declare the unpaid balance of the Loan and other
------------
Obligations, or any part thereof, immediately due and payable, whereupon
the same shall be due and payable.
(b) Termination of Obligation to Advance. Terminate any commitment of
------------------------------------
Lender to make further Advances under this Agreement in its entirety, or
any portion of any such commitment, to the extent Lender shall deem
appropriate.
(c) Termination of Obligation to Grant Partial Releases. Cease
---------------------------------------------------
granting partial releases from the Lien of the Deed of Trust.
(d) Completion of Construction. In its own name or in the name of
--------------------------
Borrower, enter into possession of the Property, perform all work necessary
to complete construction of the Resort Improvements substantially in
accordance with the Plans (as modified as deemed necessary by Lender), the
Loan Documents, and all Applicable Laws and continue to employ each
Architect, each General Contractor and/or any contractor pursuant to the
applicable contracts or otherwise. Borrower hereby appoints Lender as
Borrower's attorney-in-fact, which power of attorney is irrevocable and
LOAN AND SECURITY AGREEMENT-Page 38
---------------------------
coupled with an interest, with full power of substitution, to do any of the
following in Borrower's name upon the occurrence of an Event of Default:
(i) use such sums as are necessary, including any proceeds of the Loan,
make such changes or corrections in the Plans, and employ such architects,
engineers, and contractors as may be required, or as Lender may otherwise
consider desirable, for the purpose of completing construction of the
Resort Improvements substantially in accordance with the Plans (as modified
as deemed necessary by Lender), the Loan Documents, and all Applicable
Laws; (ii) execute all applications and certificates in the name of
Borrower which may be required for completion of construction of the Resort
Improvements; (iii) endorse the name of Borrower on any checks or drafts
representing proceeds of any insurance policies, or other checks or
instruments payable to Borrower with respect to the Property; (iv) do every
act with respect to the construction of the Resort Improvements that
Borrower may do; (v) prosecute or defend any action or proceeding incident
to the Property; (vi) pay, settle, or compromise all bills and claims so as
to clear title to the Property; and (vii) take over and use all or any part
of the labor, materials, supplies and equipment contracted for, owned by,
or under the control of Borrower, whether or not previously incorporated
into the Resort Improvements. Lender shall have no liability to Borrower
for the sufficiency or adequacy of any such actions taken by Lender.
(e) Judgment. Reduce Lender's claim to judgment, foreclose, or
--------
otherwise enforce any Lien in all or any part of the Collateral by any
available judicial or other procedure under Applicable Law. Lender's right
to xxx and recover a judgment, either before, after, or during the pendency
of any proceeding for the enforcement of the 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 the Deed of
Trust or the foreclosure of the Lien thereof.
(f) Sale of Collateral. Exercise all the rights and remedies of a
------------------
secured party under the UCC, including (i) require Borrower to, and
Borrower hereby agrees that it will, at its expense and upon request of
Lender forthwith, assemble all or part of the Collateral as directed by
Lender and make it available to Lender at a place to be designated by
Lender that is reasonably convenient to both parties; (ii) enter upon any
premises of Borrower and take possession of the Collateral; and (iii) sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Lender's offices or elsewhere, at such time or
times, for cash, on credit, or for future delivery, and at such price or
prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be
required by Applicable Law, ten (10) days notice of the time and place of
any sale shall constitute reasonable notification. At any sale of the
Collateral, if permitted by Applicable Law, Lender may bid (which bid may
be, in whole or in part, in the form of cancellation of indebtedness) for
the purchase of the Collateral or any portion thereof for the account of
Lender. Borrower shall remain liable for any deficiency. Lender shall not
be required to proceed against any Collateral but may proceed against
Borrower directly. To the extent permitted by Applicable Law, Borrower
hereby
LOAN AND SECURITY AGREEMENT-Page 39
---------------------------
specifically waives all rights of redemption, stay, or appraisal that it
has or may have under any Applicable Law now existing or hereafter enacted.
(g) Retention of Collateral. At its discretion, retain such portion
-----------------------
of the Collateral as shall aggregate in value to an amount equal to the
total amount owed by the Borrower pursuant to the Loan Documents, in
satisfaction of the Obligations, whenever the circumstances are such that
Lender is entitled and elects to do so under Applicable Law.
(h) Purchase of Collateral. Buy all or any part of the Collateral at
----------------------
any public or private sale.
(i) Exercise of Other Rights. Exercise any and all other rights or
------------------------
remedies afforded by any Applicable Laws or 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.
9.2 Application of Collateral; Termination of Agreements. Upon the
----------------------------------------------------
occurrence of an Event of Default, Lender may apply against the Obligations any
and all Collateral in its possession, any and all balances, credits, deposits,
accounts, reserves, indebtedness or other moneys due or owing to Borrower held
by Lender hereunder or under any other financing agreement or otherwise, whether
accrued or not.
9.3 Waivers. 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, 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 Obligations,
or by any release or change in any security for the payment or performance of
the Obligations, regardless of the number of such renewals, extensions, releases
or changes.
9.4 Cumulative Rights. All rights and remedies available to Lender under
-----------------
the Loan Documents shall be cumulative and in addition to all other rights and
remedies granted to Lender at law or in equity, whether or not the Obligations
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.
9.5 Expenditures by Lender. Any sums expended by or on behalf of Lender
----------------------
LOAN AND SECURITY AGREEMENT-Page 40
---------------------------
pursuant to the exercise of any right or remedy provided herein (including
amounts expended by Lender to construct or complete the Resort Improvements)
shall become part of the Obligations (regardless of whether such amounts exceed
the Maximum Loan Amount) and shall bear interest at the Default Rate, from the
date of such expenditure until the date repaid.
9.6 Delegation of Duties and Rights. Lender may perform 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. To the maximum extent practicable in light of all relevant
facts and circumstances, Lender will attempt to avoid any duplication of effort
and cost to Borrower in connection with any such delegation on Lender's part.
9.7 Lender Not in Control. None of the covenants or other provisions
---------------------
contained in this Agreement or in any other Loan Document shall give or be
interpreted as giving Lender the right or power to exercise control over the
affairs and/or management of Borrower or Guarantor.
9.8 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, whether such negligence or inadvertence is the sole or
contributing cause of any damage.
ARTICLE 10
----------
CERTAIN RIGHTS OF LENDER
------------------------
10.1 Confidentiality. Borrower agrees, and agrees to cause each of its
---------------
affiliates, not to transmit or disclose provision of any Loan Document to any
Person (other than as may be required to comply with applicable laws including
Securities and Exchange Commission rules and regulations or to Borrower's
advisors and officers on a need-to-know basis) without Lender's prior written
consent. Lender reserves the right to review and approve all materials that
Borrower or any of its affiliates prepares that contain Lender's name or
describe or refer to any Loan Document, any of the terms thereof or any of the
transactions contemplated thereby. Borrower shall not, and shall not permit any
of its affiliates to, use Lender's name (or the name of any of Lender's
affiliates) in connection with any of its business operations. Nothing
contained in any Loan Document is intended to permit or authorize Borrower or
any of its affiliates to contract on behalf of Lender.
10.2 Performance by Lender. Lender may, at any time and from time to time,
---------------------
take such actions as Lender deems necessary or appropriate to protect Lender's
Liens 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 and will take such actions to
preserve the Collateral and Lender's Liens as Lender may direct, including,
without limitation, by promptly paying, upon Lender's demand therefor, all
documentary stamp taxes or other 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 therein shall be payable by Borrower
LOAN AND SECURITY AGREEMENT-Page 41
---------------------------
pursuant to Section 10.3 below.
------------
10.3 Fees and Expenses. Borrower shall pay to or reimburse Lender for all
-----------------
expenditures and expenses which may be paid or incurred by or on behalf of
Lender in connection with the documentation, modification, workout, collection
or enforcement of the Loan or any of the Loan Documents. Costs payable on the
date of the Initial Advance shall include (i) the fees and costs of Lender's
attorneys (including fees of Lender's inside counsel) in connection with the
documentation of the Loan and all other expenses incurred by Lender in
connection with the due diligence review of Borrower's deliveries including
travel costs incurred by Lender to make such review; and (ii) all applicable
title, filing and recording fees and other closing costs. During the term of the
Loan, costs payable by Borrower shall include: payments to remove or protect
against Liens; attorneys' fees (including fees of Lender's inside counsel);
receivers' fees; engineers' fees; accountants' fees; independent consultants'
fees (including environmental consultants); fees of the Trustee under the Deed
of Trust; all costs and expenses incurred in connection with any of the
foregoing; outlays for documentary and expert evidence; stenographers' charges;
stamp taxes; inspection costs as set forth in Sections 6.11 and 6.14 above;
------------- ----
publication costs; and costs (which may be estimates as to items to be expended
after entry of an order or judgment) for procuring all such abstracts of title,
title and UCC searches, and examination, title insurance policies, and similar
data and assurances with respect to title as Lender may deem reasonably
necessary either to prosecute any action or to evidence to bidders at any
foreclosure sale a true condition of the title to, or the value of, the
Collateral. With respect to fees of Lender's in-house counsel, Borrower
expressly agrees that its obligation hereunder to reimburse Lender shall include
reasonable charges for legal work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Lender in its sole
discretion for the legal work performed. If not paid by the Initial Advance or
when requested by Lender, all such costs shall be included as additional
Obligations bearing interest at the Default Rate set forth in the Note until
paid.
10.4 Lender's Right of Set-Off. Upon the occurrence of an Event of
-------------------------
Default, or if Lender shall be served with garnishment process in which Borrower
shall be named as defendant, whether or not any Event of Default shall have
occurred, Lender may, but shall not be required to, set-off any indebtedness
owing by Lender to Borrower against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Lender or its security interest herein.
10.5 Assignment of Lender's Interest. This Agreement shall inure to the
-------------------------------
benefit of Lender, all future holders of the Note, any of the Obligations or any
of the Collateral and all Transferees (as defined below), and each of their
respective successors and permitted assigns. BORROWER ACKNOWLEDGES THAT LENDER
MAY AT ANY TIME AND FROM TIME TO TIME MAY SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS
AGREEMENT, THE NOTE, THE OBLIGATIONS, THE COLLATERAL AND/OR THE OTHER LOAN
DOCUMENTS TO OTHER PERSONS, INCLUDING, WITHOUT LIMITATION, FINANCIAL
INSTITUTIONS (EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A "TRANSFEREE"). In
----------
such case, the Transferee shall have all of the rights and benefits with respect
to the portion of such Obligations, the Note, the Collateral, this
LOAN AND SECURITY AGREEMENT-Page 42
---------------------------
Agreement and the other Loan Documents held by it as fully as if such Transferee
were the original holder thereof (including without limitation rights of set-off
and recoupment), and either Lender or any Transferee may be designated as the
sole agent to manage the transactions and obligations contemplated herein;
provided that, notwithstanding anything to the contrary herein or in any Loan
-------------
Document, Borrower shall not be obligated to pay under this Agreement to any
Transferee any sum in excess of the sum which Borrower would have been obligated
to pay to the Lender had such participation not been effected. Notwithstanding
any other provision of any Loan Document, Lender may disclose to any Transferee
all information, and furnish to such Transferee copies of reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement or any other Loan Document.
10.6 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, (i) from time to time to institute and prosecute in the
name of Borrower or otherwise, but for the benefit of Lender, 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; and (ii) generally to do all and any such acts and
things in relation to the Collateral as Lender shall in good xxxxx xxxx
advisable. Borrower hereby declares that the appointment made and the powers
granted pursuant to this Section are coupled with an interest and are and shall
be irrevocable by Borrower in any manner, or for any reason, unless and until
all obligations of Borrower to Lender have been satisfied.
10.7 Indemnification of Lender. In addition to (and not in lieu of) any
-------------------------
other provisions hereof or of any other Loan Document providing for
indemnification in favor of Lender, Borrower and Guarantor hereby defends,
indemnifies, and holds harmless Lender, its subsidiaries, other affiliates,
officers, directors, agents, employees, representatives, consultants,
contractors, servants, and attorneys, as well as the respective heirs, personal
representatives, successors, and assigns of any or all of them (hereinafter
collectively referred to as the "Indemnified Parties"), from and against, and
-------------------
agrees promptly to pay on demand or reimburse each of them with respect to, any
and all liabilities, indebtedness, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses, and disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against any
of them, in any way relating to or arising out of or in any way, directly or
indirectly, related or attributable to: (i) this Agreement, the other Loan
Documents or the Collateral; (ii) the transactions contemplated under any of the
Loan Documents including, without limitation, those in any way relating to or
arising out of the violation of any Applicable Laws; (iii) any breach of any
covenant or agreement or the incorrectness or inaccuracy of any representation
or warranty of Borrower or Guarantor contained in this Agreement or any of the
other Loan Documents including, without limitation, any certification of
Borrower or Guarantor delivered to Lender; (iv) any and all taxes, including
real estate, personal property, sales, mortgage, excise, intangible, or transfer
taxes, and any and all fees or charges that 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
LOAN AND SECURITY AGREEMENT-Page 43
---------------------------
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 Project of any Hazardous Materials (except to the extent
that liability of the Indemnified Party with respect to such matter would not
exist but for the acts or omissions of such Indemnified Party as determined in a
final, non-appealable adjudication by a court of competent jurisdiction); (viii)
the removal or remediation of any Hazardous Materials from the Project required
to be performed pursuant to any Environmental Laws or as a result of
recommendations of any environmental consultant or as 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 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
Project; (x) the violation or claimed violation of any Environmental Laws in
regard to the Project; (xi) the preparation of an environmental audit or report
on the Project not to exceed one per calendar year and premised upon the
Lender's reasonable belief of the existence of a violation of Environmental
Laws, whether conducted by Lender, Borrower, or another Person; (xii) the breach
or violation by Borrower of any Applicable Laws; or (xiii) the exercise by
Lender of any rights or remedies under this Agreement or any of the other Loan
Documents. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that Lender believes is covered by this indemnity, and subject to
the condition that no Event of Default under this Agreement shall then exist,
Lender shall give Borrower notice of the matter and an opportunity to defend it,
at Borrower's sole cost and expense, with legal counsel satisfactory to Lender.
Notwithstanding any defense by Borrower of any such suit, claim or demand,
Lender shall have the right to participate in any material decision affecting
the conduct or settlement of any dispute or proceeding for which indemnification
may be claimed. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE
INDEMNITY PROVIDED FOR HEREIN IS INTENDED TO AND SHALL PROTECT AND INDEMNIFY
LENDER FROM THE CONSEQUENCES OF LENDER'S OWN NEGLIGENCE (BUT NOT 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.
10.8 No Liability of Lender. Lender is obligated to perform all covenants
----------------------
and obligations of Lender hereunder, including but not limited to making
Advances to Borrower, subject to all of the terms, provisions, and conditions
hereof and of the other Loan Documents. However, 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 Project,
all or any portion of the Collateral, under any Timeshare Documentation, or
under any Applicable Laws, or in connection with any other business of Borrower
or the Collateral, nor shall it otherwise bind Lender to the performance of any
obligations with respect to the Project or the Collateral, it being expressly
understood that Lender shall not be obligated to perform, observe,
LOAN AND SECURITY AGREEMENT-Page 44
---------------------------
or discharge any obligation, responsibility, duty, or liability of Borrower with
respect to the Project, any of the Collateral, or under any of the Timeshare
Documentation, or under any Applicable Laws, including but not limited to
appearing in or defending any action, expending any money, or incurring any
expense in connection therewith. Without limiting the foregoing, neither this
Agreement, any action or actions on the part of Lender taken hereunder nor the
acquisition of the Collateral 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 Project or such Collateral, 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.
10.9 Right of Lender to Extend Time of Payment, Substitute, Release
--------------------------------------------------------------
Security, Etc. Without affecting the liability of any Person or entity for the
--------------
payment of any of the Obligations and without affecting or impairing Lender's
Liens in and to the Collateral, or the remainder thereof, as security for the
full amount of the Loan unpaid and the other Obligations, Lender may from time
to time, without notice: (a) release any Person liable for the payment of the
Loan; (b) extend the time or otherwise alter the terms of payment 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 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; and/or (f) join in any subordination or other agreement affecting this
Agreement or the lien or charge thereof.
10.10 Verification of Use. Lender shall be under no duty or obligation to
-------------------
ascertain the manner in which Borrower has used or will use the proceeds of the
Loan. Lender's sole obligation shall be to advance the proceeds of the Loan
subject to, and in accordance with, the terms, provisions, and conditions of
this Agreement and the other Loan Documents. Lender's obligation to fund the
Loan is limited to the Maximum Loan Amount. Borrower is solely responsible for
obtaining any other financing that may be necessary in order to fund costs of
the Project that are in excess of those budgeted or the Maximum Loan Amount. It
is expressly understood that Lender has no responsibility or obligation
whatsoever to provide to Borrower any further financing.
ARTICLE 11
----------
MISCELLANEOUS
-------------
11.1 Notice. Any notice or other communication required or permitted to be
------
given shall be in writing addressed to the respective party as set forth below
and may be personally served, telecopied or sent by overnight courier or U.S.
Mail and shall be deemed given: (a) if served in person, when served; (b) if
telecopied, on the date of transmission if before 3:00 p.m. (New York time) on a
business day; provided that a hard copy of such notice is also sent pursuant to
--------
(c) or (d) below; (c) if by overnight courier, on the first business day after
delivery to the courier; or (d) if by U.S. Mail, certified or registered mail,
return receipt requested on the fourth
LOAN AND SECURITY AGREEMENT-Page 45
---------------------------
(4th) day after deposit in the mail postage prepaid.
Notices to Borrower: Preferred Equities Corporation
Attn: Xxxxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile: 702/369-4398
With a copy to: Preferred Equities Corporation
Attn: Xxx X. Xxxxxx, Esq.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile: 702/369-4398
Notices to Lender: CapitalSource Finance LLC
Attn: Structured Finance Group
Re: Preferred Equities Corp (Inventory)
0000 Xxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxx Xxxxx, XX 00000
Facsimile: 301/841-2370
With a copy to: Xxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: 214/758-1550
11.2 Survival. All representations, warranties, covenants and agreements
--------
made by Borrower herein, in the other Loan Documents or in any other agreement,
document, instrument or certificate delivered by or on behalf of Borrower 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
the extension of the Obligations (and each part thereof), regardless of any
investigation made by or on behalf of Lender.
11.3 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 APPLICABLE LAWS OF THE STATE OF NEW YORK AND
APPLICABLE LAWS OF THE UNITED STATES.
LOAN AND SECURITY AGREEMENT-Page 46
---------------------------
11.4 Limitation on Interest. Lender and Borrower intend to comply at all
----------------------
times with all 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 no contingency, whether by reason of demand or
acceleration of the maturity of the Note 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 Laws. If, from any
circumstance whatsoever, fulfillment of any provision hereof, of the Note, or of
any other Loan Documents shall involve transcending the limit of such validity
prescribed by any Applicable 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 that 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
Applicable Law, be deemed 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 that exceeds the highest lawful rate. The
provisions of the Note, 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 Lender and
Borrower expressly declaring the usury limitation of this Section to be null and
void, and no other method or language shall be effective to supersede or waive
this Section.
11.5 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 and 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.
11.6 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 and Lender.
11.7 No Duty. All attorneys, accountants, appraisers, consultants,
-------
custodians and other professional persons retained by Lender shall have the
right to act exclusively in the
LOAN AND SECURITY AGREEMENT-Page 47
---------------------------
interests of Lender and shall have no duty of disclosure, duty of loyalty, duty
of care or other duty or obligation of any type or nature whatsoever to Borrower
or Guarantor or any of their officers, directors or shareholders or to any
Person.
11.8 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, 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.
11.9 Successors and Assigns. This Agreement and the other Loan Documents
----------------------
shall be binding upon and inure to the benefit of Borrower, Guarantor, and
Lender and their respective successors and assigns; provided, however, that
-------- -------
neither Borrower nor Guarantor may transfer or assign any of its rights or
obligations under this Agreement or the other Loan Documents without the prior
written consent of Lender, which consent may be granted or withheld in Lender's
sole and absolute discretion. This Agreement and the transactions provided for
or contemplated hereunder or under any of the other 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 or the
other Loan Documents except as specifically set forth herein or otherwise
provided in a written document signed by Borrower and Lender. No Person other
than 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 Borrower, under any circumstances whatsoever, shall
be deemed to be a beneficiary of such conditions, any or 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. In particular, Lender makes no representation
and assumes no obligation as to third parties concerning the quality of the
construction of the Resort Improvements by Borrower or the absence therefrom of
defects.
11.10 Amendment. This Agreement (including all exhibits and schedules
---------
hereto) may not be amended or modified, and no term, provision, or condition
hereof may be waived, except by a written instrument that is signed by all of
the parties hereto.
11.11 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits hereto and to the other Loan Documents and agreements referred to
herein embody the entire agreement between the parties hereto, supersedes all
prior agreements and understandings between the parties whether written or oral
relating to the subject matter hereof and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There are
no oral agreements among Lender, Borrower, Guarantor, or between any two or more
of them.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT BORROWER. GUARANTOR AND LENDER FROM
LOAN AND SECURITY AGREEMENT-Page 48
---------------------------
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED COVERING SUCH MATTERS
ARE CONTAINED IN THIS WRITING WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS THEY MAY LATER AGREE IN WRITING TO
MODIFY IT.
11.12 Venue. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
-----
DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED, AT LENDER'S SOLE
DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE STATE OF NEW
YORK. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED WITHIN SAID STATE. BORROWER HEREBY IRREVOCABLY
APPOINTS AND DESIGNATES CT CORPORATION SYSTEMS, 000 XXXXXX XXXXXX, XXX XXXX, XXX
XXXX 00000, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES
THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE
OF PROCESS UPON BORROWER. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH
AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, NEW YORK, BORROWER SHALL,
WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST, APPOINT A SUBSTITUTE AGENT (IN NEW
YORK CITY) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH
APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN
ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE
(5) DAYS NOTICE TO BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON
THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH. IN THE EVENT SERVICE OF
PROCESS IS MADE ON CT CORPORATION SYSTEMS, LENDER WILL SEND A COURTESY NOTICE
(SERVICE SHALL NOT BE AFFECTED BY LENDER'S FAILURE TO SEND SUCH NOTICE) TO
BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.1 OF THIS AGREEMENT.
------------
Initial on behalf of Borrower: ___________________
LOAN AND SECURITY AGREEMENT-Page 49
---------------------------
11.13 Jury Trial Waiver. BORROWER, GUARANTOR AND LENDER HEREBY WAIVE THEIR
-----------------
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER, GUARANTOR AND LENDER,
AND BORROWER AND GUARANTOR ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER
OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. BORROWER, GUARANTOR AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. BORROWER, GUARANTOR AND LENDER FURTHER ACKNOWLEDGE
THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED)
IN THE SIGNING OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
Initial on behalf of Borrower: ______________________
11.14 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.
11.15 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.
11.16 Broker's Fees. There are no brokers or other similar fees or
-------------
commitments due with respect to the transactions described in the Agreement.
Borrower shall defend and indemnify Lender and save and hold Lender harmless
from all claims of any Persons for any such fees, which indemnity shall include
reasonable attorneys' fees and legal expenses.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
LOAN AND SECURITY AGREEMENT - Page 50
---------------------------
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have caused this Agreement to
be executed and delivered by their duly authorized officers effective as of the
date first above written.
BORROWER:
--------
PREFERRED EQUITIES
CORPORATION, a Nevada corporation
By:_____________________________
Name:___________________________
Its:____________________________
GUARANTOR:
---------
MEGO FINANCIAL CORP,
a New York corporation
By:_____________________________
Name:___________________________
Its:____________________________
LENDER:
------
CAPITALSOURCE FINANCE LLC,
a Delaware limited liability company
By:_____________________________
Name: Xxxxxxx X. Xxxxxxxxxxx
Its: Managing Director
LOAN AND SECURITY AGREEMENT - Page 51
---------------------------
SCHEDULE 2.1
------------
Preliminary Budget
------------------
COSTS RELATED TO PROJECT: $4,600,000
Land Acquisition Costs $1,500,000
Hard and Soft Costs of Project $3,100,000
-------------------------------------------------
TOTAL PROJECT COSTS $4,600,000
EXCESS LOAN PROCEEDS /1/ $2,400,000
-----------------------------------------------------------------
TOTAL LOAN AMOUNT $7,000,000
_____________
/1/ Borrower acknowledges that Lender has agreed to fund up to $4,600,000, the
estimated costs of the Project. No other loan funds will be advanced by Lender
to Borrower hereunder unless and until Lender has approved, in its sole and
absolute discretion, the proposed or intended use of such funds by Borrower
Schedule 2.1 -- Page 1 of 1
------------
SCHEDULE 4.1
------------
Closing Deliveries
------------------
Section 1. Initial and Interim Advance Requirements. The obligation of
----------------------------------------
Lender to enter into this Agreement and to make the Initial Advance of the Loan
and any Interim Advances thereafter shall be subject to the complete
satisfaction of each of the conditions precedent set forth herein, in addition
to all of the conditions precedent set forth elsewhere in the Loan Documents:
(a) Execution and Delivery. Borrower and Guarantor shall execute and
----------------------
cause to be notarized, witnessed, and attested, as appropriate, and
delivered to Lender the Loan Documents, together with such additional
documents and certifications as Lender and its counsel may reasonably
require in order to ensure that all conditions precedent to the closing of
the Loan and the making of the Initial Advance hereunder have been
satisfied in all respects.
(b) Opinion of Counsel(s). An opinion of Borrower's and Guarantor's
---------------------
counsel stating: (i) that the Loan is not usurious under Applicable Laws;
(ii) that the Loan Documents are validly executed, duly authorized and
binding and enforceable in accordance with their terms; (iii) that the
execution and delivery of the Loan Documents and the performance of the
transactions contemplated thereby do not violate or contravene any law,
court order, judgment or contract to which Borrower is a party and grant to
Lender the security interests set forth in this Agreement; and (iv) such
further opinions as Lender shall require.
(c) 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
required to have been complied with and performed by Borrower shall have
been fully complied with and performed to the satisfaction of Lender.
(d) Borrower's and Guarantor's Corporate Documents. Borrower shall
----------------------------------------------
have delivered to Lender, and Lender shall have approved each of the
following:
(i) Borrower's and Guarantor's Organizational Documents.
---------------------------------------------------
Copies of Borrower's and Guarantor's organizational documents,
including but not limited to their respective articles of
incorporation and bylaws, together with any amendments thereto,
certified to be true and complete by Borrower's and Guarantor's
Secretaries, respectively.
(ii) Good Standing Certificates. Current good standing
--------------------------
certificates issued by the Secretary of State of Nevada and New York
for Borrower and Guarantor, respectively.
(iii) Resolutions. Certified resolutions of Borrower's and
-----------
Guarantor's boards of directors authorizing the execution by each of
the applicable Loan
Schedule 4.1 -- Page 1 of 8
------------
Documents and the performance of all obligations of Borrower and
Guarantor thereunder.
(e) Proceedings Satisfactory. All actions taken in connection with
------------------------
the execution and delivery of the Loan Documents, and all documents and
papers related thereto, shall be completely satisfactory to Lender and its
counsel. Lender and its counsel shall have received copies of all such
documents and papers as Lender or its counsel may reasonably request in
connection therewith, all in form and substance satisfactory to Lender and
its counsel, in their sole discretion.
(f) Expenses. Borrower shall have paid all fees, expenses, and other
--------
amounts required to be paid prior to or on the Execution Date, pursuant to
this Agreement, including but not limited to the Commitment Fee (or portion
thereof) the due and payable.
(g) Title. Borrower shall have delivered to Lender (and Lender shall
-----
have approved) a commitment to issue an ALTA extended coverage lender's
policy of title insurance insuring in favor of Lender, together with its
successors and assigns, the first priority of the Lien of the Deed of
Trust, without exception for filed or unfiled mechanics' liens or claims or
for matters that an accurate survey would disclose, subject only to such
exceptions and conditions to title as Lender shall have approved in writing
and such affirmative coverage as Lender deems reasonably necessary (the
"Title Insurance Policy"). The Title Insurance Policy shall be in an amount
----------------------
not less than the original principal amount of the Note and be issued by
the Title Insurer. The Title Insurance Policy shall contain such
affirmative coverage as Lender deems reasonably necessary, including but
not limited to an affirmative statement that the Title Insurance Policy
insures Lender, together with its successors and assigns, including but not
limited to Lender, against all mechanics' and materialmen's liens arising
from or out of construction of the Resort Improvements and, to the extent
available and commonly required by lenders in the State of Nevada, shall
contain endorsements in form and content acceptable to Lender: (A)
insuring against matters that would be disclosed on an accurate survey of
the Land; (B) insuring that no building restriction or similar exception to
title disclosed on the Title Insurance 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; and (D) insuring over any
environmental superlien or similar lien upon all or any portion of the
Land. Such Title Insurance Policy shall provide that Borrower shall
receive an endorsement to the Title Insurance Policy on the date of each
Advance of the Loan: (i) indicating that since the date of the immediately
preceding Advance, there has been no change in the state of title and no
mechanics' or materialmen's lien, claim, or lien or similar notice has been
filed against any of the Collateral; (ii) updating the Title Insurance
Policy to the date of such Advance; and (iii) increasing the coverage of
the Title Insurance Policy by an amount equal to the amount of such Advance
if the Title Insurance Policy does not by its own terms provide for such an
increase.
(h) Evidence of Insurance. Lender shall have received and approved
---------------------
evidence of policies of insurance as required hereby.
Schedule 4.1 -- Page 2 of 8
------------
(i) UCC Searches. Lender shall have received such searches of the
------------
applicable public records as it deems necessary under Applicable Law to
verify that it has a first and prior perfected lien and security interest
covering all of the Collateral.
(j) Taxes and Assessments. Lender shall have received copies of the
---------------------
most current tax bills related to the Project, together with evidence
satisfactory to it that all taxes and assessments owed by or for which
Borrower or an owners' association is responsible for collection have been
paid, which taxes and assessments include, without limitation, sales taxes,
room occupancy taxes, payroll taxes, personal property taxes, excise taxes,
intangible taxes, real property taxes, income taxes, and any assessments
related to the Project. Lender shall also have 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 Land and the identities of the
taxing authorities having jurisdiction over the Land as well as the
instrumentalities and entities having the power and jurisdiction to impose
assessments against the Land or the Resort Improvements.
(k) Commitment Fee. Lender shall have received the Commitment Fee (or
--------------
portion thereof) payable upon execution of this Agreement.
(l) Equity Contribution by Borrower. Lender shall have received
-------------------------------
evidence satisfactory to Lender that Borrower has contributed not less than
$150,000 of its own funds to pay costs and expenses of the Project approved
by Lender.
(m) Other Items. Lender shall have received such other agreements,
-----------
documents, instruments and certificates as Lender may request to evidence
the Obligations and to evidence and perfect the liens and security
interests contemplated by the Loan Documents.
ANY WAIVER OF ANY OF THE AFORESAID CONDITIONS PRECEDENT MUST BE IN WRITING,
SPECIFY THE CONDITION AND BE SIGNED BY AN AUTHORIZED OFFICER OF LENDER. ANY
WAIVER, IF ANY, SHALL ONLY WAIVE THE SPECIFIED CONDITION AND NO OTHER, AND SHALL
NOT BE DEEMED OR CONSTRUED TO BE A SUBSEQUENT WAIVER. NEITHER THE CLOSING OF
THE LOAN NOR THE DISBURSEMENT OF ANY LOAN PROCEEDS SHALL BE DEEMED A WAIVER OF
ANY OF THE AFORESAID CONDITIONS PRECEDENT.
Section 2. Requirements for Construction Advances. The obligation of
--------------------------------------
Lender to make any Advance of the Loan which would cause the aggregate amount
advanced by Lender to Borrower hereunder to exceed $1,770,000, shall be subject
to the complete satisfaction of each of the conditions precedent set forth
herein, in addition to all of the conditions precedent set forth elsewhere in
the Loan Documents:
(a) Title. The Title Insurer shall have issued to Lender the Title
-----
Insurance Policy and a downdate endorsement thereto, in form satisfactory
to Lender's counsel, without any exceptions from coverage other than the
Permitted Exceptions allowed by Lender prior to the Advance. If required
by Lender, the Title Insurer shall issue to Lender an endorsement to the
Title Insurance Policy deleting the standard, pre-printed
Schedule 4.1 -- Page 3 of 8
------------
exception for matters disclosed by a survey of the Land.
(b) Survey. Lender shall have received and approved a survey, dated
------
within ninety (90) days prior to the requested Advance, satisfactory to
Lender and prepared by a licensed surveyor satisfactory to Lender and the
Title Insurer in accordance with Lender's requirements, of the Land,
reflecting the completion of demolition of the Existing Improvements and
the location and dimensions of any other improvements remaining thereon and
indicating the routes of ingress and egress for public access to the Land,
all utility lines, walks, drives, recorded or visible easements and rights-
of-way on such Land, and showing that there are no encroachments,
improvements, projections, or easements (recorded or unrecorded) on the
property lines. Foundation perimeters are to be added to the survey by the
surveyor as soon as they are in place for all buildings comprising a part
of the Resort Improvements. The survey shall indicate whether the Land is
located within any flood hazard area. The survey must be prepared in
accordance with the standards set forth by ALTA/ACSM and those of any and
all surveyors' bureaus or associations of the State of Nevada as well as
any and all Applicable Laws and must be certified to Borrower, Lender and
the Title Insurer. The surveyor's certificate placed on the survey shall
include a statement that said survey locates any and all such items set
forth as exceptions in the Title Insurance Policy as Lender may require,
shall include a legal description of the Land, and otherwise satisfy all of
Lender's survey requirements, and shall include any other information
required by Lender, Borrower, or the Title Insurer. If the Survey
discloses the existence of utilities or easements that must be removed or
relocated to construct the Resort Improvements, Borrower shall provide
Lender with evidence satisfactory to Lender that such utilities and
easements can and will be relocated prior to the completion of all site and
grading work for the Resort Improvements.
(c) Environmental Report. Lender shall have received and approved an
--------------------
updated environmental report or reports covering the Land, confirming (to
the extent relevant, in Lender's reasonable discretion):
(i) The removal and disposal of the Existing Improvements
(including all friable asbestos within the Existing Improvements) in
compliance with the requirements of all Applicable Laws and the
absence of Hazardous Materials on, under, or affecting the Land;
(ii) That the engineering or environmental consulting firm has
obtained, reviewed, and included within its report a CERCLIS printout
from the Environmental Protection Agency (the "EPA"), statements from
the EPA and other applicable state and local authorities, and such
other information as Borrower or Lender may reasonably require,
including, without limitation, a Phase I Environmental Inspection, all
of which information shall confirm that there are no known or
suspected Hazardous Materials located at, used or stored on, or
transported to or from the Land or in such proximity thereto as to
create a material risk of contamination of any the Collateral; and
(iii) The absence of radon gas at the Land or, if radon gas is
found to be present in any part of the Land, that such presence is of
a nature or magnitude so
Schedule 4.1 -- Page 4 of 8
------------
as to be fully in compliance with applicable standards under the
Environmental Laws and all other Applicable Laws.
The removal and disposal of any friable asbestos or other Hazardous
Materials must be accomplished by a licensed removal contractor for a
guaranteed maximum sum satisfactory to Borrower and Lender and included in
the Budget. In addition, the environmental consultant shall deliver to
Lender results of soils testing taken prior to the commencement of grading
or excavation work, confirming the absence of Hazardous Materials in the
soil that does or may require the implementation of special procedures to
ensure the health and safety of all workers at the Project.
(d) Soil Tests. Lender shall have received a report as to soil and
----------
compaction condition and analysis made at the Land by a soil testing firm
satisfactory to Borrower and Lender. The number and location of such
borings shall be in accordance with the recommendations of the soil testing
firm and must also be satisfactory to Lender and also shall include a
sinkhole analysis of the Land. The report shall include the
recommendations of the soil testing firm as to the preparation of the soil
needed in order to adequately support the Resort Improvements. During the
course of construction, Borrower shall also provide to Lender such reports
as to concrete tests and such additional soil tests as are required by the
Architect, General Contractor or contemplated by the Plans.
(e) Applicable Laws. Borrower has received evidence satisfactory to
---------------
Borrower and Lender that all contemplated Resort Improvements are and will
be in compliance with all applicable zoning, building, and other Applicable
Laws in connection with the construction, development, establishment, and
operation of the Project and the sale, use, marketing, and occupancy of all
Units and Intervals.
(f) Construction Contract. Lender shall have received and approved
---------------------
each general construction contract (the "Construction Contract"), executed
---------------------
or to be executed by and between Borrower and a general contractor
acceptable to Lender (the "General Contractor"), to construct the Resort
------------------
Improvements in accordance with the Plans therefor and all Applicable Laws.
The Construction Contract shall contain, in addition to any other
provisions relating to construction of the Resort Improvements that Lender
may reasonably require, the following provisions:
(i) An agreement to supply and/or furnish all labor,
supervision, materials, supplies, and equipment necessary to complete
the construction of the Resort Improvements, on or before the
Completion Date, for not more than a guaranteed maximum fixed price
acceptable to Lender;
(ii) A provision that the General Contractor and each
subcontractor and materialman shall, as a precondition to the making
of any Advance hereunder (including the final Advance for Retainage)
execute and deliver to Borrower and Lender conditional or
unconditional lien waivers (as required by this Agreement) in any form
and substance approved by Lender;
(iii) A provision for such Retainage of 10% of the Hard Costs
payable
Schedule 4.1 -- Page 5 of 8
------------
thereunder or a lesser amount, if any, as Lender may consider
appropriate under the circumstances, which Retainage shall be released
in the manner set forth in herein;
(iv) A provision that prior to final payment under the
Construction Contract (including Retainage), the General Contractor
shall deliver to Borrower and Lender (A) a final and complete release
of Liens signed by the General Contractor and all subcontractors and
materialmen performing work or supplying materials; and (B) a
certificate of substantial completion or its legal equivalent with a
punch list executed by Borrower, the General Contractor, and the
Architect;
(v) A provision that the Construction Contract may not be
terminated by the General Contractor unless Borrower's default
thereunder continues for a period of thirty (30) days after delivery
of a written notice of Borrower's default to Lender (or such longer
period after said delivery as may be reasonably necessary to cure a
default thereunder) and may not be terminated by the General
Contractor by reason of the bankruptcy or insolvency of Borrower;
(vi) A provision that, upon the occurrence of a default or an
event of default under the Construction Contract, the General
Contractor will, at the request of Lender, continue to perform
thereunder until construction of the Resort Improvements have been
completed; and
(vii) Such other commercially reasonable provisions as Lender
shall require.
(g) Budget. Lender shall have received and approved the Budget
------
consisting of a breakdown certified by Borrower and the General Contractor,
in form, scope, and content acceptable to Lender, setting forth all
acquisition, construction, and other costs of developing the Resort
Improvements, including, without limitation, financing costs, costs of
acquisition of the Land, costs of construction of the Resort Improvements,
and other costs incidental to the construction of the Resort Improvements
and the development of the Project and specifying which items are to be
funded from sources other than the proceeds of the Loan. The Budget shall
serve as the basis upon which advances of the Loan are made on account of
each of the categories set forth therein (the costs disclosed on the Budget
and approved in writing by Lender shall hereinafter be referred to as the
"Approved Costs"). If, pursuant to Section 6.14(b) hereof and in the
-------------- ---------------
judgment of Lender, the total estimated costs of constructing the Resort
Improvements and developing the Project exceed the Maximum Loan Amount,
plus any equity contributions by Borrower as required by this Agreement,
then Borrower shall contribute toward the payment of Approved Costs the
amount of the difference prior to the making of any Construction Advance
hereunder.
(h) Bonds. Lender shall have received and approved (i) a performance
-----
bond for the General Contractor in a penal sum equal to the full contract
amount and in form and content satisfactory to Lender including, without
limitation, provisions naming Lender as an obligee, consenting to changes
in the Construction Contract without notice
Schedule 4.1 -- Page 6 of 8
------------
to the surety, and allowing Lender a reasonable time after notice by the
surety in which to cure (without any obligation to do so) any breach or
default which could release the surety; and (ii) a payment bond for the
General Contractor, in form and content satisfactory to Lender. Each bond
shall be issued by a corporate surety authorized and admitted to do
business in Nevada and licensed by the State of Nevada to execute and issue
bonds as surety in Nevada.
(i) Architect's Contract. Lender shall have received and approved a
--------------------
copy of each contract by and between Borrower and each Architect, including
contracts for the services of an engineer retained by the Architect in
connection with and as part of Architect's work under such contract. Each
such contract shall be in form and content acceptable to Lender and provide
that the Architect shall submit to Borrower all certificates, as-built
plans, specifications, and other information as a prerequisite to the
making of any Advance by Lender hereunder, including the final Advance.
Among other provisions, said Architect's contract shall prohibit Borrower
from agreeing to or permitting any material amendment, modification,
waiver, or other material change to the Plans or the Architect's contract
without the prior written consent of Lender. Lender shall also have
received from Borrower a written certificate from the Architect covering
such matters as may be required by Lender and stating that the proposed
Resort Improvements, when completed in accordance with the Plans, will
comply with all Applicable Laws, together with an agreement by the
Architect, in form and content acceptable to Borrower and Lender, that (i)
upon the occurrence of an Event of Default under the Loan Documents, the
Architect will, at Lender's request continue performance pursuant to its
agreement with Borrower until the completion of construction of the Resort
Improvements, and (ii) evidences the Architect consent to (A) the
assignment by Borrower all of Borrower's right, title, and interest in the
Architect's contract and the Plans in respect of the Resort Improvements,
and (B) permits Lender to use the Plans and any materials obtained by the
Architect from any other architect or engineer retained by the Architect at
no cost to Lender.
(j) Subcontracts. If requested by Lender, Lender shall have received
------------
copies of each contract that has been executed by and between the General
Contractor and a construction manager, subcontractor, materialman, or
supplier that is to provide labor and/or materials in connection with the
development and construction of the Resort Improvements in accordance with
the Plans with a value of $100,000 or more (a "Material Subcontractor")
----------------------
contains the agreement of the Material Subcontractor to perform its
respective contract for Lender following the occurrence of an event of
default pursuant to the Loan Documents. Furthermore, Lender shall have
received from Borrower or the General Contractor a current list of all
Material Subcontractors working on the Resort Improvements, showing the
name, address, and telephone number of each Material Subcontractor, the
work or material performed or supplied thereby, and the total amount of
each relevant contract and subcontract and amounts paid through the date
upon which such list was completed.
(k) Plan and Cost Review. If required by Lender, Lender shall have
--------------------
obtained a written plan and cost review covering such matters as may be
required by Lender and confirming that the proposed Resort Improvements can
feasibly be constructed within the cost limitations set forth in the Budget
and that the proposed Resort Improvements, when
Schedule 4.1 -- Page 7 of 8
------------
completed in accordance with the Plans, will comply with all Applicable
Laws.
(l) Permits and Approvals. Lender shall have received copies of
---------------------
building permit(s) and other satisfactory evidence that the Land and the
Resort Improvements and the intended uses of the Land are in compliance
with all Applicable Laws, including, without limitation: (i) Environmental
Laws; (ii) erosion control ordinances; (iii) doing-business and/or
licensing laws; (iv) laws protecting disabled or handicapped persons; and
(v) zoning laws. All permits and approvals granted to Borrower shall
continue to be legally valid and shall remain in full force and effect for
so long as the Loan is outstanding.
(m) Plans. Lender shall have received and approved complete and
-----
detailed Plans which shall be satisfactory to Lender, including any changes
or modifications thereto and including Plans for architectural, structural,
mechanical, plumbing, electrical, and site development (including storm
drainage, utility lines, erosion control, and landscaping) work. All Plans
must be stamped with all required approvals from all applicable
governmental authorities, certified under seal by the Architect, and signed
by Borrower and the General Contractor to be true copies of the Plans
architecturally and structurally approved by all authorities and agencies
having jurisdiction over such Plans.
(n) Certificate of Architect. Lender shall have received a
------------------------
Certificate of Architect from each Architect who prepared any of the Plans
addressed to Borrower and Lender and stating that (i) any necessary soil
testing has been performed, and soil conditions are satisfactory for the
structural support of the Resort Improvements; (ii) that there is adequate
ingress and egress to the Land and Resort Improvements; (iii) that the
Plans have been approved by all applicable governmental authorities, meet
all state construction and energy conservation laws and comply with all
federal laws and regulations adopted pursuant to the Fair Housing Act of
1968 (as amended), the Americans with Disabilities Act of 1990, and all
other Applicable Laws; (iv) that provisions have been made for the
handicapped in accordance with all state and local ordinances, rules, and
regulations; (v) that the zoning is proper; (vi) that all utilities
necessary to service the Resort Improvements are available with adequate
capacity; and (vii) that all required governmental permits and approvals
have been obtained; and such additional items as may reasonably be required
by Lender.
(o) Appraisal. Lender shall have received and approved an MAI
---------
appraisal of the Land (exclusive of the Existing Improvements) and the
proposed Resort Improvements, prepared by a nationally recognized appraisal
firm, and in form and content acceptable to Lender in its sole and absolute
discretion.
Schedule 4.1 -- Page 8 of 8
------------
SCHEDULE 5.1
------------
List of Affiliates
------------------
State of Date of Tax ID
Company Name Incorporation Incorporation Number
============================================== ================= ================= ==============
Mego Financial Corp. New York 2/23/54 00-0000000
Preferred Equities Corporation Nevada 11/6/69 00-0000000
(NOTE: THE FOLLOWING ARE
SUBSIDIARIES OF PREFERRED
EQUITIES CORPORATION)
AB Preferred Holdings, Inc. Florida 8/14/01 00-0000000
Calvada Springs Corporation Nevada 10/6/69 00-0000000
Central Nevada Realty Co. Nevada 6/16/72 00-0000000
Central Nevada Utilities Company Nevada 5/18/70 00-0000000
Colorado Land and Grazing Corp. Colorado 5/16/84 00-0000000
First Corporation of Nevada Nevada 6/4/76 00-0000000
First National Equity Corp. Nevada 10/18/83 00-0000000
Overlook Food and Beverage Company Colorado 10/7/96 88-0000020
Preferred Colorado Land Co. Colorado 10/13/92 84-1216123
Preferred Equities Insurance Agency, Inc. Nevada 1/7/92 00-0000000
Preferred Vacation Resorts, Inc. Nevada 4/8/85 00-0000000
Resort Properties Advertising, Inc. Nevada 5/16/86 00-0000000
RVS Marketing, Inc. Texas 11/29/95 00-0000000
Southern Colorado Properties, Inc. Colorado 6/4/81 00-0000000
Steamboat Suites, Inc. Colorado 9/21/94 00-0000000
Brigantine Preferred Properties, Inc. Nevada 2/7/90 00-0000000
(NOTE: THE FOLLOWING ARE
SUBSIDIARIES OF BRIGANTINE
PREFERRED PROPERTIES, INC.)
Brigantine Inn Management, Inc. New Jersey 4/19/84 00-0000000
Brigantine Inn Marketing, Inc. New Jersey 4/19/84 00-0000000
The Brig Inc. New Jersey 9/13/83 00-0000000
Schedule 5.1 -- Page 1 of 1
------------
EXHIBIT A
---------
Legal Description
-----------------
Lots Twenty-Five (25) and Twenty-Six (26), Block Two (2), Flamingo Estates,
Xxxxx County, Nevada, as shown by map thereof on file in Book 5 of Plats, Page
22, in the Office of the County Recorder of Xxxxx County, Nevada.
EXHIBIT A -- Page 1 of 1
---------
EXHIBIT B
---------
Permitted Exceptions
--------------------
1. Reservations and provisions as contained in the Patent from the State of
Nevada, recorded January 27, 1921, in Book 7 of Deeds, Page 269, as
Instrument No. 14991.
2. All oil, gas, coal and other hydrocarbon substances as conveyed to Xxxxx
Xxxx in a document recorded March 25, 1957, in Book 124, of Official
Records, as Instrument No. 102052.
3. Covenants, conditions restrictions and easements in the document recorded
December 24, 1957 in Book No. 148 as Instrument No. 121291 of Official
Records, which provide that a violation thereof shall not defeat or render
invalid the lien of any first mortgage or deed of trust made in good faith
and for value, but deleting any covenant, condition or restriction
indicating a preference, limitation or discrimination based on race, color,
religion, sex, handicap, familial status, or national origin, to the extent
such covenants, conditions or restrictions violate Title 42, Section
3604(C), of the United States Codes.
Documents declaring modifications thereof recorded October 17, 1972 in Book
No. 272 as Instrument Nos. 231058 through 231080 of Official Records.
Documents declaring modifications thereof recorded March 24, 1983 in Book
No. 1708 as Instrument Nos. 1667267 through 1667279 of Official Records.
Documents declaring modifications thereof recorded March 25, 1983 in Book
No. 1709 as Instrument Nos. 1668380 through 1668384 of Official Records.
Documents declaring modifications thereof recorded March 25, 1983 in Book
No. 1712 as Instrument Nos. 1671034 through 1671036 of Official Records.
4. Easements as shown and/or dedicated upon the final map of Flamingo Estates,
on file in Book 5 of plats, Page 22, of Official Records.
EXHIBIT B -- Page 1 of 1
---------
EXHIBIT C
---------
Form of Request For Advance
---------------------------
DATE:___________________________
CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: _________________________
Re: $7,000,000 Loan described in that certain Loan and Security Agreement (the
"Loan Agreement") between CapitalSource Finance LLC ("Lender") and
-------------- ------
Preferred Equities Corporation ("Borrower")
--------
Loan Number:______________________________
Borrower: Preferred Equities Corporation
Project: 000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx
Advance Request No.:______________________
Amount of Request:________________________
Period Covered: ___________, 20__ through: ________, 20__
BEFORE ME, the undersigned authority, on this day personally appeared the person
executing this affidavit, who, being by me first duly sworn, deposed and said:
1. I am an officer of Borrower and duly authorized to make this affidavit
and to execute and deliver the related request for payment.
2. If any portion of the requested Advance is to be used to pay for
construction costs under any Construction Contract, attached are AIA Document G-
702 and G-703 (1983 Edition) forms executed by the General Contractor and
approved by the Architect, all completed for the above amount and period,
together with all supporting documentation required by the Loan Agreement for
the Project, all of which are true and correct and in all respects what they
purport and appear to be.
3. Borrower has not been served with any written notice that a lien will
be claimed for any amount unpaid for materials delivered, labor performed, or
services provided in connection with the properties, or any part thereof, and,
to the Borrower's knowledge, no valid basis exists for the filing of any
mechanic's or materialmen's liens or claims with respect to all or any part of
the Project.
4. I understand that this affidavit is made for the purpose of inducing
Lender to advance funds to Borrower and for Borrower to make payments of such
funds as appropriate under the loan documents and that, in so lending funds or
making payment, Lender and Borrower will rely upon the accuracy of matters
stated in this affidavit.
EXHIBIT C -- Page 1 of 3
---------
5. All representations and warranties contained in the Agreement and the
other Loan Documents are true and accurate in all material respects as of the
date of this Draw Request, except as follows (if any): _________________________
________________________________________________________________________________
6. No Event of Default exists (or would result from the Advance herein
requested), except as follows (if any): ________________________________________
________________________________________________________________________________
7. No part of the Property has been taken by eminent domain proceedings,
and Borrower has not received written notice of any proceedings or negotiations
therefor which are pending, except as follows (if any): ________________________
________________________________________________________________________________
8. All previously disbursed Loan funds have been expended, or are being
held in trust, for the sole purpose of paying Project costs included in the
Budget and previously incurred by Borrower as set forth in previous Draw
Requests.
9. Borrower has previously or concurrently disclosed to Lender all
matters known to Borrower that are required to be so disclosed under the Loan
Documents.
10. All conditions precedent to Borrower's right to receive the requested
Advance have been met in accordance with the terms of the Loan Documents, except
as follows (if any): ___________________________________________________________
________________________________________________________________________________
11. To the knowledge of the undersigned, the amounts and percentages set
forth in this Draw Request (including any AIA Document G-702 and G-703 submitted
in connection herewith) are true and correct.
12. The aggregate sum of (i) Loan funds previously disbursed to Borrower,
plus (ii) the Loan funds included in this Draw Request, plus (iii) the existing
Retainage, does not exceed the aggregate amount incurred and/or expended to date
for construction work incorporated into the Resort Improvements.
13. Upon disbursement by Borrower of the funds advanced by Lender as
requested in this Draw Request, all obligations for work and other costs
heretofore incurred by Borrower in connection with the Project and which are due
and payable will be fully paid and satisfied.
14. All lien waivers or payment receipts required under the terms of the
Loan Documents for this Draw Request have been submitted to Lender.
15. Borrower agrees to notify Lender in writing immediately if the matters
certified herein will not be true and correct as of the time of the requested
advance, and the foregoing certifications shall be deemed made and ratified as
of the time of the advance unless Borrower so notifies Lender in writing before
that time.
EXHIBIT C -- Page 2 of 3
---------
16. Capitalized terms used herein but not otherwise defined herein shall
have the meaning ascribed thereto in the Loan Agreement.
EXECUTED as of the date first written above.
AFFIANT:
-------
________________________________
STATE OF NEVADA (S)
(S)
COUNTY OF _________ (S)
SUBSCRIBED AND SWORN BEFORE ME, on this ______ day of ______________ 20__.
________________________________
Notary Public
Printed Name:
My Commission Expires:
EXHIBIT D
---------
Preliminary Construction Schedule
---------------------------------
None
EXHIBIT C -- Page 3 of 3
---------
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT
-------------------------------------------------
THIS FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT (this "Agreement")
---------
is made and entered into effective as of March 11, 2002, by and between
CAPTIALSOURCE FINANCE LLC, a Delaware limited liability company ("Lender"),
------
PREFERRED EQUITIES CORPORATION, a Nevada corporation ("Borrower"), and MEGO
--------
FINANCIAL CORP., a New York corporation ("Guarantor"). Unless otherwise defined
---------
herein, capitalized terms shall have the meaning given such terms in the
Receivables Loan Agreement (defined below).
RECITALS
--------
A. Lender previously agreed to make a loan (the "Original Receivables
--------------------
Loan") to Borrower. The Receivables Loan is evidenced by a certain Promissory
----
Note dated as of August 8, 2001 (the "Original Receivables Note"), from Borrower
-------------------------
to Lender in the stated principal amount of $15,000,000. In connection with the
Receivables Loan, Borrower and Lender executed that certain Loan and Security
Agreement dated August 8, 2001 (the "Original Receivables Loan Agreement").
-----------------------------------
The obligations of Borrower under the Original Receivables Loan Agreement are
guaranteed pursuant to a Guaranty, executed by Guarantor to and for the benefit
of Lender (the "Guaranty").
--------
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 4
-------------------------------------------------
B. Borrower has requested that Lender agree to increase the amount of the
Original Receivables Loan from $15,000,000 to $20,000,000 and, in connection
therewith, Borrower is executing and delivering to Lender two Promissory Notes,
each dated of even date herewith and each in the maximum principal amount of
$10,000,000 (together, the "Restated Notes")(the Original Receivables Note, as
--------------
amended and restated by the Restated Notes, is hereafter referred to as the
"Receivables Note;" and the Original Receivables Loan, as so increased, is
----------------
hereafter referred to as the "Receivables Loan").
----------------
C. Borrower also has requested that Lender make a Construction Loan
(defined below) to Borrower to provide financing for the acquisition and
development of certain property located at 000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx.
D. As an inducement to Lender to make the Construction Loan to Borrower,
Borrower has agreed to modify the Original Receivables Loan Agreement (the
Original Receivables Loan Agreement, as modified by this Agreement is
hereinafter referred to as the, "Receivables Loan Agreement") and the other Loan
--------------------------
Documents referenced therein to cross-collateralize and cross-default the
Receivables Loan and the Construction Loan.
NOW, THEREFORE, for and in consideration of the premises, the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed, Lender, Borrower and
Guarantor hereby agree as follows:
1. Amendments to the Original Receivables Loan Agreement. The parties
-----------------------------------------------------
hereto agree that the Original Receivables Loan Agreement shall be amended as
follows:
(a) All terms referenced on Exhibit A of this Amendment are hereby
---------
added to the Appendix of the Original Receivables Loan Agreement and to the
extent the terms set forth on Exhibit A differ from those terms set forth in the
---------
Original Receivables Loan Agreement, the terms set forth on Exhibit A shall
---------
govern and control.
(b) Section 1.2 of the Original Receivables Loan Agreement is hereby
amended and restated in its entirety as follows:
1.2 Maturity. The Loan shall be payable in full, together with
--------
all other amounts due and obligations owe under the Loan Documents, on
March 11, 2005. The Loan, the Revolving Period and the Maturity Date may
be extended for a period of two years if, and only if: (a) Borrower
provides Lender with written notice (the "Extension Notice") of the
----------------
exercise of its desire and election to extend the same not less than ten
(10) days prior to the initial Maturity Date; (b) Borrower has paid or
caused to be paid to Lender, not less than ten (10) days prior to the
applicable Maturity Date an extension fee of $200,000; and (c) Borrower is
not in default under the terms of any of the Loan Documents at the time of
delivery of, or at any time after delivery of, the Extension Notice.
(c) Section 1.6 of the Original Receivables Loan Agreement is hereby
amended and restated in its entirety as follows:
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 5
-------------------------------------------------
1.6 Commitment Fee. Borrower shall pay to Lender a commitment
--------------
fee equal to $250,000. As of the date of the Amendment, a portion of the
Commitment Fee equal to $187,500 was paid by Borrower and the remaining
$62,500 shall be due and payable simultaneously with the execution of the
Amendment.
(d) Section 7 of the Original Receivables Loan Agreement is hereby
further amended to add the following thereto:
"7.9 Cross Default. The occurrence of a "Default" (as defined
-------------
therein) under the Construction Loan Agreement, or the occurrence of a
default or event of default (however defined) under the Construction Note
or any other Construction Loan Documents."
(e) Section 8.1(f) of the Original Receivables Loan Agreement is
hereby amended and restated in its entirety as follows:
(f) Exercise of Other Rights. Exercise any and all other rights
------------------------
or remedies afforded by law, in equity, or by the Loan Documents or the
Construction Loan Documents, as Lender may deem appropriate 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 and/or the Construction Loan Documents or in aid of the exercise
of any right or remedy granted to Lender in the Loan Documents and/or the
Construction Loan Documents.
2. Representations and Warranties of Borrower. Borrower hereby
------------------------------------------
represents and warrants to Lender that (a) to the best of Borrower's knowledge,
the execution and delivery of this Agreement does not contravene, result in the
breach of or constitute a default under any deed of trust, loan agreement,
indenture or other contract or agreement to which Borrower is a party or by
which Borrower or any of its properties may be bound; (b) this Agreement
constitutes the legal, valid and binding obligations of Borrower enforceable in
accordance with its terms, subject to the limitations of equitable principles
and bankruptcy, insolvency, debtor relief or other similar laws affecting
generally the enforcement of creditors' rights; (c) the execution and delivery
of, and performance under this Agreement are within Borrower's authority without
the joinder or consent of any other party; (d) there exists no Default or
Incipient Default under the Receivables Loan Documents; and (e) all of the
representations and warranties of Borrower under the Receivables Loan Documents
are true and correct in all material respects on the date hereof (all of which
are hereby ratified and reaffirmed for all purposes). Borrower agrees to
indemnify and hold Lender harmless against any loss, claim, damage, liability or
expense (including without limitation reasonable attorneys' fees) incurred as a
result of any representation or warranty made by Borrower herein proving to be
untrue or inaccurate in any material respect.
3. Consent and Ratification. Guarantor hereby unconditionally and
------------------------
irrevocably consents to (i) the execution and delivery by Borrower of this
Agreement, and (ii) the consummation of the transactions contemplated by this
Agreement. Guarantor hereby unconditionally and irrevocably acknowledges and
agrees that the Guaranty, and its obligations,
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 6
-------------------------------------------------
covenants, agreements and duties thereunder, remain in full force and effect,
notwithstanding the execution and delivery of the Construction Loan Documents,
this Amendment and the Restated Notes, and the consummation of the transactions
contemplated hereby and thereby. Guarantor further acknowledges and agrees that
the "Obligations" (as defined in the Guaranty) shall hereinafter include and
also refer to the indebtedness evidenced by the Restated Notes. Guarantor hereby
unconditionally ratifies, reaffirms and confirms its Guaranty.
4. Ratification of Obligations. Borrower hereby ratifies and reaffirms
---------------------------
all of the obligations of Borrower set forth in the Receivables Loan Documents.
The liens, security interests, collateral assignments and financing statements
in respect of the Original Receivables Loan are hereby ratified and confirmed as
valid, subsisting and continuing to secure the Receivables Note and the
Receivables Loan Documents. Nothing herein shall in any manner diminish, impair
or extinguish the Receivables Note or any other obligations of Borrower under
the Receivables Loan Documents. Borrower ratifies and acknowledges that the
Receivables Loan Documents are valid, subsisting and enforceable and agrees and
warrants that there are no offsets, claims or defenses with respect to any of
the indebtedness evidenced by the Receivables Note. Borrower acknowledges that
the foregoing representations are given to induce Lender to modify the
Receivables Loan, make the Construction Loan and otherwise modify the
Receivables Loan Agreement as described above and but for such representations
and warranties, Lender would not so modify the Receivables Loan or make the
Construction Loan.
5. Release of Usury Claims. Borrower hereby releases Lender, its
-----------------------
successors and assigns, from all claims, demands, liabilities, penalties,
defenses or causes of action which Borrower may be entitled to assert (although
no such claims are known to exist) against Lender by reason of Lender's
contracting for, charging, or receiving interest on the Original Receivables
Loan prior to the execution of this Agreement in excess of that permitted under
applicable law.
6. Sale of Receivables Loan; Cooperation of Borrower. Borrower
-------------------------------------------------
acknowledges and agrees that Lender may, from time to time, sell or offer to
sell the Receivables Loan or undivided ownership or participation interests in
the Receivables Loan to one or more assignees or participants ("Participating
-------------
Lenders") and, in connection with such sale, Lender and the Participating
-------
Lenders, may elect to appoint Lender or another Person to administer the
Receivables Loan and the disbursement by Lender and each of the Participating
Lenders of their respective pro rata shares of each Advance made under the
Receivables Loan Agreement. Borrower shall execute, acknowledge and deliver any
estoppel certificates or other instruments requested by Lender to satisfy a
purchaser or participant that the Receivables Loan is outstanding in accordance
with the terms contained in the Receivables Loan Documents. Borrower shall
execute, acknowledge and deliver any estoppel certificates or other instruments
requested by Lender to satisfy a Participating Lender that the Receivables Loan
is outstanding in accordance with the terms contained in the Receivables Loan
Documents. Borrower will, at the request and direction of Lender, (a) at the
election of Lender, modify the Receivables Loan Documents (including issue
additional or replacement promissory notes evidencing the Receivables Loan and
the interest of Lender and each Participating Lender therein) or enter into an
intercreditor agreement with Lender and each of the Participating Lenders which
will, among other things so long as the duties and obligations of Borrower under
the Receivables Loan Documents do not materially change, (i) appoint an agent
("Agent") to act on behalf of Lender and each of the
-----
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 7
-------------------------------------------------
Participating Lenders in connection with the administration of the Receivables
Loan and the making of Advances hereunder by Lender and each of the
Participating Lenders, (ii) set forth the proportionate share of the Receivables
Loan owned by Lender and each of the Participating Lenders and the obligations
of Lender and each of the Participating Lenders to disburse to Agent for
delivery to Borrower their proportionate share of any Advances made hereunder,
and (iii) identify the rights, powers, duties and liabilities of the Agent,
Lender and the Participating Lenders and Borrower in connection with the
Receivables Loan, and (b) execute, acknowledge, deliver, procure and record
and/or file such further instruments (including, without limitation, further
deeds of trust, security agreements, financing statements, continuation
statements, and assignments of rents or leases, but excluding any additional or
replacement promissory notes) and do such further acts as, in Lender's opinion,
are necessary to carry out more effectively the purposes of this Section.
Borrower authorizes Lender to disseminate any information it has pertaining to
the Receivables Loan, including, without limitation, credit and financial
information on, the Property, Borrower and Guarantor, to any such participant,
assignee or prospective participant or assignee, and to any other parties as
necessary or appropriate in Lender's reasonable judgment.
7. Miscellaneous. This Agreement may be executed in any number of
-------------
counterparts with the same effect as if all parties hereto had signed the same
document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart. The terms and provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, their
representatives, successors and assigns. The Receivables Loan Documents, as
modified hereby, shall be construed in accordance with the laws of the State of
New York and the laws of the United States applicable to transactions in the
State of New York.
EXECUTED as of the date and year first above written.
LENDER:
------
CAPITALSOURCE FINANCE LLC,
a Delaware limited liability company
By:___________________________________
Name:_________________________________
Title:________________________________
BORROWER:
--------
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By:___________________________________
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 8
-------------------------------------------------
Name:_________________________________
Title:________________________________
GUARANTOR:
---------
MEGO FINANCIAL CORP.,
a New York corporation
By:___________________________________
Name:_________________________________
Title:________________________________
FIRST MODIFICATION OF LOAN AND SECURITY AGREEMENT - Page 9
-------------------------------------------------
EXHIBIT A
---------
DEFINITIONS
-----------
Agreement. This Loan and Security Agreement dated as of August 8, 2001,
executed by Borrower and Lender, as amended by the Amendment.
Amendment. The First Amendment to Loan and Security Agreement dated
effective as of March 11, 2002, executed by Borrower, Lender and Guarantor.
Availability. At all times during the Revolving Period, the lesser of (A)
the remainder of [i] $20,000,000 minus [ii] the principal balance of all
Advances then outstanding (without giving effect to the currently requested
Advance); or (b) the remainder of (i) $20,000,000 minus (a) the sum of eighty-
five percent (85%) of the principal balance of the New Eligible Notes
Receivables and (b) ninety percent (90%) of the principal balance of all Mature
Eligible Notes Receivables.
Commitment Fee. A non-refundable loan commitment fee with respect to the
making of the Loan in an amount equal to $250,000, which amount is payable in
accordance with Section 1.6 hereof.
Construction Loan. That certain $7,000,000 acquisition and development loan
from Lender to Borrower, as evidenced, in part, by the Construction Note, as the
same may be hereafter amended, modified, supplemented, increased or extended
with the consent of Lender.
Construction Loan Documents. Collectively, the Construction Note, that
certain Loan and Security Agreement dated of even date herewith, executed by
Lender and Borrower ("Construction Loan Agreement"), and any and all other
---------------------------
agreements, documents, instruments and certificates delivered or contemplated to
be delivered in connection with the Construction Loan Agreement, as such may be
amended, renewed, extended, restated or supplemented from time to time with the
consent of Lender.
Construction Note. That certain $7,000,000 Promissory Note dated of even
date herewith, executed by Borrower to the order of Lender and all other notes
given in substitution therefor or in modification, supplement, increase, renewal
or extension thereof, in whole or in part.
Indebtedness. All payment obligations of Borrower to Lender arising under
the Loan Documents or the Construction Loan Documents.
Loan. The $20,000,000 credit facility described in this Agreement.
Loan Year. Each successive twelve (12) month period commencing on March
11, 2002.
Maturity Date. March 11, 2005 unless extended pursuant to Section 1.2
above.
Maximum Exposure. The lesser of (a) $20,000,000; or (b) the sum of (A) 90%
of the principal balance of all Mature Financed Note Receivables and (B) 85% of
the principal balance
of all New Financed Note Receivables.
Note. Together, a Promissory Note dated as of March 11, 2003, executed by
Borrower to and for the benefit of Lender, in the maximum amount of $10,000,000,
and a Promissory Note dated as of March 11, 2003, executed by Borrower to and
for the benefit of Lender, in the maximum amount of $10,000,000, which notes,
together, amend and restate in its entirety the indebtedness evidenced by a
Promissory Note dated as of August 8, 2001, executed by Borrower to Lender in
the amount of $15,000,000.
Revolving Period. The period commencing on the date hereof and ending on
March 11, 2005.
PROMISSORY NOTE
---------------
[000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx - Note A-1]
$3,000,000.00 As of March 15, 2002
1. Promise to Pay.
--------------
FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation,
("Maker"), whose address is 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx 00000,
-----
promises to pay to the order of CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company, and its successors and assigns ("Holder") the sum of THREE
------
MILLION AND NO/100 DOLLARS ($3,000,000.00), together with all other amounts
added thereto pursuant to this Note or otherwise payable to Holder (the "Loan")
----
(or so much thereof as may from time to time be outstanding), together with
interest thereon as hereinafter set forth, payable in lawful money of the United
States of America. Payments shall be made to Holder at 0000 Xxxxxxx Xxxxxx,
00/xx/ Xxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000 (or such other address as Holder may
hereafter designate in writing to Maker).
This Note, along with that certain Note A-2 dated as of the date hereof
executed and delivered by the Maker, is given in replacement, but not in
extinguishment or novation, of that certain Note A dated March 11, 2002 in the
original principal amount of $10,000,000 executed by the Maker and payable to
Holder which, along with that certain Note B dated March 11, 2002 and executed
and delivered by Maker, amended and restated that certain Promissory Note dated
as of August 8, 2001, executed by Maker payable to the order of Holder in the
original principal sum of $15,000,000.00.
The repayment of the Loan evidenced by this Note is secured by that certain
Loan and Security Agreement dated as of August 8, 2001 as amended by that
certain First Modification of Loan and Security Agreement dated March 11, 2002
(as amended, the "Loan Agreement"), the Assignment of Deed(s) of Trust and
--------------
Purchase Documents ("Assignment") dated as of August 8, 2001, and any other
----------
documents evidencing or securing the Loan or executed in connection therewith,
and any modification, renewal or extension of any of the foregoing are
collectively called the "Loan Documents". All capitalized terms not otherwise
--------------
defined herein shall have the meanings ascribed for them in the Loan Agreement.
2. Principal and Interest.
----------------------
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a floating rate per annum equal to the Prime Rate plus two
and one-half percent (2.50%) (the aggregate rate referred to as the "Interest
--------
Rate"). The term "Prime Rate" shall mean the interest rate published each day in
---- ----------
the Wall Street Journal as the "Prime Rate", the base rate on corporate loans
posted by at least 75% of the nations's thirty (30) largest banks. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed. In no event shall the Interest Rate be less than ten percent (10%)
per annum.
3. Payment.
-------
Commencing on the 1st day of April, 2002, Maker shall pay interest computed
at the Interest Rate monthly in arrears on the first day of each month. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed.
The Loan shall be due and payable on or before March 11, 2005, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").
-------------
4. Prepayments.
-----------
(a) Voluntary Prepayments. Prepayments of the Loan (i) are permitted
---------------------
during the Revolving Period, and (ii) may be made in whole, but not in part,
upon five (5) days prior written notice to Lender at any time upon payment of
the applicable Prepayment Premium (whether such prepayment results from
voluntary payments by Borrower, acceleration, or otherwise); provided, however,
that payments or prepayments of Financed Notes Receivable made by Purchasers
shall not violate this Section 4(a), and no Prepayment Premium shall be payable
as a result of any such payment by Purchasers. The term "Prepayment Premium"
------------------
means the percentage set forth below multiplied by the amount prepaid, payable
in connection with a voluntary prepayment of the Loan in accordance with the
provisions of this Section:
Loan Year Percentage
First Loan Year Two percent (2%)
Second Loan Year One percent (1%)
Thereafter None
(b) Payment After Default. In the event Holder declares the Loan
---------------------
immediately due and payable at a time when a Prepayment Premium would be due,
such Prepayment Premium shall be paid upon any tender of payment at any time or
upon foreclosure of the Mortgage.
5. Default.
-------
5.1 Events of Default. Any of the following shall constitute an "Event of
----------------- --------
Default" under this Note: (a) failure to pay any amounts owed pursuant to this
-------
Note on the due date; or (b) the occurrence of any default under any of the
other Loan Documents, after giving effect to any applicable grace or cure
period.
5.2 Remedies. So long as an Event of Default remains outstanding: (a)
--------
interest shall accrue at a rate equal to the Interest Rate plus four percent
(4%) per annum (the "Default Rate"); (b) Holder may, at its option and without
------------
notice (such notice being expressly waived), declare the Loan immediately due
and payable; and (c) Holder may pursue all rights and remedies available under
the Loan Agreement or any other Loan Documents. Holder's rights, remedies and
powers, as provided in this Note and the other Loan Documents, are cumulative
and concurrent, and may be pursued singly, successively or together against
Maker, any guarantor of the Loan, the security described in the Loan Documents,
and any other security given at any time to secure the payment hereof, all at
the sole discretion of Holder. Additionally, Holder may resort to every other
right or remedy available at law or in equity without first exhausting the
rights and
remedies contained herein, all in Holder's sole discretion. Failure of Holder,
for any period of time or on more than one occasion, to exercise its option to
accelerate the Maturity Date shall not constitute a waiver of the right to
exercise the same at any time during the continued existence of any Event of
Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due under
the Loan Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note; (iii) to protect the liens of the Purchaser Deeds of
Trust or any of the Loan Documents; (iv) to represent Holder in any other
proceedings whatsoever in connection with the Purchaser Deeds of Trust or any of
the Loan Documents including post judgment proceedings to enforce any judgment
related to the Loan Documents; or (v) in connection with seeking an out-of-court
workout or settlement of any of the foregoing, then Maker shall pay to Holder
all costs, attorneys' fees and expenses in connection therewith, in addition to
all other amounts due hereunder.
6. Late Charge.
-----------
If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of five
(5) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.
-----------
7. Governing Law: Severability.
---------------------------
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. Waiver.
------
Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors and assigns, legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note, and agrees that their respective
liability shall be unconditional and without regard to the liability of any
other party and shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver or modification granted or consented to by Holder.
Maker, for itself and all endorsers, guarantors and sureties of this Note, and
their heirs, legal representatives, successors and assigns, hereby consents to
every extension of time, renewal, waiver or modification that may be granted by
Holder with respect to the payment or other provisions of this Note, and to the
release of any makers, endorsers, guarantors or sureties, and of any collateral
given to secure the payment hereof, or any part hereof, with or without
substitution, and agrees that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to Maker or to any endorser,
guarantor or surety and without affecting the liability of any of them.
9. Security, Application of Payments.
---------------------------------
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein. Payments will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to interest due on
the Loan and third to the outstanding principal balance of the Loan.
10. Miscellaneous.
-------------
10.1 Amendments. This Note may not be terminated or amended orally, but
----------
only by a termination or amendment in writing signed by Holder.
10.2 Lawful Rate of Interest. In no event whatsoever shall the amount of
-----------------------
interest paid or agreed to be paid to Holder pursuant to this Note or any of the
Loan Documents exceed the highest lawful rate of interest permissible under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Note and the other Loan Documents shall involve exceeding the
lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("Excess Interest"), then ipso facto, the obligation to be
--------------- ----------
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Holder shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the Loan (whether or not due and payable), and
not to the payment of interest, or refunded to Maker if such Loan has been paid
in full. Neither Maker nor any guarantor or endorser shall have any action
against Holder for any damages whatsoever arising out of the payment or
collection of any such Excess Interest.
10.3 Captions. The captions of the Paragraphs of this Note are for
--------
convenience of reference only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof.
10.4 Notices. Notices shall be given under this Note in conformity with the
-------
terms and conditions of the Loan Agreement.
10.5 Joint and Several. The obligations of Maker under this Note shall be
-----------------
joint and several obligations of each Maker, if more than one, and of each
Maker's heirs, personal representatives, successors and assigns.
10.6 Time of Essence. Time is of the essence of this Note and the
---------------
performance of each of the covenants and agreements contained herein.
11. Sale of Loan.
------------
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note and the other Loan
Documents, any guaranties given in connection with the Loan and any collateral
given to secure the Loan.
12. Venue.
-----
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE STATE OF NEW YORK. MAKER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND
STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION SYSTEMS,
000 XXXXXX XXXXXX, XXX XXXX, XXX XXXX 00000, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, NEW
YORK, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN NEW YORK CITY) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY
HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED,
HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE
AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
HOLDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH. IN THE EVENT
SERVICE OF PROCESS IS MADE ON CORPORATION SERVICE COMPANY, LENDER WILL SEND A
COURTESY NOTICE (SERVICE SHALL NOT BE AFFECTED BY LENDER'S FAILURE TO SEND SUCH
NOTICE) TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.1 OF THE LOAN
AGREEMENT FOR PREFERRED EQUITIES CORPORATION.
Initial on behalf of Maker:_____________________
13. Jury Trial Waiver.
-----------------
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN EXECUTING THIS NOTE AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS
NOTE AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL.
Initial on behalf of Maker:_____________________
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to be
executed by its duly authorized representatives as of the date set first forth
above.
MAKER:
PREFERRED EQUITIES CORPORATION, a
Nevada corporation
By:__________________________
Name:________________________
PROMISSORY NOTE
---------------
[000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx - Note A-2]
$7,000,000.00 As of March 15, 2002
1. Promise to Pay.
--------------
FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation,
("Maker"), whose address is 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx 00000,
-------
promises to pay to the order of CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company, and its successors and assigns ("Holder") the sum of SEVEN
------
MILLION AND NO/100 DOLLARS ($7,000,000.00), together with all other amounts
added thereto pursuant to this Note or otherwise payable to Holder (the "Loan")
----
(or so much thereof as may from time to time be outstanding), together with
interest thereon as hereinafter set forth, payable in lawful money of the United
States of America. Payments shall be made to Holder at 0000 Xxxxxxx Xxxxxx,
00/xx/ Xxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000 (or such other address as Holder may
hereafter designate in writing to Maker).
This Note, along with that certain Note A-1 dated as of the date hereof
executed and delivered by the Maker, is given in replacement, but not in
extinguishment or novation, of that certain Note A dated March 11, 2002 in the
original principal amount of $10,000,000 executed by the Maker and payable to
Holder which, along with that certain Note B dated March 11, 2002 and executed
and delivered by Maker, amended and restated that certain Promissory Note dated
as of August 8, 2001, executed by Maker payable to the order of Holder in the
original principal sum of $15,000,000.00.
The repayment of the Loan evidenced by this Note is secured by that certain
Loan and Security Agreement dated as of August 8, 2001 as amended by that
certain First Modification of Loan and Security Agreement dated March 11, 2002
(as amended, the "Loan Agreement"), the Assignment of Deed(s) of Trust and
--------------
Purchase Documents ("Assignment") dated as of August 8, 2001, and any other
----------
documents evidencing or securing the Loan or executed in connection therewith,
and any modification, renewal or extension of any of the foregoing are
collectively called the "Loan Documents". All capitalized terms not otherwise
--------------
defined herein shall have the meanings ascribed for them in the Loan Agreement.
2. Principal and Interest.
----------------------
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a floating rate per annum equal to the Prime Rate plus two
and one-half percent (2.50%) (the aggregate rate referred to as the "Interest
--------
Rate"). The term "Prime Rate" shall mean the interest rate published each day in
---- ----------
the Wall Street Journal as the "Prime Rate", the base rate on corporate loans
posted by at least 75% of the nations's thirty (30) largest banks. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed. In no event shall the Interest Rate be less than ten percent (10%)
per annum.
3. Payment.
-------
Commencing on the 1st day of April, 2002, Maker shall pay interest computed
at the Interest Rate monthly in arrears on the first day of each month. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed.
The Loan shall be due and payable on or before March 11, 2005, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").
-------------
4. Prepayments.
-----------
(a) Voluntary Prepayments. Prepayments of the Loan (i) are permitted during
---------------------
the Revolving Period, and (ii) may be made in whole, but not in part, upon five
(5) days prior written notice to Lender at any time upon payment of the
applicable Prepayment Premium (whether such prepayment results from voluntary
payments by Borrower, acceleration, or otherwise); provided, however, that
payments or prepayments of Financed Notes Receivable made by Purchasers shall
not violate this Section 4(a), and no Prepayment Premium shall be payable as a
result of any such payment by Purchasers. The term "Prepayment Premium" means
------------------
the percentage set forth below multiplied by the amount prepaid, payable in
connection with a voluntary prepayment of the Loan in accordance with the
provisions of this Section:
Loan Year Percentage
First Loan Year Two percent (2%)
Second Loan Year One percent (1%)
Thereafter None
(b) Payment After Default. In the event Holder declares the Loan
---------------------
immediately due and payable at a time when a Prepayment Premium would be due,
such Prepayment Premium shall be paid upon any tender of payment at any time or
upon foreclosure of the Mortgage.
5. Default.
-------
5.1 Events of Default. Any of the following shall constitute an "Event of
----------------- --------
Default" under this Note: (a) failure to pay any amounts owed pursuant to this
-------
Note on the due date; or (b) the occurrence of any default under any of the
other Loan Documents, after giving effect to any applicable grace or cure
period.
5.2 Remedies. So long as an Event of Default remains outstanding: (a)
--------
interest shall accrue at a rate equal to the Interest Rate plus four percent
(4%) per annum (the "Default Rate"); (b) Holder may, at its option and without
------------
notice (such notice being expressly waived), declare the Loan immediately due
and payable; and (c) Holder may pursue all rights and remedies available under
the Loan Agreement or any other Loan Documents. Holder's rights, remedies and
powers, as provided in this Note and the other Loan Documents, are cumulative
and concurrent, and may be pursued singly, successively or together against
Maker, any guarantor of the Loan, the security described in the Loan Documents,
and any other security given at any time to secure the payment hereof, all at
the sole discretion of Holder. Additionally, Holder may resort to every other
right or remedy available at law or in equity without first exhausting the
rights and
remedies contained herein, all in Holder's sole discretion. Failure of Holder,
for any period of time or on more than one occasion, to exercise its option to
accelerate the Maturity Date shall not constitute a waiver of the right to
exercise the same at any time during the continued existence of any Event of
Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due under
the Loan Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note; (iii) to protect the liens of the Purchaser Deeds of
Trust or any of the Loan Documents; (iv) to represent Holder in any other
proceedings whatsoever in connection with the Purchaser Deeds of Trust or any of
the Loan Documents including post judgment proceedings to enforce any judgment
related to the Loan Documents; or (v) in connection with seeking an out-of-court
workout or settlement of any of the foregoing, then Maker shall pay to Holder
all costs, attorneys' fees and expenses in connection therewith, in addition to
all other amounts due hereunder.
6. Late Charge.
-----------
If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of five
(5) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.
-----------
7. Governing Law: Severability.
---------------------------
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. Waiver.
------
Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors and assigns, legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note, and agrees that their respective
liability shall be unconditional and without regard to the liability of any
other party and shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver or modification granted or consented to by Holder.
Maker, for itself and all endorsers, guarantors and sureties of this Note, and
their heirs, legal representatives, successors and assigns, hereby consents to
every extension of time, renewal, waiver or modification that may be granted by
Holder with respect to the payment or other provisions of this Note, and to the
release of any makers, endorsers, guarantors or sureties, and of any collateral
given to secure the payment hereof, or any part hereof, with or without
substitution, and agrees that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to Maker or to any endorser,
guarantor or surety and without affecting the liability of any of them.
9. Security, Application of Payments.
---------------------------------
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein. Payments will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to interest due on
the Loan and third to the outstanding principal balance of the Loan.
10. Miscellaneous.
-------------
10.1 Amendments. This Note may not be terminated or amended orally, but
----------
only by a termination or amendment in writing signed by Holder.
10.2 Lawful Rate of Interest. In no event whatsoever shall the amount of
-----------------------
interest paid or agreed to be paid to Holder pursuant to this Note or any of the
Loan Documents exceed the highest lawful rate of interest permissible under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Note and the other Loan Documents shall involve exceeding the
lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("Excess Interest"), then ipso facto, the obligation to be
--------------- ----------
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Holder shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the Loan (whether or not due and payable), and
not to the payment of interest, or refunded to Maker if such Loan has been paid
in full. Neither Maker nor any guarantor or endorser shall have any action
against Holder for any damages whatsoever arising out of the payment or
collection of any such Excess Interest.
10.3 Captions. The captions of the Paragraphs of this Note are for
--------
convenience of reference only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof.
10.4 Notices. Notices shall be given under this Note in conformity with the
-------
terms and conditions of the Loan Agreement.
10.5 Joint and Several. The obligations of Maker under this Note shall be
-----------------
joint and several obligations of each Maker, if more than one, and of each
Maker's heirs, personal representatives, successors and assigns.
10.6 Time of Essence. Time is of the essence of this Note and the
---------------
performance of each of the covenants and agreements contained herein.
11. Sale of Loan.
------------
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note and the other Loan
Documents, any guaranties given in connection with the Loan and any collateral
given to secure the Loan.
12. Venue.
-----
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE STATE OF NEW YORK. MAKER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND
STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION SYSTEMS,
000 XXXXXX XXXXXX, XXX XXXX, XXX XXXX 00000, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, NEW
YORK, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN NEW YORK CITY) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY
HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED,
HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE
AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
HOLDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH. IN THE EVENT
SERVICE OF PROCESS IS MADE ON CORPORATION SERVICE COMPANY, LENDER WILL SEND A
COURTESY NOTICE (SERVICE SHALL NOT BE AFFECTED BY LENDER'S FAILURE TO SEND SUCH
NOTICE) TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.1 OF THE LOAN
AGREEMENT FOR PREFERRED EQUITIES CORPORATION.
Initial on behalf of Maker: _______________
13. Jury Trial Waiver.
-----------------
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN EXECUTING THIS NOTE AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS
NOTE AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL.
Initial on behalf of Maker: ________________
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to be
executed by its duly authorized representatives as of the date set first forth
above.
MAKER:
PREFERRED EQUITIES CORPORATION, a Nevada
corporation
By:____________________________________
Name:__________________________________
PROMISSORY NOTE
---------------
[000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxx - Note B]
$10,000,000.00 As of March 11, 2002
1. Promise to Pay.
--------------
FOR VALUE RECEIVED, PREFERRED EQUITIES CORPORATION, a Nevada corporation,
("Maker"), whose address is 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx 00000,
-------
promises to pay to the order of CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company, and its successors and assigns ("Holder") the sum of TEN
------
MILLION AND NO/100 DOLLARS ($10,000,000.00), together with all other amounts
added thereto pursuant to this Note or otherwise payable to Holder (the "Loan")
----
(or so much thereof as may from time to time be outstanding), together with
interest thereon as hereinafter set forth, payable in lawful money of the United
States of America. Payments shall be made to Holder at 0000 Xxxxxxx Xxxxxx,
00/xx/ Xxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000 (or such other address as Holder may
hereafter designate in writing to Maker).
This Note is executed and delivered by Borrower in connection with that
certain Promissory Note dated of even date herewith in the amount of $10,000,000
issued by Borrower to and for the benefit of Holder (the "Other Note"). This
----------
Note and the Other Note are intended to amend, restate and further evidence the
indebtedness evidenced by that certain Promissory Note dated as of August 8,
2001, executed by Maker payable to the order of Holder in the original principal
sum of $15,000,000.00 (the "Original Note"). This Note and the Other Note,
-------------
together, shall constitute a renewal, amendment and restatement of the Original
Note. This Note and the Other Note do not constitute a novation or payment of
any part of the indebtedness evidenced by the Original Note.
The repayment of the Loan evidenced by this Note is secured by that certain
Loan and Security Agreement of even date with the Original Note as amended by
that certain First Modification of Loan and Security Agreement dated of even
date herewith (as amended, the "Loan Agreement"), the Assignment of Deed(s) of
--------------
Trust and Purchase Documents ("Assignment") of even date with the Original Note,
----------
and any other documents evidencing or securing the Loan or executed in
connection therewith, and any modification, renewal or extension of any of the
foregoing are collectively called the "Loan Documents". All capitalized terms
--------------
not otherwise defined herein shall have the meanings ascribed for them in the
Loan Agreement.
2. Principal and Interest.
----------------------
So long as no Event of Default exists, interest shall accrue on the
principal balance hereof from time to time outstanding and Maker shall pay
interest thereon at a floating rate per annum equal to the Prime Rate plus two
and one-half percent (2.50%) (the aggregate rate referred to as the "Interest
--------
Rate"). The term "Prime Rate" shall mean the interest rate published each day in
---- ----------
the Wall Street Journal as the "Prime Rate", the base rate on corporate loans
posted by at least 75% of the nations's thirty (30) largest banks. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed. In no event shall the Interest Rate be less than
ten percent (10%) per annum.
3. Payment.
-------
Commencing on the 1st day of April, 2002, Maker shall pay interest computed
at the Interest Rate monthly in arrears on the first day of each month. Interest
shall be calculated based on a 360 day year and charged for the actual number of
days elapsed.
The Loan shall be due and payable on or before March 11, 2005, or any
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").
-------------
4. Prepayments.
-----------
(a) Voluntary Prepayments. Prepayments of the Loan (i) are permitted during
---------------------
the Revolving Period, and (ii) may be made in whole, but not in part, upon five
(5) days prior written notice to Lender at any time upon payment of the
applicable Prepayment Premium (whether such prepayment results from voluntary
payments by Borrower, acceleration, or otherwise); provided, however, that
payments or prepayments of Financed Notes Receivable made by Purchasers shall
not violate this Section 4(a), and no Prepayment Premium shall be payable as a
result of any such payment by Purchasers. The term "Prepayment Premium" means
------------------
the percentage set forth below multiplied by the amount prepaid, payable in
connection with a voluntary prepayment of the Loan in accordance with the
provisions of this Section:
Loan Year Percentage
First Loan Year Two percent (2%)
Second Loan Year One percent (1%)
Thereafter None
(b) Payment After Default. In the event Holder declares the Loan
---------------------
immediately due and payable at a time when a Prepayment Premium would be due,
such Prepayment Premium shall be paid upon any tender of payment at any time or
upon foreclosure of the Mortgage.
5. Default.
-------
5.1 Events of Default. Any of the following shall constitute an "Event of
----------------- --------
Default" under this Note: (a) failure to pay any amounts owed pursuant to this
-------
Note on the due date; or (b) the occurrence of any default under any of the
other Loan Documents, after giving effect to any applicable grace or cure
period.
5.2 Remedies. So long as an Event of Default remains outstanding: (a)
--------
interest shall accrue at a rate equal to the Interest Rate plus four percent
(4%) per annum (the "Default Rate"); (b) Holder may, at its option and without
------------
notice (such notice being expressly waived), declare the Loan immediately due
and payable; and (c) Holder may pursue all rights and remedies available under
the Loan Agreement or any other Loan Documents. Holder's rights, remedies and
powers, as provided in this Note and the other Loan Documents, are cumulative
and concurrent, and may be pursued singly, successively or together against
Maker, any guarantor of the Loan, the security described in the Loan Documents,
and any other security given at any time to secure
the payment hereof, all at the sole discretion of Holder. Additionally, Holder
may resort to every other right or remedy available at law or in equity without
first exhausting the rights and remedies contained herein, all in Holder's sole
discretion. Failure of Holder, for any period of time or on more than one
occasion, to exercise its option to accelerate the Maturity Date shall not
constitute a waiver of the right to exercise the same at any time during the
continued existence of any Event of Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due under
the Loan Documents, whether or not legal proceedings are thereafter instituted
by Holder; (ii) to represent Holder in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note; (iii) to protect the liens of the Purchaser Deeds of
Trust or any of the Loan Documents; (iv) to represent Holder in any other
proceedings whatsoever in connection with the Purchaser Deeds of Trust or any of
the Loan Documents including post judgment proceedings to enforce any judgment
related to the Loan Documents; or (v) in connection with seeking an out-of-court
workout or settlement of any of the foregoing, then Maker shall pay to Holder
all costs, attorneys' fees and expenses in connection therewith, in addition to
all other amounts due hereunder.
6. Late Charge.
-----------
If payments of principal and/or interest, or any other amounts under the
other Loan Documents are not timely made or remain overdue for a period of five
(5) days, Maker, without notice or demand by Holder, promptly shall pay an
amount ("Late Charge") equal to four percent (4%) of each delinquent payment.
-----------
7. Governing Law: Severability.
---------------------------
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. Waiver.
------
Maker, for itself and all endorsers, guarantors and sureties of this Note,
and their heirs, successors and assigns, legal representatives, hereby waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note, and agrees that their respective
liability shall be unconditional and without regard to the liability of any
other party and shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver or modification granted or consented to by Holder.
Maker, for itself and all endorsers, guarantors and sureties of this Note, and
their heirs, legal representatives, successors and assigns, hereby consents to
every extension of time, renewal, waiver or modification that may be granted by
Holder with respect to the payment or other provisions of this Note, and to the
release of any makers, endorsers, guarantors or sureties, and of any collateral
given to secure the payment hereof, or any part hereof, with or without
substitution, and agrees that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to Maker or to any endorser,
guarantor or
surety and without affecting the liability of any of them.
9. Security, Application of Payments.
---------------------------------
This Note is secured by the liens, encumbrances and obligations created
hereby and by the other Loan Documents and the terms and provisions of the other
Loan Documents are hereby incorporated herein. Payments will be applied, at
Holder's option, first to any fees, expenses or other costs Maker is obligated
to pay under this Note or the other Loan Documents, second to interest due on
the Loan and third to the outstanding principal balance of the Loan.
10. Miscellaneous.
-------------
10.1 Amendments. This Note may not be terminated or amended orally, but
----------
only by a termination or amendment in writing signed by Holder.
10.2 Lawful Rate of Interest. In no event whatsoever shall the amount of
-----------------------
interest paid or agreed to be paid to Holder pursuant to this Note or any of the
Loan Documents exceed the highest lawful rate of interest permissible under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Note and the other Loan Documents shall involve exceeding the
lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("Excess Interest"), then ipso facto, the obligation to be
--------------- ----------
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Holder shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the Loan (whether or not due and payable), and
not to the payment of interest, or refunded to Maker if such Loan has been paid
in full. Neither Maker nor any guarantor or endorser shall have any action
against Holder for any damages whatsoever arising out of the payment or
collection of any such Excess Interest.
10.3 Captions. The captions of the Paragraphs of this Note are for
--------
convenience of reference only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof.
10.4 Notices. Notices shall be given under this Note in conformity with the
-------
terms and conditions of the Loan Agreement.
10.5 Joint and Several. The obligations of Maker under this Note shall be
-----------------
joint and several obligations of each Maker, if more than one, and of each
Maker's heirs, personal representatives, successors and assigns.
10.6 Time of Essence. Time is of the essence of this Note and the
---------------
performance of each of the covenants and agreements contained herein.
11. Sale of Loan.
------------
Holder, at any time and without the consent of Maker, may grant
participations in or sell, transfer, assign and convey all or any portion of its
right, title and interest in and to the Loan, this Note and the other Loan
Documents, any guaranties given in connection with the Loan and any collateral
given to secure the Loan.
12. Venue.
-----
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY
OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE
LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A
SITUS WITHIN THE STATE OF NEW YORK. MAKER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND
STATE. MAKER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION SYSTEMS,
000 XXXXXX XXXXXX, XXX XXXX, XXX XXXX 00000, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER. IN THE EVENT SERVICE IS
UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN NEW YORK, NEW
YORK, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST, APPOINT A
SUBSTITUTE AGENT (IN NEW YORK CITY) ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY
HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED,
HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE
AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
HOLDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH. IN THE EVENT
SERVICE OF PROCESS IS MADE ON CORPORATION SERVICE COMPANY, LENDER WILL SEND A
COURTESY NOTICE (SERVICE SHALL NOT BE AFFECTED BY LENDER'S FAILURE TO SEND SUCH
NOTICE) TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.1 OF THE LOAN
AGREEMENT FOR PREFERRED EQUITIES CORPORATION.
Initial on behalf of Maker: _________________
13. Jury Trial Waiver.
-----------------
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER
HAVE ALREADY RELIED ON THIS WAIVER IN EXECUTING THIS NOTE AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS
NOTE AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL.
Initial on behalf of Maker: _________________
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, Maker has executed this Note or has caused the same to be
executed by its duly authorized representatives as of the date set first forth
above.
MAKER:
PREFERRED EQUITIES CORPORATION, a Nevada
corporation
By:__________________________________
Name:________________________________
