Eron Lenders
Lender Update
Project: Riva Pointe Partners, LLC

March 22, 2004

Further to our letter of May 14, 1998 we are writing to update you on the status of the above noted mortgage.


Project Status

In our last letter to you with respect to Riva Pointe, we indicated that negotiations had been underway with the existing ownership group to settle on the outstanding mortgage. A meeting was called to discuss an offer from one of the partners, the Seltzer Group, to settle the mortgage for US$4,100,000 subject to court approval. Approximately fifty lenders attended the meeting and all voted to accept the offer. Another 107 facsimiles and telephone calls were received, all supporting the offer.

Throughout the balance of 1998 and 1999, the Judicial Trustee worked closely with the Seltzer Group to try and finalize the documentation to permit the offer to go before the courts for approval. The general partner in the Riva Pointe project refused to sign a Settlement Agreement and Mutual Release until late in 1999. In December 1999, the Court approved the agreement.

Unfortunately, the Seltzer Group declined to make the US$4,100,000 payment to activate the agreement and complete the settlement offer. We understand that the reasons for not proceeding were the failing health of Mr. Seltzer and difficulties in finalizing financing. There was no way the Judicial Trustee could force the Seltzer's to perform under the agreement.

The options available to the Judicial Trustee to maximize recovery of the Riva Pointe project mortgage were limited. We could either settle with the borrowers as we attempted to do with the Seltzer settlement offer or we could attempt to obtain title to the property through a foreclosure action. Legal counsel had advised that without the cooperation of the borrower, foreclosure would take a minimum of two years, but most likely considerably longer and be extremely costly. We were aware that the borrowers would not agree to a foreclosure. The borrowers had indicated that any attempt to foreclose on the property would lead the borrowers to place the Riva Pointe project in bankruptcy thereby further complicating a foreclosure action, adding to the costs and delay in obtaining title to the property. In addition, the borrowers would launch a counter suit claiming lender liability and fraud on the part of Eron. As a result, foreclosure was not an attractive option and would only be considered if all attempts to settle the mortgage failed.

Once the Seltzer settlement offer collapsed, the Judicial Trustee opened negotiations with one of the other partners in Riva Pointe, Pearson Partners, Inc. (Pearson). In March 2000, Pearson offered to settle the mortgage for US$2,500,000 all cash at closing. With the agreement of your Lender's Committee, this offer was countered at US$3,500,000. After several counter proposals, the Lender's Committee and the Judicial Trustee agreed to a settlement price of US$3,000,000 with US$100,000 paid upon execution of a Settlement Agreement and Mutual Release document.

Although the final settlement amount was significantly below the Seltzer offer, there were substantial obligations outstanding against the property.

Throughout the period of negotiations with both Seltzer and Pearson, outstanding property taxes and condominium fees had grown to in excess of US$400,000. There were architects and engineering costs incurred by the partnership prior to Eron's collapse of approximately US$300,000 secured by liens against the property. Permits and approvals had lapsed and before the municipality would issue new building permits, a US$500,000 park fee had to be paid not to mention the costs of reactivating the other municipal approvals.

On October 10, 2000, a Settlement Agreement and Mutual Release document was signed by all partners in the Riva Pointe project and the Judicial Trustee. Court approval of the agreement was obtained on June 28, 2001. The closing date was set for August 22, 2001.

Unfortunately, the Pearson's underestimated the amount of time it would take to renew or reactivate the expired permits and approvals, and arrange their financing. The New Jersey Department of Environmental Protection caused a significant delay by withholding their approval. As the pier is located across from the former World Trade Centre site in New York, the events of 9/11 also contributed to the delay in closing the agreement.

When it was determined that the original closing date would not be met by the Pearsons, the Judicial Trustee and the Lenders Committee agreed to provide an extension in the closing date provided the Pearson's pay an extension fee equivalent to 10% of the unpaid balance of the settlement and bring and maintain property taxes current. Further extensions were requested and granted by the Judicial Trustee with the approval of the Lenders Committee in order to keep the settlement alive. In addition to the extension fees being paid, the non-refundable deposit was increased to US$150,000 in October 2001 and to US$350,000 in May 2003 as part of the extension arrangements.

The settlement agreement closed on March 11, 2004 with the balance of the US$3,000,000 paid. In addition, US$666,375 in extension fees has been collected plus US$15,000 to offset legal costs. These funds have been placed in an interest bearing trust account pending the court's approval of a distribution.


Estimated Time Line For Distribution

The court date for approval of a distribution of funds to the Riva Pointe lenders has been scheduled for April 20, 2004. Once approval is obtained, we will post an update to the Eron website (see below) and proceed with the distribution process. We anticipate the initial distribution of funds to the lenders should be completed by the end of May 2004.


Estimated Amount of Distribution

The Judicial Trustee's estimated recovery on your investment after deducting direct costs (including legal and Judicial Trustee fees, expenses such as appraisal costs), and an allocation for indirect costs is 55%. For example, if your investment in the Riva Pointe project was $10,000, your recovery will be approximately $5,500.

This will be an interim distribution and in keeping with past distribution Court orders, you will receive 70% of your estimated recovery or in the example above, $3,850.

Further distributions will be made at a later date, but are dependent on the accuracy of the estimate of indirect costs allocated to the Riva Pointe project and the approval of the Court.


Lender Communications

We will continue to communicate directly will all lenders. However, we urge you to take advantage of the web site at http://www.eron-pwl.com for project specific updates as well as related court orders and other general information. If you need information on reclaiming tax on interest income in prior years, please call David Craig at (604) 713-6680.


Yours truly,

Judicial Trustee





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