Ultimate Escapes Files Form 8-K

By: Destination Club News
Date: September 1, 2010

CapitalSource, a commercial lender with $10.7 billion of commercial lending assets and direct real estate investments, has agreed not to exercise their options on several defaults of Ultimate Escapes until September 10, 2010 by entering into a forbearance agreement with the world's second largest destination club.

"Under the Forbearance Agreement, Agent and the Lenders agreed, subject to the terms and conditions contained in the Forbearance Agreement, not to exercise or enforce, until the Forbearance Termination Date, their rights or remedies under the Loan Agreement and related documents with respect to the following events of default that have occurred or are expected to occur under the Loan Agreement: (i) the Borrowers’ failure to make interest payments due on or before each of June 5, 2010, July 5, 2010 and August 5, 2010 under the Loan Agreement, (ii) the Borrowers’ failure to maintain the minimum cash balance required under the Loan Agreement, (iii) the Borrowers’ failure to pay certain home owners association fees which have resulted and may in the future result in the creation of liens upon the Borrowers’ assets, (iv) the Borrowers’ default in the payment of indebtedness for borrowed money in excess of $500,000 with respect to a property owned by an affiliate of the Borrowers and (v) the Borrowers’ anticipated failure to make the interest payment due on or before September 5, 2010 under the Loan Agreement. The 'Forbearance Termination Date' under the Forbearance Agreement is the earliest to occur of 5:00 p.m. (New York, New York time) on September 10, 2010 or the date on which any of the following events occurs: (i) an event of default under the Loan Agreement or related loan documents, other than the Specified Events of Default, (ii) the failure of any Borrower or any Guarantor under the Loan Agreement to comply with the terms of the Forbearance Agreement, (iii) the termination, replacement or a material modification of the terms of engagement of the Chief Restructuring Officer without the prior written consent of the Agent, (iv) any representation or warranty made by the Borrowers or any Guarantor in the Forbearance Agreement, the Loan Agreement or related loan documents is determined by the Agent to have been false or misleading in any respect when made, (v) the initiation of any federal or state bankruptcy, insolvency or similar proceeding by or against Borrowers or any Guarantor, (vi) the commencement of litigation or legal proceedings by the Borrowers or any Guarantor or any of their affiliates against the Agent, the Lenders or any of their affiliates, (vii) the claim, initiation or commencement of any claim or proceeding in favor of, through or by any Borrower or any Guarantor which alleges that the release of Agent and the Lenders set forth in the Forbearance Agreement is invalid or unenforceable or (viii) the filing or commencement of any criminal indictment, charge or proceeding pursuant to Federal or state law against any Borrower or any Guarantor. On the Forbearance Termination Date, the Agent may elect to deem the Borrowers’ obligations under the Loan Agreement to be automatically accelerated and immediately due and payable."

As the world's first publicly-traded destination club, Ultimate Escapes is required to disclose a report each quarter about the financial position of their club. The calendar has now flipped over to September and the third quarter will soon be at an end. It will be telling to see how the plans that Ultimate Escapes has put into motion, including the closure of the Colorado branch and the addition of Sheon Karol as Chief Restructuring Officer, will impact the club once they release their quarterly results later this year.

We will continue to monitor the situation of Ultimate Escapes and the rest of the destination club industry, so check back frequently to stay apprised of happenings throughout the sector.